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Executives at Grupo Nacional Provincial (GNP) know all about the value of research. Statistics and other research information are part of their day-to-day business as the largest insurance company in Mexico. Therefore, when the company was considering outsourcing part of their Information Technology (IT) functions, the first step logically was research.

"We did research about vendors that we have available in Mexico," said Jorge Valdes, outsourcing services administrator. "We had good information from Gartner Group regarding who are the leaders of the outsourcing market in the worldwide industry. We tried to identify the key issues."

Based on their research and references from Gartner, GNP selected EDS as their outsourcing vendor earlier this year. The contract is for facilities management of all data center functions. Employees have been transferred from GNP IT operations to EDS, but the insurance company retains ownership of all equipment and software. The fact that EDS has maintained an office in Mexico City for over a decade was a major factor in GNP's decision. "It was very important to us to have local support," said Jorge Sanchez, technical consultant/special projects.

Other major issues identified by Valdes and Sanchez were meeting their deadlines, based on the response time of the vendor, and having a good understanding of the terms of the relationship written in a foreign language. Language is important, said Sanchez, "because before negotiating a contract, you have to understand all of the business issues, what you want and what the vendor is offering you."

Since the negotiations were conducted in English, GNP hired an American attorney. However, Valdes stressed the need for the vendor to be fluent in the Spanish spoken in Mexico. Even vendors from Spain or Argentina, he said, can have different names for things such as computers.

"It's not only regarding the language issue," said Valdes. "It's very important that the people on the vendor side know the environment and culture of country and maybe the city. Without that, it could be difficult to have a mutual understanding."

GNP also was meticulous in handling such key issues as the transition of personnel. "It's a very delicate issue," said Valdes. "There were people who had been working here in Grupo for the last 18 or 20 years. We tried to be very careful with all of the issues managing the transfer of people. In fact, we told EDS that we wanted to write the contract instead of them."

GNP went into their search for a vendor armed with a clear idea of what they wanted: to address all of their efforts to satisfy business requirements, to improve service levels, and to obtain savings. They also knew specifically what they wanted the IT function to provide.

Although the relationship is still in its infancy, it appears to be addressing GNP's needs. Consultants specializing in applications development and technology integration are responding to internal clients' requests for competitive solutions. Operators of the auto and health claims areas have access to better customer information.

"We have developed some systems that permit the agents to issue some policies by phone or fax to simplify delivering policies.," said Valdes. The only cloud on the horizon is an internal one. Sanchez said they have been discovering a lack of administration on their side of the deal. "We weren't as careful as we were on other issues in constructing an administration model for dealing with EDS in the day-to-day matters," he said. "We didn't consider that you have to prepare a specific group to deal with the vendor on a day-to-day basis, so we didn't have all the administrative support to work with the vendor and their group."

The results of that oversight have shown up in service levels, where Sanchez said there is room for improvement. "In some cases, service levels have improved," he said. "In some, service has remained the same, but others have a lower service level. We're working very hard on that issue."

GNP appears happy with their outsourcer selection and with the decision to use an American firm. Valdes said one benefit of international outsourcing is access to technology and concepts not familiar to the customer.

"Another benefit is that the vendor is a specialist in performing the functions that you are outsourcing. That's why you're looking for a vendor that is the market leader," he said. "You're hiring the best practices in the functions you are outsourcing."

Lessons from the Outsourcing Primer:

• Do your research before selecting a vendor.
• Have clearly defined needs and goals.
• Be meticulous in handling delicate issues, such as the transfer of personnel.
• Have an administrative group ready to deal with your vendor on a day-to-day basis.

Publish Date: August 1997

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Copyright © 1997 - Everest Partners, L.P.

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