The Outsourcing Blog: Horses for Sources

Buy some innovation right here... just talk to Bob

We're still recovering from one of the longest discussion-threads in the history of outsourcing when we asked whether some outsourcing vendors had thrown in the innovation towel.

This also inspired my old friend Bob Cecil to reach out and ask us to work with him to provide some practical advice to the industry on how to achieve some innovation; without coupons, promotional discounts, or even early-bird specials. Just plans old advice, practical thinking, and - heaven forbid - maybe even some patience.  "But wait!  If you call in the next 10 minutes, we'll also throw in..."

Bob, simply-put, is "Equa-Man" - one of the original champions of BPO who has been a key figure in helping mastermind the growth of outsourcing advisory firm Equaterra since its inception.  If there's ever a complex BPO engagement in the works, Bob's usually somewhere on the scene (and likely holding up a warning sign).  He's also hard to track down, as you have to drag him off a basketball court or ski-slope when he's not on a plane somewhere, but we did manage to grab a few minutes with him earlier this week...

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:

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.

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 -:)

 

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.

Taking a walk on the Wacki side...

If there’s one person who’s been a consistent figure closely tied to the development of Finance and Accounting sourcing over the last decade, it’s Paul Nowacki (or to those of us know him, simply “Wacki”), who today leads F&A transformation for leading sourcing strategy and implementation consultancy, Everest Group.

Paul’s advised on several of the largest engagements in the business (in fact, I do think he’s worked on the largest) and taught me a lot about the space when I worked with him at Everest a few years’ back. Never afraid to speak his mind, Paul is always a popular figure at industry events to talk about what our industry needs to do to get to that next level of performance. He’s truly a “been there done that guy” who’s seen it all… Anyhow, I managed to drag Paul away from his favorite past-time of tracking global financial indices and stock markets (no joke, he does that for fun) to talk to us for a while about finance transformation and global sourcing:

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

Mixing it with the big boys: A Tea-interval with Tiger

Not too many service providers have had a bigger impact on the world of Business Process Outsourcing in recent years than General Electric’s former offshore captive, Genpact. And much of this rapid growth to a billion dollars of revenue and a global delivery network, can be credited to one individual – the tenacious “Tiger” Tyagarajan (simply known as Tiger to anyone who knows him).  And what an apt name for the wee fellow.

I can recall, just a few short years’ ago, when Tiger was fronting Genpact’s US business and taking on the major incumbent BPO providers such as Accenture, ACS, HP and IBM, with tales of Six Sigma excellence and Virtual Captives; dazzling firms such as Kimberly-Clark,

Wachovia and Cadbury Schweppes in the process. And when he’s not absorbed with cricket statistics

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?

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

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

Hear the great Hags on global finance transformation

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

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

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

How to get two whales in a mini...

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

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

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

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

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...

Contemplating the BPO industry with Wipro's Ashutosh Vaidya

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

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

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

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 .

Conference Alert: The FAO Summit Europe 2009

 

The hottest area for new BPO growth is over in Europe, and you can get a taste of the action at the forthcoming FAO Summit Europe in London on May 18-19. This is ideal for executives considering how to improve F&A’s impact on the total enterprise, including those actively engaged in F&A outsourcing and/or shared services.

There's also a compeling line-up of speakers, including a keynote address from Andrew Tinney, Deutsche Bank's CFO.  I will also be at the show and would welcome to chance to meet while am over visiting my homeland.

For more information please contact event organizer Faye Holland.  She promises special discounts for Horses readers...

Keeping it onshore: an interview with Mark Vengroff

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

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

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

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. 

Outsourcing is not for wimps

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

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

Outsourcing is not for wimps

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

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.

Doing nothing is not an option

Some excellent feedback and comments from you regarding our recent discussion about the cost and delivery models sourcing advisors need to deploy with cost-constrained clients.  Lee Ann Moore of sourcing advisory firm Equaterra, has shared some experiences her company has been finding in this market, and offers some alternative services advisors can deliver, beyond trying to crack a wall-nut with a sledgehammer.  Lee Ann is one of the behind-the-scences brains behind the rapid rise of the firm since 2003, being the company's first employee and Chief Marketing Officer.  Over to you Lee Ann.

"Corporations are in a state of flux and uncertainty. Many of our clients are announcing layoffs and going through divestitures, mergers and acquisitions – activity that places pressure on their sourcing organizations that often exceeds capacity and capability. These companies must demonstrate productivity improvements and cost savings now. Doing nothing is not an option, and many organizations avoid a doom loop by using flexible advisory services when they cannot afford full-time employees or consultants for business transformation projects.

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

Conference alert: Shared Services Week

Folks - it's challenging cherry-picking which events are worth going to this year with everyone cutting back on the travel costs, but one you should definitely have on your calendar is IQPC's Shared Services Week, where I am hosting their F&A BPO session entitled Going Beyond the Letter of the Contract: Deriving Business Value From Your F&A BPO Experience, where I will be joined by my industry BPO friends Graham Russell (Astrazeneca), John Transier (Unilever), Mike Monaghan (Wells Fargo) and Sunil Narang (Level 3). Check out the session at 3.35pm on March 24th. 

And even if you can't make the week, you can still catch the highlights here, with the Horses being the official blog for the show.

IQPC have offered Horses readers a discount offer: 2-for-1 Special – Bring a colleague FREE when you purchase a main conference pass at standard pricing.  Reference code IUS_HFS_#1 to receive this discount. *Open to end-users only.

So why attend?

*A focus on quick wins for your shared services organization, with highlights on meeting short-term immediate gains and cutting costs without jeopardizing service levels

*An expert speaker faculty, including 4 Chief Economists, to demonstrate how to use survive the economic downturn and come out stronger on the other side

*Easy-to-customize conference experience: Choose between 7 tracks, including HR Transformation, Sourcing, Talent Management and Blue Sky Innovation Room, 3 Master Classes, 4 site tours and 16 workshops

*Expanded Exhibition Hall, networking opportunities and an exciting new year for the Annual Shared Services Excellence Awards.

4 Chief Economists will be speaking

Gregory Miller, Chief Economist, Sun Trust Banks
Brian Fabbri, Chief U.S. Economist for North America, BNP Paribas
David Wyss, Chief Economist, Standard & Poor’s
W. Michael Cox, Chief Economist, Federal Reserve Bank of Dallas

For more information, please contact: Kim Vigilia, IQPC || Ph: 212-885-2753 || [email protected] || www.linkedin.com/in/kimvigilia

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.

Emerging from the rubble of 2008: BPO has a breakthrough year

Much more fascinating than trying to predict what, on earth, is going to happen in global sourcing in 2009, is trying to make some sense of 2008's non-stop chain of events. However, emerging from the rubble has been the maturing of the BPO industry, as several global service providers have striven to consolidate their market positions, anticipating further growth in BPO services in 2009.  The premise being that buyers are quickly becoming more accepting of radical change to their global business models that not only drives down operating costs, but also enhances their competitive position.  

How has BPO emerged as a vehicle to achieve these goals?

BPO matured as buyers took on a bottom-up approach to adoption.  For the first time, we have started to see BPO engagements being adopted in the right way.

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. 

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”.

Smarter and smaller: banks bank on BPO

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

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

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

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

Outsourcing: cash, growth and hedge-trimming

Spending the day with Accenture at their annual analyst presentation, it helped put a lot of our current predicament into perspective.

We can debate, for hours, the finer points of whether outsourcing is currently helping the wounded US economy, but what is abundantly clear, as Accenture’s CEO Bill Green points out, is the need for the US economy to be competitive globally – and to be competitive as a nation, we need our businesses to be competitive.

We also had the pleasure of listening to one of outsourcing’s legendary figures, Kevin Campbell, who runs Accenture’s $10bn outsourcing business. For those of you who don’t know Kevin, he was a pivotal figure behind the industry growth of HR outsourcing at Exult, before moving over to Accenture in 2005 post Hewitt’s acquisition. He is one of the industry’s most straight-talking and colorful characters, with a seemingly infinite supply of energy (evidenced by the 4.00AM emails he shoots off periodically).

Kevin makes some great points that outsourcing can – and is – providing many enterprises today with many more business benefits than simply slashing administrative costs. However, you need to engage a service partner which can deliver

The change imperative: it's back-to-basics time

Even though you are probably more interested in the breed of puppy Barack is going to buy his girls, I have had a chance to ponder the realities of the recession.

In a nutshell, we have reached a crucial juncture in our economic history:  gone are the days we can borrow whatever we want to subsidize ambitious business ideas, buy houses we cannot really afford, or fritter money away on expensive holidays. Walking down Boyslton Street at 7.30pm on Friday night - one of Boston's prime restaurant areas - every restaurant had vacant tables and was taking walk-ins.  It really hit home to me that things have finally changed.  Years of over-spending have finally caught up with us and we're now feeling the pinch.  But whether this was to be a rapid banking meltdown, or a long painful slowdown, this had to happen eventually. 

I recall sitting on a panel at at outsourcing conference in New York City back in 2004

Wipro brews Brazilian BPO

Wipro has continued its aggressive surge into the BPO world by announcing plans to open a BPO delivery center in Curtiba, Brazil, to service it new client, AmBev, the South American bewing giant, and subsidiary of global brewing giant InBev.  InBev recently had its merger with Anheuser-Busch approved to create a global beer monolith - not a bad industry to be developing your outsourcing business, in this economy (to quote a CIO at a major brewer recently: "we love the good times, but we REALLY LOVE the bad times"...)

Following on from Capgemini's agreement to take over Unilever's South American BPO operations, we are clearly seeing signs - as we discussed last year - that Latam countries have great potential for delivering BPO services, such as finance and accounting and HR, in addition to supporting IT engagements (particularly with the legacy development skills that have sprung out of the Latam financial services sector).  This latest development further augments the discussions that the leading outsourcing providers see Latam as a major addition to a global delivery framework, especially when you consider the investments Accenture, Genpact, IBM, Infosys, TCS and others have also been making in Latam resources.

Moreover, this announcement follows on from several major recent BPO wins from Wipro, which has been performing a stellar job taking on multi-tower BPO services for a number of global clients across finance, HR, customer care and some industry-specific domains.

Why not build a shared services infrastructure to support the banking sector?

With the US Treasury yesterday making an initial $125 billion stock purchase of nine beleaguered financial institutions, it makes me think seriously about how these colossal investments also could be deployed to create new jobs, better technology investments, and more efficient support processes. 

Our recent survey shows that many financial institutions are ready to grab the low-hanging fruit of outsourcing offerings, where they can make quick cost-savings and transition costs are offset by arbitrage.

However, while outsourcing clearly has its benefits, what about the

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

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

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

Banks ramp-up their outsourcing plans

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

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

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

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

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

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

 

Can Obama turn the USA into a competitive sourcing location?

Being ineligible to vote in this country, I've been an amused observer of one of the the most enthralling and contentious elections in years - and trying to understand how each candidate will impact the future of the global outsourcing industry.

What is clear, is that shipping jobs offshore isn't necessary very good for the local unemployment rate - the age-old argument of focusing US staff on "higher-value" work is wearing a bit thin these days.  What's more, many offshore service providers are now focused on taking on more higher-value work activities for their clients, in addition to routine transactional work. For example,

Why these are good times for the outsourcing industry

Despite the uncertainly and current gloom that is consuming us, these really are opportunistic times for the outsourcing industry.

Outsourcing thrives on mergers. disruption, corporate restructuring, cost-containment needs and business change (remember the post 9/11 outsourcing bounce). 

The financial services industry is finally ready for that change, and early survey results show this.  In addition, the majority of service providers are polarizing their sales efforts on the beleaguered sector to increase their market presence and defend existing business. Moreover, my optimistic side tells me that this bail-out package will be ratified by Congress, and it will drive a new culture of long-term change into the sector that will favor long-term ITO and BPO contracts that reduce costs and add core focus to re-emerged enterprises. 

Traditionally, this sector has been very reticent

The Wall Street Mess and the Outsourcing Industry... early thoughts

With the whole of Wall St being restructured and substantial investment being primed to re-vitalize the financial services sector, what will be the short-medium term impact on the outsourcing industry?    please complete this 2 minute poll here.

I've been trying to get my head around the looming crisis on Wall St. the past few days, and the situation is far more severe than when we discussed the sub-prime crisis a few months ago. 

Normally, I'm quick to pounce with my thoughts and opinions (as if you didn't know that already), but I've been truly perplexed by the goings on - and the potential magnitude - of the potential outcome to global markets.  I cling to the hope that the bail-out package will quickly steady the economy and spark a mini-revival, despite the long-term ramifications of paying back this debt - and our children footing the bill too.  So what does this mean to the outsourcing industry?

Historically, tough economies have proved to be lucrative markets for increased outsourcing: remember the 2001 recession and subsequent deal activity.  However, this situation will have a two-pronged impact on the outsourcing industry:

1. Outsourcing drivers:  Merger activity is going to provide new outsourcing opportunities, for example the Bank of America, with its acquisition of Merril Lynch, will surely look to move Merrill's support functions onto third-party resources, as BoA has a strong and effective outsourcing culture.  And the newly-merged entity may have to look at additional or new providers to support the broader global presence of the new firm - especially when you take into account Merrill's international operations.  We can also expect to see a host of other M&A events taking place in the coming weeks (i.e. JP Morgan taking over Washington Mutual's assets, and CitiGroup taking over Wachovia and its global BPO operations).  In addition to M&A activity,

A stateless multinational mindset

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

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

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

Poland: More than "just another" BPO location

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

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

Bristol Myers double-bundles

Bristol Myres Squibb today joined a rare breed of enterprises which have bundled apps and business process to two suppliers across finance and HR towers, with the announcement today that Accenture has taken on a 10-year $550m engagement to take on the pharma giant's finance and accounting processes and related application development and management services.  This follows on from their recent $324m 10-year deal signed with IBM that covered Human Resources BPO and related applications services.

This strategy builds firmly on our recent discussion on bundling apps, and the related business processes supported by those apps, under a single supplier.  This deal is just the latest in a series of contracts where the buyer is clearly recognizing the synergies of tying together process design, knowledge transfer and governance across IT and operations "boundaries".  Bundled outsourcing is not the answer for everyone, but it can provide a major spur for some companies looking to shake-up their back office functions, provided the vendor can demonstrate the skills and business understanding to drive this agenda.  These "boundaries" shouldn't exist, and bundled BPO is one potential solution that can help eliminate them. (Much) more on this topic to follow...

Are vendors and advisors getting too cosy?

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

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

HP/EDS: a reverse-takeover to create a services giant, but what's the game-plan?

So HP’s $13.9Bn acquisition of EDS became official this week – the largest-ever merger between two IT and business services providers.  The merged services entity resembles a reverse-takeover of the combined services business, with all the management positions remaining in Plano, with the exception of application services.

Overall, there were few surprises in the deal-finalization announcement. However, the fact that there seems to be no initial definitive plans to integrate the businesses at a service/product level beyond the newly-outlined organization structure, gives me some cause for concern, especially considering the fact that HP/EDS has already had three months to draw up a merger-strategy.  We're operating in a market where crafting and developing a global delivery strategy quickly is critical.  We've seen far too many failures in recent years from services providers that have sat on their traditional revenue streams, while others have pushed aggressive services agendas to win over clients looking for vendors with new thinking and focus on driving innovation into engagements.

Why bundling apps and business processes with a single provider can make a lot of sense

The software industry has - for decades - dealt with the whole "best of breed" versus "integrated application suite (ERP)" quagmire, the scenario centered on whether clients are better off trying to manage a whole variety of individual products themselves, via-à-vis having a ready-made integrated suite of applications.  These arguments are surprisingly similar to the debates raging in the outsourcing industry today.

While a best-of-breed (b-o-b) approach can provide the client added quality (or functionality) and control over its suppliers, the prohibitive cost of managing multiple service providers (or applications), combined with the increased need for unique skillsets to integrate them into the business, favor the multisourcing (integrated-suite) route.  And, while many enterprises have persisted with a b-o-b software strategy, both Oracle and SAP have been vacuuming up many of the niche application products, whereby presenting the client with the integrated-suite strategy, whether they initially wanted it or not.  While outsourcing providers are generally not as acquisitive as software providers for a number of reasons, their need to add process depth, industry expertise, technology enablement and scale to their global services offerings naturally narrows down the playing field over time, as outsourcing engagements become more global and complex.

Why is this blog called "Horses for Sources"?

I get asked this question from someone nearly everyday, so here is the reason:  It's a horse-racing term. Certain horses run better on certain courses.

HORSES FOR COURSES - "A mostly British expression urging someone to stick to the thing he knows best, 'horses for courses' comes from the horse racing world, where it is widely assumed that some horses race better on certain courses than on others. In 1898 a British writer noted in the first recorded use of the expression: 'A familiar phrase on the turf is 'horses for courses.'" From the "Encyclopedia of Word and Phrase Origins" by Robert Hendrickson (Facts on File, New York, 1997, Page 339); "A course of action or policy that has been modified slightly from the original to allow for altered circumstances. A horse that runs well on a dry course will run less well on a damp course and vice versa."

I always felt this phrase sums up the experiences of both vendors and buyers which have danced around with outsourcing relationships over the years. An outsourcing engagement that works well for one firm in its particular circumstances, may not be as successful for another; there is no one-size-fits-all solution, when you are dealing with a company's people, processes and technology.  It took me about 30 seconds to come up with this goofy name after a few glasses of vino when I decided it was high-time to get a blog going...
 

The Sheriff puts some fizz back into Cap

Capgemini is making some waves in the world of F&A BPO this year, winning some major global engagements, one of which is likely to be down in Tampa.   Not a bad return from new Sheriff David Poole (he claims he is no longer a deputy).  I have gone on the record to describe the current climate as crucial for Capgemini to break heavily in the global F&A BPO business - and they seem to be doing just that in a highly-competitive market.  They will be pushing hard for the number 3 market share position in the F&A BPO market by year-end behind both Accenture and IBM, but leading the large pack of outsourcing vendors jostling for position.