The Outsourcing Blog: Horses for Sources

Horses for Sources have galloped off to a new website

 The Horses can now be found grazing at the creatively-named new URL:

HTTP://WWW.HORSESFORSOURCES.COM

See you over there...

Why we've formed an analyst organization

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

So why on earth do this?

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

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

The Horses won't change, we just expanded

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

A big fat personal thank you

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

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

Phil.

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

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

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

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

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

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

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

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

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

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

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

Why Cloud Computing is the future of outsourcing delivery

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

The Industry Speaks, Part 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.

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

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

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

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

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

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

The "new normal" in the outsourcing delivery business

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

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

So what is this "new normal"?

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

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

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

Mystery Governance Predictions

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

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

Simply Lowell (Part II)

So here's the eagerly-awaited second part of the Lowell Williams experience, where we decided to give him 30 minutes of fame. Over to Equattera's HRO mega-star with the handbrake firmly in the off position...

Phil Fersht: Lowell, we’ve had a lot of talk on here about “Platform BPO”, where clients essentially take on a standard SaaS-delivered platform, supported by business processing services delivered by a BPO provider. How do you view these “on-demand” business services? Isn’t this just a win-win for the software providers, with limited value for the BPO provider? How can service providers differentiate their offerings in this type of model?

Lowell Williams: As mentioned above, many HR and IT executives

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. 

Simply Lowell (Part I)

For once I am stumped for a title.  The one man who had successfully escaped my previous attempts to feature him has finally been caught.  Either his career has nose-dived and he's now desperate for some publicity, or the "Horses" now gives that 15-minutes of fame people so badly crave.  I hope it's the latter -:)

Yes - we have the one-and-only Lowell Williams in a two-parter...

Lowell, quite simply, is the most respected practitioner in HR Outsourcing.  Not only has he spent many years as an actual HR leader, he also worked for the "original" HRO provider Exult, moved into the sourcing world with TPI, before joining Equaterra in 2004 to head their HRO advisory practice.  He has been responsible for many HRO engagements - and he has somehow survived to tell the tale.  He also became the HROA's "Person of the Year" in 2008... an honor only bestowed to the most lovable scoundrels in the outsourcing world.  So without further ado...

Can IT overcome its credibility crisis?

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

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

Eulogizing on the Eurozone with Principal Euan

Attend any European analyst meeting and there’s one character guaranteed to be propping up the bar. Scratch that, there are normally about 50 analysts propping up the bar. But in the midst of the throng you will undoubtedly find the stolid Euan Davis of Forrester Research.

I recall a conversation with Euan back in '95 when I told him “you should give this analyst lark a try” (If you want to know what he working on in those days, drop me a note…).  Anyhow, the story began from there, with Euan rising through the ranks at IDC’s European operation, making a curious detour to Yankee Group, before finally attaining new heights of stardom and adulation with Forrester.

Euan now boasts the words Principal Analyst in his job title and waxes lyrical about IT services in the Eurozone. Ask anyone in the industry and you’ll discover he’s fast becoming one of the most popular analyst figures on the European services circuit. And, despite the fact he once lost to me at tennis (a shameful occurrence for any man or beast), he still warrants an airing on the Horses…

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

Euan Davis (ED): The issues are many and varied but if I was to distill it down to what I see as the issues that clients are facing today then they fall into three categories: Some are “firefighters” and are looking to reduce costs wherever they can, pushing for discounts and getting economies of scale through aggressive supplier consolidation. Others are “explorers” and are directing energies into investigating a host of emerging options for IT service deliver—and business process outsourcing is one such area. The exciting ones to watch for my money are the “builders.” These firms are sinking the foundations that underpin a profound shift in their operating model architecture, IT/business redesign, and supplier engagement models. These firms are building hybrid operating models driven by a structured sourcing frame works, regulated through a retooled service management structure, and connected to a core set of suppliers. And the recession has speeded up the process of change.

Sitting on a shrinking business and afraid to change

"Most of our managers are happy sitting on a shrinking business" bemoaned a senior executive the other day.  Sound familiar?

I hate to say this, but too many senior executives I talk to these days adopted this survival mechanism during the economic crisis, and are clearly struggling to change their mind-set now it's clear that armageddon has been averted.  And the main reason seems to be that the last year has exhausted them, preventing fresh, bold decisions to be made.  Hey - it's exhausted everyone. 

Smart business leaders are now trying to re-energize their staff, take that deep-set panic out of the daily job, and find reasons to celebrate, like a not-so-bad-quarter.

I clung to the forlorn hope that a year-long economic crash, a transformative president, and new approaches to business ideology would encourage businesses to start thinking differently.  But, in many cases, I appear to have been naïve .  The result is that many businesses are going to have to force real change upon themselves to escape this malaise. 

From wanting change... to embracing  it

In reality, most businesses are coming out of recession having already cut visible costs to the bone, for example areas where cost can be directly extracted from the business without any form of arbitrage such as travel feezes, headcount reductions from non-critical areas, budget reductions across departments in areas such as marketing or IT, and so on.  The next steps are to explore cost arbitrage through labor (i.e. outsourcing), and ultimately process transformation that should accompany any form of outsourcing.  Simply put, it's nigh-on impossible to dig out further pockets of cost, without re-wiring the guts of business operations to find new efficiencies.  

Global sourcing provides one of those vehicles where businesses

can effect progressive shifts in their business models to approach things differently.  It can provide the change agent to make this happen, but only when our management talent has the energy and determination to look at things differently - and refuse to settle for sitting on that shrinking P&L. 

So where next for the Galloping Hooves?

"You are going to keep doing that blog aren't you?" seems to have been the most frequently-asked question I've had since I changed my day-job.

And a few people have asked whether I can still credibly run this blog, now I work for one of the firms actually tasked with delivering the services we have been talking about for the best part of three years.  Heaven forbid. 

As we have discussed at length, blogs and other social media have been a major game-changer with how we engage with issues, market dynamics - and each other. 

We live in a different world today, where the rules are changing and we are constantly seeking out new and innovative ways to reach our industry.  To sum up the new constant in a nutshell, credibility is in the eye of the beholder. 

So here are the reasons for keeping these hooves galloping:

Insecurity is the modern corporate disease

In 1597, Sir Francis Bacon coined the famous phrase "Knowledge is Power".  While knowledge does create power to the beholder of that knowledge, it can rarely be harnessed effectively until is it shared with other entities.  In today's business world, I'd broaden that phrase to "Sharing Knowledge Creates Value".

Let me explain my thinking here.  Too many employees today have a tendency to hoard their nuggets of knowledge, for fear of fear that giving them away will weaken their value and, ultimately, their job security.  This can sometime be as rudimentary as documenting a business process, through to sharing knowledge of a particular market, discovery or idea. 

It never ceases to amaze me how much better businesses could perform if their employees were better at sharing their knowledge with each other, and - ultimately - with their trusted partners.  We can talk for hours (and have done) about how you can develop service levels, contract stipulations and incentive plans to drive more value into a service-contract.  But ultimately it's the spirit of collaboration and knowledge-sharing that wins the day.

How can firms create this spirit?  Can they go out an buy some software to enable it?  Can they call up McKinsey or PwC and pay for them to create it for them?  Sometimes; these are measures that can help, but ultimately it's about corporate leadership driving change throughout their organization that is likely unprecedented for them.  And sadly, it's a change that is likely abhorrent to the culture that has blighted  so many organizations in this modern business world.  This change is about making talent feel secure about their jobs and their futures.

Let's take some examples from across the sourcing industry where knowledge-sharers succeed:

Derail the Healthcare gravy-train: introduce competitive multi-sourcing

Being a relatively recent immigrant to US society, it's fascinating to observe the political games corporations and politicians play to reach their desired outcomes. 

What I find a little absurd is how easy it is to decipher the real political motives behind all the rhetoric; especially those ridiculous commercials sponsored by insurance companies trying to protect their monopolistic positions and keep their gravy-train chugging along.

Working in the sourcing industry forces you to cut quickly through complex issues to find sensible solutions, and healthcare doesn't seem a whole lot different - despite the sheer scale of the issues and requirements.  Trust me,

Join the world's largest social-networking sourcing community

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" now has 7,000 members. This is a forum for leading sourcing practitioners to share their experiences, views, opinions, best practices and lessons learned in the worlds of IT Outsourcing, Business Process Outsourcing, Shared Services and Offshoring. You also get a free subscription to the Horses Digest. And it's FREE...

SIGN UP HERE

 

The entire Great Recession of 2008-2009: Blogged for the outsourcing industry

Wouldn't it had been something if there had been some sort of interactive journal during the Great Depression, where we could have truly experienced the emotions of the time, peoples' ideas for change, the stark contrasts between desperation and hope? 

It's been a geniune privelege to have hosted these emotional debates throughout the entire Great Recession of 2008-9.  It's incredible how attitudes have changed over these tough months - I don't know about you, but I feel a little wiser as a result - and the great interaction I have enjoyed and observed with so many of you, has made this all possible.

Here's the whole story of the Great Recession and it's impact on the global sourcing industry (in chronological order):

So who's peddling "influence" these days?

Prolific blogster and all-round industry pundit Vinnie Mirchandani asks whether the IIAR's definition of the analyst is outdated.   He also begs the question whether my good friend Ray Wang, who has recently left research firm Forrester, will repeat his honor next year.  Unless old-school PR executives get with the changing times, somehow I doubt it. 

Vinnie goes on to declare "seems like AR (Analyst Relations) folks want to cling to a narrow (and shrinking) definition of market influencers."  I didn't even feature in the top 3 services analysts, despite the fact there are 45,000 RSS subscribers to this blog and my calendar is booked solid until well beyond Labor Day with client meetings (but I promised my wife to keep my ego in check, so will not venture further with my little dig here...).  I haven't even heard of these "top 3" guys... but they seem to be "influencing" far more than I seem to be.  Maybe I need to get myself double-booked next time?

Crash and Learn: is TPI's "quartus horribilis" reflective of the sourcing industry at large?

There were a few alarm-bells ringing in the outsourcing industry with TPI's shaky Q2 results.  As our recent buy-side survey data indicates, in addition to the multitude of service providers and consultants, outsourcing interest and uptake is on the rebound, so what should we read into TPI's 38% drop in revenues from Q2 2008? I spoke to leaders of all the key sourcing advisors to get their candid input on how their firms were faring, and whether TPI’s results are reflective of the sourcing industry in general.

Rival Equaterra, which is currently privately held, reports to us that its Q2 results have increased 10% over 2008, expects Q3 to perform well, and is encouraged by strong IT outsourcing activity, with on-plan BPO advisory business. Another rival, Alsbridge, added: “First half revenues are up 40% on a 1st half ‘08 to 1st half ‘09 comparison. Across the board, we see good demand

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  

 

It's all about hitting the ground running after you sign the contract

Captive sell-offs: good for innovation, good for employment

I know I've been depressing everyone with calls for change and for our flagging companies to step up and disrupt their business models.  But did I ever say I was here to make you happy?

However, one shimmer of light amidst this gloom is the increase in activity of service providers buying up business' captives or shared service operations (often under the guise of a new "client win"). 

EXL's acquisition of Schenider Logistics' Czech operations is yet another recent example of a service provider making a strategic move to add scale and expertise to its delivery portfolio.  In this case, EXL is cementing its European presence in a unique and attractive sourcing location, enhancing its F&A BPO business and bolstering its multilingual capabilities, in addition to incorporating supply chain and logistics management process expertise - an area of increasing importance in the industry.

So why is this good for industry?

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

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

It’s time for disruption, not stagnation

2009 is going to be remembered as the year of cost-containment. Most client discussions are not very sexy – it’s largely about cost, as opposed to innovation or revenue generation. McKinsey recently revealed 70% of its current client engagements are cost-reduction focused, only 30%focused on revenue-generation (the opposite of a year ago).

I strongly believe our businesses, while being diligent about cost-containment, must use this opportunity to make fundamental changes to their business operations in order to emerge more profitably in the future. Simply ripping away cost elements and failing to improve access to global corporate data and processes, is a massive wasted opportunity to be more competitive over the long-term.

I wrote recently about how the lay-off culture that has afflicted both the US and UK in recent years, where many firms treat their labor as a variable cost that can be scaled-up or down at will, depending on the next quarterly forecast. I cannot stress enough the damage this can cause to businesses as the economy recovers. One common theme that has dominated discussions with business leaders recently has been their surprise at the amount of visible cost they have been able to take out of their businesses as they move from a revenue-generation to cost-containment strategy.

It’s not solely the cost of labor that is highly visible – it’s the costs of technology, travel, infrastructure, real-estate etc. that can often be easily driven-down in a desperate business climate. Less visible are costs associated with poorly-integrated business processes and procedures, of dated analytical tools, of ERP systems incapable of supporting global process templates, and so on.

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

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

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

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

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.

Hear the great Hags on global finance transformation

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

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

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

Supply Management BPO - short-term body shopping trumps business transformation

It's easy to get excited with high-growth markets, but supply management BPO's different. 

While the market has grown exponentially, and a 30% increased expenditure last year is eye-opening, the nature of these engagements doesn't give me confidence that this market will sustain its growth trajectory unless customers think beyond short-term labor arbitrage, and service providers introduce significant process and technology enhancements to the early adopters to help them optimize their delivery.  This "lift and shift" model could well result in customers losing more than they save.  Read more at Think Global.

Shaping your career in this sourcing industry

There's one character in the sourcing business those "in the know" know... Larry Janis.  When senior management look to hire or poach key talent, Larry is known as the discreet man with the black book.  He's also a great guy, and agreed to post a few suggestions on what sourcing executives should be doing to shape their careers in this environment.  No-one in the business knows the hiring dynamics of buyers, consultants and service providers as well as Larry...

PF: Larry – you’ve been a lead search consultant in the sourcing industry for many years. In terms of roles and openings both buyers and service providers are looking for, what’s changed today?

LJ: The stress in the global economy has certainly changed in the outsourcing provider space. Add to this, HP/EDS merger/acquisition, the Satyam scandal and staff reductions at several of the major providers. As a result, both the

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

Why the lay-off culture is far more damaging than offshoring

Ever since President Obama proposed to change the IRS tax code that regulates how US corporations declare income from international activities, I've been thinking about other measures governments can take to slow the recession and help businesses become less myopic with how they navigate these rough waters. 

Reading between the lines, he appears to be targeting a revenue grab, while making political overtones against companies which use offshore resources.  However, he's simply penalizing firms from being more productive with their exports.  Sure, there are issues with tax fraud from havens such as Bermuda or the Caymens, but this is primarily an issue with individuals, not large enterprises. 

Why penalize a US conglomerate for manufacturing diapers in Brazil for the

How to get two whales in a mini...

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

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

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

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

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

During  Part I of Lee's interview, he talked about the development of the global sourcing industry and how companies were now approaching sourcing strategy in today's economic climate.  In more Blackberry-smashing style, Lee goes on to discuss his theory of "innovation" within outsourcing relationships, and delivers some tips on how operations leaders can improve the performance of their service providers (without resorting to baseball-bats, water-boarding or enforced transition workshops at Epcott).

PF: Lee, what is your theory of "innovation" within outsourcing relationships, and are we really seeing it in today’s engagements?

LC: I have a pretty simple theory of innovation. We aren’t seeing it today because most of the clients today didn’t buy it. Somehow we believed that

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

The flat of the curve: are we scared of innovation?

Kevin O'Marah, AMR Research's Chief Strategy Officer, blogs a thought-provoking piece that highlights how so many retailers and manufacturers have failed to embrace collaborative supply chain models through fear of "giving more than they'll get".  Kevin argues that consolidation amongst suppliers will accelerate in this environment as major industrials drive cost out of their supply chains by reducing their supplier bases.  He adds,"what we have since seen is that cooperation takes a lot more than just setting up EDI, reverse auctions, or visualization.  It takes trust, which apparently is still in short supply." 

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

 

SaaS versus BPO: is this where tech-geeks finally interact with services-nerds?

So there was a bit of Phil-bashing going on this week - from SaaS lovers - after my post that discussed some of the potential issues with SaaS delivery versus outsourcing.  I also got several messages of "thanks for nailing this one for us" from services folks.  To clarify my point, I would like to emphasize I am a huge fan of SaaS delivery and strongly believe that SaaS services will enmesh with some areas of BPO to create the genuine business utility models for the future.  BPO provides that level of business-customization for those business processes that are enabled by the SaaS app.  I believe the issues are more about IT folks understanding the basics of business service delivery - and vice-versa.

My concerns with SaaS delivery are how companies govern their business processes that are supported by SaaS application delivery.  It is a serious step

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.

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. 

Guatemala: Bananas, Green Tomatoes... and BPO

We've been debating the opportunities for Latin American countries to take on BPO work for a while now, and spending a few days in Guatemala has confirmed - beyond doubt - the potential of the region. 

I had the pleasure of visiting Capgemini's facility, which is quickly ramping up customer-facing F&A work for Coca-Cola Enterprises (which we picked up on here).  I am going to write more about this engagement in due course, but the hybrid nearshore/offshore operating model for Finance and Accounting and Procurement is showing strong signs of being the way forward for the industry.  This is also the case for many global strategic sourcing, supply management and HR BPO engagements. For example, Coca-Cola Enterprises is sourcing neashore work to Capgemini's centers in Guatemala and Krakow, and using its Chennai operation to support these centers with non-customer facing processes. 

Guatemala's population itself is only 13.7m people, with 40% based in urban areas, however, it is the largest Central American hub with strong potential to source activities to neighboring countries, such as El Salvador and Nicaragua (see graph below) to compliment serices and keep costs low.  What impressed me most meeting many operations agents and managers was the easy-to-understand English intonation, the obsession with process, the youthful energy and the discipline. 

HR outsourcing in this recession... why this makes sense for many global firms

While many firms are hunkering down tryng to ride out this turbulent year, we're also seeing an increasing number of multi-national companies use this time to develop business support infrastructures that can scale quickly with the needs of the business. It's not all about cost-reduction - it's about being nimble, and having a firmer handle on accessing critical data on your staff at a global level.   You can view the full post over at Think Global.

Time to offshore the law

I've been getting an increasing number of service providers talking up the growth of Legal Process Outsourcing (with the mind-blowing acronym "LPO").  Personally I'm a bigger fan of PPO (Political Process Outsourcing), but it seems like we could have some onshore/offshore complications with that one, so let's talk about LPO. 

Having had a few discussions with clients and service providers in this space, it's clearly an area for major cost-efficiences for businesses.  I've even had one service provider bragging he was making a killing doing liquidation administration offshore.  Bottom-line, several of the fat law firms are already offshoring their own legal support work to low-cost locations, whilst still billing their clients top-whack rates, so smart corporate legal buyers are focusing on engaging with LPOs, as opposed to highly-expensive law firms, for a lot of legal work, while retaining expensive lawyers for critical activies that require deep experience.  And did you know Mahatma Gandhi was a barrister?  I'd use him anyday over Denny Craine :)

I've recently had the pleasure of interacting with the industry's one full-time LPO advisor (if there are others, here's your chance to make yourself known), so I asked him if he can educate us more regarding what LPO's all about.  Step up Matt Sullivan who lived in Pune, India, for two years, where he managed the risk management & regulatory compliance practice for a global IT outsourcing company as part of a 20 year career in services and outsourcing. He now plies his trade at Red Bridge Strategy, where he's teamed up with some very smart and friendly consultants who focus on global sourcing issues. Over to you Matt:

Changes Ahead in Sourcing U.S. Legal Services in 2009

Businesses have traditionally relied on a combination of in-house legal departments and outside law firms for all of their legal work. During the past few years, maturing processes, technologies, and legal-services-delivery-perspectives have created an environment where corporations now have a spectrum of choices from which to source legal services.

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. 

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