EquaSiis Brief, Top 10 Things for SP's in Tough Times, Mar 2009 (E1001)

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The Top Ten Things Outsourcing Service Providers Should Do in Tough Economic Times www.equasiis.com | 2

they need to pursue it in a straightforward manner within a rapid time frame – and without

risking the loss of any associated cost savings. In other words, they are seeking processimprovement achieved through standardization and automation rather than elaborate and

expensive transformational reengineering efforts.

When economic conditions are poor, it is also more important than ever for service providers

to tout their financial stability and establish credibility for both the short- and long-term.

2. Be selective, and focus on quality clients. Providers must maintain strict opportunity

assessment and prospect qualification processes and standards and rigorously vet current

and potential clients for their short- and long-term economic viability, weighing their appeal

accordingly. While all revenue matters in a tough economic environment, difficult, high-risk or

unprofitable clients can prove to be more trouble than they are worth. Outsourcers should give

priority to more desirable accounts.

Also, while it is difficult to resist the allure of a desperate client who has money – especially at

the end of the quarter – providers should show restraint and avoid establishing relationships

that might sour rapidly in the not-too-distant future.

3. Diversify. A market downturn is a logical time to rebalance client and prospect portfolios.

Providers should use caution when selecting which banking and financial services clients to

work with, although there are still lucrative accounts in this market segment. Shifting focus

away from Western markets to local markets in China and India is an approach that will serve

most service providers well.

4. Take market share. As buyers pare back their spending, they are also looking to rationalize

the cost of their third-party services supplier base – something most of them have not done for

many years. They want to gain greater economies of scale with tier one providers, and

outsourcers that successfully leverage these consolidation efforts at the expense of their

competition will come out on top. Providers should act aggressively and creatively to shine,

but keep item 2 above in mind – do not go after bad business.

5. Go shopping for shared service centers and captives. Many buyers today are actively

looking to off-load – or open to the suggestion of off-loading – their shared service centers and

offshore captive operations to reduce operating expenses, get rid of fixed assets or avoid

future maintenance costs. These types of acquisitions can broaden a provider’s footprint and

increase its credibility in a particular location, industry or functional area. Service providers

must keep in mind, however, that the majority of these operations, especially captives, are

underperforming relative to market best practices. (This is another reason buyers are hoping

to sell them off.) They must thoroughly vet opportunities, and selectivity is crucial.

6. Go shopping for the competition. Based on market capitalization levels, nearly all business

and IT service providers are worth less now than they were a year ago. However, this does

not mean they are a bargain. Current market conditions will invariably lead to consolidation,

but mergers and acquisitions (M&A) between service firms have historically been difficult to




pull off successfully. Those that involve outsourcing providers tend to have a more positive

outcome, though, than those involving more people-intensive services like consulting andsystems integration. All service providers should have buy and response-to-sell plans in place

and execute them as circumstances dictate.

7. Prioritize service offerings. During the prosperity of the past several years, most providers

significantly expanded the scope of their services. Marketing, selling and managing too many

different types of services has a real and significant cost and can also dilute management

attention. Outsourcers should review and prioritize all their offerings to determine if they still

have adequate traction in the market and are sufficiently profitable. Based on this analysis,

providers may need to shelve some offerings until demand picks up and discontinue others for

the foreseeable future.

8. Focus on process automation and standardization. Outsourcing is often an interim step onthe path to process automation. The first step is to use cheaper – and ideally better skilled –

labor to perform a task. The ultimate goal, however, for many administrative and transactional

processes is to remove labor from the equation completely via automation (e.g., self-service

human resources [HR] applications, e-commerce, automated voice response systems

[AVRSs], Web self-service applications). Providers should renew their efforts to implement

greater automation in their workflow as a means to reduce costs, improve margins, and loosen

the correlation between staff and revenue growth. Another benefit to automation is that it

creates an opportunity to standardize processes around best practice models, further

increasing both efficiency and effectiveness.

9. Improve operational efficiency and consistency. Providers should revisit all program

models, processes and procedures to ensure that they are optimized for existing marketconditions and consistently deployed in the field. Improvements in these areas can help an

outsourcer gain an edge over its competition. For example, in today’s tight market it is more

important than ever for providers to ensure that all their sales teams adhere to established

prospect profiling and qualification processes.

10. Reassess global risk and security programs and capabilities. The terrorist attacks in India

in December 2008 did not directly target service provider operations, but they highlighted the

risks that exist in today’s global markets. Service providers need to review and upgrade their

physical and IT security programs as needed. They must also ensure that contingencies are

structured appropriately into contracts and service levels and determine whether they are

adequately helping current and prospective clients realistically assess the risk and security

aspects of sourcing initiatives.




What’s Next?

The global business and IT services marketplace will continue to expand in 2009, albeit perhaps

somewhat more slowly due to economic and geopolitical issues.

The year 2009 will not be an easy one for business and IT service providers. Demand for some

types of services will decline, and buyers in general will seek to drive harder bargains. However,

challenging times also create opportunities for top outsourcers that can leverage tumultuous

market conditions to their advantage. Providers must ensure that their own operations are

synchronized with current market conditions while simultaneously working aggressively to take

business from weaker, less prepared and less capable competition.

Market trends point towards continued long-term growth in the business and IT services market –

especially for global outsourcing services – and demand levels will improve in 2010 over 2009.

Now is the time for smart providers to prepare for and execute against these opportunities on thehorizon.




About EquaSiisEquaSiis, an EquaTerra company, provides software and services that

improve the business support services lifestyle for shared services,

outsourcing practitioners and service providers. The software,

EquaSiis Workbench and EquaSiis Enterprise, is a framework for

collaboration used during the service delivery assessment and

sourcing process to assist in analysis and decision making for shared

services or outsourcing. EquaSiis provides intelligence and

optimization for the delivery of business support services across the

entire organization. The company also offers service providers market

intelligence, research, customer satisfaction and trending data through

its Insights group. For more details about EquaSiis’ research offerings,

please contact Stan Lepeak, [email protected].

www.equasiis.com

Media ContactsRon Walker, EquaSiis

+1 858 486 6035

[email protected]

Lee Ann Moore, EquaTerra

+1 713 669 9292

[email protected]

Copyright © EquaTerra 2009. All rights reserved. The prior written permission of EquaTerra is required to reproduce

all or any part of this document, in any form whether physical or electronic, for any purpose.

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EquaSiis Brief, Top 10 Things for SP's in Tough Times, Mar 2009 (E1001)