By: Linda Tuck Chapman

Developing and implementing consistent, actionable performance metrics for your Application Development and Maintenance and Testing program is one of the best ways to ensure you get value for money. One of the most important aspects of developing effective metrics is to resist measuring everything that can be measured. Focus only on measuring what matters.

According to CORE (Centre for Outsourcing Research and Education) research conducted in 2011,  one of the largest weaknesses found was that almost half of the organizations struggled to identify a compact set of metrics that aligned with business priorities. Over-abundance of metrics often obscured the core set and made it challenging for clients to aggregate relevant information and derive intelligent insights. Others recognized the issue not as a problem of quantity but of quality; stating that metrics were being tracked, but did not link to the organization’s ultimate goals.

This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information

No matter how complex or far reaching your metrics are, most managers pay attention to only a few metrics. In addition to simplifying the metrics measurement process, this guide to “best practices” will help you develop metrics that marry the relationship and performance information you really need with the information vendors can readily provide.

There are three types of Metrics that you should consider creating to measure the success of your program and vendor relationships:

1) Relationship level – these Metrics focus on how the relationship between the two companies is working, and how satisfied you are with their responsiveness and your access to their thought leadership and innovation.

2) Customer level – these Metrics focus on how well the vendor is performing tactical, “table stakes” tasks, like invoice accuracy and incident management.

3) Statement of Work (SOW) level – these Metrics focus on how well the vendor is delivering quality outcomes, on time and on budget, against each Statement of Work.

Measuring Performance

Relationship and Customer level Metrics are performance management tools and controls that are not unique to ADM and Testing vendor relationships. A good way to simplify governance processes and reduce workload associated with managing multiple vendors is to develop and deploy a generic set of Relationship and Customer levels across the population.

The primary focus of this article is on the SOW level Metrics. This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information. The best way to simplify your thinking about what to measure is to establish an overarching framework that addresses expected and important outcomes. By this I mean deciding how to group everything you want to measure into a few overarching categories. Three or four categories are simple to remember, easy to manage and simplify the communication process.

Grouping Metrics

I’d recommend grouping SOW level Metrics into “Quality,” “Efficiency” and “Effectiveness” categories, then creating sub-level metrics that align with each category. When you’re deciding on the sub-level Metrics, which are labeled “Type” in this example, give careful consideration to which metrics are referenced in best practices research coupled with what the vendor already measures internally. If you’re not sure what your vendors measure, just ask. They’ll appreciate your efforts to align your performance reporting requirements with their existing processes.

This is an example of “Quality” Metrics for Application Development and Maintenance. The Type column identifies the type of quality metric being measured; the Description specifies what is being measured; Waterfall or Agile refers to the software development methodology; Reporting periods can be set according to the timing of SOW deliverables, against major milestones or for long term relationships by quarter.

The same approach is taken to develop “Efficiency” and “Effectiveness” Metrics and any other categories you wish to measure. (Click on the chart for an expanded view.)

And here is an example of “Quality” Metrics for Testing: (Click on the chart for an expanded view.)

Conclusion

This approach is extremely useful for managing outcomes for each SOW and every vendor. Over time, you will have a sufficient volume of actual results for each vendor and every SOW. The data can be analyzed for opportunities and issues. You can identify fact-based opportunities for Project Teams and vendors to achieve better quality, higher productivity levels and lower costs. Ultimately, this is the most predictable way to increase the value for money.

Linda Tuck Chapman is a seasoned Outsourcing and Vendor Governance expert. You can reach Linda at (416) 452-4635, lindatuckchapman@ONTALA.com  or visit ONTALA Performance Solutions

The consensus from NSAM's readers: Wait for the Castros to move on before taking Cuba seriously.

By Jon Tonti

A mere 230 miles from Miami, Havana’s ultra-attractive geographic positioning continues to push Cuba on to the radar of ‘what ifs’ when looking at explosive possibilities in the Nearshore services sector.

But before floating into dream land – let’s review the facts: Cuba’s BPO market today is nearly non-existent and the Cuban government is not focused on jump-starting it.  Despite an intelligent workforce that is increasingly exposed to private-run business, Cuba still has a long way to go to become viable for global services. We drew upon our pool of experts and did some poking around of our own to find that Cuba lacks a BPO scene because of the Cuban government’s preference for other industries, a weak technological infrastructure, a dearth of transparency, and political and workforce uncertainty.

“The Cuban government doesn’t appear to be that interested in BPO; they seem to be more focused on tourism and natural resource extraction.  You really may need a regime change to get things moving with BPO,” says Peter Ryan, lead analyst at Ovum.  His opinion reflects the results of a recent Nearshore Americas online poll that indicated over 65% of audience members saying “Wait for the Castros to Move On” before examining Cuba.

Cuba already has plenty of experience participating in joint ventures with first-world democracies like Canada and Spain albeit in non-service related industries.  Canada based international mining giant Sherritt Corp. has operations in Cuba.  Spanish foreign direct investment is mostly focused on the Cuban tourism industry, which currently accounts for 12% of the labor market as reported by the US State Department, and was made possible by a series of market oriented reforms in 1993 and 1994 in attempts to stave off fiscal crisis.

Joint ventures occurring between Cuba and international companies would seem to be a signpost of Cuba’s readiness and capability to take on BPO operations, even majority foreign ownership has supposedly been allowed since 1995 despite little evidence of its actual existence. Regrettably, joint ventures between the Cuban government and foreign firms steadily declined in the seven year period between 2002 and 2009.  Reasons cited for the decline are encumbering regulations, grueling bureaucracy, and high-priced inefficient labor.

“Therein lies the problem, it is not a free market,” says Ryan when asked about how a company interested in launching a BPO joint venture with the Cuban government would go about negotiating wage rates.  “Instead you have the DR or Jamaica right there and they are already proven BPO markets with less red tape and more transparency.”

“I am sure Cubans can adapt and provide quality customer service, but it will not happen overnight”

 Is the Workforce There and Ready?

UNICEF data shows that the Cuban population has 100% literacy and youth enrollment in primary and secondary education is on par with that of the most economically successful nations in Latin America.  That reality combined with the fact that 12% of the labor market is employed in the tourism industry, where those workers may be either formally or informally receiving an education in current hospitality standards, is an argument used by some to predict that Cuba is ready for BPO.  How many workers of that 12% are truly focused on guest centric activities?  The impact is overestimated.

BPO would also find it difficult to pinch those few readied workers focused on guest centric services from the tourism sector because of the tips they receive; it is not uncommon for a worker to receive a tip that is half their monthly salary.  As for the vast majority of the Cuban workforce that is not involved in tourism, although highly educated, may take time to deliver high quality BPO services.

“It is hard to conceptualize Cuba becoming a hub for customer service anytime soon.  Customer service is very much an idea rooted in the North American business psyche.  To generalize, Cubans have simply not been exposed to this practice and as a society and they will need time to switch gears.  I am sure Cubans can adapt and provide quality customer service, but it will not happen overnight,” says Sonya Fierst, a research analyst for Centro de Estudios en Economía Sistémica (ECSIM) who recently traveled to Cuba.

Even if Cuba were to become a market economy tomorrow the communism hangover would endure for some time.

 Infrastructure Woes

Internet connectivity in Cuba has been known to be abysmal with the Cuban National Statistics office reporting as recently as 2010 that only 2.9% of the population used the internet over the previous 12-month period.  The arrival of an undersea fiber optic cable in early 2011 from Venezuela evoked wary optimism by freedom of information supporters; all Cubans know that with any increased access to virtual information monitoring and blocking technologies will escalate in lockstep.  As to date there has been little reporting on the anticipated internet access that was promised with the delivery of the fiber optic cable, sources on the ground say internet access for the average citizen continues to be absent.

Political and Economic Uncertainty

Any BPO buyer has political and economic stability on the top of their due diligence checklist.  Unfortunately, Cuba remains a wildcard in terms of its post-Castro future.  The island is also preparing for an altered relationship with Venezuela and the Cuban government, which now employs 85% percent of the Cuban workforce, claims that within the next 4-5 years 50% of the country´s economic activity will be in the private sector as reported by NPR.

However, the Cuban regime has a track record of making claims and not following through or reversing course, especially when it comes to the issue of economic liberalization.  It remains true that the small subset of Cuban entrepreneurs cannot deal directly with foreign firms, and until a big shift occurs an unpredictable Cuban government still controls everything.

By Robert L. Scheier

Service level agreements (SLAs) are the heart and soul of many outsourcing contracts. They define what the provider must deliver and their penalties for failure, in anything from application uptime to the time required to solve a customer’s problem on a help line.

But at least as currently defined, SLAs often fall short of detecting (and, more importantly, correcting) problems quickly. That was the message at the recent SIG Spring Summit from Senior Corporate Counsel Richard English of Ingram Micro and Shaalu Mehra of Sheppard Mullin Richter & Hampton, who helps the electronic distributor negotiate outsourcing deals.

SLAs fall down, said Mehra, because they don’t change with the customer’s requirements, aren’t defined precisely enough, and often aren’t structured to do a root-cause analysis of the root problem behind multiple failures.

“I love SLAs,” Mehra said in a session on “Best Practices for Ensuring Quality of Service in Multinational Outsourcing Engagements.” However, he continued, they are limited because they are just one “data point” measuring a provider’s performance.

While SLAs are the subject of intense negotiations at the start of engagement, he says, they may not be based on the right metrics to measure the effectiveness of the outsourced service for the customer. In addition, he said, SLAs “can be undermined by even minor changes” to the processes or systems they measure, and are often not updated often enough.

Another factor that limits their usefulness is “single incident limitation, (which makes) root cause analysis subject to an agreement of the parties,” said Mehra. Understanding and correcting the reasons for past failures can also be hindered by what English called a “statute of limitations” requested by vendors on how long a customer can ask for a service credit after a failure.

Both strongly suggested using a common approach to SLAs and other terms with all outsourcing providers, regardless of their location. “While that company may be India-based, and might be doing work for us in Asia, or might be doing work for us in Latin America…we don’t care,” said English. “We’re going to build in one global SLA.”

Two areas where the pair said specialized SLAs might make sense were to measure English language fluency and attrition. While Mehra agreed that “fluency” is subjective, he said it could be measured through a sampling of calls or surveys of whichever end users were being served.

Mehra said such SLAs often measure attrition on a rolling 12-month basis, and is an area where definitions (such as whether promotions, reductions in force or departures for personal reasons count as attrition) are often the cause of hard bargaining. “However reasonable the vendor’s concerns may sound, at some point, we have to draw a line” about where and how the customer will be protected from excessive turnover, he said.

In addition to SLAs, Mehra recommended regular payments based on the achievement of milestones, as well as periodic payments with provisions for holdbacks as a penalty to the provider for failures in delivery.

Opportunities to deepen ties ranging from trade and investments to education and security

The First CEO Summit of the Americas wrapped up on April 14, 2012 with calls for greater cooperation among Western Hemisphere nations on matters ranging from trade and investment to education, science and technology and security, in order to boost prosperity from Canada to Chile.

At the end of the conference, held ahead of the 6th Summit of the Americas, Presidents Dilma Rousseff of Brazil, Juan Manuel Santos of Colombia and Barack Obama of the United States participated in a roundtable discussion in front of an audience that included more than 700 top executives from many of the Western Hemisphere’s leading companies.

After praising the economic and social progress achieved by countries such as Brazil and Colombia over the past decade, Obama said there were many fields where countries in this hemisphere could collaborate fruitfully. “We’ve never felt more excited about prospects of working as equal partners with our brothers and sisters in Latin America and the Caribbean,” he added.

Rousseff, whose nation recently overtook the United Kingdom as the world’s sixth biggest economy, also spoke in favor of closer cooperation, but stressed that alliances should be based on equality among allies. She called for greater integration of supply chains among countries in the Americas, most of which have to catch up to Asian and Eastern European countries that are well connected with global production systems. “We need to view this region as an area where you cannot have protectionism,” Rousseff added.

Santos, who called for closer coordination of economic policies to avoid the “export of crises,” proposed that the countries of the Americas should arrive with a common position to the G20 meeting due to be held in Mexico in June to discuss possible joint actions to head off another global recession.

The three heads of state also agreed on the importance of improving education and job training in their countries in order to improve people’s employment prospects. “If we were to ask our people what is their greatest concern, I am sure that the answer would be jobs,” Santos added.

Science and technology research and development was also seen as a fertile ground for collaboration in the Americas. Obama noted Brazil’s leadership in biofuels, adding that both countries should intensify their cooperation on developing clean energies.

The conversation among the American, Brazilian and Colombian presidents capped the two-day event organized by Colombia’s private sector with the endorsement of the Colombian government and technical support from the Inter-American Development Bank. During the CEO summit participants discussed opportunities to speed up economic growth and reduce poverty in Latin America and the Caribbean through public-private partnerships and deeper regional integration.

In his opening speech on Friday, Santos called on the private sector to contribute to inclusive economic growth. “Without business people prosperity will not come to the peoples of this continent,” Santos said. “But business also has a tremendous responsibility. You must do everything possible to improve social conditions. Fighting poverty is a great business proposition for everyone.”

In his presentation for the CEO summit, IDB President Luis Alberto Moreno said that the Americas could double the value of their commerce within a decade if governments and the private sector undertake key investments. “This would have a tremendous impact on job creation,” Moreno said, “especially for the millions of young people who enter the job force each year.”’

Moreno called on companies and governments to ensure that benefits of digital connectivity not only benefit wealthy consumers in large cities, but that they also push out into isolated rural areas and down into the base of the income pyramid. “We need to bet on the future, and take infrastructure, products and services not only to the growing urban middle class, but also to isolated populations, to families that aspire to greater social mobility,” Moreno said.

Moreno announced two new IDB initiatives that seek to leverage greater connectivity among public and private sectors to help solve two important development challenges: youth unemployment and access to finance.

The IDB and the Multilateral Investment Fund (MIF) are teaming up with the International Youth Foundation and the region’s biggest employers, including Walmart and McDonald’s operator Arcos Dorados, to launch an alliance to train as many as 1 million youth for their first jobs over the next decade. They also announced the provision of up to $55 million in financing for institutions to develop new lending models to improve access to credit for women entrepreneurs in the region.

Throughout the CEO summit heads of state and distinguished cultural, diplomatic and business figures shared their vision for accelerating connectivity and development across the hemisphere.

The president of Mexico, Felipe Calderón, urged Latin American countries to advance free trade agreements, eliminate trade barriers and embrace open markets. “Trade is one of the key factors for progress,” he said, “and humanity has known for a thousand years that trade generates benefits for all.”

Colombian singer Shakira exhorted the business community to deepen its commitment to corporate social responsibility. “It would be fantastic to see the business leaders of Latin America embrace philanthropic capitalism in the way that executives in other countries have, for example Bill Gates and Warren Buffet, who asks multimillionaires to promise that they will pledge half of their fortunes to help the poor,” she said.

Shakira, who started her own educational foundation as a teenager, added that she is waiting to see a Latin American version of philanthropic capitalism, and that she would like to see business people in the region “encourage each other and compete to see who writes the biggest checks.”

On the eve of the CEO summit, the IDB and Shakira’s ALAS Foundation presented their joint awards for excellence in early childhood development. During the ceremony, the artist invited Moreno and leading business people to join a “movement for early childhood” to promote programs to serve children from birth to the time they enter school, prioritizing investments for the 35 million children in the region who currently lack access to adequate nutrition, health care and education services.

By Kenneth Hess

No one wants for a relationship to fail but sometimes you have to quit on one that isn’t working. How do you know when to say, “When?”

Relationships are difficult. Band members have creative differences, teammates have ego problems and marriage partners have irreconcilable differences. Likewise, vendors and clients in business-to-business relationships experience all of the pains of band members, teammates and marriage partners. Maintaining a positive relationship is challenging when everything goes well but adding in technological differences, language barriers and time zone disparities has the effect of widening the gap between client and vendor.

But, everyone knows those problems exist and takes steps to mitigate them. Awareness of the potential problem areas is a good start but relationships deteriorate on a subtler level. Relationship failure occurs in much the same way as the boiled frog story. The story is that a frog dropped into boiling water will sense the heat and immediately jump out. However, if you place that frog into cool water and slowly heat the container, the frog will boil and never know until it’s too late.

It would be a better business environment if relationships would fail at the initial introductions rather than waiting until both parties have invested resources. If only we could sense the boiling water at the beginning instead of having the water slowly heat up around us. The reality is that most relationships, personal or business, fail over time and in small amounts. Like the frog, we boil one degree at a time.

The question is, “How do you recognize when your vendor/client relationship has failed?” The answers and experiences might surprise you. There are warning signs that you should pay attention to that point to problems. You have to be brave and be ready to cut your losses before it’s too late to leap from the boiling pot.

Testing the Waters

First time offshore outsourcers smile when they hear the pricing from vendors. And why shouldn’t they when quoted prices are as low as one-twentieth the price of local labor. It’s high-fiving and glass-clinking all around the conference table. The pricing, the promise of short delivery times, the open discussion and the friendly atmosphere coalesce into what can only be described as the business equivalent of “finding your soul mate.”

Everyone walks away happy from those first few “honeymoon” meetings. The calls go without any problem. Your offshore partners on the other end have an uncanny grasp of the English language. And, they understand the urgency and depth of the project ahead.

Taking the Plunge

You and your staff decide unanimously to engage the offshore partner for your project. You set milestones for progress and agree on delivery dates. Your partner keeps you informed, attends meetings conveniently scheduled during your standard working hours, keeps communications open and delivers your milestones as promised. Everyone is happy and you celebrate your win.

Turning up the Heat

The first sign that something’s going wrong in your newfound relationship is when your offshore partner begins to make excuses for non-delivery. Kevin Chandler of C3K Enterprises said that, “Everything went fine until our three week promised delivery stretched into nine months with no usable progress. We found a local resource for the work and enjoy an ongoing and successful relationship with the company.”

Once a commitment had been made between Chandler and his offshore partner, the partner came back to him with, “It’s going to take longer and cost more.” This is a common ‘bait-and-switch’ routine with some offshore companies. This one came highly recommended to Chandler.

Chandler didn’t give up on offshore outsourcing. He tried a total of five different companies in various countries for his projects. All but one was a total fail for him. For the others, he’s decided to use local US-based resources. He said that he might try offshore outsourcing again but with caution.

Jumping Out of the Pot

Unfortunately, the lure of low cost labor is just too irresistible for some. This lure might not be palatable after several failed attempts. As Paul Midler writes in his book, Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game, the frequently heard phrases, “You heard me wrong” and “Price go up” wipe any cost benefits of going offshore.

Often what happens with offshore partnering is that you end up spending more time mitigating problems than you do producing results. Chandler said that he spent a lot of time on the phone at all hours of the day and night managing projects. One company “flat out lied about their capability,” he said.

You have to know when it’s time to cut ties with your offshore partner. Non-delivery, a breakdown of communications, rescheduling calls to times that are very inconvenient for you, prices that mysteriously rise in double or triple digits and inexplicable or repetitive production delays are all good reasons to sever your relationship. US-based companies want to create good working relationships with their foreign partners and most are willing to deal with a significant amount of delays, misunderstandings and price fluctuation but, at some point, the cost savings aren’t worth the headaches.

Keeping the Waters Cool

All such relationships aren’t bad nor do they have to fall into complete disrepair. When you find that something is going wrong, you have some options to revive the relationship and maintain your margins and your sanity.

What’s needed in such cases is honesty on the part of both partners. A candid phone conversation or a visit to your partner’s location will often resolve problems. One vendor suggests that you maintain close contact with your partner to keep the project and the relationship moving in the right direction. If you find your partnership failing because of missed deadlines or cost overruns, you need to discuss a detailed plan of action with your partner’s management team. You might have to revise milestones and expectations but you should put in the effort to create a productive and ongoing relationship with your partner. But, don’t be afraid to call it quits on a partnership that just isn’t working.

There are many companies, legitimate ones, with which to work on your projects. By selecting the right offshore partner, you can still save money, enjoy decent profit margins, meet your deadlines and not get boiled in the process.

By Robert L. Scheier

A recent study out of Duke University shows that American companies still prefer India, China and the Philippines to the Latin American Nearshore for IT infrastructure and application development and maintenance (ADM). The percentage of finance and accounting work done in Latin America rose from 10 percent in 2009 to 16 percent in 2011, with application development and maintenance (ADM) work rising from seven to 12 percent in the same period, according to the International Offshoring Research Network Project at Duke’s Fuqua School of Business.

And yet, the researchers found, the percent of ADM work done in Asia rose from 66 percent in 2009 to 70 percent in 2011. Among the reason for the preference for Asia (especially India), they say, are customer familiarity, the maturity of the IT and BPO industry. And China, which some predict may outpace India as the largest outsourcing provider in the world by 2020, already has 10 percent of America’s outsourcing business, the study found.

Another factor, as reported on Alsbridge’s Outsourcing Center, is that relocating to the nearshore or even back to the US is not free of cost or complications. It requires planning, management effort, possible disruption to operations (and other) transition costs, says Arie Lewin, a professor of strategy and director of Duke’s Center for International Business Education and Research.

Lewin also points out that the decision to outsource, and where to outsource, is being driven over time more by strategic concerns such as the need for innovation, or to move into a fast-growing developing market, than by cost savings alone. While it’s little surprise that India continues to be the home of choice for mature, well-understood disciplines such as application development and maintenance, Latin America can carve out specialties for itself in newer areas such as the development of mobile or social applications.

There’s no doubt, as we recently saw at the Sourcing Interest Group’s spring summit, that growth and innovation are key customer concerns as the global economy recovers. For customers looking to “transform” their organizations, the greatest concerns might not be where to outsource, but what specific skills and expertise a partner (wherever they are located) can provide.

The onus is thus on Nearshore governments to provide the appropriate training to their populations and to keep providing hopefully smart incentives to foreign as well as local start-ups. Just as important, Nearshore based service providers must keep moving up the value chain and differentiating themselves from their hungry Asian competitors. The current differentiators of location, language and cultural affinity will only go so far before the Nearshore must distinguish itself with value-added skills in area such as agile development, software testing or multimedia.

This article originally appeared on our sister site Global Delivery Report

By Heather Littlejohns

Companies seeking to locate new outsourced or shared services centers to offshore or near shore locations typically focus their exploration on factors such as price, local government support and incentives, cultural affinity with the target market, unemployment rates, labor pool, language skills, etc. But are companies really taking the necessary time to explore, assess and discuss their own points of differentiation as they are perceived by the local population?

Beyond providing a basic salary, what contribution can the business make to the lives of the people who will be employed? These cultural considerations should be an important component of the due diligence process as they are crucial to the long-term sustainability of the business. Unfortunately, they are too often overlooked.

Act “Corporate,” Think “Local”

The most effective way to select a successful and sustainable market, community and location to facilitate an operation is to spend time on the ground with local community leaders and prospective employees, using the language skill with which you expect services to be delivered. In a sense, this is a grassroots and tourist approach to the region, building on a foundation of previously completed market analysis, research and the corporation’s strategic vision.

Before investing in a destination, many basic requirements “on the ground” should be fully identified. These are easily gained through market analysis and research and by speaking directly with economic and government groups within the country/region of choice. The following check list can serve as a starting point:

• Local government investment and support

• Technology and infrastructure

• Education

• Safety and security

• Tourism

• Like industry success

• Transportation

• Labor pool

• Education level and graduation rates

• Language skill–English bilingualism

• Skills learned (preferred)

• Customer service orientation

• Affinity to Western culture

• Employable population–demographics

To truly test the likelihood of success, spend time on the ground in the community. Ask questions, document observations and understand the community from which you will hire and where you will be a corporate citizen:

• Understand how education works in the destination. Is it public or private? Is it mandatory? What is the local government’s degree of engagement in the education system? How do people get to school? Is there an emphasis on learning English/other language?

• Assess the rates of school attendance.

• Visit a school, university or community college. Build relationships.

• Determine who are the economic and community development supporters and funders in the community. When do they meet? Who are the members? Do they live in the community in which they serve?

• Attend a meeting of these community development supporters. Take notes and make observations about interactions and behaviors such as tone and pitch in conversation; gender based interactions; non-verbal communication such as eye contact and handshaking. These observations will help you adapt your body language and mannerisms to put people at ease when interacting with the local population.

• Discover the cultural customs of the local community including holidays, events and religious ceremonies. This knowledge will help when managing your new workforce.

• Understand the demographics of the region. What is the average employable age and are they male or female? What is the current make-up of the population interested in the BPO industry? Are they well-educated males or single mothers? Are they second income earners or primary breadwinners?

• Investigate local restaurants, shopping facilities and tourist hot spots. Eat at local favorite restaurants. Attend a local customary event, read the tourist brochures and spend time in the recommended areas. This will tell you what the local people are proud of within their country. Knowing exactly what gives a person pride can also act as a motivational tool. This can allow you to better identify with the needs of the people that the corporation will employ. It will allow the opportunity to learn, understand and place value on what is important to the team.

• Learn how local services are facilitated and distributed. Are these services valued and utilized? How does the role of the family contribute?

• Research health care, child care, transportation, etc. This will help provide a more comprehensive view of total costs. It will also help you “design the differentiators” that I referred to earlier to strengthen your value proposition as a “glocal” employer, and can help you in “positioning” your corporate philosophy to your future employees.

Integrate Cultural Components with Business Goals

By integrating the “softer”, cultural components of the destination you are reviewing with that of your strategic business objectives and long term priorities, your answers to questions like those below will become far more informed and accurate.

• Is a local staffing agency required to help launch the business?

• Does it make sense to place the business in the duty free zone or is an urban, centralized location more feasible?

• What type of community participation and recruiting event will need to be held?

• What aspects of the corporation should be advertised? What are the value added benefits for employees that will matter most? What are your differentiators as they relate to the community?

On the surface these concepts are relatively simple, logical and one would assume being facilitated, however, this is not the case in many situations. Cross-cultural communication and a grassroots approach is not often practiced for a wide variety of reasons. These include the assumption that knowing the statistical facts about unemployment rates and government incentives is enough to be successful, aggressive timelines, low price points driving a quick transition, lack of regional expertise within the organization or simply an attitude that cultural considerations are an “after thought.”

To truly minimize new geo risk, not only should the selection team conduct the formal process, but drive the due diligence from a grassroots perspective and through a cultural prism. Once this knowledge and, more importantly, experiences are gained, the transition or execution team should act as the “cultural interpreter” for the enterprise. This is crucial to see a new operation through to success.

Heather Littlejohns, Director-Operations at Aditya Birla Minacs and also an independent consultant, is responsible for strategic Country and Site Leadership and Client Relationship Management. She also serves as Partner & Contract Liaison, Implementation & Launch Project Sponsor and Government Point of Contact. Heather brings 16 years of rich and varied experience in directing, developing and implementing effective near shore and offshore BPO global service delivery solutions. Heather.Littlejohns-Brown@minacs.adityabirla.com

By Jon Tonti

Of the 8.2 million business services jobs held domestically at the beginning of 2002 in some 4,700 companies based in North America and Europe only 4.5 million will remain in their domestic markets by 2016 according to a study by The Hackett Group, a management consulting firm. The same study finds that the amount of business services work moving offshore will “level off significantly” during the next few years due to changes in the conditions of offshore drivers.

The Hackett study concentrates on the business services jobs related to finance, procurement, human resources, and IT that have been moving out of developed economies for well over a decade. Historical and predictive data shows that the number of jobs created in those four categories between 2002 and 2016 is offset by productivity improvements resulting in no net gain; the net loss of business services jobs appears to be the amount of work moved offshore.

Loss of IT Jobs to Increase 

Of business services jobs IT will see the highest job loss rate of 54% between 2002 and 2016 compared to that of 42%, 36%, and 33% for Finance, Procurement, and HR respectively. Despite what may seem to be a tough hit to domestic IT business services jobs provided by companies with over US$ 1 billion in revenue in North America and Europe, the IT sector continues to grow and small and medium sized technology companies often do not offshore with similar intensity.

The creative destruction of productivity improvements and movement of commodity processes from domestic business units to Global Business Services centers (Captive or Outsourced) reduce the costs of business processing services that are not only transactional in nature but also knowledge-centric. This trend permits Hackett Advisors to state that “the likelihood that the HR, IT, finance and procurement organizations of corporate America and Europe will become contributors to job creation is extremely low.”

Economies of scale allowing companies based in North America and Europe to take advantage of high skilled offshore resources are evolving naturally

Service Centers Diversify

Driving this continued migration of business services jobs is the transformation of one dimensional service centers for routine business services into multifunction Global Business Services centers capable of delivering knowledge-centric services. The FTE (full-time equivalent) job base that is now based out of Global Business Services centers, instead of domestically in North America or Europe, is staggering in both transactional and knowledge-centric realms. Captive GBS far outstrips Outsourced GBS with an average 42% of the knowledge-centric FTE job base residing in Captive GBS organizations while only 10% of knowledge-centric FTE is concentrated in Outsourced GBS. Captive GBS again trumps Outsourced GBS with regard to transactional FTE job base; an average of 50% of transactional FTE job base for business services resides in Captive GBS while a mere 15% on average for Outsourced GBS.

Another reason companies are continuing to displace business services jobs from traditional domestic markets is that the increased use of the GBS model complements the predictable globalization of any large company’s operations. As supply chains, target consumer markets, strategy, etc. have to be reoriented in a global context that redefines the value chain, business services to serve that value chain must also adapt. Business services are adapting and transforming what were once shared services operations only taking advantage of economies of scale into GBS organizations enabling economies of scope and economies of skill as well.

Business Services to Level Off 

Expanding the scope of a GBS’s portfolio of services to include other commodity like services is a natural progression of the GBS model. Likewise, economies of scale allowing companies based in North America and Europe to take advantage of high skilled offshore resources are evolving naturally. Service offerings of offshore BPO/IT providers and Captive GBS organizations are more mature than ever. This truth presents itself in the context of the standardization and digitization of work and workflow making work less origin dependent. Now that intellectual talent is not constrained by its geography, why is it that the Hackett Group posits business services offshoring will “level off significantly during the next few years?”

First Hackett asserts that the number of business services jobs going offshore is rapidly declining because the majority of tradable jobs that can be offshored already have been moved offshore. Also mentioned is that economic growth in North America and Europe is creating less suitable jobs for offshoring while productivity improvements continue to eliminate jobs of the offshorable variety. Not mentioned were the obvious rising wages in traditionally low cost countries which is diminishing opportunities for labor-arbitrage and making the close-shore model in second-tier US and European cities more viable. Hackett goes on to comment that in ten years’ time “demand by Western companies for traditional offshore capacity will have largely dried up.”

If the Hackett Group is talking about the most basic business services jobs which have already been outsourced or are set to be eliminated by productivity improvements, then the assessment that business services offshoring will continue to slow and indeed level off is correct. However, traditional offshore capacity has already matured to the point where basic knowledge-centric services are commonplace and foreign R&D operations have become necessary to support any large company’s global operations. What were once simple shared services centers are now GBS organizations poised to evolve into headquarters for important knowledge-centric activities.

The mass offshoring of low level business services jobs is reaching a saturation point, but the steady trickle of knowledge-centric jobs moving offshore continues. Despite that, it is not a zero sum game in which developed economies lose jobs to lower cost countries never to be seen again. Global companies born in what are considered low cost countries are increasing their presence in developed countries and may be the new forces generating the offshore jobs of the future. This trend will be accompanied by a shift in BPO says Mark Hillary author of “Who Moved My Job?” and CEO of IT Decisions, a Brazilian tech research firm based in São Paulo. “Large companies not of Western origin doing business in the US and Europe will need local staff in those markets for their customer sensitive BPO operations.”

By Robert L. Scheier

As the global economy improves, customers are looking to outsourcers to not only save money, but to drive growth, improve quality and drive innovation.

Those were among the key themes from two days prowling the corridors and break-outs at the Sourcing Interest Group (SIG) spring summit. Speaker after speaker, whether the topic was procurement, category management or macroeconomic trends, described how their employers are trying to use outsourcers not “just” to save money but to make a more strategic contribution.

Beyond Short-Term Savings

The need to drive strategic, ongoing business benefits runs throughout the top concerns presented during a summary of the executive roundtable. They include:

Revenue enhancement: The need to drive more sales, and higher profit sales. Outsourcers and other service providers can help by suggesting new products, services or delivery channels and then helping to create them.

Cloud and what comes after: Understanding the various flavors of the cloud, the true nature of the risks and benefits, and how to use it effectively is confusing for most organizations. It can also be a great opportunity for outsourcing providers, especially those who can tailor their regional advantages (such as in Latin America) to the requirements of the cloud. Execs at SIG also want partners who can help them understand the Next Big Thing after the cloud.

More automation: Also known as the “relentless elimination of non-value added activities.” Automating ongoing processes is a great way to deliver “sustainable” savings over time, versus one-time cost savings that can fade as business requirements and outsourcing requirements change.

Managing complexity: As customers use more different outsourcers for more different functions, the environment gets more complex and harder to manage. This is an area where an outsourcer with the best practices for managing “portfolios” of applications, services and relationships can deliver the most value to customers.

Close interaction with the business: This also comes under the heading of “alignment.” It means really understanding the most strategic, long-term needs of the entire business, rather than the short-term, tactical needs of individual departments. Achieving this alignment requires both the outside partner and the internal purchaser to have the attention and respect of senior management.

Outcome-based contract: Rather than pay outsourcers per full-time equivalent (FTE) or per transaction (both of which incent the provider to do more work, even if it’s not useful) many customers hope to pay vendors based on their ability to deliver business results. This is still a hoped for, rather than a usual, state of affairs. It requires changes in both thinking and processes, which speaks to the next area of concern:

Organizational readiness: There was a lot of talk at SIG about the need for customers to change their own behavior to accept new and better practices from their outsourcers. This means not only developing ways to measure the benefits of innovation, but changing incentives so internal departments don’t act like “junkyard dogs” protecting their own turf and keeping out new, better processes from a partner.

What all these concerns have in common is they reflect the need to move beyond short-term cost savings (especially those where the savings fade over time or drives up costs elsewhere in the organization) to newer, fundamentally better processes that drive value over time. That’s what some leading customers say they want – now comes the hard work of implementation.

This article originally appeared on our sister publication Global Delivery Report 

“Laurus International is the first call center opened by the President of the Dominican Republic and it is an honor to welcome Dr. Leonel Fernandez, to our building today” commented Rudy Ganna, President and CEO of Laurus International, when the company inaugurated its state‐of‐the‐art call center facility in downtown Santo Domingo at the end of March. “We are eager to show our facilities, which features technology, security, productivity tools and employee amenities never before implemented in the call center industry. We also want to highlight our longstanding and deep commitment to expanding trade in the DR and creating careers for Dominicans that provide the highest level of comfort and care to our employees,” concluded Ganna.

The opening of its latest facility is part of a three year expansion plan in the DR to serve its rapidly growing demand for nearshore contact center and BPO services. Laurus International was founded in 2007 and currently employs 850 people in the Dominican Republic. Laurus provides customer care & technical support services for both “Inbound” and “Outbound” programs to Fortune 500 companies in US. Areas of specialization include sales, technical support, health care, financial services and customer care.