It is no secret that the traditional media and entertainment industry has experienced extraordinary value
destruction in the past 20 years. The music industry right-sized from $26.6 billion in 1999, to $14.9
billion in 2015. Print media lost the fight for classified advertising to Craigslist, Yelp, and Groupon, and
legacy brands like the New York Times have survived only by exchanging analog dollars for digital
pennies through their subscription services. Only film has held up reasonably well with studios like
Disney tapping into multiple revenue streams (musicals, mobile apps, theme parks, etc.) to monetize their
brands.
Industry Leader Q&A: RPO
OI’s Frank Casale Talks RPO with WilsonHCG Founder/CEO John Wilson
RPO Client Satisfaction
Ask the Expert series with Frank Casale, OI, John Younger, Accoio, David Pollard, Talent Fusion and Larry Heckathorn, Human Capital Group.
Effective Vendor Management — Devil in the Details
Vendor Management and Governance is all about the big picture – maintaining transparency into the multi-vendor ecosystem and ensuring that all the moving parts are seamlessly integrated and aligned.
But the high-level oversight that characterizes effective vendor management must be built on a foundation of operational detail, characterized by process consistency and adherence to standards within and across service providers. Trouble is, when it comes to defining the “standards” around which vendor management will operate, many enterprises allow for just a bit of wiggle room – wiggle room that risks compromising the structural integrity of the overall governance framework.
Consider, for example, ITIL standards around incident, change and problem management. While service providers uniformly adhere to ITIL guidelines, different providers tend to adopt their own particular flavor of how to interpret those guidelines. And even subtle differences in language at the operational data layer of governance can create significant problems when multiplied thousands of times a day across multiple providers.
The solution is to ensure that requirements for service level reporting are clearly and specifically spelled out, leaving no room for ambiguity. The process of defining those standards at the necessary level of granularity, however, is arduous and time-consuming, and finding the resources and commitment to get the job done presents a challenge.
Many organizations are outsourcing certain vendor management functions to third-party specialists who leverage process discipline and cost-efficient offshore resources to handle many day-to-day administrative tasks. The model offers significant cost benefits and allows the client vendor management team to focus on value-added activities.
— David England
The Nuance of Language and Effective Vendor Management
“You keep using that word. I do not think it means what you think it means.”
That’s what the swashbuckling character Inigo Montoya says in the 1987 cult movie The Princess Bride, in response to the villainous Vizzini’s repeated and incongruous exclamations of “Inconceivable!”
While comically captivating, Inigo’s observation holds a potential lesson for executives struggling to implement standardized and consistent processes in a complex, multi-vendor environment. Namely: words have meaning, and it’s inherently risky to assume that all people understand words in the same way.
Consider a standard hierarchy of vendor management. The operational governance layer at the base of the pyramid comprises day-to-day activities related to service delivery – identifying, tracking and closing incidents and problems, responding to and implementing change requests, resolving problems and collecting and reporting data. A seamless, end-to-end, outcome-based delivery model requires that all of the myriad providers involved in the chain of service delivery are on the same page when performing these activities.
The good news is that the ITIL framework provides needed guidance for a common understanding around the daily activities of incident, change and problem management. And service providers without exception adhere to ITIL guidelines. That said, ITIL describes what has to be done, but not how. That subtle distinction leaves the tiniest bit of wiggle room for interpretation. Indeed, different vendors have different flavors of how they log, track, report and resolve an incident or handle a change. It’s not that one flavor is better than another, it’s simply that they’re different.
Therein lies the problem: If repeated and multiplied thousands of times a day across multiple providers and multiple processes and activities, these slight differences can undermine the underlying foundation of operational governance, as well as compromise the strategic layers of management higher up the pyramid.
To avoid this scenario, client organizations must take ownership of achieving a truly standardized understanding of operational governance processes and ensure that all providers involved in service delivery are truly on the same page. This responsibility goes beyond checking off an “adhere to ITIL” box. Rather, clients must apply the discipline needed to identify the nuanced differences of how Provider A manages an incident versus Provider B, and clearly define the standards to be followed.
Revealing and reconciling these subtleties of language can be an arduous and painful process – but it can yield significant benefits in terms of true outcome-based service delivery, plug-and-play capability and provider collaboration.
— David England
Why business process outsourcing is being redefined as business process automation
Service providers are continuously investing a great deal of effort to enable automation/artificial intelligence as part of their service offerings. The level of standardization of processes/activities related to BPO services make it a perfect candidate for automation.
As we all heard over the last couple of months, service providers have continuously invested a great deal of effort to enable automation/artificial intelligence as part of their service offerings.
Specifically related to business process outsourcing (BPO), the evidence of automated activities is more prevalent than any other type of outsourcing deal. This can be attributed to the level of standardization of processes/activities BPO services are executed – making it a perfect candidate for automation.
With numerous BPO deals expiring over the last 12-24 months, below are some ideas organizations may wish to consider before determining their next course of action:
BPA, business process automation, is not a myth but rather a reality: The adoption of automation through BPO activities is an avenue most service providers are pursuing as this leads to increased margins on outsourcing deals. As such, organizations should have an understanding of the “automation element” and its implications to the financials of the deal. Since this can represent a win-win scenario for all parties involved, it is on the organization’s best interest to determine whether or not automation is a reality they are willing to embrace.
The “As-a-Service model” is here to stay: BPO is a precursor of the “As-a-Service” model. Although not as complex as an ITO deal, the foundational principles to effective manage a BPO deal are quite similar: (1) standard set of terms & conditions, (2) appropriate governance model, training, protocols and procedures, and (3) appropriate service levels and remedies. The BPA can, however, be quite complex and challenging at times, especially if the organization does not have the right fundamentals in place – as the “As-a-Service” model emphasizes the importance on how organizations manage service providers. What does it means? Organizations should be ready to embrace the change otherwise it can create service delivery challenges, which could potentially impact the organization’s reputation on the marketplace.
The service provider’s labor dilemma is not solved: As I wrote on my latest article (millennial outsourcing), no one is certain of when the offshore labor advantage is going to erode. That explains the increased focus on automation by service providers, as it will help to mitigate the service provider’s labor risk. Automation is an enabler service providers’ are leveraging to mitigate this risk.
The client’s optimum point for BPA: Organizations need to decide how much of their BPO services should be automated, not service providers. Organizations may wish to consult with their service provider or to hire an independent party to help determine the best course of action for their needs. Prior to adopt automation, organizations should understand the implications and potential risks associated with this option for inscope BPA services. There are nuances related to BPA that organizations should consider to understand sooner than later. This helps to determine the automation appetite levels.
The cultural impacts of BPA: Any changes to the working environment that are not effectively managed can lead to a productivity loss. As clients goes through those, emphasis on appropriate change management practices can help the organization to manage any cultural impacts/challenges derived from BPA. As automation is an enabler but at the same time a disruptor, organizations may wish to control the level/speed of change the organization can absorb so productivity is at a minimum neutral or improved.
The importance of due diligence prior and after the BPA deal: Many organizations conduct different levels of due diligence on vendors prior to signing an agreement for services. Very few, however, execute ongoing monitoring of vendor activities, latest news. This is particularly important, for example, in case vendors have a breach of their data – as those may have direct consequence to the organization’s services and its clients.
The third party risks become real: As organizations look to further refine/enhance services while reducing costs, the risk elements and factors shall be considered in advance of any decisions. For some industries like financial services, regulators are increasing their focus on third party/vendor management practices.Given the stage in which we live today, organizations cannot afford to damage their reputation as this can have significant impact to the organization’s bottom line. For example, organizations should understand the implications of subcontractors and concentration risks. In addition to it, organizations may wish to consider developing a third party sourcing risk management program to manage risks at the (1) contract, (2) vendor, and (3) program levels across its entire enterprise.
The ability to scale has a price: With the new advancements applied to BPA deals, organizations will be able to scale their operations using multiple service providers in a manner they have not experienced yet. The fundamental question here is whether or not the organizations has the right means to monitor multiple service providers’ interdependencies and services. If an organization wishes to scale services on a needed basis, a suggestion is to conduct a proof of concept exercise to ensure that their resources, skills and abilities are not placed at risk.
The ability to measure success: Organizations will be more focused on the quality of services being provided, not costs alone. At the backbone of this, organizations will need to determine their measurement of success and then apply across different service providers offering the same type of services. This will help organizations to determine their strategies for different needs. As presented above, an alternative organizations may wish to consider is to develop a third party sourcing risk management program.
The Development of the Digital Economy
A Framework to Bridge the Digital Divide and Reap Digital Dividends
Digital technologies have proliferated rapidly in the last two decades, more heavily so over the last decade. Internet penetration and mobile phone adoption has increased; a number of new digital tools that aid businesses, consumers and governments have been created. While the growth of digital technologies has been significant, there is still a major gap that needs to be bridged. Only 31 percent of the population in developing countries had access to internet in 2014, against 80 percent in high-income countries. The difference in deployment and leverage of digital technologies between developing and high-income countries is still stark. This digital divide is leading to a number of lost opportunities for several developing countries and is impeding faster growth of their economies, resulting in lower levels of job and wealth creation.
What happens when intelligence becomes a commodity?
I recently read an article about a twelve-year old boy who scored higher than both Albert Einstein and Stephen Hawking on the Mensa Test. Immediately, I thought of how many companies are already lining up to hire this bright young mind; possibly even before he ventures on to college.
I went on to think about the importance of knowledge and education as my own daughter recently departed for her freshman year of college. Fortunately, she graduated top of her high school and was accepted to some very select universities. After the sticker shock of paying her first semester’s tuition, I smiled realizing the bright future she will have. After all, a solid education and high intelligence is what the market has always sought, right?
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Welcome to the Founder’s Corner: Cognirati!
We invite you to check out our new blog, Cognirati. The Founder’s Blog, written by Frank Casale, is focused on sharing his experience as well as the unique and fortunate vantage point that comes from being the Founder of IRPA, the largest global process automation/ AI ecosystem.
A big believer in the network effect and the wisdom of the collective, Frank’ posts are written to provide insights, encourage discussion and open dialogue. Hopefully you will find the posts not only helpful, but interesting enough to spark a response from you.
www.irpanetwork.com/cognirati/
Millennial outsourcing is here, are you ready for it?
Organizations, service providers and advisors share thoughts on millennial outsourcing and the other latest trends within the outsourcing industry.
Last month I participated in numerous events in North America with clients, service providers and advisors – primarily discussing the many changes we are facing within the outsourcing industry. We are indeed going through some fundamental changes and exciting times for all parties.
Below is a summary of the latest thinking, which I call millennial outsourcing, and the facts we should be aware of:
• Change is imminent: There are several outsourcing contracts expiring within the next year – most of which will not likely be renewed exactly the same way as a traditional outsourcing deal is. During the Wall St. Technology Conference hosted by the Outsourcing Institute on June 2 in New York City, ISG President and Conference chair, Mr. Anubhav Sanexa, disclosed a staggering finding: the numbers of contracts facing significant changes are in the thousands.
• The as-a-Service model is here to stay: The technological advancements with software technologies and cloud now enable organizations to effectively multisource for both standard and project-related services. Although premature, this trend is set to continue to evolve – as buyers are becoming more experienced. A key component to an effective as-a-Service model is Governance, since the “handshakes” required are within the critical path for an effective service delivery.
• The labor arbitrage dilemma: As the middle class in emerging economies continues to grow, the labor benefits will commence to erode. A recent trend on nearshore and onshore locations has already begun, although there are other considerations driving that forward. For now, the basic measure that offshore is cheaper remains sustainable, however no one is certain on how long it will take for service providers to reach an offset.
• The automation optimum: As service providers and clients look to benefit from automation as a service, there are some constraints/key considerations to be taken into account. During a recent event hosted by Wipro and The Outsourcing Institute in New York City, Mr. Nicholas Carr, a renowned speaker and author talked about his latest book ,“Automation and Us.” The comment that did resonate with me was the fact organizations like Toyota are “Humanautomating Things” – which is basically to bring the best from machines and humans to obtain the best possible outcome, not one vs. the other.
Another important consideration to automation is the implication to traditional pricing models. In the near future, organizations and service providers may define the new acceptable way for pricing structure at the unit rate level. A potential approach will be to disclose the percentage of automation and labor applied to a specific tower or service within a unit rate. This will help to determine the “automation appetite” of organizations and service providers before they enter into an outsourcing relationship. In addition, this will also influence some potential gainsharing targets/goals for the agreement.
• The orchestration becomes real: The art of a good workflow to manage services from end-to-end through a multitude of service providers is very complex to achieve. Great examples of success have been obtained by some service providers – CapGemini’s state of Texas case study the first one that comes to mind. What is interesting about this is that different organizations have different perspectives on who should be orchestrating their services. There is no right or wrong here – rather an organization’s preference for managing some strategic considerations or involving an external party to do so. In addition, governance protocols and processes will be more strategic rather than operational – as organizations will need to put stronger emphasis on relationships at all levels, not on tasks or dashboards.
• The dependency on data and analytics rises to the top: Regardless the organization’s target operating model, data and analytics will become a major driver on how organizations’ assess services being provided – and where the organization should focus. The standard reporting and metrics provided today will continue to be enhanced – up to a level organizations’ have not seen yet. This will determine a much more factbased approach, linking organizations trends internally with external factors. The focus will be direct tied to customer experience, not only tasks being completed on time. The old saying, “all of my SLAs are green, however, my clients are still unhappy with services” is no longer acceptable. In the near future, organizations and service providers shall be able to understand and address issues proactively.
• The new client-facing focus: As discussed,customer experience will drive the organization’s perception of services being provided, not only the standard metrics and SLAs. The fact that services providers, either for software or infrastructure, have already invested a great amount of development and time on it is a major step forward.The integration of software and tools with mobile technology is becoming essential to the service providers business and client experience. The important factor is that organizations are heavily concerned with client-facing elements of services – as that is where the opportunity exists for them to make a difference from the client’s point of view.
• The risk considerations can no longer be evaluated in silo: The integration of technology tools from procurement to risk will provide greater visibility to risks that would otherwise be hard to assess in a timely manner. As organizations are constantly looking to protect their brands, the dependencies on service providers, regulatory requirements, and client expectations can no longer be assessed separately. During the Wall St. Technology Conference, I had the pleasure of moderating a panel discussion on this exact topic – the message I got from our speakers was simple: if you do not manage risks effectively, you will not survive.
• The market consolidation is taking shape: As margins for outsourcing deals are in decline, a consolidation among the service providers is already taking place. Most recently, CapGemini acquired iGATE, setting a precedent for greater competition with IBM, Tata and others. The strategic nature of acquisitions going forward will be a strong factor for organizations while assessing their upcoming contract renewals.
• The workforce generation gap: With the increased use of automation to commodity-like activities, a new generation will grow knowing how to monitor activities but lacking execution knowledge. As such, some skills and talents will become extremely valuable both to organizations and service providers. Therefore, it will be important for organizations and services providers to start laying out some of the required foundations sooner than later, so this can become a non-issue.
As you can see from above, our industry is going through fundamental changes. All parties involved are trying to anticipate the right solutions/responses to the items listed above. The upcoming months shall provide greater clarity on where we go from here. As an advisor myself, I believe these are exciting times as we learn to navigate in this new outsourcing world – welcome to millennial outsourcing and enjoy the ride.