You can outsource almost anything. Maybe you don't know it yet, but it's true. A couple of days ago, when I was drinking coffee in the kitchen, my wife pointed at the faucet that was leaking big time. The good ole faucet was there when we moved in about ten years ago, and trying to fix it again didn't make sense any more. Since I religiously believe in DIY, I bought a new faucet and set about working. When the old faucet was gone, I found out the metal pipe under the sink had to be replaced, too. There was no way I could do it without recourse to welding. I realized I was ready to outsource that part of the project, so I called the plumber.
If your experience and budget allow you to cope with a task, you should do it yourself. Otherwise, it's about time to consider the advantages and disadvantages of outsourcing.
IT development outsourcing isn't much different than any other kind of outsourcing. When you face an insistent need to start a new IT development project, you have to weigh your current in-house capacity first. If your experience and budget allow you to cope with the task without resorting to any outside expertise, you should probably take full advantage of your potential and do it yourself. However, if there's danger that you'll bite off more than you can chew, it's about time to consider the advantages and disadvantages of outsourcing.
Advantages
Basically, outsource service providers offer you higher quality services at a lower cost. This makes the advantages of IT development outsourcing obvious, so let's have a look at just a few of them.
Outsourcing IT development is a most effective way to stretch your budget. When managers plan IT development outsourcing, they usually make it their aim to cut down the company's expenditures by 30%. This is a figure that speaks for itself. Of course, there's always the risk of failure, but if you outsource prudently, you'll afford to implement projects of such a scale that would be impossible for you to reach on your own.
Outsource service providers offer you higher quality services at a lower cost. Cutting your costs and upgrading the quality of your services will expand the competitive capacity of your business.
If you need to have state-of-the-art IT solutions worked out and innovations implemented with small losses, outsourcing may be the only way out. It will save you from the nightmare of retraining your employees (or even hiring new ones) and/or paying for re-equipment.
Cutting your costs and upgrading the quality of the services you offer will allow you to expand the competitive capacity of your business. I suppose the state the IT market is in today makes this simple argument a crucial one.
When you outsource IT development to an outside company, you can concentrate on your core activities. You won't be able to completely forget all about the project or its part that you have chosen to outsource as soon as you sign a contract with an outsource service provider, but you won't have to get scattered, either.
If you deal with an experienced and highly qualified vendor, you'll be able to gain valuable expertise in support of your IT capacity. Almost any vendor will surely try to set a dependency trap for you, but it doesn't mean you have to acquire the dependency pattern instead of learning everything you can derive from the vendor's expertise.
Disadvantages
So, you have finally decided in favor of outsourcing. Will it automatically make you wealthy and happy? This is far from true. Various studies show that 20% to 35% of IT outsourcing contracts are not revived after they expire. Needless to say that most customers in these cases are not satisfied with the quality and/or price of the services. Outsourcing as a nightmare was eloquently illustrated by Beth Cohen, president of Luth Computer Specialists, Inc., "There was a company in Dayton that decided to outsource much of its IT and production to a foreign company about five years ago. After about nine months of outsourcing, the company realized that there was a huge loss in quality for both production and IT support. The company decided to cancel the contract and rehire their old employees. They ended up getting most of their old employees back but at a higher wage than before. Most people would think that the story ends there. However, as hard as it is to believe, the company is actually considering outsourcing again. They think it will be different this time. It will be interesting to see what happens."
You will partially lose control over the project you have chosen to outsource. Try to make the whole process of the project implementation as transparent for you as possible.
If you need to have state-of-the-art IT solutions worked out and innovations implemented with small losses, outsourcing may be the only way out. It will save you from the nightmare of retraining your employees (or even hiring new ones) and/or paying for re-equipment.
Cutting your costs and upgrading the quality of the services you offer will allow you to expand the competitive capacity of your business. I suppose the state the IT market is in today makes this simple argument a crucial one.
Forewarned is forearmed. This is why I suggest we discuss the pitfalls expecting a business that puts out to the sea of outsourcing.
You will lose control over the project or at least over the part that you have chosen to outsource. This is the problem that frightens almost any manager who has little or no experience in outsourcing. This is the challenge any business involved in outsourcing faces. This is the risk you have to take. It is inevitable that outsource service providers should take control - at least in part - over outsourcing projects. However, they are not supposed to abuse the confidence reposed in them by their customers. In order to minimize the risk, you have to be extremely careful studying the background of your potential vendor. Once you decide in favor of this or that company and begin negotiating the contract, you should try to make the whole process of the project implementation as transparent for you as it is possible.
It's usually difficult to avoid the inherent problems of communication.
* Telephone conversations are bad enough, but email and communicating via some instant messaging program online takes even more time. You'll have to put up with an endless amount of emails to be sent and received. Besides, if you are dealing with an overseas vendor, the time zone problem will surely arise - the difference between your vendor and you may be seven hours or more. Just imagine: you arrive at the office at the same time when your vendor's employees are going to leave. The best way around this problem is to set the mutually acceptable time for online meetings and to require that your vendor should stick to the schedule. In fact, you can even benefit from the difference in time zones between your overseas vendor and you. For instance, you transmit a rush order to the vendor at the end of your working day, the vendor receives it in the morning (their morning) having those seven or more hours behind, and by the time you arrive at the office, a considerable amount of work will have been done.
* Standards of correspondence may be different to the extent of misunderstanding. If you are having any problems like that while corresponding with your potential outsource service provider, you should try to work out some standards that both of you will find easy to follow, or you'd better start looking for another vendor.
* Language and/or cultural problems might contribute to all kinds of mix-up. For instance, a lot of people knowing some fundamentals of English are sure that when they ask your opinion about something and you say, "It's okay," it means you like it a lot. Don't waste your time on foreign vendors communicating in something like "Pidgin English," and even if the person you're contacting has a fairly good command of English, ask for the resumes of those employees who are going to be responsible for each part/stage of the project to make sure they are fluent in English.
An outsource service provider might be trying to diversify the business so zealously that achieving progress in one particular area becomes questionable. The solution to this problem lies in the company's portfolio. Examine the relevant case studies and success stories, ask the vendor for references, and, if you are still uncertain, do not hesitate to check these references.
Some vendors advertise services and even take up projects having little or no experience in the corresponding areas. Apparently, they intend to farm out at least some parts of such projects to subcontractors - which certainly doesn't look very attractive to the customer. This problem resembles the previous one, and the recommended solution is the same.
Almost all outsource service providers place the highest emphasis on the most advantageous projects. It's only natural, but it surely doesn't make the life of the customers with lower profit potential easy. In order not to become a neglected customer, you should:
* insist on appending to the contract a project implementation schedule that includes as many milestones and deadlines as you find it necessary;
* stipulate for tough financial sanctions in case the vendor fails to meet any of the deadlines;
* agree on some incentive payments for completing the project on schedule (or even ahead of schedule);
* last but not least, build partnership relations with the vendor whose work you are satisfied with and whose high-value customer you want to become.
Most vendors try to accumulate as many projects as they can. It's also easy to understand. However, the burden might appear to be beyond the vendor's strength, and this will most likely wreck the project schedule, if not the whole project. If you don't want it to happen to you, you can:
* find out the scale of the vendor's operations including the approximate number of employees and customers - of course, if it's possible;
* request the resumes of all the vendor's employees that are going to be involved in the project implementation;
* ask the vendor to describe in detail these employees' responsibilities;
* follow the advice given in the previous paragraph.
An unscrupulous vendor may be simply unqualified for the project that an imprudent customer have chosen to outsource. One of the ways to solve this problem is to focus your attention on the expertise of your potential outsource service provider at the selection stage.
A number of problems may arise due to the incompetence of a customer who is a novice in outsourcing. That's right, you don't have to think that an outsource service provider is the root of all evil. Incompetent customers tend to make modifications in standards and procedures that have been long established. A vendor who knows that the customer is always right tries to implement the project the way the customer wants it, which finally leads to a total mess-up. In order to avoid this kind of situation, try to find out as much as you can about IT development outsourcing from your contacts and… from articles like this.
Conclusion
If you are discreet selecting the outsource service provider, negotiating the contract, and monitoring the project implementation, the return on investment might be the greatest you have ever had.
Will outsourcing IT development really profit your business? Uh, maybe yes, or maybe no. In other words, it depends.
If you don't possess in-house expertise and/or budget necessary to implement a vital IT development project, outsourcing it - in full or in part - to an outside company seems to be the best solution you can find.
However, you should be discreet selecting the vendor, examining the vendor's expertise, negotiating the contract, and monitoring the project implementation. In this case, outsourcing IT development will be rewarding, and the return on investment might be the greatest you have ever had.
12/30/2006
The great expectations for 2007
The year 2006 closes today with a number of milestones achieved in the Information and Communication Technology (ICT) front but also not without challenges standing in the way of development of the sector.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
The great expectations for 2007
The year 2006 closes today with a number of milestones achieved in the Information and Communication Technology (ICT) front but also not without challenges standing in the way of development of the sector.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
The great expectations for 2007
The year 2006 closes today with a number of milestones achieved in the Information and Communication Technology (ICT) front but also not without challenges standing in the way of development of the sector.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
The new year is expected to take off on a high ICT note, what with plans that are underway to connect Kenya to an optic fibre cable from the port of Sudan via Ethiopia by February.
The cable, which is just 100 kilometres from Moyale town, will be linked to Nairobi through Telkom Kenya’s digital microwave link.
The connection is expected to reduce transaction costs of telecommunication players now utilising satellite technology to link with outside world.
This is expected to be a major boost to the business process outsourcing industry, which is now in its infancy in the country. Kenya is likely to see the emergence of call centres and data processing outfits once the fibre optic cable is in place, and once the Communications Commission of Kenya tackles touchy issues relating to licensing.
The cost of telecommunication has come down this year following the launch of the Voice Internet Protocol (VoIP) services and award of International Gateway licences to the two mobile networks, Sataricom and Celtel.
Mobile service provider Safaricom is expected to introduce a cash transfer service, Mpesa in the new year.
The service will enable subscribers to send and receive from 130 Postal Corporation of Kenya branches countrywide.
The service will enable network’s clients to send and receive modest sums of money (up to Sh10, 000 per transaction) and is meant to be a convenient and much simpler method of making such transactions.
Initially, the service is going to be restricted to local transactions and will be confined to Safaricom subscribers only.
Celtel, the country’s other mobile network is also expected to roll out the service, since it has applied for a licence to offer money transfer services.
As the world strives to move from the industrial age to the Information age, the local ICT sector in 2006 saw new entrants introducing new products, which in many ways took competition a notch higher.
The most recent and laudable move was the going online of Parliament, a step towards creating a knowledge based parliamentary system and an effort to make the House paperless. More interestingly, the new parliamentary web site offers information on parliament’s legislative calendar, programme of parliamentary business, Bill tracker for every year as well as information on every Member of Parliament. It is hoped that all parliamentary activities would be conducted online from 2008.
The year also saw the entry of WiMax, a new standards-based technology which stands for World-wide interoperability for Microwave Access. WiMax is an infrastructure enabling the delivery of wireless broadband access as an alternative to traditional wired service.
Corporates such as Uunet Kenya, Access Kenya and Kenya Data Networks joined the WiMax scene and intend to invest up to Sh45 million in this infrastructure to enable them deploy an Internet Protocol (IP) based network for its clients.
This technology threatens to replace a number of existing telecommunications infrastructures. For instance in a fixed wired configuration, it can replace a telephone company’s copper wire networks, cable television coaxial cable infrastructure while offering Internet Service Providers (ISP) services.
In September, Nairobi hosted the United Nations e-government forum for local authorities. The workshop took stock on the achievements so far made at the local authorities’ level in terms of adoption of e-governance and enabled the sharing of knowledge and experiences and also development of co-operation channels.
The launch of digital wireless television by Oxygen Television Network set the stage for Kenyans to enjoy affordable international entertainment programmes. Being the first wireless digital terrestrial in the east and central Africa region, Oxygen TV network went on air on September 1 after successful trials, which showed that 89 per cent of the viewers were happy with the extra channels and were most captivated by the crystal clear picture reception and sound.
The rise in electronic waste was a concern that topped the government agenda in the year, causing it to seek for ways to control the entry of obsolete electronic gadgets especially computers. The government grappled with what to do with the obsolete computers currently in use in many public and private institutions. This issue arose as reality dawned that the latest Windows XP 2007 could not be installed on Pentium 2 or 3 computers. This latest version of Microsoft’s Windows series can only be installed in Pentium 4 computers and above.
Fixed line telephone operator, Telkom Kenya launched a wireless telephony service to compete with mobile telephone operators Celtel and Safaricom. Unlike Safaricom and Celtel that use GSM cards, the Telkom wireless service uses a RUIM card. A RUIM card is a removable ID chip. Telkom Wireless was launched at a cost of Sh1,000 while SMS services cost Sh2.50 within the Telkom Network.
Popote Wireless, a firm offering wireless internet and telephony services also made its entry into the local market, rivalling Internet Service Providers (ISP) and mobile telephone service operators and fixed line telephone operators.
The firm provides superior services such that they allow people to connect to the Internet using radio waves instead of phone lines. Popote fixed wireless service gives a connection that is far more superior than ordinary landlines. Being wireless, the connection remains unaffected by cable cuts and rains.
A wireless phone installed at your location is connected to a transmitter mounted at an appropriate location on your house or building. The transmitter sends signals to one of its towers which is then sent out to the Internet.
The information from the Internet is then sent back to the tower and sent back to your transmitter and then to your radio and finally to your computer. Sounds like a long and slow process? Wireless Internet is very fast and can transmit information hundreds of times faster than a normal dialup account.
At the end of the year, ICT was clearly in the picture as the results for the Kenya Certificate of Primary Education were released.
Instead of the bulky documents that hitherto used to be delivered to the Minister for Education at Jogoo House by the examinations council, this time everything was reduced to a CD.
At the same time, a faster way for parents to check results was inaugurated via SMS and the web portal of the exams council.
It is expected that ICT will again come to the fore later in 2007, when elections are expected to be conducted mostly on the latest technology platform.
How to outsource business processes
Cutting hair is a tricky thing. I know many people who wouldn’t trust just anybody to take a pair of scissors to their head. Even me.
If that’s true for you, it could explain why you probably frequent the same stylist. You built a relationship with that person and you know you’ll always get the look you want. Initially price may have been a factor, but results based on experience are likely the key to your long-term selection.
When it comes to business process outsourcing (BPO), the same applies. You need to be careful to pick your partners based on their track record of performance and your needs.
Let me explain by drawing a parallel to the electronics manufacturing services (EMS) business. I’ve been in this business a long time, and the BPO industry today looks very similar to where EMS was 10 years ago.
In the early days of EMS, the model was rather innovative—allowing OEMs to outsource non-core functions like volume production to firms dedicated to manufacturing. The success of the model attracted a lot of competitors —many of them with little expertise. If an EMS provider claimed to perform a feat once, suddenly they were advertising themselves as an expert in the service.
Fortunately, in the mid-1990s the EMS industry began to alter its value proposition focused on business outcomes, and BPO firms are beginning to do the same. At Solectron, we realized we could add greater value to OEMs as a collaborative strategic partner by optimizing the supply chain for competitive advantage.
Before you hire a BPO provider, you need to determine your readiness for outsourcing.
* Will a certain function currently insourced better serve my customers, shareholders and employees if it’s outsourced? If so, outsource it.
* Is my business ready to outsource? If the infrastructure (people, processes, procedures) is not in place to support an outsourcing model, get your house in order before outsourcing.
* Is the executive team on board? Moving forward with an outsourcing relationship without the full support from senior executives won’t succeed.
If you have these pieces figured out, the next step requires creating a strategic roadmap for success supported with clear goals and responsibilities. Once you’ve mapped out the business strategy for outsourcing, you will be in a position to identify the right partner to achieve your goals—one with the proven expertise to deliver results.
When looking for a BPO partner, think of it like hiring an employee. You hire based on competence, not price. Certainly price—or salary—is a consideration but a candidate’s ability to generate results and who has the ability to grow and develop are paramount. Three other suggestions:
1. Hire based on a long-term commitment. You don’t hire with intent of firing.
2. Hire those with the right attributes and potential. With mutual investment from both parties, their value will only increase.
3. Have a roadmap with a long-term view of how to develop over time.
#
#
Apply the same filter in choosing a BPO partner as you do when choosing a hair stylist. As you can see from my picture, my requirements for a good haircut are going to be dramatically different than my wife’s. Know the result you want in your new 'do’ and find someone with the ability to deliver (match skill-set to desired outcome). Next, establish metrics for achievement (longer in the front, shorter bangs, keep the sideburns). Make adjustments as needed (a little more off the top). Stay involved (this is a symbiotic relationship). But by all means let the stylist do the job. In the end, you’ll both be happier.
If that’s true for you, it could explain why you probably frequent the same stylist. You built a relationship with that person and you know you’ll always get the look you want. Initially price may have been a factor, but results based on experience are likely the key to your long-term selection.
When it comes to business process outsourcing (BPO), the same applies. You need to be careful to pick your partners based on their track record of performance and your needs.
Let me explain by drawing a parallel to the electronics manufacturing services (EMS) business. I’ve been in this business a long time, and the BPO industry today looks very similar to where EMS was 10 years ago.
In the early days of EMS, the model was rather innovative—allowing OEMs to outsource non-core functions like volume production to firms dedicated to manufacturing. The success of the model attracted a lot of competitors —many of them with little expertise. If an EMS provider claimed to perform a feat once, suddenly they were advertising themselves as an expert in the service.
Fortunately, in the mid-1990s the EMS industry began to alter its value proposition focused on business outcomes, and BPO firms are beginning to do the same. At Solectron, we realized we could add greater value to OEMs as a collaborative strategic partner by optimizing the supply chain for competitive advantage.
Before you hire a BPO provider, you need to determine your readiness for outsourcing.
* Will a certain function currently insourced better serve my customers, shareholders and employees if it’s outsourced? If so, outsource it.
* Is my business ready to outsource? If the infrastructure (people, processes, procedures) is not in place to support an outsourcing model, get your house in order before outsourcing.
* Is the executive team on board? Moving forward with an outsourcing relationship without the full support from senior executives won’t succeed.
If you have these pieces figured out, the next step requires creating a strategic roadmap for success supported with clear goals and responsibilities. Once you’ve mapped out the business strategy for outsourcing, you will be in a position to identify the right partner to achieve your goals—one with the proven expertise to deliver results.
When looking for a BPO partner, think of it like hiring an employee. You hire based on competence, not price. Certainly price—or salary—is a consideration but a candidate’s ability to generate results and who has the ability to grow and develop are paramount. Three other suggestions:
1. Hire based on a long-term commitment. You don’t hire with intent of firing.
2. Hire those with the right attributes and potential. With mutual investment from both parties, their value will only increase.
3. Have a roadmap with a long-term view of how to develop over time.
#
#
Apply the same filter in choosing a BPO partner as you do when choosing a hair stylist. As you can see from my picture, my requirements for a good haircut are going to be dramatically different than my wife’s. Know the result you want in your new 'do’ and find someone with the ability to deliver (match skill-set to desired outcome). Next, establish metrics for achievement (longer in the front, shorter bangs, keep the sideburns). Make adjustments as needed (a little more off the top). Stay involved (this is a symbiotic relationship). But by all means let the stylist do the job. In the end, you’ll both be happier.
The future of outsourcing
Datamonitor examines what lessons from the past the new wave of
outsourcing can learn from and what will drive its success going
forward, in its report, "The Future of Outsourcing". The report
examines outsourcing in Automotive, Energy, Healthcare, Technology, and
Financial Services markets.
Datmonitor research highlights include:
Sales force outsourcing in the pharma industry: Sales force outsourcing
is common practice within the pharmaceutical industry. Sales force
outsourcing is being used as a tactical maneuver by pharmaceutical
companies, using the services provided by contract sales organizations
(CSOs) to meet their short-term and longer-term. The benefits:
* Speed and efficiencies - CSOs can quickly a build sales forces or
provide additional sales representatives. This is useful for
pharmaceutical companies to adapt to sudden changes in their sales
force needs.
* Expertise - Using a CSO can provide pharmaceutical firms with
sales force expertise in new geographic or therapeutic areas they wish
to expand into, but do not have the expertise in.
* Avoiding capital outlay - For some pharmaceutical companies,
particularly smaller ones, such an investment may be too risky or they
may not have the upfront capital required. Outsourcing the function to
a CSO offers a viable alternative.
BestShoring in Western domestic contact centers: Outsourcing is slowing
while BestShoring is emerging. Outsourcing is continuing to grow across
all vertical markets, and contact centers are no exception. However,
western domestic contact center outsourcing is slowing in the wake of
new business realities and offshore locations providing high levels of
customer service at a lower cost.
Many investors in the US and Western Europe have adopted to nearshore
model as a way of moving their operations to cheaper locations. Simply
put, they locate their facilities in relatively close proximity to the
markets they service (e.g. from the standpoint of US investors, Canada
and Mexico).
However to derive maximum profits from outsourcing, many are now using
the BestShoring strategy -- tailoring specific customer care needs to
locations that are best suited for these functions. BestShoring allows
the investor to save on the cost of domestically sourcing the work,
while at the same time removing the inflexibility of using only one
offshore location.
For example, many outsourcers are now locating administrative-to-mid
level customer care in offshore locations including India, Argentina
and the Philippines (which may account for 60% to 70% of total call
volume), while locating the high-end/value add work in nearshore
locations such as the Czech Republic or Egypt.
Europe's payment card market and outsourced card processing solutions:
The result of the changing market conditions and the improved approach
of US third party players mean that Europe's map of card processors is
starting to look very different than it did two years ago. One only has
to look at the number of new outsourced processing relationships that
have been signed over the last year. These include, First Data's
merchant acquiring alliances with ICS in the Netherlands and BNL in
Italy; Sociiti Ginirale's relationship with eFunds for international
card processing and euroConex's acquisition of Citibank Card Acceptance
in Europe.
In considering these recent, new relationships, as well as some of the
acquisitions that have been made over the last year (largely by First
Data International), it is clear that Europe is witnessing a second
wave of outsourced card processing solutions.
Energy Sector infrastructure and Business Process Outsourcing (BPO):
The most successful approach taken by mass market customer service
providers towards outsourcing has been to optimize systems in advance
of relocating specific tasks. This recognizes that there are economies
of scale from outsourcing a single entity rather than a number of
disparate systems. With the systems fully in place and functioning
effectively, this allows for a further round of cost savings beyond
those efficiencies that naturally fall out of a process optimization
process.
The UK domestic energy sector is one example of a deregulated industry
in which the costs involved in serving customers have been cut in
relative terms. Centrica is one example. Having invested in optimizing
systems and with full migration of accounts complete, it is now in a
position to seek to lower its costs of business processing. Centrica
already has 1,000 back office seats in India, with the scope to add
further headcount over time. Datamonitor estimates that the combination
of the systems investment and BPO will see Centrica's Cost-to-Serve
fall from 30.74 per customer to 21.86. At present, Centrica's policy is
to keep customer service operatives in the UK, but it is well placed to
deliver further cost savings should this change in the future.
Outsourcing of fleet management services in Europe: Datamonitor expects
Europe's market for outsourced fleet management services to reach 6.67
million vehicles by 2010 representing a 3.6 % growth over the 5.5
million vehicles in 2005. The 5% growth enjoyed during 2004 is expected
to slow, reaching 3% by 2010. This decline of market growth represents
a restriction in growth potential for fleet management companies.
Traditionally, fleet management companies have targeted outsourcing
services at customer segments where the penetration of outsourcing
services is already high. To maintain the currently high levels of
outsourcing with medium and large size corporate clients, Datamonitor
says companies need to adopt successful customer retention strategies -
costs involved in retaining a customer are far lower than those
incurred trying to expand the client base.
outsourcing can learn from and what will drive its success going
forward, in its report, "The Future of Outsourcing". The report
examines outsourcing in Automotive, Energy, Healthcare, Technology, and
Financial Services markets.
Datmonitor research highlights include:
Sales force outsourcing in the pharma industry: Sales force outsourcing
is common practice within the pharmaceutical industry. Sales force
outsourcing is being used as a tactical maneuver by pharmaceutical
companies, using the services provided by contract sales organizations
(CSOs) to meet their short-term and longer-term. The benefits:
* Speed and efficiencies - CSOs can quickly a build sales forces or
provide additional sales representatives. This is useful for
pharmaceutical companies to adapt to sudden changes in their sales
force needs.
* Expertise - Using a CSO can provide pharmaceutical firms with
sales force expertise in new geographic or therapeutic areas they wish
to expand into, but do not have the expertise in.
* Avoiding capital outlay - For some pharmaceutical companies,
particularly smaller ones, such an investment may be too risky or they
may not have the upfront capital required. Outsourcing the function to
a CSO offers a viable alternative.
BestShoring in Western domestic contact centers: Outsourcing is slowing
while BestShoring is emerging. Outsourcing is continuing to grow across
all vertical markets, and contact centers are no exception. However,
western domestic contact center outsourcing is slowing in the wake of
new business realities and offshore locations providing high levels of
customer service at a lower cost.
Many investors in the US and Western Europe have adopted to nearshore
model as a way of moving their operations to cheaper locations. Simply
put, they locate their facilities in relatively close proximity to the
markets they service (e.g. from the standpoint of US investors, Canada
and Mexico).
However to derive maximum profits from outsourcing, many are now using
the BestShoring strategy -- tailoring specific customer care needs to
locations that are best suited for these functions. BestShoring allows
the investor to save on the cost of domestically sourcing the work,
while at the same time removing the inflexibility of using only one
offshore location.
For example, many outsourcers are now locating administrative-to-mid
level customer care in offshore locations including India, Argentina
and the Philippines (which may account for 60% to 70% of total call
volume), while locating the high-end/value add work in nearshore
locations such as the Czech Republic or Egypt.
Europe's payment card market and outsourced card processing solutions:
The result of the changing market conditions and the improved approach
of US third party players mean that Europe's map of card processors is
starting to look very different than it did two years ago. One only has
to look at the number of new outsourced processing relationships that
have been signed over the last year. These include, First Data's
merchant acquiring alliances with ICS in the Netherlands and BNL in
Italy; Sociiti Ginirale's relationship with eFunds for international
card processing and euroConex's acquisition of Citibank Card Acceptance
in Europe.
In considering these recent, new relationships, as well as some of the
acquisitions that have been made over the last year (largely by First
Data International), it is clear that Europe is witnessing a second
wave of outsourced card processing solutions.
Energy Sector infrastructure and Business Process Outsourcing (BPO):
The most successful approach taken by mass market customer service
providers towards outsourcing has been to optimize systems in advance
of relocating specific tasks. This recognizes that there are economies
of scale from outsourcing a single entity rather than a number of
disparate systems. With the systems fully in place and functioning
effectively, this allows for a further round of cost savings beyond
those efficiencies that naturally fall out of a process optimization
process.
The UK domestic energy sector is one example of a deregulated industry
in which the costs involved in serving customers have been cut in
relative terms. Centrica is one example. Having invested in optimizing
systems and with full migration of accounts complete, it is now in a
position to seek to lower its costs of business processing. Centrica
already has 1,000 back office seats in India, with the scope to add
further headcount over time. Datamonitor estimates that the combination
of the systems investment and BPO will see Centrica's Cost-to-Serve
fall from 30.74 per customer to 21.86. At present, Centrica's policy is
to keep customer service operatives in the UK, but it is well placed to
deliver further cost savings should this change in the future.
Outsourcing of fleet management services in Europe: Datamonitor expects
Europe's market for outsourced fleet management services to reach 6.67
million vehicles by 2010 representing a 3.6 % growth over the 5.5
million vehicles in 2005. The 5% growth enjoyed during 2004 is expected
to slow, reaching 3% by 2010. This decline of market growth represents
a restriction in growth potential for fleet management companies.
Traditionally, fleet management companies have targeted outsourcing
services at customer segments where the penetration of outsourcing
services is already high. To maintain the currently high levels of
outsourcing with medium and large size corporate clients, Datamonitor
says companies need to adopt successful customer retention strategies -
costs involved in retaining a customer are far lower than those
incurred trying to expand the client base.
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