The Outsourcing Blog..."Horses for Sources"

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?

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.

HROWorld 2008: An industry re-inventing itself

Braving the annual industry HRO schmooze fest this year, I realized I was emulating Roger Federer’s extraordinary Wimbledon run by making it to my fifth-consecutive show.  Only an elite few have made all six – at least I can’t claim that honor -:)

From the moment I stepped into Naomi Bloom’s Brazen Hussies event on Tuesday night and was ordered to eat a heavily-garlicked vol-au-vent with the instruction “we’ve all had one, and so should you”, I knew something interesting was in the air this year.

For starters, all the industry big-guns were there; the leading HRO providers with all had their head honchos; the sourcing advisors; both SAP's and Oracle's BPO teams espousing the virtues of outsourcing on their ERP platforms; every staffing, benefits, talent management, data-something-or-other firm you’d never heard of; and even a few mercenary analysts dotted around the place.  We even had a new double-act to entertain us – the Elliot and Richard show, moderated by the vivacious and cabalistic Jay Whitehead.  This was one networking event when you just had to be there.

So, in true HROWorld tradition, I slammed myself with 20 back-to-back meetings over the two days, supplemented with a constant supply of stale coffee and a constant stream of sales literature I will cherish for a long time (ahem). 

My overall impression of the state of HRO is one of re-engineering to get this right.  This was the resounding message I got from several discussions with the market-makers in this industry. OK, we’ve had a few non-starters recently, but let’s emphasize these were projects that were cancelled before any implementation work had taken place, and in several cases, the contract had just never quite made it to fruition.  This doesn’t imply that HRO is failing; it implies that some businesses have made strategic decisions that now isn’t the right time to undergo open-heart HR surgery on themselves.  And do you blame some of these firms, when the bottom has fallen out of their industry and they might just have some other urgent priorities to rectify?

I wrote a year ago that the industry crystallized around the Convergys/J&J deal, and I was right.  What I liked about this show was the serious discussion on what works in HRO versus what doesn’t.  There was a refreshing honesty from almost everyone regarding the steps suppliers and buyers need to take to make this work…and so much less hype.  In fact we had so little hype, we could have used some.  Most of the suppliers are seriously focusing on what they are good at, and crafting HRO solutions based on their core strengths.  The need for standards and common service levels was discussed at length, with several ongoing initiatives in the industry currently focused on the joint-development of common HR standards and technologies that enable a more robust, repeatable HR delivery model. 

There was universal recognition that HRO works when solutions are crafted from the bottom-up, with services added incrementally and HR leaders having more time to develop successful governance practices, as opposed to some of these massive end-to-end “big-bang” deployments, that have often resulted in a misalignment of expectations and delivery.  This isn’t failure or disaster; it’s a 9 year-old industry testing the boundaries of what works - and what doesn’t.  I’ve been at pains recently to point-out that 97% of HRO deals have succeeded – and by succeeded, I emphasize that they are plugging away to get this right.

Let’s be brutally honest here, this is business process outsourcing – and this is a tough complex business, where things can only go wrong.  You really cannot judge the “success” of any major outsourcing engagement until it’s at least 3 years’ along and transition has been completed.  The day of the billion-dollar mega-HRO deal may be over for now, but take some time to look at the plethora of these “bottom-up” engagements taking place, where companies like ADP and Ceridian are racking up their HRO clientele at double-digit growth rates; look at Hewitt’s re-focused strategy on centering its core benefits outsourcing business as the kernel of its HRO delivery model; and look at Accenture's and IBM’s continuing efforts to optimize their global HRO engagement models, with HR service-delivery centers employing thousands of service personnel across several global locations. The seeds of this industry have been sewn, and we’ve had our reality check.  Now it’s time to move on and watch some great companies make this thing work.

March madness: little advisors, Starbucks redux, F&A is bubbling back... and EDS gets active

So what was the month of March all about?

Little outsourcing advisors.  The outsourcing advisor debate continued on Deal Architect.  We opened the debate here where we discussed the plethora of small boutique outsourcing advisors that continue to be influential advising on outsourcing engagements.  We also kicked off a heated discussion thread when we discussed what enterprises should look for in an advisor.  Vinnie makes some interesting comments on why many firms find advantages with the smaller players, especially when established advisors can suffer from Stockholm Syndrome and refrain from aggressive negotiation tactics with large vendors.  Bottom-line, it's "Horses for Courses" when enterprises decide what's best for them... now where is that recurring theme from again?

Starbucks redux.  Returning CEO Howard Schultz made a quick decision to perform a U-turn on the retailer's HR Outsourcing (HRO) engagement with Convergys, which got debated here.  HRO has proved too much of a distraction for the firm’s management and staff, as the firm goes through a major restructuring to improve its offering to its customers, close some US stores and slow down opening new ones.  With the contract only eight months old, you cannot cite operational issues as a prime reason for this reversal of strategy.  As only Convergys was involved in the initial blue-print deployment work, both parties can exit the agreement before any serious implementation efforts have started. With the press trying to find flaws in the HRO model, I have been at pains to point out that only a small handful of HRO deployments (3%) have actually been terminated.  While comprehensive HRO deals may be under continual scrutiny, the demand for smaller scope HRO solutions in transactional areas is still healthy, with ADP announcing it is servicing payroll for 100,000 of Sodexo's employees.  The fifth annual HROWorld show this year should be interesting... and yes, I will be there.

Finance & Accounting (F&A) Outsourcing is bubbling again.  There are a number of major F&A BPO pursuits well underway at the moment, with the market showing strong signs of a pick up this year after a slowdown in the latter half of 2007.  Watch-out for my upcoming report on this market in May.  My old friend Clarence Schmitz, who runs F&A BPO specialist Outsourcing Partners International, has also been busy expanding his company's footprint.  Only a week after he announced his firm had opened a new F&A service center in Gurgaon (New Delhi), I was invited to the opening of their new 280,000 sq foot facility in Bangalore in May.  OPI now boasts three facilities in India (their other center is in Kochi),  in addition to its Central European center in Sofia, Bulgaria.  And if you ever wanted some excellent - and low-cost - skiing, don't discount Bulgaria...

EDS is back onboard the public sector gravy train. It's been an interesting few weeks for EDS, with its contact center outsourcing and government businesses.  No sooner had it announced its joint initiative with Microsoft to develop its Dynamics CRM solutions for its call center business, that it announced it had been named one of the preferred suppliers to the General Services Administration's $2.5 bn Indefinite Delivery/Indefinite Quantity contact center services contract.  This comes hot on the heals of a mega $1.3 bn contract with the Singapore government's iDA to provide desktop services across Singapore 74 public agencies both domestically and worldwide.  Having lived and worked in Singapore, I can personally attest that the country is a true pioneer in developing Internet-enabled government services for its citizens. With EDS' recent initiatives to restructure its SAP services practice and its renewed focus on developing its legacy integration services, are we looking at a new era for the Plano TX firm?  My view is it needs to fill the F&A BPO gap in its delivery portfolio and it will have a completing array of BPO and IT services.  Don't bet against an acquisition this year to remedy this.  Drop me an email if you want to speculate further...

And more from Blogsphere in March....

Is your industry over-networked?

Is there such a thing as being over-networked?  While it's practically impossibly to get finance professionals, for example, to do anything but worry about their work and pry them away from their offices, HR folks can't seem to get enough of seeking out the next shindig where they can listen to best-practices all day long and hobnob with their peers from other firms.

My good friend Mark Stelzner, over on his blog Inflexion Point, has hit upon this issue with his coverage of the litany of member-based HR associations and consortiums.  I have never witnessed an industry which is as networked as HR.  Everyone knows everyone, and senior HR personnel seem to spend an exhorbitant amount of their time traveling to these conferences:

SHRM (The Society for Human Resource Management);

IHRIM (The International Association for Human Resources Information Management);

CLC (The Corporate Leadership Council);

HCI (The Human Capital Institute);

HR.com;

HROA (The Human Resources Outsourcing Association); and

i4cp (The Institute for Corporate Productivity)

It'll be interesting to hear your views on associations you frequent and whether your industry has the peer networking you need to do your job more effectively.

Managing talent in these economic conditions

As we reflect on enterprises' strategies for this troubled economic climate, people seem to be thinking about the same old "routine" approaches for battening down the hatches and riding this out - i.e. mass layoffs and budget slashes across the board.  This may be the case if this recession is longer and deeper than we fear, but in the shorter term, I am seeing many companies taking a different approach when bracing themselves for this forthcoming downturn than many past recessionary experiences.

February highlights

Some thought-provoking gems from February:

An Industry Gone Wild on HRM Technology Deployment:  HR luminary, Naomi Bloom, is on top form as she gives us a breakdown of the evolution of the Human Resources Management (HRM) software market over the past 4 decades, and discusses the influence of how IT and Business Process Outsourcing has given companies access to delivery models and scarce talent to run HR technology platforms.  However, she doubts today's HRM software vendors will achieve the Holy Grail of a true one-to-many model with SaaS, as they cannot create the "embedded intelligence across HRM processes" and has faith in HR BPO as the preferred deployment and payment model.  Well worth a read.

The NASSCOM 2008 Diaries: More Fog on the Windshield:  AMR Research's Chief Research Officer, Bruce Richardson, on his experiences and takeaways from the recent NASSCOM event in India.

Renewal Strategies for ITO Relationships:  TPI's thought-provoker Peter Allen is on the money discussing options enterprises have when they enter into renewal discussions with their ITO provider.  "Incumbent providers should not be retained on the basis of predecessor agreements.  A review of the current market conditions – meaning pricing, contract terms, and scope of services – is essential. We’ve observed that some clients can become complacent and trapped by the perception that the transfer of responsibility and institutional knowledge between IT service providers, or repatriation, becomes costly.....The pricing of the existing contract should be compared to the prevailing market for like services in order to gauge the range of anticipated future pricing"  I appreciate Peter's efforts to discuss some of these options for enterprises today so openly on his blog.  My view is that enterprises today need to use renegotiation as a great opportunity to get more value (process and technology) from their provider.  More on this to follow...

Mexico Sourcing:  That Margarita Never Looked Better:  Jason Busch on Mexico's attractiveness as a manufacturing sourcing location for US businesses.  "When it comes to the dollars and sense of importing manufactured parts and goods into the US on a total cost basis, the benefits that Mexico presents more than outweigh the risks."  Interesting discussion... builds on what we discussed here.

You're Not Consultants Anymore:   Brian Sommer on why consultants have become "order fulfillment specialists".   "People love to call themselves consultants even when all they do is show up at the same outsourcing data center and do the same task every single day.  Likewise, you are not a consultant if you routinely install the same software package using the same methodology that is sold through a menu of pricing options from which a customer selects. No, you're not a consultant."

Podcast:  Outsourcing in a Downturn:  And finally....yours' truly being grilled on the potential ramifications of an economic downturn on outsourcing trends by AMR Research's CEO Tony Friscia. 

 

The Human Capitalist got it right

   It's been one of the best running blog discussions of recent  months, where the Human Capitalist - aka Jason Corsello - predicted that Workstream would get acquired by Empagio.  Credit also to Mark Stelzner for hitting the spot with this one.   This is one of the first times I have seen a whole host of industry experts come together in one "location" to debate who would acquire who - and when it would happen.  A great example of blogging leading the media charge on an issue like this.  Interesting times we live in...

My 10 cents on HR and seats at tables

Firstly, thanks to all of you who contributed to the lively debate following the recent post "Will the HR function have a seat at the corporate table in 2008?".  I was merely highlighting some interesting thoughts from the Inflexion blog, and didn't expect such feverish input from so many of you!  (And before I continue, I promise this will be my final rendition using the corny phrase "seat at the table").  Anyway, I have been under pressure from several people to put forward my opinion in this topic, so here we go:

HR used to be  merely "personnel" and looked after the administrative activities related to basic employee needs.  It wasn't until the '80s when the wider berth of "Human Resources" was developed where HR would be activity involved in all issues people within a firm, and not just the basic admin, i.e. recruiting, organizational design and development, corporate culture, compensation, career planning and counseling etc.  The challenge of HR leaders was to get taken seriously at board level and prove their worth to the business.  Not an easy task where you are not directly related to revenues and there are always more "critical" issues to be discussed before people strategy.  The HR struggle had begun. 

Then came the onset of HR suites like Peoplesoft, whereby it became vogue for HR executives to apply metrics to their organizations to help base management decisions.  Where else in the company was there a more comprehensive view of staff profiles, compensation, attrition-rates and performance than in the HRIS? Hence, where finance departments could show the board how to budget and forecast the business to aid decisions, HR could (in theory) link employee performance with the business.  Part of the problem has been that HR (unlike finance, for example) hasn't done a good enough job of embracing technology to demonstrate real value metrics to the business.  It has been stuck in the weeds of blocking and tackling, and not focused enough in areas that get real board attention.

And then the wave of HR outsourcing hit after 9/11.  All this achieved was a very public dissection of the "strategic value of HR" as several high-profile companies grabbed at reasons to move out as many HR people as they could into service providers, or out of the firm altogether.  It has taken a few years for HRO to iron out its issues, but it had the impact of alienating many HR leaders within firms, and driving them further away from the corporate table.  However, I am convinced the HRO industry has now found its balance and the real HR issues are back at the forefront of many organizations' agendas.

My view is centered largely on the skillset of the HR professional today - it's too focused on the legal issues, compliance, managing the basics... and not enough on delving into corporate data to provide real input into driving a talent strategy into the organization.  Moreover, we need more "business managers" in HR - people who understand the real business issues, and how to help their firm hire, manage and retain key talent.  HR is the most important function in today's organizations, but it has simply not been developing in the right manner.  Hence, my thoughts are around HR helping to instill world class HR principles and practices into today's managers.  I once managed a team of 14 senior people and it was one of the toughest challenges of my life.  I needed support, advice - and a venting outlet - to help me do this effectively.  The success of my whole business function centered on my ability to be a good manager.  This is where HR, in my opinion, comes into play.  It is there to support today's managers, who are under ever-increasing pressure, to get the best out of their people.  I have seen so many positive examples of where this works in firms... and, unfortunately, some less successful examples.

Will it get there in 2008?  Professor Dave Ulrich, with whom I have enjoyed discussing these issues on several occasions,  outlines  excellently the roles HR departments must fulfill to deliver value.  His mantra is simple:  HR must play a role in implementing state-of-the-art strategies that are tailored to the needs of the business... an "operational executor role".  In a world of rampant change, where firms are constantly globalizing, restructuring, outsourcing, divesting and acquiring, the need for the operational executor has never been so intense.  It is my belief that we will see the roots of this happening in 2008 - otherwise businesses will struggle to survive and change in these complex times.      

The worst mistakes companies make when they evaluate BPO - and how to avoid them (Part I)

"Best Practices" are formed through the experiences of firms innovating and trying out new ways of doing things.  So - in reality - that means they'll tell you where they messed up and give advice on how they got it right (or how they would do something differently second-time around).  BPO is no exception... in fact, it's probably a shining example of how to learn from others' mistakes :)

Here, in my experience, are the most common mistakes companies have (and many still are) making when evaluating BPO:

A great debate on HR

Folks - incase you hadn't seen it - check out the discussion thread for the recent post "Will the HR function have a seat at the corporate table in 2008?".  Some true heavyweights from the HR world have chipped in with some great insights.

Will the HR function have a seat at the corporate table in 2008?

Mark Stelzner, author of organizational-development blog Inflexion Point (and did that gravelly voice-over for Southwest Airlines) sees 2008 as a make or break year for the role of Human Resources:

"Like Toby on NBC’s The Office, HR continues to have a bad name in the eyes of business units, managers and employees.  Often viewed as either enforcers, legal risk mitigators or transactors, the human resources department is not the first place business leaders turn to for advice and guidance in meeting strategic goals and objectives.  They are generally perceived to lack basic business acumen (root cause analysis, business case skills, comparative analytics, etc.) despite years of trying to shift internal and external perception.  I believe this is a make-or-break year for HR.  If consistent, demonstrable examples of strategic value add do not break the glass ceiling in 2008, we will see the continued absorption of HR responsibilities into legal, finance, IT and outsourced service providers, effectively resurrecting the “personnel department” of old."

The HR function has been under increasing scrutiny in recent years, typified by the now-infamous 2005 Fast Company article "Why We Hate HR", by Keith Hammonds.  Stelzner does hit upon a very important point that HR strategy is becoming a core competency that is needed by managers in all corporate departments.  Any successful business manager today should have a solid grounding in HR skills when managing talent, in addition to a degree of understanding of finance to allocate and determine budget for his/her area, and some understanding on the IT needs of his/her function.  Hence, "HR strategy" is not something that is silo-ed into a single HR department, but is pervasive across an organization's management.  The HR department should be the driver and facilitator of sound HR practice across the management team, and ensure these HR practices are aligned with their organizations' strategic goals.  By demonstrating this alignment between solid HR and business performance (i.e. linking customer metrics with employee performance), HR will regain it's "seat at the table" when corporate decisions are made.  Moreover, with many businesses undergoing complex change with outsourcing, globalization and this predicted economic downturn, the role of HR has never been so important as it is today (I outlined the role HR needs to play in a company's outsourcing environment in this article for the IAOP earlier this year).

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'    ......not yet free to have a seat at the table

   

Is India adapting to the Night Shift?

A new report released by the Associated Press is highlighting the issues of outsourcing jobs on Indian workers' health.  While the report lacks any hard evidence and focuses on a handful of individual cases, data released by the Indian Council for Research on International Economic Relations estimated the cost of these increased health issues, namely sleep disorders, heart disease and depression, could amount to $200bn for the Indian economy over the next 10 years "if corrective action is not taken quickly".

As we discussed here on HFS a few weeks' ago, the business case for organizations outsourcing certain services to locations closer to home (or even at home?) is becoming increasingly appealing - especially for those services that require a high degreee of interaction between the organization and its outsourced workers (for example software development).  For those services where the offshore workers need to be operating at the same hours as US companies, for example customer support / help-desk services, the Indian workers must adapt to working swing-shifts and unsocial hours.  My concern here is that Indian culture is very family and social-centric, and these types of jobs are becoming increasingly less desirable for many workers who go into these jobs initially to enjoy the increased compensation on offer, but are quickly realizing the trade-off with their lifestyle, health and family / social issues.  As long as outsourcing providers are servicing US businesses from India that require a large degree of worker overlap, they are going to be faced with increasing issues of attrition and rising wages to keep workers in these jobs.  This is the chief reason why the Latin America region is on the cusp of a major upswing of taking on outsourced jobs that benefit from the time overlap.  At the same time, it increases the appeal of UK and European-centric services being run out of India, where the time differences are far less oppressive on the offshore workers. 

These health and social issues are very symptomatic of a developing economy like India - and my only surprise is the speed at which they are happening.  I believe these issues will only be magnified when work is outsourced from US businesses to China, where the time differentials are even more brutal, and the language issues much tougher.  That is one of the principal reasons why China is (and will continue to be) far more successful at taking on services such as engineering and manufacturing, where these worker interaction issues between offshore staff and Western organizations and their customers are less crucial. 

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Is India growing up too quickly?

Globalization of labor and outsourcing will dominate Human Capital strategy in 2008

An interesting study conducted by WorldatWork, one of the leading HR executive organizations for F500 companies, has cited firms' abilities to deploy a global strategy towards its workforce, the advancement of technology and the increase in outsourcing as having core implication for workforces in 2008. 

"Organizations will look for ways to pull jobs apart to find pieces to outsource. Thought must be given to the motivation of workers assigned “pieces” of the work."

No great surprises here, but hearing the "O" issue becoming so prevalently and openly debated by one of the most reputable HR bodies is a step forward.  The majority of other leading HR bodies are still sweeping the importance of outsourcing under the carpet, so it's a significant mind-shift to see it reaching the top of the HR agenda.  I discussed here the crucial role HR strategy must take on when companies go through the outsourcing process (earlier this year).

What do you do all day at work?

Loved this post from Mark Stelzner's Inflexion Point....

Are you wasting time at work?  According to the results of the latest Salary.com 2007 Wasting Time Survey, you probably are. In fact, employees waste approximately 20% of a typical 8.5 hour work day. And guess what - younger employees (ages 20-29) waste anywhere between 10-25% more time than their older colleagues.

So what exactly are employees doing?
* Using the internet for personal needs (34.7%)
* Socializing with coworkers (20.3%)
* Conducting “personal business” (17%)

And why do they do it?
* They don’t have enough work to do (17.7%)
* Their hours are too long (13.9%)
* They are underpaid (11.8%)
* Their work isn’t challenging (11.1%)

Personally, I thought the British went down the pub after lunch, while the Yanks spent all their time in boring meetings eating pizza....maybe times have changed?

   Mark Stelzner... he knows what you're up to all day

Sticking to your guns

Kudos to Jason Corsello (aka the "Human Capitalist") for this brave and excellent post lauding the merits of HR software firm SuccessFactors.  Jason is fast-becoming the pre-eminent industry analyst in HR technology because he says what he thinks based on his informed judgement.  Having met Lars Dalgaard myself and having had a lot of exposure to the SuccessFactors product, I can attest to the fact that Jason is spot-on here with his synopsis.  It's refreshing to have analysts unafraid to air their views.

Jason Corsello aka "The Human Capitalist"

The HR Outsourcing Industry Crystallizes around J&J

• 

• You can’t understate the importance of the 10-year $1bn Johnson & Johnson HR Outsourcing contract to the long-term sustainability of the HRO industry. When discussions began within J&J back in the summer of 2005, the key question bouncing around J&J’s leadership was “can we really do this?”.  For a company that has grown largely through acquisition, J&J today boasts a couple of hundred businesses operating under the flagship brand.  You can only begin to imagine the challenge of standardizing this global business on a common HR platform, across multiple countries, supported by centralized HR organizations.  I recall times it looked doubtful the deal would happen with all the negative publicity surrounding HRO, the contractual issues of some of the earlier engagements, and the financial difficulties experienced by some of the ambitious providers who bit off slightly more than they could initially chew.  It became abundantly clear over the last 6 months that J&J would prove to be the bellweather of the HRO industry – its very survival hinging on whether this would actually happen.

• What is transpiring in today's industry, is that outsourcing (BPO and ITO) is providing the lever for companies to go through major change (hey – I managed to avoid saying “transformation”).  And what’s more, HR outsourcing drives business change with the investment footed by labor arbitrage, process automation and self-service technology (contrary to the mega ERP implementations of the ‘90s where the cost was borne by the shareholders).  For many global organizations, they simply cannot drive the scale of change necessary through organic process re-engineering – it’s often far too expensive, far too slow, and often far too political.  Many companies do not have the required management experience to do it either.  Going through outsourcing drives shock into system, forces change quickly and usually reduces administrative costs.  Yes, a handful of companies decided it was not for them, for various reasons, but the vast majority would never go back.  They want to work with what they have achieved and make it better, through better governance and constant innovation. 

So what’s next for the HRO industry? – here are my snapshot predictions:

• Global deals will continue to slow as the major providers reach capacity and absorb what they have already taken on
• The upper middle-market will open up aggressively as firms with 5,000 – 10,000 employees pursue broader outsourcing strategies across SG&A and IT functions.  Interest in outsourcing is at an all-time high and companies are vigorously exploring sourcing models that work for them – i.e. captives / hybrid models / full scope outsourcing
• The “Transform first, then outsource” myth is beginning to fade (but slowly).  The common plea of “we can’t do this right now until we get our act together internally first” isn’t washing as well as it used to, with more and more companies fixing their internal process and technology requirements while going through outsourcing transition.  J&J is a perfect example of that, and a bellweather for many more organizations to follow who desperately need to change.
• HRO will become more accepted as a standard outsourcing practice, like ITO, F&A and Call Center.  My post on the Human Capitalist blog in December 2006 lays out the issues the HRO industry has had to contend with, unlike other outsourcing towers:

  Holding HR Accountable

The Job Trap

Great post from Mark Stelzner's "Inflexion Point"....

http://www.inflexionadvisors.com/blog/

"I was looking over my contact list yesterday evening and came to a stunning (but not shocking) realization. I could only identify five people that are happy with their current job. Virtually everyone I know would jump if a better opportunity presented itself, and most are either actively or passively pursuing side interests and opportunities with the hope that one day soon, that “perfect job” will rear its glorious head.

"Many years ago, a mentor and friend suggested that employment nirvana required three significant attributes - 1) doing something you enjoy and truly believe in; 2) the opportunity for advancement; and 3) decent cash. I would argue that a majority of my former and current colleagues can check at least one box, less than fifty percent can check two, and an increasingly small minority have found that perfect combination of passion, pay and promotion.

"In the industries in which I’ve worked (human resources, the public sector, outsourcing, call centers), attrition is ridiculously high. Industry events turn into reunions as thousands of former colleagues emerge with new logos and titles beneath their names. Thousands more troll the trade show floor hoping to find the next job that just may be the “perfect fit”. It’s well-known lore that many industry executives use such events to lure dissatisfied workers from their current employ.

"Paying the price in all of this are employers and families.

"The gap between the recruiting pitch and life in the trenches approaches Grand Canyon-like proportions as employers become increasingly desperate for talent. Recruiters are typically incented on volume, not retention, so forcing a square peg into a round hole is second nature. Hiring managers are often too busy to perform proper due diligence and instead need a warm body in seat as quickly as possible. And executives stand to lose precious dollars from their P&L if preapproved headcount are not onboarded in a timely fashion.

"Unfortunately, families pay the biggest price. Forced to endure the 24-hour lifecyle of their loved ones, the mirage of work/life balance and predictable employment is more ellusive than ever. With the new job “high” fading ever faster, loved ones must suffer through the sad realization that this, alas, was yet again not the job everyone had hoped for. And the cycle continues….

I want to blame someone for this mess but I struggle to identify who. The job boards and recruiting technologies simply present what is entered - garbage in, garbage out. Employees feel the grass is always greener - and is often is - but everything comes at a price. Employers are not evil-doers yet cannot clearly convey what life is really like behind closed doors. This forces us to put our trust in our friends who know these firms well. And when that fails, our gut instinct is the only remaining barometer."

I'd like to add to Mark's comments:  the work environment has changed dramatically over the last 4-5 years.  Executives are expected to check their blackberries every 30 minutes - right up to midnight, email checking is now commonplace over the entire weekend.  The work environment intensity has magnified significantly as employees become tethered, accounted, and measured like never before.  Some employees are just getting burned out and employers are getting increasinly expert at playing the "churn and burn" game.  In my opinion, the employee/employer "trust" has hit an all time low - it's all about "what can you do for me today"...  Companies need to work harder at enforcing work-life balance, or we will see increasing employee burn-out in the workplace.