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The Nissan & IBM Outsourcing Agreement

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Introduction

In the year, prior to the turn of the millennium, Nissan was a company in a serious financial crisis. Debt had approached $22 billion by 1999. The company had been too complacent, and had taken its prior success, for granted [2].

Did Nissan’s decision to outsource their IT Infrastructure to IBM in 1999 make good sense? Nissan was a very troubled auto-manufacturer in the late 1990’s. Senior executives from the company were known for their conservative outlook on business, and their ‘old boy’s network,’ mentality. Profits were dropping dramatically, eventually forcing the company into the $22 Billion debt that it then faced. There were no signs indicating a change in the market that would encourage profit growth. The vehicle sales needed invigoration.

Mergers were the flavor of the day in the automotive industry during the late 1990’s. Nissan executives approached Daimler Chrysler and Ford to discuss a possible merger, but there was no interest from either of the companies [2]. There was only one alternative left, which was to reinvent themselves and reduce unnecessary overheads. This was the defining point that led to the business process outsourcing decision.

This paper seeks to answer the question “Does the cost of implementing an in-house solution outweigh the benefits or does Business Process Outsourcing (BPO) make more sense?” We reviewed the example of the automotive manufacturer, Nissan, when they decided to outsource their entire Information Technology department to IBM in late 1999, to answer our question.

Nissan – A brief history and the events leading up to the BPO decision

I. The Boom years

Nissan was established in Japan in 1933 as a heavy industry manufacturer. After the Second World War they turned their attention to automotive vehicles. In the 1950’s, they finally had an impact on the global market with the introduction of the Datsun branded sedans and small pickup trucks. The company eventually opened full-time operations in the USA in September 1960 [6].

The company experienced dramatic growth with the introduction of the ‘Z’ series sports sedans in the early 1970’s, with the 240Z becoming the fastest selling sports car of all time. This success led Nissan to the top of the U.S. vehicle importers market by 1975. Vehicle sales in the USA topped over 250,000 units per annum by 1970 [6]. The company was young, its leaders dynamic and the future looked very bright. They were competing for the U.S. market with the likes of Ford, Chrysler, and General Motors, showing improved quality and production efficiencies over their competitors.

The company was growing at a phenomenal rate, opening new manufacturing plants around the world on a regular basis such as Australia (1976), Spain (1980) and the United Kingdom (1984) [6]. There was no respite to the pace of growth and new business generation coming from the company.

In 1983, the company began the worldwide marketing of vehicles under the Nissan name which was felt to have a stronger quality image and started the six year transition from Datsun to Nissan on vehicles, dealerships, facilities and marketing materials. Sales continued to grow, eventually reaching 830,767 in 1985 [6]. The decade closed out with resounding success for Nissan with their domination of the North American market.

In 1993, the mid-line Stanza sedan was replaced with an all-new Altima and non-competitive Japanese-designed minivan was replaced with a new U.S. created Quest, which was the first minivan with car-like handling. Sales came roaring back in 1994 to near-peak levels of 774,405 [6].

In 1996, sales began to slip once again, fueled by a change in American vehicle tastes. Trucks and SUVs gained market share at the expense of sedans and sports cars [2]. Nissan’s position as a manufacturing driven company, which helped them in the ’80’s and early ’90’s, then had new problems with the dollar/yen balance which began to hurt their competitiveness against market driven companies.

Unlike their competitors, Toyota and Honda, which were focused on key volume segments, Nissan did not dominate any individual segment and competed in identical segments against Toyota and Honda.

Unfortunately for Nissan in the 1990s, the Japanese “bubble economy” burst, a downturn in Europe coincided, so there was more pressure in the U.S. to perform. Unfortunately U.S. customers didn’t have a genuine brand reason to shop Nissan except for the ‘best price’ deal.

Former Nissan president, Mr. Nakamura, announced a “Back-to-Basics” plan. The key elements of the plan were to reduce inventories, eliminate unrealistic sales targets, and increase dealer profitability. Unfortunately for Nakamura and Nissan, the plan did not work [2].

II. Trouble looms for the auto-manufacturer in 1990’s

In the early 1990’s, trouble began to brew in the organization. The once revered executives at Nissan were now viewed as arrogant members of the old-boys club and were ignorant to the changing needs of their customers and the overall automotive market, in general.

As the company progressed deeper into debt, it met with more challenges. Nissan’s business partners and suppliers were charging a premium for their goods and services. Nissan was obliged to meet its financial commitments and by so doing placed itself further into debt. Finally, the company was in debt to the tune of $22 billion. Even the company’s financers were tightening the noose around them. Nissan felt the situation was hopeless.

III. Steps taken to address issues

Nissan executives were looking for a way out, a way to rescue the company from entering into bankruptcy. The first approach was to find a partner. Both the newly established DaimlerChrysler and the Ford Motor company were approached, but both organizations rejected the idea of a merger [2]. Finally, Renault, the French automotive company recovering from a similar predicament, decided to enter into negotiations with the flailing Japanese company. A senior executive at Renault, Carlos Ghosn, was a huge supporter of the merger idea.

After much negotiation, the Japanese Ministry of Economy, Trade and Industry agreed to allow Renault to purchase a substantial stake in Nissan. The Nissan-Renault alliance was born and Ghosn was appointed Chief Operating Officer.

Nissans Executive decisions and major events

I. Creating a global alliance vision:

The following is excerpted from the Nissan/Renault alliance vision:

“The Renault-Nissan Alliance is a unique group of two global companies linked by cross-shareholding. They are united for performance though a coherent strategy, common goals, and principles, results-driven synergies, shared best practices. They respect and reinforce their respective identities and brands.”[2]

The Alliance set itself three objectives, with the goal of being amongst the best three automotive groups in the following areas:

1. Quality.

Achieve customer recognition as being a quality and value added product.

2. Technology.

Lead in key technology development and implementation with a focus on excellence in specific areas of the automotive business.

3. Operating Profit.

Consistently generate a high operating profit margin and vigorously pursue growth.

II. Appointing a new leader

Ghosn, given his enthusiasm for the merger, his demonstrated tenacity, and his experience of the automotive industry, was a natural choice for a senior position at Nissan. His initial appointment as Chief Operating Officer (COO) was just a temporary assignment. In 2000, he was named President and in 2001, he was appointed Chief Executive Officer (CEO).

As CEO, Ghosn was very aware that the ‘buck’ stopped with him. He was the final decision maker. Some important and very serious decisions were made to save the ailing company. Ghosn had to use all of his valuable experience gained from rescuing other organizations, such as Michelin and Renault, to save Nissan.

III. Decision making to save a troubled auto-manufacturer

With Ghosn’s arrival in Japan in the spring of 1999, he immediately set about researching Nissan’s root problems. The newly appointed COO had a management philosophy that stated “you must always start with a clean sheet of paper because the worst thing you can have is prefabricated solutions… you have to start with a zero base of thinking, cleaning everything out of your mind.”[2]

For the first few months, Ghosn flew around Japan, meeting and greeting employees at all levels, absorbing information and formulating a plan. He used this information to plot a picture of Nissan from a global perspective, identifying issues, and problems that had created the dispersed, unprofitable organization.

One of the many issues Ghosn identified was the lack of communication around the organization. Seniors managers around the world were aware of some of the issues that caused the downturn of fortune in the company. They even had solutions to them, but had lacked the necessary authority to implement or communicate the solutions back to Corporate Headquarters.

Finally, the major issues were whittled down to five key issues: [2]

• Lack of clear profit orientation. Nissan was not focused on driving profit, but were rather focused on market share and ended up having to buy their market share at the expense of the declining profits.

• Insufficiently focused on customers and too much focus on competitors. The company was too concerned about the competition introducing a new line which would have dug into the Nissan market share. For example when Volkswagen introduced their new Jetta sedan Nissan saw a significant decline in their Maxima sales.

• Lacked cross-functional, cross-border, and intra-hierarchical lines of work in the company. Nissan seemed to operate as separate islands scattered throughout the globe. There was no centralized purchasing function or in fact any of the other major business activities. The organization was not making maximum use of its global presence or buying power.

• Lack of sense of urgency. The executives in Nissan were complacent in their activities. Things had gone so well for the company in the preceding 60 years that they felt that there was no reason to embrace change.

• No shared vision or common long-term plan. Senior management within Nissan did not have a joint plan for the different brands within the company. Each division did their own thing with little or no thought for the greater good of the company. An example was the Z series that had achieved phenomenal success throughout the 1970’s and ’80’s but was suddenly dropped from production when sales dropped. The obvious thing to have been done was to test the market with a modernized design. Instead Nissan chose to ignore the market and drop the brand.

To address the issues, Ghosn announced the Nissan Revival Plan on October 18, 1999. This seven-point plan was aimed at reducing costs and debt as well as creating and launching new automotive brands to raise sales and market awareness. The goals announced in the plan were far-reaching and encompassed: [2]

• The reduction of operating costs, net debt, global head count, and vehicle assembly plants and manufacturing platforms (the latter in Japan).

• The generation of new product investment through the launch of twenty-two new models.

The cost-cutting plan called for centralization of purchasing, procurement, human resources and information technology. By centralizing these essential functions, the plan aimed to assist the company in achieving its aggressive cost reductions.

Expenditure, particularly in the information technology function, was perceived as being out of control. Ghosn’s message to senior level executives was clear, “cut costs in every possible area.” If that meant outsourcing non-core activities because somebody else could do it cheaper, then that had to be fully investigated and determined. The management was ruthless in their execution of the plan [2].

Nissan looks at Business Process Outsourcing as a means

I. Will outsourcing non-core activities save money?

There are well-documented records of company’s saving money and others of outsourcing horror stories. Success really depended on the situation and the provider.

Most experts agreed, though, that you needed to use BPO in strategic decisions, for example refocused efforts on core competencies and not merely for cost cutting activities [1]. Stephen Withers of ZDNet said in his on-line article that you should only “use BPO for strategic purposes, not to take advantage of a (possibly transient) cost saving.” Withers then asked the reader, “Does outsourcing the IT Infrastructure make sense?” To answer that question corporate Chief Information Officer’s (CIO’s) would need to have completed extensive research and have done a thorough analysis of their business processes.

This is exactly what Nissan’s CIO did, or rather what Ghosn told him to do. The company had invested over 80 billion yen (over $US760million) in 1998 on IT services, but their processes were still not providing the management with the infrastructure that would assist in building their competitive edge [5]. The final decision was made to approach various outsourcing service providers for the much needed help.

II. Does outsourcing the IT infrastructure make sense?

If Information Technology (IT) truly was a commodity, like gasoline or electricity, then companies only competed on price, with very small profit margins. In that event, the decision to turn over IT to an outsourcer was as simple as it was a century ago to turn to motor vehicles instead of using the horse and cart. However, while personal computers and the networks they run on may be standardized, the services provided by IT outsourcers vary in many ways. Services such as data analysis, application development, and IT decision-making allowed companies more competitiveness in the market therefore, those elements of IT are far from being viewed as commodities [8].

With regards the decision to outsource, many factors were considered in Nissan’s case. Ann Moynihan in her article in the Albany Business review states “Outsourcing can help you: [3]

• Reduce and control operating costs.

• Free staff to focus on core business.

• Gain access to specialized skills and technologies.

• Introduce positive change.

• Gain control over a difficult-to-manage function resulting from uneven workloads, insufficient or unskilled resources.”

With Nissan, in 1999, this was exactly what they were looking for. Refocused staff efforts, introduction of positive change and control gained in all critical areas led to the outsourcing decision.

The choice of IBM as Nissan’s outsourcing partner was a strategic one. In the late 1990’s there were not many outsourcing companies that had the breadth or the global reach that IBM had. Competitors such as EDS and CSC were not considered because they were only outsourcers and could not offer the hardware and software technology that Nissan required to update their infrastructure [5]. If either one of those competitors were selected over IBM as a partner Nissan would still have faced the same infrastructure issues. IBM was the only logical partner.

Did the relationship work between Nissan & IBM?

I. A further look at the relationship between IBM and Nissan

In a joint IBM and Nissan press release published in Tokyo on June 19, 2000, the two companies announced that they were “Extending their global partnership for information system (IS) operations which Nissan Motor Co., Ltd. and IBM agreed in October 1999, Nissan and IBM today jointly announced that Nissan will outsource its IS operations in Japan, to IBM Japan.

The service includes Nissan’s regular maintenance and operational activities as well as part of its application development, but excludes the planning and design of new systems. The two companies will start operations from October 1. [7]

In North America, Nissan has outsourced these same operations to IBM Corp. since October 1999. This latest agreement in Japan is expected to further accelerate the standardization, integration and centralization of Nissan’s IS on a global level.”

Ghosn further noted, “The Nissan Revival Plan cannot be accomplished without effective information systems. Following upon the recent agreement with Japan Telecom, this latest partnership with IBM puts in place the global infrastructure which is key to support Nissan’s long term profitable growth.” [4]

II. Hypothetical view of the Return-on-Investment model used

Before they could calculate their Return on Investment (ROI), Nissan first had to look at the Total Cost of Ownership model proposed by IBM. Total Cost of Ownership (TCO) is a type of calculation designed to help consumers and enterprise managers assess both direct and indirect costs and benefits related to the purchase of any IT component. The intention was to arrive at a final figure that will reflect the effective cost of purchase, overall [8].

The TCO model used, had to calculate the costs that were required, beyond the fees of outsourcing. The organization had to evaluate specific criteria’s that could have added expense to the outsourcing project. They also had to calculate the ongoing expenses throughout the lifetime of the contract [8].

Then, after calculating the payback period, Nissan were in a position to calculate their ROI. Once the numbers were crunched, a thorough financial and risk analysis was conducted. The ROI measured the profit or cost savings realized. It was calculated by estimating, for a 3-year period, the investment was made and the resulting profit created through that investment.

The results were conclusive. Nissan and IBM entered into their agreement and operations scheduled to commence on October 1, 1999.

Conclusion

I. Did Nissan’s BPO reach its stated objective?

Nissan’s stated objective for the outsourcing of the IT infrastructure was to control expenditure, improve efficiencies, and update the infrastructure. By outsourcing to IBM, Nissan achieved all of its goals.

In controlling expenditure, outsourcing gave companies the opportunity to have a predictable monthly budget for expenditure. That amount may or may not have been lower than current expenditures but the component that was crucial to a large organization such as Nissan was that the amount is predictable. There was no variable component to the pricing. The only time the pricing may have fluctuated was when additional services, which were out of scope of the contract, were required.

In Nissan’s case, that was never a requirement. The company was in the first stage of a major, global, restructuring project and there were no new initiatives taking place.

The second objective in the BPO was to improve efficiencies. IBM is the world’s largest information technology company with revenues close to $100 billion [9]. When companies outsource their operations to IBM they are gaining best-of-breed technologies, excellent consultants and some of the best systems architects money can buy.

The way that any global outsourcer makes its money is by achieving economies of scale. The only way to achieve these economies of scale is to ensure that they deploy the best hardware, software, and infrastructure possible and make that equipment work to maximum efficiencies. By taking full advantage of this best-of-breed technology, Nissan met its second and third stated objectives.

II. What if the IT Infrastructure had been retained in-house?

If Nissan had decided to retain its IT infrastructure in-house and attempted to implement an updated and modernized system, it would have lead to a significant increase in their expenditure. Ghosn’s prime objective, when he took over the company in 1999, was to reduce expenditure by 700 billion Yen [2]. He was not interested in spending any additional money to modernize existing equipment.

To support the intended improvement in competitiveness, Nissan had to ensure that their infrastructure supported the additional workload. There was no way they could do the intended improvement in efficiencies without external support. Nissan did not have the expertise and the additional work force to handle the required upgrades and the reengineering of business processes.

III. Final assessment and summation of the relationship

Robert Greenberg, Nissan’s CIO of North America was on record as saying in 2006 that, “We were happy with the services from IBM but the world had changed.” This comment sums up the relationship as it stands now, almost 8 years later [5]. When Nissan announced its Revival Plan, in 1999, the company had very clear objectives; cut costs, and return to profitability.

Nissan was looking for help in 1999 and IBM fulfilled this role for their IT Infrastructure. Greenberg also stated in his Q&A that “One of the things that also took place with the original outsourcing to IBM was we probably outsourced too much.” [5]

Greenberg was not working for Nissan when the original outsourcing decision was made in 1999; he only joined the company in 2005. He is on record though as saying that he thought that they should have either retained some of the infrastructure in-house or perhaps have multi-sourced, thereby ensuring that they had the best possible solution and price.

In 2006, when the contract came up for renewal, the CIO decided to put everything out to bid and compare what the other vendors were offering with what IBM had provided for so many years. The decision to look at new vendors was actually excellent timing for the company as Nissan had decided to relocate their North American corporate headquarters from Los Angeles, CA to Nashville, TN and any transition could be timed to coincide with the move.

Ultimately, what Greenberg opted to do was to accept IBM’s proposal to “manage desktop systems, network services, help desks, dealer systems, and other key infrastructure elements for Nissan North America.” He then outsourced the application and maintenance to an Indian firm, Satyam and brought the remainder of the services back in-house [5].

When asked about the decision to bring IT back in-house, Greenberg said, “By bringing it in-house you increase the alignment. It’s a matter of building the knowledge internally [that] can be used to help drive the business activity, which is much harder when a business analyst function is sitting within a third party.” [5]

IV. Does the cost of implementing an in-house solution outweigh the benefits or does BPO make more sense?

As Stephen Withers stated in his article, BPO decisions should not be made for cost-cutting exercises but rather for strategic directions [1]. In other words, companies should not view BPO as a cost saving tool. Outsourcing the IT operation makes sense when an organization is looking to improve efficiencies and business processes or when they cannot attract, or retain, the human capital who have the expertise and ability to modernize or improve the infrastructure.

Nissan’s CIO Robert Greenberg thought that he would actually save money by bringing some of the work back in-house because he was “not paying margin on the individual [headcount].” [5]

Some of the individual lessons that Nissan’s Greenberg has learnt from the outsourcing agreement with IBM has been that certain services developed by the IT organization can indeed be outsourced or developed externally. However, he felt strongly about retaining in-house IT skills in such value generation areas as business analysts who have a strong understanding of the business, sometimes even better than the business customer does. Insourcing these skills could result in ideas and dialog with the business, with the end result being a service delivery or product development than can then be outsourced.

In summary, the answer to the question, ‘Does the cost of implementing an in-house solution outweigh the benefits or does Business Process Outsourcing make more sense?’ is that it depends. It depends on the available skills; it depends on the overall objectives (cost saving vs. process improvement) and it depends on the organization. For the most part the majority of major corporations world wide that have been through an outsourcing contract or are in an outsourcing contract will agree that there are substantial benefits to implementing an outsourcing contract and there substantial benefits in retaining those skills in-house. What each organization needs to do is ascertain which of those benefits outweigh the other and base their decision on that analysis.

Works Cited

[1] Withers, Stephen. “BPO: Save money or fix your processes?” ZDNet.com

[http://www.zdnet.com.au/insight/business/soa/BPO-Save-money-or-fix-your-processes-/0],139023749,139156391-10,00.htm 17 August 2004. Downloaded October 22, 2007

[2] Magee, David. Turn Around: How Carlos Ghosn rescued Nissan. New York: HarperCollins Publishers Inc, 2003.

[3] Moynihan, Ann. “Outsourcing enables owner to focus on core business.” http://www.bizjournals.com/albany/stories/2002/10/14/focus10.html October 11, 2002. Downloaded October 22, 2007

[4] IBM Press room press releases. IBM.com “Extending Their Global Partnership, Nissan, and IBM Announce IS Outsourcing for Japan” http://www-03.ibm.com/press/us/en/pressrelease/1670.wss June 19, 2000. Downloaded October 19, 2007

[5] Thibodeau, Patrick. “Q&A: Nissan CIO reshapes automaker’s IT”

[http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=110024&intsrc=industry_list] March 29, 2006. Downloaded October 23, 2007

[7] McDougall, Paul. “IBM, Nissan Outsourcing Deal Spans The Globe” http://www.informationweek.com/outsourcing/showArticle.jhtml?articleID=181502685 March 10, 2006 10:00 AM. Downloaded November 02, 2007

[8] Ikin, Paul. IBM Representative on Nissan Global team. 1998 to 2001.

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Top 10 Tips For Beginners And Veterans – Escape From Tarkov

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Top 10 Tips For Beginners And Veterans - Escape From Tarkov

New at the legendary Escape from Tarkov? Or have you been playing it for quite a while now? In either case, a little help never hurts.

You might be unfamiliar with specific tactics that could enhance your game and make you better. But what are those? To know more about these ways to ace your game, visit Battlelog. Escape from Tarkov hack from their team is the best way to master the game. Plus, we also have these 10 tips and tricks for EFT below that you can check out!

1.  Master Maps One-by-One

Being a trader of all crafts and master of none never benefited anyone. And if you do that with Escape from Tarkov, you’ll never improve your skill. As a beginner, try not to divert your attention to various maps unless you’ve mastered one or two.

When you start playing EFT, begin by trying maps like Customs and Interchange. These maps aren’t too tricky and familiarize you well with the game. Once you’ve mastered them, move on to improving your fighting skills. But remember, learning maps one by one is the best way to become an expert.

2.  Pro-tip: Practice Offline

You’re an EFT pro, but that doesn’t mean you don’t need practicing occasionally. In fact, the more you practice, the better you’ll become. But practicing in the online mode isn’t a wise option. Because you will keep losing health and spend your money unnecessarily.

So to practice, switch to offline mode. It’s the best way to learn how to fight Scavs well, how the maps work, and where extraction points are located. Keep polishing up your skills in the offline mode.

3.  Insurance Works in EFT too

Insurance isn’t just for your car and home anymore. In EFT, you can insure your weapons and belongings. This doesn’t mean that if the enemy loots you, you’ll get compensation for them. But it’s still advantageous because it often lets you have your weapons even after you die.

If you’re an experienced player, insuring your weapons is even better. If the enemy who loots it from you later dies, you can claim your weapons back. This way, you don’t lose those precious guns and rifles after a challenging game.

4.  Be Careful After Killing

You might be tempted to loot an enemy as soon as he dies. Even experienced players often do it. But this isn’t always a wise move.

When you kill someone, there might be some other enemy lurking around. And in your fit to loot the dead, you might not even pay attention to the enemy who’s hiding nearby. So after you kill, wait for a little to see if anyone surfaces or makes a sound. If you feel like the territory is safe, proceed to loot and move on.

5.  Be a SCAV friend when playing as a SCAV

Escape from Tarkov often lets you play as a SCAV. When you do, you don’t have weapons of your own. But you also don’t carry any liabilities. So even if you die in the game, you won’t lose essential weapons.

But here’s something every pro player knows that a beginner should too. As a SCAV, you shouldn’t attack other SCAVs. But why? Isn’t that foolish? Well, not really. In fact, doing that will attract negative attention to you and make the game difficult.

6.  Complete Quests – Lots of Them

Completing quests in a shooting game might sound lame to you. But it is an excellent way to gain experience and some other perks.

In Escape from Tarkov, you can complete various quests to get rewards and gear. Of course, some quests don’t reward you as much, and the items they grant aren’t helpful. But you can always trade them or sell them to stock up on weapons. Use the Flea Market for trading such goods.

7.  Go to Dorms

This tip isn’t really for beginners. But for experienced players, it makes the game thrilling and more rewarding.

Dorms are a dangerous location because they often contain the best loot in EFT. They are also home to the SCAV boss, and many players frequent this place looking for loots. But when you’re feeling up to it, raid a dorm to get the best loot possible.

8.  Switch between passive and aggressive style

This rule works for any combat game, but for EFT, it does wonders. As a player, you should have enough instincts to know when to play passively and go aggressive.

As a rule of thumb, be as passive as possible unless you’re faced with an opponent. Move around sneakily and make as little sound as possible. But once you’re in a fight, don’t shy away from landing a few hard blows of your own.

9.  Have a CMS Kit

In Escape from Tarkov, it will be too difficult to win if your limbs are dead or wounded. You have to reach an extraction point without your feet working properly. But recently, the makers added a surgical kit called the CMS to the game.

With the CMS kit, you can get your limbs healed quickly. It is a significant investment, and whenever you plan to go for combat, keep this one handy.

10.Know Your Sounds

EFT has an excellent sound mechanism. You can hear your enemies, and they can listen to you. In fact, everything from aiming a gun to moving makes a sound. So you have to be highly conscious.

While trying to ambush or kill someone, aim at them from as far as possible. This way, there’s little chance of them hearing you. Similarly, move stealthily to make fewer sounds. And no matter what, pay attention to enemy sounds too.

Conclusion

Whether you’re an expert veteran or a newbie at the game, you will benefit aplenty from these 10 EFT tips. Comment down below which one helped you the most in your game.

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Work Breakdown Structure and Outsourcing

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Every outsourcing project should create and make a WBS available to all its outsourcing staff. What is a WBS and how can it help you manage your outsourcing project? All projects consist of small tasks and quality control procedures. A Work Breakdown Structure (WBS) breaks down all the tasks that must be performed on the project and estimates timing and resources for each task as well as the order the tasks should be done in. It pays to have a clear and effective WBS in all your outsourcing projects.

An effective Work Breakdown Structure starts with high level activities (these may be your milestones) and breaks these activities down into lower and lower levels until you’ve covered every conceivable step in the process. Before you ever begin work on a project, also confirm with your outsource staff that they understand the overview and the individual components of your WBS and give them the opportunity to ask questions. It is never helpful to assume that they have it all under control. It is preferable that if any questions or problems arise they do so before the project has even started.

An example of a WBS is if one of your milestones is submission of the first draft of chapter one of a book someone is ghostwriting for you. You would then break that down into its smaller steps, like research, outlining, and writing. These steps would then, in turn, be broken down into even smaller steps, like types of research, verification of facts, and so on.

For each low-level task, estimate time needed for completion, start and end dates, human resources required, and in what order each task should be completed. Obviously, facts can’t be verified until the research is done but you get the gist.

If you have the knowledge and background to begin a WBS during the planning stages for your project, please do so. Regardless of whether or not you’ve already started the WBS, work with your provider to nail down the details and finalize the breakdown.

A well thought out Work Breakdown Structure is of immense help to any project, small or large. It enables your freelance staff to work with confidence and it enables you to know that your outsourcers can carry out the work competently. A good Work breakdown Structure will also minimize hiccups, saving time, money and energy.

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Potential Cost Savings Associated With Legal Outsourcing

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“How much can I save?” “What is the cost of legal work done offshore?” “Please give me a quote for 100 hours per month for legal work done in India.” “What is your hourly rate?” “How much do you charge for ______?” These are the questions and requests directed my way at the beginning of conversation when someone contacts me about sending certain legal tasks offshore for completion.

Regularly I advise potential clients that the first question to be asked, either of a lawyer or someone potentially assisting in the outsourcing of a legal project, is not “how much?” Instead, at the outset, determination should be made whether those who would work on the project have the skills, training and experience to complete the assignment(s) in a quality fashion. This necessarily involves a clear delineation of the proposed undertaking and the expectations of the outsourcer. Further, what are the assurances of confidentiality? Can the time deadline for completion be met? What about conflicts of interest? These questions should be asked of every U.S. lawyer whose services might be retained. Likewise, they should be asked of every person or entity involved in outsourcing legal assignments. It should be noted that offshore lawyers are not licensed in the U.S. and do not provide “legal services” or advice. Foreign attorneys, working offshore, complete assignments under the supervision and review of qualified U.S. attorneys in generally the same manner as paralegals, summer law clerks or junior associates in the U.S. Indeed, the Code of Professional Conduct requires such supervision.

Cost savings achievable from outsourcing, however, seems to be the burning issue of the day. Large law firms, in particular, are looking for ways of cutting costs to maintain profitability or to even survive in challenging economic times. Dan DiPietro, client head of Law Firm Group of the Citi Private Bank, offered Storm Warnings (American Lawyer, Dec 2007) in observing “for the first time since 2001, expense growth actually outpaced that of revenue from January through June, depressing profit margins.” Sounding an ominous note, DiPietro observed that the biggest expense increases were in associate salaries and in occupancy and technology costs. His warning proved prophetic, as a number of old-line law firms closed their doors in 2008 including Heller Ehrman, Thelen LLP, and Thacher, Proffitt & Wood. Other large law firms are reducing staff and lawyers, including de-equitizing partners. Corporate clients are cutting the number of outside firms they engage, while pushing them to become more efficient. It is becoming increasingly apparent that difficult decisions are on the horizon for many law firms and their clients. Law firms want to retain their rainmakers, secure the best legal talent available and keep their profits per partner high. Clients want their overall costs for outside counsel reduced. How will these issues be addressed, particularly in a difficult economic climate? Outsourcing is one way of potentially confronting the challenges. Thus, the question, how much can I save?

Assuming the proper initial inquires have been made and adequately addressed, what are the cost savings reasonably attainable by an outsourcing U.S. law firm and its clients? Answering that question necessarily involves a comparative analysis of revenue and expenses. Suppose a large U.S. law firm wishes to consider outsourcing work that might otherwise be performed by one U.S. associate working exclusively for one of the law firm’s corporate clients. The junior associate bills 2000 hours annually at the lawyer’s hourly billable rate of $200.00, for a total annual cost to the corporate client (and income to the law firm) of $400,000. The law firm’s expenses chargeable against the income produced by its associate include the lawyer’s base salary ($160,000) and bonus (say $20,000) plus the associate’s share of overhead expenses for occupancy, support staff, benefits, marketing, recruitment, technology and other expenses. In its 2006 survey, Altman Weil, the well-regarded legal consulting firm, estimated average annual law firm expense per lawyer at $161,893. (Doubtless those expenses have increased since 2006, but, for the purposes of conservatism, we will use Altman’s 2006 number in our example.) Altman’s breakdown included promotion ($7,136), reference ($4,655), equipment ($9,299), occupancy ($25,879), staff ($55,147), paralegal ($17,911) and “other”($41,866). In the Altman survey, “other” includes malpractice insurance premiums and settlements, payments to former partners, recruiting costs, and other expenses not shown separately. Adding the associate’s share of expenses ($161,893) to the associate’s total earnings ($180,000) it is apparent that it costs the law firm a total of $341,893 to produce $400,000 in associate income. Let’s call it a $60,000 law firm profit attributable to the associate’s efforts. Put in other terms, it costs the law firm $171 per billable hour of the associate’s time to produce $60,000 of profit.

Now, assume the same 2000 hours were produced offshore at a cost of, say, $75 per hour instead of $171 per hour. (Higher end outsourced work such as legal research or writing might cost in the range of $75.00 per hour, while other kinds of work such as document review would likely be less. For purposes of our analysis, we estimate the overall offshore costs toward the higher end.) The actual cost to the law firm for 2000 offshore hours at $75 per hour would be $150,000 instead of $341,892. Further, the law firm’s client could be billed, say $240,000, for this work instead of $400,000. (Recent bar association ethics advisory opinions allow for a reasonable supervisory fee by the law firm, providing the client is advised of the off shoring and the Code of Professional Conduct, particularly Rule 1.5, is followed). The client would happily achieve a savings of 40%, while the law firm’s profit would also likely increase. Moreover, the law firm would require fewer associates at the ever-escalating salary structure (now starting at $160,000 base) for lawyers from top tier law schools. Because of overall lower costs and a fewer number of new associate hires, the firm would be able to more effectively compete for a reduced number of premier U.S. attorneys it decides to hire. Over time, partner equity and distributions would be shared with a fewer number of individuals. Thus, an outsourcing program for selected legal assignments, carefully implemented and supervised, can potentially result in greater client satisfaction and retention as well as enhanced law firm profitability.

In 2007 Mayer Brown, a 1500 lawyer Chicago based law firm, purged 45 equity partners. While denying any sort of crisis, James Holzhauer, chairman of the firm, commented on the move: “It’s necessary to manage a law firm like you manage any kind of big business and make sure you have the right staffing going forward.” Outsourcing, seen by some law firms as the enemy of law firm profits, may in fact be the opposite. Without doubt, even if some law firms are reluctant to change the traditional ways, their clients are not. In August of 2007 Bloomberg.com observed that “clients are pushing firms like Jones Day and Kirkland & Ellis to send basic legal tasks to India.” It is significant that this “push” came well before the global financial collapse of the last quarter of 2008. Regarding law firms, Holzhauer cautioned in March of 2007: “This (law business) is to a certain extent a fragile business. Our greatest asset is our people. If you’re not economically strong so that you can retain your best people and attract other strong people from elsewhere, a fragile business can have problems.”

Corporate clients are on a mission to reduce legal costs. Some of those clients would prefer to supervise the outsourced work in house, while others apparently are content with their chosen outside U.S. counsel overseeing the offshore work. Irrespective, legal outsourcing is on the table for consideration of cost control. “How much can I save?” is a question being asked by those who, a few short years ago, never imagined entertaining the concept of legal assignments being completed offshore.

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ICT Outsourcing Definitions and Types

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ICT outsourcing can be said as one of the current trends for companies around the world to do their business processes. It is estimated that ICT outsourcing starts in the early 1990s where Kodak uses external partner to handle its ICT resources. As Kodak does not have the expertise in ICT, they hire another company to help them handle the ICT resources. This phenomenon occurs because companies would like to concentrate their core business functions among other benefits. After merely 20 years, outsourcing is now needed by a lot of companies mostly at customer support and also back-office processes and this affects Malaysia as well. Currently, Malaysia is known as a main outsourcing hub for the world, where it is currently ranked third globally behind China and India in the outsourcing industry. This shows how significant outsourcing is to developing countries in Asia.

Outsourcing Definition

Outsourcing is defined as a concept of contracting out part of the organization’s business process to a third party that has the specific skills and services. The third party must have the skills needed by the organization so that the outcome of the outsourced job is as expected. Outsourcing can also be explained as the movement of one or many business functions of a company including its assets to an outside service provider who gives a defined service for an agreed duration of time and payment on a written agreement.

From these two definitions, we can see that outsourcing can be defined with the following characteristics:

1. A company transferring one or many business process to a third party.

2. A third party has the skills and services required for the business process.

3. Has an agreement or contract between the two parties on the price and expected outcome.

Types of Outsourcing

Outsourcing can be separated into two types, namely total outsourcing and selective outsourcing.

The first one is total outsourcing, where the IT budget being used to pay the external vendors is approximately 80% or more than the total. For outsourcing activities that only took less than 80% from the total IT budget, it will be called as selective outsourcing. It is named as ‘selective’ because the company will select only one or several IT functions to be outsourced to a third party.

Aside from these two main outsourcing types, there are also other types of outsourcing that are usually the sub-division from these two main types like insourcing and transitional outsourcing.

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Medical Transcription Outsourcing – The Great Advantages

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If you haven’t started outsourcing your medical transcription work, it may be time you start considering this option. This process includes taken information that is dictated and putting it into a text format so the information can be put into records for patients. You’ll actually find that there are many advantages to going with medical transcription outsourcing. Here is a look at a few of these advantages that your medical facility will appreciate.

One of the main advantages to going with medical transcription outsourcing is the time that you will save. There are many types of reports that must be done in clinics and hospitals, such as consultation notes, discharge summaries, physical reports, lab reports, and more. Having to take care of these files on your own can take a lot of time. Instead of doing this in-house, you can simply send files to a transcription company and once they are transcribed they can be sent back via the web. Outsourcing gives medical facilities the ability to focus more on core activities that are important, such as patient care.

High end security is yet another of the benefits of going with medical transcription. When you send these files to the company, they are sent securely on the web. Then they are transcribed into a format like HTML, ASCII forma, MS Word, or other formats. Then the files are going to be returned through a process that is password protected so only those who are authorized are able to access these files.

When you choose a company to take care of this for you, you can be assured that the transcriptionists working on your projects are highly skilled in the profession and they have a good understanding of the rules for producing these records. Transcriptionists that understand the terminology helps to ensure that your reports are done error free.

Of course, the cost is definitely a big advantage that you’ll enjoy when you go with medical transcription outsourcing. There are many companies that provide you with low cost outsourcing, which can save your medical facility a lot of money. Instead of trying to take care of transcription within your facility, hiring the work out can save money and ensure you get your records completed as quickly as possible.

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How to Succeed With Business Process Outsourcing (BPO)?

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As outsourcing becomes an indispensable part of corporate business strategy, especially during economic downturns, BPO (Business Process Outsourcing) has emerged as an important driver of IT Enabled Services. In very recent years, it has progressed from being considered for limited peripheral activities to encompassing very critical business activities that contribute to strategic advantage.

Though traditionally cost reduction has been the key driver for all outsourcing activities, other drivers such as speed of development, flexibility, expert skills and political maneuvering are equally important, if not more.

To succeed with Business Process Outsourcing (BPO), you must first research and determine if outsourcing should be pursued at all – an initial understanding of the expected size and nature of the deal is a must at this stage. This phase is known as the Assess phase as the involved parties try and establish senior stakeholder expectations at this stage. At the end of this phase, stakeholders should have clarity on the expected benefits, costs and risks of the potential engagement.

Next comes the Prepare phase which encompasses the vendor selection process. More often than not, organisations roll out RFPs (Request for Proposal) documents to find the right outsourcing partner. Fundamental elements of all other phases are defined and agreed upon in this Phase.

Evaluate phase is the third stage of the outsourcing lifecycle and it focuses on structured and thorough evaluation of the proposals received from vendors. At the end of this phase, you should be able to negotiate with selected vendors.

This phase paves the way for the Commit phase which is essentially the pre-contract stage. The Commit phase is by far the most resource intensive and commercially crucial phase as the deal design is finalized and the transition plan is developed in this phase.

Next comes phase 5 which is the Transition and Transform phase. In this phase, a robust transition plan is implemented. In addition, a reporting mechanism is also brought in place at this stage of the outsourcing lifecycle.

The Optimise phase, which comes next, focuses on managing the vendor relationship efficiently, tracking the vendor fees against the original proposal and monitoring contractual obligations. In principal, this phase is an ongoing one until the contract is renewed, renegotiated or exited.

When implemented properly, outsourcing contracts are likely to bestow immense benefits on organisations. No wonder that BPO is seen as a disruptive force that has huge impact on the cost-structure of nearly any industry and that is why it is not easy for organisations to ignore it. The hype around BPO may subside soon, but the business advantages that come with it are here to say as it enables many enterprises to succeed.

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Payroll Outsourcing

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Payroll outsourcing is a very common and growing practice these days. Payroll is an important business function that deals with the process of paying employees for services rendered. Payroll outsourcing can be defined as the accomplishment of a payroll task by some external agency. There are many reasons why companies outsource payroll, but the most prominent benefit lies in the fact that it often saves money. Basic payroll outsourcing services include calculating paycheck and tax obligations for each employee, printing and delivering checks, and providing management reports.

Every business owner knows that handling payroll can be a headache. Preparing payroll internally can cost valuable hours of employee time every pay period, and require expensive accounting software and training. Besides, the person handling payroll of an organization internally needs to keep up to date with changes in personnel, deadlines, and tax requirements on an ongoing basis. Payroll outsourcing is an affordable way to take away these burdens, because it is a time-saving and cost-effective alternative to internal payroll processing.

Payroll actually commences with the worker signing up with a company. A typical payroll report contains items such as gross hourly wages and gross salaries, bonus payments including stock given as a bonus, overtime pay, severance pay, per diem and travel allowance, and contributions to deferred compensation by employees.

Today, payroll outsourcing is a vital part of an organization’s payroll and benefits functions. This will improve employee satisfaction and enable the organization to focus its assets on mission-critical areas. The market for payroll outsourcing services is competitive and there are a number of key points, such as speed, accuracy and ease of use, to consider when opting to use a payroll company.

Though payroll outsourcing may prove highly valuable for many organizations, it also has many drawbacks. It is essential that every company precisely assess its requirements to determine if outsourcing is a feasible alternative.

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Why Hire an SEO Content Outsourcing Firm?

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Every small and big company has a website today. A website has all the information about the products and services a specific company has to offer. Websites make the selection process easy for the customers. But what if the customers are not able to access or find the website? This can ruin the company’s business, bringing in losses. Exposure can really help a company sail through.

There are some major elements which can be added to a website to make it more popular, user-friendly and search engine friendly. These elements include the right animation, pictures, colors and content. Content is one of the most important elements of a website. SEO based content can bring in amazing results. A good SEO content outsourcing firm can help you earn more money. Along with this, it can:

· Help in search engine optimization of your website

The search engine optimization process depends on the website’s content to a great extent. An SEO content outsourcing firm can make your website’s content rich and interesting. Along with this, its experts put a lot of relevant content in the website to make it search engine friendly. SEO content writing also includes producing keyword rich content which helps in the link building campaigns. The usage of latest keywords related to your products and services can help search engines read your website’s content more often. This will make the search engines display your company’s website in the first few search results when a user types in a related keyword.

· Help in link building campaigns

The SEO content writing firms offer an array of services today. These services include SEO content writing as well as article writing. The latter basically helps a website get more exposure. The articles written by the experts of these companies are submitted on various article submission websites. This helps in the process of your website’s link building. Article writing services can help your website receive more traffic which can ultimately help you get more customers.

· Help people to know your company better

A good SEO content outsourcing firm can help people understand your company better. The website content and company related articles can be used to express your mission and vision. You can even use these platforms to share the background of your company. All these things may help the customers connect with your company.

SEO content writing and article writing services can help you earn people’s trust. They can bring in huge traffic, high conversion rate and many other benefits. You can use these services to set up your company’s rapport and to make it even more popular internationally. So, hire an established SEO content outsourcing company and gear up to earn the profits!

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Things to Consider When Outsourcing Support Functions of Your Organization

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Outsourcing is defined as hiring a third party provider to take care of certain non-core areas of business like technical support and customer care support. By outsourcing support functions of a company, one can save on a lot of skilled manpower that can be used to develop core areas like business development while at the same time cutting costs by outsourcing without compromising on the standards of excellence of the company. Technical support and customer care support are the two main areas where large companies or even relatively new startups outsource.

Usually, technical or IT support is outsourced to other countries to cut costs. This can prove beneficial to the company in the perspective of a long term contract. But at the same time, this requires a lot of careful planning and research. Some of the main points to be bare in mind while outsourcing these tasks are outlined briefly below.

In the extremely competitive business environment of today’s world, outsourcing supportt especially customer support is a crucial factor in determining the position of a company among its peers. While outsourcing customer support services to a service provider, one should always research the credentials and client history of the company. This gives a fair idea of the company’s standing and what you can expect from it. Also, one needs to determine whether the company holds regular accent training classes to make its employees familiar with the language they are required to speak in.

Outsourcing support of the technical kind is a very lucrative option for companies since many countries offer highly skilled technical expertise which can be utilized to further the company’s prospects in a global environment. But you should always do a thorough background search on the level of competence in technical areas of a business and the best way to do it is to visit the place personally and get a first hand account of the way things are done. Also, one can ask the service providers to complete a few projects on a trial basis and a fair judgement of the service can be done to analyze their potential.

Before outsourcing support of any business process the first factor to be considered is whether it is a viable option for the company. Sometimes, certain companies spend more on outsourcing than on the core areas of the business like business development. A detailed analysis of the company should be done and after considering the various risk factors and the benefits, a final decision should be taken in the light of the company’s future plans.

Another point to be taken into account is the commitment of the service provider in executing the projects in time. There is a difference in the time between any two countries which could lead to a lot of confusion in the setting of the deadlines. The company should have a strict policy in case of assignments submitted late or projects not done satisfactorily. If all factors are kept in mind, then the company can have a very lucrative future due to outsourcing support.

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TPF Outsourcing – What Does It Mean And Why Are More Businesses Doing It

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When was the last time that your made a major purchase or even a small purchase for that matter? Do you remember what took up most of the businesses actual man hour time when you made the purchase? If you stop to think about for a moment, it was when you were completing the transaction or paying for what you were purchasing that occupied the most amount of time of the person or business that you were dealing with.

TPF – Transaction Processing Facility

TPF stands for “transaction processing facility” and this, in simple terms means anywhere in a business where the actual money and paper work is changing hands. This, in most businesses that you visit on a daily basis would be the main focal point of their operation many times. It is the “front office” or the “check out counter”.

It All Makes perfect Sense

TPF outsourcing is the means by which a business hands the responsibilities of this mundane task to a source that is outside of the main business operation. If you stop to think about it, it makes perfect sense, because once a customer or client has made the decision to patronize an establishment, the job of the business should then shift to finding more customers or clients and also servicing the customers or clients that are active.

TPF Outsourcing for the Travel Industry

The travel industry is one area where TPF outsourcing has began to take hold in a big way for a number of reasons. One of the big reasons this is so, is because unlike other business where the customer or client leaves after they have made a purchase. In the travel industry the client has to be dealt with after the purchase is made. In simple terms TPF outsourcing in the travel industry frees up the businesses to fly the planes instead of manning the ticket counters.

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