Posted on February 15, 2010 by Atul
By Glenn P. Remoreras, Information Technology, CEMEX USA Shared Services
I’m home! I thought it would be appropriate to write about the Philippines while I’m in town. It’s been 2 years since my last trip here. A family occasion gave me the opportunity to visit home this close to Christmas. I surely miss the vibrant colors, vitality and noise of the streets filled with jeepneys. I miss the company of friends and family. I am currently at a local coffee shop right in the heart of Metropolitan Manila’s business district – Makati. Like so many others, I come here mainly to connect to the internet and the coffee is just secondary. I am part of a shared services organization based in Florida. Due to a scheduling conflict, I am tasked to work during the first two weeks of December even though I am in a different time zone (13-hour difference). Indeed, technology has broken the barriers to work and collaboration. Something that – decades ago – one can hardly imagine doing. I work nights (usually until 1am) to catch-up with the US Eastern Time zone. It is not as if I am the only one working the night shift in Metro Manila and in many major cities in the Philippines. I am comforted by the fact that I work at the same time as thousands of service agents and consultants providing services to the US and Europe. In Makati, it is pretty common to see heavily lighted high rise buildings at night. After all, the Philippines is one of the main centers of business process outsourcing (BPO) and shared services in the world. The Philippine BPO industry provides a wide portfolio of services that not only include traditional voice and IT services but also higher value services such as finance, IT programming, engineering, medical transcription and architectural services.Business Process Outsourcing According to Tas, J. & Sunder, S. in a journal entitled Financial Services Business Process Outsourcing published in 2004: “Business process outsourcing (BPO) is a form of outsourcing that involves the contracting of the operations and responsibilities of a specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain.” BPO can be categorized into two types—front office and back office outsourcing. Front office outsourcing is typically related to customer services and contact center services while Back office usually refers to support and administrative functions such as human resources, finance and accounting. Based on service location there are two types of BPO—nearshore and offshore outsourcing. For example, relative to United States, BPO service providers in Mexico can be considered a nearshore outsourcing as compared to BPO services provided to US companies from Asia Pacific countries, like the Philippines.Why Philippines is a First-rate BPO location Amid the global economic crisis, the BPO industries in the country have remained strong in 2009. Industry experts in the Philippines expect 35% growth this year. According to the Business Process Association of the Philippines (BPAP), the biggest organization of outsourcing providers in the Philippines, the outsourcing industry will earn about $12 billion to $13 billion and employ close to 900,000 people in 2010. The Philippines has remained one of the most ideal locations for companies who outsource business processes and services. Filipinos are known to be highly skilled, hardworking, dedicated and loyal. There is a known Filipino trait called “malasakit” (in local Filipno language) that means genuine concern and care. Filipinos are known to exhibit this quality in the workplace. Skills and hardworking attitudes guarantee strong performance and productivity, while on the other hand, dedication and loyalty translates to better talent retention, less training costs and experienced service personnel. The Philippines is also considered as the location of choice due to its less expensive operational and labor costs, as well as having an English-speaking workforce (the result of English being the main medium of instruction in schools and universities in all educational levels). The Philippines, with the help of the Government and private sectors, has also developed a competitive infrastructure in terms of telecommunications, information and technology.UK body proclaims the Philippines as World’s Best BPO destination for the 2nd time The Philippines has won the 2009 Offshoring Destination of the Year category at the 4th National Outsourcing Association (NOA) Awards held October 15 at Park Plaza Riverbank in London. The Philippines bested Egypt, Malaysia, Russia and Sri Lanka among others. This is the second time that the country bagged the prestigious award category. The first time was in 2007. This was reported in a press release by BPAP last October 2009.BPO Lifestyle A lot of top multinational companies have service centers in the Philippines—Caltex, Citibank, HSBC, Procter and Gamble, Deutsche Bank and Dell, to name a few. It’s common for an individual to have at least one close family member who works in BPOs and services centers. It’s just that so many Filipinos nowadays work in BPO-related industries across the Philippines. My new sister-in-law, for instance, works in HSBC service center and my brother used to work there too— it’s where they met. This goes to show that indeed, business process outsourcing, offshore call and service centers are now part of Filipino lifestyle of service. We are known for our service— not just in BPO industries but in many industries— not just in the Philippines but around the world.
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Posted on February 14, 2010 by Atul
This
is the fourth in a series of an excerpt from the newly published book by Atul
Vashistha, Globalization Wisdom: The Seven Secrets of Great Globalizers. (Amazon link)
I’ve
said before that a company that wishes to flourish in today’s global market
must adopt a services globalization strategy. But not every company is ready to
globalize every process today. A successful services
globalization strategy takes diligent planning and thought—and that takes time
and focused effort.
In
the last chapter on adopting a lifecycle approach (Secret #3), we talked about
answering the following questions: Should
the organization globalize? Why will
the organization globalize? What will
the organization globalize? When will
it globalize?
The
last two questions are more operational than strategic; the first two—about why
the organization is globalizing and if it even should globalize, are purely
strategic. In answering those strategic questions, an organization must look at
globalization in relation to its overall business strategy. This is the fourth
secret: Align business and globalization objectives. If the two don’t align, the organization is wasting its
resources and should not globalize.
When
talking about GE’s globalization strategies, former CEO Jack Welch, arguably
one of the best strategists of modern business and a highly successful
globalizer, says “If GE's strategy
of investment in China is wrong, it represents a loss of a billion dollars,
perhaps a couple of billion dollars. If it is right, it is the future of this
company for the next century.”
Not
every organization will risk billions of dollars in its globalization strategy,
but each runs the risk of unsuccessfully globalizing and missing out on the
opportunity to complement business strategy with globalization. In order to
successfully leverage services globalization—to “be right” in globalization
decisions—organizations must ensure that their globalization strategy is driven
by and aligned with their business strategy.
The
sections that follow aim to offer insight into the questions an organization
needs to ask when determining if its business strategy and globalization
strategy align.
As
services globalization becomes a business imperative for industries from
financial services to health care, companies will be even more inclined to jump
on the bandwagon with their peers. Afraid of being left in the dust, too many
companies globalize without really considering whether services globalization
is right for them—and whether their particular approach to services
globalization is the best one.
While
it’s true that services globalization is becoming a business imperative and
should receive due consideration from executives at every organization,
services globalization is not a one-size-fits-all proposition: the way Company
A executes its global strategy will not necessarily work for Company B, just as
the reasons for Company B to globalize are not necessarily the same as Company
A’s reasons.
In
other words, too often globalization initiatives are taken on with no real
strategy at all. Or an organization allows its globalization strategy to drive
its business strategy. Successful globalizers, in contrast, develop very clear
globalization strategies before setting one foot out the door, and those plans
are driven every step of the way by the corporate strategy.
Applied
Materials’ Group VP and CIO Ron Kifer says that aligning business and
globalization objectives is really about securing the future for the company.
“Your business strategy should be the primary driver of the globalization
strategy because globalization doesn’t happen in isolation. If you look at what
Applied Materials is doing with globalization, we’re all-around optimizing
performance and focusing on the core, critical competencies of the
organization, the cost-effectiveness of the solutions closer to our customers,
and that means a different geographic footprint.”
Successful
globalizers thoroughly assess their business process portfolio, financial
state, goals, objectives, risk and transformation needs, as well as the
supplier landscape and market capabilities in provider locations. Using
information from those assessments, successful globalizers build a
globalization strategy that includes the following elements:
§ Future proofing
§ Risk management
§ IP protection
§ Transformation
§ Service extension
§ Resource redeployment
§ Innovation management
Armed
with a globalization strategy, successful globalizers develop an execution
roadmap, which includes:
§ Geographic placement
§ Ownership model
§ Third-party supplier relationships
§ Transition timing
§ Financial return
§ Governance organization
Case
Study: Too Much, Too Fast
One
S&P 100 global investment bank offers a good example of a company that did
not allow its business strategy to drive its globalization strategy. Instead,
perhaps eager to jump on the bandwagon of financial services firms adopting
services globalization, the company globalized too much, too fast.
The
organization globalized its application development, application support and maintenance,
IT infrastructure management, and internal IT help desk all at the same time.
Overloaded and lacking a clearly defined globalization strategy, the investment
bank began to experience performance and quality issues with its offshore
internal IT help desk services.
To
remedy the problem, the organization had to backtrack, taking steps that it
would have been wiser to take initially, including securing buy-in from key
client stakeholders, providing for effective knowledge transfer, and building a
well-planned, solid governance framework. After taking those steps and
determining that its newly defined services globalization strategy did follow
its overall business strategy, the company was able to successfully resume its
initiative.
In
addition to aligning its globalization strategy with its business strategy and
ensuring that it is the business strategy that’s the driver, the successful
globalizer has a clear idea of what part of its business strategy globalization
will help execute.
Former
Lenovo CIO Steve Bandrowczak explains that globalization is not just for the
sake of lowering costs. "We were lowering costs not because we were not
competitive in the industry. We were lowering costs because our stakeholders
expected it and competition demands it. You keep getting back to what are the
strategic objectives of your business.”
Bandrowczak
added that in his staff meetings, the alignment between globalization and
business strategy was crystal clear. “If you had sat in my staff meeting, we
didn’t say ‘Okay we’re going to shut two data centers down and we’re going to
save three centers.’ Instead, we said ‘We’re going to improve our
expense-to-revenue ratio from an IT perspective because we’re going to get in
line with industry standards and we have to deliver $100 million to the bottom
line of Lenovo.’ You constantly have to keep tying your global initiatives to
those business and strategic directions.”
Case Study: Lack of Clarity and
Definition
A
Fortune 500 electronics company provides an example of an organization that did
not develop a clear idea of the part of its business strategy that
globalization would help execute before beginning its globalization initiative.
As a result, the organization encountered a number of (avoidable) problems.
The
company initially decided to offshore its corporate business customer service,
retail customer service, levels 1, 2 and 3 customer support, order processing,
accounts payable and receivable, and order-to-cash processes to third-party
suppliers as well as a captive center in India and the Philippines.
Once
the initiative was underway, the electronics company found significant
performance and quality issues with corporate business customer service
processes within its captive center. Additionally, the ramp-up of higher-end,
customer-facing processes was slower than the company had originally expected.
After
analyzing the problems that had occurred within its services globalization
initiative, the organization realized that its fault lay in not fully analyzing
its portfolio of processes to understand the fundamental what, when, where and
how questions that services globalization requires. Additionally, the company found
that its fragmented processes needed to be aggregated and that an effective
transition needed to be based on a detailed analysis of processes.
This
Fortune 500 electronics company responded to the deficiencies it found in its
services globalization rollout, re-planned the initiatives by answering those
critical what, when, where and how questions, and developed a clear picture of
how globalization would help the company accomplish its business objectives.
Now it has very successful offshore operations.
A
Fortune 500 health and life insurance company provides a good example of the
strategic considerations a company might make at different levels of the
organization. This company had a very fragmented and inefficient life claims
process, with no existing manuals or desktop procedures. Each examiner had his
or her own version of the process and method for calculating claim amounts.
In
addition, the organization was bogged down in paper-based calculations that
were full of errors with no audit trail. Furthermore, process
output/productivity, accuracy, and efficiency were not tracked. As a result,
the firm was unable to leverage its systems and knowledge to compete in the
market against new players.
This
organization resisted the urge to adopt services globalization as a fix-it
solution to its inefficiencies. Instead, it considered its strategic goals and
how it could accomplish those goals with an aligned services globalization
strategy. Each executive team member contributed in a different way to the
strategic development: the CEO had a strategic focus, concerned with leading
the business into the future; the CIO took a performance focus, concerned with
flexibility, productivity, guaranteed services levels and proven technology.
The CFO took a bottom-line focus, concerned with reducing current costs and
managing future costs.
Instead
of using services globalization as a substitute for sound business strategy,
this Fortune 500 health and life insurance company used a well-developed
services globalization strategy to complement its business strategy, which was
geared in part toward overcoming several process inefficiencies.
Atul
Vashistha is Founder & Chairman of Neo Advisory (formerly neoIT), a leading
management consultancy since 1999, focused on independent, objective and
actionable advice to enterprises that seek to transform their organizations by
capitalizing on outsourcing and globalization. He is also Founder of Neo Group,
a firm focused on managing, monitoring and improving supply relationships. His latest venture is
BestOutsourcingJobs.com, an online job portal focused on outsourcing careers.
He can be reached at atul@vashistha.com.
Posted on February 9, 2010 by Atul
Karen Mansell has held the dual role of Head of Corporate Procurement and Business Process Outsourcing at AstraZeneca since joining the organization in July 2008. Her task is to develop an intelligent sourcing strategy, leveraging the corporation's inhouse expertise while at the same time optimizing the sourcing process from an operational and process-driven standpoint.
SSON: Karen, can you describe your new role at AstraZeneca, and what it means for the corporation's sourcing strategy. KM: Mine is essentially a new role, and I wear two hats. One is corporate procurement, which is structured under a global Chief Procurement Officer and includes R&D, sales & marketing, operations, IS, all US business and corporate procurement units. I support the centralized functions such as HR, finance, tax, and treasury advisory, as well as all business travel services — I'm effectively the procurement lead for all indirect spend in those categories across the globe. So, I have corporate responsibility for P&L as well as global category responsibility for procurement. The other hat is the BPO Center of Excellence. To explain how this evolved: when we started really looking across the business we realized that although many departments were starting to do outsourcing, there was no standardized approach. We wanted to ensure that we were optimizing all our outsourcing activities as well as reducing risk at the enterprise level. That effectively started us off in this direction. I have been developing a small team since March this year. We number three in total — small but effective! Called the BPO Center of Excellence, we support all outsourcing activities with coaching, consultancy and project execution, where needed. On a pan-AstraZeneca level, we're also monitoring all outsourcing activities, ensuring they deliver to promises, track metrics, and manage some of the strategic relationships. We've created a steering group at this level, which reports into the board. So we are able to represent, end-to-end, across the globe, and across all P&L units, what outsourcing looks like in AZ.SSON: And what were the drivers, apart from the obvious 'optimization?' Why was it important to develop a new sourcing strategy? KM: It's primarily about risk management, consistency, scale and leverage — but also expertise and innovation. We've had a number of outsourcing contracts in the past, which suffered from inadequate sharing of best practice, overlapping roles, paying for advice and toolkits many times over, etc. Where we've not done very well previously is in ensuring, as a new area approaches BPO, that they are aware of what's gone before, in order to extract the best value and the lowest risk out of our knowledge base. So, in the past we'd been in the habit of looking around internally, deciding that no-one had the outsourcing experience we were looking for, and then buying that in. We'd go to an outsourcing advisor and effectively purchase the entire team — including procurement people — to take the project forward, write the RFP (Request for Proposal), help with supplier evaluation, project management work, etc. We also had the tendency to constantly rewrite our contracts, instead of working from a standard template. So we'd carry the same up front costs for each new outsourcing deal. Now we have a set of tools and templates sitting in a library, which is accessible to all. From a financial perspective we've already achieved considerable savings. Speed and time is also much improved. For example, in tax and treasury we have some withholding tax issues, which are complex. We've now set up some best practice work streams and weÕve tagged people — experts — who sit in tax, treasury, or the legal department, and who have the prior experience to answer these questions quickly. This effectively creates a COE.SSON: How does your BPO work fit into AstraZeneca's overall sourcing plan? KM: We are replacing the sourcing advisory piece of the outsourcing lifecycle. So, as an area moves through the various stages of an outsourcing contract, we'll help with some of the up front diagnostics, decision-making tools, and make or buy decisions. At the end-to-end sourcing advisory level, we look at RMPs, supplier selection, evaluation, due diligence, market or competitor intelligence - through to contract or post contract management, from a commercial perspective. My team is effectively replacing the reliance on third party advisory at that point.SSON: How do you manage that with a staff of only three? KM: Yes, three is small! But we are building more of a virtual network model — building capability and supporting existing project managers and procurement people. In other words: we are trying to teach people to fish rather than do it all for them.SSON: Hoe did the crisis of last autumn affect AZ's sourcing strategy deployment? KM: AZ had had outsourcing on its agenda for a while, but as the pharmaceutical industry tended to be cash rich, so there had not been the same pressure to pursue lean exercises, as was the case elsewhere. Top down focus seemed to concentrate more on addressing future talent needs and shaping the business for the future. With the events of last September, however, we've become almost radical in our approach. For example, R&D would never traditionally be an option for outsourcing, as it is heavily IP-focused and represents the crown jewels of the organization. But we are now working with that department to change strategies — breaking down the end-to-end process and helping them understand that not every part of the process has to be ring-fenced; that elements of it can be taken out.SSON: How are you seeing changes in sourcing behavior as a result of this new approach? KM: We have what we call a low cost country strategy — so we are in China and India. We run small sourcing teams in both markets, which have traditionally looked at the active product ingredients or provided support for supply chain manufacturing, as part of the operational piece. As we move forward with our outsourcing strategy, we are looking at the growing capability in all our emerging markets, but especially from an original delivery center point of view. So we are re-evaluating what supplier relationship management looks like coming out of those areas. Traditionally, when you put an offshore contract into a place like India, you then go ahead and try to manage it from the US or the UK, or wherever you are based. What we are looking at doing is to put some of that supplier management capability on the ground, alongside the preferred supplier relationship. That is actually more closely aligned with the ethos of our procurement methodology where we try to get closer to the supplier base and understand what the innovation and insights look like, so we can marry them up to the business requirements and really drive some aggressive supplier development programs.SSON: What are your greatest challenges? KM: In theory we all understand the reasons for going through this change, but in practice it is hard navigating the organization. Also, as a traditional R&D organization — where it can take 12 years to get a product to market — we are used to operating at a slower pace. We're not like the financial services or telecoms industries, where things change fast. Our organizational culture is built on proving a business case before getting the go-ahead. So we are going through not insignificant changes.SSON: So, what does the sourcing future look like? KM: We are looking at the future from a number of different aspects. The Center of Excellence is itself currently owned by sourcing — but it really needs to be owned by the business, and driven by it. I believe it should become less of a procurement activity, and more driven by the business. In terms of the procurement strategy, on the other hand, our aim is to ensure risk mitigation and to bring innovation and insight from the supplier base into the customer base. I think we are currently on that path, and expect that we'll be really good at it in a few years. The next thing will then be to challenge ourselves to bring more diversity into what we are doing, into our sourcing. Well need to expand the supply base to stay ahead of the game. We're currently driving our strategy through our key hubs — the UK, Sweden, and the US — and are starting to drive it through India and Chi
na, as well. But the market is always moving and the challenge is to make sure you stay ahead, to benefit from new sourcing opportunities as these become available.
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Posted on February 9, 2010 by Atul
POUGHKEEPSIE, N.Y., Dec. 30, 2009 – Companies will return to using outsourcing to recapture innovation and provide flexibility in 2010 versus simply saving money, but global economic uncertainty will continue to impact the industry, according to year-end predictions by the International Association of Outsourcing Professionals® (IAOP®).“Coming off a year of tremendous pressure, the outsourcing industry is expected to enter the next decade with positive signs of rebounding,” said IAOP Chairman Michael Corbett. “As companies recover from these tough economic times, outsourcing will enable them to emerge as leaders in the new global economy.”Here are the top 10 trends to watch for in 2010 from IAOP with insights from top industry leaders:1. Delayed Deals Get the Green Light The economicdownturn overthe past 12 to 18 months put many outsourcing deals on hold. Companies are now forging ahead with renewed confidence in the stability and growth of economic markets. “Although pricing will continue to be under pressure, outsourcing deals that were frozen will begin working their way through the sourcing and RFP process, leading to some significant new outsourcing activity in 2010,”said Danny Ertel, Certified Outsourcing Professional®, (COP), partner of Vantage Partners and chairman of IAOP’s Governance Chapter. 2. Desperately Seeking Value The tremendous pricing pressure on outsourcing deals renegotiated in 2008-09 will lead some companies to realize that deep pricing cuts have damaged relationships and the business value that outsourcing brings. Providers and customers will re-negotiate contracts more collaboratively to regain innovation and flexibility, and enhance total value.“As we put the worst of the economic downturn behind us and begin to move back to ‘normal,’ companies will be needing agility and innovation in their businesses,” Ertel said. “Outsourcing service providers that haven’t re-negotiated contracts also will be more proactive to improve and renew relationships with customers.” 3. Flexibility to Get Out of Contracts With uncertainly still surrounding the economy, companies will hesitate to make long-term commitments with outsourcing service providers because of the fear of the unknown. “The looming economic uncertainty will lead customers to seek shorter term contracts, inflation indexing, currency exchange protection and volume band relief,” predicts Jagdish Dalal, COP, IAOP’s managing director of thought leadership. 4. Uncertainty Leads to Consolidation Global economic uncertainty, currency fluctuations and other market forces will encourage increasing levels of mergers and acquisitions on a global basis, particularly among service providers. “This consolidation of outsourcing providers will drive higher value services and continue to put pressure on other players to be more strategic in their offerings,” Dalal said. 5. Outsourcing Hiring Return Expect to see growth in new graduate hiring in emerging outsourcing locations as well as wage increases of 8 to 10 percent in India and many other Asia Pacific locations, while the U.S and Western Europe will see much smaller raises.“Rising inflation will lead to wage increases, creating increased pressure on margins,” according to IAOP board member Atul Vashistha, COP, and chairman, Neo Advisory & Neo Group. 6. New Outsourcing Destinations EmergeRising geographies in Central and South America will take market share away from traditional outsourcing locations, such as China. “Offshore players will continue to expand and set up operations in new geographies, taking a share of an expanded pie,” said Vashistha.7. New Destinations Differentiate ThemselvesAs new destinations emerge, the competition among outsourcing providers will intensify, leading parts of the world – particularly the BRIC nations – to differentiate themselves through professional certification, such as the COP designation, and training and education programs. “Increased competition from emerging market providers also will drive a focus on services differentiation, bundling of services and greater intimacy with customers through outsourcing relationship management (ORM),” said Matt Shocklee, COP, president and CEO of Global Sourcing Optimization Services and IAOP U.S. Ambassador. 8. Tooling Up with Technology Companies will increasingly make use of advanced management practices, tools and technologies – such as ORM and cloud computing – to provide improved value and operational flexibility and performance. “Cloud computing platforms will change the way outsourced services are sold, purchased and delivered, resulting in greater flexibility in the delivery of services and helping both clients and providers further optimize outsourcing business value delivered through their outsourcing relationships,” Shocklee said. 9. Social ResponsibilityOutsourcing practices will continue to be impacted by increased environmental awareness and social responsibility. The industry will be called on to step up its role as a leader in corporate social responsibility globally. “Companies will need to develop new innovative technologies to deliver the sustainable products that consumers want and also look more broadly at the impact of their outsourcing actions on a global basis,” said Julia Santos, COP, director worldwide strategic outsourcing, Johnson & Johnson Group of Consumer Companies, and chair of IAOP’s Global Human Capital Chapter. 10. Political Shifts Increased government regulations and the resulting need for compliance will affect outsourcing in the coming year. “Global businesses will become increasingly aware of the new regulations and seek to establish better relationships with key opinion leaders,” Santos said. About IAOP The International Association of Outsourcing Professionals (IAOP) is the global, standard-setting organization and advocate for the outsourcing profession. With more than 100,000 members and affiliates worldwide, IAOP helps companies increase their outsourcing success rate, improve their outsourcing ROI, and expand the opportunities for outsourcing across their businesses. To learn more, visit www.outsourcingprofessional.org.Media Contact:Kimberly L. Maneeley+1.845.452.0600, ext.104kim.maneeley@outsourcingprofessional.org
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