The Dirty Truth - Your Outsourcing Team Might Be To Young ?

One issue I  frequently discuss with corporations which have outsourcing relationships with other vendors is that they are often times not happy with the performance provided. There is not one single performance matrix which is leading corporations to that conclusion but rather this is often times an across the board assessment of the relationship. The attitude is that it works, albeit not great.

Some of the frequently mentioned  Key Performance Indicators which lead to that assessment are :

  • Development Sprints take to long to completion
  • Sprints are simplified by reducing the number of sub tasks
  • Q&A takes to long
  • Average time for bug fixes  

I am often times amazed that the prevailing mindset seems to  be that this is just "fine"  and  lesser performance is to be expected when outsourcing. After all...pricing is low enough that it does still make economic sense.  (and I am sure that is true for a lot of outsourcing relationships).

Let me perfectly clear...I am the first one to admit that there is a productivity gap between an onshore and offshore software developer.

What is important to realize though is that with familiarity the productivity gap will start shrinking right away. The actual gap remaining after a month or two month is subject to my opinion it is not uncommon that the gap will be eliminated completely, but as I is subject to debate.

As such the question needs to be looked at why the feeling is so often that the quality of the work is just not great. In my experience and when discussing the outsourcing strategy I usually learn that in situations like the ones described above the outsourcing vendor is looked upon as a cost center.

The most important factor in negotiating any outsourcing deal is most often the hourly rate or team rate being charged. Corporations will negotiate to get the lowest rate to realize the most savings.

The strategy does of course makes sense to the corporation...but the flip side of the coin is that it does then lead to shortcoming in the composition of the development team.

A low rate will lead to a team which is predominately staffed with junior developers, supervised by a few senior guys. The problem with that approach is that the Junior developers are afraid of the power wall...they lack the authority and confidence to challenge their immediate superiors or anyone from the client side.

Consequently the back and forth which ultimately results in a more productive and informed process is lacking.

Of course not every corporation is going to willingly spend more money on its offshore development team to change the mix up of the team. It might be a good investment though...just exchanging one or two junior developers with mid-level developers might create the bridge the team needs to overcome the power wall, both internally and externally.

If the budget is set in stone another option is to exchange 3 junior against 2 mid level developers (given the team size allows for it). It should be cost neutral  but it is my experience that the change in team dynamic will boost productivity and improve the overall KPI's despite the reduction in team size.

The Dirty Truth About Utilization Rates And What You Pay Your Outsourcing / BPO Provider

Anyone who has ever negotiated an Outsourcing Deal realizes that it it a rather murky business environment to swim in.  The company who will be performing the work resides in the Philippines, India, China or some other country which is hard to reach by the average person.

You might have local business partners to deal with but you really have no idea to know what it is going on in the office where you outsourcing will actually take place.

You can educate yourself as to what the going rates should be...but the simple truth is that the rates being offered and paid by high value customers are a very well guarded secret.

One determining factor in the pricing of any new outsourcing contract, and what it typically overlooked by clients, is what is known as the internal utilization rate of the BPO / ITO center.

Generally speaking any outsourcing center will have excess staff over and above their current commitments. This is not so much a luxury as it is a necessity. Once the contract is signed a certain level of service has to be delivered...and the client does not care how it is being accomplished.

In the ordinary case of business this is just part of the routine the outsourcing provider has to deal with. They have excess staff which needs to be paid so that in case of defections, illness and/or failure to meet deadlines there is a process in place to counteract against those events.

An interesting situation arises if and when your outsourcing provider is in a situation where a project is about to roll off, freeing up employees which are not yet assigned to a new project yet.

Those freed up employees are a drag on earnings for your BPO / ITO provider. They push the utilization rate down of the entire operation and thus create a drag on earnings.

If you happen to catch an outsourcing company right at that moment in time where their utilization rate is high you might be pleasantly surprised as to what type of rate you can negotiate. Just do not be surprised that when the time comes to renew you see a significant bump in those rates.

The Medical Profession And Outsourcing...How A Doctor Can Benefit

Medical Billing and reimbursements has been a hotbed for the outsourcing industry for quite some time now. Insurance companies as well as government (state and federal) are constantly on high alert to detect the next medical insurance fraud case. Consequently every invoice submitted and every claim gets scrutinized to a level not seen just a few years ago.

The expertise needed by hospitals and doctor's offices to successfully navigate in that environment  is more and more outsourced to vendors specializing in that type of service.

The ultimate goal of outsourcing medical billing is Revenue Cycle Management (RCM), the time it takes from submission of payment to payment received. Apart form a timely submission the key component to shorten the Revenue Cycle Management is the correct submission.  Submitting a claim in such manner that it gets approved on the first submission represents real money to the hospital or doctor. Driven by their clients outsourcing providers therefor place key emphasis on the successful 1st  acceptance.

The Medical Outsourcing market is expected to grow in the high single digits in 2016. The continued increase in adoption can primarily be attributed to a combination of the following:

  • Increasing emphasis on compliance and risk management and the need for efficient processes
  • Reduction in processing costs compared to an in house medical billing department
  • Built in staff redundancy by outsourcing 

The overall medical billing market is dominated by a few big industry players.  Companies like  Cognizant Technology Solutions, HCL Technologies, Accenture and Genpact are estimated to control about 70 % of the global outsourced medical billing market.

Outsourcing Medical billing is one of those industries where it is hard to argue against the benefits it provides. The reduction in costs associated with it help to lower insurance premiums for everyone. As such the medical outsourcing industry can play a viable part in reducing the continued expansion in healthcare costs.

The Human Face Of Outsourcing... How One BPO Employee Thinks About His Job

I came across an article written by an employee of a BPO center which is apparently located in the Philippines. (article does not say). I feel the article makes a great read for those of us who hire  center reps and sometimes wonder how the call center representative might feel about his or her job.

It is well understood that working for a a BPO center is often times not looked upon favorably by those who are working in it. The outsourcing industry has had very high staff turnover rates for years ( 50 % and more used to be the norm).

Turnover (churn) is much higher in areas of phone customer support (lower employee satisfaction)  or sales then in IT related functions (higher employee satisfaction). The caveat is therefore that there is a need  to differentiate between the individual employees and their job functions. Not every situation can be painted with the samae brush.

Everyone has aspirations and so does the author of this article. He initially felt that his aspirations had been crushed by working at the BPO center but slowly came around to see the positive and finally walked away valuing the experience.

What makes the article an interesting read is the human side of it. It provides insight as to what the person motivated and how he felt about his work environment. Reading it allows to draw important lessons for those who are in charge of outsourcing operations.

Staff turnover rates have been falling consistently in the Philippine's  Outsourcing/BPO industry and are now down to levels which are similar to the US. (see a blog post dealing with turnover rates here).

There are  a few lesson to be learned from that article, which, when applied correctly, will boost employee morale, reduce staff turnover and make for an all around better BPO center environment.

Consequently, for the user of outsourcing services  certain Key Performance Indicator's such as client complaint rate, client retention rate, revenue per customer, just to name a few, should improve.

Article Can Be Found Here - Leaving The BPO Industry With Pride