HfS Network

Monthly Archives: Mar 2009

Keeping it onshore: an interview with Mark Vengroff

March 29, 2009 | Phil Fersht

Vengroff, Williams & Associates, Inc. Having witnessed the rampant growth of Finance and Accounting BPO over recent years, the common thread among the leading service providers has been cost-arbitrage through offshore labor.  There is, however, one exception:  Vengroff Williams and Associates (VWA). 

Naturally, the core differentiators among service providers is the ability to innovate with process and technology, and provide great people to service their clients, however, the offshore element has created the cost-lever to entice companies to move into a BPO end-state.  VWA is the one service provider which has resisted the lure of offshore/nearshore delivery to drive down costs even further, and has chosen to focus on its onshore delivery centers underpinned by its order-to-cash technology solution to service its clients. 

VWA achieved a 5% share of F&A BPO engagements in 2007, which was greater than several of the leading BPO providers in the market, and boasts some blue-chip brands in its client portfoilio, namely Ford Motor Company, Federal Express, Kodak, Microsoft, Yamaha and others.  Moreover, in this age of protectionism, in addition to the increased focus on healthcare reform, you have to consider VWA in a unique position in the industry today.  I recently caught up with CEO Mark Vengroff to ask him to share with us the reasons for VWA's success.

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

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Blogs and Research on outsourcing: are you getting what you need?

March 28, 2009 | Phil Fersht

Reports When I made the move back to research from the sourcing advisor world last January, many of you may recall providing input into what research you wanted.  This blog has proved to be a great medium for driving debate and cultivating ideas - in fact, someone even said recently this was becoming the "Huffington Post" of the sourcing industry. 

But blogs are not research reports, they let you test the temperature, get the high-level insight, but not always the deep-dive data points that we all need to base decisions.  I wanted to share with you some research highlights we've been putting out at AMR Research over the last year or so, and would love to get more feedback from you on what you want to see in the coming months:

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

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It's not too late to come to SIG

March 28, 2009 | Phil Fersht

SIG Baltimore

Folks, one event I've always found a lot of value attending over the years has been the Sourcing Interests Group's Global Sourcing Summit.  The organization always attracts a diverse group of professionals with responsibility for all types of sourcing responsibility, from supply chain through to finance, HR and IT.  I've been especially impressed with the new direction the association is taking under the guidance of Dawn Evans, since she took the reigns last year.

Come along to Baltimore this week if you can - there are some excellent sessions taking place all week at the Waterfront Marriott, Baltimore.  I'll be speaking about the BPO market outlook this Thursday if you want to come along and ask me some easy questions. And then I get to meet with Newt Gingrich prior to his keynote address later that day, where I'll blog his talktrack to you all (no Twittering...).

For more information contact Jeff Felix - he is offering a 50% discount for corporate buyers who read this blog.  Click here to access the main webpage for the event.

Posted in: Outsourcing Events

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Being middle-seated... all the way to Orlando

March 24, 2009 | Phil Fersht

Orlando You may recall the classic post “Being middle-seated in the back-row”. Well, I think I can go one worse… by being middle-seated all the way to Orlando (gasp). Yes, I was stuck in hell all the way to purgatory...or was I stuck in purgatory all the way to the gates of hell?

Orlando is my version of a very, very bad dream: a world where you can actually buy a fake Guinness in a fake Irish pub, and get stuck behind entire families in lengthy queues where the kids start at 220lbs… you never normally ever see people like this, but somehow Orlando acts as a magnet for over-sized, under-cultured plasticity.  Seriously, why bother with Guantanamo for interrogations? Just lock suspects in Epcot for a couple of days and we’ll find out who killed JFK, which Ritz-Carlton Osama Bin Laden resides in these days, and even where Bernie stashed his $50 billion…

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Posted in: Absolutely Meaningless ComedyOutsourcing Events

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Think before your retain: is IT impeding many companies' survival in this economy?

March 22, 2009 | Phil Fersht

IT_Impediment?I had this private debate with a number of peers in other analyst and consulting organizations recently, and wanted to share some of the discussion points with you all here.

In our recent discussion "Think before you fire: The cost of replacing IT talent", we discussed the issues facing  many companies who were too trigger-happy to scale back their IT wage-costs, and ended up spending a lot more in the long-run when replacing the valuable knowledge of their business systems.  At the same time, we see even more firms held back by IT departments that have failed to move with the times - and none more so than mid-market firms that simply cannot afford to employ the best quality IT staff.   And while we can debate the fine points about business processes moving to offshore or fully outsourced models, you sometimes forget how critical IT is to getting things done. 

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Posted in: Buyers' Sourcing Best PracticesIT Outsourcing / IT Services

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Outsourced from Africa

March 21, 2009 | Phil Fersht

I feel like I'm becoming a travel journalist these days, but we're seeing some very interesting locations get themselves onto the global sourcing map.  Enter South Africa and the picturesque coastal hub of Cape Town, which is primed to challenge for UK and European BPO services. Read more over at Think Global....

Posted in: Business Process Outsourcing (BPO)

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Outsourced from Africa

March 19, 2009 | Phil Fersht

I feel like I'm becoming a travel journalist these days, but we're seeing some very interesting locations get themselves onto the global sourcing map.  Enter South Africa and the picturesque coastal hub of Cape Town, which is primed to challenge for UK and European IT and BPO services.

As the 21st century dawned, South Africa sought to expand its economy with one of the focal points being the English-speaking workforce. Problems existed in the value proposition to potential European customers, most notably in the high cost of telecommunications. Like the dismantling of the Berlin wall, deregulation and the elimination of the telecommunications monopoly have propelled the nation into a rising star as an offshore location for IT support, customer care and BPO work.

For several years, the battle raged with the push/pull between economic development and the predominantly government-owned sole telecommunications provider, Telkom. Competition was injected into the industry with the first competitor, Neotel, commencing service in November of 2007. The government has been committed to reducing costs and implemented notable tariff reductions.

In 2008, the government formed Infraco to provide fiber optic connectivity to telecommunications firms that augments a wired national infrastructure that is 99.9 percent digital. Infraco is also laying fiber optic lines from Cape Town to the UK. Larger municipalities including Cape Town have proceeded to launch broadband networks to provide less expensive voice and data services.

By reducing the barriers of telecommunications costs, business is booming in Cape Town as an offshore location. There are several factors that contribute to the appeal of Cape Town as a destination for customer care. One major key is that there is little issue with accent for customers in the UK as English is the primary language for over one million Cape Town residents. There are also benefits from a compatible time zone to Europe compared to many other offshore locales.

According to CallingtheCape, a nonprofit agency promoting investment in Cape Town, call center employment grew by over 28 percent in 2008 and employs over 20,000 full time agents. The annual call center churn rate is slightly above 17 percent, roughly half the turnover rate of the UK. Further, they state that the monthly salary for an agent ranges from a low of approximately $400 for entry level and up to a high of twice that with four years of experience. Agent salaries have only escalated by around ten percent since 2004 and CallingtheCape reports UK companies saving $17000 per seat annually.  While labor costs are double those of Philippines and India, they are 20% less than those in Hungary, and even more that Poland.

The allure of Cape Town is not confined to just serving customers in the UK. In the spring of 2008, Royal Dutch Shell opened a call center in Cape Town to take advantage of the Afrikaans language spoke in the region. Agents service customers in Belgium, the Netherlands and Luxembourg in Flemish and Dutch. Lufthansa also has a center in Cape Town with bilingual agents fluent in English and German.  We have also seen Barclays Bank, Carphone Warehouse and a major US credit card develop operational support service in the area.

The growth has been virtually the same for captive and outsourced call centers over the years with captives employing a bit over two thirds of the full time agents. The annual turnover rate is five percent higher at slightly over 20 percent for outsourced agents compared to the captives. This is not surprising as outsource providers typically pay less with reduced benefits and are tasked with a higher percentage of outbound sales.

As we have seen with the development of new locations for offshore work, call center is normally the first work-type to ramp-up, with business-specific services, such as banking and accounting services quickly following suit.  South Africa is no exception.  Like Guatemala, their next challenge is developing scale, with a labor force of only 2 million in the Cape region.  It needs to develop its network of centers across the whole country, and possibly in neighboring countries, while keeping standards high and wage costs low.

The recent changes in the policies of the national government and in the global market place point to a very bright future. It can be expected that many larger established global outsourcing providers will set up shop to follow the leads of major corporations to harness the potential BPO and customer care benefits offered by Cape Town. As competition develops and matures in telecommunication delivery, the costs of doing business will reduce, further increasing the attractiveness of the value proposition as a nearshore hub for European service delivery.

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesSourcing Locations

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Global business on a Knife-edge: Bonuses, H-1Bs and Naïve Protectionism

March 17, 2009 | Phil Fersht

AIG Has the world gone mad? Or is it just the US Senate? One month after Senators Bernie Sanders and Chuck Grassley pushed their amendment through the Senate making it tough for TARP recipients to hire H-1B* or L1 visa holders, we use the same TARP cash to pay retention bonuses to the very people who got us into this mess in the first place. We could create many, many more jobs with that bonus cash than we’d ever had “saved” by blocking a small minority of H1-B applicants.

The original intent of the Sanders/Grassley amendment barred all recipients of TARP funding from hiring any H-1B workers. However, the amendment was

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

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Join the Horses... in Budapest

March 16, 2009 | Phil Fersht

Budapest

Folks - we're honing in on the European sourcing industry in May, with Horses die-hards taking center stage at the 9th Annual Shared Services & Outsourcing Week in Budapest, Hungary.  It's Europe's largest shared services and outsourcing show, organized by the prolific SSON folks.   Yes - we're live in Budapest with a web-stream on Horses for Sources talking about "Survival Mechanics: defining a competitive sourcing strategy in today’s economy". 

If you can make it to Eastern Europe, it would be great to have you part of the show and take part in the debate.  And if you can't make it in person, log-on and blog your questions live to the panel. 

Horses readers can receive a 25% discount registering here, quoting promotional code MP23*.  For further information you can contact Liz McAleer

*not available for AIG employees who've just received bonuses

Posted in: Business Process Outsourcing (BPO)Outsourcing Events

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Guatemala: Bananas, Green Tomatoes... and BPO

March 14, 2009 | Phil Fersht

Antigua-Guatemala We've been debating the opportunities for Latin American countries to take on BPO work for a while now, and spending a few days in Guatemala has confirmed - beyond doubt - the potential of the region. 

I had the pleasure of visiting Capgemini's facility, which is quickly ramping up customer-facing F&A work for Coca-Cola Enterprises (which we picked up on here).  I am going to write more about this engagement in due course, but the hybrid nearshore/offshore operating model for Finance and Accounting and Procurement is showing strong signs of being the way forward for the industry.  This is also the case for many global strategic sourcing, supply management and HR BPO engagements. For example, Coca-Cola Enterprises is sourcing neashore work to Capgemini's centers in Guatemala and Krakow, and using its Chennai operation to support these centers with non-customer facing processes. 

Guatemala's population itself is only 13.7m people, with 40% based in urban areas, however, it is the largest Central American hub with strong potential to source activities to neighboring countries, such as El Salvador and Nicaragua (see graph below) to compliment serices and keep costs low.  What impressed me most meeting many operations agents and managers was the easy-to-understand English intonation, the obsession with process, the youthful energy and the discipline. 

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

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Outsourcing is not for wimps

March 10, 2009 | Phil Fersht

Deputy-dawgMany Americans in the global sourcing industry will attest that they never did quite separate themselves from their old colonial masters (but we let them think they did…). One such example has been the UK’s very own David Poole, imported by European outsourcing giant Capgemini to spearhead its Americas BPO business. Upon his arrival at these shores two years’ ago, David even adorned the title “Deputy”, in the hope he could quickly assimilate himself with the Wild West, installing himself and his family in Chicago, where he could steer them of clear of crime and corruption.

David, today,David has firmly established himself as a veteran of the BPO industry, leading Capgemini to some major new global F&A BPO client wins that have firmly established the firm’s global delivery footprint across the Americas, Europe and Asia (including major operations in China and India). He joined Capgemini in 2004, from PwC in London where he was a partner and a founding member of the firm’s global BPO business prior to IBM acquiring their operations. He’s made a significant contribution to the development of the global BPO industry, helping to craft several major global engagements since the early ‘90s. David is also a qualified management accountant and can wax-lyrical for hours about operational excellence with invoice processing. Enough said – over you Deputy Poole for your take on what outsourcing means to businesses today…

Outsourcing is not for wimps

I spend a lot of time talking about why outsourcing is a smart idea – I talk to clients, at public forums, in meetings, to my staff, heck I’ve even bent the ear of my dog on occasion. So, when Phil asked for volunteers to contribute to this blog, I naturally jumped on the soapbox. I couldn’t resist another chance to make my case, which is this: When the going gets tough, the tough outsource.

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

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Imitation is the greatest form of flattery

March 10, 2009 | Phil Fersht

Nandakumar Hatalkar of Patni writes in Global Services Magazine about "Eight Worst Mistakes in Outsourcing and How to Avoid Them". Actually, it's a very good piece and well worth a read, but I suggest he finds a more original title next time :)

Posted in: Uncategorized

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HR outsourcing in this recession... why this makes sense for many global firms

March 07, 2009 | Phil Fersht

While many firms are hunkering down tryng to ride out this turbulent year, we're also seeing an increasing number of multi-national companies use this time to develop business support infrastructures that can scale quickly with the needs of the business. It's not all about cost-reduction - it's about being nimble, and having a firmer handle on accessing critical data on your staff at a global level.   You can view the full post over at Think Global.

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

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Where should outsourcing vendors invest their marketing dollars in this climate?

March 05, 2009 | Phil Fersht

Being an analyst, you get a broad view of all the entities competing for the same service provider dollar. You also get a good perspective on how service providers can get the best bang for their marketing buck. And being a blogger, you also pick up a strong sense for the effectiveness of media outreach, but I'll save that discussion for another time.

There is no one-stop support shop for vendors to find and attract new clients, and influence the market - they need to gauge where they need to build influence, using both direct tactical measures - i.e. speaking at conferences or advertising, and indirect measures - i.e. influencing influencers or subliminal branding. The current pull-back in discretionary spending from vendor marketing budgets is seriously exposing the bloated array of firms feeding off the vendor marketing-dime, and with a lot less to go round, we're going to see some firms exit the market, some market consolidation, and others simply going out of business. We'll also see some boutiques linger around the industry because their owner has no idea what else to do, and his only costs are living and travel expenses, and maintaining a website.  Desperate times call for desperate behavior and none more so than for many of those entities forging their living selling to IT services and BPO firms.

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

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Chance to meet me...

March 03, 2009 | Phil Fersht

Road-to-where Now that's an offer you can't refuse... surely?  Am road-ing it heavily the next three months at the following locations:

Americas: Guatemala City; Orlando; Palo Alto; Baltimore; New York; Boston; Phoenix

Europe: Budapest; London; Zurich; Waldorf

India: Bangalore; Mumbai; Chennai (all cities yet to be confirmed)

Drop me a mail if you want to buy me coffee / Red Bull.

 

Posted in: Uncategorized

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Time to offshore the law

March 02, 2009 | Phil Fersht

GandhiI've been getting an increasing number of service providers talking up the growth of Legal Process Outsourcing (with the mind-blowing acronym "LPO").  Personally I'm a bigger fan of PPO (Political Process Outsourcing), but it seems like we could have some onshore/offshore complications with that one, so let's talk about LPO. 

Having had a few discussions with clients and service providers in this space, it's clearly an area for major cost-efficiences for businesses.  I've even had one service provider bragging he was making a killing doing liquidation administration offshore.  Bottom-line, several of the fat law firms are already offshoring their own legal support work to low-cost locations, whilst still billing their clients top-whack rates, so smart corporate legal buyers are focusing on engaging with LPOs, as opposed to highly-expensive law firms, for a lot of legal work, while retaining expensive lawyers for critical activies that require deep experience.  And did you know Mahatma Gandhi was a barrister?  I'd use him anyday over Denny Craine :)

I've recently had the pleasure of interacting with the industry's one full-time LPO advisor (if there are others, here's your chance to make yourself known), so I asked him if he can educate us more regarding what LPO's all about.  Step up Matt Sullivan who lived in Pune, India, for two years, where he managed the risk management & regulatory compliance practice for a global IT outsourcing company as part of a 20 year career in services and outsourcing. He now plies his trade at Red Bridge Strategy, where he's teamed up with some very smart and friendly consultants who focus on global sourcing issues. Over to you Matt:

Changes Ahead in Sourcing U.S. Legal Services in 2009

Businesses have traditionally relied on a combination of in-house legal departments and outside law firms for all of their legal work. During the past few years, maturing processes, technologies, and legal-services-delivery-perspectives have created an environment where corporations now have a spectrum of choices from which to source legal services.

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesKnowledge Process Outsourcing & Analytics

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