What has technology meant for outsourcing?

Global outsourcing today has its roots in the rapid development and penetration of ever evolving technology. As communication infrastructures and productivity technologies become more pervasive, so does the effectiveness and potency of outsourcing.

Today, teams the world over communicate, share and collaborate with increasing efficiency and ease. Indeed, outsourcing in many countries, particularly our own, owes its existence and continued prosperity to the depth and width of technology on offer.

Enhanced Capabilities – companies around the world now have the potential of doing more. Whether it be streamlining existing processes or incorporating new ones that previously did not exist. The world of outsourcing allows companies to truly be all that they can be

Leaner, Meaner Business Machines – outsourcing has bred a new kind of business animal, one that is agile and responsive to change, that can adapt and learn faster to situations and demands

Facilitating Mastery – outsourcing has allowed companies to become true masters of their craft. Specialization is a possibility when all other functions are taken care of

The Intuitive way of doing business – by connecting specialized skills – with specific needs – outsourcing has proven to be the most direct, potent and intuitive way of doing business

Has Outsourcing benefitted anyone else?

Yes, it has. In its wake, outsourcing has evolved not just the way we do business, but has also transformed the societies and environment that have made it possible.

An Empowered Workforce – outsourcing has caused a sharp rise in technical competence among labor pools the world over, in a multitude of industries. This new workforce is empowered with knowledge that makes it relevant to a far broader spectrum of business needs

Expertise is now Digital – no longer is competence a matter of regional expertise, but simply a matter of finding the right partner anywhere in the world

Driving both Technology and Society – outsourcing has spearheaded infrastructure development in many nations. This need to upgrade and integrate has benefitted both businesses and society at large

Localized Specialization – overtime specialization in the local market has led to an immense amount of value to be derived from outsourcing relationships in terms of cost savings and service improvements

The spread of mobile broadband comes with its share of opportunities as well as challenges. Users of the iPhone surf the Internet 75 percent more than do users of regular cell phones, and more than half use their phones to watch video. In just three years since the iPhone’s launch, developers have created more than 200,000 applications, and this is only the beginning: nearly 50 percent of all new mobile phones purchased in developed markets are now Web-enabled smartphones. That rush of new Net surfers includes a growing number of emerging-market users too: in China last year, more than 100 million people logged on using the country’s new 3G network, which is why global mobile data usage rose 2.5 times in 2009.

The explosion of mobile networks is giving billions of people their first real entry point into the global economy, helping them become more informed consumers, connecting them to jobs, and providing much better access to credit. According to McKinsey, “the economic impact of mobile is tangible: every 10 percent increase in cell phone penetration in India corresponds to a nearly 0.6 percent rise in national GDP.” This eventually spills over to the internet as well. At present, more than 35 billion “things” are connected to the Internet—sensors, routers, cameras, and so on. Additionally, more than two-thirds of new products feature some form of smart technology.    by Omar Ahmed

Over the past few years, globalization and digital tech have intertwined to create vast, complex networks that weave themselves through virtually every economic and social activity. Cash, consignments, data, and even people now cross borders in huge volumes and at unprecedented speed. According to McKinsey, since 1990, trade flows have grown 1.5 times faster than global GDP. Cross-border capital flows have expanded at three times the rate of GDP growth. And information flows have increased exponentially.

These networks form a global communications and data overlap that enables large-scale interactions in a flash. Within this digital fabric cross-border capital flows also become information flows; and just-in-time supply chains simultaneously serve as just-in-time information chains. Such ecosystems create their own information heirarchy. In the absence of direction from a focal center, they grow, evolve, interconnect, disrupt, by themselves. Even as capital flows temporarily shut down during the crisis’s darkest days in the winter of 2008–09, for example, the global information grid kept growing. Estimates by Cisco Systems suggest that in 2009, global data flows expanded by nearly 50 percent. Hence, the resultant information matrices that result from different business elements crossing and connecting, serve as the key catalyst for eventual innovation.    by Omar Ahmed

Amidst this tight competition, successful BPOs are resorting to certain tactics that help them stay on top of the global game. At the helm of these tactics lies innovation, but that too in the the form of “innovative offshoring.”

Innovative offshoring is redefining many traditional account management practices eg. changing the long-standing model for contracting offshore services by focusing on the quality of services delivered, rather than the usual benchmarks of costs per offshore hire, and collaborating with clients in new ways and gaining more control over outsourcing strategies. They conquer this mountain through a blend of techniques. First, they have a managed services model that allows for a more translucent knowledge transfer process, leading to optimum SLA delivery.  

Secondly, such companies develop niche strengths over time and also propogate themselves as titans of that segment, developing solid marketing muscle over time. Examples can be specialization in certain technologies or service niches that differ innovatively from the mainstream industry perception of that specific service. When the efficiencies manifest themselves, it makes more sense to offshore, owing to the trust and service contentment, and thus the practice ends up defining offshoring, rather than offshoring shaping the business technique.  Thirdly, and most importantly, such firms demand from clients that they have control over their local project and labor management, as a notion to control attrition rates. At the same time, the client’s KPIs are guaranteed to be met. Such a penchant for localized labor management allows the company to not only develop in-house best practices, but also retain top talent.     by Omar Ahmed

Whilst our blog has been focusing on real-time trends as they shape the industry these days, we thought it was good to go “old-skool” this time and refresh outsourcing basics. Bearing that in mind, it is good to analyze what the mainstream models of BPO delivery are.

The most widely adopted model for delivering offshore services is identified as  ”staff augmentation” and under the traditional system, clients pay for each staff member a supplier adds to complete an IT contract-from the help desk agents who handle service problems to AJAX or similar mainframe software developers. Clients seek the lowest cost per head, which encourages stiff price competition among suppliers, but gives the vendor limited incentive in terms of the output quality, as no specific requirements or benchmarks are specified in the contract itself.

The second type of approach is the managed-services model, whereby suppliers agree to deliver a specified capability or functionality with a pegged service level agreement for a given price: for example, they contract to provide customer support for a year within certain volume and downtime parameters or to support production operations with clear, mutually agreed upon service levels. This model requires a higher level of trust, as clients relent more control to suppliers. The client benefits by locking in the services they need, without having to manage variable resource requirements at the offshore venue tightly.        by  Omar Ahmed

All organizations train their people, and most spend significant sums doing so, yet they generally don’t have a measurable benchmark to ascertain the impact of the training. They typically measure it by conducting surveys of attendees or counting how many employees complete courses, rather than by assessing whether the learning impacted business performance or not.

Picking the right metrics is the key to creating real value from training. That itself is a proposition that varies from industry to industry. A retailer aiming at enhanced customer service and sales growth, for example, could train employees by getting its managers to provide real-time coaching and to champion best-practice customer-interaction techniques. All this instead of just measuring the managers’ time allocation or employee-engagement data, the retailer should measure the impact of its programs through business metrics, such as sales, basket sizes, and conversion rates in specific categories or departments.

Similarly, a manufacturer might try to improve its operations by teaching plant supervisors lean-manufacturing and coaching skills, but rather than tracking only how many managers have been trained, it should track metrics such as downtime, the overall operability of equipment, or other tangible operational benchmarks. Such techniques, whichever vertical they are applied to, will garner the true purpose and value of corporate training initiatives.   by Omar Ahmed

Software companies that deliver software as a service (SaaS) experience higher sales and marketing costs relative to earnings than traditional vendors do. There are at least two reasons.

First, a subscription model for software produces lower revenues during the growth phase, since payments are spread over a period rather than made immediately through the sale of a one-time license. Sales expenses in both models are expensed as incurred, however, leading to a higher ratio of costs to earnings for the service model. Second, a higher percentage of a service vendor’s customers are small and midsize businesses: more effort is required to reach them compared with the large-enterprise customers that make up more of the customer base of traditional software companies. Over time, however, as subscription revenue streams become steadier, the service model may look better, since the marketing and operating costs of adding additional subscribers and up-selling additional services to existing customers are minimal.

As companies evolve to follow the overall industry evolution, it will become imperative to remain aware and strategic about the change in revenue models.     by Omar Ahmed

According to the first line of a survey, conducted by the Council of Chief Marketing Officers (CMO) in the US, “Nearly two thirds (64 percent) of consumers say their computer has caused them anxiety due in large part to frequent slowdowns and lengthy boot-up times, and more than 40 percent who use an outside computer support service are not happy with it or feel it costs too much.” And the more surprising thing is, names such as HP, Dell, Acer and Lenovo are into the debate.

Top sources of frustration with the tech support experience are long wait times, inability to fix problems, the cost of service, and limited language skills of technicians. Seventy-five percent are experiencing hours or more of downtime per year, and 40 percent are experiencing days or more (of downtime). Top five impacts of computer failure include increased stress levels, interrupted work or play time, valuable lost data, dropped connections, and difficult online purchasing.

However, companies are looking to address the issue, and doing it fast. According to Jodi Schilling, VP of Customer Support Operations, HP America,  “We are investing in the support space in a way that we haven’t in the past,”; that reflects from the opening of a $28 million facility in Arkansas. The key to achieving the optimum level of support to the tech-intensive industry is by having a dedicated team of resources that are focused solely on the corporate vertical; alot of times that need is met ultimately through outsourcing.     by Omar Ahmed

As industry analysts in the US warned of a “double-dip” recession this week, retrenchment seems to be the order of the day for many high-tech companies. Research at McKinsey, however, suggests that conventional downturn strategies many not serve them well. McKinsey analyzed the performance of nearly 700 such companies during contractions in markets around the world over the past two decades and found that the turmoil accompanying downturns significantly reconfigures the high-tech landscape. About half of the companies that entered these downturns as leaders-the top 20 percent-ended up as laggards when the economy regained momentum.  What are the strategies to steer safely?

First, they should fully understand the dynamics and impact of the financial contraction. Revenue is, and will go on declining, but the contours of the downturn will differ dramatically by subsector. Second, executives should know how liquidity issues may affect operations. As compared with other industries, the credit situation is stable in high tech. Problems are mounting along the supply chain, however-particularly among distributors and contract manufacturers-and in international markets. These developments could ultimately affect the operations of many companies. Third, high-tech executives should play offense, acting to strengthen the balance sheet and improve the competitive position. A very key platform for achieving this is a strategic outsourcing partner, that can work in tandem with overall corporate vision.     by Omar Ahmed

Outsourcing has created a multitude of employment, allowing businesses to optimize and ensuring the profitability all round. But has this last decade of outsourcing truly benefitted one of its key stakeholders - the employees?

In a recent publication by the UN’s International Labor Organization (ILO), the body points out that while off-shoring and outsourcing of business services from developed to developing countries is creating good jobs by local standards, the industry still has to work on achieving fully decent work. The report cites major outsourcing destinations such as Argentina, Brazil, India and the Philippines.

Ovex Technologies serves a myriad of clients including those in North America and Europe, as well as managing alliances in China. Our projects range from front-end processes to back-office support, with shifts and operations running 24/7/365. This coupled with client expectations and can often lead to stressful situations. So how can a company manage this internal chaos while still striving to continuously meet and exceed customer expectations?

At Ovex we ensure that our work environment facilitates growth and allows people to work towards what is important for them. We have the lowest attrition rate in the industry for our call center employees. Our back-office employees are amongst our most valuable assets, with many specializing to the point of mastery.

Over the years we have developed robust human capital management policies coupled with extensive organizational development and training processes. Our open culture, transparent processes and open-door policy (almost always glass doors) make us the industry’s employer of choice.         by Ibrahim Umar