New Impacts on Outsourcing in 2009

By Kathleen Goolsby

New impacts on outsourcing in 2009 include service-oriented architecture (SOA), service provider "DNA," green IT, the changing role of physicians, and what the future holds because of the convergence of technology and business process. This article looks at what you need to know about each of these impacts.
Service-Oriented Architecture
"I'm really excited about SOA," says Gianni Giacomelli, head of BPO Strategy and Marketing, SAP. "Conceptually, it's a revolution in outsourcing that will take it to the next level."
Software implementations today are constrained by yesterday's way of writing code. As Giacomelli explains, software developers wrote hundreds of thousands of lines of code that, together, handle a business process (such as finance and accounting). But the code is not clearly segmented into functions or subprocesses (such as accounts payable, accounts receivable, collections, general ledger, and fixed assets). It's often difficult to take out the lines of code for subprocesses and give them to another company. And, at times, companies have to implement an entire system even if they only want to use one segment of the code.
In contrast, SOA makes the code accessible in pieces, so to speak, that are very easy to map to business subprocesses. So if a company only wants to implement a system for collections or a system for the general ledger, for example, SOA enables that option.
"By being able to do that, you enable one simple thing: specialization," explains Giacomelli. He compares it to automobile manufacturers that use subcontractors to build almost of the components that make up a car. "Those components became a natural breeding ground for organizations that are specialized in doing specific things such as making brakes or transmissions. Without specialization, we wouldn't be able to have cars that cost what they do today. Cars were expensive and extremely rudimentary decades ago because there was no specialization in the components in the car."
SOA has the potential to generate that specialization in the outsourcing industry because it enables providers to take much more granular pieces of a process and concentrate on them. "By concentrating only on one piece or on a few pieces, service providers can actually choose the ones in which they are really, really good, the ones in which they really can create significant economies of scale for 100 or 200 customers," says the SAP exec.
That's a value proposition that Giacomelli points out is still sometimes lacking in BPO today. "Many providers are not bringing to the fore significantly different economies of scale that the client can't replicate because many providers have at best only a handful of clients running on the same platform."
What are the implications for buyers of outsourcing services? The risk and difficulty of outsourcing subprocesses will be much lower. "The connection points between the piece the buyer moved out and gave to the provider and the rest of the retained subprocesses are going to be very clear because they are mapped into the software. It's almost like taking a Lego piece out of a structure; it still recombines fairly well with the rest because the connection points are very regular. SOA is also great for making new and improved pieces fit with the rest of the structure; there's less pain with enhancement, upgrades, and ultimately innovation."
The ideal scenario is one where both the buyer and provider have SOA so that they can communicate in the best way and so there is a minimum amount of "stranded assets" on the client side. "But the reality is most clients don't have SOA in their landscape today for most of the processes. It's changing, and there's a wave of adoption today; however, broader adoption will follow the rhythm of upgrades, so it will take 10 years," says Giacomelli. "This said, the fact that the provider is already able to use SOA on its end to build very focused 'droplets' of subfunctions is game-changing."
The big advantage of SOA in outsourcing is a win-win for buyers and providers. Giacomelli points out, "With SOA, the BPO provider needs to implement and run only a specific piece of the entire application landscape (such as the collections piece of the accounts receivable process). Therefore, the implementation will be much less complex, less lengthy (and costly) than traditional implementations."
Provider DNA
"I think that the biggest thing in the outsourcing landscape over the next year or two is going to be the expectation of the customers of a much different DNA in the suppliers that they work with in the outsourcing space." That's the belief of Keith Higgins, vice president of Worldwide Marketing, at Aricent, a global innovation, technology, and outsourcing company focused exclusively on the communications industry.
In an age where user experience and consumer demands dictate product development, companies are under pressure to innovate and get to market a lot faster than ever before.
"We're moving from cost arbitrage to skills arbitrage," claims Higgins. This is different from the DNA required for just being the recipient of a client's to-do list and doing it globally at lower cost. Outsourcing providers are now moving up the value chain and product life cycle all the way to the whiteboard."
As clients ask for innovation, industry domain expertise will be "paramount to selecting the right outsourcing partner." It will enable more streamlined expertise for the buyer. Higgins believes the trillion-dollar outsourcing market will soon fragment into players focused on domain expertise.
"It will be the death of the mile-wide inch-deep outsourcing deals," he says. "You can't be a jack of all trades in the outsourcing space." He predicts that domain expertise will be a self-fulfilling prophecy; the more customers a provider has in one domain, the better the provider "gets it," and the more customers the provider will gain.
Neeraj Bhargava, CEO of WNS Global Services, agrees. "Successful providers are going to have greater industry specialization." He says the DNA of offshore providers will also change. "The successful offshore companies will add more value by combining their talent with technologies." According to Bhargava, offshore providers like WNS have the momentum of growth at 40 percent per year for the past five years. Now they're adding higher value-added areas such as research and analytics to their DNA. "Areas such as financial research, marketing analysis, and procurement analysis are growing rapidly in the offshore market," says Bhargava.
Debra Kops, chief marketing officer, WNS Global Services, also lists the changing provider DNA as a new impact on outsourcing in the coming year. "What's driving the increased focus on vertical domain expertise is the need for the provider to understand the buyer's industry challenges and changes in business volumes. An example is knowing the context of billing in the utilities industry along with conversion rates and need for accuracy of meter reading."
Changing role of physicians
Look for a new spin on clinical help desks next year. New opportunities for outsourcing are developing in the physician community, according to Greg Baugh, senior director of operations, Siemens. Business processes in hospitals are changing, and physicians' roles are changing, requiring them to do more things in hospitals. For instance, in an effort to reduce medical errors, hospitals are implementing systems that require physicians to take accountability and place their orders themselves instead of having other clinicians do it for them.
"Outsourcers will need to change the way they provide help desk services and on-site services to physicians. We need to help the physicians do what's now being required of them. Physicians can't delay their work while they're held up with IT issues. They need support right away and expect answers immediately."
Physicians are also getting more involved with the electronic medical records (EMR). As companies sell them ambulatory products to handle the EMR, it will create new opportunities for outsourcing services in support of those products.
Green IT
"Companies are really taking up the charge of responsibility to the environment and to society at large," says Arthur Mazor, senior vice president, Offering Management & Marketing, Fidelity HR Services. Fidelity is finding that most companies seeking to create outsourcing engagements are now including interest in and requirements around environmental sustainability contributions in their evaluation criteria for service providers.
"We're finding that this is a significant impact on the way that outsourcing providers must think about and execute their business strategies, solutions, infrastructure footprint, and usage of resources that are environmentally friendly."
According to Mazor, many buyers' RFIs, RFPs, and questions from analysts and sourcing advisors guiding clients are now requiring providers to demonstrate their positions and environmental contributions. The environmental issue is starting to manifest itself in companies requiring electronic distribution and collection of RFPs.
Mazor says the "big question" is to what degree companies will weight the RFP questions related to environmental sustainability compared to the rest of the provider evaluation. "I think that's something that companies are wresting with," he says.
Bob Pryor, senior vice president, Sales and Marketing, HP Outsourcing Services, agrees that the influence of environmentalism in terms of "green" IT is a significant trend shaping the industry today. He ties it together with pressures on data centers for reducing costs of energy and cooling. "These two issues are tightly connected now."
"We're seeing very significant trends in this past year about what customers are asking for and the issues they are facing regarding their data centers not being able to handle the higher demands for power and cooling, especially in higher density environments," says Pryor. Customers are asking about solutions for energy management, conservation, preservation, and alternative energy sources as well as seeking understanding on whether they should build solutions with their own capital, outsource, or do a combination of both.
Convergence of technology and business process
"Although it's happening in pockets, the trend around the convergence of technology and business process hasn't quite taken hold yet. But it's ultimately the new area in outsourcing," predicts Pryor.
In this emerging model, customers move away from doing everything in an isolated pocket (for example, buy an application from one company, outsource computing capacity from another, and outsource accounting to another company). In the model Pryor favors, customers demand and expect that one company "could provide them all of their business process services with all of the people, expertise, and enabling technology and all bundled back to them at a price however they want it (per customer, per volume, per certain service units, the way they bill their customers, etc.)."
"Combining all of these pieces is an early step in offering on-demand services over the Internet," says Pryor. While cloud computing (including the SaaS model as one component) is "a profound trend in the marketplace today," he believes it will take a while before suppliers can deliver everything as a service from an outsourcing standpoint.
"I think you'll see aspects or components of it in outsourcing within the next three to five years," predicts Pryor. The question is, how prominent will that be? The answer depends on how advanced the enabling network and computing environments become." Building the model will shift the risk to providers, along with the significant capital investment.
"It won't be a small undertaking for providers," he adds. "So we'll see it first in niche kinds of services and with early adopters. But as the demand grows, you'll see the investment and the growth curve that says it's truly a big trend in the industry."
Lessons from the Outsourcing Journal:
Service-oriented architecture (SOA) will enable outsourcing service providers to specialize in certain processes and thus create more significant economies of scale for the buyers' benefit; this will create a value proposition that is often still lacking in BPO to date.
SOA will reduce the complexity, time, and costs involved in traditional software implementations.
The outsourcing market is beginning to fragment into providers focused on domain expertise, enabling them to better meet buyer's needs around industry challenges and changes in business volumes.
The influence of environmentalism in terms of "green" IT is now tightly connected with pressures to reduce energy and cooling costs in data centers. Many companies are now starting to include requirements around environmental sustainability contributions in their evaluation criteria for service providers.
Physicians' roles in hospitals are changing as is their use of IT. Accordingly, service providers need to change the way they provide help desk and on-site services to physicians.
Outsourcing will begin moving away from doing work in isolated pockets (buying an application from one provider, computing capacity from another, and outsourcing a business process to another) and move toward providers that can deliver all such aspects in one bundled offering at a pricing structure that suits the buyer's needs. Combining all these aspects is necessary for offering on-demand outsourced services. This movement is beginning to happen now and will increase in niche areas over the next three to five years.

Source: http://www.outsourcing-journal.com/nov2008-outsourcing.html

How to start an online business for $100
Christopher Null, PC World

November 5, 2008 (PC World) Today's economy isn't doing anyone any favors, and if you're one of the unfortunate folks to have been served a layoff notice, you might be facing a long haul when it comes to searching for another job. Is now the right moment to put your long-lingering business idea into practice? While times may be tight for many larger enterprises, in many cases, smaller, more-nimble companies are better able to withstand market uncertainty and weather downturns.
The best way to stick it to the man? Start working for yourself by founding your own company. Working for yourself has some serious and obvious advantages over job hunting. Not only do you determine your own hours and decide where you set up your office, but you keep all the profits too.
Starting your own business doesn't have to mean spending thousands of dollars on setup costs before you ever open your doors. Don't get suckered into spending loads of money on services that you don't need or that have far cheaper alternatives. Seriously, with $100, you can obtain everything you require to start just about any business online, with only minimal need to get up from your desk. Here's how to do it.
Find an Affordable Web Host
The Web site for your new business has to reside somewhere. How do you pick a Web host that won't leave you high and dry?
Most hosting plans for small companies offer similar features: basically unlimited storage space, support for common databases and publishing systems, and anywhere from a few gigabytes to 2TB of data transfer per month. Expect to pay between $5 and $15 per month for the service, with a one- or two-year upfront contract.
How to pick one from the dozens out there? Look for reviews from recent users, with a particular focus on how quickly the host resolves problems and how often the service goes down. If you expect sudden, big influxes of traffic due to promotions or Digg-like flooding, you'll want to ensure that the host can handle it. Ask about these issues if the company doesn't have written policies.
If your business is blog-centric, you can get started for free with a hosted service such as one from WordPress. You can always move to your own Web host later when you outgrow it or are ready for more.
Get Logos and Design Work
Numerous Web sites, such as Logo Ease and LogoMaker, will design a free logo for you based on options you set via a Web interface. The quality varies, but generally you can get the logo for free for online use. The services make money if you want to download the logo in EPS format, which is more suitable for printing on T-shirts and coffee mugs. A Web search for "free logo" will turn up dozens of additional alternatives.
Another, possibly better, approach is to seek out an independent designer to work on your logo. If you don't need anything fancy, you can find someone to do the job for $50 or less through a simple Craigslist ad. The advantage is that you get to work with a live person (with genuine artistic skills) to create something unique for you rather than a cold, computer-generated logo.
As for Web design, you're unlikely to encounter someone who can create an original site for you for a fee within our $100 budget range. If you can't afford a real designer from the start, begin with a simple layout and customize it as you go -- but try to avoid making incremental changes every day or week. When it's time to redesign, do all the work at once to avoid confusing and alienating your readers for a protracted time.
Build an E-Commerce Site on the Cheap
If you're planning to sell a lot of physical goods, you'll need a service that can handle e-commerce transactions, process credit cards and provide security for both. Setting all of this up on your own server is an expensive, time-consuming task laden with security risks. It's best to outsource the functions to a hosted service targeted at merchants. Such services can be surprisingly affordable. Yahoo Inc.'s popular Merchant Solutions start at $40 per month. E-commerce sites at Netfirms start at a mere $15 per month. You can customize both extensively to match your desired look and feel.
Find a Big Sales Partner
Thousands of merchants use Amazon.com to promote their goods, giving Amazon.com Inc. a cut when items sell. The big advantage: You don't need a Web site at all to sell there. You can sell just about anything that Amazon stocks by registering as a merchant, finding the product page for the item you're selling, and clicking Sell yours here. Merchants must pay $40 a month, plus a sliding scale of closing fees (6% to 20%). Individual sellers can sign up to sell with no monthly fees but must pay an extra 99 cent closing fee.
You'll find similar services (though less of a selection) at Half.com, which is part of eBay Inc. Of course, you can always try your hand at dealing on eBay itself, which is still a popular venue for selling new and used merchandise, though one drowning in noise.
Think SEO, All the Time
Don't underestimate the value of optimizing your Web site for Google. But you don't need to pay an expert thousands of dollars to optimize your site for you: Check out the expert advice from SEOmoz and other search engine optimization writers to learn the basics of SEO, and instill your site with good SEO habits from Day One. It takes time for the engines to get to know your site, so be patient. (Just make sure you've submitted your URL to all of them!)
Get Bonus Income With Google AdSense
Unless you're selling physical merchandise, try adding Google AdSense ads to your site. You might pull in only a few dollars a month while your site is small, but that's more than nothing -- plus, it opens the door for bigger ad opportunities down the road.
Constantly Promote Your Business
How do one-person businesses get big? They're always promoting themselves. Add your URL to your e-mail signature. Create a Facebook group for your business. Write a humorous blog about your product or industry (check out Chris Lindland's Cordarounds blog for ideas). Submit your gems to Digg, Reddit, and StumbleUpon. Comment on online stories in your field and cast yourself as an expert. Meet and greet at trade shows. Make T-shirts, stickers and business cards. Give away products to charity events in exchange for an ad. Hold contests for freebies and make people work for the prizes. Above all, don't let anyone forget about your new enterprise.
File for a Fictitious Business Name
Unless you intend to receive all incoming payments under your real, legal name (as, say, with a personal consultancy) you need a fictitious business name for your company, also known as a DBA ("doing business as"). You need one because of your bank's policies: If you receive a check for Acme Widgets, you won't be able to cash it unless you can prove that Acme is really you.
To make that connection, get a DBA. This is one of the few actions described in this article that you often can't do on the Web. The specifics of obtaining a business name vary from city to city and county to county, so you'll need to check with your municipality. In my city, you must make filings in person at the city hall (after you've ensured that no other businesses have the same name), and you must place a notice in a paper of record indicating that you've opened up shop. In some cities -- Little Rock, Ark., for example -- you can do the whole thing online. Some regions require county filings, too.
Check with your official city and county Web sites for specific instructions. Fees will range from nothing to about $50 to have any DBA and relevant licensing (see below) taken care of. Just make certain you go directly to the municipality to do the task: Intermediaries claiming to file forms on your behalf are often expensive scams.
What About Additional Licenses?
Again, this is a locale-specific issue. Some cities make you file for a special license if you're going to be working from home (the city doesn't want you snarling traffic if you open a cookie shop in your kitchen, for example). Others require certain types of businesses to file additional paperwork to get a license. Again, the rules vary dramatically from place to place, but usually you can take care of it all while you're filing for a DBA (and, in fact, usually the city won't give you a DBA unless you've handled any other relevant licensing issues already).
Also, if you're selling physical goods, you'll have to collect sales taxes if your state requires it, as most do. Check your state's Web site to learn about collection and filing procedures. Usually you won't have to pay any up-front fee.
Incorporate? Skip It
Many guides to starting a business will encourage you to incorporate, citing the legal protections that such a move offers. Their assertions are true, but unless your new venture is selling herbal Viagra online, your risk of facing a serious legal headache while your business is in its infancy is minimal. It's far cheaper, easier and faster to operate as a sole proprietorship, especially in dealing with finances and taxes. If things grow complicated, you can always incorporate later.
The Simple Business Bank Account
You can open a second bank account if you'd like, but if you're a proprietorship and have a DBA, you can use your personal bank account for business and not have to worry about multiple accounts. Your bank will even print your DBA on personal checks, making them suitable for business use.
If you really need a second account, ask your current bank if it has any special deals for small businesses. Many banks, for example, offer free business checking if you maintain a certain minimum balance.
Set Up a Switchboard
If you're expecting a lot of incoming phone calls, an answering service might be worth the investment. You'll seem more professional to customers, and you won't be roused from bed at the crack of dawn by callers who don't understand what time zones are.
You can have a live answering service (similar to the one your doctor uses) for $20 a month -- or less, if you have minimal incoming calls. Another option is to do it virtually. For about $10 a month, you can get an 800-number-based system such as RingCentral that answers calls with an automated greeting, routing calls to you (or other employees or contractors) or to voice mail depending on button presses.
If phone calls aren't a big deal, consider a second land line or a dedicated cell phone that you can use for business. Adding a line to either is easy, and with a cell phone you can even share minutes under a family plan.
For a Little More: Get a Virtual Office
The world doesn't need to know you're working in your basement, so many business owners turn to a P.O. box for the official address of their company. A bare P.O. box, however, doesn't seem all that professional, and you can't receive UPS or FedEx shipments there.
Another option is a virtual mailbox service, such as that of Regus PLC. With a virtual mailbox, you get a physical mailing address and someone who will sign for packages from other carriers. The catch is that people sending you mail still have to put a PMB code on the envelope, though it's less conspicuous than with a regular post office box. You pick up the mail once a week, or the service forwards it to you at cost. The plans cost $100 to $150 per month.
You can step up from there to a more serious arrangement: A virtual office setup gets you not just mail service but also a live receptionist who answers the phone however you like, plus access to a physical space with offices, conference rooms,and even videoconferencing facilities. Fees can range from $250 to $325 per month.
These costs are admittedly beyond our $100 budget, so consider whether you really need them before signing a contract. With so much business conducted online and via phone, you may never deal with visitors at all.
For a Little More: Offload Fulfillment and Shipping
Selling physical goods online often means long hours spent in your garage packing up orders to ship to buyers, and then standing in long lines at the post office to mail it all off. Another option exists, thanks to the wonders of e-fulfillment: You pay someone else to do all the inventory handling and order shipping for you. Fees can be pricey unless you have the volume to mandate it: Efulfillment Service costs a flat $70 per month, along with $1.85 per order processed and 25 cents per cubic foot per month for inventory stored, plus actual shipping fees.
Alternatively, you could hire a student or other temporary help to do the work for you a few days a week, but you'll still have to find somewhere else to park your car.
By now, your business should be up and running -- but that, alas, was the easy part. Now get out there and publish, promote and sell, sell, sell. And remember that even if, in the worst case, your business fails, "CEO" always looks good on your résumé!

Source: http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=Networking+and+Internet&articleId=9119119&taxonomyId=16&pageNumber=1

Hal Varian: 14 Free Business Models

Here’s a very interest abstract from Hal Varian’s (Economist-in-Residence at Google) white paper on 14 business models that allow content creators to make money even if the content is distributed free due to the changing economics of content, technologies shaping market forces & changing copyright laws.

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HAL VARIAN: 14 FREE BUSINESS MODELS
I had a great interview today with Google's economist-in-residence Hal Varian on the economics of free. He pointed me to a 2004 paper he wrote on the changing economics of content and copyright in a digital world. It includes 14 business models that allow content creators to make money even if they cannot stop the content from being distributed for free. Here they are:
"Most information is born digital and that digital information is typically very easy to copy and distribute, it is conceivable that copyright laws may become almost impossible to enforce. Are there ways for sellers to support themselves in such an environment? It is worth considering some of the options. Here is a brief list of business models that might work in a world without effective copyright.
Make original cheaper than copy. This is basically the limit pricing model described earlier. If there is a transaction cost for a copy-a direct cost of copying, an inconvenience cost, or the copy is inferior to the original in some way-then the seller can set the price low enough that it is not attractive to copy.
Make copy more expensive than original. The "cost of copying" is partially under the control of the seller, who could use a "digital rights management system," some anticopying technology, or threats of legal action which would increase the cost of copying and, therefore, increase the price that it could charge for its product.
Sell physical complements. When you buy a physical CD you get liner notes, photos, and so on. Perhaps you could get a poster, a membership in a fan club, a lottery ticket, a free T-shirt, as well. These items might not be available to someone who simply downloaded an illicit copy of a song.
Sell information complements. One can give away the product (e.g., Red Hat Linux) and sell support contracts. One can give away a cheap, low-powered version of some software and sell a high-powered version.
Subscriptions. In this case, consumers purchases the information as a bundle over time, with the motivation presumably being convenience and perhaps timeliness of the information delivery. Even if all back issues are (eventually) posted online, the value of timely availability of current issues is sufficient to support production costs.
Sell personalized version. One can sell a highly personalized version of a product so that copies made available to others would not be valuable. Imagine, for example, a personalized newspaper with only the items that you would wish to read. Those with different tastes may not find such a newspaper attractive. Selling works with digital fingerprints (encoding the identity of the purchaser) is an extreme form of this. (Playboy has allegedly put digital fingerprints in online images.)
Advertise yourself. A downloaded song can be an advertisement for a personal appearance. Similarly, an online textbook (particularly if it is inconvenient to use online) can be an advertisement for a physical copy. There are many examples of materials that are freely published on the Internet that are also available in various physical forms for a fee, such as US Government publications (e.g., The 9/11 Commission Report, or the National Academy of Sciences reports.
Advertise other things. Broadcast TV and radio give away content in order to sell advertisements. Similarly, most magazines and newspapers use the per copy price to cover printing and distribution, while editorial costs are covered by advertising. Advertising is particularly valuable when it is closely tied to information about prospective buyers, so personalization can be quite important. In an extreme form, the advertisement can be completely integrated into the content via product placement.
Monitoring. ASCAP monitors the playing of music in public places, collects a flat fee, which it then divvies up among its members. The shares are determined by a statistical algorithm. The Copyright Clearance Center uses a similar system for photocopying-a flat fee based on an initial period of statistical monitoring.
Site licenses. An organization can pay for all of its members to have preferred access to some particular kinds of content. University site licenses to JSTOR content, Elsevier content, or Microsoft software are examples. This is particularly relevant when there are strong network effects from adopting a common standard, such as in the Microsoft example.
Media tax. This a tax on some physical good that is complementary to the information product (i.e., audio tape, video tape, CDs, TVs, hard drives, etc.) The proceeds from this tax are used to compensate producers of content. For example, the Audio Home Recording Act of 1992 imposes a media tax of 3 percent of the tape price.
Ransom. Allow potential readers to bid for content. If the sum of the bids is sufficiently high, the information content is provided. Various mechanisms for provision of public goods could be used, such as the celebrated Vickrey-Clarke-Groves mechanism. This could be used in conjunction with the subscription model. For example, Stephen King offered installments of his book The Plant on his web site. At one point he indicated he would continue positing installments if the number of payments received divided by the number of downloads from his site exceeded 75.6 percent. His experiment did not succeed, perhaps due to the poorly chosen incentive scheme.
Pure public provision. Artists and other creators of intellectual property are paid by the state, financed out of general revenues. This is not so different from public universities where research and publication is considered integral to the job.
Prizes, awards and commissions. Wealthy individuals, businesses or countries could commission works. The patronage system achieved some notable results in Europe for several centuries. The National Science Foundation or the National Endowment for the Humanities are examples of modern day state agencies that fund creative works using prizelike systems."

Source: http://www.longtail.com/the_long_tail/2008/09/hal-varian-14-f.html