Big mega-mergers in IT services are fast-becoming a thing of the past. Noone wants to blow billions on services firms when you’re bound to have a horrible clash of cultures, management teams, legacy unwanted business lines that can’t be killed off, not to mention the impact on the clients and the risk of losing half your decent executives. So why not revisit that age-old practice of partnering? Why not play the field and experiment with your future possibilities as opposed to tying the knot too quickly and regretting it later? (Thank god my wife doesn’t read this…)
It’s about having the right mix of offshore scale and onshore domain knowledge… all nicely packaged in a suite of privately cloudy data centers that can be priced competitively for clients. So enter two candidates from separate continents which are experimenting with each other in a unique partnership to help clients modernize their applications and take advantage of both companies’ core strengths: the cost-competitive offshore scale and expertise of HCL and the onshore domain expertise, legacy integration skills and data center resources of CSC.
CSC and HCL could be paving the way for a new wave of strategic partnerships that combine the skills and capabilities to address the increasingly complex app modernization and integration needs of enterprises
With the economy now in an upward swing and the relentless move to the cloud driving companies to overhaul their IT infrastructures faster than ever, HfS believes now is the time for ambitious providers to act aggressively in the market. Never before have so many organizations been plagued by so many integration nightmares created by multiple instances of ERP, legacy applications still surviving on spaghetti code workarounds, and islands of cloud apps being hurled into the throng, bringing a whole new set of integration challenges that most organizations are simply not equipped to tackle by themselves. Simply put, the rapid emergence of the cloud as is now creating an unprecedented demand for integration services – and the race is on among the leading IT services providers to take a lead in this evolving market.
We view HCL and CSC’s partnership as being a bold and unique approach to developing a compelling offering to clients that takes advantage of each other’s respective market strengths. Both parties clearly feel they can close the gap on the market leaders more effectively by partnering than going it alone. For example, in banking, HfS estimates each company has roughly $200m in ADM revenues, which puts them well behind leaders such as IBM, Accenture and TCS. Both CSC and HCL need to do something to address this gap. The deal will entail co-creating a dedicated delivery network with the first centers located out of existing centers in Bangalore and Chennai. Though CSC brings extensive clients across the US government, the initiative will have an initial focus in banking and financial services, where both firms need to inject more firepower into their market presence and global capability.
The two companies will each appoint a senior executive to run the joint operation encompassing a team of experienced employees sourced evenly from each firm, and the new entity will share revenues and costs based on predetermined rules around what is contributed by whom to each deal. The stated rationale behind the move is to allow them to move more quickly in their pursuit of the growing opportunity around modernizing legacy enterprise apps and solving the integration headaches being posed by multiple cloud and legacy applications. By combining respective strengths – such as CSC’s established client base in banking, where its Hogan platform creates a prime target and HCL’s skilled and lower cost offshore delivery teams, the two entities believe their collective opportunity will greatly exceed what each could obtain on their own.
In the simplest terms, CSC gains access to HCL’s robust global delivery skillset and several new clients for its core technology platforms, especially outside of CSC’s public sector business. HCL will white-label CSC’s BizCloud as it standardizes and rationalized its private cloud offerings to two or three core infrastructure partners down from the 20 or so it has today. For its part, HCL will gain access to CSC clients to boost its enterprise application services business – a segment that was flat during 2013. These reasons alone are compelling and with each entity having mature leadership able to recognize the battles they cannot win on their own, the rationale is sound. Moreover, for several years now, CSC has needed to develop more robust offshore delivery capabilities to compete more effectively with larger competitors like Accenture and IBM, which have massive offshore scale today.
With this deal, HCL and CSC are betting that much of the spoils of all that new transformation activity will largely fall to those that conduct the initial work of modernization. With HfS estimates of around 80% of today’s enterprise application services spending directed at maintaining legacy systems, there is significant upside for the two firms if they can free up this spending for transformation.
Bottom-line: With services deals becoming more complex and niche, we could be in line for a spate of specialist services partnerships
The enterprise application services market now faces a challenging new reality where yesterday’s mega multi-year deals have been replaced by more tightly defined projects. In response, IT services firms need to develop more targeted and nimbler ways to compete. This means tailoring industry specific offerings in order to win new deals. Which brings us to the heart of why it just might serve as the new go-to-market approach for many providers. By forging this alliance, CSC and HCL can collectively go after these narrower markets without making many additional investments that would destroy their ability to remain competitive. HfS’ expects to see this new partnership model utilized by many of the IT service providers seeking to compete across verticals where individually they need to plug scale and capability gaps. We are also highly likely to see more focused collaborations in specific business process areas where pure-play BPO providers could do more hook-ups with technology services firms which lack the process expertise and knowledge.
Net-net, HfS believes that this partnership could serve as a highly-effective model for providers seeking to address the new emerging marketplace defined by deep industry knowledge coupled with vertically-focused technology platform solutions. Mega-acquisitions in IT services have become far, far too costly and unrealistic in today’s environment, and partnerships like this could signal the way forward for many ambitious service providers. Providers want to be more agile and focused, not so big and clunky they lose sight of their goals and control over the operational costs, which is why many of the mega-mergers in IT services have not yielded very successful outcomes in recent years.
If I had a dollar for every person who enlightened me with the news that Global Business Services (GBS) is BS, I could purchase about three hours of offshore help desk support.
However, while several folks make valid arguments why GBS may be a pipe-dream for their own organizations (or some of their clients’ organizations), I believe they are missing the big picture.
GBS is about laying the foundations to achieve much more value than the modest benefits of labor arbitrage and process standardization
The crux of the matter is that when it comes to achieving business outcomes, enterprises need to focus on the “what”, but can’t do that until they have some capability with the “how”. Many of the GBS cynics are stuck in a world where they will forever be trying to master the “how” and settling for achieving the modest benefits of some labor arbitrage savings and process standardization.
In my view, GBS is only BS if you can’t make the Six Maturity Leaps we discussed during Part I, where ambitious enterprises must lay the groundwork to shift from siloed, immature shared services and outsourcing to effective, commercially-oriented Global Business Services:
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Simply put, today’s ambitious enterprises can’t really focus on achieving their desired outcomes (the “what”) until they have the operations framework in place that gives them the control and culture to make genuine advances with their operations performance (the “how”).
In short, there are limitations to the value you can achieve by finding a few more bodies that can be displaced to lower-cost locations and standardizing processes with some better workflows and technology. Most ambitious governance executives already know that only focusing on transactional processing and lower costs will fail to reap the long-term, continuous incremental results their leadership demands (or will start to demand when they see the results of peer enterprises). In short, there is a ceiling to achieving outcomes if you can’t make the Six Leaps.
Business outcomes don’t change with GBS, it’s the desire and capability to achieve them that does
Let’s examine further by comparing the desired business outcomes of enterprises with their level of operational maturity, where we divided up the maturity levels of 343 major enterprises into four percentiles, based on the Six Leaps described above:
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As the data clearly illustrates, the desired business outcomes of enterprises’ shared services and outsourcing initiatives are pretty much the same as their operations become more mature. However, there is a clear jump in focus as enterprises approach the top quartile for maturity – which represents those enterprises which most closely fit the GBS framework.
Suddenly, the desire to drive out cost, improve their quality of data is critical to more than 60% of enterprises, as opposed to much lower proportions of less mature enterprises. Similarly, in terms of developing talent, increasing control over end-to-end processes, improving collaboration with service provider staff and achieving innovations to to processes, the impetuses are double that of the less mature enterprises across each category.
Desire to achieve outcomes is directly linked to maturity of operations and performance
So it’s one thing to aspire the achievement of certain outcomes, but is this desire linked to actual performance? Let’s investigate further:
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As the data plainly points out, strong performance against outcomes increases markedly with maturity levels of operations. However, what is also apparent is there is a real “leap” forward when enterprises enter the highest quartile for maturity. It’s as if they took a running jump and now they are on the other side of the chasm, they have hit the ground running.
Why do I dismiss the GBS naysayers? Because even in the relatively “tactical” areas of cost reduction, capability and standardization, the top quartile massively outperforms. However, the gaps in performance are even more pronounced between the top quartile and the rest of the pack when it comes to more strategic measures, such as staff accountability, greater provider collaboration, improved data quality, talent alignment with corporate objectives and innovation.
The Bottom-line: GBS is about making breakthrough changes to operational maturity, and those on the train are already reaping significant benefits
One of the problems with GBS is that too many people simply don’t understand it, and many who do are threatened by it. It’s about closing the book on the legacy practices of managing providers with punitive and contractual measures, on persisting with dysfunctional, poor quality shared services, on tolerating siloed uncollaborative business units. Asking a monolithic vendor manager to jump on the GBS bandwagon is akin to asking a demolition expert to start building houses. Suddenly they need to think about producing an end product from their work that has long-term meaning and value to their clients, as opposed to meeting simple targets devoid of a long term game-plan.
It’s about the governance function becoming the consultative, value-add capability that does the basics really well, such as running transactional processes efficiently at low cost, but also contributing the higher-value services the organization needs, namely providing better quality operational data, continuous improvements to processes and operations, getting the best out of the third party outsourcers, and so on.
If you’re stuck in those lower two quartiles for maturity, how long will it be before your leadership decides to eliminate much of your inhouse operations altogether? I would agree that GBS is BS to many organizations which couldn’t even conceive of achieving anything near the performance levels of the high achievers with their current operational leadership and infrastructure. In some cases, they may be better off outsourcing as much as they can now, and then rebuilding their internal competencies with a new governance team that can apply analytical thinking and real value to their organization. Or they may simply not care and will limp along hauling around a hulking great inefficient back office, if they can somehow get away with it and still survive.
However which way we look at this, moving to the top quartile is a long, arduous journey for many enterprises, and one that will require a five, or even ten, year roadmap – even in today’s fast-moving environment. But, what is clear, is that successful enterprises have to divorce themselves from the inertia and monolithic habits of managing failing outsourcing relationships and immature operations, and look to develop a governance function that can call itself part of the business, not a cost center. Let’s hope 2014 will be the year that many enterprises can genuinely make this distinction…
Readers can also access our complimentary new report, “The Global Business Services Industry Study“, produced in conjunction with KPMG LLP, where we interviewed 416 enterprises across a cross section of regions and industries about their GBS activities, priorities, drivers, constraints, and plans.
As we embark on our fifth year in operation at HfS, I’ve been reflecting on where the research analyst industry is going.
I’ve always passionately believed research thrives on innovation and disruption of the enterprise status quo, which means you need two factors to be an effective analyst organization:
Data. Trends from the buyers of services and solutions that tell us where they are with their current strategies, how they aspire to evolve, what they need to help them evolve – and what catalysts will drive the evolution.
People. Individual analysts who can read into the data points, who surround themselves by the buyers, sellers and expert advisors, to share an informed judgement on where things are heading and what the industry stakeholders needs to do to survive and thrive.
When it comes to research, big just isn’t so beautiful anymore
What we’ve proven (so far), at HfS, is that you don’t need hundreds of millions in revenue and hundreds of employees to provide that. When you have a platform to present your research to your market, people will flock there, and many others will quickly find you. However, what we’ve also learned is that enterprise executives want data and insight from analysts whom they respect and with whom they can interact, not necessary a faceless machine which churns out facts and figures that simply have to be accurate… as you paid tens of thousands to access it. Simply put, clients want to pay for the experience, as opposed to merely a productized service.
I spend a lot of time with many academics, think-tanks, investors, consultants, pundits, enterprise practitioners, service provider and tech vendor execs to share ideas, data and viewpoints. They all tend to work within small groups of smart individuals to figure out where their world is heading. One factor is common among these beings – most have a real passion for their respective areas of coverage – their careers and livelihoods depend on it, and they care about where all this is heading.
However, when I talk to many analysts working for the big machines, many of them just seem so jaded, and almost disconnected with the world, they’re just going through the motions. Many of these analysts just seem so beaten down by the pressure from paying vendor clients and internal territory wars with other analysts from within their own firms, that they struggle to have anything innovative or profound to say. As one analyst once told me “we just call the trends, that’s all we need to do to get paid”. I would argue that some of these legacy analyst firms aren’t really analysts anymore, they’ve become “J.D. Powers” that validate buying decisions of products and services. Clients aren’t getting an experience from them, they are getting a product.
‘Analyst 2.0’ is about insight, data and community. It’s about experiences, not products.
The core challenge for the emerging analysts is achieving a revenue model that allows them first to first survive, then to establish the right degree of scale and degree of influence to build enough reputation and credibility to attract clients which want a long term, ongoing relationship. Smart clients tend to want three things from analysts:
1) Credible Data. Everyone wants data – on suppliers, on market directions, on business models, on pricing trends; With real validity and statistical significance.
2) On-tap expertise. Clients want instant knowledge-gratification; When they need help with something, they want it via a quick email, phone call. No-one likes 1-800 numbers which take two weeks’ to set up to talk with some individual you don’t know, who’s probably going to tell you they don’t have what you need, in any case.
3) Networking and influence. Research buyers often want to feel they are talking to an analyst connected with the world, who is part of a community that involves them. I have a secret joke with friends, but the best analysts would make great headhunters if they chose to change careers!
Entire industry models are being disrupted, and some obliterated, at a speed yet not seen – and research is not immune
The exciting – and daunting – aspect of today’s business environment, is the speed with which entire industries can be turned on their heads. Did the likes of Sony, Nokia, or Blackberry see Samsung, LG and Apple in their rear view mirrors? Didn’t Yahoo, AOL and Microsoft think they had the internet game sewn up before Google obliterated their dominance? Did Monster have any inkling that LinkedIn would eat its lunch in barely a couple of years (before it was too late to respond)? Does Walmart have any concept how to deal with Amazon developing the ultimate digital retail sales channel, which is revolutionizing the whole retail ecosystem? Did Blockbuster stand a chance responding to Netflix once the industry model had shifted – or, in fact, did it ever stand a chance even if it had realized what was happening in time?
As with many industries, most of the leading enterprises only respond to business model changes when they genuinely feel the impact on their revenue streams (an unfortunate bi-product of the Wall St quarterly view of the world). However, as with the examples above, once the inflection point has been reached, it’s almost impossible to respond, and the only obvious measure is to acquire the disruptor. However, the culture and business model of the acquiring firm often crushes the innovation of the disruptive firm they are buying, even if a takeover is financially viable.
In today’s business environment, the power of digital collaboration, ease of information dissemination, and ubiquitous global access of the cloud is ripping into the 1980 and 1990 business models at a pace that is now frightening. Services are becoming commodities in time-spans we have never seen before – just look at the IT services and BPO industries where the “value” from buying low-cost labor is being completely commodotized by cloud-based business platforms and automation, where clients simply do not need to pay for as many bodies to take support calls, develop lines of code, process payments, claims, paychecks or invoices. The handful of service providers with ambitions to survive are desperate to develop value-add capabilities that will stop their clients dragging them into a price-war for the lowest common dollar denominator.
The research industry is not immune to disruption – the 800lb gorillas can’t simply keep buying up smaller competitors which dare to threaten the status quo, if the way in which the customers desire to use their services is changing. Today, thought-leadership and good ideas are free – and clients expect them to be free. In fact, most of the research clients need to help their decision-making is likely to be freely available if they search hard enough. So that means they will eventually not need to pay for the “basics” that research houses persist in providing today – they will only pay for more personalized expertise, actual data to support specific scenarios and a networking relationship that can really help them be successful in their jobs. They will pay for an experience, not a product.
The Bottom-line: The new analysts are coming, but they just might not be what you expect
This means the “analysts” of the future aren’t necessarily going to be the analysts of today – the smart consultants are desperately looking at more “one-to-many” models to service their clients who want more of an ongoing relationship, than simply splurging on expensive projects every time they need some help. What’s stopping the likes of a Deloitte taking on Gartner, with its global presence and vast resources of experts and networks of clients? And where next for the likes of Reed Elsevier or Thomson Reuters, which are streamlining their executive offerings in a similar model to the analyst houses? And what about smart BPO providers themselves, with their analytics capabilities, global presence, domain knowledge and client communities, where they can pool vast quantities of knowledge, which already have the capability to deliver people services at low cost on long term annuity contracts?
The future of analysts is about providing clients the experiences they need to be smarter and more effective at what they do, not selling them something pre-packaged that everyone else already has…
One of the great discussion topics coming out of the recent Blueprint 3.0 sessions in New York was centered on how enterprise operations can progress beyond the “ordinary” and avoid fading into the netherworld of corporate insignificance. Or, as one member profoundly stated, “We really need to stop being really good at irrelevant stuff”. So let’s take a look at how they can start to do just that…
It’s all about shifting the whole foci of operations from yesterday’s fragmented immaturity to tomorrow’s mature model
Let’s examine the six maturity leaps we identified during our recent GBS study of major enterprises with KPMG:
Location leap: from high-cost to low-cost locales; Do we really need to process those insurance claims in New Jersey?
Standardization leap: from independent standards tied to BUs and geos to enterprise-wide standard solutions; Why do we have 14 instances of ERP, when we can rollout multi-tenant cloud solutions and kill the dysfunction and poor data integration?
Process Orientation leap: from siloed processes within BUs to business-wide process alignment across geographies and broad functions; Why do we need 153 different ways to pay suppliers and process invoices?
Commercial Orientation leap: from operating like a cost center to being measured as a business service center; Why wouldn’t we want to have centralized operations servicing our enterprise with the skill, scale and efficiency of a professional services firm, than some back office cube-farm which constantly gets beaten up for cost and quality, which the BUs barely use in any case?
Pace of Change leap: from low-impact change to a genuine willingness to impact people and invest in long-term strategies; Rolling out a “Big Data” roadmap takes enterprises 5-10 years – how can you be serious about a strategic roadmap when every action is reactive and short-term in nature?
Service Portfolio leap: from being merely transactional to delivering both transactional skills and analytical services at scale. Transactional process are ultimately automated, or outsourced (or both) – especially if these are delivered inefficiently, which means operations teams need to deliver business value and analysis if they want to thrive in today’s business environment.
As the GBS study detailed, most enterprises still have a long way to go when it comes to achieving “maturity” across these six leaps, especially when it comes to adopting a more commercial orientation:
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The Bottom-line: In 2014, ambitious operations leaders must begin achieve a certain degree of maturity across their operations before they can really address achieving their desired outcomes
Our research has clearly shown that enterprises can’t achieve anything near their desired levels of cost-reduction, analytics quality or innovation, if their operations and processes are fragmented and poorly aligned with the corporate goals of the business. Outsourcing and shared services can provide levers to access expertise (often at lower cost) and standard ways of managing process flows. However, it is the job of the governance organization to take oversight control of end-to-end processes and work with their BU leaders to map out a long-term roadmap to get better access to data and achieve consistent, ongoing cost efficiencies.
Global Business Services isn’t just about managing a few provider contracts and beating up on poorly performing shared service centers – it’s about re-aligning the enter operations function (the old “COO’s office”) to support the business with a commercial orientation. A GBS operation needs to operate like a consultative service provider that can deliver ongoing expertise, processing capability and analytical services in a scalable fashion. GBS executives needs to pull together both the internal and external resources to make this happen. Smart service providers will (and some already are) positioning themselves as partners to support their clients’ GBS strategies, while smart sourcing advisors know they need to address the broader GBS transformation needs of their clients, or face being relegated to supporting contract procurement.
Stay tuned for Part II of our 2014 outlook, we will analyze the performance of enterprises against their desired business outcomes, based on their maturity levels.
Readers can also access our complimentary new report, “The Global Business Services Industry Study“, produced in conjunction with KPMG LLP, where we interviewed 416 enterprises across a cross section of regions and industries about their GBS activities, priorities, drivers, constraints, and plans.
Naomi Bloom discusses the new breed of SaaS-savvy HRO providers
My little rant last week (click here) about HRO and SaaS seemed to ruffle a few feathers. It’s clear, without the benefit of significant labor arbitrage, the advent of serious SaaS solutions is going to (and already is in some quarters) bulldoze the entire way enterprises access business services. None more so than HRO, which has been so reliant on onshore processing centers to deliver low-value administrative work for clients – especially those suffering dysfunctional / non-existent technology. I wanted to share a contribution to the discussion from matriarch of HR technology, Naomi Bloom, who expands on these points and provides a couple of excellent example of where the HR Cloud revolution is already well under way….
Phil, this is a great topic with lots of threads worthy of comment, but I’ll focus on just two.
First, not only does the new breed of SaaS provide a better foundation for delivering a wide range of HR capabilities directly to the real customers, from manager and members of the workforce to applicants and vendors of contingent workers, but the best of the new SaaS offerings automate HRM so much more fully that the amount of manual work, the amount of HRO needed, is reduced substantially. Except in the heavily regulated areas, like benefits and payroll, great SaaS should eat a lot of HRO providers for lunch. Call centers? We shouldn’t need them at anywhere near the level that exists today for many large organizations. HRO-provided self-service? Gone! But that doesn’t mean that there isn’t work to do with SaaS; it’s just very different work, which takes me to my second point.
Second, with near continuous attention to turning on entirely new functionality as frequent releases deliver it or business conditions warrant its use in an already present release or even when changes in business require reconfiguration/changes to existing functionality, customers need clever business analysts with deep business and product knowledge to ensure that such work gets done well and quickly. But these are still scarce KSAOCs in our world, especially as regards understanding the growing number of models-based, metadata-driven products which old think analysts struggle to understand. What’s needed to support customers here is a very new style of HRO, which is much more business analyst services than call center/manual processing services.
One example, OneSource Virtual, is such a new style HRO provider focused entirely on Workday’s customer base for whom they provide not only a wide range of initial and ongoing implementation services but also a variety of ongoing back office payroll and benefits administration outsourcing services. Another strong example is Ultimate Software, which just bought one of its partners, which provided similar services focused entirely on Ultipro’s customer base, to offer some of these same services in-house. These are just examples as you and I know that there are many such offerings in various stages from planning to real.
It will be fascinating to see if the larger SIs and/or HRO providers will be able to craft just the right mix of quality and cost-effectiveness to be successful in delivering much smaller, less labor-intensive and more tool-based implementation and post-implementation HR services.
How much longer will we be staring into the HR abyss?
My attention was momentarily side-tracked by an interesting blog penned by HR blogger-cum-consultant Andy Spence bearing the dramatic title “Will HR in the Cloud kill HR Outsourcing“. Oh yay – I like titles like that…
Andy raises some interesting points and cites some good examples and other analyst data sources, namely:
HR Buyers are cautious, ‘letting the dust settle’ on SaaS providers as they review their current HR Operating Models and future needs.
The rise and rise of Workday has actually breathed life into the HRO market – NGA HR, IBM and AON Hewitt are implementing or have HRO contracts using Workday software.
HRO Buyers want both SaaS and services together, however are not willing to lose portal, chat, contact centre solutions that have been developed over last 10 years. Expect HRO providers to develop solutions in this space.
There is a 15-20% HRO penetration level for orgs with >10,000 employees and there has been more new buyers in last 8 months than previous 2 or 3 years
Why the successful advent of HR Cloud solutions breathes new life into the multi-process HRO corpse
Having cut my teeth on HRO in the early-mid 2000s, I became increasingly frustrated with the market because you couldn’t make the numbers work moving dysfunctional processes to a third party provider which – more often than not – didn’t have much of an integrated technology platform to help standardize process and workflow. My good friend and HfS board member, Naomi Bloom, was at pains to point out that multi-process HRO was fundamentally flawed as you can’t improve HR processes if the technology underbelly was a steaming pile of rubbish.
So I watched the market tank into insignificance while the likes of Fidelity, Mercer, Convergys, IBM, Accenture and several others made subtle (and some not-so-subtle) exits from the space. I also watched the admirable efforts of SAP and Oracle trying to encourage everyone to do HRO on their on-premise software packages, but struggle to do much more than paint pretty pictures around payroll deals that weren’t really much more than… er… payroll.
Sadly, everyone who was counting of multi-process HRO being successful quietly slipped away, either to focus on discreet HR services markets like staffing, benefits admin or payroll, or slinking off into adjacent growth BPO markets like F&A, procurement or LPO.
Let’s face facts here, people. When God was dishing out the technology dollars, poor old HR was always loitering at the back of the queue. We’ve grown up amidst hoards of enterprises suffering from multiple instances of ERP, far too many payrolls, benefits providers, staffing firms, complete black holes of data on their workforces being mismanaged by understaffed and under-skilled HR departments. So many firms have been desperate to make HR less cumbersome – they’ve tried to outsource it, they’ve tried looking at terrible software products that are overpriced, hard to integrate and built on rules-based engines that add little-to-no-value. They’ve made HR the whipping boy for everything dysfunctional and low value about an enterprise.
Then slowly, but surely, HR has gone Cloud crazy.
It’s completely changing the way companies can/are/should be approaching HR. The industry is suddenly awash with enterprises rolling out the likes of Workday – and seeking providers which can not only implement the product, but also help with the HR transformation, support and processing that comes along with the purchase. In short, rolling out a true Cloud-based HR solution completely changes the HR dysfunction game. It brings together the app and the process in a way we have never experienced and enables organizations to kill off the obsolete processes that add zero-to-negative value – and helps them re-set and rethink how they manage their workforces.
Suddenly, you don’t need armies of HR admin weenies to pester staff to fill out forms and jump through their hoops – as so much of this is now automated and standardized. And when there are providers (we hope) prepared to step up to the plate to host your Cloud-based HR nirvana, you can completely rethink how to refocus how you manage your staff. Suddenly, line of business managers can access better data to understand how to staff their functions better and manage the performance of their staff in a more relevant value-add manner. The value of HR – of acquiring, developing, motivating and managing staff, is now able to permeate the business managers outside of the dreaded HR department because their systems of record are suddenly functional and more relevant.
The Bottom-line: Cloud is helping clean out the detritus of everything that was wrong with HR
Dysfunctional process and dysfunctional technology created a dysfunctional function that attracted low-value individuals to paper over the cracks. The emergence of more affordable Cloud based solutions is finally – after decades of disarray – making it possible for firms to stop staring into the HR abyss and start getting functional again. And the HROs who want to do more end-to-end HR services finally have a backbone upon which to service clients. Yes, the dust needs to settle on the SaaS products and the capabilities of the new breed of HROs, but the HR Cloud revolution seems to be taking root and threatening to completely revamp how today’s enterprises can – and should – manage their workforces.
Well, that was quite the week! Thanks to all of you who made the effort be part of a great December networking escapade in the Big Apple. I can’t remember such a large group of outsourcing powerbrokers under a single roof…
Recessions are good times for business leaders who love to focus on containing costs. Saving money is the name of the game, and executives who achieve this for their organizations become heroes.
Struggling to manage your extended enterprise? Then click here to course correct
However, times of recovery are markedly different. The onus shifts from cost to value; from defense to attack; from conservative to bold; from tactical to strategic; from efficiency to innovation. And, with the current recovery, perhaps most significantly, the very nature of a company’s cost base is shifting from inside to outside of the organization.
For decades, enterprise executives focused on reducing costs as the key to unlocking an organization’s profitability. This often began with an emphasis on reducing expenditures around SG&A. Activities that fell under this area received derogatory descriptions such as “back-office” and “non-core.” In time, the application of these terms spread across the entire business and any function tagged as such was prime for outsourcing. As a result, many parts of the enterprise were increasingly outsourced.
At the same time, forward-looking businesses began to adopt new organizational structures that were developed to foster lean operations. Rather than build out functional areas across the value chain, companies picked a few key areas to focus on and used partners to deliver the rest. Car manufacturers stopped building components and focused on design and assembly. Hotel chains stopped owning and operating buildings and focused on building and maintaining a brand. Businesses in nearly every industry adopted models that moved significant functional elements to a third party.
Consequently, many of today’s companies look like shells of their former behemoth selves. Marketers now rely on outside agencies and analytics providers to improve their own customer insight and advertising spend, operations teams rely on outsourcing and technology to eliminate labor costs, and IT teams rely on cloud-enabled SaaS platforms instead of an army of programmers occupying the lower floors. For any area of an enterprise’s P&L, a range of suppliers are ready and willing to perform the same tasks faster, cheaper, and better. Yesterday’s pay slips have become today’s supplier invoices.
Want to learn more? Then download our new report “Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities”, where we hone in on the following:
The shell game: today’s successful enterprises are leaner versions of their former selves
The goal: leverage external relationships for broader business value
How to shift from tactical sourcing and procurement to a capable strategic team
The bottom line: the business models of the future require better leverage of your supply base’s assets and operational flexibility
Feel free to drop me a line with any questions on the topic,
As we gather the largest-ever superstar assemblage of sourcing leaders in New York this week, let’s have a look back at how we got here as an industry… and how HfS has evolved from this ramshackle little outfit into such a glitzy professional high-end corporation (ahem)… oh – and crank up the volume 🙂
Leila Janah is Founder and CEO of non-profit social sourcing organization, Samasource (click for bio)
One person we are very excited to be addressing the Blueprint 3.0 Sessions next week is Leila Janah, the dynamic Founder and CEO of non-profit social sourcing firm Samasource.
Leila’s work is focused on providing training and computer-based work to women, youth, and refugees living in poverty, while providing Internet-enabled outsourcing services to paying clients. Samasource recruits workers from low-income, underserved communities across the world. We managed to catch up with Leila to learn more about her, and what we can expect to hear from her address next week…
Phil Fersht (HfS): Leila, we are very excited at HfS that you will be coming to our event and delivering our evening keynote address. Before we get into that, can you give us a little bit of information on your background?
Leila Janah (Samasource): Sure, Phil. I started Samasource 5 years ago. Before that I studied international economic development at Harvard as an undergrad and did a lot of work in the NGO world after going to Africa when I was 17 to do volunteer work. I worked with Ashoka and the World Bank and just became frustrated with the traditional approaches to poverty alleviation, which saw poor people as helpless. What I saw while I was there was how much educated human talent was emerging and could be tapped to contribute to the global economy and would contribute to wages that would help to alleviate poverty. Over time, I thought through that model further and became a management consultant at Katzenbach Partners, which was later acquired by Booz & Company. My first consulting assignment was to help take a large Indian Outsourcing firm public. Through that I got a lot of exposure to the industry and I learned the dynamics of outsourcing. Perhaps the most powerful thing that I learned was that thanks to the internet, a back-office job can be done pretty much anywhere. This frees us of the traditional constraints of capitalism, which is that money can move freely across borders but people cannot. That has profound implications for the ½ of the world’s population that lives off of less than $4 a day. This population is increasingly educated and capable of doing knowledge work. So it was this background that led me to found Samasource. I had a number of experiences following my undergraduate career, both through the World Bank and Ashoka , but also through some other NGO’s that really led me down this path.
Phil: You are working across a number of economically challenged nations including Haiti, parts of Africa, and even parts of rural America. Can you tell us more about your global reach and where you are engaging with your clients today?
Leila: Sure, and I think as I talk about this, the thing to consider is that the bulk of people living in extreme poverty now live in middle income countries. One of the myths about poverty is that poor nations have most of the world’s impoverished population, yet what we are finding increasingly is because of income inequality, those poor people reside in places like India, China, and Brazil; places that are not seen as the most destitute areas. So that is where Samasource does most of its work. We work in India, Kenya, Uganda, Haiti, have a small presence in Ghana and we launched a new program in the US called SamaUSA, which trains low-income Americans to do online work.
Phil: Leila, can you give us some examples of some of the types of projects that you’ve taken on across the world for your clients and how they are developing as you evolve the company?
Leila: We work with Google, Wal-Mart, and Getty Images. The reach of these three projects is really astounding. For Getty Images we are doing a large-scale image tagging project. At the Blueprint Sessions, I will start with a video that outlines this program. We have workers at locations disparate as Northern India, where we have an all-women’s center in a conservative Muslim community where women are not ordinarily allowed to work. Additionally we have a center in rural northern Uganda, which is an area that had previously been in the middle of a massive civil war that had tens of thousands of children abducted as child soldiers and some of those former child soldiers are now working on that same project for Getty. The project involves tagging celebrity images in a way that machines cannot yet do. We have human workers identifying images with celebrities and then tagging the celebrities. The same images then get pulled into national and international media that requires celebrity images. It is a very exciting project for workers because their output is immediately seen by people all over the world.
Another example is what we do for Wal-Mart.com, which is a growing need among e-commerce companies. That work involves helping to improve the quality of the e-commerce product catalogue. In this case we have English speaking workers who come together and write descriptions of products on Wal-Mart’s website. What’s remarkable about this project is that people who don’t have a lot of exposure to Western products, but are interested in them because of their interest in Western media, are very passionate about learning about these products. So you will find a worker in Kampala who is able to write a very accurate and thoughtful description of the product that has never before been seen in Uganda. Nonetheless, the quality of the descriptions remains high because there is such a strong motivation to do this work well.
Phil: When you look at the broad commercial outsourcing industry today, which is so centric around India, the Philippines, Central and Eastern Europe, what is your take on where all of that is headed? Do you feel that there is a race to the lowest common denominator or do you feel that it is an industry that is headed in the right direction?
Leila: I do see some things that are concerning. I see the consistent production rate in the price that companies are willing to pay for these services, which has a lot of implications for workers in these countries. At the same time, I think that the constant price pressure forces us to look beyond the current locations for outsourcing and that can be a good thing for workers in poor locations. What might be less than a livable wage in one country could be a huge boon for a worker in another. So, that can be good. The critical concern that I have is that the wages that workers are paid are appropriate and living wages given their context. That is not currently a huge priority for the industry, but it really should be.
Phil: You are going to meet a lot of these folks who are big customers of outsourcing and suppliers of outsourcing at the Blueprint 3.0 event in December. What do you plan to talk about at the event?
Leila: First, I think I will talk about the evolution of corporate social responsibility. It used to be something that companies would do to check a box and to show that they had been responsible and then could move on. I think what we are seeing now is this hunger among employees at big companies to feel like their company is not just checking boxes but is having a positive impact on the world. The new generation of people entering these companies are young people who are hungry for change and are less interested in just taking home a big paycheck. They want to see that the organizations that they are a part of are genuinely improving the world. I think that Impact Sourcing is one trend that goes far beyond CSR and cuts across so many aspects of the business, especially in the supply chain. It is a very real way for a company to make a social impact that goes far beyond just having an employee volunteer day or giving some money to a charity. This is helping people in a way that is completely integrated with the company’s bottom line and supply chain and that is the real way to create change and to evolve capitalism from within. I will talk about the implications of that strategy and what that means for the field of poverty alleviation. In this field, which is dominated by non-profits, we are finally starting to come around to the idea that corporations have far more capital than non-profits do to solve some of these big problems. Essentially, what we do, is we take money from Google and Wal-Mart and we get it into the hands of poor people in rural Uganda. Traditionally that would only be done by a development agency and now I think it is really cool that it is being done by a big corporation. So we need more corporations doing that and I think the other piece of it is ensuring that once those relationships are established, that they continue to work for the benefit of people. Unfortunately, in the wake of the Bangladesh factory fire, I think there is growing concern that Western firms can have a negative impact in poor countries. As an industry, I think we have to nip that in the bud and ensure that we are setting things up in a way that doesn’t lead to those outcomes. I think it is very possible and not so difficult to do.
Phil: Leila, thank you for your time today and looking forward to seeing you in NYC next week!
Laila Janah (pictured above) is Founder and CEO of Samasource. You can also learn more about Leila Janah at her personal website and follow her on twitter here.
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