The Outsourcing Blog: Horses for Sources

The Kraft of Outsourcing: Learnings from Lee Coulter (Part I)

There is only one Lee Coulter.  Service providers tremble at the very sound of his name, consultants run for the hills... practitioners flock for advice.  And when he isn't performing carpentry or attempting cordon bleu, Lee has the small task of being SVP for Kraft's shared services, where he is a key leader of the firm's corporate transformation program "Organize for Growth".  He is responsible for Kraft's IT services, global finance and HR shared service centers, in addition to the firm's BPO activities.  He even once threatened to smash up my blackberry.   

On a more serious note, Lee has a practical and experienced perspective on how enterprises today should approach global sourcing, and we have enjoyed his exuberance and candor in our buyers' group meetings.  Today, we are blessed with the first part of a lengthy interview with Lee, where he is discussing how practitioners should approach global sourcing in this economic climate, how to select and engage the right service partner and how to decipher and execute innovation (yes, I said it) in a global sourcing environment...

PF: Lee, we’ve been through some major developments in the world of global sourcing over the last decade. As a senior operations leader in one of the world’s largest multinationals, what, in your opinion, has worked, and what hasn’t?

LC: Let me start by saying that the global sourcing industry has proven its most basic value proposition, and that is a huge success. There are many skeptics of

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

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

*World Exclusive* Horses For Sources - Live From Budapest

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

Exclusive: Outsourcing poised to rebound

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

Go to Think Global to read more...

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 .

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

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

Innovation: What’s in a Name?

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

So, what is it?

The politics of offshoring: all talk, no action

Many of you whom I've been interacting with lately know I'm concerned by the degree of protectionism from some politicians and a handful of organizations; namely the TARP-funded financial services firms and a few from the healthcare sector.  We recently discussed many of these issues here. 

Professor Bob Kennedy, who heads up the William Davidson Institute, a non-profit research and educational institute that focuses on business and policy issues in emerging market economies, has been keeping very close tabs on these issues and I asked him to contribute his recent experiences and views with us.  Bob also has a new blog up and running entitled "Services Shift", and has recently released his new book, adorning the same name.  Over to you Bob...

Why No Regulation of Offshoring: Untangling the Gap Between Rhetoric and Action

Picking up on Phil’s April Fool’s day post, I wanted to share a few thoughts on why we see lots of anti-offshoring rhetoric from politicians, but (thankfully) very little actual policy.

Taking the industry temperature

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

CLICK HERE TO COMPLETE THE SURVEY

 

Join the Horses' socially-networked BPO forum

Yes, there is such a thing as a free lunch...

Horses For Sources' official LinkedIn Group, the aptly-named "BPO and Offshoring Best Practices Forum" has just passed its first anniversary, and 5,000 members. 

This is a forum for leading outsourcing executives to share their experiences, views, opinions, best practices and lessons learned in the world of business process outsourcing and offshoring.  You will also get a chance to participate in our forthcoming "State of the BPO Industry" online survey next month. 

LinkedIn has just expanded the group's capacity to 8,000, so we can start letting more of you in... whether you want to find out the cost of a mainframe developer in Buenos Aires, chit-chat with other services-nerds, or just can't wait to find that dream job (ahem).  You also get a free subscription to the Horses Digest.  And it's FREE FREE FREE.  Am I the most charitable person you know?

SIGN UP HERE

 

Highlights from SIG

TPI's Bill Huber was busy on the blog all last week at the Sourcing Interests Group show and has good summaries of some of the key sessions.  For any of you who missed the show, I suggest you follow the progress of the group under the excellent stewardship of Dawn Evans.  To pack a place as well as she did - in this market - is a phenomenal achievement.  The fact the event was organized in Baltimore was a master-stroke... people don't feel guilty going to events in Baltimore :)

SaaS: Outsourcing out-of-control?

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

Was it really that believable?

I'm still getting emails / tweets and calls from all sorts of people wanting to talk about the "sensational news" yesterday, on what was a record traffic day on the Horses.  And if I haven't already made it plain enough, it was an April Fools joke.  And while it was kinda funny, what hit home was how believable the story was. 

Yes, protectionism already is the number one impediment to outsourcing growth over the next few months, but we're never going down anything like the crazy lines outlined in the post.  What's nervy, however, in this era of rapid change, is the fact that so many people fell hook, line and sinker for that little prank.  It made me realize how prepared so many people are for sensational changes to their way of life.  And if you feel I went too far I do apologize, but everyone seems to have taken this in a good spirit.  I really feel we need a sense of humor and a few laughs to help out out of this tough time...

 

The soon-to-be-appointed head of the outsourcing disciplinary committee

Horses Exclusive: Obama to ban offshore outsourcing

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

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

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

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

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

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

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

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

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

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

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

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

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

Outsourced from Africa

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

As the 21st century dawned, South Africa sought to expand its economy with one of the focal points being the English-speaking workforce. Problems existed in the value proposition to potential European customers, most notably in the high cost of telecommunications. Like the dismantling of the Berlin wall, deregulation and the elimination of the telecommunications monopoly have propelled the nation into a rising star as an offshore location for customer care and BPO work.

For several years, the battle raged with the push/pull between economic development and the predominantly government-owned sole telecommunications provider, Telkom. Competition was injected into the industry with the first competitor, Neotel, commencing service in November of 2007. The government has been committed to reducing costs and implemented notable tariff reductions.

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

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

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

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

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

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

Time to put banking executives on trial?

As the sheer magnitude of the unfettered lending and borrowing that has taken place over the last few years continues to unfold, I am hearing more and more calls to put banking and government executives who failed to prevent this (or knowingly encouraged this) on trial.  I am inclined to agree with them.  The BBC's Robert Peston just put out an excellent analysis of HBOS's final earnings report as a discreet entity:

This corporate division generated losses of £6.8bn in 2008 from loans and advances to businesses of £116bn.  It has had to write off an average of 47% of those loans in this area that have gone bad. Almost 12% of all its corporate loans are now classified as impaired or damaged. And as a percentage of the total corporate lending book, the impairment charge is just under 6%.  On the basis of those statistics, HBOS appears to have left a big bag of money open on the pavement with a sign saying "borrow what you want".

How can you give out over $100 billion in bad loans?  In Spain, for example, their banking system, which has been one of the least affected by the crisis, operates using dynamic provisioning, where each loan mustbe underwritten with capital in the banks' reserves.But what has transpired in the US and UK banks is tantamount to executives knowingly driving their businesses into the ground at the expensive of getting fat and happy themselves.  It's like hundreds of these executives were riding tigers without knowing when to get off. If I hear one more jingoistic anti-offshoring argument about the fact that a whole industry should be tarnished because a single service-provider was caught cooking the books... how about a whole industry cooking its books?

Source like an Egyptian

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

Get your finances in order before you outsource?

When I talk with firms about outsourcing, the conversation almost always circles around whether the client should sort out its internal processes before it can consider outsourcing opportunities.  In most cases for large global enterprises, transformation can be carried out concurrently as part on an incremental outsourcing transition.  However, for mid-market firms which may not have the resources, technology or the expertise as larger enterprises, moving too much of its back office too quickly to a third-party can often prove more damaging to the business than any savings generated.  That is not a risk you want to take in a cut-throat economy, where you may not have a chance to recover from poor decisions.

To this end, an old friend of mine, Bill Rieke, shared his experiences with CFOs of mid-market firms trying to drive cost-efficiencies into the financial processes.  Bill is a respected veteran of the BPO industry, having worked on multiple international engagements with Convergys and subsequently Genpact.  He now works independly with firms as an advisor with BPO and process optimization.  Over to you Bill...

In American Heartland, Optimization Finally Brings Hope of Accounting Transformation

Did Slumdog wipe the Satyam slate clean?

Lee Ann Moore sent me this interesting analogy of Slumdog's Millionaire's success at the Oscars, and whether it could enhance India Inc's image in the wake of the Satyam scandal and the "Buy America" protectionim we're seeing at the moment...

The post-Academy Award media has declared 2009 the year of India. Will that hold true for outsourcing and Indian workers? Perhaps this push is just what our political leaders need to keep protectionism policies at bay. It is too late to impact the recent bailout package that bans recipient companies from hiring H-1B workers, many of whom are well-educated Indian nationals. Can this Oscar favorite change our attitude toward work in India?

How could our sentimental side not cheer for all the Jamal’s and Latika’s of India who grew up in an impoverished country and work every day to create a better life for themselves and their family? Granted the movie presents a well-written yet fanciful tale, but it helps us understand a unique and beautiful culture. Only time will tell if Hollywood can help the American worker minimize his fear of losing a job to India or perhaps treat the tech support personnel with a bit more respect. Shall we track the call center escalations pre and post-“Slumdog”?

There are many challenges in understanding how a global economy will benefit the American worker and corporations. Thomas Friedman’s recent post, The Open-Door Bailout, provides a compelling argument for open borders and challenging Americans to focus on innovation over fear or job loss. Perhaps the emotional appeal of “Slumdog Millionaire” will allay the fears of the American worker and challenge Washington to think and act global.

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

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.

What's happening to sourcing advice?

I have never (I repeat never) witnessed such an intense level of interest in global sourcing than the current environment.   I simply am struggling to find the time to do anything but take calls from companies in deperate need of working out their sourcing options.  In fact, if anyone wants to send me compeling guest posts, be my guest, as this thing is creeping into my weekends far too much these days ;)  However, I have been alarmed with the recent retrenchments that several of the leading sourcing advisors are being forced to make.  Their problem is simply the cost model - if large engagements close out with nothing immediate to re-staff the advisors, they simply cannot afford to keep them on the bench.  What worries me is how buyers are getting their advice and direction. 

Bottom-line, buyers are being forced to avoid spending on consultants unless deemed absolutely essential, and investing a few hundred grand on getting the support, methodology, data, ideas, knowledge and experience they need, seems to be beyond many firms at the moment.  So what are they doing?  The answer is scratching around for snippets of wisdom, being courted by service providers offering "free" evaluations, turning up at industry events hoping for free info and joining LinkedIn groups hoping for a silver bullet solution for helping them through the sourcing maze.

So what's the answer?  

Think before you fire: The cost of replacing IT talent

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

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

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

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

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

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

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

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

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

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

Want to offshore yourself?

IBM is now offering employees, who would otherwise face layoffs from their North American jobs, the chance to work abroad through 'Project Match'. Destinations include Argentina, Brazil, China, Czech Republic, Hungary, Mexico, Poland, Romania, Slovakia, Slovenia, South Africa, Turkey, and United Arab Emirates. IBM will also help with moving costs and provide visa assistance. While some cynics will sneer at this scheme, at least Big Blue is doing something proactive to support at-risk staff, and also promote moving much-needed onshore talent into their emerging country delivery centers. Furthermore, maybe they'll pick up some good work habits and bring them home to the States when the economy improves?

Alliance performs some spectacular Satyam ambulance-chasing

I was stupefied to observe Alliance Global Services, a privately-held IT services shop, join the Satyam ambulance-chasers by promoting it's "IT Partners Bill Of Rights".  Alliance is hoping to get 100,000 signatures supporting some version of its bill of rights and to have the document serve as a platform to establish a "global ethic consortium for IT services vendors":

1. The right to demand transparency throughout every step of an engagement -- from sales to contracting to delivery and termination
2. The right to fully understand the nature and character of an IT partner and the service that it provides to them
3. The right to fully understand the financial viability of an IT partner
4. The right to be made aware of any impending legal charges against an IT partner, should they arise, as soon as they occur
5. The right to arrive at a mutually agreed upon definition of the term "trusted partner"
6. The right to expect a clear contract that defines fees and expenses up front before any agreement is signed
7. The right to terminate a relationship with no financial penalty in the event of any admitted fraudulent activity
8. The right to demand the existence of a truly independent board of advisers
9. The right to expect the presence of an independent financial auditor accompanied by a set of checks and balances
10. The right to demand accountability for any actions taken within the scope of a technology project or as part of a firm's broader business practices

While I cannot argue with any client requesting any of the above from an IT vendor (or any client of any services supplier in any industry for that matter), this media-marketing is shamelessly exploiting the Satyam situation to market its own services and take advantage of media-hounds hungry to add fuel to this controversy.  One vendor cooks the books and suddenly the whole world of offshore outsourcing is crooked? Would this action really have prevented Ramalinga Raju doing what he did?  Puh-lease!

Beware of Satyam ambulance-chasers

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

The Horses spawns a partner: Think Global

Amigos - I'm excited to announce the launch of a sister-blog to Horses for Sources : here ariseth "Think Global", with focus on global delivery strategy, BPO, supply chain and IT services trends.  My firm, AMR Research (God bless 'em) has admirably tolerated the Horses for a long time now, until finally asking if I'll consider extending my verbosity to our research content, to which many of you do not gain access.  I've kicked this off with complimentary access to a new research article entitled "Beware of Myopic Cost Cutting: Use Outsourcing To Be More Competitive in This Economy".

I've always used the Horses platform as an outlet to knock around views, cultivate ideas and take the industry temperature.  So many of you have been part of that.  And, while we might not always have been 100% accurate, we've collectively generated so many gems of insight that I frequently read our commentary to add some color to what I am thinking - and I know many of you do the same. 

The power of the blogsphere is truly extending to the analyst world.  And while some of the other analyst firms have pushed their blog strategies for a while now, I am (for once) going to brag that none of them have come close to cracking the blogging code.  Over here we have, and it's time to take it mainstream.

Horses will not be going away, but will run in tandem with Think Global.  I hope you take a little time to pay a visit.

While you're there, please also check out the blogs from a couple of AMR's industry legends, Bruce Richardson and Kevin O'Marah.  I'll see you over there...

PF.

Satyam: It was like riding a tiger, not knowing how to get off without being eaten

A great quote to cap a sad story for Satyam's Ramalinga Raju, who resigned as Chairman today. 

Following the recent issues regarding Satyam’s financial irregularities, India’s IT-BPO services industry finds itself under increased financial scrutiny from Wall St analysts and corporate clients. However, while Satyam has a major challenge ahead to maintain its market position, and is a likely takeover target, we do not believe this fiasco will have longer-term ramifications for the Indian services sector, as long as Satyam’s creative accounting turns out to be an isolated incident and not a more pervasive problem across the sector.

Satyam’s existing customers will ask questions, but are unlikely to switch suppliers, unless Satyam loses a large number of crucial operational staff in the coming weeks. However, Satyam is now at a disadvantage in winning new business in the short-term as it struggles to shake off the current controversy. Plus, some customers renewing existing agreements will be evaluating alternative service provider options, in the wake of the uncertainty surrounding Satyam’s future. Its new leadership needs to move fast to right the ship and placate corporate accounts, and likely prepare the firm for an imminent takeover – the firm’s stock just hit a new all-time low. With Satyam’s strength across software service areas, particularly high-margin enterprise application services – we believe potential suitors include

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.

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

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

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

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

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

Horses outsourcing predictions for 2009

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

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

WSJ confuses itself about outsourcing

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

Now the election is over... what about outsourcing?

Not many people are better-placed to debate the thorny issues of outsourcing and government policy than my old friend Glenn Davidson.  Glenn is synonyous in the public sector world with issues relating to human resources strategy and broader outsourcing strategy, having been one of the founding members behind Equaterra's public sector practice that was launched in 2005 and now a major part of their business.  Among several commercial roles, Glenn previously served as one of Accenture's key executives behind their early forays HRO post their e-Peopleserve acquisition, and prior to that as a chief of staff and communications director to a Virginia governor, as the Commonwealth’s chief federal lobbyist and as a legislative director to an Ohio congressman.  

With so much heated discussion regarding the policies President-Elect Obama is going to deliver regarding the USA's future stance on offshore outsourcing and public sector contracting (which we touched upon here), I asked Glenn to put together some of his thoughts on where this will lead... over to you Mr D:

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

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

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

So how could this play out?

Mumbai events test appetite for offshore

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

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

Looking to 2009: a chat with Peter Allen

One of the most sought-after thinkers in the sourcing industry, fellow-blogger and TPI  veteran, is Peter Allen.  Peter started his own blog Consider the Source around the same time "Horses for Sources" got rolling, and we've pretty much been bouncing ideas, opinions, advice and outlooks off each other over the last couple of years. Peter spent some time at our offices recently and I wanted to share some highlights from our discussion as we move into this new era of global sourcing:

PF: Peter - You've witnessed the growth and development of the global outsourcing industry and probably have had more conversations with sourcing buyers and suppliers than most people over the years.  How critical is this current economic crisis to the outsourcing industry?  Do you see increased activity on 2009 as a result?

PA: Thanks, Phil. These are certainly times of considerable stress

How should companies approach outsourcing in this economy?

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

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

Ford: outsource only where it makes long-term strategic sense

I trust you enjoyed the animated discussion on the woes of the US autromotive industry. My take was that these issues facing Detroit represent a microcosm of the problems facing many of today's flagging industries, with urgent needs to transform their business models, product-lines, management talent, labor unions, global supply chains and outsourcing strategies in order to survive.  I wanted to share these comments from Rachel Geiger, who is a lead HR executive at Ford Motor Company, where she has held senior HR positions for both labor relations and procurment strategy.  Rachel makes some interesting points regarding why Ford is a little different; namely it's focus on ongoing transformation and strategic outsourcing.  Over to you Rachel:

 

"I agree that it is about changing their DNA, or "What does it mean to work at Ford?". Being in the organizational change business, and taking part in driving this cultural change, I can honestly say that I do see it happening.

Investing in the right vehicles for change

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

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

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

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.

SAP plays it safe, with some positive signs ahead

With the ever-closing barriers between ERP strategy and BPO - which we discussed at length back in August, it's important to understand enterprises' activities with their ERP maturity in order to get a solid picture of future potential outsourcingactivity.  The performances of both SAP and Oracle are now a sure-bell-weather for the IT and outsourcing industries at large.

Bruce Richardson, AMR's Chief Research Officer, offers some keen insight into SAP adoption in his recently launched blog "First Thing Monday", which is an extension of his popular e-newsletter that hits the wires at the beginning of every week.

Bruce points out some key indicators of what we can expect in the coming months:

• Many SAP customers he is talking to are continuing to expand their footprint at present and are still planning for further upgrades;

• SAP is not planning any labor reductions, despite heavy growth in recent years, and will reduce costs with a hiring freeze and travel restrictions;

• SAP is likely to push new programs in the short-term to encourage mid-size business to move into SAP environments.

While we're clearly moving into a difficult economic climate, it's encouraging that many enterprises are continuing to invest in their ERP backbones.  I anticipate that as we see more companies seeking cost-containment outsourcing avenues, many will be able to benefit from upgraded (or new) ERP platforms as they evaluate their options.  Common ERP standards ultimately support more scalable and lower-cost outsourcing strategies.

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.