Outsourcing has long been the ‘marmite choice’ of multi channel retailers. Love
it or hate it, there are many compelling reasons to outsource some or all IT,
contact centre and fulfilment services. The utopia is to create conditions under
which your cost base can ‘flex’ with turnover on a monthly basis – this is
particularly attractive to seasonal businesses. Ultimately, outsourcing reduces
headcount and enables business to focus its efforts on strategy, product and
marketing.
The Case for Better Technology?
So, there is a mad rush to outsource, right? Wrong. For every company that outsources, there is
generally one that is in the process of ‘in-sourcing’. Insourcers cite any of the following reasons for
this:
- ‘Control’ –many believe that good customer services are a result of a process that is controlled from end-to-end by the brand.
- ‘Geography’ – the thought of stock being held by a company hundreds of miles away in unpalatable to some.
- ‘Cost’ – some retailers grow too fast which often leads to disequilibrium between cost and volume.
- ‘Consistency’ – a slick warehouse operation may not be matched by the contact centre service.
- ‘Service’ – Can an operator from a contact centre pool really project the brand as you expect?
- ‘People’ – outsourcer and provider are solely focussed on their own business objectives, which are often mutually exclusive.
- ‘Process’ – the provider’s method of handling transactions is standardised, but not to your liking!
- ‘Data’ – you cannot access data in a format to support decisions and operation of the business.
- ‘Technology’ – the providers software system does not support required functionality.
The list goes on…
Whilst nothing can be done about geography or cultural differences between client and provider, much can be achieved by harnessing the respective talents and resources of all parties. Perhaps we should also think of outsourcing with multiple providers who each specialise in IT, logistics and contact centre. Can a single company always provide the best possible service across all disciplines?
Shared Systems
Cutting through all of the arguments is the role of technology. Software is the common denominator
and the vehicle with which we provide excellence in customer service. Yet systems are very often
fragmented and ringfenced. For example – a fulfilment service provider may use a sales order
management system across all clients for their own purposes. Unfortunately this means that each
client is immediately ‘disconnected’ from the daily business process, having no hand on the tiller and
relying on daily reports for comfort. Let us consider a typical supply and demand process in a traditional outsourcing environment: The demarcation of people, processes and systems leads to duplicated effort and poor customer service as client and provider work out of sync.
The answer is to bind client and provider together using a shared system and process. In this case,
there are no dividing lines, as all functions are managed within a single environment. This transparency increases service quality and serves the purposes of each partner – the provider is able to run the operations from real-time information, whilst the client has total visibility across the business.
Distributed Systems
The case for shared systems and resource is compelling, but not always feasible, as providers and clients utilise highly specialised applications for both core and peripheral functions. In this case, we need to consider how systems can seamlessly ‘talk’ to each other. Integrating systems has always been a difficult art, but over the past decade the IT industry has worked to create a framework under which disparate software can operate on a common standard.
Service Oriented Architecture or ‘SOA’ is a software architecture which enables organisations to build an IT solution using a series of applications from a host of suppliers. At present, these applications are generally boxed and licensed products, however, in the longer term they will be increasingly delivered as on-demand ‘services’ via the internet. This approach is often referred to as Software-as-a-Service or ‘SaaS’ and will greatly increase choice and mobility in the software marketplace. Users subscribe to SaaS products that meet very specific business requirements, with no lock-in or capital expenditure required. The attraction of SOA in an outsourcing environment is that no party need lose functionality as a result of conflicting software demands. SOA pushes a standard data framework that enables disparate applications to ‘talk’, delivering a tailored user experience, whilst meeting the overall business objective. For instance, the provider may have a strong sales order processing module but weak purchasing functionality. An SOA approach would be to integrate and share a best-of-breed purchasing product with existing functionality rather than wholesale system replacement. This method is more efficient in terms of time/ money and significantly reduces risk, as the missioncritical operations of the client and provider are unaffected.
- Core Business
- System
- (SOP, Product & Stock)
- Reporting
- Forecasting
- Marketing
- Data Quality
- Management
- Purchasing
- eCommerce
The SOA concept is gaining traction in the marketplace and is persuading businesses to consider
which IT assets are core, and which are peripheral. Instead of racing to replace back office systems,
the focus is now placed on re-use and enhancement of applications to meet the overall objectives of
an outsourcing partnership.
The Checklist
When selecting an outsource partner, a number of factors need to be taken into account. Notwithstanding the providers’ approach, people, costs and ability to scale-shift in line with your business growth, technology should be a primary concern. As discussed above, there are different ways of achieving the objective of a technology and resource sharing partnership and the following points should be considered:
- Does the provider use bespoke or off-the-shelf software systems? If bespoke, is it adequately supported and documented?
- Is the provider committed to a technology development roadmap? In other words, are they truly committed to driving competitive advantage through IT?
- Is the provider able to integrate their back office software with external applications such as eCommerce, marketing and forecasting?
- Is your latest data made freely available in an open, readable and structured format?
- Is the provider committed to resource sharing? For example, would a common software system be used for the operational management of your business?
- Can the provider’s system meet your functional and business requirement?
There a number of different approaches to outsourcing, but in my experience those clients who choose to build partnerships with committed providers benefit the most. Outsourcing is unlike a normal buyer:supplier transaction. It is an ongoing relationship that relies on trust and shared risk/reward to be mutually beneficial. Like it or not, technology is the major player in the realisation of successful outsourcing and must not be underestimated.