Friday, August 31, 2012

Global Outsourcing 100 – The Dog Ate My Homework...and other tales of woe.

With the GO100 launching tomorrow, September 1st, we thought this was the perfect time to share a humorous take on some past questions, excuses and complaints.  

The IAOP Global Outsourcing 100 rankings are heading into year eight, and to say we’ve “heard” it all is an understatement.  For the most part, service provider companies open their applications and “lock” them within the deadline, read all of the detailed instructions, check out the “help” information for tips on getting the best application, and do it all with the minimum fuss and muss. 

Then, of course, we hear the tales of woe, year after year.  Here’s a sampling: 

“My company is the (biggest, best, fill in the blank) but we’re not on the list.”
Nine times out of ten, it’s because the company didn’t complete an application!  GO100 is an opt-in program….everyone must apply each year to be considered…no exceptions. 

“I didn’t get notified about the application open date.”

The GO100 program sends important communications about the program throughout the year to the main contact listed in your application…if someone in that company has moved on, IAOP must be notified.  For the past seven years, the application process opens on September 1st and closes on November 1st. 

“The spam filter ate the email.”  

See above, not a valid complaint; please have your SPAM filter LOVE IAOP! 

“I know that it’s October 31st, but I (just found out) (was sick) (got married) (got divorced) (was in jail) (was on holiday) and can I have an extension to complete my application just this once?” 

The IAOP administrator can be very forgiving, but when 99.9% of all applicants get their applications in on time, it’s simply not fair to the judging panel to put their job on hold for the latecomer!  All applicants have a full two months to send in their application. 

“I’m still waiting for my customer testimonials and need more time.”

See above, plan ahead! 

“I didn’t understand what was ‘valid’ for the best score.” 

No excuse on this one.  The questions are as plain as we can make them, and for each one, you can click through on additional “help” tips with samples of valid answers.  The GO100 administrator is always happy to answer your questions if you are unsure….we’ll even get a judges call on it if needed. 

“I gave the same information as last year, but my ranking is lower.” 

The applicant pool is different every year, plus the importance of the ranking makes it more competitive  each and every year.  You can’t look at your overall ranking on an apples-to-apples basis from year to year. 

“I’m hardly on any sublists at all.” 

If you answered “other” on any of the company profile questions, you may have excluded yourself from some sublists for no reason.  Always find the dropdown category closest to your service areas or industry specializations, and only use the “other” for clarification.

So that's it...not too bad. Did we leave anything out? You be the judge and tell us here.

Tuesday, August 28, 2012

Book Review: The Moral Case on Outsourcing: How Good, Bad, or Ugly is it for America and the World?

Is offshore outsourcing good or bad for America? There are a thousand answers and, of course, everyone thinks their answers are right.

The Moral Case on Outsourcing: How Good, Bad, or Ugly is it for America and the World? delves into the hot button issues of the outsourcing debate. The author, Scott Phillips, takes a deep look into the moral, social and political ramifications of this contentious industry.

An admitted insider on the provider side, who also spent time in the Peace Corps, he remains objective, provides the hard-cold facts and is fair and balanced in confronting both sides of the debate. Throughout the book, Phillips asks the readers, taking all positions into account, to make the decision for themselves:

“These are the biggest of my big ideas on how to help Americans succeed in the face of the vast changes underway in the global economy. They are aggressive. They are specific. You can decide whether they are right.” (Page10)

“If we address the offshoring aspect of this debate exclusively in utilitarian terms, a simple cost-benefit analysis seems to suggest the benefit side wins.  Of course, the reader could weigh the costs and benefits differently or new information could become available that swings the argument either way.” (Page 145)

Phillips provides straightforward research: costs – job loss, labor exploitation, environmental damage and commodity inflation to name a few; benefits – cheaper goods, better services, saving jobs and poverty reduction to name a few; the moral case – utilitarian case, campfire test, trolley car problem and narrative bias to name a few; and remedies – growing America, green revolution, zero deficit and strategic growth markets to name a few. He covers much more than the above list.

Snippets sure to entice:

“Using the 22.5 million base rate for annual layoffs and separations, the rate of job loss from offshoring represents about 2.0 – 2.5 percent of total layoffs and discharges in the US economy each year.” (Page 33)

“Outsourcing is widely reviled as a cause of job loss. But by allowing companies to preserve businesses that would otherwise fail—to reduce costs and remain viable in the face of competitive threats—it also results in companies surviving and, therefore, jobs being saved.” (Page 89)

“As a nation, we are under-investing, running down our assets and infrastructure, and squandering opportunities for economic growth now and in the future. Our aging infrastructure is simply wearing out.” (Page 189)

Clearly, much needs to be considered in this debate. Scott Phillips has laid the foundation; those interested in the outsourcing debate, and we know there are a couple of you out there, will find much to ponder here. 

Please share your thoughts, recommend a book for us to review or give us a review of this or another outsourcing book.
Kate Tulloch-Hammond, IAOP Manager of Media & Communications

Tuesday, August 21, 2012

“Change the Rhetoric or Change Our Name”

To quote the IAOP web site, “With a global community of more than 120,000 members and affiliates worldwide, IAOP is the leading professional association for organizations and individuals involved in transforming the world of business through outsourcing, offshoring, and shared services.”  Considering this position of strength, we have a job to do in correcting an increasingly broad and harmful misconception about our industry.

I am fairly new to IAOP membership, but far from new to the industry, and like the vast majority of our members, I could offer numerous first-hand accounts of significant, measurable business improvement resulting from the strategies suggested by our name.  A couple of these stories are ingrained in my “elevator speech”, for when someone on the plane asks, “So, what do you do?”  (I’m hesitant to reply, “I help companies outsource work”).

And yet, what business strategies have been dragged deeper into the mud recently (at least in North America) more than outsourcing and offshoring?  These very terms have become synonymous for heartless, unpatriotic gutting of the U.S. economy in order to maximize profits.

This phenomenon is not limited to the U.S., because as discourse in U.S. politics and U.S. economics becomes cemented in ideological misconception, our trading partners face an uphill battle in maintaining fair and consistent trade practices.  Nor is it limited to one side of the political spectrum or the other.  Both sides are guilty of grossly over-simplifying the issue in terms of a “bumper sticker philosophy”, with a simple, provocative spin requiring less energy than exploring and explaining the complexities of a multi-tiered, interactive and connected economy.  

This same thing occurred around the implementation of Nafta in the 1980’s as politicians demonized the “shipping of jobs to Mexico”.  However, according to a Wall Street Journal article by John Engler (April 21, 2008), “… in the case of Nafta, that job impact has been almost exactly balanced by increased U.S. production and exports of farm and factory goods.”  The general population can be faulted also, for not expending the energy to intellectually challenge these simplistic positions.

Clearly, we live in a global economy, and one more job in Shanghai or Bangalore does not necessarily mean one less job in the U.S.  An organization’s ability to become more efficient in fact enables them to strengthen their entire operation, many times allowing MORE jobs in sales or service in their home country.  This is NOT a zero-sum game.  GM sells more cars in China than in the U.S., (with a significant level of international content in parts and engineering), and would anyone challenge their right to do so?

To quote the late Peter Drucker in a 1989 Wall Street Journal article entitled “Sell the Mailroom”, which is quite possibly the most sensible piece ever written on the topic, “Systematic innovation in service work is as desperately needed as it was in machine in the 50 years between Frederick Winslow Taylor in the 1870s and Henry Ford in the 1920s.”  When an organization is not free to source goods and services to their relative advantage, this places them at a disadvantage to their competitors elsewhere, and ultimately leads to erosion of their ability to compete, and hence, their ability to sustain employment.

I invite our membership to steer the conversation towards a more logical foundation and help elevate the dialogue on outsourcing and offshoring, not only with or business partners and clients, but with our neighbors, friends, and colleagues.  

Either that, or let’s just change our name and lose the “O” word!
Guest blog by IAOP Member who may or may not be named later, pending company approval...internal bureaucracy.

Friday, August 17, 2012

Globalization Psychology 1: Outsourcing & The Lottery, by guest blogger Alan Hanson

Any of us are sometimes reluctant to make what look like simple switching choices.  Returning from a brief stop at London’s Olympic Games this week (no I didn’t run, jump, tumble, or throw; I wasn’t asked), I ignored a faster moving security line at Heathrow in favor of staying put behind an elderly couple who weren’t exactly moving at world class speed.  We do this sort of thing all the time: failing to act on what seems like the obvious.  Maybe the abandoned line will magically accelerate once we’ve moved on, we figure.

Is there a basis for such “irrational” reluctance and could there be similar tendency among outsourcing market participants?

In fact, there is a pool of research using a lottery ticket scenario that may be insightful to consider.   For example, in 2007, Jane Risen and Thomas Gilovich, a pair of inventive Cornell Psychology Department colleagues, asked 50-odd participating undergrads to exchange a randomly- drawn ticket for a $500 prize for another randomly-drawn ticket.  Then the researchers went a step further and offered the students an additional $10 cash incentive to switch.  (Depending on your undergraduate era, that represents decent beer- or Red-Bull drinking money.)

Even with the added sweetener, the results were overwhelming.  A whopping 46% of participants turned down the $10 premium, intuiting that if they made the switch their old ticket would be more likely to win (although a switch would of course have no bearing on the odds).

Prior research with this lottery ticket scenario had attributed switching fear principally to anticipated regret, a fancy way of saying that participants would kick themselves if their surrendered ticket won.  The Cornell researchers concluded something else was happening as well.  They attribute this tendency to people’s “subjective likelihood judgments.”  We convince ourselves that our actions may affect the likelihood of the outcomes.

Perhaps the same belief explains why outsourcing buyers may be reluctant to switch from an incumbent supplier – even if the incumbent supplier is viewed as underperforming.  

Unfortunately there is no reliable measure of how many outsourcing buyers don’t switch providers even in the face of underperformance.  Numerous surveys have taken up the subjects of failures, switching, and renewals, especially with billions of dollars in contracts reaching the end of their terms. While most such work provides some insight, it focuses primarily on such issues as the frequency with which contracts are renewed and (sometimes) the stated reasons for switching.  But no sane buyer is going to say: “I didn’t switch my service provider because then the provider might start to do better.”

Unemployment is already high.

Like the Cornell test in which the students could earn a $10 premium for switching, the outsourcing buyer may also have a hard dollar incentive to changing providers.  Frequently, service providers are eager to underbid incumbent service providers.  Yet even with the “premium” of lower pricing, we still may irrationally soldier on.

To take the behavioral insights a step further, consider this:  In a subsequent test, the Cornell researchers gave study participants the chance to purchase lottery insurance, and found that participants who switched bought significantly more insurance than their counterparts.  In other words they had a high belief that their old tickets would win even with no basis for that likelihood.
It is true that for corporate buyers there may be many very rational reasons not to switch from even an underperforming provider.  At the least, maybe the “devil we know” adage applies.    At the most, they can seek out market and predictive data that can help them determine whether to stay with a particular buyer or a particular location because of forward conditions.

For others, perhaps a deeper more introspective look at our decision-making processes may be worthwhile. Maybe a Rorschach test is in order?  (In fact, the 2012 Olympic Logo itself would make a pretty good one; you be the judge.)  Back at Heathrow Airport, by the way, my security line outpaced what appeared to be the faster-moving lane nearby (The elderly couple in front of me also benefited from new rules that seniors can leave their shoes on).  There was no Gold Medal, but for once I had won the race.

And I’m sure that if I had changed lanes, the line I had abandoned would have smoked me.
Alan Hanson is Senior Vice President of Neo Group, a leading Global Advisory and Analytics firm, which provides Global Supply Risk Monitoring a service for dynamically monitoring, managing and predicting country, city and supplier risks.

Outsourcing vs. Offshoring, by Jag Dalal, COP

As we approach the U.S. election day, the "outsourcing" rhetoric-meter will be rising rapidly. From presidential to the local council, candidates will be talking about "outsourcing means losing jobs to workers offshore" and "eliminating tax benefits for corporations who outsource - or send jobs abroad." Although it is their right to get on the soapbox (of course, made in the U.S.), as a COP (Certified Outsourcing Professional) I wish they would understand the difference between outsourcing and offshoring and take a stand accordingly (as always, they can still plunge ahead and confuse the issue and not let the facts get in the way).  

Outsourcing is when a company turns over a function (process) to another company and has them perform it according to the contract. The company taking over the function can do that work on site, in the U.S. at another location or overseas - again, most contracts put restrictions on alternatives.  So, as you read this blog, you may be sitting in a building outsourced and managed by CBRE, on a computer network supported by HP, eating in a cafeteria managed by Aramark or Sodexho, while waiting for a package to be delivered by UPS. Those are all outsourced functions where all jobs remained in the U.S., and in many cases, on site. In fact, most of the outsourcing ends up in keeping jobs in the same country and not moved off shore.  There may be a job loss and a potential job loss in the community where the company was located.

Offshoring is when a company has a function performed at a location outside of the country, either as a captive subsidiary or outsourced to a provider located there.  Obviously, there are "employment" implications depending on the form of offshoring . In a future blog, we can talk more about offshoring's impact on employment and taxes.

So, Mr./Ms. Politician, before you confuse the public (although it is your right) about the evils of outsourcing, make sure you are not in California (HP and CBRE), New York (IBM, Xerox), Pennsylvania (Aramark) or Georgia (UPS), whose outsourcing business keeps hundreds of thousands, if not millions of people, employed and contributing to the economy.
Jag Dalal, COP, is Managing Director of Thought Leadership for IAOP

If IT Doesn't Get It, Neither Do You, by guest bloggers Rick Bertheaud and Bryan Furlong

You may think you own the global process, but if your global business services are dependent upon a disconnected or uninterested IT group, breakdowns aren't far ahead.

We’ve all heard the statistics: 40 percent of IT implementations are considered failures, and it goes miserably down from there. Typically, the project starts with process consultants interviewing process owners then turning those into requirements for IT, and yes, with a varying degree of quality. 

Nonetheless, a longstanding fractious relationship tends to exist between process owners and technology owners.  Not to beat up exclusively on the IT folks, but with so much riding on their ability to implement, what does that hold for your process improvement efforts?  The reality is, too often, in the underwhelming statistics of success or lack thereof.   

The answer is in solution ownership

We have paid a lot of attention over the last few years to process and process ownership.  In today’s overly matrixed world, you can hear about a lot of ownership in an average planning meeting.  “I own the process.”  “I own the technology.” “I own the people.” “I own the budget.”  Rarely do you hear anyone say, “I own the solution.” But how refreshing, not to mention valuable, if someone did.

To be truly successful on a global scale today, forget departmental divides. The most mature organizations own multifunctional processes as well as the underlying technology.  In other words, The Solution.  This means they can manage cohesive, end-to-end solutions that connect disparate systems, owners and activities.  They also organize skill sets in appropriate groups to drive efficiency and additional controls.

New transformational skills

Speaking of skill sets, CPAs can now become CITPs—Certified Information Technology Professionals. Only CPAs can become CITPs, and they have a unique understanding not only of accounting, but of the technology to, among others, review programs for:

Risk Assessment
Fraud Considerations
Internal Control and IT General Controls
Evaluate, Test and Report
Information Management and Business Intelligence

CITPs, and others who understand both the process and the technology put together the people with the knowledge, process and technology, so solution ownership becomes more of a reality.  

Service-oriented models

New approaches may also make solution ownership more viable.  Through models such as service-oriented architecture (SOA), you may not have to invest heavily in your own information technology.  Instead, you can have multiple services within a diverse commercial enterprise resource planning (ERP) environment, while taking advantage of multi-tenant platforms offered by software-as-a-service providers.  Cloud anyone?

Not that you should ever use the cloud to avoid IT, quite the contrary.  Involving IT in any cloud solution might not thrill them to death, but you desperately need their years of experience with vendors, contracts, compatibilities, upgrades, etc.

Mark Thiele of Swift recently blogged the following:

Can you use a mix of external providers such as Amazon EC2, Terremark, Savvis & CSC
Easily change from HP to Cisco hardware (or vice versa)
Switch from VMWare to Hyper-V 3 (or vice versa)
Can you easily adopt a new provisioning/scripting framework like chef/puppet/cfengine
Reuse the policy enforcement & auditing system you currently have while making any of changes above
Reuse your procurement portal and provisioning workflows while achieving the above

If you don’t know the answer or don’t know what these questions mean, exactly, your chances of being a successful IT renegade are probably quite low.

The proof is in the team

Global business services (GBS) take the team approach.  Even with the best IT and applications, the GBS approach makes sure the infrastructure is supportive, the applications work, change management has brought the organization in line, and internal customers are treated like valued clients.  In short, the GBS is positioned and working to meet business goals and set up for prosperity ahead.
Rick Bertheaud, Principal, KPMG 
Bryan Furlong, Global Management Consulting, KPMG

Financial Regulations Challenge IT Directors to Provide More Data >>> FASTER, by guest blogger Kyle Lindley

IT Directors at capital markets companies are on their toes these days as the new SEC mandate for consolidated audit trail adds to the list of rules. Those mandated by Dodd Frank, The Card Act, Basel III, the Consumer Protection Act, and requirements from the alphabet soup of SRO’s and international agencies.

The aforementioned regulation requires IT Directors to design internal controls to prevent noncompliance issues before they happen and update their systems to provide more information to satisfy data request validating the compliance of the trades that are legal. At the same time, these systems need to be powerful enough to handle terabyte data aggregation in a world of nanosecond decision making, while being flexible enough to handle the next set of regulation dictates. Oh, less I forget 100% reliable too; otherwise you might find your company in the headlines next to Knight Capital or Facebook!

So what’s a company to do in the face of such a herculean task – jump in with both feet; join the gang of lobbyers to form the regulations; file exemptions against existing requirements; or simply do nothing in the hopes that it will all fall apart anyway? While IT Directors might like to join the ranks of regulators drowning in the sea of uncertainty, they just don’t have the luxury to wait and see. Management expects them to have the answers and never let it be said that an IT Director didn’t like a good challenge.

While you might not be able to guess at what quirky rule comes down the pipe, you can plan to report and capture everything. Trading systems can be reconfigured to execute on the new parameters quickly but proving compliance during surprise SEC visits requires more than just historical trade information.

Andy Wang, Bleum’s Financial Services Business Unit Leader suggests the trick is to “go back to the drawing board with a partner that’s been there. Overtime, administers have patched the patches to the point where even minor changes require massive effort. So not only is it difficult to furnish the right data at the right time, but systems and reporting are slower too. While a systems overhaul may sound costly and time consuming, it is often the best total cost option. Working with somebody that has done it, just makes it that much easier.”

And that is exactly what most companies are doing. IT Directors and their tech teams are starting to match the front office in numbers, and the only thing that exceeds the demand for qualified programmers is their cost. In order to stay on top of the core functions and ever changing business requirements, more and more IT Directors are looking for external resources to fill the knowledge gap while keeping budgets intact.

My advice, take the regulators out of the picture. You know that demand for more information will never stop. It’s not just regulators and politicians; management and automated systems continue to require more data for decision making. Whether or not Dodd Frank is ever implemented, IT Directors will continue to be challenged to refine their systems to provide accurate information, faster. If you focus on building the most flexible and powerful system possible, the derived business intelligence makes the ROI worth it anyway. Just tell management it’s those pesky regulators that require the investment!
Kyle Lindley, Director of Business Development, Bleum, a China based IT outsourcer to MNC’s in the financial services industry.