The Publishers’ Perspective

Assumptions

When debating the outsourcing issue, we all make assumptions on a number of issues, and much time can be wasted discovering that our assumptions are not in fact valid or shared by others. With this in mind I have chosen to start by making explicit some of the core assumptions that I have heard. In putting these assumptions down I am in no way making a value judgment as to correctness or otherwise, merely laying them bare for debate.

1. Total Outsourcing is one end of a continuum running from “do everything in house” to “do everything out of house”. Both extremes of this continuum are theoretically possible but unlikely. (See Figure 1)
2. Given the above, “Total Outsourcing” is a direction and - most likely - never a destination.
3. The strategy of outsourcing assumes that an organization has identified the “core business activities” it intends to focus its internal resources on and, equally, that it has identified the “non-core activities” which it feels can best be supplied from an external source.
4. Because an activity is “non-core” does not mean it is not critical.
5. There are many reasons for considering outsourcing: price, flexibility, expertise, better utilization of scarce resources, etc. Without a clear understanding of what the goals and objectives are, outsourcing will not be a success.
6. The decision to outsource is strategic and needs the commitment of both the vendor and the customer. It is intended to be a long-term decision with both parties committed to building a “partner relationship”.

Figure 1: The Outsourcing Continuum

Objectives

The goal of my discussions was to find out how publishers would like to see the industry structured in 2-3 years time, and how “total outsourcing” related to this. In particular, I wanted to explore the following questions:

1. What, if any, correlation is there between the major publishers’ visions?
2. What are the hurdles we have to overcome to get from where we are to where they want to be?

Preliminary results

• All the publishers interviewed agreed that, at least in some ideal fashion, a position to the far right of the continuum (i.e. towards total outsourcing) was where the best solution lay for their organization.
• People distinguished clearly between personal preferences, organizational preferences and market requirements. The primary reason for arriving at this view was an expectation that market dynamics would require a significantly outsourced solution over time.
• Almost everybody expressed the view that both parties (i.e. publishers and vendors) fell significantly short of the ability to implement this solution. The main difference in views expressed was between publishers who had set up facilities for providing localization services recently (i.e. in the last 2 years) and those who were more established.
• The newer facilities tended to be designed for significant outsourcing from the start. Interestingly it was these publishers that most strongly expressed the view that vendors were ill-equipped to deliver on their outsourcing “story”.
• Publishers felt that, given the right vendors, it was possible to address their own internal issues and gain the commitment inside their own organizations needed to make outsourcing work.

With this in mind, I then looked at how we might get from where we are to where we feel we need to be. Issues that arose were (in no particular order):

• A lack of confidence in the vendor base to deliver total outsourcing.
• The unreliability of today’s vendor base.
• The failure of the publisher to identify core and non-core competencies.
• A difference between established publishers with significant current in-house resources and newer publishers, who can start with outsourcing in mind.
• The failure of the vendor base to prove it understands outsourcing.
• The failure of the publisher to understand its own internal costs.
• A concern at the way outsourcing would be costed.
• The failure of vendors to understand the publishers’ needs.
• Delivery of a quality product on time was the most important factor.
• The need to take control of our destiny before destiny takes control of us.
• Translation expertise is not the core skill needed by total outsourcing providers.
• Vendors have to have much greater “business management” expertise if they are to be able to deliver total outsourcing.

Straight from the horse’s mouth

The quotes given below may help put the issues given above into perspective:

• “If EDS had a staff of 500 people in localization I’d go with them rather than any of the current localization vendors.”
• “The recent round of mergers and acquisitions has introduced more uncertainty into the equation. On the upside, these new super-vendors have the appearance of what it takes to provide a total outsourcing solution. On the downside, there are many new problems introduced: the lack of a standard process, uncertain reporting structures, uncertainty as to the financial success of these mergers/acquisitions, diverted focus from customers to shareholders, etc.”
• “I am going to go with a split between the large vendors and the smaller vendors in case the mergers don’t work out.”
• “Before I could isolate my problem and talk direct to the CEO of a medium-size vendor. Now neither I nor the super-vendor know who is responsible for what.”
• “I have picked a couple of vendors and agreed to pay for some fixed resources within them. I expect them to be able to cope with my peaks and I’ll look after my troughs. Nobody else can use my fixed resources within the vendor.”
• “Localization vendor sales people in the main have no concept of what the real issues with outsourcing are. I need the vendors’ help to sell a credible outsourcing solution internally and there’s no organization out there that could withstand even a basic audit of its “PowerPoint” outsourcing process.”
• “If there was an independent audit process that could asses a vendor’s capabilities and these audit results could be used for benchmarking vendors on some form of continuous improvement scale, then I think this would be a good thing and I would be prepared to help it happen.”
• “Although I have significant internal resources currently deployed I do not see this as a major hurdle for me to move towards total outsourcing. With current business expansion and the shortage of good-quality people I see this as more of a redeployment issue that a redundancy issue.”
• “Although we have not done the work to isolate localization as a non-core activity for outsourcing, I believe that with a credible solution available and together with the help of a professional vendor I could get the internal focus and commitment necessary to give this a real shot.”
• “If there was some form of consensus on the part of the publishers as to what we needed from the vendor base, then I would think it should help the vendors identify a long-term strategy. I would be worried if I thought that mine was the only company working with the vendor towards a total outsourcing solution. The last thing I need is a schizophrenic vendor that is not focused on designing their organization from the ground up to deliver a total outsourcing solution.”

Suggestions for improvement

In focusing on how some of these issues might be addressed, the following were some of the suggestions offered:

Statements of intent

Publishers could avoid any ambiguity contributing to vendors’ inability to demonstrate a commitment and focus on delivering a reliable outsourcing solution by clearly identifying a direction (i.e. a point on the continuum) and a time scale in which they intend to get there. Most publishers agreed that, while their organization had not identified the localization process as being either a core or a non-core activity, the evidence suggested by their actions led one to conclude that it was not a core activity.

Again, people were at pains to point out that there should be no confusion between core activities and vital activities. A decision to outsource localization is not a demotion in importance of localization to the success of a product. On the contrary, because the localization process is a vital part of the success of a product it is difficult to sell an outsourced localization solution internally. It is only by demonstrating that outsourcing is a better solution all round, particularly for the future, that outsourcing of localization will get the necessary internal commitment.

Statement of objectives

Publishers need to identify their goals and set service level agreements that are measurable and can be used to assess the ability of the vendor(s) to meet these goals.

Task force

Generally, vendors and publishers have no outsourcing policy of any depth in place at the moment and need to establish an internal task force with the authority to deliver a successful outsourcing solution.

Vendor audits

Vendors need to be prepared to have their innermost processes audited on a regular basis to demonstrate that their organization is competent and reliable.

Partnerships

Publishers need to commit to a long-term relationship with a small group of vendors in which both parties are committed to making things work through thick and thin. It should be difficult for a vendor to attain the status of an outsourcing partner, with many strategic hurdles to be overcome. However, it should be even more difficult to fail once the status of outsourcing partner has been attained.

Industry structure

In the course of my conversations, I identified the following three groups of value-chain building blocks (Tables A, B and C below). For a more complete picture, more aspects are included than those that would normally be associated with localization.

If we consider the center column (service types) to be value-chain building blocks, we can see that it is possible to create a corporate value chain that is completely vertically integrated, whereby resources can be put in place to service only one customer (Table A). Examples of this could be seen in the major software publishers in the mid to late 1980s.

Equally we can see that it is possible to create a totally outsourced corporate value chain using Table B. Example of this are usually found in government-contracted development projects.

Table C arises when a company which has invested in a vertically integrated value chain such as that in Table A decides to offer services to third parties. An example of this would be the decision of some software companies to sell their localization tools; another would be in the software manufacturing area, where a number of software companies have spun off their manufacturing facilities to become stand-alone service providers.

Table A

Customer Type	Service Type	Function
Single Customer	Software Development	Internal Service Providers
Single Customer	Software Internationalization	Internal Service Providers
Single Customer	Software QA	Internal Service Providers
Single Customer	Localization Multi Language	Internal Service Providers
Single Customer	Localization Single Language	Internal Service Providers
Single Customer	Localization Engineering	Internal Service Providers
Single Customer	Localization Tools	Internal Service Providers
Single Customer	Software Manufacturing	Internal Service Providers
Single Customer	Software Distribution	Internal Service Providers
Single Customer	Software Support	Internal Service Providers

Table B

Customer Type	Service Type	Function
Multi-Customer	Software Development	External Service Providers
Multi-Customer	Software Internationalization	External Service Providers
Multi-Customer	Software QA	External Service Providers
Multi-Customer	Localization Multi Language	External Service Providers
Multi-Customer	Localization Single Language	External Service Providers
Multi-Customer	Localization Engineering	External Service Providers
Multi-Customer	Localization Tools	External Service Providers
Multi-Customer	Software Manufacturing	External Service Providers
Multi-Customer	Software Distribution	External Service Providers
Multi-Customer	Software Support	External Service Providers

Table C

Customer Type	Service Type	Function
Multi-Customer	Software Development	Internal Service Providers
Multi-Customer	Software Internationalization	Internal Service Providers
Multi-Customer	Software QA	Internal Service Providers
Multi-Customer	Localization Multi Language	Internal Service Providers
Multi-Customer	Localization Single Language	Internal Service Providers
Multi-Customer	Localization Engineering	Internal Service Providers
Multi-Customer	Localization Tools	Internal Service Providers
Multi-Customer	Software Manufacturing	Internal Service Providers
Multi-Customer	Software Distribution	Internal Service Providers
Multi-Customer	Software Support	Internal Service Providers

Although each of these three tables paints a clear picture of a possible value-chain configuration, in reality our industry consists of many hybrid variations of these three generic types.

While any combination of value-chain building blocks from any of the three tables above is possible, it is important that all those participating in the value-chain configuration are aware of the “motivations” of their “partner” service suppliers.

The Vendors’ Perspective

Objectives

As with the publishers, in embarking on the initial round of interviews I set myself the objective of finding out:

1. How would vendors like to see the industry structured in 2-3 years time and how does “total outsourcing” relates to this vision?
2. What if any correlation is there amongst the major vendors’ visions?
3. What are the hurdles we have to overcome to get from where we are to where they want to be?

Preliminary results

• All of the vendors agreed that, at least in some ideal fashion, a position to the far right of the continuum (i.e. towards total outsourcing) was where they felt the best solution should lie for their organization.
• Concern was expressed as to the willingness of publishers to pay for a totally outsourced service.
• Vendors accepted that they are short on the ability to deliver a full outsourced solution but said that they were prepared to make the investment when there were clear market indicators that such investment would be rewarded.
• Concern was expressed at the willingness of publishers to restructure their own organizations in line with their outsourcing policy.

With this in mind we once again looked at how we might get from where we are to where we feel we need to be. Issues that arose (in no particular order) were:

• A lack of confidence that publishers would fully commit to total outsourcing.
• Uncertainty in the relationship with publishers.
• The failure of the publisher to identify core and non-core competencies.
• A difference between established publishers with significant current in-house resources and newer publishers who could start with outsourcing in mind.
• The failure of publishers to develop resources who understand outsourcing.
• The failure of publishers to understand their own internal costs.
• A concern at the way in which outsourcing would be costed.
• The failure of publishers to appreciate the economics of the vendors.
• The poor definition of measurable quality criteria.
• The need for much better “outsourcing management” expertise on the part of publishers to drive total outsourcing.

The vendor story

Vendors were also asked for quotes to put the issues above into perspective. The following were among those received:

• “I am supposedly in a long term partnership with customer A but they still insist on telling me how much of my resources they will pay for.”
• “If I could drop my customers’ insistence on using their own tools I could save them 20%.”
• “I wouldn’t like to have only 5 - 10 big customers because I couldn’t afford to lose 20% of my business at any one time.”
• “If publishers truly costed their own internal costs then they would outsource more.”
• “If publishers cannot get their minds around ‘variable requirements = variable prices’ I cannot see full outsourcing working.”

Suggestions for improvement

In focusing on how some of these issues might be addressed, the following were some of the suggestions offered:

Statement of intent

Publishers must be clear, open and honest about their service requirements.

Value-chain specification

Given the lack of clarity that exists as to the role that each organization plays in getting the product to market, it would be useful if publishers defined their value chains and the relevant responsibilities of each party.

Commercial understanding

Vendors say they need publishers to understand the economics of their business and accept that they are not charities.

Outsourcing charter

Vendors would like publishers to develop an outsourcing charter that documents each side’s requirements and obligations.

Audits

Process audits were a good thing and should be applied to publishers and vendors.

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Alex McDonnell, General Manager
Pervasive Software E.S.D.C.
18-19 College Green
Dublin 2, Ireland
Tel +353 1 612 7401
Fax +353 1 612 7405
E-mail: amcdonne@pervasive.com
Web site: http://www.pervasive.com