Consider the Source

The IT Consumerization Challenge – and Opportunity

By John Lytle, Consulting Director, Compass

The “consumerization of IT” – or the Bring Your Own Device (BYOD) trend – has emerged front and center, and a lot of CIOs aren’t very happy.  A recent article in Computerworld calls it a “thorn in the side” of most IT departments, and cites complexity, support, and security concerns.

Like it or not, employees are purchasing iPads, Blackberries, iPhones, and other devices and using them for work-related purposes.  One question CIOs need to ask themselves is, “When do I start caring?” Specifically, what policies should be defined and enforced around who can use what kind of device for what kind of activity – be it messaging or collaborating, accessing corporate networks, etc.?

Another set of considerations revolves around the basic question: “How do I support these devices?” If they haven’t been already, CIOs will be tasked with providing mobile access to company information. If you have character-based legacy applications rather than browser-based applications, it will be a lot more difficult to support mobile devices. Meanwhile, telling the folks in the Boardroom that they can’t access sales figures on their “executive jewelry” devices isn’t a viable option.

The consumerization issue also affects infrastructure: how good is your network’s perimeter security? The influx of mobile devices could impact your entire network strategy. Consider the question in the context of how will you manage “data in motion;” in other words, your companies IP, client data, etc.

While discussions around IT consumerization tend to focus on the various headaches it causes IT, it also provides an opportunity.  I’m having more and more conversations with CIOs who are concerned about building their operational defense plan, about managing their legacy applications and rationalizing their portfolios.  They’re looking for a good understanding of overall staffing and support costs, and how to pull together their shared services and sourcing strategies.  Ultimately, they need to understand what they’re spending and what they’re getting.

In this larger context, the IT consumerization challenge can help you take on these big picture tasks of IT operational strategy.  So, rather than a putting-out-the-fire exercise, the imperative to effectively support mobile devices can become part of your strategic plan to transition the enterprise from where is now to where you know it needs to be.

What do you think? Is IT consumerization keeping you awake at night? How are you dealing with it?

Waiting for the Innovation Fairy

By Max Staines

If you expect something, you should have some way of knowing whether or not you get it.

A sizable portion of IT executives seem to be missing that point.  According to a recent survey cited in CIO magazine, “67 percent of IT leaders say they rely on outsourcers to turn ideas into new and improved processes, but just a third actually measure the impact of innovation delivered by their service providers.”

Sounds like a recipe for disappointment.

The survey, conducted by the United Kingdom’s Warwick Business School and sponsored by offshore outsourcing provider Cognizant, also found that most CIOs would welcome some sort of framework for innovation, and half would be willing to pay more for such a framework.

From Compass’ perspective, a process for measuring innovation has to address some basic questions, including:  

• What’s my current state?
• What’s the potential benefit of the proposed innovation or improvement?
• What’s the investment, risk, and change involved to implement the initiative?
• What are the alternatives to the proposed change?
• What will we need to manage the future state?

A broader consideration is to make a distinction between productivity improvements on the one hand, and true innovation on the other.  Client organizations and service providers will admit they often make unrealistic demands for (and promises of) both. Yet true game-changing innovation requires specific mutual incentives that allow both parties to envision the art of the possible and work towards a transformative future state.

That’s a very different proposition from optimizing the efficiency of the existing environment. 

Bill Huber, a TPI Partner and Director of CPO Services, suggests building a certain number of consulting hours into service provider contracts that are devoted to identifying and exploring truly innovative ideas. Gainsharing incentives can also be effective, as can governance frameworks that include a specific focus on tracking the introduction, acceptance, and lifecycle of innovation initiatives.  (A recent column in Global Services magazine discusses TPI insights into innovation, specifically in the BPO space.)

To put the improvement vs. innovation distinction into perspective, consider the business world of 100-some years ago.  When efficiency-minded organizations were equipping messengers with bicycles to increase productivity, a few saw an opportunity to make a step change with this new telephone thing.

What were the telephone people doing differently?

Value of Sourcing Advisors, Advised Deals Discussed at SSON “G6 Panel”

by Bill Huber, Partner & Director - CPO Services, TPI

Do sourcing advisors add value? This was a question posed to a panel of service provider executives at the IQPC Shared Services Outsourcing Week (SSOW) conference in Orlando this week.

The panelists from Accenture, Genpact, Infosys, CSC and TCS offered their candid and sometime pointed perspectives on whether advisors enhanced or stifled innovation and accelerated or delayed reaching a deal. Several of the providers expressed their preference for unadvised deals.

Granted that there are some advisors who fit all of these descriptions; but the fact is that service providers have always been motivated to prefer unadvised deals to advised deals. This is rational self-interest on the part of the providers, as unadvised deals often can tip the scales in favor of the providers. Service providers are in the market doing deals all the time and thus better understand the economics and risks of a transaction than a client who has much more limited knowledge of the market.  Additionally, the involvement of an advisor increases the probability that an outsourcing relationship will be sourced competitively. 

All service providers prefer a single source transaction. Sometimes this is okay, and an unadvised deal can turn out well. However, the majority of failed deals are either unadvised or have been negotiated with advisors who are willing to short-cut appropriate deal discipline to get a “strategic” deal signed in an unrealistically short timeframe. Regular industry watchers can all rattle off a list of deals that fit these characteristics.

The fact is that good advisors create value by ensuring that the deal economics are sound to both the client and the service provider and are priced competitively with the market; that service levels are aligned with client outcomes; and that financial structures and incentives are designed to achieve the client’s objectives for the relationship. The best deals also are structured to foster innovation and transformation, but such structures must ensure measurable outcomes — not merely reflect promises or good intentions.
Lastly, the best advisors also serve to educate and guide their clients on the art of the possible in terms of strategy and transformation; the real (vs. advertised) capabilities of the service providers; and the risks and pitfalls that are present even in good deals and how best to mitigate them through effective change management, transition and governance.

One panelist, a high-level executive of a multinational service provider, affirmed this, pointing out that good advisory services are not merely about tools and templates but about the softer elements that need to be considered when guiding a customer through the complex dynamics of outsourcing, all of which help clients to achieve more predictable outcomes. Another executive of a well-known provider pointed out that, similar to any industry, sourcing advisors need to continually innovate, and as the best advisors help their clients to build their internal sourcing capabilities, they are able to build on this internal expertise to help take their clients to the next level of strategy. A third panelist underscored this, pointing out that with a strong advisor, the probability of a deal coming to fruition was greatly increased.

The bottom line is that a smart client should select its sourcing advisor not only by the reputation of the advisory firm, but by the proven ability of the individual advisors who will be guiding them on the path to transformation.

Surviving — and Thriving — in an “Overnight” Outsourcing Transformation

by Cynthia Batty, Director, TPI

 

Something is changing in the outsourcing universe. We suddenly see companies that have never outsourced before becoming deeply engaged in multiple concurrent outsourcing transactions. It is happening because these companies have an imperative to transform their organizations "overnight."

So they are undertaking these transformations by outsourcing functions such as information systems, transaction processing, Finance & Accounting and Human Resources — all within a very few months of each other. 

 

Rapidly transforming companies have learned from mistakes of the past and want to talk about Governance, but they assume that"Governance" and the roadmap to success are completely mature. This leads to a phenomenon of "Governance in an Hour" or its related cousin, "Governance on One Page," in which the speed of change overwhelms the ability of the organization to address fundamental decisions, structures and processes that will enable the transformation.

 

 

If you recognize your organization in this scenario, consider these TPI Top 5 tips for companies coping with overnight transformation through outsourcing:

 

1. Make sure you have established clear accountability for the outsourcing relationships at all levels of the enterprise. We see companies trying to matrix responsibilities as they design their Governance of complex transformations. That is understandable, but a matrix reporting structure can obscure accountability. The service provider is responsible to deliver the services; but YOU are accountable for ensuring that you receive the services. Identify a clear line of accountability from a service to an executive who is a genuine stakeholder in the outcome to ensure that the service accountability does not get lost in the transformation.

 

2. Establish enterprise roles and responsibilities early in your transformation. Corporate functions are significantly affected in outsourcing, particularly Procurement, Risk, Security, Legal, and Audit. Leaving role definition until later in the process can stall important development of the Governance approach and can impede the development of an Outsourcing Center of Excellence.

3. Invest in a Governance data and workflow system. Most companies that are more mature in multisourcing are still using Microsoft Excel and Access to manage their data and workflow at great human cost in both hours and fatigue. Resist this approach. Software to manage these areas is maturing rapidly. A true Governance data and workflow system will pay for itself in a year and free your Governance team to focus on work, not on spreadsheets.

4. Seek out and listen to experienced colleagues in other companies. To paraphrase a well-known quote about childrearing: "Once upon a time I had five theories about outsourcing, but no outsourcing. Now I have five service providers and no theories." Outsourcing will change everything about the way your company works, forever. Ask people who have been through it.

 

 

5. Follow your instincts to conduct meaningful organizational change management — and have a plan to look back. Companies undergoing rapid transformation have a very high risk of changing too fast for the organization to absorb the changes. Transformational outsourcing is not a popular choice for change; your program must include the vision of what your organization is changing into, the detail for the organization to see and live in the new world, and a program for following up to make sure the transformation stuck.

TPI Governance Advisory Services experts can help you achieve your organizational goals through objective advice, knowledge of your industry and experience with arrangements from simple to complex.

Contact Cynthia Batty, Director, TPI, to learn more. 

Tips for Using Transformational Sourcing to Capture Lost Value

By Greg Blount, Partner ― CIO Services, TPI

When you developed your sourcing strategy it probably had several key elements articulated in order to  achieve the resultant business case. In the end, were you able to execute against the entire plan, or did you achieve objectives only in specific areas?

The days of the lift and shift of assets and people are long gone. If there was not a fundamental transformation occurring, we were simply moving from high cost to low cost and showing significant savings. These solutions in most cases still had fragmented governance, non-integrated organization models, limited to no change management, and transitions that in some cases took twice as long due to lack of methodology and organization commitment.

Today we have to be smarter about sourcing and how to capture lost value. Today’s “transformational sourcing” framework is designed to ensure that our clients can enable long-term value and sustainability. With this higher order of sourcing, investing in sourcing management, change management and re-tooling resources — in addition to transferring risk to service providers, designing optimized organization models, and defining enhanced IT governance processes — are all imperative for achieving greater value and sustainability.

Here are the TPI Top 5 tips for IT executives looking to determine how to capture lost value or maximize value through transformational sourcing:

1. Implement a clearly defined organization structure that has minimal overlap of roles between the client and service provider.
2. Invest in the organization, tools and processes to implement a centralized sourcing governance model that has clear separation of duties between the operational groups.
3. Ensure that the leadership team is highly experienced and can manage to the outcomes along with having a clear vision of success — not a vision of the past. Change management is key to driving the new model’s culture and behavior.
4. Implement a well-defined set of IT governance processes that establish solid demand management, forecasting and decisioning processes.
5. Conduct a comprehensive roles and skills analysis to ensure you can move the best talent into key roles, and establish a training program to evolve personnel into new roles.

TPI’s seasoned transformational sourcing experts can help your company define the right strategy through our experience, objective advice, industry knowledge and depth in all aspects of information technology and business process services.  To learn more about evolving to transformational sourcing, e-mail
Greg Blount, Partner - CIO Services, TPI, or phone him at +1 214 616 0204.

Considerations for Emerging Technologies in Your Sourcing Strategy

by Fred Croxton, Director, TPI

There are a number of commonly accepted models for the adoption of emerging technologies and the most effective manner for the organization to consider, test and deploy them. Generally there is a “trigger event” followed by building expectations, then disappointment and eventually a period of more pragmatic expectations and realizable productivity. Here are the TPI Top 5 considerations for how the technology adoption cycle may impact your sourcing strategy:

1. Rationalize technology adoption with your service provider integration strategy. More enterprises these days are employing smaller, more segmented sourcing transactions (along “tower,” region or business units), and hence managing three, four or more outsourcing relationships versus one large one. While there are clear advantages to such a strategy, there are also inherent governance challenges. Make sure you consider expectations for your sourcing partner(s) for their role in adopting and deploying new technologies and have contractual mechanisms in place to enforce these expectations.

2. Leverage SOA investments to rapidly integrate new services. Although service-oriented architecture (SOA) is one example of technologies featured in most views of emerging technologies, it is well along the “slope of enlightenment” and is already embedded inside many organizations. For those with a reasonably developed SOA strategy in place, you would do well to consider how to leverage this architecture to more quickly plug in selected technologies and how to deploy them in the form of services for a quick return. This is, after all, one of the reasons for embarking on the SOA journey.

3. Take a long-term view toward innovation. Clients frequently have inflated expectations of provider-driven innovation as they enter a new sourcing relationship. After all, “they do this all the time, so they should be the experts.” As a practical matter, innovation is difficult, and service providers may be much more consumed with driving down delivery costs than identifying opportunities for real innovation. Look at your governance mechanisms and how you will manage expectations for your sourcing partners to identify, test and introduce new technologies into your organization. Be realistic, and don’t give away the “family jewels” as far as business-driven opportunities for innovation. Consider an “innovation steering committee” comprised of a cross-section of business/user representatives that emphasizes “influential and visionary” contributors as much or more than seniority.

4. Don’t forget “end of life” strategies. Nearly as important as your adoption strategy of emerging technologies is having a clear strategy on retiring “end of life” technologies. For example, cathode ray tube (CRT) monitors are expected to reach end of life within a year or two. Such an installed base may represent a significant investment in physical retirement and disposal of the asset (especially considering today’s “green” movement) as well as replacement cost. Make sure you have practical alternatives baked into your sourcing strategy for end of life strategies. Schedule timely reviews with suppliers of technology assets and build deployment and retirement plans into your agreements.

5. Consider the impact of “transformational” technologies on your sourcing relationships. Emerging technologies may be viewed as “transformational” or “modestly impactful.” “Transformation” itself could arguably be considered a form of “hype,” but in the best of sourcing relationships it can have a real and measurable impact on resource consumption and spending (e.g., server consolidation). Be sure your sourcing relationships have appropriate safeguards built in to protect against punitive revenue commitments.

TPI’s experts can help you achieve an objective assessment of your strategy for managing technology change. We provide objective, risk-balanced, and forward-oriented strategies for sourcing relationships. Contact Fred Croxton, Director, TPI.

Order to Cash Outsourcing - 5 Reasons Why It’s a Trend to Watch Today

By Art Shanfeld, Senior Advisor, TPI

Order to Cash (OTC) outsourcing has typically been on CFOs’ lists of “potential outsourcing opportunities,” but it has not risen to the top of the list until recently. TPI is seeing more interest and activity in OTC outsourcing this year in spite of - and possibly because of - the depressed economy.

Several emerging trends in OTC are catching CFOs’ attention and changing their priorities on that list of outsourcing opportunities. These are the TPI Top 5 reasons why OTC is growing in popularity:  

1. The shift from function-based to process-based (“end-to-end”) outsourcing. In the past, OTC outsourcing solutions have focused on just two or three functions within the OTC process (e.g., credit, collections or cash applications). But in the past few years, sourcing service providers have invested in developing “end-to-end” OTC capabilities that offer integrated solutions (tools and processes) across order management, credit management, invoicing, cash application, dispute resolution and reconciliation and analysis. These end-to- end capabilities drive higher efficiency in transaction processing as well as resolution of order entry mistakes, pricing disputes, billing errors and credit or collection issues. The benefits of transparency and accountability that come with service provider investments in end-to-end capabilities are paying off with increased buyer interest and confidence.

2. Shifting buyer interest from offshoring to transformation. The “lift and shift” model has been the backbone of most OTC solutions and has driven cost savings for most companies. Most service providers have established networks of offshore centers with the technology and telecommunications infrastructures that are necessary to support customer requirements. Separate from and beyond offshore capabilities, though, some service providers have made investments to quickly broaden their offerings by making strategic acquisitions of niche companies with deep OTC capabilities. These providers have combined the proprietary tools and methodologies from those acquisitions with their other service delivery resources and capabilities to provide robust OTC transformation capabilities to their customers. The providers are offering much more than just “labor arbitrage” and are differentiating themselves from their competitors in the early stages of customers’ RFI/RFP processes.

 

3. Increased focus on customer service requirements. Buyer concerns with service provider offshore capabilities in customer service and support are not uncommon, given the language barriers and timing in getting issues resolved. This sensitivity is particularly high for companies that require higher levels of customer communication and contact. Given these sensitivities, TPI is seeing situations where customers are choosing onshore and nearshore solutions to gain better support and higher customer satisfaction (internal and external customers) by foregoing higher-level cost savings from offshore options. 

 

4. Shift from customized to standardized OTC solutions. As part of the drive to “end-to-end” OTC outsourcing solutions, service providers are leveraging their investments in technology by pushing to their customer bases standardized tools and methodologies that require lower costs to implement and maintain. This trend will likely take hold in the more transaction-based areas of invoicing and cash applications, while demand for more complex and customer-facing activities (such as order management) will still require higher solution customization. 

5. Focus on cash flow. Companies are evaluating OTC outsourcing opportunities with several goals in mind, including obtaining cost savings while balancing customer support and satisfaction requirements. A benefit that has always been part of the discussion is cash flow. Service provider capabilities to reduce days sales outstanding, to improve receivable agings or to reduce receivable write-offs have typically been a part of the “benefits” discussion. But with demonstrated end-to-end capabilities by service providers, the cash flow benefits are even better, more visible and more attributable to the changes and improvements brought by service providers’ OTC solutions. 

The net effect of these five trends is that OTC is not just one of the topics on CFOs’ lists of outsourcing opportunities . . . it is quickly becoming the area of focus.

 

TPI’s CFO Services experts can help your organization produce an objective assessment of your current sourcing strategy and develop a roadmap for your future strategy with objective, risk-balanced, and forward-oriented solutions for maximizing value during economic uncertainty. To learn more contact
Art Shanfeld, Senior Advisor, TPI.

The Optimus Primes of Outsourcing

Parents of young, robot-obsessed children will recognize Optimus Prime as the chief hero of the good guys in the Transformers line of toys, comics and the blockbuster movie now in theaters (other brand extensions hitting your pocketbook soon).

There's a neat synchronicity here: The most visionary companies are starting to recognize transformation as the hero of outsourcing, with the best service providers filling out the ranks of the good guys. This is no small vision, as the tide today is taking a great number of companies toward the offshoring model, as I wrote last week.

Part of what's great about the buzz about transformation in outsourcing is what it's not: "Transformation" has long been bandied about as "consultant speak," but the transformation that we're hearing more about is something bigger – and we're hearing it from clients and contacts, not consultants.

I've written previously about the increasing use of outsourcing to drive change around the scope of the deal itself – and beyond it: When services are outsourced, with attendant standardization and consolidation, that process serves as a catalyst to enhance how all the work that touches those services is organized and delivered. Clients are factoring these derivative benefits into their cost evaluations and giving the best service providers an opportunity to create broader benefits for the clients.

Now we're also seeing the truly visionary, ambitious clients look to outsourcing as a way to migrate older operations – systems, applications, and processes – to Brave New World models. In this new world, the contract is less about defining which assets are affected and more about capturing the emerging capabilities of BPO, software-as-a-service, and other models for improved efficiency.

For these firms, the essential make-versus-buy question is swinging toward "buy," because the alternative of carrying forward legacy operations increasingly is untenable: Can I modernize myself, or should I outsource – and structure the contractual terms accordingly – to produce real, fundamental change and to pay for services in a very different manner?

The Transformers – the companies and organizations really seeking fundamental change – are stepping up, looking to move beyond complex, costly, and confused legacy applications. They look like heroes to me, and I'm betting their own customers will come to feel the same way.

The Next Big (Vision) Thing

I’ve spent quite a bit of time in recent weeks with clients who are looking to outsourcing to accomplish some mighty big things.

Our industry has long spoken about “transformation” to mean a sourcing solution that goes beyond a simple fix to pervade an entire enterprise and accomplish something on a bigger scale. Most often the term has been bandied about to talk about overhauling IT, a call center or financial-reporting activities. All those transformations are still occurring and are still relevant.

But what I'm seeing and hearing about is an even more ambitious flavor of change – one that has captured the fancy of some very progressive executives. These leaders share a vision of fundamentally reorienting and resizing their organizations – with outsourced services as the tool for doing so. Among other things, they’re targeting operations that could become more productive by having a more responsive and flexible infrastructure delivered through expert outsourcing.

This reminds me of my days running infrastructure services for a global investment bank that I'd like to think was quite progressive. Indeed, while our scope of responsibility was limited to the basic computing and communications services, the leaders of the bank created forums to directly align technology and operations – essentially to find ways that the outsourced infrastructure services might accrue benefits in productivity or efficiency to the teams that actually used the technology to do their jobs.

Now it's happening everywhere: Executives see outsourcing as a means to a much broader end state, and the transformations they are considering go well beyond the domain limits of individual functions.

Isn’t this just business process outsourcing I'm talking about?  Maybe, but it has a distinct vertical orientation to it – meaning it’s often BPO for companies that are looking to effect the broadest definition of people-intensive work processes.

Conceptually, the idea has been around for a while, but the appetite for change through outsourcing is just now starting to ramp up. It's exciting to be part of.