How about IT outsourcing in Central and Eastern Europe?

November 30, 2010

5 experts interviewed, over 240 companies operating in 16 CEE countries surveyed, and much much more. These are the headlines of the comprehensive “Central and Eastern IT Outsourcing Review 2010” which has been currently published.

This 164-page-report examines the role of ITO sector in Central and Eastern Europe and delivers answers regarding recession and its impact on ITO sector, market volume, development in number of companies and their characteristics, number of IT professionals and hourly rates. Except of that a brief characteristics of countries of the region has been delivered and contact data of companies and other organisations operating in the region have been presented.

Below a short excerpt from the interviews with outsourcing experts: Phil Fersht, Boris Kontsevoi, Magdalena Szarafin, Christoph Prieler and Franco Dal Molin.

Question 1. What are the main development trends on IT outsourcing services market and what will be the main outsourcing drivers for the years to come?

Phil Fersht: IT outsourcing is reaching a pivotal juncture in its maturity. Many of the large
enterprises today have now moved much of the “low hanging fruit” application development and maintenance work to service providers and are now need looking at new ways of finding further savings beyond utilizing low-cost labor services. They are still driven by cost and efficiency, but also by innovation – i.e. unique and creative methods to find new levels of productivity and topline growth.

Question 2. Has the recession and the following cost-pressures changed the companies’ attitude to outsourcing (IT outsourcing specifically)?

Franco Dal Molin: Yes, it has. Many companies are now seriously evaluating outsourcing for the first time, or at least they do consider the possibility with a genuine interest and open
mindset, whereas in the past we encountered more skepticism, widespread black-and-white
thinking and cynicism.
Obviously most companies are looking at outsourcing primarily as a means for saving costs. In a number of West European economies there is – despite the crisis – still a significant shortage of skilled IT specialists. Finding developers and hiring them fast enough becomes often more crucial than just lowering costs. Finally, in times of uncertainty and volatility, outsourcing is looked at as an ideal way to become more flexible and/or scalable.

Question 3. View of the CEE region as a cluster of IT outsourcing services providers. Advantages, disadvantages, trends, image, specifics.

Magdalena Szarafin: One friend of mine, who comes from Canada, visited Poland a few years ago. Then he said to me: you know what? I am very impressed by what I saw. That is a very modern country. I visited some companies: everywhere young, dynamic, high-motivated people speaking foreign languages.
In my opinion, that statement describes the CEE region very well. Another maxim which points out the situation very well is: “Outsourcing is people’s business” – the geographical, cultural and language proximity are of importance for buyers. Customers from Western Europe are likely to make business with partners from Central and Eastern Europe as their locations are available within 2-3 hours their business partners speak their languages. They are high-qualified and the prices are still lower than those in Western Europe.
And another maxim yet: “We are the second (third, fourth) – we try harder” implies that a customer doing business with partners from CEE countries can expect to be delivered with highquality services.
One of the challenges is cost explosion: wages and salaries in the CEE countries are rising quicker than those in Western Europe. Also lack of professionals which can already now be observed in many industries is the next challenge for the upcoming years.

Question 4. Europe outran US as the biggest outsourcing spender last year (http://bit.ly/5PQcFA), will this trend remain?

Christoph Prieler: The US economy has experienced the highest impact of the economic
downturn around the globe. Consequently US companies were securing their short term survival rather than closing strategic outsourcing relationships in 2009 and many outsourcing deals in the pipeline were therefore put on hold. Since the economy has picked up, we experience outsourcing spent in the US on the rise , overtaking European revenues again. The interesting trend within the European outsourcing spent consists of the fact, that continental European countries such as France and Germany have for several quarters now overtaken the UK in spending amounts.

Question 5. How growth of new technology trends (Cloud computing, virtualization, etc) impacts IT outsourcing and business models?

Boris Kontsevoi: I don’t see any impact from technology innovations on outsourcing
models, at all. Cloud computing, virtualization, etc. is exactly like a new version of .NET platform, or operating system, or any other technological advance. These are new tools, that will be utilized of course, but won’t directly impact the business models, except, perhaps, for IT infrastructure companies. It’s more interesting to discuss a new trend of cloudsourcing, (or
crowdsourcing, e.g. Wikipedia success, Tripadvisor and tons of other product review websites, Google maps, blogging, etc.), when the power of “a public cloud”, a crowd is utilized to create a new value. Of course, such public clouds will need cloud computing technologies to run (and some are already available from Microsoft, Google, Amazon, etc. and we should see a lot of new start ups yet) but there is not yet a good business case. I can understand the drive behind the people who write a Wikipedia article or a product review but doing anything like this for a commercial organization will immediately require some incentive and compensation. We’re yet to see in which form the new crowdsourcing models will appear.
One more interesting trend is a new reincarnation of rural sourcing. Offshoring still is more cost effective but with all populist political agendas regarding job outsourcing and, in some situations, availability of a good business case to use native speaking resources and culture, rural sourcing will increasingly compete with offshoring.

The full report can be downloaded from the following location:

http://ceeoa.org/CEE_ITO_Review_2010.zip

Magdalena Szarafin
http://www.szarafin.info

Magdalena Szarafin participates in “Central and Eastern Europe IT Outsourcing Review 2010″

November 30, 2010

A unique, valuable, 164-page-report “Central and Eastern Europe IT Outsourcing Review 2010″ has been just released. Except of a comprehensive country anaylsis, presentation of reasearch results and the list of IT companies operating in the CEE region, expert interviews (Phil Fersht, Boris Kontsevoi, Magdalena Szarafin, Christoph Prieler and Franco Dal Molin) have been published.

Here is an excerpt from the interview with Magdalena Szarafin:

Question 1. What are the main development trends on IT outsourcing services market and what will be the main outsourcing drivers for the years to come?

Let’s perceive the IT market from the perspective of the trends affecting its main players (vendors and buyers). The following trends can be observed on vendors’ side:
· Searching for new products and solutions to increase sales revenues,
· All big suppliers (and many smaller ones as well) deal with new service models (e.g. cloud computing, managed services, SaaS),
· Integration of IT and telecommunications solutions,
· Using service models based on economies of scale: having a large number of customers, low sales revenue per customer and low costs of sales per customer.
And the trends observed on buyers’ end can be summarized as follows:
· Cost pressure and limited budgets for IT investments,
· Security concerns,
· Need for flexible solutions,
· Multi-site collaboration, need for product and services supporting home office and mobility solutions.

Question 2. Has the recession and the following cost-pressures changed the companies’ attitude to outsourcing (IT outsourcing specifically)?

For many vendors the crisis time has brought the opportunity to increase revenues as many companies think about outsourcing their operations to third parties in difficult times. Also those of them who were skeptical about outsourcing until now. The decision whether to outsource (or not) tends also to be met quicker and easier under the pressure of crisis.
Companies try to focus on their core competencies and to cut costs. Therefore IT outsourcing has been as popular in the crisis time – trying to improve their cost structure, companies tend to implement projects which help them to improve performance and have short time of amortization. Also outsourcing infrastructure to third party enables the buyer to improve shortterm liquidity.
What is going to come after the crisis? Vendors can be optimistic, after the phase of cost-driven, quantitative outsourcing the phase of qualitative outsourcing is likely to come. Companies searching for innovations, quality improvement and use of external know-how will try to outsource their operations, expecting vendors to help them to achieve these objectives.

Question 3. View of the CEE region as a cluster of IT outsourcing
services providers. Advantages, disadvantages, trends, image, specifics.

One friend of mine, who comes from Canada, visited Poland a few years ago. Then he said to me: you know what? I am very impressed by what I saw. That is a very modern country. I visited some companies: everywhere young, dynamic, high-motivated people speaking foreign languages.
In my opinion, that statement describes the CEE region very well. Another maxim which points out the situation very well is: “Outsourcing is people’s business” – the geographical, cultural and
language proximity are of importance for buyers. Customers from Western Europe are likely to make business with partners from Central and Eastern Europe as their locations are available within 2-3 hours their business partners speak their languages. They are high-qualified and the prices are still lower than those in Western Europe.
And another maxim yet: “We are the second (third, fourth) – we try harder” implies that a customer doing business with partners from CEE countries can expect to be delivered with highquality services.
One of the challenges is cost explosion: wages and salaries in the CEE countries are rising quicker than those in Western Europe. Also lack of professionals which can already now be observed in many industries is the next challenge for the upcoming years.

Question 4. Europe outran US as the biggest outsourcing spender last year (http://bit.ly/5PQcFA), will this trend remain?

Yes, I would definitely say yes. The improvement in macroeconomic
conditions will actively contribute to this positive trend. According to Gartner, IT spending in Europe increase in 2010 by 5.2 percent comparing with the previous year while the average increase of IT spending in the US amounts to “just” 2.5 percent in 2010 comparing to 2009. And one thing cannot be forgotten: there is still a gap regarding IT and telecommunications between Europe and the US so that European companies have no solution than to spend more than the US to make up for the distance missing.

Question 5. How growth of new technology trends (Cloud computing, virtualization, etc) impacts IT outsourcing and business models?

It is expected that IT outsourcing will get much more heterogeneous than ever before. Security concerns buyers have tend to motivate vendors to offer new forms of business relations. Traditional outsourcing with personnel, assets and responsibility transfer is very likely to be amended by outtasking and utility sourcing where no personnel and assets transfer takes place and the buyer is responsible for processes.

The full report can be downloaded from the following location:

http://ceeoa.org/CEE_ITO_Review_2010.zip

Magdalena Szarafin
http://www.szarafin.info

Kaizen makes things better: Slowly, step by step and every day

November 3, 2010

Do you know the story about burnt toast? What are you going to do if your making toast process results in an unacceptable (or: uneatable) slice of toast? Would you put another slice on and try it once again? Scrape the toast to make it eatable? Complain to the canteen staff? Would it not be much simpler for you just to fix the settings on the toaster? If your answer is close to “yes”, then welcome to the club and let me introduce a concept named kaizen.

Kaizen is a Japanese word standing for “continuous improvement” or “change for the better”. In fact, it is possible to make things better – with small steps but systematically and continuously. In fact, kaizen is a very universal approach and refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, supporting business processes, and management. It has been applied in many industries, such as: healthcare, psychotherapy, life-coaching, government, banking, and many other.


Source: http://game1.pogo.com/applet/images/jigsaw/cases/case21/story21c.jpg

But… How to start? That is also as simple as the concept itself. Here you have 10 commandments of kaizen:

1. Be open-minded – just open your mind to change
2. Think big – Think “Yes we can!” – That does not have to be used only in political campaigns, just feel free to use it!
3. Always analyze processes and customers – never attack your people
4. Seek simple solutions (you know the KISS concept: Keep It Short and Simple, don’t you?)
5. Stop to fix it if it is broken – doesn’t matter what it is – if it is broken, it really costs to fix it
6. Use creativity – not capital (think about the success of Apple – innovations make this company successful)
7. Problems are opportunities – think positive and perceive the problems you have as challenges
8. Find the root cause (use 7W-questions, as follows: What? Who? Which way? Why? When? Where? Why so?)
9. Use the wisdom of many – not just the knowledge of one (make the use of synergies: a group of 2 or more people can achieve much more then the same people acting individual)
10. There is no final destination on the improvement journey – as there is always something which can be improved.


Source: http://scrutinyhooligans.us/wordpress/wp-content/uploads/2010/06/Kaizen.gif

That is a short and easy reference how to do kaizen. Maybe a small additional remark: Do it every day. Only continuous daily practice makes kaizen activities successful. In fact, that is not the talent – but many hours of work or training which make the master.

Magdalena Szarafin
http://www.szarafin.info

Shared services: friends, that is really not just about cost!

May 22, 2010

An old stereotype, common-known (in a new scenario of the global financial crisis): We implement BPO or shared sevices (SSC) solutions as we want to cut cost. And the global economic crisis would just support that way of thinking (and doing things). However, things are not as simple as they seem to be at first glance…

“Going up the value chain to knowledge-based services isn’t just about cost reduction; it allows you to create a lot of value for the organization.” (Shared services shines in challenging times: Insights from Deloitte’s global shared services survey, p. 8)

Good news for people perceiving F&A (F&A – finance and accounting) BPO and SSC operations in a long-term perspective, adding value for organization running them and developing also advisory services, not just transactional ones: corporations tend to recognize that quality is more important than quantity, although the latest one is obviously not unimportant.

While a few years ago the main reason for implementing a shared services organization was the cost aspect, it is not the most important reason any more. Why is it so? One reason is the increasing role of the F&A function for corporations. Professor Joe Lampel from the Cass Business School in London, describes the situation as follows: “Today (…) it’s much more difficult to obtain money, your own ratings have come under greater scrutiny, and bonds have to be carefully managed. All of these things have put a lot of pressure on the CFO.” No woner then that according to 70% of top performing corporations (according to KPMG methodology, refer to KPMG survey Thriving not just surviving: Insights from leading finance functions) the F&A has significant influence on core operations, for 61% of them the finance function has material influence on marketing, supply chain (55% of respondents) and IT (53%). That clearly means: F&A managers actively influence business leaders to make better decisions across all functions. Therefore timely reporting of business results, delivering accurate budgets and forecasts, and investor relations management are the priorities for the F&A function.

Timely reporting, accurate figures… – it is all about quality. Let’s briefly discuss the findings of some surveys undertaken in the past two years and showing the increasing role of qualitative aspects in the F&A function, incorporated in shared services organizations (SSOs).

Higher transparency, process quality and process security are the most important drivers to implement an SSO according to the study Shared Service Center – the 2nd Generation undertaken by PricewaterhouseCoopers (PwC) in 2008. These objectives are followed by decrease of error rates, increase of customer satisfaction –
and cost reduction, expressed as less important than the previous objectives.

Service and quality improvement, accuracy and timeliness have been given as main reasons for having established or for establishing an SSO by 85% of world-class corporations identified by The Hackett Group in 2008. Service standardization was the next reason for 83% of them and about 80% said that cuts in
administrative costs, headcount and salary/wages reduction are the most important drivers to implement a shared services organization.

The increasing role of F&A (which – as such – “just” represents back-office operations) and the supporting business processes performed by shared service centers make the F&A function and the SSO existing within this function even more important for corporations. Shared services become strategic influencers, offering
corporations a tool to facilitate enterprise growth, improve focus on core business and enhance talent management.

Magdalena Szarafin

http://www.szarafin.info

(Almost) perfect, at less cost and applicable in the outsourcing and shared services industry

May 22, 2010

Good quality does not cost – it pays. But many companies do not recognize it as they do not know how much things cost due to missing cost calculation in many areas. And that is the reason why it usually takes a long time for them to think their processes over and to implement simple measures assuring reduction in cost of delivering customer satisfaction. The latest one does not have to be as high as the cost of materials!

Good, better, (almost) perfect… – there is always a better way to make things. That is an old approach known as continuous improvement or kaizen and being an integral part of TQM (total quality management). It got very famous in Japan thank to quality gurus of Western origin and then the idea fascinated the rest of the world. Originally applied for industrial processes and by engineers, could be then successfully implemented for administrative tasks. And after the boom of outsourcing and shared services industry has begun, it has also been an attractive approach worth following to improve outsourced or insourced operations.

Six sigma, lean management – they are no more the domain of production, engineering or of in-house made operations. Even more insourcers and outsourcers recognize their importance to cut cost and increase customer satisfaction as quality pays. And the concept of “customer” itself does not just cover external but also internal clients you provide your work to.

While six sigma is a statistical method of quality control, lean management implies a qualitative approach. The main principles of lean / six sigma are as follows:

• they provide a system for improving the performance of a process, product or organisation,
• they help to understand performance from the customers’ perspective (how to put yourself into customers’ shoes),
• they provide a way of thinking in terms of end-to-end,
• they put a stress on making value flow and removing waste,
• they are in fact a pragmatic and rational approach to data and statistical variation.
• they help to treat causes not symptoms (in place of the fire-fighter approach).
• they focus on people, learning and continuous training being crucial to sustained competitiveness of the organisation.

Lean / Six Sigma
Source:Mike Way, Six Sigma and Lean in a shared services environment, presentation Prague 2009

Many organisations could reduce cost and/or increase revenue by reducing waste in existing processes thank to implementing lean / six sigma: Better, faster, safer with lean / six sigma implies quality improvement, reduction of response/reaction times and reduction of operational risks.

That all sounds nice, doesn’t it? Why not try it?

Magdalena Szarafin
http://www.szarafin.info

Shared services: Why? How? What for and how long?

May 19, 2010

Process standardization, simplification, harmonization, cost management, achieving synergies, common systems, practices and ways of doing things, common technology – that is all what can be delivered using shared services. Let’s briefly analyze some statistics delivered by surveys undertaken on shared services

1 or 5? – How many shared service centers in use?

Almost 50% of international corporations with shared services use just one shared service center (SSC) and each fifth has five or more shared service centers. Each third corporation works with 2-4 shared service centers.

The optimal number of shared service centers depends on customer requirements regarding the process complexity and level of process standardization.

How long does the SSC implementation take?

For each second multinational corporation it has taken under 12 months to implement a shared service center. For further 20% it has taken between 12 and 18 months to implement a SSC.

After the implementation of a SSC, it takes shorter than 2 years for the investment in a shared service center to payoff in case of each fifth corporation. For further 60% the amortisation period is between 2 and 4 years.

Which functions and activities are eligible to be relocated to a SSC?

Accounts payable, receivable and account reconciliation are the favourite activities and functions which are likely to be relocated to a shared service center by global corporations. Except of that, global giants use shared service centers to provide services in the following functional areas:

• Asset accounting,
• General ledger,
• Travel expenses,
• Payroll,
• Controlling and reporting,
• Procurement,
• HR administration,
• Treasury,
• Tax,
• IT helpdesk,
• Order accounting.

Why shared services?

Cost reduction, process improvements, increase of customer satisfaction and improvements in quality are the main drivers for corporations to run a SSC. In brief: shared services means establishment of a common languages in a heterogenic, multinational environment.

Shared services vs. IAS/IFRS

The subject of compliance with IAS/IFRS or US-GAAP is an important issue for financial shared service centers. Placing IAS/IFRS reporting in a shared services environment can yield cost savings through consolidation and process efficiencies. It can also help increase the consistency of corporate financial reporting and improve comparability of single financial statements across the corporation.

Shared services organization (SSO): important dimensions

The following dimensions are crucial for a SSO:

• Performance metrics (mainly through a set of key performace indicators: KPIs), customer feedback,
• Service level agreements (SLAs),
• Global and regional process owners.

Cost savings through shared services

The potential for cost savings through shared services vary from function to function. For most organizations it is around 15-20% in a treasury, financial reporting and analysis, procurement and tax function, amounting to even 30-50% in the IT, accounting, facility management and personnel administration functions.

Literature:

1. Heinz-Josef Hermes, Gerd Schwarz, Outsourcing: Chancen und Risiken, Erfolgsfaktoren, rechtssichere Umsetzung, Haufe-Lexware 2005
2. Shared services shines in challenging times. Insights from Deloitte’s 2009 global shared services survey

Magdalena Szarafin
http://www.szarafin.info

Outsourcing is people’s business: Meeting Indescon

August 22, 2009

Is outsourcing model something new for you? Do you have to deal with it – and think how to influence key employees? Or maybe you have problems with not clearly defined goals and objectives in an outsourcing engagement? Or… Maybe you like Murgh Dansek or Alu Channa Masala and want to extend your network?

If you ask yourself these and similar questions, you should definitely have visited the meeting organized by Indescon and held a few days ago in Frankfurt, Germany. And if you could not attend the meeting, read the story and get the feeling about the meeting, outsourcing, networking possibilities, and Indescon itself.

Hot weather has not deterred us from joining the event which took place in Mayur Restaurant – an Indian restaurant located in Frankfurt (thank you for your hospitality and good food served to us!). Ashant Chalasani, the President of Indescon and Pramod Reddy Atla, Director at Indescon have presented the history of the organisation and its objectives. We could also find out many interesting details about themselves: their coming to Germany a few years ago, their engagement to get the Indians living in Germany together and to establish a community, and their business initiatives, understood as a bridge between Germany and India.


Inside of Mayur Restaurant, source: Mayur Restaurant, http://www.mayur-frankfurt.de

Pramod has also presented the reasons why many outsourcing projects fail. Then we could discuss our experiences regarding critical factors in outsourcing initiatives. The results of this (creative!) brainstorming session are as follows:

How to manage an outsourcing model which is new for you? It is important to be well informed: not only about the advantages but also about possible risks. It makes sense to collect best practice cases and to try to implement them. Learning by doing is crucial as well.

How to influence key employee attrition at the vendor? A very sensitive subject, isn’t it? In fact, people make success happen – and not technology, processes or structures. Therefore it is very important to set objectives, to communicate them (in both: formal and informal way) and to consider the cultural aspects of the undertaking: how different people think, interpret facts (as agreements for instance) and react. Incentives are of big importance, too. In companies with high personnel turnover rate a question can be asked who are the key employees?

How to deal with not clearly defined goals and objectives in an outsourcing engagement? Personal relationship between the vendor and the buyer is very important in this context. It is also possible to have independent party between them both to manage the relation. And once again: communication, communication, communication – as much as possible.

What additional measures can be undertaken to protect intellectual property rights? First, the legal framework is very important here: legal circumstances and system of penalties should help a lot. Many companies ask the question about data security while outsourcing them – in many cases the vendors have even more experience with protection of intellectual property than the buyer. Regarding the question of data security and the way: datainformationknowledge I can recommend you another text: Paper-free office – efficient model for a modern company?

How to deal with a service delivered that does not fulfil the expectations? Our team has come to the conclusion that such parameters as quality, quantity and the delivery conditions should be defined in the service level agreement. However, we cannot precisely define everything and we cannot predict everything. Therefore one thing should be clearly communicated from the first day on: that what is delivered is never a finished product, it makes sense to work in a phase system, where the project in dealt into many phases which are subject of delivery to the client. It also makes sense to express realistic expectations by both sides: the vendor and the buyer. And giving the customer the possibility to manage vendor’s team makes it possible to control the results and the project progress.


Meeting Indescon: Open and creative brainstorming session

The atmosphere of the meeting was very open and interactive and we had a very good networking opportunity. We could exchange our ideas about outsourcing, India, innovative business models as IT flat for instance (that will be for sure a topic of another text I am going to prepare) and many more.

Such meetings will be held every month. And I am really happy to attend the next meeting at the end of September – I will write a small report from this event, too.

Magdalena Szarafin
http://www.szarafin.info

_________________________________________________________________________________________________________

The Indo-German Software Competence Network (Indescon) e.V. is a network of German and Indian software companies that view India and Germany as potential export and sourcing markets. As Germany’s largest special interest group for the offshore software development services industry between India and Germany, Indescon offers unique opportunities for networking with potential partners in the two countries. The focus is to provide fresh perspectives to member companies that eventually result in growth and profitability. more >>

Paper-free office – efficient model for a modern company?

August 8, 2009

Workflow software is one of the factors which – according to Thomas L. Friedman – have “flattened” the world and supported globalization and offshore outsourcing. It has also contributed to establishing of the paper-free-office concept and outsourcing digitalization and archiving services. The latest solution helps to cut costs even by 40%

We live in digital era. However, there are still many organizations as private companies and public institutions which prefer the traditional way of printing and archiving documents. The costs of printing and archiving of documents are relatively high and they can easily be reduced. Also the authorization of employees to enter archive areas are neglected in many cases so that employees can see documents which they normally should not have access to. Therefore one of the intelligent solutions is outsourcing.

Many companies avoid to outsource operations as they are of the opinion that outsourcing brings much risk. For instance, sensitive data, processed by an external service provider, would not be safe any more in their opinion. That can be subject for discussion as data is not equal information and information is not equal knowledge. Let us briefly define the difference between these three concepts.

Data is defined as pieces of information that represent the qualitative or quantitative attributes of a variable or set of variables. Information is a collection of data from which conclusions may be drawn. And knowledge means the confident understanding of information with the ability to use it for a specific purpose if appropriate. (Oxford English Dictionary)

The regulations regarding protection of intellectual property differ from each other in different countries. However, if a vendor processes data, it does not automatically mean that they possess knowledge or even information — does not matter what legal circumstances there are in their country. It is definitely easier to create information or knowledge in-house, having better connection to the business made. Therefore, it could now be asked if the data are really safer while processing them in-house then outsourcing them?

As people like to write their ideas on paper and print them out, outsourcing paper archives to third party definitely makes sense. And that not just for cost reason but also due to security reasons described before. Also additional room gained due to outsourcing of paper archives to external party means that the space can be used to perform business processes.

In many countries companies and other institutions are obliged to archive important documents as for instance tax-related documents or invoices for 5 to 10 years. Construction plans should even be archived for a period of 99 years!

Of course, the solution in form of digital signature has made life easier. But this solution is quite new, used for a period of 2-3 years now. Therefore good practice is to outsource digitalization and archiving of documents to third party, specialized in such services and then making them available for secured download to authorized users. Possible cost reduction in this case amounts even to 40 percent. And more security of data can be achieved as well.

Magdalena Szarafin
http://www.szarafin.info

Business Transformation Outsourcing – What’s that?

July 25, 2009

Traditionally, in the outsourcing agreements the conditions of the service are specified. However, some outsourcing providers offer more than “just” outsourcing: they do not just bring service defined but they also try to search for opportunities for innovations and process improvements. That is a classical win-win situation, where both parties invest capital but they both benefit from the success achieved. This modern approach to outsourcing is also called Business Transformation Outsourcing (BTO).

Magdalena Szarafin
http://www.szarafin.info
_______________________________________________________
Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared service industry penetration experience.

Outsourcing: What do the clients expect?

July 25, 2009

Flexibility? Cost reduction? Innovations? Risk avoidance? Quality improvements? Any of them? Or maybe all of them? What do companies expect making the decision about outsourcing operations?

A few days ago I visited an interesting conference organized by Computerwoche and held in Offenbach, Germany. Among others, the findings of a study dealing with the expectations and motivation for IT outsourcing and different customer profiles have been presented. This study has been undertaken by Prof. Helmut Krcmar and Dr. Stefanie Leimeister of the Technical University of Munich.

The key finding of the study is as follows: IT outsourcing market consists of different players. The combination of: cost, innovation, technology and business makes it possible to make the market segmentation and to divide the clients into 4 groups: business-efficiency clients, cost-conscious small shoppers, strategists & innovation seekers and IT excellence & reliability clients.

The first group, business-efficiency clients, is service-oriented and expects flexibility and quality improvement. These are bigger companies representing banking, insurance and finance industry, their annual revenues amount to over EUR 10bn and they employ 5000 and more staff.

The cost-conscious small shoppers are focused on cost reduction. They represent electrical engineering, consumer goods industry and IT services. These are middle-sized and big companies, employing 2000-5000 staff and having EUR 1-5bn revenues.

The third group, strategists & innovation seekers, consists of companies from the automobile industry, engineering, and public sector. They are small and middle-sized companies with revenues of EUR 250-500m and under 2000 employees. They expect IT and service innovations, joint product and service development, knowledge transfer from the provider, and access to qualified personnel.

And finally, the group consisting of IT excellence & reliability clients has different motives: IT focus (better and modern IT, cutting edge technology) and/or business focus (quality improvements, qualified personnel, risk avoidance). They represent small companies from manufacturing industry, which employ under 500 staff and generate EUR 50-500m revenues.

The study was conducted among German companies, however, future studies in other countries are planned.

Magdalena Szarafin
http://www.szarafin.info
_______________________________________________________
Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared service industry penetration experience.


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