The Outsourcing Blog: Horses for Sources

Eulogizing on the Eurozone with Principal Euan

Attend any European analyst meeting and there’s one character guaranteed to be propping up the bar. Scratch that, there are normally about 50 analysts propping up the bar. But in the midst of the throng you will undoubtedly find the stolid Euan Davis of Forrester Research.

I recall a conversation with Euan back in '95 when I told him “you should give this analyst lark a try” (If you want to know what he working on in those days, drop me a note…).  Anyhow, the story began from there, with Euan rising through the ranks at IDC’s European operation, making a curious detour to Yankee Group, before finally attaining new heights of stardom and adulation with Forrester.

Euan now boasts the words Principal Analyst in his job title and waxes lyrical about IT services in the Eurozone. Ask anyone in the industry and you’ll discover he’s fast becoming one of the most popular analyst figures on the European services circuit. And, despite the fact he once lost to me at tennis (a shameful occurrence for any man or beast), he still warrants an airing on the Horses…

Phil Fersht (PF): Euan, firstly, what are the main issues you’re hearing from your Euro clients these days? What are the main contrasts between now and before the economic crash last year?

Euan Davis (ED): The issues are many and varied but if I was to distill it down to what I see as the issues that clients are facing today then they fall into three categories: Some are “firefighters” and are looking to reduce costs wherever they can, pushing for discounts and getting economies of scale through aggressive supplier consolidation. Others are “explorers” and are directing energies into investigating a host of emerging options for IT service deliver—and business process outsourcing is one such area. The exciting ones to watch for my money are the “builders.” These firms are sinking the foundations that underpin a profound shift in their operating model architecture, IT/business redesign, and supplier engagement models. These firms are building hybrid operating models driven by a structured sourcing frame works, regulated through a retooled service management structure, and connected to a core set of suppliers. And the recession has speeded up the process of change.

Efstathiou uncut: all aboard with the sourcing skipper

When I returned to these Western shores 6 years' ago, I was given the the unenviable task of working with the indomitable Andy Efstathiou. 

Now, analysts who have spent 20 years working in commercial banks are not to be messed with - and I quickly learned my lesson with Andy, who (literally) has an encyclopedic knowledge and perspective of everything that has gone wrong with the world.  I recall Andy warning us years' ago that this was all going to go horribly wrong... and did anyone listen?

Andy has since become a good friend over the years, and has always been one of my first ports-of-call when I want to understand anything about sourcing and the banking sector.  He now runs the Banking Sourcing Program for BPO analyst NelsonHall, but his real claim-to-fame is that he finished seventh in the US Olympic trials for sailing in 1988 (pictured).  Not many people knew that...

Anyhow, I caught up with Andy last week to pose a few direct questions on the current state of the banking industry, how sourcing strategies will evolve after the recession, and how banks can navigate these choppy waters (sorry):

Phil Fersht (PF): Andy, firstly, let's not beat around the bush here. What's the climate like in the banking, financial services and insurance (BFSI) sector these days? Do you expect things to continue improving, or are we in a false dawn right now?

Andy Efstathiou (AE): Banks will continue to do well as long as they are on performance enhancing stimulus. However, the banks are aware that some day they will have to stand on their own two feet. In order to do that they need to be able to scale operations in both directions without eating overhead on the downside or investing capital to expand on the upside. Therefore banks have been aggressively working with outsourcers to create engagements built around transaction based pricing.

Bittersweet

As many of you close to me already know, after 14 years in the analyst and management consulting community, I am going to take a little break and make a few changes.

I'd like to thank publicly AMR Research for a wonderful couple of years, where I got to spar with some great people, service more clients that I care to remember, and have a lot of fun bantering with so many of you who frequent the Horses.  I'd especially like to mention some great analysts with whom I'd had the pleasure of working: Dana Stiffler, John Hagerty, Simon Jacobson, Bruce Richardson and Mickey North-Rizza - a real credit to the analyst industry (and will, hopefully, be featured here in the future).  I'd also like to thank Helen Scott for her sheer perseverance... 

If you're wondering how to get hold of me, you can always mail me here. Onwards and upwards my friends -:)

The entire Great Recession of 2008-2009: Blogged for the outsourcing industry

Wouldn't it had been something if there had been some sort of interactive journal during the Great Depression, where we could have truly experienced the emotions of the time, peoples' ideas for change, the stark contrasts between desperation and hope? 

It's been a geniune privelege to have hosted these emotional debates throughout the entire Great Recession of 2008-9.  It's incredible how attitudes have changed over these tough months - I don't know about you, but I feel a little wiser as a result - and the great interaction I have enjoyed and observed with so many of you, has made this all possible.

Here's the whole story of the Great Recession and it's impact on the global sourcing industry (in chronological order):

Crash and Learn: is TPI's "quartus horribilis" reflective of the sourcing industry at large?

There were a few alarm-bells ringing in the outsourcing industry with TPI's shaky Q2 results.  As our recent buy-side survey data indicates, in addition to the multitude of service providers and consultants, outsourcing interest and uptake is on the rebound, so what should we read into TPI's 38% drop in revenues from Q2 2008? I spoke to leaders of all the key sourcing advisors to get their candid input on how their firms were faring, and whether TPI’s results are reflective of the sourcing industry in general.

Rival Equaterra, which is currently privately held, reports to us that its Q2 results have increased 10% over 2008, expects Q3 to perform well, and is encouraged by strong IT outsourcing activity, with on-plan BPO advisory business. Another rival, Alsbridge, added: “First half revenues are up 40% on a 1st half ‘08 to 1st half ‘09 comparison. Across the board, we see good demand

Are you a BPO sales professional?

My industry chums Larry Janis and Lowell Williams are conducting a survey of BPO sales professionals to get the buzz on the current economy, your views or lawyers and advisors, and how much moolah you currently rake in.  They claim you can do this while sipping a venti in Starbucks.  They also claim to be giving away a couple of iPod shuffles to random participants (as if you don't already have one...).

Please complete the survey by clicking here

 

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". 

It’s time for disruption, not stagnation

2009 is going to be remembered as the year of cost-containment. Most client discussions are not very sexy – it’s largely about cost, as opposed to innovation or revenue generation. McKinsey recently revealed 70% of its current client engagements are cost-reduction focused, only 30%focused on revenue-generation (the opposite of a year ago).

I strongly believe our businesses, while being diligent about cost-containment, must use this opportunity to make fundamental changes to their business operations in order to emerge more profitably in the future. Simply ripping away cost elements and failing to improve access to global corporate data and processes, is a massive wasted opportunity to be more competitive over the long-term.

I wrote recently about how the lay-off culture that has afflicted both the US and UK in recent years, where many firms treat their labor as a variable cost that can be scaled-up or down at will, depending on the next quarterly forecast. I cannot stress enough the damage this can cause to businesses as the economy recovers. One common theme that has dominated discussions with business leaders recently has been their surprise at the amount of visible cost they have been able to take out of their businesses as they move from a revenue-generation to cost-containment strategy.

It’s not solely the cost of labor that is highly visible – it’s the costs of technology, travel, infrastructure, real-estate etc. that can often be easily driven-down in a desperate business climate. Less visible are costs associated with poorly-integrated business processes and procedures, of dated analytical tools, of ERP systems incapable of supporting global process templates, and so on.

Outsourcing drivers in today's climate: large companies want to globalize, mid-sized companies seek expertise

I wanted to share some recent dynamics from our new survey of outsourcing adoption intentions in mid-2009.

While the onus on firms today is to drive out as much cost as they can from their businesses (close to four-fifths view cost-reduction as the primary driver for outsourcing), other factors are becoming crucial for companies’ planning as they evaluating outsourcing business models, notably globalizing their businesses more effectively, re-engineering business processes, and accessing expertise from service partners.

If there's one thing this recession taught us, it is how integrated global economies and markets are today, how businesses need to adapt to move in and out of diverse regional markets, and how they must make rapid decisions to invest or divest global service / product lines in order to prosper.  Read more over at Think Global...

Supply Management BPO - short-term body shopping trumps business transformation

It's easy to get excited with high-growth markets, but supply management BPO's different. 

While the market has grown exponentially, and a 30% increased expenditure last year is eye-opening, the nature of these engagements doesn't give me confidence that this market will sustain its growth trajectory unless customers think beyond short-term labor arbitrage, and service providers introduce significant process and technology enhancements to the early adopters to help them optimize their delivery.  This "lift and shift" model could well result in customers losing more than they save.  Read more at Think Global.

Why the lay-off culture is far more damaging than offshoring

Ever since President Obama proposed to change the IRS tax code that regulates how US corporations declare income from international activities, I've been thinking about other measures governments can take to slow the recession and help businesses become less myopic with how they navigate these rough waters. 

Reading between the lines, he appears to be targeting a revenue grab, while making political overtones against companies which use offshore resources.  However, he's simply penalizing firms from being more productive with their exports.  Sure, there are issues with tax fraud from havens such as Bermuda or the Caymens, but this is primarily an issue with individuals, not large enterprises. 

Why penalize a US conglomerate for manufacturing diapers in Brazil for the

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:

Exclusive: Outsourcing poised to rebound

I wanted to share a few early snippets from our global sourcing adoption study, which we've been running over the last 2 weeks.  And thanks to Global Services Media, Vinnie Mirchandani, William Mougayar, Jason Busch and Dennis Howlett, who have all contributed in helping us reach close to 700 respondents, of which we had 127 enterprise buyers for IT, supply chain, finance, HR and other BPO services.

Go to Think Global to read more...

Phil Fersht on service provider rankings: make the experts accountable, not faceless brands

Vinnie Mirchandani has his latest take on the constant controversy of third-party researchers, consultants and associations compiling rankings of service providers.  This time the IAOP's Global Services 100 is being questioned. 

We've also had some banter about the Black Book of Outsourcing on this site, which made such a noise with its constant rankings of service providers, that Datamonitor decided to buy them to hop on this bandwagon.  And we've never even got to discussing the Global Services 100, or several other rankings that come out periodically.  Moreover, some "analyst" firms make a living ranking service providers, while barely bothering to talk to their customers, and selling white papers to the winners so they can flout their success (you all know who you are).

Personally, as an analyst and advisor, I find these lists useful - I sometimes find out about some provider I didn't know a lot about, and they draw attention to who's doing well at the

Datamonitor goes to Hollywood

Congratulations to our friends at the Black Book of Outsourcing, who have been rewarded for their years of entertaining us with a nice little buy-out by British research firm Datamonitor, which also owns boutique outsourcing advisor Orbys.

It speaks volumes for the Brown-Wilson group

Why protectionism is failing

With all the recent fuss in the media and the global sourcing industry about protectionism derailing new engagements, I wanted to set the record straight with some brand new survey data and some views into President Obama's current position, that protectionism is not proving to be as big an impediment behind companies' making outsourcing decisions in the near future as many people have stated.

To this end, I wanted to share some preliminary data from our current survey on global sourcing dynamics that tackles the issues preventing companies from making outsourcing decisions this year:

Supplier Management BPO breaks a billion

I wanted to share a few early snippets from our forthcoming market landscape on Supplier Management BPO services, which is due to hit the shelves next month.  The market surpassed a billion dollars in expenditure for the first time last year with a 30% hike in expenditure on new multi-scope BPO contracts.  Find out more over at Think Global...

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.

Taking the industry temperature

You can spend hours analyzing how the global sourcing industry got to where it is today, but in today's climate it's more important than ever to reach out to the industry at large to get the real deal on what's going to happen next.  Your voice is crucual, so please spend a few minutes filling out my online survey and I'll share a summary of the findings with you in return.

CLICK HERE TO COMPLETE THE SURVEY

 

SaaS: Outsourcing out-of-control?

SaaS is effectively the same as outsourcing - you're handing control over business processes to a third-party service provider.  However, while SaaS delivery shares many similarities with outsourcing as a delivery model, there are serious caveats buyers need to consider. Read more over at Think Global.

Blogs and Research on outsourcing: are you getting what you need?

When I made the move back to research from the sourcing advisor world last January, many of you may recall providing input into what research you wanted.  This blog has proved to be a great medium for driving debate and cultivating ideas - in fact, someone even said recently this was becoming the "Huffington Post" of the sourcing industry. 

But blogs are not research reports, they let you test the temperature, get the high-level insight, but not always the deep-dive data points that we all need to base decisions.  I wanted to share with you some research highlights we've been putting out at AMR Research over the last year or so, and would love to get more feedback from you on what you want to see in the coming months:

Guatemala: Bananas, Green Tomatoes... and BPO

We've been debating the opportunities for Latin American countries to take on BPO work for a while now, and spending a few days in Guatemala has confirmed - beyond doubt - the potential of the region. 

I had the pleasure of visiting Capgemini's facility, which is quickly ramping up customer-facing F&A work for Coca-Cola Enterprises (which we picked up on here).  I am going to write more about this engagement in due course, but the hybrid nearshore/offshore operating model for Finance and Accounting and Procurement is showing strong signs of being the way forward for the industry.  This is also the case for many global strategic sourcing, supply management and HR BPO engagements. For example, Coca-Cola Enterprises is sourcing neashore work to Capgemini's centers in Guatemala and Krakow, and using its Chennai operation to support these centers with non-customer facing processes. 

Guatemala's population itself is only 13.7m people, with 40% based in urban areas, however, it is the largest Central American hub with strong potential to source activities to neighboring countries, such as El Salvador and Nicaragua (see graph below) to compliment serices and keep costs low.  What impressed me most meeting many operations agents and managers was the easy-to-understand English intonation, the obsession with process, the youthful energy and the discipline. 

HR outsourcing in this recession... why this makes sense for many global firms

While many firms are hunkering down tryng to ride out this turbulent year, we're also seeing an increasing number of multi-national companies use this time to develop business support infrastructures that can scale quickly with the needs of the business. It's not all about cost-reduction - it's about being nimble, and having a firmer handle on accessing critical data on your staff at a global level.   You can view the full post over at Think Global.

Where should outsourcing vendors invest their marketing dollars in this climate?

Being an analyst, you get a broad view of all the entities competing for the same service provider dollar. You also get a good perspective on how service providers can get the best bang for their marketing buck. And being a blogger, you also pick up a strong sense for the effectiveness of media outreach, but I'll save that discussion for another time.

There is no one-stop support shop for vendors to find and attract new clients, and influence the market - they need to gauge where they need to build influence, using both direct tactical measures - i.e. speaking at conferences or advertising, and indirect measures - i.e. influencing influencers or subliminal branding. The current pull-back in discretionary spending from vendor marketing budgets is seriously exposing the bloated array of firms feeding off the vendor marketing-dime, and with a lot less to go round, we're going to see some firms exit the market, some market consolidation, and others simply going out of business. We'll also see some boutiques linger around the industry because their owner has no idea what else to do, and his only costs are living and travel expenses, and maintaining a website.  Desperate times call for desperate behavior and none more so than for many of those entities forging their living selling to IT services and BPO firms.

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.

Can Cloud transform Outsourcing?

Is the mainframe making a comeback under a fluffy guise?  Join the debate over at sister-blog Think Global. 

BPO bucks the trend as WNS posts strong revenue growth

As we discussed last month, the Business Process Outsourcing market is maintaining double-digit growth as we move into 2009, fueled by increased uptake of source-to-pay, analytics, finance and accounting, HR and industry-specific services. WNS Global Services, one of the largest pure-play BPO providers, with revenues in excess of $500m, has posted a 15.9% increase in revenues for Q4 2008, over the corresponding quarter in the prior fiscal year.  WNS's main competitor Genpact is due to report on 18th February, and I would expect to see a similar revenue increase from them.  It really appears that BPO is finding its feet and

India dominates procurement BPO delivery

Taking a detour from the Satyam fiasco, I have much better news for the Indian services sector based on brand new data on the procurement business process outsourcing (BPO) market.  Only a couple of years' ago, barely a small fraction of procurement work was sourced from offshore locations such as India.  However, it has now reached almost 70% for all current procurement BPO engagements.  Read the full post at Think Global.

Beware of Satyam ambulance-chasers

Been inundated with calls from several Satyam competitors circling their clients like vultures... read my thoughts over at Think Global.

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.

Horses outsourcing predictions for 2009

Yes, it's that time again folks, when analysts and other industry wannabe needle-movers come up with some profound verbiage that they think gets everyone excited for a few days, and hope no-one re-reads in 6 months.  Well... I occasionally do some research in my spare time, so here are some thoughts on what we can probably expect to see happen (just don't bookmark this page and hold it against me):

Low-hanging fruit outsourcing with immediate cost-savings will be strong.  As we discussed and surveyed here, it's areas where enterprises can streamline initial costs over a contract and get an immediate impact on the bottom-line.  That's bread-and-butter application outsourcing, high-arbitrage BPO areas such as F&A and vertical-specific analytics (that KPO stuff).  I am also expecting increased adoption of procurement BPO models as increased procurement and supply management work is moved offshore, and buyers can benefit from labor arbitrage to underpin the transformation costs that have held back adoption in the past. 

HRO is out of rehab

We've had many animated discussions in the past regarding the trials and tribulations of the HRO market. To cut to the chase, HRO has struggled to live up to expectations as clients struggled with poorly integrated service delivery, overly complex operational issues, the lack of common HR standards and common HR technology platforms. This often resulted in negligible cost savings and fractured service provider relationships.  Not to mention some significant write-downs by some of the providers who took on overly complex engagements.

However, new research I've been carrying out in recent weeks

Mumbai events test appetite for offshore

My esteemed colleague at AMR Research, Dana Stiffler, who works with me in our Global Business and Outsourcing Services practice, has compiled some thoughts about the recent atrocities over in Mumbai, which we wanted to share with you, discussing the impact on the offshore sourcing industry... over to you Dana:

India's financial markets, including technology company stocks, bounced back admirably following last week's terror attacks in Mumbai.

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

The challenges of moving to a global HR model

Julia Velixon at Mercer recently presented a new study conducted with the Harvard Business School, based on interviews with senior HR leaders from 60 global corporation, focused on the challenges of HR leaders moving from local to global roles within an global HR function.

Key findings from the study:

Workforces are becoming more globally-dispersed.  The increased globalization of many of today's businesses, both in terms of their penetration into new international markets, in addition to their adoption of global sourcing models across IT and corporate support functions, is significantly increasing the need for global HR practices.  More than 50% of respondents' workforces reside outside of their corporate home country - the pressure to standardize policies and processes, manage increased workforce mobility and manage compliance needs is greater than ever. 

Many senior HR executives are stepping up into global roles, but are failing to divest of their localized issues.  45% of the executives have moved into global roles over the last two-to-three years

Expect a phrenetic Q1'09 for outsourcing activity in the banking sector

More on the recent survey we ran (to which many of you contributed) on the immediate outsourcing intentions from the beleaguered financial sector.

     The financial services sector has held back from many outsourcing opportunities in recent years through a stubborn resistance to change and a fear of losing control over non-core business processes.  However, with this current tough financial climate, executives have little choice but to embrace global opportunities that afford both short and long-term cost-savings, access to process acumen and new technologies. When we delve deeper into the new survey data,

Banks ramp-up their outsourcing plans

Thanks to all of you who took the time to complete our recent poll of the financial crisis and its impact on the outsourcing strategies of financial institutions.  Below is a snippet of the findings:

* Only 16% of financial institutions surveyed have actively sought to pull-back their outsourcing expenditure plans, while 39% are now looking to increase expenditure in light of recent events

* 45% have not made any changes to their planned outsourcing expenditure on ITO and BPO services

When we delve deeper into the data, it's the major US banks which are clearly the most aggressive with ramping-up their plans to pursue outsourcing strategies.  The main service-lines where they are focusing are banking-specific BPO services, application outsourcing, IT infrastructure outsourcing and Finance and accounting BPO.  Insurance companies also stated a strong focus on adopting insurance-specific BPO services in a 6-12 month period.

Service lines not being so aggressively pursued are primarily HR outsourcing and IT staff augmentation projects.  More thoughts to follow. 

Many thanks to the folks at Global Services Media for their help in sending the survey to its readership.

 

Dispatches from DC: Shift Happens

Here is the movie clip taken from my recent presentation "Creating a Strategic Enterprise Sourcing Strategy and Governing Change".  A special thanks to John Fisch for supplying some great content, and Mike Brown at AMR for mixing up the clip with this great soundtrack.  Enjoy.

Click to Play

 

And we did this before the Wall street shenanigans, just to add fuel to the fire...

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

Dispatches from DC: going global with your HR function

Been listening to some excellent discussions at Mercer's client event, where the central theme is all about globalization.  Mercer's Jeff Miller and Julia Velixon discussed the results of their new study, conducted with the Harvard Business School, based on interviews with senior HR leaders from 60 global corporations.  Some key points of note:

• Workforces are becoming more globally-dispersed.  More than 50% of respondents' workforces reside outside of their corporate home country - the pressure to standardize policies and processes, manage increased workforce mobility and manage compliance needs is greater than ever;
• Many senior HR executives are stepping up into global roles, but are finding the transition challenging.  45% of the executives have moved into global roles over the last two-to-three years - many of these transitioned in the last year alone.  However, while roles are being structured globally, most of the executives have been struggling to get away from dealing with local and regional issues. 
• Lack of standardization.  The lack of a consistent approach to governance and compliance, especially in Europe and Asia - where employment and tax laws vary widely in different jurisdictions - creates further challenges for HR leaders.  There is also a lack of standardization around the approach to global mobility, which hinder's HR's ability to apply consistent procedures to the compensation and benefits of a workforce that has been growing rapidly.  It is becoming increasingly important for companies to properly manage the logistics of moving there employees from country to country.

Food-for-thought...more to follow

Poland: More than "just another" BPO location

I received a very interesting synopsis from a senior executive at one of the major global IT-BPO providers on the subject of Poland as an offshore delivery location.  From my own personal experience, Poland has proved to be a first-class location for high-quality, multi-lingual support, particularly for BPO functions such as finance and HR.  No wonder providers such as Accenture, ADP, Capgemini, Genpact, HCL, HP and IBM have all made significant investments there, in addition to many captive centers that have been established there in recent years. 

Siddhartha makes some excellent points, most notably that Poland is simply not an "alternative offshore location", as its value-proposition is not driven by scale and low-cost, but by highly-motivated and educated staff, and is a proven first-class hub for multi-lingual European language support. He also makes a bold assumption that Poland has the potential to be challenging the unique expertise of a country such as Israel, as Poland possesses far more potential that simply being a BPO / shared services location. In many instances, clients have not found significant cost savings using Polish delivery resources - they have used them because of the value and quality they bring to a global delivery model.  Over to you Siddhartha:

Are vendors and advisors getting too cosy?

We completed our survey looking at the world of third-party sourcing advisors this week, with the high-level results being discussed by my friend Ed Nair, over at Global Services Media. 

One of the key takeways, which I wanted to share with you, is the importance of the sourcing advisor / vendor relationship.  Of the 114 advisors who completed their section of the study, almost half of them revealed they frequently get business through their relationships with vendors.  We always knew that vendors refer advisors in certain client instances, but not to this extent:

What makes a good blog?

I seem to get pulled into daily discussions from people trying to get a blog off the ground.  There appears to be a common misconception that all you have to do is post something and thousands of people will flock to your site, eager to listen to your rhetoric and add their own views.  I have literally lost count of the number of bloggers who put out a few posts, only to leave the thing stranded gathering web-dust.  Cyberspace is littered with blog-junk that clutters web-searches and gives the impression their owner fell off a cliff or experienced some other inexplicable disappearing occurrence.  Bottom-line - if you're going to start a blog, stick with it. 

Why I put the kibosh on the survey of list-makers

Apologies to several of you who voted on a poll I ran on Sunday/Monday that was evaluating the credibility of the list-makers and award-givers in the outsourcing industry. Unfortunately, I received a very large number of suspicious survey responses from a host of "FORTUNE 500 buyers", whose IP addresses - for some reason - all seemed to emanate from the same couple of locations. I received a very large number of these survey submissions clustered within a short time-frame, and they had no names or email addresses attached. They also all had selected one particular list-maker as "highly credible", while simultaneously describing the same 2 others as having "poor credibility".

It saddens me that on-line surveys can seemingly be so easily manipulated by entities that seek to sabotage results, or skew them in favor of themselves. I have become a little more cynical (than usual) this week as a result. As an industry analyst, I try hard to be impartial and deliver information to clients to help them make informed, unbiased decisions. I run this blog to drive healthy discussion, promote ideas and share knowledge with others. It seems that not everyone shares my ideals.

There's my rant. Issue closed. Thanks for listening. I just hope that there are still many of us who want to drive out bias and impropriety from a challenging industry in these complex times.

The Book of Lists (revisited)

There's been a lot of heated discussion in the outsourcing industry of late regarding the issue of lists, rankings, awards and proclamations of vendors, advisors, tought-leaders etc.  As per expected, emotions are strained when some come out looking good, and some not-so-good. 

However, with such a ramshackle swirl of information out there... from consultants, media, bloggers, analysts, associations, researchers, there has never been a more critical need for the ultimate target - the buyer - to have balanced, unbiased and accurate information and advice. The real issue here is that rankings or "best of" lists are only as valuable as the rigor and independence of the evaluation methodology.

Deborah Kops, who has guested here with some intriguing views on outsourcing issues, has offered to share her thoughts with us on this whole issue.  Deborah is widely recognized as one of the outsourcing industry's most experienced voices, having spent the majority of her career on the advisory and practitioner-side of global services, leading global transformation efforts at Deutsch Bank and Bank of America, before helping to establish PwC's outsourcing division.  Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO and KPO provider, and has greater exposure than most people in the industry to these "lists", now she is leading marketing for a services provider with revenues of half-a-billion dollars. Over to you Deborah:

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.

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

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

So why should we care? 

Sourcing advisors - your opinion is valuable

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

Join the BPO and Offshoring Best Practices Forum

Sign up now!

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

 

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....