For many organizations, the most critical products are the documents sent to customers. For financial services, it's the statement or trade confirmation. For utilities and telecommunications, it's the invoice or billing statement. For insurance companies, it's the policy or EOB. These documents have broadened in definition in the past five years, initially limited to paper, more recently expanded to multiple and various electronic media. Regardless of the channel, your organization has limited touch points with your best, most profitable customers. And firms that have traditionally managed this process internally are reluctant to surrender control.
By developing a comprehensive document strategy, organizations can remove the guesswork and anxiety of migrating applications to external service providers. Outsourcing has always been an option, but one typically relegated to the small to midsized organizations that lack the volume to create the economies of scale needed to support internal operations. Serving those markets, outsourcing vendors were slow to adopt new technology and industry best practices as the customer base didn't demand it. In addition, most organizations aggressively shopped output solutions to the low-cost provider, again straining the ability of vendors to expand capabilities or offerings.
The Changing Face of Document Outsourcing
But things have changed. As the complexities of document processing have increased, so have the desires to move this once straightforward process out of house. With the boom in the application services provider (ASP) model as applied to documents, outsource vendors quickly identified a need for value-added services. These services were perhaps uneconomical when viewed internally by organizations, but by spreading costs across a larger customer base, unit costs became reasonable for everyone. Consider the many benefits that outsourcing provides:
Lower total cost of ownership Bundling multiple services, such as document composition development and support with out-mail services, can bring the total cost per unit down. But beware, the amount of enhancement activity and the number of additional applications directly affect the cost variable and can quickly raise unit costs.
Reduced internal resource requirement By not supporting the entire application internally, fewer in-house resources are required to deliver customer correspondence. This includes staff, software and hardware in addition to physical space and subsequent supporting requirements.
Reduced technology obsolescence There is the potential for outsourced activity to yield a competitive advantage by allowing the vendor to remain current on technology. Outsourcers have the luxury of spreading the capital requirements over numerous clients, thereby reducing the individual technology burden on any given client or application. This advantage can be difficult for small to midsized organizations to realize, given application volumes.
Not a core competency While organizations may claim customer communication or customer service as a core competency, it is specifically the document design, function and presentation of information that are competitive advantages; the actual document production is not. The manufacturing process, like other physical manufacturing processes, is a skill set developed over time through experimentation, error, testing and thousands of production scenarios that are not easily transferable.
Reduced process risk While business risk can increase with the incremental dependency on a vendor, process risk can be reduced. Although most organizations have basic backup and redundancy capabilities, most have ineffective processes or lack necessary redundancy to handle these applications in adequate volumes or timeframes. Outsourcers understand the criticality of business process interruption and are obligated to have multiple resolutions and options.
Guaranteed production delivery times With the adoption and strict monitoring of service level agreements (
Systems integration and consulting Vendors provide these services to assist in the development and implementation of applications. By leveraging the vendor resources, organizations will reduce the need to develop or acquire these assets internally.
Backup and recovery Application development and maintenance performed by outsourcers provide another layer of external disaster recovery (DR). In most organizations, a disaster does not impede the ability to conduct business (i.e., to produce customer documents). If performed internally, document production would follow standard DR procedures, albeit these applications would potentially yield to higher-priority applications, possibly delaying delivery to the customer. Vendors must have documented DR plans and should, at a minimum, test them yearly.
Outsourcing Payback
The value of outsourcing is measurable. We recently assisted the transactional printing and mail-processing operation of a major financial services firm assess its outsourcing needs, identify its key requirements and select a technology vendor. With the recommended vendor, the brokerage house expects to cut its unit cost by 45% and eliminate millions of fixed capital costs. In addition, the financial services firm expects better performance and faster delivery to customers, including electronic channels, at a reduced annual expenditure.
Strategy Before Implementation
The first step in outsourcing is to define your organization's overall enterprise document strategy. As a key component of your strategy, the vendor that you choose must be able to seamlessly integrate into your existing infrastructure and provide all the necessary feedback, including reports, index files and viewing files, to support any internal or external document-viewing applications.
For example, an outsourcer may create monthly statements in paper form for mail distribution, but it may also create electronic versions for email distribution or Internet posting to support electronic viewing and payment. The outsource vendor can track each item to ensure it successfully reaches its final destination whether an outbound mailing, an email server or a Web server. Therefore, make sure that the vendor technologies you choose can support your output and distribution options.
You'll also need a contingency strategy. Outsource contingency strategies vary from internal recovery scenarios to secondary or multiple vendor options. For small volume applications, an internal contingency may fit the bill, while larger applications might require separate vendor participation in the event of a disaster. Ideally, the outsource vendor should have internal fail over and operational redundancy, preferably part of its infrastructure.
Finally, your organization will need a management structure to monitor the vendor relationship. Although your organization may not produce the physical communication, the final responsibility continues to rest with the organization. By creating a partnership with the outsource vendor, hostile or problematic situations can be avoided. Constant monitoring and feedback will ensure a beneficial relationship.
Options for Outsourcing Success
Today, a number of vendors offer outsourcing solutions. Offering sophisticated end-to-end hardware and software solutions are major mail insertion equipment vendors such as Xerox and Pitney Bowes. Other traditional vendors, such as Automatic Data Processing (ADP), Affiliated Computer Services, Inc (ACS), Output Technology Solutions (OTS), Moore and Lason, focus their attention on integrating with best-of-breed solutions to create comprehensive offerings.
Affiliated Computer Services, Inc. provides a full range of information technology services to clients including technology out-sourcing, business process outsourcing and systems integration services. Within the commercial sector, the company provides business process outsourcing, systems integration services and technology outsourcing to a variety of clients nationwide including retailers, local municipalities, state agencies, health care providers, telecommunications companies, wholesale distributors, manufacturers and utilities, financial institutions and insurance companies.
Automatic Data Processing offers a broad spectrum of technology-based outsourcing solutions through four large businesses: employer services, brokerage services, dealer services and claims services. ADP's solutions transform routine mailings (for example, statements and invoices) into highly targeted paper- and electronic-based customer communications.
Output Technology Solutions (OTS), a subsidiary of DST Systems, is a leading outsourcing provider of communication services for companies in the financial services, telecommunications and broadband industries. OTS' services (print and electronic statement and billing services, electronic storage and distribution services) help companies enhance operating and call center efficiencies, increase revenue and customer retention and improve cash flow and customer response rates.
Moore Corporation's Business Communications Services (BCS) provides products and services that help companies communicate through print and digital technologies. As a leading supplier of document formatted information, print outsourcing and data-based marketing,
Lason integrates information outsourcing for image and data capture, data management and output processing services. The company primarily serves customers in the commercial, health care, financial services and professional services industries. Its core competencies in input processing, data management and output processing enable it to provide a broad range of services across a wide range of media types and allow customers to fulfill their information management outsourcing needs with a single vendor.
The Move to Outsourcing
The first step is to identify the outsourcing opportunity, both short term and long term. This includes the functions to move out of house and the degree of these functions can relinquish control. In the short term, internal resources and operational constraints may potentially restrict outsourcing. In the long term, the opportunity is based on your organizational risk management model, capital strategies and projected market growth.
The next step is to initiate the outsource procurement process, which can be initiated immediately to eliminate project slack time. This process will take from 30 to 90 days to complete, depending on the number of vendors selected, the RFP detail and project scope.
Next, smart organizations build a prototype, or proof of concept, with the chosen vendor that will support the migration of a portion of an existing production or completely new application to the selected vendor platform to test its performance in the interest of mitigating risk.
Finally, judiciously begin migration of the entire application to the new vendor. Migrating portions of the work helps reduce the application risk and allows for a controlled transition. A complete and detailed project plan is necessary for any project of this magnitude.
Kemal Carr is with Madison Advisors. Contact him at kemalcarr@madison-advisors.com. Carr was previously a senior analyst with Doculabs.
