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Article discusses the trends and issues involving distributing and/or outsourcing customer call centers.

Note: Darwin Magazine is now dead. Some articles are moving to CIO. I will try to update the links when I have time...

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"...the basic concept is outsourcing. And seeing as we've had a quarter century to work out the kinks, you'd think that by now it would be a trouble-free, fill-in-the-blanks process. But you'd be wrong. Outsourcing, it seems, is one place where it's a snap for history to repeat itself-with some calamitous results. While many companies have undoubtedly saved money, several others have seen costs spiral, quality plummet or, worst of all, IT operations crash. Why is it that this seemingly simple idea has spawned so many disaster stories?

...regardless of why you outsource, mistakes happen-and often enough for us to compile a list of five classic outsourcing blunders. Here's hoping that you can learn from a host of others' missteps."

Farming out in-house operations has become a religion. Faith must now be tempered by reason.

Eager to focus on the things they do best, companies have turned to business process outsourcers for virtually everything else.

Despite the fall-out from the collapse of Enron, companies are outsourcing everything from manufacturing to human resources. Simon London asks how far re-engineering will go.

Without effective security, companies risk losing money and customer trust. With good security, companies have the power to maintain stakeholder value, customer loyalty, and competitive advantage. Faced with the complexity of providing effective security, many companies are turning to outsourcing.

This is Part 1 of a 3-part article.

Part 1 notes the benefits of outsourcing security.
Part 2 evaluates the cost of such an outsourcing.
Part 3 provides guidelines for selecting a security services provider

To get the real strategic value out of your third-party relationships, the first thing to do is throw out what you thought you knew about outsourcing. Here's why.

Want IT to deliver shareholder value? Start identifying what's core to competitive advantage and what's only context, then build systems accordingly. But beware: What's core today quickly becomes context tomorrow.

Welcome to the world of global back-office operations, or as it is often called, cross-border business-process outsourcing. While companies have long outsourced manufacturing operations and other tasks such as IT maintenance or software development, the trend has now expanded to include other kinds of business processes such as customer contact, bill processing and medical transcription. Companies are moving such work to locations in India, the Philippines and Jamaica, arguing that they can cut costs by 20% to 40%. As a result, cross-border business process outsourcing has grown into a massive market. Consulting firm Gartner estimates that cross-border business process outsourcing will grow into a $178.5 billion business by 2005 from $123.6 billion in 2001.

Knowledge@Wharton presents a two-part special report examining this phenomenon. In the first part, we look at the pros and cons of business process outsourcing arrangements, examine some human resources issues, and also present some findings from a Wharton research project led by professors Ravi Aron and Jitendra Singh. The second part explores management and financial issues in BPO transactions.

Once used largely for nonessential, tactical activities, partnering now covers core operations, transforming entire industries.

Business Process Outsourcing (BPO) once had a clear place in the executive's toolkit-it was used to achieve cost savings in transaction-intensive, back office business processes. That's all changed. BPO is emerging as a flexible and powerful approach that business leaders can use to achieve a wide range of tactical and strategic aims. A new piece of thought leadership, published in conjunction with Accenture's Institute for Strategic Change, is a global study that assesses the big opportunities associated with BPO. Using the idea of a "relationship compass," the paper takes a holistic look at the complexity of business process relationships and how companies can form effective ones.

For more specific, service-related BPO information, companion pieces are offered in these areas:
- Customer Relationship Management
- Finance Solutions
- Human Resources Services
- Learning

When companies outsource back-office services overseas, one of the biggest challenges they face is measuring the results. Failure to monitor whether work is being performed correctly after it moves outside a company can result in massive and costly errors. How can companies protect themselves against such risks? Ravi Aron, co-director with Jitendra Singh of a recent Wharton executive education program on business-process outsourcing, offers some crucial insights.

You can outsource many things, but operational risk is yours to keep. Protect yourself and your company with a contract that mitigates the risks.

Cisco. Sony. Palm. Contract manufacturers gave OEMs more supply chain headaches than solutions. What went wrong. What needs to be done.

Editor's Note: I think this is an interesting counter-balance to the arguments made by Don Tapscott in "Rethinking Strategy in a Networked World (or Why Michael Porter is Wrong about the Internet)"
http://www.mbadepot.com/redir.php?ID=2861&file=links

Business process outsourcing is reshaping companies in fundamental ways -- and raising new, complex questions that transcend cost savings.

What should companies be considering as they move towards outsourcing finance and accounting (F&A) activities? How can they achieve their strategic goals and maximize the benefits, while defusing the risks?

Accenture's report, "Outside Upside: Finding Focus through Finance Outsourcing," written in cooperation with the Economist Intelligence Unit, addresses these issues. Based on an online survey and one-to-one interviews with senior executives, the study yields rich comment and original findings. F&A outsourcing, it reveals, offers benefits ranging from cost savings right through to providing the impetus for far-reaching strategic change. Yet, alarmingly, the vast majority of companies have no metrics in place to measure the success of their outsourcing arrangements.

Reinforcing the need for tight controls, the study also features an in-depth case study from Thomas Cook UK who, as a result of a unique co-sourcing agreement, has improved operations, reduced its cost base by £75 million (30 percent), and increased profitability.

In setting out guidelines for implementing a successful F&A outsourcing strategy, the report reveals how to maximize the opportunities while reducing the risks.

While thus far objective quality measurements for outsourcing have been elusive, Accenture believes the eSourcing Capability Model will benefit both buyers and outsourcing providers who understand the value of a standardized approach to evaluate outsourcing capabilities. This paper from Accenture Outsourcing and Infrastructure Delivery describes the model, its potential benefits and promising pilot results.

Outsourcing has long been the subject of management studies. Though the issue has been analysed from multiple perspectives, a unified, coherent view of outsourcing is still lacking. In this Working Paper, Professors Dalsace and Cool, along with Nicola Dragonetti, identify the major rationales for outsourcing and test these against data for French small and medium-sized enterprises. Their results are surprising and have important implications for firms.

If there's anything harder than deciding what to outsource, it's negotiating a fair price.

In the past, fixed-price or cost-plus pricing models were an adequate, if imprecise, way to compensate outsourcers. But today's competitive marketplace offers CIOs new alternatives that add flexibility and agility to these relationships. Indexed pricing, gain sharing, and capacity or utility pricing promise a stronger correlation between business results and IT-resource consumption. They also add risk, though, in the form of complexity and costly overhead. CIOs need to balance flexible prices with ease of administration and make sure pricing mechanisms allow the requirements of the business to drive technology decisions, rather than the other way around.

Knowing the risks of offshore outsourcing will help you avoid shoals along the way.

Companies thinking about using offshore outsourcing need to consider more than just cost savings.

Businesses that outsource gain powerful new control over business performance according to a multinational survey conducted by Accenture. A full 86 percent of executives realize control gains over business results-most within the first year of outsourcing.

Note: Darwin Magazine is now dead. Some articles are moving to CIO. I will try to update the links when I have time...

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Successful outsourcing of your business processes begins close to home.

Metrics and Incentives are an important component of outsourcing relationships, but as executives use outsourcing more strategically, these become more critical than ever.

In this research study, we found that each type of outsourcing relationship calls for different metrics and incentives to some extent. More importantly, executives also use the same metrics and incentives in different ways to shape the outsourcing relationship they need. Tapping new sources of value means sharing ownership for results with an outsource partner. The more transformational the outsourcing agenda, the more blurred the lines of accountability and control become. Executives who operate at this cutting edge have loosened their white-knuckled grip on control and use metrics and incetives to foster commitment.

Editor's Note: this is an excellent article with very practical advice - I highly recommend it.

Last year, nearly half of all CIOs used offshore providers to avoid high labor costs in the United States and Europe, and two-thirds say they plan to send work overseas this year. Yet while offshore business processing is among today's hottest topics, few CEOs have a basis for comparing host countries. A.T. Kearney has developed an evaluation tool that rates countries according to three factors: cost, environment and people. The tool was used to measure the offshore prospects of 11 countries. This paper explores the various attributes and characteristics of the countries, and examines what makes them good or not-so-good candidates for offshore business processing.

As the uses for BPO have expanded, however, so too has the confusion about how to make it work. The old formulas about when to use BPO, how to structure deals, how to manage relationships, and how to capture value no longer hold. In order to be successful, executives must configure a host of complex choices into a unique "value equation" that fits their situation.

This is no simple task. This report will help executives navigate through the largely uncharted terrain of the new business process outsourcing by answering three principal questions:
• What can organizations accomplish through business process outsourcing?
• How can organizations create the right relationships?
• What steps can they take to ensure they meet their objectives?

Gregory Mankiw, head of the White House Council of Economic Advisors, ignited a firestorm of debate when he said outsourcing of U.S. jobs is probably a good thing in the long run. As tends to happen with hot-button issues in presidential election years, sensible discussion of this question was soon drowned in an uproar of political posturing. Experts at Wharton and the Boston Consulting Group point out that outsourcing is as old as the corporation. Increasingly, sourcing work overseas is no longer a tactical option that can help firms save a few dollars here and there; it is a strategic necessity for any company that cares about its long-term competitiveness.

Note: Darwin Magazine is now dead. Some articles are moving to CIO. I will try to update the links when I have time...

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How to avoid 10 potential issues in your outsourcing relationship.

Why do so many executives feel their stomachs knot at the thought of turning over a vital business function to an outsider? Because they fear losing control. But a solid, collaborative business process outsourcing relationship can actually give you more control-and boost performance in the bargain.

HR outsourcing is booming, as companies send everything from payroll to training outside. But take out too much of the company's core, and you risk losing its heart and soul.