As stated regularly in my other blog entries the world of outsourcing is becoming more mature year on year. There is a vast array of process that can be outsourced, everything from lower skilled jobs in call centres to risk analytics in banking. From BPO (Business Process Outsourcing) to KPO (Knowledge Process Outsourcing) there is nothing sacred in the world of global economics. So where does that leave today’s youth? What subjects should they study that can never be outsourced? To determine this list we must first look at where outsourcing has come from and where it could possibly lead.

Outsourcing has been around for as long as people have been in business. It simply means letting someone else do something within your business if they are not actually part of it. The first time a debt collector was used to settle a debt rather than the lender, this was outsourcing. The debt collector took a cut of the total amount and became a supplier of services.

The explosion of outsourcing happened in the mid to late nineties with the Y2K projects. These repeatable, easy to describe development tasks were shipped out initially to India as the talent pool and infrastructure made it cost effective and ensured this massive project was completed on time. In this case all that was required was a scaling up of the workforce to guarantee success. From that time, a number of close relationships were forged between large western organisation and Indian service providers. It was then realised that the scope of services could be expanded. Of course there were a number of trail blazing organisations already ahead of the curve but most people will agree this was a pivotal time for outsourcing.

Things have moved from there. The array of services on offer is staggering, with more being added all the time. It is difficult for people in the industry to keep up with the offerings. Niche service providers are becoming even more niche. From companies that will look after your ranking in search engines to a recent company I came across that owned a 3D imaging system contracted to model complex structural units in airplane engines and provide measurements to manufacturing companies. The move from low skilled labour to high experience skilled professionals is continuing. So, what course should someone study if they want to have a well paid job with some guarantee it won’t be outsourced to somewhere of lower cost.

There are obviously two types of career paths, corporate and non-corporate. If students want to follow the corporate career path there will be a reduced number of career opportunities with the increase of outsourcing. A few years ago there would have been a long list of jobs that fitted into this category. Let’s look at a few of these.

Middle management still perceive of themselves as beyond the grasp of outsourcing, although, with the trend of matrix management, often managers don’t have to actually understand the work being done, orchestration of the individual work items is all that is required. In fact many conmsultancies already achieve this by placing by placing long term consultants into middle management roles. The ramp up costs for new managers can be excessive but really good consultant managers can hit the ground running and be effective in a manner of weeks.

Upper management already have the concept of non executive directors, which is essentially bringing in external expertise, but the top level executive directors, in charge of strategy in a business unit need explicit knowledge that can not be outsourced. That doesn’t help today’s students, what degree do they chose to get to those stratospheric levels.

The one thing many students have in their favour is the tenant that companies should not outsource their core. Therefore there will always be some jobs for all graduates. The main issue is that there will be considerably less of the outsourceable core skills. As the majority of companies send these jobs to external vendors.

Non-corporate skills so far have remained outside.

So what actual courses should be studied? If today’s student, if thinking about a corporate career perhaps the managerial style courses rather than courses which could be seen as core outsourcing skills would be suited best. The increasing move to global sourcing will put pressures on today’s workforce that are unknown to previous generations of students.

Talking about end-to-end processes, one has the idea it is all a smooth flowing, highly automated system that keeps rolling on! Reality in most companies is that end-to-end processes are islands of automation in various departments, with manual links between these islands of automation. This is usually because of the realities of the evolution of computing within the company. They may have installed a Financial Accounting System from one vendor, say Oracle, while they started using Manufacturing Automation software from another vendor, say Manugistics.HR automation may be from PeopleSoft. Even in companies that may have standardized on one vendor like SAP, end to end processes may span more than SAP modules in some departments. If parts of the end to end process is outsourced, like Customer Service or Support, then the CRM system used may be local but the phone system may be with the outsourcing vendor. Managing these processes, getting data about process execution and effecting process improvements become difficult.

So systems themselves become disconnected islands in an end-to-end process. Web-services enabling these different components goes a long way in connecting all of them together with a Business Process Management (or sometimes called Business Process Orchestration) software and stitching them all into one coherent, monitored end to end flow.

Web-services enabling applications may run into a lot of office politics since different departments may have their own concerns regarding data integrity and security as this article shows - Business Process Success: Advice from an Expert . So it is easier said than done, given the realities of change within organizations.

Process Improvement may be implicitly achieved and great gains made just stiching all these components of an end-to-end process together! Eliminating manual islands of work in between two automated steps of an end-to-end process achieves more than simple efficiency gains. Not having to enter the same data twice in two different systems eliminates lots of potential errors in between. Manual entry almost entails double checking or costly errors and re work. Having two systems talk to each other eliminates a lot of this waste of errors and rework realizing process improvement gains!

Nobody can go back and start a new beginning, but anyone can start today and make a new ending. - Maria Robinson

In recent article from Newsfactor it reported that Dell was planning to sell it factories to contract manufacturers round the globe. This re-focusing on core is a classic of outsourcing. Dell obviously doesn’t see manufacturing as a core function of the company and is looking to move it to a company that treats it as its core. This will free up capital and make the company more flexible in its approach getting hardware to consumers. Dell has recently lost its top spot in the market and, in these difficult times is using outsourcing as a mechanism of transformational change within the company.

The article then goes on to point out that HP (the worlds no. 1 maker of computers) has already done this.

During recession perhaps outsourcing should be considered more often as a way for companies not only to whether the storm but to thrive.

Click here to read the full article

I once did a crude study, at our local library, of the Average Financial Performance of Public companies in various Industry codes. I discovered that out of every dollar earned by companies from Manufacturing to Service Industries they were spending an average of 40 Cents to 80 Cents on Operating Expenses. Of course, the Service Industries had more of their Sales revenue dollar spent on Operating Expenses and Manufacturing was on the other end. Net profit percentages were about 0 or negative to about 6% or 8%.

My guess is also that a large percentage of Operating Expenses are spent on Internal Business Processes, especially in Service Industries. On an average Operating Expenses budget of 60%, if you were to improve your business processes and reduce your operating expenses by 10%, many of these companies stand to become Doubly Profitable if you were to save an additional 6%!

It’s no wonder that companies like Toyota that use the Toyota Production System (TPS) to continually look for waste and inefficiences and eliminate them systematically. They are able to reduce their costs constantly while increasing quality at the same time. TPS has not been applied as much outside Manufacturing but the basic idea of elimination of waste is a universally applicable!

That’s powerful motivation to look at Continuous Process Improvement! Many Continuous Process Improvement efforts are hampered by availability of good data. Some of them are natural to the problem at hand, but none of them are insurmountable! Especially when there is so much to be gained!

Typical data characteristics or problems are:

a. Disparate Data Sources - An Order to Cash Process may be using a variety of backend software systems - Order Processing, Sales Accounting, Production Planning, Manufacturing and Production, Warehousing, Shipping, Billing, and Financial Accounting Systems. These may be from the same software company like SAP or Oracle or different functions may have software from different companies. End to end collection of data becomes a task of Extracting, Transforming and Loading (ETL) data to a single repository. I know Business Process Orchestration tools can collect this kind of information but what about the other 95% of companies that don’t use those currently or plan to use them in the near future?

b. Multiple Data Cubes - For the same end to end process, analysis may have to be different in each stage of the process. While processing orders you may want to analyze by regions or zones where the orders are coming from.When it is being manufactured, KPIs may need to slice and dice process data down to the manufacturing shop or teams within. When a product or service is being supported over phone or other media, customer support center metrics may be the way process is analyzed.

c. Data Availability and Integrity - If parts of an end to end process are outsourced, then the vendors systems may be involved and you may need to get data from the vendors’ systems! Data Integrity is always brought up as a key issue.

None of the above problems are insurmountable but looking at the potential for Continuous Process Improvement to improve the bottom lines of companies significantly, it should be motivation enough for companies to hunker down and address all of these individually and collect the data needed for analysis and focused Process Improvement.

It is a capital mistake to theorize before one has data - Arthur Conan Doyle. Sr.

When you consider a process for improvement, there are a number of things you could do it - Train the people better, give them more latitude in decision making and keeping customers happy who bring in more business, invest more in a rules engine that automates many of the otherwise manual decision making, buy three additional servers so that system response time is better or add additional people.

All of these cost DIFFERENT amounts of money, effort and dedication and may produce results of different magnitudes! What is interesting is that some of the results may be different from what was expected and may come as a total surprise! May be adding some better lighting to the location where work was done produces an improvement much more than millions of additional dollars spent on a new software application! The only way to find out is to experiment in a limited way first before committing one or more courses of action among the many available.

This is where Design of Experiments (DOE), originally from the natural and social sciences and now being adapted for use by Lean and Six Sigma experts comes in handy as a rational way to go about process improvement. Every organization has its limits when it comes to resources and so money judiciously spent is always much more appreciated than money thrown wildly at the problem without having some idea of what the end results might be for a dollar spent on each of the different options!

Design of Experiments advocates that perform experiements on a smaller scale, measure the results, compare them to your expectations and use the conclusions further in whatever way your overall objectives dictate.

Sometime ago I had written an article about Cause and Effect Diagrams and Design of Experiments in Process Improvement. These two tools are very useful in effecting rational, focused process improvement that makes the best use of a dollar of resources you may have available for you. The Cause of Effect diagrams systematically may help you identify all the candidate causes for the process Key Performance Indicator (KPI) you are trying to improve. For example, in a Call Center you are trying to improve the Average Handle Time of agents on the phone trying to support customers. The AHT metric can be improved by addressing Additional Training for Agents, Upgrading to a new software application or restructuring your incentive packages. Each of these may have different results in the end and may cost you different amounts of money. How do you ensure that you Optimize your improvement? By actually conducting experiments and measuring the results for each of these approaches. Send a smaller group of agents for training, ask the software vendor for a limited set of licenses for a subset of agents to use the new software application in a pilot implementation or restructure the incentive package only for one team of agents. Measure the results, compare the costs of each and you will find the best ways to spend your limited amount of money for optimum results!

DOE and Cause of Effect Diagrams provide a useful way of making rational process improvement decisions!

I think that in the discussion of natural problems we ought to begin not with the Scriptures, but with experiments, and demonstrations. - Galileo Galilei