HfS Network

Monthly Archives: May 2007

The Job Trap

May 31, 2007 | Phil Fersht

Great post from Mark Stelzner's "Inflexion Point"....

http://www.inflexionadvisors.com/blog/

"I was looking over my contact list yesterday evening and came to a stunning (but not shocking) realization. I could only identify five people that are happy with their current job. Virtually everyone I know would jump if a better opportunity presented itself, and most are either actively or passively pursuing side interests and opportunities with the hope that one day soon, that “perfect job” will rear its glorious head.

"Many years ago, a mentor and friend suggested that employment nirvana required three significant attributes - 1) doing something you enjoy and truly believe in; 2) the opportunity for advancement; and 3) decent cash. I would argue that a majority of my former and current colleagues can check at least one box, less than fifty percent can check two, and an increasingly small minority have found that perfect combination of passion, pay and promotion.

"In the industries in which I’ve worked (human resources, the public sector, outsourcing, call centers), attrition is ridiculously high. Industry events turn into reunions as thousands of former colleagues emerge with new logos and titles beneath their names. Thousands more troll the trade show floor hoping to find the next job that just may be the “perfect fit”. It’s well-known lore that many industry executives use such events to lure dissatisfied workers from their current employ.

"Paying the price in all of this are employers and families.

"The gap between the recruiting pitch and life in the trenches approaches Grand Canyon-like proportions as employers become increasingly desperate for talent. Recruiters are typically incented on volume, not retention, so forcing a square peg into a round hole is second nature. Hiring managers are often too busy to perform proper due diligence and instead need a warm body in seat as quickly as possible. And executives stand to lose precious dollars from their P&L if preapproved headcount are not onboarded in a timely fashion.

"Unfortunately, families pay the biggest price. Forced to endure the 24-hour lifecyle of their loved ones, the mirage of work/life balance and predictable employment is more ellusive than ever. With the new job “high” fading ever faster, loved ones must suffer through the sad realization that this, alas, was yet again not the job everyone had hoped for. And the cycle continues….

I want to blame someone for this mess but I struggle to identify who. The job boards and recruiting technologies simply present what is entered - garbage in, garbage out. Employees feel the grass is always greener - and is often is - but everything comes at a price. Employers are not evil-doers yet cannot clearly convey what life is really like behind closed doors. This forces us to put our trust in our friends who know these firms well. And when that fails, our gut instinct is the only remaining barometer."

I'd like to add to Mark's comments:  the work environment has changed dramatically over the last 4-5 years.  Executives are expected to check their blackberries every 30 minutes - right up to midnight, email checking is now commonplace over the entire weekend.  The work environment intensity has magnified significantly as employees become tethered, accounted, and measured like never before.  Some employees are just getting burned out and employers are getting increasinly expert at playing the "churn and burn" game.  In my opinion, the employee/employer "trust" has hit an all time low - it's all about "what can you do for me today"...  Companies need to work harder at enforcing work-life balance, or we will see increasing employee burn-out in the workplace.

Posted in: HR Strategy

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Moving and Shakin' in F&A Outsourcers

May 29, 2007 | Phil Fersht

Some recent notable power moves in the F&A Outsourcing suppliers worth mentioning:

HP:  Steve Stubitz, who led Americas sales for HR and F&A BPO has gone out on top and into the private equity world.  Steve - you will be missed.

Infosys:  Devesh Nayal, who led their BPO business, has moved on to an - as yet - unnanounced company... expect to see him back soon.

Genpact:  Regina Paolillo, the Queen of Order-to-cash, has moved to  one of their parent investors, General Atlantic Partners.  Don't think we've seen the last of Regina somehow....

EXL Service:  Has recruited former EDS and ACS BPO veteran Matt Appel as CFO, and Pramode Metre - (who seems to be able to be at 6 US cities at the same time in between a trip to India) as head of sales and marketing. 

Xansa:  Worth mentioning David Hirst, who has seemingly managed AR, CR, IR, MI and Marketing all by himself (and a thoroughly nice bloke too).  Anyway Dave's moved on...but I'm not allowed to say where ;)

And finally... Accenture:  Mike "Sal" Salvino (who still comes up as Hewitt on my Outlook) has already been promoted to uberlord of Accenture's Procurement and Customer Contact Services in addition to continuing to have oversight for Accenture Finance Solutions.  Something about "capitalizing on the natural synergies"...nice work if you can get it.  Nice one Sal!

Dumb07

F&A dude..it's where it's all happening

Posted in: Finance & Accounting BPOOutsourcing Heros

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Guest Post: An Outsourcer on Every Corner: Part I

May 26, 2007 | Phil Fersht

David Sheinfeld is one of the best-kept-secrets in the outsourcing world... he operates behind the scenes on many major deals doing the real down-and-dirty technical and contractual stuff to make these things work.  The man is a walking encyclopedia - need I say more?  The following is a snapshot of his thoughts on how dramatically the industry is changing....

  • It used to be that Outsourcing was reserved for the name companies in the marketplace. That was not long ago. After Y2K and the spending spree, corporate America embarked upon it, and it became clear that many functions could be handled more efficiently and less costly by having someone else do the work. We saw contracts orth billions of dollars being awarded to the likes of IBM and EDS. Then along came companies such as Accenture, ACS, CSC and HP. Together, these six companies became known as the Big Six of outsourcing companies. That was just a couple of years ago. How things have changed in such a short time period. The latest reports showing dollar volume, growth and the number of outsourcers seem to question whether the term Big Six is even applicable today. Over the past few years many other companies, especially those companies located outside the U.S. and whose Global delivery model has gained traction, have diluted the market share of the Big Six. A recent report by TPI states that over $100 billion dollars worth of contracts were coming due in 2006 and 2007, with almost 50% of those dollars concentrated in two companies, IBM and EDS. Now there is a whole group of new companies coming up the chain to provide the same services and solutions as do the larger companies. Outsourcing has become a commodity and is experiencing the same pressures that many other commodities go through as they become mature market players.
  • As in any commodity business, the more choices you have, the more pressure the commodity has in the market.  The Outsourcing Industry is in a sea of change. The client is more knowledgeable today than in the late 90’s when those original contracts were signed.  The client appears not as concerned with outsourcing and has a more expanded view of what the outsourcer should provide -  and it’s not just cost savings.  The client is requesting more in terms of value-added services and solutions as part of the outsourcing transaction. The outcome of all of this is more choices, more competition and therefore greater price pressures on those providing the services.
  • Depending upon which offering the outsourcer is pursuing will determine what services are offered and the price for those services.  For example, call center services and the pricing for those services may be more generic and the processes more uniform than Finance and Accounting or Human Resource processes.  Each specific area requires a particular expertise not only on the human side but also the technology side.  Some areas have the potential for large transition and start-up costs which are likely to cause greater margin pressures during the life of the agreement.  Now with clients breaking up the contract scope to more than one provider, there is less margin dollars and less opportunity to make up losses if they should occur in the beginning of the contract.  Furthermore, with smaller contracts in place there is a greater emphasis by the outsourcing company to try to hold back transition and start-up costs as the ability to recoup those costs becomes that much more difficult.  The new contracts may also require more services or other value added solutions that increases not only the requirements under the terms of the agreement but also increases the risk to perform. Thus, the provider needs to be prepared to give more for less!!

David Sheinfeld is currently a strategic partner with Becton Schantz, Inc., one of the largest application service providers in the country.  He is a Principal of Horizon Business Advisors LLC, a strategy, management and merchant banking firm.  He is also the founder and CEO of MKJ Advisors, LLC, a merchant bank and advisory firm specializing in strategic planning and mergers and acquisitions.  Previous to this David was a founder, Chairman and CEO of Fresh America, Corp., one of the largest distributors and manufacturers of value-added food products in North America.  David can be reached at [email protected]

Posted in: IT Outsourcing / IT ServicesOutsourcing AdvisorsOutsourcing Heros

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Why Technology is an important key to BPO-sustainability

May 24, 2007 | Phil Fersht

Folks:  I will be featuring several guest posts from experts in the outsourcing industry who I respect. One gentleman whom I have known and worked closely with over the years is SAP's BPO group leader, Dr Christian Baader.  Christian is now the globally recognized thought leader on how crucial technology strategy becomes when companies take on BPO engagaments.  Take it away Christian...

There is widespread agreement in the BPO-industry by now, that the traditional, labor arbitrage dominated way  of "lift and shift" or “my mess for less” as some pundits call it, is not producing sustainable BPO-situations.   Many deals not living up to expectations and meager provider profitability are warning signs of this.  Sustainability has become one of the key issues of the industry.

Sustainability should be read as “both sides, customer and provider, achieve their business goals over the deal duration, i.e. the customer gets the targeted improvements in cost and quality of service while maintaining a low risk exposure and keeping long-term options open while the provider makes his margin, and the relationship  grows for both sides in value over time.” 

A number of factors need to get played well in order to safeguard sustainability of the deal from the start, one of them being the decisions around the technology foundation of the deal on the provider and customer side. 

Technology’s influence on deal economics
Business decision makers often tend to either leave the technology choice to the provider (an attitude we often see expressed as "we bought a service, now the  technology choices are on the service provider") or treat it as a mere IT-discussion only.  Both attitudes however miss the crucial influence, that technology has on the enterprise value of the deal:

·         Technology’s influence on the economics for the provider:  The design of the processes and choice of technology influences all the fundamental business drivers influencing the providers ability to service the deal efficiently and in a sustainable fashion: Synergizing between different parts within the customer organization as well as between customers for generating economy of scale (“do it cheaper”), ability to automate and optimize processes taking full advantage of future innovation potential (“do it better”), and effectively leverage labor arbitrage (“employ cheaper resources”)

·         Technology’s influence on the economics for the customer (ie, incl. the retained organization):  The technology choice and platform design of the customer and the provider is very often a shared one, or at least a heavily integrated one - and as such the choice on one end impacts the other end (e.g. when the outsourcing/centralization scope does not include all subprocesses or countries. Common problems include data integrity and ability to keep synchronized over time when the two sides of the fence move in slightly different direction – which might express itself in additional process exceptions requiring manual interventions or inconsistencies  in self service implementations or reporting)

All in all, the appropriate deployment of technology as an enabler of outsourced and retained processes is therefore critical to the sustainable delivery of the BPO services (leveraging appropriately automation, analytics, workflow, authorization concepts etc). 

The need for “Design for Manufacturability” of Process solutions
Furthermore, technology deployment cannot be engineered in a silo – it must be considered TOGETHER with the process reengineering, so that the resulting service is not just satisfying the business requirements but is also efficiently manufacturable.  I call this the "Design for Manufacturability "-paradigm of BPO-service manufacturing (and it seems high time, that we learn from the lessons of the physical goods manufacturing for the service manufacturing world).  Process solution “design for manufacturability” includes the choice of the platform itself, and configuration/customization choices for process adaptation and integration.   The advantages of standards-conformant deployment of standard technology (ie, leveraging configuration and avoiding customization) for your process solutions are manifold:

  • required levels of process integration can be achieved more cost-effectively
  • the solution is easier to maintain over time – which includes higher quality as well
  • adoption of innovation is easier
  • necessary scope-extensions of the platform (be it additional processes, geographies, businesses) are easier to accommodate
  • finally migrating the platform at the end of contract (to another provider or back to inhouse delivery) will be less risky and painful.

In order to leverage those technology aspects most effectively, decision makers should make sure, that the topic is integrated into the sourcing project from the RFP-design stage onwards and that business and IT-teams are working on this in a highly integrated fashion.

Leave the technology choices to somebody else at your own peril!

Christian_baader_2

Dr Christian Baader is VP of SAP's BPO Group, and is based in Waldorf Germany

Posted in: Business Process Outsourcing (BPO)HR OutsourcingOutsourcing Heros

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Outsourced!

May 21, 2007 | Phil Fersht

In case you haven't see this rather amusing movie trailer...

Posted in: Absolutely Meaningless Comedy

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Privacy Policy

May 21, 2007 | Phil Fersht

Our privacy policy is simple: No spam, period.

We will not rent or sell your personal information to anyone, not even our affiliates. If you choose to register for e-mail updates, that's all the information will be used for.

This policy covers how horsesforsources.com treats personal information that phorsesforsources collects and receives. Personal information is information about you that is personally identifiable like your name, address, email address, or phone number, and that is not otherwise publicly available.

This policy does not apply to the practices of companies that horsesforsources.com does not own or control, or to people that horsesforsources.com does not employ or manage.

ABSORB INFORMATION ON THIS BLOG AT YOUR OWN DISCRETION. THERE ARE NO GUARANTEES OF COMPLETENESS, CORRECTNESS OR APPROPRIATENESS TO YOUR INTENDED PURPOSE OTHER THAN YOUR EVALUATION OF THE WRITER AND MEDIUM'S INTEGRITY.

Posted in: Uncategorized

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Privacy Policy

May 21, 2007 | Phil Fersht

Our privacy policy is simple: No spam, period.


We will not rent or sell your personal information to anyone, not even our affiliates. If you choose to register for e-mail updates, that's all the information will be used for.


This policy covers how fersht.typepad.com treats personal information that fersht.typepad.com collects and receives. Personal information is information about you that is personally identifiable like your name, address, email address, or phone number, and that is not otherwise publicly available.


This policy does not apply to the practices of companies that fersht.typepad.com does not own or control, or to people that fersht.typepad.com does not employ or manage.


ABSORB INFORMATION ON THIS BLOG AT YOUR OWN DISCRETION. THERE ARE NO GUARANTEES OF COMPLETENESS, CORRECTNESS OR APPROPRIATENESS TO YOUR INTENDED PURPOSE OTHER THAN YOUR EVALUATION OF THE WRITER AND MEDIUM'S INTEGRITY. 

Posted in: Uncategorized

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Disclaimer

May 21, 2007 | Phil Fersht

This web site is not affiliated with or funded by any commercial organization. This site is intended to be an educational and not-for-profit website providing useful information. Any thoughts, opinions, and/or statements are those solely of the author and its contributors, and not associated with any commercial entity. It is not for the purpose of trade or to induce the sale of any goods or services.

Posted in: Uncategorized

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Disclaimer

May 21, 2007 | Phil Fersht

This web site is not affiliated with or funded by any commercial organization. This site is intended to be an educational and not-for-profit website providing useful information. Any thoughts, opinions, and/or statements are those solely of the author and its contributors, and not associated with any commercial entity. It is not for the purpose of trade or to induce the sale of any goods or services.

Posted in: Uncategorized

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Exclusive: F&A BPO deals continue to rocket…but they’re getting smaller

May 20, 2007 | Phil Fersht

You heard it first here folks…. In 2006 we saw 89 new F&A BPO deals signed (contracts with at least 2 core accounting processes bundled). This compares to 66 deals in 2005 – an increase of 35%. However, when we look at the Total Contract values, the 2006 deals averaged $30 million each, compared to $39 million for the 2005 deals - that's 30% smaller.

And we have already seen another 24 deals so far in 2007 (until 2 weeks’ ago) – but the deal values are averaging only $24m.

So what does this initially tell us? Let’s get the debate going but my initial analysis is:

  • The "upper" middle-market is opening up (the 5-10K employee orgs)
  • Companies are taking the plunge, but scaling back the size of the commitment with fewer processes bundled
  • The big global deals are getting fewer - and further - between
  • Onshore/Nearshore services are becoming more critical as deals get smaller and the offshore component becomes less cost-effective in deals of this type. Offshore still plays a major role at the high-end, but to a lesser extent in the middle market

Rocket

The Rocket goes on….but there’s less juice with the special deliveries

Posted in: Finance & Accounting BPO

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Beyond Labor Arbitrage: The New F&A BPO Frontier

May 17, 2007 | Phil Fersht

The value proposition of F&A BPO now encompasses many added business benefits beyond a simple arbitrage of labor to help decrease transactional processing costs.  Companies are focused on both incremental improvement and transformational innovation, and F&A BPO is a lever that can help drive both without the need for significant investments in people and technology. These benefits can be summarized as follows:

·          Access to scarce talent.  Many companies today are struggling to find the finance and accounting talent they need. The U.S.-based talent pool has been shrinking considerably, and many companies are finding that F&A BPO service providers can usually offer skills, like payroll and accounts payable, significantly over-and-above basic transactional tasks – and at significantly lower cost. 

·          Ability to focus retained finance function on mission-critical activities.  The retained finance function can focus its time and resources toward driving ongoing quality into its financial processes and staff development and determine ongoing transfer of experience and skills from their service provider.  Moreover, the finance function’s retained management can focus time and energy on SLA-setting and rolling out governance programs, while working closely with their supplier.  These collaborations are often decade-long “marriages” and require increased energy and focus to achieve effective results with compromise required on both sides on many occasions. 

·          Continual cost reduction and performance enhancement, taking advantage of process methodologies and standards, namely Six Sigma and LEAN.    Companies can often achieve cost reduction initially through labor arbitrage, and then subsequently through increased economies of scale from service providers and increased performance levels from services providers as they continue to mature and further their offshore investment (e.g., China and the
Philippines).  Contracts are frequently structured to demand annual performance improvement and reduced baseline costs, while expecting the service provider to drive process improvement and innovation.. Additionally, today’s companies are quickly realizing that F&A BPO is an opportunity to make rapid, impactful changes to their business and take advantage of the standards service providers are developing.  Many service providers are going to market with differentiated value propositions that are geared to moving companies onto their existing delivery models, with a heavy skew toward offshore delivery.  They have quickly realized that they need to demonstrate industry-specific F&A process excellence to win credibility.  Effective companies are quickly seeing BPO as an opportunity to make substantial structural changes that would be very difficult to achieve if they were not moving into an outsourced end-state.
 

·          Ability to increase working capital and directly impact the bottom line.  Experienced suppliers can devote increased resources and generally have more efficient processes for managing cash flow from end-to-end solutions, such as Order-to-Cash and Procure-to-Pay.  Improving the effectiveness and velocity of the cash-flow can help improve management decision-making, not to mention the positive impact on working capital. 

·          Availability of new F&A technologies and bundled solutions.  It’s our experience that many of the leading F&A BPO service providers are continually developing solutions that can work in tandem with the company’s technology, or even replace it in certain cases.  Service providers are focused on F&A BPO solutions that can be standardized on incumbent ERPs, namely SAP and Oracle, with bolt-on tools and application solutions in discrete areas where value can be reaped. Additionally, solution areas like Order-to-Cash have moved beyond the performance of simple account collections using a billing application. They are frequently now bundled process solutions that often cross organizational boundaries, (e.g., dispute management, cash-flow analytics, and reporting capabilities).  The benefits of bundled process outsourcing can include improved opportunities for process redesign and associated cost reduction, synergies from staff working together in the same environment, the ability to create a more leveraged management team, and potentially fewer contact points with external and internal customers. 

·          Potential to integrate multiple disparate financial platforms, applications and middleware into one common global standard.  The cost savings enjoyed through labor arbitrage can offset significant enhancements to financial systems as part of the F&A BPO initiative to achieve a single, unified global chart of accounts.  We have seen many companies in the past delay F&A BPO initiatives to resolve inherent issues with their accounting systems, but there is a clear move within many of today’s initiatives to combine systems integration with the F&A BPO transformation, especially where the same service provider can be deployed to improve the F&A systems as part of the BPO initiative.  BPO provides the opportunity for companies to make rapid changes to their business, especially where there are multiple silos of financial data strewn across geographies and business entities.  Companies have a singular opportunity to address these issues as part of the BPO transition process. 

·          Transferal of risk to the supplier.  Managing offshore resources in today’s business environment can be very difficult.  In particular, offshore captive organizations that are not a Tier 1 global brand in lower-cost geographies (e.g. India) will find it increasingly difficult – and expensive – to hire, train, and retain quality staff resources – not to mention accounting for the geopolitical risks associated with owning offshore assets and employing offshore labor.  Many companies are quickly realizing they are far better off having experienced service providers take on these associated risks, as they have invested heavily in their staff development and governance programs. This can also save companies hefty management costs in running a captive operation. 

·          Preparation for a business slowdown. The desirable time to consider creating more effective and efficient F&A processes is when business is good and there is sufficient time to plan and manage the outsourcing transition. When done properly, engaging an outsourcing service provider takes time and is more effective when not executed hastily. Additionally, service providers are more willing to collaborate and share the benefits when you (and other companies) are not feeling immediate cost-reduction pressures.

·          Preparation for M&A activity. Outsourcing F&A forces the company to move to standard processes across business units.  This can help facilitate future M&A activity by decreasing the effort associated with the integration and by improving the likelihood and accelerating the timeline of realized synergies.  It also allows the company to focus on the core business during integration, leveraging the service provider’s skills and platform for integration of F&A. 

Posted in: Finance & Accounting BPO

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