Discuss trends and ideas on the convergence of Infrastructure Technology Outsourcing (ITO) and Business Process Outsourcing (BPO). Find out how you can benefit from adopting a managed services delivery model, and learn more about how the bundling of consulting, technology and BPO services can transform your organization.

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February 15, 2010

Multiply your supplier collaboration effort using Platform

I had an interesting comment in one of my blog entry that  - we need to be cognizant of the fact that while supplier consolidation offer better negotiation power and control on supplies in addition of host of other benefits, there is another school of thought that drives de-risking of supplies by using more suppliers’. While there’s no one-size-fit-all approach while attempting supplier rationalization (read consolidation)  in the present economic environment it is also important to have a rigorous supplier risk management plan in place while taking a decision on supplier rationalization. On one hand the idea of supplier rationalization is extremely effective in improving relationship with a focused supplier base and thus helping you in increasing your sourcing effectiveness, I have also seen instances where organization after consolidating its supply base continue the business-as-usual with the remaining suppliers attempts no improvement in collaboration, partnership or try to come out with a new road map and such supplier rationalization is certainly not good for organization’s health in the long term.

Continue reading "Multiply your supplier collaboration effort using Platform" »

Posted by Gurjeet at 01:15 PM | | Comments (0) | TrackBacks (0)

January 06, 2010

Unified technology is vital for managing Supply Risk effectively

The rapid embracing of globalization during last few decades has created an extremely profitable complex network business environment and on the other hand it has also made the global supply chain extremely vulnerable to any adverse event even in the remotest part of the world. You may ask any CPO and one of their biggest concerns today is supply continuity without disruptions and organization’s ability to manage any supply disruptions. While prevention is always better than cure, in managing supply risk you actually need a balanced combination of both. Today’s supply chain needs to be much more agile and adaptive to both external & internal events and should have the ability to react quickly to any negative signals popping up anywhere down the supply chain. With slow recovery though the number of bankruptcies have been abated and there’s an ease on liquidity, today’s global supply chain is bound to face newer kind of risks in the form of trade barriers, sustainability regulations, fluctuating currency rates, volatile commodity market etc, which mean that we need to gear up our supply chain eco-system beyond the myopic view of supplier monitoring alone. There’s also a need to evaluate supply risk from a multi-tier perceptive for any risk event at supplier’s supplier supply also that can impact our supply chain, and so access to diverse and fragmented sources of supply information is absolutely critical.

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Posted by Gurjeet at 10:06 AM | | Comments (0) | TrackBacks (0)

December 16, 2009

Should You Build, Buy, Host, Rent or Managed while addressing your underlying technology?

The emergence of Application software during last few decades has addressed one of the most common business dilemma - ‘buy versus build’ with ‘build’ clearly becoming a default and preferred choice for most of the organizations. However this panacea was short lived and organizations grapple with yet another challenge of heterogeneous and fragment technology landscape multiplied over years. This happened especially in supply chain area where these applications are unable to communicate with each other resulting in sub-optimized underlying technology. While consolidation of different technology applications into a single & common instance is the most common acceptable approach, which however is a costly endeavor in current state of capital crunch. The recent economic downturn has also seen the fast emergence of  yet another option – ‘Rent versus Managed’ riding on cloud computing wave and providing serious options to business and contemplate yet another model to keep pace with adaptive supply chain and remain competitive.

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Posted by Gurjeet at 12:29 PM | | Comments (0) | TrackBacks (0)

November 19, 2009

‘Cloud services’ delivered through Platform Model

The fast maturing cloud computing concept is going to disrupt and change the way organizations would use and leverage technology as a strategic tool in managing their businesses. Organizations are seriously evaluating cloud applications along with underneath computing power due to its ability to provide agile, flexible and adaptable services. In its simplest sense cloud computing will eventually involve into like simply dialing into the cloud exchange, connect with right helpdesk support & gets immediate expert response on the phone and the caller will eventually pay based on time duration. However the significant business value really lies in the bundling of business services plus cloud computing plus cloud application through a third party which will  take cloud computing to the next paradigm i.e ‘cloud services’ wherein organizations would  look to offload their non-core processes to providers who can deliver the cloud services in the most efficient and effective way.

While there are many different ways these cloud services can be delivered, the two main conduits are ‘Public cloud’ and ‘Private cloud’. Public cloud typically is the service which is available to everyone with a standard offering and you pay a fee based on computing power usage while Private cloud on the other hand is available to specific organization only on a platform model. For eg. not anyone can plug into to spend analytics service provider say at Infosys cloud and can buy the spend report based cloud services from Infosys.  However the real test of cloud services provider would be their ability to evolve this platform model on a multi-tenant architecture. Shared infrastructure thus would not only bring economy of scale but would also be a good breeding ground in driving innovation due to its ability to get a real time access of customer behavior, business need and cross pollination of best practices within the private cloud and let organization drive non-core business processes managed through the cloud services using platform model.

Posted by Gurjeet at 12:21 PM | | Comments (0) | TrackBacks (0)

October 19, 2009

eAuction is just one aspect of eSourcing strategy

eAuctions erupted into sourcing scene with lots of hype later failed to live up to the high expectations, and organizations slowly realized that other modes of negotiations are equally essential as well to sustain healthy supply relationships and cost competitiveness. In many instances we have seen that the over usage of eAuctions ended into fiasco primarily due to lack of supplier acceptance and inability to cut down the cost beyond certain level. This has resulted into many organizations eschewing their eAcution tool and relook at traditional negotiation strategy like RFx, Cost model, Face-to-Face negotiations as well to drive viable & sustainable cost savings, which became important during these tough years when we saw a string of supplier bankruptcies resulting in immense supply chain risk. Having said that organizations in early stages of eAuction adoption curve, for instance in Asia region where eAuction penetration had been low due to cultural reasons, continue to reap initial success and saving benefits. Most of the eSoucing tools available in the market are pretty matured with stable functionality and differentiate very little in terms of attributes.

While evaluating eSourcing tool organization needs to consider two very important factors as well – one: Ease of use, two: Customer and training support. It is vital to keep following in mind while choosing eSourcing tool:
1.      Focus on business aspect than technology superiority: It is important to consider ‘ease of use’ and this need to be from the perspective of internal users as well as external users to accommodate change management on the supplier side also.
2.      Look for business value of feature than just availability: It’s a known fact that organizations typically use only a fraction of functionality available in any package. So the evaluation of solution should be based on business value the feature would actually be providing rather than just availability and complexity.
3.      Effective Customer Support: It is absolutely essential to have support from your eSourcing tool vendor in terms of high responsiveness and resolution of customer queries. This is a key to successfully conduct sourcing event and achieve the end objective.

Fortunately now organizations also has option of managed services for Sourcing which focuses on realized savings as an outcome rather than underlying eSourcing technology and is fast emerging as a generally accepted service model. It is typically on a gain share pricing model – a trend maturing fast in this space.

Posted by Gurjeet at 05:13 AM | | Comments (0) | TrackBacks (0)

September 14, 2009

Pay-as-you-Use Pricing Model - for Managed Services

Imagine a Cell phone operator instead of charging you ‘per call’, charges you based on high monthly rental irrespective of calls you make or Utility provider charges you high periodic fee irrespective of units you consume. Now after getting used to ‘pay-as-you-use’ pricing model in these areas, any other alternate pricing model is just unthinkable.   As a consumer we are more comfortable and would love to pay ‘metered fee’ for the ‘service usage’ instead of just ‘service availability’. In fact much credit for the explosive growth of Telecom during last few decades can be easily attributed to user friendly innovative fee model which helped in taking telecom services closer to the mass consumers.
Platform service model is trying to emulate exactly that only by making its services available in much cost effective way for SMB segment – who often grapple with unpredicted demand and so cash flows. It allows companies to adapt to the changing external environment which could be either rapid growth or reduction in a smooth way. There are different ways evolving to define or meter the ‘service usage’ – for eg ‘$ spend’ in case of Source-to-Pay or ‘# Employee’ in case of HRO and all this make the pricing model evolution extremely challenging for managed services vendor from two aspect: One – Acceptance of pricing model plus price points by mass companies; two – Challenge for managed services provide to ensure a stable revenue. While it’s still a challenge for managed services providers to customize its services for ‘mass adoption’ and evolve an ideal ‘pay-as-you-go’ model, early drift indicates the future trend and the necessary need to come up with an innovative pricing model in this fiercely competitive services arena.

Posted by Gurjeet at 10:09 AM | | Comments (2) | TrackBacks (0)

September 07, 2009

Ensure Green Purchasing thru Green Technology

Green purchasing has shown excellent resilience during current tough economic time and delivered value through sustainable cost savings thereby breaking the myth that – It’s a social obligation and so you have to necessarily pay an extra premium. There are three most important aspects to be considered while detailing out policy for green purchasing – social obligation, environmental impact & economic benefit. Of these the latter – which is directly related to the cost equation needs to be broadened for life cycle costing approach , so the  cost equation not only need to capture cost for energy, waste and duration but also additionally include cost for  repair & maintenance, disposable effort, health & safety compliance thereby offsetting any potential financial and environmental risks to the organization in today’s increased regulatory world.

We have noticed that most of the organizations assessment of carbon footprint is mostly limited to ‘organic buying’, ‘local buying’, ‘eco friendly or 'energy star certification’ and reason for this is that there’s no universal criterion which can be applied to every situation. Buyers need to define green policy for each spend category keeping following broad criteria in mind:
- Look for energy efficiency
- Avoid hazardous, toxic foot print in the product or services
- Conservation for heat, light, water and other natural resources
- Look for refurbishment and recyclability
- Easy disposability like bio-gradable
- Leverage technology automation

This brings us back to the most debated aspect – How compliant your purchasing processes are?
Unless organization leverage technology to embed green policy into its purchasing processes- like green specification & standards, green selection criteria, life cycle costing approach, green clauses in contracts at an enterprise level, it is difficult to comply with green purchasing commitment. It is extremely important for organization to leverage the green technology – eSourcing, eProcurement and eAccount Payable  (which avoid paper heavy manual processes – saving tones of paper) thereby making its purchasing processes not only more effective & efficient but would also ensure complying with green purchasing policies at an enterprise level.

Posted by Gurjeet at 12:22 PM | | Comments (4) | TrackBacks (0)

August 27, 2009

Next generation BPO: will drive on tailored standardization

It is now by and large evident that the next generation BPO will happen on more complicated and knowledge based process outsourcing in a much shorter time span, and organization’s objective would be to attain transformational benefit rather than cost savings alone. The ongoing recession has brought some method in the madness towards outsourcing rush wherein service providers are being challenged to articulate value proposition beyond ‘cost savings’ alone as a long term strategy. Today we are seeing plethora of solutions mushrooming in the provider’s offering list even if they are not solution in real sense. The next generation BPO solution has to primarily address:

-‘Standardization’ to drive savings through shared service model from a low cost location and this invariably can’t be achieved unless the underlying technology layer is seamless
-‘Tailoring’ to address client specific nuances in terms of process, language and skills in an integrated fashion to enable client become more agile to external environment.

Standardization and Tailoring, though sounds conflicting necessarily needs to be in optimal balance and its right mix is key to the success of next generation BPO solution. This would also mean that service providers would need to have a good handle on both process and technology while executing outsourcing for much needed aspired transformational benefits.

Posted by Gurjeet at 10:57 AM | | Comments (0) | TrackBacks (0)

August 07, 2009

The Right way to price.....

In the recent past we had multiple interactions with prospects and existing customers on the pricing model for Platform based solutions for "Source to Pay" (managed services).Various stakeholders have expressed opinions which rightly address their concerns but it’s hard to conclude to a single model.

Let me start out with a fundamental argument. What is the objective of an outsourcing engagement? Is it to impact business process from a business requirement standpoint or to impact at transactional level?
In my view a transactional view does not enable a service provider to create any transformational value for clients. Service providers will perform the transactional work as per agreed SLA but will not be in a position to appreciate or contribute larger business goals that client organizations strive for. The transactional view probably provides benefits which are tangible, but are far from business benefits that is the need of the hour.

A pricing model should also reflect the basic premise (transformational v/s transactional) and should use the right metrics accordingly. In the next post I would like to discuss with the audience various pricing models that can be proposed. Till then please feel free to share your views on pricing.

Posted by Nitin at 05:30 AM | | Comments (0) | TrackBacks (0)

July 29, 2009

How Source-to-Pay platform can help you achieve transformational savings?

While leading economic indicators are showing sign of slight recovery there’s still a long way to stabilization of economy and get over current uncertainty. Smart organizations are using this challenging environment as an opportunity to drive some of the tough transformation changes while outsourcing which otherwise would have been difficult to implement. Such transformational changes invariably require overhauling of existing process and underlying technology layer to achieve savings beyond traditional ‘lift & shift’. Endured by various hype & bust cycle over last two decades, organizations today are more sensible when it comes to drive the transformation changes instead of looking for panacea to the problems.  Platform BPO being a new concept is going through initial hype cycle and so also need to cross the chasm of some of the glaring expectation gap. Organizations need to evaluate this as an integrated combination of both ‘process’ and ‘technology’ in a synergistic way instead of evaluating alone on just process or technology. If any one of the vital element is weak or ignored, it will fail to deliver the complete transformational savings.

Continue reading "How Source-to-Pay platform can help you achieve transformational savings?" »

Posted by Gurjeet at 10:09 AM | | Comments (0) | TrackBacks (0)

July 08, 2009

Variablize your contract prices. Simplify your sourcing strategy.

The unprecedented changes in commodity prices, unpredictability and economic uncertainty over last one year has taught one important lesson to the sourcing professionals – ‘Variablize contract price by collaborating with supplier, especially for the repeat buy’ in order to keep purchase price competitive, realistic and in tandem with changes in the external environment. With commodity price index slowly rising up there’s also a strong prevalent feeling among sourcing professional about missing extremely good opportunity to achieve lower prices. However driving ‘low price’ opportunistically in such a way is a myopic approach, as the current environment lately has also taught us not to attempt low prices at the expense of suppliers thereby exposing them to financial risk hazard and threaten their own supply chain continuity.

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Posted by Gurjeet at 05:25 AM | | Comments (0) | TrackBacks (0)

June 30, 2009

Leverage your suppliers to drive innovation

With most of the supply management community focusing on ‘supply risk’ due to increased adoption of globalization and outsourcing during last decade, many are still missing one of the most positive and unprecedented opportunity, the current situation has provided to us i.e.  Drive innovation by leveraging intellectual capital of your diversified supplier base. With suppliers acting as an extended fourth wall,  organizations are in a state to increase their competitiveness by driving all important elements of cost, quality, time, responsiveness and technology in an innovative way. Organizations with better insights about their suppliers are in a better position to involve and collaborate with suppliers to innovate their products and services. Technology continues to become a key enabler for collaboration with extended enterprises in a supply management arena.

Continue reading "Leverage your suppliers to drive innovation" »

Posted by Gurjeet at 09:44 AM | | Comments (0) | TrackBacks (0)

June 18, 2009

Procurement outsourcing: Don't let leakage become flood

Procurement outsourcing has registered excellent traction and faster adoptions over last year with high growth thereby helped purchasing organizations achieve quick savings in a tough economic environment. While purchasing organizations continue to be gung-ho about reducing their operation cost riding on labor cost arbitrage, most of the organizations are likely to miss the bigger saving opportunity, ‘procurement outsourcing’ can offer through effective spend management. Once the ongoing economic turbulence will subside, organization will soon realize that in a moment of frenzy they have been able to muster only a small pie of bigger savings opportunity and are locked in a rigid structure which will offer them very less room for effective spend management. Unless organizations invest beforehand in underlying technology and process it‘s not possible for them to reap full benefit of procurement outsourcing.

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Posted by Gurjeet at 02:35 AM | | Comments (1) | TrackBacks (0)

April 28, 2009

Don’t focus on ‘Efficiency’ alone while Outsourcing Procurement

Organizations are increasingly viewing procurement as a strategic function due to its unique ability to influence spend, which contributes directly to its bottom line. Taking a myopic view on efficiency alone can hurt organizations where in only operating costs are cut to the bone without focusing on strategic sourcing savings, which is a big ticket item.  The most common dilemma faced by CPO’s are – whether to capture cost arbitrage based savings quickly or aim towards much higher strategic sourcing savings by adopting a path of transformation. Taking a balanced view on both is necessary for sustainable cost savings.  

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Posted by Gurjeet at 01:28 PM | | Comments (0) | TrackBacks (0)

April 13, 2009

Reap full benefits of Procurement Outsourcing with a Unified Approach

Procurement Outsourcing (PO) burst into outsourcing scene with lots of promise & hype in the early part of this decade, however it has failed to live its fullest potential and still lags behind other outsourcing areas like FA and HRO due to various reasons.  Organizations are now realizing that the potential of procurement outsourcing (PO) is not just limited to traditional cost arbitrage but effective management of overall spend, which contributes directly to the bottom line savings, especially for the ‘non core’ part. While PO deals has demonstrated numerous tactical benefits such as reduction in operation cost and sourcing savings in an isolated way, most of the organizations are still struggling to realize the full potential of PO in an integrated way.  Even the much hyped ‘sole sourcing outsourcing’ deals based on gain-share model failed to deliver the targeted benefit, as most of the time actual ‘realized savings‘ was actually a fraction of ‘identified savings’ and thus form a major conflict between Finance & Purchase department in terms of procurement department performance. Organizations typically based their projected sourcing savings on the assumption that end-user community would follow the ‘contract pricing’, but in reality they have achieved low compliance & adoption in the absence of unified procurement platform and structure.

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Posted by Gurjeet at 07:46 AM | | Comments (1) | TrackBacks (0)

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