The Outsourcing Blog: Horses for Sources

Reminder: stop and smell the roses

Sometimes life becomes a converged morass of email, reading, writing, number-crunching, slideware-designing, talking, selling, firefighting, and so on - and more so these days than ever. Noone has time anymore to have a quick chat about anything non-important, read an interesting article (or more than 140 characters), have a cup of coffee with a friend, take a walk, read a good book...  My long-suffering wife keeps reminding me to take a deep breath, take a walk, and "smell the roses" - just thought I'd pass on her advice...

An Autumnal Sunday afternoon in Boston's Public Gardens

Randomly shout into the darkness and hope someone's listening

"None of you have any friends"... this little clip about that social networking tool we know and love just cracked me up -:)

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:

Why you sometimes may need to fine-tune your innovation plans...

Efstathiou uncut: all aboard with the sourcing skipper

When I returned to these Western shores 6 years' ago, I was given the the unenviable task of working with the indomitable Andy Efstathiou. 

Now, analysts who have spent 20 years working in commercial banks are not to be messed with - and I quickly learned my lesson with Andy, who (literally) has an encyclopedic knowledge and perspective of everything that has gone wrong with the world.  I recall Andy warning us years' ago that this was all going to go horribly wrong... and did anyone listen?

Andy has since become a good friend over the years, and has always been one of my first ports-of-call when I want to understand anything about sourcing and the banking sector.  He now runs the Banking Sourcing Program for BPO analyst NelsonHall, but his real claim-to-fame is that he finished seventh in the US Olympic trials for sailing in 1988 (pictured).  Not many people knew that...

Anyhow, I caught up with Andy last week to pose a few direct questions on the current state of the banking industry, how sourcing strategies will evolve after the recession, and how banks can navigate these choppy waters (sorry):

Phil Fersht (PF): Andy, firstly, let's not beat around the bush here. What's the climate like in the banking, financial services and insurance (BFSI) sector these days? Do you expect things to continue improving, or are we in a false dawn right now?

Andy Efstathiou (AE): Banks will continue to do well as long as they are on performance enhancing stimulus. However, the banks are aware that some day they will have to stand on their own two feet. In order to do that they need to be able to scale operations in both directions without eating overhead on the downside or investing capital to expand on the upside. Therefore banks have been aggressively working with outsourcers to create engagements built around transaction based pricing.

Why I joined Cognizant

Folks -

Having spent 14 years on the analyst and advisory side of the sourcing industry, it's a natural move for me to join a service provider - for both professional and personal reasons.  Having considered several options (and some of them were truly awesome... you know you are), I decided to make the service provider move, and chose Cognizant.  To keep this brief, and avoid a completely blatant sales-pitch, here were my reasons:

• They're in high-growth mode
• They have a truly dynamic culture and offer something unique to their clients, in terms of value and energy (customers rarely lie...)
• They focus on genuine IT-BPO, leading with industry acumen, supported by global scale
• Their CEO reads this blog (well, that did worry me a little...)
• They have acquired the letter "C"... wait for the announcement

I'll be working in a strategy and communications role, so hope to continue stimulating the debate right here... please keep coming and we'll keep the story of this industry rolling.  And am always open to suggestions for topics to write about, or receive compelling insights from you, so email me here if you like. 

PF.

Business and friendship: it's all about professional respect

You can't understate the importance of relationships in business - especially sourcing, where it's all about cultural fit and working relationships.  In business, it's not always about liking people, it's about being able to trust - and work - with them.  Sometimes, you will actually grow to like someone, in addition to trusting them and working well with them - and that is special; but let's face it, it's quite rare.

In many cases, people you like are not always people you're going to work well with - and vice-versa.  You may not have any affinity or liking for someone at all, but you are straight with other in a working scenario, and have an effective working relationship.  You can always develop a professional respect for someone - and that is different from developing a personal relationship.

If there's one thing that irks me, it's those people who only bother to talk to you when they need something, but paint a facade that they're one of your real "friends".  I like to create a distinction between someone who is a genuine friend, and someone who is a colleague / industry contact.  It's like when you change jobs - you are often surprised by whom was really a friend, versus who was merely toadying up to you, to get you to do things for them...

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.

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

We've had a number of discussions with some of the SAP executives over the last few years regarding its highly-publicized BPO partner-program.  Meanwhile, there's been a crack Oracle team quietly working on developing its own BPO strategy, led by its enigmatic commander Tibor Beles.  After being been educated on the nuances of Hungarian beer in a Budapest bar recently, I decided it was time to drag Tibor away from his Karate sessions to talk about his team's progress...

Phil Fersht (PF): Tibor, why does Oracle have a group dedicated to BPO? What's the game-plan here?

Tibor Beles (TB): Our customers demand more choice when it comes to leveraging Oracle software. In addition to the traditional on-premise deployment and hosted/managed applications our customers expect us to offer BPO services powered by the software they like and are familiar with. As we don’t want to be a BPO provider, we have created the BPO powered by Oracle choice by partnering with leading service providers. Our goal is to place Oracle software under the hood of their offerings.

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:

Stop Press: meaningful use of Twitter discovered

Just as I was about to close down my Twitter account, I discovered a perfect use for the tool:

Bittersweet

As many of you close to me already know, after 14 years in the analyst and management consulting community, I am going to take a little break and make a few changes.

I'd like to thank publicly AMR Research for a wonderful couple of years, where I got to spar with some great people, service more clients that I care to remember, and have a lot of fun bantering with so many of you who frequent the Horses.  I'd especially like to mention some great analysts with whom I'd had the pleasure of working: Dana Stiffler, John Hagerty, Simon Jacobson, Bruce Richardson and Mickey North-Rizza - a real credit to the analyst industry (and will, hopefully, be featured here in the future).  I'd also like to thank Helen Scott for her sheer perseverance... 

If you're wondering how to get hold of me, you can always mail me here. Onwards and upwards my friends -:)

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

Swine Flu can impact your service levels

If you wake up looking like this...

Scale the peaks of FAO... in Tampa

As a wise man once told me, "there's nothing  quite like visiting Tampa in late October".  Many years on, his prophecy is coming true, with the second annual North American "FAO Summit", being held in the Saddlebrook resort, 20-22nd October. 

Anyhow, come and meet a compeling line-up of speakers, panelists, hobnobbers and politicians that include several outsourcing PMOs (for some strange reason they managed to attract several from beverage producers...), former senator John Sununu (one of the five panel members responsible for the oversight of TARP funds), a bunch of advisors, service providers and some crazed blogger.

As usual, a large discount is offered to the cheapskates who visit here, so click on the icon to the left to register quoting the code "FERSHT2".  If you are on the buyside and evaluating BPO strategy, drop me a note.

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?

The art of blog: credibility is in the eye of the beholder

Mark Stelzner roused some passions last week with a great blog post discussing how some traditional media are highlighting the need to regulate bloggers with possible "conflicts of interest".  For example, Workforce Magazine's online article discusses the impact of controversial HR bloggers, such as Cheezhead's Joel Cheesman.

At the heart of the debate are the issues surrounding which industry entities are more credible for regaling information to the marketplace.  My take is that

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

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,

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

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

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

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

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

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

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

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

This is where BPO gets interesting,

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

 

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

Facebook: the twenty-to-one rule

I just read yet another media article, this time in the WSJ, on the downsides of using social media tools such as Facebook.  While the theme of this article is spot-on, it's merely journalistic negativity to bash a new way of doing things. 

Facebook is a great tool because you control how you use it.  Yes, it's rude not to accept a friend-request from a colleague, but you can do so in a way that they will never see your updates and you can choose not to see theirs'.  They are essentially becoming an addition to your contact database where you can view their contacts too.

And if you find my status updates irritating, then turn off my updates, or de-friend me.  I don't want you... if you don't want me.  For every 20 great interactions I have, one person may get annoyed, or I may get annoyed by someone else.  That person can then remove my updates, of I can remove theirs', so that ratio now moves to thirty-to-one, and so on.  Yes, Facebook

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

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

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

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

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