Posts Tagged ‘bpo’


by Oliver Schmid

 

What is outsourcing and why might outsourcing be good?

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  • Do you make your own shoes?
  • Do you deliver your own mail?
  • Do you sew your own cloth?
  • Do built your own car?
  • Do you build your own house … by your own hands?
  • Do you have the skills to be your own physician and make your own medication?
  • Do you grow your own food and raise your own life stock?
  • Do you take care of your own trash removal?
  • Do you …. (fill in anything you do not yourself) … ?

If you answered ‘YES” to any of the questions above you are outsourcing.

Anytime a service is provided for something you don’t want to do yourself, anytime somebody else does something for you, you don’t want or can’t do you are outsourcing something. Have you ever thought about this when you are complaining about that too many things and too much work or services are outsourced?

Outsourcing has been around as long as mankind. Anytime somebody realized that they have a special skill for something and focus on this skill and providing these skills to others in exchange for services, goods or money it is outsourced.

Why are we doing this? Because we always were aware of the fact that certain people have special skills one might not posses themselves and in return this person might have a skill somebody else does not have.

Outsourcing is nothing that was invented yesterday. What is new, is that we have realized people in other areas or countries have the same skills but perform these skills for a fraction of the cost. Before complaining about outsourcing think about whether the task on hand that is outsourced would be something you wanted to do yourself and had the skills to do yourself.

Think about if each of us had to grow their own food, build their own homes, remove their own trash, … you continue the list … would we still be able to fly to the moon, invent all the technological gadgets we have today that make our lives so much easier and more comfortable. Be honest to yourself. Most likely not.

By giving work and services away too others we  freed ourselves to learn other things, specialize and improve on skills we have as well as developing new skills.

Reflect on your daily tasks, your job, your kids, your family. Aren’t you performing outsourced services for them because you know how to do a particular process or task.

Over the years I have learned and realized that most of the tasks or work we outsource to other countries are things we really don’t want to do ourselves. I have worked for instance with domestic call centers just to learn that the people working there are not really happy in their job. They don’t want to listen to other people complaining. They don’t want solve other peoples problems. Eventually these people leave their jobs because they get burned out or fed up with what they are doing. Churn in US call centers is many times higher than compared to Indian or Philippine call centers. The reasons here for will be subject of another follow-up blog, since the subject is so complex in itself.

We only outsource work we don’t want to do ourselves or are not willing to pay for if it would be done in our own country (onshore outsourcing).

Without getting deeper into why we are outsourcing and all the plausible and less plausible reasons, ask yourself when hearing about outsourcing or complaining about outsourcing:

  • “Would you be willing to it yourself?”
  • “Do you have the skills?”
  • “Would you want to perform the same work for the same amount of pay?”
  • “Would you be willing to pay for the service if it would be done by what you expect a fair wage if you would do the same work? “

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by Oliver Schmid  – IAOP :: International Association of Outsourcing Professionals Member


1.) What is outsourcing?

For years, outsourcing has been on the mind of many business people but what one associates with the term outsourcing, might be conceived as something completely different by somebody else. The only common ground is the understanding to give a task or process that used to be performed internally to a third-party service provider for fulfillment.

2.) Types of Outsourcing:

Outsourcing can be as mundane as giving support to somebody else and might be as complex as having business core processes being performed by somebody else.

Typical tasks and/or processes that are outsourced can be:

  • Partial or Total Outsourcing: Some functions or tasks will be outsourced partially while other will be outsourced in its entire. Partial or complete outsourcing can also be seen differently and depends of the viewpoint (Customer / Provider) of the parties involved. It also depends of the overall functionality of the to-be outsourced operations and can often not be determined clearly.
  • There is outsourcing of only operational functions vs. outsourcing of functions, tools and personnel.
  • Business Process Outsourcing (BPO): Interpretation of the meaning of BPO varies and depends again on the point of view. From a customer point, it could be giving away an in-itself-closed-business-process for which the provider carries complete responsibility. From a legal aspect, it is imperative to define all roles and responsibilities in a contractual from and every party involved need to understand their individual responsibilities and the consequences for non-compliance.

3.) Goals

The possible reasons for customers to look more closely at outsourcing to are equally diverse and complex as its possibilities and approaches.

Therefore, only some of the usual motivations for outsourcing will be referred to here:

  • Focusing on core business:
    • An organization wants to concentrate its resources on its core business, and therefore functions that are not part of its core business will be outsourced.
  • Cost savings and optimization:
    • An organization wants to reduce its cost of doing business through outsourcing by creating a flexible cost structure, which is directly related to the performance of its service provider.
  • Purchasing skills:
    • An organization wants to benefit from the increased competence of the provider who considers the to-be outsourced function as its core business. Often, an organization also wants to reduce its performance risk through contractual reassignment of performance risk to its service provider.
  • Flexibility:
    • The provider can often offer the customer more flexibility in the implementation of the delegated services than it would have been possible to a customer with its limited resources and scope for action.

4.) An outsourcing project is divided generally into:

  • the preparatory and planning phase, which includes the Baseline analysis, defining goals and determining the future procedures,
  • the initiation phase with the selection of the provider. and the contract negotiations,
  • the implementation phase with the transfer and the Setup of the facility (or Transition to Operate) and finally the actual
  • the start of the actual operation

Looking at the continuous “life” of an outsourcing initiative the following phases will follow:

  • Review and optimization of relationship and implemented processes
  • At contract expiration either the transfer of all functions to a new service provider or the return of the outsourced functions to the organization (insourcing)

5.) Preparation & Planning:

At the beginning of each outsourcing, a strategic analysis is performed to determine which services or which divisions will be outsourced as well as where the interfaces between the internal and external providers will be in the future.

Following this phase the outsourcing scope will be defined, which will include the functional spectrum. It should definitely be avoided not to make any clear commitments at the beginning, because the scope is the basis for all further tests, the structuring of the outsourcing and the subsequent tender.

The next step would be the internal analysis (assessment) of all areas that are part of the scope:

  • What personnel and which assets are involved?
  • What type of data is available?
  • Current Cost?
  • Which services are currently performed internally and which are already performed externally?
  • To which extend have processes and services already been documented?
  • What is the quality of the currently performed services?
  • Is delivery of services consistent with the according service performance documentation?
  • Are there any legal aspects that need to be considered; e.g. transfer of licenses?
  • Are there any industry-specific aspects to be considered (e.g. in the financial area)?

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, nearshore outsourcing to Canada and onshore 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.


Oliver Schmid, EzineArticles.com Basic PLUS Author


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The Structure of Outsourcing by Oliver Schmid is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.


Should I outsource?


All about, if outsourcing in general makes sense and what to consider and how to approach outsourcing for it not to become a failure.

Who has not heard horror stories about failed outsourcing initiatives. Many organizations that attempt outsourcing often forget that the key to any successful outsourcing initiative is shared goals and good management.

Often outsourcing is only seen as a way to save money quickly and there for implementations are rushed into without the proper planning and without any detailed documentation of the business processes to be outsourced. As a matter of fact, documenting all relevant business processes as they exist today and the way they should exist in the future with the new outsourcing service provider will allow for a much smoother and painless implementation. Only developing the proper documentation will allow all parties involved to clearly understand all the needs, requirements and challenges of these processes.


Use your in-house know how

It is also important to take responsibility for requirements. Incomplete or misunderstood requirements can make an outsourcing project more expensive as budgeted or even may fail a project completely. Nobody knows your business better than you and the outsourcer probably ever will. It is up to you to gather requirements from your business perspective and explain them to the outsourcer. Only this will assure that your needs and requirements are understood and documented accordingly. The next important step is providing training. Very often training is ignored, but good training is an important key aspect.


Do not blindly rely on your outsourcing partner

In order to show quick saving, poor documentation is often thrown at the outsourcing partner, with the expectation that they would be able to deal with it, and then the partner will be abandoned. Such outsourcing deals will fail for sure. It is important to maintain control. Outsourcing does not mean abandoning and/or losing control. It is wrong to assume that the outsourcing partner knows it all and maybe even more and there for will be able to perform better, faster and cheaper. It is important to have key people that control and maintain relationships with outsourcing partners. These key people will maintain control and guide and govern the outsourcer.


Milestones and KPI

It is also important to implement metrics or key performance indicators (KPI) that are important to your business. Assign people that understand these metrics and are able to perform benchmarking of your outsourcing partner against these KPIís and present them in a readable and understandable format that will allow to draw conclusions and take the necessary steps if required. Last but not least, review your relationship regularly, as you would do with an internal department or internal staff. Make sure to review KPIís, technical infrastructure and operational infrastructure. Combine reviews with clear measures to indicate problems or progress.


Pros + Cons from the employees’ point of view

Horror stories as mentioned above, will often emerge from the employees of the affected companies. Indeed, it may be challenging to work with somebody else from a third party outsourcing company, especially if one has just experienced colleagues getting laid off. But if you look closer, discharging experienced personnel may sometimes results from prior mismanagement, and it is possible that a well-performed outsourcing concept may be the only way to keep things rolling.


Remember if managed correctly, an outsourcing deal will be a win-win situation for both sides.


Oliver Schmid, EzineArticles.com Basic Author
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 Chainoutsourcing 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)

outsourcing2

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

by Oliver Schmid / 4954 IT Consulting, LLC

Outsourcing EDI  is increasingly being chosen by companies of all sizes who engage  in EDI.   Suppliers are put under pressure from their customers to adopt EDI, but find that they are investing resources and money into, which may for the organizationa non-value-adding activity, while negatively impacting  the core business.  Even companies who come willingly to EDI are often put off by the extra resources and technical expertise it demands.

There are EDI Standards that have to be learned like ANSIX12, EDIFACT or XML and knowledge has to be maintained, since structure of these EDI standards changes all the time, as well as customers often change their internal standards and usually is your responsibility to stay up-to-date on these changes.  In addition EDI translation maps for your various trading partners (TP) need to be developed and maintained.

Learning and maintaining those standards, developing and maintaining TP maps on an ongoing bases,  plus the acquisition of an internal EDI Solution (Translator, Hardware) can be expensive.  To setup an in-house EDI System you need:

  • EDI Translation Software – The low end packages are a few thousand dollars and they go up from there. And usually you get what you pay for.
  • EDI VAN Services – A few hundred dollars to set up and monthly charges based on volume. And volume may go up quick, since a trading partner not only sends you an order (ANSIX12 – 850), but wants in return a “Functional Acknowledgement (ANSIX12 – 997). These are already two transactions for one order. The next thing a TP usually will require from you to be send is an EDI Invoice (ANSIX12 – 810) and you will in return receive a Functional Acknowledgement back. And already we are at four transactions just for one order. Transactions that may follow down the road are Advanced Ship Notices  (ANSIX12 – 856) (which are by the way one of the most difficult transactions to setup and to satisfy), Change Order Request (ANSIX12 – 860), etc.. And anytime you are not able to trade these documents in a timely and for your customer satisfactory condition you will get hit  with a Charge-back, which someday will be a complete Blog Subject of its own.
  • EDI Integration with your Business Software (Your ERP Solution or accounting package)  and this can be expensive. Even most EDI Packages today claim to seamlessly integrate with the major back-end systems, some customization is usually required and depend on your needs and your customers requirements.
  • EDI Technical Staff – You will need at least one technical person to set up the EDI Translation Software and integrate with your back-end system. This person will not only need to understand the technical challenges your business has on top of all the EDI requirements from your trading partners and of course the systems and software involved.
  • EDI Coordinator – At least one person, which will oversee the day to day operations of your EDI system to insure all your documents are flowing in and out of your systems  correctly and in a timely manner. This person is usually also the direct contact for your trading partners in case anything goes wrong on your end or your trading partners end and coordinates the resolution.

Summary: There will be some significant upfront cost and investments, as well as some ongoing investments in staff and operations to maintain an In-house EDI System.  This does not mean that you should outsource your EDI Operations at all cost, but you definitely should perform a detailed cost benefit analysis to see what makes most sense to you.

email: oliver.schmid@4954itc.com

Phone: +1-770-776-6182

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Published by Oliver Schmid at 4954 IT Consulting, LLC



Outsourcing is becoming more and more a viable option for many businesses. Reasons for outsourcing vary and can be increased-shareholder value, reduction of cost, improve operations, keeping up with competition, lack of internal resources, improve cash flow, turn fixed cost into variable cost and many more.
Outsourcing has been around for generations. Outsourcing is a part of how businesses operate. In its lowest form it is your office cleaning crew. Another form of outsourcing is your source of electricity. Who would ever think about having their own power plant to generate the electricity needed to run their business?

Outsourcing is taking a set of work, tasks, responsibilties or functions and transferring them to an outside service provider.

Why would you outsource Information Technology? You may say that there is a profound difference, but is there really? Is Information Technology the core of your business, it this where your organization is best at?

In the past outsourcing Information technology was a business decision in order to drive down internal IT costs. I agree this should be a factor in your decision making, but it should never be the sole reason or you will be in for a big disappointment further down the road.

What can be some of the advantages of outsourcing Information Technology in its entire or only partial? How about:

  • Best practices service – > State of the art service you only could provide at a substantial increase in cost.
  • Improved network operations – less down time through a more stable network infrastructure
  • Opportunity to reduce costs – through IT operational overhead cost reduction and infrastructure standardization
  • Reliable data backup and recovery – allowing for business continuity and sustainability
  • Network Redundancy – allowing for business continuity and sustainability through redundant data center

At the same time you may argue disadvantages like:

  • Loss of control – It depends on a good contract and agreed upon Key Performance Indicators (KPI)
  • Less flexibility and customization – Flexibility could be a minor issue but with the right planning the issue can be minimized. Customization – not really a disadvantage but rather an opportunity for standardization.
  • Fragmented services and vendor coordination issues – it depends. You certainly do not want to fragment your critical business process in order maintain control and avoid costly “finger pointing”.  Planning is crucial.
  • Possibility of increased costs – Yes you may have increased cost for the start-up, but due to improved efficiencies these costs can be recuperated fairly soon.

Again, key is being diligent in planning your outsourcing project in all details. Don’t leave it up to your vendor or service partner.  I can assist you in doing the planning, providing cost-benefit analysis and work with you on finding a service partner that fits your needs.

I will provide you with a free 1 hour phone consultation. Please email me at oliver.schmid@4954itc.com


(c) Oliver Schmid / May 02, 2009 / IT Consulting, LLC

LImproved network operations
Opportunity to reduce costs
Reliable data backup and recovery
Economies of scale and specialization

by Oliver Schmid / 4954 IT Consulting, LLC

Imagine walking into your office on a Monday morning just to learn that your network has crashed or you get this call on a weekend or during your vacation.

Angry Network Admin

  • Do you know what to do at that time.
  • Will you be able to help or how long will your network be down?
  • Do you know the cost of such an incidence to the overall business?
  • How can you prevent such occurrences and make sure that this won’t happen to you or your organization?
  • IT Outsourcing is you answer.  But what is IT Outsourcing?
  • What can it do for me and what and how much do I outsource?
Outsourcing means that you are sourcing experts in their fields

The answers to these questions are: Outsourcing means that you are sourcing experts in their fields, so you and your business can concentrate on the field you are the experts in.  In the old days organizations used to select so-called single or full outsourcing deals. They outsourced a mega deal that provided them with a single provider for all their outsourced operations.

The question that arises here is, how can one be an expert in all fields? Would you hire somebody that claims to be your Accountant, your IT guy and your Distribution Manager at the same time?

Probably not. So why would would you hire on Outsourcing provider for all your organizational needs?

Here is where “Selective Outsourcing” comes into the play. Selective sourcing deals are much more effective and much more successful. Selective outsourcing deals are successful 77% of the time, versus 38% in single or full outsourcing deals based on a study.

A Forrester Study reveals that 88% of organizations today are in selective outsourcing deals. Selective outsourcing is used to optimize processes and to reduce cost.  At the end of the month when justifying your budget and the increase in outsourcing cost remember that 38% of cost savings come from process optimization and standardization. Labor will only be about 9%.  Yes your overall IT cost and budget may increase, but your overall cost of doing business will decline.

This means that during any outsourcing deal process optimization and standardization must be the main focus in order to be successful.

A main focus today is on innovation and you are wondering, how can I be innovative if I have everything outsourced.
This is while searching for the right partner to outsource to, the ability of this partner to be also your partner in innovation  must be considered and evaluated.  Many outsource providers today do not have this ability. Once signed up you are stuck with what they have to offer at this time for years to come.
Can innovation be bought you are wondering. Innovation may be bought from an external service provider, but in order to do so they need to understand your business and have the expertize to provide you with the right solution. They must have deep vertical business process and technology expertise.
It is important to know how much your service provider is investing in R&D and being able to help you with innovation.
You have to request innovation, because it does not come as part of the deal.
Below a great presentation on “Outsourcing your IT”  by
Orrin Klopper, MD of Netsurit discussing the benefits of outsourcing your IT.

Cover your nose with a tissue when sneezing or coughing. Visit www.cdc.gov/h1n1 for more information.