www.outsourcing.com, January 12, 2003
Q&A with Digital Fuel CEO, Benny Lehmann
| Frank Casale, Chairman & CEO of The Outsourcing Institute, in a conversation with Benny Lehmann, CEO of Digital Fuel spoke about the importance Outsourcing Relationship Management (ORM). Digital Fuel is a leading provider of enterprise Outsourcing Relationship Management software, enabling fully automated, end-to-end, real-time management of service provider relationships.
FC: What is Outsourcing Relationship Management?
BL: Outsourcing Relationship Management or ORM is the term used to describe the software tools and services necessary to successfully manage complex sourcing relationships as well as improve the sourcing value proposition for corporations and service providers.
FC: What Elements should and ORM solution include?
BL: A comprehensive ORM solution should encompass all of the primary business issues faced by Sourcing Management organizations including:
* Compliance monitoring and analysis of service delivery (SLA's) objectives from outsourcing providers;
* Financial analysis enabling tracking of budgets to actual spend, charge back allocations and measurement of incentive-based contracts;
* Management of multiple outsourcing/insourcing relationships and the management of resources (people, hardware, software) in a widely distributed environment; and
* Standardized management of contract issues such as breach, dispute resolution, escalation, renegotiation, etc.
FC: Give us a real world example of Outsourcing Relationship Management (ORM).
BL: Bank of America has implemented Digital Fuel's ServiceFlow' ORM solution within its telephone banking organization. The company has evaluated the costs associated with performing regular service level audits, service level dispute resolution as well as estimated value of supplier cost reduction, customer retention and increased outsourcing efficiency. By implementing Digital Fuel's ServiceFlow' ORM solution the bank has achieved an estimated 6-month ROI with a 3-year ROI of 576% for the telephone banking business process.
FC: How does a company determine if they need ORM software?
BL: Any company with a complex service provider environment and overall annual services spend exceeding $30M should take a close look at the benefits and ROI associated with implementing and ORM solution.
FC: How do you measure the ROI of optimizing ORM and SLA management?
BL: The ROI on ORM solutions is achieved by optimizing the sourcing management processes and enhanced vendor management capabilities that ultimately reduce the cost of sourcing. While evaluating ORM solutions companies tend to measure the cost associated with Service Level audits and Service Level breaches, vendor incompliance and failure rate as well as the amount of labor and lost productivity due to manual sourcing management procedures and contract administration - these elements ultimately define the ROI on implementing and ORM solution.
FC: What kinds of businesses can benefit from your ORM software?
BL: Any organization with a Sourcing Management function can benefit from Digital Fuel's ORM solution. The software is web-based and scalable enough to support Sourcing Management needs ranging from the single department level to cross-enterprise implementation capabilities.
A Dun and Bradstreet survey indicated that 25% of outsourcing contracts fail within 2 years and 50% fail within their first years. Given that the outsourcing market is currently $320 billion worldwide, we are looking at potential loss of $8 billion a year. It is our job as to reduce that number to a bare minimum, by using proper sourcing management solution and proven-methodologies organizations can significantly increase their chances of success.
For more information about Digital Fuel visit www.digitalfuel.com