The Outsourcing Blog..."Horses for Sources"

TPI loses its talisman

One of the grandfathers of the outsourcing industry is Peter Allen (see his recent interview with us), who has established himself over the years as one of the pre-eminent thought-leaders, practitioners and faces of the industry.  Peter has also been one of my closest industry companions in blogging on global sourcing issues, with his popular "Consider the Source" blog-journal.  He has also been the consistent face of leading sourcing advisor TPI. 

Yesterday, Peter resigned from TPI to pursue other opportunities in the industry, after many years with the firm.  There is no shortage of suitors for his services... and I look forward to hearing where he lands.  Peter wanted to share his personal thoughts with Horses readers at this time:

"The global outsourcing and offshoring industry needs to step up to a new level of performance. The sources of leverage that can bring value to companies far transcend wage arbitrage. I want to help bring to reality a new class of leverage - of investments, platforms, and solutions."

"It has been a privilege to work alongside my colleagues at TPI. A twenty-year record of great outcomes for clients and providers alike is the product of commitment to a culture of value creation for all participants. We do that."

"The current global recession is an awakening for the industry - as much opportunity for redefinition as it is risk of irrelevance. I really believe that the winning equation is one that maximizes the power of leverage to the benefit of productivity. That means that buyers and providers adopt new models for partnership to weather variances in economic conditions."

These are critical times for the outsourcing advisors. The process of managing outsourcing transactions has increasingly commodotized over the last couple of years, and the recession has only exacerbated this issue.  The sourcing advisors need to focus on helping clients disrupt their current global business infrastructures, help them execute after the transaction and manage the ongoing outsourced environment. 

People like Peter understand this, and I hope advisory firms like TPI continue the work he has done in helping drive these new areas of competency, and hiring consultants who have other skills than solely deal negotiation.  Those that focus purely on cranking out transactions will struggle to grow in this new environment.

Good luck Peter - I know many people in the industry join me in wishing you well on your future journey.

Everything you need to know about Supply Management BPO (but never dared to ask)

Folks - we're staging a webinar entitled "Supply Management BPO: Why Business and Technology Transformation is Critical for Long-Term Success". 

Being Frank about Global Sourcing: An interview with Cognizant's CEO (Part II)

Since Part I of the Francisco D'Souza interview, I've been assured Frank has improved his golf handicap. Now he'll discuss his views on how ITO service providers can differentiate themselves, the convergence of IT and BPO solutions... and a few other tidbits...

PF: How can ITO providers differentiate themselves in today’s market? Is it by vertical focus, or other elements?

FD: Given the extraordinary pressure that clients are under, I think that the key to differentiation is to focus on how to make clients’ businesses stronger. Rather than focusing on technology, process or methodology, I think providers need to really understand a client’s business drivers and then sell and deliver solutions that further those business objectives. As I said before, clients are facing both cyclical and secular pressures. As a result, depending on the client, their objectives of outsourcing will be very different. Some clients seek to improve efficiency or effectiveness. Others are looking to use outsourcing as a enabler of innovation. Still others are looking at outsourcing as a tool to gain access to the best talent in the world – regardless of where that talent is located. And of course, given the significant secular changes we are seeing, many clients are looking to outsource as a way to enable agility and transformation within the organization.

Being Frank about Global Sourcing: An interview with Cognizant's CEO (Part I)

Observing the rise of the new wave of service providers over the last few years, the one that has scared the living daylights out of all of the incumbents is Cognizant. 

Now a $3bn company with deep footprints in the world'slargest global financial institutions, consumer businesses, manufacturing and healthcare organizations, Cognizant can no longer be considered an upstart.  It's now part of the industry elite; quietly and cleverly aligning its value proposition to the post-recession era.  As CEO Francisco D'Souza points out,  we're in a time of not only cyclical change, but also secular change.

I've had the pleasure of talking with Frank a few times over the last couple of years and have been impressed by his high-energy, thoughtful and common-sensical approach. I was even more surprised when I received emails from an "FDSouza" on the Horses... took a couple of times for me to realize who this guy was.  To cut to the chase, Frank is one of the youngest IT and BPO industry leaders of the modern age, having risen through the management ranks of Cognizant to assume the role of President and CEO at the beginning of 2007 when the company was announcing its landmark Kimberly-Clark engagement.  And when Frank isn't busy hacking his way around the local golf course, or playing with his kids, he managed to find some time to share some of his views of the global sourcing industry with us...

Can 6-sigma really help execute an effective sourcing process?

One major service provider that has quietly - and very effectively - grown its US presence over the last couple of years is HCL.  And behind the scenes is a very classy guy, Debashish Sinha, who pulls the strings across its US sales, marketing and operations units. 

Anyone dealing with HCL these days is always glad to have Debashish around (despite the fact he organized their last industry event in Orlando).  Prior to HCL, Deb has consulted for both Conscient Partners and NeoIT, in addition to being Gartner Group's principle analyst for IT services and sourcing.  And when he's not comparing the subtle nuances of Malbecs or flying planes (not simultaneously, I assure you), he has some excellent views on the effectiveness of 6-sigma methodology in a sourcing environment.  Over to you Deb...

About four hundred years ago, Galileo Galilei noted that “We must measure what can be measured, and make measurable what cannot be measured,” a philosophy now embodied in the well-tested axiom “You can’t manage what you can’t measure”.

So how about managing the Sourcing cycle? How do you actually measure Risk, or Internal Readiness, or even effective Governance?

One potential option could be to use Planning for Six Sigma tools to “make measurable what can’t be measured”. After all, it’s still one of the most prominent approaches for managing by measurement.

Hear the great Hags on global finance transformation

I never knew that one day I would get to co-host a webcast with the great John Hagerty, but tune in on June 18th at 2.00pm ET to hear about Transforming the Global Finance Function in Today's Economy.  Click here for full details, or register directly here.  And like everything else here, it's FREE FREE FREE.

John is a true legend in the analyst world, where he delivers insights in the world of finance transformation, performance management and corporate governance. He could also convince Newt Gingrich to vote for the communist party in 2012.  In addition to the great "Hags" and myself, you'll also get to hear from Joe Spears, senior finance executive at eBay, and Dominick DiPaolo, BlackLine Systems.

John Hagerty (pictured) is Vice President and Research Fellow for AMR Research. He is the recognized worldwide authority in business intelligence and enterprise performance management.  This picture also reveals the wear and tear of the analyst life -:)

The Campbell chronicles: an exclusive interview

If the Queen was handing out honours for outsourcing, then "arise Sir Kevin" would be a likely outcome.  However, unless Accenture can grant him a British passport, even their PR heavyweights may struggle to pull that one off.  

Kevin Campbell is a legend in the outsourcing business (I refrained from saying "the Tiger Woods"...), having begun his career with the old Andersen Consulting business in the 90's before making his name as the COO of Exult, the protagonist of HR BPO, where he because synonymous with many of the early multi-process BPO deals for clients such as BP, Bank of America and International Paper. 

Upon Exult's sale to Hewitt in 2005, Kevin found himself returning to his roots with Accenture, where he how has been elevated to overseeing the firm's entire $9.2 billion global outsourcing business, when he's not watching re-runs of the Packers and terrorizing his kids. 

I managed to catch-up with Kevin recently, and was surprised to hear he's a regular visitor here, so convinced him to share some of his views on the industry with us...

Shaping your career in this sourcing industry

There's one character in the sourcing business those "in the know" know... Larry Janis.  When senior management look to hire or poach key talent, Larry is known as the discreet man with the black book.  He's also a great guy, and agreed to post a few suggestions on what sourcing executives should be doing to shape their careers in this environment.  No-one in the business knows the hiring dynamics of buyers, consultants and service providers as well as Larry...

PF: Larry – you’ve been a lead search consultant in the sourcing industry for many years. In terms of roles and openings both buyers and service providers are looking for, what’s changed today?

LJ: The stress in the global economy has certainly changed in the outsourcing provider space. Add to this, HP/EDS merger/acquisition, the Satyam scandal and staff reductions at several of the major providers. As a result, both the

Innovation: creativity within financial constraints is the key

So with all the talk about falling conference attendances, it's clear that people are still game for good events, but are simply being more selective about which ones they choose to attend this year.  After the success of the recent Shared Services & Outsourcing Network show in Budapest, I had the good fortune to be at AMR Research's Supply Chain Conference in Scottsdale AZ this week, which attracted 650 senior-level supply chain, finance, operations and IT executives, many of whom wanted to talk about sourcing issues.   

The one opportunity I did have to escape the analyst meeting room was to see former Disney CEO Micheal Eisner's keynote speech (pictured), where he talked about creativity under financial constraints being the key to success today. 

In order to demonstrate this, he played us the now infamous "sword" scene from Raiders of the Lost Ark:

According to Michael Eisner, Harrison Ford was having a few stomach issues on that day of filming and kept rushing back to the hotel, and with the sun setting, the crew were concerned that they would have to wait until the following day to complete the scene.  With production costs running at $100K a day (not chump-change in those days), Harrison just got out his gun and shot the guy... now that's innovation ;)

Always happy to hear any more examples of creativity that saved the day...

The Kraft of Outsourcing: Learnings from Lee Coulter (Part III)

And finally… the last tranche of our three-part interview with Kraft’s Lee Coulter. Here’s Lee’s take on attributes service providers need to demonstrate, and some advice for budding sourcing executives today…

PF: Lee, when evaluating outsourcing service providers today, what attributes should companies look for? What should they try to avoid?

LC: That is a really big question and not one I am sure I can answer in less than ten pages. Every engagement is different, and the basic dimensions of suitability are: service scope, service quality, service cost, cultural match, the leadership teams, partnership capability, and risk. Assuming that you have providers capable of doing the job and meeting the objectives, then it is about the team and the commitment to true partnership (a topic for another day). These two things lead to a measure I use… confidence. So you would score the providers

Talent Management vs. HRO – it’s not an “either or” proposition

If you've ever ventured into the brave world of HR Outsourcing (and you need to be brave...) the chances are you'll hear the views of Ceridian's Keith Strodtman. 

Keith has been a constant at the global $1.6 billion HR services and store-card solutions giant for many years now, and when he's not coaching his twin girls' fastpitch softball team (that's "rounders" for any Brits on here), he's been running Ceridian's global HRO practice.  He is also widely recognized as HRO's smoothest man, with a constant smile, never a raised word, and never a hair out of place. 

Keith has some excellent views on how companies can use third-party managed services to take on their administrative work and focus their HR executives on what they should be doing:  helping develop their organizations' talent.  Over you Keith...

I’m not sure about you, but I don’t get why some analysts and bloggers

Going green with sourcing...

Folks - if you happen to be drifting around New York City on 3rd June, swing by the Philippine Cultural Center to hear some interesting discussions, including my friend and colleage Dr Stephen Stokes (pictured), author of the infamous piece "The Green Transformation of Indian Outsourcing: Heading for the Clouds, But Doing So on a Low-Cost and Carbon Budget".   

The event entitled "Global Sourcing After the Meltdown: In Search of Sustainability" is being organized by my good friends Christine Bullen and Wanda Lopuch at the Global Sorcing Council.  For more information click here.  You can also contact Wanda directly here.

Talk tracks for the day are as follows:

How to get two whales in a mini...

When I got a call from the Shared Services & Outsourcing Network crew back last Fall (Autumn) to run a session at their European Shared Services Week in Budapest this month, my immediate response was "how the expletives are you going to convince operations executives under severe cost restrictions to show up at a 3-day boonie in Budapest in the midst of the worst recession since Harold got clipped by an arrow in Hastings in 1066?"

One of my favorite jokes (and I do have a rather strange sense of humor), is "How can you get two whales into a Mini"... and the punchline is "Along the M4 Motorway and across the Severn Bridge".   If you don't understand this joke, click here.  I am going to add to that one:

"How do you get 400 senior operations executives, 200 of whom lead shared services operations, to show up in Budapest in the middle of the worst recession in post-biblical times?"

Yes, they managed to defy gravity, common sense and many other undefiable factors

The Kraft of Outsourcing: Learnings from Lee Coulter (Part I)

There is only one Lee Coulter.  Service providers tremble at the very sound of his name, consultants run for the hills... practitioners flock for advice.  And when he isn't performing carpentry or attempting cordon bleu, Lee has the small task of being SVP for Kraft's shared services, where he is a key leader of the firm's corporate transformation program "Organize for Growth".  He is responsible for Kraft's IT services, global finance and HR shared service centers, in addition to the firm's BPO activities.  He even once threatened to smash up my blackberry.   

On a more serious note, Lee has a practical and experienced perspective on how enterprises today should approach global sourcing, and we have enjoyed his exuberance and candor in our buyers' group meetings.  Today, we are blessed with the first part of a lengthy interview with Lee, where he is discussing how practitioners should approach global sourcing in this economic climate, how to select and engage the right service partner and how to decipher and execute innovation (yes, I said it) in a global sourcing environment...

PF: Lee, we’ve been through some major developments in the world of global sourcing over the last decade. As a senior operations leader in one of the world’s largest multinationals, what, in your opinion, has worked, and what hasn’t?

LC: Let me start by saying that the global sourcing industry has proven its most basic value proposition, and that is a huge success. There are many skeptics of

Contemplating the BPO industry with Wipro's Ashutosh Vaidya

One of the most enthusiastic leaders in the BPO industry is the man who has overseen Wipro's rapid rise in recent times:  Ashutosh Vaidya.  In-between playing squash, watching cricket and clocking up a ridiculous quantity of airmiles, Ashutosh has overseen a series of Finance & Accounting, HR and supplier management wins that have moved the service provider into the BPO industry's top tier.  I asked Ashutosh to share his views of the current state of the BPO industry and what steps need to be take to ensure the continual growth of the business in these times.

PF: Ashutosh, we’ve been through a tremendous development in the world of BPO over the last decade. What, in your opinion, has worked, and what hasn’t?

AV: Indeed the BPO world has come a very long way over the past decade. In fact, 2009 really marks the 10th anniversary of the meaningful 3rd party BPO

Time to scratch that 7-year HRO itch

So it's coming again this week... the 7th annual HRO schmooze-fest in New York's plush mid-town Hilton.  Yes, I've been to every bloody one and I swear this will be the last :) 

This time I am assured there will be:

• No rubber chicken

• No dodgy awards

• Lots of buyers

In fact, with the industry enjoying something of a revival, this should prove to be an interesting experience, with focus on the core elements of HR operations:  payroll, benefits, recruiting, talent management and HR

Contemplating the BPO industry with Infosys' Ritesh Idnani

When he's not tinkering with his fast-cars and rock music, Ritesh Idnani has emerged one of the key guys behind Infosys' prominent rise as a leading BPO provider.  But's it's not been an easy ride...when you get up close, you can start to see some grey hairs creeping in to defy those baby-face looks.  I've known Ritesh for a number of years and thought it ample time for him to share his views on the development of the BPO industry and what holds for the future in these crazy times...

PF: We've been through a tremendous development in the world of BPO over the last decade. What, in your opinion, has worked, and what hasn't?

RI: The emergence of outsourcing is not a new phenomenon. It has been practiced by corporates from the 60’s, but it is only in the last decade or so that corporations have recognized the phenomenon and actively engaging in outsourcing as a lever to reduce the effect of non-core activities contributing to the wrong side of P&L .

The politics of offshoring: all talk, no action

Many of you whom I've been interacting with lately know I'm concerned by the degree of protectionism from some politicians and a handful of organizations; namely the TARP-funded financial services firms and a few from the healthcare sector.  We recently discussed many of these issues here. 

Professor Bob Kennedy, who heads up the William Davidson Institute, a non-profit research and educational institute that focuses on business and policy issues in emerging market economies, has been keeping very close tabs on these issues and I asked him to contribute his recent experiences and views with us.  Bob also has a new blog up and running entitled "Services Shift", and has recently released his new book, adorning the same name.  Over to you Bob...

Why No Regulation of Offshoring: Untangling the Gap Between Rhetoric and Action

Picking up on Phil’s April Fool’s day post, I wanted to share a few thoughts on why we see lots of anti-offshoring rhetoric from politicians, but (thankfully) very little actual policy.

White water canoeing with Newt Gingrich

I had the pleasure today of having lunch with former Speaker of the House Newt Gingrich, who is also widely rumored to be a possible Presidential candidate in 2012.

While I do not share many of his political views, Newt does have some nailed-on perspectives on globalization, outsourcing, and some measures the US needs to take to get its act together to remain the world’s economic superpower. Plus, he’s very funny.

Here are some soundbites from his keynote speech at the excellent Sourcing Interests Group conference in Baltimore from earlier today:

"We’re spending trillions to cover up really stupid policies, violating every fundamental principal of economics. These congressional leaders are people who know nothing – our Founding Fathers deeply mistrusted politicians. Bush was wrong for all of 2008. Paulson the worst ever Treasury Secretary, even though Geithner is now rivaling him."

Keeping it onshore: an interview with Mark Vengroff

Having witnessed the rampant growth of Finance and Accounting BPO over recent years, the common thread among the leading service providers has been cost-arbitrage through offshore labor.  There is, however, one exception:  Vengroff Williams and Associates (VWA). 

Naturally, the core differentiators among service providers is the ability to innovate with process and technology, and provide great people to service their clients, however, the offshore element has created the cost-lever to entice companies to move into a BPO end-state.  VWA is the one service provider which has resisted the lure of offshore/nearshore delivery to drive down costs even further, and has chosen to focus on its onshore delivery centers underpinned by its order-to-cash technology solution to service its clients. 

VWA achieved a 5% share of F&A BPO engagements in 2007, which was greater than several of the leading BPO providers in the market, and boasts some blue-chip brands in its client portfoilio, namely Ford Motor Company, Federal Express, Kodak, Microsoft, Yamaha and others.  Moreover, in this age of protectionism, in addition to the increased focus on healthcare reform, you have to consider VWA in a unique position in the industry today.  I recently caught up with CEO Mark Vengroff to ask him to share with us the reasons for VWA's success.

Outsourcing is not for wimps

Many Americans in the global sourcing industry will attest that they never did quite separate themselves from their old colonial masters (but we let them think they did…). One such example has been the UK’s very own David Poole, imported by European outsourcing giant Capgemini to spearhead its Americas BPO business. Upon his arrival at these shores two years’ ago, David even adorned the title “Deputy”, in the hope he could quickly assimilate himself with the Wild West, installing himself and his family in Chicago, where he could steer them of clear of crime and corruption.

David, today,David has firmly established himself as a veteran of the BPO industry, leading Capgemini to some major new global F&A BPO client wins that have firmly established the firm’s global delivery footprint across the Americas, Europe and Asia (including major operations in China and India). He joined Capgemini in 2004, from PwC in London where he was a partner and a founding member of the firm’s global BPO business prior to IBM acquiring their operations. He’s made a significant contribution to the development of the global BPO industry, helping to craft several major global engagements since the early ‘90s. David is also a qualified management accountant and can wax-lyrical for hours about operational excellence with invoice processing. Enough said – over you Deputy Poole for your take on what outsourcing means to businesses today…

Outsourcing is not for wimps

I spend a lot of time talking about why outsourcing is a smart idea – I talk to clients, at public forums, in meetings, to my staff, heck I’ve even bent the ear of my dog on occasion. So, when Phil asked for volunteers to contribute to this blog, I naturally jumped on the soapbox. I couldn’t resist another chance to make my case, which is this: When the going gets tough, the tough outsource.

Time to offshore the law

I've been getting an increasing number of service providers talking up the growth of Legal Process Outsourcing (with the mind-blowing acronym "LPO").  Personally I'm a bigger fan of PPO (Political Process Outsourcing), but it seems like we could have some onshore/offshore complications with that one, so let's talk about LPO. 

Having had a few discussions with clients and service providers in this space, it's clearly an area for major cost-efficiences for businesses.  I've even had one service provider bragging he was making a killing doing liquidation administration offshore.  Bottom-line, several of the fat law firms are already offshoring their own legal support work to low-cost locations, whilst still billing their clients top-whack rates, so smart corporate legal buyers are focusing on engaging with LPOs, as opposed to highly-expensive law firms, for a lot of legal work, while retaining expensive lawyers for critical activies that require deep experience.  And did you know Mahatma Gandhi was a barrister?  I'd use him anyday over Denny Craine :)

I've recently had the pleasure of interacting with the industry's one full-time LPO advisor (if there are others, here's your chance to make yourself known), so I asked him if he can educate us more regarding what LPO's all about.  Step up Matt Sullivan who lived in Pune, India, for two years, where he managed the risk management & regulatory compliance practice for a global IT outsourcing company as part of a 20 year career in services and outsourcing. He now plies his trade at Red Bridge Strategy, where he's teamed up with some very smart and friendly consultants who focus on global sourcing issues. Over to you Matt:

Changes Ahead in Sourcing U.S. Legal Services in 2009

Businesses have traditionally relied on a combination of in-house legal departments and outside law firms for all of their legal work. During the past few years, maturing processes, technologies, and legal-services-delivery-perspectives have created an environment where corporations now have a spectrum of choices from which to source legal services.

Get your finances in order before you outsource?

When I talk with firms about outsourcing, the conversation almost always circles around whether the client should sort out its internal processes before it can consider outsourcing opportunities.  In most cases for large global enterprises, transformation can be carried out concurrently as part on an incremental outsourcing transition.  However, for mid-market firms which may not have the resources, technology or the expertise as larger enterprises, moving too much of its back office too quickly to a third-party can often prove more damaging to the business than any savings generated.  That is not a risk you want to take in a cut-throat economy, where you may not have a chance to recover from poor decisions.

To this end, an old friend of mine, Bill Rieke, shared his experiences with CFOs of mid-market firms trying to drive cost-efficiencies into the financial processes.  Bill is a respected veteran of the BPO industry, having worked on multiple international engagements with Convergys and subsequently Genpact.  He now works independly with firms as an advisor with BPO and process optimization.  Over to you Bill...

In American Heartland, Optimization Finally Brings Hope of Accounting Transformation

The Horses spawns a partner: Think Global

Amigos - I'm excited to announce the launch of a sister-blog to Horses for Sources : here ariseth "Think Global", with focus on global delivery strategy, BPO, supply chain and IT services trends.  My firm, AMR Research (God bless 'em) has admirably tolerated the Horses for a long time now, until finally asking if I'll consider extending my verbosity to our research content, to which many of you do not gain access.  I've kicked this off with complimentary access to a new research article entitled "Beware of Myopic Cost Cutting: Use Outsourcing To Be More Competitive in This Economy".

I've always used the Horses platform as an outlet to knock around views, cultivate ideas and take the industry temperature.  So many of you have been part of that.  And, while we might not always have been 100% accurate, we've collectively generated so many gems of insight that I frequently read our commentary to add some color to what I am thinking - and I know many of you do the same. 

The power of the blogsphere is truly extending to the analyst world.  And while some of the other analyst firms have pushed their blog strategies for a while now, I am (for once) going to brag that none of them have come close to cracking the blogging code.  Over here we have, and it's time to take it mainstream.

Horses will not be going away, but will run in tandem with Think Global.  I hope you take a little time to pay a visit.

While you're there, please also check out the blogs from a couple of AMR's industry legends, Bruce Richardson and Kevin O'Marah.  I'll see you over there...

PF.

Executing effective HR in 2009: an interview with Jason Geller

We've had the privilege of hearing from a host of industry leaders over the last couple of years (just look under the Outsourcing Heros category), and I'm delighted to present an interview with Deloitte's Jason Geller.  Jason has been instrumental in driving some of the largest and most complex global HR transformation initiatives over the last decade, and has gained a stellar reputation within the industry as one of HR's most prominent thought leaders and consultants.  I also had the privilege of working with Jason, and discovered he's quite a bashful chap who frequently shuns the spotlight in favor of his colleagues, so I thought I'd do something about that...

PF: Jason, in a nutshell, what do you see as the major challenges and opportunities facing HR executives today - and what measures do you recommend to address these?

JG: In these uncertain times, it is more important than ever to focus HR on activities that create business value. That means having a HR Strategy/Business Plan laser-focused on business value drivers:

• Revenue Growth:  Business Transformation, Globalization, M&A, New Markets, Innovation  

• Talent Strategies:  Workforce Planning, Learning & Development, Total Rewards, Mass Career, Customization, Global Mobility

• Operational Effectiveness:  HR Policy, HR Service Delivery, HR Operations & Technology, Change and Culture, HR Analytics, Compliance

HR must deliver the HR services needed to support business strategy, such as revenue growth, talent and operational effectiveness. HR must make sure it is doing the right qqwork at the right level within the organization: By the right person; At the right location; By the right entity; Through the right delivery method; By the right HR role, which will lead to improved alignment with business goals.

Now the election is over... what about outsourcing?

Not many people are better-placed to debate the thorny issues of outsourcing and government policy than my old friend Glenn Davidson.  Glenn is synonyous in the public sector world with issues relating to human resources strategy and broader outsourcing strategy, having been one of the founding members behind Equaterra's public sector practice that was launched in 2005 and now a major part of their business.  Among several commercial roles, Glenn previously served as one of Accenture's key executives behind their early forays HRO post their e-Peopleserve acquisition, and prior to that as a chief of staff and communications director to a Virginia governor, as the Commonwealth’s chief federal lobbyist and as a legislative director to an Ohio congressman.  

With so much heated discussion regarding the policies President-Elect Obama is going to deliver regarding the USA's future stance on offshore outsourcing and public sector contracting (which we touched upon here), I asked Glenn to put together some of his thoughts on where this will lead... over to you Mr D:

Looking to 2009: a chat with Peter Allen

One of the most sought-after thinkers in the sourcing industry, fellow-blogger and TPI  veteran, is Peter Allen.  Peter started his own blog Consider the Source around the same time "Horses for Sources" got rolling, and we've pretty much been bouncing ideas, opinions, advice and outlooks off each other over the last couple of years. Peter spent some time at our offices recently and I wanted to share some highlights from our discussion as we move into this new era of global sourcing:

PF: Peter - You've witnessed the growth and development of the global outsourcing industry and probably have had more conversations with sourcing buyers and suppliers than most people over the years.  How critical is this current economic crisis to the outsourcing industry?  Do you see increased activity on 2009 as a result?

PA: Thanks, Phil. These are certainly times of considerable stress

Ford: outsource only where it makes long-term strategic sense

I trust you enjoyed the animated discussion on the woes of the US autromotive industry. My take was that these issues facing Detroit represent a microcosm of the problems facing many of today's flagging industries, with urgent needs to transform their business models, product-lines, management talent, labor unions, global supply chains and outsourcing strategies in order to survive.  I wanted to share these comments from Rachel Geiger, who is a lead HR executive at Ford Motor Company, where she has held senior HR positions for both labor relations and procurment strategy.  Rachel makes some interesting points regarding why Ford is a little different; namely it's focus on ongoing transformation and strategic outsourcing.  Over to you Rachel:

 

"I agree that it is about changing their DNA, or "What does it mean to work at Ford?". Being in the organizational change business, and taking part in driving this cultural change, I can honestly say that I do see it happening.

Smarter and smaller: banks bank on BPO

I am delighted to introduce a long-time industry friend, and one of the pioneering executives in the world of financial services BPO:  Michael Koontz. 

Michael has spent most of his career (14 years, in fact) helping steer Wachovia's BPO strategy, where he led over 130 transitions, managed over 1000 SLAs, over four countries and three service providers.  He also served as Wachovia's CFO for Banking Operations.  Michael recently made his first foray into service provider world, leading the financial services vertical for up-and-coming BPO and KPO service provider Aditya Birla Minacs.  

Michael is sharing his views with us on where he sees the banking sector going with its BPO strategies - namely a further sell-off of captives, service provider rationalization, growth in regional markets, and also the smaller banks opening up to BPO contracts.  Over to you Michael:

    What we are seeing in the financial services sector is nothing less

Getting the fundamentals right

We've had some serious - and sometimes passionate - discussions on "Horses" these last few weeks, and I laud so many of you for chiming in with your feelings and thoughts. 

We've examined the impact of our current predicament on the outsourcing industry, how globalized delivery has such a pivotal role to play in improving businesses' competitiveness, and even how struggling industries and faltering economies could embrace global delivery to create new jobs and industry.  It's proving to be a time for many of us in the outsourcing industry to reflect on how this business has developed over recent years, and why we must focus on helping enterprises compete more effectively at a global level, than simply stripping out short-term overhead.

To sum things up, my old friend Lowell Williams sent me his thoughts yesterday on the current economic situation. 

Leading Change – the 15% Solution

The most dominant discussion thread I constantly have with clients today is about change management, and this is massively relevant in these times of rampant globalization, and this uncertain climate. 

Companies today simply cannot go out and hire teams of executives with deep outsourcing and offshoring experience - they are hard to find, expensive and often don't understand your specific business needs (horses for courses...). There simply is no defined curriculum for managing change.  Companies need their change leaders to lead from the front and bring out new qualities and skills from their existing people.  To this end, I am humbled to receive this guest article from one of the most respected practitioners in sourcing folklore...and certainly the finest to hail from Canada ;) 

In her recent past, Linda Tuck Chapman led the sourcing efforts at Fifth-Third Bank (as Chief Sourcing Officer), Scotiabank and BMO Financial Group and now runs her own boutique strategy firm called ONTALA Performance Solutions.  Linda also studied under the tutelage of my father-in-law during her MBA, and claims to have been a model student.  Anyway - over to you Linda to discuss executing a change strategy in this economy:

A stateless multinational mindset

The recent article on Poland certainly stoked up some creative discussion about sourcing BPO locations.  And none more so than from Ratnesh Mathur, a BPO guru from India, based in Central Europe.  Ratnesh has worked in the "outsourcing temples" of Citibank and Infosys, in both India and Europe, for over 17 years. These days, he spends his time traveling to lesser known places in India and Europe, and, when not traveling or working on his upcoming book on Indoeuropean linguistic/cultural links, you can seek his blessings on outsourcing advisory work in India & Europe, through social networks like Linked-in.  Anyway, I thought Ratnesh's recent contributions warranted a full-posting:

When selecting a BPO location inside the European Union and in India, its useful to first segregate the City-level metrics from the Country(EU)/State(India)-level metrics and then quantify relative-importance of each metric vis-a-vis others, specific to your unique need: 

• Country(EU)/State(India) Metrics- BPO/SSC Set-Up time; Visa/ Work Permit Requirements; Subsidies/Government Incentives; Labour Laws; Tax & Accounting Laws; Political stability
• City Metrics- People (Labor Pool size / Education - Graduate skills/ Location attractiveness for Senior Foreign Hires/ Understanding of US & Western European cultures/Languages) ; Infrastructure (Real Estate, Telecom, Light/Heat/Water etc) ; BPO/SSC Competition; Travel links with key Client sites

The Future Of HRM Service Delivery

I am honored to welcome one of my earliest - and long-time - mentors in the services and hi-tech advisory business to guest on Horses for Sources. It's taken me over a year to persuade her to showcase her insights here, so I guess now she has submitted me a piece is testament to the power of blogging, and the fact that it is fast-becoming a preferred medium for industry luminaries to opine their views to the industry-at-large. The fact that she felt she could be a little more "edgy" and freer to express her views here makes me feel like I am doing something useful for the outsourcing industry hosting this blog :)

Ladies and gentlemen, please welcome the honorable Naomi Bloom and her take on the future of Human Resources Management service delivery. Naomi has over four-decades of experience in HR delivery and technology in a number of advisory roles and is widely-regarded as the pre-emeninent authority in HR platform delivery. Over to you, Mrs Bloom:

Good luck Lisa

I was a sad day this week then Lisa Ross announced that FAO Research is ceasing its operations.  I have known Lisa for several years as a good friend, and have rarely met such a talented industry networker and marketeer with a strong perspective on the industry.  Lisa has also guested here during the early days of Horses. 

Lisa's recent work bringing together the sourcing advisor and vendor communities in targeted forums created a platform for valuable industry interaction that only Lisa made possible.  All is not lost, however, as she will continue her recently launched blog.  Knowing Lisa, we will see her re-invented and re-energized in the not-too-distant future.

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:

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.

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. 

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:

Quest for an Organic Approach to Offshore Outsourcing

One of the toughest challenges for businesses today is trying to retrofit offshore operations once they have evaluated what work to send offshore or outsource.  They can spend months - or even years - strategizing how to do this effectively.   I am honored to welcome Uttiya Dasgupta discuss his theories on developing a phased approach to implementing an offshore outsourcing initiative.  Uttiya is one of the industry's first genuine offshoring pioneers, having set up and managed IBM's first offshore dedicated center in Bangalore in the 1980's, in addition to helping Texas Instuments and Samsung establish their offshore operations.  He now heads up his own outsourcing consulting firm Omnispan.  Over to you Uttiya:

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. 

 

Mystery vendor management

I wanted to introduce a great blog called 360 Degree Vendor Management written by a good friend of mine who facilitates complex RFP development, leads vendor selections, contract negotiations, and manages outsourcing governance processes for a FORTUNE1000 enterprise.  She / he obviously cannot share her experiences publicly so chooses to do so under blogsphere anonymity.   Respect to that!

Some great pieces which are well worth reading include:

Paying Outsourcing Vendors

Insights on Procurement Outsourcing

Onsite Vendor Management in a Global Outsourcing Environment

Vendor Management and Learning Curves

HRO:  Where's the Value?

Outsourcing Vendor Metrics

Offshoring Secrets

As I've mentioned before, I admire people with the dedication and focus to write a book... especially one about their experiences of offshoring.  Step up Utkarsh Rai, who heads up India operations for Infinera, an optical transmission equipment supplier, after starting his career working for Siemens in India in the '80s and spending time in Germany and Silicon Valley in various roles.  Uktarsh has a deep and unique experience of setting up offshore operations in India and has kindly offered to share some of his views here, taken from his book Offshoring Secrets.  I found the book an extremely informative and refreshing read about the trials, tribulations and best practices behind developing successful offshore operations . Over to you Utkarsh:

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New faces of Finance and Accounting Outsourcing

It's been quite a year in the world of FAO, with a current of deal activity, new entrants into the industry and a lot of new faces to drive the business and address the market (some of whom we highlighted back in May).  I wanted to mention a few characters who are making some waves:

Henry N. Schweppe III is adding fizz to IBM's F&A Managed Business Process Services.  Henry is a keen golfer, and is so good they gave him Roman numerals after his name like this guy. '

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Schweppe III

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Accenture has accepted the cultural divide across the pond and put Tony Chambliss in charge of the Americas and Jean Pierre Bokobza, Europe.  When I learn more about these guys, I will embarrass them further.

Cap Gemini is still refusing to admit there are any such cultural issues and has flown Brit David Poole in from the UK to get some traction with Uncle Sam.  David likes burgers and cold windy weather - so Chicago it is for him.....  David uses the title "Deputy CEO" for Cap's BPO business, so I guess he's being positioned as some sort of Sheriff.  Not to be outdone, David Kaminski has also joined Cap's US business to drive their F&A solutions, previously leading Microsoft's global financial services business line.

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David Poole (before his first Chicago winter)

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ACS has made a sharp appointment in Ron Gillette to "lead and transform its global F&A Outsourcing business".  Ron comes from Accenture, where he was a senior partner for its outsourcing business.  Ron's headshot is in black and white so assume he's 10 years' older than this...*grin*.

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Gillette... the best ACS could get

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Ritesh Idnani has played a particularly active role leading Infosys BPO's market and business development, including closing their major F&A engagement with Philips earlier this year.  Ritesh is a keen racer of fast cars and loves rock music, so quite what he's doing in accounting services is beyond me....

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Idnani... accounting for life in the fast lane

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Ritesh's former colleague, Devesh Nayal, is now CEO for his own offshore FAO and KPO firm, CompassBPO.  Anyone who agrees to have a briefing with me at a Dunkin' Donuts deserves a mention...

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Devesh Nayal... Dunkin' it with the best

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Cognizant has been making a move into BPO of late, and has installed Kaushik Bhaumik to lead its charge into this space.  Kaushik is based on the West Coast and comes from McKinsey.

WNS has also made investments in new senior personnel, and has brought Deborah Kops on board to lead marketing and strategy.  Deborah contributed a great piece here a couple of weeks' ago.

And finally, I wanted to give a mention to Rob Sherman, who is market-maker for Vengroff Williams and Associates, one of the FAO industry's best-kept secrets, which delivers AR BPO solutions to a plethora of F500 firms.  When not modeling, Rob likes boating and ice hockey.  Again, a great fit for accounting services... *grin*.

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Sherman at VWA (without the Aviators)

Upward, Onward, Onsource!

To celebrate the return of Horses for Sources, I wanted to feature an excellent piece submitted by Deborah Kops, who is embedded in sourcing folklore, having led global transformation efforts at Deutsche Bank and Bank of America and was also one of the founding partners at PwC's outsoucing division.  Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO provider.  We will be featuring a lot of debate on the future of shared services / offshore captives and the road to BPO services over the coming months on this site, and Deborah's insight here typifies the approach many world class organizations are taking with regards to their sourcing journey.  Take it away Deborah....

The microscope is on the performance of the estimated +2500 shared services operations worldwide now reaching performance maturity.  What’s next for these centers as the pressures of competition and globalization demand more and more...

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Three to five years in, and step changes in performance has been achieved by consolidating back office operations in shared services centers (SSC). Aggregation of processes has yielded the benefits of scale and scope. Near- shore locations have delivered cost arbitrage and language capability. Best practices have been implemented end-to-end, resulting in standardization across both business lines and geographies.  Business unit customers have adopted new ways of working. And the paraphernalia of good business management—dashboards, service levels, KPIs--have been put in place, supported by reasonably efficient governance routines.  Has nirvana been reached?

Yet the C-suite is demanding more out of the shared services organization. Since outsourcing is no longer a dirty word, all delivery options are now on the table for consideration in order to reach the next level of performance. Corporate strategy could allow a spin off of the one or more of the centers, ‘commercializing’ the captive. Or the time may be right to embrace full-fledged outsourcing as a next logical step? 

There is another, less radical option to evolve shared services---onsourcing could be the right answer for many organizations.

Moving select processes out of existing SSC operations to a more cost effective near- or offshore provider may provide the solution.  In this scenario, the SSC management identify those processes which can be either ‘lifted and dropped’, or further improved, to benefit from the advantages of labor arbitrage and/or consolidation.  SSC leadership retains control of delivery, managing a portfolio of services provided to the business.

Why ‘onsource’ rather than transfer the entire operation to a third party lock, stock and barrel, either through a services contract or a sale?  Onsourcing provides an approach to outsourcing that gives a comfort to those organizations for which full scale outsourcing is difficult from a cultural, process complexity or regulatory standpoint.  Process delivery remains under the control of the company’s trusted services organization; services are then ‘retailed’ to the end user.

With control in the hands of the SSC, onsourcing results in a low risk, gradual approach to outsourcing, adjustable whenever.  It can be structured within a framework contract and ‘gated’ according to the ability to manage the velocity of change.

A challenge of full-scale outsourcing is knowledge retention and customer intimacy. By itself, outsourcing a specific scope is not a difficult proposition; breakpoints come from the point at which the outsourced workflow connects to upstream/downstream client processes. Onsourcing preserves that knowledge because a client layer is still firmly embedded in the SSC, ensuring that corporate knowledge is retained, and delivery remains end-to-end.

Onsourcing alleviates investment in lower cost locations to sustain delivery economics. With a rapidly globalizing services landscape, corporations cannot afford an ongoing investment in program management, property, infrastructure, and local branding to attract qualified staff.

Successful outsourcing implementation requires a change in the capabilities of management.  Good shared services managers have advanced their skills moving the corporation from vertical process delivery to consolidation. Onsourcing represents the next measured, step in evolving the capabilities of the retained team. Onsourcing managers become the ‘switching station,’ managing the expectations of the business by fitting the right ‘made or bought’ delivery solution.

Flexibility to adjust the speed of implementation of outsourcing is a key benefit. If business conditions change, the strategy can adapt.  Alternatively, if the velocity or complexity of transactions increases, onsourcing becomes a flexible delivery mechanism.

Onsourcing also acts as a buffer to the inevitable politics surrounding the decision to outsource. Since the SSC is still the corporate provider of services, onsourcing can be implemented without angst to the business.

Who can argue with the benefits of transitioning quickly and containing implementation costs? Full scale outsourcing requires substantial investment in business case development, sourcing, and transition.  Onsourcing can be implemented under a task order framework, justified by incremental business cases which can be approved quickly.

Onsourcing keeps the SSC competitive, and rate card increases static.  More expensive, high touch, risky or complex processes can continue to be delivered by the SSC while onsourcing can offset increases in costs, reducing the inevitable noise that comes from the annual transfer pricing exercise.

Is onsourcing a new idea?  No--just a simple term for the way in which many organizations would like to outsourcing business processes.  Benefits to the SSC can be easily understood—continuous improvement at a digestible pace, avoidance of investment, lessened impact of change-- with control in the hands of an organization with a strong corporate reputation. Many SSCs are seeing the virtues of incorporating selective or phased outsourcing into their delivery strategies. It’s time to give the trend a name.

• Deborah S. Kops is Chief Marketing Officer of WNS Global Services

An Unsung Outsourcing Hero

I always respect someone who has the focus and discipline to write a book - especially a particularly insightful book on "Outsourcing and Management".  Thomas Tunstall Ph.D. has enjoyed a colorful career, highlighted by his running KMPG's IT operations in Afghanistan (nice work if you can get it...).    Tom now serves as co-chair of the Dallas chapter of the International Association of Outsourcing Professionals (IAOP) and is Advisory Liaison for ACS (but we won't hold that against him).  I asked Tom to give us a brief outline of his book, which you should consider reading now Gray's Anatomy, Lost, 24, Sopranos, Ugly Betty and Desperate Housewives are all off the air:

"To understand why outsourcing – specifically the outsourcing of services – is completely overhauling management styles, we need to take a step back to see how we got here in the first place.

   

"As the large corporation blossomed in the late 1800s, it was first modeled as a stiff hierarchy, not much different than a sole proprietorship writ large. It then evolved into a multi-divisional form in the 1920s, which left finance and strategy functions at headquarters, but pushed operations and other tactical functions into the hands of field personnel. Although the structure of the large organization changed, the old hierarchical, manufacturing-oriented management styles endured for decades. A lot of those old school boys are still with us.

 

"Such antiquated management styles may have been okay during the manufacturing era, but the emphasis on services changes everything. When services used to be classified as merely overhead, they made up a small percentage of overall costs relative to raw materials and direct labor. They were safely ensconced within the walls of the old style organization.

 

"Now services are the products, and they contain a huge people component. The ability to readily outsource services, which now comprise over 80% of the economy in terms of employment, will strip down the old corporation to its core. All of the attendant functions and non-related processes will be turned over to specialists. This means that more and more work will get done outside corporate boundaries.

   

"This change in governance may seem unremarkable, but it will have a huge impact on management practice. Management behavior will be forced to change at long last – not because of goodwill or altruistic intentions on the part of management – but rather through the discipline of the market, the nature of the new rules of competition and the pervasiveness of services outsourcing. And make no mistake – the lessons will be harsh.

"Because the old governance mechanisms won’t work anymore as outsourcing and cross-organizational relationships become far more important, new management competencies will be required. Working with other organizations requires skills that many traditional managers just don’t have. Internal departments, for example, can be managed by whim or fiat. External suppliers can’t and won’t operate in such a fashion. The upshot will be that old authoritarian management styles will prove ineffective. Even laughable.

   

"Greater collaboration will become a must because it improves coordination. Management will be focused on outputs, process interfaces, and clear rules of engagement – all of which go part and parcel with outsourcing. Strong working relationships will win the day; idiosyncratic, ego-driven personalities will be an expensive luxury that few can afford.

   

"In the years ahead, watch the old school managers and executives retire early or be forced to bring new mindsets to the game. Many old school boys have become casualties already. Will you be next?" 

Adapted from Outsourcing and Management: Why the Market Benchmark Will Topple Old School Management Styles by Thomas Nelson Tunstall (Palgrave 2007)

Thomas Tunstall Ph.D. addressing the IAOP in Afghanistan

Moving and Shakin' in F&A Outsourcers

Some recent notable power moves in the F&A Outsourcing suppliers worth mentioning:

HP:  Steve Stubitz, who led Americas sales for HR and F&A BPO has gone out on top and into the private equity world.  Steve - you will be missed.

Infosys:  Devesh Nayal, who led their BPO business, has moved on to an - as yet - unnanounced company... expect to see him back soon.

Genpact:  Regina Paolillo, the Queen of Order-to-cash, has moved to  one of their parent investors, General Atlantic Partners.  Don't think we've seen the last of Regina somehow....

EXL Service:  Has recruited former EDS and ACS BPO veteran Matt Appel as CFO, and Pramode Metre - (who seems to be able to be at 6 US cities at the same time in between a trip to India) as head of sales and marketing. 

Xansa:  Worth mentioning David Hirst, who has seemingly managed AR, CR, IR, MI and Marketing all by himself (and a thoroughly nice bloke too).  Anyway Dave's moved on...but I'm not allowed to say where ;)

And finally... Accenture:  Mike "Sal" Salvino (who still comes up as Hewitt on my Outlook) has already been promoted to uberlord of Accenture's Procurement and Customer Contact Services in addition to continuing to have oversight for Accenture Finance Solutions.  Something about "capitalizing on the natural synergies"...nice work if you can get it.  Nice one Sal!

F&A dude..it's where it's all happening

Guest Post: An Outsourcer on Every Corner: Part I

David Sheinfeld is one of the best-kept-secrets in the outsourcing world... he operates behind the scenes on many major deals doing the real down-and-dirty technical and contractual stuff to make these things work.  The man is a walking encyclopedia - need I say more?  The following is a snapshot of his thoughts on how dramatically the industry is changing....

• It used to be that Outsourcing was reserved for the name companies in the marketplace. That was not long ago. After Y2K and the spending spree, corporate America embarked upon it, and it became clear that many functions could be handled more efficiently and less costly by having someone else do the work. We saw contracts orth billions of dollars being awarded to the likes of IBM and EDS. Then along came companies such as Accenture, ACS, CSC and HP. Together, these six companies became known as the Big Six of outsourcing companies. That was just a couple of years ago. How things have changed in such a short time period. The latest reports showing dollar volume, growth and the number of outsourcers seem to question whether the term Big Six is even applicable today. Over the past few years many other companies, especially those companies located outside the U.S. and whose Global delivery model has gained traction, have diluted the market share of the Big Six. A recent report by TPI states that over $100 billion dollars worth of contracts were coming due in 2006 and 2007, with almost 50% of those dollars concentrated in two companies, IBM and EDS. Now there is a whole group of new companies coming up the chain to provide the same services and solutions as do the larger companies. Outsourcing has become a commodity and is experiencing the same pressures that many other commodities go through as they become mature market players.

• As in any commodity business, the more choices you have, the more pressure the commodity has in the market.  The Outsourcing Industry is in a sea of change. The client is more knowledgeable today than in the late 90’s when those original contracts were signed.  The client appears not as concerned with outsourcing and has a more expanded view of what the outsourcer should provide -  and it’s not just cost savings.  The client is requesting more in terms of value-added services and solutions as part of the outsourcing transaction. The outcome of all of this is more choices, more competition and therefore greater price pressures on those providing the services.

• Depending upon which offering the outsourcer is pursuing will determine what services are offered and the price for those services.  For example, call center services and the pricing for those services may be more generic and the processes more uniform than Finance and Accounting or Human Resource processes.  Each specific area requires a particular expertise not only on the human side but also the technology side.  Some areas have the potential for large transition and start-up costs which are likely to cause greater margin pressures during the life of the agreement.  Now with clients breaking up the contract scope to more than one provider, there is less margin dollars and less opportunity to make up losses if they should occur in the beginning of the contract.  Furthermore, with smaller contracts in place there is a greater emphasis by the outsourcing company to try to hold back transition and start-up costs as the ability to recoup those costs becomes that much more difficult.  The new contracts may also require more services or other value added solutions that increases not only the requirements under the terms of the agreement but also increases the risk to perform. Thus, the provider needs to be prepared to give more for less!!

David Sheinfeld is currently a strategic partner with Becton Schantz, Inc., one of the largest application service providers in the country.  He is a Principal of Horizon Business Advisors LLC, a strategy, management and merchant banking firm.  He is also the founder and CEO of MKJ Advisors, LLC, a merchant bank and advisory firm specializing in strategic planning and mergers and acquisitions.  Previous to this David was a founder, Chairman and CEO of Fresh America, Corp., one of the largest distributors and manufacturers of value-added food products in North America.  David can be reached at dsheinfeld@bectonschantz.com

Why Technology is an important key to BPO-sustainability

Folks:  I will be featuring several guest posts from experts in the outsourcing industry who I respect. One gentleman whom I have known and worked closely with over the years is SAP's BPO group leader, Dr Christian Baader.  Christian is now the globally recognized thought leader on how crucial technology strategy becomes when companies take on BPO engagaments.  Take it away Christian...

There is widespread agreement in the BPO-industry by now, that the traditional, labor arbitrage dominated way  of "lift and shift" or “my mess for less” as some pundits call it, is not producing sustainable BPO-situations.   Many deals not living up to expectations and meager provider profitability are warning signs of this.  Sustainability has become one of the key issues of the industry.

Sustainability should be read as “both sides, customer and provider, achieve their business goals over the deal duration, i.e. the customer gets the targeted improvements in cost and quality of service while maintaining a low risk exposure and keeping long-term options open while the provider makes his margin, and the relationship  grows for both sides in value over time.” 

A number of factors need to get played well in order to safeguard sustainability of the deal from the start, one of them being the decisions around the technology foundation of the deal on the provider and customer side. 

Technology’s influence on deal economics
Business decision makers often tend to either leave the technology choice to the provider (an attitude we often see expressed as "we bought a service, now the  technology choices are on the service provider") or treat it as a mere IT-discussion only.  Both attitudes however miss the crucial influence, that technology has on the enterprise value of the deal:

·         Technology’s influence on the economics for the provider:  The design of the processes and choice of technology influences all the fundamental business drivers influencing the providers ability to service the deal efficiently and in a sustainable fashion: Synergizing between different parts within the customer organization as well as between customers for generating economy of scale (“do it cheaper”), ability to automate and optimize processes taking full advantage of future innovation potential (“do it better”), and effectively leverage labor arbitrage (“employ cheaper resources”)

·         Technology’s influence on the economics for the customer (ie, incl. the retained organization):  The technology choice and platform design of the customer and the provider is very often a shared one, or at least a heavily integrated one - and as such the choice on one end impacts the other end (e.g. when the outsourcing/centralization scope does not include all subprocesses or countries. Common problems include data integrity and ability to keep synchronized over time when the two sides of the fence move in slightly different direction – which might express itself in additional process exceptions requiring manual interventions or inconsistencies  in self service implementations or reporting)

All in all, the appropriate deployment of technology as an enabler of outsourced and retained processes is therefore critical to the sustainable delivery of the BPO services (leveraging appropriately automation, analytics, workflow, authorization concepts etc). 

The need for “Design for Manufacturability” of Process solutions
Furthermore, technology deployment cannot be engineered in a silo – it must be considered TOGETHER with the process reengineering, so that the resulting service is not just satisfying the business requirements but is also efficiently manufacturable.  I call this the "Design for Manufacturability "-paradigm of BPO-service manufacturing (and it seems high time, that we learn from the lessons of the physical goods manufacturing for the service manufacturing world).  Process solution “design for manufacturability” includes the choice of the platform itself, and configuration/customization choices for process adaptation and integration.   The advantages of standards-conformant deployment of standard technology (ie, leveraging configuration and avoiding customization) for your process solutions are manifold:

• required levels of process integration can be achieved more cost-effectively
• the solution is easier to maintain over time – which includes higher quality as well
• adoption of innovation is easier
• necessary scope-extensions of the platform (be it additional processes, geographies, businesses) are easier to accommodate
• finally migrating the platform at the end of contract (to another provider or back to inhouse delivery) will be less risky and painful.

In order to leverage those technology aspects most effectively, decision makers should make sure, that the topic is integrated into the sourcing project from the RFP-design stage onwards and that business and IT-teams are working on this in a highly integrated fashion.

Leave the technology choices to somebody else at your own peril!

Dr Christian Baader is VP of SAP's BPO Group, and is based in Waldorf Germany