Backblog | | Outsourcing

Last week’s IT Financial Management Association (ITFMA) conference in San Francisco marked the 25th anniversary of the association dedicated to professionals involved with the financial management of IT.  Conference attendees came from a variety of industries and government organizations with some attendees travelling from as far afield as Africa.

Sustainable sourcing — considering environmental and social impacts in selecting and managing suppliers — can enhance your company’s brand, improve operations and drive efficiency while promoting a healthier environment and stronger community. Regulators, consumer groups and customer demands drive sustainability requirements.

When I travel, I like to get out and see the city I’m visiting — especially when the city has more than 20 million people in it. On my most recent trip to Mumbai for the 20^th successive NASSCOM India Leadership Forum, I decided to use an open morning to take a city tour.

What does the term ‘Outsourcing‘ mean to you? Do you automatically think of a Slumdog Millionaire call centre, where hundreds of underpaid workers read from a script and barely speak English? Or does it make you mad, assuming that any company that ‘outsources’ is trying to cut corners and eliminate jobs?

Discussions around cloud security tend to be framed in terms of lonely ships sailing into uncharted waters: “You don’t know what you’re getting into,” we’re routinely warned. Actually, we do.

The National Institute of Standards and Technology defines a hybrid cloud as a “composition of two or more clouds (private, community, or public) that remain unique entities but are bound together by standardized or proprietary technology that enables data and application portability.”

As service delivery destinations have become increasingly globalized over the years, selecting the optimal location for a sourcing engagement has become a more and more complex process. While the number of possible locations has grown dramatically, each destination is also busy self-promoting, creating a competitive atmosphere that further magnifies the difficulty of your decision.

The stability of the IT services sector and the growth of the service providers has come under debate again due to several developments in the macro economic environment. The unemployment rate in the U.S. is more than nine percent, Standard & Poors lowered the sovereign credit rating of the U.S. on August 5 and in Europe, several European economies are in need of bailouts by stronger economies or measures to cut budgets and curb spending for improving their fiscal health.

Look for interesting news in the TPI Momentum 2011 review of outsourcing spending. We looked at outsourcing trends in 27 vertical and 68 sub-vertical industries throughout 2010 and found that, while overall outsourcing spending increased by five percent, conditions were highly variable across industries – with spending up or down by more than five percent in over half of the verticals.

As my colleague Bobby Neil and I wrote earlier this year, if you’re looking to buy Software as a Service (SaaS), it takes diligence. It’s important to understand whether you’re buying a true SaaS solution or simply a repackaged, “on-demand” version of the software. The same can be said for Infrastructure as a Service (IaaS). A true IaaS service can, at times, be difficult to discern from a more traditional managed service.

Just getting the word out about my next webinar with Focus.com. I'll be presenting along with Polycom on the topic of remote workers.

Implementing a multi-provider sourcing strategy across multiple countries requires tight coordination between business units, finance, legal and internal contract management. Success depends on an appropriate commercial structure, well-managed multiple-provider service delivery, smooth invoicing and allocation processes, and optimal service levels.

Defined in basic terms, a “benchmark” of an outsourcing deal is simply a comparison of one set of numbers against another, with the objective of adjusting pricing terms to more closely reflect market standards. But benchmarking can and should be much more than a discrete exercise aimed at cost reduction.

One of the key benefits cloud computing promises to deliver is that of flexible, usage-based pricing for IT resources: use more, pay more; use less, pay less.  This model gives businesses transparency into actual consumption and eliminates – at least in theory – the problem of managing insufficient or idle capacity.  The result is optimized efficiency and a more agile enterprise.

We are constantly looking ahead. That’s why we have eyes in the front of heads, giving us the ability to look forward, to see what is ahead of us. This is particularly useful in an environment that changes so quickly, and the line between present and future is often blurred. In business, it is part of the job to look ahead, forecast for the future and be prepared for a changing landscape. The people with the corner offices are paid the big bucks to make these predictions and lead their companies to success. What does the future of your business look like?

Cloud ERP is clearly the talk of the ERP software industry. The marketing engine supporting cloud options such as software as a service (SaaS) and hosted ERP systems is very strong, even reaching into the consumer-facing side of things with Microsoft’s push into the cloud with Windows-based products.

Much is made of the importance of Cloud Computing, the endless options for what can be sourced to the Cloud, and the vast dollars that can be saved by moving services to the Cloud. But very little is said about what consideration should be given to specific financial structures and terms of a Cloud-based services agreement.

In the late 1980s, the first wave of modern outsourcing realised the promise of specialisation, labour arbitrage, risk sharing and scale efficiencies. From the late 1990s forward, the era of globalisation saw the forming of the second wave of outsourcing with the rise of offshoring. Now, in the era of social networking, are we seeing the third wave of outsourcing with the emergence of crowdsourcing?

Microsoft recently released its Windows Azure Pricing Calculator, adding to the growing list of simple, web-based pricing calculators for cloud platforms. Amazon Web Services, a public cloud pioneer, has had a pricing calculator in place since 2009. Of course, in true cloud fashion, it’s still in beta.

TPI has recently concluded its third annual captive benchmarking study in India. To enhance benchmarking results and analysis, in addition to cost factors we included operational and process complexity parameters to identify key industry trends and actionable insights for the participants.

Because telecom costs represent a significant investment for a global organization, effective negotiation of telco/service/product contracts is imperative.

Earlier I posted the first installment of a two-part blog on the importance of using a value plan in performing value assessments and acting on their results. Today I address several steps you should take in conjunction with creating the value plan to help bring about a positive outcome for your company and your service providers. If you haven’t already done so, please read part 1 of the discussion here.

“Be careful what you ask for” — it’s fortune cookie wisdom. We have many client situations where they want to know whether they are really getting the value out of their outsourcing relationships. They ask us to look at the situation from all kinds of angles: services, invoice and resource unit accuracy, risk, productivity and so forth. We do these types of assessments from time to time, and they almost always show that there is some value loss in the relationship.

Sourcing considerations in ERP environments are not that dissimilar from those of traditional Application Development & Maintenance (ADM) environments in many ways. Yet there are also unique challenges and nuances that are especially applicable when sourcing ERP service providers.