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Table of Contents

Why Does the Contract Price Differ from the RFP Price?

Can you Overdose on Outsourcing?

Outsourcing Helps Worldspan Travel in the Customers' Shoes

Outsourcer Makes Event Reporting Easier For Ingersoll-Rand

The Trust Factor

Outsourcing Service Provider or Buyer Bankruptcy

Law Firm Profitability Requires Non-Legal Expertise

Giving the Processes and the Provider Their Due

Finally, Outsourcing Tackles the Real Value Driver

The Call Center Becomes a Revenue Generator

By today's standards, the marketing and communications agency, Hill, Holliday, utilized a method of documenting employee time that was passé. The agency's 1,000 employees were recording time spent on client business manually on paper. Hill, Holliday's reporting system was also complicated, resulting in timesheets that were riddled with errors. This, in turn, translated to lost billable time and the inability to analyze client profitability. As Mitch Dickerman, CIO of Hill, Holliday explains, "We don't have inventory, we have people. When employees don't record their time accurately, we don't get paid."

In addition to the growth of the company, its employees worked coast to coast in the company's Boston, New York and San Francisco offices. Hill, Holliday needed a more sophisticated solution.

Dickerman determined that adding additional financial staff was cost prohibitive and, with little internal IT expertise, he turned to outsourcing. After pursuing several options and coming up dry, Dickerman fortuitously answered a cold call from Surebridge.

One Stop Shopping

Surebridge is a full-service application outsourcing service provider based in Lexington, Massachusetts. Founded in 1997, it offers application choices to mid-market companies and divisions of Fortune 500 companies. "Full service" for Surebridge means software evaluation as well as deployment, hosting and application management facilitation. For Dickerman, optimizing limited time and resources were paramount, so he was especially pleased with Surbridge's terms: A customized solution in a fixed time and at a fixed, competitive price.

Mike Gately is Surebridge's director of the Northeast PeopleSoft practice. Surebridge designed a three-pronged "one-stop shop" approach for Hill, Holliday that included implementation service, application management and hardware hosting.

First, Surebridge analyzed Hill Holiday's existing business processes and helped it develop a PeopleSoft solution that best fit its needs. Next, Surebridge created a customized time and expense entry system for data input. On the backend, the service provider customized the management of the billable and non-billable data Hill, Holliday wanted to capture. This enabled Hill, Holliday to deploy its talent in the most cost-effective manner as well as analyze client profitability.

Surebridge hosts the hardware in its data center, performs backups and monitors disk space and memory allocation. Its ongoing application management includes the administration of upgrades, patches, user problems and database performance. As Gately reveals, "If we're doing our job, they don't even know we exist. If we're doing things correctly, and we're keeping the system performing and optimized, they shouldn't have to call us. Most of the proactive management is seamless, transparent."

Hill, Holliday estimates a cost savings of more than 20 percent by using Surebridge over a systems integrator.

A Question of Long-term Financial Viability

Analyst Amy Mizoras, program manager for outsourcing at IDC, a technology intelligence and industry analyst based in Framingham, Massachusetts, says that the customer has a built-in opportunity for regular check-ups since the outsourcing contracts pay the provider on a monthly basis. ASP contractual terms usually include a 30-day notice to terminate the contract, giving the buyer great short-term flexibility. Application service provider (ASP) buyers can terminate their contracts faster and easier than other types of outsourcing contracts, which have much higher switching costs.

This is vastly different from the established way of software delivery where "the customer bought software and installed it, and they'd never hear from the vendor again--unless the vendor had an upgrade or something they wanted to sell," says the analyst. An ASP holds the software license and handles all the upgrades, providing one of the benefits of outsourcing.

Nowadays, it's imperative that the service provider and customer establish a strong relationship. Dickerman says, "Surebridge was a true business partner with a desire to create a relationship with our company from the start."

Hill, Holliday decided to purchase the necessary hardware and software because, as Dickerman explains, "If the ASP goes out of business, I own the boxes and software and can use them again." This sentiment echoes the concerns of many companies considering outsourcing today. In the last few years ASPs have experienced a shake-out. As in any new market, lots of providers rushed to jump on the new opportunity. Eventually, only the financially stable won the Darwinian struggle to survive. After the dust settled, the industry realized the biggest hurdle they'd have to overcome for the acquisition of new clients was proving that they were financially stable. Today, Surebridge is profitable due to its high customer satisfaction rating.

The First and Last Rules of the Road: Trust

Hill, Holliday's due diligence before signing the contract with Surebridge satisfied its own comfort level that the company was financially viable. That freed its executives to focus on the issue at hand: finding an efficient way to track employee time on client projects. According to Gately, "This is a good example of how application outsourcing can be successful. There's a trust level here, and we work together to get Hill, Holliday what they need. The customer depends on the service provider, and the service provider trusts that the customer is going to manage the change on its end too."

Mizoras advises all companies in the market for an outsourcer to "look for one that wants you to be successful. Find one that's relationship-focused." The trust factor should enter the equation before the contract is signed. "It can be really disruptive if the service provider isn't able to live up to its end of the bargain. I think it really has to be a mutual understanding between both the service provider and the customer that they're both in it together," says Mizoras.

Lessons from the Outsourcing Journal:

• As a customer, seek an outsourcing provider partner; someone who has a vested interest in your success. Outsourcing is optimal when both parties align their interests.
• During the due diligence phase, buyers must investigate the financial stability of the service provider.
• Outsourcing to a service provider saved 20 percent over using a systems integrator for one company.

Publish Date: April 2003

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Copyright © 2003 - Everest Partners, L.P.

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