Tag: best practices

Tales of Horror: SOW Edition | Sherpas in Blue Shirts

October 19, 2015

Everyone involved in the deal-inking end of an outsourcing engagement has a love/hate relationship with SOWs. They’re necessary, of course. But, do their creation and iteration need to be painful? They don’t, but buyers and service providers tend to make them more difficult than they need to be.

Here are some of my SOW development tips to make everyone’s life a little easier.

No one knows what Risk Management is

Not even George Costanza from the Seinfeld television show. (If you’re a Seinfeld fan, you’ll catch the joke.) This is why it’s imperative to write clear definitions in any SOW you create.

  • E.K.W.A.Y.R.T (Not Everyone Knows What Acronym You’re Referring Too) – Every company loves their acronyms, but no matter how obvious you think they are, spell them out. You’d be surprised how many people you’re confusing
  • Where’s Waldo – In the definition of terms, simply writing, “as defined in the document” tells people nothing. Tell them where (e.g. “As defined in section 4.1”) and you’ll save readers a lot of searching
  • Change Management – Ask five people how they define Change Management and you’ll get some very different answers. Even if you think a term is industry standard, define it. You’ll save yourself a lot of arguments in the future on what was in-scope versus out-of-scope.

Redlines Redlining is Aan artArtartArt

I have an image of service providers sitting around a table, drinking Cognac, and laughing about how many redlines they will put into a document. If this is a real thing, please stop. It makes everyone but you sad.

  • Very Sneaky Service Providers– If you redline a document, and then ”accidentally” turn track changes off when changing part of the wording in your favor, people will catch it, and it won’t look good for you. Don’t do it
  • Jigsaw Puzzles – I love jigsaw puzzles, but having a service provider rearrange an entire document just for fun makes me cringe. Yes, we know you’re a provider, which means you think you walk on water, but organization can be done later. Focus on the content
  • Vulcan Logic – Always have an independent source re-read an entire document before submitting it to a buyer/service provider. Dividing a document among four different people then duct taping it back together doesn’t work. There are always contradictions, and it makes documents unclear and illogical. Star Trek’s Spock would not be impressed

Nay one und’rstands what ye are writing

We get it. You were an English major and studied Shakespeare, but the people who are going to live and breathe the contract likely weren’t and didn’t.

  • Shift+F7 – Using a thesaurus was great when submitting English papers in high school, but in a SOW, the simplest words often work best
  • Lawyers get paid by the word – Stay away from terms in a SOW that imply something is to be done. Use firm language like “will” and “must.” Don’t worry about what the lawyers will do after. Focus on making sure responsibilities are clear so the attorneys understand the concept, and then let them make their millions
  • Copy-Paste – Let’s be honest…we all re-use content. Copying and pasting great IP is great, if it flows. But it often doesn’t. It’s worth taking the time to rewrite a section, or very carefully reviewing your paste job, to make sure your document flows correctly.

Having anxiety attacks just thinking about working on your next SOW? These tips may be just the natural remedy you’ve been searching for.

Photo credit: Flickr

Automation Introduces New Business Risks | Sherpas in Blue Shirts

September 25, 2015

Automation has the essentials for introducing different kinds of business risks and risk at a different order of magnitude. The new risks manifest differently and have greater consequences than in a normal business process. The issue is the difference between type 1 and type 2 errors.

  • Type 1 error. This is a normal error such as making a mathematical error on an invoice. The consequences are that you would under-bill or over-bill a client. Once you reconcile the error, you may have lost a revenue opportunity or may have to rebate the client for the difference in overcharging.
  • Type 2 error. An example of this situation is that you under bill all your clients. The consequence is often 10X or more the impact of a type 1 error.

We at Everest Group have discussed with clients this impending shift of business processes to a far more automated landscape where type 2 errors are inadvertently introduced.

In a previous blog, I talked about automation bias and how people tend to blindly come to accept or believe whatever comes out of an automated tool. This makes the likelihood stronger that type 2 errors would occur.

On an industrialized services basis with broad-scale business processes, we must be aware of type 2 errors and guard against them. This is why many of the leading firms that are looking at adopting automation, cognitive computing, and robotics are considering implementing a Center of Excellence (CoE) to help the business understand the changes that accompany automation. A CoE can help educate employees to guard against automation bias and type 2 errors that could inadvertently be institutionalized in automated approaches to business processes.

Photo credit: Flickr

Lacking a Clear Path to Digital Nirvana? You’re Not Alone | Sherpas in Blue Shirts

August 27, 2015

While enterprises that correctly embrace digital stand to gain great rewards – not the least of which is survival – Everest Group research shows that the road to success is not a straight shot.

As an organization begins its digital journey, its initial investments are focused on streamlining the existing IT landscape to prepare for future digital initiatives. During this phase, enterprise IT generally focuses attention on traditional internal-to-IT success measures (cost, control, and compliance), and there is little need for redesign, nor much involvement from the broader organization. As a result, perceived barriers to adoption are few, and enterprises feel confident about the outcome of their technology investments – the journey looks clear and easy.

But just as the enterprise thinks it is on a clear path to digital nirvana, it hits a speedbump that threatens to wreck its transmission and send it spinning off the road. Once the initial streamlining work is done, the next phase requires the IT and business functions to work together to achieve digital goals, which requires significant change.

Suddenly, what seemed easy becomes much more complicated, requiring the enterprise face challenges such as:

  • Effectively measuring and demonstrating the beneficial outcomes of digital investments
  • Overcoming the inertia of redesigning long-standing business processes and changing end-user behavior
  • Addressing legacy technology challenges, a significant talent crunch, and behavioral change management

And lest you think you can find an alternative path to avoid this barrier, beware: our research indicates that nearly half – 43 percent – of North American enterprises are caught in this murky area we call the “Digital Trough.”

 

What should you do when you’ve hit the Digital Trough?

Just as failure to address problems with your car’s undercarriage can lead to erosion of your transmission, failure to address problems in the Digital Trough can lead to erosion of executive support for your digital transformation.

Here are a few strategies you can use to continue your digital adoption journey and reap the longer-term rewards of digital transformation:

  • Design a set of metrics that measure digital investments on a clear set of efficiency or growth objectives
  • Shift from a technology bolt-on view to a business process-centric view, with rigorous processes for evaluating new technologies against business efficiency or growth metrics
  • Leverage digital technologies for larger end-to-end processes to capture scope and scale benefits across the organization

The last point addresses the necessity for a pervasive approach to digital adoption (see our So You Think You’re Digital blog) as the benefits of a converged, end-to-end digital strategy significantly outweigh those of an isolated, piecemeal approach.

Once past the Digital Trough, our research suggests that the path to digital success is smoother…and well worth the trip.

To learn more about digital adoption patterns in North America, check out our just released research report, North American Digital Adoption Survey – How pervasive is your digital strategy.

Our readers are also very interested in hearing about your experiences with digital adoption. Are you suffering the impacts of the Digital Trough? Feel free to share your thoughts and comments.

Photo credit: Flickr

Taking the Internet of Things Journey from Pilot to Program | Sherpas in Blue Shirts

July 10, 2015

In the services world, how can we create business value from the Internet of Things?  As I’ve blogged before, the IoT is replete with opportunities to apply the data flow among IoT devices to business processes and transform the world. Therefore, it should open an unending series of opportunities for service providers to create completely new lines of service for their customers. So why is that potential primarily resulting in disjointed pilots and not evolving to programs?

I’ve observed the same pilot-to-program problem also occurring in analytics and cloud. How can service providers solve this problem?

I think the answer in most cases, and certainly in the Internet of Things, is that the pilots are not focusing on solving a real business problem. I acknowledge that some revenue-generating programs are successfully underway in some companies. But many can’t get to programs because the pilot doesn’t start with the right focus.

Let’s use service warranties as an example and look at how to apply the right focus.

First, define the issue – a real business problem – and then ask: “How can the IoT affect the warranty of our products and solve this problem?”

The answer to the question gives focus to what you want to try to accomplish. With this focus defined, you know what signals to look for from the data. You understand what data you need to acquire, the location of the relevant signals, and how to act on those signals to enhance your customer’s warranty experience or service experience.

Then you can build warranty platforms that apply broadly across multiple companies. And you’ll be able to transform the customer service processes and the device maintenance services.

If you start by characterizing a business problem and then ask how the IoT can solve the problem, you can move from a series of disjointed pilots to a program that can capture significant funding and create robust business results, gain market share, improve customer satisfaction and potentially even lead to creating additional service offerings.

The warranty service example is just one of many opportunities for the Internet of Things. I’d be interested in your opinion as to other IoT opportunities for the services world.

Monkey Poop & the INR 500 Shoe Shine: Lessons in Value for Outsourcing? | Sherpas in Blue Shirts

May 4, 2015

“Sir, sir – a monkey pooped on your shoe!” was the first thing that brought my attention to the large, wet mound on my casual walking shoe.

Not a convenient development when walking around Connaught Place in New Delhi.

Interestingly, the next thing I heard was “Shoe shine – only 500.”

Despite the jet lag, I was able to immediately recognize the scam. The fact that the same person who pointed out the poop before I noticed it also happened to have a shoe shine kit was a pretty good clue. Never did see the accused monkey, although I strongly suspect it was actually the person who I begrudgingly paid INR 500 for that shoe clean-up and shine!

I filed it away as a humorous lesson and forgot about it until mentioning it some colleagues in our India office the next week. They were aghast and surprised that I would pay so much for the shoe service (about US$10 at the time, and 20% of the value of the shoes – which I had never previously considered deserving of a shine). From their perspective, I had paid far above market value (10-15 times the market rate) and should have negotiated the price down. From my perspective, I had no idea of the market price and just wanted the issue fixed quickly despite knowing the painful truth that the source of the problem was also the solution to the problem.

I was recently reflecting on this for reasons completely unknown to me (er, might have come about while changing a baby diaper…you get the idea). I was struck by the fact that my colleagues, the shoe shiner, and I all had different thoughts upon the value exchange. In an effort to demonstrate exactly how much I over-analyze life, I distilled this to three lessons.

1. Value is relative

The shoe shine from my perspective cost US$10 and allowed me to get back to enjoying the sights and sounds of Delhi. Frustrating, but well worth the money from a functional perspective that had nothing to do with the shoes themselves, but rather to remove a nuisance and enable me to do other things. From my colleagues’ perspective, it was 10x the market rate. From my experience, it was about 2X the market rate (US$5) in the U.S., so I did not mind the rate too much. If I had been asked to pay 10X the U.S. rate or US$50, I would have resisted and likely gone ballistic. For the shoe shiner, ignoring raw material costs of the poop, it was tremendous profit and a highly valuable exchange.

Depending upon one’s perspective, the financial price of a value exchange and the utility from the value are viewed differently.

No wonder we struggle to put a price to value in outsourcing!

2. Attribution of value creation is contextual

Although the shoe shiner definitely helped solve the issue and did so quickly, I could not be pleased with the value received; the context of the need for the services completely undermined his shoe shining contribution.

If this had not been a scam and I accidentally stepped into something and a shoe shiner happened to be nearby and solved the issue, then I would have thanked him profusely and happily paid the INR 500. However, instead of thanking him, I left grumbling and scowling because of the context in how the value was created for me.

In other words, if you cause the problem, your perceived value in solving the problem is less than if you solve problems created by others.

3. Perception of value is as much about experience as results

After starting to reflect on this, I pulled out these old shoes (see photo), which I have not worn much in recent years. Ironically, they look pretty good. In fact, I believe the leather is softer and better looking than when I first bought them. They have also avoided collecting as much dust as before the unplanned shoe shine.

In other words, they benefited from the shoe shine and it appears to have been a decent shoe shine.

But I can’t give the shoe shiner any credit for this because the experience was such a turn-off.

So, solve the problem, but also ensure the experience of problem resolution is appreciated by the recipient.

Outsourcing is fundamentally a service provided by one complex organization to another complex organization. The situation is ripe with many factors (mis-communications, mis-aligned stakeholders, budget pressures, turnover, etc.) to limit the chance for perceived value exchange between organizations. Although we need to ensure the work completed creates value, we should not forgot that how we treat each other and manage our interactions can completely undermine the appreciation of value. If you solve a problem, don’t expect credit if you created the problem – solve problems beyond your scope. If you solve a problem, don’t expect much credit if the experience is suboptimal – own the problem and the service experience.

10 Golden Rules for Good Benchmarking | Sherpas in Blue Shirts

April 10, 2015

Originally posted on the National Outsourcing Association (NOA) blog

Insights from the NOA “Benchmarking” Special Interests Group with Everest Group

Benchmarking is a worthwhile endeavour. When conducted properly, the practice will give you a baseline indicator of where your business is currently, where it is headed on its current trajectory, where you need to be to maximise gains and how you can get there.

Benchmarking can also act as the catalyst for a more fruitful long-term outsourcing relationship, by highlight areas that must be focused on moving forward. On the other hand, it is not the solution to every problem that relationship might have. The term is frequently misunderstood and the practice is even more frequently misused.

At the NOA’s Special Interests Group on Benchmarking in association with Everest Group, benchmarking experts led a roundtable discussion on when benchmarking is necessary, how it is best carried out and what the practice does to help business relationships between clients and their providers.

 

Dangers in Overreacting to Services Industry Challenges | Sherpas in Blue Shirts

March 2, 2015

Timing can be crucial. I recently blogged about trends that are powerful enough to drive substantial changes in the services industry, even to the point of restructuring the hierarchy of the industry. We at Everest Group believe these are very important trends and service providers must develop their strategies for reacting. Here is our guidance to avoid overreacting to the impending changes.

As a provider, if you react to the challenges by putting new emphasis on new models too fast, you will lose focus on your core business. But if you don’t change quickly enough or are not able to make the requisite changes, you run the risk of becoming a dinosaur. The industry saw this happen 15 years ago when the Indian ISPs with their labor arbitrage and factory models caused tremendous disruption in the MNCs that dominated the industry at that time (e.g., Capgemini, CSC, EDS, HP).

Organizations struggle when changing business models. It’s difficult to change a services organization without losing its identity and value. There are basically two strategy paths providers can take in dealing with the industry changes.

Two strategies for changing

First, don’t fall into the temptation of trying to make your company be something it’s not. For example, most of the Indian ISPs are effectively talent companies; they manage and deliver talent. There will always be a need for talent. The kind of talent and the work the talent undertakes will change, but there will still be a need for talent. So one potential strategy is to stay true to your company’s identity and value and manage talent.

Another strategy is to try to develop completely new business offerings and intellectual property (IP).

However, this strategy carries several risks, and some companies that take this route run into significant problems. Some try to build a new business model but use philosophies and structures that evolved for the talent-pool model instead of digital-age models. Others rethink their philosophies and structures and also change their IP, investment model and pricing structure. They also must change their customer interaction model.

It is particularly instructive that there are very few examples where companies were able to develop their new IP in house. IBM is an example of changing IP numerous times, but they tend to do it through acquisitions, not through developing new vehicles in house. If that’s the strategy other providers adopt in reacting to the impending changes, we can look for a big spree of well-funded service firms buying software or as-a-service products.

However, providers need to change their acquisition strategies. Yesterday’s strategy was to buy tuck-in companies at low valuations and leverage them for customer access, but today it’s necessary to buy technology. Should you buy an early-stage startup that’s affordable but hasn’t fleshed out its business model and hasn’t honed its pricing structure or built market momentum; or should you buy one that has – and pay a premium for it? Obviously there is a huge difference in valuation. And the valuation can change in the course of three months for a fast-moving tech company. So the pace at which you make the valuations has to change, and the risk is different. As I mentioned earlier, timing is crucial.

Another acquisition issue: should you nurture the company and hold it separate so it doesn’t get cannibalized and shut down? Should you let them have an independent sales force and marketing arm, or should you roll them under your existing teams?

So there are substantial challenges and some daunting issues along the road to evolving to an IP-driven organization. There will be a huge learning curve at every level of change.

So which is the best strategy?

You basically have three choices in strategies for dealing with the impending industry changes:

  1. Stay the course and stay true to your talent model and refocus it on the opportunities that the new digital-age technologies will present.
  2. Fundamentally change your DNA in order to play in the new services world.
  3. Attempt to do both #1 and #2.

All the necessary change I described above is a difficult and risk-filled proposition. But it’s even more difficult to try to sustain both models at the same time.

The consequence of option #1, to stay the course with talent, could be that your company ends up on the sidelines and has to watch your talent get commoditized, deal with reduced earnings and slower growth while other providers soar to huge valuations.

The consequence of option #2, shifting to the digital-age models, include a huge learning curve. Can you make that pivot fast enough to offset the revenue runoffs or the lack of growth from your shift in direction? Will it confuse your existing client base? Can you learn the new business model quickly enough to compete successfully?

The consequence of option #3, trying to maintain the old while shifting to the new, will feel and look schizophrenic. You’ll have a split focus in every aspect of your business. And all the while, each model will seek supremacy. If you allow that to happen, you’ll lose focus on the other model.

There is no obvious “right” answer to which strategy your company should undertake in dealing with the impending industry changes. Choose the one that you can best execute on and is the best choice for maximizing shareholder value and growth opportunities.

Seven Steps to Successful Sole Sourcing | Sherpas in Blue Shirts

February 27, 2015

Sole sourcing can deliver multiple benefits, including reduced cost- and time-to-decision, elimination of the need to manage a large portfolio of providers, and likelihood of reaping greater value from a closer relationship with a single services delivery partner. Yet the sole-source process can quickly unravel if not carefully designed and managed by the buyer, even (or perhaps, especially) when a strong relationship between the buyer and provider already exists.

Several factors are critical to sole sourcing success. 

Deepen the relationship

While mutual respect, aligned interests, commitment, and trust are critical in any outsourcing relationship, they assume greater importance in a sole-source situation. Why? Buyers look to sole source to achieve collaborative, insights-based solutions, rather than merely receiving a table stakes collection of transactions. Buyers achieve this by openly sharing their desired outcomes and concerns, and building an outcomes-focused, value-oriented foundation during the solutioning and negotiation process. This depth of relationship must be nurtured throughout the tenure of the engagement. This applies whether looking to transform the relationship or simply update it. Alignment of both organizations to the objectives is key to a successful sole-source.

Engage senior leadership

Senior leadership from both the buyer and supplier need to set the initial goals for the relationship as they deepen it, and then continue to reinforce the desired outcomes to their teams throughout the sole sourcing process. Institutionalizing these objectives will ensure that they become the parameters that guide behavior in all interactions. This takes significant and persistent effort at all levels, and will require some spot coaching to realign team members who fall back to the old ways of doing things.

Get approvals early and often

Given their role as stewards of an enterprise’s activities, boards of directors may balk at the idea of sole sourcing. To avoid delays and additional fact gathering expenses – and even the requirement to tender an RFP to multiple providers – the buyer should present the opportunity to its board as early as possible in the process. The buyer must understand the concerns the board might have around the value of a competitive process, and address them through external benchmarking, leveraging current market information about suppliers and services, and a thorough understanding of the value of the current relationship. An early confirmation from the board that this is worth considering will avoid wasting time, resources, money, and momentum.  

Don’t boil the ocean

As one of the key advantages of sole sourcing is time-to-execution of the agreement, buyers need to focus on three factors during the sourcing process: a strong, solid, and accurate business case that is easily explained to the organization; confidence (through benchmarking and external validation) that the service provider, scope, and pricing are market-competitive and aligned to the desired outcomes; and a robust contract that focuses negotiations on the most relevant terms.

Develop a robust business case

To attain buy-in from senior leadership, the board, and the overall organization, the buyer’s business case must include: a baseline to demonstrate the full current service delivery costs; projections for the contract duration; dynamic modeling for real-time solutioning; an accounting of direct cost, business, and strategic benefits; and multi-dimensional risk measures. The business case must include a comparison to a competitive process, ensuring that the organization understands the value of the sole-source. And while it must cover all these bases, the resulting information must be presented in a clear, simple, direct, and compelling manner.

Compare to ensure value

The onus is on the buyer to ensure that the scope, pricing, and value are reasonable. As the buyer, you need to know what you want from the provider’s services, and how they’ll help you achieve your goals. After analyzing all through a market-comparative lens, you should work hand-in-hand with the provider to set specific (and quantifiable!) solution targets, making it clear that under-achieved goals may re-open a multi-provider sourcing process.

Focus the contract and negotiations on truly important factors

By taking ownership of the engagement process to set specific milestones and goals, the buyer maintains control of the decision and problem solving involved in reaching the goal, and eliminates any ambiguities relating to timing, scope, responsibilities, metrics, and targets. But a bit of buyer beware: Everest Group has identified 31 relevant contractual terms that sourcing negotiations should address.

For more specifics on attaining sole-sourcing success, please read our paper, “Sole Source Outsourcing – Ensuring a Successful Outcome.”

The Cloud Experiment is Over, but are Buyers Waiting for Godot? | Sherpas in Blue Shirts

January 8, 2015

The cloud experiment is over and the debate in enterprises about its benefits and risks is settled. We know it works, it’s more flexible and cheaper, and it makes it easier for IT to align with business needs. So should buyers put their applications into a cloud environment?

My advice: Don’t rearchitect your legacy applications that were designed and implemented in a legacy environment and port them over to the cloud. Organization of all sizes have been waiting for providers’ porting solutions. Unfortunately, that’s sort of like the Samuel Beckett tragicomedy play, “Waiting for Godot,” in which two characters wait days for Godot even though they don’t know where or when he might arrive. Buyers wait, thinking cloud porting solutions will arrive in the market, but it just doesn’t happen. That’s because porting is really expensive and really risky.

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I’ve blogged in the past about CSS Corp Cloud Services and Redwood Software platforms for easily migrating legacy apps to the cloud. But as we get further into the cloud story, it looks like replatforming offerings will be far rarer than we anticipated. I’m not saying they won’t exist; I’m just saying they won’t be the dominant model.

As the smoke clears from cloud experimenting and pilots, the best-practice dominant model for moving into the cloud is shaping up as follows:

  • Look for opportunities to make incremental improvements to your legacy environment. Rework legacy by increasing the level of virtualization and automation in your data center.
  • When you develop new applications, architect them for the cloud environment.

This strategy of adding virtualization and automation may get your legacy environment into a private cloud, but it doesn’t get you into the agile low-cost public cloud environment. However, it allows you to improve the efficiency and resiliency of the existing legacy environment without the huge cost and risk of rearchitecting.

The strategy also helps CIO organizations regain some of the influence and credibility they’ve lost with business units as they’ve addressed new functionalities enabling where the business is moving. It enables the organization to be more agile, better aligned and do so with lower cost, which significantly relieves the tension of having to get a huge amount of funding for a set of high-risk legacy projects.

The fact is for many legacy applications the best you can do is make incremental progress. You can move them out of dedicated hardware into virtualized hardware. And other than some potential cost savings, there is little to no business benefit from taking on the risk of reengineering them for a public infrastructure or shared environment.

We saw this same best-practice model happen with distributed computing; new applications went into distributed computing and eventually we reached a tipping point where we needed to move legacy apps. I anticipate the new functionalities, new work will similarly drive the shift from legacy to cloud.

Going forward until the tipping point occurs, put all your efforts into standing up your organization’s new environment to take full advantage of the business alignment, flexibility and cost that the cloud family offers and just make incremental changes to your legacy environment. If you wait for a huge re-platforming surge of cloud porting solutions, I believe you’ll be waiting for Godot.

How Can a Service Provider Take Advantage of the Increase in New Shared Services Starts? | Sherpas in Blue Shirts

April 10, 2014

In a recent blog I noted that there is a new wave of shared services activity. But don’t dismiss that news with an assumption that new starts in shared services just means taking a slice of business away from third-party service providers. Here are my tips for shifting this potential business loss to a new revenue stream.

Tip #1: Be patient

If a company has decided to go down the shared services path, your trying to convince them to use purely outsourcing is not likely to succeed. However, we know that over time companies that decide to embark on a shared services journey later decide to use third-party providers in their shared services mix, to a lesser or larger degree. So be patient. These activities take years to develop.

Tip #2: Be an ally 

Don’t be an enemy of their decision to take the shared services path. Instead, be an ally and assist them on their journey. You can help them build out their shared services approach and use that relationship to identify where they could use a third party for part of of the services.

Tip #3: Cede control

At some point a shared services unit probably will adopt a hybrid approach to services. Even so, companies moving to shared services inherently favor maintaining control; so the types of services you offer them should be designed to allow them to exercise control.

Much of the outsourcing model is about giving the provider control so the provider can operate in an efficient manner and give the customer a low price. That approach won’t work in a hybrid shared services model. Instead, take an approach along the lines of “Let us help you craft control” so you can participate going forward.

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