Strategic Outsourcing Professionals

Hey all.  It has been almost a year since my last post and I appreciate the notes for more content.  While I know I disappeared, this past year has been both insane and great.  The startup life has consumed me; however, the career move has been highly rewarding.  I have learned a great deal and all the experience has been worth the effort and sacrifice.  I have enjoyed the work and job immensely.  It was a great change for me and I am happy I made the switch.

Here are some highlights of the past year:

1.      I was interviewed and cited in a great book,  The Services Shift, Seizing the Ultimate Offshore Opportunity, written by Robert E. Kennedy who is a professor at the University of Michigan’s Ross School of Business and Executive Director of the William Davidson Institute

2.      Built an entirely new service strategy at my new employer, Shopatron.

3.      Bought a new house – I need to give thanks to TransUnion Interactive, my old employer, for providing me with knowledge and insight to the credit markets.  Seriously, that was huge.

4.      My wife decided to go back to work and teach 5^th grade - this severely reduced the free time I once had and blogging went away first.  Sorry.

a.       It should be noted that I have an awesome wife and she is as passionate about teaching as I am about business.

5.      The gray hair on my head doubled.

Well, that was the year in a nutshell.  Now that I am back to blogging, I have to commit to a few new blogging rules.  Going forward, I am no longer going to write the long and lengthy articles that you were accustomed to reading.  In order to keep generating content, I need to keep it simple.  So, this will probably be the longest post you read from me in a while…although, since most of my readers unsubscribed, not many of you will read this one.

Last, but not least.  I want to reach out to my ‘anonymous’ friend over at 360VendorManagement for inspiring me to blog again.  If you haven’t seen his recent makeover, go check it out!  I am eagerly awaiting more content.

Hey All –

I have been extremely busy the past few months and I have not been blogging on the site. I have seen my readership fall dramatically, and I am sorry that I have not been able to provide you content.

This being said, I have resigned from my current position. In late August, I will be starting a new role with a company called Shopatron.

I will not be managing outsourcing operations at Shopatron, but am excited about my new opportunity. I will continue to blog occasionally, but may need to change some of the content every now and then. I will continue with the series I promised six weeks ago. I know it was a giant let down that I did not continue with my assessment of proactive customer service, but I promise to get something out soon.

Best,

Brad

My February has been very busy with travel and work, which is why I haven’t posted anything this entire month. My travels and workload are calming down so I figured I would take this opportunity on a lazy Sunday to get something out on the site. I wouldn’t want to give the impression that I am a slacker.

I started off February in Asia, and my last post discussed the benefits of Cebu as a BPO Destination in the Philippines. I went to Central America the following week to visit facilities in Guatemala; we were impressed with the infrastructure and have started discussions to acquire some Spanish services for our business. After my travels, I have spent the last two weeks getting our team’s 2008 goals aligned, presenting project plans and financial goals to executive management and obtaining buy-in that we are going to accomplish great things throughout the year! The workload is heavy; we have approximately twenty projects to deliver by year-end. As always, I am confident we will come in on time and within budget.

One of the biggest things that we are going to accomplish this year is improvement upon our call abatement strategy, customer self-service and customer retention while also building upon our existing service experience for our customers. When looking at all these projects, it occurred to me that there is an extremely heavy focus on the discipline of Business Process Management. That being said, we instituted a paradigm to manage this discipline by leveraging the core principles of process design and improvement.

Business process management is a common term that means different things to different people. For me, I find this to be a simple core component of an organization and sum it up as the constant improvement of the foundational and ancillary processes that govern the business functions. The goals are to measure the success of processes to keep the ‘trend your friend’ (trend moves Up and to the Right) and demonstrate constant and continuous improvement. In turn, constant improvement drives down operational costs, which will land you in the ‘circle of trust’ (can’t resist, sorry…I liked Robert Dinero’s character in Meet the Parents…a lot).

There are many ‘best-practices’ for managing business process. Within my team, we have implemented a lot of six-sigma methodology to measure our success and improve how we operate. The idea with six-sigma is that you quantify improvement through statistical analysis. It has helped us a great deal on many levels; especially with our quality program. We have also adapted some of Microsoft’s approach to business process management and use this methodology to model our process design today.

• Model & Design
• Develop & Deploy
• Manage & Interact
• Analyze & Optimize

By adopting six-sigma principles and Microsoft principles, our business has and will continue to improve immensely. In my opinion, our business process efforts will improve the following for 2008:

• Increase Customer Retention
• Reduce Operational Costs
• Improve Regulatory/Compliance Objectives
• Improve Efficiencies Across Organizational Boundaries
• Enable Reuse
• Greater Employee and Personal Satisfaction
• Reduce Risk
• Agile Work Environment

I hope this post satiates all of you for now. My apologies again for taking so long to get something out on the site, but my real job and family take priority. Maybe I will develop a process to improve my available time for the website. I think this would be the hardest goal to conquer all year.

Cebu is a great destination to provide business continuity in your global sourcing plan; this is true even with Manila as an existing destination. The island is far south of Luzon (island where Manila resides) and is surrounded by neighboring islands. Because of the location, it is shielded from most tropical storms and typhoons. If Manila gets pounded with weather, Cebu usually doesn’t feel more than strong rain. Additionally, the island has the fastest growing economy in the island chain and is the second largest metropolis in the Philippines.

Here are some other factoids about Cebu:

• The island boasts a population of about 3.5MM; most speak English well
• Cebu graduates 20K students annually from its universities and offers a strong, educated labor pool
• Power sources are a mix of fuels and geothermal energy, ensuring long term reliability and protection of the environment; all power and water supplies are mutually exclusive of Luzon and the northern islands.
• BPO growth remains strong in the region and is expected to continue as the US economy heads into recession.
• Cebu is the most accessible place in the Philippines, with more domestic air and sea linkages than Manila
• It has one of the best records for peace and order within the country
• It is not in an earthquake zone or typhoon belt, nor are there volcanoes on the island
• Its labor force is oriented towards non-agricultural lines and is one of the most productive in the country
• The development of its infrastructure is balanced; it has all the ingredients necessary to be competitive and sustain investments

And, finally, my favorite tidbit about Cebu…

• Its warm hospitality, white sandy beaches and surrounding rich coral reefs, make it a favorite international tourism destination.

I am ready for some hard work ahead.

Here are my top ten predictions for the BPO industry in 2008:

1. Outsourcing will once again become a hot topic in Presidential debates as both Republicans and Democrats try and win votes from the masses; expect lots of ‘Keep the jobs in the USA’ propaganda – it should be noted that neither political party really knows what they are talking about.
2. Guatemala of 2008 is the Philippines of 2003. Lock in those highly competitive rates and snatch up the English speaking talent while you can.
3. Locations will be more difficult to identify as market saturation in existing BPO destinations drives increasing costs and emerging BPO destinations offer threatening political profiles.
4. Offshoring market trends for quality English speakers will drive the Philippines to the number one destination for English-based support. This is only true if government officials can agree to disagree and get past their issues. No more bombings and coups are necessary.
5. BPO 2.0 will emerge and become a competitive advantage for vendors as work-at-home platforms have the potential to offer higher quality talent at cheaper prices. The financial services industry has work to do for this model, but it will eventually work itself out. By 2025, owning real estate to house a call center will not even be an afterthought.
6. Opportunities for business development are prevalent in Brasil as the economy will continue to flourish driving demand for Portuguese based services. Latin America provides the best opportunity to provide these services with vendors already providing free language classes.
7. Companies will continue the trend of reintroducing domestic-based services for critical vertical functions that include inbound/outbound sales, customer retention and escalation services.
8. Launching offshore, captive centers within big companies will continue in developed BPO markets. Captive centers will continue to be a key strategy in driving down operational costs while acquiring and retaining experienced resources.
9. Companies will learn to use outsourcing tools to manage SLAs more effectively to drive new and better contract terms with their providers.
10. Eastern Europe was buzzing in 2006/7. The region will not flourish for American business, but will emerge as primarily a European outsourcing destination.

Cheers to a prosperous and healthy 2008!

I have been published in a book entitled, Mutlisourcing – Concepts and Applications, edited by Jaya S Krishna. The book was published and released by ICFAI Books, which is a branch of Icfai University in Hyderabad, India.

I was contacted back in February to see if I would like to donate my work to the Institute of Chartered Financial Analysts of India, which is a non-profit organization established to impart quality education in Management and Finance. Besides generating original articles and books, they aim to accommodate a plurality of views and multiplicity of ideas for the benefit of learning. For this reason, I welcomed their request to include my thoughts and viewpoints for their publication.

The book is a compilation of articles and white-papers written by industry experts. For this particular book, I wrote the article outlined in Chapter 8, Three Keys to Managing Multi-vendor Environments for Success.

Recently, we have undergone an evaluation of Emerging Markets to explore alternative outsourcing destinations. One of those markets, Guatemala, is extremely appealing when you look at the labor resources available, the price points of services provided, and how the government is setting up the infrastructure to win U.S. based business. Below is a quick snapshot of our findings with regards to Guatemalan vendors offering BPO and customer care services.

Guatemala is trying to establish itself as the premiere Central American country offering Nearshore business process outsourcing and call center services. The country provides the largest population in Central America with 14 million people.  Guatemala also provides 40% of the total GDP for the entire region – the economy is strong and growing. For BPO and call center services specifically, the industry is virtually untapped; approximately 1-2% of the entire Guatemalan labor force works in the BPO industry. 

When looking at the Guatemalan infrastructure to support U.S. business, there are several initiatives underway that promote the growth of the BPO industry. The largest and most compelling initiative is the establishment of the ‘Cluster’ or Guatemalan Call Center Commission. This commission was established by the government to prepare, standardize and regulate companies seeking U.S. clients. The Guatemalan government is trying to ensure that the industry remains healthy and that companies in the commission represent the country well. Call centers must undergo a standardization process, similar to ISO, before they can be granted membership into the commission. The commission also seeks to protect the labor force by enforcing laws around age requirements, employee benefits, fair working conditions and promoting competitive compensation packages.

The main benefits for seeking BPO services in Guatemala are as follows:

• Low Attrition Rates – The Call Center commission tracks employees in a centralized database as a check and balance against employee poaching. Once an individual works for a call center, the individual is not eligible to work for another call center for 6 months. This combats high turnover rates that are present in highly saturated markets like India, Costa Rica and the Philippines.
• Low Pricing – The rates in Guatemala are highly competitive in comparison to other markets. There are American companies who sub-contract through Guatemala, but pricing for American based vendors seem to be 20-30% higher. By going directly to the Guatemalan providers, costs will be lower because there is not a ‘pass through’ provider trying to make their margin.
• Strong English – While Spanish is the primary language, Guatemala has a large English speaking population; this is especially true throughout the Universities. The English capability is far better then India, Panama, Costa Rica and the Philippines.
• High Quality – While we have not yet employed a Guatemalan vendor, our dealings with them have been terrific. They really understand the business and know what clients want in a relationship. Each vendor seems to have the capability to provide a fully-loaded solution that includes data/voice recording for quality management, Work Force Management, ICM integration, favorable personnel ratios and seem very willing to take on aggressive SLAs.
• Strong Connectivity – Telecom response times have been noted at .065 milliseconds. The redundancy in fiber is 99.99% with some major carriers. T1 rates are also some of the lowest in the region.

The benefits for moving operations into Guatemala are compelling. My only advice when researching Guatemala as a future outsourcing destination - ignore the crime rates.

Recently, our team sat down to review and discuss proposals from vendors providing services exclusively in the Asian and Central American markets. The conversation flowed like many sourcing discussions; we talked about how the vendors differentiated their service offerings and the value they could bring to our business. For the most part, all the proposals were well prepared and we enjoyed the discussion with the exception of one thing - the global footprint under review.

With the Asian and Central American markets already saturated, it is extremely difficult to keep an offshore BPO provider in these regions operating seamlessly. Vendors in these regions are constantly battling attrition with employees moving for increased wages or better opportunities. The vendor attrition rate puts a strain on customer interactions for the American business, which in turn drives down brand-equity. This is not anything new to an outsourcing professional, but it is flabbergasting to understand how vendors, both large and small, are responding to the market saturation.

It comes as no surprise that the Indian Rupee, Filipino Peso, Costa Rican Colon and plenty of other foreign currencies have gained momentum against the declining US Dollar. When you couple the declining dollar with globalization, you have an issue of thin margins for outsourcing vendors. To hedge risk, vendors are now asking customers to accept a currency fluctuation clause in the contract with regards to pricing. This is what drives me to challenge vendors pitching the acceptance of currency risk clauses in contracts; the concept defeats the key principles of cost and risk reduction with outsourcing.

I understand how it can be hard to stay competitive in the BPO marketplace; especially in Asia and Central America. However, vendors should make an effort to develop creative solutions rather then simply asking for a customer to burden additional risk to an increasing problem. I would offer the suggestions of hedging foreign currency and start researching new outsourcing destinations so your customers don’t need to accept unwanted or undesirable risk. I hear Mauritius is a real nice place, cheap too.

As the outsourcing paradigm continues to boom, and companies learn that they gain competitive advantage by removing non-core functions of their business from their everyday operations, the ability to research, assess, source, manage and sustain strategic outsourced relationships is increasingly critical to competitive success. Executives are quickly learning that outsourcing is no longer a simple strategy for cost reduction initiatives, but rather a mechanism to empower enterprise growth by forming strategic partnerships with 3rd party vendors.

Outsourcing, in particular Business Process Outsourcing (BPO), is now viewed as an integral part of business strategy to provide higher quality products and services while increasing the bottom line and operating income. By offloading an entire business function that is not a core competency, a company can remove the burden of fixed-costs, capital investment, technology obsolescence, and human resources to staff these functions. Further, outsourcing empowers a business to scale and grow rapidly by minimizing costs, maximizing efficiencies, and reducing overall business risk.

To stay competitive, it is essential for a company to identify the right outsourcing strategy, create strategic alliances with the right vendors, and hire the right people to manage outsourced services. Once the value of a qualified outsourcing professional is understood, executives will find themselves reaping the rewards of happy customers, shareholders, and company success. Obtaining a qualified sourcing professional to manage strategic vendor relationships will only empower a company to achieve more.