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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September 30, 2013

Driving global process transformation: Removing roadblocks

For an organization to work like a well-oiled machine, each function should dovetail into the next one. However, in practice, one function sees another through the tinted glass of local interests.


One universal desire: to operate as a unified global entity
As processes get increasingly complex at global enterprises, CIOs are anguishing over some fundamental questions around process transformation. The successful executive is the one who knows what the roadblocks are to process transformation, how to remove them and can really do it. But here's the catch. For the organization to work like a well-oiled machine, each function should dovetail into the next one. However, in practice, one function sees another through the tinted glass of local interests.

There is a short-sighted approach to running functions in organizations. This provides a spurt of performance in the shorter term; but it might go against the interests of the organization in the long term. By taking a "parallax view", an effective CIO can see the organization as a unified whole, binding people, process and technology together. If that is the case, what is holding people back from implementing such a harmonized vision at every global enterprise? There is agreement all around that enterprises must operate as single global entities in order to be more effective. Yet there are many hurdles to overcome.

Two big questions....
There are some very basic questions that keep haunting the C-suite. These invariably come up in conversations with them, like: 
1. How can we improve reliability and predictability of our business operations?
2. How can streamlining our global operations help us grow both in volumes and in profits, while creating a formidable competitive advantage for us?

Three areas where the value is at stake
Businesses must first resolve the local conflicts around functional processes before they can drive radical change to their global organization, which is the next level of performance. Their efforts at resolution should be directed at areas where much of the value is at stake. Cost is one such area. Organizational costs are hard hit where functions work in silos without an enterprise-wide view. Internal stakeholders very often suffer from myopia. Internal and external stakeholders represent another significant impact area. A functional silo is all too apparent among many of the internal stakeholders. This arises from the very fact that they have been recruited for a narrow function and therefore do not have the understanding around where their particular functions "sits" in the overall enterprise fabric. Interestingly teams can work in virtual isolation and still meet their key result area (KRAs) activity; however they will fail in matching the ever-rising expectations of external stakeholders.

What are enterprises hamstrung by: Four challenges that really hold companies back

  1. Defining optimum process structure: A rigid process structure might provide the company a handle on things like compliance and control. All the same, it is a roadblock to improving throughput and also leads to overall dissatisfaction. 
  2. Non-aligned function-focused performance measures
    More often than not, the focus of the business is on parameters that are function-centric and local in nature. What can be worse than having in place parameters that are in direct conflict with the way related processes are measured? 
  3. Resistance to change
    The way change is presented tends to organize resistance to it. Often times, organizations don't provide any understanding around the larger picture of change. 
  4. Multiple technologies and applications
    Many technology applications and tools work as islands and are not integrated through a common interface. This results in information residing at multiple locations, which prevents people and organization from taking a global view.

This point of view takes the reader inside the root causes of these conflicts and identifies the core transformation levers. For more insights, read this point of view.

September 26, 2013

Are we buying a product or a service ? (Part-I)

How do we define product and service? How do we distinguish product and service other than being a line item in a PO or in a Procurement contract?


During one of our morning team discussions in SnP CoE, there was a discussion on supplier shortlisting based on total cost of ownership.  The specific instance had both components of Product and service that were to be considered. That was when we had raised the following questions.

How do we define product and service? How do we distinguish product and service other than being a line item in a PO or in a Procurement contract?

This debate sparked off an explanation of a product being a commodity with tangible benefits. Examples being oil, gas, cables, clothes, tooth paste etc.... Services would represent intangible elements that are being utilized. Examples would be banking, insurance...and so on.

The impact of defining whether the item purchased is a product or service would have implications in many countries with indirect taxes applicability. This would mean an impact to the cost based on how we describe it. The definition that resulted from traditional methods of defining something could no longer be considered as sacred.

We did a quick internet search for all known places to define what is a service? And what is a product?

The search results provided us the traditional definition of a product and a few instance highlighting a continuum of a service being a product, as well.

To elaborate, in the banking insurance industries, we observe a more prominent use of the word product for a bundle of services (example: co-branded credit card as a product, home loan as a product).
In the software industry, application software is also called as a product, for example - Microsoft Office.

In continuation to the quest of definitions, we recognized that countries have legislation on indirect taxes. For the applicability of the indirect taxes, they certainly should have defined what is covered as a taxable element through various tax forms.

When we searched for excise duty, a form of indirect tax in the business dictionary, it was defined as below:

  1. A percentage levied on manufacture, sale, or use of locally produced goods (such as alcoholic drinks or tobacco products).
  2. A percentage tax levied on a company's revenue, instead of (like income tax) on the company's income.
  3. A fixed tax levied on an activity or occupation, such as the license fee charged from attorneys, doctors, and other professionals. Also called excise tax.

Based on the above, our thoughts on the definition of products and services point towards - both products and services are indeed products.

To be continued...

References:
http://www.businessdictionary.com/definition/excise-duty.html#ixzz2d6BSsYJk

September 23, 2013

Procuring Property and Facility Services

The more effectively a company manages its properties and facilities the more success it will have with its customers, employees and shareholders.


For many businesses the cost of operating their facilities typically ranks near the top of their expenses. Frequently, it is second only to the labor cost of the employees. Property and Facility Services includes areas such as real estate, architecture and engineering, construction and fit outs, utilities, operational services, maintenance and more. It is also becoming more of a strategic Human Resources consideration as companies are using their facilities to attract and retain a quality work force. Work place satisfaction is often a key to employee satisfaction.

The more effectively a company manages its properties and facilities the more success it will have with its customers, employees and shareholders. Facilities are critical to a company's overall operations and must also be prepared in case of a catastrophic event.  Business continuity, disaster recovery and preparedness are paramount to a company's ability to serve its clients and manage risk. A company must have a solid team maintaining its facilities with a strategic approach to both managing cost and reducing risk. A property and facility manager must have a good knowledge of strategic procurement, facility cost, current industry trends, and should actively participate in industry organizations.

Property and Facilities Management impacts not only direct costs but also affect indirect cost as well. The workplace environment will impact efficiency and output of the workforce, equipment, consumables/materials and services. Companies are looking for means to drive out cost, increase sustainability, improve efficiencies, and improve workplace satisfaction. According to KPMG's 2012 Global Real Estate and Facilities Management (REFM) survey the top 3 focus areas for REFM in 2013 are cost reduction, improving workplace environment as a tool to attract/retain talent and energy management. In addition activity based working is also becoming a trend for businesses with more people working remotely and workplace requirements needing to be more flexible. While companies strive for a more efficient workplace often real estate and workplace equipment becomes an additional cost to a company's overhead. Many times these facilities and excess equipment can be turned into cash. By pursuing early termination for leases, sub-letting and liquidating assets companies can actually turn these assets into cash.

Businesses today must be proactively reviewing its real estate needs with the workplace by planning and evaluating the benefits of optimizing its real estate portfolio and consolidating facility services. Whether your facilities focus is business to consumer or business to business, through a focused resource such as an outsourced Business Process Organization a business can deliver savings with a holistic view and solution that addresses your specific needs.

September 17, 2013

Greater than the sum of the parts

BPO has tremendous potential to add significant value across the organization.  The key is making the proper assessments, analysing the right data, finding the right application and partnering with the right provider. 


In its infancy, BPO primarily focused on non-core business processes such as, order processing, fulfilment, payroll, and employee benefits and some facilities activities like lawn care and security.  Recently however this has since grown to cover functions which are important (even essential) to a company's operations, but not necessarily seen as being core to a company business strategy.  Marketing Production, Travel, Information Technology and Facilities Management are a few examples of such areas. 

By partnering with business process outsource (BPO) service providers it is possible to adopt solutions that are constructed of highly specialized industry expertise and evolve over the duration of the relationship to improve the entire organizational operation. 

By adopting a BPO approach to important, but non-core, functions an organization can gain added insight into many areas of their business. The right relationships in place ensure custom tailored solutions tailored to precise business needs, adding considerable value beyond simply cost reduction. It has been shown that just 10% of organizations describe cost-cutting as the primary role that their BPO provider plays, ranking access to specialist skills and expertise (72%) and growth and expansion potential (66%) far higher(1). The focus here is really to extract the greatest amount of process enhancements, and place less emphasis on immediate direct cost savings as a priority. This is not to be achieved, however, without an adherence to well defined Key Performance Indicators and Standard Operating Procedures. Business process improvements that impact the entire organization can be achieved through effective collaboration with high quality BPO partners. As a result, areas that were once seen as "mundane" or "non-core" can now be supported with a high level of innovation that mirrors the industry leaders in these areas.  Additionally, the entire process sees improvement as a result, and decision making can incorporate higher performance levels in these areas.  This will also allow company employees to devote more time towards activities that are considered core to the business.

Thus we can see that BPO has tremendous potential to add significant value across the organization.  The key is making the proper assessments, analysing the right data, finding the right application and partnering with the right provider.  With the right due diligence and the proper alignment of resources, the whole can be greater than the sum of the parts.

(1) Computer Weekly -Cost cutting primary driver in only 10% of BPO deals - By Karl Flinders on October 31, 2012 

September 4, 2013

Managing the "Double-edged Sword" for a Successful Project Performance

The indicator for an organization for measurement of  successful project management primarily has always been its cost performance vs. meeting the ultimate set deliverables "on time". This "Double-edged Sword" - "On Time Delivery" and "Project Cost Adherence" has been the key issue the industry and enterprises have been struggling with for years.


"Project Management" as we all know has always been a very crucial and important program across enterprises and industries to deliver the overall operational and financial effectiveness objectives. Talking about any project ranging from a small scale to large scale in any dimension like - greenfield turnkey, ramp up and overhaul, delivery improvement or services quality improvement within any industry sector - starting from industrial infrastructure to manufacturing, consumer, healthcare, energy or technology the challenge has always been to meet the most important objective of "cost adherence" within all its elements to meet or exceed the desired project performance level.

Typically any project of any order is planned on a network of interlinked activities or building blocks, what we call as "Project Plan", and the blocks which forms all the elements are the functional units - from planning, organizing and execution at a high level to fragmented sub-units of design, survey, sourcing, ordering, manufacturing, logistics, distribution, installation & commissioning, commercial / finance and quality. So it is this capacity of the system itself to hold all different competencies and domains closely knit together in harmony that either makes or breaks the performance of the project.

The indicator for an organization for measurement of successful management of a project primarily has always been its cost performance vs. meeting the ultimate set deliverables "on time". So this "double-edged sword" - "on-time delivery" and "project cost adherence" has been the key issue the industry and enterprises have been struggling with for years.

If we look at the workflow of this whole project delivery process we would find it divided mainly into two parts - "pre sales" and "post sales". The "pre sales" portion takes care of the process starting from developing a market opportunity to evaluation of customer requirement and finally translating it down to a blueprint of "deliverables" and "cost structure" what is called as a "solution"; and the "post sales" portion takes responsibility of physically converting the "solution" into tangible deliverables for the customer in line with deliverable objectives set in the earlier phase.

 Indranath_Sword.png

So the "pre-sales" phase and "post sales" phase performing two distinctive set of activities work in sequence to fulfil the final objective for the customer.  However in practical situations many times these two phases remain isolated and the supposed to be interconnecting link is found broken leading to potential risks of becoming a threat to the overall performance during the phase of transition or delivery. As a result the project managers and operation managers on the field are found struggling hard to find alternative ways and meet an absolute dead-end many a times accepting a compromise in performance level in either  performance or cost. The "double-edged sword" if managed to be held at one end would definitely cut through the other end if the means of balancing it are not put in proper place and time. 

This vulnerability of the performance of the project traces back its root cause to a lack of successful collaboration during the evaluation phase leading to practices of defining the scope and cost baseline purely on assumptions with no validation (due to lack of planning input) or on some judgements based on past experience or industry average leading to % estimation method of allocating costs to sub units e.g. - freight cost x% of total value of goods supplied etc. with no  feasibility study of these  basis on the current situation and scope. This leads to very high possibilities of overwork (higher cost), rework (COPQ- Cost of Poor Quality) of resources, lead time delays (productivity loss), hidden set up costs etc. going forward which hits directly on the bottom line.

It is the practice of collaboration amongst teams which can help enterprise combat and eliminate this challenge and effectively prevent and control the "double-edged sword" cut through its operational and financial efficiency framework.  This is where introduction of a "start up" process comes in which bridges or makes an effort of bridging the gap between "pre sales" and "post sales" by evaluating the cost baseline vis-à-vis the scope and project environment parameters before the same is moved into delivery phase.  It is this "start up" process or the bridge that has to be leveraged well during the evaluation phase in "pre sales"; which by its early involvement can provide real time inputs and situation fall outs with risks that can form the scoping and cost baseline principle of the overall project . It is only then that an optimum balance of this "double-edged sword" can be restored and help establish a discipline which can be successfully nurtured and evolved into a practice for achieving excellence.

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