Los Angeles, California
In this election, outsourcing is getting a lot of heat from the left as a force destructive to our economy. The right, on the other hand, seems to believe that outsourcing is generally good for the economy. The Indian press seems scared. Which is it?
In late October, the IQPC Legal Process Outsourcing conference is happening in Chicago. It’s a great conference for those interested in LPO matters.
The link can be found here.
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.
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.
This year’s TiECon East conference focused on the continued likely growth in outsourcing to India - seeking to dispel rumors of a bubble in the outsourcing market. While this is not surprising - TiECon is the conference of the Trans Indus Entrepreneur organization - and may, in fact, prove true - that assertion was not the news in this article.
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.
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.
Just moments after I wrote this morning’s post, my computer, a six-month old MacBook, froze.  After several attempts at restarting and some web research, I called AppleCare.  The agent, clearly domestic and probably an Apple employee, walked me through several, ultimately futile steps.  He then suggested that I take it to my local Apple Store and made an appointment for me for 2 hours later.Â
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.
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.
The Institute for Global Challenges and the Law at Boalt Hall in Berkeley is sponsoring a conference called:Â
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THE INTERNATIONAL OUTSOURCING OF THE LEGAL PROFESSIONÂ
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On Friday, April 25, 2008, in Berkeley, CaliforniaÂ
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Registration can be found here
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.
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!
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.
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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