HfS Network

Monthly Archives: Mar 2012

Isn't it great having hands-on management in tune with the business...

March 31, 2012 | Phil Fersht

Posted in: Absolutely Meaningless ComedyBusiness Process Outsourcing (BPO)IT Outsourcing / IT Services



The great outsourcing sham redux

March 29, 2012 | Phil Fersht

So we managed to whip up a tidal wave of emotion and opinion when we made the call that the "outsourcing industry", in its current state is, quite frankly, a sham.  When over 30,000 people read something, there's a reason why... so let's drill down into what this all means.

Outsourcing has an image problem, not a delivery problem. The intent of the blog was to deplore the shoddy image of outsourcing in today's economy and the discuss the lousy job the industry - as a whole - has done in defining itself.  It wasn't to slam the premise behind outsourcing, or the performance of engagements: the "industry" produces wads of cash and healthy margins while saving buyers lots and lots of money (our own research emphatically supports this fact).

Buyers and providers are desperate to alter the perception of "outsourcing", it's the intermediary businesses profiting from vendor marketing dollars which are afraid of change.  I have never had so many “Thank God you called it” emails from buyers and providers this week.  The only people we have upset are some of the events firms and advisors/analysts who take money from service provider marketing people, as this paints their whole modus operandi in a bad

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Posted in: Business Process Outsourcing (BPO)Captives and Shared Services StrategiesCloud Computing



Why today's outsourcing industry is a sham

March 24, 2012 | Phil Fersht

Outsourcing: a one-time transaction followed by seven years of turbulent relationshipWhen God created "outsourcing", she/he/it clearly had a sense of humor.  I mean, how do you encourage people who offloaded a chunk of their low-end processes offshore to get together and form an "industry"?

Sure, you can pull together those providers and consultants who've made a fortune orchestrating the "offloading" to get together and feel good about what they do (or at least convince themselves they should feel good about it) but the reality is, outsourcing "networks" are strange concoctions of individuals striving to feel part of a "community" that doesn't really exist.

Let's cut to the chase here - "outsourcing", for most buyers, is like purchasing a wedding dress - a one-time transaction followed by seven years of relationship struggles and future legal wrangles.  I mean, when was the last time the missus went to a wedding dress convention?

In this context, how can you encourage buyers to get together to spend days-on-end reliving that one-time purchasing experience with the fervor of a civil war battle re-enactment? Do service

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



In case you somehow shamefully missed our Super-Lawyer Summit webinar...

March 23, 2012 | Phil Fersht

This week's webinar included the  'A' Team of  experienced, handsome and fun-loving outsourcing attorneys.  In fact, these guys are so handsome, we chose an audio format to have the ladies focus on their brains, and not their brawn.  Oh dear...how  low are we stooping for a cheap laugh these days?

Anyway, a special thanks to Esteban Herrera (HfS), Akiba Stern (Loeb & Loeb), Jeff Harvey (Hunton & Williams) and Jeff Andrews (Thompson & Knight) for one helluva lively discussion in the state of today's outsourcing contracts.

Missed out on the legal ear-candy? Click below for the re-play.


And if you want to enjoy a fully interactive experience of having the slide deck to accompany their dulcet tones, click here.

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



Negotiations and the deals we make: the Good, the Bad, and the Ugly

March 20, 2012 | Phil Fersht

Nothing makes HfS' own Esteban Herrera happier than helping save our clients obscene amounts of moolah when it comes to negotiating a service contract, especially when all that was needed was a prod in the right direction, and a couple of days of smart discussions...

Don't hang your advisor just yet...

I’ve been reflecting on the last three outsourcing contracts where we were asked to coach the clients (a partial answer for those of you who keep asking: how does HfS Research make money?)

As the resident complainer about stagnation and lack of creativity in our industry, I am immediately encouraged, but at the same time also dismayed, by what I’ve recently witnessed. Encouraged because I see clearly where we add value and I’ve been around long enough to see some things change for the better, dismayed because I see so many things still staying the same.

Without further ado, here is the good, bad, and ugly of recent deals where we've coached clients, with some critical names and dates obscured to protect the, er… guilty.

The Good

We have job security. The average savings on TCV for the last three deals we helped negotiate was 29%, as measured by total price of the winning bid on day 1 of negotiations and total price of the same bid upon completion of negotiations. This doesn’t even take into account improvement in positions like SLA risk pools and service credits, limitation of liability, indemnification, key personnel commitments, and the other myriad terms that matter to providers and buyers alike. All

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



Have some industry events reached their stagnation point?

March 15, 2012 | Phil Fersht

As our research has emphatically revealed, peer networking is the preferred medium of choice for today's outsourcing decision makers.  So when executives are putting considerable time, cost and effort into spending multiple days at these gatherings, they hope to get some serious value out of the networking and education.  

So who better to send to  the International Association of Outsourcing Professionals (IAOP) annual summit in Orlando than HfS' research head, Tony Filippone, who has attended this event for several years running in his previous role heading up BPO for healthcare payor giant WellPoint.  Here's his report on the proceedings...

Lack of Thought Leadership Leads to a Rerun Performance

After attending the 2011 and 2012 World Summits hosted by the International Association of Outsourcing Professionals (IAOP), we were left with a feeling that event organizers were ignoring the opportunity to assemble top-notch thought leadership to drive community discussion. While keynotes were remarkably better than 2011, the educational sessions seemed similar to discussions had at every other event and last year’s 2011 World Summit. Presenters share a background on their company, their journey to success, challenges overcome, and lessons learned. Service providers stand beside their clients as their clients endorse the service provider’s services. Panelists who are CEOs for different service providers argue for the viability of regions, niche categories of services, and the need for better contract terms.

Time to change that channel?

The formula for events has become rote. Lectures and panel discussions are the dominant format, which drives little communication among attendees. Sessions rarely focus on the need for our industry to change and instead focus on repeating what has already happened or promoting sponsor interests. In lieu of tools and templates, presenters provide business cards and collateral. There is an exhibition hall full of booths staffed by marketing leaders handing out tchotchkes. Sales people meet between sessions to assemble lists of leads.

IAOP events, in particular, create the impression that the event is formulaic. Awards are given to individuals and companies. Many of the same people moderate or lead IAOP sessions each year. New lists of top service providers and advisors are announced. In fact, for the second year in a row, these “top” lists exclude the likes of industry leaders Cognizant, IBM and Xerox.

It leaves us wondering whether the IAOP really intends to be a voice of the industry, or just another event company bent on rehashing the same themes. With a hefty $1,900 dollar price tag for the 2013 World Summit, we asked ourselves, “If I attended the 2012 IAOP World Summit, would I learn anything new in 2013?”

Billed as "The Largest of its Kind"

Over 780 “delegates” attended the IAOP 2012 World Summit held in Orlando, Florida. Roughly one third of delegates were customers or buyers, one third of delegates were service providers, and the last third were a mix of advisors, regional governmental representatives, academics, and press. The event spanned roughly two and half days, which were divided into the following types of content.

»        Main session presentations where keynote presentations were given to all delegates. These made up roughly eight hours of the World Summit. Three of those hours were held at the same time as other content.

»        Seven “educational” tracks where companies presented theory and experiences. These tracks focused on customer experience, outsourcing tools, “management science”, transition and governance, the “human side” of outsourcing, globalization, and the future of outsourcing. There were six 50-minute presentations in each track, which totaled nearly six hours of content.

»        Networking events where customers were sometimes separated from service providers and advisors. Besides structured “speed dating” networking where participants moved from table to table discussing different topics (about two hours), there were evening mixers sponsored by service providers who gave away prizes to participants.

»        Practicums were held on the morning of the last day where buyers and service providers were separated. Three hours of presentations were given to each group. Buyers heard ITSqc promote its CMI-like capability maturity model and presentations from P&G and McGraw-Hill on metrics. Service providers heard the findings from Duke’s 2011 outsourcing study, ITSqc’s promotion of its capability maturity model, and a sales effectiveness presentation from Pretium Partners.

In addition, several service providers sponsored dinners or drinks in the evenings. There was also a large hall filled with service providers’ marketing booths.

The IAOP also rolled-out the “Summit Hub”, an online portal for attendees to read detailed session descriptions, plan their schedule, and proactively network with other attendees. In fact, the IAOP allowed all participants to update personal profiles and “request” meetings with other participants online.

Benefits of Attending an IAOP World Summit

For the most part, IAOP puts on well-organized events with high attendance of a broad cross-section of industry stakeholders. Expect crowds full of buyers, sales people, and industry influencers. If you are a newcomer to outsourcing, a World Summit is an ideal event because it hosts sessions on nearly every conceivable topic, from contract metrics to outsourcing in China and from contracting for cloud technology to health care services. World Summits are a smorgasbord of outsourcing discussion. You’ll have an opportunity to listen to topics on subjects you may have never otherwise have considered. However, discussion is rarely more than a high-level summary. You’ll need to follow-up with presenters after the event to get the detailed information you need to execute.

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



In case you missed today's webcast on Business Platforms, here's the re-run

March 14, 2012 | Phil Fersht

Thanks to Robert McNeill (HfS), Shawn Riegsecker (Centro Media), Paul Roehrig (Cognizant) and Bob Law (HP) for an excellent discussion today on Cloud, BPO and Business Platforms.  Here's the re-run:

And if you really want more, click here for the slide deck.

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



Source to stay?

March 13, 2012 | Phil Fersht

The world of sourcing advisory has gone through unprecedented change over the last couple of years.  

The days of enterprise buyers dropping millions to view their favored (and less favored) providers strut the catwalk and have their contracts hammered out by some baseball-bat wielding former ITO salesman are rapidly fading into the past.  That ship has, thankfully, sailed.

However, a new ship is now dropping anchor in the sourcing harbor, promising riches beyond your wildest dreams to re-vamp your shared service centers, re-craft your entire governance framework and ensure those outsourcing engagements fit seamlessly into the overall mix.  But are these new-found riches all they appear to be, or another crafty way for consultants to sneak that MBA bus back into the visitor's car park?  Who better than Deb Kops to investigate further...

Source to stay

The aggressive push of the big name management consultancies and the Big Whatever into sourcing advisory is in many respects a good thing. These organizations bring a wealth of resource—from an acute understanding of corporate strategy, incredibly deep domain knowledge, regulatory requirements, organizational design and development, and all shades of expertise in between…plus strong ties to the c-suite (the power of which should never be underestimated when hiring a consultant). After all, the sourcing decision encompasses so much more than a market study, a location analysis, writing a good RFP and implementing a rigorous selection process.

But to any shared services and outsourcing conference these days and you’ll hear many of these white shoe guys express a decided preference for shared services as a model. And the traditional sourcing transaction firms are now following close behind, echoing the same refrain.

The guidance from the podium sounds something like this—“Be safe and smart. Alternative delivery models are tricky no matter what. Consider outsourcing but only after you’ve fixed, consolidated into captive centers, and operated until stable. Then think about outsourcing that transactional stuff to a provider to tap into transaction pricing/gain flexibility/leverage investment/free up management bandwidth.”

What’s the implicit message? “Outsourcing is risky. Outsourcing is not the first step on the journey. If you want to fix the mess, do it yourself (with our help). Outsourcing is not transformational. Outsourcing is a commodity—pursue it only after you ring out every penny of cost, then throw it over the transom to a specialist factory.”

Now, shared services very well may be the right answer for many of current crop of organizations investigating or evolving alternative delivery models. First, despite what the pundits say, Western companies are reacting to pressure (or at least thinking twice) to keep jobs onshore and in-house—ergo a captive. Second, what value outsourcing or a simple shared services implementation is capable of delivering at this point in time is pretty well understood. And some organizations are now getting comfortable revisiting their strategies with the view that the trick is no longer fixing the factory, but getting closer to the business—perceiving shared services as the better ticket. But these trends alone cannot account for the noise from the consultancy bully pulpit, and the number of firms renaming outsourcing advisory “shared services” or “global business” or “enterprise advisory”, putting the “O” word in awfully fine print.

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



Legal Services Outsourcing: India's next growth market?

March 07, 2012 | Phil Fersht

Jui Narendran is Research Director, Business Services, HfS Research (Click for bio)

We're really excited to announce that respected business services analyst, Jui Narendran, has joined the fulltime HfS team as Research Director, based out of Pune, India. Jui's been a good friend of HfS for a couple of year's now, having worked on several research projects with us... but that still didn't discourage her from joining our rumbustious rabble of research reprobates.

Prior to joining HfS, Jui headed the outsourcing research team at ValueNotes, a boutique research firm in India, leading several custom engagements and also worked on creating thought leadership research in the BPO and KPO domains. Jui has also worked for advisory organization TPI, where she led the offshore research team, which supported the consulting team with real time research and insights into the client industry and business issues. Additionally, she has worked for service providers Accenture and TCS. Jui brings a deep knowledge of the business services domain and will be focusing on several specific areas of BPO, namely the retail industry, KPO and legal services outsourcing. And when she's not cranking out content for HfS, she is spending much of her spare time honing her new found talent for oil painting... but before we start airing her fledgling masterpieces, let's hear about her recent analysis of the legal services outsourcing market.

Legal Services Outsourcing:  India's next growth market?

We've been doing some funky math over at the HfS data factory, and we've estimated that corporates splurge at least $1 trillion a year on legal services, which includes their internal General Counsels and their lawfirm partners. We've been keeping tabs on this space for a few years now and we believe the time is ripe for this market to really start kicking into gear.

Traditionally, the law firms engaged with Legal Process Outsourcing (LPO) providers for specific services, such as document review and other litigation support. However, over the last three years, large corporations have been signing comprehensive deals with LPO service providers. The following are some examples:

»      In 2009, Microsoft engaged with Integreon, one of the larger pure play LPO services providers to provide exclusive e-discovery and document review services. The contract was subsequently extended to include contract review services.

»      Also in 2009, Rio Tinto signed up with CPA Global, another large legal services provider, to provide contract review and drafting, legal research, and document review services. The engagement is also geared to expand to additional services.

»      Pinsent Masons, a leading UK based law firm, signed up with South Africa based LPO firm, Exigent in 2009 to provide initial data review and e-disclosure services.

»      Clifford Chance, a UK based law firm and member of the “Magic Circle”, procures legal support work from its shared services center in Gurgaon, India.

»      Nixon Peabody, a Global 100 law firm outsourced its e-discovery review work to Pangea3, an LPO and a part of Thomson Reuters.

To learn more about why we believe Legal Services Outsourcing is poised for significant growth you can click here to access Jui's new RapidInsight "The Exciting Evolution of LPO" at the BPO Resource Center (for a limited time only).

Jui Narendran (pictured above) is Research Director, Business Process and KPO Services, HfS Research.  You can access her bio here and email her at jui @ hfsresearch dot com.

Posted in: Business Process Outsourcing (BPO)Legal Services Outsourcing



Which industries are more inclined to outsourcing versus shared services?

March 05, 2012 | Phil Fersht

Our recent State of Outsourcing study, conducted with the Outsourcing Unit at the London School of Economics, has revealed that nine out of every ten enterprises will be increasing or maintaining their reliance on either, or both, outsourcing and shared services over the next three years.  The key is to identify, at the industry level, what factors are influencing these increasingly aggressive approaches to global sourcing strategy.

The study has uncovered many home-truths about why some organizations are more motivated to externalize their support operations to third-parties, while others prefer to focus on their own shared services investments. We can also evaluate organizations within specific industries that are seeking to assign equal significance to both outsourcing and shared services as they pursue a holistic governance framework across both models.

So we've taken a closer look at how 250 large organizations, with annual revenues greater that $1 Billion, are intending to make significant planned investments in either, or both outsourcing and shared services models over the next three years: 

It's plain to see that it's organizations within those industry verticals experiencing fundamental shifts to their economics, which are more prepared than ever to admit they need to look outside of their current organizational boundaries to keep their business operations competitive. Simply-put, secular changes to industry environments are crystallizing options for businesses and driving more radical and actionable behaviors from executives under pressure to deliver continual productivity improvements. The radical impact outsourcing can potentially have on business performance is clearly becoming more attractive to those businesses in the throes of tackling fundamental challenges and opportunities to their business environments.

Buyers are getting savvier at focusing their outsourcing plans to improve their competitive advantage

Increasingly, we are seeing a realization that retaining some processes internally isn't – in any shape of form – bringing organizations a competitive edge, and these sourcing decisions are no longer only about cost – they represent a fundamental change in the way business leaders now view outsourcing as an integral function of their operations.

For example, many of today’s leading banks do not lead their markets because they process mortgage applications better than their competitors.  Their management teams typically prefer to find a services partner to process them at lower cost, using industry-standard process flows and technology, while it focuses its internal competencies on business functions that can help the bank gain marketshare, such as smarter customer targeting, or upselling new product through customer support channels etc.

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesHfS Surveys: All our Survey Posts



Outsource your sales performance management on a genuine Business Platform model? Indeed you can!

March 01, 2012 | Phil Fersht

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

You may recall we first started introduced the concept of the "Business Platform" a few years ago, when we discussed a "Business Services Cloud" where SaaS-providers could start building a BPO capability to deliver their solutions to clients and ensure they were making maximum use of the application.

We also made the point that if BPO providers were merely selling commodity processes on commodity packaged software, they were going to get sucked into a race to the bottom, where the focus was all about low-cost and delivery-scale.

Hence, those providers wanting a competitive offering, need to provide distinctive services that can help their clients transition effectively to new processes that really work with their businesses.  Simply selling packaged software through various channels, with minimal business transformation support, is not going to help clients take full advantage of what they have - and often leaves them only using a fraction of the functionality of the software.  However, the very concept of leading with BPO capability is simply too alien for many software providers to grasp - they still live by the stack 'em high and sell 'em cheap concept of pushing out license sales as aggressively as they can through whatever channel partner that will sell for them.

However,  one software provider which has gone against the grain is Sales Performance Management provider Synygy, which quickly realized developing its own BPO delivery competency would create a major competitive advantage over its competitors, and also help it develop deep, sticky relationships with its clients.  We recently investigated how three clients organizations are improving business outcomes using this Business Platform solution for their sales compensation management, which has direct impact on their top-line. The paper entitled Drive Revenues and Lower Costs by Outsourcing Sales Performance Management outlines the business benefits and return on investment (ROI) achieved by three multinational companies that have outsourced the end-to-end management of their sales compensation programs—inclusive of technology, people, and processes—to Synygy.

We caught up Mark Stiffler the founder and CEO of Synygy recently to get his take on what Business Platforms mean to his company and ask him about some of the shifts that are occurring in the market....

HfS: Good morning Mark – can you please give us some back ground on how your company got started?

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