Warning: This is a rant.
The author is not is a particularly good mood and may say things that are not entirely objective, not completely rational and potentially insulting to some readers. His opinions are based entirely on tons of research and his own experiences – and prejudices. Do not read this if you have a thin skin or hate reality checks… otherwise read away, nod vociferously and weigh in 🙂
One fact I would challenge anyone on is the abject failure of the outsourcing industry to brand and market itself to corporate society at large.
Lousy events, third-rate publications, meaningless jargon that only “outsourcing people” actually understand, poor branding and too many old white dudes who remain lost somewhere in the 80’s and 90’s, are culminating in a directionless mess that used to be an emerging industry, but is now becoming a confusing collection of activities, business strategies and provider offerings.
Where’s the fresh thinking, the new ideas, the spark of youth and enthusiasm for what we do? I don’t think I can remember sitting on a call with anyone under the age of 40 for quite some time now.
This business needs a complete overhaul with how we approach outsourcing careers, how we communicate what we do and – most importantly – how we define ourselves. I hate to say this, but we really haven’t created an “outsourcing” industry, more a functional capability that only a select few people understand and care about.
One of the biggest problems facing the services and outsourcing industry today, is the constant failure to market the use of third party services providers as value-added services for enterprises. Good Lord – is it really that hard to promote the fact that our enterprises today should drive down their operating costs and improve how they do their IT, finance, procurement, HR, supply chain management, etc?
While business leaders are falling over themselves to blow more corporate moolah on the sexiest new SaaS solutions or the latest ERP upgrade, when it comes to soliciting real help to drive down costs, improve technology and service quality, suddenly every excuse under the sun is used to delay decisions and investments. Buying new tech is about automating processes – and ultimately eliminating unnecessary tasks and jobs, while engaging with services is more often about improving the way that processes are delivered… so clearly the tech industry does a far better job marketing itself that the services industry does. Why is this?
Very poor and boring communication to corporate society about the benefits of services and outsourcing. We’ve done the “O” debate to death and there isn’t much that can be done to mask the term, however, that is no excuse for the poor job most people in the services and outsourcing industry do to communicate what we do. Complicated, badly-written and (frankly) boring white papers that only very sophisticated outsourcing people can understand do not help. Why do so many providers and consultants persist in churning out unreadable stuff that probably costs a small fortune to produce and virtually noone, bar their competitors and the people who write them, actually read. Scratch that, I bet even their competitors do not bother to read the stuff anymore… probably only the authors. And let’s not forget the turgid webcasts that keep getting churned out, where barely a handful of people turn up and pretend to listen to the painful conversation. Whatever happened to people talking and writing in plain English and having a personality to make this stuff interesting? We’re talking about how businesses can re-invent themselves and get much smarter at how they operate – does that need to be boring?
Failure to create “outsourcing careers”. Most companies, once they outsource, fail to rotate their best talent into the outsourcing governance function, and view it as some weird anomaly that only procurement people should do. Not enough people stand up and talk about the potential career opportunities it can create despite the fact that many of us have developed very interesting, challenging and rewarding careers in this business. One of the problems is buyers and providers are only looking to hire people with an “outsourcing” track record on their CVs. How many jaded provider sales execs do you know of their third, fourth, fifth or even sixth provider? And why do buyers only look for people with major outsourcing experience? Why not hire real ambitious practitioners and train them how to understand outsourcing and develop real career tracks, rather than groping for the same ol’ dwindling pool of old timers who know the lingo?
After the deal the real “operators” get neglected. This one really starts to irk… in so many instances both buyers and providers roll out their big guns to negotiate a deal, but, once the ink is dry, they dump it all off onto middle managers to figure out what was actually sold and how to deliver the stuff. At HfS, we are increasingly finding the executives managing the deals, especially on the buyside, are often junior managers desperately trying to figure out how to get through the day, let along do anything remotely “innovative”. Not having enough senior day-to-day visibility and support is highly detrimental to an enterprise seeking to achieve more than “lights-on” effectiveness with their engagement.
Western media always views outsourcing as negative. Every time I get a call from a reporter from a non-Indian publication, they are always trying to dish dirt on outsourcing. And this ranges from the small rags to the most respected broadsheets. There is a stigma that just needs to be broken through better education and communication to the media masses.
Events only promote the paying sponsors. Most events in the outsourcing and services industry struggle to serve up good speakers – they tend to be paying advisor or provider sponsors who just want to get up and preach the same four trends, receive awards and take us through their worn out PowerPoint paraphernalia. And now they can even do them on their iPads…
Niche outsourcing media is poor quality. Ugh – it’s just bad. Most of these publications and websites just copy each other’s rubbish. Some even hire ghost writers to put together “interesting blogs”. Does anyone actually read this stuff? And why do some firms persist in sponsoring it?
Too many advisors are tired old dudes who stopped learning about new stuff more than a decade ago. For example, we estimate that close to 20% of the current application services deal flow today is actually being driven as digital projects from the CMO and there are virtually no advisors today which have any clue how to approach them, according to the providers bidding on them. In so many cases today, providers just prefer it when the advisor is not even there, so they can have decent direct conversations about what the clients need. Advisors have their boxes into which they want to shoehorn everyone, when what they really should be doing is helping tailor the solution the client needs with what providers have the capability of delivering. As someone once said, outsourcing is a game of “horses for courses”.
Big analyst firms have shied away from it. Where did they go? Do they even cover this space anymore? Do they care? Did all the good outsourcing analysts really go work for Cognizant’s marketing department?
Buyers still feel everything is just so “NDA”. When 97% of the Global 2000 “outsources” some element of its IT and 90% some element of its business processes, isn’t the cat out of the bag these days that most big firms “outsource”. Then why do the majority of buyers refuse to allow their executives to talk openly in public channels about their experiences and best practices? Are there really trade secrets that will leak out about how GM uses Prasad to process some invoices? Surely when buyers can talk about their global services experiences more openly, more operations executives will learn what this is all about, and we can get on with the business of creating a more open, developing industry?
Most providers are still not investing in the right sales talent. This one just continues to baffle. If you want to sell F&A BPO, then hire someone who can hold a meaningful conversation with senior finance people, and if you want to sell Cloud services, hire someone who understands the real issues needed to get there and can articulate them to their clients. Is it really so hard, or is there some other reason why the same old blokes keep showing up at different providers every year, who really would be better suited to a BMW showroom?
Can we have more women please? At our recent HfS summits, about 60% of the buyer execs were female, but about 90% of the provider and advisor execs are male. Isn’t it smart business practice to level the playing field a bit here, folks?
So there we have it. I feel better now 🙂
Posted in : Business Process Outsourcing (BPO), Cloud Computing, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, Outsourcing Advisors, sourcing-change, Talent in Sourcing
I was nodding vociferously all the way through – well said, Phil!
Colin
Phil – definitely agree on the old dudes.
Good piece and needed to be said,
Paul Smith
Well said!
I think that there is another issue that needs to be acknowledged: outsourcing is frequently ONLY a matter of Low Rate Card. Rate Cards trumps Quality. You note that outsourcers do not invest in the right sales talent: agreed. But, in our view, outsourcers don’t invest in the right talent – period. They pay way too much attention to cost of talent over quality of talent.
Unfortunately Procurement in large companies doesn’t understand Quality either. So the Low Rate Card wins. That’s when the trouble begins. Quality talent is not a fungible resource.
We always compete with Low Rate Card shops and have a very high win rate. But it takes a LOT of business value selling to senior line of business execs for this win rate.
Nimish Mehta
CEO/Founder, LumenData
Phil,
Fantastic tirade and can’t argue with any of it.Agree with Nimish about the obsession with low-cost. I frequently find buyers push the rate card (often with their advisor) to get the cheapest deal possible and then complain later they didn’t get good quality. Until outsourcing buyers change the focus from cost to quality this will not change – providers cannot deliver much more than the basics if their clients are squeezing them.
Gary
Music to my ears, Phil. As you and your HFS colleagues write about, so many buyers want to improve their outsourcing outcomes. Many of the points you make here are reasons why outsourcing struggles – it’s not marketed well or sold well, priced correctly and the product is a decade old.
Time to improve the outsourcing marketing mix!
Manish.
So true on all counts – this industry needs a revolution!
Excellent observations on outsourcing. Don’t write off all of us old white dudes off Phil- some of us are still challenging the intertia which seems to have gripped the industry.
@Nicholas – I will be an old white dude soon too… There is hope for us!
As an agency that frequently helps outsourcing firms build better marketing presence and stories, I find there is some angst about buy-side apathy too–the clients almost never want to hear fluff and cut to the cost bones directly, they play the “procurement” game between vendors, so vendors dance to the “cost” tune, and finally, there is no correlation between the client’s “outcome goals” and the vendor’s “body count” rational. No client wants to champion a vendor–testimony, advisory, or in any format, thus vendors have slowly given up too. But a great piece, Phil.
@Paul – my next rant will be “What we need to do to get our act together”!
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Nodding nodding nodding nodding nodding. Keep it coming.
Phil, we can always count on you to get it out in the open. A good collection of observations of what is really taking place. The comparison to the tech industry is an interesting one. Perhaps as product companies they are traditionally more invested in marketing while in the O world, it is sales first, sales second, sales third. Marketing does not make the podium. As a result, marketing is seen synonmous with demand gen. Very little long term positioning and messaging, conditioning of the market, or truly understanding the customer need and then communicating in response. But we must look ourselves in the mirror. We must reinforce the marketing basics of defining a value proposition (in the eyes of the customer), delineate our marketing spend on awareness and demand generation, and measure, measure, measure. What is the Return On Marketing Investment (ROMI). When they (senior leadership) see and understand the value, the support and investment will come.
Much too often I see marketing inside out – pushing capabilities, versus outside in, truly listening to the customer and the market. And your comment on complexity is right on. Who else out there get powerpoint slides with 10 and even 8 point text so that they can get everything in there? Let’s push for the 3 Cs – Clarity, Conciseness, and consistency.
I’m game, let’s stir it up.
@Robert – some astute observations. I always view marketing as the “ability to satisfy customer needs and wants profitably” (I was a keen study of Philip Kottler back in the day). In the case or outsourcing, I would add the nuance that it should be about “delighting customers with relationships that engender the desired profit and outcomes of both the buyer and provider over the long term”. The problem with outsourcing is that it has become the impossible paradoxical “product” – customers want to buy low cost solutions, but that quickly turns into a desire for greater value, once the deal is done. Too much of the industry is still obsessing with the low-cost (dinosaur advisors and their rate cards), when it should also be focusing on the greater value (process improvements, better talent and better technology). We need to join the two together – lower costs, but also greater value – and where the balance can be found. We need to communicate this clearly as an industry with more customers stepping up to share their experiences, and more providers investing in smarter channels to air their philosophies and capabilities.
I do think many of the providers are caught between a rock and a hard-place here, but that is where your comments make so much sense – investing in marketing to give greater clarify and consistency over the long haul. Sadly, there are only a small number of providers really making these investments as these outsourcing functions are led by sales people with a tunnel sales vision. When you look at the investments in marketing the likes of SAP, Oracle, Saleforce, Netsuite and Workday make, and the visionaries they employ to spread the gospel and enlighten their prospects and customers, you quickly see what’s going wrong with outsourcing… a lack of visionaries who can communicate with the customers; a lack of customers being enticed to share their stories, and a lack of quality venues and media to bring these experiences together. Maybe it’s time for a genuine association of services leaders to be developed that invests in the long term value and future of the creating an industry…
PF
I believe the disruptive, Trojan horse like, IT players (Rackspace, Amazon, Google, Workday, NetSuite, Etc.) are just waiting for the opportunity (scalability and capability) to go to the CIO’s / CFO’s and say, “you may not know this but most of your BU’s have been using our solutions for some time now and I thought that maybe we could be considered in your next outsourcing RFP”. This industry has gotten way to cozy between buyers and sellers.
Very well said Phil. I nod. Awaiting more to come 🙂
Phil
Well said!
I can relate to experiences within the telecoms services industry where
1) four big vendors dominate the outsourcing provider space, all struggling to move away from outdated service frameworks and processes, and
2) a disparate bunch of telecoms operators around the world being driven to demand more, pay less and move up the value chain while fending off new entrants like Google
Your points on failure to market, lack of fresh thinking, poorly documented expertise, no governance focus, and lack of transparency are clear in the telecoms services niche at least.
Maybe outsourcing is simply too broad a topic that there is so limited openly available expertise specifically for telecoms. And perhaps there has been too much of a one-size fits all approach that precludes evolution. In any case, wouldn’t it be great for outsourcing to get the IT open-source treatment to clear some of those cobwebs. I look forward to the next post.
Darma
How about placing outsourcing in the hands of our youth? Get it out of the hands of the old, for they have had their chance. Start with outsourcing as a high school, community college, or college project. Grad students with IT experience are the facilitators. The IBMs, Tatas, and HPs of the world provide the hard stuff, Local or national soft wear firms chip in the soft stuff. Then the grad students, with the help of some wily grisly veterans who do not care about the status quo and embrace newness like the fresh dew of the dawn of a new day, create an outsourcing culture among our youth who might be able to spin out of the school universe into a startup universe. A ground up approach versus a top down approach might be the way to give outsourcing its just due.
Price, Product, Promotion, Place
Given the lack of differentiation in the other 3, I think the marketers have lost interest in promotion. Though external/general business sentiment about product is forever tarnished by Dell and the telecom industry’s Indian call center failures.
Nasscom is so scarred and has such a large hole to dig themselves out of, they keep trying to rename the product. But, does a tree make noise when it falls if the general
business environment would prefer to log the whole forest (regardless of the rare spotted owls Nasscom claim live there).
Super article Phil. You had me at ‘why’…
Love your rant. Very true and this is why I left the O industry. The rate cards and commoditisation of services are driving this industry down. As deals can’t always be profitable enough from the way they are built, then it is all about cost cutting: getting cheap labour offshore and pushing the small numbers of people left onshore to do more (driving them mad in the process). There is no long term view, it is all about the margin and revenue for the quarter, which can be understood, however, not to the detriment of having a strategy and taking care of your people.
People, Process and Technology are the key components. Technology and processes are important to get stuff done, but it is all about the quality of the people and relationships at the end of the day. That’s what brings the value add this industry really needs.
Here that’s my rant over 🙂
Catherine B (recovering Outsourcing addict, looking to move into Marketing)
As an old white dude who has recently reached the age of 60 I have a vested interest in the conclusions of your article Phil. I used to work in outsourcing advisory and thought it provided valuable insights to both customers and service providers, primarily in terms of relationship management, change management and cultural expectations. Sadly, it often ended up as Nimish suggests in a lowest rate card procurement negotiation. Part of that is essential market stall trading because many providers expect their prices to have to drop during negotiation, therefore they pitch high. Likewise, the customer’s Procurement function have to prove their worth in getting the best deal. It all becomes a bit of a game in which both sides knowingly play their parts.
So called Benchmarking often doesn’t help because it focuses on unit pricing at the expense the more complicated evaluation of capability, capacity and customer-centric services. My personal view is that benchmarking clauses in contracts work against the opportunity for true partnering and have very little to do with Robert Camp’s original benchmarking methodology. (Did I mention that I’m a curmudgeonly grumpy old white dude? – but that doesn’t stop me from empathising with Phil’s very perceptive criticisms of our industry).
Just over two years ago I took the plunge and moved to the ‘dark side’, i.e. a service provider. It has been an enlightening experience. Technically I remain old and white and a dude but I feel proud to be part of an organization that cares about the impact it has on its customers. The key to me is not to hide behind the “outsourcing” label but to understand that customers have a choice when it comes to service provision. These days those services are underwritten by rapidly changing and highly accessible technology. To succeed you have to get your head around both the service and the delivery method. That’s were social, mobile, analytics and cloud will play an increasing role. If I remove the jargon, customers simply expect to be able to use outsourced services that work first time, every time, anytime, anywhere, via any device. Good marketing focuses not on the tech bells & whistles but on delivering the benefits that are important to the customer. We have to be able to describe both the journey and the destination, otherwise the customer will remain confused and sceptical of our aims.
Personally, I am more excited now that I have been for many years about our industry and its potential impact on our customers! It’s great to meet next gen people joining our industry with no pre-conceived ideas about how outsourcing works – apart from, it works. After all, if we can do a good job, help our colleagues do a good job, make our customers smile, enjoy our work and go home happy then surely the world can hope for a better future 🙂
I posted this on my office wall. As someone who has been in the Outsourcing industry (and marketing) for 15+ years, I couldn’t agree more. I have recently taken an executive marketing position at a company who is embarking on an exciting new HR Outsourcing offering. We are building the the opposite of what you’ve described here. Thanks for the article & watch for us soon! – Bonnie
Phil, please help the analyst and media community take a peek into the world of next generation outsourcing providers who are focused on building businesses based on adding value. We haven’t given up on trying to make a difference for our clients.
[…] many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful […]
@Liam – this piece and the accompanying report gives a strong peak as to what’s in store…
PF
[…] many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful […]
Thank you for bringing these topics out in the open. I thought I was alone (or crazy) for feeling like I was missing something. As a young-ish 30 something, I have worked with the stereotypical advisor on many engagements. The ‘it is what it is’ mentality has always left me yearning for more answers. I once thought that I had to be employed for a service provider for 20+ years in order to effectively negotiate a contract. And, as you stated, reading through white papers over and over hasn’t cut it. I think the perception that should be cleared is that outsourcing isn’t necessarily offshoring. My generation is keen on keeping jobs in the States because they do not have an understanding of the types of roles that are being leveraged as well as the funding that is available for more value added work. Outsourcing seems to be overcomplicated and undervalued, from my perspective.
brian klumpe…
Why the outsourcing industry is so horrible at marketing itself…
Excellent piece and great comments from all.
As the author and commenters have pointed out, the buyers are often their own worst enemies. Buying software to “eliminate unnecessary tasks” is sexy, but simply improving processes through outsourcing is not. Cost is the only focus, as opposed to improved quality, scalability and capability at the same or maybe even greater cost. Love Gary Leary’s comment, “…buyers push the rate card (often with their advisor) to get the cheapest deal possible and then complain later they didn’t get good quality.” It is a chicken-and-the-egg question: do buyers not focus on value and quality because the marketing sucks? Or does the marketing suck because providers know that cost is all that matters to buyers anyway?
As a finance and accounting BPO provider serving emerging growth and lower middle market businesses, our buyers are often non-financial entrepreneurs that may simply not appreciate the value of upgraded financial operations (or the risk of sticking with their status quo). In these cases in particular, the conversation needs to be about business value because making the finance function better for its own sake is not a compelling value proposition. Without shifting the conversation to one about value, our services will be further commoditized. Also love Phil’s comment on “delighting customers with relationships” – this comes down to the provider’s culture, which is one of the only true differentiators among professional services firms.
Phil’s comment includes the suggestion, “Maybe it’s time for a genuine association of services leaders to be developed that invests in the long term value and future of creating an industry…” The CPA profession (through the American Institute of Certified Public Accountants and its marketing arm, CPA2Biz) is currently pushing outsourcing as a new revenue stream in addition to audit and tax for regional and local CPA firms. (The outsourcing provider I head up is a subsidiary of a CPA firm). This effort is targeting a lower tier than the “big boys” but is at least an effort to educate the market, and in an appropriate way that emphasizes value-added advisory services in addition to routine transactional accounting and reporting.
Phil,
Love it and guilty.
One of the reasons we have done such a bad job marketing outsourcing is the outsourcing blathering of alleged differentiators: Transformation, Optimization, Business Enablement, Alignment, plus a plethora of stupid acronyms that usually start with E (enterprise) or G (global). Seen plenty of OWGs come up with “new product offerings” that they literally will into existence through 9pt PPT chartjunk. No rigour, no product life cycle, no real marketing. The “my deck’s more clever than yours” approach. It’s time to put it out of its misery.
Lnkd.in…
Why the outsourcing industry is so horrible at marketing itself…
Aw man guilty as charged, Phil! Well articulated. Get out of my head.
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