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August 14, 2014

Vertically Disintegrated? We Have Solutions For That.

Posted by Kumar Paramasivam (View Profile | View All Posts) at 10:09 AM

The Evolution of IT Outsourcing [Source: http://www.youtube.com/watch?v=mOF54rIIw0Q]

Today, a manufacturing firm can confidently stride across the globe, set up plants, distribution centers, storage facilities, and whatever else it wants with the utmost organizational precision. That confidence - as well as a global footprint - is rooted in the knowledge that the firm has at its disposal an endless array of great software. Whether MRPs, ERPs, demand forecasting, or logistics & supply chain management, there are endless options to ensure that the modern manufacturing company utilizes IT to enhance operations and boost margins.

Every sector and industry should be so lucky. You see, the overarching phenomenon that is offshoring or outsourcing (or whatever you'd like to call it) affects each industry differently. Whereas the aforementioned manufacturer has an IT suite that allows it to reap the efficiencies of having storehouses in Malaysia, a stamping plant in Switzerland, and a sales office in Uruguay, other sectors haven't been as successful. I'm speaking, of course, about the professional services field. Woe to the project manager whose task it is to keep a global operation running seamlessly with the most rudimentary set of IT tools.

Indeed, it's a matter of corporate culture that some sectors have benefited extensively by the colossal shift in how specialization, labor arbitrage, and skills availability are leveraged across the globe - and how others have not. The IT outsourcing/offshoring phenomenon has grown in leaps and bounds over the past three decades and has created a mammoth industry in and of itself. What followed has been the phenomenon known as 'vertical disintegration' in areas like tax preparation, engineering, medical transcription, and a slew of other services.

What's curious, of course, is the realm of professional services. Vertical disintegration, in this space, has primarily been supported by rudimentary spreadsheets and project planning software. Don't get me wrong: The right team in the right organization can accomplish quite a bit using only spreadsheets and project plans. But there's been a technological limit placed on the distributed development and delivery of professional services. If there is to be a surge in the adoption of the disintegrated model and associated growth in the volume of professional services and offshoring locations, there has to be more focused IT offerings to help enterprises go to the next level. Regulatory requirements concerning data protection and privacy will make it difficult for companies to manage service delivery with rudimentary tools.

India used to be the primary destination of choice for companies that were looking to take advantage of the so-called disintegrated model. Several other locations, including South America, Eastern Europe and the Far East have also emerged as options. A company chooses which parts of its various services get delivered from which locations, based on the availability of skills, capacity, cost, and compliance. That's why things have worked out so well for many manufacturing companies. They decide where to source components and where to have them assembled. They base their decisions on everything from lead times, shifts, factory capacity, and availability of raw materials all the way to their proximity to ports. Likewise, an integrated services company that provides a one-stop service will find that engineering can be sourced from India, design from Europe, and post-production formalities for the same from the United States.

Now imagine the plight of the program manager who is tasked with ensuring that the services are delivered on time and on budget with high quality to the client organization. How can this person exercise the right amount of visibility and control? Take the case of the person running the service delivery office out of India, Europe, or the United States. Does that employee have the ability to track the demand for various skills, assess existing capacity, and plan for requisite adjustments in staffing levels? Can you imagine a project manager or heads of the service delivery centers trying to reconcile these global issues with a spreadsheet and a project plan? Hardly. Those are tools for simpler times.

If a professional services firm is going to orchestrate a vertical disintegration on par with, say, a savvy manufacturing company, it needs a robust system with built-in workflow, collaboration, resource, demand, supply, and project management functions. I have some advice for professional services firms looking for such a system: Don't bother shopping for an 'off-the-shelf' solution. It won't be worth the time and expense. You're better off working with an enterprise that has mastered the development of high caliber software solutions that can address the complex requirements of professional services firms. Use the right tools for these times.

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