Contract signing is a major milestone in outsourcing engagement but things exists only on paper. Transition phase, from incumbent vendor or internal IT staff, sets the tone of the relationship. Your governance processes, performance measurement and reporting mechanisms are established during the transition phase.

The selected vendor is tasked to perform detailed knowledge transfer on client’s application, environment and operating processes. Tremendous time and commitment is required to plan and execute any outsourcing or managed service transition without significantly impacting the business.

Smooth transition also results in building mutual trust and respect that leads to stronger long term relationship. The quality of resources and processes brought to the table during this stage is a good indicator of how your vendor’s service delivery quality will shape up.

A poor service transition can result in a false start to a relationship and will require significant effort to make amends.  Following are the reasons for the transition failure:

• Poor due diligence and project planning
• Failure to understand the scope by the service provider
• Poor rebadging and Onboarding process
• Lack of access to client SMEs
• Aggressive Go-Live date
• Poor transition governance
• Unclear exit criteria
• Lack of tools, skill, prior transition experience
  

Effective planning, due diligence and proper communication across all the stakeholder’s is the key ingredient for the transition’s success. Recommendations to make the transition phase successful

• Switch from people dependent model to process dependent model
• Always perform the risk analysis and define the risk mitigation measures
• Involve all stakeholders in transition to create the right level of attention. Treat the transition as a “normal” change program with high impact
• Be open to all unanticipated challenges that arise in outsourcing engagements. Both the parties should bring challenges faced by each other and be supportive to each other

A well executed service transition a strong exhibition of vendor capability and resourcefulness and goes long way in building enduring partnerships.

In the times of economic turbulence and financial crisis many organizations start  evaluating options to outsource for the first time or expand on their existing sourcing strategy.

In today’s competitive market, vendors are constantly evolving their delivery and pricing models to differentiate themselves. The final vendor you select depends on the context of your outsourcing engagement.  If you only evaluate vendors of similar size and competency then you choose to limit your options. 

Companies are realizing the initial vendor mix has a major impact on how their final outsourcing engagement gets structured.  It is important to understand the capabilities and values-adds that the vendor can bring to table.
In our vendor selection process, we recommend considering a diverse group of vendors from the following big buckets:

• Global player
• Tier 1 giants
• Tier 1 Contenders
• Indian Pure Plays

 At the end of the day, the fit and not the size will determine the success of your outsourcing engagement. The supplier selection process should be designed to find the best partner and not to preclude the right fit solely on size considerations.

Over the past few years many companies are exploring global sourcing to reduce overall spend, conserve capital and increase efficiency.  Some of the first time outsourcers face challenges and frustrations associated with managing outsourcing and shared services engagements. It is not too late - and certainly not too early - to establish long term relationship with your strategic vendor.

Outsourcing and offshoring changes the responsibility for executing IT services from the internal IT department to external service providers. Your strategic partner should not only provide solutions for the most pressing business problems but also contribute by sharing their ideas, insights, industry knowledge and technical expertise.

The first step is to identify potential IT vendors with whom you should have a closer partnership. Next, invest time and resources on developing long-term agreements and shared sense of partnership and respect. Successful outsourcers leverage their vendor’s capabilities and realize maximum value from the initiatives.

A marathon mindset is required to build partnership approach:

• Look for a value beyond labor arbitrage or rate negotiations with vendors
• Build better vendor governance frameworks grounded in process and supported by tools
• Review strategic vendor’s new capability and how it aligns with company’s roadmap
• Share information with vendors: business plans, priorities, or technology road map
• Be explicit about expectations and provide regular feedback
• Explore ways your vendor can put more skin in the game and drive innovation
• Communicate incremental benefits to the internal team

Building higher-value relationships is a two-way street. We need to establish a strong foundation of trust and closer relationships that will deliver greater impact than mere transactional relationships.

“It is difficult to train for a marathon; but it is even more difficult to not be able to train for a marathon”.

In the recent 2Q11 Global TPI Index, which measures commercial outsourcing contracts valued greater than $25 million excluding public sector, it was reported: ·     

 

• The total contract value of outsourcing agreements signed during the first half of 2011 dropped roughly 18 percent, driven down by Americas (down 50%)

• The Total Contract Values is lowest reported for second quarter in the past decade

• The total number of outsourcing contracts signed, however, was virtually unchanged-- down 1 percent compared to last year.

The trend shows that the number and value of large contracts and mega deals are on a decline.

The dominance of smaller deals is due in part to companies' reluctance to make the larger investments required for bigger contracts. The lack of big bang outsourcing contracts is also a sign of outsourcing saturation. The penetration of vendors into the largest of the Global 2000 organizations in each industry group is high. Hence, the scope for new large IT transactions coming to market is lower.

Growth is more likely to come from mid-market IT and business process outsourcing, which will produce smaller transaction values. Also there is a growth in restructing of existing contracts. 

Smaller deals also point to outsourcing customers' continued preference for multi-sourcing arrangements over single-sourced deals. Companies like the many-partnered model because it allows them to access specific skills and can provide some internal market competition for services.

In multi-sourced model organizations can effectively run a competitive bid process for certain projects to ensure they are getting some elements of the external market competition, rather than limited choice.

While internal competition for new projects can benefit outsourcing customers, they're increasingly asking their cadre of IT suppliers to cooperate as well. Providers understand this and are increasingly effective in working together for their clients

Maintaining control and oversight of delivery and ensuring that the business users are getting what they need, whilst the value is extracted from the original transaction, can present a real conflict. However, managing the multi-sourced environment continues to be a challenge for some customers.

The mature organizations were taming their tactical issues and focusing on the more strategic aspects of managing the relationship. While the lesser organizations are struggling to cope up with basic vendor management functions such as contract and invoice management.

Price is always a factor in any buying decision, especially where the performance of procurement professionals is evaluated based on money saved. Outsourcing contracts that save money and meet the goals of the business in more ways than one are the ones that really move the needle.

Here are two critical areas that will help create outsourcing contracts that focus on business needs and goals and pricing:

Spell it out: From terms to Service level agreements to detailed roles and responsibilities, make sure your outsourcing contracts have every line item listed and spelled out to the nth level of detail. Write the contract as if you won't be there to read it the minute it is written. Make it explicit for both, internal and external teams so that their roles & responsibilities are clearly defined. also make sure that the contract provides clear (early) termination clauses so that there are no loop holes should you wish to terminate the contract early.

Transition Period: The scope of work for the actual work is usually well understood by most. The area where most scope statements fall short is in defining the transition period roles and responsibilities and also the scope during the transition period. This invariably leads to finger pointing and lack of accountability about scope responsibilities.

Pricing is the primary variable when outsourcing although flexibility in agreeing to a price comes into play when other conditions and requirements are more favorable. So although you started down the path of outsourcing to save money, how much you save is based on what else you were able to negotiate with the supplier/s. Also, pricing will change year over year so that you may not find savings after the initial one or two year period. That's when the other negotiated terms and conditions become more important.

Price is the biggest factor in creating an outsourcing relationship. However optimizing outsourcing contracts to create a balance between overall benefit to the company in areas such as scope of work, SLA's and tranforming the company through innovation is perhaps even more important.

Some outsourcing relationships fail not because the vendor is not good or the deliverables are not met but because users are not happy with the results of outsourcing. These users create their own little processes or duplicate the work being done by the outsourcing team to take care of the issue inhouse.

In anything we do, we know that if users aren't satisfied to a majority extent, the entire effort becomes wasted. Many companies make technology outsourcing decisions without consultating their internal users. Remember, these are the same users who have to do their job and they need to do it with or without the help of the outsourced provider.

So does your company have an end User Satisfaction Survey which will help you determine if technology outsourcing is working for them?

If not, here is some high-level information that will help you create an end-user satisfaction survey. First determine the criteria which will be used for doing the evaluation. Obviously it needs to be well-defined so that it can be appropriately measured and understood. Some areas for what to evaluate may include:

• Ease of use: Is the software easy for the end user to use?
• Productivity: Is the software creating productivity or is it adding to the end-users' workload?
• Complete: Is theapplication in question complete - meaning does it fulfill all the needs of the tasks a user is supposed to do using it. Or was the software implemented in a rush and the remaining phased deployments never happened which made the application either partially usable or not used.

So then how to measure the feedback provided?

What works best is when you provide users the ability to answer the various questions using the "Agree, strongly agree, don't agree" type of scale.

Also be sure to include an area where users can give open-ended feedback where users have the ability to provide specific examples which can help fix a software problem quickly. It is important that users have the option of submitting the survey response anonymously so as to get high quality feedback.

You may wish to do a survey once or twice a year. Remember software development is done to help users do their job better to meet the needs of the business. To make your outsourcing decision sustainable, get feedback from users and listen to it. Othewise you'll have spent tons of money for nothing because users will find ways to do their job using temporary solutions which may become permanent over time.

MphasiS is a leading provider of applications services, remote management services and BPO services. The company delivers real improvements in business performance for clients through a combination of technology know-how, domain and process expertise. With currently over 38,000 people, MphasiS services clients in financial services, healthcare, communications, transportation, consumer & retail industries and to governments around the world.

Financial Highlights for Quarter ended 31 July 2010

• Consolidated revenue at $ 275.6 million for the quarter ended 31 July 2010 as compared to $ 232.0 million in the same quarter last year displaying growth of 18.8%
• Net profit at $ 58.5 million for the quarter ended 31 July 2010 as compared to $ 48.1 millionin the same quarter last year displaying growth of 21.6%
• Operating Profit at $ 59.4 million for the quarter ended 31 July 2010 displaying growth of 17.6% over the same quarter last year
• Operating margins stood at 21.5%
• EPS for the quarter was $ 0.28, an increase of 21.1% over the same period last year

http://www.mphasis.com/pdfs/PressReleaseUSDQ3FY10.pdf

Ramco Systems, a part of the USD 800+ million Ramco Group, is a global provider, catering to over 100,000 users. Their resource strength exceeds over 1,306 employees operating out of 18 offices in 9 countries. Ramco Systems develops cost effective, flexible, and innovative enterprise applications, across multiple verticals including banking, insurance, manufacturing, supply chain, aviation, transportation and logistics, healthcare, governance, retail and so on. Ramco's collaborative solution innovation platform-Ramco VirtualWorks ensures that when your business changes, your system also changes along. Ramco Systems has been certified for ISO 9001:2008 quality standards, and ISO 27001 security standards.

Financial Highlights

•Global profit of USD 0.40 mln for the financial year 2009-10 as against last year’s profit of USD 0.45 mln
•Global revenues for Q4 (FY: 09-10) stood at USD 9.05 mln.
•During the year, the total quarterly income (India) reported is Rs 27.28 crores as against last year revenues of Rs. 18.12 crores depicting noteworthy growth of 51%.

Business Highlights

•The company’s flagship product RODE (Ramco OnDemand ERP- ERP delivered on cloud) successfully added 60 new customers in India
•The company’s entered into partnership with HP to market its Analytics Product on its neoview platform

http://www.ramco.com/news/company_press_May_24_10.asp

WNS (Holdings) Limited (NYSE: WNS) is a leading global business process outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offering and a proven track record enables WNS to deliver business value to some of the leading companies in the world. WNS is passionate about building a market-leading company valued by our clients, employees, business partners, investors and communities.

Financial Highlights: Fiscal Fourth Quarter Ended March 31, 2010

• Quarterly revenue of $157.6 million, up 24.6% from the corresponding quarter last year.
• Quarterly revenue less repair payments of $96.7 million, up 1.8% from the corresponding quarter last year.
• Quarterly net income of $1.0 million compared to $2.5 million from the corresponding quarter last year.
• Quarterly adjusted net income (or net income attributable to WNS shareholders excluding amortization of intangible assets, share-based compensation, related fringe benefit taxes and loss attributable to non-controlling interest) of $13.3 million, compared to $13.7 million from the corresponding quarter last year.
• Quarterly diluted income per ADS of $0.02, compared with $0.06 for the corresponding quarter last year.
• Quarterly adjusted diluted net income per ADS (or diluted income attributable to WNS shareholders per ADS excluding amortization of intangible assets, share-based compensation, related fringe benefit taxes and loss attributable to non-controlling interest) of $0.30, compared to $0.32 for the corresponding quarter last year.

Financial Highlights: Fiscal Year Ended March 31, 2010

• Annual revenue of $582.5 million, up 11.8% from the prior fiscal year.
• Annual revenue less repair payments of $390.5 million, up 1.4% from the prior fiscal year.
• Annual net income of $3.7 million compared to $8.2 million from the prior fiscal year.
• Annual adjusted net income (or net income attributable to WNS shareholders excluding amortization of intangible assets, share-based compensation, related fringe benefit taxes and loss attributable to non-controlling interest) of $50.7 million, up 8.6% from the prior fiscal year.
• Annual diluted income per ADS of $0.08, compared with $0.19 for the prior fiscal year.
• Annual adjusted diluted net income per ADS (or diluted income attributable to WNS shareholders per ADS excluding amortization of intangible assets, share-based compensation, related fringe benefit taxes and loss attributable to non-controlling interest) of $1.15, up from $1.08 for the prior fiscal year.

http://ir.wns.com/phoenix.zhtml?c=200768&p=irol-newsArticle&ID=1429928&highlight= 

Deals

CSC Secures $30 Million IT Services Contract from Woodside Energy Limited
CSC has signed a three-year, AUD$30 million information technology (IT) services contract with Woodside Energy Limited, one of the world’s leading producers of liquefied natural gas
http://www.csc.com/au/press_releases/45213-csc_secures_30_million_it_services_contract_from_woodside_energy_limited

MindTree outbids biggies to win Rs 30-cr unique ID deal
MindTree has won Rs 30-crore contract from India’s Unique Identification Authority (UIDAI)
http://economictimes.indiatimes.com/infotech/ites/MindTree-outbids-biggies-to-win-Rs-30-cr-unique-ID-deal/articleshow/5884742.cms

HCL Technologies Signs Five-Year, Strategic Engagement Agreement with MSD
The deal, spread over five years, will see HCL becoming business and technology services partner to Merck by providing services such as software-led IT solutions, Remote Infrastructure Management (RIM), engineering and back office services.
http://www.hcltech.com/media/press-releases/2010/05/04/

State of Nevada and Capgemini Launch New Unemployment Insurance Solution
Capgemini Awarded Three-Year Contract to help increase Efficiency and Accuracy of Unemployment Insurance Administration for Nevada Department of Employment, Training and Rehabilitation
http://www.capgemini.com/news-and-events/news/state-of-nevada-and-capgemini-launch-new-unemployment-insurance-solution/

Mahindra Satyam gets $40 million deal from Nissan
The deal valued at $40 million involves outsourcing new technology for application maintenance and operation services of Nissan.
http://economictimes.indiatimes.com/infotech/software/Mahindra-Satyam-gets-40-million-deal-from-Nissan/articleshow/5922682.cms

Wipro bags three state data centre projects
Wipro Infotech, the IT arm of Wipro has bagged three projects from the governments of Maharashtra, West Bengal and Gujarat for setting up data centre.
http://economictimes.indiatimes.com/infotech/software/Wipro-bags-three-state-data-centre-projects/articleshow/5927170.cms

M&A, Partnerships, JV

Pegasystems and Wipro Expand Global Strategic Alliance
Pegasystems and Wipro announced global strategic alliance to provide industry-leading BPM solutions and services to worldwide clients.
http://www.pega.com/NewsEvents/PressRelease/release.asp?prid=493

HCL Technologies and Stellar Asia Pacific form strategic partnership to further expand business in Australia and APAC
HCL and Stellar will offer compelling business services and outsourcing proposition to clients by leveraging HCL's back office and technology product capabilities and Stellar's customer relationship management services.
http://www.hcltech.com/media/press-releases/2010/05/05/

Cognizant Acquires PIPC, a Global Program Management Consulting Firm
Cognizant has acquired The PIPC Group, a global program management consulting firm based in London.
http://www.cognizant.com/html/news/pressreleases/2010/Mercury_PIPC.asp

Alstom and Infosys Technologies Partner to Develop Next Generation Power Solutions
Alstom, a world leader in energy and rail transport infrastructure and Infosys Technologies, expanded their strategic partnership in areas of global Research and Development (R&D), Engineering and Engineering IT services.
http://www.infosys.com/newsroom/press-releases/Pages/engineering-research-development-power.aspx

News & Events

Study Shows Outsourcing Best Practices are Changing
Outsourcing Center conducted a study among 65 of the outsourcing relationships nominated for the 2009 Outsourcing Excellence Awards.
http://www.outsourcing-journal.com/may2010-study.html

Infosys BPO Launches Enhanced Sales and Fulfillment Outsourcing Services
Infosys BPO, has launched an enhanced offering in the areas of sales support and fulfillment operations.
http://www.infosys.com/newsroom/press-releases/Pages/sales-fulfillment-outsourcing.aspx

Wipro Technologies announces changes in leadership to focus on R&D business
Ayan Mukerji to head Product Engineering Services business globally & Jeffrey Heenan Jalil appointed as Head of Europe
http://www.wipro.com/corporate/media/newsdetail.aspx?id=1611

UK's National Grid shortlists Infosys, Mahindra Satyam, Cognizant for $250-mn deal
UK’s National Grid, which manages the country’s natural gas and electricity networks, has shortlisted Infosys, Mahindra Satyam and Cognizant for an outsourcing contract.
http://economictimes.indiatimes.com/infotech/ites/UKs-National-Grid-shortlists-Infosys-Mahindra-Satyam-Cognizant-for-250-mn-deal/articleshow/5928651.cms

Awards

Mahindra Satyam BPO honored as ‘India’s Most Customer Responsive BPO Company
Mahindra Satyam BPO has been honored as “India’s Most Customer Responsive BPO Company” at the ‘AGC Networks Customer Responsiveness Awards 2010.
http://www.mahindrasatyam.com/media/pr1May10.asp

iGATE named as a leading IT vendor for the insurance industry
iGATE, has been rated among the best 20 Leaders catering to the Insurance Industry by the International Association of Outsourcing Professionals.
http://www.igate.com/uploads/newsroom/press_releases/154iGATE_Named_As_A_Leading_IT_Vendor_For_The_Insurance_Industry.html?expandable=1

Outsourcing Center Announces Winners of 14th Annual Outsourcing Excellence Awards
Outsourcing Center, one of the leading sources of information about outsourcing, announced winners of the 2010 Outsourcing Excellence Awards.
http://www.outsourcing-awards.com/

Analyst/Reports

Market Vista: Q1 2010
Market Vista reports provide data and analysis highlighting key trends and developments in the fast evolving global offshoring and outsourcing market
http://www.everestresearchinstitute.com/Product/11148

Checklist: Key Questions For Setting SLA Strategy in Outsourcing Relationships
Forrester research for Sourcing & Vendor Management Professionals
http://www.forrester.com/rb/Research/checklist_key_questions_for_setting_sla_strategy/q/id/56799/t/2