Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Outsourcing (BPO) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.

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May 31, 2013

Achieving Strategic Fit - Competitive Strategies & Supply Chain Strategies - Part - 1

From purchase of raw material to delivery of final product to the customer, a supply chain has different stages and the demand uncertainty is different for each stages. It is very important to understand the demand at each stage of supply chain and choose the appropriate level of responsiveness or efficiency for that level.


What is "Strategic Fit"? - in a business scenario "strategic fit means aligning supply chain strategy with competitive strategy." Companies build a competitive strategy to target a set of customer segments and build strategies to satisfy needs and priorities of those customer segments. Companies also study what competitors are doing and what changes they can offer to have a competitive advantage, like winning customers by offering a lower price on the product or by providing large varieties of the product or by providing better services. Companies can achieve these strategies by ensuring that their supply chain capabilities are able to support these strategies.

Companies have to understand the need and priorities of targeted customer segments and the uncertainty of their demand.  There are many factors which influence the demand of customer like price, convenience of purchase, urgency of the product, size of the lot, delivery lead time, etc. The customers of one segment tend to have more or less the same demand pattern, so to satisfy the uncertainty of demand for the target segments the supply chain has to build the strategy and capabilities accordingly. The demand uncertainty of target segments is called "Implied Demand Uncertainty" which is different from "Demand Uncertainty" which reflects the overall uncertainty of demand for a product.

Now the question arises as to how to handle this implied demand uncertainty? For this, companies have to build the supply chain capabilities of responsiveness and efficiency. Being a strategic fit is all about building the supply chain strategies to face the customer demand and uncertainty or in other words a supply chain which is able to supply big quantities required, in the shortest lead time, covering large product portfolios and providing better services. Having these capabilities makes a responsive supply chain. Responsiveness towards customer demand for quantity and quality comes at a price. For example, to respond to a large product portfolio a company needs to increase the production and storage capacity which will increase the cost. The increase in cost will have an inverse effect on the efficiency of the supply chain. So a strategic decision to increase the responsiveness will have additional cost which will lower the efficiency. It's a trade-off between responsiveness and efficiency. Some companies being more responsive will have less efficient supply chain and if companies need an efficient supply chain then they have to lower the level of responsiveness. Strategically companies have to decide on the level of responsiveness they need to provide and try to bring the efficiency by enhancing the processes and technologies.

From purchase of raw material to delivery of final product to the customer, a supply chain has different stages and the demand uncertainty is different for each stages. It is very important to understand the demand at each stage of supply chain and choose the appropriate level of responsiveness or efficiency for that level. To make it clearer let's have an example of Dell computers which uses the direct order model where customers can configure computers and place orders online. Dell gives a choice to customers to make customized models for their requirement, and delivers them at their door steps. This increased the implied demand uncertainty for Dell which needs a responsive supply chain. To provide these services to the customer there will be additional costs involved for carrying huge inventory for all the parts which cannot be charged to the customers because Dell has to be competitive in the market to survive. As a solution to this increased cost Dell closely collaborates with suppliers, which allows Dell to operate with only a few hours of inventory for some parts and a few days of inventory for other common components. This way the supplier will have less demand uncertainty which can be handled through an efficient supply chain. Thus Dell absorbs most the uncertainty and provides responsiveness in supply chain and its supplier being efficient absorbs very little uncertainty. To achieve strategic fit companies need to bring consistency between implied demand uncertainty and supply chain responsiveness. For a high implied demand uncertainty we need a responsive supply chain and for a low implied demand uncertainty we need an efficient supply chain.

To be continued.....

May 30, 2013

Contracts Playbook - A Ready Reckoner for Negotiators!

It's essential that negotiators understand their organization's standard policy and procedure and at the same time appreciate the other negotiator's constraints.


Contract negotiation is one of the most risky, time consuming and complicated task a contracts team, legal team, paralegal, or a business unit is involved in. It is imperative for organizations to precisely know what they are willing to accept and at what point they should walk away. They need to speculate accurately how far their opponents are willing to go to get what they want*.  It's essential that negotiators understand their organization's standard policy and procedure and at the same time appreciate the other negotiator's constraints. A negotiation playbook will do all this and more!

What is a Contracts Negotiation Playbook?

A guide template containing an organizations standard and acceptable fall back contractual positions to help negotiate contracts effectively and efficiently.

  • Contains firm's standard position for agreed clauses/provisions as well as 2-3 fall back/alternate positions for each clause (Clause library)
  • Facilitates as a ready reckoner for fall back positions to be proposed to the other party during negotiations
  • Contains guidelines or scenarios for use of fall back positions

What for?

A contracts negotiation playbook can be created for any type of contracts; Master Services Agreements, Non-Disclosure Agreements, Software License Agreements, Professional or Consultancy Services Agreements, Commercial Leases and many more.

What does creation of a playbook involve?

  • Detailed review and analysis of existing contracts
  • Tracking deviations from standard positions which will highlight the extent of deviation an organisation has agreed to or can agree to (Deviation analysis)
  • Create fall back positions for each clause considering business, legal and finance perspectives
  • Finalize standard positions and fall back clauses in consultation with legal/finance/business units

Key Outcomes

  • Reduced Contract Closure Time
  • Risk Mitigation
  • Reducing the gap between business, finance and legal team by setting up an effective risk management process.
  • Guidelines for negotiation
  • Pre-approved fall back positions with scenarios for faster negotiation
  • Reduced need for "across the table" negotiation - playbook as a ready reckoner facilitates quick virtual negotiation

Value additions

An expert in creation of playbooks will add value to this service by providing -

  • Multiple acceptable fallback positions in response to counterparty pushback
  • Explanation for internal understanding of rationale behind each position
  • External arguments to be made to counterparty supporting positions as a guide to negotiator
  • Standard clause library for use in editing agreement according to guidelines
  • Defined escalation protocol within contracts team, legal team, or other departments (e.g. insurance, finance) and business units
  • Methods to enhance contracts database including categorizing the contracts by risk and revenue contribution
  • Visibility to legal department and stakeholders into the risks and liabilities of their contracts

"Let us never negotiate out of fear. But let us never fear to negotiate." - John F. Kennedy

* Melanie Lindner and Lisa LaMotta, The Negotiator's Playbook, Nov 21, 2008, available at http://www.forbes.com/2008/11/20/buffett-goldman-harvard-ent-manage-cx_ml_1120negotiatorsplaybook.html

May 15, 2013

Not able to realize the value of validated contracts data?

Having a validated contracts data is the first step for any large procurement organization to get the full visibility of the spend under management and understanding supply base.

Many organizations have taken steps to digitize contracts and upload them to contract management systems, or better still to set up the contracts online for P2P transactions.

However, the challenge facing many companies maintaining contracts in repositories or contract management systems is to ensure that all contact documents are complete and relevant; contract attributes are valid and up to date. Another problem is to reference the master agreements to sub agreements, SOW's etc. since they are multiyear, multi locational contracts, which many a time results in companies not being to realize the full benefits of early payment discounts or volume rebates / discounts, etc.

Another added problem is ensuring up to date supplier data, parent and child relationship, etc. which can help companies realize aggregation opportunities too.

Unfortunately,  a number of flaws creeps into the process of maintaining  contract data since the data itself is available with multiple users/systems and many a time available documents are uploaded without validation . It could also be a laborious process for buyers to validate once the documents /information has been entered over a period of time.

Having a validated contracts data is the first step for any large procurement organization to get the full visibility of the spend under management and understanding supply base. While it becomes very critical during contract renewal time  , it is also important for contract compliance. Needless to state that without validation of data ,  it's integrity is suspect.
Undertaking the cleansing  and validation of contracts data is not only a time consuming activity that requires  knowledge  of contracts and attention to detail , it will also involve contacting multiple stakeholders and suppliers which is a cumbersome activity for buyers..

However centralizing and outsourcing the contract management process to a managed service provider with a large pool of contract specialists would not only be cost effective and efficient  , it will also ensure contract compliance  on a real time basis.

May 13, 2013

Changing trends in today's procurement

Procurement now actively contributes in board room discussions and is drawing increased attention from senior management. It is being treated as a true business partner and becoming more centralized and coordinated.


Today's dramatically changing business environment highlights the strategic importance of procurement. Until recently, procurement was a necessary, but seldom celebrated, component. But now-a-days, procurement function is playing a pivotal role in the organization's success as supplies of critical commodities have tightened and prices have risen.

Procurement is now undergoing transformation as a function in itself. Age old, traditional and rudimentary concepts have shifted towards a more open, innovative and flexible focus. Expectations have also undergone a change. Companies are looking for procurement related services not just to fulfill their requirements at the lowest cost but also to enable them to manage risk, meet legislative requirements and tackle the challenges posed by globalization and scarcity of supplies. Simultaneously they are also working towards meeting the important day-to-day goals of finding and pre-qualifying suppliers, and ensuring data quality.

Procurement now actively contributes in board room discussions and is drawing increased attention from senior management. It is being treated as a true business partner and becoming more centralized and coordinated. The procurement function now gets involved early on in project related and strategic tasks. Procurement staff is becoming increasingly professional and advanced technology (tools and systems) is being used.

Adding value to the organization has become the priority area for procurement. It is not only all about the cost but about developing a strong commercial discipline, developing and maintaining strong and sustainable relationships with suppliers, internal and external customers, innovating, striving for continuous improvement, and firming up governance for long time success.

We as procurement persons are expected to do things that we didn't do before. Organizations expect the procurement function to think beyond cost cutting measures and start leveraging the talent that comes from procurement and expect them to think about the supplier market.  As an extension of that towards supplier relationship side, we are being looked upon for building stronger supplier relationships. It's everything about speed and innovation these days. Just to start with it is important to have contracts rather partnerships in place and focus on governance and look at how we can ask suppliers to invest on organizations behalf , drive down the costs, and bring the best buy.

Considering the current scenario it will be imperative to say that we require more capability to do out of the box thinking to help the business go after the strategy and be successful. The idea that suppliers can add much value to the organization needs to be explored more so when lots of things are happening online and in social media.

May 10, 2013

Rewriting the rules of creating custom content

Today companies like Infosys are taking some bold steps. They are changing the way to more flexible units of learning - they are no more interactive flash based elearning content hosted in a LMS.

Purchase of custom content to train the workforce is almost as old as corporate training. The birth of Computer Based Training (CBT) and later elearning had brought in the need to make content in measurable units to make it easy for purchasing. Classroom training was measured in days of training. In the elearning era, the unit was a course-hour. The elearning industry devised a variety of methods to price the units based on complexity of interactivity, media used etc. And to add to these, there were the learning standards like AICC and SCORM.

Much of the industry has been playing the game of creating course hour after course hour in the last couple of decades. Each Course Hour could have multiple smaller modules. But in the absence of an alternative, course hours continues to be the standard unit of purchase of elearning modules. It took 3 to 4 different skillsets to make the elearning unit and it took at least a couple of months, given the time constraints of the SME. Much of the traditional elearning even today continues to be done this way.

Except for a few success stories, this form of interactive flash based elearning content has not been met with great enthusiasm as far as I know. The cost of making rich media and interactivity has kept the industry from only creating less than desirable outputs for long.

On the sides, the world was changing. Digital cameras, multimedia software, Google, facebook and YouTube were changing the way people create, view and share content. Media related industries like media quickly changed. Thanks to YouTube, people were making video based content easily and quickly. Content was now available in small palatable units, including learning content. Intelligent search engines were able to create the relationships based on people's viewing patterns and suggest what to watch next.

Learning Management Systems were not designed to work like YouTube or Blogger. Employees were not used to frequenting the learning portal with the same passion as they would go after facebook. The corporate learning paradigm had hardly changed. Companies continued to buy as per the previous year's formats.

Today companies like Infosys are taking some bold steps. They are changing the way to more flexible units of learning - they are no more interactive flash based elearning content hosted in a LMS. They no more take several clicks to even get to the first page. There are more user produced content that can be freely shared through a restricted portal. These modules cost less and take less time to make. According to one estimate, they take at least 60-70% less time to make. They don't require complex tools. They don't require you to be a professional voice over artist. There are no superior coding skills required to do smart interactivities. These are products of plain and natural sharing and will change the way companies create and share digital learning content in the future.

May 9, 2013

LPO 2.0

LPOs that flourished in the early days, succeeded because their sales and service teams were supported by US or UK trained lawyers who added their domain expertise and experience to building the client relationships. While the fundamentals of relationship-building remain consistent, in this next phase of LPO, termed LPO 2.0 by industry leaders, the primary driver for sales is shifting to delivering on-demand expertise effectively, to produce high-quality work product and process improvements.

 

Since the inception of Legal Process Outsourcing service a decade ago, the primary driver for sales was cost savings, using the well-understood labor cost arbitrage approach. India, with its nearly 80,000 law graduates annually, has been the leader in LPO offshoring due to the depth of the labor pool and the commonalities between the US, UK and Indian legal systems. Those LPO companies which flourished in the early days, succeeded because their sales and service teams were supported by US or UK trained lawyers who added their domain expertise and experience to building the client relationships. While the fundamentals of relationship-building remain consistent, in this next phase of LPO, termed LPO 2.0 by industry leaders, the primary driver for sales is shifting to delivering on-demand expertise effectively, to produce high-quality work product and process improvements.

Infosys is one of the rare organizations designed to handle the demands of LPO 2.0, as it possesses many of the characteristics that define this stage of LPO growth. Here's why:


1. Infosys is a premier global brand that can attract the best talent and cultivate that talent through continuous training in our LPO Center of Excellence. Attracting and retaining talent, and maintaining bench, support scalability and capacity demands. Unlike traditional IT or BPO work, legal projects typically deploy rapidly, in less than a week, making them an excellent opportunity to boost revenue quickly. There are also annuity opportunities to add talent to existing ODC headcount to support untapped legal functions.


2. Infosys has a global presence and international sales force to support multinational clients from a wide range of delivery centers. In fact, unlike other LPOs, Infosys has strong ties to many emerging legal markets, such as China and South America, which allows us to take on opportunities in these areas more readily than our competitors. Our ability to multi-shore legal work enables capturing a greater market share of work and building deeper relationships with our clients.


3. Infosys is poised to be a leader in Investigations and Litigation support due to our technology heritage. Unlike pure-play LPOs, Infosys has the opportunity to offer clients end-to-end e-discovery services behind the firewall, reducing costs and risks of managing data. Five years ago, one would speak about legal document review using "per gigabyte" discussion, and today, that discussion happens commonly in terabytes...the future of petabytes is not too far distant. The industry accepted norm for the end-to-end cost of managing one gigabyte of data collected (approximately 3,500 files), processed and reviewed for litigation production is $2/file, or $7,000/GB; it is easy to see how the cost of litigation document review impacts our client's bottom line. Infosys already manages the client applications and data - continuing to own the data in downstream legal workflows enables more control, process efficiencies, transparency, and defensibility when matters come before the courts. When discussed with clients, this is a very appealing element to working with the Infosys LPO team.

 

May 3, 2013

BPO - breaking the myth!

Once upon a time, during my B-school placements, I had to decide whether to join a BPO or not. I made an informed decision and am convinced that there is more to it than the general perception that a BPO is just a call center and no more. Here is what I have to share from my experience! I still remember the day I was appearing for a campus interview for a BPO firm during my B School's placement week. To add to the misery and pressure of the placement week, there was this big internal debate of joining a "BPO" firm or not. The stereotype thought about this industry was putting lot of questions in my mind. Fortunately for me these doubts were cleared through a frantic call I made to one of my seniors who was part of this industry and helped me understand the true nature of this business.
 
But even today I get this question very frequently from folks around me about being in the BPO business (or "call center") and then I go on to give my now well-rehearsed speech on the depth and breadth of offerings which this industry has, the various levels of complexity we work on and the process improvement we bring to a client's business. I always emphasize on the complexities of voice support especially given how it's the liveliest floor which needs very active on ground management and the fact that voice support processes have evolved to supporting various complex transactions.  I still feel that there is a lack of awareness around the kind of work done in this industry and unfortunately it's more so in a country like ours which pioneered the BPO movement.
 
Research shows that outsourcing business processes actually builds a company's process capabilities. The business process is optimized thanks to the outsourcer's experience and expertise. The industry has moved much beyond the cost arbitrage benefit BPO initially used to sell. Growing competition & shrinking margins have made clients sit up today and look for a partner who can deliver continuous improvements in an optimized, yet affordable manner.
 
The BPO as we know today has emerged to be a global phenomenon spread across multiple geographies catering to different client requirements across traditional areas like finance & accounting, order management, call center etc. to emerging areas like "social media support", "promotions management" etc.  The fact that our work not only makes processes better for our customers, but also improves the experience for our customer's customer showcases the powerful impact we have in helping our clients build "Tomorrow's Enterprise".

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