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eSourcing Brings Fresh Air To Recession-Hit Customers: Ravi Chander
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The world is finding it very difficult to face the current global financial crisis. But India remains optimistic about the country's outsourcing future. However, the current economic scenario is forcing companies to come out with new concepts and models in order to become more competitive in the outsourcing market. The following are excerpts from an interview with Ravi Chander, partner, sourcing strategy and implementation, Anantara Solutions, who shares with us the overall concept of eSourcing and its market.
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Saturday, January 17, 2009:
EFYTimes: What is eSourcing and eSourcing Capability Model (eSCM) all about?
Chander: eSourcing refers to the sourcing of services that are IT-enabled, i.e. they use IT in the process of creation, delivery and management. These include both BPO services (voice and non-voice) and managed IT services. Some examples of such services include back-office transaction processing, contact centres, infrastructure management, application management and IT help desk.
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The eSourcing Capability Model (eSCM) models are developed by the IT Services Qualification Center (ITSqc) at Carnegie Mellon University. The ITSqc is supported by an industry consortium comprising leading global players in the IT-enabled sourcing space (e.g. Accenture, IBM, EDS, CA and TPI).
The eSCM models contain best practices and are used as a reference to drive improvement in IT-enabled sourcing relationships. The eSourcing Capability Model for Services Providers (eSCM SP) and eSourcing Capability Model for Client Organizations (eSCM CL) are designed to apply to service providers and clients, respectively.
eSCM SP has 84 best practices across 10 key capability areas that will matter in the future for IT-enabled services:
Knowledge management effectively create and manage engagement level and organisation level knowledge assets
People management across all aspects including competency planning, recruitment, training and retention
Performance management both engagement and service level performance, to improving organisational performance through benchmarking and capability base-lining
Technology management effectively managing the enabling technology infrastructure, including optimising and ensuring high availability
Relationship management managing relationships with clients, suppliers and partners
Threat management mitigating risks from information security, business continuity as well as protection of intellectual property and ensuring statutory and regulatory compliance
Contracting across all aspects of relationship initiation from requirements development through to contract establishment
Service design and deployment including designing personnel structures, processes and technology, through to transitioning services from the client
Service delivery ensuring effective service delivery, with minimal disruption to service availability, and ensuring adherence to service quality commitments
Service transfer managing both inward transition from the client as well as outward 'reverse' transition back to the client
The eSCM SP also provides a roadmap for progressing client relationships towards continuously improving business value. Besides, certification to an eSCM Level provides organisations with competitive differentiation in the marketplace by providing an external validation of effective implementation of eSCM best practices.
The capability levels in the eSCM SP are as follows:
Level 1 Providing Services: An organisation is at this level if it has not implemented all of the practices of the eSCM required for Level 2 and hence will be at risk in their ability to consistently meet client requirements.
Level 2 Consistently Meeting Requirements: Organisations have implemented all the 48 eSCM practices required for Level 2 and hence have established capabilities to understand clients' requirements and provide effective services.
Level 3 Managing Organisational Performance: Organisations at Level 3, have implemented the additional 26 eSCM practices required at this level and have capabilities to not just focus on specific client engagements, but can drive measurement driven reactive improvement at an organizational level.
Level 4 Proactively Enhancing Value: Organisations at Level 4, have implemented the additional 10 eSCM practices required at this level and have capabilities to not just drive reactive improvement, but proactive value creation through focus on innovation, benchmarking etc.
eSCM CL
The eSCM CL has 95 practices that are designed to specifically address the needs of organisations that are sourcing clients, across 17 capability areas that clients will need to address to establish business value creating sourcing relationships (e.g. sourcing strategy management, governance and organisational change management)
The eSCM models are relevant now more than ever, considering the changing order in global outsourcing.
By providing service providers with best practices across the key capabilities that will enable them to provide business solutions, it enables them to drive towards greater business value for their clients. It also provides the foundation for both the strategic and operational excellence initiatives required to be undertaken to effectively compete in a post cost arbitrage era.
And for sourcing clients, the eSCM CL provides the basis for them to effectively structure or re-evaluate their existing outsourcing programmes and also establish the key capabilities in their retained IT and business process organisation. By guiding client organisations through the process of sourcing strategy, portfolio analysis, vendor selection, organisation change management and outsourcing value management the eSCM CL helps clients derive greater business value from outsourcing. And in turn, it also helps service providers as their clients will be more mature in their expectations and in their ability to effectively contribute to the outsourcing relationship.
EFYTimes: Is there any relationship between eSourcing and outsourcing? If yes, please explain (similarities and differences)?
Chander: The term eSourcing can be understood as a sub-set of outsourcing. Outsourcing can be broadly defined as executing specific tasks or business processes leveraging external suppliers or partners. Within this definition, we can include outsourced manufacturing, outsourced facilities management, as well as BPO and IT services. The term eSourcing specifically refers to the outsourcing of IT-enabled services like BPO and IT services, since they use IT as a critical enabler for their delivery and management as opposed to other forms of outsourcing.
EFYTimes: What sort of companies or customers actually need to/go for eSourcing models? How does it work and help them achieve their goals?
Chander: The eSCM SP is targeted at organisations that provide IT-enabled services. This includes BPO and IT service providers. These providers could be providing services in any industry vertical or market segment. In terms of the eSCM CL, it is targeted at organisations that have adopted or are in the process of adopting outsourcing as a business strategy and are looking to improve their capabilities form, manage and continuously improve their outsourcing relationships.
From the perspective of Indian outsourcing service providers, the key drivers for adoption of the eSCM SP are:
# Help sustain cost competitiveness through improved efficiencies
# Enable the shift to business value, which is now an imperative from customers
# Serve as a differentiator amongst global competition
# Help retain and expand current sourcing relationships
From the perspective of organisations in India who are looking to leverage the tremendous opportunity presented by outsourcing, the adoption of the eSCM CL will be driven by the need to:
# Learn from global experience in outsourcing to establish a best practices framework to plan and manage the outsourcing journey
# Derive greater business value from their outsourcing relationships
EFYTimes: What are the specific areas/sectors that you target? What all are the other areas that can be benefited from this model?
Chander: In terms of outsourcing service providers, the eSCM model can benefit organisations who are involved in all forms of IT-enabled service delivery, including:
Voice/Contact Centres
Non-Voice/Transaction processing
IT infrastructure management and operations
As regards outsourcing clients, these can be organisations that are in any industry vertical and have IT-enabled or are in the process of IT-enabling their business operations.
EFYTimes: Has smaller organisations also benefited from the practices of the eSCM?
Chander: The practices in the eSCM are designed to be applicable to organisations irrespective of their size of operations. However, smaller organisations will need to appropriately tailor the implementation to ensure that they minimise process overhead, while yet achieving the business value targeted.
In Anantara's experience, both large organisations i.e. with several thousand employees, as well as smaller organisations with around 100-300 employees, have benefited from the practices of the eSCM. However, the trend has been that certification to a specific capability level is primarily targeted by medium to large organisations.
In terms of outsourcing as a business strategy, both large and smaller organisations can leverage it to obtain significant business value. For larger organisations, the value will be in achieving service providers to provide business solutions as well as reduction in costs. For smaller organisations, outsourcing provides them with an opportunity to rapidly and cost effectively access competencies leveraging the economies of scale of service providers.
EFYTimes:What kind of obstacles do you come across while convincing the companies to use your model?
Chander: In Anantara's experience, establishing the specific business value that can be unlocked by adopting the eSCM is critical to convincing organisations to adopt the model. Anantara, therefore, has a robust ROI estimation and monitoring model in place that is used to assess an organisations current state, plan the journey towards improved practices and to verify the achievement of the targeted business results.
Anantara also conducts public as well as organisation specific workshops and training programmes to improve the level of awareness of the models in the industry.
EFYTimes: Who are your major competitors?
Chander: While we firmly assert our position as the pioneer of the Second Generation Outsourcing model, we recognise that customers could perceive multinational companies such as IBM and Accenture and large Indian IT firms such as Infosys and TCS as our competitors.
EFYTimes: Could you name some of the leading names in the market that Anantara has in its kitty?
Chander: Confidentiality agreements prevent us from discussing individual customer names although we can reveal that our customers range from Fortune 100 companies to mid-sized enterprises hailing from 17 countries.
EFYTimes:Define the overall eSourcing market in India? And what is the adoption level of eSCM in India and other countries?
Chander: The BPO industry in India, that is currently estimated at $11 billion, has the opportunity to grow five-fold to be over $50 billion by 2012 (Source: NASSCOM Everest Group study on Roadmap 2012). However, is this promising future secure, particularly for Indian BPO companies? More importantly, is their present secure? Cost arbitrage is no longer the source of competitive advantage for Indian BPO companies that it once was. It is a level playing field, with global companies now offering the same value through out-located operations in India. Further, competing destinations like the Philippines and China are poised to overtake India in terms of cost competitiveness. Customers are also now asking 'what next'? Importantly, they are demanding a shift from cost arbitrage to improved business value from outsourcing service providers. This changed market scenario, coupled with the current crisis in the global economy, significantly threatens the ability of Indian BPO companies to survive and realise this enormous potential.
On the other hand, Indian industry (other than IT and BPO industry), which has achieved significant growth in business volume in the past few years, is faced with a different set of challenges. How to scale rapidly with optimal investment? How to effectively compete in the global market place? Outsourcing of IT and business processes is emerging as the business strategy that can help Indian industry effectively address these challenges. Outsourcing is a strategy that global players have already successfully adopted and hence it is imperative that Indian industry follows suit to keep up with global competition. More importantly, outsourcing presents an enormous opportunity to 'leap-frog' global competition since Indian companies do not carry a significant legacy in terms of IT investments and can therefore directly move towards outsourced on-demand IT and business processes.
This provides the context for the key drivers for adoption of the eSourcing Capability Models (eSCM), both eSCM SP for service providers and eSCM CL for client organisations, by outsourcing entities in India.
EFYTimes: How is the global recession affecting the eSourcing market in general and Anantara in particular?
Chander: The eSourcing market after facing some initial difficulties is starting to look up as recession-hit customers seek fresh avenues for cutting costs and improving efficiencies. While we have felt the general impact of the recession, in many senses the recession has created a conducive environment for new messages such as Second Generation Outsourcing (SGO). While we have to be extremely prudent with daily management, we maintain an overall healthy growth.
EFYTimes: Could you share something about the plans of the company during this period of global economic crisis?
Chander: Anantara is increasing the strength of its campaign significantly. We have seen more prospect meetings happen in the US, Europe and Asia compared with any previous quarter. We will actively push the case for innovative deal structuring and business value creation and are hopeful that customers will respond to this message better now than in the past periods of prosperity.
By-- Arti Singh, Sub-Editor, EFYTimes.com
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