Posts Tagged ‘4954 IT Consulting LLC’

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by Oliver Schmid

Over the last 15 years outsourcing has developed at a very fast pace. Unfortunately, what has not developed at the same speed is the development and implementation of Best Business Practices and the according standard processes and procedures. This in return results in uncoordinated efforts and lack of understanding of the whole process. Third party service providers will try to sell outsourcing as a win-win situation, but this is not always the case.  A majority’s outsourcing efforts are implemented through “trial and error” and there for a more costly than expected.

Sixty-nine percent of companies outsource IT services. Outsourcing of application development and maintenance ranges from 15% for CRM, ERP 25%, another 25% for business processes, and 27% for other applications.

Statistics about outsourcing provides us with a positive picture but more and more businesses are disappointed with their outsourcing efforts, according to new research.

Companies express frustration with the quality of work being provided, according to a survey, but most businesses still said they chose the cheapest outsourcing option instead of the best quality.

The question is why are companies frustrated with quality of work provided. What are the reasons behind that frustration? There can be many reasons. Reasons can be:

  • Language issues
  • Geographical problems
  • Cultural problems
  • Infrastructure and Operational problems
  • Lack of procedures and controls
  • No or poorly defined Service Level Agreements (SLA)
  • Lack of or poorly defined Key Performance Indicators (KPI)
  • Lack of guidance and follow-up
  • Failure to understand the business model, processes and expectations

Some of these listed issues may have a bigger issue on your business than others depending on the type of service that has been outsourced.

In my 12+ years of outsourcing experience the lack of guidance and follow-up by the Outsourcing Organization led to a failure of understanding the business model, the processes and expectations by the Outsourcing Partner. Yes, you read right – The Outsourcing Partner. It is important to see the organization/provider you outsourcing to as a partner rather than just a service provider.

Service Providers are organizations that provide services that do not directly have an impact on your business and its day-to-day operations. Service providers are banking services, payroll services, cleaning services, mail and package delivery services and other business services that have are not part of your core business model. Even certain outsourced IT services fall into these categories.  Again, some of the above services may be critical to the success of your business and at that time they must shift from Service Provider to Outsourcing Partnerships.

Outsourcing Partnerships must be established with any organization that provides services, which are part of your core business model and have a direct impact on the overall success and profitability of a business. These can be services like Customer Service, Supply Chain Management, Warehousing, Logistics (3PL Services), Software Development and more.

It is not that a “regular service provider” is less important to a business than a outsourcing partner that provides core business services. The difference is that a Service Provider will need less controls and less of an understanding of the core business processes. Some of these services have standard service levels they provide and not necessarily have exactly specified KPI’s and the according control mechanisms in place.

There for let us concentrate on a typical outsourcing partnership and the requirements to make it a success.

First we need to evaluate why so many business fail in outsourcing. Over the years, I have managed many outsourcing initiatives. At some I participated from the get-go and some either after they had failed or were about to fail. The number one reason has always been that the business, which was outsourcing services, did not communicate their expectations well enough or did not manage the third party provider. At the same time the organization, which became the provider of the outsourced services did not understand what was expected from them completely. The reasons have been multitude, but eventually always boiled down to lack of communication. The majority of organizations see outsourcing just as a personnel cost cutting measure and hand off all responsibilities to their third party service provider. Outsourcing initiatives, which are handled in such manner are for sure doomed to fail and will leave at the same time the impression that outsourcing does not work. This is why outsourcing has left such a negative impression with many people and organizations.

Often outsourcing projects will fail from the get-go, because an outsourcing relationship is established at the wrong level. Management is negotiating not only terms but also requirements with a sales department whose focus is to make the sale, without understanding 100% what is expected. Terms, SLA and KPI are negotiated and agreed upon before processes have been defined, communicated and put in place. It is imperative to have from day 1 all the people in the boat that are affected by the outsourcing measure. These folks really do understand their business.

I can attest that outsourcing can work and will work if done for the right reasons and if done the right way. I have successfully managed and participated in various outsourcing initiatives, like:

  • Outsourcing of customer-service-call-centers to offshore third party service providers, as well to onshore and nearshore providers.
  • Outsourcing of data center monitoring and support.
  • Outsourcing of data center replication and backup for data center redundancy and disaster recovery. At the same time improving the sustainability of not only the IT organization within the business but also the sustainability of the business itself in case of natural disasters or other unforeseen catastrophic  events.
  • Outsourcing of Warehousing, Logistics and Supply Chain Management to Third Party Logistics (3PL) providers.
  • Outsourcing of certain Accounts Payable and Receivable functions.

In many cases, outsourcing may not save you money but may improve your service levels without investing in more resources. This in return, over time, will improve company performance, reputation or brand awareness and hopefully <if done right> profitability.

It is highly recommended to engage not only reputable third party organizations that provide the to be outsourced services, but also to hire a person that has experience in managing and handling outsourcing projects. The person to be hired should not only know the does and don’ts of outsourcing but also be aware of the Structure of Outsourcing. It is also imperative to assure that your business model and the business processes that are to be outsourced make sense to be outsourced. A skilled person that has vast experience in outsourcing will be able to help to make this determination.


Disclaimers:

This post was originally posted on the LinkedIn Group “Outsourcing to Ukraine” by Alena Shechkova at the Ainstainer Group and has been republished on this Blog with her consent.

This article is a shortened article of Jérôme Barthélemy “The seven deadly sins of outsourcing

The Seven Deadly Sins of Outsourcing

While outsourcing is a powerful tool to cut costs, improve performance, and refocus on the core business, outsourcing initiatives often fall short of management’s expectations. Outsourcing failures are rarely reported because firms are reluctant to publicize them. However, contrasting them with more successful outsourcing efforts can yield useful “best practices”. Through a survey of nearly a hundred outsourcing efforts in Europe and the United States Jérôme Barthélemy in his article “The seven deadly sins of outsourcing” underlined most failed outsourcing efforts. Here they are:

  1. OUTSOURCING ACTIVITIES THAT SHOULD NOT BE OUTSOURCED. Determining which activities can be best performed by outside vendors requires a good understanding of where the firm’s competitive advantage comes from. Resources and capabilities that are valuable, rare, difficult to imitate, and difficult to substitute for lead to superior performance. Activities that are based on such resources and capabilities (i.e., core activities) should not be outsourced because firms risk losing competitive advantage and becoming “hollow corporations”.
  2. SELECTING THE WRONG VENDOR. Selecting a good vendor is crucial for successful outsourcing. The literature has identified numerous criteria for successful provider choice. A useful distinction can be made between hard and soft qualifications. The first are tangible and can be easily verified by due diligence. Hard qualifications refer to the ability of vendors to provide low-cost and state-of the-art solutions. Important criteria also include business experience and financial strength. Soft qualifications are attitudinal. They may be non-verifiable and may change depending on circumstances. Important soft criteria also include a good cultural fit, a commitment to continuous improvement, flexibility, and a commitment to develop long-term relationships.
  3. WRITING A POOR CONTRACT. Since the 1980s, vendor partnerships have emerged as a model of purchasing excellence. Partnerships replace market competition by close and trust-based relationships with a few selected vendors. The notion that outsourcing vendors are partners and that contracts play a minor role was popularized by a landmark IT outsourcing deal. However, there are pitfalls in partnership management. A good contract is essential to outsourcing success because the contract helps establish a balance of power between the client and the vendor. Spending too little time negotiating the contract and pretending that the partnership relationship with the vendor will take care of everything is a mistake. Drafting a good contract is always important because it allows partners to set expectations and to commit themselves to short-term goals
  4. OVERLOOKING PERSONNEL ISSUES. The efficient management of personnel issues is crucial because employees generally view outsourcing as an underestimation of their skills. This may result in a massive exodus even before an actual outsourcing decision has been made. Firms that contemplate outsourcing must face two interrelated personnel issues. First, key employees must be retained and motivated. A second personnel issue is that the commitment of employees transferred to the vendor must also be secured.
  5. LOSING CONTROL OVER THE OUTSOURCED ACTIVITY. When the performance quality of an activity is low, managers are often tempted to outsource it. If poor performance is attributable to factors such as insufficient scale economies or a lack of expertise, outsourcing makes sense. If poor performance is attributable to poor management, outsourcing is not necessarily the right solution. When an activity is outsourced, it is crucial to retain a small group of managers to handle the vendor. These managers must be able to develop the strategy of the outsourced activity and keep it in alignment with the overall corporate strategy. While vendor management skills are very important, they must also be complemented with technical skills. If no one in the company is able to assess technological developments, outsourcing is bound to fail.
  6. OVERLOOKING THE HIDDEN COSTS OF OUTSOURCING. Outsourcing clients are generally confident that they can assess whether or not outsourcing results in cost savings. However. They are often overlook costs that can seriously threaten the viability of outsourcing efforts. Transaction cost economics (TCE) suggests two main types of outsourcing hidden costs. First, outsourcing vendor search and contracting costs. Search costs are the costs of gathering information to identify and assess suitable vendors. Contracting costs are the costs of negotiating and writing the outsourced contract. Second, outsourcing management costs: monitoring the agreement to ensure that vendors fulfill their contractual obligations, bargaining with vendors and sanctioning them when they do not perform according to the contract when unforeseen circumstances arise.
  7. FAILING TO PLAN AN EXIT STRATEGY. Many managers are reluctant to anticipate the end of an outsourcing contract. Therefore, they often fail to plan an exit strategy (i.e., vendor switch or reintegration of an outsourced activity. Actually, outsourcing relationships can be viewed on a continuum. At one end are large-term relationships where investments specific to the relationships have been made by one or both partners. At the other end are market relationships where the client has a choice of many vendors and the ability to switch vendors with little cost and inconveniences. In this case, there is no real advantage in recontracting with the same vendor.

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, onshore outsourcing to Canada and domestic Outsourcing of matrix oriented call centers. He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.


by Oliver Schmid / 4954 IT Consulting, LLC

Nearshoring (also known as “nearshore outsourcing” and “nearshoring”) means sourcing service activities to a foreign, lower-wage country that is relatively close in distance. (Source Wikipedia)

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Outsourcing means that you are sourcing experts in their fields.
Now, you made the decision to outsource certain business processes. The question now remains, do you want to go offshore, (which is usually from a straight financial aspect the cheapest solution), stay onshore (usually the most expensive solution) or outsource to a near-shore service provider (usually more expensive than off-shore but less expensive than onshore outsourcing).
The question you may want to ask yourself: “But how good is an expert that has all the technical expertise but does not understand your business needs and requirements, due to cultural misinterpretation or due to language barriers. What benefit does it have, if you have the hardest time to contact the people you work with due to differences in time zones.”

This is what may happen when you outsource to offshore service providers.

Please, don’t get me wrong, I have nothing against offshore outsourcing, where it makes sense. Not all outsourcing projects lend themselves for offshore outsourcing. I have worked in the past on various offshore outsourcing projects. Some were 100% successful but some we had to change midway and bring some of the outsourced BPO (Business Process Operation) either back inhouse or to a onshore or near-shore outsourcing partner.

Near-shore outsourcing makes sense in outsourcing projects that require frequent personal interaction, like hands-on product training and/or education about product and company processes. Another area that lends itself as a perfect candidate for nearshore outsourcing is software and application development and here especially if it is an add-on development to an existing solution that is critical to the overall business process.

More and more countries close to the US, like Argentina, Mexico and Peru have companies that concentrate t deliver near-shore outsourcing solutions in the areas of software and other technical IT areas. These countries have the advantage of being close to the US in regards to time zone and travel distances. People and organizations understand the US business culture better than countries in Asia or Eastern Europe.

If you are exploring outsourcing opportunities at this time or any time in the future please contact me and I will together with you evaluate your requirements. I will not develop and propose a solution based on my experience alone, but I will work with you to come up with a solution that fits all your needs, makes financial sense and delivers, while guaranteeing sustainability of the solution for the future.

Together with you I will find the right partner for you and will work with you through the process all the way from intiation to completion. I will be your partner  and your consultant at al times, representing your needs, requirements and demands. I have implemented offshore and nearshore as well as onshore outsourcing solutions in the areas of customer service (call center on demand support), software development, IT Infrastructure hosting and Logistics and Supply Chain outsourcing to 3PL and 4PL providers.

A provider we agree on will have the  expertise of advanced technologies has alloweto provide innovative, customized, groundbreaking, sustainable Nearshore software solutions and providing your business with an outstanding value and a competitive edge.

I work with service providers in the areas of IT Consulting that have an uncommon combination of experience, know-how and leadership, which allows me offer consulting services on the application of information technologies to achieve substantial improvements aligned with your business objectives. Whether it is in the areas of

  • Internet,
  • Technology Architecture,
  • Business Intelligence,
  • Network Security,
  • or custom Software Solutions Development.

The providers I chose with you can perform

  • Risk Analysis,
  • Vulnerability Analysis
  • and develop security policies suitable to your organization.

They advice and development procedures that guarantee for your systems:

  • Integrity,
  • Confidentiality,
  • Availability
  • and Irrefutability (Non-Rejection).

For a free one hour phone consultation please contact me at +1-770-776-6182 or send me an email to oliver.schmid@4954itc.com

Have you ever wondered what outsourcing actually means?

Ever asked yourself what can be outsourced?

Wonder no longer.

Just listen to the following explanation about . . .

Outsourcing A Chickenhttp://blip.fm/~apxhq

Once you reached the site, select PLAY

Outsourcing, Insourcing and Saving MoneyOutsourcing means retaining the services from somebody outside of an organization to perform a task that would normally be done by somebody within an organization.  Saving money has always been one of the drivers for considering outsourcing. If saving money is used as the only driver, any outsourcing project will fail badly. There has to be a strategic motivation behind outsourcing in addition to save money, such as …

  • … increasing efficiencies. For example: Outsourcing customer support can provide the opportunity to increase customer service performance by offering extended support hours, adding a potential for increasing revenue streams through up-selling and/or cross selling.
  • … freeing up internal staff to concentrate more on the core competencies of an organization

For any outsourcing project it is imperative that all parties communicate their needs and requirements at all times. Outsourcing does not mean handing of a task, process or business function to a third party and then let leave them with it for all eternity without any follow up interaction. Outsourcing means interaction and communication between all parties at all times, whether it is during the planning and setup stage or whether it is an ongoing interaction after going-live.

Some great resources I recommend in regards to Outsourcing and how it can save you money and improve your overall business processes are:

Oliver Schmid / 4954 IT Consulting, LLC

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  • E-Mail is down frequently.
  • Internet connectivity is slow or only works infrequent.
  • LAN is slow or down.
  • Phone rings off the hook because people complain.
  • No consistency in IT Infrastructure, due to budgetary restrictions
  • No name computer equipment and servers,
  • Outdated computer technology, Infrastructure equipment that is not compatible with each other.
  • Running today’s applications on outdated hardware.
  • Unlicensed software or no control over which software is in place, leading too incompatibility between applications and user frustration, as well as opens the possibility for legal actions against the organization.
  • Missing or non-existing documentation, policies and procedures.
  • Infrequent backups, which never are tested for reliability.
  • No disaster recovery or business continuity plan in place and/or enforced.

These are only some of the issues a Small Business IT Shop may face today.

Data Center Managers today are sitting between two chairs. They are expected to do more and more with fewer resources. They are managing highly complex and a wildly heterogeneous IT Infrastructure, with less qualified staff and low budget expectations.

A 2008 “State of the Data Center” research, conducted by the Applied Research Association, concluded that reducing costs is the highest key objective of Data Center/IT Managers today, while providing higher service levels and improving and increasing responsiveness.

The study revealed that 38% of all data centers are understaffed.

Today 45% of organizations solve their dilemma by outsourcing some or all of their data center operations. Outsourcing seems to be the key alternative, since, in the end, it will be less expensive due to increased efficiencies. Which organization today can afford do not have access to their data for an extended period of time. Why would you want to invest into the personnel, the resources and the capital required to increase availability. It would be more beneficial for you to concentrate on your business and what your business is the specialist in.

Whether it is manufacturing or distribution of a product or providing a certain service … isn’t this the area you should concentrate on.  This is what you are good in. You would not expect your IT Service provider to manufacture your goods or provide your type of service.

I can assist and advise you on how to best increase your IT Infrastructure efficiencies, plan for disaster recovery, business continuity and business sustainability.

I research and recommend the best possible solution that makes the best sense to and your organization.

I will provide you with a cost/benefit analysis so you will be able to make the most educated choice.

My experience is in:

  • Consultation, research and advice on partial data center outsourcing for disaster recovery and business continuity.
  • Complete Data Center outsourcing for disaster recovery , business continuity and business sustainability, as well as high infrastructure availability by suggesting Clustering Solutions, that support a variety of operating systems, physical and virtual servers, as well as a wide range of heterogeneous hardware configurations providing an effective strategy for maximizing resource utilization.
  • Reducing day-to-day data center and network infrastructure operating cost. Consultation and advice on various VoIP Technologies and it’s benefits for your business.
  • Consultation, research and advice on the best solution to run your EDI Application in order to reduce charge backs and fines and free up internal resources in the areas of Order Management and Finance.