Why Uber is largely missing the Corporate Boat for now–Ten Key Reasons why Uber has not significantly penetrated the corporate ground transportation market

Ten key reasons why Uber has not significantly penetrated the corporate ground transportation market (other than syphoning off personal rides by business passengers on their T&E or personal credit card statements) are numerous.  They are:

  1. No solution for the predominantly direct billed (account) billing preference of approximately 80% of the Corporate ground transportation customers in the NY Metro market (and their P Card solution to put all the account expenses on a single credit card leaving the corporate client with a nightmare reconciliation process is no answer)
  2. Failure to accept future bookings which is what every other travel booking platform provides and accounts for a significant (anywhere from 30-40% of the total ride volume)
  3. No answer for corporate lineup or rank/queues
  4. No ability to capture corporate business rules requirements, e.g., cost center, client matter numbers, integral for internal chargeback or allocation of the expenses
  5. No ability to “order on behalf of”, a typical scenario in Corporate where an admin or secretary books/orders on behalf of their boss or VIP
  6. No ability to book multiple cars at the same time, e.g., for an event or small party travelling with same/similar itineraries
  7. Duty of Care gaps—with all the well-documented issues with their insurance or lack thereof with their contractor drivers (and lacking the “gap” insurance typically provided by base station operators). Uber’s callous indifference to the safety of corporate travelers by shamelessly hiding behind the wall of “we’re a software company, you’re on your own and at your own risk” shows disdain for their customers.
  8. Sub Standard criminal back ground checking to weed out drivers that are sub standard
  9. Uber’s outright refusal to provide ANY MIS or reporting on their ride data, which corporate craves for their own internal Big Data requirements. Uber shamelessly hides behind their own wall of lawyers and right to privacy of the data—even when that data is tied to a corporate credit card that is the property of the corporate entity they’re supposed to be servicing!
  10. Outrageous “surge” pricing that ramps up to 16X the normal rate during supply shortage just won’t fly in corporate where negotiated rates and predictability of expenses and procurement-methodologies are totally anathema to Uber’s surge methodology.

Wow, only ten reasons. I thought there were more.

In short, right now Uber is a consumer app only and while they’ve successfully indirectly disrupted the corporate car service/limo business primarily by shrinking their competitors supply of drivers by poaching their competition’s drivers away, making less cars available for the corporate end user, to some degree forcing corporations to use their service, Uber clearly still doesn’t have an answer to the corporate business model–except to win the war of attrition.

But the question is, why, after being in the space for over four to five years, knowing that the corporate car/limo service is nearly what the consumer spend is do they not have an answer?  What is Uber waiting for?  Instead Uber continues to try to expand in foreign markets now to enhance their global reach (and their litigious activities which have banned them all over the world).

One simple reason could be, as a so-called disrupter, Uber is playing a waiting game, a game of attrition, determined to weed out all their competition by continuing to poach drivers from their competition so that eventually corporations will have no choice but to use their services—on their terms. It is a position of pure arrogance and short-sightedness.

But of course a main reason one could state Uber has chosen to avoid/ignore reasons 1-10 on the prior page is one can easily see it would total lay waste to their current, simplistic, steam roller business model. For Uber to implement all of those requirements from corporate would require them effectively admitting they’re no different than anybody else and that is simply not going to happen with an organization as arrogant and determined as Uber.

Some speculate the only people that ultimately will benefit from Uber are the initial investors and investment banks involved in their eventual IPO, who will rake in the short term dough, as it’s not clear that Uber will be in the mix long term.  Many speculate shortly after their IPO they will implode.

Interestingly, however, Uber fails one of the critical litmus tests for a true industry disrupter—what they serve the greater good.  Yes, their app made it easier to order and get a car and yes, some of their trips are cheaper (subsidized by their own obscene pile of cash they’ve amassed) than their competition,  is 16X surge pricing beneficial  or “for the greater good?” Is charging New Yorkers extreme surge pricing during hurricane Sandy ‘for the greater good”?  And what happens if Uber is the only game in town? What has happened with every other monopoly—is lack of competition good or bad for consumers??

Speculation leads towards their real future and pursuit being what to do with all the big data they’re compiling on their passengers and will likely try to leverage and or sell (legally or not) to other retail scenarios and or in partnerships with other callous cash rich entities like Google.

So Uber does not fit the true disrupter definition—they won’t benefit the greater good. They plan to benefit only themselves ultimately.

So when will Uber come up with a real answer to Corporate’s needs? Maybe never.   Does Uber think If they’re the only game in town, corporate will have to capitulate to their business model ?  Maybe they think they can convince enough of their salivating investment banker clients to force their service on the very IBanks they work for, by-passing all the critical items mentioned in 1-10, ignoring the banks’ legal, compliance, operations, procurement and practically every other silo’s internal guidelines and business rules, the same ways that these banks lost their minds in the recent financial debacle, nearly ruining our economy.  Stay tuned.

 

Legal Business Process Outsourcing Industry Direction Continues to be Dominated by Price-Driven RFP Processes

Legal Business Process Outsourcing Industry Direction Continues to be Dominated by Price-Driven RFP Processes

Law Firm Business Process Outsourcing services sourcing projects, typically Requests for Proposals often run by industry consultants have recently become price-intensive. This is especially true in the AM LAW top 100 firms where many services areas are under price scrutiny.

Law firms are also feeling the pinch of the conversion of their traditional time and materials-based business and billing structure towards more fixed, predictable-priced models. The advent of Legal Project Management, which enables law firms to fix a price or not to exceed for relatively redundant, predictable matters and legal processes continues to get sea legs. Law Firm clients have been pushing for years to get their law firms to move away from time and materials-based billings in favor or fixed cost models.Legal Project Management is in direct response to that.

In fact, law firm clients now use this modeling to create RFPs for matters that they may even bid out to multiple law firms. Further, Legal Process Outsourcing, where non core legal functions like eDiscovery and document review are largely outsourced to cheaper on or off shore options is also gathering steam at law firms in order to remain cost competitive.

This commoditizaion or heavily cost-drive focus of some legal matters and practices is akin to the same approach taken on Business Process Outsourcing. While being cost-reduction conscious to remain competitive is of course a necessity in today’s world, for on-shore Business Process Outsourcing companies, the intense price focus they claim is severely hurting the industry.  Business Process outsourcers–many of whom have significant overhead structures needed to support their clients, often overlooked by RFPs that only focus on the dedicated on site staff–are finding it difficult to remain afloat in the traditional “bodies and boxes” (staff plus office equipment) model.

Consultants managing RFPs for the services for law firms who fixate on the on site staffing costs only, comparing them in competitive bidding scenarios to other vendors who’s wages and benefits are suspect, skew the results. Further, Business Process Outsourcers bake other overhead costs in their on site staffing costs such as for technology resources, industry expertise, research, new product/services development and yes benefits, training, career path that are differentiators in their business offerings. In a business where you truly get what you pay for, law firms are often stuck with new supplier relationships that are less than optimal, unrealistic service levels for the price point paid, higher turnover due to staff with less competitive wages and benefits and a reduction in the traditional value-added provisions outsourcing providers should be introducing.

There are outsourcing providers that will accept lower margins and profitability to get a toe hold in the door, hoping to leverage their expertise in other areas to compensate with other billings at their client engagements, with no guarantees.

Legal Outsourcing Services–More than a Hot Trend Right Now!

Legal Services Outsourcing (LSO)  

LOS2has been transforming the legal marketplace for the past five years, coming on the heels of the banking-led economic crisis of 2008.  Legal Outsourcing Services is the practice where law firms, to reduce costs, outsource components of their legal practice that are repetitive and non-core, such as legal review, transactional legal proceedings and other areas.

This was largely triggered by the post economic crisis focus on cost-cutting by corporation’s in house council as well as many company’s legal services provisions, in conjunction with the price-driven procurement-laden attempts by companies to convert traditionally variable legal costs to fixed costs.

In addition, law firm clients have put price pressure on their law firms and law firms, to be competitive, have migrated to outsourcing solutions. This is also consistent with another trend in legal, Legal Project Management, where law firms at the behest of their clients (or proactively to serve their clients), have committed to fixed cost/not to exceed project-based pricing models, again for certain repetitive or transactional-type legal matters, that can fit this model.

In short, law firm clients have taken back control over the client/vendor relationship, so ad hoc time and materials in perpetuity billing structures on many legal matters may be a thing of the past. Law Firm clients are now not above putting out an RFP for certain matters that can be practically estimated on a project basis,  similar to other formally procured service.

LSO however, requires a true partnership between the law firm and the outsourcing entity as law firm attorneys still retain the intimate client knowledge and subject matter expertise that they utilize to manage in a knowledge transfer arrangement with the outsourcing provider , necessary for a successful engagement.

Presently, according to industry experts, over half of all corporations and three quarters or more of law firms are outsourcing to some degree with the largest component being litigation-related document review. About half of all law firms outsource up to 25% of their legal work to LPOs, according to the experts.

The practice of billing in-house associates hours for this purpose and other low-level legal tasks is not longer practical, thanks to LSO. LSOs, like many outsourcing providers, can more easily scale up or down easily, based on resource needs, a lot easier than in house.

While attorney/client privilege and data security protection are two key issues that must continue to be tightly monitored in LSO, that responsibility falls largely on the law firm client.

Legal Outsourcing Services has been traditionally a very fragmented vendor market. While there are a number of large suppliers, traditionally, law firms managed other ad hoc outsourced legal services in a decentralized, informally procured process. This led to high turnover in eDiscovery and other outsourcing vendors as well as different attorneys and paralegals using different suppliers within the same firm. Indeed, RAS Consulting in its RFP review process, often noted law firms using half a dozen or more vendors just for off site litigation support services or imaging, let alone for higher end eDiscovery, where typically even more vendors were in use.

With providers differing significantly in their capabilities, experience and the breadth and quality of their offerings, in house teams are becoming more and more familiar with legal outsourcing and how to differentiate the good from the not so good providers.  It is likely there will be some consolidation in this space and only well-established vendors in the market who recruit, train and retain the best talent will be able to sustain the business model.

Leading LSO providers are well versed in managing costs and delivering per definitive time tables which enable law firms to better manage client expectations. Combined with these fixed costs, law firms are able to manage and develop bona fide budgets for these matters.

One key question is, where will the large Business Process Outsourcing providers like Williams Lea, Merrill Corporation, Novitex, DTI, Ricoh, Swiss Post, FSO Solutions and others fit in this picture. Not coincidentally, all of these providers for some time have seen the hand-writing on the wall from severely declining revenues from their original core Business Process Outsourcing services from the 1990′s and many have for years diversified into offering off site imaging operations, eDiscovery, Lit Support, Forensic services and other services.

Yet to a large extent, these outsourcing providers have not yet been able to penetrate deeply into providing Legal Outsourcing Services provisions (more akin to contract lawyers and services) to the extent they are targeting. Perhaps some of the operational issues they have traditionally experienced in the entry-level highly transactional (and high risk) outsourcing areas under Business Processes, mail, fax, reproduction, conferencing services, etc., have colored their clients against utilizing them for more specialized Legal Outsourcing Services areas, perhaps unfairly.

We will be exploring the capabilities of these large national outsourcing providers in future blogs to attempt to identify the differentiators.

The Seven Biggest Mistakes to Avoid Making in your Outsourced Office Support Services RFP Process #2

The Seven Biggest Mistakes to Avoid Making in your Outsourced Office Support Services RFP Process #2

Not providing the right or enough information in your RFP to the vendors for them to be able to provide a viable RFP response.

You can never provide too much information or data for an RFP. The more information you provide, the less guess-work, the less surprises later on!  Very often the vendor or consultant will provide you a complete list of the data and information that they require for the RFP.  So don’t hold back unless you feel it’s absolutely necessary.

You’ll be signing an NDA (non-Disclosure Agreement) as well as a confidentiality agreement with the vendors so whatever data, information you do provide is fully protected.

But don’t provide salary data or your in house (labor) costs! Don’t make it easy on the vendors. They will be able to estimate your resource costs based on the headcount and positions/job descriptions they will be provided.

Ultimately, you want to avoid “baiting” the vendor into accepting RFP terms that they, unknowingly, accept, only to come back to you later with contract creep and increased costs, claiming they were misled about the contract scope. That happens when you don’t provide the full information they are seeking or “hold back” on something during the data gathering or services review phase of the RFP process.

Most vendors will insist on having analysts spend hours even days on your premises reviewing the current operations. This can be awkward on your incumbent vendor and worse, deflating to your in house staff if you’re considering outsourcing.

If you don’t want multiple vendors and their analysts on your premises, it may make better sense to hire a consultant to do the same. They will only have to be on site one or two times and are typically much more sensitive to in house or existing staff to make the process less invasive. They can put together the data and detail for the outsourcing vendors less pervasively.

 

-30-

The Seven Biggest Mistakes to Avoid Making in your Outsourcing Office Support Services RFP Process

The Seven Biggest Mistakes to Avoid Making in your Outsourced Office Support Services RFP Process

1)    Inviting the wrong or too many vendors to participate in the RFP.

Don’t fall victim to the aggressive sales approach of some vendors just trying to get a foot in the door.  You know, the ones that hound you constantly on the phone and the only way to get rid of them is to break down and agree to include them in the bid process. That’s a mistake in our view.

There is absolutely no point in tendering a bid to a service provider that is not qualified or does not have the market presence to service you.  Instead, it is better to only invite the vendors to bid on your outsourcing services that are capable of providing the services to your company and organization. How to do that? Via a Vendor Prequalification or Request for Information (RFI)

Prequalify your vendors so you don’t feel obligated to tender the RFP to a vendor not qualified to service you. Identify specific criteria to measure the vendors responding on their market share locally and nationally, their clients in your vertical, references, new clients, lost clients and try to get as much in the format as data as possible so you can do quantitative analysis.

You can tender a vendor prequalification or RFI to as many vendors as you want, even to the vendor with that nagging sales rep.  You can use a prequalification to build your industry knowledge. It may come in handy later. But ultimately, it is generally recommended that you decide on no more than 5 vendors to tender a bid or RFP to.  Use your analysis and your subjective evaluation of the vendors to narrow the selection choices down to that small circle via your prequalification. If you’re on the fence about any one vendor, check references that you would have requested in the RFI.

Good luck!

 

For more information on how to choose an industry consultant and what pitfalls to avoid in your outsourcing RFP process, please ask for our free white paper http://ras-consulting.com/ras-consulting-core-story/

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

In Spite of Price-Driven RFP results, Clients Still Place High Priority on Business Process Outsourcing Services

Price Driven only RFP Projects May Result in Vendors Having Difficulty Providing High Quality Business Process Outsourcing Even Though Law Firm Clients Will Still Expect it via Challenging SLAs

With the focus on many client outsourcing RFP projects becoming more and more price-driven, as law firms try to cut costs in many areas,  outsourcing providers have seen their headcounts cut and more importantly, reductions in their profit margins. Indeed, vendors today admit to single-digit profit margins on some projects, particularly competitive displacements (replacing an incumbent vendor). These low profit margin contracts, many of which are for sizable, national outsourcing contracts covering multiple office locations and contract revenue levels above one million dollars annually, are difficult for a vendor to “offset” with more profitable contracts, a long-standing industry practice.

Outsourcing providers have complained that on many consultant-run projects today,  primarily price-driven pursuits have put pressure on employee wages and benefits plus forced vendor’s hands to have to deploy more and more temporary help to fill lower cost resource positions.

unhappy-24634951For years, clients pushed back on outsourcing providers using temps to fill gaps in open positions or for absent or vacationing employees because temps are generally considered to be less committed, less skilled and less familiar with a specific client’s operations. While this is the new reality for some law firms who engage in new primarily price-driven outsourcing contracts, and the impact of lower wages, use of temps on the overall quality of the operation will only be measured in time, several Firms RAS Consulting recently interviewed were concerned with this direction in the industry.

One of the logical conclusions one would make in primarily price-driven decisions is a diminishing desire by law firms to pay for “premium” level office support services as they have in the past. Vendors who made their living by providing a premium level service to law firms have taken their lumps on these price-driven RFP projects.  But in spite of the logical thought process that, to expect the same level of services for lower cost as not being realistic, law firms still pursuing these price-driven solutions apparently still expect the same (high) levels of service. The old cake and eat it too scenario.

One large law firm based in Boston who is running a closed bid process with a consultant indicated they were expecting some cost savings in their new contract with their incumbent, and would put the project out for general bid if they did not get the results they were looking for But the Firm indicated that in spite of diminishing mail, fax, copy and other service volumes, the services provided by their outsourcing providers, though diminished in volume, as still perceived as critical to the Firm.

Another west coast law firm based in Silicon Valley that RAS Consulting recently spoke to, that also underwent a recent closed bid process to renew with their incumbent provider also remarked that while cost savings are an on going target, especially in contract renewals, a high level of service is still paramount. In spite of corporate downsizing, reduced service volumes, reduced hours or operations, this west coast firm re-affirmed the critical nature of the services. “The Firm still places high value on the services that remain, in particular litigation copying and imaging,” according to this firm.

Law firm revenues are also under attack, as clients are increasingly questioning traditional office services costs for mail, fax, reproduction, courier and other services, making it more difficult to continue to turn these outsourced services into a profit center.

One thing is certain, price pressures will force outsourcing providers to look to lower cost options which will lead to a dilution of the services. Many law firms would object to this reality and should consider this when they negotiate their outsourcing contracts.

For more information on how to choose an industry consultant and what pitfalls to avoid in your outsourcing RFP process, please ask for our free white paper http://ras-consulting.com/ras-consulting-core-story/

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

-30-

 

Mobile Apps for corporate car transportation are here to stay but you must avoid some of the pitfalls

Mobile AppsMobile Apps for booking corporate black car/limousine or yellow taxi transportation have picked up steam in the New York City market, in particular with the advent of Uber three years ago (2011). Use of these applications will expand even further with the eventual rollout of the eHail yellow taxi application pilot program in New York City now that an injunction has been overturned.

Applications like Uber, Hail O and Taxi Magic will be participating in a one-year pilot which will allow pedestrians to book a yellow taxi for immediately pickup in certain zones of New York City via their smart phones or tablets. But these applications are primarily targeted at the consumer, not corporate.

But there is a distinction between the mobile applications that target yellow taxis as in the pilot and the mobile applications that target the corporate ground or livery target market. Yellow taxis have precedence for use by corporate users, even for business purposes at times, an accepted corporate practice.  Many Corporations support use of yellow taxis for some business use in particular because they are often lower cost than livery or corporate black car services on short routes and can be easily put on their expense account, now that credit cards are accepted in all yellow taxis.

Services like Uber are invading the corporate territory competing with corporate black car services, not yellow taxis, by targeting corporate users from the consumer side.

Consumers are also corporate employees and the “consumerism” of business applications and devices, have already invaded the corporate space. Apple and Droid Smart Phones and Tablets, sold in millions to consumers who also happen to be corporate employees, have invaded corporate IT in droves. But IT security risks have limited their adoption in the business place on firm networks.

Similarly, mobile ground transportation booking applications, which are fun, funky and user friendly (many are “one click”) and which a targeted to the same demographic that purchased all the Apple/Droid mobile devices, are invading existing corporate car booking processes, siphoning away business from existing corporate black car suppliers.

Operating as “rogue” alternatives to contracted/preferred Corporate ground transportation vendors, one mobile operator in particular, Uber, has brought the ire of Corporate Procurement officials who are tasked with monitoring and maintaining corporate approved vendors and contracts as the corporate watchdog.

What are some of the pitfalls of the corporate car mobile apps?

  • By definition, the mobile application providers, some of whom provide their own fulfillment/vehicles, are not approved vendors for the corporations whose employees they target, often for business rides that take business away from approved, contracted vendors.
  • Employees who use these mobile applications are often in violation of corporate company policy if the mobile app vendors are not approved vendors.
  • The mobile booking applications may be higher priced than their existing corporate ground transportation contracted vendors during certain times of the day, certain routes.  In any event, there is no published tariff to rate shop vs. their corporate approved vendors.
  • With no published rate tariff nor any necessary conformity to a rate tariff, in some cases, it was observed recently that for the identical itinerary taken three days in a row by the same passenger, he was charged three different rates. That doesn’t happen in a corporate ground transportation program with pre-established rates.
  • Mobile application providers excuse themselves from any liability or risk from providing the service as their drivers are owner-operators. This unlike the corporate black car providers who provide insurance, services to drivers and corporate clients alike.
  • Mobile applications are not capable of capturing nor storing (to profiles) critical company requirements information, such as the passenger’s employee id, cost center, client matter #, project or cost codes, necessary to earmark these expenses correctly to clients and for accounting purposes. With 75% of the ground transportation spend in the greater NYC area still direct billed or account payment type, this is a critical issue as expenses normally billed back to a client can end up unallocated, costing these companies revenue recapture. This is often lost on the typical end user or passenger.
  • All car charges are via credit card and are generally Point of Sale where pricing is final in the vehicle ; there is no data or rate “scrubbing” to sanctify the rates charged is correct in an industry where billing issues and overcharges occur frequently.
  • For Corporations who are still on a direct billed or account billing process with their corporate suppliers, the redirection of significant ground transportation spend to the T&E system, causes several significant drawbacks.  T&E systems often have limited reporting. By having to manage corporate ground transportation expense in both direct billed and credit card payment methods means loss of consolidated reporting and “split” allocation corporate ground transportation expenses. Also credit card companies do not provide the full pricing detail that is typical in the industry. This is called “level 3 detail”. Credit card companies are typically only able to provide Level two detail, e.g, total ride cost only, to expense management systems.

What is the optimal solution for the corporate ground user?

  • Corporate end users should make sure that any of the mobile booking companies are approved vendors for the company they work for, or else they risk being reprimanded for violating company policy
  • Deploy a mobile corporate car booking system that your corporate ground transportation providers can provide, or,
  • Use a mobile corporate car application like Sedan Magic that can be linked to your existing corporate ground transportation booking system/platform.  This will allow you to leverage:
    • Your existing suppliers to maintain contractual obligations
    • Maintaining your contractual pricing and pre-process scrubbing process
    • Follow your corporate-approved payment and reporting process
    • Captures the critical company requirements data (and validates it)

     

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

 

How Much More Can Some Consultants Squeeze out of Outsourcing Services Contracts

With the advent of more and more consultants in the Office Support Services Outsourcing Providers space and their approach treating traditional outsourcing services like a commodity, it’s resulting in retreating margins for outsourcing providers and potentially harmful effects on the quality of the services that come out of these new contracts.

It’s a well-know fact that in its hey day of the late 90′s and earlier part of this decade, it was not uncommon for Office Support Services outsourcing providers like Merrill Corporation, Williams Lea, Pitney Bowes Management Services, OCE, IKON, DTI and others to enjoy profile margins that exceeded 20%.  But since the economic collapse in 2008, resulting in mega downsizing and cut back in services, headcount and equipment, those margins have shrank.

In practicality, it was unrealistic for law firm clients to expect outsourcing providers to reduce their costs in earnest for their on site operations, as that would result in lower revenues, hence lower margins.  Many of those firms turned to consultants like RAS Consulting back in the late 1990s and 2000′s to execute competitive bidding processes via RFPs to secure savings.

Then in the past three years or so a new crop of industry consultants have come along, like Profit Recovery Partners as well as a new approach by existing industry consultants like Mattern & Associates who treat these services entirely as a commodity, like office supplies. For these consultants, price alone is the driving force, pressuring participating vendors in an RFP to reduce their pricing on levels so extreme by pitting one against the other, it has resulted in single digit profit margins on these projects.

While the consultant no doubt met their “savings” targets to justify their considerable fees,  they often leave the vendor and the client with a residual arrangement that is unsustainable.  As someone who has worked both on the corporate side and for outsourcing companies, unlike most of my competitors, there’s an old saying that a bad business deal is no good for either side. In RAS Consulting’s view, a vendor/client relationship has to be a win/win for both, meaning sustainable, healthy profit margins but cost effective services and a true partnership that continuously strives to be cost effective.

The vendor, in order to meet the miniscule profit margins left on the contracts, was forced to cut wages, use temporary personnel, reduce training, benefit packages to employees, a myriad of cost cutting moves that hurt not only the employees, their morale, but the services themselves. These less qualified, less compensated, less motivated personnel often result in more mistakes, errors and less dedication that in the legal business can be catastrophic. This is where one lost package, misplaced document original can result in loss of a client or case costing tens of thousands of dollars or more.

How does it work? The traditional competitive bidding process, the nexus of these processes even before consultant’s involvement, was to bid out and throw out the highest bid and the lowest bid. Now the lowest bid, often unattainable, is now becoming the benchmark for all the other participating vendors are being forced to reconcile to in these processes.

Vendors interviewed by RAS Consulting acknowledge that the industry is changing in terms of its revenue source from the traditional “bodies and boxes” now to more of a consultative, strategic resource offering as law firms look to outsource more and more functions to save money, especially in legal areas like eDiscovery, document production, document review, etc.

But as the current feeding frenzy and trend of consultants who continue to apply extreme pressure on pricing for outsourcing services–essentially taking money out of the pockets of these entry level employees–outsourcing will no doubt take its share of blows as service issues mushroom in frequency due to this dehumanizing process.

As one senior management person at Pitney Bowes Management Services (now Novitex) told RAS Consulting,  these consultants want to ruin the business by forcing vendors to accept ridiculous low margins and providing low quality services.  Senior members of other major outsourcing providers have echoed this statement.

RAS Consulting believes there are more creative and strategic ways vendors and clients can partner to reduce costs, re-engineer services, increase recovery revenue that doesn’t necessarily have to result in severe reductions in wages, benefits and quality of the outsourced workforce, to say nothing of the impact on their morale.

Above all, in outsourcing, you do get what you pay for and to expect to hold an outsourcing provider to unrealistic SLAs–while you’ve cut their margins and employee compensation levels might look good on paper, but it will likely back fire.

There’s certainly a place for good traditional procurement methods in running an RFP process, but let’s not forget, these are operations, they employ people, systems and procedures. Price pressure only dilutes the effectiveness of all of these. and when you diminish the compensation of human resources you rob their dignity, effectiveness and dedication.

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

-30-

Consultants Treating Outsourced Support Services like a Commodity is not the right way to go and can really result in a negative solution

Some of our consultant competitors are all about dispassionate cost cutting in their outsourcing RFP processes, treating office services outsourcing as a commodity. But the only people being hurt are you the customer, as these companies force suppressed wages on the staff that do the work, resulting in higher turnover, mistakes, low morale and service levels failure.

Of course in today’s environment, cost cutting is critical for non-revenue generating support areas and every reasonable cost cutting measure must be explored, and unfortunately, because the vendors earn margin on every person, every piece of equipment they provide, they have a dis-incentive to cut costs in your outsourcing contracts. But don’t compromise everything to save a few dollars that could end up costing you in the end by reducing these services to a mere commodity, like office supplies or library services.

What some of my competitors will do as their primary strategy in their RFP processes, is pit an incumbent vendor against one or two others in a competitive bidding scenario, but rather than letting the competitive bidding scenario drive pricing via market conditions, these companies come up  with arbitrary “savings” targets they claim are based on benchmarking, but it really isn’t, as office support services is an organic, operational service, not about the old “bodies and boxes” theme.   How the services need be provided depends on a number of operational nuances and your culture, not just benchmarking. Do these companies understand that? I think not.

The result of these scenarios, is the client finds a new vendor willing to essentially absorb the incumbent vendor’s personnel at below market rate, thus reducing costs, but with two very negative by-products:

1)      The “winning” vendor ultimately writes a deal that is barely above costs because they can’t in practicality reduce the incumbent employees’ salaries to the level of the consulting company’s arbitrary targets—so the vendor’s margin shrinks.

2)      Secondly, the incumbent vendor’s staff are now paid less, with less benefits, to do the same work, which is not only bad for them, but bad for the industry in general as it will prevent good talent from pursuing careers in this field, resulting in lower employee standards, poorer quality work and ultimately, to you the client, mistakes and service failures. It could lead to outsourcing of the labor pool to these outsourcing companies, now competing for lower cost temporary staff to fill the inevitable staffing void, which in the past has had mixed results at best.

All it takes is one late package, mis-delivery, lost FEDEX and bungled copy/print/scan job that can mean the difference between making a filing, losing a case, or worse, a client. Is it worth it?

What’s the better solution? The combination of sound procurement procedures in a competitive bidding process AND the understanding of the operational and people elements of servicing to forge a reduced-cost but still functional solution that is a win-win for the vendor and client alike.

Whoever is telling you that it no longer necessary to have a win-win scenario between you, the client and your vendor, isn’t likely going to be around six months after your new contract when it collapses. By then, the predatory consulting firm will be long gone on to another client repeating this process.

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

How to Know if you’re getting a competitive Per Click Service and Maintenance Rate on your Office Copier/MFDs

With the advent of more reliable copier/MFDs (or multi-functional devices), both the actual lease/sale price of the device and its accompanying service and maintenance per click costs have come down markedly in recent years. Service and Maintenance pricing, is usually in the form of a per click or per copy/print (but NOT scan as this should NEVER be chargeable by your copier service vendor).

Among the four large copier manufacturer players, in recent copier/MFD equipment, service & maintenance RFPs RAS is consistently seeing per click rates for service in the neighborhood of $.005 for black & white and $.05 per click for color, unheard of rates just five years ago.

Copier servicing costs are determined by suppliers from a complex formula that essentially benchmarks the # of copies between service calls, the cost of device consumables, all the variable costs that factor into service/maintenance per click rate. With devices running longer in between service calls, consumables coming down in price (with the additional influx of recyclable consumables) this have been pushing the service cost down to record lows.

However, in an example of an act of God,  the tsunami/earthquake in Japan a few years temporarily took its toll on product from Ricoh and Canon as well as consumables, which impacted service and maintenance costs to some degree in the years that followed.

One final thought about service and maintenance and that is each copier band or model typically has its own service and maintenance rate. Central Copy Center duplicator or high band devices like a Canon 105 page per minute devices have a much lower per click rate for service & maintenance than a low band copier/MFD that copies/prints at say 22 pages/minute because the duplicators generate high volume copies between service calls and the low band device produces far fewer copies between service calls. It’s not uncommon to see a fairly wide disparity in the service & maintenance rate between say a duplicator (at $.005 per click) and a low band device like a Canon 2022 which could have a click rate of $.0104–three times higher than the 105 copy per minute device!..

In most cases, the copier service provider will provide a “blended rate”, which means they will “average” the variable per click rate of all the different models provided in a customer bid. But be wary that they FIRST compute the total service and maintenance costs for all devices then divide by the total # of clicks to arrive at an average per click rate–they don’t just take an average of all the variable rates! In a recent RFP, RAS noted a vendor that did just that–they averaged the variable click rates of about 6 different models, irrespective of the volumes for each band and came up with a composite average of $.008–still less than what the customer was currently paying, but a statistically incorrect rate.

When RAS applied the various click rates to the different bands and computed the service and maintenance costs based on a monthly average copies/prints baseline for each device specified, the sum of the charges divided by the total clicks came to $.006, not $.008– a savings of over $60,000/year based on this customer’s high volume!

So remember to always verify a “blended” click rate by applying the variable rates to the individual devices by band and taking the overall average–not just the average of the variable rates–you have to use the all-important weight factor of where the clicks occur. In most cases over half of your clicks will be generated on Copy Center equipment, which should greatly offset the higher per click rate of convenience equipment at a higher rate.

Finally, Facilities Management Companies may charge a slight markup on their equipment, service and maintenance to cover their sourcing, technical integration and ongoing support, above and beyond the placement of the equipment and the service and maintenance. While many view this as a necessary “value-add” provided by most providers at gratis in some cases, remember you get what you pay for. In RAS’ view it is acceptable for the vendor to tack on 5% or so margin for the overall fleet management of the equipment–but impose SLAs to ensure they are meeting a high standard!

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

-30-