Outsourcing is the delegation to a third party of the continuous management responsibility for the provision of a service under a contract that includes a service level agreement. On the other hand, define outsourcing as “allotting work to suppliers and distributors to provide needed services and materials and to perform those processes that the organization does not perform itself.” Or in Fund Raising Management (1992), Outsourcing is the fancy word that means letting someone outside the organization do the work and convinced that they can do better that in-house.
Outsourcing can also be used across the organization, covering both the information technology and business processes. It has two principles: the core processes inside the organization (service management, user support, enhancement and development, and maintenance), and delivery mechanisms (the industrialization, automation, mutualisation, and globalization)
Information Technology, on the other hand, means the technology-advanced equipments and system that is used to speed up the organization’s processes and production, such as computers and the internet.
History
In 1970, Information Technology showed its presence as punch cards and paper tapes, batch programs, and early 3GLs being used (such as Cobol and Fortran). And during those years, computers cost a lot more than people; systems were designed to maximize the use of hardware not staff.
Outsourcing that was focused on Facilities Management on this year were:
- Care and Maintenance of Hardware
- Efficiency – Lower cost
- Reliability – more system “up” time
- Cope with erratic capacity demands.
In 1980, IT Outsourcing changed its phase. This decade, VDU and online users made their presence, interactive programs plus older batch systems, and 3GLs, rise of 4 GLs and programming tools, and mini-computers and personal computers surrounding traditional business Information Technology department. In this decade, end users demanded more, applications developed faster three to five year, business payback period lowering to five years, and business demanded more new applications.
During this time the challenge for IT became harder – getting the control IT staff costs, how to devote more time to new application development to help the business, and maintaining the current, mission critical legacy systems.
In 1990 came the rise of the development of Information Technology. Before it was only batch systems being used, now Personal computers and Local Area network, client, and server started to make its presence.
The challenge became even harder for IT: how to control, support, and manage users; keeping up with faster changing business demands; maintaining skills fasts enough to cope with changing technology, and moving from archaic technologies without disrupting the business.
On the other hand, business for the 90s was that people costs continue to rise, new technology costs rising faster than the average wage, new application development times must be under two years – preferably less than 12 months, hardware systems ROI dropping to 18 months to 3 years, and complexity of different technology, plus cost of constant change enters the equation.
In 2000 onwards, IT Systems have become global and extended. Today, IT outsourcing faces with a lot of challenges and modernizations: Legacy systems, INTRAnets, EXTRAnets, INTERnet, packages, integration, mobile working, and always on and connected.
The evolution of IT Outsourcing can be summarized as follows: 1960s and 1970s it’s all about machine cost, 1980s about people cost and IT early effectiveness, 1990s about speed, flexibility, customer service, and 2000 – adaptability, risk sharing, global delivery, innovation, and growth.
Today, Outsourcing is no longer varied in the past because of how focus the business, the speed of response is much faster; control and flexibility are its highest, specialist skills, organizational changes and legacy system (non-net), and innovation.
Further on, the most critical part of outsourcing is its transition. The features are:
· Baselining – understanding the starting point;
· Mobilization – organizing the skills, processes and technology ready for transfer of the to-be solution
· Transfer execution – testing the solution and going live
· Knowledge transfer is central to the process.
The outsourcing service model is based on Industrialization, Consolidation, and Repeatability.
- The service model features include: Cohesive end-to-end approach to managing services, robust and proven delivery model underpinned by ITIL, single point of accountability for the whole service, collaborative working is a fundamental principle –with our clients, with our alliances/suppliers and within Capgemini.
Rightshore (Global Delivery Model)
The key drivers for offshore are lower cost, access to skills, and more volume. While the four elements to Rightshore Cost Reduction are: (1) Moving to lower cost and culturally compatible environments to bring reduced cost of inputs – such as labor and property; (2) moving to an outsourced environment brings efficiency gains – through economies of scale etc; (3) Global, center-based distributed delivery brings further economies of scale; (4) with some impact on average labor cost
Transformational Outsourcing
Transformational Outsourcing is defined to be the intelligent mixing of different skills and expertise that provides ongoing innovation and significant business change to the client through a strong outsourcing relationship.
Transformational Outsourcing is a bundled service to effect significant business change. Moreover, bundling our capabilities include: (a) Consulting; (b) Technology; (c) Outsourcing; and (d) Commercial Model.
Multisourcing
Multisourcing is changing the way suppliers work together. For example, in a Single Supplier it depicts of a single client with one Outsourcing partner. In Multiple Suppliers it depicts of one client with two Outsourcing partners working together. In Prime Contractor, it depicts of one client working on one Outsource Partner who also partnered with another outsourcing organization to cater to the need for the client one.
Delivery Channel Strategies
Branch based ‘business models’ include: Conventional sales and service, product (sales) focused, sector focused, franchised, retailer located, retailer operated, other ‘host’ located, shared (service) branching.
Further more, In-Store branching, special considerations are followed: retailer’s target market/shopper profile, footfall and frequency, shopper mindset, the site in the store and its cost, proximity to complementary services, and retailer relationships.
In building branches, capabilities of self-service and branches are considered, such as standards: plastic, cheque, passbook encashments, notes and coin dispensing, and exchange; ‘non-cash’ transactions in many forms, fully automated depositories, video conferencing/multimedia, smart card and phone interaction, the virtual bank account.
Video and voice conferencing, data overlay, point-to-point document image transmission, online self-service for the customer, among other concepts came through in the 1990s. Other concepts are as follows: screen based sales and marketing, growing PC based services, interactive digital television, mobile telephones, and other hardware and software.
In Call Center delivery, five principal models are proposed: Brach banking and call centers (as a defence, or seeking branch closures, or new complementary initiative; “Direct only’ banks; ‘non bank’ entrants… wanting a low cost way; post bank… historic mass market emphasis; overseas entrants… low cost/low commitment (including ‘reverse flow’ from ICIC in 20005). There is also growing customer resistance to IVR, the internet is dis-intermediating call centres, resistance grows towards outbound sales calls (90% of UK homes will have opted out by 2007), large units of staff and infrastructure redundant.
Further on, the following are the position where the phone offers access to four banking channels are: Call/contract centre banking, Online banking, TV banking, Self-service channel activation.
Key access issues
Internationally recognized guidelines from the UK ‘Centre for Accessible Environments’ now cover best practice approaches to the issues of:
- Access and location
- Location and layout of operating features
- Operating instructions
- Screen design
- Card swipe, insertion and withdrawal
- Outputs
- Security and privacy
Moreover, card product, which has been placed in funds ahead of spending without resort to a credit line. It may be an e-purse or magnetic strip card with/without a PIN. Examples include: wages card, travelers cheque card, money transfer or remittance card, teen or youth card, and gift card.
The Process Perspective
Why process is important
From Toyota view:
“We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.
In 1980s, the supply in different companies had outstripped demand. Japanese had the competitive advantage. And through cheaper computing power automation was seen as a way of cutting costs.
Further on, the word Automation floated first – it meant doing faster things, with less people, but not necessarily doing the right things. America’s biggest largest car manufacturer had to invest billion in technology for robots to beat Japan’s Toyota.
In 1990s, US industry was generally uncompetitive. Division of labour meant work was still organized along the principles first proposed by Adam Smith (The Wealth of Nations) over 200 years earlier; Hierarchical structures was characterised by their stability and their “scaleability”; and Information Technology systems although helpful but were not providing the anticipated benefits
Business Process Reengineering Definition
According to Hammer and Champy, Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.
Mean while, conventional view of an organization is coined with Engineering, Finance, Sales, Purchasing, Manufacturing, and Call Centre.
Value means adding work is any effort the customer is prepared to pay for. Muda is anything that adds cost but no value to the product or service in the eyes of the customer. On the other hand, quality is related to value. By definition, quality is measured of how well an organization delivers the consumer’s perception of value.
The original seven wastes (Muda) are: over production, inventory, scrap, repair, and rework, waiting, motion, transportation, and unnecessary processing.
More over, Lean thinking is understanding value as defined by the customer; focuses on delivering value to the customer faster by eliminating or minimizing waste; often misunderstood as bag of tools, not an integrated management philosophy; strategic planning and policy deployment are essential to give direction; standard work, learning and continuous improvement are the foundations; respect for the employees; major cultural change for older organizations; “ballet not Ice Hockey”.
3 Ms for Muda
Muda (waste) is any effort which does not contribute to the value of the product; Mura (variation) is eliminating variation to improve process capability, and to keep your promise to your customer; and Muri is avoiding stressing either man or machinery.
The value stream mapping will be an interesting challenge in the Information Technology office environment:
- There is much more variation in non-manufacturing processes;
- Processes are not clearly defined;
- Based largely on people “expediting”;
- We rarely have helpful work standards;
- We struggle to understand who our customers are and what they want;
- Management Reports sap what little resource we have;
- We have no definitions for Value or Waste.
The essential aspects, which sustain Change, are change in management thinking; change in organization structure; organizational Intelligence; and organizational learning and knowledge management.
Management attitudes may be the key.
We are going to win and the industrial west is going to lose: there’s nothing much you can do about it, because the reasons for your failure are within yourselves.
Your firms are built on the Taylor model; even worse, so are your heads.
For you, the essence of management is getting the ideas out of the heads of the bosses into the hands of labour. We are beyond the Taylor model : business, we know, is now so complex and difficult, the survival of firms so hazardous in an environment increasingly unpredictable, competitive and fraught with danger, that their continued existence depends on the day-to-day mobilisation of every ounce of intelligence.For us, the core of management is precisely this art of mobilising and pulling together the intellectual resources of all employees in the service of the firm. We know that the intelligence of a handful of technocrats, however brilliant and smart they may be, is no longer enough. Only by drawing on the combined brain power of all its employees can a firm face up to the turbulence and constraints of today’s environment.
Traditional Management vs Lean Thinking
Traditional Management
Lean Thinking
Functional focus
Customer, system, product and process focus
If it ain’t broke don’t fix it
Fix it so it doesn’t break; do not pass on defects (jidoka)
Specialized workers, technicians and leaders
Multi-skilled people; Intelligent and involved workforce
Good enough: don’t get out of bed for a DPMO <10,000
Never good enough, continuous improvement
Management directs
Leaders teach
The Knowledge Management
· Economic value of intangible assets in 1980 was “zero dollars”
· By 1997 this was estimated at 75% of market value
Trends in Information Technology
Business Application Software Developers Association
acknowledged as the world’s leading authority on business & accounting systems.
Application Software Industry changes
The number of software companies declining; difficult for start-ups to hit the road running – ERP model; few successful ERP start-ups (PeopleSoft); few 2nd generation successes (SAP R/3, Sage Line 50); many 2nd generation failures (Baan, SSA BPCS, JD Edwards); spectacular growth by some developers in late 90s; consolidation – Sage, Microsoft, Oracle; worst technology recession in 20 years.
Keeling’s Principles include Market leaders 10 years ago (and not market leaders today), no inspiration after founders leave, product architecture is critical to growth, market intolerance – no second chance, majority of packages in maintenance-mode, few systems ever meet user expectations.
Moreover, in Profitless Computing, Paul Strassman stressed that no relationship can be demonstrated between the amount a company spends on computer systems and its profitability. While Robert Solow said you can see computers everywhere – except in economic statistics.
The Business Case includes timely access to information, accurate and reliable information, improve productivity, reduce costs, improve cash flow, simplify IT infrastructure, risk associated with compliance and regulation, and eBusiness – the future of IT.
Modular Systems Approach
- Specialist functionality;
- Unconcerned about interface problems;
- Use external reporting tools;
- Inaccessible for drill-down / zoom;
- Poor workflow capability;
- Minimum impact on ‘status-quo”
Specialist applications
Specialist applications include: designed for vertical industry groups, expensive to make changes, inflexible design, traditional architecture, limited resources to fund development, poor access to information, and localized applications.
Best of Breed Approach
Best of breed approach includes designed to interface with other products, use modern ‘windows’ connectivity, use modern reporting tools, inbuilt flexibility, links to legacy/specialist developed systems, and minimum impact on ‘status quo’.
Enterprise-wide applications
- Local data-entry
- Real-time integration
- One version of the truth
- Advanced workflow and best-practices
- Access to information
- Best-of-breed sacrificed for usability
- Strategic not departmental decision
- One vendors supplies all
Application Service Provider – ASP
- Software as a Service
- Hosted applications
- System administration eliminated
- Intranet/wide area network connectivity
- Rented on a user / month basis
- Applications need to be redesigned to take full advantage of this model.
- Everyone has PC skills
- Web-browsers interface
- Move from centralized IT functions
- Local data entry
- Scalability – 300, 000 users
- Tailored for individual work-groups
- Intranet rather than internet
The reasons why to change and upgrade software is to have improved access to information, greater flexibility growth in business, commercial advantage, legislation/regulatory requirements, improve office efficiency, and reduce costs.
Selecting a Reseller
There are various type of Reseller: one a High Street Computer Store, Solus, Solus Software Reseller, Multi-Package Reseller, Value Added Reseller, and Implementation Partner.
Background to eBusiness
After 20 years only 5% use Electronic Data Interchange (EDI). EDI is complex and bespoke solution. EDI integration by middleware providers, costly to implement for SME systems, extremely difficult to agree message standards, and rest of the world use printed orders and invoices.
Data Warehousing
Data warehousing involves gathering large amounts of clinical and financial data and securing it in a usable format. The goal is to be able to access this data for broad analysis, operational efficiency and decision support. Currently, insurance companies have bypassed healthcare providers in data warehousing, since the concept is geared towards large corporations. Healthcare providers currently have the tools for creating a workable data warehouse, but they have yet to integrate everything. A functional system could be as much as five to ten years away (H., Mark 1998)).
On the other hand, there are top five Business Intelligence Trends. First, the predictive analytics are being embedded in many BI applications, creating clearer views of opportunities and trends. Second, dashboards and scoreboards are proliferating through the enterprise, offering interactive drill-down capabilities. Third, new integration technology is feeding real-time data into BI applications, enabling real-time decision-making. Fourth, BI front ends are working their way lower in organizations’ hierarchies, fueling changes in business processes. Fifth, staffing needs are shifting, as more staff with analytical, statistical, and business domain experience are required.
The Data Warehouse Challenge: Access to Relevant Data
A single business information store: Integrated, time variant, simplified corporate data, analyzed via interactive business applications, and managed through powerful administration tools.
For William Inmon, a Data Warehouse is “a subject-oriented, integrated, non volatile, time variant collection of data organized to support management needs.
21CN
21CN milestones include in 2004 where its Voice transformation trial, access fibre trial, converged network work, service creation framework work, experience development centre work began. In 2005, strategic vendors were announced, so was the broadband growth on MSAN/combo cards, first new service launches based on re-usable capabilities; broadband was available to 99.6%. In2006, migration begins; 17 new product launches/enhancements based on re-usable capabilities. New operations and service management capability in place.
Access Fibre Trial
Trials of Fibre in access network – to the cabinet and to the premises; designed to test the investment, operational, technology and business case; providing telephone and broadband via fibre to 1,500 homes/small businesses; trials in Suffolk, Milton Keynes and London.
21CN Common capabilities include applying the development approach from IT software industry to telecoms, creating series of reusable, common capabilities; increasing automation and accelerating time to market for new services; and contribute to cost reduction.
Credit:ivythesis.typepad.com
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