| ------------------------------------- BrainStorm Bulletin e-newsletter of BrainStorm Group October 9, 2003 -------------------------------------
==================================================== -- INTRODUCTION: ==================================================== We have a fully packed issue for you today! With BrainStorm New York less than a month away, we have lots to talk about. BrainStorm New York features 4 dedicated events in one location:
In this issue we will cover four of the featured presentations: Andrew Spanyi, author of a popular book titled “Business Process Management is a Team Sport: Play it to Win!”, will speak at the Business Integration conference on "Transforming Traditional Executive Mental Models." Andrew told me that the most important thing to change for effective process management is the traditional business mindset, and he will give a number of examples in his presentation. Stan Lepeak of the Meta Group will address both the Nearshore/Offshore Outsourcing conference and the BPO seminar. He will separate the current myths from the realities of BPO, as well as the developments, challenges, and the future of outsourcing in general. Marc Jacobson is an analyst for Ovum and will address the BPO seminar. He will cover on-demand business process outsourcing, which is a hot topic in the utility computing space today. Read what he has to say about it below. And finally we are covering Alan Pelz-Sharpe, Vice President of Ovum, who will address the Nearshore/Offshore conference. His subject is "Overcoming the Organizational Challenges to Offshore." He will look at the real costs and benefits of offshore outsourcing and the importance of first building a business case for any move offshore. Register for BrainStorm New York by October 10 and you can access sessions from all four events in New York for just $495*. Remember that you can also sign up for one-on-one sessions with our deep bench of industry leaders, analysts, experts, authors and providers to give you the latest technological and business advice for your organization. Lets talk in New York. * This offer is for practitioners only – solution providers are not eligible. This offer is for new registrations only – no refunds will be given. |
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================================================= Andrew Spanyi is the managing director of Spanyi International Inc., a consulting and training company that operates in the field of organization and process design. He has worked with executive teams at global organizations for nearly two decades, assisting them in transforming the way they think about their business. He is the author of "Business Process Management is a Team Sport, Play It to Win!" Andrew's New York presentation covers the key elements and principles in transforming traditional executive mental models and behaviors to more effective solutions based on business process thinking. Andrew told me that traditional senior management thinks is one of the biggest barriers to fundamental and lasting change within an organization. "We are living in a period where the only constant is change, and the traditional functional paradigm has done more to impede true customer-focused business performance improvement, including the effective deployment of technology, than almost anything else." In his talk, Andrew will discuss six reasons why traditional thinking is problematic. He gave me three:
Andrew will list eight things that promote traditional thinking, along with a series of questions to help people assess how entrenched the problem is within their own organizations. Some examples are:
He said that he often runs into the attitude that organizational mindsets are "soft" issues. To emphasize the importance of attitude and mindset, he paraphrased Yogi Berra, "90% of Business is mental, and the other half is physical," Andrew added, "The alternative is to truly embrace business process thinking at the enterprise level and install enterprise business process management (EBPM) practices and cascade it across the organization." Andrew says the EBPM solution allows organizations to achieve three goals that are critical to success. These are strategic focus, organizational alignment, and operating discipline. As an example, he said that EBPM supports strategic focus in three ways:
Andrew said that he often sees mission statements where the goal to be one of the top three players in a particular industry. He commented, "That's nice, but how does the guy on the loading dock or in the call center interpret this goal to do a better job? When you say, 'We want calls answered in 30 seconds and customer problems resolved first time right,' it gives more insight into what that strategy means." Andrew's talk is directed to leaders of organizations and people who are internal advisors to leaders. Elements of his talk will be of interest to the financial side of the business, as well as IT and Human Resources. "I am going to emphasize that it is really important for leadership of an organization to develop a shared understanding of the key business processes that develop true value to customers. I also think that for this to work, there needs to be an enterprise process management plan and there also needs to be ownership of the major enterprise processes assigned to key executives," he said. Make plans to hear Andrew Spanyi's Analyst Keynote talk on "Transforming Traditional Executive Mental Models" in New York on November 4. Jon Huntress ================================================= Bulletin Subscribers can still take advantage of the discounted rate of just $495 (a $1,495 value). Your registration includes access to all four dedicated events being held in New York: Business Integration
& Web Services Conference Register online at:
================================================= Stan Lepeak is a noted
commentator and frequent speaker on professional services, services procurement
and management best practices, e-business, business transformation, organizational
change/risk management/compliance, and underlying supporting technologies.
There is a trend for the pure-play offshore service providers, the Indian firms, to move upstream beyond traditional application development work, according to Stan. They are getting into application configuration, business process outsourcing, and application management and maintenance, thus becoming more competitive with traditional IT service providers such as IBM and Accenture, both of which are moving downstream to develop their own offshore capabilities. "Firms, which in the past were more complementary, are now becoming more competitive, which is creating challenges for the pure-play offshore firms. So there is a blurring of the delineation of the onshore and offshore service providers just as there is a blurring of the business process outsourcers and the IT outsourcers. As a result, the market is becoming more competitive, which is good for users. But it is also becoming more complex and confusing, which can challenge users," Stan said. Another factor is the emergence of the "way offshore" service providers of China, Eastern Europe, Russia and the Philippines. This growth has generated much talk because of the very low costs, but Stan will show how these areas are quite risky for the average end-user. It is an immature market, the providers are generally unknown, and there are issues such as the protection of intellectual property that need to be understood. There is also a growing backlash against using offshore providers. Stan said that much of this has been overstated, but given the current economic and geopolitical environment, looking offshore is no longer just an IT issue. "Companies need to understand the ramifications, both from a risk standpoint, and from a negative PR standpoint and not dismiss, nor overstate the potential for these political and geopolitical risks that factor into it. They need to recognize that it is a more complicated scenario than they may have thought when they got into it." The assumption that going offshore is cheap is wrong. Stan said that using offshore firms might not save as much money as expected, because of the built-in inefficiencies of going offshore that include remote project management and challenges with the language and time differences. Even performing the due diligence to discover if the vendors are all they say can be difficult. Stan said he is seeing a shift towards looking at different criteria for vendor evaluation, looking beyond just costs, to softer criteria such as:
Rather than looking at outsourcing as just a low-cost opportunity, it needs to be seen as a complex long-term relationship. These questions need to be answered.
Stan said that more complex work is being outsourced now, such as managing applications, configuring software, and business process outsourcing. As offshore firms work with ever more mission-critical applications, the stakes are raised because their work now directly touches your customers. "The bottom line is that offshore is a very lucrative area but people need to go into it with their eyes open. The long-term trend is that the terms 'offshore' and 'onshore' will go away and we will have global service providers, just as most large organizations have operations around the globe. It is moving toward global, distributed IT services. It is a big challenge for users and providers who have a lot to learn in the next five years or so, but it is a natural evolution of IT going from a local to a global thing. Right now it is kind of in-between." Stan's talks should be heard by IT decision makers, and also people from the business side who might be enamored with offshore but don't understand its complexity. Conversely, those who view it as too risky and don't understand the benefits should attend as well. It will also benefit IT people who view outsourcing negatively, but need to gain an understanding of what the realities are and how it will impact their jobs, and what they have to do in order to maintain their own viability. "IT professionals need to evolve also, and do more value-added work as the more commoditized things move offshore," Stan said. In the BPO context, any company considering moving any process offshore should attend this talk. You can hear Stan on November 4 and 5 in New York at the BPO Seminar and the Nearshore/Offshore conference. Remember that attendees can attend any of the presentations at both conferences and seminars. Make plans to come. Jon Huntress ================================================= iWay Software sells proven, industry-leading integration products that accelerate e-business application development. Our software creates an enterprise architecture that can integrate legacy systems and data, transactions, ERP and CRM packages, custom applications, and EAI environments from such leading vendors as IBM, NEON, Vitria, BEA, and many others. 10 Years of Integration
Leadership For more information visit www.iwaysoftware.com or email: info@iwaysoftware.com ================================================= Marc is an Ovum Analyst specializing in market trends and developments in the IT services industry. He contributes to Ovum’s advisory service for the hosted service (xSP) market. Marc is the co-author of several Ovum reports, including “Web hosting: Usage and Markets” and “Managed Service Provision: Opportunities for MSPs, Telcos and IT Suppliers.” Most recently, Marc has been watching the growth of the “utility” computing concept, and advising clients on how to best position such offerings. There is a lot of hype in the Utility Computing space and it is beginning to spill over into the BPO space. The value of being able to deliver outsourced business processes on-demand is being pushed by large IT service companies. The benefits claimed include lower overhead, predictability of cost base, and improved business agility. Although there have been some success stories within specific industries, Marc says this utopian vision of corporations paying only for business processes consumed may never be realized. Marc told me the expectation for taking advantage of on-demand services is unrealistically high. In his talk, Marc will define BPO on-demand, how it is being perceived in the marketplace, and include some of its elements, such as data-center best practices and delivery to multiple clients. I asked him what he thought of the latter, and he said there isn't much going on now. The majority of BPO contracts he sees are large outsourcing deals with large enterprise clients, where the BPO part is small. He sees BPO as a future growth area when the technology matures and acceptance increases in the user communities. He will also discuss the pay-per-use, transaction-based pricing model, which is the heart and soul of BPO on-demand. In this model a fee is charged for each transaction, such as an airline reservation or for each cleared check. Marc will discuss some of the current dynamics in the market and the nature of the deals being done today. He also sees a shift from the present situation, where the majority of contracts for outsourcing involve IT skills, to more outsourcing of business skills. Currently, few processes are being outsourced. Marc said that in the bigger outsourcing deals, some BPO is often included, but it is a small part of the package. In the future, more business skills will be outsourced. He will discuss how the market is moving toward an on-demand delivery model, where IT expertise such as data center best practices and shared processing are increasingly going to be embedded in BPO deals. Marc will close his talk by discussing how to negotiate the deal and how to define reasonable expectations. Marc said there have been several high-profile deals that didn't work out, due to unrealistic expectations. "One of the main things I want to address is the pricing aspect of BPO deals. It is always going to be tricky to a certain extent. The provider wants some guarantee for revenue and the client wants some kind of predictability. I think BPO on-demand is trying to find some kind of happy medium where the client has some flexibility and only pays for what they are consuming. On the other hand, the provider can look at the historical trends and see there have been X number of occurrences of this process occurring in the enterprise during the last five years and therefore can expect a certain revenue if priced this way." Both providers and potential adopters will benefit from hearing Marc's talk. The discussion of delivery models and on-demand pricing proposition is more geared to the provider side, but there are many implications for users here too. Marc will give his talk at the BPO Seminar at the Crowne Plaza Times Square in New York on November 5. If you have questions or concerns about Business Process Outsourcing, join us at BrainStorm New York. Jon Huntress ================================================= Alan Pelz-Sharpe is Vice President of Ovum in North America, and is a Research Director in the Software and Services (SITS) Research Group. He focuses on issues relating the value of IT in business, and the growth and importance of Information Management to organizations. Alan is the Lead Author of "Ovum Evaluates: Integrated Document Management and eProcess - Workflow for the eBusiness," and Co- author of "Web Content Management - Strategies, Technologies and Markets." He has written many reports and articles, delivered speeches around the globe, and appeared on CNN Europe, CNN International and CNBC. He also writes for CIO, Business Week, Computing, Computerworld, and Investors Business Daily. The current debate on the issue of outsourcing technology jobs to offshore companies is making headlines. In this debate, both sides often use spurious and indefensible arguments. The objective of Alan's talk is to examine the real costs and benefits of offshore outsourcing and to look at less widely discussed topics, such as how business cases are built, the true value of IT operations in organizations, and the economic drivers that affect both the individual and the broader economy. Alan told me that there is a host of challenges to outsourcing. One typically overlooked is building a good business case for outsourcing in the first place. This should be the first thing to do: evaluating the pros and cons of outsourcing some function before signing a contract. But the rush to save money has led to insufficient understanding of the risks. Building a business case for outsourcing is a complex job, according to Alan. Other challenges are political and cultural issues, including the business culture of other countries. Just in the last week, the reduction of the H1B visas and the picketing of the genome and outsourcing conferences has shown the fragility of many foreign ties. One of the things that concerns Alan is the level of understanding of costs versus value that current IT systems currently deliver. His said, "If you are doing something you really shouldn't be doing at all, doing it cheaper isn't actually very much of a success. It is a generalization, but, I think, a fair one, that when people are looking at outsourcing, they want to reduce bottom-line costs. While this is alright, if you aren't sure what benefits are being delivered to the company in the first place, you are starting off on an unsteady road, and by outsourcing, you certainly can make the situation worse." Alan will also discuss the delicate issue of outsourcing IT jobs. The risks need to be factored into the business case. He isn't taking sides on it, but if there is going to be an impact on the economy, both locally or nationally, it needs to be considered. The loss of morale within an organization could have a real impact. This needs to be evaluated, and the dollar costs attributed in the business case. Anyone considering offshore outsourcing should hear this talk. Companies currently looking at the decision-making process involved in whether to keep something in-house or move it offshore need to be aware of all the issues and risks involved. Alan told me that vendors and integrators are getting involved in this process and need to know the issues as well. He said there is still some naiveté within the industry and will highlight the issues for all parties. Alan emphasized this by saying, "This is a highly, highly complex arrangement you're getting involved in, and the idea that you can simply push the complexity off on someone else for a monthly fee is madness. It is a very complex business relationship you're getting involved in and you need to go into it with your eyes open. In some cases, offshore outsourcing is a very good option, but in almost all cases it is going to be more tricky and complex then people are imagining." Alan's stance on this is completely a-political, neither for nor against. This may well raise some issues that other presenters may not touch on so he is expecting some tough questions in New York. BrainStorm hopes that this presentation will better inform both sides about the real costs and benefits of offshore outsourcing. Jon
Huntress |
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