04.30.07
Posted in Best Practices, Outsourcing, Posts at 9:00 am by Gary M. Zeiss
Over the past few years, outsourced call centers have become a whipping boy for the trouble with outsourcing. We have all seen the cartoons or the YouTube videos and we have all had similar experiences… A poor customer negotiates a maze of teleprompts and menus, is placed on hold for an extended period and finally gets to speak to someone who barely speaks the language and seems to be reciting from a written script intended to frustrate the customer.
For many products, the call center is their only point-of-contact after the sale. Consumer electronics, car insurance, banking and other products and services rely heavily on their call centers to be their primary customer point-of-contact. But when this point of contact is a frustrating mess, the company’s relationship with its customer is damaged – sometimes irrevocably.
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04.27.07
Posted in Outsourcing, Posts at 11:06 am by Gary M. Zeiss
Recently, there has been a lot of press coverage over TPI’s analysis of the first quarter’s severe market drop-off in U.S. outsourcing. Many press agencies have picked up the story and, like Chicken Little, are claiming that the sky is falling. Other analysts are calling it, at worst, a temporary blip or a “market correction,†the result of the “maturity in the outsourcing market.†But what’s really going on?
Ann All, in her recent post, captured what may be the essence of the problem:
“Why are diet aids so popular? It’s simple. People want to be skinny without having to exercise or pay any attention to their diets… Many companies seem to have a similar outlook on outsourcing – viewing it as a nearly magical way to slim down those bottom lines. Problem is, as with the diet aids, outsourcing doesn’t always deliver the hoped-for results.†IT Business Edge, Does This Outsourcing Initiative Make Me Look Inefficient? (http://www.itbusinessedge.com/blogs/sts/?p=122)
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04.18.07
Posted in Negotiations, Outsourcing, Posts at 2:03 pm by Gary M. Zeiss
Some law firms claim to be “Champions of the Customer,†a phrase that I always thought was a bit peculiar in the context of outsourcing deals. Thinking about this, I looked up the word “champion†and found the following definition: “a militant advocate or defender.†Is that what one needs to start a good long-term relationship? I think not.
After all, an outsourcing deal is really about a relationship, not a single point in time. Single point-in-time deals, like used car transactions, really are “divide the pie†contests and merit aggressive tactics on both sides. They are the “Ali-Foreman†fights of the business world. But an outsourcing deal? Where customer and supplier interface on a day-to-day basis – for years on end? These warrant a different approach.
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04.16.07
Posted in Information Technology at 11:34 pm by Gary M. Zeiss
Software as a Service (SaaS) is a services delivery model being sponsored by many software vendors. While not generally referred to as “outsourcing,†SaaS has many of the same features, and requires many of the same contractual precautions of an IT outsourcing.
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Posted in Best Practices, Governance, Outsourcing at 11:00 pm by Gary M. Zeiss
A short entry in Baker & McKenzie’s March 2007 Outsourcing LegalBytes entitled “Governance: A Key to Offshoring Success” offers an interesting perspective on the importance of governance:
A comprehensive study by A.T. Kearney offers surprising insights into the reasons for successful offshoring. Results from offshoring varied widely among surveyed companies, with cost savings ranging from zero to 75%. Overall, performance tended to improve, but some individual metrics actually declined. According to the study, this surprising variation was not a reflection of differences among industries or particular functions. Instead, the study found that performance was more likely to improve with greater management attention. Companies that invest more in managing their offshore programs achieve significantly better performance. The best performers among the surveyed companies cited CEO commitment; a strong offshore management team with centralized, dedicated resources; and high quality, detailed implementation plans as key drivers for success. The best performers erred on the side of more management resources rather than less.
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04.14.07
Posted in Best Practices, Outsourcing at 8:36 pm by Gary M. Zeiss
According to a Deloitte survey cited in an article by Jeana Wong in Channel News Asia, outsourcing is not generating the savings promised. Surprising? No. Actually, to anyone in the business, it is pretty obvious.
Nor are the reasons surprising. In that article, Phua Jer Hong, regional practice leader of Strategy & Ops Advisory at Deloitte Consulting, says:
“Typically, for organisations that outsource, they might have variations in terms of their practices across different regions or perhaps different operating companies. These different practises would mean that they are not able to accept the standardised solution offered by a vendor in a wholesale manner. In other words, the majority of the organisations have yet to realise the cost savings that they are originally entailed or have identified in their business case. They are also putting in place a larger-than-expected retained organisation to manage outsourced vendors, as well as to manage the outsourcing deal itself.”
So, without cost savings, why outsource? Two basic reasons come quickly to mind: capabilities and growth.
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04.13.07
Posted in Best Practices, Outsourcing at 4:21 pm by Gary M. Zeiss
(the Obese Outsourcing Term Sheet, That Is)
Back when I was in high school, I knew a guy who was a great athlete – baseball, football and track letterman. He had all the pretty girls swooning over him (including the one that I was secretly in love with). He seemed unstoppable. I ran into him a couple of years ago at my thirtieth high school reunion. Instead of the svelte, strong and dashing young man I remember, I was looking at an extremely overweight, ponderous and clearly unhealthy man. In fact, I recently heard that he had a heart attack (fortunately he survived it) and was doing rather poorly.
This memory came to me recently as I was asked to draft a term sheet for an outsourcing deal. Back when I first started practicing law, a term sheet was a short (two or three pages), athletic document intended to get the nuts and bolts of the business deal memorialized. Sometimes referred to as a “Heads of Agreement,†particularly by my Commonwealth counterparts, the term sheet was a vehicle to make sure that everyone was on the same page when they started negotiating the deal. Unlike a letter of intent, however, it contained no binding provisions – it instead was the guiding light – the “ten commandments†– for the deal teams to follow.
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04.11.07
Posted in Best Practices, Outsourcing at 4:26 pm by Gary M. Zeiss
Much has been written about the failures of outsourcing deals to live up to their true potential. Poor communications, scope creep, and unrealistic promises and expectations top the list. Interestingly, these are all derivatives of poor deal governance – both by suppliers and customers.
Certainly, the governance issues among customers are well understood, even if they’re not well addressed. In many outsourcings, the business group who led the deal process and the business group left to run the deal are entirely different, ensuring no continuity between the deal-making process and the deal-running process. In these cases, suppliers are faced with an entirely different team – with different priorities and personalities – and, generally, with a poor understanding of the deal. Furthermore, governance teams often lack the political power to manage the deal, and are regularly bypassed in communications between internal business clients and the supplier.
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