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Category Archives: HfS Surveys: Innovation in BPO

Automation killed the gamification star

March 04, 2014 | Phil Fersht

"Rewritten by machine and new technology, and now I understand the problems you can see"

Source: "Video Killed the Radio Star" by the Buggles, 1979

Yes, even back in '79, when a portly Christian Bale wore a hairpiece and the first nudist beach was established in the United Kingdom, the world was already beginning to zone in on the power of automation.  Well maybe it wasn't, but we were trying to find a clever way to connect the Buggles, American Hustle with Automation and BPO... so let's have HfS' own automation star, Charles Sutherland, shine some light on this one...

The Stagnation of Gamification

It wasn’t that long ago that in certain circles of the outsourcing market, there was a great deal of excitement about how gamification was a trend which would have a real and meaningful impact on how work was done in delivery centers around the world.   Books were written, conferences like GSummit were organized and in general there was an emerging belief that if you made even the most routine work more “fun” organized around mini-games, competitions, points and leaderboards rates of employee engagement and retention would rise and with that overall productivity in the outsourcing market.  A full disclosure now, I believed in this at the time and in many respects still due although as I’ll explain, I no longer see this as a wide-sweeping trend and instead as a niche approach for certain roles and workforces now in the future.  So while the books still reside on my Kindle, I’m now moving to the belief that at least in the world of BPO and GBS, it won’t be the gamification of roles rather it will be the process automation of roles that will define this world over the next several years.

While it’s true, that gamification may not have made it into the standard discourse in the BPO and GBS marketplace, our recent study of technology trends in BPO suggests that by comparison to process automation and the members of the SMAC stack (Social, Mobility, Analytics and Cloud), Gamification is at best the present, likely the past and certainly not the future technology trend.  What has emerged in its place is process automation.

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Why and Why Not Gamification in BPO

Gamification was attractive in BPO as a possible solution to some structural challenges in the industry.  How do you keep employees engaged and retained when their daily work isn’t always interesting and rarely varies?  How do you appeal to new millennial and Gen-Y employees who live

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



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,


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



Innovation in BPO purgatory, Part III: the escape route

June 15, 2010 | Phil Fersht

Now there's some significant innovation potential...

When it comes to achieving innovation when outsourcing, buyers need to identify where real innovation is possible, and where they only really need operational efficiency.  

Innovation is about deploying creative and unique methods to drive new productivity or top line growth into the company.  In reality, some processes have that potential, while others, quite frankly, only offer a means to an end.  

Our new innovation study, conducted in conjunction with our BPO networking partner, the Shared Services & Outsourcing Network, reveals some staggering results from 136 senior BPO buyers, when we asked them where they were achieving significant innovation today, and where they saw the potential to achieving significant innovation within a two-year time frame: 

Determine the ceiling of innovation value 

This data reveals an awful lot about outsourcing today.  Essentially, most business processes can be improved to a certain extent when they are outsourced, whether it be through better workflows, application of new technology, and domain knowledge from experts.  And most buyers today still feel most - or all - of their outsourced processes can benefit from further innovation. 

However, some processes clearly have a ceiling of innovation value that can be attained, which is where the move towards standardization comes into play.  For example, once you've got a benefits or payroll solution that delivers the required functionality, is delivered via a hosted / SaaS model, and the provider has the costs and service quality performing to an acceptable level, is there really a whole lot more value your business can gain from them, to increase productivity further and drive new top-line growth?  Cloud Computing and SaaS can further help drive down the operating costs and optimization of delivery, but once you're happy with the processes and the service, that may be the limit of future innovative value that you can expect to attain. 

Pinpoint where future growth and productivity can be attained with a BPO provider 

Where there is significant opportunity to achieve innovation, is where there is significant room to improve process flows, add domain knowledge, creativity and technology into the mix to achieve impactful business outcomes.  This is especially prevalent with those processes that are often a long way from standardization, and can benefit from consultative business partners to develop a specific innovation agenda (see Part II).  Analytics innovation clearly represents a major opportunity for providers and buyers to work together to make better use of information to drive results, in a cost-efficient manner.  It also encompasses a much greater need for consultative support from the provider.  And it's the same story as you go through those processes where the innovation opportunity is significant, for example, P2P (massive productivity and cash flow); supply chain (driving product to market quicker); customer--care (driving new income), recruiting (reducing time-to-hire and improving talent selection), and so on.  Each innovation gap tells a story of where the future value lies. 

The HfS Viewpoint: The key lies in determining  and achieving the right balance between operational efficiency and innovative value.  Both are crucial.  

That means, when selecting BPO partners to drive new business value, buyers need to focus on identifying which ones can genuinely help them innovate, versus those who can keep the machine cranking.  In most cases today, buyers are increasingly finding they can source to multiple BPO and consulting partners - those to help them innovate in processes that have real value-potential, and those which can keep the costs down and the operations functioning.  Many buyers today with some BPO experience, are now seriously considering adding more competitiveness to their provider mix to get more creative value. 

On the flip-side, providers need to determine where they add the most value.  For example, ADP has the lion's share of the managed payroll business - so does it need to broaden beyond that into adjacent processes, for example P2P, that requires greater innovative and consultative support?  Cognizant has a strong portfolio of industry-specific offerings in verticals such as life sciences and banking - does it need to broaden more aggressively into more horizontal processes, such as F&A or procurement?  Accenture and IBM have strong offerings across many of these processes, so where should they choose to invest more of their resources in a tightening market? 

Buyers and providers need to work out a game-plan whereupon they determine what innovation is possible, and how it needs to be achieved.  Some buyers feel they don't need a hell of a lot of innovation, and some providers are happy delivering standard services with little innovation impetus, beyond a few basic requirements.  In the future, we'll be drawing up illustrations of the innovators and the operational players.  There is room for both - the key is to determine how much focus to put into each area. 

All-in-all:  Both buyers and providers need to be honest with themselves to determine whether they are truly prepared to invest in either achieving or delivering innovation.  If not, stick to being operationally efficient and stop talking about an innovation game-plan that will never happen.

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



Innovation in BPO purgatory, Part II: Enterprise buyers are blaming themselves for innovation failure

May 28, 2010 | Phil Fersht

Time to demonstrate real governance...

In Part I of Innovation?  The BPO industry needs to escape from purgatory, our latest survey reveals a few crucial aspects about innovation* in BPO endeavors: 

  • 43% of decision-makers now see it as a critical element of BPO
  • Half of today's enterprise buyers are disappointed with the innovation they have currently achieved
  • The potential to achieve innovation across many core business processes is huge.  This was notably cited in industry-specific process and analytics areas, in addition to some maturing BPO domains, namely procure-to-pay, supply chain and recruitment

So why aren't half of today's enterprise buyers achieving innovation

When we asked those executives with significant influence over BPO decisions their prime concerns for failing to achieve innovation in BPO, they cited the following reasons: 

It is abundantly clear that enterprises buyers recognize that the blame lies a lot more in their camp than their provider's, with well over a third citing poor change management and communications as a great concern, coupled with the fact that their current governance team has little juice internally to drive an innovation agenda.  If they were going to blame primarily their provider's lack of innovation prowess, much more than a fifth of buyers would have cited "the wrong composition of skills among their governance team and the provider's relationship team" as a major concern. 

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Posted in: Business Process Outsourcing (BPO)HfS Surveys: Innovation in BPOKnowledge Process Outsourcing & Analytics



Innovation? The BPO industry needs to escape from purgatory. Part I

May 17, 2010 | Phil Fersht

Forgive me father, for I hath missed gain-share opportunities...

While there's a lot of puff coming from several providers, expectations are not being met when it comes to the actual achievement of innovation within many Business Process Outsourcing (BPO) engagements.  Consequently, this improves the options for the first-time BPO buyer to select a provider that can demonstrate a proven track record of innovation, but what about the second-time buyer, firmly-rooted in BPO purgatory?

Our brand new survey* of 588 shared services and outsourcing executives, studying the current achievements of innovation within BPO, serves up a major does of realism to the global sourcing industry:  buyers want it, but they are not working effectively with their providers to achieve it.  And many buyers and providers are pointing the finger at each other.  So why should we care?

Innovation is becoming a critical component when it comes to BPO

In the past, many buyers shied away from innovation because they were so laser-focused on achieving operational stability within their BPO environment. Many claimed that they would have to sacrifice meeting service levels if they tried to tinker with their processes to find new ways of achieving better outcomes.  However, when we  look at how those buyers with significant influence over BPO decisions are viewing innovation today, the importance being placed on innovation is distinct:

Close to half of enteprises' operational leadership today now view the achievement of innovation as a critical component of their BPO strategy.  With most providers operating within a similar price-band today, this is clearly becoming the major differentiator for the first-time BPO buyer, as we first discussed in our "New Normal in Outsourcing Delivery" study, ealier this year.

First time BPO buyers can select proven innovators, but the second-time buyers have a challenge on their hands to escape BPO purgatory

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