How about making “upgrade projects” as a part of your annual service model and bundle them into operating expenses budget as against capital expenditure spending? Companies who have invested in the right outsourcing models should challenge their vendors to reduce the intensity (or budget) of a typical R12 upgrade project. In other words the spending should be apportioned over 12 months or 24 months annual operating expenses instead of spending “huge project budget”. The ROI to spend significant amounts on functional features versus routine technical upgrades has lot of room for prioritization and spread the risk over several months at the same time get short term benefits. When you look at task level detailed project plans of many upgrade projects, there are at least 40% to 60% of the scope items that can spread over a calendar year or down load them to support & maintenance budget instead going for “project budget”. This will minimize risk for corporations and vendors will have better chances to succeed with flexible implementation schedules for non-prioritized items. Corporations burn huge amounts for expensive consulting hours in figuring out the scope of these projects but focus less on how to minimize the spending patterns to get better and real ROI.

In one of the recent surveys conducted in our webinar, one of the validation for the above concept is when people answered that they are not sure about the ROI as well as no bandwidth in house to start an R12 project. Companies spend millions of dollars upgrading their sytems and budget approvals for such initiatives are tough. People sharpen their pencils with ROI calculations and “how to convince the management” for a “CapEX” (Capital Expenditure Budget) approval. This is inspite of having large IT teams as well as vendors supporting their system in an “outsourcing model”. My earlier blog post mentioned “valuesourcing” as means of getting better ROI and “multishoring” is one of the tools to achieve the real value. Use these tools on your R12 upgrade.

Tools: Multishoring & Valuesourcing

As the world is slowly emerging out of economic downturn, the question lingers on everyone’s mind is “What is next”?. While a set of people are busy validating the ‘revival reality’, I thought it is time to look at some trends that could potentially change the landscape of business models. The large volume outsourcings that have triggered a major outsourcing wave during Y2K and .com wave have not only disappeared but the value gaps are widening with no proper model to support. Developed economies such as US & Europe are not only focused on commodity and low cost alternatives to sustain growth and also starving to create bandwidth for innovation. The large scale outsourcing of IT services and BPOs have virtually created new industries in India, China and other destinations in Eastern Europe and also in Latin America. The GDP growth and stronger economies in Emerging markets have created new markets for corporations in North America. It is hard to ignore these trends for a economy which needs to recover to year 2000 level and then progress from there.

I believe companies will look at ‘multishoring’ in a value and growth expansion context as opposed to volume and cost basis. Service providers need to focus on vertical solutions that could potentially solve ‘global expansion’ problems to sustain growth. The traditional offshore players with large number of people presence in emerging markets, interestingly needs to invest in “building value drivers” (both people & solutions) in developed economies such as Europe & US. In the coming years corporations will have to focus on more ‘Internet & mobile retailing’ as well as ‘vertical solutions’ that can help them to grow globally. If this trend is adopted by both SMB and Fortune 1000 companies as a sustenance strategy, it will trigger next wave of outsourcing which I would like to call its as “valuesourcing”. Service providers irrespective of their size needs to build on

(a) Global delivery capabilities
(b) Vertical Solutions that can help companies to grow rapidly & globally
(c) “Valuesourcing” with right blend of people & solutions.

I am sure every corporation in North America and Europe will ask themselves this question at some point of time in the next 10 years (2010 – 2020). “How can we sell our products and services through internet and also serve & expand into global markets”. US & Europe markets will re-tool its people and systems to ride on this wave. If M&A strategies focus on ‘valuesourcing’ and they will trigger job creation to support global expansion as opposed to downsizing. Well managed and result oriented companies will pursue more acquisitions to reach this trend.

“In my opinion, it is the brand that makes more business sense as opposed to shifting too much toward one particular shore”.