Time to crack open a cold one, turn up the volume… and relax!

Posted in : HfSResearch.com Homepage, Sourcing Best Practises

Our new research reveals the majority of enterprises are failing to develop the talent they need to be effective in the Digital Economy.

Working environments have become increasingly difficult to manage and too many staff are simply not motivated to drive value to their firms. Simply put, the old way of managing staff in today’s self-entitled employment world is just no longer working, and there needs to be a significant mindset change from both employers and their staff to re-humanize the enterprise.  Otherwise, the ROI of hiring people will really become unattractive.

When I penned the now-infamous post “Welcome to the age of Digital cruelty, where two-thirds of operational jobs are under threat“, I was thinking about how enterprises can develop change programs to reorient staff to add more “Digital Value” to their organizations, and how they can leverage their partner relationships to help plug the Digital gaps and improve their existing talent potential.

Then HfS’ workforce and talent analyst, Christa Degnan Manning, shared her insights with her new Talent Acquisition Services Blueprint, which brought forward many of the issues surrounding talent retention and creating a work environment where (motivated) staff can develop their careers with their employers with a long-term goal in mind.

So we revisited our recent workforce study which covered 5,000 enterprise employees globally, to understand how motivated today’s talent is to stick with its current employers:

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Barely 4 out of 10 staff intend to stick with their employer for more than a couple of years

Ouch. Yes, people, the day of the long term company job is truly dying on the vine, where close to half of today’s workers are already looking for a new employer, while another third are readying to move on in another year or two. At the same time, as our recent State of Outsourcing Study fleshed out, two-thirds of enterprises feel their existing operations talent is falling well short in “Digital” areas such as analytical capability, being creative with new ideas, driving better automation etc.  So what does all this mean?

Poor talent leadership and unmotivated staff is a recipe for corporate failure

It’s becoming abundantly clear that many staff that stay with a single employer for too long are losing relevancy, when it comes to delivering new value and insights.  This is because most employers are clearly failing in reorienting existing – or hiring new – talent to stay ahead of the curve and keep adding value beyond routine transactional activities. Moreover, the majority of staff are clearly not being motivated by their employers to want to build long-term careers in a single company anymore (or may just not be motivated at all).

Clearly, there is a major employer-employee breakdown occurring: employers are not focused on investing in the right talent strategies, and their talent isn’t that focused on investing their careers in them either. The result is management being pissed off with the value their staff are delivering, and their staff being pissed off with the value they get from their organization – it’s a recipe for failure and poor enterprise performance.  And if internal labor investments are fast becoming a negative commodity for many firms, they will naturally look elsewhere to achieve its goals – such as improving automation and leveraging third party services relationships, where the talent can quickly plug the gaps.

The old ‘nine-to-five job mentality’ must quickly evolve into a value-based work culture for organizations with emerging Digital Cultures

Simply put, most effective workers today do not start work at nine and clock-off at five.  As peoples’ personal lives become digitally-entwined with their professional responsibilities, most want to spend time during the day on their electronically-driven social activities, which means they frequently need to compensate for this during their evenings and weekends.  Moreover, the working styles of management and staff need to evolve to become most outcome-focus and less task-focused.

Managers need to think less about “what do Jane or Peter actually do between nine and five” and more about “what business outcomes have Jane and Peter produced for the firm this week – and how are they adding value to the organization.”  This means that enterprises need to ensure they have forward-thinking managers who understand the shifting mindsets and lifestyles of their staff in order to get the best out of them.

Workers who cannot motivate themselves to add value beyond ‘just enough not to get fired’ will see their career potential rapidly decline

It is also the responsibility of employees to adapt to being judged more on outcomes than “time served”.  There are far too many staff today who still “work the nine to five mentality” but barely spend 2-3 hours today actually working (we all know many, I am sure!).  These people need to understand they will be quickly replaced if they cannot adapt their working styles and motivate themselves to add value.  From my experience, staff become motivated when they are encouraged to use their creative energies and are judged on the quality of their outcomes – when they are simply checking the boxes and doing just enough not to get fired, is when the employment model falls apart.  I would bet a champagne lunch on the fact that most of the 62% of frustrated staff only do barely enough for their employer to avoid the sack.

The Bottom-line:  The working cultures and attitudes of management and their staff both need to evolve to be effective in the Digital Enterprise

The current employment model is broken.  There is a sense of entitlement among too many workers that all they need to do is show up to warrant their paycheck and all the accompanying benefits.  At the same time, there is too much legacy management going on, where enterprise leaderships persist in judging their staff on effort-based inputs, as opposed to value-based outputs.  Yes, the old “time sheet” for knowledge workers is probably the worst invention for the enterprise since on-premise ERP software…

I recall when I graduated in ’94 during the pit of an economy and you couldn’t find a job anywhere – you had no choice but to hustle and adapt to whatever job you could get not only to build your career, but also to earn a living.  My first job was answering the phone is a burglar alarm firm – you turned up, you worked hard and you kept at it until something better came along.  Sadly, that “hustle mentality” is clearly shot in today’s workforce – I find people either want to work, or they don’t – and smart employers are figuring that out in today’s much looser, more complex, work environment.  You basically need to hire people who want to work and manage them by their outcomes – it’s really that simple.

So there needs to be a significant mindset change from both employers and their staff if we want to re-humanize the enterprise, otherwise we might as well give it all up to the robots…

Posted in : Digital Transformation, HfSResearch.com Homepage, HR Strategy, kpo-analytics, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, smac-and-big-data, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing

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Posted in : Cloud Computing, Digital Transformation, HR Strategy, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, sourcing-change, The Internet of Things

Has anyone noticed a much harsher mentality towards “labor” these days?  I can recall presenting at an HR Outsourcing conference in 2004 where there was a large gathering of anti-globalization protestors outside the hotel bearing placards and shouting obscenities are us through the window.

“Outsourcing” was a truly dirty word, and shame on any callous corporate executives for instigating the use of low cost foreign labor to substitute their own. Even poor old Mitt Romney was associated with evil “outsourcing” practices during his corporate days at Bain Capital, which hurt his (unsuccessful) attempt to become elected US president.

But all of a sudden, noone really seems to care about protecting jobs anymore – if people are just performing “transactional” tasks, for chrissakes automate them quickly, or buy a SaaS platform to get rid of the unnecessary waste. Where are the demonstrators outside of SAP headquarters in Waldorf, or Oracle HQ in Redwood Shores as these firms desperately try to convince the world they are cloudifying their products so their clients can start to do away with some of those unnecessary jobs on-premise software provides.

And what about that evil Workday, which only provides cloud-based software and enables its clients to do away with HR admin people making a living cobbling together archaic hire-to-retire processes? And where are the tears shed for all those lovely marketing admins who used to earn a crust managing customer databases… their jobs literally obliterated by Salesforce.com?  Not to mention those jovial IT maintenance people no longer needed to support crappy old email systems now their companies have started using Google apps or Office365…

Why did companies get such terrible rep for using lower cost overseas labor, but get a completely free PR pass when it comes to eliminating positions altogether through better technology?  At least they were providing jobs somewhere…

Job protectionism really has left the building 

In all seriousness, organizations are already democratizing their decisions to do IT outsourcing and BPO and, instead, looking at ways simply to erase labor altogether (see earlier). If you only outsource your labor to a provider, you’re likely going to be stuck with it for some considerable time – just at a lower price point. You’ve simply passed on your labor costs to someone else to manage for you – more efficiently and cheaply. And once it’s been outsourced, it’s not as easy to eliminate those passed-on labor costs – you have to convince your provider to replace the labor with better automation and make less money from you, which it is not going to do unless create genuine incentives in place to do it.

Hence, the pressure is really now on for corporate leaders to eradicate that need for labor in the first place to ensure those costs are expunged for good… never to return.  Suddenly, reducing transactional labor has become the accepted norm for enterprises – not some wicked, insensitive capitalist strategy being driven by greedy corporate leaders. Essentially, if you’re only managing routine operational work with limited interpretation of meaningful data, or failing to provide creative ideas that drive value or income for your company, you may already be on that short-list to be eliminated.

Why the new wave of Digital capabilities is challenging the workforce like never before

Organizations have been trying to reduce their labor costs for decades, but something feels very different about the new Digital reality in which we operate.  Many people thought the onset of web technologies would be the big game changer with how we utilized labor, but it actually increased our reliance of humans – many business processes became web-enabled, which necessitated training on new applications and helped us work more effectively – but they didn’t fundamentally change how we operated – the web really just enabled us to run things the same way as perviously, just with more global capabilities and much more efficient communication. It was this previous wave of Digital which really enabled the great outsourcing boom of the last 15 years, as communication costs plummeted and web applications made it possible to work with people anywhere/anytime.  The initial web evolution helped globalize the workforce, but didn’t have as much impact on how we could automate processes, mine vast pools of data, leverage mobile applications to interact with our employees, partners and customers.

We have entered an era today where there is real capability to change how we run our businesses – from the back office processing to the front office customer interaction:  we have tools and apps to target and interpret meaningful data, we have developing software solutions to automate and even robotize processes like we never could in the past and we have all submerged ourselves in a mobile culture where all forms of business are conducted on all types of devices and interfaces.  Perhaps even more importantly, cloud-based platforms are being developed which allow us to share these capabilities, re-invent the way we run services and process transactions that require such a lesser amount of human intervention and oversight.

Hence, the onus shifts to the capabilities of our talent to add value to their organizations that are insightful to help base decisions; that are creative, which help try new ways of doing things, or targeting new markets; that are innovative, where their organizations can find entirely new ways of competing, or developing unique products or services.  Whether their work in finance, HR, marketing, procurement, IT, supply chain… their job is to leverage Digital technologies and platforms effectively so they can refocus their time adding value, because the need to people to sit around and fill in spreadsheets all day is being gradually eliminated. People need to do a lot more thinking, and less executing.

Two-thirds of today’s operations talent is falling short when it comes to supporting Digital Transformation

Which brings us to our new State of Outsourcing study, conducted with the support of KPMG and covering the experiences of 312 enterprises, where two-thirds of operations jobs are now under threat. Simply put, barely a third of enterprises today are happy with their internal talent’s ability to drive positive outcomes from their analytical and creative capabilities with their current outsourcing engagements:

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Steps enterprise leaderships should undertake to prepare for Digital Transformation

What’s clear, is that company leaders are bemoaning the lack of capabilities of their operations staff to adopt Digital technologies and provide the acumen to make them effective for the business. If two-thirds of them are not providing the capabilities to help automate processes, analyze meaningful and targeted data, or come up with creative ideas and solutions for the organization, then their leadership needs to take on the following measures:

1) Evaluate the Digital Transformation capability of existing internal staff

The burning issue today is whether people have the capability to change the way their work, as doing things the same old way and expecting different results is the known recipe for failure. Staff need to be evaluated whether they not only have the intelligence to develop their analytical and creative skills, but more the willingness and motivation to do things differently. Simply put, most people in the white collar workplace are smart enough, but whether they have the mental fortitude to change the way they work is another matter.  Future research will tell, but we already see millennials and younger generation staff showing a more Digitally-aligned mindset to how they work, and can embrace their technology environment to be effective. The mid-career people can go either way – some embrace change (or do it through fear), while others just seem incapable of deviating their work habits – and choose to jump jobs than step up to the challenge of actually being better at how they apply their skills to the workplace.

2) Introduce formal training to change the way capable staff approach managing operations

Once organizational leaderships have evaluated the right candidates which want to re-align their skills, then lies the challenge of beginning the training. Consultants can be useful at bringing in organized programs, structured methodologies and smart learning tools, but ultimately organizational leadership needs to drive the change.  The change is more than merely “doing things differently”, it is about thinking differently, it is about changing the work culture.  It is about having staff understand how they are going to be measured in the future, what is expected of them, and how they need to spend their time.  It is about these staff understanding how to embrace the technology toolsets around them to do their job smarter and collaborate with other like-minded staff to come up with better ideas for the business and better ways to achieve results.

3)  Evaluate and engage with existing and future potential partners to create a Digital culture across your organization

Most companies really struggle with change, and only relying on steps 1 and 2 might not be that effective alone. However, the nature of third party relationships can forge a very powerful catalyst to do things differently. The successful providers of the future will be those which can work with their clients to advance their skills beyond transactional.  For example, if you buy finance and accounting services, a provider which only does the transactional grunt work isn’t going to be very relevant in the future when you can get much of the work done using automated technology.

Providers need to be the ones helping develop the Digital mindset with your staff, so they can work with them to be more analytical and creative. They need to provide teams of data scientists and creative thinkers who can work in hybrid teams with your own staff to create a whole new training ground and environment to take advantage of the new wave of Digital. If your current provider cannot offer those capabilities, then evaluates those who can. And these partners aren’t necessarily the usual suspects of today, many of whom have already become legacy (and are only just realizing it).  The partners of tomorrow are going to look very different, may have different brands, working styles, leverage different platforms and tech. Many aren’t traditional service providers, but operate with different models where delivery staff might be in the less traditional locations, or may simply be consulting firms which prefer to work with clients on longer-term service models. They may simply be SaaS vendors with great support capabilities.  The landscape is going to look very different in three years’ time…

The Bottom-line:  The business world is becoming a harsher place to be, and many workers will struggle if they can’t adapt

The talent crunch is already coming.  The old safety nets of years gone by have bigger and bigger holes in them – you only need to look at the job ads and the types of skills smart companies are now looking for to understand quickly how irrelevant you could become if you don’t embrace the Digitally transforming world we are now living it.  It really is time to get with the program, people, or start preparing for an early retirement…

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Digital Transformation, Global Business Services, HfS Surveys: State of Outsourcing 2014, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, Mobility, Outsourcing Advisors, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, smac-and-big-data, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing, The Internet of Things, the-industry-speaks

The world of work has become a very, very different place in just a few short years. Today’s workers need to adapt, develop and promote their skills to make themselves attractive in today’s Digital economy – and savvy employers need to try harder than ever to ensure they are finding staff who can do more than simply transact – they increasingly want people who can think, create, analyze, collaborate and sell; people who are embracing today’s technology to create value to their organization. Ambitious employers want talented workers which can align themselves with where they want their businesses to go, not with the legacy environment from where they are trying to evolve.

So what better strategy to adopt than hire a service provider to take care of this talent headache for you?  Surely it’s time to explain to your HR department that fishing through resumes on LinkedIn is unlikely going to net you the best people?  Surely it’s time to partner with a recruiting expert that can quickly understand your business, the talent you need, and how to go out into today’s people marketplace to find it?

So we tasked our global workforce and talent expert, Christa Degnan Manning, to assess those services providers helping organizations fill their open positions. The Talent Acquisition Services Blueprint is the second in a series of HfS Workforce Support Services Blueprints reexamining and redefining how organizations are creating operating models and solution portfolios to support today’s workforces. And here is how the providers today shake out, after Christa had put them through the HfS Blueprint mincer:

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So Christa, what exactly are Talent Acquisition Service providers and how do they fit in with the overall research you are doing?

A key principle of my Workforce Support Services research approach is that the traditional HR “hire to retire” process-driven solution approach is completely obsolete in the modern workplace. We can see from the Power to the People research few people are actually planning to stay with their current firm until retirement, and they are struggling to focus on the right work to stay engaged and be productive.

So companies have to think differently about how they identify the right workers, support them in their collaboration and development on a day to day basis, and recognize and reward them in more meaningful ways. The first Blueprint we did was on Rewards, Remuneration and Recognition services, earlier in 2014 which took a new look at global payroll, benefits, and employee contact center providers and how they are moving away from simply processing paychecks to really help keep workers focused on work and appreciative of the support they get from the business.

Then given what HfS saw in terms of both the disengagement in the workplace and this massive workforce exodus upon us, I targeted Talent Acquisition Services next. HfS defines Talent Acquisition Service providers as those third-party firms that support companies in the strategy, sourcing, and engagement programs and processes required to attract and activate workers as businesses desire today.

Talent Acquisition Service delivery is evolving from the traditional recruitment process outsourcing (RPO) and contingent or contract work managed service providers (MSP) worlds as companies seek access to more flexible labor pools and talent sourcing and management support models as well.

We know that work is getting done today across an extended enterprise of traditional workers, contract laborers, and third-party service partners, so our new Blueprint explicitly assessed if third-party service firms could support clients across types of labor: staff (traditional full- or part-time employees) and contract (contingent labor).

And to achieve business outcomes of quality of hire, faster time to productivity, or better engagement and retention, these services providers are having to go deeper into traditional talent management areas like workforce strategy and planning, helping clients answer: what is the employer value proposition to potential workers? What makes them productive or retained over time?

This gets into more qualitative issues than simply sourcing and placing workers, so we also looked at capabilities amongst the service providers in terms of how they could support talent strategy and engagement as well.

And what are the important service provider capabilities companies are looking for today?

First, it’s talent. Recruiters who know how to find passive candidates, assessment experts that understand people and organizational psychology, creative communicators who can help identify and amplify a company’s unique employer brand and value proposition, and analytical and proactive account staff that can look across a client’s business as well as network and share with their peers to identify opportunities or challenges and offer suggestions for solutions.

Given the dynamics of hard to find skills and the geographic differences in labor markets, companies are looking for specific talent acquisition focus and sophisticated expertise, including in new technologies.

Second it’s the availability of the technology solutions themselves, particularly social media sourcing and passive talent community development, because firms are no longer simply filling reqs, but supporting the complexities of matching the right people to the right roles at the right time, which is much less of a transaction and more of an on-going supply chain and relationship development set of issues.

Of note, this has meant some early multi-HRO players with administrative transactional models are opting out or just catching up in the Talent Acquisition Services marketplace, while others have successfully doubled down and are being recognized for developing talent strategies and changing outcomes, not just doing support tasks.

Yet new entrants are also emerging specifically to deliver technology-enabled talent acquisition services that support overall talent management objectives like engagement or retention. They don’t even use the term “outsourcing” to describe themselves really, it’s just good service delivery.

So which providers are leading this emerging new Talent Acquisition Services market space?

Companies in the Winners’ Circle were those that have aggressively targeted providing progressive service delivery as we define it and incorporating the use of new sourcing methods and technologies, specifically:

• Accenture – seen as a strategic client advisor with technology, global footprint, and C-level trust
• Cielo (formerly Pinstripe Ochre House) – a growing global player rising to the top of the talent services “sky”
• KellyOCG – leading the industry in adapting acquisition to supply dynamics and methods
• TheRightThing! – an early leader in progressive outsourcing being absorbed by ADP
• Seven Step – savvy strategy and seamless services stalwart poised for greater success
• Neeyamo – a complete human resources outsourcer featuring flexibility and focus
• WilsonHCG – a tech-enabled talent acquisition specialist going global

High Performers were AonHewitt, IBM, Peoplescout, and WNS who are clearly going after talent acquisition clients, but have room to develop either in terms of broader strategy and engagement capabilities recognized and used by clients, or across traditional staff and contract labor support, or both.

Of note, we also include 8 short profiles of companies in the traditional recruiting or staffing agency space that appear to be targeting this market, but shy away from official analyst RFIs.  These service providers will have to embrace new scrutiny though as they ultimately compete against the breadth of technology-enabled business service providers investing in the talent space.

And what are some of the key take-aways of the study, Christa?

In light of all of the changes and challenges in the modern workforce and workplace, I see talent acquisition today as the tip of the spear to broader workforce transformation. To deliver value beyond cost take out, Talent Acquisition Service providers are now being tasked with partnering with clients to acknowledge – and in many cases address – fundamental workplace and workforce issues beyond simply posting requisitions and screening workers. They are having to deal with the issues that impact quality of hire and company performance through approaches such as culture match and soft skills assessments which completely changes the way a company sees and values talent in many cases.

From competitive pay data benchmarks and labor mapping to identifying employee engagement elements and career development initiatives, the bar is being raised against which the service providers are assessed for their ability to impact the quality of hire.  But this also means buyers have to change how they operate and treat people in order to secure and retain the best workers today.

Many of the enterprises I spoke with acknowledged that they are relying on their services partners to both strategically guide as well as tactically support them in on-going talent transformation efforts and it’s going to be a long but ultimately necessary journey – and one they have to take with a third-party to be able to achieve results because they simply don’t have the resources or expertise themselves today.

An interesting aspect of the research you did was to document how fat Talent Acquisition Service providers are along the path to “progressive service delivery”, which we often talk about, can you expand more on this concept?

With the expectations being raised with regard to the business transformation impact from talent acquisition services, more and more buyers say they are collaboratively partnering with service providers who they see as an extension of their own organizations, in many case completely transparent to their candidates and employees.

In this way, talent acquisition buyer/service provider partnerships are exhibiting the acknowledgement and commitment to Workforce Support Service orientations, where they actively work to culturally match the staff on their accounts with the client, find ways to motivate and reward extended teams based on a joint mission to drive business outcomes, and to provide ways they can connect across their organizations and regions as an extended enterprise.

In delivering their services to the marketplace as third-parties specifically sensitive and focused on people and talent, I’d say Talent Acquisition Service providers are leading examples of the characteristics of successful enterprise workforce extension. The service providers in our Winners Circle were recognized for developing an on-going partnership mentality to focus on outcomes not just the “hire” but in securing a well-matched and engaged worker with a positive experience in the business.

Also of note, while a number of long-term traditional outsourcing type contracts were analyzed as a part of this research report, more and more companies are seeking to buy Talent Acquisition Services in shorter contract durations, including project-initiated ways, with an eye to expanding to broader on-going service delivery as their needs dictate – and scaling down when necessary. This was clearly a flexibility that the Winners Circle service providers embraced. They are also very open to having discussions with their partners to add additional capabilities and technologies that ultimately involve new business and pricing models.

With regards to technology, Christa, you’ve called it out as a contentious issue, can you elaborate?

Christa Degnan Manning is SVP, Workforce and Talent Strategies at HfS (Click for bio)

As most early RPO and MSP engagements were tactical and administrative in nature, buyers of services often asked their service providers to use the buyer’s internal enterprise applicant tracking systems (ATS) and contract labor vendor management systems (VMS); others were open to suggestions from their providers or to interact with their proprietary systems if they had to.

Today the market is still split on technologies, some not expecting much beyond what they offer to their service provider staff, others who want new technologies and innovations brought to them part and parcel of the contract. Notably some of the latter are very vocal about who should pay for access to technologies – they say if the service provider team can and should be able to benefit from tech across their customer bases, there should not be separate and equal fees as if they were buying the technologies themselves.

With an accelerating pace of SaaS-based innovation across HR and talent, the use of technology will be a deciding factor in the future success of talent acquisition broadly. I predict the Talent Acquisition Services space will lead a transformation in the SaaS marketplace itself, where SaaS firms negotiate wholesale or volume agreements with service providers so they can help implement and consume the technologies, wrapped by their staff and proprietary service delivery capabilities, and analyze the data that is thrown off and provide advice.

I believe that is the way that enterprises will and should expect to engage with operational capability service providers – not as separate SaaS or outsourcing in and of themselves – in the future.  Don’t you?

Christa, thanks for taking the time to share your new research… we look forward to more of your continued coverage of the global workforce in the coming months.  HfS readers can click here to view highlights of all our current 15 HfS Blueprint reports.

HfS subscribers click here to access the new report, “Talent Acquisition Service Providers – Partners on the Path to Total Talent Management”

Posted in : Business Process Outsourcing (BPO), HfS Blueprint Results, HfSResearch.com Homepage, HR Outsourcing, HR Strategy, SaaS, PaaS, IaaS and BPaaS, Sourcing Best Practises, sourcing-change, Talent in Sourcing

Digital, Digital everywhere and no time to stop and think?

The business world is fundamentally shifting, but do our organizations really need to reinvent their operating models to stay ahead of the curve? Well worry your brain no longer, as we roll out the definitive research study on said topic to understand how today’s enterprise buyers, advisors and providers are approaching Digital Transformation, the current and future expected impact, the technology and business skills that we all need to get the most out of these technologies  – and how this changes the game for outsourcing, shared services and global business services strategies.

Please take 15 minutes of your time to complete the study and we will send you an executive report of the findings – and you can enter our prize draw for a Nexus 10:

As always, we sincerely appreciate your time investment to contribute to our research,

Digitally Yours,

The HfS Research team
@hfsresearch

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Cloud Computing, Digital Transformation, Global Business Services, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Mobility, Outsourcing Advisors, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing, The Internet of Things

Eugene Kublanov, Managing Director for KPMG's Managed Governance Services

Over the years, we’ve had the opportunity to interview many of the key characters who have helped develop and shape the global services industry as we know it today.

And one gentleman who has quietly spent many, many hours in executive boardrooms all over the world helping craft some extremely complex – and sometimes very simple – global services management strategies, is the great bald eagle of sourcing himself, Eugene Kublanov.

And when Eugene hasn’t managed to get his family lost somewhere in the wilds of his adopted Arkansas or coaching , he is busily growing and developing one of the industries’ first platform-based managed governance services solutions at KPMG.  So, in a long overdue interview, we a delighted to have Eugene with us today to give us his own story…

Phil Fersht, CEO, HfS Research: Good afternoon, Eugene, and thank you very much for taking the time with us today. I think we first met seven or eight years ago, and I seem to remember that you were running a lot of outsourcing engagements and offshoring localization work. Can you talk a bit about your background and how you got into this business?

Eugene Kublanov, Managing Director, Shared Services and Outsourcing Advisory, KPMG: Sure, Phil. Thank you; I appreciate the opportunity to catch up. I started in the outsourcing advisory business in 1999, and that was really through a combination of circumstance and accident. I had spent the early part of my career at a consulting firm advising clients on market entry strategies for the former Soviet Union, living and working in Russia for a good bit of the ’90s.

Then in 1998, when things sort of came crashing down in that part of the world, I went back to school and was recruited by a firm called neoIT. A few years after I joined, the dot-com bust forced the company to rethink its mission and business model. We realized that clients really valued our knowledge and expertise as it related to nontraditional IT providers, locations, cultures, and the mechanics of getting the whole offshoring model to work right. We also realized that the VC community had closed its wallets for the time being. So, we evolved into the first offshoring advisory firm.

I spent nine years at neoIT, the last two as its CEO, and I had the opportunity to work with some very talented professionals who have in their own right taken on leadership positions in the industry today in client companies, advisory firms, and provider organizations. Then in 2009, a good friend and neoIT colleague, Cliff Justice, brought me into KPMG to help launch its Shared Services and Outsourcing Advisory practice.

We grew the practice from a handful of us in 2009 to nearly 1,000 shared services and outsourcing advisory professionals globally. Along the way, we’ve had some great milestones, none more significant than our acquisition of EquaTerra in 2011. Not only did we exponentially grow our ranks, but we also added incredible talent to our mix that has helped us innovate and establish a market leadership position.

Today I lead KPMG’s Managed Governance Services solution, which is a platform technology-enabled service that helps clients be more effective in managing their portfolio of outsourcing providers.

Phil: I remember NeoIT well – it was a smaller advisory boutique . . . very hands on, and you guys were hustling for deals. How did that compare when you went into a big company like KPMG, and how has that been for you?

Eugene: The first thing you realize when you go from a boutique consulting firm to a Big Four is how much risk actually exists in the world. After two weeks of online courses on security, risk management, and independence you realize how much of a tight rope you were walking on before.

After the initial learning period, I began to witness a really interesting phenomenon that I’ve now seen numerous times as new professionals join our practice and the broader firm—a really healthy balance of core KPMG culture and the entrepreneurial spirit you see in boutique firms taking root. It happened with me, it’s happened with our EquaTerra acquisition, and it’s been evident in the numerous acquisitions KPMG has done since I’ve been here.

This blended culture has created an environment where we are learning to move faster and yet we are still very much grounded in managing risk and meeting regulatory requirements. So for me personally, I think it has been a phenomenal learning journey, and one that has made me a more well-rounded professional.

Phil: Talk to me about the governance practice which I know you have now been very intimately involved in growing and building, over the last few years. This must be a very hard concept to sell to clients, convincing them that they need real help externally with managing their relationships and governing their operations. How is that faring?

Eugene: That’s a good question, Phil. It is interesting, in the last five or six years that I have really been focused in the governance area, there has been a noticeable change and shift. There are two types of clients we see today. The first type are The Indoctrinated. These are organizations that really understand the value of effective governance. Their understanding typically comes from past failures to meet business cases, poor customer satisfaction, operational breakdowns, regulatory and internal audit findings, and contracting nightmares. The second type are The Unindoctrinated. These are organizations that have not yet realized the value of effective governance. This may be the result of their early stage in the outsourcing life cycle, a lack of focus, a lack of talent, or a lack of realization that managing the vendor relationship is ultimately the only way to create sustainable value.

Frankly, we have a difficult time convincing The Unindoctrinated to consider our Managed Governance Services solution. Our typical clients realize that effective governance is hard, requires specialized skills, enabling technology, a process orientation, data, and above all, a disciplined approach that spans the term of the vendor relationship. For The Indoctrinated, we have been able to help take their overall outsourcing programs to an entirely new level.

As we look out over the next three to four years, we are really bullish on how we can continue to create value for our clients and build our business. Based on HfS’s projections, the outsourcing industry will continue to grow at a healthy clip reaching over $1 trillion by 2017. Managing the increasing outsourcing scope will need to be a priority for clients to achieve their overall business objectives, and we are well positioned to be the provider of choice.

Phil: Eugene, let’s talk about when clients start to get really interested in governance support services. Is it typically two or three years after a transaction that they really start to struggle to manage the operations effectively, or are you finding the challenges set in sooner in the process? When are you typically bringing new clients on board during the sourcing lifecycle? 

Eugene: That is a good question, Phil, and it’s a bit of a scatter-shot in that regard.  Everybody from the analyst to advisory community is still working on educating clients on the value of governance. I would say the leading organizations that are progressive and experienced in this area have developed a strong sense of what it takes to be successful at outsourcing and shared services. These organizations are typically beginning to think about governance during their strategy phase and certainly before they source. They have already committed resources to estimates around financials, resourcing, and what it would take to run this model after it is stood up. Unfortunately, I think the majority of clients typically wake up to the need for governance somewhere in the early to mid-transition stages. These are the companies likely doomed for an early renegotiation with their service provider. In the worst case, they wake up to a governance nightmare six to nine months after finishing their transition phase.

Phil: I know your firm has been talking a lot about GBS and integrated service portfolio management. Are you seeing a stronger amount of attraction between what you are trying to drive at MGS and the broader GBS initiatives, or do you think the two still haven’t quite intertwined yet?

Eugene: They are very much intertwined. In fact, as we work with clients on GBS transformations, we apply a model that consists of eight key dimensions and governance is very prominently one of those elements that needs to be in place. Our belief is ultimately that without effective governance, the GBS model begins to break down over time. There have been cases where companies have stood GBS models up, but didn’t put into place the type of governance needed to run it efficiently and effectively, and they have had to essentially backtrack. That becomes a very expensive proposition. We definitely see GBS as the future and a direction that will allow companies to take their first, second, and third generation of outsourcing and shared services initiatives to create the next level of value from those models. To do that, organizations will need to rely on good governance as the bedrock for GBS.

Phil: As you mature your governance capability, does this mean that you might end up as a kind of service provider for clients to help them manage their providers? Is that the big vision here, that you might become the GBS outsourced managed service office for clients?

Eugene: That’s definitely a possibility. Frankly, I think we are well positioned to play that role. As you know, we don’t provide ITO or BPO services, so we have that unique position of being a neutral advisor in the marketplace. We believe that this is the type of position or role that could really make us very effective as part of the governance engine for GBS organizations.

Phil: What do you think about the role of technology to enable these types of services? Do you feel there is a huge amount of potential out there for clients evolving onto new platforms?

Eugene: Yes, we definitely believe that technology enablement of the GBS organization is absolutely essential to getting full value. So whether it is BI and visualization tools used to enable data and analytics, or business process management tools to enable effective rollout and continuous improvement of global processes or service management tools that enable catalogs and fulfillment, getting the technology mix right is key to GBS success.

As we look at the governance area of GBS, this is where our Managed Governance Services solution plays a key role in helping clients address everything from performance to financials to contract to relationship management.

Phil: Thanks, Eugene – it’s been great catching up again, and I am looking forward to sharing this with our readers. You have been a good friend to HfS over the years, and it will be great to finally get you published on the site. Thank you very much for your time today.

Eugene: Thanks, Phil – we love what you guys are doing at HfS and are happy to contribute!

Eugene Kublanov is Managing Director for KPMG’s Managed Governance Services.  You can view his bio here.

Posted in : Global Business Services, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Advisors, Outsourcing Heros, Sourcing Best Practises

No industry has been, is currently – and will continue to be – so wholly and fundamentally disrupted by impact of Digital Technologies than retail. And how can retailers survive and prosper in this post-Amazonization world where good ol’ firms like Radioshack and Brookstone are on life-support? How can they constantly stay ahead in an environment where the channels to market are forever blurring, the places to market and advertise are increasingly complex to understand and target, and the supply chain strains to respond to increasingly unpredictable demand signals from ecommerce and social media, in addition to traditional retail channels.  Staying ahead of the retail curve is harder than ever, but the rewards are also potentially much greater for those which uncover new market channels and make sense of the proliferation of available data.  In order to extract some sense from this intricate market, HfS analyst Reetika Joshi set about developing a Blueprint analysis on the space…

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Reetika, how did this market evolve and what is driving buyer interest in Retail Operations today?

The retail operations marketplace has evolved over the last decade in an opportunistic manner. Buyer demand has primarily addressed traditional IT services and horizontal BPO needs (including customer service, finance & accounting and human resources outsourcing). In the last five years, buyers and service providers have also started to venture into outsourcing retail-unique processes to a limited extent. These include service support for areas such as storefront operations, merchandizing and replenishment, ecommerce channel support (content, web development and customer service) and supply chain processes. Buyer interest in these core services support area is being driven by four key imperatives for global retailers today:

1. Cost Reduction – Reducing cost and creating process standardization in a low margin business, especially for large retailers
2. Surviving the ‘Amazonization’ of retail – Digital retail and developing a progressive digital roadmap (strategy and execution) that aligns ecommerce and brick and mortar operations. This includes not only the integration from an inventory management standpoint, but elements that affect customers that outsourcing can address, such as cross channel pricing and promotion and merchandizing opportunities.
3. Creating a future-proof supply chain – Bringing visibility in supply chain operations, streamlining inefficiencies across geographies and units, improving forecasting and time to market. As supply chain management (SCM) becomes more complex, there is more of a need for proactive monitoring and reporting and dashboarding, customer impact visibility, cost, etc. This creates a demand related to SCM particularly in the analytics space.
4. Elevating the consumer experience – Winning and retaining loyalty of fickle consumers, increasingly the ‘digital natives’ with their heightened expectations for same day deliveries, real time promotions and personalized in-store engagement. This is the most direct opportunity for service providers to pitch next-gen outsourcing services in omni-channel support, as retail has more consumer facing operations than back-office operations thus far.

To address this sea shift in retailers’ business models, service providers have had to go beyond services typically classifiable as ‘BPO’. We see buyer interest develop in areas that have more consultative and technological components along with service support. E.g. consulting/re-engineering services to help optimize supply chains, spend management or formulate digital roadmaps. To add to this mix, service providers have started to push technology-led solutions including point-solution toolkits, analytics products and platforms alongside services support.

And how did the Blueprint analysis turn out?

Reetika Joshi is HfS Research Director, Industry BPO and Analytics Strategies (click for bio)

Overall, the clusters of companies in this Blueprint analysis are hedged somewhere in the middle of our map, reflecting the relative nascency of this market and its future potential. The Winner’s Circle service providers represent a diverse mix of origins, approaches and strategies for servicing the retail market. Cognizant, with a robust retail consulting and ecommerce practice, brings thought leadership, an array of retail-specific technology enablers and focus on digital support. Sitel has customer experience management expertise and a collaborative approach towards driving global best practices in retail customer engagement. TCS demonstrated technology expertise and along with its acquired captive retail assets, it brings ecommerce thought leadership to an expansive retail clientele.

Similarly, the High Performers in this study also represent a mix of multi-dimensional strengths. Infosys, Wipro and Tech Mahindra are continuing to expand their range of work with retail clients beyond IT services and are making the most investments in retail analytics and select core process support such as storefront operations and supply chain management. Concentrix, Sutherland and WNS are looking to leverage their analytics capabilities and customer experience management presence in retail to add new logos and update solution sets through new technology enablers (automation, social tools, etc.)

So what are your key takeaways from this study and what should we be watching for in next few years in retail operations?

We believe the retail operations market is set for rapid growth in the next 3 years. This will be largely driven by the impact of digital requirements for retailers which will lead them to look for more and more external support. On the service provider side, this is an interesting space to watch because as a relatively new market, these companies can really build differentiated services portfolios by strategically alinging to what we call ‘progressive operations’. As discussed above, buyer needs goes beyond traditional ‘BPO’ delivery, and as service providers carve out their solutions in this space, they have the opportunity to invest in comprehensive analytics led service delivery, process transformation (especially for supply chain and ecommerce engagements), collaborative partnerships and investments with retail clients that bring together modern technology components to impact business outcomes. Some other observations we made around this market are outlined below:

• The ‘vertical’ retail story has a long way to go. Over the years, service providers have developed significant relationships with global retailers through IT services or horizontal BPO services. While they may have verticalized their businesses to align with client industries, we do not see the same level of maturity in well-thought out retail value chain services support as with other verticals such as banking and insurance. Industry alignment will help service providers bring domain experience to effect core industry outcomes across IT services, business processes and consulting for retailers, but only in the medium-long term.
• Digital proliferation is placing new demands on managing the customer experience. Retailers are looking to service providers most notably to help them address changing customer channel preferences, ecommerce and brick and mortar integration and the nuances of digital marketing. With this study, we saw the most demonstrated capabilities of innovation from these three areas. Service providers are aggressively trying to differentiate their CEM offerings by weaving in technologies that address digital (e.g. gaining a single view of customers, social media monitoring and promotions). Some service providers are starting to productize their offerings such as omni-channel customer analytics recommendations engines, monitoring tools, etc. Success here will hinge on the ability of a service provider to integrate insights back into campaign strategies, provide consultative marketing support, and ultimately transform traditional CEM processes to align with its retail clients’ digital roadmaps.
• Multiple delivery models developing to cater to the seasonal variability of retail demand. Retailers have the highest demand variability among industries for customer engagement management (CEM) services,creating staffing, retention and quality issues over the years. We are seeing certain service providers try and address this with alternate delivery models that have been appreciated by clients in our study. Examples include relying on a much higher percentage of work-from-home agents that are retained long term, and leveraging part time university talent pools in nearshore destinations. The challenge of seasonality is not going to go away and cracking the code on it has the potential to impact revenues at peak times – making retailers particularly amenable to working with innovative service providers in this area.
• Consolidating technology investments across the retail value chain. During our analysis, we observed multiple examples of service providers opportunistically funding/co-investing/piloting technology investments with retail clients. Some of these have resulted in productized offerings in the last couple of years, such as cloud based trade promotions management applications, analytics platforms for ecommerce revenue optimization and supply chain visibility. This approach can be helpful for establishing the business case for certain emerging technologies (e.g. in-store iBeacon mobile technology applicability). However, service providers must craft and more importantly, communicate a well thought out strategy for impacting the retail value chain through technology beyond these siloed projects.  What this market doesn’t need is a wide variety of client specific solutions that lack ongoing investment and roadmaps, instead we need to move to more consistent business platforms that span across clients.  This will call for service providers to actively enable their non-competitive retail clients to collaborate and contribute towards new solution development and a wider understanding of existing core service capabilities, where applicable.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Digital Transformation, HfS Blueprint Results, HfSResearch.com Homepage, IT Outsourcing / IT Services, kpo-analytics, Mobility, smac-and-big-data, Social Networking

We woke up this morning to a wonderful endorsement from the mighty Gartner for all the hard work the HfS team has been putting into developing our HfS Blueprints over the last couple of years, when we proudly launched our revolutionary HfS Blueprint crowdsourced methodology for evaluating business and IT service providers.  Yes indeed folks – Gartner has announced it is doing its own “Blueprints research”!

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Since we released the first Blueprint Report almost 18 months’ ago, the HfS Blueprint has become one of the industry’s best known and most popular methodologies for assessing provider capability and competitive market landscapes, with fourteen Blueprint reports now published (you can view all the HfS Blueprint highlights here).  Enterprise buyers have used the Blueprint Reports exhaustively as an assessment guide for their provider portfolio management, and many advisors rely on it to sanitize their own provider selection processes with their clients.

So does this mean Gartner will take onboard the key tenets of the HfS methodology, in addition to leveraging the broad community data we gather from 1000’s of industry constituents, when it develops its own “Blueprints”?  Let’s recap how we develop and execute on the HfS Blueprint methodology – and you can make up your own mind whether you think Gartner will deviate away from its Magic Quadrant process for assessing tech suppliers:

The Tenets and Objectives of the HfS Blueprint:

• To assess services providers without being reliant on the arbitrary viewpoint of a single analyst;
• Provide a credible methodology (see here) to gauge the performance of service providers against “real” innovation and execution capabilities;
• Deliver a performance assessment of providers that apportions importance weightings of each innovation and execution category based on data from our annual State of Outsourcing Survey, conducted with the support of KPMG, covering 1200 enterprise buyers, influencers, advisors and provider executives each year;
• Evaluate performance assessments of providers where exhaustive inputs from buyers and influencers shape the scoring (not solely a handful of rose-tinted client references that the providers served up themselves);
• Enable a customizable assessment tool where enterprise buyers re-calibrate the weightings to assess their provider-fit based on their own unique needs.

Good luck Gartner – we can’t wait to see these new Blueprints of yours’ hit the market!

Posted in : Business Process Outsourcing (BPO), Confusing Outsourcing Information, IT Outsourcing / IT Services

We have heard a lot about Apple’s manufacturing outsourcing, where the firm has ~500,000 people subcontracted via Foxconn in China to crank out its iPhones, but very little about its IT outsourcing habits.

So… does Apple also leverage large scale IT outsourcing? If answer is yes, then what kind of IT outsourcing is done by Apple, and how it has been changing with time?

With these questions in mind, our ever-curious India-based analyst (note: also keen novelist now seemingly developing a penchant for investigative journalism), Pareekh Jain, started studying Apple’s IT outsourcing initiatives, and the results surprised us: Apple doesn’t outsource its core software technologies that go into its products, but it does outsource Enterprise Applications, Business Intelligence, ADM and other software initiatives to a combination of TCS, Infosys, Wipro, TechMahindra and Exilant (which we know of). Quite simply, as Apple is growing, so is the scope of its Indian-centric IT outsourcing to support it’s ever-increasing needs.

Another related aspect that cropped up during Pareekh’s research, is the increasing use of global engineering talent by Apple. According to our estimates, Apple leverages Indian engineering talent heavily as indicated from its sizable H1B and GreenCard applications.

We shared our research findings with Times Of India (The World’s largest English daily newspaper), which went as far as a story on this interesting little topic on today’s front page.

We’ll be sharing our research report on Apple’s outsourcing  strategy with our readers shortly….

Posted in : HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, Procurement and Supply Chain, Talent in Sourcing