The Outsourcing Blog: Horses for Sources

Why we've formed an analyst organization

So H-Day has arrived, and we can finally reveal what it actually means.  It's the day Horses for Sources became more than a blog... today it becomes an advisory analyst organization focused exclusively on researching global outsourcing strategy. 

So why on earth do this?

A natural and logical progression.  Simply put, it's a natural progression for Horses.  Having developed such an effective community for collecting so many opinions, having such strong outreach to all the key stakeholders in the outsourcing business (buyers, vendors, intermediaries, investors, academics etc), leveraging the three-year development of Horses as the platform for a new research organization is the logical next-step. 

The outsourcing buyer needs a pure analyst organization.  While there's tons of great content floating around out there, there really isn't one entity that has brought together researchers and real practitioners, with real experience, to focus purely on researching BPO and global sourcing as a pure analyst organization, that doesn't broker deals or write vendor white papers.  Some of the sourcing advisors deliver excellent thought-leadership, and they deserve credit for driving the sourcing industry over the last few years.  The large analyst shops have stuck to their IT knitting and have largely overlooked BPO - they service IT vendors and IT users.  Investing heavily in sales and research to service finance, HR, procurement and other operations professionals desperate to learn more about outsourcing (not solely IT), is not something any of the large traditional analyst firms have done.  You can read, in detail, the challenges and opportunies we face over at SageCircle. 

The Horses won't change, we just expanded

Firstly, the blog remains, and will have even more content and contribution.  We've exported all the content from "fersht.typepad.com" over to www.horsesforsources.com and the blog will continue as a front-end to the analyst organization.  We are producing a series of premium content reports that you will need to be a client to access, but the blog will continue to deliver opinion, and discuss many of the key findings from our research.  I am encouraging our analyst team to set up their own personal blogs in time (if they want to), and several of them will be sharing snippets of their research on the Horses.  And we'll continue to invite industry guests to be interviewed and submit articles.

A big fat personal thank you

Bottom-line, this wouldn't have been possible without the ongoing support and participation of so many of you over the last three years.  I am amazed at the sheer quantity of email and comments I get on a daily basis from people all over the world who visit this thing.  All I ask is that you continue to lend your opinion, respond to our surveys, and continue to pass on the good word.  End of the day, I choose research because I enjoy learning how we can constantly get better at being global, savvy organizations.  I do not profess to know how the world will look in 3 years' time, but if we all continue to debate the issues, the future will gradually unravel. 

I really do welcome your thoughts, opinions, suggestions, criticisms and contributions, so drop me an email anytime,

Phil.

The Industry Speaks, Part VI: Customers increasingly look to industry-specific BPO solutions, but which vendors will ultimately invest to define and deliver them?

As we discussed during the previous five chapters of this encyclopedic journey to over-analyze our industry, customers are looking beyond the old simplicities of outsourcing to find new and creative ways to find new performance thresholds. 

One of these areas is to exploit BPO opportunities within industry-specific domains, especially where there is opportunity to bundle both BPO and IT services together under a single vendor's provision to generate more efficient business outcomes. 

To cut to the chase, the industry-specific (vertical) process domains are where some of the newer vendor entrants are infiltrating, almost unnoticed, into the BPO industry.  Most of the strong IT services vendors have been developing BPO niches in specific verticals where they have developed some strong process acumen and client credibility, and have the determination to invest in becoming best-in-class within that industry. 

The Industry Speaks, Part IV: Cloud services will separate the "real" business services providers from the body-shoppers

For once I am stumped for a catchy title, and am opting for some good ol' jargon-laden gruyère to tee-up Part IV in the series discussing our New Normal in Outsourcing Delivery survey.  At least I've avoided the 'T' word lately, to grant myself a morsel of poetic license to indulge in a little schmolz...

But we all love the term "Cloud" (c'mon, you know you do...).  It gives us a nice fluffy visual of ripping out all that complex, clunky computing chaos from our organization, and having some nice services vendor deliver us everything we need for our business... leaving us with simply a screen, a keyboard and lots off additional space in the office to set up that Fussball table... or a Twister mat in the corner...

Why Cloud Computing is the future of outsourcing delivery

While I am probably the first cynic to de-odorize the latest cheese fumes that infuse our industry, I have to admit I am rather taken with the whole philosophy of Cloud Computing.  Cloud signifies the coming-together of business process and IT delivery in a fully outsourced model (see earlier post).  Cloud's not simply about outsourcing the heavy-duty computing grunt - it's about the delivery of real business services, enabled by the applications needed to support them, powered by the requisite computing and network infrastructure to host and deliver them.

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 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...). 

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.

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 -:)

 

Getting a bit of Ruest (Part I)

If there was a Nobel Prize for industry analysts, this guy walks away with it - he's super cool, talks a good game, and has done very little beyond, well, be super-cool and super-smart... and with a French accent to boot.  So today, I thought we'd give IDC's Sebastien Ruest the chance to prove there's a bit more substance behind the snowboarding, hockey-stick-wielding playboy façade :)

Sebastien's proving IDC's nearshore model by leading it's global services research from Canada, and developing a solid reputation in the industry as one of the industry analysts who "gets it".  So I thought it time to grab a few minutes with the dude himself...

Mystery Governance Predictions

Remember our mystery blogger who evangelizes on best practices for vendor management?  Well that mysterious individual has challenged me to a predictions dual this morning (gasp), where he /she said "I'd be willing to wager a drink on who gets a higher percentage right.  After all, I didn't bet on England in the World Cup, so I'm pretty optimistic :)"  We'll see about that sunshine...

In any case, our friend has come up with some pretty eye-catching and profound statements, for example:

2010 Predictions for the Outsourcing Industry

Firstly: my apologies to everyone for hopping on the perennial "Predictions Bandwagon".  One may as well say "Stop press everyone, I'm just such an important smarty-pants you should listen to ME ME ME!"  As Newt Gingrich told us earlier this year:  "There is not one living being that can accurately predict the outcome of this crisis, all we can do is continue the dialog and the answers will slowly unravel". 

Secondly:  we've conducted two major studies with outsourcing buyers globally this year (and am currently sifting through 800 responses - and counting - from our current industry study).  While we can evangelize, prophecize, pontificate and sermonize, nothing can substitute for real data on what everyone is currently doing and planning to do.  We have the platform here to do that, and I personally thank all of you who took a little time out to share their views, actions and intentions.

And Thirdly: I'm just such an important smarty-pants you should listen to ME ME ME!"  So maybe I can help with the unraveling?

i) CIOs and CFOs will be uniquely challenged to avoid becoming "Cartoons of the Recession". 

Simply put, when there's a serious recession in the works, the job of the CIO is relatively simple - cut costs and squeeze your suppliers using whatever means are at your disposal.  CIOs rarely get fired in this scenario, unless they somehow messed up the cost-cutting. 

Can IT overcome its credibility crisis?

There's little doubt about what's been providing the rocket-fuel behind the rebounding services business: IT outsourcing.  Simply put, there are plenty of eager providers to choose between, they have access to most of the technical skills companies need, and their rates are far cheaper than retaining or hiring staff inhouse.  Some are also getting pretty handy at becoming consultative business partners, and not simply low-cost body shops.   Our recent study tells the real story -  50% of enterprises are either kick-starting, or scaling-up, their ITO right now.  "So tell us something new", I hear you groan into your laptop screen...

What's different as we emerge from this crisis, is that the perceptions of IT from the other parts of the business are becoming increasingly cynical in many companies.  Many companies are hiring new CIOs with the mandate to "turnover half the department, or outsource it", and IT middle-managers are being seriously questioned about the value they are adding to the business.  While much of the bottom-layer of IT has already been contracted out, it's now the middle layer of IT professionals which is under threat.  CIOs are under pressure to prove the value of maintaining these heavy middle-layers, or move them out of the organization.  Some CIOs are already operating under the strategy of hiring a few people who "genuinely get it" to drive IT value, while outsourcing as much of the operational work as they can.

Xerox-ACS: Cloud Services Potential, or Dinosaurs Huddling Together for Warmth?

Our recent discussion on Xerox's acquisition of ACS certainly served up some meaty discussion, and even got picked up by CIO.com, among other media.

My dear friend, and former colleague at AMR Research, Dana Stiffler(pictured), recently sent us in some of her views on the merger.  Dana actually got promoted today to VP and Head of Research for AMR's services research, where she will be offering clients "cashable benefits, or your money back" with her group's output.

Anyhow, thought this a good time to showcase her talent...  Over to you, Dana:

Xerox-ACS: Cloud Services Potential, or Dinosaurs Huddling Together for Warmth?

Xerox is the latest in a long line of technology manufacturers to realize that its future lies in services, not products, particularly in the B2B value chain. Once manufacturing and supply chain efficiencies have been wrung out, it’s time to turn to top-line opportunities: services that use product heritage as a foundation. The fastest way to acquire these capabilities is by acquisition. Xerox’s predecessors in this journey include IBM, Fujitsu, Hitachi, HP, and, just recently, Dell, with its acquisition of Perot Systems.

Consulting the Oracle: Tibor's talktrack (Part II)

  In the second-part of this two-part interview, Oracle's Tibor Beles discusses how service providers can be successful at platform-BPO offerings, how the broader BPO industry can improve, in addition to discussing the shifting dynamics with software licensing models.  Tibor is also a blackbelt in martial arts (not the Six Sigma category), but spends more time hitting tennis balls these days with his teenage daughter. He also loves political thrillers, but he didn't elaborate whether that was through his day-job, or reading Le Carré novels -:)

Phil Fersht (PF): Do you see platform-based BPO as a major threat to the BPO pureplays which are not experienced in broad-based ERP enablement and implementation services?

Tibor Beles (TB):The first question calls for a long answer but I will try to keep it short. An aggregate BPO service provider must be passionately committed to process and IT excellence in its chosen function. Offshoring for labor arbitrage alone has limited benefits.

Forget Platform BPO, it's really about the Business Services Cloud (Part II)

We inspired a lot of offline debate when we discussed the challenges facing BPO providers delivering so-called "Platform BPO" solutions.  Bottom-line, if BPO service providers are competing for commodity services engagements which are underpinned by software platforms that are widely deployed by several other service providers, they face a major challenge of differentiating themselves to win new clients and avoid a price-war for new business.

At the enterprise level, selecting a BPO provider to process transactional business services for a major Oracle or SAP-based engagement is dependent on the providers' global scale, brand and competency.  For these large-scale transactional BPO engagements (i.e. accounts payable, payroll etc), it's largely a commodity market these days.  However, the battle is on to provide industry-specific solutions, such as health insurance processing and revenue-cycle management, banking-specific services (i.e. netting, lock-box services), retail merchandising, legal services, healthcare informatics etc etc.

For example, I had a great conversation last week with Mark Stiffler, CEO of sales compensation provider Synygy. He was faced with two choices for his business:  either to provide an on-demand managed service to his clients, or license his software through BPOs in the channel.  Sales compensation is an area that can be delivered on a set of standard processes, with some unique personalization to the client.  It's also an area where there's a hell of a lot of value an outsourcing provider can add

The Dell finally tolls - but is this the right fit?

So Dell finally made its major play into the IT services enterprise arena announcing a $3.9bn deal for the Texas-based Perot Systems.  Unlike the HP/EDS mega-merger of last year, there is a lot less overlap between the merging entities, however, you have to assume this is more of a play by Dell to transform its commodity hardware business by refocusing its future strategy on services-led engagements.

However, while there isn't much overlap, there also isn't a lot of synergy.  Why should Perot customers want to buy Dell equipment all of a sudden?  Most CIOs today are looking to move away from hardware-centric IT delivery models, and onto more on-demand cloud computing models.  If anything, it's more of a play for Perot to push services onto Dell's customer-base.  It also opens up the lucrative healthcare IT market to the newly-merged entity.

While I applaud a bold move by Dell to transform its business model, work has yet to be done to elevate Perot's IT/BPO services business to the top echelon of service providers at a global level.  Namely, Perot hasn't  yet fully exploited its presence in healthcare to position leading edge IT/BPO offerings in that space, especially with the market ripe for exploitation in light of the new government initiatives, namely ICD-10 compliance and digitization of patient records.  If Dell can quickly leverage this merger to make a further strategic acquisition in this space, then you can see a new player emerging.  However, if they spend a whole year trying to restructure these firms and take their eye off the ball with regards to broadening the service offerings, this could present a window for several of Perot's services competitors in the healthcare space to step in...

You also have to wonder whether the largely US-dominated vendors are going to continue to consolidate in light of fierce competition from the Indian-dominated global providers.  ACS-CSC anyone?

Stephanie Moore's Law

One of the most prominent industry analysts in sourcing over the last decade-plus has been Stephanie Moore.  Steph started out at Gartner, before spending time at Giga, and most recently Forrester Research, where she built an industry-wide reputation as an outspoken and respected figurehead of the IT services and outsourcing world. 

Earlier this year, Steph made her first venture over to the service provider side, and when she's not busy entertaining her three kids, sailing around the Westport beaches, or regaling stories of her junior golf open triumph (she swears they had color-TV back then...), Steph assumes the role of Chief Marketing Officer for IT services firm, UST Global.  I thought I'd take this oppountunity to grab a few words with Steph to share some of her views on where the industry is headed, and how she's finding life on the vendor-side of the fence...

PF: Stephanie, how has the world of offshoring changed over the last decade?

SM: Phil, it has changed dramatically. In 1999, people were using offshore outsourcing to save money, but also to execute on very low-value tasks. There were also a lot of people scrambling to fix the Y2K problem. Today, it couldn’t

Forget Platform BPO, it's really about the Business Services Cloud (Part I)

The recession has upped the ante for today's BPO providers: the move to providing business services in a cloud-like model is accelerating, and the real challenge for today's service providers lies in answering the following questions:

1) Do we want to play in the BPO space? 

2) How do we play in this market?  What's our angle?

3) How can we compete?  What's our differentiation?

The challenge today is whether a provider is adding value beyond low-cost processing services.  If you are only really providing an arbitrage solution, someone is going to come along and offer it for even less money, and someone else will eventually come along and provide it for even less.  It's a no-win game, unless you want to become the lowest-cost provider in town and make a razor-thin profit margin.

What's interesting is this coming together of the IT/BPO model.  And it's becoming much more sophisticated then simply providing a platform and some low-cost processing services.  It's about  integrated business services where the provider delivers the hosting, the application skills and the business services needed to help clients achieve specific business outcomes.

IT services providers have made a living differentiating themselves by providing expertise in technical areas that allowed them to charge a premium to their clients.  However, as technical skills became a commodity, some IT services providers are moving up the value-chain by providing expertise that apply technical skills to specific business needs, while others have opted to scrap around for the low-cost "price per developer per hour" commodity business.  Those IT services providers which think they can get away with charging a premium for commodity development services are having a rude awakening in today's post-recessionary marketplace.  Most clients today are insisting on greater transparency with the costs of services. 

This is where BPO gets interesting,

New-age influence peddling: Ray and Jeremiah join Charlene's Angels

After our little debate the other day about who is influencing decision-makers these days, I found Ray Wang's new career move worth mentioning...

Ray's joined former Forrester Research "rock star analyst" colleagues Charlene Li, Jeremiah Owyang at consulting outfit Altimeter Group, headed by Internet pioneer Deborah Schultz.  They also announced the launch of "The Hanger," a physical space intended to bring together the ecosystem of emerging technologies, thought leaders, business and service providers to innovate and bring new ideas to life.   I asked Ray (pictured) this morning why he's doing this:

"Because the rate of technology obsolescence now outpaces the pace of technology adoption, organizations need new enterprise strategies to cope with the massive forces of change they face".

I also asked Ray if he'd say exactly the same thing after a few shots of tequila... This ecosystem development of today's influencers and thought-leaders is the culmination of the impact social media has had on the technology industry.  People want immediate relevant, impactful advice and information - and from people whose opinion they trust.  The question now is how consulting and advisory firms can make money providing it, and where today's decision-makers go to be "influenced".  Interesting times... let's keep the discussion rolling.

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.

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...

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

Can Cloud transform Outsourcing?

What I detest most about recessions is when firms put all their focus on short-term cost-reduction measures and take their eye off the ball with initiatives that can reap much more lucrative efficiencies over a longer period.  I am somewhat hopeful this recession is a little different: shaving a few percentage points off the bottom-line is unlikely to make a huge difference when your very survival is at stake, and several companies are exploring more radical, longer-term strategies that will lift them above the depressed morass.  Moreover, many smart executives are seeking to tie themselves to longer-term projects that give them added job security and enhance their own roles in changing times. 

Cloud computing has all the attributes and potential to support a global outsourcing environment with lower infrastructure costs, lower energy costs from eliminating hardware boxes, and much better scaleability to provide computing resources to meet demand in an unpredictable global market.  My view is that we are in a global delivery continuum, where many organizations will originally evolve from crude BPO environments (a lot of lift and shift), explore SaaS delivery to optimize that environment, and ultimately dabble with SaaS apps that be deployed in a Cloud "plug-in" model.  A flashy diagram will likely ensue, but that's the nuts-and-bolts of how this continuum will eventually play out.  Bottom-line, those service providers which persist in a labor-arbitrage-only service model and ignore the benefits and cost-efficiencies of SaaS and Cloud, will get left behind.

"I just knew the mainframe would make a comeback", said an excited industry veteran on Cloud computing recently. He's actually right, but the difference in today's world, is we are creating the applications and the development environment to run real business applications in a cloud environment.

We're not there yet, but smart organizations need to start exploring service provider relationships where Cloud is on the horizon.  Cloud computing is not only rapidly emerging as an infrastructure option that is relatively inexpensive; it is also becoming a buyers' market.

Cloud has come a long way since being a small blip on the radar in 2007 when the likes of Microsoft, HP, Google