Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities

December 5th, 2013

Recessions are good times for business leaders who love to focus on containing costs.  Saving money is the name of the game, and executives who achieve this for their organizations become heroes.

Struggling to manage your extended enterprise? Then click here to course correct

However, times of recovery are markedly different. The onus shifts from cost to value; from defense to attack; from conservative to bold; from tactical to strategic; from efficiency to innovation. And, with the current recovery, perhaps most significantly, the very nature of a company’s cost base is shifting from inside to outside of the organization.

For decades, enterprise executives focused on reducing costs as the key to unlocking an organization’s profitability. This often began with an emphasis on reducing expenditures around SG&A. Activities that fell under this area received derogatory descriptions such as “back-office” and “non-core.” In time, the application of these terms spread across the entire business and any function tagged as such was prime for outsourcing. As a result, many parts of the enterprise were increasingly outsourced.

At the same time, forward-looking businesses began to adopt new organizational structures that were developed to foster lean operations. Rather than build out functional areas across the value chain, companies picked a few key areas to focus on and used partners to deliver the rest. Car manufacturers stopped building components and focused on design and assembly. Hotel chains stopped owning and operating buildings and focused on building and maintaining a brand. Businesses in nearly every industry adopted models that moved significant functional elements to a third party.

Consequently, many of today’s companies look like shells of their former behemoth selves. Marketers now rely on outside agencies and analytics providers to improve their own customer insight and advertising spend, operations teams rely on outsourcing and technology to eliminate labor costs, and IT teams rely on cloud-enabled SaaS platforms instead of an army of programmers occupying the lower floors. For any area of an enterprise’s P&L, a range of suppliers are ready and willing to perform the same tasks faster, cheaper, and better. Yesterday’s pay slips have become today’s supplier invoices.

Want to learn more?  Then download our new report “Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities”, where we hone in on the following:

  • The shell game: today’s successful enterprises are leaner versions of their former selves
  • The goal: leverage external relationships for broader business value
  • How to shift from tactical sourcing and procurement to a capable strategic team
  • The bottom line: the business models of the future require better leverage of your supply base’s assets and operational flexibility

Feel free to drop me a line with any questions on the topic,

PF

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We are HfS. Yes we are!

December 2nd, 2013

As we gather the largest-ever superstar assemblage of sourcing leaders in New York this week, let’s have a look back at how we got here as an industry… and how HfS has evolved from this ramshackle little outfit into such a glitzy professional high-end corporation (ahem)… oh – and crank up the volume :)

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You mean outsourcing’s not all about making big corporate profits? Meet Leila Janah…

November 29th, 2013

Leila Janah is Founder and CEO of non-profit social sourcing organization, Samasource (click for bio)

One person we are very excited to be addressing the Blueprint 3.0 Sessions next week is Leila Janah, the dynamic Founder and CEO of non-profit social sourcing firm Samasource.  

Leila’s work is focused on providing training and computer-based work to women, youth, and refugees living in poverty, while providing Internet-enabled outsourcing services to paying clients. Samasource recruits workers from low-income, underserved communities across the world. We managed to catch up with Leila to learn more about her, and what we can expect to hear from her address next week…

Phil Fersht (HfS): Leila, we are very excited at HfS that you will be coming to our event and delivering our evening keynote address. Before we get into that, can you give us a little bit of information on your background?

Leila Janah (Samasource): Sure, Phil. I started Samasource 5 years ago. Before that I studied international economic development at Harvard as an undergrad and did a lot of work in the NGO world after going to Africa when I was 17 to do volunteer work. I worked with Ashoka and the Read More »

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HP and Salesforce team up to go after the zombie enterprise

November 27th, 2013

Click to find out about private clouds embedded inside public ones...

Now we’ve really heard it all… HP and Salesforce’s new “Superpod” offering provides a Private Cloud within the Public Cloud, making the term “Cloud”, well, pretty much irrelevant…

HP and Salesforce.com have teamed up to provide Salesforce CRM on dedicated “Superpod” HP boxes in an effort to satisfy enterprise clients fearful of having their data situated in the Public Cloud.  The partnership is designed to help Salesforce.com gain more traction with large global enterprises and highly regulated industries, while providing HP some Cloud street-cred after years of negative publicity and pride a much-needed fillip to its hardware and CRM services businesses.

Following the announcement, many industry stakeholders quickly questioned whether the arrangement met “required criteria to be referred to as a Cloud offering” based in the fact that dedicated hardware boxes do not service “multiple tenants”. HfS believes those arguments from multitenant purists have some validation from a theoretical perspective; however, in today’s Read More »

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Don’t fumble the future…the legendary Bruce Rogow talks to HfS, Part III

November 26th, 2013

“Now, suddenly, CIOs have to be very creative, they have to adjust to these new challenges, they have to deal with ambiguity”

–Bruce Rogow, November 2013

And we can bring our superlative discussion with Bruce “hand-brake released” Rogow to a conclusion with one very frightening warning to all technology leaders…. don’t fumble the future!

Phil Fersht (HfS):  Bruce, what do you think visitors from 10 years into the future will think of us if they came back for a gander?

Bruce J. Rogow (IT Odyssey & Advisory):  The 80’s taught me that most organizations will adapt. It may be very painful though. For my view of what It will need to become, here are some relatively radical ideas. First, I think that IT will have a merchandising function. And by that I mean it’s going to try to figure out what technologies are out there, and what ways IT should bring them into the enterprise to add value. It will be very much like a merchandising manager at Home Depot decides Read More »

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A different circus with a different set of clowns… the legendary Bruce Rogow talks to HfS, Part II

November 22nd, 2013

“You really need progression planning where you determine the skill set you’ll need going forward, because it’s a different circus with different clowns”

– Bruce Rogow, November 2013

We’ve had the outsourcer’s comeuppance, now it’s  time for the next installment of Rogow…

Phil Fersht (HfS):  Bruce, how has the role of the CIO changed to cope with the shift in approach to enterprise technology? Are many CIOs succeeding in refocusing themselves into more business-aligned roles within their companies?

Bruce J. Rogow (IT Odyssey & Advisory): Ah! We are NOW going to be “business aligned”. Phil, with all due respect, what the heck do you think DP managers and CIOs have been trying to do since the 60’s?

I come from the school that has seen these guys trying to do alignment since 1968! Once again, the game has changed. And the important thing to recognize here is the maturity of the platform and Read More »

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The outsourcer’s comeuppance… the legendary Bruce Rogow talks to HfS, Part I

November 20th, 2013

Bruce Rogow willing Big Papi to knock one out of the park

Can you imagine a guy who’s immersed in, literally, hundreds of CIO relationships. And not only immersed in them today, but for more than four decades – long before they were called “CIOs”.

This guy knows exactly why CIOs are succeeding and why many are failing in their jobs. He is the archetypal CIO therapist, one of the original “Gartner Greats” having headed their worldwide research in the 80′s and 90′s, in addition to years and years advising, coding and analyzing IT.

Today, Bruce Rogow has been banned from retiring by his missus, Ruth, as he’ll just drive her insane, so instead he wiles away his hours advising, perhaps, the most challenged of enterprise executives today.  Plus he still writes for Gartner’s executive program as a Research Affiliate, so not exactly sure how we managed to get him on here.  But here he is – my favorite lunch companion and living IT mind, who has his own very distinct flavor of the future of the IT function, the role of the CIO and how companies frequently xxxx up their outsourcing strategies.  So, without further ado, let’s begin the first of three blogs where Bruce opens up to us – and where better to start than…

The Outsourcer’s Comeuppance

Phil Fersht (HfS):  Bruce, you’ve been a luminary in technology, as an analyst and an advisor, for a very long time. Would you please give us an overview of your career background, and how you wound up where you are today?

Bruce J. Rogow (IT Odyssey & Advisory): I started off with IBM a long time ago. One of the areas I was involved in there for five years was advanced technical training, where we were trying to invent what became known as systems management and was later packaged as ITIL. After that, I spent 10 Read More »

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HfS lands second spot in the Analyst Value Index

November 18th, 2013

So here we are, staring up at the big shadow of the Borg after four years of ranting and raving about the future of the services industry, collecting data like lunatics and flinging our research over the paywall to anyone who wants to read it.  We’ve managed to race past 42 unsuspecting purveyors of analytical information (click here to view the full Index results), leaving us with just the one hurdle to jump.  But we’ll take second.  Second is good, it’s where you can pose as the alternative to numero uno.  It’s like winning the silver medal for table tennis at the Olympics – and not being Chinese.  It’s like Netflix taking on HBO…

In all seriousness, when analyst observer maestro, Duncan Chapple, and his team at Kea Company went out and surveyed an unprecedented 352 consumers of IT and services research, we thought we’d be happy with an honorable mention, or maybe a “they’re quite good at covering outsourcing” pat on the back.  Or even an “innovation” award, which is what you give the little guys who try hard and have great ideas, but ultimately get their asses kicked by the monolith incumbents.  So, you can imagine our surprise when we – somehow – didn’t get trampled by the old guard, when the real consumers of research came through and declared out stuff is actually pretty bloody useful, accessible and more valuable than much of the other stuff floating around out there…

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Why is this data meaningful?

The respondent depth is more significant than any other analyst firm survey. There were a minimum of 40 respondents commenting on each firm (352 in total took the survey).

Small research firms can out-muscle much larger competitors on trust and quality.  Key categories for formulating the overall scoring were current value, degree of independence, future confidence and share of voice.  We like the fact that boutiques can compete with firms many times their size.  Research quality isn’t about how much money a firm makes, or how many bodies are on the ground – it’s about getting insights to market quickly and accessibly that are credible and have the confidence of the reader.

Analysts focused on services do well.  Congratulations to some of our services research peers, which also made the top 10.  This reflects well on the amout of focus and diligence we’re all placing on the space, and the level of interest out sector has in reading our work.

And, finally, we’d like to give a shout out to Kea Company’s Duncan Chapple and Ian Scott for their hard work in developing the Analyst Value Index:

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The 2013 Enterprise Analytics Services Blueprint is announced: Accenture, Genpact, IBM, Infosys and Wipro make the Winners Circle

November 14th, 2013

And finally one of the most complex Blueprints is finally final, where we researched across the services lines to ascertain which outsourcing service providers are delivering the goods for enterprise analytics services.  Here’s a sneak look at the Axis:

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Still preserving her sanity after collecting over 1000 data-points from 250 live multi-process enterprise analytics contracts, and conducting an exhaustive series of interviews with enterprise users of analytics services, we caught up with report author, analyst Reetika Joshi, to get a little more color into the analytics services environment and discover what she learned from the 2013 Blueprint process:

Reetika, is analytics really such a big deal for services, or just a lot of puff and bluster?

It’s a pretty big deal! Service providers are betting big on growing out their analytics capabilities in the next two years – and with good reason. I see analytics as a transformative force for an industry that’s undergoing an identity crisis. In ways, analytics is already helping IT and Business Services providers bridge the gap between being ‘vendors’ and being ‘partners’, offering ‘mess for less’ vs. smart, efficient business operations and most importantly, driving the conversation towards outcomes. Buy side organizations are leveraging these providers’ analytics expertise in many ways Read More »

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Time to inoculate your firm against early-onset Zombieism… by coming to the Blueprint Sessions 3.0 this December

November 10th, 2013

When  Zombieism takes its grip on enterprise operations, many fail to realize… until it’s too late.  In fact, many of you reading this may already be exhibiting signs of early-onset Zombieism and immediate inoculation is imperative…

But never fear folks, as the forthcoming BluePrint Sessions 3.0 in New York this December are specifically designed to detect the early warning signs of creeping Zombieism and help you do something about it.

Just picture the scene, the leaders of the leading outsourcing providers and advisors face off with 75 of the leading buyers of outsourcing services.  Pure ITO and BPO with a twist of shared services and GBS.  And there is one common rule which applies – all egos must be left at the lobby of the W Hotel Union Square New York City, or face being personally escorted from the premises by the corporate Zombie-buster himself, Lee Coulter.

In all seriousness, we’ve arrived at the sixth HfS Sourcing Executive Council summit, and this one has all the ingredients to provide the jolt this industry needs to define its purpose, its career paths and its long-term direction.

So, without further ado, let’s take a closer look at the festivities…

Zealots of Anti-Zombieism leading the way in New York this December: H.D. Smith's CIO David Guzman; Author and Hero of the Uncorporation Vinnie Mirchandani; Northern Trust's Sultan of Sourcing Stategy Jay Desai; Ascension Health's Shared Services CEO Lee Coulter; Cigna's Head of BPO John Haworth and Samasource CEO Leila Janah

The Agenda

We start on the Monday night with a private buyers-only reception and dinner on the evening of the 2nd where a garlic-free evening promises to lubricate the intimate conversation and set the agenda for the following two days.

Day 1: Disruption Day

Guzman gravitates. We kick off the intellectual proceedings with legendary CIO, David Guzman presenting on the Data-Driven Organization.   David is CIO for pharmaceutical wholesale giant H.D. Smith, possessing a stellar track record in the data-hungry healthcare, pharma and retail industries where he served as CIO for the likes of Acxiom, Owens & Minor and Office Depot.  Any of you who have crossed paths with David will be eagerly anticipating his views on where the future of data and analytics is heading.

Cliff contemplates. We then get treated to a bit of Captain Cliff Justice, KPMG’s head of shared services and outsourcing advisory and the grand architect and proponent of Global Business Services. Presumably, he’ll be discussing Global Business Services and what it actually means to the world.

Vinnie validates. Then comes the irrepressible Vinnie Mirchandani, one of the all-time great technology bloggers, where he will stoke the morning fires by addressing Five Disruptions Shaking the Foundations of the Modern Enterprise.  If any of you don’t know who Vinnie is (and shame on you if you don’t), he’s a former analyst with Gartner, consultant with PwC, and today a serial entrepreneur and author.  Vinnie’s pupliteering will be palpitated by HfS’ Ned May as he probes deep into the disruptive dynamics.

Tim and Don delectate. We then get treated to a double-act of vendor management debate, with the lively and (occasionally) outspoken Tim Norton, now with UPS after a long career with GE, teaming up with his drinking buddy colleague Don Hickey to tackle the topic of Progressive Vendor Management head-on in his usual no-frills style.

Craig encapsulates. The afternoon feature some serious governance debate, with HfS’ Mike Beals leading off a discussion on training and certification, followed by a new double act to saviour:  the inventive Craig Libby of USAA twinned with HfS Fellow, and industry outsourcing veteran, Paul Cervelloni tackling the little topic of Creating an Actionable Road Map for Attaining a Progressive and Mature Governance Program.

Michael and Jo Ann invigorate. The sticky topics continue to get stickier with Deutsche Bank’s Michael Heeger going for the kitchen sink with The Good, the Bad, and the Ugly, followed by The Hartford Group’s Jo Ann Tan who wrenches herself from her road-mapping to discuss  the topic we all having in common, Getting to Where We Want to Be.  If there is anyone who does not want to get where they want to, I suggest they stay away from this one…

Everyone Speed Dates. We then do something I once vowed never to take place at an HfS event… Speed Dating.  Sigh. We’ll also lock the doors, so there is no escape from this one… like a colonoscopy, it’ll be over before you know it and you’ll feel better for the experience.  I think.

And Leila liberates. After the horrific experience of Speed Dating, we promise to make it up to you with a healthy injection of food and booze, where we will be treated to Samasource CEO, Leila Janah talking to us about how Samasource has moved 4,000 workers and their families over the poverty line in under five years, and spun out a domestic program, SamaUSA.

Day 2: Judgement Day

Reality-check. The hangovers are guaranteed to kick in with the latest rendition of the sorry State of the Industry, this time being tag-teamed by yours’ truly and BPO/Robotics/Techie brain-box Charles Sutherland.

C-Suite provider leaders. However, the real fun starts with the most berserk C-suite provider panel ever-constructed, where we put to task Accenture’s Mike Salvino, Gapgemini’s Hubert Giraud, WNS’ Keshav Murugesh, Cognizant’s Vipul Khanna, Sutherland’s David Poole, IBM’s Christine Gattenio, Genpact’s Gianni Giacomelli, Infosys’ Gautam Thakkar and HP’s Danila Meirlaen to tackle all the really tough talking points.

The advisor heads take the stand.  And once we’re done grilling the providers, we’re putting leading minds from the advisor shops on the stand for their turn – ISG’s David Whitmore, Alsbridge’s Chip Wagner, KPMG’s Cliff Justice, Deloitte’s deadly Doug Plotkin, PwC’s Derek Sappenfield, Alvarez and Marsal’s Peter Allen, Loeb and Loeb’s Howard Akiba Stern and Ernst and Young’s Tom Schramm.  The roof threatens to be blown off with the level of big thinking and big hutzpah we’re gonna hear…

The Zombie-busters visit from the future.  If you just can’t come back down to earth after witnessing 17 captains of industry duke it out, then Cigna’s John Haworth and Ascension Health’s Lee Coulter will do their best by reenacting what the world would look like when some characters  from some future point in time visit us to assess how our enterprises are falling into a state of creeping Zombieism – and what catalysts will/should/can occur to break the cycle.

A brief sojourn to Robotistan. Sending us back into the realms of an alternate reality – in fact, into the land of the robots – is Blue Shield of California’s Pradeep Khemani, where he will lead a discussion reminding us that Outsourcing: really is just An Interim Step Towards Automation.

Back down to earth and the ‘innovative partnership’ topic. And after we’ve been truly robotized by Pradip, Coventry Healthcare’s Rajesh Bhutani and Patty Onion will bring tears to our eyes, when we tackle that thorny topic Traveling the Path from a Cost-Saving to an Innovative Partnership.

Our dysfunctional career paths are exposed. However, just as you think you’re going to survive  until cocktails, we unleash the fearsome feistiness of Change-maestro Deb Kops and HfS’ Talent Queen Christa Degnan Manning to put everyone on the spot when we debate our own futures and undefined career paths with Creating a Blueprint for Global Services Talent.

The grand finale. And to cap it all, we finish up with the pièce de résistance as we wheel out the sultan of sourcing himself, Northern Trust’s Jay Desai, to lead the Family Fued-themed buyside team as they look to take on the Sell and Advise Families.  Oh fun.

And then there are the much-needed drinks…

Bottom-line:  If you like the status quo – and creeping corporate Zombieism is a viable option – then this little extravaganza just ain’t for you

The outsourcing business is in danger of killing itself with boredom, with repetition, with believing its own bad marketing.  Most of the corporate world has little clue what “outsourcing” is beyond subbing onshore with offshore labor.  It is a business with unclear career paths, with over promised outcomes, and too many struggling and distrusting relationships.  Can we change all this in two days of great discussion and open views?  Let’s give it a shot :)

I’d personally like to thank our sponsors for helping with the ever-spiraling cost of putting on an event in New York during Xmas shopping season:  Accenture, WNS, HP, Cognizant, IBM, Infosys, BluePrism, Sutherland, HCL and TCS.

See you in December!

Click here to learn more about the Blueprint Sessions 3.0

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Fancy being an industry analyst?

November 8th, 2013

How would you fancy behaving like an arrogant xxxxx all day, work for a firm still living in the 90′s, have the whole world forced to kiss your behind, while you put out nonsensical research and vendor rankings that noone can fathom?  Well – send your resume to wewillneverhireyouinamillionyears@hfsresearch.com and we’ll review your application.

However, if you want to join a research firm that believes a world exists outside of the CIO’s office, a firm that is living in true “whitespace” where it is trying to define and shape an industry living at the heart of global business operations, then we would like to actually talk to you!

In all seriousness, HfS is expanding its global remit and we need to bring onboard more talent which has a good idea where our world is heading.  If you are passionate about our industry, want to put YOUR stamp on its direction and be part of an incredible team, then send us your resume to careers@hfsresearch.com.

Here are our pre-requisites:

1.) Wants to work and is sick of the “nine to five”

2.) Loves embracing, debating and writing about change

3.) Wants to be part of something special

4.) Has genuine entrepreneurial spirit

5.) Has had opinons repressed for years are can’t wait to get them out

6.) Has some tendencies towards insanity, or just plain wackiness

7.) Wants to make a difference

8.) Wants to stick it to the man (desirable, but not essential)

We would love to hear from you (in confidence)

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Mike Friend joins the HfS batting line-up

November 8th, 2013

Mike Friend... now batting for HfS as Vice President for European BPO Strategies (Click for Bio)

We’re proud to announce the beginning of a major expansion with HfS’ European cricketing BPO capabilities, with the arrival of the esteemed fast-bowler and useful batsman analyst Mike Friend.

Mike successfully passed the HfS entrance examination, by managing to prop up the bar at a recent analyst event until 2.30am, while still managing to deliver a flawless presentation the following morning.  We were particularly impressed by the fact that Mike had ensured half the audience were also hungover and soundly slept through the proceedings.

In all seriousness, I have known Mike for over a decade, since he wrote the bible for European payroll when at IDC (which everyone in the industry glopped onto, as noone else had ever bothered to write anything comprehensive on European payroll before – and probably haven’t since).  With the biggest smile in the business, Mike will be a welcome player in the HfS analyst team as he tackles the core areas of BPO, namely F&A, HR, Payroll, Analytics and the underlying platforms that enable effective delivery. Mike brings with him 15 years of drinking analyst and consulting experience, most recently leading Finance and Accounting BPO research for analyst NelsonHall.  Previously he was a consulting manager for Deloitte’s human capital practice, having cut his analyst teeth first at IDC.

Mike will also pay particular attention to fighting the war we are waging on destroying the legacy FTE-model and attempting to transform the way the world actually works. Well maybe that’s pushing it a bit, but we have to set him some lofty goals for the coming months!

So without further ado, let’s find out a little more about said curious character… Read More »

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Invest in the humans first, systems second

November 7th, 2013

And now for the third and final installment in Christa Degnan Manning’s discussion on HR’s obsession with obsolete processes…

People leadership problems like “Smarter management talent,” and “Better talent in the HR function,” are in the top 3 challenges to employee engagement uncovered in our survey while “Better technology implementations/user experience” ranked #11 and “Improved data capability/analytics to support my job” ranked #12. Unfortunately there has been too much focus on HR process and automation in companies, with the latest hype around integration and analytics as the next breakthrough “gotta have” investments.

However, people lead people and they are asking for the support, training, and enablement to meet and collaborate to both better manage day-to-day work and develop into the next generation of leaders. In another recent study HfS conducted on global business services functions, we explicitly asked about investments in formal business training in many key areas today by type of worker: enterprise or service provider.

What we found confirmed results found throughout the engagement research that workers are not getting development support: the majority are not getting any kind of formal training in critical business areas at all. As the extended enterprise expands, ambitious professionals may very well choose to work at service provider companies specifically because the traditional enterprise has dropped the ball in terms of its people. Will this be the tail wagging the dog?

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When we asked workers in the engagement survey how they want to spend their time, regardless of engagement level, they did not call for more automation or integration. They said they want to Read More »

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Predicting and postulating potential procurement provider positioning post-Procurian purchase

November 5th, 2013

It’s been a few weeks now since the surprise announcement of Accenture’s purchase of Procurian and, while the teams on both sides are busy working through details of the post-merger acquisition, we wanted to spend some time thinking about the implications of this deal for the other service providers in the Procurement Outsourcing (PO) market.  What can they do in this short window, while the dust settles, to respond? Charles Sutherland pokes around at the post-Procurian procurement planet…

Regardless of whether this purchase is positive, polysemous or problematic for a service provider, everyone has to recognize that the market landscape has shifted quite seismically in recent weeks, with a clear market leader emerging, in terms of market share, industry breadth and client footprint.

Using the market shares from our recent Procurement Outsourcing Blueprint we place the combined Accenture/Procurian at 28%, which is more than 1200 basis points greater than #2, Xchanging:

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When we look at the remaining service providers, we see this acquisition in placing each one into the following these clusters: either positive, problematic or polysemous for the business, depending on the context and the opportunity. (We just couldn’t quite give up totally on the P alliteration but promise to stop now.)

The Positive Providers

So, why could the merger of two major competitors create a positive event for a PO service provider? Well, one of the key drivers for Accenture in buying Procurian was to expand its bench of seasoned category managers and sourcing experts – especially in direct materials.   For all three of these specialists listed above, mid-sized providers which also have a depth in sourcing direct materials and category management (as well as consulting and transaction capabilities), are all now serious alternatives for buyers who may not want to go with Accenture.  Moreover, they are also acquisition candidates for the service providers which now need to expand their own capabilities in response (e.g. most of the Problematic category).

The Polysemous Providers

For our polysemous service providers it’s a mix of positives and problems, as a result of this deal (and if you didn’t take Latin at school, Polysemous = multiple implications, in this context).  GEP is another likely acquisition candidate for the Problematic providers, although the firm has been working hard to position itself as a technology, not sourcing-led, company and so they might not be first on the shopping list.   The firm may find that ir has to make decisions as to where to invest if the market begins to place a greater emphasis on sourcing depth over technology in the near-term.   Infosys and Xchanging are in similar positions, they have some depth in sourcing and some unique vertical strengths, but they won’t have the depth of an Accenture or an IBM in category management.   What they do have going, is a greater use of proprietary technology than most PO service providers, and so steering buyers towards the value created by technology-led solutions is where the opportunity has emerged for both.

We also believe that this deal is a mixed blessing for the more traditional sourcing consultants.  On one hand they now face reduced competition as Accenture’s own sourcing consulting practice will be part of the PMI plan for this acquisition and may emerge quite differently than it has been previously structured.   It’s also positive in the sense that the smaller independent consultancies may be acquired by the Problematic positioned providers as readily as the likes of a Corbus, Denali or Proxima.   But things aren’t all rosy; the core consulting business model in sourcing is under threat from the end-to-end capabilities of PO service providers, especially now with the depth of category management sitting in the leading companies.   Also, for those PO service providers which don’t have the appetite (or cash) to make a sourcing acquisition, the consultants, managers and Partners of these consultancies make for very attractive focused hires to build up practices on a person-by-person or client industry-by-industry basis.

The Problematic Providers

This deal is problematic for other PO service providers whose depth and breadth in sourcing specialists and category managers, especially in key products or industry specializations, now clearly stand out as a competitive weakness versus Accenture.

For Capgemini and Genpact, this acquisition removes an established and growing alliance partner from their own solutions so they will need to invest in category management either through acquisition or hiring / organic growth.

For the smaller PO service providers including Aegis, HCL, TCS and WNS who generally entered the market with or from F&A P2P contracts, they need to decide if this is a sustainable strategy or whether they also need to follow in the footsteps of the larger diversified providers and quickly build up sourcing and category management benches.  The alternative is to concentrate more on the transactional processing elements of PO and build their own technology platforms in the way that Infosys, GEP and Xchanging have been going.

Finally, for IBM, its strengths especially in manufacturing and consumer goods client industries for sourcing and category management are now matched by Accenture’s breadth and client references, and so the head-to-head competition that has marked this part of the market for the last several years has now become even more intense.

The Bottom-line:  A spate of M&A has to emerge to re-balance the competitive nature of procurement outsourcing

Charles Sutherland is Senior Vice President, BPO Strategies at HfS (Click for bio)

Overall,  it would come as no surprise to HfS to see a domino effect of acquisitions begin to take shape in Q1 of 2014 as the PO marketplace realigns itself to the post-Procurian world.  We really do not expect their aggressive competitors simply to rollover and have their bellies tickled.  IBM has laid out its master plan that Supply Chain Management is one of its core areas of growth and future investment; Infosys has gone gangbusters making the Pocurement Outsourcing Winner’s Circle after barely a few short years in the space;  Capgemini has invested heavily in procurement with its acquisition of IBX and its fledgling supply chain BPO business and needs a strong procurement capability to balance its powerful F&A business; Genpact needs to expand its procurement strength and depth to compliment its F&A prowess.  Accenture has forced the issue by sweeping up Procurian, now its competitors have to respond.

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Senior managers are almost as disengaged as their subordinates

November 1st, 2013

And now time for the second installment of Christa Degnan’s Manning’s discussion on HR’s obsession with obsolete processes, and we’ve got some more fascinating data to share from our new employment engagement study of 5,000 worldwide employees, conducted with the support of KellyOCG:

Why senior managers are almost as disengaged as their subordinates

Curious how leadership could be contributing to this poor employee engagement situation, we also looked at engagement by workplace hierarchy. By the nature of being a front-line employee, lower levels of responsibility and autonomy might drive disengagement as they are typically on the receiving end of orders or the bottom of the goal cascading process in the HR process world. (What is it that they say about what runs downhill?)

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While we did find higher levels of engagement the higher up the proverbial ladder one goes in an organization, the key take away for us was the difference wasn’t that much. This actually supports Read More »

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Robotistan takes a seat at the BPO Security Council

October 29th, 2013

And Robotistan casts the crucial swing vote...

Every autumn, the world’s leaders descend on New York causing mayhem as they make their way to the UN to make speeches and assert their influence over the direction of world affairs. 

Last year, we noticed there was a new nation-state “Robotistan” making its presence felt at this august world body and we, at HfS, wondered how significant a player it could become in matters of the BPO and shared services nation states. So we sent our very non-robotic Charles Sutherland to take a closer look into this subtle shift to robot arbitrage…

Framing a Constitution for Robotistan

Over the last year, Robotistan has developed even faster and more extensively than we could have anticipated, a set of developments we have captured in our recently published research report “Framing a Constitution for Robotistan”.   What we have seen is how Robotistan is quickly becoming part of the strategic planning efforts of leading BPO Service Providers, operational consultants, analysts and end clients many who have appointed their own dedicated ambassadors or sent fact finding missions to Robotistan so that they can better understand how the place works. We have also seen new citizens arriving in Robotistan in the roles of both software providers and end users to help swell the ranks and the influence of this emerging entity.

In fact, this growth in interest and strategic importance for Robotistan is such that this fall, it has clearly taken residence as one of the members of the BPO Security Council participating in the debate over the future of horizontal business processes such as F&A, HR, Procurement, Supply Chain, Marketing and Legal.  While not yet a permanent member of the security council with the status in the BPO world like: labor arbitrage, process redesign, staff augmentation, global business services or the SMAC stack we are amazed by just how far Robotistan has come already and can already see a future when it could replace a permanent member owing to its ability to create incremental and permanent value for both clients and service providers.

Charles Sutherland is Senior Vice President, BPO Strategies at HfS (Click for bio)

For those of you asking, why this new nation-state seems to be on the ascendency at the moment, we believe it comes down to a number of major changes occurring in the world of BPO today. Specifically, the striving for differentiation amongst service providers, the increasing value of contract renewals and re-competes, the strategic imperative to break the revenue-FTE linkage for service providers, solving for the eventual end of labor arbitrage new mindsets about the role of technology and humans together and how user friendly the technologies of Robotistan are becoming.

These changes will only continue to become more significant in the BPO world in the coming years which further enhances the potential appeal of Robotistan as a destination for many of the world’s leading companies.

For those of you joining HfS this December in New York for our Blueprint Sessions 3.0, come to hear more about the HfS view on how this world is developing including more about the growth of Robotistan and how we see the BPO Security Council changing over time.

“Framing a Constitution for Robotistan” is a new report authored by HfS analyst Charles Sutherland – you can download your complimentary copy here.

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Can HR ever overcome its obsession with the automation of obsolete processes?

October 28th, 2013

Christa Degnan Manning is Research Vice President, HfS (Click for bio)

The smartest leaders are those who figure out how to get the most out of their staff – to hire the best people they can afford, make sure they are continually energized, and to ship out the poor performers and bad apples on a continual basis.

So why, oh why, do so many Human Resources executives obsess with administering irrelevant processes and buying technology products to fuel these obsessions, when they should be helping their firms’ managers get the best out of their staff?  It brings me back to the heyday of HR outsourcing, where so many deals fell by the wayside as they were centered on HR offloading the administrivia to outsourcers and focusing their retained org on the “value add” HR work.  Sadly, most organizations quickly discovered most HR people only wanted to deal with administrivia, and HRO was a direct threat to their employment.  So end-to-end HRO died a painful death, leaving the outsourcers to focus on discreet administrative processes, namely payroll, benefits and staffing admin, which HR people could administer – and obsess over – to their hearts’ content.

As was so famously pointed out in 2005′s Fast Company’s Why We Hate HR article, the whole HR function needs to be blown and and completely reconstructed with a new set of skills, a renewed purpose and mission to put the HR function back somewhere remotely near the C-Suite table.  So, without further ado, it’s time to unleash our own doyenne of the disruptive workforce as she wages her war on weird workforce ways, Christa Degnan Manning…

Time to Put the People Back into the People Business

As noted in my HfS bio, I recently returned to the business research and analysis arena focused on workforce optimization because my last five years’ experience as a line manager and employee in a Fortune 100 firm (supposedly one of the best companies to work for) exposed me to the fact that predominant human resources philosophies, policies, programs, and particularly systems in place today are woefully inadequate and even obsolete for today’s global, virtual, mobile, social, time-starved, knowledge-worker world.

Today’s firms investing more in talent outside of their core organizations

Compounding this challenging reality is the fact that companies continue to downsize their traditional full-time staffs as well as under-invest in the people that remain. Too often, they neglect the knowledge transfer, culture indoctrination, and relationship building with all their Read More »

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Who wants to be friends?

October 25th, 2013

My good pal Vinnie Mirchandani just blogged about how we can add so much to our lives by looking beyond Twitter, LinkedIn, Facebook, Quora, Pinterest etc to find value from our networks, when it comes to learning new ideas and gleaning knowledge.  He mentions going to more events, getting more magazine subscriptions on your iPad, going to the book store… I would go further and encourage us all  just to make more of an effort to meet and talk!  You can’t beat sharing knowledge with each other as the best way to learn something new…

I was having a drink with an old friend recently and that person said something that make me think;  ”Everyone knows you, but very few people actually know Phil the person”.

It really him home that I was electronically famous (or notorious) but few people actually know me to hang out / have drinks / shoot the sh*t etc

I used to really value my personal relationships but it really dawned on my how superficial so many of my social media relationships were. I’ve put so much effort into building my electronic network in recent years, and not enough into my personal network. While my electronic friends are fun, they pale in comparison with real people and real conversation…

My first New Year’s resolution is to change this and focus more on the “real” less the avatar… so if anyone’s passing through Boston, my offer is open to share a decent glass of wine… pint of good ol’ ale… maybe even a single malt.  Drop me a line anytime :)

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Traditional outsourcing advisory is dead.

October 20th, 2013

Who's feeling disruptive today?

Why do so many service providers still hover feverishly around outsourcing advisors begging and willing them to invite them into huge contracts… when the reality is that most maturing enterprises are today less reliant on the advice of traditional consulting than they ever were?  And when will advisors wake up and realize that the old method of billing their clients millions for effort-based grunt work is just no longer doing it for them?

As one advisor confided the other day… “we can tell in a quick phone call if we can bill them $500K plus… if we can’t, we just don’t bother pursuing them”. There was little thought regarding how to develop a long-term outcome based relationship, the onus simply being to park the MBA bus at the client’s visitor’s parking spot and sell the same old dog n’ pony show of cranking out operational data to effect the sort of operational result that the client really should do itself.  Bottom-line, clients need a helluva lot more than the obligatory 200-slides appendix that quietly gets dropped into the recycling bin after gathering dust on some executive’s desk for a few weeks.

And when the world’s number 1 management thinker, Clayton Christensen, writes about Consulting on the Cusp of Disruption, you know it’s officially game-over for the way consultants have traditionally delivered effort-based high-cost projects for wizening clients.  And when it comes to helping clients with Global Business Services and Outsourcing, the credibility of consultants is at an all time low – according to 106 C-levels and SVPs  of major enterprises responding to our new GBS study:

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Why do only half of enterprise leaders see increased investments in consultants as the way forward to achieving effective global business services?

Yes – just look at the data – increasing investments in consulting scores drop-dead last when it comes to achieving fluid and effective governance.  46% actually sees no benefit whatsoever, and Read More »

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What happens when you put the leaders of an industry in one room?

October 11th, 2013

I honesty cannot tell you… but it’ll be fun finding out!

During Blueprint 1.0 we all figured out what the biggest challenges actually were in the sourcing industry;

In Blueprint 2.0 we debated them vociferously with the buyers and providers;

And in the upcoming Blueprint 3.0 we’re going to put words into action by bringing together all the key stakeholders in outsourcing and shared services.  And we’re even going as far an inviting the leading sourcing advisors… oh boy, what on earth are we doing?

Can you handle this? Click to learn more...

However which was we look at this, this is going to be one helluva crowd – with a bevvy of buyside sourcing and shared services leaders from 60 major organizations, in addition to this motley crew.

Drop us a line if you’re interested in getting involved…

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