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I S S N 1 9 8 5 - 1 0 0 6
Cloud
Computing 101
Why external
providers are
often better
Achieving
business success
through process
excellence
How to
manage
offshore Is Cloud
Sourcing
relationships
a Fair Day
Event?
Matrade-outAD.indd 20 5/27/09 11:01:05 PM
38
10
22
18
36
CONTENTS
6 PIKOM fetes industry leaders and
organisations
28
Offshoring relationship
management
36
Financial basics of Outsourcing
transaction
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PREMIE
06
5-10
198
ISSN
09
#15, 20
ISSUE
Cloudputing 101
Com
extern al
Whyid ers are
provn be tter
ofte
Achie ving ccess
busine ss suocess
h pr
d
Is Clrocuing
throug e
excellenc
to
Souair Day
Howag
man oree
offsh nships
a F nt?
relatio
Eve
three
hree more locations develop
into MsCC Malaysia cybercentres
THrEE NEW locations in the There are four cybercentres
Datacom Klang Valley will be developed
into MSC Malaysia cybercen-
in the Klang Valley currently,
which are Kuala Lumpur City
opens second tres to provide more accessibil-
ity to tech companies wanting
Centre, Cyberjaya, KL Sentral
and Mid Valley City. There
Malaysian to be part of the MSC Malaysia
initiative.
are six cybercities in the states
of Kedah, Penang, Malacca,
office The three new cybercentres
are the Persoft Tower in Petal-
Perak, Johor and Pahang.
Datuk Badlisham Ghazali,
poration (MDeC), announced
this at the 21st MSC Malaysia
Kiwi iT company Datacom ing Jaya, GTower and Bangsar chief executive officer of the Implementation Council
has officially launched its South City in Kuala Lumpur. Multimedia Development Cor- Meeting (ICM) on Nov 9.
second Malaysian office
servicing the local contact
centre market.
New Zealand Prime
Minister John Key was on
fetes
hand for the opening of
the new facility in Bandar
Utama, Kuala Lumpur.
“Our growth in Malaysia
is fuelled by the confidence
industry leaders
our clients have in us to
deploy quality solutions,
enabled by talented people
across the region that are
passionate about innovation
and organisations
and creating value,” said
Kirsty Hunter, managing
director for Datacom
Connect, specialist in
contact centre services
across Asia Pacific.
Datacom was founded PIKOM, The National ICT Association of Year Award.
in Christchurch in the mid Malaysia, honoured organisations and ICT The awards were presented by the Minister of
1960’s and now spans leaders at the PIKOM ICT Leaderships Awards Science, Technology and Innovation (MOSTI),
locations in Australia, New (PILA) 2009. YB. Datuk Seri Dr Maximus Johnity Ongkili
Zealand, Malaysia and the MOL Access Portal President and CEO and Deputy Minister, YB. Tuan Haji Fadhillah
Philippines. “Our recent Ganesh Kumar Bangah and Sime Darby at the PIKOM Annual Dinner 2009 in Petaling
growth, increasingly fuelled Group CIO Tan Kah Chai were awarded with Jaya on Oct 30.
by an expansion into the the Technoprenuer and CIO Excellence award PIKOM ICT Leadership Awards event
Malaysia domestic ICT respectively. honours and gives due recognition to out-
market, has lead to the Hewlett-Packard (M) and MOL Access Portal standing leaders in the ICT industry and
investment in our new were both announced as joint-recipients of the user community. Introduced in 2008, the
facility. This investment PIKOM Member Excellence Award. awards are presented to individuals and
speaks to our confidence Lembaga Hasil Dalam Negeri (LHDN) firms that demonstrate ICT best practices in
in Malaysia as Datacom’s Malaysia received the PIKOM ICT Organisation their industry, commending the commitment
core regional hub location,” Excellence Award while Yasmin Mahmood, and innovative business strategies required
said Datacom CEO Michael Managing Director of Microsoft Malaysia Sdn to advance in the local and global market-
Browne. Bhd received the PIKOM ICT Personality of the place.
Workers take
Green issues
seriously
Singapore employees are more likely to opt to polled 3,125 employees across IT, gov-
work for a company that is ethical and takes social ernment, manufacturing and retail
and environmental responsibilities seriously than a sectors.
rival that ignores them, according to a new study. More than half (53%) of Singapore work-
Nine out of 10 (91%) workers said they would ers polled also said that they would prefer to
think about a company’s reputation on ethical and take a pay cut or lesser role in a company that
green issue when considering a job offer, with two had a reputation of looking after staff, the
out of three workers (66%) saying this was “very environment and general community.
important”. Workers asked the same question in other
Eight out of 10 (80%) said they would only work countries returned similar results:
for companies that upheld their environmental 50% in Malaysia; 48% in Indonesia; 48% in
obligations. Hong Kong; and 44% in Thailand.
In deciding where to work, 39% said policies to ad- The findings are part of the Kelly Global
dress global warming were “very important” – more Workforce Index, which obtained the views of
than workers in the US or Europe. approximately 100,000 people in 34 countries cov-
The survey by a recruitment firm Kelly Services ering North America, Europe, and Asia Pacific.
Worldwide SaaS
revenue set to grow, Bad times
a boon for Dubai
says Gartner
Worldwide software as a service
(SaaS) revenue is forecast to reach US$7.5
Outsource Zone
billion in 2009, a 17.7% increase from
2008 revenue of US$6.4 billion, according
to Gartner, a research firm. The market
will show consistent growth through 2013
when worldwide SaaS revenue will total over
US$14 billion for the enterprise application
markets. Dubai Outsource Zone (DOZ) sourcing phenomena comes from,”
“The adoption of SaaS continues to grow , a member of Tecom Investments, he said.
and evolve within the enterprise application is experiencing “overwhelming” During the global downturn, compa-
markets,” says Sharon Mertz, Research growth in the outsourcing indus- nies have been more inclined to outsource
Director at Gartner. “The composition of try. their peripheral business needs, with cost
the worldwide SaaS landscape is evolving “The growth took us by surprise,” cutting and making efficiencies the main
as vendors continue to extend regionally, Esmail Al Naqi, executive director drivers.
increase penetration within existing accounts of Dubai Outsource Zone, told UAE “Companies find the best solution
and ‘greenfield’ opportunities, and offer newspaper Gulf News. can be found in DOZ, either through
more-vertical-specific solutions as part of “This year, the zone saw a reengineering their back office operations
their service portfolio or through partners.” 23% increase in the number of and consolidating it back in DOZ or
“Adoption of the on-demand deployment companies and is expecting many outsourcing it to a third party, operational
model has continued to grow as on-demand more by the end of the year. The in the zone or elsewhere in the UAE,” Al
vendors have extended their services total number is up to 105 compa- Naqi said.
through alliances, partner offerings, and nies. Today, we are running at 100%
more recently, by offering and promoting occupancy within the zone and we
user application development through are expecting new buildings to be
platform as a service (PaaS) capabilities,” delivered within a month.
Mertz says. “Although usage and adoption is “We have a solid pipeline for
still evolving, deployment of SaaS still varies these buildings. Overall, it has During the
between the enterprise application markets been a very positive year and
this is where the role of the out-
global downturn,
and within specific market segments
because of buyer demand and applicability companies
of the solution.” have been
The content, communications and
collaboration (CCC) market and the more inclined
customer relationship management (CRM) to outsource
market continue to have the largest amount
of SaaS revenue across market segments, their peripheral
with the CCC market generating US$2.6 business
billion in 2009, up from US$2.14 billion in
2008 and the CRM segment generating needs.
US$2.3 billion in 2009, up from US$1.9
billion in 2008.
Products and
services offered
by a business
are linked to
the critical
parameters of
value to the
customer.
By Aditya Bhalla & Sandeep of the business to the appropriate process that are viewed as critical by the customer
Banerjee improvement strategy. keep on changing as the market gains
maturity.
Process improvement cannot be di- context of business growth Given the dynamics of competition and
vorced from the context of the business. The Products and services offered by a business the evolution of the needs of the customer,
journey from Process Excellence (primary are linked to the critical parameters of organisations are continuously adapting
focus on achieving process throughput) to value to the customer. Critical parameters their internal priorities (refer image above).
Business Excellence (primary focus on excel- of values are those parameters or charac- One of the core skills that management
ling in business metrics such as profitability) teristics of a product or service for which the must focus on is the ability to understand
will require mapping the evolution stage customer is willing to pay. The parameters the current stage of the evolution of the
At the Onset of the Process During the Implementation of the At the end of Process Improvement
Improvement Imperative Process Improvement Imperative Imperative
a) Perform Gap Analysis a) Regular reviews a) Perform After Action Review (AAR)
• Base it on a process improvement • Regularly monitor implementation of • Check against the set benchmark
framework to benchmark company processes and other process assets • Identify areas of strength and
performance with industry practices • Escalate issues as per Escalation Matrix. weaknesses
• Decide what can be implemented within Maintain an issue register and an action • Identify next set of process areas
the year register that can further help the organisation
b) Define strategy and milestones • Keep relevant stakeholders involved capitalise on the gains
• Assess business context and critical to identify opportunities for optimising, b) Reward and Recognition
parameters to achieve remove redundancies • Appreciate contribution of all
• Perform risk assessment b) Capture lessons learnt stakeholders
• Estimate effort based on stated • Analyse audit results and look for practices c) Next Steps
assumptions that are not implemented. • Create the plan for the next year’s
• Derive the schedule based on availability • Identify inefficiencies in deployment process improvement imperative.
of resources, calculate the cost, • Identify new risks discovered
compare against budget, resolve
conflicts if any c) IFDL: Implement-First- Define-Later (Try
• Define measurable milestones. Example: the bottom-up approach – it works !)
Process pilot, process definition etc. • Prepare a draft process
• Do process pilots and evaluate results. Fine
c) Provide Resources tune definitions based on pilot results
• Assign a Project Manager, site • Roll-out full scale across the organisation
coordinators and resources for • Review process implementation
implementation of each focus area/ • Get into formal definition of processes
process area d) Be open to change, it’s a learning process
• Obtain commitments on Infrastructure, • A process defined now may change later
and acquire other hardware/software based on several factors such as business
tools as needed conditions, service level agreements,
• Create a Responsibility and authority customer satisfaction parameters et
matrix linked to deliverables e) Training and mentoring
• Obtain signoff from internal and external • Plan and track training activities and the
stakeholders impact on developing skills/competencies
d) Project Management Office • Create mechanisms for mentoring linked to
• Form a Project Management Office to staff competency development
review implementation f) Re-prioritise focus areas
• Re-prioritise focus areas as appropriate
based on periodic reviews.
Aditya Bhalla is Practice Manager with QAI Innovation Practice consulting clients
on product and process design. Sandeep Banerjee is Senior Consultant with QAI SPI
and Human Capital Management Practice consulting clients on implementation
of best practices based on CMMi, and PCMM frameworks. They can be contacted
at adityabhalla@yahoo.com and sandeepcrpark@hotmail.com respectively.
Honoring the best and brightest in ICT/BPO! Nominate your choice for e-Services Awards 2010.
Log on to http://www.e-servicesphils.com/ for more details.
Regional
For more information, contact: Operations
Partners: and Development
Group
e-Services Project Management Team
Center for International Trade Expositions and Missions (CITEM) Industry Partners:
Golden Shell Pavilion, Roxas Boulevard
cor. Sen. Gil J. Puyat Avenue, Pasay City, Philippines
Is Cloud Sourcing
a fair day event?
By Jerry E. Durant buyers to lower costs further. Their Scalability is much
sights are clearly set on flexible like a power strip,
What is cloud computing? The resourcing whereby they only pay there may be no
concept originated from the cloud for what they use and not what physical limits on
metaphor as used to describe the they don’t as often set by contracts. the number of
internet. Rather than driven by a Thus the concept of cloud sourcing plugs that you can
rigid design, the navigation and was born. attach but there
deployment of need is satisfied by are limits in terms
a community of service resources. buyers vantage point of its effectiveness
In this context it was conceived Buyers want to pay as little as possi- to deliver power.
that the same could hold true for ble for the services that they receive.
outsourcing. Even though there are other factors
Up to this point buying compa- that influence a sourcing decision,
nies have bought fixed commodities such as increasing bandwidth and
whether it be a number of seats in service delivery, cost remains as one
a call centre or a fixed price for the of the leading factors. Therefore
delivery of an application system. having flexible resourcing can
Unfortunately business condi- make cloud sourcing a desirable
tions often demanded change approach.
and these arrangements However there are
required augmentation several sig-
in order to deliver a nificant
suitable outcome.
On the other buying risks to be considered. These
hand, present include:
economic con- • Adaptive Abilities
ditions have • Quality Consistency
placed • Scalability and
added • Availability
stress Unlike the inter net where
o n resources and routes are driven
from the interest of the user, in an
outsource arrangement the deploy-
ment or redeployment of resources
is driven from within the sourcing
community. This means that bonded
relationships must exist in order to
offer cohesive adaptability.
One cannot simply connect a new
resource, especially from outside
of that organisation, and expect
the service delivery to be fluid in
nature. Often that presents different
attitudes about quality in terms
of the measure and the means of
delivery. There are limitations that
the cloud can be expanded by.
Scalability is much like a power
strip, there may be no physical limits
on the number of plugs that you
can attach but there are limits in
terms of its effectiveness to deliver
power. It would be hard to imagine
that a group of providers, say 25,
Plug and
could deliver the services without a
play … It
significant amount of coordination
is highly
risk being introduced.
possible that
In a similar sense a reduction
cloud sourcing has
in service has a profound effect on
the potential to become
cost of service. A provider who offers
a sourcing approach.
would much rather go out of business the need for base compensation in The good and the appropriate levels of consistent qual-
than to share control. For this reason order to retain the bench rather than bad … Having ity management to be sustained.
concern is raised as to whether cloud operate from a position of ‘possible’ flexible resourcing Equally the buyer community, when
sourcing can become a choice in the utilisation (as the cloud suggests in can make contemplating cost savings and
arsenal of source approaches. terms of flexible informal inclusion). cloud sourcing resource scalability, must recognise
The graphic box (on the previous Suppliers must also pay close atten- a desirable the potential for reaction latency
page) illustrates how cloud sourc- tion to resource reductions, which approach. and inconsistencies in delivery and
ing might occur should there be a may also be referred to as ‘cloud However there are quality. Furthermore both buyers
willingness of the outsource service thinning’. The principal of the law several significant and outsource suppliers need to be
providers to be cooperative and of diminishing returns exists. buying risks to be prepared to critically evaluate the
fearless. So what are some of the A service offered at a fixed considered. cloud in terms of secondary buyer vi-
considerations that suppliers have price is based on a certain level ability and delivery abilities. Global
to take into account? First and fore- of delivery. If reduced fixed costs outsourcing offers many challenges
most is the relationship, the trust remain, despite further a reduction and tradeoffs.
bond and the quality of the service in service, the result would reflect to The question is not whether “we
being provided collaboratively. As lowered profit margins. can” but whether it makes practical
the lead supplier it’s your reputation business and cultural sense to do so.
that is in the balance. the final analysis Every problem has solutions and
Excuses are no excuse in the eyes While it is highly possible that these might very well be problems
of the buyer. The measures of viability cloud sourcing has the potential that are worth taking the risk.
and capability as exercised over you to become a sourcing approach,
by the buyer now become a duty that it is unlikely that we will see this
you must exercise over your cloud as having immediate plausibility. Jerry Durant serves as Chairman
relationship. Of additional attention This is largely due to relationship Emeritus (founder) for The International
in the VRM‐VRM cloud relationship maturity issues, flexible scalability, Institute for Outsource Management,
is the expand bench deployment. and the need to conduct advanced a trade organisation dedicated to the
Benchwarmer organisations are capacity planning. assessment, development, and guidance
apt to demand some compensation Of particular concern is the of outsource service providers in the
for the relationship. Preparatory ability for the outsource service ITO, BPO, Call Centre and KPO domain
and training measures will prompt environment to be flexible and for areas.
OUTSOURCING
“PROVIDING
THE RIGHT STAGE
FOR OUTSOURCING
SERVICES PROVIDERS
AND SEEKERS”
CONTACT US:
MaLaYSIa
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Tel: +603-90564770
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URL: www.the-outsourcing.com
e-learning markets (the US and in 2007, declared that it will not pursue see this niche segment as a strong
UK), word has definitely spread patent infringement cases against competitor for offshore providers. The
through online communities. Users open source projects and schools. As a majority of such companies ValueNotes
in developing countries are now complementary strategy, for targeting interviewed remained hopeful, and
finding open source applications the Small and Medium Enterprises mentioned that the open source sec-
a viable solution to their many segment (which forms a significant tor may result in further business for
learning challenges. part of the open source community), them after all. Corporates/universi-
The recent economic turmoil large e-learning providers are turning ties looking at cost-effective learning
made open source an important and to hosted LMS solutions, which are solutions may turn to outsourcing the
viable option for many, as learning more cost effective and competitive. implementation/feature development/
budgets were among the first to be maintenance for their open source
slashed. As an example, the Moodle • Medium and small international systems to offshore providers.
website shows increased activity in players (and even some large com-
2009 amongst users in countries panies) are in fact expanding their The future looks bright for open
such as Brazil, Mexico and Portugal. services portfolios to include open source software in the e-learning
The reasons behind this rise can source related services. These include domain, with evangelist-like sup-
be better understood through a Users in companies like Kineo, Infinity Learning porters, both among the service
SWOT assessment of open source Solutions, Activica and many others. providers and buyer communities.
e-learning applications. developing Services include integrating features for With the range of technologies that
countries open source learning platforms, course are currently being employed, there
implications for content, consulting, implementation is no one particular method that
e-learning outsourcing are now and ongoing maintenance for the will address industry challenges.
companies finding technology. The integration and collabora-
Open source e-learning has carved a tive frameworks which are currently
niche for itself within the e-learning open • e-learning outsourcing companies evolving among providers, users
outsourcing industry. Service pro- source in popular offshoring destinations, and ultimately, technologies sug-
viders have varied views about its
implications on their businesses.
applications however, have a different take on open
source. It imposes a potential challenge
gest that it will always be a host of
solutions that each unique user will
These are somewhat dependant on a viable to their value proposition against be able to choose from to address his
the position of the company in the
industry value chain:
solution to onshore companies – cost savings.
Players in offshore locations are able
e-learning needs.
By Dr Wendell O. Jones organisation. A large outsourcing Best in class … specialise, focus, and gain repeated
provider can buy and fully utilise Because of the experience with management of
Critics of outsourcing usually rest large, powerful, and more efficient variety of clients tasks that may only come around
their arguments on the assumption equipment than clients who operate and circumstances once in the careers of many manag-
that internal units should be able to at smaller scale. A large-scale out- outsourcing ers in customer companies.
perform as well as the outsourcing sourcing provider has considerable providers Consequently, outsourcing man-
service provider, if only the internal advantage in negotiating price and encounter, service agers in supplier companies are
unit applied good management service with providers of equipment providers have a often more skilled and have more
practices and worked smarter. and software. depth and range rounded experiences, which leads
Sometimes this may be true, but in Large-scale outsourcing pro- of experience that to the second advantage.
most instances it is not. viders can maintain a bench of individual clients
Outsourcing providers usually technical experts with greater range can’t match. experience advantage
hold an advantage in a number and depth than any of their clients Because of the variety of clients and
of ways. because the outsourcing provider circumstances outsourcing providers
can utilise the expertise efficiently encounter, service providers have
scale advantage and effectively when spread over a depth and range of experience
Multiple clients allow an out- multiple clients on a flexible, as that individual clients can’t match.
sourcing provider to operate at a needed basis. Outsourcing providers can go
scale unattainable by any single Large-scale outsourcers can through multiple restructuring and
specialisation advantage
The ability to specialise in skills
also extends to experience with
new technologies. Internal people
may participate in a conversion to
a new operating system or a or ar-
chitecture occasionally, but through
engagements with multiple clients,
outsourcing provider personnel can
have this experience numerous
times and gain a real advantage in
knowledge, speed, and efficiency.
Embracing
Globalisation
This is the first in a series of
excerpts from the newly published
book by regular columnist Atul
Vashistha, “Globalisation Wisdom:
The Seven Secrets of Successful
Globalisers”. Here he shares
with us his Secret #1: Embrace
Globalisation
One underlying fact success-
ful globalisers understand is that
services globalisation has come a
long way from offshore outsourcing
and continues to evolve every day.
As services globalisation evolves,
new opportunities arise. The reality,
as Applied Materials GVP and CIO
Ron Kifer sees it, is that a company
can embrace, leverage and be a
part of that globalisation or it can
become its victim.
“It’s greatly important that
global organisations understand
that we’re moving to a globalised
economy and understand that
they have to have the flexibility
to be able to do the work wherever
the work is more cost-effectively
done and wherever the work is
high-touch to the customer. That’s
why we’re pushing globalisation
as a key strategic initiative in our
organisation because we want to be
on the leading edge of that,” Kifer
explains.
That concept of flexibility – of
being open to new opportunities
– leads into the first secret of success-
ful globalisers: Embrace globalisa-
tion. Successful globalisers welcome
services globalisation into their
organisations with open arms; they
allow themselves to be constantly
learning, constantly open to the
new opportunities – and challenges come, organisations must be always • Mandate the globalisation of pro-
– that the evolution of services mindful that they are embracing
“Mandating cesses that can be performed better
globalisation presents. Embracing globalisation for all that it may
the elsewhere.
globalisation means looking at the offer. globalisation • Keep an eye on the future.
big picture; considering every corner of processes
of the world as a potential sourcing model for embracing that cannot When the offshore outsourcing
destination and thinking about the globalisation be done trend first caught hold of US busi-
unique advantages and opportuni- The basic model for embracing glo- elsewhere is nesses, most firms saw it as an oppor-
ties that each location offers. balisation has four components: an important tunity to reduce costs through labour
Embracing globalisation is also • Embrace globalisation across the part of arbitrage. But as the movement has
an important stepping-stone in business. stripping an evolved – as offshore outsourcing
the development of a services glo- • Ask whether your processes should organisation has become services globalisation
balisation strategy. Whatever may be performed better elsewhere. bare.” – companies have looked past cost
considerations.
In fact, flexibility is even more Companies must
important than cost in services glo- be constantly vigilant
balisation. “If cost was your primary
consideration, I think that you’re and always prepared to
going to fall short of meeting the real scrap the old way of doing By Atul
objectives,” Kifer says.
“The real objective of a sound
business to take advantage Vashistha
globalisation strategy is to have a of new opportunities.
flexible workforce and global model
and to realise that the markets,
customers and competitive environ-
ment is going to change, which will
require a company to maintain
competitiveness to be able to do work
in a different model in a different
place over time,” he adds. And that’s
why successful globalisers embrace
it across the business.
Bill Gates, Co-Founder of Micro-
soft, once said, “If we are not realistic
about what we’re good at, then there
is a chance of going backwards in the
face of further competition.”
In asking why each process can-
not be done elsewhere, an organisa-
tion must be realistic about which
processes are:
a) core competencies
b) performed most efficiently in-
house.
something more in offshore employ- US and Western Europe to encom- Think about it Embracing globalisation is about
ees as well: top engineering talent, pass India, the Philippines, China, … Embracing seeing the big picture. It’s about
attention to detail and quality, Ireland, Poland, Chile, Brazil, Rus- globalisation is looking beyond a single destination
sophisticated mid-level and senior- sia, South Africa, and more. These about seeing the or a particular set of processes. It’s
level management, and even a level visionary leaders understood, even big picture. It’s about an attitude change; about
of brand identity and loyalty that in the early days of globalisation, about looking bringing the principles of services
rivals that of their domestic staff. that global sourcing would become beyond a single globalisation into the business and
The most successful globalisers a key competitive advantage. They destination or a embracing them in every decision
are companies who have visionary saw that global sourcing could not particular set of that’s made.
leaders at their helms. Steve Band- only allow them to reduce their costs, processes.
rowczak, former Lenovo CIO, says but it could also allow them to grow
that trying to succeed in globalisa- more quickly, to cut time to market, Atul Vashistha is Chairman of Neo
tion without visionary leaders is like and even to improve efficiency and Advisory (formerly neoIT), a leading
trying to bake a delicious cake with raise quality levels. management consultancy since 1999,
stale ingredients. “I don’t care how Embracing globalisation is the focused on independent, objective and
you mix it,” he explains, “you’re go- first secret of successful globalisers actionable advice to enterprises that
ing to come out with a bad cake.” not because it is necessarily the most seek to transform their organisations
Visionary leaders – the ones at important, but because it lays the by capitalising on services globalisation.
the helm of globalisation since the foundation for the six secrets that fol- His latest venture is BestOutsourcing-
beginning of globalisation – saw low. Indeed, we’ll see the principles Jobs.com, an online job portal focused
the big picture as it emerged: how that underlie this first secret pop up on outsourcing careers. He can be
the playing field expanded from the throughout the next chapters. reached at atul@vashistha.com.
outsourcing
Malaysia
O
utsourcing Malaysia (OM) is an initiative • Access to OM’s Thought Leadership content
of the outsourcing industry and a chapter via Member’s Login on its website.
of PIKOM – the National ICT Association.
The prime objective of this organisation is to Business Exposure
enhance global visibility of Malaysian service • Providing members with tremendous business
provider capabilities to the global buyers. OM exposure and visibility through the complimentary
focuses on enabling both buyers and providers of listing via OM website and overseas campaigns;
services to work together on addressing service • OM as the direct contact point for global
needs, within the aegis of global best-practices buyers.
and competencies. • Affiliations with global outsourcing focus
Officiated by the Prime Minister in 2006, publication such as the Black Book of Outsourcing
OM aims to represent 80% of all Malaysian Global Vendor Directory, Forbes etc.
outsourcing providers by 2012. Highlights of the
benefits our members are enjoying are: Priority, Subsidies & Discounts
OM Members are given priority in OM-organised
Industry Representation events in terms of reservations, subsidies and
OM represents the local outsourcing industry discounts. Members are provided subsidies
to the Govt and private sector both locally and on Overseas Campaigns and other Capacity
overseas. OM is backed by the support of its two Development Programmes. Discounts and
institutional partners, i.e. MDeC and MDV, and complimentary priorities are allocated for
consulted by a large number of organisations participations of seminars, conferences, cocktails,
such as MDeC, MATRADE, PSDC, Malaysian industry talks, surveys, and media promotions.
Central Bank, etc.
Capacity Development
Trade Promotions Programmes
• Marketing the capabilities of Malaysian OM is responsible in introducing the International
industry to local and global buyers through Association of Outsourcing Professionals (IAOP)
various trade events, while generating business Certified Outsourcing Professionals (COP) and
leads for members. Master Class programmes; and working alongside
• Providing business-networking opportunities with MDeC on their K-Workers Development Institute
for members through networking sessions, (KDI) programmes designed to develop the human
inbound and outbound trade missions and resources of the industry.
industry meets.
Global Membership and
Industry Information Affiliation
• Providing forum for members to debate Global Membership
important industry issues and promoting • Sourcing Interest Group (SIG)
conducive business environment • IAOP through partnership with MDeC.
through appropriate government
policies for the industry. Global Affiliations
• Regular Thought Leadership Through PIKOM’s partnership and membership:
brainstorming sessions. • ASOCIO • NASSCOM • WITSA
Contact: OM Secretariat
1106 Block B, Phileo Damansara 2
No 15 Jalan 16/11,
46350 Petaling Jaya
Selangor, Malaysia.
Tel: +603 7955 2922 F: +603 7955 2933
e-mail: info@outsourcingmalaysia.org.my
Outsourcing | study
Offshoring relationship
management what do we mean by culture?
By Danny Ertel and Question: To what extent to do these issues pose challenges Companies nearly always encounter
Joseph Bubman in your offshoring relationship? different organisational cultures
when entering into strategic rela-
Complex outsourcing relationships Culture tionships with external partners.
are always difficult to manage, After all, companies have different
but the unique characteristics Geographic distance strategies, structures, risk positions,
of offshore deals complicate the capabilities, and norms, and when
challenge. Some early concerns Language barriers the deal is more than a simple buy-
about offshoring, such as political sell transaction, those differences
uncertainty and tax issues, appear Recruiting and retention
(at service provider) impact how they work together.
to have become more manageable Offshore relationships, though,
with experience. Infrastructure present unique challenges because
Others remain, however, with of perceived cultural differences
one rising above the rest, accord- Time differences attributed mainly to the country
ing to hundreds of participants in or region where each company is
the Vantage Partners Offshoring Political uncertainty located. And this means that the very
Relationship Management Study: approach partners take to discussing
culture (see Figure 1, right). Tax issues different structures, making strategic
And the way customers and pro- decisions, or reconciling different risk
1 2 3 4 5
viders manage culture has a direct positions can be quite different. In
impact on the value they achieve n=184 Average rating
1 = No challenges 5 = Significant challenges this study, we examine the impact of
in their deal. perceived cultural differences across
13 key dimensions:
• Individuals vs. groups (emphasis
on individuals vs. groups)
• Status and hierarchy (egalitarian
vs. hierarchical)
• Risk (risk-averse vs. risk-taking)
• Directness of communication
(indirect vs. direct)
• Relationships vs. tasks (emphasis
on relationships vs. tasks)
• Time frame (short-term vs. long-
term orientation)
• Multi-tasking (doing one thing at
a time vs. multiple things)
• Decision-making (consensual vs.
authoritative)
• Formality (informal vs. formal)
• Agreements (reliance on implicit
agreements vs. emphasis on con- Nearly everything you do
tractual deals) in an outsourcing deal is
• Ambiguity (tolerance for ambiguity geared towards achieving
vs. need for certainty) maximum value from the
• Dealing with conflict (avoid conflict contract. That’s why you
vs. engage directly) attend to the relationship,
• Making commitments (agree even and that’s why you should
when not sure vs. reluctance to agree pay attention to culture.
unless certain can deliver)
Decision-making
Another explanation is that cus- Individuals vs. groups
tomers see themselves differently
Formality
from how providers see them. For
instance: Relationships vs. tasks
• Multi-tasking: 71% of customers Risk
say they emphasize multi-tasking, Dealing with conflict
while only 45% of providers describe
Time frame
their customers that way.
• Dealing with conflict: 47% of cus- Agreements
tomers say they possess a tendency 100% 75% 50% 25% 0% 0% 25% 50% 75% 100%
to confront and engage conflict; only Percentage of respondents Percentage of respondents
32% of providers say that about their
customer. n=154 � No difference � 1– point difference � 2+ point difference n=210
cessfully engaging in that activity Our study also shows that the � 0% � 11-20% � 31-40% � More than 50%
(e.g., efficient communication, ef- impact of cultural differences can � 1-10% � 21-30% � 41-50%
frequently absent. mechanisms, including joint skills � High savings � Lost savings
High staff morale Low staff morale
And in offshore deals, cultural training and health checks, can
� �
�
Quick response time to requests �
Missed deadlines
differences around communica- help the parties overcome cultural �
Innovation and thought leadership �
Missed innovation
tion, commitment management, challenges, leading to increased � Delivery of value-added projects on � Poor quality
time and on budget
and issue resolution shake those satisfaction with the relationship. �
Customer satisfaction
�
Scope overruns
Complaints from end users
• Among those respondents with
�
% respondents indicating that cultural differences have an impact on the following activities (rating a 3, 4, or 5 on 5-point scale)
80%
60%
Percentage of respondents
40%
20%
0%
Communicating Identifying, Managing Managing Creating Managing Establishing Generating Making
effectively raising, and scope performance buy-in with commitments an effective innovation joint decisions
resolving issues stakeholders governance
n=371 structure
Malaysia’s services market capabilities currently, and manners although Malaysia a thorough success.
amounts to an encouraging Us$3 in which they could be addressed. is already well- He said: “in my opinion, the lo-
billion against the global market of iDc said key fundamentals of the known as an cal industry must be strengthened
a staggering Us$770 billion, reveals business like scale, capability/skill attractive location through better market access pro-
a recent study by research firm sets and reliability remain basic due to its living grammes and also by creating bigger
iDc commissioned by Outsourcing requirements for local outsourcing cost, infrastructure companies within the industry such
Malaysia (OM) and MDec. players to look for further growth. and general as giants Wipro and infosys. Besides,
The key growth areas for Ma- OM chairman David Wong overall stability, the quality of talent pool must be
laysian entities remain Business said: “Malaysia is certainly among in many cases improved through short-term plans
Process Outsourcing (BPO), systems the most attractive locations for it has been let such as Train and Place Programmes.
integration (si) and iT consulting. outsourcing as attested by many down by the lack in the long run, certain iHls’ (insti-
The Government, Financial service high rankings it has obtained in of higher value- tute of Higher learning) curriculum
industry (Fsi) and Manufacturing numerous surveys, including of skills required could also be revised to cater for the
verticals remain the largest services course, the a
aT Kearney’s 3rd ranking for technical BPO and iTO sectors.”
opportunity verticals for the country, recently. itO and BpO in recent time, an array of cities
it said. “However, we still need to work engagements. across the asia Pacific have emerged
The latest report – entitled “stra- harder to achieve greater success and positioned themselves as attrac-
tegic Planning & Tactical road Maps as other countries, especially the tive offshoring locations synonymous
For Malaysian Organisations to emerging ones, are fast catching with global sourcing strategies and
Become leading Global Outsourc- up.” delivery centres. Front-runners to the
ing Providers” – discusses in detail Wong added that the country cause have traditionally been cities
the strengths and some key gaps needs to continue to put in more such as Bangalore, Dalian and Ma-
and shortcomings in Malaysia’s efforts towards making the industry nila, who have equipped themselves
everest:rPO
market on the
upswing
NotwithstaNdiNg the tough increase in deal signings this year
economic environment, the RPo compared to 2008, but decreased
market continues to grow at a hiring volume is resulting in more
healthy rate in terms of deal sign- selective, smaller-sized deals.
ings in the last few years. however, More than half of the deals are
the nature of deals and the hiring
volume has changed in 2009, ac-
inked by North american firms;
however, adoption is on the rise by Procurement
outsourcing
cording to Everest group, a global buyers in the United Kingdom and
consulting and research firm. while Continental Europe, particularly
the offshoring leverage within RPo germany and France.
is currently lower than overall hRo,
increasing cost pressures in the
current economic environment has
“RPo is witnessing a fair amount
of interest among buyers given
the focus and specialisation that
“RPO is
witnessing a
on the rise
led North american and UK buyers RPo suppliers bring to the table,” Spend on procurement
to start receiving the back-office RPo said gaurav gupta, Principal and
fair amount outsourcing (po) is expected
services from offshore location such Country head, Everest group.
of interest to increase by 25% next year,
as india. “while the hiring volumes are among the everest Research Institute
the study, “Recruitment Process down in the current economic buyers has found. The organisation
outsourcing (RPo) – Moving Beyond environment, the value proposi- given the forecasts that uptake of po
the Pioneer stage” reveals that while tion of RPo is still resonating with focus and will be led by the “mature”
india-headquartered suppliers such buyers that are looking for a cost- specialisation US market, while european
as infosys, wwipro, and Caliber Point effective and flexible option to that RPO businesses will also continue
have already entered this space in withstand the current turmoil and suppliers to increase spend on
the past two years, wwestern suppliers at the same time create an efficient bring to the outsourced purchasing.
such as Momentum and People- and effective talent acquisition pro- table,” Global market growth will
scout are also leveraging india for cess that can be scaled up quickly – Gaurav Gupta be helped by an increase
delivering RPo services. when business environment im- in the number of suppliers
the study also projects a marginal
t proves.” offering po services.
Renewing and extending the
scope of existing contracts is
Employer branding
vital to attract talent
In a competitive and borderless world, is changing significantly. of top quality applicants over a period of
organisations need every possible means “The workforce of today is more inter- time.
to attract and retain their talent. Even in nationally mobile, Generation Y (born It further outlines ways to communi-
a turbulent economic climate, employees, between 1978 and 1995) make up an cate the Employer Brand such as award
especially those who possess the right increasingly larger portion of the workforce, programmes, editorial content in targeted
technical and behavioural competencies, and there is a greater emphasis on highly publications, presentations at conferences
continue to be a scarce resource. skilled and knowledge workers. This brings and viral programmes.
To address the growing concern about to light the need for effective employer “Employer branding is an integrated
talent attraction and retention, Kelly Ser- branding to attract and retain top tal- approach involving several cross-function
vices, a workforce management services ent,” explained Melissa Norman, VP and areas of expertise including human
and human resources solutions provider, Country General Manager of Kelly Services resource, marketing, finance, customer
recently launched a white paper titled, (Malaysia) Sdn Bhd. service, and senior management.
’Building a Strong Employer Brand – at all The Kelly Services whitepaper explains To be most effective, employer branding
times for a sustainable organisation’. that employer branding is a viral-based must be believable and interactive,” added
“Organisations need to understand their perception management programme that Norman.
employees and what attracts people to work is intended to raise an organisation’s image “It’s about making your organisation a
for them. Several important trends have in the marketplace as a well-managed destination company and being the coolest
emerged in the workforce. Its composition business, thereby attracting a steady flow employer brand,” Norman said.
taxes
For most outsourcing services, soft-
ware or hardware arrangements will
incur some form of local taxes de-
pending on laws of the host country.
There are some countries that allow
Financial basics of
for reduced tax rates depending on
nature of services rendered, thus it
would be wise to consult the appro-
priate financial authorities for such
outsourcing transaction
Outsourcing is probably one of lives. However, this may not be incentives. There are customers that
the most complex IT decisions most the most economical arrangement demand that outsourcing vendor
CIO, CFO or Vendor Management for all involved parties. In recent absorb such applicable taxes. This is
makes. In most cases, any outsourc- times, there have been outsourcing probably not a fair arrangement and
ing deal would involve a long term arrangements signed with quarterly may lead to discontentment among
commitment to be financially viable. and bi-annual payment streams. the parties involved over a longer
It requires significant adjustment to Annual payment streams are also term. Such long term arrangements
ensure cultural alignment between practiced although these would are beneficial only if a win-win situ-
both parties, detailed analysis of the not be the norm. It is used mainly ation is adopted for all the parties
services expected by the customer by cash rich organisations that involved.
and service levels to be provided wish to bargain for lower prices or
by the outsourcing vendor. On top additional services in return. disputed fees
of that, the terms used are often From an outsourcing vendor’s While this is not a situation that any
lengthy and difficult to concep- perspective, such payment stream parties would like to experience, it
tualise, adding to the complexity will lead to further reduction in does happen especially when there
of the process. In this article, we will administrative cost and other sup- are changes to the fees structure or
explore some of the key financial port related cost. The main benefit mismatch of service expectation.
terms and positions often used in the is that it lifts the financial burden One of the most effective ways to
structuring of complex outsourcing by ensuring a positive cash flow resolve such situations while main-
deal contracts. movement. Naturally, the customer taining a positive relationship and
Financial terms are vital in any would expect some financial benefit an expected service provision would
outsourcing arrangement. The pri- in return such as lower price. be to establish a joint governance
mary intent of most organisations to forum with different level of escala-
outsource is cost savings. Similarly, late payment fees tion such as:
the objective of an outsourcing ven- Most of us would be reasonably • Level 1 – Team/Deal Manage-
dor is to ensure a profitable business familiar with this concept from late ment
agreement that is sustainable for payment of credit card bills. It’s a • Level 2 – Country Management
their operations and quality of generally acceptable concept but • Level 3 – Regional Management
service. Some of the key financial area of discussion would be the late
terms to be aware are:- fees incurred and notice period. It’s This allows the issues to be ad-
common for customer to request for dressed by the right decision makers
payment stream a decent rate normally pegged to and enables the project teams of both
The most prevalent in this part any official published rate by the parties to continue their existing
of the world is monthly payment local bank association or central working relationship. Some more
stream. This is probably due to banks, this differ from countries to complex arrangement would specify
the commercial exposure we are countries. the specific maximum amount of
accustomed to in our daily trading Furthermore, it is becoming more withholding dispute fees (such as
Holiday choices
for workplace
By Dr arLyne
rLyne
Diamond
Kre8tif! Digital
Content Conference
in December
Malaysia’s Multimedia Development Cor- “The idea of having the Kre8tif! Confer-
poration (MDeC) is organising the MSC ence originated from the desire to further
Malaysia Kre8tif! Digital Content Conference promote and develop the digital creative
to provide a platform for the exchange of content industry, while profiling Malaysia
insights and expertise on digital content as a strategic location to identify potential
and emerging media among the local and collaboration opportunities, recruit talent,
international creative communities. outsource and engage with co-production
The conference, the first of its kind in partners,” said MDeC vice president of
Malaysia, will be held in Kuala Lumpur the industry development division, Saifol saifol shamlan …
from Dec 7-9 with the theme “Infinite Minds, Shamlan. MDeC vice president
Unlimited Passion”, which highlights the The three-day event is expected to attract of the industry
vast opportunities that abound, resulting over 500 participants from Malaysia’s digital development
from the meeting of over 20 international creative content industry and discussions will division.
and local experts in the field coupled with focus on four key areas of digital arts, games,
raw talent. visual effects and emerging media, he said.
agents
gents reportedly told
– Elbert Hubbard (American philosopher)
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