2 Areas Not To Outsource

Part 1 Here

In my last post, I submitted that today’s outsourcing is not all that different from basic economic specialization.  We can see that due to advances in technology – particularly communications – the pool of places, talent and resources to draw from is now essentially global and nearing limitless.  Often times my customers ask me questions and I have to point out that the question they have asked is not a matter of “can” something be done, but instead “should” it.  That is where these options with outsourcing have left us.

So what areas should a successful corporation focus on?  Obviously those that offer the biggest return in cost savings.  Now those who have done business with me over the years know me to be perhaps obsessive when it comes to focusing on hard dollar ROI and having very little tolerance for the soft dollar pay-backs that are often used to justify technology sales.  That being said, one has to consider all the COSTS including harder to estimate impacts on other areas of the organization.   Continue reading “2 Areas Not To Outsource”


What To Outsource

PART 1: Background

For years now, companies in corporate America have been turning to outsourcing to help improve margins and make their organizations more competitive.  The thing is that the successful stories – the ones that truly deliver on the promise – are the ones we hear the least about.  Conversely, the biggest disasters are told many times becoming modern versions of the warnings to mariners of sea monsters or the edge of the earth over time.

Why hide it?

Well as it turns out, large companies in America have lots of competition looking to tighten the belt just as much as they are.  When a company outsources successfully a particular part of the operation, the only people they would want to tell about it might be shareholders or potential shareholders.  Then again, if it is successful enough, the better numbers should speak for themselves better than any details of their process ever could.  As such they would be only giving their competition a roadmap to re-level the playing field.  In addition, outsourcing can have negative connotations with some customers regardless of the positive overall effect on the product or service they are purchasing.  Better to keep the best stuff under a hat overall in most cases.

As it turns out, there are huge amounts of information available on successful cases of outsourcing things as varied as IT Services, Call Center work, Tech Support, Data Entry, Manufacturing or any number of others.  The problem is that this information is usually generated courtesy of the company providing the outsourcing services.  Predictably they are going to give “case studies” that proffer stories that might as well include cutlery jumping over celestial bodies (ibid Neal Stephenson).

So how is the busy COO or President to know what is best to pursue and what things should be avoided?  My approach to almost all problems in life is to reduce them to their primary and build back up from there.  I’ll try to be brief since most readers understand the background, but the point needs to be made.  Outsourcing is a modern way of expressing a very old concept: economic specialization.  Without economic specialization, the modern world could not exist.  If each of us had to grow our own food, build our own shelter, weave our own clothes, provide our own healthcare, etc. we would have little time left to concentrate on designing efficient engines, packing more transistors on a wafer of silicone or making a beautiful sculpture.  Today’s modern communication and transportation have simply allowed us to take advantage of varied conditions in further away places.  The answer to WHY outsource lies in the very same roots as any economic specialization.

NEXT POST: The 2 Areas Not to Outsource

A Timely Technology Solution

Now picture 7.3 million of these
Now picture 7.3 million of these

Saturday’s Wall Street Journal had an interesting headline: Massive Effort To Save Mortgages.  The article went into how JP Morgan was planning on targeting 400,000 loans for modification of terms on top of what they were already doing.  It also mentioned some other banks such as Bank of America’s efforts to modify the terms of existing loans in lieu of foreclosure.  The article points out that “…7.3 million American Homeowners are expected to default on their mortgages between 2008 and 2010.”

As you might expect, when banks transact business with other banks, things can be done in a largely electronic environment generating minimal amounts of paper.  Since individual homeowners don’t have systems that hook directly into lenders the process of modifying the terms (mod) of a loan is done almost exclusively on paper.  Things like pay stubs, tax returns, letters of hardship are used to determine what can be done for each loan.  This means that even simple mods may carry 20-40 pages of faxes, mail, etc. inbound to the lender.  Multiply that by say 7 million and you have yourself a mess of paper.

So many times I see companies in Corporate America spending money on technology for the sake of technology instead of a solid Return on Investment like cutting costs.  In this case however, I came across a service that is specifically targeted to handle all the paperwork related to the workout options for these loans.  I put a copy of the PDF for the service on my website if anyone is interested in an overview (full disclosure: I have worked on various projects with this company for over ten years and am not a totally disinterested party).  It is exciting to see how technology can be used to effectively address something that is urgent, timely and expensive without being overcomplicated.

The service is particularly appealing to lenders because they really don’t have large capital expenditure budgets floating around right now.  Instead of a long drawn out implementation and large amounts of money down, they “pay by the drink” if you will.  It gives lenders who are under pressure to mod loans an option other than throwing more bodies at the problem and hope they can keep ahead of the tide.  Essentially it is a way for them to focus on the decision making aspect of the process rather than the menial, clerical and repetitive tasks.

This is technology and efficiency at its best and it is great when it happens.  Do you have any positive / timely technology examples?  Put it in the comments and I will do my best to address it.

Dealing With Red Tape?

How will lenders cope with increased oversight requirements?

How will lenders cope with increased oversight requirements?

The reaction to recent developments in the mortgage lending world seems to dominate the headlines. Each morning, the front page of Wall Street Journal brings news of yet another lender closing their doors or “suspending” operations. Meanwhile, various opinion pieces are calling for new government regulations.

Whether we see new requirements from the government or simply change to appease frightened stockholders, the coming months and years are sure to add complexity to an already cumbersome process. The companies that remain as lenders will likely see huge volumes of loans even if the overall number of loans decreases simply by taking volume that might have been distributed to those who have left the industry. These volumes are likely to be sustained since it will be very difficult for any new players to raise money to enter the market.

Traditionally, lenders have added headcount to address up ticks in volume. Continue reading “Dealing With Red Tape?”

Free Capitalism Lessons From China

Free Bread

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
Adam Smith

I ordered some small key chain LED lights for a business associate a couple weeks ago. He was going to go to a trade show type of event and wanted something with his new company’s logo on it to give away. He had seen some lights I gave away for a similar purpose a few weeks before and thought they would fit the bill. Since I had ordered from these folks before, I offered to place the order for him. The company that makes the lights is based in Shenzhen, China.

The lights are well made, VERY bright and cheap as heck. I figure for marketing chachki, function beats form. These lights are something that someone might actually USE rather than throw in with another million free pens that never seem to write well. I have seen these lights in stores (I would name them, but don’t want to deal with lawyers) for $12-$15 each. With custom color printing, shipping etc, I got them for just under $0.60 each. With a 500 piece minimum on custom printed items, that came to just south of $300.00 delivered. None of that is enough to inspire me to write a blog post about them though. Continue reading “Free Capitalism Lessons From China”

Has Anyone Seen My ROI? (part 1)

ROI Binoculars

I love doing ROI calculations. I suppose if I had started out in something that had less compelling returns, it might not be the case. Then again, I turned down some early job offers after college when I could not at least napkin out their ROI on what I would be selling. There is a funny thing about ROIs in corporate America today though: when was the last time you saw an ROI that did not pay back? Now ask yourself how many times you have seen a project your company undertook that did not pay back?

So I can’t say that I have ever seen someone else’s initial ROI calculation that did not show a sure pay back. So is every project considered or undertaken a good one? Doubtful. I suspect the first opportunity for error is simple human nature. What vested interest does the person doing the ROI calculation have? Why would they fudge the numbers? It is not like they are getting a kickback from the vendor (if they are you have bigger problems). In most cases, people tend to dislike cognitive dissonance (wiki definition). Many times, very early in a project the influencers (real decision makers who don’t have authority) already have their mind made up as far as what direction to go (build / buy / outsource) or what tools to use (vendor selection). When that is the case, it is tough to get objective ROIs. Continue reading “Has Anyone Seen My ROI? (part 1)”

George Washington’s Parchment Inbox???

Washington's Inbox?I have a hobby outside of obsessing about the best way to automate data entry in a claims department or underwriting process: it is collecting quotes. Most of my favorites come from the founding fathers, although I have collected ones from figures throughout history. I thought I would start out with a post that helps people understand what this site is about.

We should not look back unless it is to derive useful lessons from past errors, and for the purpose of profiting by dearly bought experience.
George Washington

You see, I have come by most of my lessons through “dearly bought experience”. The way I learn is by going through it first and understanding. Since most of my lessons where so expensive, I thought I would use them for something other than for the benefit of my customers. I would hope that I can share some of the things I have learned without my readers having to pay such a steep price.
So what of Washington’s inbox? We have all heard of the paperless office. I think I read that King George predicted the paperless office all the way back in Continue reading “George Washington’s Parchment Inbox???”