SAP + SuccessFactors = Great for SAP, but could restrict growth potential for the HR services industry

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"I'll show you how I feel about your license model…"

SAP has made a major move to “Cloudify” its software portfolio with the $3.4bn acquisition of the darling of HR software, SuccessFactors. However, while HfS’ research partner Ray Wang succinctly outlines why this is a winning move for SAP, we do not believe this is particularly good news for BPO service providers and services clients.

This rampant consolidation of business software apps firms makes it tough for service providers to develop their own Business Platform offerings and develop outcome-based delivery models.  As we have been discussing at length on HfS, the leading BPO providers are hurriedly developing service offerings that are underpinned by Business Platforms to support transactional, high-volume, standardized processes with very little variation in outputs.  HR services are prime candidates to be optimized by Business Platform delivery, epitomized by ADP’s GlobalView payroll and HRO offerings – arguably the industry’s first Business Platform – introduced years before anyone even knew what a Business Platform was.

This means BPO providers have three choices with their Business Platform strategies

Choice 1: Develop and patent their own cloud-based workflows

This is surely where BPO service providers can really clean up, provided they can deliver complete clusters of standard process offerings for their clients that are cloud-based, affordable, scalable, high-quality and – most importantly – can be maintained with quality service personnel that can offer consultative support when needed, as the client seeks to transition onto the offerings.  Most BPOs today are developing prototype platforms that they can “productize” as utility services, once they achieve a handful of clients using each offering.  Our ongoing research already points to more than 150 business platforms in various nascent stages of development from the BPO providers.

Choice 2: Acquire them from a client or another vendor

Most of the ambitious BPOs are seeking to pick up new clients that deliver the potential to develop industry platforms, such as TCS’ recent $2.2bn Friend’s Life engagement which gives the firm the ability to enhance and deploy insurance systems across multiple insurance clients, and Cognizant’s acquisition of UBS’ India operations to service capital markets clients.  In terms of outright vendor acquisitions, the capability to develop platforms is high on the agenda, such as Capgemini’s recent acquisition of VWA and its WebCollect OTC platform, Infosys with McCamish, Accenture with Zenta and IBM with Sterling Commerce.

Choice 3: Partner with a software firm and deliver directly to the client

Both SAP and Oracle have invested heavily in structured programs over recent years to encourage the BPO providers to deliver processing services that are underpinned by their software products.  This has included programs to support education and implementation throughout the outsourcing process, in addition to license agreements structured specifically for an outsourced environment.  Many BPO “partnerships” have been announced such as Wipro with Oracle and Netsuite with Genpact, however, we’ve yet to see significant evidence of clients chomping at the bit to take up these software/BPO partnership offers.  Most of the software firms have “partnered” with as many services providers as possible to maximize their market opportunity, as opposed to co-development and co-investment of product and delivery resources.

While SAP already has been attempting to assemble its own portfolio of Cloud “offerings”, it has been worried about cannibalizing its cash-cow legacy revenue from its ERP licensed products. How SAP  structures the licensing and pricing of SuccessFactors is going to dictate whether BPO providers offering HR services will seek to push it proactively to their clients.

SAP joins Oracle in increasing its stranglehold over enterprise software platforms

For service providers seeking to push HR services  to large enterprises, it’s increasingly challenging to avoid partnering with either SAP or Oracle in some capacity (Choice 3 above).

For example, if the client already has PeopleSoft or SuccessFactors and wants a BPO provider to service those existing implementations, there really are only two ways for the providers to be competitive from each other:

1) Be cheaper than everyone else.  Provide payroll processing or employee-record update services at a lower FTE cost than the next provider.  Hmmm… doesn’t sound like a very attractive business for the ambitious provider looking to increase its margins and service value… sounds more like a race to the bottom.

2) Be better than everyone else.  Provide HR consultative services, such as succession planning or change management that truly differentiates themselves from their competitors, and allows them to charge higher rates to the clients.  Clearly, this is the preferential model for providers seeking higher margin-value, but wouldn’t it be so much more attractive to provide their own workflows and platform?

The dichotomy here is that whatever route BPO service providers decide to take, they can only really achieve price-per-headcount results and can’t truly look at delivering real business outcomes for their clients, if they are delivering someone else’s workflows. For example, being incentivized financially for lowering a client’s employee-attrition, or increasing their employee-satisfaction. Moreover, whichever way they look at it, they are going to have to factor in the hefty Oracle or SAP license fees somewhere along the line.

The bottom-line: SAP and Oracle need to embrace outcome-based service provision to make this attractive for both BPOs and clients alike

SAP and Oracle need to work with service providers to develop outcome-based scenarios for clients.  This means they actively need to offer up portions of their license fees to incentivize risk-sharing pricing.  This could work if the ERP provider gets paid via the same gain-share model the BPO has structured with its client.  However, this is a lot easier-said-than-done, as it’s hard enough for client and provider to broker a gain-share engagement model, let alone invite the software vendor to get involved.  (If someone has an example of this type of model actually working in practice, please tell us, as this is where many of these engagements need to be structured in the future – and would be a great advancement for the lawyers and third party advisors, if they dare to venture away from their familiar FTE-based transactions).

Ambitious services providers in the HR space need to look further afield to make smart platform investments. There aren’t too many options left in the market for BPO providers seeking to make their own platform investments.  If you read the speculation, Taleo is the next best available, and this isn’t overly attractive, with most of its revenues coming from recruiting. It also puts the spotlight on SuccessFactors’ (arguably) toughest competitor, Cornerstone OnDemand, with its compelling platform of integrated Cloud-based talent management processes.

Beyond Taleo and Cornerstone, there are few public HCM SaaS vendors left worth acquiring, and there is precious little value to be found when examining the HCM start-up space. The darkhorse in all of this is what happens with Workday, and whether it can make itself a more attractive partner for one of the BPOs to make a real play into the HR BPO services market.  What would be game-changing, is if one of the leading BPOs were to acquire Workday and create a whole new platform/BPO ecosystem in its own right; however, it’s unlikely that any of them would dare upset their cash-cow Oracle and SAP relationships.

It seems the Oracle/SAP stranglehold is set to continue for a few years’ yet, but the increasing development of the Business Platforms market could be the ultimate force that finally starts to erode their domination.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, HR Outsourcing, HR Strategy, SaaS, PaaS, IaaS and BPaaS, Sourcing Best Practises, sourcing-change

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Fed up with cheesy sales presentations? Well, here’s the web event you’ve been waiting for…

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Fed up with those whiffs of camembert emanating from your latest sales deck illustrating 92 beautifully-crafted graphical representations of your offshore transition methodology, your global delivery model and your “unique” roadmap to achieving innovation? Still wondering why your last three deals went south despite those investments your firm made in PowerPoint designers?

Well, your wait for answers is soon to be over, thanks to our own resident cheese-buster himself, the notorious Esteban Hererra who re-wrote the rule book on busting through the PowerPont cheese with his famous post entitled “Eight top tips to prevent outsourcing providers committing harakiri in the sales process“.

So how can you make the sales process smell less like a Wisconsin dairy farm? Easy – simply join us for our next web event, where we’ll discuss – and officially answer – these questions:

  • Which common presentation practices are actually detrimental to the efforts?
  • What are buyer’s pet peeves during sales pitches?
  • What can buyers do to improve the quality of the communications they receive?
  • How do successful presenters manage time and use tools like powerpoint?
  • What makes a presentation memorable?
  • In outsourcing pitches, how can you achieve differentiation?
  • How can you separate the hype from the actual capabilities of a provider?

December 7th at 11:00 AM Eastern Time, 4.00pm GMT

REGISTER NOW

HfS says NO to cheese

Watch the sparks fly as HfS COO Esteban Herrera leads the discussion with these four cheese-busting industry luminaries:

*Kevin Judice: CIO, PNM Resources
(Rumored to turn up to sales pitches with a 12-bore)
*John Gustafson: VP, Energy & Utilities, Wipro
(Has the bullet-holes to prove it)
*David Poole: BPO Executive
(A reformed fondue expert and expert salesman)
*Chip Wagner: Chief Cheese-Busting Officer, Alsbridge
(Spends his days wearing cheese-armor)
*Mystery Cheese
(We’ll unveil a mystery cheese-buster especially for the occasion!)

December 7th at 11:00 AM Eastern Time, 4.00pm GMT

REGISTER NOW

Posted in : Absolutely Meaningless Comedy, Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Outsourcing Advisors, Outsourcing Heros, Sourcing Best Practises

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Too late to compete with the Sourcing Raj? (Part I)

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Taking on the Indian outsourcers: too late to make a splash?

HfS Research Fellow and Sourcing Change protagonist Deborah Kops investigates whether India has bowled an unplayable delivery to the rest of the world’s ambitious outsourcing businesses, or if there’s still a chance to nick it over the slips and get on the scoreboard…

Let’s give Indian-legacy providers their due—they arguably initiated, then accelerated acceptance of  the concept of working offshore; they’re well-entrenched in some of the best global clients; they’ve set the bar for industrialized delivery—from hiring to training; from process mapping to technology, from delivery to measurement. As a result, sending critical processes over five time zones away is considered safe and smart today. Other countries want to emulate their positioning, ensuring that the names Brazil or Chile, Malaysia or China, South Africa or Kenya, Ukraine or Poland are mentioned in the same breath when global delivery models are under discussion.

Will the market expand rapidly enough to make non-Indian providers a must-add to business models—beyond a language or regional proximity play? Will clients seriously consider providers based in other geos to deliver critical scale for finance and accounting, knowledge or vertical business functions in the near term?

Despite rising costs and increasing attrition rates, it seems, for the foreseeable future, Indian legacy providers will continue to have a leg up on providers headquartered in other countries, with good reason.

Why is challenging for non-Indian offshore providers to penetrate the global outsourcing market?

Reputation. Bad American sitcoms and call center jokes aside, just as Germany has built a reputation for precision engineering, or Italy for fashion, or the French for fine food, today India’s greatest reputational export is globalizing work. It makes no difference that the Koreans can now go toe-to-toe on the manufacture of quality cars, or some of the best new fashion designers are coming out of Turkey, or London has more Michelin-starred restaurants than Paris—Germany, Italy and France are synonymous with great cars, high style and fabulous eating. Similarly, Brand India is outsourcing.

When buyers think of India, they think of the jobs export destination. Whether that reputation is due to timing, compelling wage rates, undisputable demographics, marketing or luck is unimportant; truth is no other destination  conjures up the same meaning in the minds of sourcing decision makers. Buyers are aware of the plusses and minuses of sourcing to India and understand the map– Bangalore has strong analytics talent, Chennai the right location for technology and Pune a Mecca for finance and accounting. By contrast, what sort of talent can be found in Uberlandia, Timisoara or Accra?

For the foreseeable future, unless there are explicit language, market, or portfolio risk issues, India’s providers will dominate every long list. What’s helping India reign supreme? Why can’t providers in South Africa, Colombia, Ukraine, Brazil or even China come close to India?

Scale. We acknowledge that without scale, any business is seen as a hobby. Although there is sometimes room in our sourcing portfolio for small, emerging best-in-breed providers, we tend to gravitate to markets and providers with scale to serve our needs, even if we don’t plan to expand. Scale says that other clients are placing the same bet; that we’re dealing with a financially and operationally sound operation; and that the provider will be able to make the right investments to improve our business. Plain and simple, at this point in time, other outsourcing destinations do not have sufficient scale to challenge India.

There are several dimensions to scale—scale of the indigenous industry, scale of the export industry and scale of the individual provider. Scale of the indigenous industry is important: corporate decision makers want comfort that the location will grow as a sourcing destination and the government’s economic development policies are aligned with their goals. Corporations have no interest in being held hostage to the vagaries of political and economic policy in emerging sourcing destinations.

Second, few corporations have any desire to be the only game in town. Going it alone is rarely an option when it comes to designing a global delivery model; the herd instinct is the strongest justification for offshore location decisions. Being the foundation client for a provider’s new center is fraught with risk—will the provider be able to attract the right talent? Will the provider scale quickly enough to keep costs in check? Few organizations have the desire to be the biggest fish in the provider’s pond, even though providers think playing the “special relationship” card is a great enticement. In a maturing market, clients no longer have to take this risk.

Lack of network. Have you looked at the roster of so-called global sourcing leadership in blue chip companies lately? Along with Smith and Johnson, you’ll find an increasing number of names that reflect the map of India—Gupta, Jain, Singh. These sourcing-savvy executives, often groomed by stints in leading Indian providers, or selected because they understand how to do business offshore (read: India), have, in aggregate, extraordinary power to devise corporations’ global delivery maps—and source more work in India.

Although India is certainly a vast country, as a percentage of the population, experienced sourcing professionals are relatively few. So the game of seven degrees of separation works wonders when an Indian outsourcing salesperson knocks on the door of a major bank, telecom or outsourcing advisor. This is not to accuse Indian sourcing executives of any overt bias toward India as a sourcing destination, or India-legacy providers; rather, they go with what and whom they know.

Providers from other locations just don’t have the same network of countrymen in place. Chances are, walking into a meeting and greeting the exec in Sichuan dialect, or chatting about the best place to eat in Lvov, is highly unlikely. So if shared knowledge or experience is not in place as a platform to build the trust necessary to establish a good relationship, it means the non-Indian provider has to work that much harder to gain credibility.

Lack of strategy. When Indian providers first came onshore, market conditions were nascent. Timing and luck were often enough to attain scale. It was possible to play the IT card one day, and boast mastery of business process delivery the very next. If one client wanted insurance process delivery, and another logistics support, the provider could—dare I say it—fake it, leaning on a relationship to get enough time to figure it out.

But in today’s mature market, it’s impossible to grow without a plan. With an established sourcing destination map, and a recognizable roster of Indian-legacy providers, successful market entry by non-Indian offshore providers means playing it more strategically.

It’s no longer enough for a provider to show up at a trade show, throwing up a value proposition and seeing what sticks—ITO, analytics, horizontal or vertical BPO. Second, the all-things-to-all-people approach that worked 10 years ago is now passé. Buyers have moved on, demanding proven track records and deep skill sets before they entertain a relationship. So the non-Indian player, with limited relationships and brand recognition, is forced to declare his hand relative to process and domain.

Lack of investment in marketing. Granted, with a few exceptions, Indian providers are not masters of marketing. Most of them are still struggling with differentiating their brands in a market where one provider’s declared value proposition looks like another’s. But the news is they have some semblance of brand resulting from time in market and success in client penetration, not to mention a boost from the India-as-the-premier-sourcing-location reputation.

The “me-too” marketing approach taken by non-Indian providers is simply not workable. Believing that brand doesn’t matter and that the market is big enough for everyone is a non-starter.  They either spend a pittance in marketing, or when they do open their wallets, they get limited bang for their buck, buying ads or showing up at conferences which few clients attend– because the decisions are being made from marcomms managers in Buenos Aires, Kiev, Dalian or Kuala Lumpur. Little attention is paid to deepening relationships with influencers or developing thought leadership as a differentiator. Marketing is treated as a sideline, when it’s the key driver of revenue for new outsourcing market entrants.

Language. English really rules in the outsourcing world. The vast majority of multi-nationals use English as their lingua franca, even if they are based in Germany, Spain or Russia. Industry research and commentary is written primarily in English. Most conferences are held at least in part in English. Computer literacy is heavily dependent on knowledge of English. Buyers want a range of language capability to service particular markets, but who grows a global outsourcing business speaking mainly Finnish, Chinese, Tagalog or French?

Deborah Kops, HfS Contributing Analyst

Deborah Kops, Research Fellow, Sourcing Change Management, HfS Research (click for bio)

The concept that providers without strong English language skills can simply decouple tasks as “non-language dependent” in order to move delivery anywhere is a belief of mythical proportion. And assuming that client-facing staff with less-than-adequate fluency can successfully grow a business is a similar fallacy. The charm of a thick accent pales when a buyer is negotiating a contract or the transition team is mapping processes.

Language skills imply a degree of cultural understanding. When a student is immersed in English language study, he learns more than grammar. The syntax tells him something about the way native speakers look at the world. Exercises help the student understand why the English are fanatics about gardening, or why Americans love their baseball. Don’t underestimate how language drives context in outsourcing—it makes all the difference to relationship success.

Let’s face it–India has the English advantage in spades. Granted, not all staff speaks like Bostonians or Brummies, but the understanding necessary to communicate is present. Outsourcing is about crossing an organizational divide to forge relationships; if the language issue rears its head as an obstacle, it’s difficult to justify working with the provider, all other things being equal.

So, with the reputation, scale, client networks and language boxes checked by India, how do non-Indian headquartered providers compete? Stay tuned for Part Two.

 

Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, kpo-analytics, Sourcing Locations

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As InfosysBPO reaches the $500m mark, is it ready for the big-time?

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One thing’s for sure – we’ve heard a lot of noise from the Indian IT services mammoths over the last five years that they are going to grapple with the likes of Accenture and IBM to become billion-dollar BPO giants.  And while Cognizant, Infosys, TCS and Wipro have all made progress developing sizeable BPO businesses, none of them have yet come close to surpassing the size and scale of pureplay Indian BPO leader, Genpact’s $1.5bn turnover.  Why is this?

The Indian ITOs have built their companies by occupying “real-estate” in the CIO offices of the Global 2000.  They’ve done a phenomenal job piling in the people resources to support application testing, maintenance, help desk and development projects.  They’ve developed institutional knowledge of their clients’ IT processes to support the business, which has proven cost-effective for the vast majority of leading global enterprises.  Our recent state of outsourcing survey found 97% of $1bn enterprises outsourcing some component of their operations in today’s environment, with most of these organizations involving Indian ITO service providers within their supplier portfolio. However…

Developing BPO footprints requires cementing relationships beyond the walls of the CIO’s office. One of the reason’s for HfS’ success, is our ability to communicate with business function leaders, in addition to IT leaders.  This involves understanding and lending value to supporting the business function issues and processes that impact finance, procurement, supply chain, HR and other operational areas.  Most of our research competitors are firmly rooted in IT-land and have not invested in personnel that can open communication channels to support the business functions – and most never will.

It’s similar for the Indian IT services firms, as they seek to push business-process led solutions, often enabled by IT, into their clients.  While many initially began their forays into BPO by attempting to reach business function leaders through their IT relationship, most have realized that they need a more direct line into the business function than tenuous introductions from the VP of CRM apps.  They’ve realized they need to make significant investments in domain-specific personnel (with real process experience) both onshore and offshore, to create awareness and open communication channels, in addition to the scale they need to take on business. They’re also realizing they need patience to convert clients and often start with much smaller engagements and make margin sacrifices.

So let’s take a closer look at one of the up-and-coming Indian firms that’s made a concerted effort to build a top-tier BPO business over recent years: InfosysBPO, who recently invited us, and several other industry influencers, to partake in their anual BPO client event, named “Colloquium 2011“.

Is InfosysBPO ready to challenge for industry leadership?  Here is our thinking…

InfosysBPO is now a major BPO contender in the global marketplace.  Infosys has quietly gone about building its BPO business streams since its inception via the buyout of FAO provider Progeon, exactly five years’ ago and expects to reach the landmark of $500m in revenues this year.  HfS has always been encouraged by the firm’s approach to developing both horizontal and vertical BPO services, and its focus on leveraging its IT heritage to augment its value proposition.  Infy is by no means the biggest player in the BPO business nor does it want to be, but it has been able to establish itself as a smart and very respected player in the BPO business.

Overall, it has shown the rest of the industry how to grow profitably and maintain above-industry growth performance. Last fiscal, it grew its business from $352m to $427m, while maintaining operating margins in excess of 20% – the best growth performance than the rest of the BPO market. We believe it has also established strong positions in the retail and consumer products, banking, insurance and manufacturing industry verticals, in addition to the horizontal BPO areas of analytics, sourcing and procurement and finance and accounting.

Consequently, today’s business takes on the following estimated revenue-breakdown:

 

HfS’ opinion of InfosysBPO’s strengths

Its open culture creates greater customer loyalty.  Infosys has consistently been one of the most open BPO firms for introducing its customers to each other and instigating open and transparent dialog with industry influencers. Attend any of its BPO customer events and you’ll be surprised by the refreshing openness of the dialog where customers air their operational issues in an open forum and have practical discussion with their peers to share their best (and worst) practices.  Too many of their competitors’ events make you feel like all the content is stringently policed and controlled with constant “rah rah” cheerleading of the provider’s performance. With BPO, we are dealing with real people, real business issues and real processes; clients today are too smart to be brainwashed and want to have the open, honest debate regarding how to get better at managing a BPO engagement.

Its organic growth performance has been exemplary. InfosysBPO has done a fabulous job growing its business organically – the best among its peer group of traditional IT offshore competitors.  All its major offshore IT competitors have inherited more than 50% of their business from acquisitions:

  • TCS –$688m out of $919m
  • Wipro – $235m out of $508m
  • Cognizant – $150m out of $250

Strong leverage with IT clients. It has leveraged its existing client base on the technology side with more than 60% of the existing BPO accounts also being relationships on the technology side. At the same time, it has been able to drive new business with its dedicated sales team opening several new annuity BPO relationships and using that as a hook to cross-sell and up-sell other Infosys offerings.

Strong vertical process performance. It has focused, over the last couple of years, on expanding its offerings which impact the direct costs of their clients and, hence, the gross margin line as well as impacting revenue of its end customers. Revenue from these vertically-focused offerings today give Infosys BPO more than 35% of its total business, which is significantly higher compared to the rest of the industry, which focuses most of its energy and resources on horizontal BPO offerings.

Focus on business platforms. InfyBPO has focused its energies on converging operations and technology to drive a multiplier effect for its clients which goes far beyond Six Sigma and continuous process improvement. Its heritage in technology has allowed it to lead leveraging Business Platforms (branded as InfosysEdge for different vertical and horizontal areas with 14 platforms actively in the marketplace) as well launch several Technology Value Accelerators (TVAs). Today, Infosys has more than 100 such TVAs in the marketplace in different vertical and horizontal markets. Today, all technology led BPO revenue constitutes more than 20% of the business and is steadily growing in contribution.

Global expansion is broadening its growth potential. InfyBPO has also been able to create a true global organization with local leadership in each of its centers – for example, its Brazilian operations are led by a local Brazilian, its Mexican operations are led by a local Mexican, its Polish operations are led by a local, as well as its Chinese and Philippines operations.

Speed of response and a high degree of customer centricity. With InfyBPO being a subsidiary of the Infosys mothership, it has provided its clients access to executive management, unlike its parent organization which has been a lot slower off the blocks. Having its key senior leadership (Ritesh Idnani – Chief Operating Officer; Gautam Thakkar – Global Head, F & A and Suranjan Pramanik – Global Head, Manufacturing) highly visible in the marketplace – and always available for a beer – is a huge plus compared to some of the other providers.

HfS’ opinion of InfosysBPO’s future challenges

Ability to continue differentiation in a rapidly evolving marketplace.  For now, Infosys’ bet on leveraging technology to drive efficiency and effectiveness in their BPO business is paying dividends and they do have an early-mover advantage here.  However, the rest of the pack is aggressively pursuing similar game-plans and it is going to require a lot of continued investment and focus to stay in front.

Ensuring client expectations around transformation and innovation are suitably calibrated. Gone are the days of labor arbitrage and process improvement – that’s now tablestakes for BPO. InfyBPO does seem to have taken some relevant steps here with the constitution of an Innovation and Transformation Board for its clients, which helps drive the transformation agenda in a focused and structured manner, however, several of its competitors also have similar iniatives in play with their clients.

Placing BPO at the forefront of the executive Infosys corporate agenda. BPO only represents 8% of the Infosys business today, but is one of the key growth engines and still an investment business rather than a mature business. Will it be able to get a significant mindshare in the overall Infosys enterprise to garner investments?  Will it receive the sales, marketing and investment attention it needs to hit $1 billion in the medium term?  Bear in mind that Capgemini recently elevated BPO to one its top tier service lines, while Accenture often leads with BPO at its corporate events.  In addition, IBM has recently appointed a true services veteran, Ginni Rometty as CEO, a known proponent for growing IBM business process market share.

Over-ambitious profit expectations at the expense of growth re-investments. The InfyBPO business still has higher profits compared to most of the BPO sector.  Worryingly, Infosys lost marketshare in the IT services side in 2008, when its other competitors like Accenture, TCS and Cognizant went after growth while maintaining margins in a lower band. Infy’s BPO business could get similarly trapped if it continues to want significantly higher margins than the rest of the sector and not be prepared to make strategic bets in areasit wants to grow (such as TCS’ recent margin-gamble to win the Friends Life insurance deal).

Being over-tentative with its cash investments to develop capabilities. Infosys needs to leverage its cash chest more aggressively as competitors are fast either plugging capability gaps or gaining advantages in markets on the BPO side (such as EXL’s recent acquisition of OPI, Genpact with Headstrong, Accenture with Ariba services, Cognizant with CoreLogic and Capgemini with VWA). Given the greater stickiness of relationships on the BPO side, this will be a critical component for continued success to avoid its competitors gaining scale.

Attrition and availability of talent.  These are common industry challenges and cannot be overlooked, especially in the current environment where quality client executive leaders in BPO are becoming scarce. InfyBPO does seem to have taken steps here to arrest attrition and keep it below industry averages, however, it does have some high-performing client executives it needs to ensure are firmly on the train for the future journey.

HfS’ view of acquisitions Infy should look at to grow its BPO business beyond $1Billion

Infosys has been tardy in its acquisitions although its BPO business has been a lot more progressive with 2 acquisitions in the last 4 years. It acquired Philips’s shared services center in 2007, which has now more than doubled in revenue since acquisition. It made a foray in the insurance marketplace with the acquisition of McCamish, in December 2009, which instantly gave it a leadership  position in the life and annuities insurance market. The McCamish business has grown more than 40% since acquisition and the pipeline has quadrupled in the last 22 months.

With such proven success with its two previous acquisitions, HfS is surprised Infy hasn’t been more aggressive with making additional investments in new capabilities to augment its market position even further. The market for acquisitions has been hotting up with several of Infosys’s competitors being aggressive in fueling inorganic growth to compensate for their lack of organic growth in the marketplace, such as the examples we mentioned above. Infy will need to look at bolstering its footprint in the following areas – healthcare, utilities, gaining more scale in traditional sourcing, onshore collections etc to ensure it can grows its business beyond $1 billion over the next few years.  With its strong position in insurance, for example, it could take a serious look at insurance BPO provider EXL service to cement its position in the sector.  Such investments do not come cheap, and will require some bold management decisions in the coming months, if they are to stave off aggressive competitive behavior.

The Bottom-line:  A great job to get to this point, but the crucial work starts now

Having been witness to this organization growing from practically nothing to half-a-billion on barely five years, you can only praise InfyBPO and its leadership for a great achievement.  One constant tireless figure that deserves a mention has been COO Ritesh Idnani, who has been integral to the division’s development over this period.  However, the challenge for InfyBPO now is not only to go after the traditional western providers, such as Accenture, Capgemini and IBM, but also to stave off the canny moves we are seeing from the likes of Cognizant and TCS.

The speed of development of the competition to develop business platforms and secure new capabilities can change the market outlook very, very quickly indeed, and those who rest on their laurels will get left behind very quickly. The Infosys corporate mothership needs to start viewing its BPO division as a critical avenue for future growth and plan strategic investments that may involve some margin sacrifices.  By creating a separate operating entity has been smart, but the time is now upon us, where InfyBPO needs more focus than ever from its corporate benefactor.

HfS Research analysts attended Infosys Colloquium 2011 to hear how Infosys BPO is working with its clients. Over 150 attendees (clients, partners, analysts and Infosys employees) came together to share perspectives, learn from customers and understand Infosys’s BPO capabilities and new investments. HfS analysts Phil Fersht, Keith Strodtman, and Robert McNeill attended and joined customer panels.

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, Financial Services Sourcing Strategies, HR Outsourcing, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Events, Procurement and Supply Chain

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Don’t miss today’s web-debate – The Future of BPO

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Are you ready for our next installment of HfS’ Live and Unfiltered series, broadcast live infront of the HfS Research community? Well… wait no longer for more no-holds-barred fun, no sponsors, no schmaltz, no selling – just good banter and discussion to share with our industry peers and colleagues.  Amd this time we’ll be debating the very “Future of BPO”…

 

Here’s the line-up…

The Buy-team

Roxanna Wall, Executive Director, Corporate Development at UBS AG

Colin Provine, Global Commodity Director, Honeywell

Ian Maher, Sourcing Management Office, The Hanover Insurance Group

Srinivasan Krishnamurthy, Vice President, Kronos Inc.

The Sell-team

Anoop Sagoo, Managing Director, Business Process Outsourcing, Accenture

Ritesh Idnani, Chief Operating Officer, InfosysBPO

Donniel Schulman, GM, F&A and Supply Chain Global Process Services, IBM

Hubert Giraud, Chief Executive Officer, Business Process Outsourcing, Capgemini

The Referee

Phil Fersht, Chief Executive Officer, HfS Research

November 22nd at 11:00 AM Eastern Time, 4.00pm GMT

REGISTER NOW 

Posted in : Business Process Outsourcing (BPO), Outsourcing Events, Outsourcing Heros, Procurement and Supply Chain, Social Networking, Sourcing Best Practises

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Capgemini collects Vengroff Williams to slip into third spot for global Finance & Accounting BPO

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With the paranoia of an impending Double-Dip Recession seemingly forever looming over us, what better than to help your clients get their bills paid?

With competition in Finance and Accounting Business Process Outsourcing (F&A BPO) reaching cut-throat levels (just observe some recent down-select negotiations and you’ll know what I’m talking about), what better than to acquire one of the most attractive onshore order-to-cash (OTC) specialists?  With demand for comprehensive F&A BPO coming from both mid-sized, in addition to enterprise-level clients, what better than to acquire an OTC specialist with on-the-ground delivery expertise and a mid-market offering?

Our only surprise at HfS is that is took so long for one of the top tier BPOs to make this move – acquiring the 45-year old heritage accounts receivables and order-to-cash specialist, Vengroff Williams and Associates.  A provider steeped in blue-chip clients at the enterprise level, such as Disney, General Electric, News Corp, Microsoft and Tyco, in addition to a raft of mid-sized clients such as Elizabeth Arden, U-Haul, Crescent Healthcare and Office Depot.  A provider that has resisted the temptation to develop offshore delivery and focus on smart onshore services. A provider that has developed its own excellent SaaS proprietary order-to-cash technology platform, WebCollect.  A provider with an annual client get-together called the “Billion Dollar Forum”, that you just have to go to, as its the closest thing you’ll ever get to feeling like a billionaire…

Yes, Capgemini has made a major move towards strengthening its position in the global F&A BPO market by today acquiring VWA – and leaping to third in the market share spot for F&A globally (which may change when we re-cast our data early next year, but for now they’re on podium).  You can also read more about our 2011 F&A BPO market landscape and outlook by clicking here.

We believe VWA was one of the few remaining jewels that the major BPOs needed to take a serious look at to bolster their presence and capabilities in order-to-cash.  Here is what they are adding to Capgemini’s global BPO business:

Positives of the acquisition

Expands Capgemini’s US onshore presence.  Capgemini has traditionally been very strong as an International BPO provider – especially with its European and Asian presence, but has perennially been perceived as lagging in the US, despite having made delivery investments in regions such as Junction City, Kansas.  VWA’s addition immediately solves this issue – and actually transforms the US region into a strength for the Capgemini, especially in light of its strong nearshore LatAm presence, with significant investments in countries such as Brazil and Guatemala to help service US clients;

The merger is a good cultural fit.  The two firms have been working together on client engagements for some time, and know each other well.  Moreover, VWA has a strong employee ownership culture and didn’t take this decision lightly – they wanted their own staff to ratify the deal. Several other potential acquirers have taken a good look at them and this “fit” was not nearly as strong;

Accounts Receivable BPO is booming and Capgemini is now firmly in the game.  HfS is observing this market as topping $35bn this year and too many of the existing BPO providers have relied on subcontracting specialists (such as VWA) to provide the AR BPO services.  By owning the process, Capgemini is in a significant positon of strength to price deals more aggressively and has more client exposure and capability to explore outcome pricing options.  Plus, Capgemini can also go after standalone AR BPO deals and leverage its global presence to be very competitive in this market.  Too many of the current crop of F&A BPO engagements have been dominated by accounts payable processes, and this added capability gives Capgemini the chops to go after deals aggressively with heavy OTC components;

VWA brings to the table a quality order-to-cash business platform called “WebCollect“.  We believe WebCollect can really help both new and existing clients standardize on quality standard workflows, which our research is abundantly demonstrating is where much of the future of BPO is headed.

VWA’s business takes Capgemini into the middle-market.  With saturation occuring at the high-end of the market, attention is turning to the middle-market (the $500m-$3 billion segment), where clients are frequently seeking “bigger-bang” and more comprehensive deals that the top tier providers can comfortably cater.  Our recent State of Outsourcing industry study shows the increasing relevance of the middle-market to BPO services areas such as F&A.

This year, Capgemini has BPO as a top-tier service line which will help it capitalize on the acquisition.  Rather than submerging BPO as a secondary service line under ITO, which some other service providers persist in doing, Capgemini’s BPO division now enjoys status as a major front-line services category in its own right.  While this brings increased financial scrutiny from the board, it also empowers the division to get access to similar sales, marketing and development funds as those enjoyed by other top-line services divisions, such as consulting and IT services.  This added marketing muscle will be critical for branding the VWA capabilities, as they are fully merged into the broader BPO division.

Potential challenges posed by the acquisition

Capgemini’s brand in the US.  With all roads traditionally leading to Paris, this has been somewhat of a perennial weakness for Capgemini, when competing for US-centric BPO deals.  However, major client wins in recent years, such as Coca Cola Enterprises and Avon Products have done a lot to increase awareness and exposure in the US market.  Capgemini needs to leverage VWA carefully to improve further  the awareness of its significant onshore US presence and brand awareness as an F&A BPO provider.

Too much focus on horizontals versus verticals.  With Capgemini’s increasing strengths in F&A, procurement, supply chain and customer management BPO, the firm does run the risk of losing focus in some of the emerging vertical BPO markets, for example banking, insurance, life sciences, healthcare and energy.  Capgemini needs to figure out how to develop and position its vertical strengths  effectively and not become overly submerged in a horizontal play.

Potential conflicts with existing engagements.  VWA is present as primary OTC “subcontractor” on engagements where Capgemini’s competitors are the primary F&A BPO supplier.  This could create some contentious issues with regarding to working relationships and contract renewals.  However, it could also put Capgemini in the unique position of potentially edging out some of its primary BPO competitors, so this could ultimately provide more opportunities than headaches.

The Bottom-line:  this is a very smart acquisition by Capgemini

VWA fills many of the needs Capgemini has as an emerging F&A BPO powerhouse.  There aren’t too many BPO acquisitions that appear to be as solid a fit as VWA into Capgemini, and the market for AR BPO is critical for future growth in this space.  The next challenge for all BPOs is going to be creating more utility in the market to take on more clients, and the WebCollect platform has great potential to provide a platform this growth.  HfS would like to see Capgemini embrace WebCollect and develop it over time to cater for clients with specific vertical requirements, for example in the retail space versus hi-tech and media.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Finance and Accounting, Procurement and Supply Chain, SaaS, PaaS, IaaS and BPaaS

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What are Business Platforms and why they represent the future of outsourcing

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We’ve been talking about Platform BPO, Cloud BPO and every other permutation of BPO for a very, very long time.  So what’s changed, we hear you cry

Buyers are ready to standardize business processes

"Please mind the innovation gap"… click here to find out what Business Platforms are and why they represent the future of outsourcing

Our recent study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of this seemly ever-present threat of a “Double-Dip” Recession, revealed what is motivating buyers to outsource in this current climate.

While eliminating cost is an ever-present obligation, buyers are also equally focused on achieving greater flexibility to scale and support their global operations – and even more significantly – prepared to explore adopting standardized business processes.

Yes:  80% of buyers are willing to move onto standard processes.  They are increasingly unconcerned if their closest competitors use the same expense management or claims adjudication processes, the same cash applications or collections tools.  They simply want to adopt quality process flows they can deploy effectively and efficiently, if there is no competitive advantage to be gained that necessitates conducting these processes in a certain unique manner:

 

Providers have a real incentive to position productized and one-to-many (or at least one-to-few) utility offerings onto buyers

The ability to develop some best-in-class processes as “Business Platforms”, whether they focus on horizontal or vertical process clusters, is becoming a real differentiator in the market, as buyers seek more standardized solutions from their outsourcing engagements. Moreover, more process standardization leads to more Cloud-based BPO services where clients can easily tap-into these Business Platforms without having to grapple with cumbersome on-premise software and expensive licenses, or contend with resistance from awkward internal IT staff.  In short, buyers can start to look at moving from “A to C” with adopting quality standard processes and miss out much of that painful “B” phase (which is often where many get stuck unto perpetuity).

So what are Business Platforms?

Business Platforms, enabled by the fusion of Cloud Computing, SaaS and BPO innovations in an integrated singular managed service, are emerging rapidly as the desired “one-to-many” utility service provision for providers and a new source of value for outsourcing buyers.

Buyers can now explore transitioning more rapidly to a desired future state for a specific business process, or set of processes.  The gauntlet being laid out to providers, with these Business Platforms, is their ability to support their clients’ transitions quickly and inexpensively.  Simply selling “products” is not the concept of business platforms – it is the provider’s ability to work with their customers to facilitate and support the ultimate business outcomes of managing the processes associated with the Business Platform offering.

Business Platforms have four key characteristics:

  1. Business platforms provision managed standardized business processes;
  2. Business Platform owners (services providers) are responsible for managing the business processes associated with the Business Platform and provisioning the people that operate them, the underlying software-as-a-service platform, and the supporting public of provate Cloud infrastructure;
  3. Business Platforms focus on business outputs or outcomes rather than inputs such as labor and physical assets;
  4. Business Platforms service more than one client

Well-executed Business Platforms provide customers with compelling technology-enabled business process services that help drive innovation via process re-engineering, greater business agility and productivity improvements. They are flexible and scalable in the face of global demand fluctuations and provide high-quality process workflows.

The Bottom-line: Business Platforms change the focus to the achievement of outcomes 

The days of clients being able to spend multiple-millions of dollars to transform processes as part of a complex outsourcing transformation are fast diminishing. Subscribing to Business Platforms that consolidate infrastructure, middleware software, labor, and process/domain expertise including future investments, as OPEX is attractive to clients. Cheaper to get started, and with output or outcomes-based fees, Business Platforms align with the current budgeting trends evident in the market. Buyers of non-core operational processes do not want to go and ask for CAPEX in this economic climate.

Click here to download our new RapidInsight, “What Are Business Platforms and Why Do They Represent the Future of Outsourcing?”

 

Posted in : Business Process Outsourcing (BPO), Cloud Computing, hfs-2011-double-dip-recession-study, IT Outsourcing / IT Services, SaaS, PaaS, IaaS and BPaaS, Security and Risk, Sourcing Best Practises, sourcing-change

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The three tenets of Global Business Services execution: customer alignment, accountability, and economies of scale

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How do you execute for Global Business Services? Click to find our more…

The complex sourcing options available to global operations leaders today can prescribe real opportunities for business improvement, but  can also pose intricate challenges.  As we’ve been at pains to point out on HfS over the years, outsourcing is only one vehicle to provoke change, impact cost and provide process improvement opportunities. 90% of enterprises, with over $1bn in annual revenues, have shared services operations, and these need to be aligned more effectively with the 97% of these organizations grappling with governing outsourcing relationships.

So how do you take shared services leaders and blend their expertise with the outsourcing governors? How do you go from fragmented service delivery with multiple points of contact, to a global governance model with a rationalized and centralized administration of third-party service providers?

In our first paper on the topic, The Evolution of Global Business Services: Enhancing the Benefits of Shared Services and Outsourcing, we asserted that senior leaders can leverage a Global Business Services strategy as a comprehensive approach to achieve strategic objectives through blended shared services and outsourcing solutions.  In our new report, which we have co-written with Charlie Aird and Derek Sappenfield of PwC and entitled The three tenets of Global Business Services execution: customer alignment, accountability, and economies of scale, we are sharing best practices from organizations that have successfully implemented a Global Business Services strategy.  In particular, these include:

»      Focusing on the Customer – Global Business Services’ processes and technologies enable business unit strategies.  Building alignment and sharing a vision is imperative to achieving successful results.

»      Building the Service Delivery Model – Achieving economies of scale and scope requires well-defined and common business architecture.  Effective organizations have a strategy to construct and leverage their global business service capabilities.

»      Aligning Processes and Technology – Providing best practice back office services requires vision, agility, and coordination across multiple functions.  It requires a focus on the provision of solutions, not technology.

So what are you waiting for?  

Click here to download your freemium copy by visiting our research site

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, IT Outsourcing / IT Services, Outsourcing Advisors, Sourcing Best Practises, sourcing-change

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Satisfying customers’ needs profitably: can marketing BPO revive marketeers?

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Back in the ’80s, every college kid that wasn’t a computer geek wanted to be a marketeer.  It’s definition was simply “Satisfying customers’ needs and wants profitably”.  

The three top dogs in the enterprise in those days were often the CEO, the CFO… and the CMO.  That ’80s CMO had to to understand the company strategy and have in-depth knowledge of the value of the products and services, while communicating that value to customers.  Not only that, he/she had to have detailed knowledge of who their prospective customers were and figure out how to reach them, while convincing the world they had a more desirable offering than the competition.  Simply put, the top CMOs were the strategists, the analysts, the go-to-market tacticians and the entrepreneurs all rolled into one super-executive.

Somehow, this function lost much of its strategic relevance over the next couple of decades, becoming a morass of (often dysfunctional) processes, data and workflows, with the CMO becoming an increasingly tactical executive, providing fodder for the sales team.  Conversely, the cost and importance of marketing has risen as the effectiveness has fallen away.  Sound familiar?

So!  Like any function in need of a facelift, a cost-gouge and some “transformation”, let’s consider outsourcing parts of it… so without further ado, let’s shift over to HfS Research’s exocet BPO analyst, Reetika Joshi, to discuss her new report “Marketing BPO Services: Solving the CMO’s Dilemma”, which you can download for limited time at our BPO Resource Center

CMOs have it tough today, whichever geography or market you look at. They’re stretching dollars for myriad activities in a function that’s undergoing major change. The slow recovery from the recent credit crunch has only made the job tougher for marketers. Rising pressure on company profits has increased the need for companies to renew focus on issues such as pricing strategies, customer buying behavior, campaign management, and customer engagement.

A first-of-its-kind new study by IBM and the Economist Intelligence Cell highlights the four main challenges that keep Chief Marketing Officers up at night: the data explosion, social media, proliferation of channels and devices and shifting consumer demographics (for some reason, global outsourcing featured at #11). An overwhelming majority of the 1700 odd CMOs interviewed admitted that over the next five years, the marketplace as they know it will become highly complex. What’s even more disconcerting is that less than half these CMOs felt they were prepared to handle these complexities. Yikes! How will businesses market themselves in the future, what’s the action plan, you ask? The worldwide consensus revolves around three major pillars of marketing improvement, as IBM and EIC’s C-Suite study found:

–       Delivering value to empowered customers by bridging the digital divide and getting to know individuals as well as their markets. This also means implementing new technologies (e.g. to handle big data, mobile apps, social media) and advanced analytics to understand and predict buying behavior better.

–       Fostering lasting connections by focusing on online and offline community building to manage the customer lifecycle better, and developing strong ‘corporate characters’ that employees can internalize.

–       Capturing value and measuring results, which is where the dreaded marketing ROI is tackled through financial analysis, internal and external resource allocation and analytics adoption to measure and act on the results of marketing programs better.

These are ambitious plans indeed, and they’re not going to be implemented overnight. Checking everything off that list will call for a broad multi-disciplinary team working on several new processes and technologies. This isn’t something that every marketing department can maintain successfully. And here lies the strong case for external help that CMOs can seek today, and the opportunity for outsourcing service providers.

Outsourced functions such as finance and accounting, human resources and customer service have become industry norm in the last decade or so. At this critical stage in the maturity of the outsourcing industry, buyers and sellers are both posing questions about the next big function – can marketing make the cut, and be moved out of the organization? We decided to find out, in our new study, “Marketing BPO Services: Solving the CMO’s Dilemma”.

The truth is, marketing departments traditionally already outsource a portion of their marketing function (though this may not be construed as such)– advertising, some promotional activities and event management. Over the years, the services outsourcing industry has started to fulfill demand for a lot more support services under the broad ‘sales and marketing BPO’ category, including customer support and demand generation. The outsourcing of marketing as a horizontal service is in a very nascent stage currently. However, given the increasing pressures for CMOs we just discussed, we believe the scope for outsourced marketing services has expanded exponentially, as the image elaborates.

The range of outsourced marketing services today

Source: “Marketing BPO Services: Solving the CMO’s Dilemma”, HfS Research, October 2011

Now, are companies queued up for miles today, demanding these new fangled ‘integrated sales and marketing solutions’? The short answer is, in comparison with other outsourced services demand in the next year, no.

As recent research shows, 25% of the marketplace currently outsources – or intends to evaluate – marketing outsourcing opportunities in the next 12 months. Moreover, we are seeing first-time-buying intentions in the utilities, media, financial services and consumer goods industries, which roughly 10% of organizations expecting a first foray into marketing BPO services over the course of the next year.

The IBM and EIC study corroborates this, with highly pronounced future intent (next 3-5 years) for external partnerships for lead management, customer and data analytics and direct/relationship marketing, followed by IT, call or service center management and tracking and measurement.

It will be some time before these services are structured and formalized in the same manner as other horizontal offerings such as Finance and Accounting and Human Resources. Strategy teams for service providers are trying to place their fingers on the best approach to this vastly untapped market. The two crucial investments for these services include the right talent and technology/infrastructure. The high level of creativity and judgment in these activities necessitates the need to have people with a strong background in marketing, advertising, campaign management and other allied activities. High-end services within marketing require a lot of investment in the correct tools and technology to work on custom process frameworks and delivery for functions such as design, content management, analytics and database management.

Reetika Joshi is Principal Analyst, BPO and Analytics Strategies (click for bio)

The larger service providers often start with the “big ticket” items such as technical support, customer support and F&A before offering marketing services. These services will be outsourced only once trust has been built up between the client and the service provider (and even then, we’re talking about piecemeal deals currently). Buyers and service providers are likely to show more interest in the category as service offerings mature and buyers start to take stock and implement long term plans to transform their marketing activities.

You can download “Marketing BPO Services: Solving the CMO’s Dilemma” for  a limited time at our BPO Resource Center.

Posted in : Business Process Outsourcing (BPO), SaaS, PaaS, IaaS and BPaaS, Sourcing Best Practises

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Why outsourcing professionals must stay in touch with the 99%

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Like everyone else, I am disturbed by the economic and social instability in which our world currently finds itself.  While the 2008 crash saw us all face a major economic and fiscal reality-check, 2012’s landscape will see us move beyond bailouts and credit downgrades to a world where governments and business leaders need to deal with the societal impact of growing unemployment, worker insecurity and an alarmingly widening gap between the wealthy establishment and the common workers (or, as the Americans love to call them, “the Middle Class”).

We’re already starting to see visible signs of social unrest developing with the “Occupy” demonstrations spreading across the western world. Worryingly, for business leaders and governments, is the fact that there is no imminent prospect of these movements fizzling out. A Double-Dip Recession will exacerbate these issues further and we could be on the cusp of some dramatic and painful changes to the global economic and political landscape.

As we stumble towards this increasing likelihood of a Double-Dip Recession, these are becoming highly sensitive times for our enterprises, and none more so for the buyers, advisors and sellers of outsourcing services operating right in the midst of many of these issues. So what are their expectations, and how do they anticipate their respective businesses to be impacted if things take a nose-dive?

Providers and Advisors are bullish about profiting from a Double-Dip, but must avoid complacency

Our new study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of a “Double-Dip” Recession, reveals that the folks advising and selling outsourcing services are feeling pretty bullish that their clients will turn to them for even more help, if things really start to get dicey over the next six months.  61% of provider and 44% of advisor executives are expecting their respective businesses to increase revenues:

While the sell-side readies itself to enjoy increased profits, close to half of enterprises are expecting layoffs, 40% are sizing up increasing the labor-arbitrage of IT and 30% similarly with finance, procurement, industry-specific and customer management processes:

Business leaders, like political leaders, must not lose touch with their employees during these difficult times – especially over issues such as outsourcing

While most of us are incredibly frustrated with Greek PM Papandreou’s decision to turn to his people for their opinion, let’s pause for a moment – if your government had mismanaged your economy so badly that you were going to be indebted to the Germans and the Chinese for the next few decades, wouldn’t you be feeling a bit miffed?  If your CEO was about to sell a major shareholding in your firm to some other entity, and you were a stakeholder in the business, wouldn’t you want a say?  If your company’s board had mismanaged its finances so badly, it feels the need to outsource a whole chunk of its operations to some provider who barely understands the intricacies of your company, wouldn’t you want a say?

Surely, lousy management teams run the risk of ripping the very soul out their corporate cultures if they fail to listen to the concerns and recommendations of their people, just like those awful governments who drove their nations to bankruptcy and think they can still fix their problems with even more bailouts and loans, without consulting their people?  Do corporate leaders want their workforces to feel like the “99%”?  I don’t think so…

And is the 99% really so ignorant about what’s going on that both governments and their business leaders can now operate in a bubble of their own because they know better?  Something’s gotten broken here, and it may simply be that many of today’s politicians and business leaders are actually losing touch with their people. This is an alarming and unsustainable trend, and the outsourcing business could be in danger of getting caught up in the complacency.

While news like this will have some advisors and providers excited about hitting their revenue goals, we have to be highly-conscious of the fact that if this data becomes reality, the outsourcing industry is going to arrive at a highly visible and dangerous phase in its development. As we have been at pains to point out – for five years on this site – buyers need to look beyond labor-arbitrage to find any real long-term benefits from outsourcing. However, these issues are going to move beyond buyers simply improving business processes and cutting costs – they are going to become  centered on how companies are managing their workforces. Governments are very capable of passing measures very quickly to restrict outsourcing if things get really bad – and they won’t have much choice if the 99% demand it.

The Bottom-line: Outsourcing professionals need to avoid being perceived as the “1%”

Now, more than ever, the outsourcing industry runs the risk of a backlash, if the worst economic fears are realized in the coming weeks and months.  A Double-Dip Recession will polarize governments and most likely paralyze uncertain businesses.  Most of you who frequent our blog and research sites make a decent living buying, advising or selling sourcing – and we have a collective responsibility to recognize that the very life-blood of organizations and their employees are at stake in the coming months. And if they fail, we will go down with them.

Outsourcing can be a tremendous help for many organizations needing support with improving their processes, globalizing their business operations and accessing better IT, but it is not – and never should be – the only solution to their problems.  It should be a vehicle to help companies perform better, to help its staff become more experienced and knowledgeable.  All outsourcing stakeholders – buyers, providers and advisors – need to focus, more than ever, on helping organizations approach outsourcing as one supporting component of a holistic solution.  In short, buyers and providers need to come closer together to tackle these issues and demonstrate to the world how they are creating value and improving competitive behavior.

We need to demonstrate how making organizations smarter helps create jobs and drive growth – not how making them smaller makes the 1% that little bit richer…

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, hfs-2011-double-dip-recession-study, HR Outsourcing, HR Strategy, IT Outsourcing / IT Services, Outsourcing Advisors, Procurement and Supply Chain, Security and Risk, Sourcing Best Practises, sourcing-change, the-industry-speaks

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