
If you enjoyed our recent interview with Mike Salvino, you better get that Twitter following cranked up asap…
Click here to listen to Friday’s excellent web-discussion involving HfS Research’s own (and definitely not SOPA-rific) Jim Slaby and Terametric’s tera-fic Chris Selland.
And for those of you who can’t be bothered, here were the main points of note:

* SOPA/PIPA have worthy anti-piracy goals, but are highly problematic in technological, political, legal, and commercial terms. They would shift considerable cost and liability for policing copyright-infringing websites and links onto businesses that aren’t engaged in piracy.
* SOPA/PIPA reflect the media & entertainment industry’s latest effort to assert control over the Internet as a content distribution channel. This is fundamentally at odds with how consumers and businesses now use it, and would crimp many valuable, legitimate commercial uses of the Internet, not just piracy.
* The many objections to SOPA/PIPA demand a smarter, more technologically-savvy, less one-sided approach to fighting piracy than this onerous legislative one. Better enforcement of existing copyright laws and pursuit of new entertainment-industry revenue models were among the panel’s suggestions.
So if the lovely SOPA legislation gets passed, here’s what would happen to HfS:
So, without further ado, here’s our security analyst, Jim Slaby, explaining why this legislation is akin to cracking a walnut with a sledgehammer…
If you were surprised to find Wikipedia offline yesterday, you weren’t alone: many Internet users were unaware of the widespread one-day online protest against SOPA and PIPA, two bills before the US Congress designed to fight online media piracy. Participation ranged from outright shutdown to the display of prominent protest messages or symbols. High-profile players included Wikipedia, Craigslist, Google, and many media sites, but thousands of other less-trafficked sites also participated.
What got them up in arms? The Stop Online Piracy Act (SOPA, the US House of Representatives’ Read More
“We did our BPO deal in 2005 and now we’re reaching our 7 year-itch”, confided a client governance executive last week. “Essentially, it’s operational – it works – but we’re now trying to focus on the what next. How can we find new value and new ways to tie our BPO operation to our company’s growth and renew the enthusiasm and passion of our staff?”. No single sentence has reinforced how far the BPO has come – from tales of woe and messy delivery in the mid 2000′s – to clients today complaining they’re getting bored?
The BPO industry has been going through such a remarkable evolution since the first major deals were cast barely more than a decade ago, that it’s high time we took stock and considered the phases – or generations - through which our industry has progressed.
And there are few people who have lived and breathed these generational shifts more closely that Accenture’s BPO leader, Mike Salvino (or “Sal” to those who know him). Having begun his career with Accenture’s ITO business in the late 80′s and 90′s, Mike spent time on the BPO front lines with one of the industry’s first pureplay BPO providers, Exult, before leading the HRO sales organization post their merger with HR services giant Hewitt. Mike rejoined Accenture in 2006 where he led their F&A business before taking full responsibility for the company’s entire BPO function.
We managed to grab a few moments with Sal to discuss these generational shifts in the BPO industry before he had to run off to coach his kid’s basketball team…
PHIL FERSHT: Mike, when we spoke two years ago, our discussion focused on what you termed third generation BPO, which is a vernacular many others in the industry are now using. But I know your thinking and Accenture’s delivery model, has evolved quite a bit since then and you’re now talking about fourth, fifth and even a sixth generation. Please talk us through this evolution and these new and upcoming generations of BPO.
MIKE SALVINO: Third generation BPO, where some of the providers and their clients are a bit stuck, Read More

Would you kindly stay on the line to complete a brief customer satisfaction survey?
The main feature of 2011 was all about the demise of quick cost reduction as prime driver behind global sourcing, and the focus on enterprises establishing a flexible global operational framework that can be effective in today’s environment.
Yes, cost prudence is always an ongoing concern, but it’s no longer the differentiator; today it’s embedded in all forms of operation strategy and planning. Hence, this means enterprises’ prime focus is fast becoming global and not solely about being low-cost. This also means providers need to service their clients as global partners with global delivery capability.
To this end, HfS Research Fellow and Sourcing Change protagonist Deborah Kops completes her investigation into the dominance of India in the world of outsourcing, and whether or not the game’s up for non-Indian providers to come back into the picture. Over to you, Debs…
You don’t have to be Indian to be a global outsourcing provider!
In The Sourcing Raj Part I, I ticked off the reasons why non-Indian providers have had a hard time cracking the offshore outsourcing market. Indian players not only have a good 10 years’ head start penetrating the market, a brand that makes India and outsourcing virtually synonymous, and an unparalleled onshore network of buyers and influencers that all know the secret handshake. But the good news for non-Indian providers is that the global economic map will continue to evolve, making it imperative to implement a portfolio approach in response to changes in markets, availability of talent, cost and other considerations. Those players with the stomach to check nationalism at their borders and follow a few simple rules can nip at the feet of the Sourcing Raj. Read More

A special thanks to Sutherland’s Matthew Heffron for sending us this little ditty. Check out his excellent BPO video blog Sourcing Sage.
One of the highlights of 2011 was that great web-debate on the Future of BPO where 1,100 people across the globe dialed in to hear from our buy and sell families. Like any typical extended family at Thanksgiving, they cussed and discussed about the trends and challenges buffeting BPO. They passed the peas and offered some pretty unbridled opinion and insight. Visit the BPO Resource Center to download the highlights…
Here are some “horses” memories as a big chubby thank you for all of your support this year… Oh – and turn up the volume
“Is nothing sacred anymore”, I thought, as I received my 200th holiday greetings e-card from some person I have never heard of, trying to use the opportunity to have me tell me about his company’s incredible achievements in 2011. Buddy – if you want to sell me something, or tell me how great your company is, just send me a pitch claiming you’re the best – and I may even read it. But pretending you know me and using that as the guise to get my attention, just incites me to press that delete button and not give you a second of my time.
This is just one example of how social media is driving the human element out of our business interactions. There’s just too much interaction out there, too much opinion, too much self-promotion and – let’s face it – too many bloody people with seemingly nothing better to do. Come to think of it, I don’t think there has been a time in my career when I’ve known so many people who I can’t figure out what is it they actually do all day, how they make any money for themselves, or others. And I can’t figure out, for the life of me, why some companies pay some people to do what it is they supposedly do all day.
In fact, I probably spend more time avoiding people these days than trying to network with them – few seem to have anything interesting to say, any new ideas about where the world is going and simply are following the commonly agreed set of “industry trends” that most people have been force-fed by industry influencers who are running out of sexy new ideas (or ran out a while back, and are bumbling along on empty until they find something new to grab onto).
What happened to the times when peoples’ opinions mattered – even if they were wrong, or were just plain off-the-wall? Economic and political paralysis, exacerbated by inane electronic social networking has sapped so much of the passion, creativity and enthusiasm from our professional lives. I find myself increasingly spending time with people who are interested in sport, music, movies or just playing with the kids, because at least there is enthusiasm and passion there. But going out for dinners with faceless executives to talk about cloud-bloody-computing – and how it is going to change the world… without being able to explain why, just that it will, because they need to sound cloudy… don’t get me started!
What we need is a dose of renewed optimism, that our world has an exciting future, that there will be areas for renewed growth, renewed innovation, renewed opportunities. That we have exciting careers where we can constantly find new challenges and invigorating things to do. Have you ever known a time when so many people cling to the job they hate because it’s the only way they know how to make a paycheck these days, and are too nervous to even consider a new challenge? Too many people are stuck in a professional status quo – and have been since the 2008 crash scared the professional lives out of so many. I have lost count of the number of people who are just plain miserable in their jobs, have lost confidence in their management and their companies’ offerings and directions, and are losing that spark and desire to find something that will give them that renewed energy and that passion? Many people seem to be so jaded these days, and it worries me that they will struggle to ever be truly energized and passionate about what they do again.
So let’s make 2012 the year of getting passionate again! Let’s dig deep to be honest with ourselves about what gets us up in the morning – what will make us look forward to going to work again. Paralyzed politicians won’t come with the answers, and neither will directionless corporate managers – only you can summon up the courage and passion to make a difference. Take a risk – jeez, take a pay cut if you have to – but if you lose your passion for what you do, you’ll find it harder and harder each year to get it back.
Well, another year goes by and HfS yet again escapes any legal action, terrorist attacks at our office, or disappearing bodies, for being thoroughly unafraid to call the industry on its issues. So let’s reflect some of the defining outsourcing moments of 2011…
January
Ditch Procurement!
Deb Kops began the year in feisty fashion by declaring war on the procurement function… Is traditional procurement deeply involved in M&A activity? Corporate strategy? Business transformation? Not a chance. While our friends in the CPO’s office have an important role to play in procurement process and governance, they cannot be the major arbiter of taste when it comes to sourcing true corporate change.
RIP Joe Vales
The nicest guy in sourcing – and one of the best marketing guys you’d ever met – Joe Vales, sadly passed away… An avid fan of HfS, he will be sorely missed by us, and am sure many of you will be equally saddened by his passing. He was a sweet and lovely guy, who loved his work.
Impatient Premji plays catch-up
You won’t see a CEO being removed after achieving a double-digit growth rate too often, but that’s just what happened, when Wipro’s co-chiefs Suresh Vaswani and Girish Paranjpe were replaced by TK Kurien… So will Premji’s impatience to produce numbers as stellar as his competitors be rewarded, or has he already missed this phase of hyper-growth in offshore services?
February
EquaTerra + KPMG – a new era, or a new error for outsourcing advisory?
KPMG became the only “Big 5″ management consultant to buy a boutique sourcing advisor… The outsourcing advisory business is all about talented people, experience and relationships. It would have been extremely messy if KPMG had tried to hire away these folks one-by-one. They have retained the top talent and have created careers for them within their organization. Quite simply, there is a really bad (and worsening) talent shortage in our industry, and KPMG has just snapped up a good portion of it in one full swoop.
March
So what on earth does the future hold for sourcing advisors?
Esteban Herrera doesn’t hold back when he declares, “Twenty-five years at EDS may have made you an expert at outsourcing IT, but it did not teach you how to run a recalcitrant back office environment that is just plain hard to optimize.”
HfS takes a deep look into Latin America’s sourcing capabilities
Clients attest to lower attrition levels and fewer site visits, and when they were required, these site visits as part of the governance were much easier to do—these and other soft factors impact the total cost of ownership. Download your copy of the report here.
How 10-year-olds explain Cloud Computing
The most concise way anyone has succeeded in describing it. One has aspirations to make a video game that features a villain with a head made of cheese puffs.
April
Are you ready for… The HfS Private Cloud Challenge? Answer = No Read More

Do you procure this Australian as your lawfully wedded category specialist?
As we discussed recently, these are pivotal times for Infosys’ BPO division, as it looks to surpass half a billion greenbacks in revenue this year.
And when you look at the overall performance of Infy’s development in BPO, surprisingly only a third is coming from the foundation horizontal of most traditional BPO providers – finance an accounting. Impressively, Infy has developed its strengths in less mature BPO markets, such as financial services and, surely the jewel in its recent performance, sourcing and procurement.
Moreover, Infy has been growing footprints in its clients by linking together supply chain and customer management processes, such as supply chain visibility, inventory management, logistics optimization, integrated service management, demand planning, order management and aftersales services – bolstered by its analytics competences.
With its sourcing and procurement (S&P) practice up to $40m this year – not an insignificant size in this immature market, especially when you bear in mind they have built this service line from practically nothing in four years – Infy has made its first substantial investment in the sourcing and category management space, picking up the lead Australasian provider Portland Group for $37m.
Why is this significant? Read More
In case you missed our joint webcast with Ed Caso of Wells Fargo Securities on Friday, fear no more, as here’s the replay. You can also download your copy of the slides here.
And if you can’t be bothered to listen to any of it, here were some of our predictions* highlights:
1. Outsourcing Providers will shy away from mega-mergers
2. European market going to be in limbo for first half of 2012 with limited major outsourcing contract signings, due to economic paralysis
3. Threat of recession will hold back one-in-four buyers from signing contracts until current economic uncertainty lifts
4. Buyers are looking more broadly than simply outsourcing to drive productivity improvements in today’s climate
5. Buyers will seek assistance from advisors with sourcing strategy, governance and Cloud
6. Focus shifts from cost savings to standardization, global flexibility and better technology
7. Many Advisors and Providers will still be overly-focused on Cost-Reduction for their clients, as opposed to process improvement and innovation
8. Global Companies need more Global Support
9. 2012 to be Year of the Mid-Market
10. Account Management of outsourcing to take Center Stage
* All these predictions have already expired and no longer valid
There will be technical weenies that exhort today’s acquisition of Emptoris by IBM as yet another acquisition that will cause cosmetic commerce IP networks to collide in a dizzying array of cloudy business models. With $20 billion allocated to their acquisition war chest, IBM’s incoming CEO clearly intends to accelerate commerce particles until a thick blue fog settles around us all. The most technical of these weenies will explain this acquisition with their aaSes (PaaS, BPaaS, and SaaS) leaving procurement geeks with an impression it is all a stinky game of charades.
And then there will be the procurement weenies that scratch their heads and wonder why anyone would want to run a reverse auction for enterprise software on a platform managed by the service provider competing in the bidding. Especially when eRFX management, Emptoris’ bailiwick, is widely available from a long list of competitors who are busy pricing themselves out of business. Frankly, it wouldn’t be surprising to see a $0.99 iPhone app for strategic sourcing. Except, they’d soon be confronted with the king patent troll of all patent trolls, the so-called inventor of competitive bidding. LOL.
So what’s the skinny on this marriage of Emptoris and IBM and why should you care?
The story begins with Procurement BPO. For a long-time the red-headed stepchild of the $50bn Finance and Accounting BPO market, Procurement BPO has silently grown into a respectable market with more than 400 deals with an estimated expenditure of of $2.5 billion this year. It is primed to be the most widely-adopted virgin BPO category at the enterprise level, with a fifth of them exploring first time adoption over the next year (Exhibit 1).
Exhibit 1: Procurement BPO tops Enterprise buyers’ outsourcing intentions for new areas of adoption

Procurement BPO is a real winner in the marketplace because service providers have proven capabilities that internal procurement executives have toiled against all the odds to create. Casting off the shackles of labor arbitrage, Procurement BPO service providers bring heavy category expertise to bear in sourcing events and category management. The results are impressive – the Read More
Remember the HfS 25, that elite group of 25 fine sourcing governators, brought together to debate the future of outsourcing? Well, after exactly one year, sadly it is no more…
…because it’s now the HfS 50! Yes, the fiftieth organization has signed up and we’re very, very excited to announce our inaugural HfS 50 event to take place at New York’s Soho Grand next April 24th-25th:

This is going to be a defining two-day working session for power-brokers of the outsourcing industry, where leading buyers of both ITO and BPO services will confront today’s critical issues impacting outsourcing, to establish a Blueprint for the industry in 2015. And this time, we will have a vendor/buyer face-off session where leaders from six of the major service providers will join the debate.
Key Highlights
*The next generation account manager—making the role work for both parties
*The next generation governance executive—making the role work for both parties
*Disrupting the vendor/client model – getting better visibility and transparency into each others’ pain-points
*Trends—what is around the corner for the industry and what will it look like in 2015?
*Trust—what has worked in building trusting relationships – and what has not?
*Community sourcing—how can social media and community networking drive better cross-client collaboration?
*Global Business Services frameworks—the next wave of value-creation, or glorified change management?
*The realities of disruptive sourcing: What is really going to change the game and how can these be effective:
Do you have what it takes to make an impact?
If you are a buy-side sourcing governator and would like to get involved with the HfS 50, or a lead service provider executive, please email Tom Ivory for more information.
We hope to see many of you in New York in the Spring!
The outsourcing industry is a labor arbitrage bubble waiting to burst. And today’s smartest buyers and service providers are poised to fatally pop it and build a better future.
We know that buyers were accomplices in the run up. After failing to invest in their operations, buyers saw limited value in their business functions. Accounts payable teams were overwhelmed with paper, finance teams struggled with creating process rigor, and human resources teams bungled global resource management.

Struggling with recent macroeconomic issues, buyers simply didn’t have the time or resources to reengineer for greater value. So, they threw in the towel and asked service providers to manage their processes for them at a lower cost. To them, reducing the monetary size of their cost centers was success.
IT was no different and they were the biggest buyers of expensive labor. Their internal customers furiously revolted against swelling technology wai$tline$ and the lack of an “application development factory” mentality. So, in the midst of economic haircuts, CIOs surrendered by outsourcing their staff to offshore companies that brought CMM and ITIL process rigor. Yet, these efforts did little to simplify underlying application and infrastructure platforms that drove their high costs.
Have no doubt – labor arbitrage provided everyone immense value. Yet, at its best, labor arbitrage Read More
“On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity…”
… and what better way to announce an exciting promotion than this quote from capitalism’s founding father, Adam Smith that, well, pretty much sums up how the outsourcing industry needs to evolve beyond its labor arbitrage model. Yes, at HfS we sure this is what Mr Smith was really referring to when envisioning the wealth of nations over two centuries ago.
People keep asking me what makes HfS different from other analyst firms. Rather that take you through reams of cheesy PowerPoint to demonstrate our unique ways of developing and actioning data and insight, let’s cut to the chase: what makes us different is our people. Essentially, we have a mix of personalities at HfS who come from practitioner, consultative, service provider and analyst firm backgrounds. We don’t just hire kids and stick them in ivory towers, or professional ivory tower-types who just like sitting in their….er ivory towers. We focus on the practical, as well as the insightful:
Our core mantra at HfS has always been to tackle the issues and complexities of global sourcing through the eyes of the buyer. One analyst who has spent nine years of his life doing just that, leading BPO governance for the $62 Billion healthcare payor, WellPoint, is our Governator himself, Tony Filippone.

Tony "The Governator" Filippone, concealing a baseball bat, is HfS' new Executive VP for Research (click for bio)
No single person in 2011 has written to – or talked with – more buyers about their governance challenges, and we are delighted to reveal to the world today his elevation to Executive Vice President of HfS’ research team. Tony’s role, is to ensure all our research is communicated to the buyer (and not the puffy stuff only advisors and providers pretend to understand). He is also tasked with pulling our ongoing data on industry trends and dynamics from our 63,000 network and making it meaningful and actionable to the world. And his ultimate religious quest is how to figure out, with the rest of the industry, how the hell we can all move on from the labor arbitrage model… so without further ado, I’ll hand you over to Tony, who tweets (click to read on):
@The_Whole_Outsourcing_Industry: Labor arbitrage built your house of cards. #Bubble What’s next?
We’ve teamed with our esteemed industry colleague Ed Caso, Managing Director and Senior Analyst for the IT/BPO Services Equity Research Team at Wells Fargo Securities, to review the world of outsourcing in 2011… and take a peek at what’s in store for 2012:
And while you are shrugging off your office party hangover and trying to avoid recalling what you were doing the night before*, we’ll be deliberating the following topics:
December 16th at 10:00 AM Eastern Time, 3.00pm GMT
*Remember to check the photocopier room to destroy any evidence
**Please be advised that any predictions made during this session will automatically expire on January 7th, 2012

For better or for worse, for richer, for poorer, until many missed SLAs do us part.
Imagine committing to someone for 15 years? Most marriages are long-divorced by that stage, companies rise and fall, entire countries are created, invaded and may even go bankrupt…
So how about standardizing life assurance and pension policies for said period, which is exactly what TCS’ insurance services delivery subsidiary, Diligenta, has become wedded to in a 15-year, $2.2bn, 1900 employee marital partnership with the UK’s Friends Life. This represents the largest life and pensions BPO engagement by a considerable margin, eclipsing the $1.1bn Prudential contract awarded to Capita in 2007.
At HfS, we believe this move from TCS signals a sea-change in the industry with regards to the growth strategies and ambitions of the leading BPO providers. Simply put, they are no longer keen to acquire each other, and see much more value ingesting large clients with domain and technology value. Taking on new clients, even at low-margins, is simply less risky from an investment perspective, and the value from developing on-shore domain capability and delivery platforms far outweighs absorbing all the unwanted mess you get when you take out competitors.
The BPO Holy Grail is no longer all about scale – it’s also about removing as many manual elements from processes as possible
We’ve been rambling on a lot about Business Platforms of late, and we see this engagement as a genuine move by a provider to develop one that dominates the UK insurance sector. So let’s keep this simple – the other day I made an electronic payment to one of our suppliers. Once the payment was completed, I had generously opted to pay the $25 transaction fee at my end for sending an “international payment” (even though it was all made in US dollars). Still wallowing in the pleasant thoughts about what a nice generous person I was, the next day I received a phone call Read More