Lessons from the 2007 Outsourcing Excellence Awards

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Lessons from the 2007 Outsourcing Excellence Awards
By Peter Bendor-Samuel, CEO, Everest Group, Beth Ellyn Rosenthal, Editor

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Beth Ellyn Rosenthal, Editor, Outsourcing Journal The annual Outsourcing Excellence Awards provide a freeze-frame look at the outsourcing industry. Last November 86 relationships went through the rigorous interview process; the buyers shared with our judges the intimate details of their outsourcing relationships. The judges faced a Sophie's choice decision to select only nine winners. Their gripping, informative, telling stories follow.

Here some of the interesting findings:

1. Cost is still paramount...but what the buyers are doing with the money is different.

All but three said cost was a significant driver in deciding to outsource. This year some of the winners are doing more than increasing shareholder value with their savings.

Aon South Africa, a division of the Chicago insurance company, handles worker pension funds for its clients. Before outsourcing to Alfinanz, its IT system was so poor some of its clients dropped it for non-performance.

Alfinanz transformed Aon's IT system and processes, reducing costs by 30 percent and doubling Aon's productivity, according to Ian Young, Administrative Executive. "We've been able to save our clients six million rands per annum. We've saved money for employers and improved the lives of shop workers by enhancing their benefits. Because we reduced the costs, a greater portion of the money can go toward fund investments and improved insurance coverage. We've become philanthropic in our wish to see Africa succeed. That's a big win for everyone," says Young.

In India, Bharti Airtel Ltd., the buyer in the relationship winning the Best First Steps category, is using its savings to help the rural pool. The company, which provides Indians with mobile, broadband, and fixed-line telephony, outsourced its call center technology to Nortel Networks India Private Ltd. One of Nortel's challenges was to cut costs by resolving calls using IVR machines (interactive voice response) instead of a much more expensive agent.

"Indians are impatient," explains Dr. Jai Menon, Director of IT and Innovation. "They want to talk to a human being. We are not a culture that likes IVRs. Success was being able to change the behavior pattern of millions of Indians."

Nortel did that. What is Bharti Airtel doing with the substantial savings?

"India has 300 million people below the poverty line. Of the remaining 800 million people, only 140 million have a dial tone. Every rupee we save helps fund capital investments, so we can give a dial tone--something considered a given in many parts of the world--to almost a billion people," says Dr. Menon.

2. A good partner is there for you in good times and bad. That could be a hurricane or a hurricane of volume.

Crises arise because of changing business conditions or Mother Nature. The right outsourcing partner will come to your aid regardless of the difficulty.

One of the most heart-rending awards stories comes from the buyer in the relationship that won the Best BPO category, the Louisiana Department of Social Services. The department collects child support money for Louisiana parents. ACS was handling the collection of $306 million and answering the phones when Hurricane Katrina displaced 1.2 million people.

State law requires state employees to work where needed in emergencies, so many of the department's employees went to work in shelters, leaving state resources stretched thin. According to Robbie Endris, executive director, Support Enforcement Services, "ACS stepped in, went into overdrive, and kept things going."

ACS established a call center--after getting all calls routed through Houston since there was limited phone service in south Louisiana--to provide information for displaced services six hours after receiving the request. The call center received more than 45,000 calls the first three days. Even more remarkable, ACS tracked down displaced parents, resulting in the mailing of 100,000 checks to custodial parents all over America. The supplier even sent an employee to Louisiana with a sleeping bag to help.

"ACS went far beyond their contractual obligation in providing services. We are extremely grateful for their help in a time of unprecedented crisis. They told us, 'Don't worry. We're going to provide this service,'" says Endris.

The Illinois Tollway, the buyer in the winning Best IT Apps relationship, had committed to improving customer service for users of its I-PASS electronic toll collection system. It hired Unisys for e-Commerce Web applications and hosting for its I-PASS online transponder sales and account management services.

It wasn't long before the Tollway needed to quickly increase capacity for its online offerings. To fund a $5.3 billion system-wide capital program, tolls doubled for cash-paying customers, sending Tollway users scrambling to join the I-PASS program. "We anticipated a huge surge in demand and worked with Unisys to successfully enhance online service capacity just before the big rush hit," says Ted Young, CIO. "We saw a dramatic influx of online activations and purchases. The Unisys team helped us handle a 1,200 percent increase in Web activity over a two week period."

A similar situation occurred when Old Mutual Financial Network (OMFN) was migrating policies to Perot Systems. The economy changed drastically during the first migration; the product OMFN offered--a fixed annuity product--skyrocketed in popularity. "Our sales volumes went from 1,000 applications a week to more than 3, 000," recalls Dave Smith, Senior Vice President, Operations for OMFN. Perot Systems held its own.

Once OMFN considered the annuities business with Perot Systems a success, it moved forward with moving its new life insurance business. When the migration began, it wrote 1,000 applications per week. Shortly thereafter, a few carriers went out of business and the volumes spiked again. They tripled! "We said, 'Is this possible? Could this be happening again?' It was déjà vu," marvels Smith. He asked Perot Systems to ramp up to 400 employees from 200 to manage the new volumes.

Other findings from this year's interviews:

Other offshore locales. In past years, up to 95 percent of the offshore suppliers were Indian. This year buyers nominated half a dozen Russian suppliers and two Chinese ones. In fact, Luxoft, a Russian supplier, was the runner-up in the Best Offshore category. Cost, cultural affinity, specialized skills, and risk mitigation were some of the reasons for not going to India.
Deep executive involvement. Forty-two percent of the respondents said the CEO of their supplier called them personally at least once a quarter to ask how they were doing. One supplier CEO actually filled in in the mailroom at one buyer when everyone else at his company was already assigned!
HR agility. Mergers and acquisitions and big ups and downs from the whipsawing economy caused companies to add employees or shed them. Outsourcing made this difficult process much easier, which buyers truly appreciated.

John Funk, an Awards judge and a partner with Morgan, Lewis & Bockius, told the winners at the Awards dinner that it was easy to become cynical about successful outsourcing relationships. "After hearing your stories, I know it can be done," he said.

Lessons from the Outsourcing Journal:

Cost is still an important outsourcing driver. Buyers are using the savings to increase shareholder value or improve processes. But some are also using the savings for philanthropic reasons.
Outsourcing is a good thing when the trying times occur. Suppliers can help buyers when Mother Nature or a radical increase in volume in a short timeframe wreaks havoc. A corollary is HR agility: suppliers can ramp up or down swiftly and do it more easily.
Buyers are offshoring to other locations beside India. Savings are better in other spots. Some don't want to put all their offshore eggs in one basket.

Publish Date: September 2007

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