The Outsourcing Blog: Horses for Sources

The Industry Speaks, Part III: Demand for outsourcing is reaching new heights, but will vendors disappoint?

Industry analysts are often accused of hyping the market they cover, creating hockey-stick growth projections to get everyone excited and avoiding ever reporting a worrying decline in growth.   I just heard you gasp in shock and horror at this revelation...

So what do you do when you're actually in a position to dust-off the old hockey-stick, last seen used adorning a forecast for online vacuum-cleaner parts from ’99, and slap it under a title such as "Outsourcing spending to reach $250 Gazillion by 2016"?

Which brings us to the topic du jour: what are customers intending to do this year with their outsourcing strategies?  When we spoke to 1055 customers, intermediaries and vendors across the global sourcing industry earlier this month, they gave us the real picture:

The Industry Speaks, Part II: When the labor arbitrage deals dry-up (and they will), customers will select vendors that can deliver business-value beyond basic low-cost services

Fed up with short, punchy news titles such as "Outsourcing is Dead", or "My Delivery Manager Ate my Hamster", designed purely to capture your attention with minimal substance? 

Well, salvation can be found right here, as long-winded rambling ones are going to be all the rage this year, so here's one to send you into a tail-spin:  "Infosys will buy Capgemini, then IBM will acquire the newly-merged entity before spinning it out as part of a joint-venture with Deloitte, GE and Macdonalds".  Actually, before you hurry out to purchase some stock in the Golden Arches, I just made that up...

Instead, let's talk about outsourcing vendors, and what on earth they are going to do when these tasty labor-arbitrage deals start to fizzle-out.  As we discussed at length back in November, operational service provision is commoditizing and leveling the playing field.  Customers did their planning during the recession, and, now armageddon has (apparently) been averted, it's time to execute on that planning.  And part of many customers' planning right now, is to take advantage of moving operational support offshore and driving out some cost. 

This is bonanza-time for the offshore-specialists that can deliver basic IT and BPO services at competitive prices.  Contract-signings that were delayed during the painful recession months are now in full-swing, service vendors are reporting healthy results and even the sourcing advisors have stopped moaning about their lack of deals, and are making money again.

Want to know about global sourcing? Then we'll lend you Anand...

Whether it's cash management in Casablanca, or payroll in Patagonia, there's one guy who'll have a Harvey Ball polished and ready for you.  Enter Everest Group's rock-loving, paint-balling enthusiast, Anand Ramesh, who lives and breathes global sourcing locations. 

However, before you read the excellent guest article he's submitted for us, please spend a few minutes assisting Anand with his new study to understand how companies are leveraging offshore locations – particularly for high-value services – and how the landscape is likely to evolve. Just click here to access his study, and he'll send you a summary of the "Market Vista" report in return for your efforts.  Over to you Anand...

Global Sourcing Destinations: Perspective 2010

The ripple effects of the global economic slowdown made 2009 an interesting year for outsourcing and offshoring. Rapid growth in offshoring slowed in 2009, despite the fact that the trend of high wage inflation in offshoring markets diminished significantly.

The Industry Speaks, Part I: it's not all about cost anymore, outsourcing provides a powerful change-agent

So it's time to drip-feed the intentions and experiences of 1055 buyers, intermediaries and vendors into the global sourcing industry. 

We'll be discussing the results from our "Seeking the New Normal in Outsourcing Delivery" in full at the Global Services Conference on 28th January, but the nuances behind why - and how - companies are exploring sourcing delivery models, as we come out of a painful recession into an uncertain climate, need to be aired and discussed. 

There's been a lot of talk about a "New Normal", or a "Reset Economy", that things will never be quite the same as before, however, we really need to zone-in on reality to grasp what these new dynamics really entail, in order to understand how we can address them. 

To cut to the chase, most industries are in a state of profound change, where businesses are having to accomplish new levels productivity and sources of revenue simply to survive, let alone grow, in this climate.  Whether you're making cars, pharmaceutical products, providing consulting services, and so forth, the chances are there's someone else in your industry vying to deliver what you do at lower cost, and potentially better quality.  (Unless you're in banking, where it's business as usual...). 

Searching for the cloud? Then look to the Highlands...

My earliest memory of outsourcing was ringing to complain about a utility bill and getting a polite, but calmly authoritative, Scottish girl at the end of the line.  I knew immediately that I wasn't going to get a ton of mileage with my quest for justice that day...

We've spent a lot of time discussing outsourcing locations here, and one we've overlooked is Scotland.  And it's not because I'm a Brit and the Jocks don't like us very much - it's simply the fact that they don't make a great deal of noise about what a stellar location they have.  They quietly go about taking on BPO services for the likes of Morgan Stanley and Shell and let their reputation take care of itself. 

So, with this year's European Shared Services Week conference being staged in Edinburgh (where I once narrowly dodged the cheese police, but I'll save that story for another time), I asked Danny Cusick to give us his best Scottish sales pitch that puts those "Invest in Wales" ads (we get force-fed on BA flights), into the shade.  And for those of you who don't know Danny, he's President of the Americas for Scottish Development International.  Over to you Sire!

Alsbridge doubles-down on data-rich consulting with TAG acquisition

 
We've had a huge amount of debate concerning the future direction of outsourcing advisory services, and today, we can exclusively reveal a sea-change in the advisor industry landscape with  Alsbridge's acquisition of TAG, the leading life-cycle expense management advisor for network services.

Weekend recap: the "new normal" in the outsourcing delivery business

Thanks to all of you who participated in December's survey "Seeking The New Normal in Outsourcing Delivery". 

In total, 1051 companies gave their opinions, with a strong mix of buyers, intermediaries and providers participating to give us an unprecedented pulse on the outsourcing industry.  About time we had less prophesying and some actual hard facts on what's really going on out there...

In anticipation of releasing the results of the study later next week, I'd like to recap some recent thoughts on where the industry is headed, to help make sense of what is really happening in the industry.  And a special thanks to our friends at Global Services Media and the Shared Services & Outsourcing Network, who graciously invited their member communities to complete the survey (thank you, Ed and Sarah).  And curses to those of you who pilfered our phrase "New Normal"... you know who you are :)

The "new normal" in the outsourcing delivery business

This truly has been a pivotal quarter for the outsourcing business.  As we've discussed several times here, many services contract decisions have been delayed during the economic crisis while organizations worked out the best course of action to get through the downturn. 

In Q3 we've started to see definitive action, with many service providers meeting, and some even beating, Wall St. expectations.  But while some providers are clearly delivering, others are struggling to compete in this "new normal".

So what is this "new normal"?

Adieu to a research legend

Right on cue with our discussion earlier this week, the "void" just got bigger as software analyst legend, Bruce Richardson, announced his departure from the analyst community to take on the role of Chief Strategy Officer at software giant Infor. 

Known in the industry as "Mr AMR", Bruce has entertained us for years with his famous "First Thing Monday" newsletter and blog.  I, personally, have Bruce to thank for bringing me back to the analyst fold with AMR in 2007, and being a guide and mentor to myself and many other analysts during his role as Chief Research Officer.

Like everyone else in the industry, I am hoping - and expecting - Bruce to continue enlightening us all with his weekly musings from the vendor side.  And I am sure even SAP and Oracle won't begrudge him what has become industry-standard with our Monday-morning espresso.  Who said you can't blog from the dark side?

Good luck Bruce - you ARE a legend :)

Getting even more Ruest... Part Dieu

And now time for the long-awaited second part of our interview with our francophonic snowboarding services stud Sebastien Ruest, IDC's Veep for Global services research. (Vous pouvez accéder à la première partie ici).  And ladies, please no more emails asking me whether he's single... 

Phil Fersht: Sebastien, let’s talk about Cloud, where you’ve been particularly involved. In a nutshell, can you help us separate the hype from reality, and explain to our readers whether this is just the next buzz-phrase in the IT business, or a genuine way we’re going to access services in the future? Do we have any optimistic IDC projections with cloud-based services?

Sebastien Ruest: In the last few months, I have had the chance to speak with many CIOs and one thing I learned is that the idea of Cloud, this new model of IT and broadly speaking of Business and Consumer delivery through the cloud is of very high interest, to business execs, CIOs in the market right now. But, as you can imagine, Cloud Computing means different things to different people. The cynics will say that it is nothing more than "ASPs on Steroids".

The great analyst roll-up is on... who'll step into the void?

So the "great analyst roll-up" is in full swing, with Gartner's announcement today to acquire another competitor, this time the Burton Group, for 56 big ones.  This comes hot on the heels of my former firm, AMR Research, also being acquired by Gartner.  I won't go into the details of the mechanics of these mergers, as you can read exhaustive commentary, debate and analysis over at Carter Lusher's blog.  However, I did want to discuss what this means to our sourcing industry.

Limited choice for alternative opinions.  As most of Gartner's competitors couldn't really compete on brand, they've had to differentiate themselves to survive, and that meant finding areas of coverage that Gartner didn't do (or do well), and having analysts on staff who weren't afraid to rock the apple-cart with edgy, sometimes controversial, opinion and research.  While Big G has picked up some superlative minds from its latest acquisitions, its new challenge is going to be maintaining those edgy opinions, and not having them toned down under the glossy corporate veneer of the billion-dollar brand.  Whichever way you look at this scenario, we simply have to have more than two analyst voices dominating the opinion and insight of our $850 billion sourcing industry.  Why?

New Year's outsourcing resolutions for service providers

Wouldn't it be refreshing if some outsourcing executives decided to try doing a few things differently this year?  Here are some suggestions...

Stop using the word "transformation".

Start trying to be different from the rest of the pack, or at least admit it if you're not really any different (but are probably cheaper, or have a sexier brand, or something).

Stop espousing that you will bring "innovation" to a finance function when you're just lumping the invoice processing offshore.

Stop claiming you're recent infrastructure management deal was a "cloud transformation".

In fact, stop using the word "transformation".

And please stop wheeling out your only client of note as an example of "innovation" and "best practice" when:

    1) You bought the deal in the first place,

    2) We've heard it 20 times before, and

    3) The client hates you anyway.

Stop claiming you do something, when you don't.

Stop claiming you can do something, when you can't.

Stop claiming ERP support is a "scarce expertise" that warrants a higher price-tag.

Stop copying your competitors' slideware.

Stop talking too much and actually listen.

Stop adopting other peoples' buzz phrases as your own.

Stop espousing that you will bring "transformation" to an HR function when you're just processing the payroll checks somewhere cheaper and using some limited piece of software that's only marginally better than the rubbish the client is currently using.

Start demonstrating how you actually did something unique with a client to help them be more efficient or generate more revenue.

Stop using the word "transformation".

Start being realistic.

Stop boring the living daylights out of everyone by tweeting all your press releases and thinking people actually will click on them.

And why not stop having meaningless meetings with sourcing advisors, when you're only going to talk about the same tired old deals everyone already knows about, and the client already knows who they're going to select in any case...

Hmmm... come to think of it, if everyone stuck to those, we probably wouldn't have an outsourcing industry anymore.  So please ignore and carry on regardless...

Happy New Year and Rock On 2010 -:)