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Outsourcing remains an extremely strategic decision with huge opportunities

BPO and ITO outsourcing remains a hot topic. That’s what we can conclude after the International Outsourcing Forum (IOF), which took place last week in Sopot, Poland. For Gdansk, Sopot & Gdynia, all together known as Tri-City, this event was a unique opportunity to present themselves as an outsourcing destination for both BPO and ITO. For all the delegates, the knowledge updates and the business meetings were most important.

Great Forum, good atmosphere

The 9th IOF, organised by Arena International, took place in Sopot Sheraton hotel. Around 200 participants talked, during the 3 days, about Business Process Outsourcing (BPO, i.e. administrative processes and call centers) and IT Outsourcing (ITO, i.e. IT infrastructure maintenance and software development). The atmosphere was very good, and the discussions really open. It was obvious the participants wanted to learn from each other’s experiences and to find out whether or not they could do business together.

For us a very special event

 This was a special event for Goyello  for several reasons . First of all it took place in our “home town”, even the office got to be visited by delegates. Secondly, the delegates were able to use the mobile IOF app, which has been developed by Goyello. Personally, I had the honor to tell the audience about my own experiences with starting Goyello in Tri-City, and I was invited to introduce the mobile app. During the conference we received a lot of positive feedback on the app.  You can probably imagine how proud we felt.

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Outsourcing needs an integrated business strategy

Carine Peeters, Professor International Strategy at Solvay Brussels School of Economics and Management, presented research findings of the Offshoring research Network (ORN). Their main findings were also discussed during the Forum.

The list below introduces the ORN conclusions with additional conclusions, which have been discussed during the Forum

  • Cost savings, flexibility and a growth are the most important reasons to outsource. Although, cost savings are still, or may be due to the economic downturn leading again, it’s noticeable this is not the only reason for companies to decide to outsource parts of their processes. It’s increasingly a strategic decision to become more flexible and to be able to decrease the time and be able to market new solutions/services more efficiently.
  • Many companies believe they are too small or not ready to outsource. Of course the organizational readiness is essential before you can outsource, but also small organizations can outsource easily. For smaller and less experienced organizations it’s better to look for a nearshore location, where it’s still possible to meet with your outsourced team. The right match is most important and therefore you should meet your team before you sign the outsourcing deal.
  • 50% of US-based companies outsources to India whereas only 25% to Europe. This might “prove” the before mentioned location decision. Many delegates expressed their preference for outsourcing to Eastern Europe.
  • India attracts especially worldwide ITO clients and BPO clients from the US. Eastern Europe attracts European BPO. The latter is especially due to the essential knowledge of the knowledge of some common languages, cultures’ characteristics and probably small time difference as well. Eastern Europe is also increasingly considered as an ITO destination.
  • Outsourcers report that outsourcing enhances especially  their competitiveness. But this won’t happen automatically. Maximizing the outsourcing benefits demands: 1. A strategic business vision 2. In which outsourcing is fully integrated 3. With the Executives backing as a part of the company-wide strategy

Parties need to do it together

Too often, at least in the past, the outsourcer tried to get the best possible deal, meaning as low-cost as possible. The reality has shown this won’t work. The incentive should be sufficient for both sides to go the extra mile, according to Srini Krishna, Director of Global Supplier Management & Finance Operations, Microsoft. This probably sounds logical to all of us, but this game of give and take is often excluded from the outsourcing negotiations. In general, this leads to a situation where the supplier will try to deliver exactly what has been agreed and nothing more, while the client won’t be happy not to receive the flexible and pro-active support he was hoping for.

The more you outsource, the more you have to be in control

Peter Snowdon, Vodafone, explained that Vodafone Netherlands basically outsourced almost everything since around 2006/2007. Most of the contracts will have to be reconsidered about now. Unfortunately, they had to conclude that business cases and decision factors, which were important those days, haven’t been achieved. That’s why their first advice is analyze and be careful to be sure that you can track whether or not the outsourcing projects are successful.

To gain more control over the situation, Vodafone has decided to introduce the eSourcing Capability Model (eSCM), a framework they advise to everyone who starts to outsource a significant project, and/or multiple projects. Together with active management and team participation across the organization this can improve the outsourcing performance significantly.

Outsourcing is, may be even especially in these times of cost savings, a strategic matter. It can make or break a company. For that reason the outsourcing decision has to be taken with care, the partner and location selection shouldn’t be under estimated. The good news is that many organizations report their successes and of course they have some lessons learned as well.

A great conference to meet

Apart from all the presentations, an important part of the forum consisted out of one-to-one meetings where Arena was the match maker. Besides, networking during lunch, drinks and evening dinners were very important elements to get to know new potential partners in business.

We are already looking forward to the 10th IOF. Date and location will be announced soon. Most probably our mobile app will show up there again!

Entrepreneur, co-founder & Managing Director of Goyello and Webmerce. Sociologist and electrotechnical engineer, a great combination that stimulates him to look for working solutions. Passionate about converting great ideas into new solutions. He is married and a proud father of 3 great sons. Participating in (and training for) triathlons to stay fit.