A contract's for keeps

V. Rishi Kumar

THIS decade is expected to witness phenomenal growth in business process outsourcing (BPO). Also, customer relationship processes, back-office operations, accounting services, HR services, engineering design services, data and IT services, payroll processing, transcription services and research services are among a range of applications set to witness significant growth, say various studies.

But everything is not as easy it appears. For instance, a big instance of a broken outsourcing contract is that of EDS Corp's with Xerox Corp, a $3.2-billion, 10-year contract for data processing. This was hailed as one of the biggest outsourcing agreements. But it did not click.

''Over each of the four years in Dun & Bradstreet's barometer of global outsourcing, companies have reported that between 20-25 per cent of all outsourcing relationships fail in any two-year period.

Half of the relationships will fail within five years. The reasons cited for failure are remarkably similar across all types of relationships.

Nearly 70 per cent of the respondents note that the outsourcing supplier didn't understand what they were supposed to do and the cost was too high and they provided poor service,'' according to a report barometer on global outsourcing - The Millennium Outlook.

If this were the backdrop for IT-enabled services to work in, the only way out is to have a standardised approach to address the huge business opportunity knocking at the doorstep of firms globally.

Well, every problem is tackled with a remedial measure and the Information Technology Services Qualification Centre (ITsec) of the Carnegie Mellon University (CMU) has done just that - by developing an IT capability modelling and certification for the IT services space, something like the SEI CMM certification for software processes.

While the CMU pioneered the Capability and Maturity Models (CMM) for assessment of a company's ability to provide sustained and high quality output, of importance and widespread use is the SEI-CMM family of models used to assess companies engaged in software and IT services. After over a year's sustained work, the CMU and Satyam Computer Services Ltd have evolved a similar approach for IT- enabled service providers so that quality levels can be addressed.

According to the Director of ITsqc and Senior Scientist at CMU, Dr Jane Siegel, business process outsourcing (BPO) involves billions of dollars.

Right now, companies are shooting in the dark when they use these services because they have no consistent basis for making their selection.

''Our goal is to give organisations a reference model to compare outsourcing providers and mitigate their risks. At the same time, the model and certification method we have developed will enable service providers to differentiate themselves and improve their operations,'' she opines.

The model seeks to position itself to tackle some of the challenges that the outsourcing service providers and the outsourcing enterprises often confront, with a framework that covers about 99 practices.

Most business process outsourcing associations get severed either due to cost over-runs, problems of measuring cost and performance, unstructured transition of assets and resources, absence of control points and deliveries not meeting quality expectations. The e-framework encompasses about a hundred practices organised into three outsourcing phases and five organisational elements that are associated with successful outsourcing practices. In addition, it has a category of practices that covers the overall outsourcing process.

And each practice is associated with a capability level covering five levels as in the case of SEI CMM levels with level one for initial, level two for performing to meet client requirements, level three for controlling through measurement, level four for enhancing through innovation and level five for sustained excellence.

While the existing models such as ISO, Balridge focus on the execution of the contract, the e-framework addresses contract activities related to the design and deployment of an outsourced service and asserts that successful outsourcing necessitates a focus on two uncovered areas - formation of outsourced relationship and the delivery, transitioning or termination of outsourced services. While the appraisal and evaluation methodologies have been put in place, the certification will now be extended by the CMU so that companies such as Satyam Computer may use it to determine service provider capability in several IT-enabled outsourcing service segments.

With the outsourced services business set to take off, a standardised way of assessing quality makes the task of the industry that much more easy.

vrishi@thehindu.co.in

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