HfS Network

Monthly Archives: Dec 2013

Industry analysts: a new world order is already coming

December 29, 2013 | Phil Fersht

As we embark on our fifth year in operation at HfS, I've been reflecting on where the research analyst industry is going.

I've always passionately believed research thrives on innovation and disruption of the enterprise status quo, which means you need two factors to be an effective analyst organization:

  • Data. Trends from the buyers of services and solutions that tell us where they are with their current strategies, how they aspire to evolve,  what they need to help them evolve - and what catalysts will drive the evolution.
  • People. Individual analysts who can read into the data points, who surround themselves by the buyers, sellers and expert advisors, to share an informed judgement on where things are heading and what the industry stakeholders needs to do to survive and thrive.

When it comes to research, big just isn't so beautiful anymore 

What we've proven (so far), at HfS, is that you don't need hundreds of millions in revenue and hundreds of employees to provide that.  When you have a platform to present your research to your

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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2014 shared services and outsourcing outlook Part I: It's time for enterprises to stop being really good at irrelevant stuff

December 24, 2013 | Phil Fersht

Are you feeling relephant?

One of the great discussion topics coming out of the recent Blueprint 3.0 sessions in New York was centered on how enterprise operations can progress beyond the "ordinary" and avoid fading into  the netherworld of corporate insignificance. Or, as one member profoundly stated, "We really need to stop being really good at irrelevant stuff".  So let's take a look at how they can start to do just that...

It's all about shifting the whole foci of operations from yesterday's fragmented immaturity to tomorrow's mature model

Let's examine the six maturity leaps we identified during our recent GBS study of major enterprises with KPMG:

  1. Location leap: from high-cost to low-cost locales;  Do we really need to process those insurance claims in New Jersey?
  2. Standardization leap: from independent standards tied to BUs and geos to enterprise-wide standard solutions;  Why do we have 14 instances of ERP, when we can rollout multi-tenant cloud solutions and kill the dysfunction and poor data integration?
  3. Process Orientation leap: from siloed processes within BUs to business-wide process alignment across geographies and broad functions;  Why do we need 153 different ways to pay suppliers and process invoices?
  4. Commercial Orientation leap: from operating like a cost center to being measured as a business service center;  Why wouldn't we want to have centralized operations servicing our enterprise with the skill, scale and efficiency of a professional services firm, than some back office cube-farm which constantly gets beaten up for cost and quality, which the BUs barely use in any case?
  5. Pace of Change leap: from low-impact change to a genuine willingness to impact people and invest in long-term strategies;  Rolling out a "Big Data" roadmap takes enterprises 5-10 years - how can you be serious about a strategic roadmap when every action is reactive and short-term in nature?
  6. Service Portfolio leap: from being merely transactional to delivering both transactional skills and analytical services at scale.  Transactional process are ultimately automated, or outsourced (or both) - especially if these are delivered inefficiently, which means operations teams need to deliver business value and analysis if they want to thrive in today's business environment.
As the GBS study detailed, most enterprises still have a long way to go when it comes to achieving "maturity" across these six leaps, especially when it comes to adopting a more commercial orientation:

Click to Enlarge

The Bottom-line: In 2014, ambitious operations leaders must begin achieve a certain degree of maturity across their operations before they can really address achieving their desired outcomes

Our research has clearly shown that enterprises can't achieve anything near their desired levels of cost-reduction, analytics quality or innovation, if their operations and processes are fragmented and poorly aligned with the corporate goals of the business. Outsourcing and shared services can provide levers to access expertise (often at lower cost) and standard ways of managing process flows.  However, it is the job of the governance organization to take oversight control of end-to-end processes and work with their BU leaders to map out a long-term roadmap to get better access to data and achieve consistent, ongoing cost efficiencies.

Global Business Services isn't just about managing a few provider contracts and beating up on poorly performing shared service centers - it's about re-aligning the enter operations function (the old "COO's office") to support the business with a commercial orientation.  A GBS operation needs to operate like a consultative service provider that can deliver ongoing expertise, processing capability and analytical services in a scalable fashion.  GBS executives needs to pull together both the internal and external resources to make this happen.  Smart service providers will (and some already are) positioning themselves as partners to support their clients' GBS strategies, while smart sourcing advisors know they need to address the broader GBS transformation needs of their clients, or face being relegated to supporting contract procurement.

Stay tuned for Part II of our 2014 outlook, we will analyze the performance of enterprises against their desired business outcomes, based on their maturity levels.

Readers can also access our complimentary new report, "The Global Business Services Industry Study",  produced in conjunction with KPMG LLP, where we interviewed 416 enterprises across a cross section of regions and industries about their GBS activities, priorities, drivers, constraints, and plans.  

Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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Naomi Bloom: HRO needs to focus on business analyst services, not call center/manual processing

December 18, 2013 | Phil Fersht

Naomi Bloom discusses the new breed of SaaS-savvy HRO providers

My little rant last week (click here) about HRO and SaaS seemed to ruffle a few feathers.  It's clear, without the benefit of significant labor arbitrage, the advent of serious SaaS solutions is going to (and already is in some quarters) bulldoze the entire way enterprises access business services.  None more so than HRO, which has been so reliant on onshore processing centers to deliver low-value administrative work for clients - especially those suffering dysfunctional / non-existent technology.   I wanted to share a contribution to the discussion from matriarch of HR technology, Naomi Bloom, who expands on these points and provides a couple of excellent example of where the HR Cloud revolution is already well under way....

Phil, this is a great topic with lots of threads worthy of comment, but I'll focus on just two.

First, not only does the new breed of SaaS provide a better foundation for delivering a wide range of HR capabilities directly to the real customers, from manager and members of the workforce to applicants and vendors of contingent workers, but the best of the new SaaS offerings automate HRM so much more fully that the amount of manual work, the amount of HRO needed, is reduced substantially. Except in the heavily regulated areas, like benefits and payroll, great SaaS should eat a lot of HRO providers for lunch. Call centers? We shouldn't need them at anywhere near the level that exists today for many large organizations. HRO-provided self-service? Gone! But that doesn't mean that there isn't work to do with SaaS; it's just very different work, which takes me to my second point.

Second, with near continuous attention to turning on entirely new functionality as frequent releases deliver it or business conditions warrant its use in an already present release or even when changes in business require reconfiguration/changes to existing functionality, customers need clever business analysts with deep business and product knowledge to ensure that such work gets done well and quickly. But these are still scarce KSAOCs in our world, especially as regards understanding the growing number of models-based, metadata-driven products which old think analysts struggle to understand. What's needed to support customers here is a very new style of HRO, which is much more business analyst services than call center/manual processing services.

One example, OneSource Virtual, is such a new style HRO provider focused entirely on Workday's customer base for whom they provide not only a wide range of initial and ongoing implementation services but also a variety of ongoing back office payroll and benefits administration outsourcing services. Another strong example is Ultimate Software, which  just bought one of its partners, which provided similar services focused entirely on Ultipro's customer base, to offer some of these same services in-house. These are just examples as you and I know that there are many such offerings in various stages from planning to real.

It will be fascinating to see if the larger SIs and/or HRO providers will be able to craft just the right mix of quality and cost-effectiveness to be successful in delivering much smaller, less labor-intensive and more tool-based implementation and post-implementation HR services.

Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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HR in the Cloud: It won't kill HRO, but it may kill what's left of dysfunctional HR...

December 11, 2013 | Phil Fersht

How much longer will we be staring into the HR abyss?

My attention was momentarily side-tracked by an interesting blog penned by HR blogger-cum-consultant Andy Spence bearing the dramatic title  "Will HR in the Cloud kill HR Outsourcing".   Oh yay - I like titles like that...

Andy raises some interesting points and cites some good examples and other analyst data sources, namely:

  • HR Buyers are cautious, ‘letting the dust settle’ on SaaS providers as they review their current HR Operating Models and future needs.
  • The rise and rise of Workday has actually breathed life into the HRO market – NGA HR, IBM and AON Hewitt are implementing or have HRO contracts using Workday software.
  • HRO Buyers want both SaaS and services together, however are not willing to lose portal, chat, contact centre solutions that have been developed over last 10 years.  Expect HRO providers to develop solutions in this space.
  • There is a 15-20% HRO penetration level for orgs with >10,000 employees and there has been more new buyers in last 8 months than previous 2 or 3 years

Why the successful advent of HR Cloud solutions breathes new life into the multi-process HRO corpse

Having cut my teeth on HRO in the early-mid 2000s, I became increasingly frustrated with the market because you couldn't make the numbers work moving dysfunctional processes to a third party provider which - more often than not - didn't have much of an integrated technology platform

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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And what a week that was! Relive those Blueprint moments...

December 09, 2013 | Phil Fersht

Well, that was quite the week! Thanks to all of you who made the effort be part of a great December networking escapade in the Big Apple. I can't remember such a large group of outsourcing powerbrokers under a single roof...

Oh, and crank it up...

Posted in: Absolutely Meaningless ComedyBusiness Process Outsourcing (BPO)HfSResearch.com Homepage

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Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities

December 05, 2013 | Phil Fersht

Recessions are good times for business leaders who love to focus on containing costs.  Saving money is the name of the game, and executives who achieve this for their organizations become heroes.

Struggling to manage your extended enterprise? Then click here to course correct

However, times of recovery are markedly different. The onus shifts from cost to value; from defense to attack; from conservative to bold; from tactical to strategic; from efficiency to innovation. And, with the current recovery, perhaps most significantly, the very nature of a company’s cost base is shifting from inside to outside of the organization.

For decades, enterprise executives focused on reducing costs as the key to unlocking an organization’s profitability. This often began with an emphasis on reducing expenditures around SG&A. Activities that fell under this area received derogatory descriptions such as “back-office” and “non-core.” In time, the application of these terms spread across the entire business and any function tagged as such was prime for outsourcing. As a result, many parts of the enterprise were increasingly outsourced.

At the same time, forward-looking businesses began to adopt new organizational structures that were developed to foster lean operations. Rather than build out functional areas across the value chain, companies picked a few key areas to focus on and used partners to deliver the rest. Car manufacturers stopped building components and focused on design and assembly. Hotel chains stopped owning and operating buildings and focused on building and maintaining a brand. Businesses in nearly every industry adopted models that moved significant functional elements to a third party.

Consequently, many of today’s companies look like shells of their former behemoth selves. Marketers now rely on outside agencies and analytics providers to improve their own customer insight and advertising spend, operations teams rely on outsourcing and technology to eliminate labor costs, and IT teams rely on cloud-enabled SaaS platforms instead of an army of programmers occupying the lower floors. For any area of an enterprise’s P&L, a range of suppliers are ready and willing to perform the same tasks faster, cheaper, and better. Yesterday’s pay slips have become today’s supplier invoices.

Want to learn more?  Then download our new report "Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities", where we hone in on the following:

  • The shell game: today’s successful enterprises are leaner versions of their former selves
  • The goal: leverage external relationships for broader business value
  • How to shift from tactical sourcing and procurement to a capable strategic team
  • The bottom line: the business models of the future require better leverage of your supply base’s assets and operational flexibility

Feel free to drop me a line with any questions on the topic,

PF

Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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We are HfS. Yes we are!

December 02, 2013 | Phil Fersht

As we gather the largest-ever superstar assemblage of sourcing leaders in New York this week, let's have a look back at how we got here as an industry... and how HfS has evolved from this ramshackle little outfit into such a glitzy professional high-end corporation (ahem)... oh - and crank up the volume :)

Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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