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The Official Magazine of the International Association of Outsourcing Professionals
GlobalizationToday July/August 2011
THE VENDOR VIEWPOINT We survey the outsourcing vendor community on a host of vital issues that affect your business and career.
Also in this issue:
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G L O B A L I Z AT I O N T O D AY The official publication of IAOP for the growing ranks of outsourcing professionals.
IAOP® is the global, standard-setting organization and advocate for the outsourcing profession. With more than 110,000 members and affiliates worldwide, IAOP is the leading professional association for organizations and individuals involved in transforming the world of business through outsourcing, offshoring, and shared services. A Global Community IAOP has members in nearly 50 countries. Each member has direct, online access to each other and to IAOP’s entire portfolio of services, including its vast chapter network, regional-level events, certifications and corporate and professional development programs. MEMBERSHIP Customer Corporate Membership provides organization-wide access to the association’s research, training, certification and networking programs — all designed to help companies
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achieve better business results through outsourcing. Provider/Advisor Corporate Membership provides the same organization-wide benefits of Customer Corporate Membership, but also includes member-only sponsorship opportunities that serve the marketing and business development needs of these companies. Professional Membership is available to individuals either as part of their company’s corporate membership or on an individual basis. This membership serves the needs of practitioners working in the field of outsourcing whether as customers, providers or advisors. In addition, it provides these professionals with direct, personal access to association services.
To learn more about IAOP membership or to become a member, visit www.IAOP.org.
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INSIDE July/August 2011 7 PUBLISHERโ S NOTE 8 NEWS FEED 8IBU T OFX BOE OPUFXPSUIZ JO HMPCBM DPNNFSDF
22 WHEN CALAMITY BEFALLS THE SUPPLY CHAIN by John Persinos
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28 BPO: WHEN INNOVATION MEETS CULTURE by Vinny Caraballo, Tony Bynum, Greg McLaughlin
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34 BUILDING AN โ A-TEAMโ by Draza Zachary Misko
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45 CHINAโ S INTERNET BOOM by Jeff Kim
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46 IAOP WORLD CONNECTION
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49 SCRAPBOOK
WHATโ S ON VENDORSโ MINDS?
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by John Persinos
We polled the industryโ s top vendors, to discover where they think outsourcing is heading.
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EDITORIAL ADVISORY BOARD Dr. Bruce Greenwald Prof. Asset Management and Finance Columbia Business School Dr. Matt Waller Prof. Marketing and Logistics University of Arkansas Dr. John Hindle Sr. Manager - Accenture, Adjunct Prof Vanderbilt University Mike Corbett Chairman - International Association of Outsourcing Professionals Matt Shocklee CEO & President - Global Sourcing Optimization Services Arijit Sengupta CEO of BeyondCore, Inc Chair of the Cloud Computing Chapter of IAOP
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GlobalizationToday
A Radical New Approach to Journalism
Giving the REAL Experts a Voice – And Letting Readers Determine What’s ‘Fit to Print’ Who decided that journalists, who’ve never worked a single day in the industries they cover, are the subject matter experts who should be writing the content for industry trade journals? Not us. At Globalization Today we think that borders on idiotic. If you want great content, you need to rely on experts. And to us the real experts are the people who work in the outsourcing industry “trenches” day in, day out. That’s why most of Globalization Today’s editorial comes from the industry itself. We’ve opened our platform to accept great content from wherever it may spring. And to help determine what “great” content is, we’re using technology that allows readers to rate each piece of content. This way the best content will “bubble” to the top and be more visible and the content that isn’t as useful will get buried. A true editorially meritocracy. This is your chance to contribute to our industry and get your voice heard. Yes – You can write for Globalization Today and get published. Every article submitted online will be published online and top rated content will be published in our monthly magazine edition. Go to www.globalizationtoday.com or email info@globalizationtoday.com to get your editorial contributor account.
PUBLISHER’S NOTE
What Do Vendors Think?
Ali Comelek Founder and Publisher
As we grapple with a still shaky economic recovery, a volatile stock market, global political instability, and various debt crises, it’s vital to get reliable data on which to base strategic decisions. That’s why we surveyed the outsourcing vendor community: to glean credible, factual information to help you better manage your business and career. Inside, you’ll find fascinating insights about where vendors think the outsourcing world is heading. Preconceptions are the bane of any profession, but they’re particularly harmful in global outsourcing, where managers must juggle different cultures and navigate the shoals of national sovereignty. We posed direct questions to hundreds of major vendors, asking them their views on future economic prospects, the most promising regions for investment, the regulatory landscape—a wide range of issues of great import to anyone in the outsourcing field. Some of their answers will confirm your own judgment; others are bound to surprise you. The overriding goal of this exercise is to cut through the “corporate speak”, press releases and wishful thinking, and get at the actual unvarnished truth. You’ll find our presentation and interpretation of the survey data, written by our Editorial Director, enlightening and of practical use. Another major feature, also written by Editorial Director John Persinos, concerns disaster preparedness and the threat that unforeseen calamities can pose to the outsourcing supply chain. The tsunami-triggered nuclear meltdowns in Japan and the tornados in the American Midwest are recent and stark reminders that many transnational businesses remain vulnerable to natural and manmade catastrophes. And yet, too many businesses aren’t adequately prepared. They often find out, far too late, that their operations can suddenly become overwhelmed, wreaking unimaginable havoc on the bottom line and human lives. Our feature story on this topic conveys practical advice on how to prepare for the worst. Another feature, dubbed “Technology Review”, explains how emerging fears about the security of Cloud computing are unfounded, examining one company’s ingenious solution for ensuring the safety of information that passes through Cloud-based systems. We also look at Business Processing Outsourcing, and ways to maintain innovation and fresh thinking in this very basic outsourcing niche. For the rest of our issue, turn to the Table of Contents. We trust as always that you’ll find the magazine to be informative, entertaining and—above all—useful.
Founder and Publisher Globalization Today Magazine “Official Publication of IAOP” www.GlobalizationToday.com 1-602-492-4194
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NEWS FEED
NEWS Feed WHAT YOU NEED TO KNOW IN THE WORLD OF OUTSOURCING
F&C SELECTS STATE STREET FOR OUTSOURCING www.techoutsourcingandbpo.banking-business-review.com
London-based F&C Asset Management has appointed State Street to provide investment manager operations outsourcing for around GBP106bn in assets. State Street will provide F&C, and its subsidiary Thames River Capital with services for their global operations which includes investment operations, custody, fund accounting, trustee, securities lending and transfer agency, the latter provided
through IFDS, State Street’s joint venture with DST systems. As a result of this mandate, 102 employees will transition to State Street from F&C in London and Edinburgh. F&C chief executive Alain Grisay said this agreement will improve operational efficiency and is a major step forward in introducing long term flexibility in its cost base, which will benefit both clients and shareholders.
BARRY CALLEBAUT SIGNS NEW OUTSOURCING AGREEMENT IN LATIN AMERICA www.reuters.com
Barry Callebaut AG, the world’s leading manufacturer of high-quality cocoa and chocolate products, announced the signing of a new, long-term outsourcing agreement with Chocolates Turin, a leading Mexican Group operating since 1928, present in the Consumer and Food Service/Gourmet markets in Mexico, as well as in 25 countries. Through this long-term agreement, Barry Callebaut will supply all of Turin’s liquid chocolate demand to be delivered directly to Turin’s manufacturing facilities. Furthermore, Turin, through its Food Service division, will become the exclusive distributor in Mexico for Barry Callebaut’s Gourmet business,
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including the Cacao Barry, Callebaut and Sicao brands. To support the distribution agreement, the two companies will jointly develop new chocolate, compound and decorations products for the local market, and it is planned to jointly open the first Chocolate Academy in Mexico. As a part of the transaction, Barry Callebaut will acquire a production facility from Turin, neighboring with the new state of the art Turin chocolate complex, located in Toluca, 65 km southwest from
Mexico City. Barry Callebaut will invest to expand capacity, for a total planned investment in fiscal year 2011/12 of approximately CHF 28.5 million (USD 30.0 million; EUR 20.8 million). This production site will be the platform to serve a variety of customers throughout the region. Deliveries from the facility will commence immediately, projected to achieve 20,000 metric tons in the near term, with capacity to capitalize on other market opportunities.
NEWS FEED
PHILIPPINES BPO INDUSTRY APPREHENSIVE OVER CICT TRANSFER www.globalservicesmedia.com
Players in the business process outsourcing and information technologyenabled services sectors in the Philippines are apprehensive that the recent transformation of the Commission on Information and Communications Technology into an office under the Department of Science and Technology (DoST) will undermine the potential growth of the industry. In a joint statement issued over the weekend, various industry groups expressed “disappointment” over the sudden transfer of the CICT to the DoST without proper consultation with industry stakeholders. “We were disappointed that (Executive Order) 47 was issued without the benefit of extensive stakeholder consultation, as we believe this would have been highly beneficial to the development and execution of public policy on the key ICT sector,” the joint statement read. “We call upon our government to engage in deeper collaborative dialogue with all stakeholders before undertaking further major reforms that critically affect our sector. Unless we strengthen our publicprivate partnership with the government, we will have great difficulty achieving our goal of generating hundreds of thousands of new jobs in the next few years.” Signatories to the joint statement included the Animation Council of the Philippines Inc., Business Processing Association of the Philippines, Contact Center Association of the Philippines, Gaming Development Association of the Philippines, Health Information Management Outsourcing Association of the Philippines, and Philippine Software Industry Association. The recently issued EO 47 dismantled the CICT, which was under the Office of the President, and
transformed it into the Information and Communications Technology Office (ICTO) under the supervision of the DoST. Under the EO, the ICTO will be headed by an executive director who has yet to be appointed. That official will hold the rank of undersecretary. This will effectively displace CICT chairman Ivan John Uy, who held a Cabinet-level rank. But in an interview, Science and Technology Secretary Mario Montejo assured industry players that the IT-BPO sector would continue to enjoy the support it has been getting from the government over the past years. “We’ll continue to push and support the IT-BPO industry. They can expect even more support from the government now. We’re asking for additional budget from the government to provide support
for training and promotions in the ITBPO space,” Montejo said. The DoST would likewise exert a bigger push for e-governance initiatives, Montejo said, citing the integral role that the DoST played in the country’s overall ICT agenda. “The National Computer Center is under the DoST. I believe the transfer of the CICT to us will result in much better synergies that will [benefit] the industry,” he said. Without mentioning who would possibly head the newly established ICTO, Montejo said some of the CICT commissioners would be retained under the new office. Also, the National Telecommunications Commission will not be included in the transfer. The NTC will continue to be under the supervision of the Department of Transportation and Communications, Montejo said.
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NEWS FEED
SWISS BANK UBS AXES 500 IT JOBS IN OUTSOURCING DRIVE www.computerweekly.com
Swiss bank UBS confirmed 500 jobs would be cut worldwide as part of a costmanagement exercise and outsourcing initiative. This is part of a worldwide initiative emphasizing on the internal IT department re-organisation and
outsourcing initiative. UBS plans to streamline its IT department as well as outsourcing its in-house technical IT user support services in Switzerland to IT services firm Cognizant to help cut costs. A spokesman
for the Swiss bank confirmed 500 jobs would be cut worldwide as part of a costmanagement exercise. A total of 200 technical jobs will be axed in Switzerland with another 300 jobs to be cut in other worldwide locations. UBS were unable to confirm if any UK-based IT jobs would be affected. UBS said: “Over the past few months, UBS has reviewed its entire global IT organisation with the aim of creating leaner structures, increasing efficiency and agility and cutting costs.� “Cost management and increased efficiency are top priorities for the entire UBS firm. For this reason UBS regularly reviews internal processes in order to improve efficiency and optimise costs; this includes outsourcing and offshoring options,� UBS added. UBS said about 90 roles of job reductions in Switzerland are related to the transfer of technical support services to Cognizant. The job cuts account for 5.5% of the Swiss bank’s 8,700-strong IT workforce worldwide. Other financial institutions have been forced to slash IT jobs in recent months as part of costcutting efforts.
NOA COMMENTS ON SANTANDER BACKSOURCING www.sourcingfocus.com
Banking giant Santander has announced that it will create 500 UK call centre jobs after staff complained of service at the India Call Centres.The jobs will be created in Glasgow, Leicester and Liverpool. Martyn Hart, chairman of the National Outsourcing Association says a trend could be emerging. “Santander has listened to its customers’ demands and brought its call centre operations back to
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the UK. This is not just a matter of rising costs in India, but falling quality,� she said. “Simple processes can be dealt with by interactive voice recognition, but more complex problems require the operative to have a solid understanding of the caller’s culture. This is what helps good operatives open calls sympathetically, drill down to the heart of the problem, then find solutions. She noted that India’s staff attrition rates are at an all-time high. “People move on very quickly, for just a few rupees more elsewhere,� she said. “This means there is no time for adequate cultural awareness training, so quality has dropped. NOA has
been saying for years that cultural affinity is a must for successful offshoring.� Santander’s return to the UK proves how important these issues are to customer satisfaction, she explained. Taking the cheapest option will never be a route to success, if the quality is not up to the mark. “As the costs of doing business in India fall into line with more developed nations, NOA suggests that companies considering outsourcing call centres to India ensure that their suppliers invest (and continue to invest) in intensive programmes of cultural awareness training. That way, they can retain business by competing on quality, not just on cost,� she said.
NEWS FEED
STARTUP TALENT ARRIVES IN CHILE AS PART OF INNOVATION PLAN www.nearshoreamericas.com
The latest round of start-up specialists has started arriving in Chile, as part of the country’s plan to turn Chile into a center of entrepreneurship and innovation in Latin America. The goal is to attract young technical talent and entrepreneurs to the Start-Up Chile program and increase foreign investment through the umbrella organization InvestChile. “We want Chile to be like the Singapore of Latin America, a place where investors want to do business,” explained CEO of Corfo InvestChile, Juan Antonio Figueroa, during a conference organized by Fundación Imagen de Chile. To achieve this objective, he announced, they will soon open four new offices in the United States (New York), Germany, Brazil, and France. The agency already has offices in Spain, Italy, India, and China, which will provide expert advice. The target proposed by InvestChile for 2011 is $155 billion of foreign direct investment, as well as hopes to capture new projects worth an estimated $260 million. Created in 2000, InvestChile has contributed to the realization of more than $2.4 billion in domestic and foreign investment and the generation of more than 40,000 new jobs. One of the ways the country is boosting innovation has been
the program Start Up Chile, an initiative created by the Ministry of Economy with Corfo, which seeks to attract high-potential entrepreneurs to settle in the country and to use it as a platform for global business. After a successful pilot with 23 teams of entrepreneurs last year, the agency expects 300 teams this year, whose first 100 began arriving in Chile in June. They come from 28 countries and prestigious universities like Stanford, Babson, Harvard and MIT, among others. Each entrepreneur receives $20 million pesos from Corfo InnovaChile and stays in the country for approximately six months. The objective is that during this period the entrepreneurs raise capital, hire people,
create networks, and start doing business. The executive director of Start-Up Chile, Jean Boudeguer, announced that on July 11, nominations will open for the next round of more than 100 entrepreneurs. This opportunity is available to talented individuals from all nationalities residing inside or outside Chile, he said. In total, Start-Up Chile has involved 112 projects in its short time in existence. Its entrepreneurs have come from each of the seven continents, and included participants from China, Norway, Israel, South Africa, Brazil, and Bulgaria. One success story: Founders of Junar, a platform that allows people to find and use information easily, obtained venture funding for $1.2 million in December 2010.
EAST LINDSEY AND SOUTH HOLLAND LAUNCH SHARED SERVICE www.sourcingfocus.com
Two district councils in the east of England have set up a shared service for front and back office functions which they are offering to other public authorities. East Lindsey and South Holland have created a limited company named Compass Point to handle HR, finance, payroll, IT support, revenues and benefits and customer services, operating from two centres in Manby and Spalding. The joint venture is owned by the two councils, with shareholdings reflecting
the size of their services and investment at 63% for East Lindsey and 37% for South Holland, although they have equal voting rights with three members each
on the governing board. Nigel Howell, chief executive of East Lindsey, said: “We’re offering two sets of services. There’s the traditional outsourced services where we might tender for work, or other authorities might invest and become new partners in the company. We are relatively young but we’ve had interest from a number of organisations already, mostly in potentially becoming partners. This is the most novel aspect of what we’ve done.”
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NEWS FEED
RECENT OUTSOURCING DEALS Capgemini Buys AIVE Group of Italy Capgemini, providers of consulting, technology and outsourcing services, has acquired 100 per cent of AIVE Group, an Italian IT service provider. Capgemini, providers of consulting, technology and outsourcing services, has acquired 100 per cent of AIVE Group, an Italian IT service provider, from three primary private equity funds (Emerald, Fidia and Athena Private Equity) and AIVE’s management. This strategic move will enable Capgemini to strengthen its application portfolio as well as its SaaS (Software as a Service) positioning and its market share in IT services in Italy. The deal will be financed by the Capgemini Group’s net cash. The contract was signed under conditional approval by the relevant antitrust authorities in Italy. A release issued here has stated that this transaction follows the earlier acquisitions of Prosodie, Avantias and Artesys in France, BI Consulting Group in North America and CS Consulting in Germany. Despite the recent harsh economic times for the IT market in Italy, Capgemini Italia registered high single digit average annual growth over the last four years. AIVE Group, an innovative IT group, was founded in 1984. It has three business units: AIVE BS (Business Solutions for medium accounts and manufacturing industry), AIVE I&C (Integration & Consulting for large accounts), AIVE BST (tailored solutions for banking and insurance). It is headquartered in Venice and has 550 professionals. The company owns several proprietary solutions tailored to different vertical markets and focussed on specific industry segment needs, such as fashion, transportation, food, banking and insurance.
BMC Software Acquires Aeroprise BMC Software has announced the acquisition of Aeroprise, the provider of the world’s most widely deployed mobility solution for the BMC Remedy IT Service Management Suite. The Aeroprise solution, now known as BMC Mobility for IT Service
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Management, boosts productivity of IT service support professionals, reduces IT support costs and improves customer service. With support for iPhone, iPad, BlackBerry, Android and Windows Mobile devices, the solution helps enterprises and public sector organizations provide rapid access to IT service management functionality at any time and from anywhere. This acquisition substantively expands BMC’s IT service management leadership position with additional mobile expertise and innovative technology. “With the explosion in mobile device usage and capabilities, IT support staff, IT managers and business users have become accustomed to having instant access to information,� said Paul Avenant, BMC’s president of Enterprise Service Management. “With this acquisition, BMC is helping our customers harness the consumerization trend in enterprise IT for increased efficiency and competitive advantage.�
Macmillan to Sell Indian BPO Global publishing giant Macmillan Group is set to sell its Indian technology solutions and BPO firm MPS, said banking sources said. Macmillan holds 61% stake in MPS, which is listed on the domestic bourses. Bangalore-based MPS employs around 1,000 people and undertakes publishing services work for the UK-based parent as well as third party clients. Ernst & Young has been mandated to find a buyer.
designed to provide optimized resiliency, efficiency and security. The solution includes Data Center Consolidation, Next Generation Infrastructure Implementation and ongoing Managed Support Services. The U.S. Air Force’s Electronic Systems Center Capabilities Integration Directorate (ESC/XR) has awarded Accenture a 24 -month, $17.2 million contract to conduct risk reduction and prototyping for advanced command and control services. The engagement focuses on developing advanced decision support services, information exchange and system interoperability. Prototype solutions will be designed to improve decision making in the command and control process and assist with risk reduction for the warfighter.
IBM IBM announced details of a $3 million (USD) deal with the Commercial Bank of Ethiopia (CBE) to support the bank in a major program of modernization and business expansion. Under the terms of the agreement, IBM will provide hardware, software and IT services to support the bank in its rapid business growth and its shift from manual financial processes to real-time financial services. With the new IT infrastructure, the bank plans to increase its number of accounts by 25 percent per year, launch 200 new ATMs per year and open 500 new branches over the next five years.
TCS Financial Solutions DELL Dell Services has signed a new fiveyear contract with Towers Watson for comprehensive IT services and solutions. Under this agreement, Dell Services will provide a full range of transformation and infrastructure services to support Towers Watson’s data center operations which house their corporate business systems. Dell Services will provide Towers Watson with a next-generation computer platform,
TCS Financial Solutions, a strategic business unit of Tata Consultancy Services (TCS), announced that PostFinance Switzerland will deploy TCS BaNCS to overhaul part of its operations. The integrated banking suite comprising payments, core banking, securities processing for funds administration and compliance for fraud detection solutions will be implemented as part of PostFinance’s modernization drive to replace the current legacy payment transactions and accounts management systems.
INDUSTRY SURVEYS
We surveyed the industry’s top vendors, to learn where these thought leaders think outsourcing is heading. By John Persinos Whenever I hear outsourcing professionals assert their faith that the prospects for their field will improve “in the long run,” I am reminded of an infamous quote from the economist John Maynard Keynes: “The long run is a misleading guide to current affairs. In the long run we are all dead.” And yet, despite the perils of long-term prognosticating, it’s crucial to at least make the attempt. Otherwise, how can management devise strategic plans for the future? That’s why Globalization Today magazine recently surveyed hundreds of outsourcing vendors, to glean insights into the major trends now unfolding in our industry. To get at the truth, it’s important to actually survey influential leaders and not simply rely on preconceived notions. Consider the results of this survey to be a “reality check” for your own corporate plans. Below is a summary, with interpretive analysis, of the highlights. First, it’s no surprise that as usual, technology tops the list of most represented industry (chart 1). Information technology is the “granddaddy” of outsourced functions and it continues to lead the list, because of the ready ability to reap savings and streamline
operations that are digital in nature. Chart 2 conveys a particularly interesting revelation—respondents at companies with revenue of less than $10 million topped the list (31.6%), a counterintuitive finding in light of the fact that the common perception is that huge corporations account for most outsourcing. Sure enough, though, those who said their companies generated $5 billion or greater came in at second (21.4%). But the message here is loud and clear: outsourcing isn’t just for corporate behemoths. Smaller companies are finding it beneficial as well. Chart 4 tells us that outsourcing is no longer a newbie activity: a clear majority, at 59.2%, reported that they have been outsourcing for more than a decade. To be sure, the accumulated knowledge and experience gained by outsourcing firms
is accelerating the maturation of the field, helping spawn a host of new consultancies, research organizations, academic outfits, and others who are able to pinpoint timetested best practices and implement them in the field. The region-related results of the survey shed considerable light on which economies on the planet are in the ascendancy. As chart 6 shows, the question “in which region(s) does your company primarily operate?” pushed countries in Asia to prominent spots. Of special note is China, at 32.7%. In our magazine’s recent interviews with top
“What is happening is that outsourcing customers and providers are working even harder to make their programs socially responsible.” Michael F. Corbett, chairman, IAOP
outsourcing managers, the Middle Kingdom crops up again and again as a major strategic target—which only makes sense. The room for growth in China is astounding and represents an outsourcing bonanza. According to the International Monetary Fund, over 95 countries are richer than China. Japan’s per capita income is $10,085. China’s per capita income is about $1,000. Impoverished nations like Libya, Lebanon, Romania, Gabon, Botswana, Azerbaijan, Namibia, Tunisia and Albania have higher per capita incomes than China. China’s GDP per capita is only one-eighth
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INDUSTRY SURVEYS that of the United States. And China has almost no debt per GDP compared to the West. Because of outsourcing, millions of Chinese workers are earning higher wages, joining the middle class and flexing their new consumer spending power by buying homes, automobiles, computers, and cell phones. And they’re traveling more, which explains why China now has more than 40 new airports on the drawing board. Again, it’s no surprise that China came in at number two, for this question: “Over the next 12 months, which region(s) will your company emphasize and expand into the most?� (Chart 7). And China was the number one answer (at 36.7%), for this question: “In your view, which region(s) will experience the greatest growth in the outsourcing field, regardless of your own company’s regional expansion plans?� (Chart 10) In the next 20 years, China plans to build about 50,000 miles of major new road, roughly the equivalent of the U.S. interstate system. The World Bank projects that China’s fixed assets — ports, bridges, and roads — will double every two and a half years for the next two decades. Outsourcing vendors know a good thing when they see one. The questions regarding politics and social responsibility also piqued our interest and appear to be of salient interest. A resounding 76.5% answered “No� to this question: “Over the next twelve months, do you expect the political climate and enacted or proposed anti-outsourcing legislation to adversely affect your outsourcing business� (Chart 9). Clearly, the political fear-mongering and grandstanding over outsourcing could be reaching an ebb, although presidential politics in 2012 may temporarily change that. Likewise, an overwhelming majority reported either “somewhat� or “not at all� to the question: “How important will Corporate Social Responsibility (CSR) become as a component of your outsourcing offerings?� In recent public remarks, Michael F. Corbett, chairman, IAOP, eloquently addressed the “hot button� issue of CSR. Corbett noted that all the overheated political rhetoric lately about how outsourcing exacerbates domestic unemployment might foster the notion that outsourcing’s negative reputation will
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INDUSTRY SURVEYS
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INDUSTRY SURVEYS
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Future of Work/Talent Mobility Why we are now everywhere, and nowhere, all at once. In this paper, we take a somewhat-philosophical shot at explaining/interpreting the first round of results from the 2011 Kelly Global Workforce Index™. With nearly 100,000 respondents across 30 countries, we have statistical validity and reliability that’s off the charts.
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INDUSTRY SURVEYS ultimately overshadow its positive impact on business and society. However, he said, there’s nothing in the survey data to suggest that this is actually the case. Corbett said that survey results such as these indicate that the political controversy and subsequent protectionist initiatives have exerted no negative impact on their organization’s actual outsourcing decisions. “What is happening is that outsourcing customers and providers are working even harder to make their programs socially responsible,� Corbett said. Put another way, outsourcing can help companies do well, by doing good. That’s an important point, because the term “outsourcing� is a pejorative in many quarters. It’s seen by its critics as a way for companies to cut costs, by relying on lowwage jobs in developing countries — at the expense of higher-paid workers in developed areas such as the United States and Europe. But that’s a glib and misleading simplification that doesn’t take into account the way in which outsourcing reinforces the generation of value-added jobs in advanced economies, while lifting the aspirations and living conditions of the world’s poor—in emerging markets such as, say, China. “Over the years, outsourcing has gone through many forms. Today, we think outsourcing is a global platform for transformation and growth, driven by integrated teams of high-value professionals, using advanced management practices and processes,� Corbett said. Meanwhile, the answers to our question
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INDUSTRY SURVEYS
about the prospects for the global economy within the next 12 months are heartening indeed and likely serve as a leading indicator that the economy will continue to improve. A clear majority—58.2%-said the global economy would “expand modestly.” After the economic carnage we’ve recently witnessed around the world, we think “expand modestly” is just fine and dandy. Look over the rest of our survey results; you’ll find them thought provoking and enlightening. If you’d like more details about this survey or if you have any comments about it, please don’t hesitate to drop us a line. Our most important reality check is you, the reader. ABOUT THE AUTHOR
John Persinos Our magazine’s Editorial Director. He formerly served as Editor-in-Chief of Aviation Maintenance magazine and Online Publisher for Aerospace & Security Media. He also served as Publisher and Editorial Director of AviationToday.com. You can reach him at: 301-385-7211, or Yo john hn.p .persinos@globalizationtoday.com.
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DISASTER PREPAREDNESS
When Disaster Strikes Here’s how to respond to emergencies that can wreak havoc on your global supply chain. By John Persinos The tsunami-triggered nuclear crises in Japan disrupted a wide range of global supply chains, casting a harsh spotlight on the inadequate disaster preparedness of many outsourcing companies. When unexpected disaster strikes a company, particularly an outsourcing firm with far-flung operations, decision makers often find themselves at a nexus, where supply chain management and emergency response intersect. Without a well-prepared roadmap in hand, the supply chain – and by extension, the company – can fall to its knees. Rapid globalization, proliferating air travel, environmental degradation, erratic weather caused by global warming, nagging health woes in the third world, and population overcrowding are all converging to present a host of security threats to business, ranging from political unrest to pandemic disease to wildfires and floods. Hurricanes, tsunamis or terrorist attacks that haven’t occurred for decades are forgotten. Even now, 10 years after 9-11, many outsourcing firms may be getting complacent about terrorism. Risk assessment and disaster preparedness are important parts of not forgetting.
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This article is designed to give outsourcing executives on the front lines the practical, how-to information they need to prepare their supply chains for the worst. At issue is nothing less than corporate survival. The stakes are high. Many leaders in Washington, DC acknowledge that there’s little the nation can do to prevent, say, a pandemic from quickly sweeping across the country, affecting all aspects of society and the economy. As supply chain managers adopt more and more responsibility for their companies’ overall performance, they are earning coveted seats at the managerial table where strategy is forged. With the emergence of interrelated international markets, companies now rely on tightknit supply chains that require optimal flexibility, efficiency and service. These supply chains tap into a broad array of global suppliers to achieve strategic business goals, but at the same time these disparate networks of offshore partners increase the odds of disruptions in regions around the globe. Companies must adopt holistic supply chain emergency response plans that take into account the preparedness of their
The Japanese nuclear disaster disrupted crucial supply chains in a host of global industries, especially in automotive and aerospace manufacturing.
DISASTER PREPAREDNESS
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DISASTER PREPAREDNESS
In 2005, Hurricane Katrina brought New Orleans to a standstill and seriously undermined the operational continuity of many businesses.
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suppliers and partners. It’s not enough to make sure your own company has its act together. A supplier’s lack of planning can create a chink in your supply chain armor. During a disaster, ensuring business continuity among a wide array of suppliers is important but problematic. There are a host of complexities inherent in working in an integrated supply chain. Outsourcing companies must have contingencies built in for each supplier, good processes in place for working with them, and exit clauses if they need to get out of a contract. They need to work with their supplier contacts as partners and foster efficient and trustworthy working relationships at different levels: IT,
security, and so on. The better integrated an outsourcing firm and the more contacts it maintains with suppliers, the faster it can respond. Supply chain managers need real-time information from the trenches that’s relevant and actionable. To glean this information, close communication and interaction among suppliers is key. You can develop these kinds of close relationships with a multitude of suppliers. Disaster preparedness also raises the question as to whether you have a sole supplier, or several of them. Each new supplier adds complexity to the planning process, which means a sole source supplier is the cheapest solution—unless
DISASTER PREPAREDNESS
disaster compels you to shut that link down. Regardless, getting all departments and suppliers on the same page also is crucial. THE FOG OF BATTLE
Manufacturing plants in Asia, energy supplies in the Middle East, and customers around the world boost the chances of catastrophic supply chain disruption. The ubiquity and resourcefulness of terrorists, the increasing occurrence and ferocity of hurricanes, and the looming specter of deadly flu all serve to exacerbate the realities of global capitalism. And yet, because investments in emergency response only show dividends when disaster strikes, it can be difficult to convince a company’s bean counters to devote sufficient resources to preparedness training when an upfront ROI can’t be shown right away. The fact is, it’s hard to get promoted within a company based on cost avoidance. When an adverse event gets underway, it typically generates conflicting information and it’s not clear what’s really going on. Different governments will issue different pronouncements, blogging will explode, and each blogger will opine about what the company should do. This highlights the value of early detection to determine the unvarnished reality of the emergency. If a stricken company doesn’t publicly announce the news right away and come clean from the get-go, it might be liable later. Nobody will think about the lack of information you had at the time — they will judge you by hindsight. Risk management extends beyond the four walls of a company, because so many risks extend beyond those walls. The most resilient companies have a corporate culture that empowers workers to act, especially during a disruption. Local workers have the knowledge and proximity to take action, because disruptions don’t wait for information to percolate up a chain of command.
The key to avoiding executive micromanagement is to develop credibility and respect long before a crisis occurs. If the outsourcing company’s executives trust their crisis team, the executives will have fewer problems delegating the response to the team. That’s why it’s a good idea to hold quarterly meetings to brief executives on continuity planning and the changing threat landscape. These meetings will engage your top executives, so that everyone understands their role in a crisis and executives feel comfortable with the people who will handle the emergency. This raises the issue of the thoroughness and competence of suppliers’ risk and crisis management. Companies may require suppliers to have risk and crisis management resources, but how will those resources function in an actual emergency? Moreover, you must always consider the potential for serious brand-damaging side effects, namely fear among customers. You can allay those fears both in one-on-one contacts at call centers and in mass-media channels. Crisis teams should be prepared to order the development of phone scripts for your call centers in addition to broadcast press announcements. Communications plays a critical role in mitigating the impact of a disruption. Consider communications messages for a range of internal and external stakeholders. For example, financial analysts and shareholders would need to understand how the crisis would materially affect the company’s finances. If a major product launch was delayed or the company anticipated extraordinary costs, this information would need to be communicated to analysts and shareholders on a timely basis. The greater the media firestorm, regardless of the actual magnitude of the disruption, the greater the crisis level. Media attention can also draw unrelated divisions of a company into the situation when local media contact them for comment.
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DISASTER PREPAREDNESS
In late May 2011, a major tornado hit the city of Joplin, Mo., leaving an estimated 151 people dead and scores of homes and businesses flattened. Disaster preparedness proved woefully inadequate, leaving the local economy in ruins.
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How your company communicates can be just as important as what it communicates. Companies can face a problem of trust in public relations when the disruption might involve risks to employees, customers, or the general public — company statements may be seen as self-serving even if they are factual. When getting messages out to the media is important, is it better to have the
PR person be the communicator, or the executives? It depends on the corporate culture. In a smaller company, the CEO might be the face of the company. However, one way to avoid the CEO managing minutia is for the CEO to understand that leaders invest 1% of their time on crisis planning, but when the crisis occurs, 90% of the time is spent on communications. The role of the CEO is to be the communicator, delivering the
DISASTER PREPAREDNESS
message, not being down in the weeds. When disaster strikes, strive for transparency in communicating with the press. With media scrutiny comes the inevitability of leaks. It’s better to tell the press what they want to know than to let the press control the process or have to fight misinformation later. Federal, state and local governments play major and varied roles in many disruptions. On the one hand, governments
provide many of the resources needed to restore public order and resurrect damaged public infrastructure. On the other hand, governments can worsen disruptions by either under-reacting or overreacting to a crisis. ASSUAGING ANXIETIES
Disrupted companies grapple with challenges with marketing and customer relations. Consumer goods companies face this problem on two levels. First, they must handle the disruption of product availability with distribution and retail partners. Second, companies need to cope with consumer reaction to disruption. Advertisements that explicitly mention the crisis but also reassure the public can be effective. Disruption for a company is often a disruption to employees as well. At the same time that the company is trying to recover its business, the workers are trying to recover their lives. Smart companies continue to pay their workers at disrupted plants, offer them fast-cash loans, and provide free counseling. Some companies are even prepared to create a trailer village with laundry and recreation facilities and serve three meals a day, as some corporations did during the Hurricane Katrina disaster in New Orleans in 2005. They also used a sevendays on, seven-days off work schedule so that hurricane victims could work on recovering their own lives. Companies face the problem of muddled jurisdictions and conflicted lines of responsibility when dealing with government. Gaining access to your own facilities can require negotiations with several different sets of authorities. Yet companies can work with government to accelerate recovery. Proactive relationship building with the relevant authorities helps a company know whom to talk to and helps smooth post-disaster restrictions and regulation. Companies can use a set of defined crisis levels as part of their emergency response processes. For example, the
World Health Organization (WHO) has a set of well-defined levels for diseases as defined by the geographic scope and number of people afflicted. Escalation can also be tied to specific trigger events prior to a potential or impending disruption. Some companies in Louisiana activate emergency procedures whenever a hurricane appears in the Gulf of Mexico. If the hurricane tracks toward the company’s assets, then the company escalates its preparatory processes in anticipation of a potential disruption. The techniques of resilience provide benefits beyond those unveiled by disruption. For example, after 9/11 one Wall Street firm implemented telecommuting as a means of handling potential disruptions to its New York offices. The firm justified its expenditure on secure IT systems not just on the basis of risk management, but because the policy also supported diversity and workforce retention goals -- new mothers could return to work without leaving home. Telecommuting started as an emergency measure, but now it’s a normal office policy that employees greatly appreciate. This experience highlights the fact that, in every disruption, there is opportunity. ABOUT THE AUTHOR
John Persinos Our magazine’s Editorial Director. He formerly served as Editor-in-Chief of Aviation Maintenance magazine and Online Publisher for Aerospace & Security Media. He also served as Publisher and Editorial Director of AviationToday.com. You can reach him at: 301-385-7211, or Yo john hn.p .persinos@globalizationtoday.com.
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BUSINESS PROCESSING OUTSOURCING (BPO)
How in Foster Innovation in BPO In Business Processing Outsourcing (BPO), it is the innovation of a particular country’s workforce that primarily attracts global enterprises. Here’s how to measure and maintain innovation in BPO. By Dr. Vinny Caraballo, Mr. Tony Bynum, Dr. Greg McLaughlin SEARCHING FOR DEFINITION
Innovation is a topic that at times can be as confusing as it is interesting and relevant in today`s knowledge based economy. The concept of innovation generates many definitions when viewed from an individual perspective. This can generate ideas and beliefs many of which could be rejected as even describing innovation. It is a complex concept, but one needed in the current business environment. Essentially, there appears to be no standard view or response. People interpret innovation differently, and because of the importance it has for many organizations, Global Targeting launched “Project Impact�. Project impact is a global study to understand attitudes, opinions, and disposition of different cultures towards innovation, in an effort to explain this organizational success factor, and
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provide some definitional clarity. To better understand innovation is to view it from a cultural perspective. For some, it is developing something completely new. While for others, it may be taking something that already exists and applying it in a different manner. But understanding how cultures view innovation has been mostly a matter of opinion and conjecture based on individual assumptions, second hand information, or even an experience that may have been isolated in its nature. There is minimal scientific or empirical evidence that links culture and innovation that can be used to help explain the relationship. Consequently, Global Targeting
Is it reasonable to assume that all people do not see innovation the same way?
decided to go around the world to gain some insight, perspective, and clarity that may lead to improving organizational innovation efforts. CULTURE MEETS INNOVATION
Culture is a powerful and important human element that defines civilization and societies. People are shaped by their environment and how they adopt to its challenges. Their influences come from their geographies, language, value system, and other factors that are different in various regions. Societies will invent, create and adapt to solve problems that are unique to them. This shapes their thinking in a systematic manner and will affect the manner in which they approach problem solving. Furthermore, these approaches have been passed down through formal or informal knowledge systems that become
BUSINESS PROCESSING OUTSOURCING (BPO)
institutionalized throughout the decades. Occasionally and often with great fanfare a new external variable emerges that may require modifications or adaptation to a way of thinking, or presents an opportunity to capitalize on those things in which the society has been able to excel. Technology and globalization are two of those external stimuli that are now impacting how business is conducted across the continents. Globalization has spread significantly in the past decade. It is now an essential part of many large businesses strategy, and a realistic growth engine for many mid size firms. This is reshaping the competitive landscape for companies seeking to expand revenues from different markets, as well as providing access to more destinations with a workforce that may be able to yield a competitive advantage. Technology is the core enabler of this cross continental outreach, but in outsourcing
and in particular Business Processing Outsourcing (BPO), it is the workforce of a particular country that primarily attracts global enterprises. Consequently, skills and innovative tendencies are human capital assets valued by these entities. Many outsourcing service providers and calling center companies operate on a “Follow the sun� philosophy. That is, they will locate customer support activities in different parts of the world so that they can service their clients on a 24 hour basis. There are numerous factors that must be taken into account to select the best blend of skills, time zones, and cultural alignments that will provide the best fit. But at the core of all these alternatives is the selection of the right workforce, and in particular, being able to leverage its innovative capabilities. The global workforce is composed of people with diverse cultures which have their own belief and values systems. This
is a consequence of the environment that has shaped belief systems for centuries to accommodate ways of life. Creativity and innovation in the work force emanates from people. Innovation has traditionally been studied from either a practical or methodological approach. Rarely is culture considered and when it is, it is only in terms of organizational culture. Although this is important, it does not consider that culture evolves from a geographic or ethnic perspective. For a multi— national corporation, the best method of identifying cultural innovative tendencies may be through a geographical perspective first, followed by a deep understanding of the ethnic attributes that define societal culture. Diversity and inclusion in many global organizations continue to restructure the workforce to better match its markets. Although it is healthy to bring in people with a diversity of thought, beliefs, and
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BUSINESS PROCESSING OUTSOURCING (BPO)
Cognition and modality concerns itself with “how� a person processes information and ultimately creates meaning from the data collected. It can be divided into two groups.
Topics Cognition & Modalities
Factors & Drivers
ABOUT THE AUTHORS:
Dr. Vinny Caraballo is the head of Global targeting, Core Faculty at Capella Univ Un iver ersi sity ty and and ffou ounder of Project Impact. A Certified Outsourcing g Pro Professional he hass co ha cons nsul ulte ted d wi w th companies around the world in strategyy ex exec e ution and business development. Dr. Greg McLaughlin is a Ce Cert rtifi ified d Master Black Belt in Six Sigma, Certifi fied ed Quality Engineer and ISO 9000 auditor, and a Fellow with the American Societyy of Forensic Examiners. He has held a number of executive positions in multinational companies and owned a successful Knowledge Management business as an entrepreneur. His consulting experiences focused on quality and process improvement, statistics and research methods. His present position is a Core Faculty for Research Methods at Capella University Mr. Tony Bynum has worked with companies and organizations to design, develop, and manufacture innovative products and unique design solutions. His experience includes strategy development, implementation of product development information systems, retail strategy and user centered design strategy.
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approaches, it is even more important to capture their beliefs as these dictate how a person will react and behave. Innovation is certainly one of those key organizational drivers. Is it reasonable to assume that all people do not see innovation the same way? Perhaps, but if one assumes this is accurate, then how can one identify the different approaches to innovation? Thus, Global Targeting set out to provide some clarity around these questions.
Intrinsic Factors
Pro Principles
The curren on t impacti
THE SEARCH BEGINS
We began Project Impact in the United States by surveying Latino professionals. This segment was selected because it is the fastest growing non dominant group in the country, and will represent 31% of the work force by 2050, according to the US Census (2006). This group should also contribute significantly to the knowledge worker pool. Companies that want to understand how this group views and approaches innovation will find benefits in how they are applied to problem solving and product development. After surveying hundreds of these knowledge workers, we identified four common factors that help us understand how this group views innovation. We found that framing these factors into a more practical context helped us form an image that defines innovation for this demographic, and has potential for multicultural comparisons. These factors have been developed into an Innovation Value Model that can help explain how cultures define themselves in their innovation efforts. It may also help a workforce understand how they can leverage their strengths to compete on a global stage, as well as helping corporate organizations deploy their innovation efforts more effectively in other geographies or multicultural settings.
Abstrac
THE INNOVATION VALUE MODEL
Through the combination of statistical evidence and design thinking methodology we developed the Innovation Value Model (IVM) that is shown in figure 1. First, we applied empirically based research methodology to find commonalities that could explain the data. Using a Principal Components Analysis and a Varimax Rotation with Kaiser Normalization, we were able to extract four factors. We identified them as Problem Framing, Novelty and Utility, Ambition Level, and Creative Destruction. We then framed them in a hierarchical model and established them as the foundational principles for defining cultural innovation. Cultures will vary on the level of commitment and involvement to each of these factors. Managers can use these as levers when considering destination selection, team integration, resource allocation, and setting innovation objectives. The model can be best explained in a hierarchical manner.
BUSINESS PROCESSING OUTSOURCING (BPO)
Defining Elements of Innovation
ct: requires the ability to think in an abstract and conceptual manner.
c Factors: factors or considerations that inform or s & Drivers define he innoyatoon itself (the 054 01 the innovation).
blem Framing
Concrete: the ability to make sense of current conditions and take action based on measurable and empirical evidence. Extrinsic Factors: outside or external factors that describe, define or profile the conditions that inform innovation (the conditions in which the innovation lives.)
Novelty & Utility
Ambition Level
Creative Destruction (continuous improvement)
act of reframing nt conditions based he PASTEL forces ng the environment
The ability to conceive and deliver solutions that are distinct and deliver newly recognized value to the market or end user(s).
An observable (quantifiable) propensity towards risk.
The ability and belief in regular and proactive obsolescence of one’s existing solutions in an effort to outpace competitive threats.
Spectrum Cognitive modalities Understanding the thought process of people and all aspects pertaining to perception, memory, judgment, and reasoning, as contrasted with emotional and volitional processes is important to the innovation process. In configuring the global workforce identifying these patterns can help in leveraging innovative talent. Abstract - used to reflect on ideas related to but separated from actual occurrences, events or relationships. Abstract processing involves looking beyond what’s empirically observed or experienced. Abstraction seeks meaning and opportunity in the “idea” of something thus opening-‐up the field possibility for something new and novel. Abstraction
After surveying hundreds of these knowledge workers, we identified four common factors..
applies the use of metaphor and analogy to derive value. Concrete - the ability to make sense of current conditions and take action based on measurable and empirical evidence. Concrete processing seeks meaning in what is actual and real. Concrete processing finds value in what is provable, known and understood by others. Concrete processing uses data, statistics and empirical evidence to derive value and meaning. Factors and Drivers Factors, attributes and drivers, describe character and context of the solution. This is a matter of understanding whether the factor is organic to the culture or is it an adaptation to environmental elements. Intrinsic Factors factors or considerations that inform or define the innovation itself (the DNA of the innovation). The innovation or solution is often the result of understanding and analysis of “intrinsinc” factors.
The intrinsic factors include the methods and means (tools) employed to arrive at a course of action for solving a problem. When used these “tools” begin to give shape and definition to the problem as well as a course of action for addressing it. Intrinsic factors provide the “what and why” behind an innovation. Extrinsic Factors - outside or external factors that describe or define the principles that play upon or inform how the innovation is carried out, (the conditions in which the innovation lives). Extrinsic factors are the considerations made for the constraints and conditions that exist surrounding the “intent” behind the solution (or innovation). Extrinsic factors inform the “how” behind an innovation. Intrinsic and Extrinsic factors live within all innovation efforts. Without the other, solutions would be formed in a vacuum. Best in - class innovation activities draw upon an understanding or grounding
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from each of these areas. Metaphorically, Intrinsic and Extrinsic factors could be viewed as “content� and “context� respectfully.
Ambition is an (quantifiable) towards risk based resources and advantage.
observable propensity on position, competitive
PRINCIPLES
Principles provide definition and clarity for organizing attitudes and beliefs that comprise innovation activities and initiatives. Problem Framing (Intent) Proprietary analysis and insight allows Innovators to craft a unique point of view that sets vision and inspires action. Problem framing is intended to be descriptive rather than prescriptive. It’s intended to form the development of forward looking strategies and initiatives. Because the frame is proprietary it informs the use and leverage of core competencies and competitive advantage. Novelty and Utility (Desirability) The ability to conceive and deliver solutions that are distinct and deliver newly recognized value to the market or end user(s) in a way that is unique and sustainable. Creativity and imagination are ornerstones of an abstract thinking society. A new idea is innovative, but can be very valuable in problem solving or development of new processes and products. Creative thinking and looking for something completely new is innovative. It would appear that quite a bit of emphasis is placed on processes and methodology to stimulate groups and to maximize their creative capabilities. Individual idea generation and acceptance is also highly regarded in such an environment. The ability to conceive and deliver solutions that are distinct and deliver newly recognized value to the market or end user(s) in a way that is unique and sustainable. Ambition Level (Capacity) When some practice, process, or product is recognized as being the best, it is considered innovative. Perception that
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an innovation can be something new or improved is valuable as long as there are some measurable and visible criteria. Therefore, “Going for the Best� can be in terms of performance or recognition. What needs to be determined is who will make the judgment. Creative Destruction (Strategy) The introduction of change into any environment can be viewed as a disruptive element. This disruption forces rethinking of processes and perhaps repositioning of products. Often giving products a new purpose is a method of innovation without radically inventing something new. The workforce that can make these changes can leverage processes and adapt them into new and exciting life cycle extensions. Reinventing existing products and processes is also applicable here. Developing and living with the comfort of an environment that is constantly changing is the key. SEARCHING DIRECTION
FOR
INNOVATION
Every journey has its instruments and tools that help the voyager find their way. Just as navigators and pilots are guided by a compass, so can the global firm be guided by the implements that assist them in finding their way to the right destination. Our research has enabled Global Targeting to begin developing tools that may help global managers find the destinations best suited for their innovation needs. These tools can also help in maximizing their current work force to yield better innovation results. In a practical context, companies can use the information being populated in this study to leverage their existing workforces and supplement it as well. For instance, if their product design teams are located in countries that primarily have an orientation towards adaptation and the need exists for a more creative approach, then the decision making process can be adjusted accordingly. The IVM will give
BUSINESS PROCESSING OUTSOURCING (BPO)
them an evidence based approach to justify and resource accordingly. Designing Knowledge Management Systems and incorporating this data becomes a critical strategic planning component. WHAT DOES THIS ALL MEAN? Innovation has emerged as a key incentive for destination selection, team selection, staffing, and global collaboration. Although cost containment is still very important, at some point many countries may lose this as a competitive advantage. In a knowledge based economy, innovation will be the key to successfully competing. Innovation will contribute to product enhancement and new product development. But we have to know how innovation is defined and viewed. Once
this has been identified, a company can structure its workforce to capitalize on the particular strengths identified for a specific location. Conversely, countries can also leverage their particular strengths to market their capabilities, and attract firms seeking a specific innovative orientation. The global workforce is a conglomerate of people with differing backgrounds, united by the objectives that are established by their organizations. Achieving innovation success appears to be high on the priority list for most organizations. The ones that can identify innovative character and meaning, can capture it through a sound knowledge management strategy, and will be able to manage their teams with a differentiated edge. Global Targetingt believes it is through the work being done in “Project Impact� that a firm may be
able to put together the tools, methods, and strategy to achieve their innovation objectives. This will allow companies to structure their teams according to what they do best and resource them appropriately. NEXT STEPS This seminal study has yielded some very enlightening results in our quest to understand culture and its impact on innovation. Currently we are actively engaged in researching other regions of the world to give this framework meaning and purpose, and are also forming collaborative partnerships to expand our global reach. We expect that our work will benefit corporations as well as scholars and we look forward to sharing our results.
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RECRUITMENT
RECRUITMENT TODAY – PLUGGING INTO TALENT WILL FRY YOUR MIND! By Draza Zachary Misko
This is an excerpt and preview of an upcoming whitepaper to be released by KellyOCG in August 2011. Let’s face it, regardless of good or bad economic times, A-level talent is hard to find. The recent global recession has only exacerbated the situation. And while A-level talent has been riding out the labor market ice age in an office or a cubicle somewhere, technology and the Internet have been changing the game of recruitment at a dizzying pace. Technology and the Internet have made the job of sourcing A-level talent more complex, turbulent and inconsistent than ever before. Take the overwhelming abundance of technology and online talent resources and compound that with major lulls in global labor markets and hiring freezes across numerous industry sectors, and companies are shell- shocked. Shaking in their boots, stammering for words. You get the picture. So how are companies embracing and adapting to these game changers to recruit A-level talent? Truth be told, not very well, if at all. But that’s not to say they aren’t trying. However, here’s what companies must know in order to stay relevant and keep their talent pipeline brimming. A-level talent is already plugged into new technology. They are savvy and comfortable with using job-search resources via the Web. It’s not an exception to the rule. It is the rule. These folks are occupationally mobile. What does that mean? They are the antithesis to traditional labor concepts. And as you read this article, they are already roving the Internet, tapping colleagues and looking for new opportunities. So how do you find and acquire them? The simple answer is: Get on the Internet. And that’ll get you as far as a slapped face and bruised pride. The true answer is deeper and messier than that. You are going to have to fully commit to plugging into technology and the Internet to source great talent. In addition to technology – people in general have changed. People want personalized experiences in their job search, faster and easier methods to apply and constant communication throughout the process. You are going to have to build a recruitment toolbox that exploits your website, job boards, social media and networking, online print
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media and other online tactics coupled with traditional recruitment methods like print, job fairs, cold calling, networking and more – as recruitment is not accomplished through technology alone in your quest for A-level talent. And it won’t be easy. However, by engaging these new mediums and tactics to source A-level talent along with the tried and true recruiting fundamentals, you will build the visibility and credibility of your employer brand. And when you do that, the tables are turned: A-level talent comes looking for you. Efficiency within the talent acquisition, coupled with improved customer satisfaction and cost savings are also key objectives, now more than ever. For those companies looking to find ways to achieve all three, understand and evaluate LEAN methodology and how it may be incorporated. While the Lean movement within the back office remains nascent, its adoption by the manufacturing community has been ongoing for decades. Toyota, the global carmaker whose production system on which the term “Lean� was based, leveraged this approach to grow itself into the world’s leading automobile manufacturer. The Toyota Production System (TPS) is so effective that it has spawned an entire industry based on its study. Today, the Lean philosophy has been adopted by organizations around the globe, with thousands of trained disciples practicing its methods. The benefits to HR have been documented. According to a study conducted by two researchers at Coventry University , Lean principles applied in a pilot project to improve candidate recruitment at the
RECRUITMENT
institution helped to significantly raise outcomes. Involving staff from the university’s HR recruitment team, external recruitment agencies, IT services, and customers in library services, academic faculty, and student services, the project netted a 20% reduction in overall time to approve and fill staff positions. More importantly, the exercise also helped HR identify non-core, ancillary activities that occupied their time, enabling HR to simplify and expedite the entire process. What exactly, then, is the Lean philosophy and how can it be leveraged to improve corporate recruitment? In essence, Lean manufacturing is a philosophy in which practitioners are committed to continuous improvements using critical tools to help them identify and eliminate waste and irregularities in their processes. Although it stemmed from the automotive shop floor, its fundamental tenets can be applied to the back office also since all organizational activities involve some degree of waste or duplication. Just as this management approach is capable of turning out a better car, when applied to recruitment practitioners can expect a more efficient and responsive process for finding candidates. Ultimately, because practicing organizations reduce waste and non-value-added activities, they also cut costs. It all starts with Value Stream Mapping (VSM), a process in which managers examine all activities that take place to produce a product or service. As part of the Lean philosophy, tasks that do not create value for the customer are considered wasteful, so in drawing up a VSM, practitioners identify “waste” to be targeted for elimination.
In recruitment, for example, an organization may duplicate efforts when a candidate slate is presented to the hiring manager. Some companies employ multiple applicant tracking systems that might require the same information to be input several times to meet customer needs, compliance requirements, for data retention, etc. This duplication clearly generates waste that adds no value to the hiring manager or the candidate. By drawing up a comprehensive VSM, Lean practitioners address all the unneeded efforts in the recruitment process. This allows team members to produce a future-state VSM free of the identified waste. Visually, it provides an organization a map to follow. If a VSM is the roadmap for the journey, then the 5S’s might be considered gas for the road. These are five essential principles for operating a Lean environment and to help ensure process consistency. They are: t Sort – separation of necessary items from unnecessary items (identifying waste); t Set In Order – arrange items according to how they will be used (an enabler of efficiency); t Shine – maintain work area for sorted and set-in-order items (maintaining workplace hygiene); t Standardize – ensure sort, set-in-order, and shine steps are consistently followed (reducing process variations); and t Sustain – maintain and improve sort, set-in-order, shine, and standardize steps (ensuring Lean efforts are ongoing).
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Industrialize and innovate By Jo G. DeBlaere, chief operating officer—Accenture and Jeffrey D. Osborne, chief performance officer—BPO Industrialization: It isn’t a pretty word, especially when spoken in the same breath as “services,” a word that carries connotations of customization and a personal touch. After all, “industrialization” shows up for work not in a business suit but in a pair of overalls. But then, when applied to the outsourcing of services and business processes, that’s precisely the source of its value. The industrialization of any activity represents a relentless drive to discover the essence of how that activity is optimally done, and then to do it in exactly the same way every time. It breaks a task or capability into smaller components, optimizes them, eliminates redundancies, automates and standardizes wherever possible, and then drives the work itself to the most costeffective and competent workforce available. The result is that companies get to mitigate the biggest threat to a business: the unknown. Outsourcing has succeeded because of its ability to reduce risk, drive standardization, increase productivity, and improve reliability and predictability within the domains it touches. In other words, where outsourcing has been successful, it has been so because of its ability to industrialize assets, capabilities, functions and tasks.
Not just standard work, but the right work Industrialization is often thought of as a way to standardize production or processes. That’s part of the picture, but only one part. Using standardized production methods, a company could make the very best concrete lifejacket in the world—faster, cheaper, and better—but it obviously wouldn’t have any practical value. In much the same way, a company can standardize IT infrastructure and applications using a one-to-many platform or through rationalized technologies. But unless standard technologies are aligned with the correct business processes, the standardization does not produce sufficient business value. True industrialization goes closer to the heart of the matter—taking a company beyond “standard” work to efficient and effective work.
But just how does industrialization work exactly? The companies that have been most successful in driving business value through industrialized outsourcing of business processes have leveraged the following principles. Apply lean and Six Sigma principles to the services environment The majority of companies do not spend the time or money to look in detail at the efficiency of their non-core business processes. An outsourcing provider, however, can give these kinds of processes an end-to-end review and apply so-called “lean” principles and Six Sigma approaches to drive time and waste out of all the handoffs, and to eliminate needless variations when they occur. To innovate, get the noise out of the system In an outsourcing environment, innovation is actually rooted in industrialization. The inefficiencies in processes and functions— redundancies, delays, performance issues, multiple operating models, and the like— constitute “noise” that has to be eliminated if the voice of innovation is to be heard. If a company can get the operating environment stabilized and running optimally, it can look beyond today’s urgencies toward the innovations of tomorrow. It will also have savings generated by those efficiencies that can be plowed back into making new ideas actionable. Focus on what’s common, not only what’s different Often, the biggest sticking point that companies face internally as they move to adopt advanced industrialization principles is the belief that their operations are somehow different from the norm. The key is not letting pockets of uniqueness get in the way of improving those parts of the business that really can benefit from solutions and approaches that have been tested in the fires of experience with multiple companies. Industrialization lets a company use common approaches where those are workable, and particular ones where those are appropriate.
Measure outcomes, not inputs Challenging though it may be, executives often need to change their management mindsets when working with an outsourcing provider. If they try to stay “down in the weeds” and manage the inputs—every detail of how the process is delivered—they may simply add more noise to the system and disrupt an otherwise smoothly flowing industrialized process. The answer to the problem of managing inputs is simply stated but sometimes difficult to achieve: trust. The establishment of trust is essential to driving greater value from industrialization. Trust the process, not only the people What a company relying on an outsourcing provider really needs to do, in short, is put faith in the reputation and qualifications of the provider’s industrialized model, not simply the personalities who designed or are implementing the model – trust the process, in other words, not just the people.
Conclusion Many business activities and processes now being industrialized within contemporary outsourcing solutions were once considered out of the reach of effective management. But industrialization is enabling executives to look with more penetrating insight into their operations and processes, and freeing their organizations to think and act in more innovative ways. That which can be made repeatable and predictable needs to be made so, leaving the considerable space that remains as the foundation from which to innovate and grow. This article is based on ‘Industrialize and Innovate,’ which originally appeared in the January, 2010 issue of Outlook, an Accenture publication. Used with permission.
You can read the full article at: www.accenture.com/ industrializeandinnovate
Š2010 Accenture. All rights reserved.
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RECRUITMENT
These five principles set the foundation on which Lean organizations execute their operational plans. Each step helps to ensure that workflow is not compromised by unanticipated problems. And when issues do arise, all team members pitch in to resolve them. When the 5S concept was first developed, it was aimed at improving production flow on the manufacturing floor. However, these ideas can be applied with equal success to recruitment, where unnecessary activities slow hiring and hinder delivery of services to customers. Each of these tools facilitates waste elimination and minimizes process variation. Let’s think about the 5S’s in recruitment. How do we take it from the manufacturing floor to the office? Well the floor is your desk, where you do your work. It is a sustainable solution. The principles have been around forever and it’s a matter of how do you apply them and how do
23 HR functions currently outsourced, by region 3% 3% 5%
Performance management
4%
Compensation
24% 6% 18%
HRIS
6% 16% 18%
Benefits
12% 41% 27% 27%
Training 18%
58% Payroll
42% 53% 69% 67% 71%
Recruitment 0%
20% EMEA APAC AMERICAS
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you challenge yourself to continue applying these principles. As the 5 S’s are implemented, organizations typically assemble “kaizen� teams— stakeholders who help sustain and administer continuous improvements. Kaizen, which simply means “improvement� in Japanese, “is the practice of making changes, monitoring results, and making adjustments as needed.� Without this important component, Lean would be unsustainable. Because of the collaborative environment it creates, Lean encourages transparency into every team member’s role so others can weigh in with suggestions on how to resolve a particular colleague’s difficult issues. Furthermore, individuals are highly accountable for their work but the culture is less about blame than about problem-solving. As well, it allows for best practices to be visible and thus shared. Consider LEAN and learn more through a quality organization such as ASMI, a LEAN consultant or your outsourcing provider. Many companieshave realized LEAN can be a valuable and cost effective tool within their HR organizations. Another option is to engage in a recruitment process outsourcing service provider with a strong Lean background capable of passing on their knowledge. This enables the hiring organization to observe Lean in practice without having to disrupt ongoing recruitment work. Using its Leanembedded processes, such a provider can help clients to ease into the transition and eventually work in lock-step under the same Lean culture, sharing all lessons learned and a vision for a future state. When considering such a relationship, remember to ask the following about the vendor:
t How long has the provider practiced Lean in its own culture? 40% 60% 90% t How has it applied Lean to other clients to help improve their recruitment efforts? t Does the provider have sufficient expert resources to help with your implementation? Source: Global RPO Report. KellyOCG. 2010.
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White Papers p t What sort of knowledgebase does it offer for your use? These and other questions will help you identify the best Lean vendors to fit your needs and who can help you successfully bring about a sustainable cultural shift in your workplace. “As you go through the Lean journey, some things might not seem like they can make a huge impact, but over time—months or years later—that’s when you really understand the impact they have. We started using LEAN in 2005 and continue to include LEAN within our own practices as well as our clients. You have to have patience,” advised Candy Lewandowski, VP and Global Practice Lead, KellyOCG. The decision to outsource is growing in popularity, with the proportion of global firms outsourcing all or part of their HR function standing at 46 percent in 2010, up from 43 percent in the previous year. Organizations in Europe, the Middle East and Africa (at 56 percent) are more likely than those in the Americas (46 percent) and Asia Pacific (29 percent) to outsource HR functions. But what HR functions are global firms outsourcing? Check out the chart on the left. Yes, here’s the most frightening truth of all: In order to find A-level talent and build your employer brand, you must be engaged and active in all of these tactics and opportunities simultaneously, around the clock. And let’s be honest, if you had the time, money, resources and know-how to do this, you would already be doing it. Maybe you’ve tried some of these tactics to no avail. But chances are you need help. Increasingly, companies of all sizes are shifting their focus to outsourcing the talent acquisition function. Recognizing the need to take a more strategic approach to their role within the organization, HR professionals realize they cannot (and should not) be all things to all people. This doesn’t mean quitting or that the game is over. Outsourcing allows an organization to manage and participate where needed, while still providing maximum flexibility. Companies also need to consider how they can best add value. The complexity of the HR landscape means that many HR professionals are becoming bogged down in transactional tasks, at the expense of more strategic priorities – acquiring A-level talent. Much of the work around hiring is largely tactical, but it is also increasingly complex and moving
beyond the capacity of some HR managers. These are the type of jobs that are ripe for being outsourced. Outsourcing some of the functionality can free time and resources for HR people to start to look at how they are meeting more important and strategic corporate goals. An outsourcing provider should be able to demonstrate their sourcing strategy and capabilities, provide long term (2 + years) client references to demonstrate their ability to sustain long term customers. If global solutioning is important, seek a provider that has a global presence to ensure they can effectively adopt the global culture into your recruitment strategy. A provider that is present in all regions, has established relationships and is visible in a large variety of markets is key. Companies need a vendor who’s plugged into understanding their industry landscape, the competencies a candidate must have to succeed in their organization, and the quickest way to beating their competitors to the best talent. ABOUT THE AUTHOR
D. Zachary Misko, Vice President, Kelly Outsourcing & Consulting Group (KellyOCG). Misko works with Fortune 500 companies throughout the world to develop and implement processes that improve and drive Human Resources and workforce solutions. He is currently a member of the Society of Human Resource Managers (SHRM) and the National Association of Personnel Services (NAPS). He is a past-president of the metro Milwaukee SHRM chapter. He is certified and is considered an industry expert in applying “Lean Methodologies” in the HR/talent acquisition process. Zachary is a Senior Executive Board Member of Best Practice Institute (BPI) and serves on the Advisory Board for Enticelabs.
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TECHNOLOGY REVIEW
In a June 29 editorial, “The Cloud Darkens,â€? the New York Times wrote: “The Internet is getting scary. In recent weeks, hackers known as Lulz Security attacked the Web sites of Sony, the United States Senate, the C.I.A., PBS, among others. ‌ A survey earlier this month by the Ponemon Institute found that 9 out of 10 companies had suffered an online attack in the last 12 months.â€? The editorial went on discuss how “Technology professionals are getting cold feet about moving more operations onto the cloud.â€? If we are acutely vulnerable to attacks from outside, we seem to be doubly vulnerable to insider attacks. On the same day as the New York Times editorial, the Times of India published an article, “Indian IT, BPO face threat from insidersâ€? which discussed a survey by PricewaterhouseCoopers and the Data Security Council of India.
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“India’s growing outsourcing sector faces security threat from company insiders,� they reported. “Nearly 90% of all security breaches at 13 small, mid-sized and large IT/ITeS companies in 2009-10 was an insider job.� What are governments doing to solve the problem? Unfortunately, their efforts may be making things worse. Privacy regulations such as those enacted by California and many European countries aim only to make security breaches extremely expensive for enterprises. For example, if a bank in California is hacked and its client data stolen, the firm would have to disclose that theft and make restitution to its clients. This could easily have a billion dollar impact on its market valuation. If however, the stolen data did not include information covered by privacy laws, the financial impact would be minimal. The intent of such laws is of
course to ensure that enterprises would be willing to spend appropriate amounts of money to protect their clients’ data. Other regulations place restrictions on what companies can do with their client data. For example, France and Canada have restrictions on whether their citizens’ private data can be taken outside their national borders. Such regulations make offshore outsourcing impossible and force the creation of regional as opposed to global Cloud solutions. Some experts feel that such privacy regulations may in fact be a backdoor way to introduce barriers to global trade in services. At te same time, developing economies that primarily act as the provider of global services may end up with restrictive regulations. Perhaps most notable are the recent data privacy rules enacted in India and the upcoming bill on the ‘right to privacy’ that is up for consideration by
TECHNOLOGY REVIEW
the Indian Parliament. A Washington Post article, “India data privacy rules may be too strict for some U.S. companies” states, “Data privacy rules enacted last month in India are now alarming some U.S. companies, which worry that they may be too restrictive. … Some [business leaders in India and the United States] say they are far more restrictive than American and European data privacy laws, and may put off customers.” A Times of India article, “Govt to address US doubts about IT Act” expands on these concerns, stating: “legal experts and companies believe that under section 43A, an Indian IT/BPO company that enters into an outsourcing contract with, say, a US bank, would have to obtain written consent from each client of the bank whose information is sought to be collected. Such a consent requirement will potentially put a huge additional financial
burden on these companies and thus affect their profitability.” Of course a significant source of these concerns is the fact that parts of Indian law are quite ambiguous and remain unclear. There is reason to believe that the regulations will be clarified and onerous regulatory constraints removed. In fact, the Washington Post article goes on to say, “India’s deputy minister for information technology Sachin Pilot dismissed the fears and said that the law addresses a longpending demand of the IT industry for a legal framework for data protection. More than 2.8 million Indians work in the IT industry, and 9 million people are employed indirectly. ‘We are aligning ourselves with the global best practices. This law should end all the fears that any global company has about data being unprotected in India,’ Pilot said. ‘Why would we bring a law that will kill our sunrise industry?’”
The combination of the risk from hackers, the risk from insiders and the fragmented regulatory environment indeed seem to justify the title of the New York Times editorial. But is the Cloud really darkening? Are privacy concerns going to stymie the growth of Cloud Computing and Global Outsourcing? As countries like France and Canada continue to restrict the movement of privacy governed data outside their borders, will this lead to the growth of region or even country specific clouds instead of truly global Cloud Computing or outsourcing? For the editors of Globalization Today, this is an especially unwelcome prospect. Albert Einstein famously said, “We can’t solve problems by using the same kind of thinking we used when we created them.” For fresh insight, we decided to reach out to Arijit Sengupta, the Chair of the Cloud Computing chapter of the International
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TECHNOLOGY REVIEW
Association of Outsourcing Professionals (IAOP). A graduate of Stanford University and the Harvard Business School, and the lead inventor on seven patents related to outsourcing and Cloud Computing, Arijit is one of the most non-traditional thinkers around. In fact, the Silicon Valley based company he founded, BeyondCore, was selected the Most Innovative Cloud Provider of 2010 ahead of more than150 firms. When asked about the concerns raised by this article, Arijit flashed a big smile and said “Oh, we solved that one already.� He went on to describe the patented SplitSecure solution recently released by his company which was selected among the top three Cloud Infrastructure solutions at the GigaOm Structure conference. Arijit explained that SplitSecure enables companies to fully realize the benefits of the Cloud and of Outsourcing by eliminating regulatory and security risks associated with processing privacy-sensitive data. Clients often refuse to outsource or Cloud-enable privacy-governed data due to concerns regarding privacy regulations. However, most information within privacy-governed documents does not actually need to be kept secure. Unnecessarily trying to secure the entire document prevents companies from adopting significant cost saving or strategic opportunities from outsourcing and Cloud Computing. SplitSecure divides each transaction into multiple pieces so that each piece can be processed separately and securely. It determines the split after analyzing the
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business transaction, such as a patient record, in light of all applicable constraints. These include (a) regulations and other information security rules, (b) processing rules that require access to certain combinations of information and (c) the relative effort required to process different fields. SplitSecure then automatically splits out the maximum subset of information that can be safely placed in the Cloud or outsourced to a low cost location without violating any regulations or other information security constraints. The “split� is automatically optimized so that the most ‘effort’ is offshored or placed on the cloud. For offshored transactions, the optimization may be based on the manual effort required to process different parts of the transaction and their relative frequency of occurrence. For Cloud-based storage the optimization may be based on the expected size of different fields of data as well as their expected frequency. After each piece of the split transaction is processed, it is then securely reassembled, avoiding any concerns about vulnerable data being mishandled. SplitSecure can also automatically handle the interactions of multiple regulations as long as each individual regulation has been mapped in the system. If data collected from France is processed in Canada remotely from India, the combination of regulations can be automatically computed. With traditional methods, an army of analysts would have to manually figure out how the regulations interacted and what
the combination of applicable regulations required. As regulations change, only the changes need to be mapped in the SplitSecure system and all corresponding impacts can be automatically figured out and applied. Why does this matter? Recall the bank that was going to face a billion dollar risk if its privacy-governed client data was stolen. With SplitSecure, the same attack results in minimal impact. Arijit explained that “All SplitSecured information is as secure as the location where the mapping key and certain retained information is stored. This critical information is typically 10% of the overall data. As long as this 10% critical information is kept completely secure by the client, the remaining 90% can be placed on the cloud or provided to an offshore outsourcing provider without risking privacy regulations. Even if the less secure information is hacked or an insider at the outsourcing provider steals the information accessible to it, no privacy regulations are triggered.� Thus, the bank never faces the billion dollar risk and can take the optimal financial decisions regarding outsourcing and Cloud Computing. This technology would also enable BPO providers to split outsourced transactions such as credit card and loan application processing or insurance claims such that the majority of the work can be done in cheaper locations without violating privacy regulations. Analysts estimate that approximately $50 billion of potentially offshore-able work has to be processed
TECHNOLOGY REVIEW
within EU, Canada, etc. due to privacy regulations. Arijit claims that about 60-80% of this work could eventually be offshored to lower cost locations by using SplitSecure. In a simplified example, a claim may contain (a) identity information such as first name, last name and an identity number such as Social Security Number, (b) medical information such as existing medical conditions, symptoms, diagnoses, and treatments, and (c) financial information such as fees, co-payment rules and insurance payouts for the specific patient till date. The identity information may be kept confidential by the client and the medical information can be provided to an offshore provider for processing, whereas the financial information can be processed by an onshore provider if the relevant regulations so require. After the offshore provider confirms that the treatments were appropriate given the other medical information, and the onshore provider calculates the appropriate payment amount based on the financial information, the client can combine the two pieces of processed information and use them to process the claim. Arijit claims that SplitSecure offers two key advantages over existing methods like tokenization that try to solve similar problems. First, it can automatically figure out the interactions between different relevant regulations in a case such as a French patient’s data stored in a Canadian server being accessed from India. Second, it can automatically optimize the maximum
amount of work that can be placed on the cloud or offshored without triggering privacy regulations. Thus, a significantly greater proportion of the work can be placed on the cloud by SplitSecure as opposed to traditional solutions. A recent article published in the Technology section of the New York Times, “BeyondCore Combines Compliance and the Cloud” concurs with at least part of his explanations: “Separating information to enable cloud-based processing has been around for a while — as anyone trying to process credit card transaction while complying with the PCI standard can attest to — but having that process automated via a SaaS product is fairly novel. The technology appears appealing to service providers that want to give customers as much flexibility as possible when it comes to choosing the right infrastructure for the job.” SplitSecure seems to have found a way to automatically ensure that offshored or cloud-enabled data processing would not trigger privacy regulations even if hacked or stolen by insiders. So, does SplitSecure solve the privacy problem? Either way, the key is that SplitSecure offers an alternative approach to solving the privacy problem: not merely more regulation, but smart technology. As venture capitalists and other firms like BeyondCore start focusing on solving this key customer pain through technology, we feel encouraged that a comprehensive solution will indeed be achieved. Is the Cloud darkening? Even if it is, there is definitely a silver lining.
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COMMUNICATIONS
INTERNET EXPANSION INTO CHINA By Jeff Kim
Here’s advice to organisations trying related to doing business in china. China is now the world’s second-largest economy, and is expected to overtake the United States by 2030. Moreover, broadband Internet access in China has exploded, with more than 450 million users, and growth expected to burgeon over the next decade. Many European companies believe expanding business into china via the Internet is a strategic priority. Every day American and European companies announce plans to jump into the Chinese Internet market. Their initial forays typically cover marketing- oriented websites that build brand awareness; online retail websites that provide direct ecommerce offerings or software and gamingoriented websites. However, many companies encounter regulatory or technical obstacles that hinder their efforts. Planning for these can save your organisation from months of frustration and inflated costs of market entry. CHINESE REGULATIONS: LESS STRINGENT THAN A DECADE AGO
The Chinese central government has come a long way in opening up its consumer markets to European companies. That said, the Bei an licence - required for registering an Internet domain in China - can take between one month and six months to acquire. The licensing process requires an in-person effort, so it’s better to use China-based employees with regional knowledge, if you have them. If you plan to outsource your data centre to China or to use the services of a content delivery network (with local Chinese staff), you may find it advantageous to leverage their Bei an registration services, which have been proven effective in navigating the people and processes multiple times for other clients. The Internet content provider (ICP) licence is needed to sell goods to Chinese users over the Internet. Again, the licensing process will progress more quickly with an in-person effort, but the real potential delay comes from the multi-province reporting that may be required. The Chinese central government requires that an organisation report on the content that it is delivering to Chinese users from each IP address, and some provinces have their own reporting requirements, which will also slow your progress. Chinese Internet users are widely dispersed, so while not all provinces have their own reporting requirements, a company using several IP addresses can initially find reporting cumbersome. Reducing the number of IP addresses you use can minimise this issue, unless you find this has too great an impact on your website infrastructure. The bottom line is that you must do your homework regarding each province’s reporting requirements before you set your content delivery strategy. CHINA’S NETWORK OF NETWORKS
The dispersed nature of China’s Internet user community throws up several operational challenges. First, China’s Internet is a fragmented
network made up of multiple telecommunications networks, with no single operator dominating in all regions. These networks have a reputation for less-than-optimal cooperation. To ensure smooth delivery of website content into the various regions, businesses must move beyond the basic peering agreements established by China’s competing telecom operators. These unpredictable arrangements, combined with a relatively small number of network traffic exchange points, frequently result in tremendous delays and outages for enterprise applications and website content that must traverse multiple networks. Most providers end up paying up to 800 per cent more each month in hosting and network fees to purchase enhanced BGP, which speeds up content across network exchange points. Before spending this kind of money, make sure your content needs to traverse multiple networks. You also need to determine the location of your user audience. This will inform decisions regarding service providers, data centre options and where you will spend the greatest energy working around network peering issues. The peering problems have given rise to demand for content delivery network (CDN) services. By leveraging a CDNs network of servers that exist within multiple Chinese networks, content providers can circumvent weak network peering. Simply serving your content and applications from outside mainland China is a poor option because of cost, performance and reliability issues. Many European organisations have tried to enter China through Hong Kong or Singapore, but market demand has pushed data centre hosting costs from these regions through the roof. Moreover, you still need to pay the additional fees for enhanced BGP to overcome mainland China peering issues — not to mention the problem of scaling ‘The Great Firewall of China’. Also be aware that whoever interfaces with Hong Kong-based providers should have business savvy regarding China and Hong Kong. Some providers in Hong Kong raise their quotes when they are dealing with foreign businesses. HOMEWORK AND PATIENCE
As you set your Internet strategy for China, be aware that the pricing and service levels that exist in Europe have yet to proliferate in China. There can be vast swings in pricing and service levels as well as the time and effort required to achieve basic business and technological goals. Do your homework and interview several different service providers before determining your tactical steps and timeline. This will help you to set realistic expectations and develop an operationally sound China entry strategy. ABOUT THE AUTHOR
Jeff Kim is currently Chief Operating Officer at CDNetworks US/EMEA. As a CDN industry veteran, Jeff brings extensive experience in sales, service and marketing to the company’s leadership team. Prior to joining CDNetworks, Jeff was an executive at BitGravity, a HD video delivery network. Jeff helped start the CDN industry as an early employee of Akamai where he conceptualised, developed and launched products that revolutionised the space.
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WHAT’S HAPPENING AT THE IAOP
WELCOME NEW IAOP MEMBERS IAOP is pleased to welcome new and renewing corporate and professional members from: Accenture; Argosy University; Ascendum Solutions; Baker & McKenzie; CB Richard EllisCGI; Citigroup ; CNO Financial Group; CSC; CuaMoc Heineken Mexico; DG3; Duke Energy; Ernst & Young; Evaluserve; GC Services; Grubb & Ellis Co; Hartford Financial ServicesInfosys BPO; Innodata Isogen; ISS Facility Services; J Phillip Partners; Jenner & Block LLP; John Hancock Financial Services; Kaiser Permanente; Kelly; Marquette University; McKesson Corp.; Microsoft; Midam Services; Mitel; NBIM; NMS; Old Mutual PLC; Oracle; PCCW Solutions; PPG Industries; Prudential; PwC; Richard Stockton College of New Jersey; Sears Holdings; Siemens; Softtek; Strategic Outsourcing Partners, LLC; Suncorp; SUNY Buffalo; Symantec; TCS; The Goodyear Tire & Rubber Company; Wellpoint; Xchanging; Xerox Corporation and Zurich Financial Services. For information on IAOP membership, e-mail sales@iaop.org.
IAOP WORLD CONNECTION CONFERENCES & EVENTS THE 2012 OUTSOURCING WORLD SUMMITŽ February 20-22, 2012 | Disney’s Contemporary Resort & Conference Center, Lake Buena Vista, Florida Outsourcing Beyond the Horizon: Turning Today’s Opportunities into Tomorrow’s Successes
Register now at www.IAOP.org and not only will you get the lowest possible rate — a $500 savings — you’ll also get a FREE room night* at Disney’s Contemporary Resort. Year after year, The Outsourcing World Summit brings the global community of outsourcing professionals together for an unparalleled knowledge sharing, networking and personal and business development experience you can count on. The 2012 Outsourcing World Summit - the 15th edition - will continue this tradition of excellence. The financial and economic crisis has reshaped and transformed the outsourcing industry. It has also created never before seen opportunities. The 2012 Summit addresses how to capitalize on these opportunities to maximize success at your organization.
t Learn what the latest innovations are and how to implement them t Hear industry best practices and lessons learned from leading practitioners and visionaries t Stay current on the latest outsourcing tools and technologies, including the cloud t Meet and evaluate vendors in the Global Services Mall (or showcase your company as an exhibitor!) t Network with 700+ outsourcing professionals from around the globe Every year, hundreds of outsourcing executives from across the industry and around the world who are seeking the very latest insights and ideas attend the Summit. Educational sessions deliver specific actionable solutions to current challenges faced by experienced professionals. Case studies feature actual experiences and the lessons learned, and discuss new ideas, approaches and opportunities. The Outsourcing World Summit has become the event that executives attend each and every year to stay informed of the latest developments affecting the outsourcing industry and their profession.
Hurry! The “Save the Date� promotion extended through June 15! *With paid registrations from 6/15-8/15 only.
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Today July/August 2011
WHAT’S HAPPENING AT THE IAOP
MEMBERSHIP Membership in IAOP provides access to an extensive array of services, and just as importantly distinguishes organizations and professionals as leaders in the field of outsourcing. IAOP membership demonstrates a commitment to innovative thinking, continuous performance improvement, and to the sustaining development of outsourcing as both an industry and as a profession. CUSTOMER CORPORATE MEMBERSHIP Organizations that are currently outsourcing or are considering one or more outsourcing initiatives should become Customer Corporate Members of IAOP. This membership provides organization-wide access to the association’s research, training, certification, and networking programs - all designed to help companies achieve better business results through outsourcing. PROVIDER/ADVISOR CORPORATE MEMBERSHIP Outsourcing service providers and advisory firms should join IAOP as Provider/Advisor Corporate Members. This membership provides the same organization-wide access to IAOP’s research, training, certification, and networking programs as Customer Corporate Membership, but also includes member-only sponsorship opportunities that serve the marketing and business development needs of these companies. PROFESSIONAL MEMBERSHIP Professional Membership is available to individuals either as part of their company’s corporate membership or on an individual basis. This membership serves the needs of practitioners working in the field of outsourcing whether as customers, providers, or advisors. In addition, it provides these professionals with direct, personal access to association services. NEWSWIRE IAOP ANNOUNCES THE CLOUD SERVICE MEASUREMENT INITIATIVE CONSORTIUM (CSMIC) AT CARNEGIE MELLON UNIVERSITY SILICON VALLEY AS NEW ACADEMIC ALLIANCE PARTNER Collaboration to Develop Cloud Computing Standards
The International Association of Outsourcing Professionals® (lAOP®) announced the Cloud Service Measurement Initiative Consortium (CSMIC) at Carnegie Mellon University Silicon Valley as its newest Academic Alliance Partner. IAOP and CSMIC are working to develop a Service Measurement Index (SMI), a set of business-centric performance indicators for members of the Cloud Commons community. This will provide IT professionals with a standardized method for measuring and comparing internal and external cloud services. IAOP has also become a member of CSMIC. “Having a talented set of leaders joining CSMIC from key professional organizations like IAOP, industry, government, and academia will enable us to develop practical measures to support senior managers who are responsible for making decisions about moving to the cloud,” said CSMIC co-director Dr. Jane Siegel. Thought leaders who are experts in measuring and managing IT-enabled services formed the CSMIC SMI management program to meet the need for enterprise-wide standards for calculating risk versus reward of cloud computing services.
MEMBER SERVICES
IAOP membership provides access to a wide range of services designed to help you and your organization improve outsourcing outcomes. Many of these services are included as part of IAOP’s Professional or Corporate Membership, with discounts available for use beyond the level provided. Some services are also available individually at non-member rates. t Globalization Today - The official publication of IAOP creates the largest and best informational publication on outsourcing by uniting and tapping the collective intellect of individuals from around the world. IAOP Members receive a free subscription plus the opportunity to get published, promote products/services and advertise. t IAOP’s Knowledge Center, Firmbuilder.com® - This online repository houses more than 600 articles, including chapter meeting presentations, conference proceedings, industry whitepapers, research articles and more. t Chapter Network - Through its active and expansive chapter network, IAOP members can share their expertise and find knowledge on best practices for specific industry segments, topics and geographic areas within outsourcing. t Conferences & Events - IAOP hosts the world’s best-known and most highly-respected executive conferences on the topic of outsourcing. t Certified Outsourcing Specialist Family of Certifications - Receive 50 complimentary COS tests each year. t Value Health Check Survey - This web-based diagnostic tool provides outsourcing customers and service providers with rapid insights to realizing outsourcing value. t BestOutsourcingJobs.com - Companies seeking the best talent for outsourcing jobs, as well as professionals looking for employment opportunities, can benefit from this IAOP member service provided through BestOutsourcingJobs.com. For more detailed information, visit www.IAOP.org/MemberServices.
CALENDAR OF EVENTS
IAOP CHAPTER MEETINGS IAOP chapters provide a forum for members to collectively focus on professional development, networking, and the advancement of outsourcing within specific areas of common interest. Each chapter is led by chairs and co-chairs with deep knowledge in the area covered. IAOP members are members of the association, and not of a specific chapter, and are encouraged to participate in as many chapter meetings as they wish. Non-members are welcomed to attend any chapter meeting as IAOP’s guest to learn more about the association and its work. t
JULY 6
GLOBAL HUMAN CAPITAL CHAPTER WEBINAR
t
JULY 21
CHICAGO CHAPTER MEETING
t
JULY 25
GOVERNANCE AND CONTRACTING PROCESS CHAPTER JOINT WEBINAR
t
SEP 14
TORONTO CHAPTER MEETING
t
SEP 29
TEXAS CHAPTER MEETING
For more information IAOP chapters, go to www.IAOP.org/chapters
globalizationtoday.com
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WHAT’S HAPPENING AT THE IAOP
“The importance of cloud services in outsourcing has grown exponentially,� said IAOP CEO, Debi Hamill. “Through our newest partnership with CSMIC, we expand our ability to bring the latest information on cloud technology directly to our membership and outsourcing professionals worldwide.� IAOP’s Cloud Computing chapter co-chairs Arijit Sengupta, BeyondCore and Brian Walker, KPMG have been named to the CSMIC Advisory Board. CSMIC co-directors, Dr. Jane Siegel and Jeff Perdue, both Certified Outsourcing ProfessionalsŽ (COPs), also collaborate with IAOP through the corporate and professional development Strategic Alliance Partner ITSqc,LLC. CSMIC directors are co-chairs of IAOPs Cloud Computing chapter. CORPORATE & PROFESSIONAL DEVELOPMENT COP MASTER CLASS & GOVERNANCE WORKSHOP SCHEDULE
The COP Master Class is a great option for earning up to half (75 points) of the Knowledge and Training points needed for COP certification, and fully completes the required training for the aCOP designation. Completing the one day Governance Workshop is worth another 15 COP Certification points. IAOP is actively registering now for the following classes: t SEPTEMBER 5-8, 2011: KUALA LUMPUR, MALAYSIA t SEPTEMBER 19-22: INVERNESS HOTEL & CONFERENCE CENTER, DENVER, CO - LAST NORTH AMERICA CLASS OF 2011! t OCTOBER 19-21, 2011: HARBOUR PLAZA METROPOLIS, HONG KONG t NOVEMBER 21-24, 2011: KUALA LUMPUR, MALAYSIA
Please visit www.IAOP.org/training_calendar for a full list of classes and current discounts and specials. PROFESSIONAL DEVELOPMENT RESOURCES AVAILABLE!
No matter what industry you are in, IAOP has resources available for all outsourcing professionals. For the latest titles from IAOP, ITSqc and others please visit www.iaopbookshop.com, and get 15% off of any title you order. Also new from IAOP are titles from the American Bar Association found at www.ababooks.org/affiliate/iaop. CORPORATE PROGRAMS
IAOP’s private master class calendar is filling up with Corporate Companies taking advantage of educating their employees in-house! With the dramatic cost savings, there is no better time than now to use up your training budget. Accenture, Allstate, American Express, Ameriprise, Applied Materials, Avasant, Blue Cross Blue Shield, Capgemini, Capital One, CB Richard Ellis, Colliers, Convergys, Deutsche Bank, Diebold, Firstsource Solutions, Fuji Xerox, Hewlett Packard, Heineken Netherlands, Infosys, ISS, John Hancock, Johnson &
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Today July/August 2011
Johnson, KellyOCG, Kirkland & Ellis, Kraft, Liberty Mutual, Long View Systems, Manulife, MDeC, NCR, Nike, Orange Business Services, Pfizer, PricewaterhouseCoopers, Procter & Gamble, Quint Wellington Redwood, Rogers Communications, SAB Miller, Oracle, Symantec, Unisys, US Department of Labor, VADS Berhad, Vodafone, Whirlpool, Wipro, Xerox, Zurich Financial Services. Executives interested in bringing the COP program division- or company-wide are invited to contact your account executive or email sales@iaop.org. DO YOU HAVE WHAT IT TAKES TO BECOME A COP?
The COP designation powerfully demonstrates that individualspossess the experience and knowledge required to design, implement and manage outsourcing initiatives that have a high probability of achieving an organization’s intended outcomes. Do you have what it takes to join the industry’s most elite professionals? Take this 10 QUESTION QUIZ (htt://www.iaop.org/ download/download.aspx?ID=1595) and see if you have what it takes to become a “Certified Outsourcing Professional� today. RECOGNITION PROGRAMS THE GLOBAL OUTSOURCING 100Ž AND THE WORLD’S BEST OUTSOURCING ADVISORS
IAOP annually conducts an independent assessment of the capabilities of outsourcing service providers and advisors, and based on this assessment, publishes The Global Outsourcing 100 and The World’s Best Outsourcing Advisors and various sub-lists. Companies apply for inclusion on the list by completing an online application. Applications are then judged by an independent panel of experienced outsourcing buyers on four critical characteristics: size and growth; customer references; organizational competencies; and management capabilities. The 2012 ranking application process will begin again on September 1, 2011. For complete details and FAQ’s about the 2012 rankings visit www.IAOP.org. Each company selected for The Global Outsourcing 100 is recognized by IAOP on its website and at various events and programs throughout the year, and in a special advertising feature in FORTUNEŽ magazine reaching the magazine’s worldwide circulation of over one million and readership in excess of five million. The 2011 Global Outsourcing 100Ž FORTUNEŽ special advertising feature as seen in the May 23, 2011 Fortune 500 issue may be downloaded at the web address above. For complete lists and more than 80 sublists with rankings by geography, industry and service areas, see the web address above. For more information on any of IAOP’s programs and services, email info@iaop.org.
SCRAPBOOK
Outsourcing Professionals to Look Beyond the Horizon at 2012 Summit IAOP Next Annual Event to Explore Turning Opportunities into Successes With outsourcing opening up many new growth opportunities forr organizations globally, the International Association of Outsourcing g Professionals® (IAOP®) will look toward the future at its 20122 Outsourcing World Summit. “The financial and economic crisis has reshaped and transformed the outsourcing industry,” said IAOP Chairman Michael Corbett. “It has also created never before seen opportunities.” Themed “Outsourcing Beyond the Horizon: Turning Today’s Opportunities into Tomorrow’s Successes,” the 15th annual event will be held Feb. 20-22, 2012, at Disney’s Contemporary Resort & Conference Center in Lake Buena Vista, Florida. The 2012 Outsourcing World Summit will address how to capitalize on these opportunities to maximize success at organizations and delve deeply into issues that are critical to today’s professionals and their companies. During the three-day event, more than 700 professionals from around the world will come together to learn about the latest innovations and how to implement them; hear industry best practices and lessons learned from leading practitioners and visionaries; stay current on the latest outsourcing tools and technologies; and meet and evaluate vendors. For more information, visit www.IAOP.org.
SCRAPBOOK
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Outsourcing Professional Certification FrameworkTM (OPCF) The OPCF is designed to address the needs of individuals who work across the global outsourcing industry from entry level positions focused on the delivery of outsourced services through to senior executives leading global outsourcing programs at customer, provider, and advisor organizations. At each stage in an individual’s career there is an opportunity for both professional development and professional recognition. The OPCF is made up of three families of certifications:
Certified Outsourcing ExecutiveTM (COE) Certified Outsourcing Professional® (COP) Certified Outsourcing SpecialistTM (COS)
BENEFITS OF CERTIFICATION Certification establishes a level of professional recognition essential in a field as complex and risk-based as outsourcing. When working together across the customer-provider relationship, certification brings a common framework for success that benefits both organizations involved. Certified individuals command greater respect within the industry and their companies, higher compensation levels, and expanded and enhanced career opportunities.
*
I’M A COP
*Expect better, more consistent results with me.
Training programs are available at the individual and corporate level. For more information, visit
www.IAOP.org/OPCF.
ADVERTISER INDEX PAGE #
COMPANY NAME
URL
36, 37
Accenture
www.accenture.com
44
BCS
www.bcs.org/opportunity
0, 2, 51
International Association of Outsourcing Professionals (IAOP)
www.IAOP.org
4, 18, 19
Kelly Outsourcing & Consulting Group (KellyOCG)
www.kellyocg.com