IT Outsourcers Turn Green

Intel co-founder Gordon Moore was a great visionary. In 1965, his prediction, popularly known as Moore’s Law, stated that the number of transistors on a chip would double about every two years. More than 40 years later his prediction continues to hold true, as the IT industry continues to develop at an exponential rate.

Many see this as an example of progress and development, however there is a growing concern that the never ending pursuit of technological advancement is taking place without an understanding of the environmental impact of the changes. There are multiple valid reasons for this concern, but one of the main ones is incredibly simple; the more technical devices in circulation, the more power is needed, requiring increased energy requirements and therefore increased CO2 emissions.

Organisations are increasingly beginning to consider the environmental impact of their actions, partly as a result of the increased importance of a green corporate image, but also as a result of the rising cost of energy. The cost of powering a server over 3 years, is now more than the cost of the server itself and economic pressures are very efficient levers to direct action. As a result, environmental concerns are creeping higher and higher up the strategic agenda.

Initially, corporations looked internally for sustainability and environmental efficiency, however there is now a growing realisation that this concept should be extended to a companies wider organisational eco-system and that responsibility should now be extended to the supplier community that support their business activity. This is particularly relevant to IT suppliers who provide outsourced IT services, often from geographically remote locations, where from an environmental perspective out of sight has previously meant out of mind.

According to a recent study carried out by Brown & Wilson, authors of the “Black Book of Outsourcing’ organisations in North America and Europe plan to continue their outsourcing initiatives while cautiously shifting functional responsibility for corporate environmental concerns to the supplier. However the report also points to an increased appetite and demand from buyers of outsourced services for more comprehensive green initiatives to assure compliance.

The report is based on an independent study of outsourcing industry decision makers and analysts with a survey of 20,000 outsourcing users. Almost half – 43% – of companies choosing to use a supplier for the first time included green factors in their decision making process for choosing suppliers. And more than 94% of executives from listed companies are planning to add “green” clauses in their renegotiation processes, compared with only 36% of privately owned companies.

More than 88% of executives said that the environmental commitment of suppliers would influence their outsourcing selection process. And 21% of US and European companies that already outsource have added green policies and performance indicators to outsourcing agreements this year, according to the research.

Almost 25% of companies are asking their vendors to reduce their carbon footprint to have “zero impact”. Further, 45% of companies expect suppliers to assure public trust by tracking and demonstrably measuring green effectiveness. Over 40% want outsourcers to develop new green technologies, products and services, which reduce wastes, save energy and increase efficiency.

Sun Microsystems has designed new datacentres in US, UK and India to lower the company’s power consumption. Sun estimates that the company’s datacentre efforts will save the planet nearly 4,100 tonnes of CO2 per year and trim one percent from Sun’s total carbon footprint.

IBM is also following similar initiatives to make computing more energy efficient and environmentally friendly. IBM is committing to spend $1 billion a year on a project named “Project Big Green” and have developed a five step programme for companies looking to cut power use in datacentres.

Fujitsu is also setting an example, spending £44 million on a 65,000 square foot London based datacentre facility that has minimised its carbon foot print through the use of the latest IT cooling and processing technologies. Fujitsu predicts that this will save enough electricity to power as many as 6,000 homes annually, equivalent to saving 10,000 tonnes of CO2 each year.

Rackspace the IT-hosting company is also busy reinventing itself as a green supplier. It is building a new data centre in Slough and is doing as much as it considers practical to achieve carbon neutrality. Rackspace gets its electricity from Slough Heat and Power, which switched from coal and gas to wood chips and fibre fuel in 2001. Rackspace is designing its new centre so that separate sections can be cooled independently. It will also draw on external fresh air when conditions allow. Rackspace has also been busy outside; they have been planting trees – some 300 per month – to offset their carbon emissions, as well as using less power hungry computer equipment internally and adopting re-cycling and re-use across their offices.

As consumers become more environmentally aware, retail organisations are improving their environmental campaigns and promotional activity. Marks & Spencer has pledged to be carbon neutral by 2012. The supermarket Tesco plans to include carbon footprint labeling on all of its products. Online bank First Direct has installed new technology to reduce its use of electricity and airlines such as EasyJet are working hard to convince passengers that they can still fly with a clear conscience.

In the retail industry, consumers have ultimate power and retailers will respond accordingly. With outsourcing the consumer is one or two steps removed, but with improved communications technology, an organisations inner workings and standards are easily accessible and quickly distributed. Being environmentally unfriendly is now bad news and this social acceptance together with financial pressure to use less energy has created a real change in the supplier market place.

Outsourced service providers are increasingly beginning to realise that “Green Credentials” are a pre-requisite when it comes to dealing with large corporations and the supplier community companies are now investing heavily in reducing their carbon footprint.

Of the 4540 supplier firms analysed in The “Black Book of Outsourcing Report” the following 10 organisations are ranked as the most environmentally friendly within their particular area of expertise and given the increased importance of green credentials, this is an accolade that should not be under estimated:

1. Accenture & Accenture HR (Score 9.66) Services: ITO, BPO, HRO, FAO, KPO
2. CSC (Score 9.54) Services: ITO, BPO
3. Hewlett Packard (Score 9.49) Services: ITO, BPO, FAO
4. SAIC (Score 9.41) Ser
5. Logica CMG (Score 9.37) Services: BPO, ITO, KPO
6. IBM Global (Score 9.35) Services: ITO, BPO, FAO, KPO
7. Pitney Bowes (Score 9.30) Services: Document Processing Outsourcing
8. UPS Supply Solutions (Score 9.28) Services: Supply Chain & Logistics Outsourcing
9. Johnson Controls (Score 9.26) Services: Facilities Management Outsourcing
10. Unisys (Score 9.21) Services: ITO, BPO

Purchasing organisations are beginning to flex their environmental muscle. This may be for altruistic, socially responsible reasons, or it may be as a result of rising energy costs and increased financial pressures, either way the tide is turning, awareness is increasing and technology outsourcers are slowly turning themselves green.

In-House Inefficiencies – The Advantages of Service Outsourcing

The rise of inefficiencies that prevail in many business send many business owners on a quest to outsource product manufacturing or specific service requirements. When confronted with the opportunity to outsource, many opt not to pursue this direction because there is a feeling of loss of control. Used correctly, the ability to use outsourcing can improve operational performance and individual job quality no matter whether the outsourced activity provided is product or services. What has made this approach popular with some companies and avoided by others? Why is outsourcing a good idea for companies? Is outsourcing a viable strategy given the business environment of today? If so, to what extent is it appropriate for your business?

The idea of outsourcing has grown beyond the idea of product or component part production. The initial concept of supply-chain management coupled with lean manufacturing techniques support outsourcing components and can be illustrated well when reading Henry Ford’s comments on the subject:

“The task of putting business on better foundations depends on every department of the business and not alone on the manufacturer.”1

The resulting effects on industry have been substantial for large manufacturers and especially for businesses with smaller work forces where the ramifications have been substantial. In many cases, their ability to use this approach has fostered their competitive advantage and provided a sustained period of business growth.

Businesses are increasingly hiring specialized service firms that perform services that they used to provide for themselves. A company’s ability to specialize or provide a more sophisticated service creates opportunities not previously available for many businesses. Growth in the underlying need for services is driven by several factors including the need for increased sophistication, globalization, and the ever-increasing aspect of management complexity.2 Specialized forms of services have proliferated, as has the complexity of needs in such established service industries as advertising, accounting, consulting, information systems, market research, and investment banking. The companies that are able to create advantages by working smarter and staying cost competitive will be the companies that will have the ability to survive the increased competition, aggressive pricing, and sustain the threats from international competition.

Are products and services affected in the same way? Specialization and sophistication are occurring in both areas. However, services are actually being de-integrated or removed from the businesses. This de-integration result actually is a net increase in service provision being provided to the organization. The trend in graphic arts industries is toward integration, or in-house provision, though this industry is considered non-traditional and does not reflect the trend by the majority of other service industries.3

By far the greatest reason for lack of outsourcing within any industry, no matter whether product of service related, is the fear of loss of control. The pervasive thought that the product can be produced better or the service performed better can be an inherent part of a business culture that can cause stagnation and large inefficiencies. Individual managers or owners will many times decide that the opportunities to vertically integrate demand in-house functions to remain “in-house”. Thus maintaining quality standards that cannot be supposedly matched by outside sources or incur increased costs that will impact the sale of the product or service.

The services that are being provided have grown and are continuing to grow due to three underlying factors: the specific need for increased sophistication by service providers, the de-integration of services previously performed as an in-house function, and the privatization of public services.4 Many of these service firms have reinvented themselves during the last decade due to the increased use of information technology. It has allowed increased productivity from the individuals that are part of the firm as well as increased the amount of information and number of services each service firm can offer to their clients. Many of the services are now automated which provide immediate access without a need for direct customer interface. The airlines have taken automated ticketing to new heights via the telephone and the Internet. The new technologies are both the cause and effect of changes the industry structure and the source of major competitive advantage in many service industries.5

Multi-service firms allow their clients to tap into a broader selection of available services. At the root of the growth of these firms is a type of systemization that allows efficient and consistent replication of the services at multiple clients due to standardized employee procedures, internal methodology, automation of the actual service tasks performed by the individual. This has spawned another critical aspect that allows firms to narrow their focus of specialization for their clients. Take for instance, a consulting firm that offers multiple service functions but has true expertise in only a couple of areas. This broad approach has given way to increasingly specialized services such as human resource management, compensation modeling, and strategy definition to name just a few. Specialization leads the service firms to a much more narrow focus which provides better service in the specific areas of client need.

There are several advantages of having a narrower focus within the service firm. Among them are the economies of scale that the service firm can gain with the specificity of a narrow focus area. For example, diagnostic service programs that can be run via a phone modem at a remote location of the client can check software programs and often even correct the problem. Other types of enhanced communication can provide data processing, telemarketing functions, or answering services possible. These are closely related to the centralization needs of the client and are specifically scale-sensitive meaning that activities provided by the service firm are adapted to the client’s need to service their clientele on a regional, national, or on a world-wide basis.

Additionally, the aspect of competition and focus are potent advantages for the outside service provider. In-house service departments are at the very least cost centers for the business. This is not to say that an in-house service facilitator cannot be profitable. It does, however, mean that the policies, procedural methodologies, and accomplishments should be regularly measured to not only justify the existence of the department, but also provide adequate pressures and performance incentives when faced with outside service alternatives.

At the same time, in-house service departments do face inherent constraints.6 Understanding barriers that are constraining for a business helps ownership and management better evaluate the performance requirements necessary for an in-house service department to function well. Given the limitations, such as compensation structures and employee benefit packages, those responsible for making the decision should probably opt to outsource the services instead of having them handled internally.

“In-house service units are housed at expensive locations, subject to corporate salary structures and benefit plans, constrained in some cases from using part-time workers, and live under other guidelines that are inappropriate for the nature of the service function provided. The independent service provider, conversely, tailors every aspect of its value chain to the particular service involved.”7

The concept of increased cyclicality should be considered by the organization facing inefficiencies. Cyclicality increases the inefficiency of maintaining a permanent service function in-house which provides companies alternatives to converting a fixed cost into a variable one.8 They need only to call on these companies, as the organization requires their services.

Recognized Opportunities to Outsource

Similarity of Service Needs – The aspect of service needs that organizations require have similarities whether competing at the local level or on a global scale. Some service needs may be industry specific, or even segment specific. For example, consulting services tailored to niche industries require years of expertise to understand specific nuances that affect industry trends requiring specific client recommendations. As the demand for services globalizes and competition becomes greater, the actual service performance at the local level may provide a cost advantage to the client. This allows for competition to be somewhat “equalized” for the local firm regardless of a whether the competing firm is considered to have global reach.

Mobility of Buyers – With increased information flow throughout the world, the opportunity for global service firms increases at the local level. In past years, buyers were confronted with minimum options when faced with the need to take in-house services out for bid. The buyer’s perspective has increased substantially providing the buyer’s organization opportunities today that may have existed in prior years, but were not available or familiar to the buyer. Additionally, the aspect of paying in different currencies is continuing to be less of a concern since many trading blocks have adopted a common currency thus relieving the concern of loss due to currency fluctuation. The Euro is probably the best and most recent example of this.

Rising Economies of Scale and Geographic Scope – The advantages that drive local service competition to open multiple offices or locations are prevalent at the global level as well. It is easier today than at any other time in history for companies to establish an international presence for services that can be outsourced. Economies of scale allow these companies to spread costs in areas such as information technology, personnel training, and capabilities to enhance topline sales revenues. The advantage of global positioning by an organization allows for growth in areas of brand cache, local personnel participation with global perspectives, and the overall advantage of serving other multinational firms similar in scope.

Greater Mobility of Service Personnel – The aspect of telecommuting has grown in recent years because many people prefer to work from home, or are unable to make the commute efficiently to the home office of the service firm. In-home workers are providing companies the opportunity to reap large benefits on productivity and employee satisfaction unobtainable in prior years. If travel is required, the ability to get to an international location is relatively easy and customer contact is relatively short. This again provides economies of scale for the employing organization which enhance the solution for their client.

Information Exchange – Buyer interaction at a distance today is to be expected given the overwhelming amount of information available via the click of a mouse. Samples are available via overnight delivery services. Emails and telephones provide instant access to other individuals needed in the buying process. Employee assessment and testing are available through many consulting service firms where the client has access to use licensed information technology at their discretion and the consulting firm has virtually no client interaction, unless required by the client, except to invoice for the services. This type of service function allows for more access to remote buyers whether face-to-face or not. Employee behavioral assessments illustrate this point well.

Wide Disparities in Cost or Quality – Huge differences remain in costing methods and overall quality of services that can be outsourced. This is true at both the domestic and international level. It is becoming easier today to setup service facilities in India or China due to availability of personnel and the overall cost of the facility itself. Many countries have not made the jump to service outsourcing from manufacturing outsourcing as yet. However, as the world’s population continues to grow and the state of development by country is opportunistic, the proliferation of service industries will be advanced.

Buyer/Supplier Relationships – The relationship between the buyer and the supplier is pivotal in the use of service firms for the organization. There are two considerations that should be taken into account when mentioning this aspect. The first is without a local manufacturing base, the demand for outsourced services will be limited. The second is the actual structuring of the manufacturing sector which can strongly influence the types of services to be provided. A certain amount of sophistication is required in order for specialized service firms to exist and be successful such as specialized software application companies or consulting services.9 On the other hand, economies of many third world countries that are non-manufacturing based have no need or demand for out-sourced services. The point being that the more sophisticated service-based economies is more apt to take advantage of the out-sourcing opportunities.

Outsourcing is truly a quality of life issue that faces individual owners and corporate business entities alike. Mature industries where specialized firms are available to be used, should determine what their core competencies are and how they impact exploitation of the firm’s competitive advantage. The organization’s core competencies should be protected at all costs.

Firms are demanding more opportunities to use outside services that provide increased product quality or sophistication of services. The opportunity to find specific areas that will benefit from these services can make a company more profitable, time efficient, and productive. Employed as a viable company strategy, outsourcing will enhance an organization’s ability to sustain upward growth patterns and explore new opportunities by using redefined human resources within the business.

Outsourcing Transcription Services

Outsourcing is subcontracting a process to a third party company. The decision to outsource is often made in the interest of lowering the cost or making better use of time and energy or making more efficient use of capital and resources.

Transcription basically means the act of transferring spoken word into typed text. It provides you with an easy reference version of recorded material. Hiring someone in-house to be devoted towards transcription increases overhead costs. The service needs to be done accurately, so outsourcing transcription services with experience is a good move to most businesses. Outsourcing of transcription process nets in a huge operational cost advantage.

Outsourcing transcription services is gaining popularity and companies are fast realizing the advantage of the process. With an increasing number of low cost, high value destinations popping up worldwide, companies are weighing up the pros and cons of outsourcing the entire process to reliable third party agencies.

Improvements in technology have expanded the marketplace. Through the use of Internet and digital and telephone dictation, transcriptionists no longer need to be in close proximity to the office. As a result, many transcription companies are outsourcing their work overseas to take the advantage of both lower cost and easy service.

Benefits

1. Outsourcing transcription services help companies reduce capital investments, expenses and overheads, resulting in saving and increased profitability.
2. Companies that outsource transcription services are free to focus on the core business activities.
3. Considerable amount of saving in cost is one of the main attractions of outsourcing transcription services.
4. Improve revenue within your department
5. Get the work in quick turnaround time
6. Free from the hassles of managing employees and records
7. Reduce liability and business risk
8. Improve customer satisfaction through efficient and timely processing of requests, service changes and projects

Outsourcing transcription services allows increased capability. By outsourcing a critical task that requires professional knowledge, the company can better focus on its core competency and enhance productivity. Outsourcing helps companies to avoid capital expenditure, which is especially relevant in non-core areas that may need new systems and upgrades. Again by outsourcing, companies are relieved of the responsibility of recruiting for transcription jobs and training a dedicated staff for that purpose.

There has been a significant growth in the outsourcing industry in many developing countries including India because of their expertise in reducing cost while enhancing the quality of service.

In these challenging times of tight budgets, compressed deadlines, exploding amount of information, managing transcription yourself can cost you in many ways. That’s why outsourcing transcription has become such an attractive solution for many. And if done correctly, it is a pain-free process that gives you the freedom to focus on many important things.

Trends in Outsourcing

Although outsourcing is not a newly introduced phenomenon it is as old as human kind itself and during this last decade or so it has become more of a mainstream method of employment and business.

Outsourcing traces back to different eras and periods of the business and industrial evolution, concerning different sectors. However historians agree that the latest and largest wave of outsourcing trend came with the revolution of IT technology and the need of manufacturing hi-tech items, including computers and electronic equipment. One of the most crucial moments in the history and evolution of outsourcing services was the dot com boom and the significant increase of e-commerce possibilities. In present times there is practically nothing that cannot be outsourced, with BPO expanding in fields like IT and ITES outsourcing, security, monitoring, administration and even commerce.

Analysts claim that in a few years outsourcing will be the focal point of all IT and online businesses, mostly because nowadays companies can benefit from skilled and experienced personnel that come from all over the world at low cost. Especially since a vast majority of outsourcers come from countries like India and China, or other Asian countries where wages are lower than in the US and the developed Western Countries, the possibility of quality contractors with low rates is increasing dramatically every year. Although the initial predictions were talking about a decrease in outsourcing in 2006, in both 2006 and 2007 the number of outsource contracts was not only bigger but also the fields of activity were more varied than in all the previous decades. The current trend in outsourcing shows that the outsource providers expand their technological scope and ensure their position in global market, while the elevated number of buyers help in the creation of new outsourcing workplaces.

Since outsourcing now is broadening its horizons to different markets taking advantage of the latest technological inventions, there are no geographical or language limits. Video conferences, instant messaging, networking groups, emails, mobile technology and social networks have facilitated the communication and work of outsourcers with the hiring companies who can now focus on the core business operations of their companies. During these last five years we saw the Western companies going offshore when it comes to outsourcers, not only because of the lower prices but also because of having access to a pool of talented and competitive freelancers, ranging from high skilled professionals to ambitious and qualified graduates who could perform equally well maybe even better.

The future of outsourcing is now considered bright and open, although everyone agrees that the main focus now will be on increasing competition and the orientation of business to processes more than before.