07.15.08
Posted in Best Practices, Negotiations at 1:34 pm by Gary M. Zeiss
One of the major sticking points in most outsourcing and services deals is risk allocation. If the supplier is presenting the paper, risk will generally allocated entirely to the customer. If the customer is presenting the paper, risk will be allocated entirely to the supplier. Then, after the business terms are agreed upon, long, drawn-out discussions surrounding warranties, indemnities and limitations of liability ensue. This occurs in nearly every deal - and those of us in the practice have our “canned” reasons why our position is proper and important.
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06.20.08
Posted in Best Practices, Outsourcing at 9:39 am by Gary M. Zeiss
Topping my list of favorite companies are Apple, Southwest and Toyota. Why? Because they unerringly meet my expectations. That is what I expect out of a company, whether they insource everything or outsource everything.
What makes these companies great? Top quality products, for sure, but there is something else beyond the quality of their products that comes into play. It’s a sense of fit-and-finish to their products, I think, that takes them to the next level.
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06.12.08
Posted in Best Practices at 9:01 am by Gary M. Zeiss
In recent years, it seems as if corporate decision making has become increasingly risk driven. Compliance requirements are seen as a key driver - because of some of the corporate excesses of the recent past, complex regulations like Sarbannes-Oxley have unquestionably increased the difficulty of addressing compliance issues.
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06.05.08
Posted in Best Practices, Healthcare, Negotiations at 1:48 am by Gary M. Zeiss
In a recent article published on Law.com, W. Carter Santos makes an argument against using Letters of Intent (LOI’s) to move projects forward when the negotiations of an outsourcing deal become protracted. His primary argument is that the customer looses substantial leverage by letting the vendor begin work prior to the signing of the deal.
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05.26.08
Posted in Best Practices, Governance, Information Technology at 2:09 pm by Gary M. Zeiss
In an article in today’s India Daily, (link) Hrithik Ratnagar suggests trouble for the Indian IT outsourcing segment. According to Mr. Ratnagar, this trouble is caused by the slowdown in the US economy, the weakness of the dollar and the strength of the rupee, the US political climate, and internal factors within the Indian IT outsourcing community.Â
No doubt, these are all significant factors in the market. However, I think that the Indian IT market may be selling a product that it’s US consumers are beginning look away from. Why? Several reasons.
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05.07.08
Posted in Best Practices, Governance, Information Technology at 9:00 am by Gary M. Zeiss
Yesterday, Ephriam Schwartz published an interesting article in InfoWorld (http://weblog.infoworld.com/realitycheck/archives/2008/05/outsourcing_bre.html). The article talks about the challenges faced when breaking up a large deal into component pieces.
Ultimately, the problem is one of management - the same affliction faced by many outsourcing deals. Whether it is “one throat to choke†or many “moles to whack,†the bane of most outsourcing deals - and the reason for their relative failure - is inconsistent and often poor management by the customer combined with opportunistic behavior on the part of the vendor. In my opinion, however, large “aircraft carrier†deals do not solve the management problem - high-quality management does.
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01.12.08
Posted in Best Practices, Governance, Outsourcing, Posts at 10:02 am by Gary M. Zeiss
Much of the monitoring of an outsourcing deal is based on specific metrics. There are good reasons for this approach — after all, metrics are “hard numbers†and are relatively easy to measure. No doubt, meeting metrics is also a very important part of any quality outsourcing deal. But are metrics everything? I don’t believe so, nor do I believe that a single-minded focus on metrics is the best way to manage an outsourcing deal.
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12.30.07
Posted in Best Practices, Governance, Negotiations, Outsourcing at 6:22 pm by Gary M. Zeiss
Here is my annual list of New Year’s Resolutions for those of us in the outsourcing industry.
For Outsourcing Customers
1) I will dedicate adequate resources to managing my outsourcing deal.
2) I will send out RFP’s only to vendors with a chance of earning the business.
3) I will set service levels that reflect my true business needs, not pie-in-the sky service levels that cannot ever be met.
4) I will avoid the end-of-year search for pricing concessions to cover up my own bad budgeting.
5) I will listen to my outsourcing vendors for ways that I can improve my business and its interface with my outsourcing vendors.
6) I will pay regular attention to my outsourcing deals and proactively work with my vendor to solve problems.
7) I’ll refrain from blaming the vendor for things that are my company’s fault, but I will be honest with my vendor when it is their fault.
… And for Outsourcing Suppliers
1) I will make quality customer service my highest priority.
2) I will only offer pricing that is fair - and will not sell outsourcing services as loss-leaders with the expectation of “making it up later.â€
3) I will accept responsibility for my actions when performing the services.
4) I will resist the urge to overdiscount.
5) I will listen to my customers for ways by which I can improve my services.
6) I will manage my outsourcing deals to optimize customer service, not short-term revenue.
7) I will take real measures to reduce turnover and keep my workforce happy and interested in the work.
… And for Outsourcing Advisors
1) I will reduce the complexity of deal structure.
2) I won’t “ride†deals to maximize my profitability (at the expense of my client).
3) I will actually watch expenses and costs.
4) I will “think outside of the box†to help my clients develop flexible deals that will bend without breaking.
5) I will reign in runaway projects an keep my staff under reasonable control.
6) I won’t make hyperbolic, self-serving public statements about future trends.
7) I will provide my customers with deal summaries and other information that will help them manage their deals.
And for all of us…
Let’s drop the hype and focus on real business and real deals! 2008 will be as good as we make it!
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12.23.07
Posted in Best Practices, Outsourcing, Posts at 8:21 pm by Gary M. Zeiss
In one of my favorite recent articles, Victor Gomez of the Dallas Morning News discussed the troubles faced by the big three Dallas-based outsourcing vendors, EDS, ACS and Perot. All are feeling the heat from Indian-based vendors, and are blaming the cost differential for their problems.
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12.17.07
Posted in Best Practices, Outsourcing at 7:47 pm by Gary M. Zeiss
In an interesting article appearing on cNet.com on December 13, Steve Tobak asks the question, “Would you pay more for better service?†In the article, Mr. Tobak implies that most Americans wouldn’t pay extra for domestically-delivered service (assumed to be superior) than they would for off-shored service (assumed to be inferior).
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12.08.07
Posted in Best Practices, Governance, Outsourcing at 11:45 am by Gary M. Zeiss
The life cycle of outsourcing as a trend is following the same pattern as recent business fads. Certainly, the U.S. domestic deal flow, which has been weak at best, is showing its age. I expect that European outsourcing, which was the major hot growth area in 2007 - will face a similar fate in 2008 (late adoption does not necessarily result in late abandonment). This doesn’t bode well for those of us providing services in this industry, although it may bode well for the global economy in the long haul.
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10.30.07
Posted in Best Practices, Legal Process Outsourcing at 8:00 am by Gary M. Zeiss
In recent years, legal fees of major law firms have grown dramatically, both on a per-attorney and per-matter basis. Individual attorney fees can be as high as $300/hour for a first year attorney. For complex mergers and acquisitions, litigations and patent prosecutions, fees can easily reach into seven figures. This growth has historically gone unchecked and has been begrudgingly accepted by institutional clients. But things are beginning to change – and, like in many industries, outsourcing is playing a key role.
Outsourcing of legal services is not a new concept. It is, however, just beginning its exponential growth. Fed in part by the undisciplined increase in firm fees, in part by industries growing comfort with outsourcing and in part because of improving skills and capabilities in the marketplace, high growth in this market is a given. Full exploitation of these capabilities, however, has been delayed by several factors, including in-house counsel reluctance and perverse incentives for law firms. As processes and methodologies improve, in-house reluctance will ultimately decrease and in-house counsel will, for economic reasons, lead the charge to offshore services.
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09.18.07
Posted in Best Practices, Governance, Information Technology, Outsourcing at 2:58 pm by Gary M. Zeiss
A September 17, 2007, article in CIO magazine entitled “How to Measure Real Outsourcing Success (Hint: It’s Not the SLAs)†pointed out some interesting statistics about outsourcing and outsourcing happiness. Starting with the premise that SLA statistics are not a measure of happiness, the article described a process built by Dr. Paul Roehig at Forrester Research, to better measure outsourcing happiness.
Let me start by saying that I honestly believe that there are portions of a relationship that defy measurement. This is true in a marriage, in a friendship, in an employer-employee situation and in an outsourcing. But these things are often the “mortar†that hold the relationships together – they are neither discreet nor clearly measurable. Certainly, I can look at a building and count the number of bricks used to build it with efficient precision. However, determining the amount of mortar that is holding those bricks together is a little more difficult.
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08.28.07
Posted in Best Practices, Governance, Information Technology, Outsourcing, Posts at 8:09 am by Gary M. Zeiss
There was an interesting short article in Computer World on Monday, August 27 (link here) that described a trend in which outsourcing customers are bringing disaster recovery back in-house. Having witnessed this debate on an ongoing basis several times, I read this article with a combination of cynicism and intrigue.
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08.20.07
Posted in Best Practices, Outsourcing, Posts at 7:08 pm by Gary M. Zeiss
Outsourcing has had a difficult year in North America. There are many explanations, some point to quality concerns, some to governance concerns, and some to a reduction in value caused by the combination of labor shortages and currency fluctuations. All of these represent a change in the risk-reward analysis that many are seeing with regard to outsourcing. The bad-news stories in the press continue to pump up the “risk side†of the outsourcing equation – particularly to Asia – while the currency fluctuations and tightening labor markets reduce the “reward side†of the same equation. The “plus side†of outsourcing is notably silent – there are simply no “good news†stories in either the press or the paid media.
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