Monthly Archives: March 2013

Dealing with multiple vendors in IT Outsourced environment

In an IT outsourced having multiple vendors is very common, though some large corporations have gone towards a single vendor to gain rate advantages there is always a case for existence of other vendors for quite a few reasons ranging from niche skill sets, bringing external or independent consulting where the vendor lacks experience, acquisitions and JVs, product implementation that needs consultants from the product seller etc., there are lot more reasons likewise which makes the IT outsourced environment a bit challenging.

Managing multiple vendors requires strong governance. the tendency to show one-upmanship is always a cause for concern and that can lead to anything from missed delivery to finance, legal and security issues. Frequent squabbles between the multiple vendors can cause deep disruption, missing out on deliveries, needless friction and demotivation just to name a few.

In some organizations having multiple vendors is seen as an advantage to induce competition, as long as it is healthy it is beneficial. However constant monitoring, providing support and being the neutral partner to ensure there are no conflicts of interests. Where both vendors are on the same initiative or project is becomes more important to stay focused on ensuring there are no issues. Now a days most contracts have some wording to imply coverage in this scenario, most details in the SOW or MSA.

There are good examples of organization where multiple vendors were seen as a drain and eventually saw reduction in the number dwindle to one or two. More vendors means more governance, control on finances, lack of consistency, multiple sites to administer, favouritism putting more managerial resources and it all plays into your IT budgets. Frequent transitions between vendors is also a hidden cost and loss of subject matter experience and introducing learning curve.

How rate tiers work. Flat rate vs. tiered rates

Today many consulting companies have multiple ways of paying their vendors. While a flat global rate is common, tiered rates based on skill sets, levels of experience, location-based, size of contracts etc. play a part in it.

Global rates work well for a large IT outsourcing engagement where companies pay a flat rates irrespective of where the resources are. They do agree to maintain a particular ratio of onsite and offshore to help drive the price advantage and monitor it closely to make sure no party is losing.

Smaller engagements call for tiered rates to benefit from getting the right resources matching the needs while bigger engagements where staff augmentation is the key abs it benefits to have a pool to choose from with some checks and balances on the quality of the resources.

Rates due fluctuate for a variety of reasons ranging from rising inflation on the other side of the globe, forex fluctuations, qualified and niche skill sets where the demand is more, location, experience levels etc. it is wise to lock down rates atleast for a year so as not to negotiate every time. Even though long-term contracts helps, it almost always provides for rate revisions every year.

I have had lots of inquiries on advantages of tiered vs. flat, and to be honest I always recommend using what is good in a given situation, Both have their own merits and demerits. Don’t get locked down in long-term contracts, allow for revisions, and negotiations. My personal preference is to have tiered rates – again just a few up to three is recommended, you don’t want more than three which leads to disputes as to where the resource could fall every time you are trying to hire.

Keep in mind rates differ widely depending on type of work. for example call center operators or KPO resources are paid much less than technology resources. Management resources or consulting one command a premium.

Negotiating is the key. Dont rush into signing contract wihtout thorough due diligence. Rates could swing due to various reasons. Read in between lines the contract to make sure there are no compromises for the rates to be lower.

Roping in a specialist consultant would be of immense help as well to get a second opinion if not first. Talking to other clients and making a reference check is a great idea.

Ultimately there is no cookie cutter rate recommendations, it is all based on specific scenarios.

Managing cultural sensitivity in outsourced environment

Todays IT sourcing is truly global crossing several boundaries.

Pay close attention to culture and adapt yourself quickly. With increased outsourcing percentages across several industries, it is pertinent to know about the culture on the other side. Bringing in experts to talk to teams and sensitize the broader segment of the team that interfaces regularly with offshore resources is a good idea. Almost all of the outsourcing companies more so the bigger India pure play firms have their own experts who routine put resources thru this grind. The higher your levels greater the emphasis and training on cultural sensitivities.

India based call centers for examples are makign thier resouces know more about baseball, basketball, hockey, football, rugby to know the teams and its more high-profile team members. They are encouraged to talk about them besides of course daily dose of weather which everyone loves to relate. Dos and don’ts are common practice and circulated widely. Special training is provided to those that are getting ready to fly into a client location.

There is no doubt both sides pay great attention and take pride in their culture and hence the need to ensure appropriate respect and attention is paid. If there are questions it is best addressed with those in the know. There is no dearth of resources to reach out to or tp into ever popular internet and Google it outright.

More often it is easy to adapt with some adjustment and accommodation. This is connected to the moral and motivation of team as well. There are lots of examples that I can share ranging from respecting the dressing sense, etiquette, eating habits, punctuality, efficiency, timeliness, discipline, language, festivals and holidays, behavior just to name a few.

Dont stay out, stay in and benefit – afterall you will learn something new in todays global environment.

Provisioning HW and SW for your offshore resources

This is a delicate issue and complicated one at that. With more and more core support moving out offshore there is always a need for vendor to ask for hardware and software from the clients abroad. However there are financial, legal and security issues involved. While the implementation of security protocols in India pure-play firms is very strict, you can install any software with an approval from clients. Some software provides for installs globally via master services agreement, whhile most of the software licenses do not extend beyond the shores of the country where it was legally purchased.

The challenges is with controlling the inventory as well, there are cases where the offshore vendors install hundreds of copies of software without the knowledge and implication on what this means, very few clients have good process in place to monitor SW and HW.

With HW it is even more delicate since the vendor would not support clients HW in some cases – mostly laptops. fixing routine problems, upgrades are a problem. In some cases, the clients end up asking the vendor to buy on their behalf and it ends up as “client funded, vendor owned” the ability to capitalize the purchases is lost in most cases leave alone benefit from pricing advantages if brought onsite.

Some clients treat their offshore centers as extension of their work place. however the vendor site not necessarily would fall under that category even with a MSA. (Master Services Agreement). Even the clients offices offshore will not be covered where the SW or HW is purchased in countries where the license agreements specifically call for using within the shores of the country where brought.

The fact that provisioning is needed for execution and support makes this a necessary evil. However putting together a good tracking mechanism will save clients from legal exposure, and also benefit from this measure than losing precious funds that can be put to use elsewhere. Also this cost is additional to overall outsourcing budget is important since this could end up being a significant amount.

Handling cultural sensitivities in IT outsourced environment

Pay close attention to culture and adapt yourself quickly. With increased outsourcing percentages across several industries, it is pertinent to know about the culture on the other side. Bringing in experts to talk to teams and sensitize the broader segment of the team that interfaces regularly with offshore resources is a good idea. Almost all of the outsourcing companies, more so the bigger India pure play firms have their own experts who routine put resources thru this grind. The higher your levels greater the emphasis and training on cultural sensitivities. This is part of training curriculam and performance appraisals.

India based call centers for examples have thrust forced watching of baseball, basketball, hockey, football, rugby to know the teams and its more high profile team members. They are encourage to talk about them besides ofcourse daily dose of weather which everyone loves to relate. Dos and don’ts are common practice and circulated widely. Special training is provided to those that are getting ready to fly into a client location.

There is no doubt both sides pay great attention and take pride in their culture and hence the need to ensure appropriate respect and attention is paid. If there are questions it is best addressed with those in the know. There is no dearth of resources to reach out to or using the ever popular internet to Google it outright.

More often it is easy to adapt with some adjustment and accommodation. This is connected to the moral and motivation of team as well. There are lots of examples that I can share ranging from respecting the dressing sense, etiquette, eating habits, punctuality, pronounciation, efficiency, timeliness, discipline, language, behavior just to name a few.

Embedding your resources offshore

This is one of the successful techniques in IT outsourcing and has several benefits. If you can afford the costs this is the fastest way to help develop some good SME skills on your offshore teams, building the camaraderie, sharing expectations, transitioning projects, handing off support, explaining design and development strategy, test methodology just to name a few.

It gets a bit expensive if you are sending few resources from US or Europe for example. For those visiting India, the IT outsourcing hub, Temporary accommodations are not readily available or convenient so you will ending putting your staff in 3 or 5 start hotels which can be much expensive then rooms back home racking up costs. Add to these costs Visa, and healthcare insurance and other incidental costs. Some of the enterprising staff have charged the cost of visiting Taj Mahal also into their office budgets – so keep an eye.

There are lots of clients that do this on a regular basis, often encouraging movement of people on both sides. It depends on how we use this technique. Take for example a large projects with a huge offshore component really merits a visit to transition requirements or design, and set upfront expectations, align teams and establish communications and reporting protocols.

The ability to develop those personal connections is another important benefit. The feedback that you get being physically there is not something you can read in an email or gauge from a series of phone calls or video calls. Inspite of all the collaboration tools, the ability to video conference etc. there is nothing that beats that personal touch and getting the feedback and assessing what you have at offshore – after all that is an extension of your work space isn’t it?

Getting the best out of consultants in IT Outsourced environment

This topic has been every on every employer’s mind in a IT outsourced environment, How do I get the best of the consultant pool? Span of control, better supervision over the pool, embedding employer representatives on the floor offshore, reporting weekly, monthly etc., fixing accountability and responsibility on deliverables with timelines, routine audits, and check points are some of the techniques.

Not all of these techniques work, what you put in place depends on nature of work and also the maturity of the consultant pool. The junior the pool, the more techniques need to be applied and less as the pool is mature and senior enough, Experience onsite as well helps understand the dynamics and expectations besides knowing the culture of the organization.

Having a good framework of checks and balances avoids surprises, removes inefficiencies to a good extent, assures predictability, and improves morale and motivation on both ends. The biggest frustration of employers that have consultants on their projects is the ability to control output a.k.a productivity. The dream of consultants being on par with their rank and file employees in terms of skillsets and efficiency is out of questions. In some cases a consultant is better than employer if these skills are niche and are needed temporarily. Having a toolbox of techniques to gain efficiencies in an outsourced environment is the key.

Remember consultant’s loyalty is always with the employer and not necessarily with the principal that employs him. Also note all of his personal evaluation is done by the employer based on their standards with little input at times on how the consultant is faring. The consultants are more interested in making sure they are toeing their employer’s line. Very few mature organizations have brought together both to reap the rewards.

Sharing best practices across the board, what is working and what is not in a particular setting is important so everyone with the organization gets benefit from a outsourced engagement and evolve a culture of benefiting from outsourced environment then seeing it as a burden.

Definition of Outsourcing

Outsourcing is the contracting out of an internal business process to a third party organization. The practice of contracting a business process out to a third party rather than staffing it internally is common in the modern economy. The term “outsourcing” became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another but not always.

The definition of outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring, which means relocating a business function to another country. Financial savings from lower international labor rates is a big motivation for outsourcing/offshoring.

The opposite of outsourcing is called insourcing, which entails bringing processes handled by third party firms in-house, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to another business without necessarily insourcing that business process

source : Wikipedia