By Sanjiv Gossain, UK managing director of Cognizant Technology Solutions
Published: October 22 2009 11:42 | Last updated: October 22 2009 11:42
From IT maintenance to CRM and business process automation, outsourcing is firmly ingrained in company culture and is central to the smooth operation of the world’s biggest and most renowned businesses.
The benefits are supposedly clear, with cost-reduction typically the number one goal. However, despite vast sums spent on outsourcing contracts each year – more than $42.2bn in 2008, according to Gartner – it appears many companies are failing to keep track of their outsourcing investments and are subsequently missing out on the major benefits of outsourcing.
Cost saving, of course, is not the only desired outcome when entering into an outsourcing relationship. According to Gartner research, organisations still outsource for “efficiency, access to skills, focus on core business, innovation, modernisation and even business transformation”.
Yet the demand for cost reduction remains high and research recently conducted by Cognizant, in partnership with Warwick Business School, finds that a proven return on investment is required in a very short time.
Over half of more than 250 European chief information and chief finance officers surveyed are demanding ROI within the first 12 months of an outsourcing agreement being confirmed. The current economic situation has no doubt intensified this need, with outsourcing providers under increasing pressure to drive more value with their clients and deliver longer-term business benefits.
Whether an outsourcing agreement has saved money over the short term isn’t too difficult to measure; in the simplest terms, it boils down to whether the new supplier can do the task more cheaply than it was done previously in-house or with an alternative outsourcing supplier.
However, given that many of these relationships can stretch over a considerable length of time – the BBC recently extended one of its contracts for a further nine years – companies expect to profit from the additional benefits outlined above.
It goes without saying, therefore, that every business has a solid methodology and auditing process in place to measure the benefits of their outsourcing investment. Or does it?
Our research suggests that business leaders are failing to get to grips with measuring the full financial impact of the outsourcing contracts they commission. Perhaps the most alarming discovery is that fewer than half of CIOs and CFOs have even tried to quantify the financial contribution of outsourcing to their business.
There is a widespread belief that the long-term value of outsourcing cannot actually be measured. More than a third (37 per cent) admit they do not try to measure the return, while a further 20 per cent do not even know whether they have tried.
This is perhaps unsurprising when considered that only 29 per cent believe that the contribution can be properly assessed beyond the one-time cost saving.
So what methods are being used to track and prove the value of these huge investments? The CIOs and CFOs surveyed provided several answers and in some cases, it seems the methods are vague at best.
Some show a degree of methodology, even if they couldn’t quite articulate what it was. Others amount to little more than “back of an envelope” sums. Examples included “Manual calculation”; “You know what it costs but you don’t really know the value”; “The accountants will use some formula for calculating ROI”.
Just 7 per cent of respondents were very confident that they know what they are spending in terms of time and money on their outsourcing arrangements.
Companies undertake outsourcing initiatives for a wide range of disciplines. So while a one-size-fits-all method for measuring value may not make sense, it is imperative to have some method to indicate what has been gained and at what price.
To measure outsourcing’s impact, businesses require a form of Return On Outsourcing methodology that includes benefits along three dimensions: innovation (the basis of future benefits, valued financially), process optimisation (quantified and valued over time) and total cost of ownership (reflected in IT budgets and IT accountability).
Value along all three of these dimensions should be addressed as part of the planning process and tracked through the life of the initiative. This should enable both the client and the vendor to see the business value and cost advantages from the outsourcing investment, understand the operational conditions and best practices that lead to long-term success, and compare projected financial returns with other companies within an industry peer group and beyond.
The evolution of an outsourcing project can and should, in many cases, begin with cutting operational costs through labour arbitrage. Over time it should gain operational flexibility, adding and subtracting third-party resources as needed, delivering additional cost savings.
As financial performance improves, the cost savings can be reinvested in strategic initiatives that enable even greater operational efficiency and support future growth initiatives.
This insight into outsourcing performance is crucial in determining future decisions. The research suggests that C-level executives are making such decisions on future business and outsourcing strategies without knowledge of the financial benefits: 78 per cent of those who cut back on outsourcing last year cited “unclear value for money”.
Yet many do not actually have any clear evidence or means to quantify this.
Senior executives, therefore, appear to be making outsourcing decisions based upon short-term cost-cutting – which remains crucial – without measuring outsourcing’s impact beyond the initial labour, skills and cost advantages.
Key business benefits such as innovation and transformation are being ignored by many. Given that outsourcing should be delivering significant operational flexibility and business process improvements, its true value is clearly being missed by many organisations given the widespread lack of measurement practices.
Without clear ways of measuring and monitoring their outsourcing arrangements, company executives could, in effect, be tying up costs that could be released to drive additional initiatives.
The practice of outsourcing IT and business processes is mature, yet the research suggests that the way in which companies measure the positive impact of these arrangements needs to be addressed.
More on the Cognizant and Warwick Business School research report on attitudes to outsourcing can be viewed at http://www.quantifyingoutsourcingbenefits.com/
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Tuesday, October 27, 2009
De-cluttering IT
By Colin Rowland, senior vice president, operations, for the Emea region at OpTier
Published: September 28 2009 10:47 | Last updated: September 28 2009 10:47
An IT department was once relatively simple. A server, a few computers, perhaps some firewalls, internet connection and a help desk. Staff came to work to write documents, make phone calls and not much more.
Today, work is supported by computing almost every step of the way. In turn, IT departments vary in size, budget and platform but have come to share one striking element – complexity.
As businesses have become ever more reliant on technology, so IT has built an intricate jigsaw puzzle of technologies.
A typical scenario: no business in its right mind is going to install a hugely expensive infrastructure without taking steps to ensure it works properly. So another system has to be installed to ensure the first one is performing.
This layering of solutions and systems to monitor the solutions has spiralled out of control. Our recent research in the UK found that three quarters of businesses admit they are blinded by the complexity of their IT management set up.
But what surprised us more is the estimated cost. Almost two thirds of respondents admitted that complex and ineffective IT management is costing their company £4.64m each year in downtime and staff time, on average.
So how has it come to this?
It is partly because there is no holistic, end-to-end picture IT that its managers need: CIOs have been forced to take a segmented approach to performance management by implementing partial solutions that monitor individual technology silos. We found that almost one fifth of companies were using more than five tools to monitor the performance of IT.
This partial approach is financially draining and does not give businesses the support they require.
For example, when a performance issue hits online banking, often the first time the IT department knows about it is when customer complaints flood in. In spite of the five monitoring tools, pinpointing the problem will still be like trying to find a needle in a haystack – or multiple haystacks. Industry analyst group Enterprise Management Associates estimates that more down time (54 per cent) is spent finding problems than fixing them.
In seeking to protect investments and ensure they deliver, IT departments have ended up with information overload that hinders resolution efforts.
What businesses need is for their IT departments to be able to assess quickly where the problems are, and avoid them.
IT is made up of many applications and systems each performing small tasks to get user transactions completed. By generating visibility into these transactions IT management can be simplified.
Each transaction from a user “travels” through the system. By capturing and tracking all transactions, across all IT tiers, all the time, organisations can see the impact that transactions have on the business.
But most importantly each business transaction provides clear evidence to how an application is performing and if there is trouble on the horizon.
Another advantage is that transactions also tell the cost side of the IT story; they make it easy to identify and resolve performance problems swiftly but also to optimise the cost of performing those transactions.
An approach that was fit for purpose 10 years ago, simply no longer cuts the mustard. Businesses have to be leaner and meaner – they cannot afford to have a reactive technology infrastructure where the systems manage the business rather than the other way around.
Simplifying IT management is, in many ways, akin to clearing out your wardrobe. It might be painful to part with that tan leather jacket from the 1980s but you know it has to be done.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Published: September 28 2009 10:47 | Last updated: September 28 2009 10:47
An IT department was once relatively simple. A server, a few computers, perhaps some firewalls, internet connection and a help desk. Staff came to work to write documents, make phone calls and not much more.
Today, work is supported by computing almost every step of the way. In turn, IT departments vary in size, budget and platform but have come to share one striking element – complexity.
As businesses have become ever more reliant on technology, so IT has built an intricate jigsaw puzzle of technologies.
A typical scenario: no business in its right mind is going to install a hugely expensive infrastructure without taking steps to ensure it works properly. So another system has to be installed to ensure the first one is performing.
This layering of solutions and systems to monitor the solutions has spiralled out of control. Our recent research in the UK found that three quarters of businesses admit they are blinded by the complexity of their IT management set up.
But what surprised us more is the estimated cost. Almost two thirds of respondents admitted that complex and ineffective IT management is costing their company £4.64m each year in downtime and staff time, on average.
So how has it come to this?
It is partly because there is no holistic, end-to-end picture IT that its managers need: CIOs have been forced to take a segmented approach to performance management by implementing partial solutions that monitor individual technology silos. We found that almost one fifth of companies were using more than five tools to monitor the performance of IT.
This partial approach is financially draining and does not give businesses the support they require.
For example, when a performance issue hits online banking, often the first time the IT department knows about it is when customer complaints flood in. In spite of the five monitoring tools, pinpointing the problem will still be like trying to find a needle in a haystack – or multiple haystacks. Industry analyst group Enterprise Management Associates estimates that more down time (54 per cent) is spent finding problems than fixing them.
In seeking to protect investments and ensure they deliver, IT departments have ended up with information overload that hinders resolution efforts.
What businesses need is for their IT departments to be able to assess quickly where the problems are, and avoid them.
IT is made up of many applications and systems each performing small tasks to get user transactions completed. By generating visibility into these transactions IT management can be simplified.
Each transaction from a user “travels” through the system. By capturing and tracking all transactions, across all IT tiers, all the time, organisations can see the impact that transactions have on the business.
But most importantly each business transaction provides clear evidence to how an application is performing and if there is trouble on the horizon.
Another advantage is that transactions also tell the cost side of the IT story; they make it easy to identify and resolve performance problems swiftly but also to optimise the cost of performing those transactions.
An approach that was fit for purpose 10 years ago, simply no longer cuts the mustard. Businesses have to be leaner and meaner – they cannot afford to have a reactive technology infrastructure where the systems manage the business rather than the other way around.
Simplifying IT management is, in many ways, akin to clearing out your wardrobe. It might be painful to part with that tan leather jacket from the 1980s but you know it has to be done.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
A first look at Office 2010
Mary Branscombe reports as Microsoft reveals an improved interface and promises real-time collaboration and web apps
Published: July 14 2009 13:29 | Last updated: July 14 2009 13:29
The technical preview of Office 2010 is an early look at some of the new features coming in the next release. Updates to the desktop apps are welcome if not revolutionary, but the real shift is that Microsoft is embracing the cloud (and the mobile phone), albeit carefully and without undermining the market for the full-featured desktop versions.
There are some users who dislike the “ribbon” interface introduced in Office 2007 but according to Microsoft product manager Chris Bryant “the ribbon has helped people use more of the Office applications in Office 2007 than ever before”.
He compares it to drag and drop, first introduced in Word in 1991: “Now it’s a fundamental part of the productivity experience; we think the ribbon will be very much the same in 10 years.”
Office 2010 extends the ribbon to all the applications and it does an excellent job of it. It also introduces the option to customise the ribbon completely, which should mollify most remaining critics.
The Office menu, which replaced the File menu in Office 2007 is in turn replaced by the Backstage menu which combines useful tools and settings once found in a variety of dialog boxes in one handy place, including file properties, previews of file templates, print preview, advanced printer settings and options for sharing files (by methods such as e-mail, SharePoint or Excel services) and packaging presentations.
Expect the look of Backstage to evolve as it currently takes up rather more space than necessary for many of the features it includes.
Otherwise, the interface of Office 2010 is generally cleaner and more efficient than the previous version, using the space better and presenting appropriate commands more intelligently.
Microsoft has gone back to basics on the core application features such as text formating, copy and paste, printing and integration between the different applications says Mr Bryant, noting that around 20 per cent of all commands used in Office are about copying and pasting.
“The long-term mission of Office is really to deliver that best productivity experience. We spent more energy and more time implementing those essentials and making sure they work the way people expect.”
Integration includes making more features common across applications. Some of that is playing catch-up. PowerPoint 2010 can now compare and merge presentations the way Word lets you compare and merge versions of a document.
But new features such as a preview that helps you pick the right format for pasting information such as tables, instant translations and tools for editing photos inside applications (adjusting the brightness, contrast and colour tone or adding Photoshop-style artistic effects) are in almost all the Office programs.
PowerPoint has basic video editing tools; they don’t replace sophisticated video editing software but if you only need to adjust the contrast or brightness and select a section to play then being able to do it all in your presentation will save a lot of time.
PowerPoint also gets the first connection to the cloud: you can embed videos from online services such as YouTube into slides and upload your presentation to the PowerPoint Live service, send the URL to participants at different companies and control the presentation in their browsers (which can be Firefox or Safari as well as Internet Explorer).
Excel’s new sparklines place mini-charts into tables, highlighting trends and key figures more clearly and new Slicer tools make it easier to explore large PivotTables and PivotCharts.
Outlook has Quick Steps and Mail Tips to streamline common tasks and help you avoid common mistakes, plus a very welcome Ignore tool for dropping out of e-mail conversations that take on a life of their own. Word gets an improved navigation pane for browsing and searching within long documents.
Useful as they are, these features are not compelling reasons to upgrade and that underlines the fact that this is very much a preview version (although it’s robust enough to do real work with).
It doesn’t include the Office Web applications (available as a preview in August) or the new version of SharePoint (expected in beta in October) that will enable collaboration between document authors and allow businesses to host the web apps themselves, suggesting Microsoft still has a lot of work to do.
The real test will come when businesses can evaluate whether the collaborative tools and web apps deliver Mr Bryant’s claim of “the best productivity experience across the PC, phone and browser”.
Most collaboration today is what he calls “linear”: using e-mail to send documents. “Today, not many people co-author in real time, but we think it will be a fundamental expectation of the future.”
Both the desktop and web applications will allow real-time collaboration, and Word will allow desktop and web users to work on the same document; Microsoft is also promoting its note-taking app, OneNote, as a collaborative tool for both storing and sharing information.
Similarly most people expect to use a PC (usually their own) to edit documents but that attitude is changing: “The freedom to work from anywhere is becoming a fundamental expectation.”
For Office to remain a key business tool, Microsoft has to judge those expectations correctly and satisfy them on the platforms business users care about.
The Office web apps need to deliver the same rich features and formats as desktop Office programs rather than the basic tools of most web apps today.
Businesses will welcome the flexibility of hosting the web applications on their SharePoint servers at no extra charge and making those available through an extranet. But apart from the promise that the web apps will be included in the Office Professional Pro edition for enterprise and free to consumers and small business users through the Live service, Microsoft hasn’t finalised business models or what collaboration will be possible across these kind of boundaries.
Those issues will be as important as the features in the desktop or the web apps.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Published: July 14 2009 13:29 | Last updated: July 14 2009 13:29
The technical preview of Office 2010 is an early look at some of the new features coming in the next release. Updates to the desktop apps are welcome if not revolutionary, but the real shift is that Microsoft is embracing the cloud (and the mobile phone), albeit carefully and without undermining the market for the full-featured desktop versions.
There are some users who dislike the “ribbon” interface introduced in Office 2007 but according to Microsoft product manager Chris Bryant “the ribbon has helped people use more of the Office applications in Office 2007 than ever before”.
He compares it to drag and drop, first introduced in Word in 1991: “Now it’s a fundamental part of the productivity experience; we think the ribbon will be very much the same in 10 years.”
Office 2010 extends the ribbon to all the applications and it does an excellent job of it. It also introduces the option to customise the ribbon completely, which should mollify most remaining critics.
The Office menu, which replaced the File menu in Office 2007 is in turn replaced by the Backstage menu which combines useful tools and settings once found in a variety of dialog boxes in one handy place, including file properties, previews of file templates, print preview, advanced printer settings and options for sharing files (by methods such as e-mail, SharePoint or Excel services) and packaging presentations.
Expect the look of Backstage to evolve as it currently takes up rather more space than necessary for many of the features it includes.
Otherwise, the interface of Office 2010 is generally cleaner and more efficient than the previous version, using the space better and presenting appropriate commands more intelligently.
Microsoft has gone back to basics on the core application features such as text formating, copy and paste, printing and integration between the different applications says Mr Bryant, noting that around 20 per cent of all commands used in Office are about copying and pasting.
“The long-term mission of Office is really to deliver that best productivity experience. We spent more energy and more time implementing those essentials and making sure they work the way people expect.”
Integration includes making more features common across applications. Some of that is playing catch-up. PowerPoint 2010 can now compare and merge presentations the way Word lets you compare and merge versions of a document.
But new features such as a preview that helps you pick the right format for pasting information such as tables, instant translations and tools for editing photos inside applications (adjusting the brightness, contrast and colour tone or adding Photoshop-style artistic effects) are in almost all the Office programs.
PowerPoint has basic video editing tools; they don’t replace sophisticated video editing software but if you only need to adjust the contrast or brightness and select a section to play then being able to do it all in your presentation will save a lot of time.
PowerPoint also gets the first connection to the cloud: you can embed videos from online services such as YouTube into slides and upload your presentation to the PowerPoint Live service, send the URL to participants at different companies and control the presentation in their browsers (which can be Firefox or Safari as well as Internet Explorer).
Excel’s new sparklines place mini-charts into tables, highlighting trends and key figures more clearly and new Slicer tools make it easier to explore large PivotTables and PivotCharts.
Outlook has Quick Steps and Mail Tips to streamline common tasks and help you avoid common mistakes, plus a very welcome Ignore tool for dropping out of e-mail conversations that take on a life of their own. Word gets an improved navigation pane for browsing and searching within long documents.
Useful as they are, these features are not compelling reasons to upgrade and that underlines the fact that this is very much a preview version (although it’s robust enough to do real work with).
It doesn’t include the Office Web applications (available as a preview in August) or the new version of SharePoint (expected in beta in October) that will enable collaboration between document authors and allow businesses to host the web apps themselves, suggesting Microsoft still has a lot of work to do.
The real test will come when businesses can evaluate whether the collaborative tools and web apps deliver Mr Bryant’s claim of “the best productivity experience across the PC, phone and browser”.
Most collaboration today is what he calls “linear”: using e-mail to send documents. “Today, not many people co-author in real time, but we think it will be a fundamental expectation of the future.”
Both the desktop and web applications will allow real-time collaboration, and Word will allow desktop and web users to work on the same document; Microsoft is also promoting its note-taking app, OneNote, as a collaborative tool for both storing and sharing information.
Similarly most people expect to use a PC (usually their own) to edit documents but that attitude is changing: “The freedom to work from anywhere is becoming a fundamental expectation.”
For Office to remain a key business tool, Microsoft has to judge those expectations correctly and satisfy them on the platforms business users care about.
The Office web apps need to deliver the same rich features and formats as desktop Office programs rather than the basic tools of most web apps today.
Businesses will welcome the flexibility of hosting the web applications on their SharePoint servers at no extra charge and making those available through an extranet. But apart from the promise that the web apps will be included in the Office Professional Pro edition for enterprise and free to consumers and small business users through the Live service, Microsoft hasn’t finalised business models or what collaboration will be possible across these kind of boundaries.
Those issues will be as important as the features in the desktop or the web apps.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
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