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Carnegie Mellon launches system to rate IT-enabled outsourcing service providers with support

Carnegie Mellon Universtity : 19 November, 2001  (Technical Article)
In response to the growing need for standards to evaluate companies providing information technology enabled outsourcing services, researchers in Carnegie Mellon University's School of Computer Science have developed a methodology to rate outsourcing firms and have established a center to certify their capabilities.
In response to the growing need for standards to evaluate companies providing information technology enabled outsourcing services, researchers in Carnegie Mellon University's School of Computer Science have developed a methodology to rate outsourcing firms and have established a center to certify their capabilities.

Satyam Computer Services Ltd., one of India's largest computer-related companies and a founding partner in the university's new Information Technology Services Qualification Center, is funding development of the eServices Capability Model, as well as other models and appraisal methods. Satyam, headquartered in Hyderabad, India, and Parsipanny, N. J., will be the first company authorized to use the new Carnegie Mellon evaluation method to appraise IT outsourcing service providers for its clients in India and around the world. 'Phenomenal growth is projected in the next decade for organizations to outsource IT-intensive business activities, including back-office operations, engineering design, IT-services, payroll, tele-support, and tele-marketing,' said Prabhuu K. Sinha, Satyam senior vice president-quality. 'These activities may range from routine and non-critical tasks, which are resource intensive and operational in nature, to strategic processes that directly affect revenues.'

Accenture, a leading management and technology consulting organization and provider of outsourcing services, also has joined the effort, providing funds and placing some of its associate partners at Carnegie Mellon as visiting industrial scholars. They also will assist in the development of the outsourcing evaluation methodologies. 'Client satisfaction is Accenture's top priority,' said Marty Cole, head of Accenture's worldwide outsourcing unit. 'That's why we are so enthusiatic about escm. We view it as a valuable tool that will allow us to further enhance the outsourcing services we provide to clients around the globe.'

Over the past several years, all kinds of organizations, from manufacturing firms to banks to hospitals, have been delegating computer-intensive activities to external service providers because they lack their own in-house capabilities. But in many cases, they have not been satisfied with the results, said Jane Siegel, senior systems scientist in SCS' Institute for Software Research International, who heads the ITsqc. 'The outsourcing business involves billions of dollars, but right now companies that use these services have no consistent basis for making their selection,' she said. 'Our goal is to give organizations a reference model to compare outsourcing providers and mitigate their risks. At the same time, the model and certification method we've developed will enable service providers to differentiate themselves and enhance and improve their operations.' According to Dun and Bradstreet's 'Barometer of Global Outsourcing,' companies have reported that between 20 and 25 percent of all outsourcing relationships fail in any two-year period. Moreover, nearly 70 percent of survey respondents said the outsourcing supplier 'didn't understand what they were supposed to do, that the cost was too high and they provided poor service.' Siegel acknowledged that several models for evaluating the quality of products and processes in organizations already exist, but said that the eServices Capability Model developed at Carnegie Mellon contains important practices for outsourcing not addressed by any of the others. 'Outsourcing has limited coverage in the other models,' she said. 'Most of them don't address pre-contractual activity, and they don't deal with post-contractual feedback-i.e., how you hand back technology, skilled employees and lessons learned from an outsourcing engagement to the client without disruption of operations. 'Some of the worst failures occur because providers didn't' get the right client requirements at the beginning of an engagement, or because the work wasn't handled correctly at the end,' Siegel said. 'We have developed material that can be used by service providers to determine the steps they need to take to implement each practice in their organization.' Carnegie Mellon researchers have been developing the escm for more than a year. They studied all available literature, interviewed companies and created and piloted their model, which underwent a rigorous technical review by quality and IT-outsourcing experts. 'By early next year, we will have trained and authorized our first set of evaluators who can do certifications for IT-enabled service providers,' Siegel said.

'Satyam intends to work with outsourcing service providers, independent consultants and evaluators, providing escm-related services covering consulting, evaluation, and training,' said Sinha. 'Although an IT-enabled outsourcing service provider may be aware of some or all of the issues impacting outsourcing relationships, it may not be able to identify those issues that are critical to establishing viable and mutually beneficial outsourcing relationships with clients. A provider may also need support to develop improvement strategies for those practices that can address these issues effectively. Clients need a way to identify critical parameters that affect the service being outsourced, so they can make meaningful comparisons of suppliers' capabilities. This information is essential for forming and developing mutually beneficial relationships between the client and the provider.' The ITsqc is part of the Institute for Software Research International in Carnegie Mellon's School of Computer Science. It was established to develop capability models for three important areas of the evolving networked economy. In addition to outsourcing, ITsqc researchers are developing capability models for electronic security and for electronic commerce.
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