How many times have you heard sales people complain “our marketing needs to be better”? The role of the CMO is probably the most thankless job in the modern organization: the executives expect great branding and messaging to be propelled through all the optimal channels to market to maximize awareness and, ultimately, increase sales. And the marketing department rarely gets credit when things go well (that goes to sales), but always bears the brunt of the blame when revenue goals are missed. What’s more, it’s always really tough for marketers to get budget approved to support the campaigns their organizations need to create awareness, educate their market and drive new sales activity. Justifying the marketing ROI is probably the hardest calculation to produce in any organization.
When I was a young business studies student, the great Philip Kotler defined marketing simply as “Satisfying customers’ needs and wants profitably“. I’d go even further – it’s about “Satisfying customers’ needs profitably while successfully managing the expectations of the sales function”. To this end, HfS analyst Reetika Joshi has been taking a deep look at how leading service providers are trying to help CMOs today…
Getting actionable insights from an integrated marketing optimization platform
In 2013, our research shows three secular changes challenges challenging the success of the modern CMO:
» Analytics and the big data movement is gaining momentum with the need to now look beyond traditional web analytics and siloed projects, towards comprehensive marketing analytics that optimize all marketing activities, be it inbound or outbound.
» Mobile and the real estate value of the second screen: While addressing mobile in the past meant optimizing websites and emails to suit mobile formats, marketeers now need to rethink seriously the best ways to integrate mobile devices as important marketing channels as part of overall strategy.
» Social marketing and the fall of paid traditional media: Beyond simply increasing social presence, the next step is to think of innovative new ways to drive user-generated content creation and sharing, making campaigns more personal, identifying and appealing to social ‘influencers’ and tracking the impact social has on overall marketing effectiveness.
Every CMO has had countless discussions about the best way forward to tackle these mega-trends in marketing to get ahead of the competition. At HfS Research, we see two overarching marketing optimization challenges for organizations:
1) Crafting an integrated campaign strategy that works in the real world
Marketeers have an increasingly complex marketplace in which to make campaign decisions. From selecting the marketing channels in which to operate – both traditional and new media, to the modes of engagement and messaging for each channel, the frequency and sequence of channels to be tapped, and finally, the methods of evaluating and optimizing these marketing efforts in near-real time. Traditional campaign management often ignores the importance of these factors to realizing fully the potential of changing customer preferences and engagement models. There is thus a strong need for rethinking and measuring the effectiveness of the integrated modern marketing campaign strategy.
The sense of urgency towards an integrated campaign strategy can be explained when we bring up three short letters hounding CMOs today – ROI. IBM’s CMO Survey reveals that 86% of marketers claim their CEO demands more marketing ROI today than ever before. This inextricably links marketing with the need for more accountability, tracking, data mining and smart analytics that can prove, beyond reasonable doubts, where the marketing dollars should be spent to maximize ROI.
Analytics can be leveraged to improve campaign strategy (and ultimately ROI gains) by optimizing timing, messaging, etc. For example, analysis of customer PoS data and channel responsiveness (email/SMS, etc.) could reveal which channels are the most effective to target certain groups.
2) Finding the muscle to get execution right
Campaign execution is the logical flip-side of the coin when it comes to optimization challenges. The key issues are two-fold:
i) Achieving the right balance of technology to support effective campaign management, and
ii) Acquiring the right talent to revolutionize siloed marketing functions.
When it comes to technology, there is frequently an immense fragmentation of tools and platforms that not only make integration expensive, but also slow down decision-making during campaign execution. Getting actionable insights from an integrated marketing optimization platform, and accordingly making the right recommendations to customers, is the Holy Grail for marketers today.
Where technology is up to speed (in cases where marketing and IT are on the same page), the other execution challenge lies with departmental siloes and lack of talent. Where before there existed departments such as TV, direct marketing and PR working discretely to push outbound messaging, there now needs to be a combined and synergized effort of online and offline tactical elements to drive inbound marketing. Additionally, the types of skills marketing professionals need are changing. Successful marketers today not only need to be able to practice core marketing principles and have sound knowledge of their markets, but also weave in skills such as: content marketing and writing skills that are relevant and flexible (e.g. blogging vs. SMS), technology know-how for enabling tools, technologies and applications, digital and social media prowess to be able to select and nurture only the most relevant online marketing channels, an understanding of analytics and KPI metrics to make business decisions, and a healthy dose of curiosity to try new things (e.g. engage the customer in a new/unconventional way). Having said that, specializations in these areas will continue to evolve as companies start to integrate them seriously into marketing operations. This brings up the challenge of attracting and retaining specialists that are already in high demand. As an example of the specialized talent gap, McKinsey & Company forecasts an annual shortage of 200,000 data scientists by 2020.
Sensing the scale of these challenges, ambitious CMOs have started to make drastic changes to their strategies for future growth. External partnerships are is one such key lever that is on the rise – companies are leveraging third party providers for tools and platforms expertise, marketing analytics support, marketing consulting and multi-channel customer engagement, among others.
Reetika Joshi is Principal Analyst, BPO and Analytics Strategies (click for bio)
At HfS Research, we have strived to present business cases and best practices that highlight how different marketers are trying to cope with evolving/maturing marketing channels and consumer habits. In our recent case study based research, we present the experience and learning of one such company, a large US-based discount footwear retailer, that engaged with Infosys on an ambitious marketing optimization project to address the key challenges discussed above. With the help of the provider on both campaign strategy and execution, the retailer used an omni-channel, analytics-powered campaign optimization solution and was able to reduce its media costs, gain a unified view of its customers, and experienced a 5% campaign response lift, potentially impacting $3MM+ in 6 month revenue flows. Read more about this case experience here.
After three years of hard labor, we, at HfS, are proud to launch our first “HfS Blueprint” that we believe is the revolutionary crowdsourced methodology for evaluating business and IT service providers.
The industry has been literally screaming at us to change the way analyst firms portray their assessments of service provider performance, and we’ve dug deep to leverage our massive community, our extensive buyer relationships and demand data, to facilitate what we truly believe is a major game-changer in the research analyst industry: The HfS Blueprint.
Finally: A genuine way to assess services providers that isn’t reliant on the arbitrary viewpoint of a single analyst;
Finally: A credible methodology to gauge the performance of service providers against “real” innovation and execution capabilities;
Finally: A performance assessment of providers that apportions importance weightings of each innovation and execution category based on data from our State of Outsourcing survey, conducted with the support of KPMG, covering 1355 enterprise buyers, influencers, advisors and provider executives;
Finally: A performance assessment of providers where exhaustive inputs from buyers and influencers shape the scoring (not solely a handful of rose-tinted client references from the providers themselves);
Finally: A customizable assessment tool where enterprise buyers can re-calibrate the weightings to assess their provider-fit based on their own unique needs.
Yes indeed – we threatened these Blueprints five months ago, and we’re now ready to launch the first one… in the much vaunted, but still immature, market of Finance and Accounting BPO, which is currently growing at a double-digit clip. Click here to access our first Blueprint in Finance & Accounting BPO:
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We are happy to discuss the Blueprint methodology in greater detail (drop us a note here) but essentially, in this example for F&A BPO, we assessed data from 745 live multi-process F&A BPO engagements to ascertain provider market shares, depth of client base, breath of execution and geographic scope of delivery. We then conducted exhaustive interviews with multiple buyers and market advisors to help score providers against each other across all the sub-categories of the Blueprint using ExpertChoice, an advanced statistical analytics platform. We also received a tremendous amount of cooperation from (almost) all of the providers above, as we went through this exhaustive process to understand their concrete plans for the future, get really deep with their current client relationships, their overall vision and their appetite to evolve into higher-value areas of F&A BPO.
Congratulations to the Winners Circle and the chasing pack of High Performers… we’ll see how the picture has shifted in 2014!
Thanks to all who took part – you’ve helped create a little bit if research history.
You can download the full HfS Blueprint methodology by clicking here.
Newsflash… Enterprises reduce costs by outsourcing, but struggle to achieve little else of value. Well, on the surface, this would still appear to be largely true, but when you rummage even deeper under the covers, you’ll soon discover it’s more the legacy IT outsourcing deals which are still all about low-cost bums on seats, while we are actually seeing a few chinks of light with BPO that could resemble what we’ve been searching for since we started this damn blog… value beyond cost (gasp!).
So industry has spoken: 399 enterprises, (two-thirds of which have revenues over $3bn) recently took part in our 2013 State of Outsourcing Study, conducted with the support of KPMG. And one chart, above all others, again illustrates the familiar frustrations outsourcing brings, better than any others:
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So what do we read into this data?
Outsourcing achieves its table-stakes goals and makes some progress providing value. On the strong positives, enterprises are achieving success when it comes to meeting their cost targets, globalizing their operations and even standardizing processes. In fact, barely one-in-seven can claim to be actually dissatisfied with their meeting these goals to-date. Also quite encouraging, is the fact that the majority of enterprises are achieving positive outcomes with higher-value areas, namely accessing capable talent and transforming processes, even though these are largely modest results for most enterprises. Considering most buyers venture into outsourcing seeking these initial “table-stakes” goals of cost-reduction, global scalability and process standardization, you have to give a healthy thumbs up to those providers and buyers for achieving these initial objectives. However, can today’s ambitious enterprises really turn around and claim they are happy with basic, operational success in today’s economy, or do they want to seek to move beyond ordinary?
Outsourcing is falling short when it comes to innovation and analytical value. With all the puff and bluster about “Big Data” and analytics, and the pivotal need for today’s enterprises to get better at managing, understanding, an interpreting their internal and external data, it’s vital that outsourcing engagements support this capability for buyers. I would go as far as declaring a provider’s capability to create collaborative analytical partnerships with clients is critical to the future success and growth of outsourcing. If we only focus on these “table-stakes”, we will eventually arrive at the dreaded lowest common-denominator of outsourcing… where the provider with the cheapest labor and a basic ability to deliver average performance, wins.
So let’s drill a little deeper to discover where these engagements are falling short, by comparing where both ITO and BPO engagements are delivering real effectiveness for buyers:
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We can see here that BPO engagements are clearly outperforming ITO engagements, not only in many key tactical areas which clients care about (i.e. cost and process standardization), but also across strategic measures, namely proving greater analytical capability and innovation. So what does this mean to the future direction of outsourcing?
ITO has become a utility service for most enterprises, whereas BPO offers enterprises the potential to achieve value beyond merely cost
Clients pay for – and receive – “cheap and cheerful” ITO. When you consider that most major enterprises began outsourcing administrative IT in the 90’s (and some even earlier), you have to draw the line that if these are the results of two decades of engagements, it probably isn’t going to get much better. However, this is probably because most ITO buyers are pretty much getting what they have set out to achieve: “utility” IT services in areas such an help desk ticketing, infrastructure support, application maintenance and development. Clients wanted cheap and cheerful…. they got cheap and cheerful. And there are many providers, today specializing in the cheap and cheerful, who are really damned good at it. Some of them even openly discuss with analysts and advisors that their main strategy is to target HP (EDS) and IBM renewals and undercut them by 30%.
ITO has founds its rhythm – low-end work is outsourced, high-end is retained. Many CIOs and IT governance leads we talk to like having the grunt work outsourced so they can focus on the higher-value work inhouse. As we once revealed here, two-thirds of ERP development work is still run onshore. Ambitious CIOs these days like to focus their time on ecommerce, mobility, “Big Data” and Cloud strategies, and will engage IT consultants with projects when they need some high-end help, but most aren’t expecting their outsourcer to do that kind of work for them. India created an amazing factory for taking on the specific routine work than can support large enterprise IT operations – but that is what it largely is – routine work than can be conducted efficiently at lower price-points.
Managed business services, enabled by IT, are where the future value lies with outsourcing. We – at HfS – passionately believe the only way for these providers to move up the value-chain with clients is to create business services that can meet defined business outcomes. Simply put, IT provides a supporting utility to help achieve these business outcomes that clients want to buy, which would ideally be accessible in the cloud where business users can access their services wherever they want. The focus then shifts from providing widgets, to the actual provision of value, where providers start working with their clients to achieve business results, as opposed to creating simply a low-cost environment. ITO has become a supporting utility, with the real transformation happening at the business end. For example, when you buy a new car, how much time do you spend deliberating what grade of fuel to put in it?
Like ITO, BPO has it’s “bread and butter” needs: processing invoices, paychecks, insurance claims, ICD-10 conversions, and so on. There’s a plethora of providers today which can perform said tasks on many different scales, across many geographies and industries, and can flex the pricing if they really want the business. However, unlike ITO, there’s not a whole lot of value with outsourcing business operations if you’re simply getting the same work done for less. ITO is already standardized, to some extent: you need 10 ABAP coders, you pay for 10 ABAP coders. With BPO, buyers’ current processes are rarely standardized and solutions not nearly as easy to industrialize. Clients often need to undergo one helluva “transformation”, simply to transition the stuff to a provider in the first place. Moreover, with BPO, we are dealing with business functions that are critically dependent on analytics to perform their tasks, whether they be marketing, customer service, finance, procurement, workforce management, and so on. As McKinsey recently revealed, it’s this creation of analytical environments which is becoming (or will soon become) the overwhelming onus for so many enterprises, with its assumption that by 2020, we’ll have a surplus of 300,000 office workers and an annual deficit of 200,000 data scientists in the US alone.
The Bottom-line: ITO maybe a commodity business, but a new wave of collaborative business services is beginning to show the way
When you consider that most of these “enterprise BPO” engagements have barely been around for a decade, the results are quite encouraging – 90% of buyers are meeting their transactional goals, and a good proportion are already getting some value from key areas such as accessing talent and improving analytical capability. Yes, there is a long way to go, but at least BPO is moving in the right direction. It’s because clients need much more help with their business operations than simply bums on seats at cheaper prices… they are far more dependent on their provider to help create an environment for themselves to become more analytical, more process-savvy and more focused on actual results, than mere inputs. Welcome to the new phase of outsourcing, which is about partnerships what are not only cheap and cheerful, but also collaborative.
“Someone is needed alongside the CEO that understands the total changes in technology that are changing customer behavior.”
— Bill Payne, IBM, March 2013
In case you missed IBM’s CRM Chief Bill Payne’s return to blog-stardom during Part I, he discussed his vision for the creation of a “Chief Customer Officer” position within companies, who would report directly to the CEO. In Part II, Bill discusses shifting mindsets, the impact of analytics and evolution of outcome-centric engagements impacting the marketing function…
Phil Fersht (HfS Research): Bill, with our next client summit dreamSource coming up in two months, the number one topic on the agenda that enterprise buyers have voted to talk about is “how to shift the corporate leadership mindset away from merely cost control to one of value creation”. Someone once said the definition of insanity is talking about the same problem in many different ways and always arriving at the same conclusion. How can we break this cycle, and is this something that you have seen with any of your clients?
Bill Payne is IBM's CRM Services lead
Bill Payne (IBM Global Services): This change in mindset can often involve a change of thinking at the top, and in some ways, I use that as evidence of why we do not have a chief customer officer. If you have everyone on the board of directors owning the customer, no one truly owns the customer. No one is truly driving the customer/consumer strategy. The CEO has a huge role in that, but in my view, you need someone with a different point of view, someone who really understands the change in generational behavior, change in technology, change in social, and actually injecting the organization with controversy and the reality around how the world is changing. I am not sure I see that in a lot of companies that they get it. We have recently seen a major UK retailer go bust, Comet Group. It had been doing well for many years, but one of the biggest drags to their development is that once they had ecommerce, it was not integrated with their bricks and mortar. Their customers rejected it because of the confusion between the costing and pricing on the website vs. stores, and their staff was not trained across the different platforms. It is a sharp reminder of the pitfalls of not integrating across all channels quickly.
What I see from an IBM perspective and from my space is that we are increasingly having sessions with customers about end to end. No longer are they thinking contact center, no longer are they thinking CRM system, no longer are they thinking speech to text analytics. There are senior people saying: can you paint me a picture, show me a vision of the consumer end to end, and tell me how that can be deployed? Now, where we are seeing that? I have to say in emerging markets, such as Brazil and the Far East. Newer organizations are basically saying, we have to do the design, build, and operate model and we have to get to an integrated solution very quickly. They say we know what our customers want, and if we do not get there, someone else will, and they are going to take away a big piece of our market. That’s the revenue growth piece.
Phil Fersht: Working for a big provider like an IBM, in your ideal world, how can you really help clients and, in reality, what is more achievable for businesess that might be 10 years behind the curve? What is the engagement model and how should it look in your mind?
Bill Payne: The engagement model is changing. In my part of the business, we have a large portfolio of customers in the front, middle, and back office. Very often the discussion would be for a piece of that: can you run our contact center? Can you provide us with outbound notification?
We have a number of very large opportunities that are coming through our door and have been having very good discussions with senior level executives about an end-to-end omni-channel fully integrated single view of the customer, using data to drive insight, using data to drive revenue across sell/cross-sell, and designing, building, and rolling that out quickly, while fully outsourcing that capacity, but doing it on a transaction or outcomes basis. Engaging with a customer about IBM sharing the risk and the upside when driving revenue up is a very different commercial model. We are beginning to see a number of significantly large opportunities in this end-to-end play and not just picking up pieces of the customers state.
Phil Fersht: Bill, you talk about outcomes and risk sharing? Can you share an example or two about how this can – and is – working in practice?
Bill Payne: I can share both can and how. It is always difficult to map this out. Phil, you and I have both been in this business long enough to know that this risk reward discussion has been going on for a decade now, and there are a number of winners and losers. I think what we are seeing is something different. As we move our model towards transactions and outcome, and if you are involved in a full omni-channel deployment with customer data for say a retail customer, it is easier then to commercialize and amortize the design and build to share both the cost and the revenue as the business grows. Should the business shrink, then one needs to be able to wind down some of the infrastructure. You need to truly variabilize that cost. What we are seeing with some of the more modern tools and software from IBM and partner’s technology is the ability to commercialize a deal in a different way with easier integration of customer data. It’s not all about throwing away everything you have and re-platforming a new CRM system, it can simply be around integrating data into the face of the customer. The true driver here is that IBM will come around and propose it, design it, build it, and operate it. The idea is to then make the cost variable such that it is variable on the number of customers or volume of transactions within the system and that then rides on a revenue going up, which is what we want to happen, but should it come down, the cost to operate the system will come down as well. We’ve got some deals working very well like that. Those discussions are naturally not easy for executives and can take some negotiation. But I think it is something that we are seeing more and more. In particular as a lot of organizations are potentially short on investment money, they need to move quickly and cannot afford not to do design, build, and operate in one step. I think we are able to utilize our big international and finance systems to drive those kinds of projects.
Phil Fersht: Let’s talk finally about analytics. We have written a lot about this recently, where the world is short on “data scientists” and overloaded with office workers. When I look at an area like customer centricity, there are a lot of niche analytics providers in this space who will provide archiving and interpretation of data. Based on this conversation, analytics is really only useful if you are able to tie it into the whole customer value chain. So, is this the central value of using an IBM as opposed to a niche provider is that you get someone who can actually put it all together and who can look at the big picture?
Bill Payne: Let me try and give you an example of this. As we head towards the heart of the American football season, when we look at the stats of the American football team, we can look at the attack and the defense stats. They are of course very interesting, but are completely uninteresting when you compare them to the winning ratio of the team. So, what this tells you is that you can look at individual pieces of statistical information and draw one conclusion, but it is only when you bring it all together that you can draw the full conclusion. So, I think there is absolutely use in looking at individual stats as one piece of the organization, but what is beginning to happen is that a single view of the customer center is absolutely back on the agenda. For a number of years, companies rejected it, by single view you were suggesting a re-platforming of their CRM system for hundreds of millions of dollars. I think there are very different ways of doing this by drawing together customer information on how we behave on all of the different channels. We do not want to ring up a contact center and then have them not know we have been on their website or what we have been saying on social media.
There is a need to integrate. The good news is that we have some great integration software. There are some really good niche providers, people like ourselves who integrate, and we have some of the tools, but we also use some of our partner’s tools. So, one can use some of these analytics, such as text analytics or speech analytics in a way, but what I think we see in the next decade for sure is how they will get brought together in a much more synergistic way around the customer. When I am speaking to executives and they ask me, what do we do Bill? I will say design your new organization outside in, not inside out. So, outside in means look to where your customers are now and where they will be and then drive that back into you organization. Do not sit around a table designing your organization based on what you think is happening now inside your company, because I can guarantee it is going to change in the customer world in the next decade.
Phil Fersht: And finally, what advice would you give to marketing executives today?
Bill Payne: Take control of your brand, take control of the changes that are happening in your customer market, understand your customers needs, integrate them, and create a new customer experience.
Phil Fersht: Bill, its been great having you back on here – am sure our readers will appreciate your insights.
Bill Payne (pictured above) is VP for Global CRM and Industries at IBM Global Services. He is a 25-year industry veteran where he has held wide ranging responsibilities in the Consulting, Business Services and Outsourcing sectors across Europe, US and Asia. He is well-known on the European speaking circuit and is also an Honorary Professor at Lancaster University Management School.
I want the best SaaS platform, some great BPO and a bunch of data scientists…
When it comes to outsourcing, dealing with the middle-market has been somewhat akin to dealing with the mother-in-law: can be awkward to deal with, very hard to please, and always has complex demands on your patience and resources. However hard you try, defining and delivering a solution that can deliver the outcomes you both want seems like the impossible nirvana.
However, as the wise ones among us have now discovered, winning over the mother-in-law goes a whole long way to achieving future happiness. What’s more, those of you who have avoided addressing the mother-in-law’s demands will soon regret it…
However which was you look at it, many of today’s middle-market firms are going to be the F1000 of the future. What’s more, most are seeking technology and sourcing solutions that can drive nimbleness and cost-effectiveness, as they simply do not have the prodigious people and technology resources within their IT, finance, HR, marketing and supply chain operations to manage their evolving needs. In fact, many of them can’t afford the top talent to run their operations, and those providers which can deliver it are already in high-demand.
Let’s examine what 399 enterprises had to say about their mission-critical objectives driving both ITO/BPO decisions in today’s market. It’s already becoming abundantly clear that high-end businesses today, unlike their mid-market counterparts, are focused primarily on cost-reduction when outsourcing, as opposed to investing in new solutions and capabilities that providers could (and really should) bring to the table:
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Why aren’t today’s providers winning over their mothers-in-law to grease the wheels for their future success?
So… if most the providers are promoting their wondrous capabilities in terms of talent, technology and analytical capability, why aren’t they targeting those clients who actually want those capabilities: the middle-market firms?
Providers are set up for high-end enterprise deals, not the mid-market. Sadly, most of today’s leading outsourcing providers are geared up for big, bloated enterprise deals, where the economics of labor arbitrage are simple, and selling cost-reduction is a much, much easier than selling business outcomes. What’s more, the providers themselves are not structured to sell aggressively to the mid-market – they tend to have limited sales talent and they want their A-team delivery teams concentrated on their A clients. When you talk to their sales heads, they’ll likely be able to tell you, pretty much, how the entire F1000 shapes up in their pipelines, but when it comes to the next few thousand firms, they’ll have little insight or visibility.
High-end buyers want to get smaller and drive out cost, not invest in new solutions. Moreover, the $10bn+ enterprises want to get rid of cost – they know they have hoards of talent, but their main motivation today is to get leaner and more flexible, to standardize processes and (if we are so bold to surmise) become smaller. Today’s enterprises want to grow their top lines, not their bottom-lines. This is why today’s outsourcing industry is so fixated on labor arbitrage, FTE-cost models and achieving basic operational success.
Middle-market solutions require business platforms, based on industrialized tech platforms and processes. We’ve talked about this for a few years now, but it’s taking an age to evolve. Where are the platform partnerships between the Netsuites, the Workdays, the SFDCs with the BPOs? Why haven’t we seen a “middle-market FAO solution” between a mid-market SaaS accounting provider and a leading F&A BPO provider? While there have been a few mutterings of hope, we are yet to see a single enterprise-scale SaaS/BPO platform engagement that we can write about.
The Bottom-line: The leading SaaS vendors don’t “get” BPO and the leading BPOs don’t want to invest in SaaS
Having spent the best part of my earlier career as an analyst studying apps and packaged software, before being subjected to the horrors of the BPO business, it’s as clear as daylight where enterprise solutions need to be focused – on the middle-market enterprises who want solutions that can be industrialized for the high-end enterprises of the future.
SaaS providers are blind to ADP’s success. However, one thing is very apparent – while SAP and Oracle quickly realized they needed to preserve their license revenue when clients signed BPO deals (both have practices dedicated purely to this cause), the likes of Workday, Salesforce.com and Microsoft Dynamics have shown little-to-no appetite to understand the opportunities a BPO channel can provide. Like, haven’t they noticed how ADP has become the world’s leading SaaS/BPO provider, with more then $10bn in annual income?
IT-BPO providers only looking to invest in niche tuck-in areas. Sadly, too many buyers are too focused on their quarterly balance sheets to focus really long-term on their operations; their operations heads are focused on preserving their empires with a few snips here and there to the operating budget. In addition, providers are also focused on their quarterly balance sheets and find it so much easier to pander to the needs of today’s F1000… not tomorrow’s. While we’ve seen a few niche acquisitions where providers are adding platform capability in process niches, such as Accenture/Octagon, Genpact/Jawood, Capgemini/VWA and Infosys/McCamish, we’re yet to see any of them really attack the mid-market with horizontal solutions that can infiltrate thousands of organizations, such as in Finance, HR and CRM.
This train is leaving the station soon… but who is going to jump on? As the existing high-end business opportunities slowly shrivel up, the new logos are springing up in the mid-tier. The winners of today will only be the winners of tomorrow of they can truly invest and build the solutions today’s mothers-in-law are craving. Those who have ignored the mothers-in-law are already in trouble… Hope springs eternal 🙂
Having been an analyst for the best part of nearly two decades, the big ERPs have always maintained a stranglehold over the majority of the global 2000. Any service or technology enhancement has to connect / integrate / work-around the existing ERP template. Entire operations departments essentially become structured around the ERP platform and dependent on their capabilities and relationships with their ERP vendor.
And the ERP premise has always been pretty good – accomplish standard, automated ways of doing things and you can employ less people to achieve the outcomes you want. However, we all know how that has failed to transpire for so many…
Susan Scrupski is Research Fellow, Business Process Reinvention (Click for bio)
However, the world of business process solutions is finally changing. Most mid-market companies looking at their first “ERP suites”, whether it’s in HR, or finance, or procurement etc, are going straight into the Cloud, with the likes of Workday, Netsuite, Ariba and so on. It’s these companies evaluating business process solutions from scratch, or are simply at the end of their tethers beating the crap out of their legacy ERP systems, which are taking the leap and reinventing their whole approach to process management. I firmly believe it’s many of today’s mid-market companies today that will make up the majority of the Global 2000 in 5 years’ time.
But let’s not get overly carried away…there isn’t a dramatic switch happening from the legacy ERP-driven firms to the new generation organization, where everything is run under a beautifully centralized global operating model, process flows are accessed in the cloud and all non-differentiating processes are outsourced. It’s simply those firms ready for the new are growing in stature and scale, while those clinging to the old are trying to get smaller and leaner. It’s about reinvention, not replacement; it’s about taking a completely new path, not simply papering over the cracks of the old one.
So without further ado, I wanted to introduce a spectacular new personality into the HfS family, Susan Scrupski, a legendary figure in the worlds of disruptive technology and social business – and Fast Company’s “Most Influential Women in Technology” in 2010 – who’s embarked on a pivotal new project with us entitled “Business Process Reinvention”…
Business Process 21C: The Jackhammer Tales
Over the past few months I’ve begun to reflect upon how I arrived here at the intersection of process and innovation in the Enterprise. It occurred to me that everything I learned as a researcher, a writer, and an industry observer in the services provider space (my pre-Internet career) now had great bearing on what I was seeing in the Enterprise as a result of the pace of disruptive technologies impacting the market. The question that kept re-emerging for me was: how are rigidly defined business processes that were hammered out in the 90s reconfiguring to adapt to better, faster, more efficient ways of meeting customer needs? Even more puzzling is, if my friend Josh’s old joke is correct, “SAP is like pouring concrete into a company,” how are large enterprises dismantling foundational ERP systems to include disruptive technologies? After all, no 21st Century business can stand to stay frozen in the past. Even SAP itself is retooling to provide greater flexibility and real-time actions and insights with its HANA in-memory database and its JAM social platform.
This big question has been vexing me for a while, so I asked my friend and fellow Enterprise Irregular, Phil Fersht at HfS Research, if he’d be interested in an exploratory study to see how BPO providers and consultants are responding to new advances in mobile, social, the Internet of things– all new capabilities that were not present when the majority of institutional business processes were “cemented” into the Enterprise. I’ve seen evidence of several companies who’ve been introducing social, in particular, to provide greater value to customers. Of course, some of the best examples are coming from platform vendors themselves such as this post, “Enterprise Social is about Business Process Redesign” by CEO Michael Idinopulos at Socialtext. But, I’ve seen other examples such as Deloitte’s work in this area explained in this post, “Social Reengineering by Design,” and even examples about how large consulting firms are changing their own internal processes as a result of new ways of working, as evidenced by this post, “Spark – taking Collaboration and Corporate Social Networking to a new Level at PwC.” Luckily, Phil agreed this is an area definitely worth pursuing, so we’ve kicked the study off this week. We’re compiling data and hope to publish results in the early May timeframe.
I’m really happy to be working in this area that combines my long history of covering the traditional outsourcing sector with my area of interest for this current iteration of my career in next generation technologies. Phil has done an amazing job with HfS Research, too, so I’m proud to be contributing to their strong brand in the market. HfS was recently named one of the leading analyst firms in a formidable field of competitors. Last week, I paid a visit to my longtime business advisor Mort Meyersen, who is an icon in the outsourcing field having helped build EDS and then Perot Systems. It feels good to be back among old friends, mashing up what I’ve been learning from new friends.
I will be working hard on this study for the next few months, but also working on the startup we announced a few weeks ago, Change Agents Worldwide. So, busy, busy, but really having fun. Hope to see some of you at SXSW, but I will be hunkered down and only getting out to a few of the evening events. Please keep up with me on Foursquare if you’d like to connect while you’re here in Austin.
Susan Scrupski (pictured above) is Research Fellow, HfS Research.
Wow, wow and wow. There’s an Analytics for Banking, Finance & Insurance event in New York next week, and HfS Research is strolling down the I-95 to study the cerebral-ness.
We hope to see you when yours truly (Phil Fersht) moderates the “Leveraging 3rd Party Analytics Players : From a Transactional Support Partner to Turbo-Charging your Core Competencies” session taking place on Wednesday, March 13th at 11:30am along with Allstate’s Ferdinand Dungca and Wells Fargo’s Eric Legrand.
Yes! Its time to head to NYC on March 11-13th at the Sentry Center for a whirl-wind event. And not only have we negotiated our readers a discount, this time we’ve arranged an elephantine 50% off for your attendance:
To register, please email [email protected] to take advantage of the discounted rate.
We look forward to seeing you in New York City next week!
If you’ve ever read Freakonomics, you’ll know how excited we are to announce that co-author Steven Dubner has agreed to speak at our dreamSource event this spring. Here’s the press release that went over the wires this morning….
NEW YORK AND LONDON (February 28, 2013) – HfS Research (www.HfSresearch.com), the leading analyst authority, today announced that Stephen Dubner, co-author of the best-selling book Freakonomics that melds pop culture with economics, will attend dreamSource as the featured speaker for the April 30th evening event at The Ritz-Carlton, Westchester, New York.
No it's not April Fools' Day… Stephen Dubner is really coming to dreamSource
Mr. Dubner offers a way of getting beneath the surface of modern business practices: how to create behavioral change, incentives that work and don’t work, why consensus building often wastes time and resources, and how to achieve the business outcomes you expect.
“Stephen Dubner is a delightful addition to our groundbreaking agenda,” comments Phil Fersht, Founder & CEO of HfS. “He reinforces with both humor and poignancy the notion that the old rules of business no longer apply. His vision is right in line with the spirit of dreamSource and the purpose of the HfS Sourcing Executive Council – to shape the future global operating model for today’s ambitious enterprises and break out of the purgatory in which so many of today’s enterprises are trapped!”
Commenting on his attendance at dreamSource, Stephen Dubner said, “HfS is moving the needle with how today’s leading enterprises need to focus on evolving their global operations dreamSource will be a unique gathering of key enterprise stakeholders to find common ground on how the sourcing industry needs to move from “good enough”, to “getting better”. Too many enterprises are caught in a holding pattern and it’s gatherings like this which will help us find new paths to follow. I am personally excited to meet many of the folks at the event.”
The full agenda addresses 2013’s most critical areas in global sourcing, such as Talent Development, Designing the Governance Organization, Real World Innovation and Influencing Value in the Shadow of Cost Myopia. At the heart of HfS Sourcing Executive Council events are industry heavyweights facilitating the discussions who are leading sourcing initiatives across their enterprises.
DreamSource currently boasts a majestic lineup of session leaders, including Carol Britton, Chief Procurement Officer for Bank of New York Mellon; John Ashworth, Global Head of Finance Transformation for Pearson: Jay Desai, SVP for Global Sourcing at Northern Trust; Craig Libby, AVP Global Service Delivery for USAA; Lee Coulter, CEO of shared services for Ascension Health; and Betsy Gauthier, 2nd Vice President and BPO Program Lead for Travelers’ Global Sourcing Organization.
“Likeminded outsourcing buyers get together to discuss the key issues facing the industry, meet each other and share experiences and wisdom,” comments Madelein Smit, VP Outsourcing for Finance and IT for CEVA Logistics. Mrs. Smit leads The Science of Performance Management on the second day of the dreamSource summit. She continues, “This is the only place where 300+ years of deep outsourcing experience have the opportunity to meet – and that is in a very young industry.”
In addition to the Stephen Dubner and enterprise governance leaders, dreamSource will feature sessions led by HfS Research leadership, including a special discussion led by Professor Leslie Willcocks, Head of the Outsourcing Unit at the London School of Economics, where he will be sharing his new book with the Council members during his session entitled “Advanced Outsourcing Practice: Rethinking ITO, BPO and Cloud Services”. HfS has also invited select leaders from the service provider community to participate in a portion of thedreamSource summit, which include the following firms:
“The Provider community is essential to the conversation to ensure our time is invested in a two-way dialogue,” comments HfS CEO Phil Fersht. “The only way to achieve genuine progress in advancing the global sourcing industry is through open dialogue across both parties in a strictly no-sales environment.”
For a detailed agenda and complete list of all dreamSource session leaders, visit http://www.dream-source.com.
For more information on the HfS Sourcing Executive Council and the HfS dreamSource summit this April, please email Tom Ivory at [email protected].
Bill Payne is Vice President, CRM and Industries at IBM Global Services
Three years after his first appearance here, IBM’s Bill Payne has somehow survived appearing on such a disreputable media platform to talk to us about his refining vision for the future marketing function and, perhaps most importantly, how today’s businesses need to manage their most precious assets in the face of such fundamental change – their customers.
We managed to convince him to take time away from his prized vegetables to talk to use more about this vision for the CCO… The Chief Customer Officer…
Phil Fersht (HfS Research): Good morning, Bill. You recently wrote an article where you spoke about the road to customer centricity and how the world’s leading organizations are putting the customer first. In your experience, how has this been working and what is your vision for the future of the customer centric enterprise?
Bill Payne (IBM Global Services): Companies have always said that they put the customer first, and I think they genuinely believe they do. When the business world was made of just bricks and mortar, and on the primitive edge of the digital age, putting the customer first meant that you had to monitor the customer simply when they walked in the store or if they touched you digitally. The world is way more complex now, and what we have found is in large organizations, there is often no integrated customer or even consumer strategy driven by the board. In an omni-channel world, there isn’t necessarily anyone at the board level who owns all customer driven channels.
According to IBM’s latest Global CEO study, nearly 90% of 1700 CEO’s said knowing the customer is top of their agenda, yet how many of those companies have a chief customer officer who owns all of the customer driven channels?
Let’s take a look at the CXO picture around 20 years ago. Why did people invent the chief information officer? They invented the CIO because information technology was changing the need to globalize, the need to integrate, and the need to rollout standard technology applications across the organization.
Then, you had the dawn of the chief procurement officer, and the theory is exactly the same, why did companies appoint CPO’s? To standardize, centralize, harmonize, and integrate procurement across their enterprise, Similarly, the CFO, allows a degree of centralization across finance.Then you had the Chief Marketing Officer, for the same purpose. To have a complete view of the enterprise and driving the brand value for the consumer, yet hardly anyone has a chief customer officer.
I would contend now that as the world develops, we as customers own the power. Any enterprise that thinks they own the power is kidding themselves. The time is now for savvy organizations to put in place a chief customer officer. The role of that chief customer officer is then to build out the presence and the brand across multiple channels, understand the concept of consumer market data, and bring all of that together with insight.
I would also contest that, that chief customer officer could potentially be the new career model for the chief marketing officer. The CMO is the face of the brand, and therefore could be the person to drive that brand value and take on the role as the chief customer officer. There is absolutely a need in many enterprises that I work with to have someone who understands the changes in the market and be able to bring all of that strategic value together to help the board and the enterprise drive the changes that they need to engage the customer.
Phil Fersht: Something I would like you to challenge here is: Do CEO’s today realize the importance or the complexity of really great marketing anymore? 20 to 30 years ago, marketing was the subject to study at business school. It was all about satisfying customers needs and wants profitably, and aligning a product or a service with the core strategy of the business. Something has seemed to have gotten lost in the last 20 years with how marketing is perceived and managed within the organization. A), Would you agree with this, and B), What do you think has gotten lost, and what do you think we can do to start to fix that?
Bill Payne: I think the brand actually can be the last vestige of loyalty that companies can leverage. I think historically, many of us have been a lot more loyal than we currently are. We tend now to be relatively open to disloyalty ‘Many of us have a mobile app on our smartphones that allows us to scan barcodes in a store, and immediately be offered lower prices for the same goods. The world is rapidly becoming mobile, so this drives an added degree of transparency, which enables us to find cheaper prices. Now, if brands are less vestiged, and I want to buy a brand, then I will go to the lowest point where I can get that brand for the highest level of service.
I think what’s gotten lost in the last 10 years is that companies have not really thought through their consumer and customer strategy and placed the value on the brand that they need to. What we have seen through many of our CEO study’s and certainly CMO studies is that the brand is still extremely important, but many CMO’s have not gotten their energy and efforts fully focused on how they monitor and drive that brand in the new world of mobile, social media and mobile apps. I think that is a big area that needs improving. The brand value is still hugely important and under leveraged by many organizations.
Phil Fersht: We had a very good discussion recently about elements of businesses that are being outsourced today, and one of the hard realities is: do CEOs wake up in a sweat in the middle of the night worrying about their procure to pay process? Probably not, but do they care about their brand and the way they are perceived in the market? You bet they do! So, in terms of developing realistic – and useful – metrics that should be used to define, measure and manage real marketing outcomes in an organization, do you have some views on what would be more effective these days, and how companies could change their approach?
Bill Payne: I think we have to step back a little first. We see vast differences between organizations in how they manage their marketing spend and understand the ROI,
I think the first phase here, in the world of transparency, is you have to get on top of where you are marketing. One of our clients has a totally integrated global brand management system through all of their web portals. They have a 24/7 update of all of their websites around the world so they can rapidly launch new products, test response to them, and work with their customers based on what they see from their digital presence. With this system, it takes about eight hours to completely launch a brand new product or service around the world. One of their main competitors takes eight days to do the same thing. This competitor has individual country based websites and many of those websites are not easily viewed on a mobile device and do not have an integrated update system. Interestingly, between those two companies in the electronics space, one is doing well, and the other is doing badly. (guess which) That is just an example of the need to start integrating your marketing spend.
I think there are two elements in marketing spend, transactional and creative. Those that are being successful are integrating around the creativity and the transactional piece, such that they are understanding the value of campaigns and understanding the value of the customer. They are able to rapidly respond across global , regional or local markets, and find value in creativity and how they deploy that creativity. So, they are effectively starting to manage the ROI of marketing campaigns and marketing spend against their brand value on a global basis.
Phil Fersht: You have talked a lot about this Chief Customer officer, and you feel that this individual should report to the CEO and not the CMO. Can you explain your thinking here and why you feel customer management should be separated from marketing?
Bill Payne: I think that the CCO should report to the CEO, and the CCO should be the CEO’s best buddy. I think it actually is a fantastic role for CMO’s to broaden into as the mentor/owner/driver of both the brand and customer in an enterprise. They could grab it with both hands and drive the change
The task list for the CCO in the next 10 years is going to be the world’s biggest job. The reason being is that everything I see, and with every customer I talk to and company I visit, the whole customer dynamic is moving into a new arena of transparency and service and technical innovation.
So that CCO, has got a huge job to get back to thinking about the single view of the customer, using customer data, using market data, collecting all that data, using analytics to drive insight,adapting to fast changing techologies and then driving (not just cost out,) but revenue up. So the role of that CCO I think is sitting on the right hand shoulder of the CEO, almost as the conscience of the CEO to drive customer revenue.
As we see in our CEO studies, their top concern is their customers. Someone is needed along side the CEO that understands the total changes in technology that are changing customer behavior. I will give you a couple of examples of this: we are in a meeting in Singapore this year with a COO of a major retail organization, and we are developing their digital presence and commerce strategy and website. 30 minutes into the meeting, I say, why are you doing this? To which there was silence. And then I said, surely, we are not talking about ecommerce, but mcommerce, and more likely scommerce (social commerce)? I put it to them: the world in the next 10 years will be 6”x4” or by 8”x10”. There is no point to build a site for a desktop web base, because the world is becoming mobile. So you should be designing all of your commerce structure around what will fit on a smart phone or on a pad. To me, you have to ditch the old thinking. It is not about ecommerce or internet commerce, it is totally about mobile commerce and social commerce going forward.
Stay tuned forPart II where we discuss shifting the corporate mindset, analytics and (heaven forbid) a little bit about IBM…
Bill Payne (pictured above) is VP for Global CRM and Industries at IBM Global Services. He is a 25-year industry veteran where he has held wide ranging responsibilities in the Consulting, Business Services and Outsourcing sectors across Europe, US and Asia. He is well-known on the European speaking circuit and is also an Honorary Professor at Lancaster University Management School.
Yes, you heard it here first, folks: outsourcing expenditure is mushrooming at the warp-speed clip of 4% this year to surpass $950 Billion, and expected to average a 5% clip each year through 2017:
Click to enlarge
How do we know all this?
Because we have a super-brainy data guy called Jamie Snowdon leading our data and forecasting practice, where we pull together data from thousands of supplier contracts, revenue databases, inflation estimates, economic primers and – most importantly – from the thousands of buyers and other industry stakeholders, who have been so religiously responding to our ongoing surveys (we have data from over 3,ooo buyer spending intentions just from the last year).
Yes, we’re so excited about sizing and forecasting global outsourcing markets, we’re delivering to industry the quarterly HfS Market IndexTM that delves into all the ITO and BPO services markets by countries, verticals and discreet horizontal markets.
Why are we doing this?
Because noone else is doing it accurately. When IDC claims China’s BPO market is $6bn, you just know something is a bit off…
Because we have such a strong day-to-day involvement into the worlds of the buyers, sellers and advisors of outsourcing. We actually have some peculiar people on staff who wake up in the morning and think about process flowcharts before breakfast.
Because there is very little data out there which really reflects what is going on across outsourcing services, with reliable and realistic capabilities to forecast out four years.
Because we can.
How can you get access to it?
Sadly, we have long tried to run HfS as a non-profit charity, but we found life started getting a bit crappy when the heating got cut off in the offices and we were living off cans of Progresso soup. So our research suibscribers will get the full benefit. However, as good Samaritans, the first one is free – yay! Go register on our site and download your copy now. This offer will expire with one week, otherwise the only other option to get a free copy out of us is through bribery, extortion or heavy imbibement.
So click here to download your one and only free copy of the HfS Market IndexTM. Now
