The Outsourcing Blog..."Horses for Sources"

How to make your boss look good

I recently had the pleasure of meeting with Kulwinder Singh, who heads up marketing for SatyamBPO in Hyderabad. It's great to meet a marketing guy who generally get's it.  Check out how he placed a picture of Kishore Rao, SatyamBPO's Head of Quality, receiving a Six Sigma IQ Excellence Award on a giant billboard in New York's Times Square...

 

Preparing the new organization for life after outsourcing

I wanted to share an article from last year that discusses how enterprises today can better prepare their key staff for life after outsourcing: 

The outsourcing debate over recent years has been dominated by the operational ability of companies to transition processes to a third-party supplier to manage. Too many companies have presumed their business will carry on as it was pre-outsourcing, but with third-party staff managing some of the business functions. However, in the majority of outsourcing efforts there is a degree of employee transition, and when this happens there are leading practices for both transitioning and restructuring the retained organization.

Experience demonstrates that those companies that proactively prepare their management effectively to:

(1) Modify their roles, responsibilities, and management styles,

(2) View outsourcing as a strategic tool,

(3) Learn new skills, and

(4) Change their daily routine...

...are those that are able to achieve value from an outsourced environment.

The full article is featured in Crossing media's HROToday magazine, and can be accessed here

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The TSA awards its HRO engagement to Lockheed Martin - an overreaction?

There's been a lot of noise in the market this week concerning the TSA's award or their HRO contract to Lockheed Martin.  While this is clearly a bold move into HRO for Lockheed, this isn't likely to prove a major loss for Accenture.  Why?

Process Optimization is the key to successful Procurement BPO

I was recently engaged in an excellent conversation witn Gianni Giacommelli, who leads marketing strategy for SAP's BPO division, on the way forward for the Procurement BPO market.  One of the aspects about SAP that has impressed me, is their strong view of BPO as a opportunity, as opposed to a threat, to their business.  Gianni's boss, Christain Baader, has performed an excellent job driving this strategy in recent years, and made his case-in-point last year where he discussed why technology is an important key to BPO-sustainaility.   BPO is all about driving common strandards that can help service providers leverage their service staff and technology applications across multiple clients in a utility model.  So what better opportunity is there to encourage enterprises to standardize on a common ERP archtecture than when they evaluate BPO opportunities for their business?  And it's not solely about BPO, it's also about globalization: the more global enterprises can encourage their country-level businesses to operate within a global process template for functions such as finance, HR, sales and procurement, the quicker they can access critical data to make global business decisions.  Without digressing further, I asked Gianni to summarize our conversation regarding the development of procurement BPO solutions, where many of the leverage points for cost savings are driven through process and platform optimization, and not solely labor arbitrage.  Over to you Gianni:

WNS enters the BPO big-time

So the long debated and much anticipated saga of the Aviva BOT (Build-Operate-Transfer) has finally been resolved, with WNS Global Services taking on a $1 billion contract to become the British insurance giant's BPO provider of choice for the next 8 years.  WNS will be assuming all of the current 24/7 Customer contact center work and some of EXL Service's F&A work, with the latter's contract remaining until 2012.  This contract follows a storming 2007 for WNS, where the Mumbai-headquartered firm has made significant inroads into both financial services and retail sectors, in addition to its already dominant position in the airline sector. 

Some key points

What the hell is KPO and where is it going? Answer: PhDs on tap

During this year's NASSCOM BPO summit, we were subjected to a deluge of three-lettered acronyms which (let's face it) aren't particularly relevant today - as Pramod Bhasin so eloquently opined.  And while "BPO" is clearly a broad and fluffy term that is now used to to describe any type of outsourced process solution that isn't IT, "KPO" is even more vague.  In fact, I discover a new firm daily which claims to have a "KPO" solution, ever since I invited every man and his dog to partake in my new research effort.  And when you have the Chairman of NASSCOM asking "what the hell is KPO?", you know there is a communication issue out there.

So why should we care? 

Sourcing advisors - your opinion is valuable

We've had some pretty spicy debating this year about the role and importance of third-party sourcing advisors.  In addition, we've had lively discussion on the boutique advisors which are proving to be an active low-cost channel for many buyers.  As part of my ongoing research into this market, I am very interested in what today's buyers and providers of outsourcing services are experiencing with the sourcing advisor medium.  Please take a few minutes to add your opinion here. And yes, you can remain anonymous if you prefer.

The Evolution of Captive and Outsourced delivery models for business processes: what is the right option for your company?

We are privileged to showcase the following incisive article from my good long-time friend Graham Russell, who leads Global Transaction Processing for pharma giant AstraZeneca.  Graham has been a long-established and respected authority on shared services and outsourcing for many years, and is one of a rare breed of executives who has had many years of experience managing both models.  I can't think of many other people in the industry more qualified than Graham to discuss the merits and shortcomings of both captive and outsourced delivery models.  Over to you Graham:

Birth of captives

Once upon a time, global and pan regional companies operated as a collection of single country businesses. Their back-office financial support was organized in the same way, with processes and systems being developed at a local level in each country. In the eighties, new global companies such as Microsoft entered the scene and were able to quickly organize their businesses and their back-office support services in a different manner since they were able to start with a clean sheet of paper, making them appear lean and nimble.

The emergence of the Indian suppliers in HRO: the answer to HRO's slowdown?

One of the most interesting discussion points I had on my recent visit to India was centered on the eagerness of some of the India providers to infiltrate the HRO market.  I recall the entry of the Indian top tier into HRO three years' ago, and have to admit I was skeptical.  Not many people believed you could take broadscale HR services offshore and run them successfully, while saving money for clients at the same time.  However, times have really changed since then, with the Indian top-tier now competing aggressively for hybrid IT-BPO contracts. What's more, the Indian providers are very good at working out how to take on back office work remotely.  It's their focus - and eagerness - to take on ground-up processes, such as payroll, data management, document fulfillment, which is driving a breath of fresh air into the flagging HRO business.

A final word from India: moving beyond "old BPO"

As we discussed last week, BPO is rapidly evolving into "Global Services Provision". Most enterprises ventured into early BPO engagements to take advantage of the quick cost-savings on offer from employee remediation, using low-cost offshore labor on offer from outsourcing service providers. Many enterprises undertook BPO in times of financial distress, their priority centered on their year-end balance sheet and satisfying short-term shareholder demand, as opposed to long-term strategic thinking.

NASSCOM dispatch: "We're now past the era of BPO" (Pramod Bhasin)

Have just listened to the inaugural NASSCOM address delivered by Som Mittal (President, NASSCOM), Ganesh Natarajan (Chairman, NASSCOM), Shri Jainder Singh (Secretary for IT and Comms Department for the India Government) and Pramod Bhasin (CEO Genpact).  My main observation is the level of energy, passion and enthusiasm for the industry by the speakers - a far cry from some of the tired, jaded speeches I have been subjected to in the States and Europe recently. 

Musings from abroad... dispatch #3... Indian drivers

Welcome to a rather cool and cloudy Bangalore in June.  Indians have no concept of how to slowdown in traffic: cars, motorbikes, trucks and buses all focus on where they are headed, and, as opposed to their looking around to check the way is clear, they hoot their horns to tell others to get out of their way, with a fearless disregard of the risks and consequences. The same can be said of their rampant services industry, where their businesses have refused to slowdown, check their wing mirrors or pad their brakes, in fear that their revenues or profit margins will be seriously derailed.  Here's the evidence:

BPO: It's all about taking ownership to get results

Our last debate about about "Platform BPO" got me thinking more about how outsourcing PMOs can be more successful at delivering these engagments, and reaching a desirable operating state sooner.  While my good friend from SAP's BPO group, Gianni Giacomelli, makes an excellent point that service providers need to leverage economies of scale and process optimization ruthlessly to hit their targets, it also raises the question of how outsourcing PMOs within the buyer need to step up to the plate to take more owenership over their outsourced processes.  (Gianni wrote an excellent piece here last year entitled "Why a good BPO provider is not enough for a successful BPO service delivery" on this topic).

Many BPO engagements are currently a lot more complex than IT outsourcing engagements, where there are many additional challenges from the buyers' standpoint, namely training personnel, mapping new processes, transfering knowledge, establishing realistic service levels, developing workable reporting models and understanding which processes can be offshored successfully, and which of them should remain onshore - on inhouse - with the buyer. 

Finance and Accounting BPO continues its growth path

As we picked up on here a few weeks ago, the F&A BPO market has had a red hot 2007, and this growth is continuing into this year.   The market saw a 30% growth in expenditure, a 20% growth in total contracts, and new contract expenditure totaling close to $4bn in contract value.  So a record year and a critical mass is being reached.  The barriers to entry in this market are getting harder and we're getting a clearer picture of how this could play out.  So, what's driving this, and who are the key players?  Read my aticle in the new issue of FAOToday magazine.

HRO Redux: 8/10 buyers don't look back, while the vendors look ahead

Following our recent discussions surrounding the successes and challenges of the HR Outsourcing (HRO) industry, I was sent a recent study from Erik Samdahl at the Institute for Corporate Productivity, which canvassed the opinions of 231 senior HR executives, mainly from large organizations, and has some telling stats on the future direction of HRO, which I wanted to share and interpret with you. There are two key observations from this study that standout in my mind:

Musings from abroad... dispatch #2... meet me at Nasscom

I'm leaving for a tour of the sub-continent next week, stopping in Delhi, Mumbai, Hyderabad and Bangalore, where I will be speaking at the Nasscom BPO strategy summit chairing a CEO Panel looking at BPO competitiveness.  Key discussion points will focus on:

• The survival prospects of pure-play BPO providers to compete effectively with the IT and business process The importance of knowledge process outsourcing to the future of successful BPO solutions
• Whether BPO vendors should take more responsibility for helping their clients establish stronger and more effective governance capabilities
• Measures BPO providers should take to add more value-added servicesinto the engagements to ensure their clients receive ongoing quality
• India's major strengths and challenges with BPO in the medium-to-long term and whether Latin America, China, and other regions could threaten India's current dominance in BPO

Drop me an email if you want to meet up while I'm at the show.

Join the BPO and Offshoring Best Practices Forum

Sign up now!

I am extending an invitation to HFS readers apply to join our new networking group on LinkedIn entitled the "BPO and Offshoring Best Practices Forum" - we already have 850 members signed up.  This is intended to be a forum for leading outsourcing executives to share their experiences, views, opinions, best practices and lessons learned in the world of business process outsourcing and offshoring.  You will also get a chance to participate in a "State of the BPO Industry" online survey next month.  And it's FREE.

 

BPO partnerships are opportunistic, rarely strategic

Having worked closely with both ICG Commerce and Genpact for the last few years, it was a positive step forward for the firms to announce a partnership, but I believe the companies should go a step further and merge.  Partnerships like this are normally opportunistic; they help the firms team up for broader finance/procurement customer bids, as they can be vulnerable when competing with Accenture and IBM, which have broadscale finance & accounting (F&A) and Procurement BPO solutions. 

Happy birthday Horses for Sources

124 posts, 548 comments and ONE YEAR later, this blog continues to (somehow) prolong the dialog on the "O" topic.  I have learned so much from some of the excellent views, opinions and insights from so many of you - I hope some of you have too.

Here are some of my favorite highlights:

Can this Marriage Be Saved?

You may recall the excellent guest post "Upward, Onward, Onsource!" by my good friend Deborah Kops, back in November last year.  Deborah is widely recognized as one of the outsourcing industry's foremost thoought-leaders, having led global transformation efforts at Deutsche Bank and Bank of America before helping to establish PwC's outsoucing division.  Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO and KPO provider.  BPO today is all about governing your service provider relationship, and whether or not you view your vendor as your partner, the whole experience is certainly like a marital relationship (better hope my missus doesn't come here...).  Thanks Deborah for sharing this great article with us... over to you:

Will the EDS acquisition spark a BPO feeding frenzy?

So HP acquired EDS.  Wow.  Biggest services news since HP acquired Compaq a week before 9/11?  In my opinion it is, anyway.

We discussed here in January the issue of consolidation among large outsourcing suppliers, and the general view was one that we would be unlikely to see acquisition among services firms that were similar in nature:

Outsourcers like to acquire firms that bring something new to the table to enhance their outsourcing offerings - for example new technologies, or a niche expertise that gives them competitive advantage.  Too many large outsourcers are too similar... they overlap too much and a merger would often end up as an unprofitable exercise and result in a mass exodus of key talent.

Knowledge Process Outsourcing (KPO)

I am in the throes of writing a series of research articles in this area and welcome any contributions from people in the Knowledge Process Outsourcing (KPO) industry.  If you are a user of KPO services, or an outsourcing vendor providing them, I would like to hear from you.

As companies tackle how to leverage third-party services for activities that require a certain level of customization, we are seeing new and established outsourcing service providers branching into KPO services in areas such as financial, legal, marketing, sales and accounting services.  While BPO typifies services that are relatively standardized, KPO represents those that require tailoring to the needs of the customer.  The benefits go beyond simple cost-savings and provide resources and skills that many firms simply do not have, or do not wish to employ inhouse full-time.  For example, most enterprises today cannot afford a full-time inhouse attorney, so use third-party legal services as and when they need them.  But why go to a top-end law firm when you can now get many legal services provided from offshore outsourcers, such as Infosys?

Bored? Look no further

Clearly you have far too much time on your hands if you're spending time here, so here are more places to go to fill those vacant hours.  This is especially for all you sourcing consultants who went out of your way to vote for yourselves as the "top place to go to get balanced advice on outsourcing" - c'mon chaps get real -:)

IBM vs. Tata: Who's More American? - Businessweek's Steve Hamm raises some incisive points, namely, TCS, India's largest tech-services company, collected 51% of its revenues in North America last quarter, while 65% of IBM's were overseas.   Builds upon some of the issues we discussed here last year;

HP/EDS redux

I know several of you are hounding me for my views here... we've put out a couple of pieces on this today at AMR - check out Bruce Richardson's blog where he raises the discussion. 

I have to confess this one came completely out of left-field while I was traveling, but does tally well with HP's focus on bundled BPO.  All-in-all, these are my key takeaways from this eventful day:

No-one saw this one coming, most of us were expecting one of the Indian providers merging with EDS.  This now raises the possibility of further mergers in services, even though this was looking unlikely until recently.  The incumbent Western providers need scale and depth to compete effectively with the lower-cost Indian firms, and we could see a response from one of the other top tier firms to swallow up one of the vulnerable services firms.

On the BPO side, this is a great move, with the merger filling both companies’ BPO portfolio gaps, most notably in finance and accounting (F&A) and HR processes.  As we discussed a few weeks' ago, BPO market leaders Accenture and IBM have already been aggressively pushing their combined portfolios of finance and accounting and HR BPO services, with increasing emphasis on bundling these services with their application outsourcing services.   HP is looking to follow suit, with the likes of Cap Gemini, Infosys, Wipro and TCS avidly observing how they can broaden their global BPO and IT services depth, scale and industry specialization.  Now HP has deep HR delivery expertise to draw on, which elevates its bundling capability, in addition to EDS's $1 billion call center outsourcing and global IT services business.

Culturally, this is definitely an odd one to fathom, but Mark Hurd has the track record and financial discipline to make this merger a success.  He also got a good valuation for the firm, so now was probably a good time to strike.

Interesting times... maybe we'll have some more days like this in the coming months?

Whom do you trust for balanced outsourcing advice?

I wrote a piece entitled "Blog-culture is ripping up the rule book for the outsourcing services and technology media industry" a few weeks' ago which raised a few eyebrows.  OK, it's a litttle biased and I was on my high-horse, but it did raise several questions on where people go to get balanced, insightful information on the outsourcing industry that they can rely on.  So, please choose your preferred three information outlets on the poll to the left side-bar.  And please be honest :)

For the results of this poll, please click on the continuation sheet.

Retail therapy....replaid

For those of you who missed today's webcast on outsourcing and offshoring for the retail sector, you can access a replay here.

Why are you calling it outsourcing in the first place?

I've been enjoying some great comments from people these past months and thought it time to highlight the occasional contribution that got me thinking "good point!".  The recent post entitled "Is it time to dump the term outsourcing?" has - and still is - produced some superb discussion, in particular one comment from Robert Jakobson, a program manager and 15-year veteran with IBM, Microsoft and Sun Microsystems, who puts forward a great argument on why some enterprises use the "O" term in the first place.  Enjoy.

Are we reaching an inflection point of business globalization?

I can't help feeling we are entering into a critical phase of business globalization, due to a convergence of factors.   We have seen these global dynamics in play for the last 30 years, but we are now in an economy where today's CEOs are aware they need the tools at their disposal to become truly integrated global enterprises.

I was privileged to have a preview of IBM's new study of 1100 CEOs this week at its analyst event in New York, and, while the findings are under embargo until next Tuesday's public release, I can say they reinforced one thing for me:  the vast majority of today's CEOs recognize the need for change, and are more prepared than ever to be bold and adopt measures that can drive rapid change through their organization.   So why is now different from that of 5 years' ago, or 25 years' ago?

Is the sub-prime lending crisis placing outsourcing engagements on the backburner, or providing an impetus to proceed faster?

UBS has shelved their planned HRO engagement with ACS and IBM as a result of its issues with the sub-prime lending crisis, the economy and their internal business uncertainty.  Like the recent Starbucks cancellation of their HRO engagement, plans have been waylaid to progress into a major HRO implementation due to changes in the business, as opposed to any operational issues.

What concerns me is the level of short-term-ism that some companies are currently adopting, with their looking only at the next quarter, as opposed to the longer-term picture.  I do believe this crisis will provide the outsourcing industry with a mixed-bag of opportunities, with some firms viewing the bigger picture and moving more aggressively into outsourcing initiatives, and others, like UBS, deferring decisions over long-term initiatives such as HRO, as they monitor the current economic situation and figure out their survival tactics.  Surely this is a perfect time to embrace changes to your business that will drive lower operating costs and new ways of doing things?  I'd be interested in your views....