Posts Tagged ‘information technology’

I just came across this great video talking about how outsourcing can make sense for your small business.

Dr Marc Kossmann and Charlie Seymour Jr explain how outsourcing can help you running your business better and more successful by allowing you to concentrate what you are doing best.

I am in no way affiliated with them but it makes really sense to me.



Advertisements
Office of Oracle (formerly i-flex Solutions) a...

Image via Wikipedia

In the context of global sourcing and new emerging locations, security and safety concerns are becoming the top issue for companies considering outsourcing their IT projects to cost efficient locations offshore. In this respect, the annual research conducted by the Black Book of Outsourcing with the rankings of the most dangerous / safest outsourcing spots around the globe attracts great attention among companies as a reference point for long-term business strategies.

Read the complete article at:

Europe Tops List of Safest Outsourcing Spots.

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.


A Definition of Outsourcing


Outsourcing is all around us and has always been. It just has become more apparent in today’s difficult economic times.

 

Unfortunately, outsourcing today is mostly associated with “Offshore Outsourcing”; meaning sending a certain function, business process or job to an oversea third party service provider, who has the ability to perform the same for less money.

We have to get away from this mindset that OutSourcing is equal to sending work overseas. Think about it, outsourcing has always been a part of our daily lives; as well in business as at home.

Some examples of business outsourcing are:

  • Hiring of cleaning crews to clean offices
  • Having trucking companies or the post office deliver your products and your mail … and YES this is outsourcing in its most basic form
  • Hire external service companies to maintain office equipment, like copiers, faxes, computers, etc.

Some examples for outsourcing in everybody’s private life:

  • Hiring a student to tutor your children
  • Hiring a cleaning person to clean your home (occasionally)
  • Taking a bus or train to work … and yes this is outsourcing, since you give somebody else the responsibility to get you from point A to point B and you don’t drive yourself.
  • Visiting a doctor… again, this is outsourcing. Who can afford to have their own doctor or nurse on staff?
  • The list goes on …
  • … and also here the list could go on and on.

Anybody may come up with their own examples about what they do not do themselves anymore in their daily life. Next, I want you to think about why you “Outsource” this functions or tasks and I bet that in 99.9% the answer is either money or lack of experience.

 

The same is valid for businesses. Outsourcing today is done because it just makes sense. Rather then investing in resources and additional education to do something that is not really a part of the core business function does not make sense anymore. It is cheaper and more effective to hire somebody who specializes in this area and has the skills, knowledge and the tools to perform the same function often even better and for less money or to say the least at the same cost to you.

Outsourcing does not make sense if one pays more for a service than if it would be performed inhouse. There for any outsourcing initiative must be evaluated carefully and a cost benefit analysis must be performed at all times

Again, Outsourcing does not mean a function is send overseas. There is onshore outsourcing, meaning outsourcing is performed by an entity in a neighboring or close by country or domestic outsourcing, which means the function is performed by somebody local or at least the same country.


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

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:

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

Powered by FeedBurner
Subscribe in a reader