HfS Network

Monthly Archives: Nov 2011

Too late to compete with the Sourcing Raj? (Part I)

November 26, 2011 | Phil Fersht

Taking on the Indian outsourcers: too late to make a splash?

HfS Research Fellow and Sourcing Change protagonist Deborah Kops investigates whether India has bowled an unplayable delivery to the rest of the world's ambitious outsourcing businesses, or if there's still a chance to nick it over the slips and get on the scoreboard...

Let’s give Indian-legacy providers their due—they arguably initiated, then accelerated acceptance of  the concept of working offshore; they’re well-entrenched in some of the best global clients; they’ve set the bar for industrialized delivery—from hiring to training; from process mapping to technology, from delivery to measurement. As a result, sending critical processes over five time zones away is considered safe and smart today. Other countries want to emulate their positioning, ensuring that the names Brazil or Chile, Malaysia or China, South Africa or Kenya, Ukraine or Poland are mentioned in the same breath when global delivery models are under discussion.

Will the market expand rapidly enough to make non-Indian providers a must-add to business models—beyond a language or regional proximity play? Will clients seriously consider providers based in other geos to deliver critical scale for finance and accounting, knowledge or vertical business functions in the near term?

Despite rising costs and increasing attrition rates, it seems, for the foreseeable future, Indian legacy providers will continue to have a leg up on providers headquartered in other countries, with good reason.

Why is challenging for non-Indian offshore providers to penetrate the global outsourcing market?

Reputation. Bad American sitcoms and call center jokes aside, just as Germany has built a reputation for precision engineering, or Italy for fashion, or the French for fine food, today India’s greatest reputational export is globalizing work. It makes no difference that the Koreans can now

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Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesKnowledge Process Outsourcing & Analytics

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As InfosysBPO reaches the $500m mark, is it ready for the big-time?

November 20, 2011 | Phil Fersht

One thing's for sure - we've heard a lot of noise from the Indian IT services mammoths over the last five years that they are going to grapple with the likes of Accenture and IBM to become billion-dollar BPO giants.  And while Cognizant, Infosys, TCS and Wipro have all made progress developing sizeable BPO businesses, none of them have yet come close to surpassing the size and scale of pureplay Indian BPO leader, Genpact's $1.5bn turnover.  Why is this?

The Indian ITOs have built their companies by occupying "real-estate" in the CIO offices of the Global 2000.  They've done a phenomenal job piling in the people resources to support application testing, maintenance, help desk and development projects.  They've developed institutional knowledge of their clients' IT processes to support the business, which has proven cost-effective for the vast majority of leading global enterprises.  Our recent state of outsourcing survey found 97% of $1bn enterprises outsourcing some component of their operations in today's environment, with most of these organizations involving Indian ITO service providers within their supplier portfolio. However...

Developing BPO footprints requires cementing relationships beyond the walls of the CIO's office. One of the reason's for HfS' success, is our ability to communicate with business function leaders, in addition to IT leaders.  This involves understanding and lending value to supporting the business function issues and processes that impact finance, procurement, supply chain, HR and other operational areas.  Most of our research competitors are firmly rooted in IT-land and have not invested in personnel that can open communication channels to support the business functions - and most never will.

It's similar for the Indian IT services firms, as they seek to push business-process led solutions, often enabled by IT, into their clients.  While many initially began their forays into BPO by attempting to reach business function leaders through their IT relationship, most have realized that they need a more direct line into the business function than tenuous introductions from the VP of CRM apps.  They've realized they need to make significant investments in domain-specific personnel (with real process experience) both onshore and offshore, to create awareness and open communication channels, in addition to the scale they need to take on business. They're also realizing they need patience to convert clients and often start with much smaller engagements and make margin sacrifices.

So let's take a closer look at one of the up-and-coming Indian firms that's made a concerted effort to build a top-tier BPO business over recent years: InfosysBPO, who recently invited us, and several other industry influencers, to partake in their anual BPO client event, named "Colloquium 2011".

Is InfosysBPO ready to challenge for industry leadership?  Here is our thinking...

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Posted in: Business Process Outsourcing (BPO)Finance & Accounting BPOFinancial Services Sourcing Strategies

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Don't miss today's web-debate - The Future of BPO

November 20, 2011 | Phil Fersht

Are you ready for our next installment of HfS' Live and Unfiltered series, broadcast live infront of the HfS Research community? Well... wait no longer for more no-holds-barred fun, no sponsors, no schmaltz, no selling - just good banter and discussion to share with our industry peers and colleagues.  Amd this time we'll be debating the very "Future of BPO"...

 

Here's the line-up...

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

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Capgemini collects Vengroff Williams to slip into third spot for global Finance & Accounting BPO

November 15, 2011 | Phil Fersht

With the paranoia of an impending Double-Dip Recession seemingly forever looming over us, what better than to help your clients get their bills paid?

With competition in Finance and Accounting Business Process Outsourcing (F&A BPO) reaching cut-throat levels (just observe some recent down-select negotiations and you'll know what I'm talking about), what better than to acquire one of the most attractive onshore order-to-cash (OTC) specialists?  With demand for comprehensive F&A BPO coming from both mid-sized, in addition to enterprise-level clients, what better than to acquire an OTC specialist with on-the-ground delivery expertise and a mid-market offering?

Our only surprise at HfS is that is took so long for one of the top tier BPOs to make this move – acquiring the 45-year old heritage accounts receivables and order-to-cash specialist, Vengroff Williams and Associates.  A provider steeped in blue-chip clients at the enterprise level, such as Disney, General Electric, News Corp, Microsoft and Tyco, in addition to a raft of mid-sized clients such as Elizabeth Arden, U-Haul, Crescent Healthcare and Office Depot.  A provider that has resisted the temptation to develop offshore delivery and focus on smart onshore services. A provider that has developed its own excellent SaaS proprietary order-to-cash technology platform, WebCollect.  A provider with an annual client get-together called the "Billion Dollar Forum", that you just have to go to, as its the closest thing you'll ever get to feeling like a billionaire...

Yes, Capgemini has made a major move towards strengthening its position in the global F&A BPO market by today acquiring VWA - and leaping to third in the market share spot for F&A globally (which may change when we re-cast our data early next year, but for now they're on podium).  You can also read more about our 2011 F&A BPO market landscape and outlook by clicking here.

We believe VWA was one of the few remaining jewels that the major BPOs needed to take a serious look at to bolster their presence and capabilities in order-to-cash.  Here is what they are adding to Capgemini's global BPO business:

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Posted in: Business Process Outsourcing (BPO)Cloud ComputingFinance & Accounting BPO

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What are Business Platforms and why they represent the future of outsourcing

November 14, 2011 | Phil Fersht

We've been talking about Platform BPO, Cloud BPO and every other permutation of BPO for a very, very long time.  So what's changed, we hear you cry

Buyers are ready to standardize business processes

"Please mind the innovation gap"... click here to find out what Business Platforms are and why they represent the future of outsourcing

Our recent study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of this seemly ever-present threat of a “Double-Dip” Recession, revealed what is motivating buyers to outsource in this current climate.

While eliminating cost is an ever-present obligation, buyers are also equally focused on achieving greater flexibility to scale and support their global operations - and even more significantly - prepared to explore adopting standardized business processes.

Yes:  80% of buyers are willing to move onto standard processes.  They are increasingly unconcerned if their closest competitors use the same expense management or claims adjudication processes, the same cash applications or collections tools.  They simply want to adopt quality process flows they can deploy effectively and efficiently, if there is no competitive advantage to be gained that necessitates conducting these processes in a certain unique manner:

 

Providers have a real incentive to position productized and one-to-many (or at least one-to-few) utility offerings onto buyers

The ability to develop some best-in-class processes as "Business Platforms", whether they focus on horizontal or vertical process clusters, is becoming a real differentiator in the market, as buyers

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

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The three tenets of Global Business Services execution: customer alignment, accountability, and economies of scale

November 10, 2011 | Phil Fersht

How do you execute for Global Business Services? Click to find our more...

The complex sourcing options available to global operations leaders today can prescribe real opportunities for business improvement, but  can also pose intricate challenges.  As we've been at pains to point out on HfS over the years, outsourcing is only one vehicle to provoke change, impact cost and provide process improvement opportunities. 90% of enterprises, with over $1bn in annual revenues, have shared services operations, and these need to be aligned more effectively with the 97% of these organizations grappling with governing outsourcing relationships.

So how do you take shared services leaders and blend their expertise with the outsourcing governors? How do you go from fragmented service delivery with multiple points of contact, to a global governance model with a rationalized and centralized administration of third-party service providers?

In our first paper on the topic, The Evolution of Global Business Services: Enhancing the Benefits of Shared Services and Outsourcing, we asserted that senior leaders can leverage a Global Business Services strategy as a comprehensive approach to achieve strategic objectives through blended shared services and outsourcing solutions.  In our new report, which we have co-written with Charlie Aird and Derek Sappenfield of PwC and entitled The three tenets of Global Business Services execution: customer alignment, accountability, and economies of scale, we are sharing best practices from organizations that have successfully implemented a Global Business Services strategy.  In particular, these include:

»      Focusing on the Customer – Global Business Services’ processes and technologies enable business unit strategies.  Building alignment and sharing a vision is imperative to achieving successful results.

»      Building the Service Delivery Model – Achieving economies of scale and scope requires well-defined and common business architecture.  Effective organizations have a strategy to construct and leverage their global business service capabilities.

»      Aligning Processes and Technology – Providing best practice back office services requires vision, agility, and coordination across multiple functions.  It requires a focus on the provision of solutions, not technology.

So what are you waiting for?  

Click here to download your freemium copy by visiting our research site

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

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Satisfying customers' needs profitably: can marketing BPO revive marketeers?

November 09, 2011 | Phil Fersht

Back in the '80s, every college kid that wasn't a computer geek wanted to be a marketeer.  It's definition was simply "Satisfying customers' needs and wants profitably".  

The three top dogs in the enterprise in those days were often the CEO, the CFO... and the CMO.  That '80s CMO had to to understand the company strategy and have in-depth knowledge of the value of the products and services, while communicating that value to customers.  Not only that, he/she had to have detailed knowledge of who their prospective customers were and figure out how to reach them, while convincing the world they had a more desirable offering than the competition.  Simply put, the top CMOs were the strategists, the analysts, the go-to-market tacticians and the entrepreneurs all rolled into one super-executive.

Somehow, this function lost much of its strategic relevance over the next couple of decades, becoming a morass of (often dysfunctional) processes, data and workflows, with the CMO becoming an increasingly tactical executive, providing fodder for the sales team.  Conversely, the cost and importance of marketing has risen as the effectiveness has fallen away.  Sound familiar?

So!  Like any function in need of a facelift, a cost-gouge and some "transformation", let's consider outsourcing parts of it... so without further ado, let's shift over to HfS Research's exocet BPO analyst, Reetika Joshi, to discuss her new report "Marketing BPO Services: Solving the CMO’s Dilemma", which you can download for limited time at our BPO Resource Center...

CMOs have it tough today, whichever geography or market you look at. They’re stretching dollars for myriad activities in a function that’s undergoing major change. The slow recovery from the recent credit crunch has only made the job tougher for marketers. Rising pressure on company profits has increased the need for companies to renew focus on issues such as pricing strategies, customer buying behavior, campaign management, and customer engagement.

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesSaaS, PaaS, IaaS and BPaaS

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Why outsourcing professionals must stay in touch with the 99%

November 06, 2011 | Phil Fersht

Like everyone else, I am disturbed by the economic and social instability in which our world currently finds itself.  While the 2008 crash saw us all face a major economic and fiscal reality-check, 2012's landscape will see us move beyond bailouts and credit downgrades to a world where governments and business leaders need to deal with the societal impact of growing unemployment, worker insecurity and an alarmingly widening gap between the wealthy establishment and the common workers (or, as the Americans love to call them, "the Middle Class").

We're already starting to see visible signs of social unrest developing with the "Occupy" demonstrations spreading across the western world. Worryingly, for business leaders and governments, is the fact that there is no imminent prospect of these movements fizzling out. A Double-Dip Recession will exacerbate these issues further and we could be on the cusp of some dramatic and painful changes to the global economic and political landscape.

As we stumble towards this increasing likelihood of a Double-Dip Recession, these are becoming highly sensitive times for our enterprises, and none more so for the buyers, advisors and sellers of outsourcing services operating right in the midst of many of these issues. So what are their expectations, and how do they anticipate their respective businesses to be impacted if things take a nose-dive?

Providers and Advisors are bullish about profiting from a Double-Dip, but must avoid complacency

Our new study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of a “Double-Dip” Recession, reveals that the folks advising and selling outsourcing services are feeling pretty bullish that their clients will turn to them for even more help, if things really start to get dicey over the next six months.  61% of provider and 44% of advisor executives are expecting their respective businesses to increase revenues:

While the sell-side readies itself to enjoy increased profits, close to half of enterprises are expecting layoffs, 40% are sizing up increasing the labor-arbitrage of IT and 30% similarly with finance, procurement, industry-specific and customer management processes:

Business leaders, like political leaders, must not lose touch with their employees during these difficult times - especially over issues such as outsourcing

While most of us are incredibly frustrated with Greek PM Papandreou's decision to turn to his people for their opinion, let's pause for a moment - if your government had mismanaged your economy so badly that you were going to be indebted to the Germans and the Chinese for the next few decades, wouldn't you be feeling a bit miffed?  If your CEO was about to sell a major shareholding in your firm to some other entity, and you were a stakeholder in the business, wouldn't you want a say?  If your company's board had mismanaged its finances so badly, it feels the need to outsource a whole chunk of its operations to some provider who barely understands the intricacies of your company, wouldn't you want a say?

Surely, lousy management teams run the risk of ripping the very soul out their corporate cultures if they fail to listen to the concerns and recommendations of their people, just like those awful governments who drove their nations to bankruptcy and think they can still fix their problems with even more bailouts and loans, without consulting their people?  Do corporate leaders want their workforces to feel like the "99%"?  I don't think so...

And is the 99% really so ignorant about what's going on that both governments and their business leaders can now operate in a bubble of their own because they know better?  Something's gotten broken here, and it may simply be that many of today's politicians and business leaders are actually losing touch with their people. This is an alarming and unsustainable trend, and the outsourcing business could be in danger of getting caught up in the complacency.

While news like this will have some advisors and providers excited about hitting their revenue goals, we have to be highly-conscious of the fact that if this data becomes reality, the outsourcing industry is going to arrive at a highly visible and dangerous phase in its development. As we have been at pains to point out - for five years on this site - buyers need to look beyond labor-arbitrage to find any real long-term benefits from outsourcing. However, these issues are going to move beyond buyers simply improving business processes and cutting costs - they are going to become  centered on how companies are managing their workforces. Governments are very capable of passing measures very quickly to restrict outsourcing if things get really bad - and they won't have much choice if the 99% demand it.

The Bottom-line: Outsourcing professionals need to avoid being perceived as the "1%"

Now, more than ever, the outsourcing industry runs the risk of a backlash, if the worst economic fears are realized in the coming weeks and months.  A Double-Dip Recession will polarize governments and most likely paralyze uncertain businesses.  Most of you who frequent our blog and research sites make a decent living buying, advising or selling sourcing - and we have a collective responsibility to recognize that the very life-blood of organizations and their employees are at stake in the coming months. And if they fail, we will go down with them.

Outsourcing can be a tremendous help for many organizations needing support with improving their processes, globalizing their business operations and accessing better IT, but it is not - and never should be - the only solution to their problems.  It should be a vehicle to help companies perform better, to help its staff become more experienced and knowledgeable.  All outsourcing stakeholders - buyers, providers and advisors - need to focus, more than ever, on helping organizations approach outsourcing as one supporting component of a holistic solution.  In short, buyers and providers need to come closer together to tackle these issues and demonstrate to the world how they are creating value and improving competitive behavior.

We need to demonstrate how making organizations smarter helps create jobs and drive growth - not how making them smaller makes the 1% that little bit richer...

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

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A big cat for a big job: meet Tiger (Part III)

November 04, 2011 | Phil Fersht

And now we bring you the long-awaited final installment of our recent discussion with Genpact's new President and CEO, NV “Tiger” Tyagarajan.  

NV "Tiger" Tyagarajan is the new President and CEO, Genpact (click for bio)

In Part I, we asked Tiger about his background and how he's going to be a little different from his predecessor, Pramod Bhasin; Part II focused on Tiger's immediate and long-term plans for Genpact; And finally, Part III delves into Tiger's vision for the future of technology and BPO.  So, without any further ado, let's circle back to the eye of the Genpact...

Phil Fersht (HfS Research): Tiger, There's been a lot of talk about business platforms and bringing together clusters of standard processes, putting them in the cloud, etc. Do you feel the industry's really moving that way, or do you think it's a bit of a mixed bag?

NV “Tiger” Tyagarajan (Genpact):  I think it's a mixed bag. Some global companies have deliberately set up independent businesses to enable a “clean sheet of paper” approach. Within that are questions including, “Can we put everything on the cloud?” “Can we wrap services onto a platform and make it standard?” “Can we all buy in to a standard without fighting like cats and dogs about ‘my process’ and ‘your process’”? Here it all boils down to, are we willing to accept a standard even though different people have opposing views?

The second situation is when large corporations are almost forced to venture into emerging markets, e.g., India, China or Brazil, in search of growth. In this scenario, they don’t have to worry about legacy processes and technology, which are expensive and time consuming. And with speed-to-market being so important, they believe they may as well hit the market running without having to invest in technology, instead investing in the cloud for just about everything.

The third scenario is for bespoke solutions for standalone requirements wherein organizations opt to buy, for example, a front-end sales force management tool on the cloud (e.g., Salesforce.com). But the reality is that most of this stuff is typically never integrated into the financial systems of the company, which actually makes it easy to say “I'm buying it.”

Then there are the mid-market companies that are growing rapidly, sometimes at a rate of 25-30 percent. For them, legacy systems don’t matter, because in three years their business will only be half legacy and within five years, it will have gone beyond that.

Similarly, emerging market companies are easily willing to leap frog onto the cloud because of their up to 40 percent growth rate. And for them, as legacy is pretty archaic, their willingness to jump to the cloud is really high.

Let me switch for a second to large corporations and their legacy platforms. We are finding that to be as tough as it was before. The fact is, if I walk into a global pharmaceutical company, even today its 100 (or however many) countries fight with each other on what is the right payables process for them. They are unwilling to sign on to a standard. So, I would argue, if they aren’t willing to sign onto a standard among themselves, the day of signing onto a standard that is a public cloud is far, far away. But I think if they agree to a standard among themselves, at least they can get on to a private cloud, which would be very beneficial.

But I still see that being quite some time away. There’s not enough push happening, primarily because there’s so much legacy and cost sitting out there, plus entrenched decision-making and vested interests. People worry about what’s going to happen to their job if processes go to the cloud. So, I think there’s a little more hype than reality about everything going to the cloud, except in the cases I already talked about where we’re seeing movement.

Phil:  My concern is that you see some of the providers persist in selling in the same myopic way they were three or four years ago, and today’s more sophisticated buyers are saying, “We know there’s cost reduction on the table. We really want to get to what you can do for us beyond that, and how can we trust you?” And if all providers are offering essentially the same thing, how does a provider differentiate itself? Is it ownership of the technology or distinctiveness of domain acumen? I think that’s the holy grail right now, and I’d love to hear your thoughts on this...

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

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