Executive Briefings

Thinking Outside The Outsourcing Box: It's All About Business Process and Service

When IT decision makers think about outsourcing electronic commerce services, they need service providers that fill in application gaps and manage the crucial business processes and business problems surrounding the applications.

A good service provider should offer effective tools, but a depth and breadth of professional expertise is equally if not more important. A well-trained professional services staff can help you sort through the business issues, make the right choices and get the job done more efficiently. Your provider should also support everything when it's implemented, including the business processes surrounding the applications they sell.

Companies that go though the outsourcing exercise tend to find themselves dealing with a common set of business problems or drivers that help propel them toward decisions on which services to outsource. You may be grappling with some of these now:

Maintaining Focus on Core Competencies: It only makes good business sense to keep employees focused on issues and tasks critical to your business. You don't want them chasing down irrelevant problems and performing sideline duties. Carefully targeting the right business process services for outsourcing is a big help in keeping valuable human resources where you need them most.

For example, more manufacturers today tend to put focus and energy into brand management and getting the highest quality sources of raw material. Manufacturing is often outsourced and going from raw material to finished goods is left to others. The accent is on raw material quality and the branding, positioning and marketing of finished goods.

Such companies tend to view having an electronic commerce interface for customers and suppliers in a similar way as manufacturing: They would rather have someone else manage it. It's simply another operational piece that needs to be done, but not one the manufacturer wants to invest in with a lot of people and money.

On the other hand, there may be specific data management pieces that are so critical to your business that it's worth the effort and expense of maintaining in-house. In the freight shipping industry for example, physically moving goods from A to B is a given, but providing shipping status information on material in transit is almost becoming more important than the actual physical movement of freight. It stands to reason that a freight company may think twice about outsourcing its electronic tracking capability.

Keeping Up with Standards: One of the most common business problems facing companies today is the explosion in industry and technology standards. Staying on top of leading standards and the most cost-effective ways to tackle them is becoming nearly impossible for an in-house team to do consistently across a broad spectrum. To be able to hire and retain qualified resources that have specialized knowledge in all required areas is also extremely challenging.

In retailing, emerging technology such as RFID and electronic product codes can be difficult to keep up with. In manufacturing, simply staying on top of shop floor manufacturing systems and the various standards around such systems is a major undertaking in addition to staying up to speed with business-to-business electronic commerce. Hiring and retaining employees that have specialty knowledge in so many different areas is becoming more difficult - and expensive.

Keeping Up With Growth and Acquisition: While companies may know how to put in a basic electronic commerce solution, many times they're not up to the task of installing an "industrial strength" solution they can grow with. A spike in transaction volumes will quickly expose such weaknesses.

You may find that a basic EDI translator that was up and running with 40 trading partners and 2,000 documents a month is suddenly groaning under volumes that have quadrupled through growth and acquisition. Now you have two business problems: First, every acquisition has to be consolidated into one system. Second, there is no single solution on deck that can handle the volume if you put everything on one platform. You need to consolidate plus get a stable, reliable production-proven system. The amount of effort and money you have to sink into engineering a solution of such scale is not usually worth the trip.

Facing the ERP Challenge: Another common incentive for outsourcing includes what might be called "ERP hangover." An ERP system implementation can be so time and resource intensive that many organizations decide to outsource electronic commerce so that they can focus on successfully implementing ERP. Being distracted from delivering electronic commerce and attendant support services can be risky to customer and supplier relationships. Finding a reliable partner to provide guarantees on service level agreement document delivery can be a smart outsourcing move if you find yourself riding an ERP juggernaut.

Whatever your reasons for seeking outsourcing options, the first hurdle is to find a solid service provider. Obvious issues of company stability and reliability notwithstanding, the litmus test is the provider's ability to offer more than out-of-the-box applications or hosting.

A service provider should give you solid knowledge and direction and ready access to professional services staffed by experts that can assist in sorting through myriad issues. You should expect your provider to proactively bring business process and standards issues to your attention and help you decide what's needed most. If the provider claims expertise in a particular industry, the service team should be able to demonstrate its experience and offer the most current initiatives and technologies in its products. An ideal partner should act as an extension of your department, to the point of participating in discussions on key strategic initiatives and what needs to happen to support them.

When you're looking to outsource electronic commerce services, ask for reference accounts and look for other customers doing volumes similar to yours. Also look for references that have either a customer or supplier community with a similar dynamic as yours.

If you need assistance in keeping up with standards, find out if your provider is demonstrating thought leadership in the areas where you need the most attention. Determine what standards-setting bodies the provider belongs to or participates in. What is their level of expertise in the vertical industry that you're in? Do they actually have other customers in the same vertical realm? If they claim to have technology prowess, are all of their technology products current with the latest initiatives?

Another major element to consider is support and service. Find out how good the provider is at community building and at managing the community on a day-to-day operational basis. How fast can the provider board your trading partners? It can make a big difference to have everyone up and running in three days versus three weeks or more. When a call comes into the outsourcing support desk, is the staff experienced enough in electronic commerce business operations to be able to rapidly help people and resolve issues? The customer support function should be as good as, if not better, than the one you have in-house.

Support can become a critical issue when you have customers with problems getting purchase orders in or getting back received ship notices. Organizations are doing more ordering on a real-time basis and "out of stock" is a killer for a retailer. If you have shipments or orders that are delayed and it's because there is a breakdown in the electronic interchange of business documents, you need to be able to lean on a support staff that has the unquestioned ability to quickly locate, solve and resolve such issues.

Finally, when you outsource an application that goes across an enterprise you should expect to see enterprise-wide benefits, especially if you expand your transaction set. You should be able to rely on a service provider to help you leverage your current electronic commerce investment without implementing new systems. If your provider has the ability to help you migrate the benefits of your electronic commerce application to accounts payable and other departments, the value and return on investment keeps going up and the total cost of ownership goes down.

As you periodically review service provider relationships, it's a good idea to make sure your partner has a finger on the pulse of industry and technology standards trends. For example, anyone in retailing or in the consumer packaged goods business should be sure his or her service provider knows global data synchronization inside and out. Another important area is supply-chain visibility and development activity with electronic product codes and RFID.

With global data synchronization it's important to view it and UCCNet as something more than a quasi-government mandate. Not only does data sync solve a lot of today's operational issues across a multitude of functional areas such as receivables, payables, procurement, ordering and shipping, it's a foundation for you to leverage some of the other emerging technologies that are even more cost-effective. For example, RFID will not benefit you that much if your product data is still all over the map.

Getting people in your organization to buy into outsourcing decisions and finding the right service provider to carry out the work require you to articulate the needs and benefits from both a short and long-term perspective. You're looking for immediate operational benefits that also act as foundation building block for emerging technologies and processes that are going to yield a significant return on investment when they're widely implemented.

Jeff Solinger, whose background is in application development, system implementation and management consulting, is a vice president of Sterling Commerce, a global provider of business integration solutions.

When IT decision makers think about outsourcing electronic commerce services, they need service providers that fill in application gaps and manage the crucial business processes and business problems surrounding the applications.

A good service provider should offer effective tools, but a depth and breadth of professional expertise is equally if not more important. A well-trained professional services staff can help you sort through the business issues, make the right choices and get the job done more efficiently. Your provider should also support everything when it's implemented, including the business processes surrounding the applications they sell.

Companies that go though the outsourcing exercise tend to find themselves dealing with a common set of business problems or drivers that help propel them toward decisions on which services to outsource. You may be grappling with some of these now:

Maintaining Focus on Core Competencies: It only makes good business sense to keep employees focused on issues and tasks critical to your business. You don't want them chasing down irrelevant problems and performing sideline duties. Carefully targeting the right business process services for outsourcing is a big help in keeping valuable human resources where you need them most.

For example, more manufacturers today tend to put focus and energy into brand management and getting the highest quality sources of raw material. Manufacturing is often outsourced and going from raw material to finished goods is left to others. The accent is on raw material quality and the branding, positioning and marketing of finished goods.

Such companies tend to view having an electronic commerce interface for customers and suppliers in a similar way as manufacturing: They would rather have someone else manage it. It's simply another operational piece that needs to be done, but not one the manufacturer wants to invest in with a lot of people and money.

On the other hand, there may be specific data management pieces that are so critical to your business that it's worth the effort and expense of maintaining in-house. In the freight shipping industry for example, physically moving goods from A to B is a given, but providing shipping status information on material in transit is almost becoming more important than the actual physical movement of freight. It stands to reason that a freight company may think twice about outsourcing its electronic tracking capability.

Keeping Up with Standards: One of the most common business problems facing companies today is the explosion in industry and technology standards. Staying on top of leading standards and the most cost-effective ways to tackle them is becoming nearly impossible for an in-house team to do consistently across a broad spectrum. To be able to hire and retain qualified resources that have specialized knowledge in all required areas is also extremely challenging.

In retailing, emerging technology such as RFID and electronic product codes can be difficult to keep up with. In manufacturing, simply staying on top of shop floor manufacturing systems and the various standards around such systems is a major undertaking in addition to staying up to speed with business-to-business electronic commerce. Hiring and retaining employees that have specialty knowledge in so many different areas is becoming more difficult - and expensive.

Keeping Up With Growth and Acquisition: While companies may know how to put in a basic electronic commerce solution, many times they're not up to the task of installing an "industrial strength" solution they can grow with. A spike in transaction volumes will quickly expose such weaknesses.

You may find that a basic EDI translator that was up and running with 40 trading partners and 2,000 documents a month is suddenly groaning under volumes that have quadrupled through growth and acquisition. Now you have two business problems: First, every acquisition has to be consolidated into one system. Second, there is no single solution on deck that can handle the volume if you put everything on one platform. You need to consolidate plus get a stable, reliable production-proven system. The amount of effort and money you have to sink into engineering a solution of such scale is not usually worth the trip.

Facing the ERP Challenge: Another common incentive for outsourcing includes what might be called "ERP hangover." An ERP system implementation can be so time and resource intensive that many organizations decide to outsource electronic commerce so that they can focus on successfully implementing ERP. Being distracted from delivering electronic commerce and attendant support services can be risky to customer and supplier relationships. Finding a reliable partner to provide guarantees on service level agreement document delivery can be a smart outsourcing move if you find yourself riding an ERP juggernaut.

Whatever your reasons for seeking outsourcing options, the first hurdle is to find a solid service provider. Obvious issues of company stability and reliability notwithstanding, the litmus test is the provider's ability to offer more than out-of-the-box applications or hosting.

A service provider should give you solid knowledge and direction and ready access to professional services staffed by experts that can assist in sorting through myriad issues. You should expect your provider to proactively bring business process and standards issues to your attention and help you decide what's needed most. If the provider claims expertise in a particular industry, the service team should be able to demonstrate its experience and offer the most current initiatives and technologies in its products. An ideal partner should act as an extension of your department, to the point of participating in discussions on key strategic initiatives and what needs to happen to support them.

When you're looking to outsource electronic commerce services, ask for reference accounts and look for other customers doing volumes similar to yours. Also look for references that have either a customer or supplier community with a similar dynamic as yours.

If you need assistance in keeping up with standards, find out if your provider is demonstrating thought leadership in the areas where you need the most attention. Determine what standards-setting bodies the provider belongs to or participates in. What is their level of expertise in the vertical industry that you're in? Do they actually have other customers in the same vertical realm? If they claim to have technology prowess, are all of their technology products current with the latest initiatives?

Another major element to consider is support and service. Find out how good the provider is at community building and at managing the community on a day-to-day operational basis. How fast can the provider board your trading partners? It can make a big difference to have everyone up and running in three days versus three weeks or more. When a call comes into the outsourcing support desk, is the staff experienced enough in electronic commerce business operations to be able to rapidly help people and resolve issues? The customer support function should be as good as, if not better, than the one you have in-house.

Support can become a critical issue when you have customers with problems getting purchase orders in or getting back received ship notices. Organizations are doing more ordering on a real-time basis and "out of stock" is a killer for a retailer. If you have shipments or orders that are delayed and it's because there is a breakdown in the electronic interchange of business documents, you need to be able to lean on a support staff that has the unquestioned ability to quickly locate, solve and resolve such issues.

Finally, when you outsource an application that goes across an enterprise you should expect to see enterprise-wide benefits, especially if you expand your transaction set. You should be able to rely on a service provider to help you leverage your current electronic commerce investment without implementing new systems. If your provider has the ability to help you migrate the benefits of your electronic commerce application to accounts payable and other departments, the value and return on investment keeps going up and the total cost of ownership goes down.

As you periodically review service provider relationships, it's a good idea to make sure your partner has a finger on the pulse of industry and technology standards trends. For example, anyone in retailing or in the consumer packaged goods business should be sure his or her service provider knows global data synchronization inside and out. Another important area is supply-chain visibility and development activity with electronic product codes and RFID.

With global data synchronization it's important to view it and UCCNet as something more than a quasi-government mandate. Not only does data sync solve a lot of today's operational issues across a multitude of functional areas such as receivables, payables, procurement, ordering and shipping, it's a foundation for you to leverage some of the other emerging technologies that are even more cost-effective. For example, RFID will not benefit you that much if your product data is still all over the map.

Getting people in your organization to buy into outsourcing decisions and finding the right service provider to carry out the work require you to articulate the needs and benefits from both a short and long-term perspective. You're looking for immediate operational benefits that also act as foundation building block for emerging technologies and processes that are going to yield a significant return on investment when they're widely implemented.

Jeff Solinger, whose background is in application development, system implementation and management consulting, is a vice president of Sterling Commerce, a global provider of business integration solutions.