By Michael Blankman

Decisions to outsource critical functions are never easy and there is a lot of internal inertia to overcome, but it is often hard to ignore the numbers. Outsourced relationships will always require a substantial remote management component. Successful remote management is not possible if the relationship isn’t sound. It is the difference between a glossy presentation and the real world.

As difficult as it is to decide on an outsourcing partner, understanding how the relationship works needs to be an integral part of the process. A process that began with identifying potential partners, issuing an RFI, conducting site visits, choosing a partner and finally signing a contract ends with making the relationship work. Not to minimize the efforts that led you to this point but if you haven’t chosen a company that you want to have a true relationship with, the business is doomed. Even if the numbers work, the potential reputational, regulatory and customer fallout will have significant downside. Fixing a flawed relationship after the fact is not an acceptable option.

At its highest level the relationship will be monitored by the contract through an explicit set of understandings, requirements, and performance criteria/key indicators. But the moment you are tempted to use the contract to resolve a dispute with your supplier, the battle may have been won, but you have definitely lost the war.

Successful relationships are driven by trust and mutual respect, not by wielding the contract like a club. The contract is not a cure-all it is just a means of forcing resolution. Often relationships get off to strong starts but are diminished by missed opportunities, inflexibility and a failed management process.

The golden rule of remote management is that once you have a process in place it needs to be driven by consistency and mutual understanding.

1) Day to Day Management: There should be a dedicated team charged with vendor management on a daily basis. This team needs to understand that whatever their responsibilities were before outsourcing, they will now need to wear two hats and focus on the development of the relationship. The team should be comprised of subject matter experts from a variety of disciplines. They will own the key indicators, curriculum management and development, train the trainers and identify risk and customer issues. The team is the nerve center of the relationship.

Too often vendors and their employees are on the outside looking in as it relates to understanding the businesses they support.

Vendors should also provide dedicated day-to-day contacts. Any sizeable application warrants the attention. Dedicated support is not negotiable.

2) Valuing Expertise: Although outsourcing is driven primarily by cost, quality and service may have already been compromised by decisions made internally to improve margins. There is little room post-conversion for a learning curve.

Each side brings their expertise to the project. Assuming the right vendor has been chosen, it is critical they are staying current and committed to leading edge technology with cost and service remaining as close to their business model as possible. From a contact center perspective this will often crop up in issues surrounding the length of new agent training or number of calls monitored (one is too few and a thousand is not enough). There is a natural desire for the business being outsourced to want to keep control even as the operational components transition to the vendor. Forcing this can lead to ongoing tensions, impact the financial model and may eventually lead to calls for renegotiation or termination of the contract.

Trusting a vendor’s model and letting go is all about understanding what you can, or more importantly, should, dictate. It is critical that the dedicated team be able to translate those issues.

3) Multiple Vendors: In a contact center environment (usually driven by the size of the application) it helps to have multiple vendors. This is not done to manage operational risk or to create adversarial relationships but to improve service and quality through competitive benchmarking

Although there are benefits to site dedication especially when dealing with high touch/high value calls, all calls should be able to be handled regardless of location. The outsourcer drives consistency through a tight vendor management program. Each site had the same curriculum, training and key indictors. The process should also be portable.

A schedule of quarterly meetings with all vendors represented should be formalized. These meetings not only provide a great opportunity to review high level performance trends but also open the door for a review of best practices. As long as there aren’t any proprietary or intellectual property issues, ideas need to be shared across all vendors. Ultimately this process will reward those partners with the best performance.

4) Vendor Engagement: Too often vendors and their employees are on the outside looking in as it relates to understanding the businesses they support. In general, vendor engagement falls under the topic of brand management. Brand management in its self is a much larger and important topic. At the very least, business goals, strategies, results, and milestones should be shared broadly. The more people feel part of and understand the role they play, their commitment to quality and service will be stronger.

Engagement includes a strong presence at the remote site, incentive programs (besides those sponsored locally) and some straight talk as issues arise. The vendor is an integral extension of the business and the relationship has to be cultivated.

5) Transparency: Outsourcing is often accompanied by a wall of silence in which the outsourcer hopes nothing will happen that will cause the business to have to acknowledge their strategy. However, if the support team is in place and the model is working, the relationship should be highlighted. Clients should know that it is a strategy not based solely on expense and headcount reductions, but includes an ongoing commitment to outstanding service and quality.

By Robert L. Scheier

The more than 700 attendees at the MIT Latin America conference March 10th in Cambridge heard a lot of upbeat talk about economic prospects for Latin America in general, and emerging markets throughout the southern hemisphere.

But they also heard warnings that Latin America is not doing enough to educate its people, reduce the power held by established elites, and improve labor productivity in the event that commodity prices (whose rise has helped fuel much of the Latin American growth) begin to sag.

Several former government finance chiefs painted a rosy picture of strong Latin American economies trading among and investing in each other, rather than relying on North American or European capital. Pedro Aspe, co-chairman of Evercore Partners and former treasury secretary of Brazil, said that the bulk of trade and investment will be among southern hemisphere countries, with the largest share of outside investments in Mexico already coming from Brazil, Colombia and Chile.

Says one observer: “The conditions for long-term growth in Latin America have not really improved”

However, New York University Professor Ann Lee, author of What the U.S. Can Learn From China said that China’s government understands that in order to continue its growth it “must get away from relying on cheap labor” and start innovating the way countries such as Germany, the U.S. and Japan do. That means investing in education, raising the social stature of teachers, and making it possible for students to graduate college without massive student loan debt.

As China moves away from manufacturing into more knowledge-based services, this will reduce its need for natural resources. And this, says Lee, is where Latin America could suffer. “Latin America has had tremendous growth, but 90 percent of its exports are in resources,” she says, which is why it’s time “for Latin America to join China in investing in education…creating a culture that values innovation.” However, that will be a challenge for many Latin American countries, she said, where elites who are “threatened by competition” will resist such spending.

Christian Deseglise, managing director of global asset management at HSBC, agreed with this pessimistic outlook, saying exports of natural resources such as oil and food have given Latin America “the best five, six seven years of the last 40 years,” but that the productivity of Latin America has not increased and is falling behind that of other regions such as Asia. For that reason, he said, “the conditions for long-term growth in Latin America have not really improved.”

One informed player in the natural resources world – Roger Agnelli, former CEO of mining, steelmaking and energy giant Vale – dismissed fears of a boom or bubble in commodity prices. He told the conference that ongoing urbanization, as well as the development of much-needed infrastructure in countries such as China and India, will continue to drive demand for (and robust prices for) natural resources. His concern, instead, is that “commodity producers are not investing enough to meet future demand.”

Yet another shot across the bow of Latin American competitiveness came from serial entrepreneur Andres Barreto, the co-founder of tablet publishing platform Onswipe and music streaming side Grooveshark, in a panel on Latin American entrepreneurship. Rather than dealing with the paperwork and delays of incorporating in their native countries, he recommends Latin American startups to incorporate in the business-friendly state of Delaware, get an American lawyer to handle the paperwork and get an American bank account so they can quickly accept payments on-line and start making money.

This article originally appeared on our sister site Global Delivery Report

By Jerry Durant

Everybody wants ROI from their outsourcing projects. Many (on both the buy and the sell side) claim it. But relatively few have the knowledge or background to calculate it correctly. This not only makes it harder to make good decisions, but saps the credibility of whoever is doing the calculations.

Far too many operations and procurement professionals try to calculate ROI without a sufficient understanding of it.

They also try to convert subjective value measures to quantifiable numbers and fail to relate ROI to business objectives that might not relate to money, but to harder-to-measure benefits such as innovation or the delivery of new products and services to customers.

First, one must understand what ROI is not. Consider a typical outsourcing decision, such as whether to outsource your e-mail infrastructure. Just because Option A costs less than Option B, while delivering similar service levels, does not demonstrate ROI. It just means you have lowered the cost of doing business – the cost of operations. You cannot claim ROI because you have not done anything to generate more revenue.

ROI is the result of the Gain from Investment less the Cost of the Investment all divided by the Cost of Investment. You achieve ROI when, and only when, it supports the operation of a profit center, rather than a support center where any savings are likely to be consumed by other areas.

So where do we stand?

1. Distinguish between investment and operating costs. An investment will produce a yield, in the form of an improvement in a profit-making operation, while operating costs allow you to keep the lights on for less than you otherwise would.

2. Know your objective. If it’s labor arbitrage then a simple comparison will reveal the spread between domestic and foreign labor costs.

3. Ensure ‘like’ comparisons. Are the processes you are comparing both fully optimized? All too often, the function you’re considering for outsourcing is not in best operating form. If it’s a simple “lift-and-drop” situation then cost comparisons would be OK, but if the provider is making changes you need to factor that in. So facilitate process improvement/optimization at some point in the relationship, whether pre- or post-engagement, measure the results and take them into account

4. Take into account all costs. It’s not simply a matter of contract cost vs. prior in-house costs. Take into account other costs that must be amortized over the duration of the contract, such as to transition the function to the provider. Remember new, in-house costs such as for a project management office (PMO) that oversees the outsourced relationship, as well as the need to monitor the quality of the outsourced work.

5. Make sure that you have systems in place that can track operating costs against the estimates you used to make your decision. In some ways this is a bold step because you may wind up finding flaws in your decision making. Don’t use this as an opportunity to find fault, but to improve your estimation and sourcing management skills.

6. Factor in whether you’re getting everything from your service provider you were getting in-house, such as a commitment to environmental efforts or working conditions. This is another way of saying “compare apples to apples,” but in an area that can cause big public embarrassment if you ignore it.

Bottom line: When calculating ROI keep in mind the difference between reducing operating costs and actually improving in business. And, when you’re comparing costs and benefits, make sure you’re doing a fair comparison that takes into account both everything you’re spending and everything you’re getting (or not getting.) The health of your organization – and of your own credibility – depends on it.

Jerry Durant is founder and chairman emeritus of The International Institute for Outsource Management, a trade organization dedicated to the assessment, development, and guidance of outsource service providers in the ITO, BPO, call center, and KPO domain areas.

By Rosanne D’Ausilio PhD

There is what we call a moment of truth when a customer makes a decision about you, your company, maybe even all companies in your industry, based on their interaction with anyone from the front lines up to and including your CEO. In those first three sentences, a customer determines whether their interaction will be a good experience, a bad experience, or a waste of their time.

When talking about customer service, customer satisfaction, and customer retention, you often hear that the best way to determine how you’re doing is to ask your customer. And that’s absolutely true. However, if you really want to know how your company is doing, ask your internal customer.

Not many companies do this. Their focus seems to be on the external customer only. But knowing what’s going on with internal customers is key to improving the satisfaction of external ones.

Who is your internal customer? Your employees, your peers, your direct reports, any and every one who has an impact on the customer experience. And how do you assess them? What do we look for when we take the pulse of a company?

• What are the strengths of your people?

• What are their weaknesses?

• What are the commonalities among applications?

• What are the changes currently going on in your organization?

• Hardware
• Software
• Teams
• Rules/Regulations

• What is today’s stress level?

• What doesn’t get communicated powerfully?

• What feels like you’re working with one hand tied behind your back?

• What are the mixed messages that may be rampant at your company?

• Why are your customers calling – do they have a question, a request, a complaint or a problem?

• What is a Typical Call?

• What is a Call from Hell?

• What’s the biggest gripe on the side of the customer?

• What’s the biggest gripe on the side of the employee?

• What gets accelerated and why?

• What empowerment exists, if any?

• What works really well?

• In a perfect world what would you do differently?

When you can answer these questions, you’re really getting to know your company and its people.

How do you accomplish this? We do it by:

1) Interviewing people

2) Monitoring calls

3) Studying the flow

4) Navigation of screens

5) After-call process

However, we don’t want to talk only to the best people or the highest level, but to all of them, whenever possible, and at all productivity levels.

Armed with this information, you can then identify the gaps and with that knowledge in hand, you are best able to present options. These options can fall into one of three categories:

(1) People

(2) Process

(3) Technology

If it is determined that it’s a people issue (which often it is), design customized training sessions to address the gaps and kick it up a notch in the area of customer service. We suggest these classes be delivered over time so that retention is improved and delivery is in real time addressing whatever current challenges exist.

If it is a technology issue, usually it’s caused by silos, the left hand not knowing what the right hand is doing. Many companies because of heavy investment in technology keep trying to make it work. Reminds me of the definition of insanity: Doing the same thing over and over again expecting different results.

If the results show a process issue, ‘be a customer’ and go through the process to see where the gaps are. Stand at the end, what is the result you want and how did you get there? What got in the way? What would make it smoother? Again, what are the gaps and how do you either eliminate them, fill them, or replace what isn’t working?

Rosanne D’Auslio, Ph.D., President of Human Technologies Global, Inc., and known as “the practical champion of the human,” is an industrial psychologist, consultant, master trainer, bestselling author, executive coach, and customer service expert. She also writes the complimentary tips newsletter How To Kick Your Customer Service Up A Notch!

By Fernando Labastida

Imagine this: Suddenly 2012 has arrived. You’re happy because you’ve successfully completed all your projects for 2011. But you’ve got no deals in the pipeline. Scary scenario, right? It’s also a very likely scenario, and it happens to far too many Nearshore IT firms.

2012 is looming. As a Nearshore provider, you may be so busy with projects that you may have forgotten to fill your pipeline. But don’t panic just yet. Here is a way to fill your pipeline quickly without having to sell your soul or stress out your overworked sales people.

It’s a very effective, original, yet cost-effective marketing campaign that you can implement even without a marketing director or a marketing department. This is a marketing campaign that sales people would be happy with, because it generates sales-ready leads, not the type of lead you have to throw away or “nurture” over time.

Identify Your Targets

Identify 50-100 highly targeted companies. These should match the profile of your ideal clients: those customers that you enjoy working with, who don’t buy on price, are profitable to you, and refer you to others.

If these ideal customers share common traits, then develop a profile of your ideal target customer. Go out and find 50-100 of them, and start building a database of these companies. Research as much as you can about them on the Internet: what software platforms they currently have; their revenues (if they’re publicly traded then that’s public information), what their goals are, their vision, their mission, and more importantly, their problems and challenges.

Identify Three Target Executives Within Each Company

Then you want to get even more granular. Identify their CEO, CIO, CTO, or their CEO, COO, CFO, CIO, or their CTO, CEO, CFO or any number of combinations. Make sure to get a business or operations executive, as well as an IT or technology executive.

I’ll explain why later.

Find out as much as you can about them, using LinkedIn, Google, Manta, Plaxo, Jigsaw, friends, acquaintances, publications, etc. What articles have they written? Do they participate in discussions on LinkedIn or Quora? Do they have Twitter accounts?

Craft a Compelling Offer

Many IT services companies or custom software developers make the mistake that their services are the offer. Frankly, nobody cares about your services – yet. You’ve got to give them a reason to care, something compelling that will make them want to talk to you.

You must come up with a way to get in the door, and no more. Don’t think about selling them anything yet.

What can you offer that’s quick, inexpensive and provides a lot of value?

• Can you offer a two-hour onsite software audit?

• Can you provide a mobile-specific mock-up of their current website and offer to show them, in person, why 40% of users who navigate to their website from their smart phones or PDAs will click away if it’s not a mobile-specific site?

• Can you offer a free webinar on “The Seven Reasons Why You Must Get On The Cloud Yesterday?”

• Can you provide a free one hour ‘one-on-one’ consultation on how they can save money and improve their competitiveness with a more efficient IT infrastructure?

What else can you think of? These offers are designed to get you in the door NOW by providing something of immediate value.

The offer has to be valuable, but it also has to be non-salesy. You’re not trying to close a sale, you’re trying to get an appointment and share your expertise for free.

Write a Letter to All Three Executives

In this age of digital everything, direct mail is back.

But you’ve got to do it the right way. Write a short, professional letter to each executive you identified above. Mention you’re also sending the letter to his/her colleagues, naming them specifically.

Say: “I’m also sending this letter to John Smith and Jane Jones, because I’m trying to determine who is the best person to share the following information with.”

Why is this important? It will generate a psychological desire in all three of them to take care of the issue you brought up before the other executive does. They need to show they’re taking care of business, so they might just call you as soon as they get your letter!

State a potential problem or challenge or goal they might have (remember, do your research – use the information you’ve gathered, don’t wing it). Then present your free offer that ideally should be a way to solve their current issues.

Close by saying you’d like to schedule an appointment, and that your assistant will be calling their assistant to put it on the calendar.

Finally, send the letters via FedEx or Priority mail.

What, do I hear you say this is too expensive? Hey, if you want to fill your pipeline with some 2012 deals, you’ve got to go all out. Just do it – you’ll be happy with the results.

Follow-up 

Have your assistant call their assistant and send a follow-up email if your research revealed their email address.

Get the appointment.

However, you’ll probably be surprised to find that some of your prospects will have already contacted you. Remember the psychological aspect of sending the letter to three executives, and letting them know you’re contacting their colleagues?

A friend of mine and fellow marketer had great success with a similar campaign. He put together a program exactly like the one I just described above for an IT services client of his. Before they made their first follow-up phone call they got a couple of phone calls from prospects wanting to take them up on their offer.

He told me this was by far their most successful lead generation campaign he’d done.

Are you ready to hit the ground running in 2012?

Try this campaign – it’s not expensive, yet it’s smart, shows you’re a professional consultant instead of a sales-oriented company, and it works!

By Randy Vetter, Director, Alsbridge, Inc.

Your CFO walks into your office 18 months after you signed your first outsourcing contract and asks, “What happened to the savings you promised?”

To prepare for this question, hopefully you have created and properly staffed a Vendor Management Office (VMO) function that manages the contract, relationship, performance, and financial aspects of the agreement. But to be able to explain any discrepancies (or even better, avoid them) ask the following questions:

1. How have addressable costs changed since the inception of the contract?

When the original base case and business case financials were constructed, costs should have been divided into two key groups – addressable (those that can be affected through outsourcing and un-addressable (those that cannot. Addressable costs are directly tied to people, processes, and technology in labor (e.g., employee salary, benefits, bonus, taxes and contractors) and non-labor (e.g., travel, office supplies, software tools, and technology.) Un-addressable costs are those that remain in the company or department regardless of who performs the work (e.g., network transport, facilities overhead, and selected software and technology expenses).

2. Has the inflation clause in the contract become effective?

For modeling purposes, a business case is most often constructed as ‘inflation neutral.’ In most contracts that we’ve seen, providers want an inflation clause included in the contract. Post contract signing, you should have revised the business case to include the impact inflation has had, both from what would have been your costs and the provider’s price. If anticipated inflation on your costs exceeds what the provider recovers via a COLA clause, your business case improves. If the inverse is the case, your business case will degrade over time.

3. Has the Foreign Exchange (FX) Rate clause kicked in?

If you have an offshore component to your delivery, the provider will typically ask for a contract clause that changes your payment terms based on currency rate fluctuations. Unfavorable currency shifts can degrade your initial business case. While such shifts are out of your control, it’s good practice to put a cap on the effects of such shifts.

4. Are your costs growing because your business is?

If your business needs more project work, servers, storage or applications because it is growing, that is not necessarily bad. However, a well constructed contract will still yield lower cost of growth than what would have been the case had you stayed insourced.

5. Have any unplanned corporate overhead allocations been assessed to your department?

From time to time there is a rebalancing of existing corporate overhead costs (e.g., HR, Administration, facilities) across departments. This may have happened after you locked in your business case. If the allocation increased for your department, this is an unplanned cost that impacts your savings line. From a corporate view, there is no impact. Properly reflected, this will not adversely impact your business case as it is an un-addressable cost.

6. Are you spending enough on vendor management?

To increase the apparent return on outsourcing, some organizations deliberately fail to provide enough staff to manage the outsourcer. This can boost returns in the short run, but eventually you will need to staff to the appropriate level to manage the outsourcing arrangement and to ensure you deliver on your commitments to the business.

7. Did you follow your plan for reductions in force?

Did you end up keeping higher-end high cost people and releasing lower cost resources? Did you keep an extra few people for good measure? While this is easy to do on an emotional level and can provide the feeling of insurance, it will chew into the savings built into your business case.

8. Were your actual transition costs greater than estimated?

If the transition took longer than planned, it will can raise costs for the customer (in the form of payroll, severance, retention bonuses, advisory fees, etc.) or for the provider, in the form of labor, tools, travel, etc.

9. Did the provider under bid the work?

Some providers think they can ask for more money once they are in place and you’ve lost the staff that previously performed the work. But unless the provider can materially prove that work volumes have changed, they are obligated to deliver per the contract. To prevent this, we seek assurance from the provider at the highest levels that they are not promising more than they can deliver and will make a reasonable margin on the work. If a provider still underbid, executives on the client side must hold the provider’s feet to the fire.

10. Was the outsourcer hit with pent-up demand?

During an outsourcing transition, it’s a good idea to “freeze” some work so the internal team can focus on the transfer of knowledge to the provider. This can create pent-up demand from the business that is eager to take advantage of the outsourcer’s lower costs. If not controlled, this can drive costs beyond those planned in the business case. Managing demands and prioritizing work is just as important in an outsourced arrangement as when you did the work in-house.

11. Are you inspecting and reconciling the provider’s invoices against work volumes and what was contracted for in the agreement?

We find a surprising number of provider invoices that lack the detail required to reconcile the work performed against the Charges Schedule in the contract. This results in errors in the invoices. A good VMO will catch these anomalies and ensure you are getting what you are paying for.

12. Did the provider hire more of your people than anticipated and/or established an on/off shore mix that is more tilted to onshore than anticipated?

If the provider has rebadged more than expected (or hired displaced people as contractors), you may benefit from their institutional knowledge. But the added costs can damage the business case. Similarly, using more onshore staff than planned can improve results, but also raise your costs. An effective VMO will alert you to these issues and allow you to decide whether the added service is worth the extra costs.

One of the toughest jobs in outsourcing is tracking the impact changes may have on your business case. While you can’t control all these changes, knowing what they are — and how to best manage them — will help your bottom line and help you stay in the good graces of your CFO.

This article originally appeared on Global Delivery Report

By Eric Simonson

Everyone loves a good debate. And one of the in global services is whether the external (outsourced) or internal (shared service or captive) approach is the “best” strategy for a particular situation. While most large organizations are getting past the either/or mindset and focusing instead on how to best combine and complement the two as neither is clearly superior to the other, Latin America is the one service delivery destination in which I see North American organizations facing a quandary on this issue.

The answer initially seems pretty simple. Latin America and the United States and Canada are roughly in the same time zones. Further, travel times to Central America and Mexico are fairly short. And as a bonus, you get either Spanish or Portuguese language skills to wrap into a Latin America-based service delivery model. The region is close, easy, flexible, and seemingly a more comfortable alternative to other low cost countries.

If a company expects to operate at scale (say 300-500 or more FTEs), and is comfortable with running international operations in the Americas, the instinctive answer seems to be an internal solution – especially if it is focusing on growing the revenue side of its business in Latin America. If this is not the case, the answer appears to be leveraging third parties to complement delivery from Asia in order to get more convenient interactions (both phone and travel) and extra languages.

However, on deeper inspection, it’s nowhere near that straightforward.

I see two factors increasingly shaping enterprises’ selection of next generation sourcing models in Latin America: 1) whether the need is multi-functional in nature; and 2) the actual operating model for the portfolio of delivery centers.

Let’s take a look at what leading organizations are discovering from their experience leveraging Latin America for service delivery.

Multi-Function Center Influence

Running an internal delivery center on a sustained basis requires commitment and the ability to withstand change year-to-year. From my experience with clients with their own delivery centers in Latin America, those with tactical, single function centers naturally become less strategic after several years. Basically, they become isolated spokes with a single purpose.

If the business needs driving the rationale for this single center change, or the macro-economic conditions surrounding the center shift (e.g., labor availability or exchange rates), the role and value of the center quickly come into question and the ongoing commitment to the center can decrease.

By contrast, if the center is multi-function (some combination of voice, IT, transactions, etc.), the commitment level more naturally stays high. This is due to many factors including generally greater scale (which provides lots of soft benefits for tapping the labor market), and larger and broader investment in making the center successful across multiple processes, functions, and even business units. Further, if one dimension of the services demand is reduced or eliminated, the center’s remaining uses are often still relevant.

The challenge from a sourcing strategy perspective is that having a multi-function center typically requires cross-organizational buy-in that is both difficult to create and slippery to maintain. Net-net, multi-function centers require a more strategic decision, and therefore turn into a more strategic commitment.

Overall Operating Model – Portfolio or Individual Centers?

The second factor – the operating model – also poses a sourcing strategy quandary. If a given center operates without close integration to other centers, the chosen sourcing strategy doesn’t make much difference from a portfolio perspective.

On the other hand, if the center in question is expected to operate some processes and functions in close coordination with other centers (think redundancy for risk diversification, capacity optimization, and multi-geography team working models), the integration is most easily enabled by utilizing the other centers’ same operating model – same tools and processes, same measurement reporting, and on and on.

The impact on the operating model creates critical trade-offs when addressing applications development and maintenance. The nature of this work is more dynamic and fluid than transactions or normal contact center activities. As a result, the attractiveness of a same time zone center can be quite high.

However, this directly leads into the question of whether the Latin American center will operate in close/direct collaboration with other centers across Europe and Asia. Typically, delivery from Latin America drifts toward specific systems that most benefit from frequent interaction, and pairs with the IT resources in the US/Canada. As an unintended consequence, the center will generally not intimately work with centers in other regions (coordinating across three or more stakeholder groups becomes over-whelming), unless the role of the US/Canada is very minimal, and the systems are primarily owned by the offshore centers.

Net-net, Latin America is “close” in many ways to the US and Canada, but operating practicalities quickly call into question the role of all centers both collectively and individually.

Implications

Latin America is a comparatively easy region for enterprises in the US and Canada to access and in which to establish a center. But hiding behind this straightforward value proposition is an eventual desire to cluster functions into fewer centers if running internally, and to optimize delivery across multiple centers if running a portfolio delivery model.

In effect, the cross-function factor emphasizes the importance of cross-business unit/function strategy, and the operating model factor highlights the need for a cross-center operating strategy. As a result, the Latin America sourcing strategy decision quickly calls out the need for a larger, overarching sourcing strategy to ensure a smart decision with sustainable results.

Eric Simonson is Managing Partner of Research, Everest Group. Eric leads Everest Group’s research practice, which conducts original research on global services trends and issues.

By Fernando Labastida

If you are a software developer or managed IT services provider entering the US market, stop talking about CMMI, agile, scrum, lean, .NET, Java, SharePoint, SAP, or any other technical or methodological buzzword.

To really prepare for the US market, to make sure you increase your chances of success, you’ve got to stop talking about the products or services you sell. Instead, talk about the problems you solve. Talk about your story, and how that fits in with your potential customer’s needs, wants and worldview. And talk about how you’re different from all the other CMMI, agile, Microsoft certified, or SAP/Oracle/IBM partners and developers out there.

Buyers and decision-makers don’t care about all the facts and figures you’ll throw at them (well, they do after they decide they like you – they use it to justify a decision they’ve already made). They care about dealing with a company that solves their problems, takes away their risks, or helps them innovate. And most of all they like dealing with companies who speak directly to them and their particular point of view.

How do you do that?

Narrow Your Focus

Just browsing through the articles at Nearshoreamericas.com, I came across three opportunities you could focus on: retail, cloud computing, and mobile software development.

If you have strong collective knowledge in your organization on one of these vertical markets it might be a good idea to focus on them.

Then research the markets like crazy. Read industry reports, go to their conferences, interview industry experts. The more you know about a particular market, the more you’ll know what to say and how to say it when you write content for your website and brochures, create presentations for conferences, and go on sales calls.

Go Beyond the Vertical

The vertical is the physical and demographic characteristics of your target market. But that’s not enough.

Remember, the US market is a hyper-competitive multi-media landscape. Your prospects are drowning in messages. Everything looks like white noise to them. They’re still not going to notice you even if you say you specialize in “cloud computing solutions for retailers.”

What you want to do next is identify two more things that will really help you cut through the noise and make your US prospects notice.

Focus On a Particular Problem

Think you’ll be limiting your opportunities by going too narrow? Not by a long shot.

Taking my earlier example: You might want to focus on providing cloud computing services for retailers. And if you read the complete article on cloud computing and the results of the KPMG study on the perceived expertise of buyers, you’ll notice a deeper opportunity: the need for education.

You could differentiate yourself by providing turnkey cloud computing services to retailers, and as a bonus you could offer free training: “Cloud Computing 101” for all your clients.

Now you’re focusing on a vertical market or two, and you’re solving a real problem within that niche.

Tell a Story That Resonates

As Seth Godin says in his book “All Marketers Are Liars ,” you need to frame a story that coincides with your target market’s worldview.

What’s an un-served worldview that is just dying for a story you could tell them? Maybe there’s a sub-group of retail CIOs and IT Directors who work for up-and-coming Tier II retailers whose mission in life is to un-seat the Wal-Marts, Targets and Best Buys of the world from their thrones.

Maybe you could tell them the story that you specialize in helping fast-growth, technology savvy retailers grow to become tomorrow’s giants.

What’s Your Story?

I just put the above scenario together in a matter of minutes using valuable information presented in a couple of Nearshoreamericas.com articles. With a bit more research and preparation you could come up with a complete market strategy by thinking along the same lines.

It’s an example of what I would do if I was in charge of your US market entry efforts and an example of the type of exercise and thinking you should go through as you plan your US or world domination plans.

So what’s your story?

By Wolfgang Benkel, Forrester Research

Service-level credits and incentive models are important tools to help outsourcing clients increase business alignment and enforce service-level achievement. When executed effectively these tools drive the behavior of service providers and allow all parties to manage the relationship more effectively. But, skeptics remain.

Some clients we’ve spoken with say that, while the main purpose of service-level credits and incentive models is to get providers to focus on the right service levels and to drive the outsourcing relationships toward better business alignment, the current use of credits and incentive models is generally weak and ineffective.

This stems from a couple of core, fundamental problems, most notably poorly defined service-level credits add no value. Many service-credit models — in which suppliers pay back credits to clients for poor performance — are overly complex and difficult to manage. With weak service-level definitions, lack of service accountability, and insufficient measurement methods in place, these credit models completely fail in their original goal: to help IT leadership manage the quality of service providers.

Another typical issue we see is service-level incentive models serve primarily to mitigate the service provider’s risk. Service-level incentives — which are based on overachievement of all service levels — are often built on an “earn-back” model. In these models it is too easy for providers to earn incentive points, which they then use to compensate service-level credits. Forrester finds many outsourcing relationships in which providers have never paid service-level credits, although the service delivery quality is weak,
because they compensate for credit with easily achieved incentives.

It is the responsibility of the sourcing professional to find the right service levels to cover business objectives and to negotiate these models with an eye toward business goals. For this reason, service credit and incentive models should be discussed as early as possible in the vendor selection process (i.e., RFP). Sourcing professionals can improve their use of these tools by understanding the fundamental elements of credit and incentive models.

Clearly defined measurement methodologies and clear accountability from participating providers are the first steps in making service credits successful and avoiding disputes.

While clients are often committed to use of service-level credits as a way to increase the sustainability of service delivery quality, providers often don’t see the need for them. In many cases, when clients wish to apply service-level credits to a contract, providers try to mitigate the risk by defining only minimum service levels and/or introducing service-level incentive models to “earn-back” service credits. In our review of outsourcing contracts, we see several key elements in credit and incentive models:

• Correctly defined service levels are the foundations for success. Clearly defined measurement methodologies and clear accountability from participating providers are the first steps in making service credits successful and avoiding disputes. Every underlying service level of credit models needs to be focused on client’s business needs and/or should generate added value for the outsourcing relationship. In Forrester’s experience, far too many companies pass over this
  fundamental point when designing their incentive and credit models.

• Select the right model for your needs. The predominant service-level credit model takes the form of a charge-reduction, which reinforces the service provider’s commitment to the service level. We also see models that provide for a payment by the provider to be invoked when failure by the provider causes actual financial losses to the user’s business. In either case, it is up to the SVM professionals to find the right balance between service-level credits that address the fundamental, root causes of problems, yet are tactical enough not to damage the health of the outsourcing relationship. In either case, clientsshould not use service-level credits as a way to reduce monthly charges.

• Apply minimum service level only if agreed with the business. We often review contracts with different service-level targets: minimum service levels for service-level credits, “standard” service levels that reflect clients’ existing business requirements; and maximum service levels that are linked to service-level incentives. SVM professionals should avoid this complexity or at least discuss the differences between minimum and standard service levels carefully, with a tight focus on the business objectives. Minimum service levels must be agreed with the business, because it is the business that will typically feel the pain if the service level is not met.

• Integrate credit models into the contract exit strategy. Every service-credit model needs an escalation process to communicate the service-level violation to the next level of the vendor governance model — typically as a way to start the root-cause analysis and the improvement process. These escalation processes can be supported by a staged credit model linked to problem resolution, increasing credits after recurring violations in an agreed time period, and ends in a possible contract and/or service termination process for continuing problems.

Outsourcing clients who are seeking to create credit and incentive models need to walk a  fine line: they must keep the models as simple as possible, while also defining the model in enough detail to drive the desired behavior. In addition, either model needs to be easy to manage and seek to avoid escalations and dispute discussions.

Wolfgang Benkel is a Principal Analyst at Forrester Research, where he serves Sourcing & Vendor Management Professionals.

By Fernando Labastida 

Why do most Nearshore providers treat marketing as a one-off event they do whenever their pipeline is empty? To survive and thrive, you’ve got to treat marketing as a process. You have an accounting or payroll process, and if you’re a software development company you probably have a specialized development process like agile or scrum. As a recent McKinsey article stated: marketing is the company. 

Following are the seven steps to marketing success you should implement as a Nearshore marketing process, adapted from John Jantsch’s 7 Steps to Small Business Marketing Success.

1.      Narrow Your Focus

Just like the allies stormed the beaches at Normandy and established a secure beachhead from which to launch their European operations against the Germans, you too should establish a beachhead by focusing on a narrowly defined market segment.

This comes in two parts:

1. Focus on your ideal customer

Who are your most profitable customers? Who are your happiest customers? Who are the customers that stick with you through thick and thin? Who are the customers that refer you to other customers? Identify them and create an “ideal customer profile,” then make a concerted effort to go after only these types of prospects.

2. Define your remarkable difference

You’re remarkable difference is not that you’re “A Certified Microsoft Gold Development Partner” or you provide excellent service. Everybody says that.

Instead, ask your customers what they think is different about you. Why did they choose you? Why do they stay with you?

What difference can you invent? Do you have a special process that you can brand with a distinct name? Can you invent a five point post-development quality-check that none of your competitors currently offer?

2.      Fill the Marketing Hourglass

The marketing hourglass turns the traditional sales funnel on its head. Instead of dumping a bunch of sales leads at the top of the funnel and getting your sales people to work them through to the bottom, think instead about how customers actually make buying decisions.

Your customers have to:

• Know you
• Like you
• Trust you, and then
• Try your product
• Buy the product
• Repeat purchase and;
• Refer you to others

Each step of the marketing hourglass has it’s own set of tactics, and you can’t rush any of the stages.

For example, you might get people to know you by publishing compelling blog posts about a topic that is of concern to your prospects. Then you might invite them to a webinar on “How company XXX achieved success outsourcing their software development to Mexico.” They’re getting to like you now.

Your prospect might attend a webinar where you introduce a satisfied customer. They start to trust you now.

Get the picture?

3.      Publish Educational Content

Educational content is the opposite of promotional content. Publish blog posts, videos, white papers, eBooks, or hold webinars, seminars and talks that provide information that is inherently valuable to your customers.

Michael Stelzner, in his new book Launch – How to Quickly Propel Your Business Beyond the Competition, talks about how educational content is the “fuel” to move your marketing machine forward.

The point is to attract your prospects by giving them a reward when they invest their valuable time with you. That reward is valuable advice, tips, tricks and industry research.

4.      Create a Total Web Presence

In this day and age this shouldn’t even be an issue, but there are still some companies that leave their web presence as an after-thought.

Most buyers start their purchase path by searching on Google. They might find your website, or they might land on Twitter, YouTube, Linkedin, Google Places, or any number of web properties.

If you haven’t optimized your website with educational content, or claimed your real estate on all the free social media sites available to you, then you’re throwing away a huge opportunity to attract customers to you.

5.      Use a Lead Generation Trio

In case you think I’m only advocating the slow boat to China to attracting customers, there’s still room for lead generation activities, or rather, a trio of lead generation tactics.

There’s paid promotion, such as Google Adwords. Only do this with a twist: offer them a free report in exchange for their e-mail address.  Then you can continue to market to them.

There’s public and community relations, such as online press releases, public speaking, and relationships with the media.

Finally, implement a referral system. This is such a vast topic it requires it’s own article

6.      Make Selling a System

Now that you’re implementing a marketing system, don’t leave your selling up to chance. Put together a systematized process for selling too.

Do you have a free trial? Do you have a starter offering? Do you have a “make it easy to switch” offering? Do you have a “customers only” offering?

7.      Live by the Calendar

Marketing is not difficult, but it is complicated. Marketing can’t be a system until you have a way to organize and track your marketing.

Conclusion 

I know there are skeptics among you who say, “we’re not a marketing company, we’re a sales-oriented company.”

I believe this so much that I will tell this to you emphatically: you’ve got to implement a marketing system, because if you’re not moving forward you’re getting left behind.

As General Erik Shinseki, ex-U.S. Army Chief of Staff said: “If you don’t like change, you’re going to like irrelevance even less.”