Tactical outsourcing:
a smart play in uncertain times

As capital budgets and staffing resources get tighter, vendor-managed “point” solutions offer a low-risk route to e-biz expansion.

You have this great idea. Instead of sending letters or having your company’s service reps call customers when something they’ve ordered is out of stock and has to be back-ordered, it would be much better to use some kind of CTI app to call them automatically. That way, they wouldn’t find out a week or more later—like they do with mailed notifications—and you’d avoid the high cost of having a call-center employee get on the phone. The only problem is that you don’t have the budget, the staff or the expertise to make it happen.

Do you give up and accept the fact that, in today’s economic climate, such ideas are destined to remain ideas because of inadequate tech resources? Or do you look for an alternative approach that will allow your company to gain the business benefits of your idea without having to shell out six figures up front?

If you’re like the growing number of never-say-die tech managers I’ve been speaking to lately, you’ll choose the latter route. They’re turning to a new breed of vendors who are delivering highly focused, turnkey “point” solutions that enable companies to expand their e-business operations without requiring them to spend money and time that they just don’t have.

The approach being used is in many ways similar to the application service provider (ASP) business model that was over-hyped and then almost completely dismissed in recent years. The service provider runs the application, manages the supporting infrastructure and handles all support tasks. Essentially, all the customer has to do is write a check. And, because the software and infrastructure are amortized across multiple companies, the check can be comparatively small. It can also be written on a monthly basis, as the company is actually reaping business benefits—rather than in a big lump sum weeks or months before the system is even turned on, as usually happens with in-house development projects.

The problem with first-wave ASP offerings was that they typically focused on core corporate applications—such as enterprise resource planning and customer relationship management—generally too strategic and logistically difficult for most companies to outsource. They were also limited in the customization that they could deliver, even though such customization is essential to any effective strategic technology implementation.

The new ASP-style hosted solutions gaining popularity among corporate technology managers take a different approach. Instead of trying to deliver core enterprise applications via hosted infrastructure, these service providers are zeroing in on highly targeted, tactical solutions to specific business problems.

Take, for instance, the example at the beginning of this column. There are actually a few service providers who can create such systems on a completely outsourced basis. They use snippets of human speech, rather than text-to-speech synthesis, to create a much more natural-sounding call.

Based on data sent from a corporate database via an XML-based transfer, the service provider can inexpensively execute individual calls (“your/red/cardigan/cannot be shipped until/Tuesday/February/5th”) on a daily basis. The system also gives customers several interactive voice response menu choices, so they can change or cancel their order if they want to.

The manager I spoke to got this system up and running in just a few weeks, without involving any of his internal IT staff. The cost per call turned out to be way below what he would have spent taking calls in his call center. The system also allows the company to handle peak loads of holiday orders without requiring the hiring of too many additional call-center operators.

Other hosted offerings being made available for specific functions—Web self-service content, personalized portals and wireless application access—all have in common that they’re turnkey, limited in scope and designed for rapid implementation.

As much as a resource-conservation strategy, the use of such hosted solutions can also be viewed as an important risk-reduction strategy. Companies today are averse to embarking on big-ticket projects that risk insufficient returns or even outright failure. They just don’t feel that they can afford a big IT mistake.

By the same token, most also recognize the risk of not moving ahead with some sort of technology initiatives that can provide competitive advantages and operational cost reductions. Rather than tossing the dice on big in-house projects, these smaller outsourced initiatives allow them to expand their IT horizons incrementally and pay as they go.

Of course, there are some downsides to this approach: limited benefits, potential security concerns and—if several host vendors are engaged—a somewhat fragmented IT environment.

Considering the circumstances most of us face right now, it’s not a bad idea to investigate what these vendors have to offer. Many of them have creative, useful technologies that are priced reasonably and can deliver quantifiable—though modest—benefits. I’ll take those modest, low-risk benefits over total paralysis any day.

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