Part 1 of this two-part series focuses on on-demand outsourcing relationship management (ORM) and service level agreement management.
The global business process outsourcing (BPO) market continues to strengthen relative to the more mature IT outsourcing market and is forecast to reach US$450 billion by 2012, according to a June report entitled “Global BPO Market Forecast: 2008-2012” from BPO analyst firm NelsonHall.
Within this massive outsourcing market exists a relatively small $500 million niche market for ORM software tools from emerging players like governance solutions provider Enlighta and SMB (small and medium-sized business) accounting outsourcing specialist RealTime Bookkeeping.
“The big trend is that companies are realizing they need specific solutions to address their outsourcing challenges and that BI (business intelligence), data management, spreadsheets, BPM (business process management) and ERP (enterprise resource planning) systems do not do that,” said James S. Diggs, vice president of strategy and business development for Janeeva.
“Now they are looking at the emerging companies because the bigger vendors are not fully addressing their needs,” Diggs told the E-Commerce Times.
Outsourcing involves a company seeking resources outside of its organizational structure, contracting with consultants, software houses, service bureaus or other third-parties to have them perform services or processes that the enterprise could provide for itself in-house but prefers to outsource to save money and/or exploit the skills of another entity.
Outsourcing requires selecting the right sub-contractor, defining the engagement (contract) and outlining processes appropriate for the project at hand. After procuring services, a company has to implement, measure and control the process to produce a successful outcome. Key to accomplishing this goal is the proper management of the engagement with the external service provider.
Outsourcing Management and Governance
ORM software tools play a key role in outsourcing “governance” — administering the outsourcing engagement. While complex outsourcing relationships require strong processes, skills and tools to succeed, outsourcing excellence depends on a governance operating model based on a combination of precise rules and guiding principles.
Ultimately, successful ORM strategies emerge from customer satisfaction, which depends on the relationship between the buyer company’s governance group (the persons, committees, departments, etc. who make up a body administering the outsourcing engagement) and the service provider.
“Often, governance is an afterthought after the deal is done and the transition is over,” said Gaurav Malhotra, vice president at Enlighta, a provider of outsourcing management solutions to global 2000 companies and IT and BPO services providers.
“This means that buyers have not budgeted for governance staff, resources and tools, and that they have not aligned expectations around their governance needs with their internal business units and with service providers,” Malhotra told the E-Commerce Times.
OM/G (outsourcing management and governance) and the software tools that support it play a critical role in enabling outsourcing success, according to an EquaTerra 2007 white paper entitled “The Service Provider Perspective on Outsourcing Governance Software Tools.” Service providers ranked service quality management as the aspect of governance that software tools are best able to support.
“Leading outsourcing service providers are clear in their positions that software tools are an important component in an overall outsourcing governance program,” the report stated. “As with OG overall, however, buyers often place too little emphasis on deploying software tools.”
As for Enlighta, its solutions are designed to enable companies to manage and govern their outsourced or offshore services in real-time to reduce the risk of failure of such operations. For IT and BPO services providers, the Enlighta Deliver Solution addresses effective performance and compliance reporting issues across all customer engagements, automation of services delivery and governance processes, according to the company.
Best practices to address these challenges include defining and meeting governance requirements as part of the outsourcing definition and provider selection and phased rollout of the ORM software to incrementally cover outsourced processes, internal business units and service providers, Malhotra said.
“This makes the associated investment in tools and change management impact more manageable,” Malhotra noted, adding that the biggest challenges faced by outsourcing service providers stem from the traditional philosophies and attitudes toward governance held by many providers.
“Less sophisticated providers often are satisfied with just providing manually created reports to buyers for just their engagements,” he said.
ORM Software for SMBs
Outsourcing relationships are just as critical in the SMB market as they are in the larger enterprise market.
RealTimeBookkeeping.com (RTB) is a division of ManageComm, an online bookkeeping firm that outsources client bookkeeping work both within the U.S. and offshore. The RealTime Bookkeeping System provides accounting firms, their clients and remote back office bookkeepers with anywhere, anytime access to QuickBooks files, a paperless document storage and retrieval system, multi-layered security, an intuitive user interface for accessing financial administrative resources, and remote back office accounting professionals for overnight “real-time” bookkeeping services.
RTB’s e-Dashboard ORM tool is an online portal that enables accountants and bookkeepers to remotely access client files and perform accounting functions in real time. The e-Dashboard software features:
- Remote QuickBooks access: End-user clients can access their financial documents and QuickBooks files in one place, anytime and anywhere they have an Internet connection. Administrators can access client QuickBooks files hosted on the RTB servers. The bookkeeper has administrative-level control on all client accounts, and both the bookkeeper and the customer can view documents and reports and access QuickBooks files remotely under a shared portal.
- A company-branded, interactive e-Dashboard for financial administrative control.
- An integrated, paperless document storage and retrieval system (DSR) that allows for instant location of client documents.
“The biggest challenge to maintaining a relationship with an outsourced service provider is maintaining daily and weekly communications contact,” said Robert Chandler, CEO of ManageComm.
“That’s why the e-Dashboard has comprehensive reporting capabilities,” Chandler told the E-Commerce Times. “Owners of small businesses don’t typically communicate on a steady basis because they get too busy just running the business. Outsourcing lower-end accounting work helps free up the owner’s time, both to better handle clients’ needs and also to spend more time communicating with the accounting firm to keep service levels high. But communication can’t just be confined to e-mails. It has to also take place within the program to be effective.”
ORM Industry Trends
Software as a Service (SaaS) and the entry into the market by big software vendors such as SAP and Oracle are big trends in ORM, according to Sara Parker Enlow, principal at Vantage Partners, a negotiation and relationship management advisory firm.
“But I think the big point is that the market is maturing,” Enlow told the E-Commerce Times. “More and more companies are beginning to move away from homegrown, Excel-based reporting and e-mail as a way to track information and manage their outsourcing relationships toward more robust third-party tools. What’s accelerating some of that maturation is SaaS — so now instead of a six- to nine-month integration project to bring on a third-party tool, there are more Web-based tools available that can pull or receive data from multiple sources to provide transparency and useful analytics to buyers and providers.”