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Monthly Archives: Sep 2012

The great outsourcing talent-chasm: 57% of service provider staff don't understand their clients' businesses

September 30, 2012 | Phil Fersht

Rarely has a debate aroused so many emotions, yet failed to reach any conclusions, which was precisely what transpired when 900 of us duked it out over whether to drop the term "Outsourcing".  However we view this debate, outsourcing is centered predominantly on one constant:  talent.  

Talent costs money and brings capability.  Outsourcing is about helping enterprises get better capability without increasing costs.  It's about tinkering with enterprises' talent bases to deliver improved services without increasing costs.  So how - pray tell - can enterprises improve their talent without going through the considerable expense of hiring new people and training their existing staff?  The answer is simple: find someone else to help you do it - and good luck with it!

Of course, better workflow and process, better quality and innovation are vital ingredients to achieve greater productivity and increased revenues, but you have to start with the most critical ingredient:  your talent.

If the industry known as outsourcing can prove consistently over time it can improve clients' access to talent and new capabilities without increasing costs, then we won't call it "outsourcing" any more, we'll just call it "IT", or "Finance", or "Insurance" (and so on) services.  However, when the central component of the industry is to swap out local staff with foreign staff, the first question the general public (92% of whom - in the US - are actually employees) will ask is "Can these people do IT, finance or insurance better than we can".

Fortunately, HfS has been able to reach out to close to 700 key stakeholders in the industry, 215 of whom are from predominantly large-sized US corporations, where we were able to ask them how they rated the attributes of their local talent to the overseas talent being provided by their service provider:

Where outsourcing is performing well

In terms of work ethic, process competency and overall value for money, service providers' non-US staff are matching the local staff.  If these staff are 30-50% cheaper, that's a pretty good return on your investment if that's all you really care about.

Where outsourcing needs to close the gaps

In terms of business understanding, initiative, innovation and culture, the non-US staff being provisioned are miles behind local staff.  For example, only 43% of buyers feel their non-US staff understands their business, when compared to 88% of local staff.  Yes, this gap will surely close as the industry matures, but I find this talent-chasm unacceptable in today's global marketplace.

The Final Word: Service providers need to improve their talent mix and use more local talent, however, buyers need to demand it

Outsourcing has earned a largely crappy reputation because it's become so focused on providing rules-based models that can enable offshore staff to get the job done.  Many clients, for whatever reason, have been convinced they can do this with 90% of their delivery staff sitting offshore, or some simply didn't care and wanted to make the numbers work.

However, our research clearly tells us that most clients care passionately about innovation and process improvement, so why are we persisting with these imbalanced delivery models, where the outcomes are performing miles from what we want to be?  Why aren't today's buyers training their own staff to manage their global resources more effectively, so that more of them do understand their businesses?  Why are service providers so insistent on sending offshore managers onto their clients' sites to manage their own staff, when they should be training their clients to be more self-sufficient?

I believe this industry has become skewed - too much work has been shifted to offshore locations, when their needs to be greater investment in improving local talent.  Providers need to be more global with their focus and provide more balanced location options for their clients, even though clients will have to pay more for it.  A more balanced onshore/offshore mix will lead to better development of offshore personnel and help bridge the current talent-chasm that is plaguing today's outsourcing industry.

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



So you think YOU have sourcing talent?

September 28, 2012 | Phil Fersht

There’s no doubt that developing, educating and – quite simply – having the right talent, has become the number one issue in the world of outsourcing and shared services. In fact, HfS Research has found that companies now place twice as much importance on having the right talent, compared to when they began their outsourcing and shared services initiatives.

We are inviting you to participate in a brief survey to explore today's talent management challenges facing both your executives and staff – and you could win an iPhone 5 into the bargain (gasp), in addition to a complimentary copy of the study findings.

Click here to complete our survey

Rest assured that your contact details will be treated with the strictest of confidence and only used for the purposes of sending you the optional executive report and entering the iPhone 5 prize draw.

This will take no more than 10 minutes to complete and will give you some food-for-thought on your organization’s own talent needs, while you cogitate your answers. Click here to complete our survey

As always, we truly appreciate your supporting our research - which we always share with the industry to further our collective learnings.

Posted in: Business Process Outsourcing (BPO)Global Business ServicesHfS Surveys: All our Survey Posts



Why the social enterprise matters... Yarmis brings his thoughts back from Dreamforce

September 23, 2012 | Phil Fersht

HfS Research VP Jonathan Yarmis (pictured right) putting in the hard graft at the Dreamforce show

We can't understate the importance of social media on the enterprise.  Hey - we bet our whole business model on it!  And that's why we hired one of the best thinkers in the social sphere to help us understand how social will impact business processes and how enterprises will operate in this new social world we live in.

So we coaxed Jonathan Yarmis from his Dreamforce-induced hangover, where he was living it up with 90,000 other technology geeks, to tell HfS why social actually matters....

Phil Fersht (HfS): Jonathan - why the hype over social?  should enterprises care?  what is hype versus reality?  is this just the tech industry jumping in the next soundbite, or is there something real here?

Jonathan Yarmis (HfS): The hype over social is very simple and I can capture it in one statistic:  950 million people are on Facebook.  Social is transforming the way we communicate with each other, and the way we discover and share things.

Enterprises should care at so many levels.  First, we’re in an era when consumer technologies move

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Posted in: Absolutely Meaningless ComedyBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices



Refocusing on business outcomes is key...

September 22, 2012 | Phil Fersht

Posted in: Absolutely Meaningless Comedy



And Kops is back with... outsourcing clients' merit badges

September 19, 2012 | Phil Fersht

Is there no stopping the colossal Kops crusade to conquer the world?  Or at the very least, award merit badges to outsourcing clients?  She's now threatening to show up at the HfS 50 next month with merit badge T-shirts... Oh what a wonderful life we all lead...

Deborah’s top 10 outsourcing client merit badges

In my last article I listed the merit badges that any outsourcing provider professional worth his salt must earn before they consider themselves a bona fide member of the fraternity. But the clients of the world doubly deserve their very own merit badges, earning their stripes not only by dealing with providers, but also herding the cats we call “internal customers.” And together, that’s no mean feat.

In this, the 100th anniversary of the founding of the Girl Scouts, an organization that measures character growth and skills attainment by the number of badges on a sash, it’s only right and proper to award badges to those trusty folk who step into the unknown every day, putting their careers and their internal relationships on the line in a valiant effort to change corporate business models. Give kudos to those who perform a balancing act between relationships and service levels, cost and quality, the needs of the business with the goals of the enterprise, and even venture out to push for a little innovation from time to time.

Outsourcing clients of the world: examine your experience to see if you’ve earned Deborah’s top 10 client merit badges. And if you find some that I’ve missed, I’ll lean on my personal badge maker to design some more.

MIA BADGE You’ve been assured of executive sponsorship, nay pushed into outsourcing with the promise of sufficient CXO air cover to ensure that you don’t become the poster child for dystopia (in plain English, that’s a pretty dysfunctional organization). And when the outsourcing strategy is first mooted at the top of the house, you truly believe that you’ve got great support. But if your sponsor is "missing in action" when the going gets rough, you quickly realize you’re holding the bag when it comes to selling and managing the change.

Most C-suite guys prefer to leave a legacy of growth, not “I outsourced the place.” So whether your sponsor thinks he’s Moses (“comes down off the mountain to deliver the Ten Commandments, then beats a hasty retreat”), or has been watching too many Soprano reruns (“communicates like a drive-by shooting”), the net effect is that you’ve no choice but to go it alone.

Automatically win your badge if you can put together a coalition of like-minded business unit leaders who are convinced that outsourcing is the way forward despite the fact that your sponsor is nowhere to be found. Earn 10 points if you don’t need body armor when you go to sell to your internal customers. And next time, get it written in blood that you’ll have the full force of the C-suite behind you.

PIGGY IN THE MIDDLE BADGE Your provider is screaming unfair as you lay the number of exceptions and too much red on the dashboard at their feet.  And your customers, who have never really moved on from the good old days of internal delivery, blame the provider (and your team, by association) for every snafu, big and small, regardless of the fact that their invoice wasn’t paid because the cost wasn’t authorized by the business.

The blame game reaches a fever pitch as you try to locate the root cause of the noise. Is it the direct result of a provider that boasts of client-centricity, but it’s really his way or the highway? Is it a customer who refuses to drink the Kool-Aid of globalizing services? Is it due to fact that you made insufficient investment in change management? Or can you blame the problem on a corporate

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Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageIT Outsourcing / IT Services



It's more about technology than ever for HR executives...

September 16, 2012 | Phil Fersht

Our world at HfS has been dominated by the need for organizations to upscale their talent and capabilities to improve their operations - and how the majority are turning to their  service partners to access these delights.

However, our trusted friends, over at the HR department, haven't given up the ghost when it comes to helping their organizations close these capability gaps either... and they look beyond service providers alone as the solution: they want to invest in better technology.

Last year's survey which we conducted with Human Resource Executive, canvassed the views of 407 senior HR executives, who view accessing new technologies as trumping all other workforce needs when they look to the future:

So where better to spend your time than at the HR technology in Chicago from October 8-10, 2012, where Bill Kutik, Naomi Bloom et al will put on their annual ode to the world of.... HR technology. This event has 15 years of history behind it and has consistently delivered break-through debate and insight, including the now-famous session where Dave Duffield’s first explained to the world - in detail - what Workday was all about.

This year has Mark Hurd, Oracle’s President, discussing the dynamics of his HR software customers. The matriarch of HR technology herself, Naomi Bloom, one of HfS' board advisors, is also presenting and hosting some excellent-looking sessions, including the intriguing "Bringing HR Into The Cloud" master panel that includes leading minds from the likes of Salesforce.com, Workday, Oracle and SAP.  The is also a not-to-be-missed session being delivered by Gartner's Thomas Otter - a great guy with some serious insight into how to avoid getting burned when doing a SaaS deal.

For those of you who have not previously attended, the conference is not deep techie stuff; instead it covers process, operations, and consulting, as well as technology, where HfS has, in the past, has presented and debated the trials and tribulations of HRO. The conference also has a reputation for actually having loads of clients and enterprise folks, not just vendors with their sandwich boards, plastic pens and booth bunnies. If you can make it to the conference, you will witness the whole wide array of HR providers - from software firms to RPOs, HROs and PEOs, in addition to the provocative sessions and panels.

Hfs followers should use the following link: www.hrtechconference.com for more information and to register. HfS registrants should enter the promotional of HFS12 code to secure a $500 discount from the full registration fee. This will get you entry to all the working sessions, as well as the vendor Expo. The conference hotels are fully booked as of this date; our suggestion is to secure accommodations near the conference hotels to be able to use the conference provided shuttle system.

HfS' Research Fellow for HR technology and operations, Pete Ackerson will be representing us at the show and is happy to meet and greet HfS followers - email him here to set up a time to meet with him.

We look forward to seeing you at the tip-top HR Technology conference in the world!

Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageHR Outsourcing



Matthew Eatough approximates his US strategy

September 13, 2012 | Phil Fersht

The Windy City braces for a new storm coming from across the Atlantic...

Eighteen years ago, one man had a vision to take on, improve and ultimately manage the procurement function for British companies.

And what better to call his firm, than the "buyingTeam"?  I mean, what else are you supposed to do when you're in the procurement services business?  However, when the affable Matthew Eatough decided to expand his business into the United States, a little whisper in his ear convinced him it was time to sex-up the name and relaunch his firm as 'Proxima' (you can read more here about the relaunch) as they settled into their new Chicago digs.

Today, Proxima has earned a reputation for going far beyond the administrative indirect procurement activities to delivering category management and strategic sourcing solutions for clients such as British Airways, Universal Music and Prudential, with a reputation for tailoring solutions for clients in dire need of improving their procurement processes.  Now the firm's challenge is to broaden its unique brand of procurment expertise into the US market, so I managed to grab some time with Matthew to find out more about the grand Proxima plan...

Phil Fersht (HfS):  Matthew, can you tell us a little bit about you and your background and how you came to lead a procurement outsourcing company?

Matthew Eatough (Proxima): It has been a long journey, 18 years. My original move into this business was a slightly odd route.  I was involved in the management of a turn-around situation for a relatively small retail and manufacturing business, which was subject to a buy-out in the early 90s.

A large portion of the financial impact of turn-around t was focused around negotiating supplier terms and putting some professionalism into the procurement processes. I don’t think we fully understood what we were doing at the time and I think it was just something we did because it was a financial necessity.

Continuing this cost reducing approach, we gradually became a cost management business which has developed over the years with the latest iteration being from buyingTeam to Proxima.

In many ways, I’ve learned most of what I know about Procurement ‘on the job’ over nearly two decades. The business turn around entry path is quite important and is probably still in my professional DNA. Many elements of Proxima’s methodology, approach, mission and vision look at procurement from a business perspective – which means not only making the procurement function better, but also delivering true value back to the business, enabling the business to achieve its strategic goals and objectives.

PF: Okay, so you’ve been around for 18 years but you’ve only recently decided to make a move into the US market. Why did it take so long... and why now?

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Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageOutsourcing Heros



Why rebrand outsourcing, when what we already have may be new and exciting...

September 13, 2012 | Phil Fersht

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



Well stone the lodes... Infosys cranks up its SAP-ness with the acquisition of Lodestone

September 10, 2012 | Phil Fersht

Cindy Carpenter is Research Vice President, HfS Research (click for bio)

So the providers are upping the ante with their acquisition push of late, with Accenture augmenting its regulatory capabilities in pharma with the pick up of Octagon, and IBM making a strong move into recruiting services with Kenexa.  Infosys now pipes in by focusing on the tech consulting side with the acquisition of global SAP consulting shop Lodestone.  HfS new Research Vice President, Cindy Carpenter joined this morning's analyst call to investigate further...

Will Infosys Be Able to Get the Lodestone Horses on the Right Track?

Infosys's acquisition of management consultancy and SAP integrator Lodestone Holdings lines up perfectly with their long-term strategy of moving to higher value services, but this acquisition is a risky way to grow these capabilities.  Management consulting firms are usually seen as poor acquisition targets, because the assets go home every night.  If they're not happy, they can usually find plenty of opportunities elsewhere, and the value of what you've bought may decline very rapidly.  This goes double when the acquiring company is in another country from the acquiree.  (We need only look at Capgemini's struggles with consulting acquisitions in the U.S. to underscore this point.)

Infosys understands the challenge of managing consultants well.  On the analyst call discussing the

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Posted in: Buyers' Sourcing Best PracticesHfSResearch.com HomepageIT Outsourcing / IT Services



An industry with no name? The outsourcing industry votes out the "O" word but can't think of an alternative...

September 07, 2012 | Phil Fersht

"How do we re-brand outsourcing" was the rallying cry at the NASSCOM BPO Summit in Gurgaon, India, this week.  Easy - let's call it something else... with two-thirds of the buyers and providers voting to drop the term, all we have to do now is agree on a super cool new set of words, and the industry's current  image problems will soon become old wives' tales.

So let's take a look at the renaming options each industry stakeholder group has voted for (this is for BPO - we asked about ITO separately) :

The beauty of this table is that it doesn't require a whole lot of analysis.  Buyers are so at a loss for alternatives, they couldn't think of much else and "Outsourcing/BPO" actually came top.  Most of the providers just want to swap out "outsourcing" for "services", while most advisors stuck with BPO, with a growing number, mainly the management consultants, pushing the Global Business Services badge (even though GBS is supposed to represent all forms of sourcing being managed under a holistic governance framework).

The outsourcing industry has a lot of work to do, if it wants to "re-brand"

There is far too much "believe our own bullshit" going on and this industry needs to change how it perceived before it can effectively "rebrand".  People in the industry are complaining that the ignorant masses confuse "outsourcing" with "offshoring". Well, I hate to be the bearer of bad news, but isn't the vast majority of ITO/BPO dependent on offshore labor to make the economics work?   We should probably just call it "offshore outsourcing" to be even more accurate (eek!).

Look - we all want non-linear growth, to focus on business outcomes, value creation and innovation.  We desperately want this industry to be making fast progress in overcoming the four challenges of the HfS 50 Blueprint Document.

The Four Blueprint Challenges facing the outsourcing industry:

»      Challenge #1: How can we overcome this singular focus on cost that strips the industry of its value?

»      Challenge #2: How can we leverage outsourcing as one of a variety of vehicles to achieve business objectives?

»      Challenge #3: How can many of the service providers invest smarter in their account management teams?

»      Challenge #4: How can buyers and providers really partner to foster innovations into business process outcomes?

Until these four challenges can be tackled, rebranding the word "outsourcing" is a futile task.  Re-branding is all about changing perception - hence, today's business leaders must be able to associate "outsourcing" with business value creation and true value-partnerships with service providers which are instituting new capabilities into their businesses.

The Bottom-line:  Once the outsourcing industry can prove to the world it is evolving, we can use smarter terminology

Yes, "outsourcing" as a term doesn't convey business value creation, or innovation, or achieving nimble global operations, but this industry needs to demonstrate it is genuinely moving away from the labor arbitrage model, before we can rightfully name it something different.  Yes, many new client/provider relationships are now moving in this direction, but we need to see more of it - and have more of it communicated to industry.

Personally, I like the term "business services partnering" as - in many cases - the entire function is not actually outsourced - only elements of it, so in effect these engagements are partnerships with providers to deliver operations, not the outsourcing of operations.  Don't get me wrong, the "O" word will go away - and we - at HfS - will only use the term when we have to , but the industry needs to prove it is winning the battle of the Four Blueprint Challenges before we can genuinely use new terminology without feeling like we just applied some more lipstick to Ms Piggy.

Posted in: Business Process Outsourcing (BPO)HfS Surveys: Dropping the "O" WordHfSResearch.com Homepage



Look what Obama has done to the "O" word...

September 06, 2012 | Phil Fersht

Remember our recent post "Caught in the xeno-bamia crossfire, these are dangerous times for the outsourcing industry"?  Well, our new survey on the toxic "O" word has resoundingly  proven that negative politics really does sway opinions, as an overwhelming majority of American enterprises want the word scrapped, which is in stark contract to European firms, who are largely happy to keep it:

Now look what you've done, President Obama!  In all seriousness, Europeans are obviously a lot less bothered by terminology - there is simply a lot less toxicity surrounding the term.  The big question is whether these feelings will die down after the US election, or whether the "O" is forever poisoned unto perpetuity?  The plot thickens... stay tuned for more

Posted in: Business Process Outsourcing (BPO)HfS Surveys: Dropping the "O" WordHfSResearch.com Homepage



It's official: the outsourcing industry has voted out its name

September 04, 2012 | Phil Fersht

All the stakeholders in the outsourcing industry have finally spoken - 871 enterprise buyers, providers and advisors - in an unprecedented study of broad opinion as to whether it's finally time to drop the term "outsourcing" for business and IT services.  

HfS Research has reached out (see survey) to its unique community of services and operations professionals, and can finally reveal the answers we have long been searching for - that it's time to re-brand the industry formerly known as outsourcing, with 61% of the industry stakeholders voting to drop the term:

Half of the enterprise buyers responding have over $5bn in revenues, 73% are significant influencers, and most of them have many years of experience with "outsourcing".  HfS would like to thank all of you who took the time to share your opinions on such a pivotal issue.

What's immediately revealing is that close to two-thirds of buyers and providers are fed up with the term, and the fact it's almost impossible to remove the image that outsourcing is only about the offshoring of labor, as opposed to engaging with service providers to create business value.  The advisor community is evenly split, with a good number of them enjoying the fruits of advising on outsourcing transactions - changing the "O" word is bad for business for many of them.  Conversely, there are also many management consultants who would like to remove the term, as it often prevents them from having meaningful and productive discussions with clients, who run a mile when the "O" word crops up.

But what alternative terms have each stakeholder community suggested to replace the "O" word? And what will the termination of the "O" word mean to industry stakeholders?  Will they lose their identity, or is this the beginning of a new era?

Stay tuned... all will be revealed.  Right here!

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



The biggest, baddest and boldest bevvy of buyers is back to bend the boundaries of the blueprint in Boston…but hurry as we're almost out of room!

September 01, 2012 | Phil Fersht
The Charles Street Jail (today aptly named the Liberty Hotel) is where tomorrow's sourcing industry will be shaped this October

It back! And this time its bigger and badder than ever.  In fact, this time it's gonna be so bad we've hired out a Bostonian prison* to confine the brain power and restrain the inmates.

The outsourcing industry power brokers gathered at our HfS 50 Executive Council event this past April in New York City for a two-day working session we dubbed the "HfS Sourcing Blueprint Sessions." With insight provided by HfS Research's analyst team supporting collaborative sessions involving 41 enterprise outsourcing leaders, who were later joined by a select group of executives representing six of the leading service providers, the HfS 50 Executive Council collectively authored the seminal Blueprint Document for the sourcing industry.  Now it's time for the "Blueprint Sessions 2.0" being held in the city of Boston this October 23-25...

Putting the four blueprint industry challenges into action

This time, there is no get out of jail free as we whip out the magnificent Blueprint Document which so many of you sweated over, to put the recommendations into practice over two and a half days of working sessions:

»      Challenge #1: How can we overcome this singular focus on cost that strips the industry of its value?

»      Challenge #2: How can we leverage outsourcing as one of a variety of vehicles to achieve business objectives?

»      Challenge #3: How can many of the service providers invest smarter in their account management teams?

»      Challenge #4: How can buyers and providers really partner to foster innovations into business process outcomes?

We are determined to make the HfS 50 Executive Council the absolute best resource and intimate community for today's sourcing leaders. Beyond the extraordinary peer networking we encourage, we want our participants to gain tangible opportunities to improve their operations and access the best research and data to support their planing, and we intend to use the Council's efforts to drive real change in the industry.  Oh - and the food and booze will be something to behold…

We are very close to capacity for our upcoming  Blueprint Sessions 2.0 taking place October 23-25, 2012 in Boston  event so Register Now to secure your spot!

*The Liberty Hotel, Boston, is an example of how a prison can be converted into a five star hotel and meeting venue

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