Selecting the right outsourcing partner

Its been some time since I put forth my views on transforming one's approach to outsourcing. The key of course is to select a partner who will help solidify that approach. Traditional price benchmarks seem to be the decisive driving factor towards vendor selection but would it necessarily ensure good customer centricity? The problem with the price argument is that it could be undercut any moment and doesn't really bring about any value added change. So what should corporations be looking at instead? I thought of a few guidelines which might  be good pointers in understanding if the outsourcing partner is likely to fit the bill or not. Of course, one might tick all the boxes and still come up short or maybe not tick any at all and be the best outsourcing deal. As a thumb rule though, i think these might be pretty useful.  Anyway, here are a few pointers I could think of: 

1. Whats the record in managing customer centric projects? Service Providers Service Delivery, SLA management, reporting, security compliance, communication and cost management capability
2. How do they handle their relationship with you: Organizations should look at the service providers’ ability to understand the business, align the appropriate resources, set up a robust governance and escalation model and collaborative set up
3. Do they have a proven Business Process Improvement plan? Assess the service provider for Quality methodologies, experience in delivering productivity improvements, continuous improvement frameworks and experience and measurable customer satisfaction metrics
4. Do they have any Innovations to show? Most importantly, corporations should analyze the service provider in terms of experience in implementing transformational changes like new technologies, delivery models and pricing mechanisms

A fair amount of analysis would be required to really get some quantifiable answers to the questions above..but spending the time and effort to get these answers would be totally worth it in the long run. After all, your outsourcing partner could well be the different between customer churn and customer delight!!

All things Telecom: Transforming Business Process Operations

All things Telecom: Transforming Business Process Operations: "I was reading an article recently which stated that the world economy is going to enter another recessionary cycle come 2013. Now that certa..."

Transforming Business Process Operations

I was reading an article recently which stated that the world economy is going to enter another recessionary cycle come 2013. Now that certainly took me by surprise. We have hardly recovered from the first shock and they are already talking about hitting us with another!!


Anyway this got me thinking..how would companies continue to make the profits that they have been used to. The obvious method in a shrinking market is to cut costs and streamline their businesses. Thats where i believe that the BPO industry is going to gain in the near future. Organizations are going to be forced to outsource their non core functions at an even more rapid pace then they have been doing so far. Now this means that companies will need to be even more careful and discerning when it comes to picking the right outsourcing partner. How do they do this? How do they achieve their outsourcing nirvana? Some thoughts....


As the cost of operations in the traditional outsourcing hubs rise, organizations are under increasing pressure to look at other avenues to cut costs. Thus, an all encompassing strategy which addresses all the touch points across the process outsourcing cycle is needed. Business Process Outsourcing ought to be looked at as a bundled service with an intricate interplay between Process, Technology and People. Integrating technology and Human Resources with the core process lies at the heart of providing a 360° Customer Experience.

Roadmap to Transformation

Undertaking such a holistic transformation is easier said than done though. Experience suggests that a stepwise model with gradual payoffs outweighs the benefits of a Big Bang approach. At the heart of the transformation roadmap lies the maturity in the relationship between the customer and service provider. This is because wringing out the last drops of efficiency and cost reductions while exceeding customer satisfaction metrics requires a much greater depth in understanding Business Drivers and Process Metrics than previously thought essential. An all encompassing transformation exercise can be looked at as progressing through three distinct phases:

Stage I: Operations Transformation – In the initial days of the relationship, “Quick Wins” are what drive change. Benefits are derived mainly from off shoring and efficiency gains through greater operational rigour. Operational levers such as cross skilling & multi-skilling of resources and workforce management also result in significant savings.

Stage II: Process Transformation – Once operations are stabilized, it gets increasingly difficult to effect savings through operations quick fixes. The client – provider relationship has by now grown more robust and affords a deep dive into the possibilities of process reengineering. Benchmarking, point automations, sharing best practices among teams and six sigma projects can all be leveraged to good effect during this stage. The key to successful implementation of these measures is a good understanding of the underlying processes and active participation of the client. Stable operations with accurate forecasts also afford the chance to move to transaction based pricing models thus incentivizing the supplier to achieve greater efficiency.

Stage III: Business Transformation – The third stage represents the final step in the transformation journey. Improving on key business metrics is of prime importance here and this stage involves making major changes in the way the business is run. Business Consolidation, system rationalization and even Organization change coupled with robust governance structure and a dynamic change management apparatus could be a tool for improvement. Of course, a very strong client – supplier relationship is critical to drive these changes to fruition. Achieving true business transformation can help corporations make the next quantum jump in their mission to achieve customer delight with minimal investment.


Now that we have a framework defining what companies ought to look for in their outsourcing partner, the next step is actually going ahead and choosing one. Thats easier said than done.. traditionally this decision has hinged on price and price alone..but are there some other factors one must consider? I think there are...but more of that in my next post... 

All things Telecom: Determining an Efficient Video Service Pricing Str...

All things Telecom: Determining an Efficient Video Service Pricing Str...: "Continuing on from my previous post, one of the key influencers of the success of any video service launch is going to be the pricing strat..."

Determining an Efficient Video Service Pricing Strategy

Continuing on from my previous post, one of the key influencers of the success of any video service launch is going to be the pricing strategy employed. Determining an Efficient Price is a tricky proposition at the best of times due to the surfeit of factors that drive it. Pricing is one of the fundamental aspects of any business model and is one of the key determinants of revenue or business value along with customer base and loyalty. 

When one needs to price a video product in a cluttered market with several players, standard offerings and a poorly defined customer segment it can become a major cause for headache. So a good price should do three things:

1.      Achieve the financial goals and ROI set out in the business model

2.      Factor in the realities of the marketplace in terms of customer demands, competitive landscape, regulatory environment and supplier considerations

3.      Be cognizant of the costs involved in designing, manufacturing, distributing and promoting the video service to achieve its desired positioning

A good pricing strategy would be the one which could balance between the Floor Price and the Ceiling Price. So how does one measure the efficacy of the pricing strategy employed by a video or content service provider? One of the ways of doing that is to measure Customer Value. Customer Value can be defined very simply as the difference between the cash flow (revenue) generated by a video subscriber and the cost of acquiring that subscriber. The price charged for any video product or service needs to ensure that all current and prospective new subscribers are adding to the Business Value of the project.

Business Value for a Product (or Service) (BV) = Revenue generated per subscriber (R) * Number of current and future subscribers (S)

  

Any pricing strategy for a video service needs to strike a balance between the value derived per subscriber and the number of subscribers. Varian (2002) & Goolsbee (2002) independently estimated that the demand for broadband based services (including video) is very elastic with cross price elasticity for dial up and ADSL based services ranging from -1.3 to -3.1 and -2.15 to -3.76 respectively. This shows that a small change in price can have a significant effect on the quantity demanded or in this case the number of subscribers that join in. In this backdrop it becomes even more important to balance the price set with the estimated subscriber numbers that the service hopes to attract.

The above figure shows the relationship that price has with the number of subscribers and the revenue generated per customer, we get an Inflection Point I. Theoretically, Business Value for the video service should be greatest at this point and hence pricing a service as close to this point must be the aim for any strategy. Combinations before or after this point may lead to an inefficient utilization of market potential or addition of subscribers with negative customer value.

While we have attempted to evolve a measure of an effective pricing strategy we still need to figure out the determinants of this strategy? How does the market environment affect price? One way of doing this is by segregating and classifying these factors under a few distinct and logical heads but more on that in my next post.

Creating a Winning Video Service Launch Strategy

These are desperate times for Telecom Companies worldwide due to a spurt in competition, falling revenues and increased customer churn. In such a dynamic market environment, the last thing Telcos want is to be seen as mere communications bandwidth providers. Small wonder then that most of them would want to jump into the video services and content provision business. Increasingly, Triple and Quad play services are being seen as the key to retaining customers and driving up the value gained from customers. Recent research has shown us that average churn for a triple/quad play service is about 3 times lower than stand alone business while revenue per user can double simply by the addition of video services. Add the fact that cable companies worldwide are increasingly coveting the voice services market and one can understand the need for Telcos to fight back.

While Telcos do have some inherent advantages like established infrastructure and links with the customers, their lack of experience in managing and providing content to these customers is a major challenge. As with any other launch, creating and implementing a strategy which works for the Telco is critical.

So what constitutes a Video Strategy? One of the first steps is to establish the end outcomes that one hopes to achieve. The outcomes must be clear and formulated in a manner which sets the tone for drafting a strategy. Increasing Subscriber Base and Competitive Ability, Improving utilization of assets and enabling customer stickiness seem to be some obvious outcomes.

Once we have established the outcomes, it is time to identify the various decision areas that would lead to the fulfillment of these outcomes.  

·         Market Forces – The strategy should address the choices relating to the environment in which the video service is to be launched. It must factor in the realities of the market in terms of competition, customers, services and price and should suggest deployment models across these factors. The who, what, why and how for the service needs to be addressed here.

·         Technology Enablers – Once the Service and content offerings have been decided upon, the strategy should explore the technology and infrastructure requirements to launch the service. These would mean understanding technology and equipment requirements for the network, compression/encoding/encryption systems, Middleware and end user equipment etc. Evaluating the technology for capacity constraints and expansion perspective and optimizing technology based on gap analysis between new and legacy systems

·         Operations Enablers – Operations support required to fulfill the service should be looked at and opportunities to merge services based on geography, product or service type as well as improving efficiencies through process reengineering should be studied.

·         Business Enablers – These are extraneous factors that have a bearing on the overall offering. Factors such as manpower planning and regulatory compliance must be understood to devise a watertight strategy 

Very simply, evaluation of the above decision areas can be condensed into a set of considerations that are mutually exclusive and cumulatively exhaustive. A matrix of these considerations could look something like this:

Market Forces ·         Customer Behaviour ·         Competitive Barriers ·         Supplier Ability ·         Product Mix ·         Pricing	Technology Enablers ·         Infrastructure Deployment ·         Capacity Development ·         System Integration Requirements
Business Enablers ·         Skill Set Availability ·         Manpower Planning ·         Regulatory Compliance	Operations Enablers ·         Operational Convergence ·         Process Efficiency

Drilling down into a set of determinants for each of these considerations would enable one to stitch them together into a single blueprint which achieves the key outcomes.  One way of doing this is to list the deployment options available to the Telco under each decision area. “Joining the dots” to combine the selected options provides a distinct roadmap of recommendations. Telcos must then carefully and diligently identify the choices in front of them and embark upon a systematic evaluation process to home in on the correct one. Establishing a blueprint which addresses all the key parameters eases the process of making the right choice. However, the ultimate success of any strategy depends on the rigor put into understanding the objectives and the outcomes and walking on the path thus chosen.