Consider the Source

ADM as a Business Changer, Plus Free ADM Webinar Details

by Steve Hall, Partner, ISG

Editor’s note: On Thursday, February 16 at 11:00 a.m. Eastern, Steve Hall will be the featured guest speaker on a webinar hosted by CAST Software on the topic of aligning service provider SLAs with long-term value. The discussion will focus on risk mitigation and value enhancement from provider relationships. View the key discussion points and pre-register here (no cost).

While cost savings remains a top priority for global Application Development & Maintenance (ADM) organizations, businesses are also increasingly looking to shift from a “run the business” model to a “change the business” (CtB) perspective, whereby ADM resources are focused on enabling transformational enterprise-wide initiatives rather than merely supporting the status quo and reacting to small enhancements. The demands associated with a CtB approach, however, can increase the risk of higher defect rates and maintenance costs, as well as poor documentation and weak standards around performance and process measures. 

Here are the Top 5 key strategies to ensuring that a CtB ADM model is implemented with optimal efficiency:

1. Separate and manage service categories. Delineation of the major categories of ADM is essential to efficient management. As the old adage goes, “You can’t manage what you can’t measure;” therefore, it is imperative for organizations to understand their application support costs. Specifically, you need to define three main categories — maintenance, minor enhancement, and project-based work — and manage costs of each of those categories separately. The reason is that cost drivers and performance indicators vary by category, so different actions and priorities may be required for each.
2. Align the retained organization with the strategy. Many ADM organizations fall into the trap of focusing on what they can do, rather than what the business needs. For a CtB strategy, that’s a recipe for disaster. Key roles and attributes to help ensure that ADM activity stays on track include liaisons whose specific role is to coordinate between business and IT leaders; program/project managers to oversee large programs; client-driven architecture; ongoing business analysis to understand and communicate business needs; service delivery managers; and business subject matter experts to work with developers and testers.
3. Define end-to-end service level agreements. Multiprovider environments are the norm in today’s outsourcing environment. The multisourcing environment provides significant advantages to clients, but also introduces complexities when trying to govern a large outsourcing arrangement or manage a large software development program. Service level agreements are an effective way to incent the right behaviors in a multiprovider environment, but they must be built to address the entire project lifecycle and clearly aligned with the responsibilities of the service providers.
4. Embrace process excellence. Service levels and quality goals are often aligned with process maturity — and more mature organizations can be contractually obligated to deliver higher quality code.  Since process adherence drives repeatability and productivity improvements, service providers should be incented to operate at CMMi level 3 or higher, and to commit to productivity improvements.  Conduct ongoing operational assessments to ensure process adherence.
5. Use key performance indicators (KPIs) and dashboards. Gauge performance on an ongoing basis with tools such as an earned value analysis (EVA) that includes a schedule and cost performance index. To stay on top of defects, employ other quality metrics such as:

• Defect injection and probability statistics for software quality
• Structural quality tools and techniques to validate the longer term supportability of the code
• Regression testing, defect detection, and effective test coverage ratios to validate the functional quality of the deliverables

For more information about ISG solutions for ADM, contact the author at steven.hall@isg-one.com or +1 720 851 0481.

Put in the Hard Yards to Get the Best Out of Your Sourcing Balanced Scorecard

by Ed Tann, Director, ISG

“Come what may, all bad fortune is to be conquered by endurance,” Joey Barton, English footballer turned Twitter prophet, quotes the ancient poet Virgil.

As Barton, and Virgil before him, reminds us: it takes hard work to win results. The balanced scorecard for sourcing promises a lot – to determine, measure and manage a set of predictable outcomes. But, like most treasure, it is the thing of whispers. There’s actually not much of a map to it, and only few have enjoyed its largesse. Indeed, the lack of a structured scorecard may have led a number of organizations into the poorly scrutinized, headline-making sourcing contracts with which the industry is, sadly, all too familiar.

Though constructing a balanced sourcing scorecard involves a degree of soul searching and rigor, the rewards at the end of the process are considerable. The following Top 5 guidelines will help you to construct a scorecard for your next sourcing transaction.

1. Create a map to flesh out the sourcing strategy. Use an established model that is based on the proven multi-dimensional Kaplan and Norton scorecard construct as the skeleton upon which to attach the meat of your sourcing scorecard. Resist attempts to change this established structure; it works. Allow it to prompt the right thinking.
   
   
2. Measure activities not outcomes. Objectives are about outcomes, and strategies are plans for achieving those outcomes. Measure the activities that underpin your strategic plans. Acknowledge major challenges, address tricky fundamentals and question entrenched patterns of behavior. The result should be a set of activities and associated measures that manage obstacles and create competitive advantage for client and service provider.
   
   
3. Guide the pre-contract process. A good deal of form and rigorous strategic thinking in the pre-contract phase is imperative to establishing fundamentals. Pre-contract deliberations will inform a great deal of the transaction including the definition of services, the assessment of the service providers’ attributes, the characterization of the type and term of the contract, the evaluation of the bidders and the definition of the service-level agreements (SLAs).
   
   
4. Manage the relationship during and after the contract. Your scorecard should underpin the delivery of services during contracting and beyond, guiding the business case requirements for both parties, value adds and investments in governance and innovation. Base SLAs on operational strategies rather than off-the-shelf norms. Use your balanced scorecard as a tool for continual relationship improvement, using inputs from senior managers from both the client and the provider that yield actionable improvement items.
   
   
5. Manage the provider’s operations. Providers need to confront the high stakes challenges of today’s competitive environment. They face margin-squeezing shifts in supply and demand, advanced cost and delivery models, new and powerful market entrants, general supply “switchability” and an increasingly savvy buyer. The scorecard produces a coherent analysis and measurement framework to help provider align its business to these fundamentals, devising go-to-market strategies, rebalancing costs, prioritizing investments and building capabilities.

As on the sports field, discipline and hard work will pay off in the competitive sourcing marketplace, especially with an expertly structured balanced scorecard. For more information, contact Ed Tann, Director, ISG, at edmund.tann@isg-one.com or +44 7769 977530.

Lessons Learned from the 2011 TPI Momentum Geography Report

By Paul Reynolds, Chief Research Officer, TPI Momentum

Every region of the world experienced significant outsourcing developments in 2011. The TPI Momentum 2011 Market Trends & Insights Geography Report found that global developments are increasingly connected. The natural and nuclear disasters in Japan, political upheaval from the Arab Spring in the Middle East and Africa and the continuing debt drama throughout the euro zone all impacted outsourcing decision-making far beyond those regions.

Here are the Top 5 highlights from the report:

1. The continental divide is growing. In 2010, for the first time, companies in Europe spent more on outsourcing than those in North America. That trend continued in 2011, as spending in the EMEA region rose four percent, led by stronger growth in Europe, while outsourcing spending in North America fell six percent and is now at the lowest level since 2006. Spending in the Asia-Pacific region reached a record high following nine percent growth.

2.  Currents are changing for offshoring. Long-held attitudes and trends toward offshoring are changing, in both directions. During 2011 clients facing contract negotiations around the world generally were more open to offshoring. However, clients in three of the largest markets – the U.S., U.K. and Canada – bucked this trend. Several high-profile U.S. and U.K. companies repatriated work that had previously been offshored. U.S. and Canadian companies exhibited growing preferences to keep outsourced work within their countries, often because of sensitivity about data security or offshoring in general.

3. The fast-changing world slows down decision making. TPI has observed that the current events that dominated world news in 2011 are also causing companies to slow their outsourcing decisions. Companies throughout Europe, and those around the world who do business there, are moving cautiously while the Greek debt crisis, the future of the euro and other macroeconomic issues play out. The natural and nuclear disasters in Japan had a major effect on business operations and planning. The Middle East and North Africa had been gaining ground as an outsourcing service destination, but, following the Arab Spring, businesses are waiting to make major commitments to the region until the political and business environments stabilize. Outsourcing decision making also slowed in the large banking and diversified financials industries because executives were highly focused on global financial conditions and preparing for the new capital requirements in the Basel III agreement that will take effect around the world.

4.  Clients want more without paying more. Clients around the world are renegotiating existing contracts, converting sole-source engagements into multisource arrangements and asking service providers for more services and lower rates. While this type of activity is typically associated with experienced outsourcing clients, it is occurring in mature and emerging outsourcing markets alike.

 5.  Change rearranges the top. The United States surpassed India in 2011 as the top-ranked country on the TPI Momentum Outsourcing Viability Index (OVI).^™ Though costs and labor competition are rising in India, it remains a leading outsourcing destination, ranking second worldwide on this measure. Rising costs also caused the Philippines to slide in the OVI, from fourth to seventh. Other changes in the top 10 include Canada rising two positions to fifth and Egypt falling from 10 to 16. The OVI ranks 51 countries on six dimensions that measure the country’s suitability to support outsourcing.

The biggest takeaway from the TPI Momentum 2011 Market Trends & Insights Geography Report is that outsourcing feels the impact of political and economic developments beyond national borders. The complete report includes regional overviews plus individual chapters on 21 countries that discuss market developments and drivers in detail. To learn more about it click here or contact Paul Reynolds, Chief Research Officer, TPI Momentum, at +1 508 625 2194.

Keys to IT Process Maturity

By Chris Pfauser, Principal Consultant, Compass

CIOs seeking to optimize operational efficiency often rely on strategies and frameworks such as ITIL and COBIT. But deploying a process improvement initiative or set of tools isn’t enough.  True enterprise-wide process maturity is characterized by clearly defined activities, functions, roles, and responsibilities. This enables the IT organization to quickly address performance issues, identify root causes, and prevent recurring problems. Perhaps more importantly, process discipline enables demand management and flexible, usage-based pricing – essential components of cloud and utility computing models.  

Here are the Top 5 keys to a successful IT process management strategy:

1. Documentation and transparency. Many organizations have pockets or islands of process maturity.  But, like chains, enterprise-wide processes are only as strong as their weakest links.  End-to-end clarity into process flow is needed to identify where and why problems and issues occur, and how best to address them.  Without this clarity, IT defaults to its traditional silo-based approach of managing the desktop or the mainframe, without an understanding of the overall system and end-to-end service.
   
   
2. Ownership and accountability. A common problem with process frameworks is that they allow individuals to use rules and guidelines to pass responsibility along down the line. The result: a “hot potato” culture where activity is defined and documented but little actually gets resolved. Commitment from IT and the business is needed to ensure key processes have owners who are responsible and accountable for results.
   
   
3. Meaningful metrics. Top-performing organizations are refining their metrics and key performance indicators to measure the end-to-end process and improve results, rather than simply track activity. The basic question is, “What are all the activities and approvals that happen between ‘I want’ and ‘I have?’” In this context, “time to resolve” is more effective than the traditional “time to respond” as a key IT functional metric.
   
   
4. A clearly defined service catalogue. A specific understanding of the composition and cost of each unit of IT service allows the business to see what’s being consumed and enables IT to see what’s being delivered, through an IT service catalog and a business service catalog. This understanding establishes a critical foundation for IT demand management.
   
   
5. Pricing tensions. Once service units are clearly defined and priced, it becomes possible for the business to see the cost implications of their choices regarding IT usage. This visibility serves as an incentive to drive smarter consumption decisions by the business, and more efficient delivery by the service provider.

Contact us for more information on IT process maturity.

Reinventing Procurement as a “Go-To” Organization

By Michael Kushner, Director, CFO Services, TPI

No other department has as much reach both internally and externally as procurement. It supports every department and employee in the company, commits significant financial obligations on behalf of the company and has the ability to view and manage consumption. And yet, in most companies, procurement is not seen as the “go-to” department. A variety of challenges can dull its reputation, but it is possible to turn these negative perceptions on their head.

Here are the Top 5 essentials to make procurement a “go-to” group:

1. Find a strong leader. An effective procurement leader is NOT a procurement person – s/he is a sales and business leader who focuses on business objectives, leveraging procurement skills as a means to support them. An effective leader will build buy-in from the business, demonstrate a “service” mentality to foster a culture that enables the business units, and will develop people even as roles change.
   
   
2. Create a meaningful set of goals. A vibrant procurement organization will know what the department stands for, what it is trying to accomplish, and what to communicate to the business units and service providers. While the group’s objectives will include cost reduction and savings reported, more importantly, the goals need to align with the company’s larger imperatives and demonstrate how procurement enables the business units to deliver on the company’s mission.
   
   
3. Establish C-suite support. Procurement needs a consistent executive message that declares its significance to the business imperatives. Executive-level support provides a credible platform for procurement to demonstrate its value and build buy-in from the business. To maximize results for the enterprise, business unit executives should invite procurement to business unit meetings and department planning sessions.
   
   
4. Motivate individuals. Empower members of the procurement team to be in charge of their decisions and their relationships, and the business units will want to work with them. Well-developed roles and activities will give the team members a sense of ownership of their actions and the outcomes they generate. Align goals for individual employees with the procurement group’s goals to drive the appropriate team actions. 
   
   
5. Build a good reputation. Procurement needs to execute consistently and market itself, reaching out to the business units and sharing success stories. Let people know you are the group to call when they need to get something done, and the team will become recognized as a partner for the business units. Once a good reputation begins to take hold, it will snowball, driving more procurement demand from the business and more interest from people who want to be a part of the team.

For procurement groups that can reinvent themselves, a domino effect brings other positive changes. Attrition will increase as other parts of the company look to hire people from the team. Demand to get into procurement will increase as colleagues realize its broad reach and influence. And business unit demand will increase, driving the need to assess procurement’s growth and focus.

For more information about how to turn your procurement department into a “go-to” group, contact Michael Kushner, Director, CFO Services, TPI at michael.kushner@tpi.net or +1 435 327 2349.

Security vs. Flexibility: Finding the Middle Ground for Offshore Captive Delivery Operations

by Dinesh Goel, Partner, ISG

An offshore risk mitigation strategy is essential to achieve the intended objectives of a captive delivery operation’s security program without compromising the confidentiality, integrity and availability of the parent company’s information. Many parents treat their offshore captives as extensions of their business units, rather than just secluded offshore units, and expect the captives to guarantee the same level of security controls and flexibility as the parents.

However, captives often experience challenges with implementing flexibility in access to the IT systems adopted by their parents without customizations to certain protocols such as the use of Internet, access to social networking sites, and access to mass storage devices. These issues can be complex, especially in healthcare or banking where offshore captives have to deal with sensitive and confidential information amid strong regulatory oversight.

Here are the Top 5 areas that must be considered if the parent unit hopes to extend its level of flexibility to an offshore captive environment: 

1. Evaluate the suitability of internal controls for offshore operations. Assess whether the parent’s existing security controls, internal policies and procedures, personnel controls, and physical and network controls are robust enough to be replicated “as is” i.e., without customization for an offshore captive environment. Your assessment will need to clearly delineate what proactive measures or steps need to be taken in case of an unplanned event or deviation. Be cognizant of risk to your organization’s reputation, and have a well-defined risk mitigation plan.
   
   
2. Pay attention to people. Focus on your people and understand the nuances specific to attrition, background verification checks and the use of subcontractors in the captive operations. Understanding the difference in personnel profiles, backgrounds and behavior patterns helps with contrasting those from the parent unit and determining any specific requirements for customizations. For example, you may find that you need to adopt a background verification process more comprehensive than one followed by the parent unit. A rigorous process usually covers areas such as educational background, previous employment, credit status, criminal record and drug screening. Similarly, you should implement stronger controls when using subcontractors in the operations.
   
   
3. Notice the local flavor. Understand the security and flexibility practices adopted by similar companies or captives in your locale. While it may be at odds with what is taken as the norm for the parent, this will provide an objective view of the "as-is" applicability of parent controls in a given offshore captive environment.
   
   
4. Foster a culture of security. Given the rapidly changing security environment and emergence of newer sources of security risk, firms need to move away from assessing the effectiveness of an offshore risk strategy simply by the number of security controls in place. Focus on creating a culture of security where people don’t need to be reminded about security controls but rather understand their relevance and significance and follow them naturally.
   
   
5. Train, train, train. Conduct regular and refresher courses on security and industry-specific security practices. Schedule training by frequency and level. Focus on measuring the effectiveness of your training programs through periodic tests and regular feedback sessions.

The seasoned offshore captive experts at TPI can help you achieve your enterprise sourcing goals through objective advice, knowledge of your industry and deep on-the-ground experience. For more information please email Dinesh Goel or phone +91 98458 93787.

New TPI Research: Baby Steps for BPO, Giant Leaps in ITO Spending

By Paul Reynolds, Chief Research Officer, TPI Momentum

Some service delivery trends and emerging client preferences were consistent across the eight specific outsourcing services lines examined in depth in the just-released TPI Momentum 2011 Market Trends & Insights Service Line Report. Buyers of ITO and BPO services alike want access to emerging technologies and service delivery options, including mobile device support, Cloud Computing and X-as-a-Service. Clients are also challenging service providers to create functionality, features and services that are tailored to their specific industry.

Changing preferences for new technologies and services didn’t stop the market, as outsourcing interest and contract activity were strong in most segments. There were a record number of BPO contracts awarded in 2010, and ITO spending was at an all-time high thanks to heavy network spending.

Here are the TPI Top 5 highlights from the TPI Momentum 2011 Market Trends & Insights Service Line Report:

1. Business process outsourcing (BPO) is attracting new clients. A record 759 BPO contracts were awarded in 2010, 20 percent more than the previous year. Many of these contracts (encompassing Contact Center Services, Finance & Accounting [F&A], Human Resources Outsourcing [HRO] and Procurement) were for limited engagements for small companies who are cautiously investigating outsourcing. New interest was especially strong in Procurement, F&A and HRO. Despite the heavy contract volume, total spending in 2010 was down 12 percent from 2009.
   
   
2. Strategic considerations slow ITO. The ITO market seemed to pause in 2010 while clients reassessed their information technology strategies. Contract award volumes declined from 2009 in part because clients were heavily engaged in evaluating options and setting plans and policies regarding mobile devices, applications and security, virtualization, Cloud Computing and other issues. ITO contract awards rose 1.6 percent in the Americas while experiencing sharp declines in the EMEA and Asia Pacific regions. The Managed Network Services service line was the unquestioned strength of the ITO market in 2010 and was buoyed by heavy telco-to-telco spending.
   
   
3. Clients are bundling up. 2010 saw a decided shift in the ratio between standalone and bundled contracts  as clients opted for more bundling of services. In ADM, Cloud Computing and F&A service lines, in particular, companies are adopting portfolio bundling, in which separate bundles of contracts for outsourcing are created in both business and technology domains. The preference for portfolio bundling and vertical niche expertise is fueling the momentum for multi-provider sourcing. Clients also bundled when they renegotiated contracts or added scope.
   
   
4. Mobility is moving the market. The general business trend toward more mobility is affecting the outsourcing industry in several ways. Demand for mobility has the most clear and direct impact on the End-User Computing service line because service providers need comprehensive solutions for supporting an ever-growing range of mobile devices. ADM service providers are increasingly called on to develop mobile apps, and network operators need to manage more traffic. Client executives want mobile access to various business applications and performance dashboards, resulting in needs for BPO service providers to address.
   
   
5. (Expert) help wanted. Clients strongly valued expertise in their vertical industry when selecting service providers in 2010. They want solutions that are tailored to their industry or business process rather than general, “off-the-shelf” offerings. Clients also prefer strong value innovation, including Cloud Computing or other emerging platforms for service delivery. Cloud Computing is now sought after both as a transformational and as a cost-reduction mechanism. Additionally there is preference for “business-process-as-a-service” solutions, in which entire functions such as payroll, recruitment and others are procured over a platform on a pay-as-you-go basis.

The complete TPI Momentum report includes individual chapters for each service line that cover these and other developments in detail. For more information contact Paul Reynolds, Chief Research Officer, at paul.reynolds@tpi.net or +1 508 625 2194.

How to Keep Visa Restrictions from Delaying Your Transition to Global Service Delivery

By Ian Watt, Director, TPI, and Kathy Welch, Senior Advisor, TPI

Implementing a global service delivery model typically requires rapid mobilization of resources. Historically, global service providers have relied on a variety of visas to meet clients’ demand for skills and aggressive deployment schedules. However, this approach is becoming increasingly untenable.

Organizations in the United States planning significant change initiatives could see their projects delayed by staffing shortages due to current restrictions on visas for foreign workers. A contingency strategy is essential, therefore, to adjust for delays in bringing service provider resources on board.

Here are the TPI Top 5 key elements of a prudent transition contingency plan:

1. Plan for delays to impact knowledge acquisition and knowledge transfer processes. The time between assignment of offshore resources to arrival in the U.S. that has been traditionally 2 to 4 weeks is now 4 to 6 weeks. What is worse, you have to expect that some resources will be denied visas, requiring added flexibility in knowledge transition planning.
   
   
2. Develop resource acquisition fallback options. Resource mobilization delays are inevitable, so adjust your internal staffing plans accordingly. During a transition, some subject matter experts (SMEs) will leave the company absent financial incentives to stay on and help. A lag in service provider transition resources can mean higher “stay” bonuses and SME costs. These all directly affect your bottom line, diminishing the value of the transaction.
   
   
3. Find better ways to leverage technology and connectivity. Collaboration software and document sharing have a cohesive effect on virtual teams. Focus on integrating collaboration tools immediately. Setting up the appropriate connections is never as easy or as quick as it appears to be.
   
   
4. Concentrate more transition work offshore. In some situations, the typical transition model can be inverted so that U.S.-based resources move offshore to work side-by-side with offshore team members at the service provider’s site. This can keep transition on track while improving cross-communication. Moreover, you can gain insight into how things actually work offshore, which will ultimately benefit the relationship.
   
   
5. Jointly develop a risk mitigation plan. The current challenges are not isolated to India-heritage firms. U.S.- and European-heritage service providers have also experienced problems with visa processing. Facilitate dialogue between your teams and develop mitigation plans for the entire service portfolio. Given the tight schedules of transitions, these plans should be reviewed and adjusted on a weekly basis.

For more information on transition services, including the possible impact of visa and immigration issues on your sourcing strategy, contact Ian Watt, Director, TPI, at +1 847 452 5897 or ian.watt@tpi.net.

Essential Building Blocks to Global Payroll Efficiencies

By Julie Fernandez, Director - CHRO, TPI

It seems so intuitive.

You have 40 payroll providers across 35 countries. Surely there are ways to consolidate vendors and contracts, stand up payroll in new countries, scale for growth, and have visibility into compliance and risk concerns with your employee pay. Right?? 

These TPI Top 5 tips from the trenches of global payroll will help you find and tap into those elusive efficiencies:

1. Skip the RFI. The global payroll market is no stranger to requests for information (RFI). The typical RFI is infamously all-inclusive, without nuance for large or small country needs and lacking a business case. RFIs consistently demand a world of fee estimates, which are seldom binding, ill-fitted for the all-inclusive scope, and dismiss numerous complexities. Payroll providers still feel obligated to respond, though RFIs are almost always sent too early and represent a client’s great idea turned into a fishing expedition with little mandate or funding.
   
   
2. Build your buddy list. Rarely is there a single owner for payroll in an enterprise. In most companies, payroll reports to HR in some countries and Finance in others. Payroll services and full time equivalent (FTE) resources can often get mixed in with staff and budgeted as part of the business unit’s in-country operations. Only your largest countries are “on the radar” of your procurement (payroll vendors) or IT (payroll systems) departments. Rather than distress over the lack of a single owner, take time to make a broad network of friends. All levels of the corporate organization chart need to buy in to the value of change, if only to be a better corporate citizen in a more strategic relationship. Forging new bonds in the company is important; beyond the challenge of adopting a new payroll is the even greater challenge of funding it.
   
   
3. Know your global platforms. Because payroll often runs on a shoestring, quantifying cost avoidance is critical to building your business case. Get to know your HR information systems, timekeeping, and general ledger platforms, as they all interface with payroll. Corporate projects to expand these platforms means that there will be development and maintenance costs associated with their touch points to payroll. Be able to estimate the savings from these interfaces to prove your case for change.
   
   
4. Point to leakage. Sadly, the business case for payroll often depends largely on business value that is not easily accounted for in the reduced budgets of payroll operations. By far, the biggest opportunity for savings comes from abating “leakage” of payroll dollars to overpayments, retroactive changes, error corrections, and financial controls that decrease compliance and financial risk. Unfortunately, no magic formula will quantify leakage. Find the types of leakage occurring in your current payroll model, and look for isolated, known examples that demonstrate its magnitude. TPI has the tools to help you approach business value and to find your most viable business case alternatives.
   
   
5. Identify regional champions. One size does not fit all in a global payroll strategy; accordingly, the governance structure should span corporate, regional, and local levels of the organization. When setting up your governance program, be sure to define how small countries participate as part of their regional teams for both in-house and outsourced payroll models. Identify resources that already function in a multi-country or regional fashion, and if you truly have nothing in place, consider using your global payroll project team to begin tapping resources to assume broader geographic roles.

As you consider the five building blocks of a more efficient payroll model, remember that progress is not defined by your ability to push all countries into a single system, single vendor, or single model. Progress happens when you can articulate your strategy and build a business case that makes some part of your strategy actionable.

For more information or help with global payroll strategy, service provider identification, and your global payroll RFP and business case, contact Julie Fernandez, Director — CHRO, TPI.

 

Selecting a Sound Sourcing Location Amid a World of Change

By Dinesh Goel, Partner, TPI India

As service delivery destinations have become increasingly globalized over the years, selecting the optimal location for a sourcing engagement has become a more and more complex process. While the number of possible locations has grown dramatically, each destination is also busy self-promoting, creating a competitive atmosphere that further magnifies the difficulty of your decision.

What might appear to be a relatively straightforward choice based on general awareness of popular countries and cities, selection is — in reality — a much more nuanced process that requires ever-more-careful consideration.

Here are the TPI Top 5 considerations for selecting your next sourcing location: 

1. Risk. Amid ever-increasing economic and geopolitical uncertainty, risk assessment is critical in selecting an outsourcing location that ensures business continuity. Thorough risk assessment requires an objective, detailed review of the economic, political, civic, and natural calamity-related characteristics of each location.
   
   
2. Human capital. The availability of the talent pool in a specific location will determine the scalability of your sourcing operation over time. Deep insight into the suitability of offshore service delivery potential, the level of training required, and the demand-supply balance in terms of density of offshore employment will help you make the best decision.
   
   
3. Infrastructure. Infrastructure can play spoilsport when ensuring a robust, secure, scalable and dependable operation. Determining the state of the current physical and technology/telecom infrastructure, the historic level of investment in infrastructure and a realistic sense of projected investments are all vital to your final destination decision.
   
   
4. Maturity. Understanding a specific location in the context of the entire offshore service delivery industry will help you assess and define its current maturity level. It’s important to gauge the industry as it has developed over time: how it has progressed over the past five years, its relative current state, and its likely future state. In some countries, such as India, domestic sourcing is growing rapidly in some delivery locations that were traditionally considered “offshore,” further adding to the maturity and complexity consideration of your location decision.
   
   
5. Cost. Last, but not least, in establishing the business case for your location selection, take into account the delivery cost per full time equivalent (FTE) or per transaction. Given the rapidly changing dynamics of various locations around the world, it is essential to understand the “go forward” view of your overall cost. Wherever you ultimately elect to go, you don’t want to revisit that decision in the near future.

The global service delivery experts at TPI are experienced in helping clients assess their global sourcing needs and select the optimal location(s) to pursue. For more information on selecting your outsourcing location or any other global service delivery question, contact Dinesh Goel, Partner, TPI, at dinesh.goel@tpi.net or +91 98458 93787.