HfS Network

Monthly Archives: Apr 2011

Outsourcing: a symptom of a failing education system?

April 27, 2011 | Phil Fersht

For a business even to consider outsourcing its operations, is a resigned acceptance that it's not running them very well and it may as well source to a provider that can try and do a better job at it.  At the very least, outsourcing will reduce costs and they'll continue to plod along with more of the same.

Most people still claim they really outsource to save money - of course that's an immediate benefit, but you wouldn't even be considering it, if you had operations in place that were really good.

For example, this company wouldn't have to do a lot of outsourcing:

  • "We have world-class HR, where we attract and keep top talent to run our business"
  • "We have superior finance, where we close the books in a week and our management can make rapid, informed business decisions"
  • "We have great customer support which upsells our products and makes our customers love us"
  • "And we have great IT brains that works with our business units to develop the applications our departments need, while automating processes to enable the business to be run efficiently."

If your business is at the point where you view your IT support, HR, finance, procurement, customer service etc. as largely low-value administrative functions, then your functional heads and their supporting teams have failed you.  I'm sorry, but if your business operations were run in a manner that could add significant value to your organization, you wouldn't consider outsourcing them for a minute.  I've been covering outsourcing for more than a decade, and I still believe in the value that great finance, HR, procurement and IT can give to a business, and it's a crying shame that so many businesses today are giving up the ghost of finding this value within themselves - they know their business  and their institutional processes the best, and looking to ship them off to a third-party is the final admission that their people have failed them. Here's the hard evidence:

Read More »

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

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NorthgateArinso: Is it ready to give the HRO market a boost?

April 27, 2011 | Phil Fersht

In the short time Keith Strodtman has been with us he's already produced an insightful piece on the Future of Work. And now he's out and about. On April 19, he went to NorthgateArinso's analyst day and filed this report as well as a new RAPIDInsight. Take it away, Keith...

NorthgateArinso’s HR and payroll outsourcing roots stem back to its days as a payroll service provider in the United Kingdom called Peterborough Software, later called Rebus Human Resources Services.  Northgate Information Solutions acquired Rebus in 2004. Over twenty acquisitions later the company has emerged as one of the largest pure play HR service providers in the world, offering HR outsourcing, HR technology, and HR consulting services.  At its analysts and advisor day in Atlanta on April 19th, several of the company’s executives provided an overview of their recent accomplishments, their growth plans, how they operate their business, and the latest on euHReka, their global HRMS solution.

Keith Strodtman, HfS Research Fellow

Keith Strodtman, HfS Research Fellow (click for bio)

For those not familiar with NorthgateArinso (NGA), the company, now owned by the private equity firm KKR, was formed when Northgate, the largest payroll service provider in the UK acquired Arinso, a Belgium based HR systems integrator and HRO provider in 2007.  While Arinso had a presence in the United States prior to last year, the company made a big splash in the US market in 2010 when it acquired the HRO business of Cincinnati-based Convergys.  Smaller acquisitions in Europe and the Asia Pacific region have rounded out the company’s service delivery capability around the globe.  According to CEO, Mike Ettling, the company has the assets it needs to compete in the global HR market and has now cemented its focus on customer service improvements and growing the business to $1B in revenue over the next few years.

There is evidence that the company is making progress toward those goals.  Despite a challenging economy, the company grew revenues 8.5% in its 2009/2010 fiscal year and increased win rates in its HRO business.  The company has made significant investments in its core technology platforms, established an extensive global delivery infrastructure, created a massive library of process standards, is in the midst of a company-wide rollout of Six Sigma, and has been developing the culture and skills it thinks are required for execution excellence and improved customer satisfaction.

NGA has developed an extensive service delivery network spanning more than 30 offices around the world.  Major delivery centers can be found in India, Philippines, Malaysia, China, Spain, Argentina, Brazil, Canada, and the United States.  They serve thousands of customers from these centers, including 100 global HR BPO customers.  One of the fastest growing areas for NGA is global payroll, a service that currently counts about 400 customers.

One of the more interactive parts of the analyst day was during the euHReka overview and demonstration - you have to love the passionate debates between technology leaders and technology analysts.  While certainly not the only arrow in NGA’s technology quiver, euHReka is clearly the most critical to the company’s growth plans.  The solution can be deployed in both an on-demand (SaaS) model and on-premise at the client site.  NGA claims 50 customers currently use euHReka around the world.  One final note of interest on the technology front was news of a soon to be announced learning solution partner that will be tightly integrated with euHReka.

Under the leadership of Ettling and several new management team members that include US industry veterans Trey Campbell, Paul Hutchinson, and Brad Everett, the company has bolstered its leadership team with a lot of HRO experience.  This combined with several marque wins in 2010 and several more promised in the near future, I don’t expect NGA to remain the relatively unknown brand, at least in the North American market that they once were.

For more discussion on NGA, please see the HfS Research RAPIDInsight entitled "NorthgateArinso: Is it ready to give the HRO market a boost", which is available at hfsresearch.com.

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

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Amazon: Saved by a Royal Wedding

April 26, 2011 | Phil Fersht
News sources covering the AWS event

News sources covering the AWS event

While most of you were out toasting the Sunday dawn sunrise with a glass of Cristal, after a marathon night of ballroom dancing and karaoke, HfS analyst Brian Robinson was busy pouring over the issues surrounding the now-infamous Amazon Cloud-outage.  So what better than that 1,301st perspective you must be eagerly craving... over to you Mr Robinson:

Amazon’s Cloud outage created significant buzz in the markets this weekend:  Google’s news archive showed that by mid-day on Friday nearly 500 news sources were reporting on the topic with over 1,300 articles written. I was surprised to see how little coverage some other world events received, many of which are arguably more important. And then I saw a true media casino – the upcoming Royal Wedding.

A quick review of Google stats shows that over 11,000 articles have been written from between 600 to 1,400 sources. It’s not hard to imagine why the Prince has asked for a two year hiatus from the intense pressure and scrutiny post the wedding. I bet Amazon wishes it had a similar ‘get out of jail free’ card to use this weekend. But as a public company, they don’t.  Nor have they earned their seat amongst the world’s largest service providers, which has its privileges.

Going forward, Amazon can expect a similar spotlight to highlight both its successes and failures.  Why?  The Cloud offering is a disruption to the tried and trusted IT and BP services model.  Much is at stake and whether it likes it or not, Amazon is one of a few companies that now sits at the fulcrum. I am certain Amazon will improve their response to and management of similar situations should they reoccur. As important, I hope the other participants in the sourcing ecosystem (i.e., buyers, research groups and consultants, and providers) also gain some much needed perspective:

Perspective #1

Buyers:  Know your customers’ availability requirements inside and out

Read More »

Posted in: Cloud ComputingIT Outsourcing / IT Services

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WellPoint's governator, Tony Filippone, joins HfS as Research Vice President

April 25, 2011 | Phil Fersht

Tony "The Governator" Filippone joins HfS' research leadership (click for bio)

Fed up leading BPO initiatives for a $60 billion healthcare insurance firm for the last nine years of your life?

Bored with developing new governance structures that cater for multiple back-office processes and managing an assortment of onshore/offshore providers?

Exasperated from pouring though reams of SLAs and pricing schedules?

Stultified by the incessant deluge of PowerPoint from providers and advisors regurgitating and repackaging that same old dog n' pony show in the vein hope you'll spare them a few dimes for their efforts?

Finally realized it's high-time to climb those steps into your very own ivory tower and start telling everyone else how it's done (or not done)?

Ladies, gentlemen and members of the outsourcing business... please welcome Mr Anthony M. Filippone to the hallowed ground of HfS analyst, industry thought-leader, and, most notably, the role of Governator-Extraordinaire.

I have got to know Tony well over the least four years where he has contributed to our thinking, added some real value to our buyers' groups, and developed an industry-wide reputation for challenging the status quo of vendor management and governance.  Not only is he an out-of-the-box thinker, but he is a prolific writer with a slightly snarky sense of humor, and a great sense of irony. And from mail-and-print through to strategic sourcing and revenue cycle, you won't meet many people with such a deep, working knowledge and understand of those operational processes that make business tick.

While you can read his bio here, and view the lovely press release here, I'll hand you straight over to our brand-spanking-new, feisty, no-holds-barred, Research Vice President for Governance, Sourcing and Healthcare strategies himself to tell you why he's joining the ranks of the crazy-horses...

Why Tony joined HfS Research and what he intends to do here (in his own words)

I am absolutely thrilled to join the experienced, no-nonsense, fun-loving HfS Research team.  I’ve formed and led outsourcing and strategic sourcing teams for the last nine years, but the time has come for me to help more organizations make great outsourcing decisions and optimize their outsourcing programs to achieve success.  Here is what my aggressive research agenda will bring you:

The “Other 90%” – No organization has truly focused on what happens after the deal is done and the work has transitioned.  The vast majority of the discussion in the outsourcing industry focuses on outsourcing solutions, service provider selection, and post-deal transition.  I offer two examples:

  1. The IAOP offers a certification program for outsourcing professionals and less than 40 pages of the 353 pages of their body of knowledge covers post-transition governance for buyers and service providers.
  2. Brown and Wilson’s “landmark” 366-page “The Black Book of Outsourcing” has four pages focused on governance and vendor management.

Putting this gap in research and industry focus into perspective, no organization has offered expert, research-based assistance on how to handle the last 54 months of your 60-month contract.  My primary role at HfS Research will be to help buyers and service providers learn how to succeed together in managing simple and complex outsourcing programs.

Deep Buy-side Experience – Advisors have extensive experience shaping deals and service providers have extensive process experience.  However, HfS Research’s objective, no-BS coverage of the industry, HfS’s relationship with the Sourcing Interests Group (SIG), and the oversubscribed HfS 25 give HfS a unique position to advance the experienced buyer’s perspectives within the outsourcing industry.  Since I have lived in the buy-side trenches for the last nine years in governance and procurement roles, my real-world experience will be invaluable to HfS’s community.

Broad BPO Experience – While ITO remains an important part of any organization’s strategy, BPO goes far beyond FAO and HRO and into the hardcore operations of a company.  I’ve led large outsourcing initiatives focused on inbound customer service and sales centers, complex back-office transaction processing, inbound mailroom/imaging/data entry, outbound mailroom, and HRO. I will play a critical role at HfS’s development of research in more horizontal BPO categories for buyers and service providers who seek to learn key industry trends.

Healthcare Industry Experience – No American industry is undergoing more change than the healthcare industry due to regulatory changes, the need to provide more cost effective healthcare, and the need to improved health in our communities.  Changes in the payor and provider industries will necessitate increased use of outsourcing to lower costs, obtain improve process efficiencies, and improve health outcomes.  I will lead HfF’s coverage of the healthcare outsourcing industry.

Tony Filippone (pictured above) has joined HfS Research's leadership team as Research Vice President, Governance, Sourcing and Healthcare Strategies.  He can be emailed at tony dot filippone @ hfsresearch.com, or tweeted @360VendorMgmt

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCaptives and Shared Services Strategies

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The Finance & Accounting BPO market landscape in 2011

April 20, 2011 | Phil Fersht

This week has marked a pivotal occasion in HfS' development as a research analyst organization, with our official launch of the HfS BPO PriceIndicator™.  As a special thank you for all your support, we are making our flagship 2011 F&A BPO market landcape report available as freemium for our subscribers - but only for one week!  So download your copy today.  Oh - here's the exec summary:

The F&A BPO market landscape in 2011:

Re-emerging from the Recession, re-focusing on business outcomes

HfS believes the market for finance and accounting business process outsourcing (F&A BPO) services is poised for a new phase of growth, as businesses recover from the Recession and focus on new strategies to drive more efficient operations in an increasingly global economy. F&A BPO fits the bill for an increasing number of organizations, while some still prefer to maintain their finance and accounting operations in-house.

Outsourcing the number-crunchers... are you ready?

However, one thing is certain – once a company makes the decision to outsource F&A processes, it will be committed to working with a service provider for many years, if not decades, hence, getting this right is going to have a major impact on its culture and operational performance over the long-haul.

This report delivers an unprecedented view of the F&A BPO industry, based on 788 live engagements, where organizations have outsourced two or more core F&A processes to a service provider. In addition to exhaustive contract information, HfS draws upon recent demand-side survey analysis to deliver the complete view of the market dynamics, the service provider landscape and the future expected direction of the industry. Key findings are summarized as follows:

»      Untapped market. The market for F&A BPO is largely untapped moving into 2011, with fewer than 800 live engagements and only one-in-six enterprises outsourcing transactional accounting activities to a third party service provider.

»      Recovering economy rekindles outsourcing motives. While the F&A BPO market grew rapidly between 2004 and 2008, interest cooled during the Recession as enterprises focused on shorter-term survival measures and put disruptive initiatives, such as BPO, on the backburner. However, with recovery under way, many businesses are refocusing attention on global outsourcing opportunities as a means, not only to reduce operating cost, but also to provide an impetus to globalize operations and transform processes. Consequently, 13% of enterprises are now intending to move into an F&A BPO model over the next year, with strong motivation coming from mid-market organizations ($750m - $3bn revenues).

»      Availability of smaller engagement models drives sustainable growth.

Read More »

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCaptives and Shared Services Strategies

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HP's strategy: is it plotting, or losing the plot?

April 19, 2011 | Phil Fersht

Leo's game-plan: Inspired, or just surrounding himself with old chums?

Today, we were greeted with news of the latest in a series of executive hires moving from SAP to HP (see last year's post on Leo's appointment), with the announcement that Marty Homlish has joined as Chief Marketing Officer - and yes, his previous employer was... you got it... SAP!  This follows several other high-profile executive appointments from... you got it... SAP, such as Marge Breya, Bill Wohl and others.

No disrespect to Marty, who has a stellar reputation from his recent decade-long marketing tenure at SAP, but what is HP doing?   Once a thriving hardware and services business locking heads with IBM, its services business has been slipping since even before its EDS acquisition, its BPO business seems to be dropping off a cliff, and now it's filling its management ranks with ERP veterans. Unless something is brewing that we don't know about, HP isn't an ERP vendor.

If HP isn't plotting a radical move to buy SAP, or some other ERP business, it seems to be letting itself down badly - the firm needs new thinkers who can drive innovation and a new direction into the business, because right now, most industry observers are left scratching their heads trying to figure out what the game-plan is.  If HP is looking to acquire SAP, and is readying itself with an already-in-place management team of old-school SAPers, then Leo may be pulling off a masterstroke in forward-thinking leadership that will go down in technology history.

Whatever the case, HP needs to put a stake in the ground - and soon - to let the world know its true strategy, as I, like many of my industry colleagues, am baffled.

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

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Why HfS is the first analyst to deliver real-time BPO price-benchmarking

April 18, 2011 | Phil Fersht

PriceIndicator™ is launched! HfS becomes the first analyst to deliver BPO price-benchmarks (click to view details)

Today marks a very special day in the life of HfS Principal Analyst Jamie Snowdon. Not only does he turn the ripe old age of 40, but his life's work is revealed to all and sundry:  the brand-spanking new HfS BPO PriceIndicator™ is officially born (SEE PRESS RELEASE).

Thanks to Jamie and his team's superhuman efforts, we've managed to crank through our database of over 800 live BPO engagements, sift though insurmountable reports on local wage rates, tax policies, inflation and exchange rate fluctuations, infrastructure costs and provider margin-uplifts, to deliver an incredible database of BPO rates across 12 countries and multiple staff roles.  Want to know how much a Chinese Sox expert during transition costs? Well, you've come to the right place...

So why did we enter this market?

For all the right reasons one offers a new product. There isn’t anything comparable available in the industry, we are in unique position with visibility to over 800 recent BPO deals, and most importantly, our clients are telling us they really, really want it!  The number one request we get from buyer clients is for support with pricing - most analyst discussions with buyers (and this applies to most analyst firms) results in the their requesting the analyst validates their rate-cards . We're simply developing a methodology to support these needs, but use our analyst time to advise them towards smarter pricing strategies.  Moreover, one of the main purposes of PriceIndicator™ is to steer the industry towards business outcomes and transactional models (if possible), and away from the creaking rate-card model.

HfS Research’s network produces the largest, most accurate and up to date deal database. Because we’ve earned the trust of both buyers and sellers of outsourcing, we can validate and ensure accuracy in real-time. And because we have an incomparable team of BPO experts who cover, in-depth, all the core horizontal and vertical business processes that are being sourced by enterprises today,

What does the HfS BPO PriceIndicator™ do?

  • It gives our clients access to up-to-date pricing information for the BPO market. And we’ll soon add Application Development and Maintenance PriceIndicator™, to give our research members even more value from their investment in HfS Research.
  • It provides all of our clients with a  quarterly report on pricing and the trends impacting the fees associated with BPO services
  • It ensures accuracy by doubling back—we take deal data and normalize it so it is useful, but we verify our conclusions with detailed “ground-up” analysis of all the inputs in over a dozen popular outsourcing destinations. Finally, we leverage our powerful network to validate both of the analyses.
  • It gives our clients the option of ordering specific data-cuts from our database, narrowing in on pricing, for example, within a certain industry or a secific type of role.
  • It enables HfS to give clients knowledge and coaching to steer them away from simply relying on "bums on seats" FTE pricing, and to evaluate more strategic pricing methodologies, namely outcome-based and transactional-based approaches.
  • It addresses a woefully underserved and historically unreliable sector of the benchmarking industry.

So please forgive us - just this once - for a rare sales-pitch. This capability is borne out of years of hard graft and experience from our analyst team, and marks a major inflection point in HfS' development as an analyst organization, just 14 months after we launched our business.

For more information on HfS BPO PriceIndicator™ please click here for a detailed methodology, and feel free to email Tom Ivory directly here.

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

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Are you ready for... The HfS Private Cloud Challenge?

April 16, 2011 | Phil Fersht

Cloud Cloud Cloud. Whenever you talk to a provider, or IT analyst, consultant or investor these days, the C word inexorably oozes out during whatever dialogue or monologue is taking place. And what we love most about the Cloud, is when we ask that person to define it, there is this inevitable pause before he or she stumbles through various unstructured sentences, before asking us how we define it.

Are you really ready for the "HfS Private Cloud Challenge"?

Never before have we come across such a vague, poorly-defined piece of terminology so many people utter so freely without really understanding it, but feel an irrepressible urge to vocalize it at every given opportunity.  At HfS, we've become so depressed by the repeated fuzziness of the Cloud, and the startling inability of anyone to put forward a convincing, proven case for the Private Cloud, that our hot-blooded analyst, Esteban Herrera, has deemed it high-time to lay down the gauntlet to you all, so over to you Esteban to explain our new challenge...

It has suddenly become almost as popular to bash the Cloud, as it has to hype it. Personally, I have been a skeptic all along, and don’t even get Phil started on Cloud BPO!

The Public Cloud mostly makes sense, but all of the technologies required have existed in some form for quite some time—they are available and people use them today, so I am not sure what is so “new” about it. At least the economics make sense: lots of companies invest in a single infrastructure with overcapacity, but because of the consolidation and standardization of the offerings, it costs them a whole lot less than developing their own infrastructure, and gives them the ability to scale. Given its limitations, the Public Cloud has been mostly popular with small and medium size.

But the Private Cloud makes my blood boil. Private Clouds are a cynical oxymoron. The whole point of a Cloud is that you share resources and don’t have to own the capacity you need, because its available on demand, so you can pay by the drink. Well, if you own the resources and the capacity, it is inherently limited to what you own, and you’ve already paid for everyone’s drinks at the bar whether they consume them or not!

Check out Wikipedia’s definition:

Read More »

Posted in: Cloud ComputingConfusing Outsourcing InformationIT Outsourcing / IT Services

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Have a read of Outsource Magazine

April 14, 2011 | Phil Fersht
Click to read Outsource Magazine.

Outsource Magazine, Spring 2011 issue. Click image to give it a read.

As you may recall, we recently partnered with Outsource Magazine. I'm happy now to share the first issue that includes our contributions. Jamie Liddell (despite jetlag and a screaming 4-month-old) and his crew have put together an absorbing issue - check out the packed table of contents, with features on IT securitycall center tech, and labor arbitrage.

If you already scour Outsource, you know what a readable pub it is. If you're not a regular reader, start today with this issue. I think you'll enjoy it.

Posted in: Finance & Accounting BPO

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Where have all the consultants gone?

April 13, 2011 | Phil Fersht

Deborah Kops has some interesting insights into the current shape of the BPO market, with those providers leading the charge originally emanating from strong consulting backgrounds... over to you, Debs

Consultants in BPO - still lurking in the background, or gone forever?

You’re probably not aware of a very subtle, but tectonic shift going on in the business process outsourcing industry which has implications for all those things that we all tout as benefits of sourcing—innovation, deep domain experience, true client partnerships.

No, when I refer to consultants, I’m not talking about the likes of the sourcing advisors.  They’ll continue to survive in one form or another. I am referring to the fact that the pioneers of the outsourcing industry, primarily BPO, came out of consultancy backgrounds.  And as they leave the industry due to retirement or the pursuit of other interests, the sourcing community is much less well off.

Think back to the heady early days of BPO in the mid 1990s. Consultants from the Big-whatever-it-was, the then Andersen Consulting and even the likes of the white shoe strategic firms, got a bee in their bonnets that their intimacy with and knowledge of their clients could be harnessed to improve and deliver business processes. They formed business lines with skin in the game, exclusively focused on doing rather than just advising, tapping not only into their own expertise, but that of their partners and colleagues.  At that time, moving work to India or even to Poland was a very hard sell to clients, so the value proposition came not from labor arbitrage, but the application of real business improvement tools and techniques in context.

Read More »

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

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HfS gets its Ivory Tower!

April 12, 2011 | Phil Fersht

Tom Ivory, our newest Vice President, will keep HfS' clients honest (click for full bio)

No, we haven't quite emulated McKinsey (just yet), but we have managed to acquire a genuine ivory tower from where we can postulate and preach to the masses... by hiring Tom Ivory.   Yes, the Tom Ivory, who once had the audacity to work for research firm Tower Group, where his email address actually was [email protected]..

Tom's joined HfS' leadership lead as our Vice President for Client Services to prove that we do actually care about our clients.  No really, we care. Despite all out abuse, criticism, mickey-taking and berating, we do want our clients to stay with us - which is why we hired an incredibly tenacious account director with the face of an angel.

Prior to joining HfS Research, Tom served as a Regional Sales Manager for Metastorm (acquired by OpenText in 2011), a leading provider of business process management software. In that role, he successfully managed a territory enabling Fortune 50 companies in the manufacturing, retail and telecommunications industries to improve operational excellence, transformation and business process efficiency. Prior to this appointment, Tom was Manager of Strategic Accounts for TowerGroup (acquired by Corporate Executive Board in 2009). During his tenure at TowerGroup, Tom grew revenue among strategic accounts such as Goldman Sachs, Wells Fargo and JP Morgan Chase and strengthened client relationships by consistently delivering solutions for the challenging and dynamic business and technology needs of the Banking, Insurance and Capital Markets industries.

Tom's excellent buy-side relationships will be extremely valuable for HfS as we grow our research advisory business, expand our HfS-25 buyers' council and (soon-to-be-launched) price-benchmarking services. We have also charged him with looking after some of our favorite existing clients, whom we promise we really do care about...

Tom lives in Dallas with his wife Lindsay and their two sons Carter and Cameron. He enjoys travelling around the world with his wife and experiencing new cultures. When he is back at home in Dallas he can usually be found cycling or running around White Rock Lake.

Tom holds a bachelor's degree from the University of North Carolina at Chapel Hill.

You can tweet Tom @tivory and email him at tom dot ivory at hfsresearch.com, to welcome him into the HfS family.  You can view his full bio here.

Posted in: HfS Research Company News

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Join us in London for SIG's Regional Roundtable

April 10, 2011 | Phil Fersht

Fresh from a scintillating summit on Amelia Island in Florida a couple of weeks ago, the Sourcing Interests Group (SIG) is venturing across the pond for its next shindig - its Regional Roundtable meeting in London on May 4 and 5, 2011.

SIG goes on tour to London Town... meet Euan Davis (HfS), Jamie Liddell (Outsource Mag), Michael Stock (formerly of the BBC), John Transier (Unilever) and Dr. Bernd Huber (Google)

And for all you savings-savvy sourcing sentinels, we have secured a saucy 20% discount for HfS readers: Enter the promo code HFS2011UK and select “Non-SIG Member", when you register here.

This event represents SIG's first major foray into the UK, and it promises to set new sourcing standards, featuring integral discussions on global business operations strategy, sourcing, shared services and BPO,  led by the following renowned sourcing practitioners:

  • Dr. Bernd Huber, Head of  Google's eSourcing Center of Excellence
  • Michael Stock, former Head of Business and Partnership at the BBC
  • John Transier, Unilever's Global Head of Finance Shared Services
  • Euan Davis, Managing Director of HfS Research's European Practice

Here are the main details you need to know:

  • The Regional Roundtable will kickoff on Wednesday, May 4 at 6:00 PM and will run through 9:00 PM, with cocktails and appetizers, and a panel discussion on on sourcing, outsourcing, offshoring and nearshoring that will include include Jamie "Lid-lifting" Liddell (Editor of Outsource Magazine), and HfS Research's Managing Director for Europe, Euan Davis.  We are assured this cocktail-infused discussion will leave no lids-unlifted.
  • Thursday, May 5 will run from 9:00 AM to 6:00 PM (yes, you get an extra hour's kip in the old country), will focus on today's burning sourcing topics, ranging from government requirements and new legislation affecting business and sourcing, smart supply-chain systems at the macro level, innovative sourcing strategies, governance excellence... and lots more.
  • The day will start with presentations from SAP, Ariba and SNR Denton, followed by three breakout roundtable sessions, each with different top-of-mind issues on the table; each attendee has the  opportunity to attend all three roundtables throughout the day.
  • Dr. Bernd Huber (Head of eSourcing Center of Excellence for Google) will discuss how Google has evolved over the last 3 years with using eAuctions and how you measure the performance and get the maximum out of eAuctions, as well as various eAuction formats and strategies and their sustainability for procurement.
  • Michael Stock, formerly of the BBC, and Unilever's John Transier will lead discussions for the group on smart governance and offshoring and how to govern complex global business operations in today's environment.

We have secured a 20% discount for HfS readers: Enter the promo code HFS2011UK and select “Non-SIG Member." Register here.

Join Euan Davis and our friends at SIG for what promises to be a right ol' sourcing knees-up.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCaptives and Shared Services Strategies

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Genpact spurns its suitors to IT-enable its BPO, with India's third largest acquisition

April 07, 2011 | Phil Fersht

As we clearly pointed out last Autumn, it was going to take one serious investment to get Gen down the aisle.  And, as we even more accurately predicted, firms such as Cognizant, weren't going to make this move anytime soon.  Moreover, we can officially proclaim, declare, announce and validate: HfS used to be conceited, but now we're perfect (ahem).

So why did Genpact buy Headstrong, in the third-largest acquisition ever made by an India-based provider, since Wipro picked up InfoCrossing for a cool $600m in 2007, and HCL-Axon for a similar sum, the following year?  And, most importantly, what does this mean for the immediate future of the BPO business?

IT-enabling BPO is getting increasingly important - especially within some high-growth verticals such as financial services

I recall a recent roundtable where eleven insurance sourcing executives were present, all of whom had mature BPO offshore-centric engagements for their insurance-specific processes (e.g. rules-based underwriting and claims processing).  One main aspect all of them agreed on:  we can only get so far with people-only processes, we need to IT-enable them to find new productivity improvements and business value.

The same applies for several other vertical markets, for example clinical data management in life sciences; but especially in the banking and financial services industries, with processes such as mortgage processing, asset services, trade settlements management and capital markets accounting.  Moreover, as the following data from our new Finance & Accounting BPO report illustrates, an increasingly majority of F&A BPO engagements require some form of IT-enablement - especially those engagements of a smaller scale and with middle-market clients, where buyers will leverage the BPO initiative to upgrade their platform, or have the provider introduce its own "wraparound" application layer that will have some pre-developed optimized workflows:

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCaptives and Shared Services Strategies

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The truth about Latin American outsourcing...

April 06, 2011 | Phil Fersht

Our recent research on Latin America's emerging sourcing presence has generated a lot of  buzz - not to mention a huge number of downloads. Today's piece in CIO - "IT Outsourcing in Latin America: 9 Things Your Vendor Won't Tell You" - sparked some further thinking from  HfS analyst Esteban Herrera, who has lived and breathed the LatAm experience.  Over to you, Esteban...

Esteban Herrera, Chief Operating Officer, HfS Research (click for bio)

The truth about Latin American outsourcing

Market activity and our recent research have created quite a bit of buzz around Latin America. In my view, it’s about time we have the debate and expose the pros and cons of nearshore destinations. Today’s CIO.com piece, for which I was interviewed, is a good example and accurately portrays some of the challenges of outsourcing in Latin America. However, I find myself, for the first time ever, empathizing with politicians and celebrities who claim to be “quoted out of context.”

The article does reflect some of my statements, but not all of them, and I find myself in disagreement with some of the headlines and conclusions. So allow me to clarify a couple of thoughts, lest people think I woke up yesterday and changed my mind about the vast services potential of the Latin American region.

  1. While more follow-up is often required (by American standards) I’ve always found the total time-to-deliverable in LatAm to actually be shorter than with India, because the wheels of productivity are greased by cultural understanding and proximity, and the fact that when people talk neither party is half asleep.
  2. I don’t know that prices have risen fast. If anything, our research indicates they rose far slower than in India. But small populations of desirable talent invariably lead to wage pressure. The good news is that in those places (like Chile and Costa Rica) we’ve seen pretty much the top of the market.
  3. Saying no is a good thing! For my 10 years as an advisor, my catch phrase to clients was “pick the provider that says no.” Saying “no, we can’t do that,” is an indication of honesty, transparency, and true partnership.
  4. I don’t buy the physical security argument. Baltimore is a more dangerous city than Sao Paulo. Detroit has more murders per capita than any Central American capital. I don’t see anyone refusing to visit GM’s headquarters based on security concerns.

Like any destination, Latin America has its challenges. But at HfS, we’ve come to see the region as a highly desirable component of a global services portfolio, whether you are a buyer or seller.

Stephanie Overby and CIO.com did us all a favor by increasing awareness and highlighting the challenges of the region, which are real. I am seizing the opportunity to highlight that the advantages are real too!

Posted in: Buyers' Sourcing Best PracticesSourcing Locations

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HfS Podcast: Why Latin America? ...And why now?

April 05, 2011 | Phil Fersht

Our recent report, How Latin America Powers Global IT Delivery, revealed that Latin America is emerging as a nearshore powerhouse for IT services and BPO.

So, armed with that info, HfS VP of Marketing Mark Reed-Edwards got together with Esteban Herrera, HfS COO, and Euan Davis, Managing Director of our European Research Practice, to discuss the region and its development in the global sourcing industry.

Listen to the podcast:
[podcast]http://www.horsesforsources.com/wp-content/uploads/2011/03/LatAm-Podcast.mp3[/podcast]

And while you're about it, why not browse some of our recent research on the LatAm region...

How Latin America Powers Global IT Delivery
Latin America: The Next Sourcing Frontier or an Afterthought?

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCaptives and Shared Services Strategies

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Wipro refines its Oil & Gas presence with slick move for SAIC's practice

April 01, 2011 | Phil Fersht

Just when you thought you'd had enough sensational news for April 1st, Esteban Herrera, who covers Energy and Utilities industries for HfS, shares his thoughts on Wipro's big acquisition today...

Wipro CEO, TK Kurien, and his new best friend

Today’s news that Wipro is acquiring SAIC’s Oil & Gas Technology practice for $150M appears to be another complementary addition by the Indian ITES industry’s most aggressive acquirer, provided it’s not a great April fool’s joke. In fact, the funny thing here is that SAIC, long positioned as a leader in this space, has a practice that is only worth $150M. Either SAIC has been excellent at marketing itself as a bigger presence than it was, or Wipro got a steal of a deal.

The motive for the purchase is not difficult to speculate: Upstream Oil & Gas is notoriously conservative and very challenging to penetrate as a new provider. Even if they outsourced their entire back office, that spend is a rounding error compared to their capital and operating budgets for pulling valuable stuff out of the ground and moving it to where their downstream friends can get it to you and me. In addition, Big Oil & Gas has been relatively slow in its embrace of offshore, in part, again, because the savings just aren’t a big enough percentage of the whole pie to get very excited about. Add to that a typically insular, homogeneous and long-tenured workforce and you get one of the toughest walls for offshore firms to climb.

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

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Painsharing exposed: HfS to reveal the worst performers in the outsourcing industry

March 31, 2011 | Phil Fersht

At HfS, we've had enough of service providers and their clients raving about how bloody wonderful they all are.

"We have a world-class global delivery operation that guarantees our clients first transformation, then innovation", said one provider. Yep - we were actually told that!

"Our experience with XXXXX was amazing.  They were so responsive and helped us transform our global processes in a way we could never have dreamt when we started out", said the CFO of a Fortune 1000 outsourcing client.  You have to wonder where his next job is being primed...

"We have this incredible culture of driving value to our clients, by making our employees feel empowered to find new thresholds of performance for our clients everyday."  Don't these guys have the worst attrition in the business?

Meanwhile, one SVP of sourcing (after a few bevvies) did confess to us recently, "I have 5 providers and they're all c**p.  They all oversell and under-deliver.  I have given up on any of them doing anything close to what I want them to do, so spend my time squeezing their rates.  If they're going to deliver c**p, we might was well pay them c**p."  Well said, old chap!  Another pint?

And other buyer (this one actually sober) stated "If my account rep turns up one more time in my office trying to sell me something, I am going to get his entry card to our building taken away". Uh, oh...

Yes, folks, it's time to separate the puff from reality, so HfS Research has finally come up with a spectacular new methodology that - once and for all - will expose this behaviour to industry in all its naked glory...

Introducing the HfS Research Painsharing Paradox

Yes, forget gainsharing folks, this is all about painsharing.  We've deployed an air-tight methodology for placing those pesky providers in their true position in industry, based on their acumen to serve up fluffy puff, correlated by their expertise in messing up all their client engagements:

The Painsharing Paradox Methodology

A Painsharing Paradox (PP) starts its life with a market definition and inclusion criteria. It’s proposed to our group of chief analysts, who are in charge of determining what markets are PP-worthy, whether or not the market is defined in a reasonable way, and so forth. In other words, analysts can’t decide to arbitrarily write a PP, and there’s oversight and a planning process, and an editorial calendar that lays out PP publication schedules for the entire year.

The rest is simple.  We figure out which providers have the biggest budgets, and then produce a draft PP - the bigger the marketing budget, the further they are positioned over to the upper-right corner of the grid.  Then the bidding process starts.  Depending on how much we like them, how many first class boondoggles we've been treated to, and how much hard cash they're prepared to pony up, we'll maneuver them down the grid towards that hallowed lower-left quadrant, where everyone wants to be.

However, if we feel the provider hasn't done enough to make us feel special, or once subjected us to two horrible days in a Red Roof Inn in New Jersey (which stays long in the memory), or - heaven forbid - didn't stump up a nice sum of dough for our coffers, we may decide to leave them stranded in that dreaded right hand corner - sharing the pain of humiliation, with the pain they have subjected on their clients.

And that's the Paradox... stay tuned for our first one, coming soon.  And providers, we have a special PayPal account set up especially for your generation donations - simply email us at [email protected] to get started.  Happy painsharing, folks :)

Oh, and by the way....

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Posted in: Absolutely Meaningless Comedy

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