Jan 24, 2006
HVTO Q&A:
Thomas Koulopoulos, President and Founder, Delphi Group
Thomas Koulopoulos is the President and founder of Delphi Group and is one of the industry's most prolific thought leaders. He is a frequent contributor to national and international print and broadcast media and, according to InformationWeek, is one of the industry's most influential consultants. His insights provide a beyond-the-edge view of the turbulence created by the collision of technology and business.
Koulopoulos has been a favorite keynote speaker at industry conferences such as Xplor International, and his articles are featured in prominent publications including CIO Insight, Information Week, and Optimize Magazine, among many others. OutputLinks was pleased to spend a few minutes with Koulopoulos and ask about his perspectives on the high volume transaction output (HVTO) industry, and specifically his ideas concerning “Smartsourcing,” which we learned of through Delphi Group.
Question:
What is “Smartsourcing,” and how is it different than Outsourcing?
Answer:
Outsourcing tends to focus exclusively on the issue of lowering costs. This is certainly not a bad thing, but focusing on that to the exclusion of innovation and growth can be a high-risk proposition. Smartsourcing differs from outsourcing in that it does not focus just on the reduction of costs. It begins by focusing an organization on it’s core competency, then intelligently moving the rest of the work to partners that would be more appropriate to perform those functions. At the end of the day, the intent is to increase innovation across the entire value chain. If you don’t focus on what is core to your business you cannot be a world-class innovator.
Question:
What are the key decision metrics that organizations should be looking at when considering smartsourcing?
Answer:
There are four decision points. The first question is one that sounds simple, but it’s amazing how few companies can really answer the question: what is your core competency? You must clearly define your core competency, and how you measure your effectiveness at that competency, before you can make the right decisions around any kind of a sourcing arrangement.
The second question is: what do you consider a core area? In every organization there may be core competencies that are not performed exceptionally well. Those are areas where you have to fundamentally reengineer since you are not doing them well enough to meet competitive pressures or market mandates.
The third question is: what are the non-core areas that you don’t do well? In every organization there are functions that you cannot do as well as a source provider. Payroll is a good example. ADP has done a wonderful job demonstrating how payroll really shouldn’t be an in-house function. The customer support call center is often another good example.
The final question is: what is non-core that you do well? In every organization there are things that are non-core, but the company does a pretty good job with them. Even though you are good at it, you may still want to have someone else perform the function since it does not add real value and innovation to your core competency. Since you do it well and understand the process, this is a great opportunity to source the process to a competent partner.
Question:
How does document processing fit into this smartsourcing evaluation?
Answer:
It is very important to understand and acknowledge that so much of what happens in organizations has historically been driven by the “form factor” – the physicality of the document. Although we’ve done a lot to move into an electronic document age, the reality is that we have not strayed significantly from the form the document was in when it was in paper. That “form factor” really drives the process, and it should be the other way around.
When you embark on a smartsourcing exercise you want to have an ability to decompose your process in to pieces so you can keep some pieces in-house and send other pieces out. It is very difficult to do that when some historical document form has defined your process. It is important to separate the historical form from the process, and the ideal way the process should be executed. That is a tough thing for many organizations to do since the document still drives the process as opposed to the other way around.
Question:
Many document process improvement efforts are initiated from a “technology first” point of view rather than a “process first” point of view. Has this approach been successful?
Answer:
Technology is certainly a very important piece of smartsourcing. Without a technology platform it is going to be exceptionally difficult to securely and effectively share your information and documents with your partners. Where we often go astray, however, is when we believe a technology “solution” can solve these problems.
There is a lot of technological evolution that is yet to occur and many times we get a bit short sighted. We look at a technology platform and get discouraged because that technology didn’t provide the solution. The real innovation is happening in organizations that are looking at it from the standpoint of the various pieces that we have to put into place. Those organizations are taking the right approach by accepting that there is not anything on the shelf that will solve all these different issues and problems. Forget the “solution” moniker. There is an evolution of many pieces that are all maturing at different rates and it will take some time before they are all at a point where we will have seamless document and information capability.
Question:
What is your advice for HVTO professionals looking at smartsourcing?
Answer:
A lot of times we discount various trends like outsourcing, or on-demand, or open source, because the time is just not right. People tend to dismiss these ideas because it is tough to make them happen “in the today.” I see a lot of momentum behind smartsourcing trends and I see tremendous pressure on businesses to change the way that they operate, to change their cost structures, and to focus on core competency and innovation. Companies need to take that very seriously if they are going to continue to compete on a global platform. Don’t discount an idea whose time has come.