Motif organizes its 4th Annual Blood Drive

Since 1990, there has been tremendous consolidation among banks in the U.S, which started with deposit deregulation in the 1980's. (For example, Capital One just announced its purchase of North Fork Bancorp last month.) Since then, banking in the U.S. has increasingly moved toward becoming a national business with highly efficient back offices, putting greater and greater pressure on banks of every kind. To meet these increased competitive pressures, banks are outsourcing a substantial number of information technology services. This outsourcing trend will continue to accelerate as banks strive to improve their operating ratios.

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The first quarter of 2006 has seen the global outsourcing industry posting a record performance. The segment saw $22.7 billion in total contract value (TCV) for contracts valued at $50 million or more, up 173% y-o-y, comprising a record number of 83 outsourcing transactions, according to TPI Index, a quarterly report on the state of the global outsourcing industry by sourcing advisory firm TPI Inc.

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Gone are the days when finance and accounting (F&A) outsourcing buyers asked whether offshoring was meant for them too. In the current multi-process FAO market, global sourcing is a value proposition that everyone takes as a given. Consider this: Since 2004, almost all third-party outsourcing contracts have included an offshore component. This adoption of global sourcing in FAO contracts is equally high across industry verticals and geographies. So now, the question is not whether offshoring should be an element in an F&A sourcing model, but rather how to maximize the rewards and minimize the risks.

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CIOs who consider cultural fit to be as important as cost savings have the most successful outsourcing relationships. In fact, experts say there's a direct correlation between a successful outsourcing arrangement and how well the two companies mesh culturally. This is particularly important in offshore relationships.

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The IT/business process outsourcing (BPO) express rolls onwards, with advisory firm TPI estimating that Q1 2006 saw $22.7 billion worth of big-dollar outsourcing activity dispersed across 83 deals. That's a remarkable 173 percent year-over-year increase, and the number would no doubt be higher had TPI not restricted its figures to deals with a value over $50 million. The average deal size for the plus-$50 million deals tracked by TPI is roughly $275 million.

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The art of outsourcing

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The biggest challenge faced by companies off-shoring currently is the lack of well defined step-by-step process migration methodology and ongoing day-to-day operations and reporting processes to consistently meet and exceed productivity and quality expectations.

Here are some guidelines to ensure what starts off as an idea, actually results into a long term relationship:

• Choose the right partner – It is not necessary that bigger is better. Identify your requirements first and then find a partner who has the capabilities to meet them. If the requirement is to outsource general voice customer support, many BPO companies would be able to do a fairly good job. But, if the requirement is for more specialized transactions, choose a partner who focuses in that particular niche area.

• Define operations parameters – Once the right partner has been identified, a basic statement of work should be created. This should encompass all operational parameters related to a SLA (Service Level Agreement). Include as many details as possible including expected response times, productivity, quality, customer satisfaction/benchmark scores, etc.

• Create a process map – Have the off-shore partner come to your location to understand your processes, tools, work culture, etc. Expect a formal process mapping exercise. It should include a plan on what processes to migrate, when and how. Start by off shoring easier transactions and gradually move more complex work. Operational parameters and targets need to be clearly defined and achieved before moving on to the next milestone/stage.

• Establish effective communication channels – There should be a single point of contact at both sides in charge of the overall relationship. Put only your trusted managers in this role. Remember, a lot is going on during this time (setting up of infrastructure, processes, policies, recruiting, external service agencies, etc.). Establish a channel for day-to-day peer to peer communication at the operations level. Define what is important to you and when you expect your partner to update you. It is important for the offshore partner to be able to share and understand your vision. Lack of proactive communication is a recipe for disaster.

• Send Subject Matter Experts Offshore – It is important that your subject matter experts (SMEs) are available on site for providing initial training or floor support to the partner’s team when the actual transitioning is happening. This also helps develop a personal rapport between the operations teams which is very important when they later communicate daily being 10,000 miles apart.

• Set up reporting process – Define what you expect in a daily, weekly, monthly and a quarterly report. Daily status reports can include daily service levels, the amount of work done, number of associates working on the project, daily quality status if available, etc. Weekly calls should be scheduled to discuss the week’s status, open issues, concerning trends or other challenges. Monthly or quarterly program reviews should provide a good indication of your partner’s performance. Expect updates on what process improvement suggestions the partner has put in place. This can include development of new tools for process enhancement.

Remember, there is a huge spike in workload at your end during the initial stages of the off shoring process. If done right, it is all worth the trouble.

Parul Mehta
The author is the co-founder and COO of Motif, Inc., a specialized BPO (Business Process Outsourcing) company providing back office transaction processing services which require decision making and customized email response services to Fortune 500 clients with a five plus year track record of 100% client retention.
(www.motifinc.com)