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Navigating the new outsourcing relationship

Article by Bianca Wright

The Current state Of Global Outsourcing

In the UK and Europe, the specter of Brexit looms large in the minds of many, but it is likely to mean a growth in outsourcing, according to Keshav Murugesh, CEO at WNS. He says: “Breaking away from the EU will likely make it more expensive for UK companies to afford to recruit top quality staff – whether that’s through British talent becoming more expensive or the need to sponsor the working permits of EU citizens – so outsourcing will become a very viable option.”

Murugesh adds that, for a while now, outsourcing might have been synonymous with cost-cutting, but as British companies look to use the best talent from foreign shores, it is going to be a lifeline for business leaders wanting to maintain their access to a broad pool of flexible and highly skilled talent at a time when it is most needed. “And the thing about outsourcing companies is, they’re built to be comfortable with change. They don’t get fazed by it and remain robust, agile and buoyant no matter what situation is passed their way,” he says.

“Once the dust settles on the decision, there’s going to be increased competition over contracts and trade agreements. Companies across the UK and Europe will have to drive more efficiencies and compete to secure contracts within new territories. While there is uncertainty about what Brexit means for them in the short run, they remain comfortable about their businesses long term and their plans for outsourcing.”

In U.S terms, Brian Hannon, Voxpro Chief Commercial Officer, says the days of 1,000 people in an offshore building, answering basic tier 1 calls for $2 an hour are over. “Or at least they are now in the minority. Outsourcing has transformed from a pure cost-saving function into a value-added way to improve quality and reduce complexity across an organization,” Hannon says.

Jose Laureano, Senior Application Programmer of Schellman & Company, Inc., says: “The acceleration of the [U.S] economy and the growth of investment capital in the IT sector will create a gap of resource availability in 2018. In order to achieve their goals, companies will augment their outsourcing strategy.”

He says that the decision factors will not focus on the financials – whether it is cost effective to outsource versus onshore – but rather as a strategy to meet deadlines. This might drive an increase in the price tag of outsourcing.

Immigration policy in the U.S is another challenge and, Laureano says, has not responded to the demand of the IT sector. “We can see this in the H1B program. For the last three years the program has received 225% excess applications based on the 65,000 per year quota. This has created tension within the tech industry in the form of delayed advancement of new products and business opportunities,” he says.

The Obama administration started a push to increase IT and Science curricula into the basic education levels. The results of this effort will not impact the marketplace until 2030. “Until then there will be a continuous recycling of local resources, where IT personnel will just change jobs instead of new local resources being added to the local availability pool,” Laureano says.

“Enterprises that have invested in an outsource strategy will continue to use the strategy as cost saving in case of a slowdown in the economy. In this scenario, onshore resource engagement will decrease 2-1 versus offshore engagement. Based on these indicators we can expect outsourcing to grow between 25% to 45% in 2018,” he says.

A Rise In Technology Will Mean A Rise In IT Skills Outsourcing

Matthew Anderson, IT Development and Applications Director at Pearson Frank, says that, as more and more businesses become driven by technology, there will be a rise in companies looking to outsource additional IT roles that may have previously been held by internal employees. This means that there will be more demand for programmers with niche skills in specific technologies.

“The downside of this is that the recruitment of skilled IT workers will continue to be difficult for a lot of organizations due to the skills shortage in the industry. This means that salaries are likely to increase as demand outweighs the talent available,” he says.

Anderson believes that this will mean that working with partners who have access to these incredibly skilled individuals and who understand not just the technical but also the business elements at play will suddenly become an attractive offer. In his view the conversation will shift from what is the best cost solution to which is the best value solution for your business.

Jaroslaw Czaja, CEO of outsourcing company Future Processing, agrees, adding that 2018 is likely to see strong competition for more in-demand roles such as data analysts, computer programmers and software developers, but with 2017 seeing cybersecurity attacks on major companies, skills in threat and vulnerability monitoring will be the most outsourced.

“Outsourcing companies are also likely to offer more flexible and catered packages to businesses. And here, we can expect to see a particular rise in the availability of outsourced cybersecurity specialists on either a full time or ad hoc basis,” he says.

Czaja says this will allow smaller companies and start-ups to turn to outsourcing for actionable recommendations and services. “And with 2018 already seeing a rise in AI start-ups and space satellite innovations, businesses of all size can expect outsourcing companies to supply both software and hardware for both.”

Hannon points to the commercial terms in some outsourcing contracts as an example of how much the industry mentality has changed. Many are drafted in a way that ensures that both the client and the BPO provider have “skin in the game”. “They share the risks and the rewards, so that the provider is incentivised to deliver added value at all times,” he says.

The geography has changed too. Hannon explains that right now people might associate outsourcing with jobs in China, India and the Philippines. “But there’s a new kid on the block – the United States. Domestic Sourcing is rising rapidly and is here to stay. So not only does outsourcing mean higher quality and value, it also means keeping jobs at home. Keeping in line with this trend, Voxpro recently opened Centres of Excellence in Folsom, California and Athens, Georgia,” he says.

Kevin Linsell, CTO of Managed Service Provider Timico, says that IT outsourcing in the UK has suffered in the past from some very bad press and public failures, often resulting in early termination of agreements and insourcing of services.  Many such issues were around outsourcing a problem and expecting that problem to get fixed whilst also saving money. 

Linsell says these contracts were typically multi-year and the outsourcer was only expecting to deliver the cost saving in the latter part of the term but it then became obvious that improving and cutting costs were too difficult.

“Fast forward into ‘the cloud era’ and there is much greater transparency of commercial models, pay for what you use and a better understanding that services – not just technology – generally requires a degree of refactoring to function at their best under a new model. This is as true for outsourcing as it is for applications. Outsourcing today needs to be seen as part of an overall digital transformation journey, not the journey itself,” Linsell says.

Get The Best Out Of Your Outsourcing Relationship

Getting that journey right requires vision and insight to ensure that outsourcing actually adds value rather than merely cutting costs. Hannon outlines the things a company can do when getting started in outsourcing:

  • Make a detailed list of your core competencies and the mission-critical functions of your company.
  • Make a detailed list of the areas outside of those core competencies – and of those, pinpoint which ones may be critical to future success. These are your potential pain points, and may ultimately be the areas that you decide to outsource in order to improve quality, drive value, and scale faster.
  • Research the outsourcing practices of your peers and competitors. Remember that many tech companies are private about their outsourcing practices so don’t just rely on Google to turn up all the results.
  • Read case studies about successful outsourcing partnerships and also testimonials about BPOs from people in your industry.

To get the best out of your outsourcing relationship, Hannon believes it is important for organizations to fully immerse themselves into their partners’ culture. He explains that, for example, there is no aesthetic difference between working in Google or Airbnb’s offices in Dublin and working in the Voxpro offices in Cork.

“We feel that by taking the approach of living and breathing the clients’ culture, this provides an operational beauty unparalleled in the world of outsource partnerships. This also means that businesses looking to subscribe to this approach need to possess a very powerful sense of self in order to not lose their own unique personality. Companies want its world-class partners to enhance its culture, not replace it,” he says.

Mitigate The Risks

Paige Boshell, a partner at Bradley law firm, says that the two continuous challenges for outsourcing are quality of services and security of systems. She explains that businesses are mindful that many of their core services and products depend on the performance of their outsourced IT. “As data breaches, and consumer anxiety about data breaches, continue to increase, the security of the outsourced functions and the access vectors between those functions and the business’s systems and information remains top of mind,” she says. 

In addition, Boshell is seeing an increase in regulatory risk.  Although domestic federal focus in the U.S seems to be less intent on regulating IT security, American states continue to adopt more specific data protection laws and the impact of the GDPR will be felt domestically, even for businesses that are not directly subject to the regulation as data controllers or processors. “Further, IT processors that are directly regulated by GDPR may become more attractive to US businesses as a means of ensuring enhanced privacy and security,” she says.

Anand Natampalli, vice president: global business development at HGS, agrees that the ability to adjust processes quickly to meet changing regulatory and operational requirements is a key consideration for many businesses that seek out a BPO partner. He says that the healthcare industry, for example, is already one of the most heavily-regulated in the United States, and each year new and more complex regulations are being introduced. These requirements must be met or the organization risks substantial fines and costly legal actions.

Industry changes bring more challenges, Natampalli adds. Old processes must be revised and new processes created on a regular basis. They must then be implemented in a timely manner. With lean IT and operational budgets, these landscape challenges are complex and demand specialized expertise.

“An experienced BPO partner can help solve these issues to ensure the organization meets its compliance requirements and deadlines. In addition, the BPO partner can work through the upstream issues, offering suggestions on how to create, revise or even eliminate processes to meet goals and move work through the organization faster—and at a higher quality level,” he says.

Boshell believes the following attributes are critical when choosing an outsourcing partner: track record and references; security standards, audits, certifications, and continuing dedication of resources to security; focus on new and emerging technologies as a means to increase value; adherence to regulatory requirements and best practices; and transparency in all of the foregoing.

For Natampalli, other essentials in any potential BPO partner include:

  • The ability to scale to meet a business’s growing demand, whether that is due to a lack of budget or not being able to find qualified people to fill the positions.
  • Process optimization: An experienced BPO partner will examine all the options to determine the best course of action. Understanding the goal, and then selecting the best method(s) to accomplish it, is at the root of an outstanding BPO partner relationship.
  • Capability enhancement. Another overarching reason to partner with a BPO organization is to quickly acquire knowledge and/or skillsets that do not currently reside within the business. This helps the business meet current and long-term goals in a way that improves operations and customer satisfaction.

study by Everest Group, with support from TELUS International, found that 50-60 percent of end-of-term customer service delivery contracts were not renewed in the last few years. Jeffrey Puritt, President and CEO TELUS International, says: “Engaged relationships don’t just happen — they are envisioned, intentionally nurtured, and diligently built, and there are many factors that can positively impact relationship value and partnership engagement.”

Puritt emphasizes the need for creating connectivity at all levels of the partnership from the executive level to the employee level. Senior leaders must be present throughout the relationship, not just at the contract signing, and customer service agents must feel connected to the brand they represent in order to bring passion and commitment to their roles and take ownership of customer service issues.

He adds that it is important to deepen mutual business knowledge by establishing regular ‘health checks’ to ensure information is flowing both ways on a regular basis. “Customer service providers gain valuable insights from day-to-day interactions with customers, gleaning their likes, dislikes, and ideas for new products they’d like to see developed,” he says.

“From the client side, by providing the bigger picture and context for their business objectives, including expansion plans, process refinement and areas of continuous improvement, they are sharing the necessary direction to ultimately achieve better business results,” Puritt says. “It truly is a symbiotic relationship that requires extensive collaboration, effort and planning to reach mutually beneficial outcomes.”

Source: IDG Connect