HfS Network

Monthly Archives: Aug 2008

HP/EDS: a reverse-takeover to create a services giant, but what's the game-plan?

August 31, 2008 | Phil Fersht

So HP’s $13.9Bn acquisition of EDS became official this week – the largest-ever merger between two IT and business services providers.  The merged services entity resembles a reverse-takeover of the combined services business, with all the management positions remaining in Plano, with the exception of application services.

EDS HP LogoOverall, there were few surprises in the deal-finalization announcement. However, the fact that there seems to be no initial definitive plans to integrate the businesses at a service/product level beyond the newly-outlined organization structure, gives me some cause for concern, especially considering the fact that HP/EDS has already had three months to draw up a merger-strategy.  We're operating in a market where crafting and developing a global delivery strategy quickly is critical.  We've seen far too many failures in recent years from services providers that have sat on their traditional revenue streams, while others have pushed aggressive services agendas to win over clients looking for vendors with new thinking and focus on driving innovation into engagements.

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Posted in: Business Process Outsourcing (BPO)Finance & Accounting BPOHR Outsourcing

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Why bundling apps and business processes with a single provider can make a lot of sense

August 25, 2008 | Phil Fersht

The software industry has - for decades - dealt with the whole "best of breed" versus "integrated application suite (ERP)" quagmire, the scenario centered on whether clients are better off trying to manage a whole variety of individual products themselves, via-à-vis having a ready-made integrated suite of applications.  These arguments are surprisingly similar to the debates raging in the outsourcing industry today.

Integration While a best-of-breed (b-o-b) approach can provide the client added quality (or functionality) and control over its suppliers, the prohibitive cost of managing multiple service providers (or applications), combined with the increased need for unique skillsets to integrate them into the business, favor the multisourcing (integrated-suite) route.  And, while many enterprises have persisted with a b-o-b software strategy, both Oracle and SAP have been vacuuming up many of the niche application products, whereby presenting the client with the integrated-suite strategy, whether they initially wanted it or not.  While outsourcing providers are generally not as acquisitive as software providers for a number of reasons, their need to add process depth, industry expertise, technology enablement and scale to their global services offerings naturally narrows down the playing field over time, as outsourcing engagements become more global and complex.

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesFinance & Accounting BPO

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Weekend sourcing

August 23, 2008 | Phil Fersht

I spent the last week in this popular BPO-delivery location for such providers as ADP, Ceridian and Convergys... any guesses where?

IMG_0601

(I'll give you a clue - it's not El Paso)

Posted in: Business Process Outsourcing (BPO)

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I cannot be serious

August 21, 2008 | Phil Fersht

When I arrived on these Western shores a few years ago from the Old Country, I made it a personal mission to ensure (some) Yankees around me learned that special brand of humor termed as sarcasm. This habit of mine seems to have spilled over into my blogging... My recent post "The Calamity Clients Awards, 2008" enticed a couple of people to contact me - one person asking where she should submit her vote, the other kindly advising me to find a way to scrap the vote before I offended someone. 


For clarification, the purpose behind the Awful Outsourcing and Calamity Client awards was to

1) Make you laugh;


2) Have a subtle dig at some of the awards being banded around the outsourcing industry;


3) Raise some real issues concerning some struggling outsourcing engagements, and the fact it actually takes two-to-tango in this business (both vendors and clients).

Thanks for the many, many messages I did receive from those of you who did realize all three of the above points - very much appreciated, and makes me feel my original mission to induce sarcasm into the North American outsourcing industry is largely working :)


Anyway, I'll lurch back to more serious stuff next week... peace out


John McEnroe'


'


'


Definitely not serious...

Posted in: Absolutely Meaningless ComedyConfusing Outsourcing Information

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The Calamity Clients Awards, 2008

August 20, 2008 | Phil Fersht

Calamity_Client2 Due to popular demand, we're adding an additional category to the 2008 Horses awards for Awful Outsourcing:  "The Calamity Clients".  Yes, it's not always vendors which are responsible for outsourcing calamity - it often takes two to tango, and this is the vendor's chance to counter-punch. 


As there are several well-trodden paths towards calamitous outsourcing, we will be distributing several awards across the following non-specialist areas:

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Posted in: Absolutely Meaningless Comedy

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The 2008 Horses Awards for Awful Outsourcing

August 12, 2008 | Phil Fersht

In light of all the recent banter on the credibility of awards, I thought we'd serve up our own awards ceremony - and I reckon we can put all of the other lists/awards companies out of business in a heartbeat, because only one vendor will get upset with each award (genius 'eh?)... Here are the categories:

Horses-Awards Worst Outsourcing Provider of the year:

Vendors - are you just so plain awful you can't hold down a client?  Then, this could be for you! This is restricted to vendors which have had a minimum of three clients bail on them over the last 12 months, whether they "backsourced", or paid millions to switch to another provider. 

The "Awful Advisor" award:

Rarely is a sourcing advisor ejected from client-site, but it's happened - and a few times!  Buyers - please nominate that team of consultants that drained you of billable hours, before coming up with recommendations that you could have got from a taxi-driver.

The "Bait-and-Switch" special:

Buyers - did you sign up with a vendor, when the minute the ink was try, the entire team who worked their guts out to woo you simply vanished?  Those Six Sigma black-belts, LEAN luminaries and Kaizen karate kids never materialized?  They leave a zero off from the attrition-rate in their Hyderabad call center?  Then nominate your favorite bait-and-switcher today.

The Lousiest HRO provider:

We're spoiled for choice with this one - how many payroll runs did your supplier miss?  Do you blame it for all your dysfunctional HR processes?  Of course you do! Here's your chance to throw your HRO provider fully under the bus.

The Funkiest FAO supplier:

Still closing the books from Q4 2007?  Got 2,748,547 unpaid invoices?  You know what to do...

And finally.... Thought Laggard of the Year:

Sick of the same old bleating from past-it, out-of-touch old industry windbags?  Tired of reading their dreary old articles that they probably got some freelancer to write for them anyway?  Worn-out with ego-filled luminaries starting their own blogs then leaving them stranded after three posts?  Well, now it's time to recognize their anti-contribution to the outsourcing industry!

 

Posted in: Absolutely Meaningless Comedy

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Some summer sourcing soundbites

August 11, 2008 | Phil Fersht

Outsourcers Hone European Savvy:  Niraj Sheth, of the WSJ, comes up with some compelling examples of how the leading Indian outsourcers are training their staff to understand European business etiquette.  With a weak dollar and tight economy, the offshore leaders are increasing their focus in the high-cost European countries, where expensive currencies, high wages and a challenging economic climate are driving outsourcing to the top of the agenda.  However, it's not quite as simple as adding americanisms to English...

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesIT Outsourcing / IT Services

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Why is this blog called "Horses for Sources"?

August 10, 2008 | Phil Fersht

Horses for Sources I get asked this question from someone nearly everyday, so here is the reason:  It's a horse-racing term. Certain horses run better on certain courses.

HORSES FOR COURSES - "A mostly British expression urging someone to stick to the thing he knows best, 'horses for courses' comes from the horse racing world, where it is widely assumed that some horses race better on certain courses than on others. In 1898 a British writer noted in the first recorded use of the expression: 'A familiar phrase on the turf is 'horses for courses.'" From the "Encyclopedia of Word and Phrase Origins" by Robert Hendrickson (Facts on File, New York, 1997, Page 339); "A course of action or policy that has been modified slightly from the original to allow for altered circumstances. A horse that runs well on a dry course will run less well on a damp course and vice versa."

I always felt this phrase sums up the experiences of both vendors and buyers which have danced around with outsourcing relationships over the years. An outsourcing engagement that works well for one firm in its particular circumstances, may not be as successful for another; there is no one-size-fits-all solution, when you are dealing with a company's people, processes and technology.  It took me about 30 seconds to come up with this goofy name after a few glasses of vino when I decided it was high-time to get a blog going...
 

Posted in: Business Process Outsourcing (BPO)Finance & Accounting BPOHR Outsourcing

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The Sheriff puts some fizz back into Cap

August 07, 2008 | Phil Fersht

Coke Capgemini is making some waves in the world of F&A BPO this year, winning some major global engagements, one of which is likely to be down in Tampa.   Not a bad return from new Sheriff David Poole (he claims he is no longer a deputy).  I have gone on the record to describe the current climate as crucial for Capgemini to break heavily in the global F&A BPO business - and they seem to be doing just that in a highly-competitive market.  CapgeminiThey will be pushing hard for the number 3 market share position in the F&A BPO market by year-end behind both Accenture and IBM, but leading the large pack of outsourcing vendors jostling for position.  

Posted in: Business Process Outsourcing (BPO)Finance & Accounting BPO

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Ensuring your sub-processes fit with the MSA

August 07, 2008 | Phil Fersht

Zztop

Remember these legends...But can you recall the name of the drummer (pictured in the center)?

Posted in: Absolutely Meaningless Comedy

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Why I put the kibosh on the survey of list-makers

August 06, 2008 | Phil Fersht

Apologies to several of you who voted on a poll I ran on Sunday/Monday that was evaluating the credibility of the list-makers and award-givers in the outsourcing industry. Unfortunately, I received a very large number of suspicious survey responses from a host of "FORTUNE 500 buyers", whose IP addresses - for some reason - all seemed to emanate from the same couple of locations. I received a very large number of these survey submissions clustered within a short time-frame, and they had no names or email addresses attached. They also all had selected one particular list-maker as "highly credible", while simultaneously describing the same 2 others as having "poor credibility".

It saddens me that on-line surveys can seemingly be so easily manipulated by entities that seek to sabotage results, or skew them in favor of themselves. I have become a little more cynical (than usual) this week as a result. As an industry analyst, I try hard to be impartial and deliver information to clients to help them make informed, unbiased decisions. I run this blog to drive healthy discussion, promote ideas and share knowledge with others. It seems that not everyone shares my ideals.

There's my rant. Issue closed. Thanks for listening. I just hope that there are still many of us who want to drive out bias and impropriety from a challenging industry in these complex times.

Posted in: Confusing Outsourcing Information

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The Future Of HRM Service Delivery

August 05, 2008 | Phil Fersht

I am honored to welcome one of my earliest - and long-time - mentors in the services and hi-tech advisory business to guest on Horses for Sources. It's taken me over a year to persuade her to showcase her insights here, so I guess now she has submitted me a piece is testament to the power of blogging, and the fact that it is fast-becoming a preferred medium for industry luminaries to opine their views to the industry-at-large. The fact that she felt she could be a little more "edgy" and freer to express her views here makes me feel like I am doing something useful for the outsourcing industry hosting this blog :)

Ladies and gentlemen, please welcome the honorable Naomi Bloom and her take on the future of Human Resources Management service delivery. Naomi has over four-decades of experience in HR delivery and technology in a number of advisory roles and is widely-regarded as the pre-emeninent authority in HR platform delivery.  Over to you, Mrs Bloom:

During the analyst panel at the HR Technology Conference in 2003, I made a bold (many said foolhardy if not wrong-headed) prediction, that continues to haunt me about the role that comprehensive HRM BPO would play in human resource management service delivery.  I was in a wheelchair at the time, recovering from a bad fall at Machu Picchu, so perhaps I was emboldened by the pain medicine.  What I wished I had said, and what may in fact be the case, is that by 2010 comprehensive HRM BPO will be the dominant approach considered by HR leaders (and their C-suite colleagues) to HRM service delivery as an alternative to "roll your own"via some flavor of shared services.  What I actually said, which was clearly dead wrong, was that within five years (i.e. by 2008) half the Fortune 500 would be using comprehensive HRM BPO. 

How could I have been so wrong about something so important? And why do I continue to believe that comprehensive HRM BPO, where uptake is moving much, much slower than I had predicted just five years ago, will eventually become that dominate approach to HRM service delivery? Perhaps I was seduced by the obvious business case for comprehensive HRM BPO, a business case which, if anything, has grown stronger over the last five years:

   * Expectations for HRM service delivery go well beyond what even large organizations can (or want to?) envision, create, manage, sustain, afford and do reliably on their own -- and those expectations now include global service delivery with local language and regulatory expertise; intelligent, role-based, integrated and content-rich self service; analytics at every level and, especially, re: business outcomes; and deep and integrated automation for both administrative and strategic HRM (a.k.a. talent management) to reduce costs and improve service consistency, quality, breadth and availability.

   * Piecemeal outsourcing and the associated vendor management, governance, and systems integration challenges, especially as to self service and data analyses, are also more than most end-user organizations can (or want to?) handle, and it’s getting tougher as end-users add SaaS-delivered point solutions into their mix of HRM software.

   * We’ve gotten used to trusting vendors for critical applications software development and providers for critical outsourced processes, and we’ll get used to trusting our core HRM data and HRM delivery system to equally valued, comprehensive HRM BPO providers -- what could be more sensitive than health care claims data, and we routinely outsource claims processing.

   * Corporate leaders have better uses for their capital, bandwidth, scarce expertise, risk-taking, frustration tolerance and other resources than to sustain their own HRM delivery system -- much more competitive advantage can be created via HRM strategy and plan, policy, program and practice design than from operating the “factory” that delivers them.

   * The industry's move to Web services and SOA by all the ERP/HRMS package vendors, with the attendant overhaul of thirty year-old data designs and semantics by the established players, will be the kiss of death to in-house implementations -- CEOs just won’t pay to do this one more time no matter how much migration support is promised by the vendors -- but I was SOOOOO wrong, back in 2003, to think that Oracle or SAP would bring their next generation application suites to market by now. Beyond the slow arrival of disruptive next generation HRMS software from the ERPs as well as specialist vendors, the nascent HRM BPO industry is still trying to recover from a number of flawed assumptions which were made by early buyers, sellers, and investors, including:

   * Lift and shift” is not a sustainable business model;

   * Highly customized and configured in-house implementations of SAP/PeopleSoft/Oracle/etc. cannot be easily commercialized, nor can highly tuned (to one company) shared services organizations;

   * Labor arbitrage will not save the day when customer contracts still express their reluctance to accept foreign CSRs and many HRM practices are too convoluted and undocumented to be taken offshore;

   * Global call centers are not as effective as global intelligent self service, and the HRM challenges of running huge HRM operations centers are big and growing;

   * The lack of an agreed and precisely-defined vocabulary (i.e. an HRM domain model) for discussing scope of services, data definitions, processes, expected outcomes, SLAs and business metrics, standardization, configuration, and customization (G-d forbid!), etc. adds big $$ to every aspect of the sourcing and HRM delivery system life cycles;

   * Comprehensive HRM BPO is not the same as ITO, and many of the early pioneers, firms and leaders, came from ITO; and

   * Comprehensive HRM BPO is also not the same as payroll or benefits admin, and most of the rest of the early pioneers, firms and leaders, came from payroll or benefits admin outsourcing.

The flaws in these assumptions are now well-understood and the industry is working hard to undo the damage caused by them, but there remain many deals that were based upon or made captive to these assumptions that have and are continuing to drain the industry's resources. Furthermore, maximizing labor arbitrage, rolling out truly intelligent self service on a global basis, and getting to an industry standard (or even provider standard) HRM domain model are by no means accomplished as yet, and there's a good bit of heavy lifting still needed to overcome the lack of these critical industry enablers.

What else stands in the way of comprehensive HRM BPO becoming everything I predicted it would be? One glaring barrier is that we are taking far too long, as an industry, to figure out what in HRM should be standardized, within and across organizations, and what MUST be unique in order to create/sustain competitive advantage. We're also taking far too long to create and deliver Amazon.com-like HRM self service (in your language, with your cultural and regulatory sensitivities considered, and by cell phones, smart phones, or whatever our customers have at hand). Doing so would not only get rid of those pesky CSRs and allow the BPO providers and their clients to focus on the few but highly skilled HR generalists and COEs needed to handle what can’t be done self service, but it would also allow those BPO providers who have the right KSAOCs to deliver the insights and advice on improving HRM which were promised.

We are also continuing to pay a very high price for not having, particularly at the high end of the market, HRM BPO software platforms that are the best possible fit for this business. We're running factories here, and you can't make M&Ms profitably in an oil refinery any more than you can make profitable HRM BPO using software designed to be implemented and operated separately for a single client. I've written monthly since 2003 in HROToday about our software platform needs for comprehensive HRM BPO, but so far none of the major ERP/HRMS vendors have committed themselves to meeting my HRM BPO architectural requirements.

The biggest barriers to greater adoption of comprehensive HRM BPO are (1) the lack of proven, high capacity, and profitable providers across all of the relevant markets who are offering compelling, global and integrated HRM delivery services, (2) the lack of HR leaders and their teams who are ready to accept standard HRM service delivery processes and even some lower value HRM business rules where uniqueness carries no competitive advantage, and the lack of truly BPO-ready software platforms. The best providers are working tirelessly to overcome the sins of the past, and new entrants are learning from those early mistakes so as not to repeat them. Since no factory can achieve high quality at low cost without a very high degree of reuse and repeatability, the providers really need their software partners to deliver BPO-ready architectures and their customers to deliver BPO-ready expectations to make this new business model as successful for all interested parties as I believe it must be.

Naomi Lee BloomAm I embarrassed by the prediction I made in 2003? Of course I am. But to me the end game is still very clear. Even with the tremendous growth in SaaS among HRM software vendors taking a large chunk out of the TCO (total cost of ownership, alias the direct IT costs) of using that software -- and I'm a staunch supporter of this software deployment option -- end-users are still faced with minimizing the TCSD (total cost of service delivery, alias the full process costs and attendant liabilities), and that can only be done through effective, comprehensive HRM BPO.

Naomi Lee Bloom (pictured) is managing partner of Fort Myers, Florida-based Bloom & Wallace

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesHR Outsourcing

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