The Outsourcing Blog: Horses for Sources

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

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

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

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

Have some outsourcing vendors already thrown in the innovation towel?

I've recently had two rather disturbing conversations with friends interviewing for client management positions with outsourcing vendors.  In both cases, they were only being asked to bring in new logos from selling low-cost IT/BPO services, as opposed to working with existing clients to up-sell more consultative, higher business-value offerings. 

Both these chaps are senior-level execs who are highly experienced, well networked, and can engage in C-level conversation.  You would have thought several of the offshore-centric vendors would be clamoring for people of this caliber to raise their level of conversation within their existing accounts, rather than utilize them to go after a handful of remaining logos.  Most of the top-tier vendors have relationships with most of the major enterprise buyers these days, so you would have thought their strategy should be centered on developing deeper footprints with them, as opposed to simply increasing the number of low-end operational engagements (or at least a combination of the two).

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

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

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

Why Cloud Computing is the future of outsourcing delivery

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

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

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

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

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

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

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

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

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

Global Sourcing Destinations: Perspective 2010

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

Adieu to a research legend

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

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

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

Good luck Bruce - you ARE a legend :)

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. 

The "new normal" in the outsourcing delivery business

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

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

So what is this "new normal"?

Operational service provision is commoditizing and leveling the playing field.  Coming out of the recession, there is a backlog of engagements which are largely labor arbitrage-focused and it's often a question of price balanced with the promise of delivery performance for most clients.  There isn't a lot of secret sauce these days for what many clients are currently demanding, where in the past, incumbent service providers could play the "capability game".  With many of these skills becoming mainstream, the competitive playing field has leveled out.

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

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

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

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

Xerox copies Dell's example and acquires ACS, but again, where's the fit?

Is there a recurring theme here?  US-based giants with faltering commodity business models from yesteryear, making very late plays to get into the IT-BPO services business?

While I could see some synergies between Dell and Perot, this one's even tougher to fathom, unless Xerox has further plans to marry ACS with a stellar IT services acquisition. 

ACS was one of the early darlings of BPO, and was right at the top of the competitive tree in the early 2000's whenever a large Finance & Accounting, HR or call center deal was up for grabs.  It would always give Accenture and IBM a run for their money in BPO pursuits, and had a compeling culture and engagement methodology for many of the old world BPO engagements (i.e. a lot of lift and shift and staff re-badging). 

Sadly, ACS has rather fallen away in recent times, and has struggled to cope with the aggressive entry of the Indian-centric global competitors into the BPO space.  The new generation of global services providers are bringing passion and combined IT-BPO prowess into the mix, in addition to global sourcing models that are driving down the price-points.

Xerox, on the other hand, has been eyeing broader business services for a while, and I can see why they'd find part of the ACS portfolio attractive - a broader client-base, great presence in healthcare, government, hi-tech and consumer business, a strong BPO brand and global delivery presence.  ACS also has a strong IT services business, but not on the same scale as the top tier. 

The real challenge for this combined entity, is to cope with the new throng of competitors in this space:  Cognizant, Genpact, Infosys, TCS et al., and not solely the incumbents such as Accenture, Capgemini and IBM.  The combined Xerox-ACS business will have a short-term potential to consolidate a commanding position in back-office BPO areas such as document management, call center, payroll, benefits admin and accounts payable. 

However, clients today are spoiled for choice with other service providers which can offer the same services at lower cost.  Xerox also needs to make a quick move to push a utility delivery model, based on common processes and standards, with compeling industry-alignment.  Continuing to push old-world BPO, where the customer shifts existing processes with limited transformation, is not a recipe for success. 

My take?  If this combined entity were to merge with a strong IT services provider and develop a coherent IT-BPO strategy, then we really have something to talk about.  Funnily enough, if you combined the new Xerox with the new Dell, then you'd be looking at a company with a lot of future potential...

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

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

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

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

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

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

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

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

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

Stephanie Moore's Law

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

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

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

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

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

The future of the sourcing industry: DNA and industry knowledge trump scale

I spent much of last week at InsofysBPO's customer summit in Baltimore.  Infy always does a good job with their events - they bring their customers together and encourage open, unstructured debate, where the good, bad and plain ugly about BPO and ITO are openly discussed.  They know the best way to win business is through baring their DNA to customers and encouraging them to trust and want to work with them.

They also invited some industry personalities to wax on about their vision for the future - and some predicted rampant "consolidation among suppliers".  I say they are wrong - they are clinging to their knowledge of the past and are not re-adjusting their perspective to the present.  I'd be surprised if we ever see

The Alamo comes to HR Tech... get your front row seats here

Anyone from the world of HR, who cares about the impact technology has on their existence, is congregating at the infamous HR Technology show in Chicago on September 30-October 2, hosted by the legendary columnist Bill Kutik (pictured), the undisputed captain of HR controversy. 

It is the world’s leading event in the HR sector, and each year attracts 2,000+ high-level HR practitioners, software and service vendor CEOs. In addition, most of the HR sector's industry analysts, bloggers and foghorns will be there - including such celebrities as Jason Corsello, Mark Stelzner, Naomi Bloom and Vinnie Mirchandani. They come for the excellent no-sales-hype conference sessions, the largest show floor of 250 exhibitors, and Bill Kutik’s signature vendor Shootout session, which this year features software giants SAP and Lawson taking on their smaller rivals Salary.com and Plateau.  I am also assured that the word "Cloud" is to be officially banned from the festivities...

Here’s how you can get the $470 discount off the $1,645 regular registration rate:

Type FERSHT in the Promotion Code box in the online registration at www.HRTechnologyConference.com

Is this a good climate to take a career "risk"? Or is it riskier staying where you are?

My definition of corporate failure in this market:  "We're gonna ride out 2009 and go for it next year."  What are you going for?  What are you riding out?  If you want to remain successful, you better get your act together now and formulate a game plan. 

Too many firms are sticking to their old business models, in denial that they need to do anything different (besides firing a few people), and cling to the vein hope that their fortunes will dramatically turn around in 2010...by doing NOTHING.  And I can be 100% sure that everyone reading this is either working for a firm with that attitude, or knows someone who is.  Smart executives sense stagnation, and a lot of top talent is re-thinking whether their current employer has what it takes to prosper in a post-recessionary economy.  (P.S. a prize is available for the first person to reveal this icon of executive innovation from the '80s...).

And the top tier isn't always offering the most appealing place to work in this market - am seeing several top executives broadening their horizons for unique companies geared for growth in this new economy.  Start-ups and small companies, for example, which are plugged into the new economy are becoming vogue.  Many people are realizing that no job is particularly secure anymore, so if you're going to take a risk, why not now? 

Ever wondered about Brazil?

And just when you thought you were in the clear, here's another webinar for you...

 

In recognition of recent shifts in the global economy many global sourcing executives have determined a more “risk averse” approach toward their global outsourcing portfolio is a prudent and necessary means to ensure supplier stability, less volatility in certain markets and enhanced skill-set options vis-à-vis regional workforces.

Many executives are asking, what are the Near-shoring advantages? What are the trends in Outsourcing and how are emerging destinations (such as Brazil) affecting this landscape?

Join us for an insightful and interactive discussion where we will discuss Latin America, and how a near-shoring strategy in an emerging destination will benefit your IT Outsourcing portfolio.

Date: August 4th, 2009 Time: 11.00 AM PDT / 2.00 PM EDT

Cost: Free!

Click her for more information

Analysts Phil Fersht and Dana Stiffler, ITO & BPO Services, AMR Research, will join Mr. Bob Mejerle, VP – Outsourcing Practice, North America of Politec Global IT Services to on this LIVE Executive webinar.

We’ll also be joined by our Moderator, Frank Casale, who will host an open Q & A session after the briefing. If you are a C-level Executive, Vice President and Line of Business Owners responsible for: Global Sourcing, Program Management, Finance, Information Technology and Operations, then this webinar is for you.

Click here to register  

 

The next stage of industry development: Co-learning partnerships, not mega-mergers

The industry's next phase of growth is unlikely to be dominated by the mega-mergers of the past (DEC/Compaq, HP/EDS etc.).  It's going to be focused on service providers moving into partnership engagements with clients, where they can develop specific IP and industry process competence.  

I see this trend escalating in the application development arena, as this area is now approaching significant scale and maturity, but also believe this will pave the way for future BPO development, as service providers find new opportunities to layer on business process services that compliment their application development work.  It's really about learning specific industry process, how they can be enabled and optimized by smart applications, and processed by smart people who add value.

This isn't simply lift and shift where the service provider does the same with less - it's where the service provider brings specific expertise to the table that allows the client to scale its business globally.  It allows the client to focus more heavily on its core competencies, which provide the real value for its own growth.  And it allows the service provider to develop specific industry process knowledge of its client's industry that is can replicate across its own knowledge workers.  The maturity of the application outsourcing marketplace is now going down this path, where the leading service providers have the lions' share of the talent - and the scale - to provide the technology development services that allow clients to invest in their core industry services that make up core value proposition.  Why invest their scarce resources in IT development when they can find a third-party to do this for them and invest in areas that will improve the front-end of their business?

One prime example of this is the new partnership between UK-based industrials magnate Invensys and service provider Cognizant.  Invensys wants to focus on on its core competency of product definition and architecture and developing its industrial automation platform, with Cognizant being its technology partner for product development. 

Invensys can focus on where it's best, and Cognizant can make a surge into the manufacturing industry.  Invensys will learn from Cognizant's technology skills and Cognizant from Invensys' manufacturing process and operations prowess.  Jobs are not lost, and existing employees are going to enhance their careers with new industry and technology knowledge.  If this partnership works, both firms will end up creating more jobs to support their expanding business portfolios. 

 You can read more about this partnership over at Think Global.

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?

Being Frank about Global Sourcing: An interview with Cognizant's CEO (Part II)

Since Part I of the Francisco D'Souza interview, I've been assured Frank has improved his golf handicap. Now he'll discuss his views on how ITO service providers can differentiate themselves, the convergence of IT and BPO solutions... and a few other tidbits...

PF: How can ITO providers differentiate themselves in today’s market? Is it by vertical focus, or other elements?

FD: Given the extraordinary pressure that clients are under, I think that the key to differentiation is to focus on how to make clients’ businesses stronger. Rather than focusing on technology, process or methodology, I think providers need to really understand a client’s business drivers and then sell and deliver solutions that further those business objectives. As I said before, clients are facing both cyclical and secular pressures. As a result, depending on the client, their objectives of outsourcing will be very different. Some clients seek to improve efficiency or effectiveness. Others are looking to use outsourcing as a enabler of innovation. Still others are looking at outsourcing as a tool to gain access to the best talent in the world – regardless of where that talent is located. And of course, given the significant secular changes we are seeing, many clients are looking to outsource as a way to enable agility and transformation within the organization.

Can 6-sigma really help execute an effective sourcing process?

One major service provider that has quietly - and very effectively - grown its US presence over the last couple of years is HCL.  And behind the scenes is a very classy guy, Debashish Sinha, who pulls the strings across its US sales, marketing and operations units. 

Anyone dealing with HCL these days is always glad to have Debashish around (despite the fact he organized their last industry event in Orlando).  Prior to HCL, Deb has consulted for both Conscient Partners and NeoIT, in addition to being Gartner Group's principle analyst for IT services and sourcing.  And when he's not comparing the subtle nuances of Malbecs or flying planes (not simultaneously, I assure you), he has some excellent views on the effectiveness of 6-sigma methodology in a sourcing environment.  Over to you Deb...

About four hundred years ago, Galileo Galilei noted that “We must measure what can be measured, and make measurable what cannot be measured,” a philosophy now embodied in the well-tested axiom “You can’t manage what you can’t measure”.

So how about managing the Sourcing cycle? How do you actually measure Risk, or Internal Readiness, or even effective Governance?

One potential option could be to use Planning for Six Sigma tools to “make measurable what can’t be measured”. After all, it’s still one of the most prominent approaches for managing by measurement.

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

And finally… the last tranche of our three-part interview with Kraft’s Lee Coulter. Here’s Lee’s take on attributes service providers need to demonstrate, and some advice for budding sourcing executives today…

PF: Lee, when evaluating outsourcing service providers today, what attributes should companies look for? What should they try to avoid?

LC: That is a really big question and not one I am sure I can answer in less than ten pages. Every engagement is different, and the basic dimensions of suitability are: service scope, service quality, service cost, cultural match, the leadership teams, partnership capability, and risk. Assuming that you have providers capable of doing the job and meeting the objectives, then it is about the team and the commitment to true partnership (a topic for another day). These two things lead to a measure I use… confidence. So you would score the providers

Talent Management vs. HRO – it’s not an “either or” proposition

If you've ever ventured into the brave world of HR Outsourcing (and you need to be brave...) the chances are you'll hear the views of Ceridian's Keith Strodtman. 

Keith has been a constant at the global $1.6 billion HR services and store-card solutions giant for many years now, and when he's not coaching his twin girls' fastpitch softball team (that's "rounders" for any Brits on here), he's been running Ceridian's global HRO practice.  He is also widely recognized as HRO's smoothest man, with a constant smile, never a raised word, and never a hair out of place. 

Keith has some excellent views on how companies can use third-party managed services to take on their administrative work and focus their HR executives on what they should be doing:  helping develop their organizations' talent.  Over you Keith...

I’m not sure about you, but I don’t get why some analysts and bloggers

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

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

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

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

Phil Fersht on service provider rankings: make the experts accountable, not faceless brands

Vinnie Mirchandani has his latest take on the constant controversy of third-party researchers, consultants and associations compiling rankings of service providers.  This time the IAOP's Global Services 100 is being questioned. 

We've also had some banter about the Black Book of Outsourcing on this site, which made such a noise with its constant rankings of service providers, that Datamonitor decided to buy them to hop on this bandwagon.  And we've never even got to discussing the Global Services 100, or several other rankings that come out periodically.  Moreover, some "analyst" firms make a living ranking service providers, while barely bothering to talk to their customers, and selling white papers to the winners so they can flout their success (you all know who you are).

Personally, as an analyst and advisor, I find these lists useful - I sometimes find out about some provider I didn't know a lot about, and they draw attention to who's doing well at the

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 .

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.

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.

Is the call center finally coming back onshore?

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

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

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

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

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

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

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

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

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

BPO bucks the trend as WNS posts strong revenue growth

As we discussed last month, the Business Process Outsourcing market is maintaining double-digit growth as we move into 2009, fueled by increased uptake of source-to-pay, analytics, finance and accounting, HR and industry-specific services. WNS Global Services, one of the largest pure-play BPO providers, with revenues in excess of $500m, has posted a 15.9% increase in revenues for Q4 2008, over the corresponding quarter in the prior fiscal year.  WNS's main competitor Genpact is due to report on 18th February, and I would expect to see a similar revenue increase from them.  It really appears that BPO is finding its feet and

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.

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

HRO is out of rehab

We've had many animated discussions in the past regarding the trials and tribulations of the HRO market. To cut to the chase, HRO has struggled to live up to expectations as clients struggled with poorly integrated service delivery, overly complex operational issues, the lack of common HR standards and common HR technology platforms. This often resulted in negligible cost savings and fractured service provider relationships.  Not to mention some significant write-downs by some of the providers who took on overly complex engagements.

However, new research I've been carrying out in recent weeks

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

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.

Cash is king again as M&A activity in outsourcing hots up

We've been talking a lot about consolidation in the outsourcing industry and when/how/if it will happen.  We can debate for hours the strategic benefits of service providers of adding niche competences, industry specialization, process acumen and global scale, and whether they should merge, acquire captives, or grow organically through client acquisition to achieve this.  However, the financial crisis is creating a compelling event to accelerate M&A between service providers. 

The amount of consolidation we're seeing in the financial sector, which is likely to have knock-on effects into other industries, will drive new client needs for global sourcing models. Many clients are worried about making large initial capital investments in outsourcing engagements - especially ones which have complex transition and transformational needs, hence those service providers which can help streamline these costs over the course of a contract will be successful. Complexity, disruption and increased globalization drive change, and outsourcing is one vehicle that can help many companies reach a global support infrastructure quickly.  Hence, those service providers with the global scale, competency and financial resources to deliver this quickly will be the winners in this market.

While this industry has ramped-up beyond the wildest expectations over the last 5 years,

Blogging on the road again...

Washington D.C.this week:  I have the privilege of delivering a keynote address to Mercer's clients on the subject entitled "Creating a Strategic Enterprise Sourcing Strategy and Governing Change" (whatever will I think up next...).  I look forward to posting some banter from their conference, where the central theme is "Successfully Managing the Global Journey".  I am particularly interested to hear Jeff Miller and Juila Velixon discuss Mercer's recent study conducted with the Harvard Business School on global service delivery models.  I promise to share the findings here.  Am also looking forward to hearing Jason Averbrook (great blog by the way) attempting to tie together web 2.0, new HR technologies and outsourcing.  Big topics - I love it :)

San Francisco and New York next week: I am more excited than usual at the prospect of attending Oracle OpenWorld this year.  Both Oracle and SAP's signature events have fast taken-over as industry meets to anyone in the hi-tech and services businesses.  If you are there and want to meet up, drop me a mail.  What's exciting this year is the stage they are giving to BPO - come visit the panel discussion entitled the "The Good, The Bad and The Ugly", Moscone South, 307 at 5.30pm on Monday.  I'll be joined on the panel with my long-time industry cohorts Stan LePeak (Equaterra) and Mark Stelzner (Inflexion Advisors). I'll be spending the latter half of the week in Manhattan where I have brought together some of the leading minds in the BPO industry for a behind-closed-doors round-table (no vendors allowed...sorry).

London and India:  Am making plans to visit London and India later in November and December, so look forward to meeting up with many of you during my travels.

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.

Weekend sourcing

I spent the last week in this popular BPO-delivery location for such providers as ADP, Ceridian and Convergys... any guesses where?

(I'll give you a clue - it's not El Paso)

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.  

How to make your boss look good

I recently had the pleasure of meeting with Kulwinder Singh, who heads up marketing for SatyamBPO in Hyderabad. It's great to meet a marketing guy who generally get's it.  Check out how he placed a picture of Kishore Rao, SatyamBPO's Head of Quality, receiving a Six Sigma IQ Excellence Award on a giant billboard in New York's Times Square...