The Outsourcing Blog..."Horses for Sources"

Is this "2001 all over again" for outsourcing?

As we've predicted, based on our surveys, many tough discussions with buyers and general chit-chat, sourcing evaluation is now picking up, and we can expect to see a wave of deals in Q4 this year and Q1 next year (and beyond). 

First, the sourcing advisors, management consultants and analysts get busy with their clients showing much more urgency, and then we can expect to see some deals happen.  Based on my conversations with the advisory community over the last couple of week we're now in that former category.  I've even had a couple of people come to me with the question "Is this 2001 all over again".  My answer is:  "In some ways yes, but the types of deals and the global delivery execution is markedly different this time". 

Now why is this?

Post 9/11 we saw a major spree of ITO, call center and end-to-end HR BPO wave.  ITO worked, call center is stuttering with offshore value, and HR BPO - in its past form - failed 

The IT infrastructure outsourcing deals were onshore mature contracts with established providers such as IBM, CSC and HP, experienced at driving economies of scale with their delivery models. The application development and maintenance deals back then were among the first to truly leverage offshore

Captive sell-offs: good for innovation, good for employment

I know I've been depressing everyone with calls for change and for our flagging companies to step up and disrupt their business models.  But did I ever say I was here to make you happy?

However, one shimmer of light amidst this gloom is the increase in activity of service providers buying up business' captives or shared service operations (often under the guise of a new "client win"). 

EXL's acquisition of Schenider Logistics' Czech operations is yet another recent example of a service provider making a strategic move to add scale and expertise to its delivery portfolio.  In this case, EXL is cementing its European presence in a unique and attractive sourcing location, enhancing its F&A BPO business and bolstering its multilingual capabilities, in addition to incorporating supply chain and logistics management process expertise - an area of increasing importance in the industry.

So why is this good for industry?

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...

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...

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

Globalizing the business is the key to outsourcing today

As we discussed last week, it's clear that many companies will continue to move into outsourced business environments, despite the recession and political pressures to keep work onshore.  While some firms find it hard to make radical decisions in a downturn, others are clearly seeing how critical it is to operate as a global business. 

If there's one thing this recession taught us, it's 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.  Outsourcing doesn't provide all the immediate answers, but it does help create the vehicle for clients to become more nimble and capable at a global level.  Check out our thoughts based on new survey data over at Think Global...

Wipro and Oracle partner to blow-up the BPO delivery model

Folks - I can exclusively reveal to you today that Wipro BPO and Oracle are shortly going to announce a partnership dubbed "simPlify", whereby Wipro will deliver PeopleSoft HR to both mid-market and high-end clients via a hosted utility BPO service, that will cater for 20 major countries.  They will also partner with The Hackett Group as part of the arrangement to provide performance benchmarks for HR processes.

The mid-market play is a true move towards "one-to-many", whereas the enterprise play will be a more customized approach.  Clients will need to invest

Take part in our Budapest debate next week... from your front room

This Tuesday, we're holding a "World Exclusive", with a distinguished panel of Horses-readers being webstreamed live from the 9th Annual European Shared Services and Outsourcing Week in Budapest Hungary.  For those of you unable to make the conference, you will have a chance to take part in the debate via a live blog-cast streamed to a computer near you.  I do hope you can partake in the banter.

*World Exclusive* Horses For Sources - Live From Budapest

Deciphering The Business Value Of Tomorrow’s Sourcing Strategies In Today’s Economic Climate

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...

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:

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 flat of the curve: are we scared of innovation?

Kevin O'Marah, AMR Research's Chief Strategy Officer, blogs a thought-provoking piece that highlights how so many retailers and manufacturers have failed to embrace collaborative supply chain models through fear of "giving more than they'll get".  Kevin argues that consolidation amongst suppliers will accelerate in this environment as major industrials drive cost out of their supply chains by reducing their supplier bases.  He adds,"what we have since seen is that cooperation takes a lot more than just setting up EDI, reverse auctions, or visualization.  It takes trust, which apparently is still in short supply." 

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...

Kicking off the "Innovation" discussions: Oracle's Roger Turnham

One of the nicest guys in the BPO industry is Oracle's Roger Turnham.  He's been Oracle's brains-behind-the-scenes since BPO was a mere twinkle in Larry's eye four years' ago.  Many of you have been dazzled by Roger's Texan charm as the software giant develops its BPO partner program for service providers.  He also has some very interesting views on innovation strategies that can add significant value to a BPO engagement.  I am going to hone in on the "I" topic over the coming weeks, and asked Roger to kick off the discussions... over you you Mr T:

Innovation: What’s in a Name?

Over the past four years I’ve sat through BPO panel discussions on innovation, I’ve listened to some of the world’s largest BPO customers complain that they can’t get it, while BPO providers claim great success in delivering it. Either somebody’s lying or the word is like evolution: It’s so broad a word that it can mean anything you want it to. To extend the analogy: Evolution is a word that means everything from change over time to the origin of matter, to a cosmic explosion that created everything, to why some of us are big and others blond and – my personal favorite – how goo turned into you. If “innovation” is like evolution, it can mean anything, or everything, or nothing.

So, what is it?

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 versus BPO: is this where tech-geeks finally interact with services-nerds?

So there was a bit of Phil-bashing going on this week - from SaaS lovers - after my post that discussed some of the potential issues with SaaS delivery versus outsourcing.  I also got several messages of "thanks for nailing this one for us" from services folks.  To clarify my point, I would like to emphasize I am a huge fan of SaaS delivery and strongly believe that SaaS services will enmesh with some areas of BPO to create the genuine business utility models for the future.  BPO provides that level of business-customization for those business processes that are enabled by the SaaS app.  I believe the issues are more about IT folks understanding the basics of business service delivery - and vice-versa.

My concerns with SaaS delivery are how companies govern their business processes that are supported by SaaS application delivery.  It is a serious step

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.

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."

Horses Exclusive: Obama to ban offshore outsourcing

Folks - I can exclusively reveal  - and you heard it here first - that President Obama will shortly be announcing a blanket ban on the offshoring of US jobs.  My government insider tells me that he will take the following measures:

• Any employer seeking to replace US staff with an overseas employee will have to prove it was unable to source a US employee for the role for a period of 90 days, where the position was widely advertised on national media;

• A task-force of leading US-headquartered outsourcing service providers, including IBM, ACS, CSC and HP, will be tasked with assisting US firms with their backsourcing initiatives, their fees being footed by a proposed budget ammendment that is likely to total as much as $50 billion;

• Leading outsourcing service providers which are not US-headquartered, and have more than 50% of their employees based outside of the US, will have their US trading licenses revoked and will have 30 days to wind down their US operations;

• All jobs that have moved offshore within the last 8 years, that are currently being performed for any US-domiciled organization, are to be replicated back to a US location within the next six months.  The US government will reimburse 20% of the reinstated onshore employee's salary to their employer upon completion of their first year of employment;

• CEOs who fail comply with the ruling will face a disciplinary panel headed by Lou Dobbs. 

So the battle is on between the USA's onshore locations.  Who will win out?  Albuquerque, Detroit, Nashville, Jacksonville, El Pazo?  Love to hear your thoughts...

Think before your retain: is IT impeding many companies' survival in this economy?

I had this private debate with a number of peers in other analyst and consulting organizations recently, and wanted to share some of the discussion points with you all here.

In our recent discussion "Think before you fire: The cost of replacing IT talent", we discussed the issues facing  many companies who were too trigger-happy to scale back their IT wage-costs, and ended up spending a lot more in the long-run when replacing the valuable knowledge of their business systems.  At the same time, we see even more firms held back by IT departments that have failed to move with the times - and none more so than mid-market firms that simply cannot afford to employ the best quality IT staff.   And while we can debate the fine points about business processes moving to offshore or fully outsourced models, you sometimes forget how critical IT is to getting things done. 

Outsourced from Africa

I feel like I'm becoming a travel journalist these days, but we're seeing some very interesting locations get themselves onto the global sourcing map.  Enter South Africa and the picturesque coastal hub of Cape Town, which is primed to challenge for UK and European BPO services. Read more over at Think Global....

Global business on a Knife-edge: Bonuses, H-1Bs and Naïve Protectionism

Has the world gone mad? Or is it just the US Senate? One month after Senators Bernie Sanders and Chuck Grassley pushed their amendment through the Senate making it tough for TARP recipients to hire H-1B* or L1 visa holders, we use the same TARP cash to pay retention bonuses to the very people who got us into this mess in the first place. We could create many, many more jobs with that bonus cash than we’d ever had “saved” by blocking a small minority of H1-B applicants.

The original intent of the Sanders/Grassley amendment barred all recipients of TARP funding from hiring any H-1B workers. However, the amendment was

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. 

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.

Is the call center finally coming back onshore?

We had a great discussion a few weeks' ago regarding the USA's potential to take on more sourcing work, with increasing unemployment and downward wage pressures.  I've made this point a few times now, but BPO is clearly the bigger onshore opportunity than mainstream application services for the US to muscle in on sourcing work.  And where better to start than the call center?

Bottom-line, President Obama should take a leaf out of Margaret Thatcher's book and examine simple effective ways to provide productive and sustainable employment in depressed areas where industry is in a terminable decline.  I never voted for old Maggie, but she did do one very smart thing during her tenure as British PM - she closed down unprofitable coalmines during the 80's recession, and encouraged businesses to set up call centers in depressed British cities.  Now there are over 650,000 call center employees across the UK. 

Source like an Egyptian

My colleague Dana Stiffler had some fun in Egypt this week, as a guest of Egypt’s Information Technology Industry Development Agency (ITIDA).  Check out her observations at Think Global.

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

Can Cloud transform Outsourcing?

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

Think before you fire: The cost of replacing IT talent

There’s currently a certain sense of déjà-vu within the IT community, as companies look at shaving even more cost out of a function that has been battered since the 2001 dot-com bust. However, when we look at the lessons of the past, you do have to question companies which decide to sharpen their knives once more when they address their IT costs. Companies need to offset the cost of every layoff with the cost of replacing that talent when the economy improves. It is not so much who is left standing, but rather who is in position to grasp the brass ring of prosperity when it returns.

If economic conditions improve in 2010, then the amount of costs saved by releasing an employee may only be $50-100K by the time all the lay-off costs are incurred. How can you put a price on replacing the inherent business knowledge of that staff member when you re-hire a replacement? It may take another year or two to get the replacement up-to-speed, and will not only end up costing you more, but may also impede your executives from accessing critical data in a timely fashion. The overall cost of replacing that staff member could easily be three times the costs saved by laying her off. And these easily-identified direct costs are only the beginning; the costs incurred to your culture and morale can prove even more damaging.

There are lessons to be learned from those who did it right and those who failed to do so during the recession of 2001. The frequently cited observation by George Santayana warrants consideration, “Those who do not remember the past are condemned to repeat it.” Furloughed IT employees in the RIF of 2001 were often reluctant to return to their previous employer. Having been viewed as expendable, the trust and bond between the two may have become a casualty. Often the company belatedly discovered the employee was not at all expendable.

NASSCOM: Pushing the Reset Button on an Industry, But Hush-Hush on Satyam

We are priveleged this year to have AMR's own Dana Stiffler at the NASSCOM show in Mumbai.  What a time to be at the heart of the Indian services industry with the recent Mumbai terror events, the Satyam saga and the current economic crisis...  How is India Inc. responding? Over you to Dana:

NASSCOM President Som Mittal opened the group’s 17th annual leadership conference with praise for the resilient city of Mumbai, as the packed house observed a moment of silence for the victims of the city’s terrorist attacks last November. It’s a watershed moment for NASSCOM and the industry in general and Mr. Mittal struck just the right tone in his opening comments: cheerful, welcoming, resolute. Addressing the attacks and Satyam’s challenges up front, he told us it was time to reset expectations.

As for specifics, Mr. Mittal announced that NASSCOM will reconvene its ethics and governance committee. He also highlighted green technology

We are priveleged this year to have AMR's own Dana Stiffler at the NASSCOM show in Mumbai.  What a time to be at the heart of the Indian services industry with the recent Mumbai terror events, the Satyam saga and the current economic crisis...  How is India Inc. responding? Over you to Dana:

NASSCOM President Som Mittal opened the group’s 17th annual leadership conference with praise for the resilient city of Mumbai, as the packed house observed a moment of silence for the victims of the city’s terrorist attacks last November. It’s a watershed moment for NASSCOM and the industry in general and Mr. Mittal struck just the right tone in his opening comments: cheerful, welcoming, resolute. Addressing the attacks and Satyam’s challenges up front, he told us it was time to reset expectations.

As for specifics, Mr. Mittal announced that NASSCOM will reconvene its ethics and governance committee. He also highlighted green technology

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

Everything will change

I've been avidly following Robert Peston's coverage of the economic crisis.  Peston is the BBC's business editor and has built a stellar reputation for reporting the key facts on what went so massively wrong and what we can do to emerge from this crisis. His recent BBC radio discussion with Robert Wolf, Financial Times's chief economic commentator, Richard Lambert, director general of the CBI and Roger Carr, the chairman of Centrica and Cadbury, is well worth hearing.  Key points discussed:

• The UK is the most vulnerable economy, due to its unprecedented housing bubble and over-reliance on the financial services sector.

• The strong sense of denial is fading - there aren't going to be any winners out of all this, just relative advantage. 

• Not everyone yet grasps this is a massive structural change - we're not going back to 2006.  The massive consumer-led debt boom cannot be repeated.  We might go back to fast growth, but the whole pattern of global demand will have to be different for that to happen.  The world economy will have to be re-balanced in different ways.

• We've done a very good job of driving short-term stimulus and saved the banking system, but the long-term solution has to be the restoration of healthy private sector demand across the world: that is the next stage of getting back to a healthy economy...but does the private sector understand this?  There is an increasing awareness that we are interdependent.  Unless the strong support the frail we will have continuing difficulty.

• We must protects the emerging economies now and change the way we finance them.  The IMF resources need to be bigger to protect developing economies.

• We need to have serious intelligent dialog with the Chinese on how to make their growth more compatible with global stability.

All-in-all, you can really start to guage how crucial the role global sourcing has to play as we emerge in a new economic structure.  The inter-dependencies across economies and businesses can be managed more effectively by firms adopting multi-cultural, multi-lingual and multi-regional delivery models. Both governments and businesses need to embrace both local and global talent to restore private sector demand over the long-term.  What is abundantly clear is that we don't fully realize how this structure will ultimately develop, but we are quickly understanding the basics of what needs to change.  The next stage is for both governments and business to work together on stimulating long-term demand and making these inter-dependencies really function effectively.

What goes around comes around

This credit-crisis-fueled recession is testing us far more deeply than merely everyone shaving a few costs while we ride this sucker out. And while it hurts, a little pain should bring about some positives that go far deeper than mere penny-pinching. We need to dig deeper to understand more about what makes us good people: fun to be with, smart to do business with, and decent returners-of-favors. I have always (somewhat naively) operated on the “what goes around comes around” principle, but I truly believe these times will help many of us get what we deserve. I don’t mind doing people favors – I just don’t do them twice if the first one never got returned when I needed it.

But we will come out of this, and we will emerge a bit smarter, a bit leaner, a bit more streetwise, and I firmly hope this will bring the best qualities out of us. We may emerge a few percentage points poorer than when we went into this, but the world we will be living in should be one where we help each other out more, and appreciate what we have.

When I look at the way many corporates and people behaved during the greed years, I sincerely hope these experiences bring a degree of humility to us all. I live and die by my friendships – whether personal or work-related, and I know many of you who have the same principles will get through the next couple of years. However, we all know people who just focus on what they can get out of others and rarely put back – those are the people I fear for in this economy, and I hope learn to act with more humility as a result.

Anyway, I will finish this little diatribe with a couple of points about how to treat our friends and colleagues:

People: remember who your friends are. Stop thinking just about your career and your self-interest, but take some time to get to know people a little better – and not simply those aspects that can further your own goals and ambitions

Work: use this episode to get smarter at what we do. Focus heavily on providing value and put in a little extra time and effort. If you are lucky enough to be in a job, remember the unluckier folks who helped you along the way, and take some time to see if you can help them out. If you are one of the unlucky ones, call in your favors – you will quickly learn who your real friends are...

I write this piece at 37,000 feet above the Atlantic, it's my birthday... and I need a break from this presentation, so forgive me this little opinionated indulgence...just this once :)

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.

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.

Preparing for '09: It IS time to dump the term "Outsourcing"

You may recall the discussion we had earlier this year regarding whether it is time to stop using the term "Outsourcing".  The general consensus among many of you (including myself) was that we are stuck with the phrase and we shouldn't go out our way to dress-up global sourcing with other, more relevant, terminology:

"However you want to spin it, your staff will view it as outsourcing, and the more you try and disguise the taboo term, the more suspicious your staff will be that you are simply trying to ship them out for lower-cost labor"

With the dramatic changes in our corporate climate and political attitudes in recent months, I believe it's now time to change our well-worn phrase.  The core issues being:

1) Poor comprehension of global sourcing. Too many people associate "outsourcing" with greedy corporate leaders only interested in slashing costs, with little regard for employee livelihood. They have pre-conceived notions that organizations have forgotten about their people, and only care about the bottom-line.  I can assure anyone that is not the case with the majority of companies with whom I speak with daily. 

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. 

WSJ confuses itself about outsourcing

I just read a piece in the Wall St Journal, which has me wondering whether many people actually think companies buy outsourcing like servers, or software licenses.  Companies outsource to reduce costs and access skills and technologies they need to be more competitive.  It's also a tough, long-term decision for many firms to take, and it's no wonder we're experiencing a slow quarter in deal activity as companies wait to see how the economy is going to shake out.  With IT budgets being reduced and pressure to take out more administrative costs, firms have little other choice than to explore outsourcing opportunities.  What the article fails to mention is the huge amount of evaluation activity we're seeing in the market right now.  How about asking TPI et al. how many consultants they have on the bench?  My sense is not many...

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:

After the wake-up call: time to focus on our young talent

As painful as this current economic climate is, we really need to start looking ahead to the positive changes that times like these can bring in the long-term when we recover. Recessions normally occur when many years of bad habits culminate, where certain things were progressing down the wrong track and, finally, the bottom fell out of the market and woke us all up. And, this time, the wake up call is a very loud one.

To correct our future, we need to focus on where our future is going to be molded - our young talent.

So how could this play out?

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

How should companies approach outsourcing in this economy?

It’s easy for enterprises to panic in this market and jump at outsourcing opportunities, simply with the goal of shedding some cost from the bottom-line. In too many situations, clients have jumped at the lowest cost option, and now live to regret their decision.

Outsourcing clients have to think more smartly and strategically about creating an experience than can drive new growth, deliver business value to the top-line, and not just take out short-term costs from the bottom. If clients can engage outsourcing to become more competitive, it creates an entirely different paradigm than simply “shipping jobs offshore”.

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.

Investing in the right vehicles for change

This whole automotive situation is a microcosm of the broader issues facing the crumbling Western economies in this crisis market, and these issues require significant surgery to our very corporate DNA.  And outsourcing and globalization are right at the heart of the issues. 

Outsourcing provides an enabler for businesses to change, but ultimately we have to be put in a position where we have to change our corporate DNA and stop clinging to the inefficient ways of the past.  That time is now upon us and we need to embrace new ways of working, and new ways of doing this smarter.  And if it's fear that is driving us, some short-term panic, some short-term hardship, is a small price to pay to find new avenues of growth and value-creation further down the road.

And that doesn't mean businesses should go out and find outsourcing providers to save them a few dollars today, for the sake of making a quarterly target.