Integrate Data From Business Process Outsourcing

August 1, 2005

Over the last five years, corporate America has increasingly turned to outsourcing and offshoring to gain efficiency. Companies assumed that outsourcers could integrate people, processes and systems more efficiently and cost-effectively than they could achieve this integration on their own. In retrospect, however, many of these companies discovered that they didn't fully consider the risks of these relationships, even if they put stringent service-level agreements (SLAs) in place.
Perhaps processes were outsourced because the management and execution activities were viewed as undifferentiating. Yet as mundane or complex as they may seem, your business processes are often directly connected to the brand value and reputation of your company. Many seemingly isolated processes actually touch crucial business relationships or can impair your ability to live up to corporate legal responsibilities. In some cases, processes can actually define your position in an industry.
Outsourcing can damage shareholder value and your business reputation because it shifts responsibility to a third party and introduces risk. Commonly outsourced processes and functions include accounts payable and receivables, outbound call centers, return merchandise authorization, service activation and service, and new product sales, to name just a few. Once these roles and tasks are no longer under your control, you may have a problem long before you realize it. Accountability is far more difficult to achieve when outsourcing is in place—SLAs notwithstanding.
In an example that points to a potential impact on brand value, Dell—which has one of the most efficient supply chains in the world—has outsourced aspects of its account management and purchase requisition processes to an offshore service provider. The simplest tasks of consolidating accounts and invoices and processing address changes are now sent overseas to India. These seemingly innocuous changes have introduced delays and made it more difficult for Dell to maintain its reputation for high-quality customer service.
In some cases, regulation makes outsourcing particularly risky. Laws such as HIPAA, for example, require greater process oversight to protect medical information. Health care providers are outsourcing tasks such as medical transcription, and insurers are outsourcing claims processing, predominately to India, yet there are no requirements for these service providers to comply with U.S. regulations under Indian law. How can this data be monitored and securely integrated into a single enterprise view if the underlying processes are outsourced?
Most organizations that outsource don't have visibility into and don't require notification of critical events within their outsourced business processes. Nor do most outsourcers offer BI systems with performance metrics that can be shared. Worse still, data management and integration activities required for business or regulatory reasons are often inefficient or missing. In fact, in most cases, the data provided from an outsourcer is manually assembled and transmitted or shipped as an extract. Sometimes the data is copied, pasted and manipulated in spreadsheets. This, of course, is a significant problem because there's no insight into where the data originated or what happened to it once it was placed in the spreadsheet. This is a common problem in order fulfillment, customer service resolution and even accounting processes that are outsourced.
Business process outsourcing is here to stay, so we can only focus on improving its performance and on understanding related risks. How can you ensure that you've considered and addressed the risks? Start by committing more time and resources to gaining direct insight into your outsourced business processes. Reassess SLAs and technology infrastructures to ensure visibility, and reexamine the outsourcers themselves to identify financial and business risks. Your efforts will be well worth it.
Use an independent consultant to assess your service provider's systems, your own systems and your data integration practices. In particular, determine your current service level and whether your operational data and metrics are accurate and secure. Lastly, take more direct responsibility for your business processes and for the secure integration of data back into your information systems. The ability to monitor and measure processes inside and outside the enterprise is strategic—and vital—to your business and its reputation.

‘Developed countries will outsource 4.1m jobs by ’08’

AGENCIES[ FRIDAY, JULY 15, 2005 01:51:35 AM]

WASHINGTON: The number of service jobs outsourced from the industrialised world to low-wage countries is expected to surge to 4.1m by ’08, according to a study. But the authors of the report argue the trend will have only a small effect on workers in wealthy nations because it will affect a relatively modest percentage of the workforce. “Labour markets in developed economies are experiencing and will continue to experience the trend toward offshoring as a slow, evolutionary change,” said the report by the Mckinsey Global Institute released at the Institute for International Economics. “It will have less impact on patterns of employment than the decline in manufacturing employment developed economies have experienced recently.” Still, the study underscored the inexorable shift of many jobs — especially in sectors like engineering and computer jobs — from the US and Europe to countries like India, China and the Philippines. “These are very profound changes that will alter the (global) labour market dramatically,” said McKinsey’s Diana Farrell, main author of the report. “But they will not happen overnight.” McKinsey estimated that about 1.5m service jobs were outsourced from rich countries to the developing world by the end of ’03. Still, this is only a fraction of the ‘potential’ 160m jobs that ‘could be done by people located anywhere in the world’ — about 11% of the global service workforce. The main factors holding down the use of outsourcing are the lack of suitable skills in developing countries, and companies reluctant to shift jobs for cultural or other reasons

McKinsey calculated some 33m young professionals with university degrees and work experience in 28 low-wage countries. But it said only a fraction of these people have the language, cultural skills and other capacities to work at a multinational corporation. Ms Farrell acknowledged that there is ‘high anxiety’ in the wealthy countries about the future of jobs in engineering and software, the sectors most affected by outsourcing. But she said there are already signs of possible shortages of engineers in some locations like the Indian high-tech centres of Bangalore and Hyderabad. “This is one area where demand is going to outpace supply,” she said. Overall, Ms Farrell said the ability to shift jobs to take advantage of cost savings “is a good thing for economic prosperity,” but added, “it does leave a lot of fallout.” “The moderate impact and generally slow pace of offshoring will not soften the blow for those individuals in developed countries who do lose their jobs as a result,” the report said. “However, most are college graduates, and therefore likely to be more amenable to retraining than manufacturing workers. And in the US, growth rates in both wages and jobs in the computer and data processing services sector, where offshoring is prevalent, are higher than in the economy as a whole.”

Accenture all set to hire 30,000 pros

TIMES NEWS NETWORK[ FRIDAY, JULY 15, 2005 12:08:54 AM]

NEW DELHI: The global technology and outsourcing major, Accenture , will be hiring big time in India. It plans to hire 30,000 - 50,000 people in India, China and Phillipines over the next 3 years. The company has already hired 1,600 people in May. While a large percentage of hiring will be in India, the company officials did not specify the numbers. Chennai will be the next big hub for Accenture, with plans to move to a facility with a capacity of 5,000 seats in the city. Currently, it has less than 1,000 people operating out of an incubation facility. “India will be the flagship of our offshore network. It’s a part of our strategy to build strong and diversified network of offshore capabilities. And now that we have more clarity on our Offshore project, we hire aggressively,” says Rueda Basilio, managing partner, Accenture’s Global Delivery Network. Accenture has more than 13,000 people in India currently and is hiring aggressively. According to Basilio, other offshore locations that the firm is looking at hiring are Philippines in Asia, the Czech Republic and Latvia in Eastern and Central Europe and Sao Paolo in Brazil. In Manila, its other delivery centre in Asia, Accenture currently employs about 4,600 people. While 4,000 are in IT Services, 600 people are in the BPO. Overall, there are about 35,000 people in Accenture’s global delivery network across 40 delivery centres and out of that about 24,000 are in India, China, Phillipines, Riga, Bratislava, Malaga, Sao Paulo and Brazil.

The consulting firm will be using the Indian operations to get big time into the space of application development and maintenance, an area where Indian IT firms are well trenched. “It’s a very competitive space, and our offshore centres will allow us to do it successfully. And we will be very aggressive in this space,” says Mr Basilio. He believes that a strong offshore presence will allow Accenture to bundle its services better. Interestingly, most of the big Indian firms garner more than 60% of their revenues from application development and maintenance kind of work. Outsourcing is a growing area for Accenture. In the recently announced third quarter results, the revenue from outsourcing amounted to 39% of revenues and grew by 16%. In the last three quarters, outsourcing has been 39% of the revenues and registered a growth of 17%, a faster growth rate than the firm’s overall growth rate. According to Mr Basilio, the reason why Accenture has decided to move into the offshore space is to increase its competitiveness. “If we are competitive, we win more, and we will get more revenues. Also the margins will be healthier with the cost arbitrage factor coming into play. And finally, the company feels it wants to take advantage of the good quality skill sets of the manpower in these geographies,” he said.