*The traditional B2B model is switching to a B2C model:  Payers now now have to cater for millions of individuals, in addition to thousands of companies with “cookie-cutter” solutions.  In effect, they now have to sell to, market to and manage consumers, in addition to their traditional corporate clients.

*Health plans must now being priced very, very differently differently:  The only variable inputs will be age, geography, family size, and tobacco use, while past history will and pre-existing conditions will no longer be taken into account.  Millions of new people will be entering the health insurance market, with vastly increased regulation on how payers ‘ revenues can be allocated.

This will matter for everyone – service providers, buyers, and pretty much anyone living in the United States.  These reforms will affect the healthcare payers the most, as they seek to cope with the monumental challenges needed to improve product operations, engage with the customer differently, optimize processes, and contain not only administrative costs, but medical costs too.  The three service providers that we found best placed currently to service the healthcare payers are Accenture, Xerox, and Cognizant:

Click to Enlarge

The Healthcare Payer Blueprint utilizes our Blueprint Methodology, which measures both execution and innovation against a set of crowdsourced criteria derived from the State of the Outsourcing Survey 2013. We assessed data from over 155 live multi-process healthcare payor BPO engagements to ascertain provider market shares, depth of client base, breath of execution and geographic scope of delivery. We examined the healthcare payer value chain (claims, service, marketing and sales, medical management, etc.) and interlaced what we know will be important to Healthcare Payers in the dramatically evolving healthcare industry with the capabilities and vision of the service providers in our assessment.

Healthcare Payer BPO Blueprint Author: Adam Luciano, Principal Analyst, HfS Research (Click for bio)

Our analyst team conducted exhaustive interviews with multiple buyers and market advisors to help score providers against each other across all the sub-categories of the Blueprint using ExpertChoice, an advanced statistical analytics platform. We also received a tremendous amount of cooperation from (almost) all of the providers above, as we went through this exhaustive process to understand their concrete plans for the future, get really deep with their current client relationships, their overall vision and their appetite to evolve and invest into higher-value areas of Healthcare Payer BPO.

You can download the full HfS Blueprint methodology by clicking here.

]]> http://www.horsesforsources.com/healthcare-payer-blueprint_061413/feed 5 http://www.horsesforsources.com/car-service-europe_061313 http://www.horsesforsources.com/car-service-europe_061313#comments Thu, 13 Jun 2013 15:47:16 +0000 Phil Fersht http://www.horsesforsources.com/?p=13696

It would be easy to forgive anyone for assuming that the Indian services majors Wipro, Infosys, TCS, Cognizant and HCL (aka the “WITCH” providers) are dominating the global battle for services supremacy, given the hype that surrounds India’s dynamic IT outsourcing economy. However, In spite of their impressive growth over the past ten years, none of the WITCH providers have yet to make the HfS Top 10 of global IT services firms, despite dominating the application development and management business:

The first of the WITCH providers likely to break the Top 10 is TCS, provided it can maintain its current growth trajectory, break through its landmark $10bn revenue barrier, and there aren’t major acquisitions or merger amongst the Top 20 providers.

The IT services competitive landscape is still dominated by the traditional large global IT firms (HP, IBM, Accenture), the global enterprise software companies and local IT services firms with strong domestic/regional market positions (Fujitsu, NTT, Capgemini, CSC, CGI).

HfS Research’s new Global IT Services Market Size and Forecast 2013 provides an analysis of the recent financial performance of the leading IT Services companies and the key drivers and inhibitors that are driving growth in these markets, particularly how they are coping with the endlessly on-going economic crisis in Europe and the key technology and business dynamics driving growth in 2013 and beyond.

Ten ways the WITCH providers can break the IT Services Top Ten

1.     Develop a greater client base outside of the US – particularly continental Europe where the benefits of offshore development are beginning to be recognized

2.     Move up the value chain – too many of them are being “ring-fenced” into the IT back office and struggling to get a bigger chunk of the integration business

3.     Expand into the upper-middle market ($1-$5bn revs), where the heritage western firms are much less dominant and demand is highest

4.     Acquire more consultative capability to move clients into the cloud

5.     Invest in word class BPO and business transformation capabilities to become genuine “technology enablers” and not solely IT body shops

6.     Focus on verticals where they can really differentiate with institutional expertise and stop trying to be “all things to all people”

7.     Become more global in nature, establishing more middle and upper management in locations outside of India

8.     Diversify more aggressively IT infrastructure-based services and become less reliant on lower-level ADM work

Jamie Snowdon is EVP Research, HfS (click for bio)

9.     Diversify beyond legacy ERP services into supporting SaaS enviroments such as Salesforce.com, Workday, Netsuite etc.

10.   Acquire a “traditional” onshore IT services business that can add many of the areas mentioned in points 1-9

Rather than panicking about the next quarterly earnings, Michael Dell is focusing on building something for the next couple of decades

I don’t want to shock everyone, but occasionally I do have positive things to say about some providers.  And it’s nice to be pleasantly surprised by one which is clearly on the right path, because when Dell acquired Perot Systems in 2009, many of us were skeptical as to whether a product-centric firm, such as Dell, could make a genuine push into high-end services.

It is my personal belief that the likes of HP and CSC will be sweating from the oncoming threat from the Austin-based firm’s $8.5 billion services arm in the not-too-distant future, not to mention some of the flagging Indian firms struggling to rediscover their mojoes.

Why Dell is a dark-horse future services powerhouse

Strong leadership and deep resources.  Michael Dell is a great guy, liked and respected by everyone who knows him and works for him.  He is also a smart businessman and smart communicator and his no-bullshit style has permeated its way throughout the company.  Moreover, he is very, very rich – with his Dell investment rumored to be only a third of his entire personal fortune.

Taking Dell private will shelter the firm from the intense public scrutiny being placed on services firms today, consumed with unrealistic margin pressures and gobbledygook strategies that mean little, but sound impressive.  It is clear that Michael recognizes which elements of his business are nearing the sunset or maturity phase of their evolution, and where the future growth is coming from.  He recognizes that the services industry is hitting crunch-time with too many competitors and too many copycat strategies.  Being able to take a detour from the impending turbulence will enable the firm to weather the storm, make some strategic tuck-in acquisitions and re-emerge in the future onto public markets as a real Tier 1 force.

Talent in abundance.  Michael has assembled an unbelievable array of talent through his acquisitions and direct hiring from competitors.  In services, snagging Suresh Vaswani to lead Dell’s services shortly after he was displaced as Wipro’s CEO is proving a masterstroke.  Suresh has built a very dynamic team, including Ashutosh Vaidya, Wipro’s former head of BPO, Tanvir Khan, who helped establish Minac’s US operations, and Sid Nair, one of Wipro’s US sharpshooters to drive the healthcare services offerings.  In addition, what impressed me most was the talent in the middle-management layer, for example, former star Redmonk analyst, Michael Coté helping devise cloud strategy, and Cameron Jenkins, former COO of legacy modernization firm Clerity, helping drive Dell’s thriving application modernization business.  While many of Dell’s competitors only push their thin veneer of senior leaders in front of the industry stakeholders to mask a mediocre middle-layer of sales people, Dell is proud of the people it has assembled throughout the organization.

Positive culture.  Let’s make no bones about it, several of today’s services firms are suffering from low morale and executive burnout.  Some have really lost their way and much of their top talent – and it’s sometimes hard to pinpoint people you still know in those firms.   However which way we look at it, services is still a people-business, where passion and energy are still the core ingredients to inspire clients and drive new thinking and ideas.  You don’t get that feeling from the Dell crew, even after several mojitoes… these folks are genuinely happy to be where they are.

Limited bullshit.  When your leader is a straightforward guy who clearly articulates what he wants to achieve, the rest of the firm normally follows suit.  This really is the case with Dell, where everyone talks a straight game regarding their strategy and game plan.  The firm’s offerings are, quite simply, uncomplicated:  IT products and services across all key areas, namely security, private cloud enablement, enterprise mobility, service management, application development and infrastructure management.  I was particularly impressed with its cloud strategy, based on its own datacenter and hardware heritage, and also its modernization business, where it was addressing many of today’s businesses still plagued by legacy mainframe environments.

There is also a stealth BPO strategy where the firm is pushing into verticals where is has deep domain expertise (both onshore and offshore), such as healthcare, life insurance, transportation, retail and hospitality, as opposed to getting crushed in horizontal areas such as F&A and procurement, where it hasn’t established much presence.  An estimated $350m a year of non-federal BPO business is enough to get Dell to the big boy’s table in its selected vertical areas, and open up the potential for acquiring additional BPO capability as it grows.

Very strong edge in the upper-middle market for IT services.  There is a host of clients in the $1bn-$5bn range which are struggling to get the red-carpet treatment from the Tier 1 providers, still feasting off the fruits of the high-end enterprises.  There is a great opportunity for Dell to exploit its massive installed base of hardware clients with no-nonsense IT services offerings from simple Windows migration projects through to complete apps and infrastructure modernization engagements.  It also has a pretty decent brand to work from (with a concerted marketing push).   It will need to contend with competitive friction from the reseller channel, but Dell knows it must develop its broad services business offerings if it wants to survive and prosper.  In addition, many of these “upper middle market” clients are going to be the F500 of the future, and building a solid base of clients in this sector is laying the groundwork to attack more high-end business down the road.

The Bottom-line:  Dell’s enterprise services journey is in the early stages, but it has a much brighter future than many of its counterparts

Dell has a lot of work to do, but Michael has spend the last three years putting together the framework and game plan to take the company forward.  Being able to shield the firm from the Wall St. headwinds that are consuming the leading service providers, is a huge benefit for the firm seeking to take its time adapting to a rapidly changing environment and re-positioning itself in new growth areas where it needs to develop its brand and reputation.  Rather than simply panicking about the next quarterly earnings, Dell can focus on building something for the next couple of decades.  The firm does need to acquire additional scale and depth across most its service lines – and may need to sunset or divest of some of its own legacy businesses, which simply make less sense to own in today’s environment.   However, for many of today’s ambitious services executives, this is one firm that has a great culture, strong leadership and a no-nonsense vision that is in tune with the realities of what is needed to survive.  I hope to link back to this post in a couple of years with an “I told you so” smirk on my face

Lars Dalgaard... sporting a fine red tie to an SAP event

Anyone who has met Lars over the last decade has been drawn to his incredible passion and vision for the future of enterprise software with the shifting sands away from legacy on-premise software and expensive lock-in licenses.

Lars joining SAP was the acid test as to whether old-world ERP vendors could find a rapid path into the shiny new world of cloud and multitenant delivery models for enabling global business operations. He was a true visionary who had almost single-handedly taken on the legacy enterprise software firms, building up Successfactors from nothing to something, that would entice SAP to part with $3.4 billion to take it out.

The stark reality is there’s just so much vested in today’s legacy enterprise model

Lars leaving so quickly symbolizes SAP’s struggle, in my mind, to change its culture and approach to disruptive business models. The economics of the cloud cannot print anywhere near as much money for our German friends as the current legacy ecosystem of clunky enterprises, whose IT managers simply do not want to invite change or disruption.  If your clients don’t want to change, why should you?

Net-net, SAP has created a nice cosy industry around itself that has created, literally, millions of careers.  What are all these developers and project managers going to do if companies suddenly had single instances of SAP available in the cloud?  What are many of the service providers going to do if they can’t earn tens of billions trying to stitch all this stuff together?  And what would SAP do if it can’t command such incredible revenues from its consulting, services and multiple-license revenues?

The startling truth is that there is a $255 billion industry (Source, HfS Research) that feeds off this ERP chaos and dysfunction centered around both SAP and Oracle, and and estimated $156 billion of this is purely the annual cost of keeping enterprises’ SAP worlds ticking over in 2013; the external services, the licenses, the hosting, the internal staff to maintain and develop the software etc.

Why do you think these little upstarts, such as Successfactors, Workday, Netsuite and SFDC command up to 40 times their annual sales income in valuation?  Because they threaten the status quo of a much, much larger industry that is scared stiff of being blown out of the water by disruptive technology:

Click to Enlarge

While the decrepit old enterprises stick to their legacy IT infrastructures, the evolving mid-market firms are breaking the mold

I recently spoke to a senior executive at a legacy software vendor stuck in multi-instance and fake-cloud land, who confided “we’re purely in the protection business now.  All the new logos are going into Workday.  Fortunately our existing clients still spend enough to keep us solvent.”

This pretty much confirmed my viewpoint that it’s the small to middle-market organizations (under $5bn in revenues) seeking technology and sourcing solutions that can drive nimbleness and cost-effectiveness, as they simply do not have the people and technology resources within their IT, finance, HR, marketing and supply chain operations to manage their evolving needs.  Moreover, many of these organizations are moving from prehistoric infrastructures to cloud-based ones… bypassing much of the painful inch-by-inch transformation where so many of today’s high-end enterprises are stuck.

As the existing high-end business opportunities slowly shrivel up, the new logo opportunities are springing up in the mid-tier, will the likes of SAP and Oracle be equipped to take them on, when compared with the evolving array of developing cloud solutions from the upstarts?  Remember, many of these new mid-tier logos will make up a significant chunk of the F500 in the future… so clearly the failure to evolve to true cloud models is eventually going to come back and bite the incumbents. Surely they can’t keep spending billions and billions on new acquisitions to control them when they start to hurt their business?

The Bottom-line:  The evolution to the cloud for firms likes SAP is simply way, way to slow for a guy like Lars

SAP’s enterprise customers, and many of the services giants which feed off the beast, are still many, many years from being forced to evolve, but one thing is clear… eventually they will be forced to comply.  The big question is whether it’s still another 5, 10 or 15 years away…

Simply put, SAP was never a place for the likes of Lars…  and won’t be for many years to come. There is no burning platform for SAP to really jump into the cloud just yet, and guys like Lars do not work in the slow-change business. When that burning platform does come, it will need people to change the mindset a lot more aggressively than they are prepared to in today’s market. Maybe then, they’ll wish they had a Lars to call on.

Let’s just hope, for SAP’s sake, he doesn’t pop up at one of these other cloudy upstarts anytime soon…

Gautam Thakkar is Chief Executive Officer and Managing Director, Infosys BPO (Click for bio)

What’s wrong with a down-to-earth guy who’ll sit down and share a beer with you to give you the no-frills run down on his challenges and opportunities? What’s wrong with an executive who has shed blood dealing with a decade-plus of transitions and tackling real client pain-points? So I was pleasantly surprised when my good pal Gautam Thakkar got the nod to take on the reins at InfosysBPO last month.

Gautam has actually sat himself through one of our HfS sourcing executive council meetings to hear close-up how clients are dealing with the world post-transaction.  What’s more, Gautam doesn’t live in a world of PowerPoint – he lives in the world of the tough realities of the business we are in – long decision cycles, complex change issues, challenging economics…

So we managed to “drag” Gautam away from the squash court and his collection of Malbecs (which is probably fairly pitiful at the rate he drinks it) to learn a bit more about how he intends to take on the next chapter of the InfosysBPO story…

Phil Fersht, CEO HfS: Good morning Gautam! Could you share some background on yourself, where you came from and how you got into what you’re doing today?

Gautam Thakkar, CEO InfosysBPO: Hi Phil… I’ve been working with Infosys for about 13 years. At that time the company was trying to grow an upsteam business – hiring consultants to work with clients and starting other transformation initiatives. I was in the middle of some projects and someone came up to me and asked, “Would you like to be a part of something Infosys is starting up, spend a couple of months framing a strategy for our BPO business?” I said sure, I’d do 2 months, but then 2 became 4 and 4 became 6 months. I went in kicking and screaming, saying this isn’t something I want to be doing for a lifetime! But as you now know, it’s become something I’ve done since 2001, before Infosys officially got into the business. I was one of the first employees  at Infosys BPO and have been through almost 10 years of the company’s BPO journey, played different roles along the way and ended up in this position. I’ve lived and worked in the US, India and Europe. It’s been an interesting evolution to see a company that was conceptualized from the grassroots and growing to where we are today, at 25,000 people globally, 23 centres and more than 60 nationalities.

Phil: You’d been heading the F&A practice for a long time, and that’s now broadened into a CEO role. What will you be doing differently now?

Gautam: As I mentioned, since I was one of the early employees, we were pretty much doing everything in the beginning. Then I was responsible for the entire Europe business, which morphed into the F&A role. Subsequently to that, in the last 2 years I’ve been handling all horizontals outside of F&A as well. This is what we refer to as the entire enterprise business BPO, accounting for 65% of revenues today. So yes, F&A was the largest part of the business that I was looking at directly, but other businesses were also rolling into me. The transition has been smooth, as I was running 65-70% of the business already and was connected with most clients. The agenda that my predecessors saw for the company was growth, differentiation and people. This is the foundation on which we have grown the business and will continue in the future. From a client standpoint, we follow the 3 Rs – being Relevant to our clients & employees, Respected as and as the best place to work for employees and one of the most profitable businesses and having strong Reach with clients  and drive sustainable businesses globally. I’m taking it upon myself to be connected to most CXOs, clients and otherwise. So directionally, the transition has been smooth because I was a part of leadership team earlier and will be taking forward these principles to engage with clients.

Phil: Looking back ten years ago to when you first formed InfosysBPO, what’s different today?

Gautam:  I think there are some things that are different, while others remain the same. Cost is a focus area and has stayed true as a favorable driver for clients to engage in BPO. When companies look to us, cost is still one of the drivers. However, what has changed dramatically is the way that we engage with clients. They are now looking at it from a revenue standpoint – how do we offer agility, flexibility and scale? So the conversation has moved from a cost focus to a growth focus in BPO. For example, we’ve moved with clients to different geographies. We recently opened a delivery center in Costa Rica where we are giving a client nearshore scale and flexibility. Last quarter we talked about creating 200 jobs in Atlanta. So ten years ago, the value proposition was largely cost. Now it has shifted to cost and growth as well – growth-led BPO. This is reflected in our revenues as well, where 40% of it comes from global centers outside of India. The headcount still remains largest in India, but we have 6,000-6,5000 employees working outside India in these global centers.

Phil: One of the things that impressed me about InfosysBPO is that you’ve gone after different markets, beyond F&A, from the outset (read our earlier discussion). For example, you’re the largest and most successful Indian provider in procurement BPO, and you’ve got tentacles in customer management and insurance as well. Can you talk a little bit about the broader portfolio and where you’re going to double-down in the next 3 years?

Gautam: Phil, the way we’re organized today, we’re centered around industry vertical solutions and the horizontals where we’ve made a lot of investments. There are certain areas where we’ll be spending a lot of our time and expanding on these investments. Sourcing and procurement is continuing to hold our attention because it is where we are having value based conversations with clients. We also acquired an insurance platforms specialist, Mccamish Systems in 2009 – insurance is another business we are spending a lot of time on, from a vertical solutions standpoint. Overall, sourcing and procurement, insurance and healthcare are the key areas we are being fairly aggressive on. F&A continues to be a staple, even though it is the most competitive service area. I believe its there for the taking, and is the easiest conversation to have with a client since the area is relatively mature.

Phil: Infosys has been frequently making acquisitions to grow the BPO business, more than most other BPO providers out there. What is the thinking around that? Can we expect more acquisitions in the near term?

Gautam: We have made acquisitions historically in BPO – the Philips center, McCamish, Portland and Marsh BPO. All these  we acquired not for scale, but for a logical fit in our portfolio. We identify those areas (white spaces) which we believe will give us the capability and skillset to get a headstart or help fill the gaps from our overall capability set. However, each business has to stand on its own – we don’t want to go acquire just to get revenues. Businesses have to be profitable and have clear growth paths of their own. We also want to make sure we are able to go after them in a structured fashion. One aspect people tend to ignore is how the acquired firm integrates in the company and whether it’s a good fit overall. All our BPO acquisitions have been integrated extremely well, giving me great confidence to go ahead and look for similar assets in the market, as and when it happens. We’re always looking for the right assets which fulfill the criteria I outlined, and we’ll continue to do so.

Phil: So what are you going to do differently that’s going to make a huge impact to Infosys and the market?

Gautam: One of the aspects I’ve always been comfortable with at Infosys is client relationships. That’s my strength and I will ensure I engage with the right clients, whether existing or prospects we’re targeting. As I mentioned earlier, the bedrock of what we had evolved was growth, differentiation and people. If I extend that to the 3Rs, I am going to continuously focus on and hopefully take Infosys to the next level. The nature of the market is also changing, there are more integrated deals happening now. Fortunately when we talk to clients and customers, we are one business, whether its IT, infrastructure, systems integration, consulting or BPO. That gives me strength and comfort that we’ll be able to take this to market appropriately. I believe clients will start seeing that value proposition that I think will differentiate us from the rest.

Phil: There’s been a lot of talk, particularly from Infosys, about seeking “non-linear growth”…you’re saying 33% of revenues are going to be targeted at being non-linear in the mid-term. How realistic is that for BPO, is that achievable and are you already seeing signs of that evolving for the company?

Gautam: The BPO and technology businesses are very closely linked at the hip. The platform strategy that Infosys 3.0 talks about is very closely linked to BPO as well. For example, two of our platforms out there, TalentEdge and ProcureEdge allow us to go on the platform and manage the entire stack of applications, infrastructure and all the business processes. That completely ties in to what Infosys is trying to do from a non-linear perspective. The other thing to remember from a BPO standpoint is that we’re close to $600 million in revenues and 25,000 people. Three years down the line, if we want to double revenues, we can’t also double headcount. There has to be a break in linearity so that we can grow our business sensibly, along with technology interventions. Infosys 3.0 fits in with what we’re trying to do because for this industry or business, you don’t want to double both [revenues and headcount]. After a while, it becomes unmanageable. There are some core processes which will be intensive on resources, but I think technology will play a big role. This is why I mentioned the cost and growth focused BPO initiatives. The shift will increasingly happen, but it will be on the back of technology, not just on the back of headcount as you increase revenues.

Phil: Finally, if I wrote you a cheque for $2m today, what would be the first thing you would do?

Gautam: <laughs> What would be the first…? I think I would take my family on a long holiday. This is more for them than for me. They bear my travels and being away for long periods of time… I think they definitely deserve a break more than I do! I’ll take them to the most exotic place that they can think of and be at their beck and call to do whatever they want to and hopefully spend that money usefully.

Phil: Answered like a CEO should

Gautam: I’ll pass that on to my wife. I think she will be very impressed, I don’t know about the rest of ‘em!

Phil:  Gautam – you’ve been a great sport!  Am sure there will be many folks here wishing you all the best in the new role.

 Gautam Thakkar (pictured above) is Chief Executive Officer and Managing Director, Infosys BPO (Click here to read his full bio)

Amigos – it gives me great pleasure to announce some imminent new analyst arrivals at HfS, in addition to announcing the promotion of a couple of guys who’ve been instrumental in the development of this business, which has literately sprung from nowhere in three years to the monstrosity it has become today…

Christa Degnan Manning joins HfS Research as Vice President to lead the firm’s Human Capital Management Strategies research practice addressing both technology and services dynamics. Christa joins from American Express where she was a leader with the firm’s managed business travel services. Prior to AMEX, she led the Human Capital Management Practice at AMR Research (Gartner), and the Procurement and Category Management Practice at Aberdeen Group.  She was one of the few analysts at AMR who never took any crap from me… she is feisty, smart and fearless.

Ned May joins HfS Research as Senior Vice President to spearhead the firm’s research coverage of Technology Enabled Business Services, where he will research the impact of mobility, big data and cloud technologies on business and IT services. Ned previously led worldwide IT services research for analyst IDC and most recently worked in the new media industry covering the impact of new technologies on publishing and information.  His official name is “Edward” and is known as the “Frat Boy” by his former UK IDC colleagues.   He is also a great writer, thinker and all round guy.

Tom Ivory is promoted to Chief Operating Officer of HfS Research, where he will oversee the company’s commercial operations, events and marketing functions, in addition to contributing to the overall research strategy. Tom has overseen 300% growth in HfS revenue performance in his two-and-a-half year tenure. He previously worked in senior commercial roles at OpenText (Metastorm) software and the Corporate Executive Board.  Tom has thrown himself hook, line and sinker into HfS and been a real part of our growth story.  Just don’t be fooled by the angelic features…

Jamie Snowdon is promoted to Executive Vice President, Research Operations, where he will manage the core HfS research analyst team, oversee the HfS Blueprint supplier evaluation methodology, price benchmarking service, market sizing and forecasting, and research processes. Jamie has successfully overseen the firm’s establishment of its Market Index forecasting during his 18-month tenure, in addition to developing the firm’s PriceIndicator benchmarking service that focuses on IT services and BPO pricing. He previously worked in research leadership roles at NelsonHall, IDC and Input.  Jamie is knows in business as the “Ginger Ninja”… the quiet research assassin who can produce research from practically anything.  He has also promised he will finally get a mugshot done which involves a collar and tie… however I’ll believe it when I see it.

Being able to attract and develop this level of talent is critical to supporting our growth plans. The research industry has been both disrupted and transformed by the whirlwind availability of information and data in recent years, and maintaining a distinct voice above the noise has never been so critical.  Research must be more about talent with a unique vision than dull reports and mass-produced trends, if the analyst industry is to thrive and prosper in today’s environment.

Finally, we wouldn’t be anywhere near close to where we are today without the support from YOU. So thanks

"It's not all about social media, it's about everything we do being very integrated". Jason Corsello is VP, Strategy at Cornerstone OnDemand

About a decade ago, when I was chugging along in the old-school analyst business, I hired a kid from the West Coast to learn the ropes.

I think he was just looking for any old job to get him to the East Coast, but, hell, he seemed smart and was willing to work for a lousy wage.  After a glamorous relocation (I recall we put him up at the Holiday Inn at Logan Airport for 2 weeks), I threw him some god-awful analyst report on HR technology platforms and said, “can you write something better than this crap”.  He’s never looked back.

Jason Corsello didn’t just turn out to be a great analyst and one of the original HR bloggers, but he’s now honing his knowledge to be a real strategist in modern marketing plying his trade for leading strategy and marketing for Cornerstone OnDemand, one of the hottest Cloud-based HR tech firms on the Nasdaq today, specializing in talent management.

I asked Adam Luciano, HfS analyst covering customer experience management, to connect with Jason just to discover how he approaches marketing strategy in today’s environment, and learn a little about Jason’s too…

Adam Luciano (HfS Research): You’ve had a very colorful career to date – can you share the highlights?  How did you end up doing marketing at Cornerstone?

Jason Corsello (Cornerstone OnDemand): Phil and I worked together as analysts at Yankee Group (back in the day) and I spent a lot of time researching technology and – more specifically – the HR technology market. I left Yankee and joined a top consulting firm [now part of Appirio] servicing the Fortune 1000 companies, like Starbucks, Nike and Dell with helping create their whole HR and talent management strategy. Essentially we looked at the best ways to recruit, manage and train employees by leveraging technology.

Then, two years ago, I decided to join Cornerstone OnDemand. At the time, Cornerstone had just gone public, and was one of the top three vendors in talent management. In the last year, two of the top competitors have been acquired by Oracle and SAP, now making us the leader on the best-of-breed side in talent management. I joined Cornerstone in the role of  VP of strategy and corporate development – meaning figuring out the three-year plan for the business and the buy-build-partner perspective. In year one, we did an acquisition, launched a number of new products and initiatives and formed some very unique partnerships. In the last year I’ve now taken on responsibility for marketing for the sole reason to better articulate our strategy and then communicating that to the marketplace of customers and key influencers. I have been leading our global marketing efforts for about six months now and am really trying to change and embrace all of the new models of marketing today.

Adam: Why the human capital management industry? What’s the appeal?

Jason: I probably never would’ve thought I would be in some sort of HR-related field, but I think most people would probably agree that it’s [HR] not very efficiently run at most companies. From the way HR recruits, to the way they manage performance, to the way they train people is still very inefficient. A number of companies typically spend anywhere from 60-70% of their overall capital expenditure on salaries, so to me there is a lot of inefficiency today that technology can have a huge impact on. Technology is drastically changing the HR industry, much the way it did in the past with the CRM industry.

Ten years ago, Cornerstone was focused on delivering online learning and training via virtual and online classrooms.  Today, Cornerstone helps organizations do everything from recruiting and sourcing the best talent, to training and developing employees and partners, to managing the performance of individuals and teams.

What we are now seeing is that the market is shifting once again. There’s so much embedded data in companies that they are not leveraging to get smarter – why are high performers, high performers, how do you know you’re finding your best candidates, and what types of training programs are affecting sales? I think the evolution happening right now is moving from process based to more intelligence based HR decision making.

Adam: So what does the future of the HR function look like, in your view?

Jason: There are a couple of areas… I think collaboration is definitely having an impact on HR right now and so are social technologies. The ability to stay current, and break down the barriers to figure out where the knowledge is, who has the skills and who has the expertise, is changing the way organizational structures are made. It’s really flattening out organizations, and I think this evolution is still in its early adopter phase. At this point, online collaboration and social-media based collaboration are changing the game.

When you look at all of the data that companies have about their employees, they haven’t even touched 1/10th of it. Linkedin knows more about its members than their own companies do. Companies know their employees on an individual level. For example, Jane got a 3.8 on her performance review but companies do not necessarily know at the aggregate level, what makes Jane a good performer, or what makes certain people high performers.

I think Big Data will have an impact too, as there is now so much data to sift through.

Adam: This brings to mind a project that I worked on last year, developing a just in time curriculum model for education institutions. Do you see things becoming more “just-in-time?”

Jason: Yes. Embedded contextual information is becoming more important. We just launched Cornerstone for Salesforce, delivering sales training and enablement from within the Salesforce platform to enable faster time to sales efficiency. For example, if a user changes a status or record type, it triggers a learning event [also known as an object] and the user has an option of educating himself or herself from an online tutorial about a competitor or the latest and greatest new product.

Adam: Now that you’re in a marketing role, is the job as glamorous as it looks from the outside?

Jason: I have dabbled in some marketing roles in the past, but now I am overseeing all aspects of marketing. Marketing is very different than it was even eighteen months ago. By leveraging technology, it’s fascinating how marketing has changed. We are leveraging a lot of new technology and we are now fully embracing marketing automation. We’ve been using marketing automation tools in the past, but there’s just so much more you can be doing with them today.

Most people use marketing automation tools to just do email campaigns or email communications. Now I see over the last two years things like nurturing and scoring have become very important to not only consumer organizations, but enterprise B2B organizations as well. So, essentially you can track how educated a certain prospect is before you even put a salesperson in contact with them to make a sale. Now, I spend a lot of time making sure that the client is smart or educated about what we do, know our brand, that they want to associate themselves with us, and that we are doing all the heavy lifting by the time it is in the salesperson’s hand. Sales should not be focused on educating or getting potential customers brand aware, they are focused on differentiating and really delivering the highest value proposition at the highest price point they can attain. So I think marketing has definitely shifted, in three key areas:

1)   Demand generation/automation. There is so much capability in this area now, from social media to tracking tools, to following prospects and understanding their behaviors, to making sure you are front and center to where prospects are going on the internet. It is really an interesting area to be concentrating on right now.

2)   Brand awareness and brand building are becoming more important every day. A lot of cloud companies that are five to ten years old are deploying more of their marketing expenditures on brand awareness than anywhere else. If you look at companies like Box or Workday for example, I heard Box is spending upwards of 70-80% of their marketing budget on brand awareness. By getting the brand out and matching their leadership position in technology and innovation, the funneling effect of that becomes very easy. Focusing on brand building is so important, because a brand has so many touch points to an organization.

3)   Social media is definitely impacting a lot of things about the way people market today, both inbound and outbound. Meaning that you can leverage social media to increase targeting, so if you know that a potential prospect comes to a product page and “Likes” it on Facebook, you can reinforce that message through sponsored ads or different types of branding advertisements that you can do on social media sites. A lot of that is really focused on just getting that brand awareness, but in effect you also control your messaging and positioning.

Adam: What are your core challenges on a daily basis?  What are the opportunities?

Jason: For us in particular, it’s really around the state of our marketplace. Our market today is about a $5 billion market opportunity and the leaders have still single digit market share, which tells us that there’s still plenty of green-field market opportunities … so there is a lot of room to grow. Our focus is getting our brand and message out into the marketplace.

There are still a lot of people that use Microsoft based tools to do talent management, so for us it’s about getting them convinced on why they should be interested in using a tool like Cornerstone. This gets accomplished through traditional ways as well as electronic media. Our goal is to maintain a constant flow of information in the marketplace. We still do press releases, but we increasingly use social media. Social media is a huge channel and is huge emphasis for us. Social media to us is not necessarily about winning clients overnight, but building brand awareness and you can do that very cost effectively. For example, we’ve got 26,000 likes on Facebook, and it does not cost us anything to be able to promote things that we want there. We also create sponsored ads/posts as a relatively cost-efficient way to get our brand and message out there. Those are some things that we are doing on a daily basis to build out our market and make sure that people know the value associated with our brand.

The heavy lifting today is around how to differentiate. I mean, you see this across all technology markets – it’s hard to differentiate today. All technology vendors have really focused on is talking about things like cloud, social, mobile, and analytics. You would not think that it is so hard for us to differentiate that message, but what you need to do is elevate that message so we look different from everyone saying the same thing. So how we elevate it is by focusing on what the impact of those things are, for example: why should we care about cloud, why does mobility matter, why does analytics matter? A lot of our work is focused on elevating that message.

Companies like Salesforce are great examples. We figure out how knowledgeable a company is about our products/services, and track the company via a scoring system. For example, our sales people approach our prospects very differently based on their level of education rendered in our scoring tools.  We do this through marketing tools like Marketo.

Adam: How would you say the marketing role is changing in today’s environment?  What’s different?  Is it really all about Twitter and LinkedIn these days?

Jason: It’s not all about social media, it’s about everything we do being very integrated. You can’t just use social media to say that we use social media. Having a social media presence is not enough; it has to be integrated into everything else that you do. I think that the difference for me from 18 months ago is that marketing departments worked fairly siloed, and this is actually very similar to a lot of other functions. Look at HR, HR is fairly siloed – you’ve got recruiting, you’ve got learning, you’ve got training, and you’ve got benefits. What we are starting to see in HR today is heads of talent starting to oversee all of that, and I would say the whole role of the CMO is starting to shift in that direction as well. It’s not just around sales operations and its not just around lead generation, it’s about a more integrated marketing approach. From making sure that you’re getting the right return on investment to making sure your cost per lead is shrinking.

You need to constantly integrate everything that you do. An example for us is that we do events all the time. To build an effective event, there should be a lot of upfront work – that you know who’s in the event, you can communicate with them in advance, you can prearrange meetings, and you can educate them before the event. After they attend the event, you can also find out if they received a demo, did a salesperson engage with them or not, did they see the product, etc. It’s a very simplistic example, but integrated marketing is where things are shifting. It is about leveraging tools, and we leverage our core tools (Salesforce and Marketo) that build the foundation for us to be able to do a lot of our integrated marketing efforts.

Adam: After having been an analyst, what do you see as the future for HfS, from the marketing side of the fence?

Jason: I think the differentiation for HfS is just being able to be more opinionated and being able to have a point of view. A lot of smaller boutiques that we see are so vendor coin-operated that they won’t take a position because they are afraid to offend a vendor and have their contract pulled as a result. For us, I’d love to see HfS as much more opinionated, even if its critical of our own company. I know marketers freak out about that stuff, but I would rather it be out in the public than behind the scenes so you can manage it.

Adam: Finally, if HfS gave you $10 million to spend on anything you like, how would you spend it?

Jason: Cornerstone was built in a very bootstrapped way, so we did not spend a lot of money in the early days.  Our focus was more grassroots and enabling our salesforce to compete effectively.  In today’s world, you will likely always be competing for viewship with companies that have more money and resources. For us, it’s less about the dollars and more about having more precision in what we do.

I also think about getting people to know us by building brand awareness in a non-traditional way. One example is putting up billboards. There’s an interesting model around billboards building brands in local markets. We did a billboard campaign and found it to be very effective to our home market of Los Angeles, so I think there’s a lot you can do today to gain brand awareness that doesn’t always have to be online and still carries a punch.

Jason Corsello is Vice President of Corporate Development and Strategy for Cornerstone OnDemand. In this role, Corsello is responsible for identifying key market opportunities, driving corporate initiatives and guiding M&A, as well as supporting product strategy and service innovation.  You can read his full bio here and contact him directly here. 

Click to Enlarge

The biggest surprises, however, are the absences of ISG (formerly TPI), the largest transaction advisor of outsourcing contracts, and PwC, one of the leading management consulting firms actively operating in the sourcing industry.  I asked both firms how they had managed to miss the “Top 20″ and they simply responded that they had declined to participate.

In addition, I am still trying to figure out how a firm can call itself “Elix-IRR” (and who, exactly, is Elix-IRR?).  Am also curious how Avasant can finish third – they seem like nice guys, but are they really ahead of the likes of Alsbridge and E&Y?

And why does the rest of the list seem to be made up largely of law firms?  Do these guys actually advise on outsourcing, or just do the legal stuff?

Oh questions, questions, questions…

Check out the replay of our recent HfS webinar here:  view the recorded Webinar

Want access to just the slides? Here you go: blue prism webinar slides.

Afraid of no processes: Genpact's solution head Shantanu Ghosh

Anyone close to business services over the last decade would have crossed paths with one little guy with a huge brain:  Genpact’s Shantanu Ghosh.  While everyone is familiar with Genpact’s current CEO NV “Tiger” Tyagarajan, and retired former CEO, Pramod Bhasin, Shantanu has frequently been the guy cobbling together the internal teams and the solutions to make it all happen.

I have had many conversations with Shantanu over the years and each time I have come away inspired by someone who is so intimately involved with so many clients and issues in the process delivery industry – he really lives and breathes this stuff.

So when we had the chance to hear his inner-most thoughts on the future drection of the services business, we couldn’t resist sharing them with you…

Phil Fersht (HfS): Shantanu, you’ve been one of the brains behind Genpact’s rise to the pinnacle of the BPO industry in the last few years. Please tell us a little about your background and how you got into this business. Did you always want to be a process guy?

Shantanu Ghosh (Genpact): Thank you very much for saying that Genpact has reached some stage in the BPO business. My background is that of a functional finance expert. I spent my early years in accounting at Pricewaterhouse, then a decade with Unilever in various functional finance roles. Then I spent five years with GE, first at the business level and then at the corporate country level as the CFO. I had reached a stage in my career where I had done the whole functional side of the game, and I wanted really to drive a business. Genpact at that time was just contemplating becoming an independent commercial BPO organization, and moving to the company has provided a huge opportunity for me to come and grow the finance and accounting service line as a general manager. My belief was that in early 2005 the BPO industry was at the cusp of a breakthrough and I wanted to be part of the action. Also Genpact provided an unique opportunity for paid entrepreneur ism.

Phil: You talk a lot about performance enhancement at the enterprise process level, and it sounds very impressive. But what do you really mean, and is it something realistic to which many of today’s businesses can aspire?

Shantanu:  Phil, our fundamental belief is that that all enterprises are basically a conglomeration of different value creation processes. Source to pay, record to report and order to cash, the supply chain processes, customer acquisition, the claims process in insurance, etc.

I think the way businesses compete are on the strength of their products and the strength of their operating performance. And operating performance is a direct function of how well those end-to-end processes run. There is a lot of empirical proof on that area. I do think performance enhancement at the enterprise process level is something realistic to which businesses can aspire to. If you look at moves toward global business services for back-room processes, if you look at what people have done with manufacturing processes…clearly there is an increasing awareness, understanding and intent to drive process performance to a level where it becomes a competitive differentiator. 

Phil: The operational challenge behind finding these new thresholds of performance, about shifting the corporate mindset from one of cost to one of value, is something a lot companies claim is their biggest challenge today. How do you think clients can learn from past experiences and start to offer best practices to others?

Shantanu: The performance of different enterprises in this area varies significantly. It’s obviously far easier to focus on cost, and much tougher to focus on the other dimension of performance which is value or effectiveness.

In terms of best practices, a value-driven model needs three primary things. First, the tone must be set at the top. Value is often driven between different functional silos across the value chain, and it’s very hard to achieve that with a bottom-up traditonal budgeting approach. Second, you need to create an empowered organization that can look at driving value across end-to-end enterprise processes … As evident by the increasing trend of Global Business service groups. Many organisations have tried to do this in their existing federated, siloed organizational model, and that obviously produces muted or mixed results. Third, value creation is not one shot process, it is a long-term, multi-year journey that includes being able to understand where one’s performance is, being able to objectively compare it and benchmark it against others, being able to create a roadmap consistent with organisational constraints of money and leadership bandwidth and change appetite, and then having the tenacity to walk on that roadmap.

Phil: Can you give us some examples of failures?

Shantanu: Many of the failures are when there has been a one-dimensional view of how can I get the most efficient, both in terms of cost as well as maybe cycle time and all, without actually being clear on the desired business value or business impact.

A classic simple example on this is in the collections or order to cash area. If you only optimize on the dimension of cost, you will try to  maximum the number of accounts one particular agent can call in a given time frame and the minimise the time needed on each call.  Whereas, if you optimize on the option of value, then suddenly you will think about what kind of analytics and technology you can use to try and figure out who to call, when to call, how you take the analytics upstream to ensure you are not on-boarding customers with credit limits issues, or fixing the billing process to eliminate the need for a lot of calls etc. It completely changes the game of how much outstanding debt you have, or how much you have to write off in bad debts and those benefits are order of magnitude higher than just cost. The second most common reason for failure is to underestimate the change management issues… Organisational habits are tough to break and all standardisation and optimisation initially looks like an impediment to flexibility and reduced control for frontline and operating people in the businesses.

Phil: Our research shows that change management is topping enterprises’ agenda in 2013. Why do you think this is? Why do you think so many want to change, but they struggling to put together programs to help themselves? What works or doesn’t work for clients, when we get into these change issues?

Shantanu: I’ll tackle these very interesting questions at two levels, First, why change management tops companies’ agendas today is that they are more looking to drive value rather than only plain vanilla cost reduction. And driving value means cutting through traditional company hierarchies, cutting though traditional organizational models of functional silos. That’s a big change. That’s not the way people are used to working. So the first fundamental barrier to making change happen is the fact that it goes against how people have worked for many years, many decades. The second piece is that driving change requires a burning platform. Many failures we’ve seen are due to the fact that the organization and the leadership team have not been able to either acknowledge or articulate a burning platform for the troops to rally around. Change is always painful. Change means you have to learn new things, you have to do things differently, you have to let go of people, you have to change your ways of working…none of it is easy. And for people to go through that process, you need to believe in something bigger, something better; you need to have a vision that fires you up.

Phil: So… what’s next for Genpact? You’ve made the Winners Circle now – you are one of the big, glitzy, top-tier providers in this space. Are you ready to declare victory and rest on your laurels, or are we going to witness a whole new impetus and focus on where your firm wants to go next?

Shantanu: Phil, we believe that we are just at the start of our journey. We are a small company, just about $2 billion in revenue. We’ve been in the commercial space for less than a decade. We’re in a market and in an industry that is hugely under-penetrated. We have a fundamental belief that this industry will double, triple, quadruple in size over the next few years. We feel very privileged to have had some role in defining the way the industry works, and that we can continue to drive that definition.

Demonstrating flawless execution

There are two aspects we feel very deeply about. One is helping our clients succeed by competing through smarter processes. So, everything we do is focused on how our customers create competitive advantage through the power of their operating model in the marketplace. The second thing we believe is that the market and the industry have really started shifting fundamentally from a pure cost equation to a cost plus value equation. It would be naive to think that the shift has happened significantly. But there is enough evidence for us to be very encouraged that the shift is happening and it’s really one way…it’s not going to change. And we believe we are uniquely positioned to both drive and benefit from that particular shift.

Phil:  So the final question… you are awarded $10 million. What will you be doing in six months time?

Shantanu:  Well, I’ve had a fabulous eight years in Genpact, but it’s been very busy, so if you give me $10 million, I’ll possibly be on a very expensive long holiday. But seriously…if I had $10 million to invest, there are so many areas of competency that we could invest in to benefit our business and customers. Whether it’s in the Analytics  space, or in the regulatory compliance space, given the changes that are happening or twenty other such interesting areas;  if I had $10m to experiment with,  I would put that  into our new products innovation funding in a couple of those areas.

Phil:  Hmmmm…. good answer  Thanks for your time today with our readers, Shantanu.  It’s been quite a journey for both you and Genpact and we’ll love to hear more from you further down the road.

Shantanu Ghost (pictured) is Senior Vice President and Global Head, Enterprise Services, Solutions, Transitions and Lean Six Sigma.  You can view his full bio here.

SVP and Research Fellow, Customer Satisfaction

As we revealed last week, most of the big analyst personalities have seemingly fled the analyst industry…  many for the riches on offer from their vendor clients, clearly seeing more ROI from employing them, as opposed to purchasing their firm’s services. However, this hasn’t prevented the remaining legacy purveyors of analyst services from making a living.

So what’s left in these firms after the rock stars have left the building?  Let’s examine the cast of characters that many of us frequently have the good fortune to meet in briefings, conferences, airport lounges, hotel bars, psych wards etc.

Mick Jagger Analysts:

Not all the rock stars fled… some stayed well past their sell-by-dates, clearly not mentally prepared for a foray into the real world.  They still drift around analyst firms, making occasional appearances in executive briefing sessions (or sometimes just walking out of them halfway through).  Their research productivity is usually about one thought-piece a year, which is usually miles from reality, but everyone tells them their piece was amazingly thought-provoking, having read the first paragraph.

They still show up at the odd vendor analyst conference, where they tend to knock back too much scotch on the  first night and spend the next morning sleeping it off in their hotel room before making a token appearance at the one-on-one briefing in the afternoon.

The High Performer Analyst:

A “High Performer” these days is pretty much an analyst who does what he/she is paid to do and actually has some reasonable research to share with the world.  They spend a good deal of time conversing with both buyers and vendors and actually cobbling together some genuine research for all to read.  Sadly, their wares are normally wedged miles behind some firewall somewhere where noone can find it, even when they’ve paid for it.  What’s more, the months it takes to get their research past their internal red tape and editorial teams drives them crazy, and their firms are unlikely going to let them blog (and they get no credits towards their bonus for blogging, in any case, so why do it?).  Motivation quickly slips away and their CVs normally slip onto the market after a couple of years.

The Egomaniac Analyst:

Analysts who got their egos stroked and loved it so much, they realized they needed them stroked… every minute of every day. Writing one good piece a quarter wasn’t enough to slake their thirst for praise, so they attempt to hop on every hot area they can and put our some fluffy piece of prose to get attention.  Their focus on quality quickly wanes, as having their name in lights, in as many places as possible, trumps all else.  After trampling on all their colleagues’ areas and sucking up all their manager’s time in the process, they eventually get booted out and apply for any analyst job they can, as they do not have the real confidence to go it alone.  Usually, some analyst firm will pick them up and go through the whole egomaniacal process with them… all over again.

The Spin Doctor Analyst:

Analysts who feel doing actual research is either beneath them, they simply feel no compulsion to do any, or they may not actually know what “doing research” is.  Instead, they get their hands on a few reports from others and cobble together their own version of the trends.  Good spin doctor analysts can do this very effectively, and very convincingly, leaving the world to believe they grafted long and hard to create this vision, when all they did was spin the ideas and views of others.  They frequently offer to “collaborate” with other analysts on reports to create the impression they do some actual research, but in reality just want to slap their name on the report for showing up at a couple of meetings.

Sadly, the average spin doctor doesn’t get away with it for too long (there have been several embarrassing examples of analysts plagiarizing over the years), but many of the good ones build a nice career doing it.  Usually they get promoted into practice lead areas, so others can actually do the real work, while the spin doctor can spin their stuff all day long…

The “Annoying and complex Questions” Analyst:

Yes, every conference is never complete without the analyst who just has to chime in with some annoying questions.  Frequently, some will start asking a question, but forget the original intent of why they are asking the question, proceeding to drone on for a couple of minutes spouting their views on something that sounds complex and undecipherable to the rest of the audience.  Others will launch into some direct questions to probe at the weaknesses of the presenter’s content, which they really should do in private, instead of trying to embarrass the presenter.

These analysts tend to attend every single conference and vendor event imaginable, with the hope that, one day, they will become enlightened and not have to ask a really annoyong question in front of the whole room.

The “Plodder” Analyst:

Sadly, this analyst comprises the good proportion of most analyst houses.  Simply put, the plodder isn’t very good, doesn’t rock the boat and drifts along checking the boxes and meeting their firm’s metrics (sound familiar?). He or she smiles politely when spoken to, produce average-to-mediocre research and isn’t going anywhere anytime soon – they simply aren’t very good.  They get left largely alone to plod along and keep the machine cranking along.

The “Why on earth are they still Employed” Analyst:

Yes, there’s always a few lurking around.  Analysts who are so bad everyone keeps out of their way.  They tend to cover boring areas noone cares about and get wheeled out for the occasional client meeting when their area need a “face” tied to it.  Their goal in life is to be as invisible as possible and eke out a cosy living until the eventual day they get that call from HR…

The “Drive-by Consultant” Analyst:

Analysts who come from the buy-side and proceed to spend every day talking about “what is was like when they were a CIO” etc. They do not see the need to do any actual research, but will put out a few flashy pieces on the good ol’ days and the incredible best practices they initiated.  Typically, the “Drive-by Consultant” Analyst can pull off this game for about three years, whereupon everyone has become tired of the same anecdotes being rolled out.  These analysts tend to sneak back to the buy-side at this point, chalking up their three wonderful years of being an “analyst” before re-entering the real world again.

The “Vendor Marketing” Analyst”

Analysts who come from the vendor side, with intimate knowledge how vendor marketers work.  They get obsessed with showing up at vendor briefings and writing up little blogs and briefs on what they thought of the occasion.  They do all the things to press the buttons of the vendors… little tweets of praise from their events and announcements, blogs (if allowed) of the vendor’s next groundbreaking industry maneuver, and profiles of their favorites.  These analysts typically go through a one-to-two year honeymoon of vendor-schmoozing, but quickly get bored of the same dog-and-pony show and start interviewing for their next salary-doubling move… back to the dark side.

The “Screw this, I can do this better Myself” Analyst

Analysts who are typically some hybrid of many of the above, who decide they can walk off into the sunset and set up their own little shop.  Some just declare they are a one analyst show, while others put up a facade that they actually have an analyst team.  A few do actually have analyst teams, but still can’t resist writing the odd cheeky blog about the analyst industry

Hear Phil Fersht talking to HR Technology’s godfather, Bill Kutik

Click to listen to the recorded interview on iTunes

You may recall our announcement to the world, over three years ago, revealing the launch of outsourcing analyst firm HfS Research… and we first mentioned this on Bill Kutik’s irreverent radio show.

Tune in to listen to our latest conversation and you’ll hear more about:

• The current state of the research business and why recent entrants, such as HfS, are playing with the traditional analysts;
• What’s happing in HR Outsourcing, and why it’s becoming more of a niche-process industry today;
• Why HR is fast-becoming one of the most dependent business functi0ns of technology to be effective;
• Why firms are more likely to do outsourcing in a good economy than a bad one;
• HfS’ new Blueprint methodology for assessing vendor performance – and why it’s such a game-changer.

Click here to listen to Phil and Bill

Produced by Knowledge Infusion, an Appirio company, and hosted by independent industry analyst Bill Kutik, selected last year as one of the world’s “Most Powerful HR Technology Experts,” the bi-weekly interview show provides leading HR business content and insight into up-to-the-minute trends.

Naturally, SAP’s competitors are all freaking out because they’ve invested so much time and attention in Thomas, while Gartner can’t be happy as its clients shouldn’t care whether they’re buying Bill or Ben… they should be buying Gartner.

What’s worrying, is the recent succession of high-profile analyst stars making vendor moves, for example, Jim Holincheck’s switch from Gartner to Workday, Stephanie Moore from Forrester to Ameritas Technologies, Mickey North Rizza from Gartner to BravoSolution, and even one of HfS’ early stalwarts, Euan Davis, to Cognizant, as the latest examples.

Having worked in the big ticket analyst world myself with IDC and AMR (leading up to the Gartner acquisition), I can vividly recall the changing attitude of analyst firms towards their high profile analysts, who commanded top-dollar for their clients to have them on the end of the phone.  When I joined IDC as a mere child, the rock stars analysts were what made the firm – and the fledgling analysts looked to emulate them as they gained experience. Plus, the analyst firms tolerated them because they brought in the clients and created a lot of attention from media. The stars were their real differentiators.

It wasn’t until the last few years, with the advent of analyst blogs and the easy capability for smart analysts to nurture their digital infamy, that the big-ticket analyst firms turned against the rock-star model. They wanted their clients to pay to spend time with whatever analysts they chose to put in front of them – and if there was an analyst departure, they could quickly (and quietly) slot some other individual into that role to fill their place.  No-one should care, it’s all about the analyst firm brand, not the individual analyst, isn’t it?

Big Data... Cloud... Mobility.... will transform the enterprise

It’s my personal concern that the exodus of great individual analysts from the great analyst firms is symbolic of a slow death of the romance and intrigue of the industry analyst industry, as we once knew it.  The tech analyst industry grew up on great personalites and thought leaders, who thrived on innovation and the exciting changes technology was bringing to the world.  Today, the succession of turgid reports, many of which read like they are written by automated robo-analyst applications with the words Big Data, Cloud, Analytics, Mobility  and Transformation being spewed out at periodic moments, is killing research as we know it.

Here’s why the demise of the rock star analyst is depressing for the analyst industry:

1) Clients value relationships with individual analysts more than written research. People don’t have time to read more than a few paragraphs of research these days, and prefer to have the key insights presented as a few bullet points to accompany a live discussion with the analyst.  The watchword of the research sales pros these days is always “research sells, but relationships renew”.

2) People want to trust with whom they share their confidential information.  The best analysts are those who regularly talk to the customers of the vendors and can deliver real insights and opinions of their products and services.  The more a good analyst becomes intimate with the vendors, the more valuable the advice and validation that analyst can deliver to the vendor.  Moreover, the more a good analyst knows the vendors, the better they can inform the customers of software and services offerings.  That means clients need to have individual analysts they want to get to know and trust.

3) Analyst firms are caught in a Catch-22 between their corporate brands and their individual analyst brands. The paradox is that the handful of analysts who reach the status of being “good” quickly become rockstars and get whisked away to the rich vendors.  For example, it’s far more valuable for the likes of SAP to “own” Thomas Otter than to share him with their competitors. So the crux of the matter is, simply, that if the likes of Gartner et al. can’t (or simply do not want to) create an environment where their rockstar analysts can prosper and be happy for the bulk of their careers, then they may as well let them all leave and milk the robo-analyst model that is more scalable and easier to control.  However, if that means they will ultimately lose business because their clients aren’t satisfied with robo-analyst, they have a problem…

4) Rogue analysts of varying quality are setting up their own “boutiques”.  There are a host of individuals who have hung out their own shingles in recent years, and some are forging a living, based on the relationships they developed when they were in the big analyst shops.  While this creates some excitement, especially when a genuinely decent analyst starts putting out some good research and insight, there is also a host of average-to-mediocre “analysts” exploiting social media and vendor ignorance to publish shabby (and often incorrect) research that confuses the market place.  We live in an unregulated world where anyone can suddenly don an analyst cap and pose as some form of “expert”…

The Bottom-line: The information and research industry is experiencing a fundamental shift… surely the analyst firms will have to change their ways soon

However which way we look at it, the sizzle and anticipation when a new analyst report comes out is becoming a shadow of what it once was, and the levels of cynicism and negativity towards analysts are reaching an all time high.  What’s more, the overall desire from companies to read and digest many analyst research reports has dropped significantly in today’s information-crazy world.

So much data and insight is proliferating the Internet, the LinkedIn groups and other digital communities, that the value of many once-acclaimed analyst reports is simply not what it once was. Sadly, as long as the big-ticket analyst firms are milking their clients and making money, they are unlikely to change. However, research is a discretionary expenditure, and ultimately if the value is diminishing, so will the investment. If clients want to invest in relationships, they will ultimately take their money to those firms who can provide them…. or directly to those individual rockstars themselves, if they are still around.

Click to Enlarge

So, in our true style of insulting everyone from every continent with sweeping generalizations, let’s take a closer look:

North American Enterprises:

Simply put, these firms are a lot more experienced with outsourcing IT and business processes, and a good proportion of them are today showing a good deal of maturity as a result.  Much of this is because outsourcing has traditionally been a game for the large corporates to play… and most of the large corporates are based Stateside.  Moreover, the biggest “lever” of attractiveness over the last 10+ years has been wage arbitrage to India, hence it is those English-speaking enterprises with the most to save, who are the prime candidates to benefit financially in the short-medium term.  This also explains why the UK, then Australia are the second and third most mature countries, respectively, for ITO/BPO.

What’s most interesting here, is the fact that cost-reduction is no longer the main dominant factor behind outsourcing for American firms – effectiveness measures, such as process standardization and re-engineering, are nearly as important, but, most encouragingly, high-value capabilities, such as improving analytics, accessing new technology and talent – and proven provider offerings, are mentioned as mission critical business drivers by a quarter of North American firms.

Simply put, many organizational leaders are waking up to the realization they are running out of wiggle-room in terms of finding massive cost savings simply from labor arbitrage, and the only long-term measures to find new thresholds of productivity is through smarter process redesign (and standardization in areas where there is limited competitive advantage to be had), a more analytical workforce that can help the firm make faster and smarter decisions, and a more flexible operations infrastructure that can scale to the needs of the business.  What’s more, our research shows many of the larger enterprises viewing outsourcing a part of a broader framework for achieving business objectives, alongside internal business functions, shared services and offshore captives.  It’s being viewed less and less as a siloed strategy for cost reduction, and more as one lever of many for achieving better productivity, tighter operational control and access to external resources and acumen.

Moreover, an encouraging economic period traditionally drives North American firms to evaluate more radical opportunities, and outsourcing frequently rises to the surface as a genuine change-agent during times of economic stability.

European Enterprises:

Cost-reduction and standard delivery requirements still dominate most European firms, with the exception of a handful of enterprises in the UK.  Simply put, many of the large-scale European enterprises are far less experienced when it comes to outsourcing and offshoring as their North American counterparts, and many offer a less mature, “just get it done” attitude.  The majority do not really want to change, and do not feel the need to transform processes or improve their analytical capabilities - or even if they did, they certainly do not view an outsourcing relationship as an opportunity to do a lot more than drive down some costs, standardize some processes and get some better flex into their operating model.

Interestingly, there does seem to be a notable increase of Euro firms viewing outsourcing as an opportunity to access some quality talent (21% state this as a mission critical driver), which is surely a result of the shortfall of affordable quality IT talent available on the European continent and the proven success of the ITO model for many global organizations today.

Couple all of this with a horribly nervous European economic outlook and you quickly get the picture why outsourcing just isn’t everyone’s cup of tea these days.  Why rock the boat even more, when everyone’s already seasick?

Asia/Pac Enterprises:

It’s difficult not to sweepingly-generalize when you have the likes of Japan lumped in with Malaysia, India, China and New Zealand, but the underlying trend here, is that many firms view outsourcing as a real chance to improve their processes, and globalize their operations.  They are less enticed by cost-reduction – and this is often because low cost labor is already available locally, in addition to the fact many AP firms are scattered across the region without massive repositories of centralized staff do to a cost-slashing “lift and shift”.

It’s clear many AP firms see outsourcing as a quick route to get from “A to C” with some areas of the business that could really benefit from a more standard solution, such as payroll, procure-to-pay or ERP maintenance.  However, what’s also clear is these organizations are miles away from recognizing real strategic value from outsourcing, with only one-in-every-seven organizations viewing outsourcing as a key driver for improving access to new talent and analytical capabilities.

So these immature adopters are viewing the tactical benefits first and foremost.  Perhaps that will change in a few short years as uptake of global sourcing models picks up… but it’s still very early days for this region.

The Bottom-line:  Tactical measures continue to dominate, but ambitious North American buyers are starting to lead the way with a more progressive approach to outsourcing

We can bemoan the old “outsourcing is all about cost and meeting green lights” adage, but there are some genuine positive signs that our weary operational warriors are beginning to take a more progressive approach to outsourcing these days.

The fact a quarter of North American buyers now view analytics, talent, improved technology and provider maturity as mission critical shows that a portion of this industry is finally beginning to move the needle to achieving more than the basics.  Smart governance leads realize they need to build careers from managing outsourcing engagements, and if they simply sit back and check boxes on spreadsheets, their own employability with soon come into question.

What’s more, shared services has struggled similarly to achieve higher level value – and over a longer period than outsourcing – and there is a genuine coming-together of operational governance models, with the likes of Global Business Services being tested as the future operating model.  Are we at an inflection point?  Yes, I believe so… albeit  very “gradual” one!

Disclaimer:  before you non-Americans go piling in, the author of this article, Phil Fersht, is actually a British subject currently living Stateside

Madelein Smit is ready for dreamSource... are YOU? (Click to learn more)

If you have recovered from the mental impairment caused by the really awful governance dancing, it’s time to get back to the serious discussion about the narrowing onshore/offshore cost gap, and the diversity issues in sourcing…. so let’s visit the final part of our recent interview with Madelein Smit, outsourcing head at the global logistics giant, CEVA Logistics…

Phil Fersht (HfS): Madelein, in our previous discussion, you talked about a watershed period for sourcing arriving in 2013, with the narrowing cost differential between onshore and offshore talent. Do you think that is going to have a noticeable impact on how a company like yours is sourcing its BPO?

Madelein Smit (CEVA Logistics): We are in a very cost-driven environment, so we will keep sourcing in a way that suits our need. One thing that has happened over the last three years in the accounting space, five years now in the IT space, is that we have built up valuable partnerships with our partners. And I do think we are at the point where we have moved beyond labor arbitration in both of our agreements, and are driving much higher value-add. I don’t think wage arbitration will impact this year in existing engagements in which there is active engagement by both provider-side and buyer-side management. But I do think that for people considering doing in-house shared services or moving to an outsourced solution for what still remains onshore, the business case will become harder and harder to fill, and the value-add will prove harder and harder for an outsourced solution.

Phil: So do you see that the buy-side will evaluate offshoring against just getting cheaper talent in-house? And do you think providers will broaden their customer options to deliver more services from onshore and nearshore locations. How do see the dynamics evolving here?

Madelein: I think both, and this is exactly my point. If the providers don’t come up with those alternative solutions, I think it will be major pickings in the pipelines for new deals. They definitely have to change the way in which they sell, and work with sourcing managers to help them understand what that value-add might be. With F&A, if you put a pure cost layer on the table, I think it’s 50/50.

Phil: You’ve also been quite vocal on the topic of diversity. Would you please talk a bit about some of the conversations you have been having on the role of women in sourcing and some of the issues going on there? 

Madelein: Absolutely…I find it fascinating. Having grown up in Africa myself, in a very male chauvinist-dominated culture, I find it very interesting to see India going through a journey similar to what Europe went through maybe 40 years ago and what Africa went through 10 years ago, or is still in the process of making. There are still basic social inequalities among people. I know this sounds a bit overly dramatic, but I do believe in equal rights for all people, and I think that we have the opportunity to do something good in the world through our work. So, this is one of the areas that I demand of my providers. I demand that they have a diversity program in place, and I regularly discuss with them what they do retain, motivate and stimulate women in places like India. I also discuss with them issues like gender or sexual preference in places like Eastern Europe, where that is perhaps a more relevant topic today.

It is very interesting to see what these large companies are doing. The leadership of NASSCOM, which is made up of all of the big providers in India, so among them they employ close to a million people or more…all of these providers recently signed an agreement that they will ask all of their suppliers what they are doing about diversity in India. Think about the security companies, the facility companies, the catering companies. The trickle-down effect of this is enormous, and has an enormous impact on the transformation of the culture and the rights of people and the development of people.

Phil: Do you think part of the problem is we live in an industry that is obsessed with cost and delivery, and it seems to override all other issues including diversity?

Madelein Smit is VP Outsourcing at CEVA Logistics

Madelein: Yes, but I think it’s like all business. You know, capitalism can be a force for evil or a force for good, as we have seen with the recent demise of some high profile banks, and with the work some of the big players like Unilever are doing in the world for the Green agenda, the Corporate Social Responsibility agenda. I think there is a huge opportunity for good. And I think that we take our old purses to work every day, and if there’s something in our power to do good, I believe we should.

Phil: That was a great answer.  Thank you so much for sharing some of these views and ideas and feelings with us today.  And we are all eagerly anticipating your next performance at dreamSource. Maybe the Harlem Shake?

Madelein: We’ll just have to wait in anticipation :)  See you in New York!

Madelein Smit (pictured) is VP Outsourcing at CEVA Logistics and will be leading the session entitled “The Science of Performance Management” at the forthcoming dreamSource summit in Westchester New York April 30th-May 2nd.  Click here for more details.

Step-up Madelein “Mads” Smit, head of both IT and F&A outsourcing for CEVA Logistics, who – sensing the moment, took it upon herself to play the Gangnam video at full blast.  Now, if you’ve ever witnessed a room full of hungover middle-aged governance professionals attempting to get-down Gangnam style…

Warning – the following clip may cause serious psychological damage:

Needless to say, Mads just had to be asked back for a second round of performance-enhancing antics, this time at the forthcoming dreamSource extravaganza…. so without further ado, let’s find out more about what Mads is all about, besides her undoubted skills singing and dancing…

Phil Fersht (HfS): Good morning Madelein, would you please give our readers some background on yourself, your career and why you are doing what you are doing today?

Madelein Smit (CEVA Logistics):  Hi Phil! I got started in outsourcing as a youngster. I was originally an accountant at PwC, and traded in that job when someone said, “There’s this thing called outsourcing coming up…would you like to be on the project for a little while?” Since then, my career has taken all sorts of turns and changes. I have been on the buy-side, the sell-side and the consulting side, so I have seen this industry from many angles. Right now, I am in a role where I am turning around an IT outsourcing contract; it’s quite large scale and looking at the benefits we can harness from integrating F&A and IT in our process. It’s now 16 years since I started working in the outsourcing industry, and I am still passionate about it.

Phil: You are still passionate about outsourcing after all these years.  Why oh why?

Madelein:  I think that it’s a great leveler.  A lot of people talk about globalization, but not many have the advantage or the privilege to see that up close. I have visited India on average two or three times each year for the last eleven years, and have seen first hand the transformation in its economy and the real difference it has made on the ground to the lives of millions of people there. I think it is really a transformational activity in the way that an NGO or a government can’t begin to change the social standing of people, and similar cases are also being played out in the Philippines and even parts of Africa. It’s contributing to education, it’s contributing to rights for women, it’s contributing to the workforce being valued in a different way, and I think it’s the best thing we can do for world peace because it’s process understanding between cultures and people living in different parts of the world working toward the same goal.

I do look at it in a bit of a romanticized way from a social development perspective.  But I am also passionate about things like process improvement, and I have seen the amount of waste that could be taken out of functions and how waste builds up in functions over time. And it is just so refreshing to see other people coming out, looking at this problem with fresh eyes and transforming it into something that is far more effective. That has to be good for capitalism as well.

Phil:  You said you have been traveling to India for over ten years now. What would you say has fundamentally changed there over the last decade in terms of how they engage and deliver these services?

Madelein Smit is VP Outsourcing at CEVA Logistics

Madelein: Well, they have become the market leaders in terms of developing and delivering BPO. Many years ago, you still had to explain to people what BPO was, what outsourcing was. But it is a complete concept in India. You can get a doctorate degree in outsourcing now, so it has become a professionalized function that people really look up to and aspire to. That has definitely changed. We are also seeing wage arbitration, which was taken for granted from Day One. I think in 2013 we will see a real transformation in that if India does not find other value-add in this process, it will start to lose ground. We’re now reaching a point due to high unemployment that you can hire a graduate onshore in certain pockets of Europe for about the same money as in India.

Phil:  That’s a very interesting point, and we ourselves – at HfS – hire local MBA graduates. We have noticed the narrowing gap in wage costs for mid-level skill sets. When we were in India at NASSCOM last year, there was a lot of debate around the fact that, in BPO, they haven’t quite developed the factory of talent coming out of the universities that they had achieved in IT. And, they needed to get their act together in terms of training youngsters and talent in colleges and linking them to the providers’ training programs. Is that something you are seeing improving, or do you think it is still a major issue for them?

Madelein: I still think it’s a major challenge. I also think there is, to some degree, a general divide in this. Accounting is usually seen in India as more of a female, or slightly softer, occupation, and IT is seen as a largely male occupation. So, there is a good stream of graduates being fed out of the big schools in the IT space, but the same is not true in accounting. So, I definitely buy into that about ITO versus BPO. Also on the diversity front, there is a real struggle to develop and pay women. They have made great strides in the industry, but still the graduate output of the top schools is about 40 percent women and 60 percent men. That remains a gap to be filled, and I think that is more valuable in the BPO space. Unfortunately the recent events in Delhi – the high profile rape case – has also led to a social reaction with a lot of clients putting women out of work when it entails them traveling home at night time, which has all just put a big dent in development and retention in the last two months.

Phil:  Very good insights, thank you. At CEVA, you oversee both IT and F&A sourcing. What do you see as the key differences in terms of talent issues and delivery between the two functions from a sourcing perspective?

Madelein: I think the IT space is definitely much more commoditized. Managed services are much easier to apply in a sizable amount – managing so many servers, keeping them patched, fed and running. But accounting is a far more subjective art. I think that adds to the complexity, which sometimes causes providers to struggle to estimate the amount of work needed, struggle to estimate the skill level needed and so on. So I do think that setting up an engagement is slightly more complex in the accounting space than in the IT space.

Stay tuned for the second part of this interview, where we talk about onshoring of BPO and the diversity issue in the sourcing industry…

Outsourcing Executives: What’s your career narrative?

Deborah Kops is, always was, and always will be, Deborah Kops (click for bio)

I’m obsessed by careers. I spend time trying to make sense of the various and sundry twists and turns that the life’s work of those in our industry seem to take. And I look closely for patterns. Will leaving a secure position in a global firm for a start-up end in happily ever after? Does a stint in a Tier 3 provider indelibly affect a career path?  After all, if Ecclesiastes 1:9 is right, there’s nothing new under the sun, or as the saying goes, history always repeats itself. So colleagues, do any of these career narratives resonate? Or is this article just the fanciful creation of someone who is absolutely at the end of her career rope?

Having recently decided that there are four major career narratives for our shared services executive cousins, I’ve turned my attention to outsourcing (read: sell side) executive career trajectories. In a segment of the global services industry with much more nuance (and opportunity), It seems to me that in every outsourcing executive’s career, there is an event, or a decision, or some other such driver that will profoundly impact his or her career narrative.

So read the 12 narratives I’ve observed in outsourcing executives. And have a good laugh if they don’t cut too close to home:

1. The mid-life crisis career narrative: Around the age of 40, some well-established outsourcing executives become frustrated with a), corporate bureaucracy; b), a stalled salary band; or c), the fact that they have years of experience on the man or woman they report to. And if their peers (especially their batch mates) are making money hand over foot starting their own companies, the itch to throw security to the winds and join a start up is compelling. So the itch takes over, and the leader leaves a good job to join the ranks of the challengers, crossing fingers that he’ll make enough money to pay off the mortgage and put the kiddies through school.

2. The yo-yo career narrative: Yo-yo career narratives characterize those executives who start out in ITO, hone their sales or management skills, are tapped to run a BPO gig because their skills are thought to be transferable, then high tail it back to ITO when a), the realization dawns on said leader that not all outsourcing pursuits are created equal; or b); their management realize that BPO is a foreign language to their hire. So after a period of time, and a very cordial leaving, the leader goes back to an often bigger post in ITO, sadder, wiser and richer for the experience.

3. The find the greater fool career narrative: The entire market knows that Mr or Ms X is a great interview, taking credit for every deal since Eve persuaded Adam to take a bite of the apple. And providers, desperate for leadership in a market with very little talent, bite hard on the marvelous resume. But eventually—about 9 months in– when the honeymoon is over and nary the hope of a deal has materialized, the dial hasn’t moved on operations, or the solutions team develops a severe allergy to a different way of working, said executive starts looking again…and again…and again.

4. The grass is always greener career narrative: A second cousin to the find the greater fool career, executives with greener grass career narratives are our industry’s true seekers. They are always looking for the perfect home: money, flexibility, respect, influence…and move around frequently, often as much as once a year, to find job nirvana. Sometimes they are allowed to come back to home base, a bit sheepish but glad to be back in the bosom of a family; otherwise they keep moving on, often into the sunset and out of the outsourcing industry.

5. The Book of Ruth career narrative: No, I am not trying to get all biblical on you, readers, but if you apply what the Old Testament’s Ruth said to Naomi “”whither thou goest, I will go, ” you’ll see some couples of the professional kind that always seem to move jobs together. These joined-at-the-hip folks show up together in outsourcing companies big and small, with the senior of the two either moving first, then yanking out his faithful follower, or as a package deal. Employers sunder their ties at their own peril: the two of them just can’t function effectively without the other.

6. The fox in the henhouse career narrative: We all know the type: he or she is itching to move from the dark to the light side, and perpetrate every crime against nature on the provider community. The former provider executive is dying to show the client side how a deal should actually done—or governed– and if a little pain is inflicted on either his former employer, or his employer’s biggest competition, so be it. After all, what better position to be in than have the CEO who never knew your name suddenly have you on speed dial when you move to the buy side.

7. The I’ve been captured career narrative: Although this career narrative is rare given the number of commercialized captive operations, there are a few of these blokes in the industry. Executive is a corporate creature, having started a captive for a multi-national. The captive is then sold to an eager provider, and the executive suddenly has to become a commercial operator. After getting over the initial shock of having to be accountable, the former captive leader wholeheartedly drinks the Kool-Aid, and becomes a pillar of his outsourcing practice…or quickly walks out the door into any career that does not involve SLAs.

8. The gentle decline career narrative: There’s a growing trend I kindly refer to as the “gentle decline.” Look around and you’ll see players who started their careers at the powerhouses of our industry—Accenture, IBM, even the late great EDS—then, over time, softly switch to companies with less and less prestige in the outsourcing provider pecking order. Said gentle decliners are absolutely convinced that their skill and acumen will be the silver bullet that elevates their new employers into the top tier. The paradox? The jobs get bigger but the employers get smaller.

9. The “any advisory firm would die to have me” career narrative: The executive is tired of 2 am conference calls to India, or wherever, and being grilled when the numbers run shy of quarterly expectations. Jumping the fence to an advisory practice, particularly if it’s at the partner level with the trappings of business class airfare and a liberal expense account, seems very attractive, despite having to don a tie to visit a client. But if these former deal or operating titans are able to make the shift, they find that selling, operating and consulting are indeed different, and yearn for the days when filling in a timesheet did not take up an hour each day.

10. The time to be an entrepreneur career narrative: The executive is a deal maven extraordinaire. He or she can sell snow to indigenous peoples living above the Arctic Circle, and is always brimming with innovative ideas. Often a lone ranger, the wannabe entrepreneur carefully calculates when his commission payouts hit, and starts looking for backing from friends and family. When the time is right, he jumps ship, spending a good year burning cash either to develop a slightly better mousetrap—a riff on some kind of KPO or accounting offering, or applies what he knows to another area entirely—perhaps selling timeshares in Florida or Cyprus.

11. The phoenix rising from the ashes career narrative: There are a few executives that flame out spectacularly by their own hands, supposedly committing some crime that’s considered to be so egregious (flaunting policy, losing a foundation client, or worse) that it results in an instant exit from a lofty position. But like the careers of many politicians and corporate moguls, memories are short and all is forgiven after an enforced period of wandering in the wilderness complete with penance and daily golf. And eventually the phoenix rises from the ashes, accepting megabucks and a CEO title from some global or private equity player.

12. The end of the line career narrative: Readers, that’s me…and several others I will refrain from naming. Having tried absolutely every outsourcing role with either a modicum of success, or a spectacular failure, we’re completely unemployable and now relegated to the sidelines of punditry. It’s a lonely job, but someone’s got to do it.

Deborah Kops (pictured above) leads many lives, including her own boutique firm, SourcingChange, a Research Fellow for HfS and  The Conference Board.  You can email her here.

Please tell us you didn't fall for it again?

Isn’t it amazing how someone can pull off a prank on 1st April every year and STILL many of you fall for it?

Here were some clues:

• “Ari Gibbs” –  Ari Fleischer and Robert Gibbs were the last two White House spokespeople
• There is no such association as the “Incontinent Association of Outsourcing Practitioners”

And here were some near-truths:

• I do actually like pink champagne (I mean, how can you NOT like it?)
• When I was a broke analyst growing up in London, my room-mate actually did steal toilet rolls from his office…

And while we’re reminiscing about falling for April Fools’ gags, here is 2012′s classic:

Merriam-Webster to remove the term Outsourcing for IT and Business Services

And 2011′s

Painsharing exposed: HfS to reveal the worst performers in the outsourcing industry

And 2010?s:

Horses for Sources to advise Obama administration on offshore outsourcing

Oh, and here’s 2009?s which I really hope you didn’t fall for too:

Horses Exclusive: Obama to ban offshore outsourcing

Now if you fell for all FIVE of these, please ADMIT TO THE WORLD NOW AND FOREVER HOLD YOUR PEACE

Advisory board spokesman, Ari Gibbs, has released the following statement:

“We appreciate Phil’s energy and sense of humour, but you can’t expect to run a profitable analyst business while giving away all the research and throwing lavish executive parties.  We will announce a replacement in due course.”

Phil Fersht to step aside as CEO of HfS Research

Fersht founded HfS Research in March, 2010, based on the success of his blog “Horses for Sources” and proceeded to assemble a world class pool of research talent to flood the market with research reports, surveys, white papers, webcasts, benchmarking data and forecasts.  Today, the firm has produced over 200 published research documents and caters for a global subscriber base in excess of 120,000 avid readers across all spectra of industry.

However, the firm’s revenue model has always remained a mystery.  According to one research subscriber, “The HfS experience has been incredible – the analysts actually talk to us like we’re human beings. We don’t have to dial 1-800 numbers and go through endless tiers of administration to talk to them.  They even write research that is readable and practical!”  However, when the subscriber was questioned as to the cost of the research, she declined to comment.

According to an HfS employee, who wishes to remain anonymous:

“Things have gotten so bad, we’re having to steal toilet paper from the Starbucks over the road from the office.  Meanwhile, Phil’s off swilling pink champagne with the likes of Stephen Dubner.”

One of HfS’ competitors greeted the news with trepidation, “Thank god he’s gone – how can you compete with a research firm that actually has personality and the confidence to give some of its research away for free?  We’ve been getting killed.  My concern now is they’ll actually replace him with someone with a business brain who will really hurt us”.

Members of the HfS analyst team remain focused, despite their wayward leader

HfS has been internationally acclaimed for its approach to research with many accolades, including being named as the most Innovative Analyst Firm of 2012 by the International Institute of  Analyst relations.  It is the new analyst brand everyone has been talking about that has disrupted the traditional analyst business of expensive paywalls, stuffy research and dubious vendor rankings.

“The sourcing industry owes Phil a great debt for bringing many of the core operational issues impacting firms to the mainstream business audience”, commented Randy Bender, Chairman of the Incontinent Association of Outsourcing Practitioners.  ”But he’s clearly running out of gas.  I wish him all the best with his future career, but I hope it’s doing something else, as we’ve had enough of him and his bloody blog”.

Oh… and one more thing….

I hear there's a vacancy opening in HR...

How many times have you heard sales people complain “our marketing needs to be better”?  The role of the CMO is probably the most thankless job in the modern organization:  the executives expect great branding and messaging to be propelled through all the optimal channels to market to maximize awareness and, ultimately, increase sales.  And the marketing department rarely gets credit when things go well (that goes to sales), but always bears the brunt of the blame when revenue goals are missed.  What’s more, it’s always really tough for marketers to get budget approved to support the campaigns their organizations need to create awareness, educate their market and drive new sales activity.  Justifying the marketing ROI is probably the hardest calculation to produce in any organization.

When I was a young business studies student, the great Philip Kotler defined marketing simply as “Satisfying customers’ needs and wants profitably“.  I’d go even further – it’s about “Satisfying customers’ needs profitably while successfully managing the expectations of the sales function”.  To this end, HfS analyst Reetika Joshi has been taking a deep look at how leading service providers are trying to help CMOs today…

Getting actionable insights from an integrated marketing optimization platform

In 2013, our research shows three secular changes challenges challenging the success of the modern CMO:

»      Analytics and the big data movement is gaining momentum with the need to now look beyond traditional web analytics and siloed projects, towards comprehensive marketing analytics that optimize all marketing activities, be it inbound or outbound.

»      Mobile and the real estate value of the second screen: While addressing mobile in the past meant optimizing websites and emails to suit mobile formats, marketeers now need to rethink seriously the best ways to integrate mobile devices as important marketing channels as part of overall strategy.

»      Social marketing and the fall of paid traditional media: Beyond simply increasing social presence, the next step is to think of innovative new ways to drive user-generated content creation and sharing, making campaigns more personal, identifying and appealing to social ‘influencers’ and tracking the impact social has on overall marketing effectiveness.

Every CMO has had countless discussions about the best way forward to tackle these mega-trends in marketing to get ahead of the competition. At HfS Research, we see two overarching marketing optimization challenges for organizations:

1) Crafting an integrated campaign strategy that works in the real world

Marketeers have an increasingly complex marketplace in which to make campaign decisions. From selecting the marketing channels in which to operate – both traditional and new media, to the modes of engagement and messaging for each channel, the frequency and sequence of channels to be tapped, and finally, the methods of evaluating and optimizing these marketing efforts in near-real time. Traditional campaign management often ignores the importance of these factors to realizing fully the potential of changing customer preferences and engagement models. There is thus a strong need for rethinking and measuring the effectiveness of the integrated modern marketing campaign strategy.

The sense of urgency towards an integrated campaign strategy can be explained when we bring up three short letters hounding CMOs today – ROI. IBM’s CMO Survey reveals that 86% of marketers claim their CEO demands more marketing ROI today than ever before. This inextricably links marketing with the need for more accountability, tracking, data mining and smart analytics that can prove, beyond reasonable doubts, where the marketing dollars should be spent to maximize ROI.

Analytics can be leveraged to improve campaign strategy (and ultimately ROI gains) by optimizing timing, messaging, etc. For example, analysis of customer PoS data and channel responsiveness (email/SMS, etc.) could reveal which channels are the most effective to target certain groups.

2) Finding the muscle to get execution right

Campaign execution is the logical flip-side of the coin when it comes to optimization challenges. The key issues are two-fold:

i)    Achieving the right balance of technology to support effective campaign management, and

ii)   Acquiring the right talent to revolutionize siloed marketing functions.

When it comes to technology, there is frequently an immense fragmentation of tools and platforms that not only make integration expensive, but also slow down decision-making during campaign execution. Getting actionable insights from an integrated marketing optimization platform, and accordingly making the right recommendations to customers, is the Holy Grail for marketers today.

Where technology is up to speed (in cases where marketing and IT are on the same page), the other execution challenge lies with departmental siloes and lack of talent. Where before there existed departments such as TV, direct marketing and PR working discretely to push outbound messaging, there now needs to be a combined and synergized effort of online and offline tactical elements to drive inbound marketing. Additionally, the types of skills marketing professionals need are changing. Successful marketers today not only need to be able to practice core marketing principles and have sound knowledge of their markets, but also weave in skills such as: content marketing and writing skills that are relevant and flexible (e.g. blogging vs. SMS), technology know-how for enabling tools, technologies and applications, digital and social media prowess to be able to select and nurture only the most relevant online marketing channels, an understanding of analytics and KPI metrics to make business decisions, and a healthy dose of curiosity to try new things (e.g. engage the customer in a new/unconventional way). Having said that, specializations in these areas will continue to evolve as companies start to integrate them seriously into marketing operations. This brings up the challenge of attracting and retaining specialists that are already in high demand. As an example of the specialized talent gap, McKinsey & Company forecasts an annual shortage of 200,000 data scientists by 2020.

Sensing the scale of these challenges, ambitious CMOs have started to make drastic changes to their strategies for future growth. External partnerships are is one such key lever that is on the rise – companies are leveraging third party providers for tools and platforms expertise, marketing analytics support, marketing consulting and multi-channel customer engagement, among others.

Reetika Joshi is Principal Analyst, BPO and Analytics Strategies (click for bio)

At HfS Research, we have strived to present business cases and best practices that highlight how different marketers are trying to cope with evolving/maturing marketing channels and consumer habits. In our recent case study based research, we present the experience and learning of one such company, a large US-based discount footwear retailer, that engaged with Infosys on an ambitious marketing optimization project to address the key challenges discussed above. With the help of the provider on both campaign strategy and execution, the retailer used an omni-channel, analytics-powered campaign optimization solution and was able to reduce its media costs, gain a unified view of its customers, and experienced a 5% campaign response lift, potentially impacting $3MM+ in 6 month revenue flows. Read more about this case experience here.

The industry has been literally screaming at us to change the way analyst firms portray their assessments of service provider performance, and we’ve dug deep to leverage our massive community, our extensive buyer relationships and demand data, to facilitate what we truly believe is a major game-changer in the research analyst industry:  The HfS Blueprint.

Finally:  A genuine way to assess services providers that isn’t reliant on the arbitrary viewpoint of a single analyst;

Finally: A credible methodology to gauge the performance of service providers against “real” innovation and execution capabilities;

Finally: A performance assessment of providers that apportions importance weightings of each innovation and execution category based on data from our State of Outsourcing survey, conducted with the support of KPMG, covering 1355 enterprise buyers, influencers, advisors and provider executives;

Finally: A performance assessment of providers where exhaustive inputs from buyers and influencers shape the scoring (not solely a handful of rose-tinted client references from the providers themselves);

Finally: A customizable assessment tool where enterprise buyers can re-calibrate the weightings to assess their provider-fit based on their own unique needs.

Yes indeed – we threatened these Blueprints five months ago, and we’re now ready to launch the first one… in  the much vaunted, but still immature, market of Finance and Accounting BPO, which is currently growing at a double-digit clip.  Click here to access our first Blueprint in Finance & Accounting BPO:

Click to access the first HfS Blueprint Report (premium HfS subscribers only)

We are happy to discuss the Blueprint methodology in greater detail (drop us a note here) but essentially, in this example for F&A BPO, we assessed data from 745 live multi-process F&A BPO engagements to ascertain provider market shares, depth of client base, breath of execution and geographic scope of delivery.  We then conducted exhaustive interviews with multiple buyers and market advisors to help score providers against each other across all the sub-categories of the Blueprint using ExpertChoice, an advanced statistical analytics platform. We also received a tremendous amount of cooperation from (almost) all of the providers above, as we went through this exhaustive process to understand their concrete plans for the future, get really deep with their current client relationships, their overall vision and their appetite to evolve into higher-value areas of F&A BPO.

Congratulations to the Winners Circle and the chasing pack of High Performers… we’ll see how the picture has shifted in 2014!

Thanks to all who took part – you’ve helped create a little bit if research history.

You can download the full HfS Blueprint methodology by clicking here.

]]> http://www.horsesforsources.com/step-aside-mq-hello-blueprint_032513/feed 16 http://www.horsesforsources.com/ousourcing_performance_2013_031713 http://www.horsesforsources.com/ousourcing_performance_2013_031713#comments Mon, 18 Mar 2013 01:03:32 +0000 Phil Fersht http://www.horsesforsources.com/?p=13159 Newsflash… Enterprises reduce costs by outsourcing, but struggle to achieve little else of value.  Well, on the surface, this would still appear to be largely true, but when you rummage even deeper under the covers, you’ll soon discover it’s more the legacy IT outsourcing deals which are still all about low-cost bums on seats, while we are actually seeing a few chinks of light with BPO that could resemble what we’ve been searching for since we started this damn blog… value beyond cost (gasp!).

So industry has spoken:  399 enterprises, (two-thirds of which have revenues over $3bn) recently took part in our 2013 State of Outsourcing Study, conducted with the support of KPMG.  And one chart, above all others, again illustrates the familiar frustrations outsourcing brings, better than any others:

Click to Enlarge

So what do we read into this data?

Outsourcing achieves its table-stakes goals and makes some progress providing value. On the strong positives, enterprises are achieving success when it comes to meeting their cost targets, globalizing their operations and even standardizing processes.  In fact, barely one-in-seven can claim to be actually dissatisfied with their meeting these goals to-date.  Also quite encouraging, is the fact that the majority of enterprises are achieving positive outcomes with higher-value areas, namely accessing capable talent and transforming processes, even though these are largely modest results for most enterprises.  Considering most buyers venture into outsourcing seeking these initial “table-stakes” goals of cost-reduction, global scalability and process standardization, you have to give a healthy thumbs up to those providers and buyers for achieving these initial objectives.  However, can today’s ambitious enterprises really turn around and claim they are happy with basic, operational success in today’s economy, or do they want to seek to move beyond ordinary?

Outsourcing is falling short when it comes to innovation and analytical value.  With all the puff and bluster about “Big Data” and analytics, and the pivotal need for today’s enterprises to get better at managing, understanding, an interpreting their internal and external data, it’s vital that outsourcing engagements support this capability for buyers.  I would go as far as declaring a provider’s capability to create collaborative analytical partnerships with clients is critical to the future success and growth of outsourcing.  If we only focus on these “table-stakes”, we will eventually arrive at the dreaded lowest common-denominator of outsourcing… where the provider with the cheapest labor and a basic ability to deliver average performance, wins.

So let’s drill a little deeper to discover where these engagements are falling short, by comparing where both ITO and BPO engagements are delivering real effectiveness for buyers:

Click to Enlarge

We can see here that BPO engagements are clearly outperforming ITO engagements, not only in many key tactical areas which clients care about (i.e. cost and process standardization), but also across strategic measures, namely proving greater analytical capability and innovation.  So what does this mean to the future direction of outsourcing?

ITO has become a utility service for most enterprises, whereas BPO offers enterprises the potential to achieve value beyond merely cost

Clients pay for – and receive – “cheap and cheerful” ITO.  When you consider that most major enterprises began outsourcing administrative IT in the 90′s (and some even earlier), you have to draw the line that if these are the results of two decades of engagements, it probably isn’t going to get much better. However, this is probably because most ITO buyers are pretty much getting what they have set out to achieve:  ”utility” IT services in areas such an help desk ticketing, infrastructure support, application maintenance and development.  Clients wanted cheap and cheerful…. they got cheap and cheerful.  And there are many providers, today specializing in the cheap and cheerful, who are really damned good at it.  Some of them even openly discuss with analysts and advisors that their main strategy is to target HP (EDS) and IBM renewals and undercut them by 30%.

ITO has founds its rhythm – low-end work is outsourced, high-end is retained.  Many CIOs and IT governance leads we talk to like having the grunt work outsourced so they can focus on the higher-value work inhouse.  As we once revealed here, two-thirds of ERP development work is still run onshore.  Ambitious CIOs these days like to focus their time on ecommerce, mobility, “Big Data”  and Cloud strategies, and will engage IT consultants with projects when they need some high-end help, but most aren’t expecting their outsourcer to do that kind of work for them.  India created an amazing factory for taking on the specific routine work than can support large enterprise IT operations – but that is what it largely is – routine work than can be conducted efficiently at lower price-points.

Managed business services, enabled by IT, are where the future value lies with outsourcing.  We – at HfS – passionately believe the only way for these providers to move up the value-chain with clients is to create business services that can meet defined business outcomes.  Simply put, IT provides a supporting utility to help achieve these business outcomes that clients want to buy, which would ideally be accessible in the cloud where business users can access their services wherever they want.  The focus then shifts from providing widgets, to the actual provision of value, where providers start working with their clients to achieve business results, as opposed to creating simply a low-cost environment.  ITO has become a supporting utility, with the real transformation happening at the business end. For example, when you buy a new car, how much time do you spend deliberating what grade of fuel to put in it?

Like ITO, BPO has it’s “bread and butter” needs:  processing invoices, paychecks, insurance claims, ICD-10 conversions, and so on.  There’s a plethora of providers today which can perform said tasks on many different scales, across many geographies and industries, and can flex the pricing if they really want the business.  However, unlike ITO, there’s not a whole lot of value with outsourcing business operations if you’re simply getting the same work done for less.  ITO is already standardized, to some extent: you need 10 ABAP coders, you pay for 10 ABAP coders.  With BPO, buyers’  current processes are rarely standardized and solutions not nearly as easy to industrialize.  Clients often need to undergo one helluva “transformation”, simply to transition the stuff to a provider in the first place.  Moreover, with BPO, we are dealing with business functions that are critically dependent on analytics to perform their tasks, whether they be marketing, customer service, finance, procurement, workforce management, and so on.  As McKinsey recently revealed, it’s this creation of analytical environments which is becoming (or will soon become) the overwhelming onus for so many enterprises, with its assumption that by 2020, we’ll have a surplus of 300,000 office workers and an annual deficit of 200,000 data scientists in the US alone.

The Bottom-line:  ITO maybe a commodity business, but a new wave of collaborative business services is beginning to show the way

When you consider that most of these “enterprise BPO” engagements have barely been around for a decade, the results are quite encouraging – 90% of buyers are meeting their transactional goals, and a good proportion are already getting some value from key areas such as accessing talent and improving analytical capability.  Yes, there is a long way to go, but at least BPO is moving in the right direction.  It’s because clients need much more help with their business operations than simply bums on seats at cheaper prices… they are far more dependent on their provider to help create an environment for themselves to become more analytical, more process-savvy and more focused on actual results, than mere inputs.  Welcome to the new phase of outsourcing, which is about partnerships what are not only cheap and cheerful, but also collaborative.

“Someone is needed alongside the CEO that understands the total changes in technology that are changing  customer behavior.”

           – Bill Payne, IBM, March 2013

In case you missed IBM’s CRM Chief Bill Payne’s return to blog-stardom during Part I, he discussed his vision for the creation of a “Chief Customer Officer” position within companies, who would report directly to the CEO.  In Part II, Bill discusses shifting mindsets, the impact of analytics and evolution of outcome-centric engagements impacting the marketing function…

Phil Fersht (HfS Research): Bill, with our next client summit dreamSource coming up in two months, the number one topic on the agenda that enterprise buyers have voted to talk about is “how to shift the corporate leadership mindset away from merely cost control to one of value creation”. Someone once said the definition of insanity is talking about the same problem in many different ways and always arriving at the same conclusion. How can we break this cycle, and is this something that you have seen with any of your clients?

Bill Payne is IBM's CRM Services lead

Bill Payne (IBM Global Services): This change in mindset can often involve a change of thinking at the top, and in some ways, I use that as evidence of why we do not have a chief customer officer. If you have everyone on the board of directors owning the customer, no one truly owns the customer. No one is truly driving the customer/consumer strategy. The CEO has a huge role in that, but in my view, you need someone with a different point of view, someone who really understands the change in generational behavior, change in technology, change in social, and actually injecting the organization with controversy and the reality around how the world is changing. I am not sure I see that in a lot of companies that they get it.  We have recently seen a major UK retailer go bust, Comet Group.  It had been doing well for many years, but one of the biggest drags to their development is that once they had ecommerce, it was not integrated with their bricks and mortar. Their customers rejected it because of the confusion between the costing and pricing on the website vs. stores, and their staff was not trained across the different platforms. It is a sharp reminder of the pitfalls of not integrating across all channels quickly.

What I see from an IBM perspective and from my space is that we are increasingly having sessions with customers about end to end.  No longer are they thinking contact center, no longer are they thinking CRM system, no longer are they thinking speech to text analytics. There are senior people saying: can you paint me a picture, show me a vision of the consumer end to end, and tell me how that can be deployed? Now, where we are seeing that? I have to say in emerging markets, such as Brazil and the Far East. Newer organizations are basically saying, we have to do the design, build, and operate model and we have to get to an integrated solution very quickly. They say we know what our customers want, and if we do not get there, someone else will, and they are going to take away a big piece of our market.  That’s the revenue growth piece.

Phil Fersht: Working for a big provider like an IBM, in your ideal world, how can you really help clients and, in reality, what is more achievable for businesess that might be 10 years behind the curve? What is the engagement model and how should it look in your mind?

Bill Payne: The engagement model is changing. In my part of the business, we have a large portfolio of customers in the front, middle, and back office.  Very often the discussion would be for a piece of that: can you run our contact center? Can you provide us with outbound notification?

We have a number of very large opportunities that are coming through our door and have been having very good discussions with senior level executives about an end-to-end omni-channel fully integrated single view of the customer, using data to drive insight, using data to drive revenue across sell/cross-sell, and designing, building, and rolling that out quickly, while fully outsourcing that capacity, but doing it on a transaction or outcomes basis. Engaging with a customer about IBM sharing the risk and the upside when driving revenue up is a very different commercial model. We are beginning to see a number of significantly large opportunities in this end-to-end play and not just picking up pieces of the customers state.

Phil Fersht: Bill, you talk about outcomes and risk sharing? Can you share an example or two about how this can – and is – working in practice?

Bill Payne: I can share both can and how. It is always difficult to map this out.  Phil, you and I have both been in this business long enough to know that this risk reward discussion has been going on for a decade now, and there are a number of winners and losers. I think what we are seeing is something different. As we move our model towards transactions and outcome, and if you are involved in a full omni-channel deployment with customer data for say a retail customer, it is easier then to commercialize and amortize the design and build to share both the cost and the revenue as the business grows. Should the business shrink, then one needs to be able to wind down some of the infrastructure. You need to truly variabilize that cost. What we are seeing with some of the more modern tools and software from IBM and partner’s technology is the ability to commercialize a deal in a different way with easier integration of customer data. It’s not all about throwing away everything you have and re-platforming a new CRM system, it can simply be around integrating data into the face of the customer. The true driver here is that IBM will come around and propose it, design it, build it, and operate it. The idea is to then make the cost variable such that it is variable on the number of customers or volume of transactions within the system and that then rides on a revenue going up, which is what we want to happen, but should it come down, the cost to operate the system will come down as well.  We’ve got some deals working very well like that.  Those discussions are naturally not easy for executives and can take some negotiation.  But I think it is something that we are seeing more and more.  In particular as a lot of organizations are potentially short on investment money, they need to move quickly and cannot afford not to do design, build, and operate in one step.  I think we are able to utilize our big international and finance systems to drive those kinds of projects.

Phil Fersht: Let’s talk finally about analytics.  We have written a lot about this recently, where the world is short on “data scientists” and overloaded with office workers. When I look at an area like customer centricity, there are a lot of niche analytics providers in this space who will provide archiving and interpretation of data. Based on this conversation, analytics is really only useful if you are able to tie it into the whole customer value chain. So, is this the central value of using an IBM as opposed to a niche provider is that you get someone who can actually put it all together and who can look at the big picture?

Bill Payne: Let me try and give you an example of this. As we head towards the heart of the American football season, when we look at the stats of the American football team, we can look at the attack and the defense stats.  They are of course very interesting, but are completely uninteresting when you compare them to the winning ratio of the team.  So, what this tells you is that you can look at individual pieces of statistical information and draw one conclusion, but it is only when you bring it all together that you can draw the full conclusion. So, I think there is absolutely use in looking at individual stats as one piece of the organization, but what is beginning to happen is that a single view of the customer center is absolutely back on the agenda. For a number of years, companies rejected it, by single view you were suggesting a re-platforming of their CRM system for hundreds of millions of dollars. I think there are very different ways of doing this by drawing together customer information on how we behave on all of the different channels. We do not want to ring up a contact center and then have them not know we have been on their website or what we have been saying on social media.

There is a need to integrate. The good news is that we have some great integration software.  There are some really good niche providers, people like ourselves who integrate, and we have some of the tools, but we also use some of our partner’s tools. So, one can use some of these analytics, such as text analytics or speech analytics in a way, but what I think we see in the next decade for sure is how they will get brought together in a much more synergistic way around the customer. When I am speaking to executives and they ask me, what do we do Bill? I will say design your new organization outside in, not inside out.  So, outside in means look to where your customers are now and where they will be and then drive that back into you organization.  Do not sit around a table designing your organization based on what you think is happening now inside your company, because I can guarantee it is going to change in the customer world in the next decade.

Phil Fersht: And finally, what advice would you give to marketing executives today?

Bill Payne: Take control of your brand, take control of the changes that are happening in your customer market, understand your customers needs, integrate them, and create a new customer experience.

Phil Fersht: Bill, its been great having you back on here – am sure our readers will appreciate your insights.  

Bill Payne (pictured above) is VP for Global CRM and Industries at IBM Global Services.  He is a 25-year industry veteran where he has held wide ranging responsibilities in the Consulting, Business Services and Outsourcing sectors across Europe, US and Asia.  He is well-known on the European speaking circuit and is also an Honorary Professor at Lancaster University Management School.

I want the best SaaS platform, some great BPO and a bunch of data scientists...

When it comes to outsourcing, dealing with the middle-market has been somewhat akin to dealing with the mother-in-law:  can be awkward to deal with, very hard to please, and always has complex demands on your patience and resources.  However hard you try, defining and delivering a solution that can deliver the outcomes you both want seems like the impossible nirvana.

However, as the wise ones among us have now discovered, winning over the mother-in-law goes a whole long way to achieving future happiness.  What’s more, those of you who have avoided addressing the mother-in-law’s demands will soon regret it…

However which was you look at it, many of today’s middle-market firms are going to be the F1000 of the future.  What’s more, most are seeking technology and sourcing solutions that can drive nimbleness and cost-effectiveness, as they simply do not have the prodigious people and technology resources within their IT, finance, HR, marketing and supply chain operations to manage their evolving needs. In fact, many of them can’t afford the top talent to run their operations, and those providers which can deliver it are already in high-demand.

Let’s examine what 399 enterprises had to say about their mission-critical objectives driving both ITO/BPO decisions in today’s market.  It’s already becoming abundantly clear that high-end businesses today, unlike their mid-market counterparts, are focused primarily on cost-reduction when outsourcing, as opposed to investing in new solutions and capabilities that providers could (and really should) bring to the table:

Click to Enlarge

Why aren’t today’s providers winning over their mothers-in-law to grease the wheels for their future success?

So… if most the providers are promoting their wondrous capabilities in terms of talent, technology and analytical capability, why aren’t they targeting those clients who actually want those capabilities:  the middle-market firms?

Providers are set up for high-end enterprise deals, not the mid-market. Sadly, most of today’s leading outsourcing providers are geared up for big, bloated enterprise deals, where the economics of labor arbitrage are simple, and selling cost-reduction is a much, much easier than selling business outcomes.  What’s more, the providers themselves are not structured to sell aggressively to the mid-market – they tend to have limited sales talent and they want their A-team delivery teams concentrated on their A clients.  When you talk to their sales heads, they’ll likely be able to tell you, pretty much, how the entire F1000 shapes up in their pipelines, but when it comes to the next few thousand firms, they’ll have little insight or visibility.

High-end buyers want to get smaller and drive out cost, not invest in new solutions. Moreover, the $10bn+ enterprises want to get rid of cost – they know they have hoards of talent, but their main motivation today is to get leaner and more flexible, to standardize processes and (if we are so bold to surmise) become smaller.  Today’s enterprises want to grow their top lines, not their bottom-lines.  This is why today’s outsourcing industry is so fixated on labor arbitrage, FTE-cost models and achieving basic operational success.

Middle-market solutions require business platforms, based on industrialized tech platforms and processes.  We’ve talked about this for a few years now, but it’s taking an age to evolve.  Where are the platform partnerships between the Netsuites, the Workdays, the SFDCs with the BPOs?  Why haven’t we seen a “middle-market FAO solution” between a mid-market SaaS accounting provider and a leading F&A BPO provider?  While there have been a few mutterings of hope, we are yet to see a single enterprise-scale SaaS/BPO platform engagement that we can write about.

The Bottom-line:  The leading SaaS vendors don’t “get” BPO and the leading BPOs don’t want to invest in SaaS

Having spent the best part of  my earlier career as an analyst studying apps and packaged software, before being subjected to the horrors of the BPO business, it’s as clear as daylight where enterprise solutions need to be focused – on the middle-market enterprises who want solutions that can be industrialized for the high-end enterprises of the future.

SaaS providers are blind to ADP’s success. However, one thing is very apparent – while SAP and Oracle quickly realized they needed to preserve their license revenue when clients signed BPO deals (both have practices dedicated purely to this cause), the likes of Workday, Salesforce.com and Microsoft Dynamics have shown little-to-no appetite to understand the opportunities a BPO channel can provide.  Like, haven’t they noticed how ADP has become the world’s leading SaaS/BPO provider, with more then $10bn in annual income?

IT-BPO providers only looking to invest in niche tuck-in areas. Sadly, too many buyers are too focused on their quarterly balance sheets to focus really long-term on their operations; their operations heads are focused on preserving their empires with a few snips here and there to the operating budget.  In addition, providers are also focused on their quarterly balance sheets and find it so much easier to pander to the needs of today’s F1000… not tomorrow’s.  While we’ve seen a few niche acquisitions where providers are adding platform capability in process niches, such as Accenture/Octagon, Genpact/Jawood, Capgemini/VWA and Infosys/McCamish, we’re yet to see any of them really attack the mid-market with horizontal solutions that can infiltrate thousands of organizations, such as in Finance, HR and CRM.

This train is leaving the station soon… but who is going to jump on?  As the existing high-end business opportunities slowly shrivel up, the new logos are springing up in the mid-tier.  The winners of today will only be the winners of tomorrow of they can truly invest and build the solutions today’s mothers-in-law are craving.  Those who have ignored the mothers-in-law are already in trouble… Hope springs eternal

And the ERP premise has always been pretty good – accomplish standard, automated ways of doing things and you can employ less people to achieve the outcomes you want.  However, we all know how that has failed to transpire for so many…

Susan Scrupski is Research Fellow, Business Process Reinvention (Click for bio)

However, the world of business process solutions is finally changing.  Most mid-market companies looking at their first “ERP suites”, whether it’s in HR, or finance, or procurement etc, are going straight into the Cloud, with the likes of Workday, Netsuite, Ariba and so on.  It’s these companies evaluating business process solutions from scratch, or are simply at the end of their tethers beating the crap out of their legacy ERP systems, which are taking the leap and reinventing their whole approach to process management.  I firmly believe it’s many of today’s mid-market companies today that will make up the majority of the Global 2000 in 5 years’ time.

But let’s not get overly carried away…there isn’t a dramatic switch happening from the legacy ERP-driven firms to the new generation organization, where everything is run under a beautifully centralized global operating model, process flows are accessed in the cloud and all non-differentiating processes are outsourced.  It’s simply those firms ready for the new are growing in stature and scale, while those clinging to the old are trying to get smaller and leaner.  It’s about reinvention, not replacement; it’s about taking a completely new path, not simply papering over the cracks of the old one.

So without further ado, I wanted to introduce a spectacular new personality into the HfS family, Susan Scrupski, a legendary figure in the worlds of disruptive technology and social business – and Fast Company’s “Most Influential Women in Technology” in 2010 – who’s embarked on a pivotal new project with us entitled “Business Process Reinvention”…

Business Process 21C: The Jackhammer Tales

Over the past few months I’ve begun to reflect upon how I arrived here at the intersection of process and innovation in the Enterprise. It occurred to me that everything I learned as a researcher, a writer, and an industry observer in the services provider space (my pre-Internet career) now had great bearing on what I was seeing in the Enterprise as a result of the pace of disruptive technologies impacting the market. The question that kept re-emerging for me was: how are rigidly defined business processes that were hammered out in the 90s reconfiguring to adapt to better, faster, more efficient ways of meeting customer needs? Even more puzzling is, if my friend Josh’s old joke is correct, “SAP is like pouring concrete into a company,” how are large enterprises dismantling foundational ERP systems to include disruptive technologies? After all, no 21st Century business can stand to stay frozen in the past. Even SAP itself is retooling to provide greater flexibility and real-time actions and insights with its HANA in-memory database and its JAM social platform.

This big question has been vexing me for a while, so I asked my friend and fellow Enterprise Irregular, Phil Fersht at HfS Research, if he’d be interested in an exploratory study to see how BPO providers and consultants are responding to new advances in mobile, social, the Internet of things– all new capabilities that were not present when the majority of institutional business processes were “cemented” into the Enterprise. I’ve seen evidence of several companies who’ve been introducing social, in particular, to provide greater value to customers. Of course, some of the best examples are coming from platform vendors themselves such as this post, “Enterprise Social is about Business Process Redesign” by CEO Michael Idinopulos at Socialtext. But, I’ve seen other examples such as Deloitte’s work in this area explained in this post, “Social Reengineering by Design,” and even examples about how large consulting firms are changing their own internal processes as a result of new ways of working, as evidenced by this post, “Spark – taking Collaboration and Corporate Social Networking to a new Level at PwC.” Luckily, Phil agreed this is an area definitely worth pursuing, so we’ve kicked the study off this week. We’re compiling data and hope to publish results in the early May timeframe.

I’m really happy to be working in this area that combines my long history of covering the traditional outsourcing sector with my area of interest for this current iteration of my career in next generation technologies. Phil has done an amazing job with HfS Research, too, so I’m proud to be contributing to their strong brand in the market. HfS was recently named one of the leading analyst firms in a formidable field of competitors. Last week, I paid a visit to my longtime business advisor Mort Meyersen, who is an icon in the outsourcing field having helped build EDS and then Perot Systems. It feels good to be back among old friends, mashing up what I’ve been learning from new friends.

I will be working hard on this study for the next few months, but also working on the startup we announced a few weeks ago, Change Agents Worldwide. So, busy, busy, but really having fun. Hope to see some of you at SXSW, but I will be hunkered down and only getting out to a few of the evening events. Please keep up with me on Foursquare if you’d like to connect while you’re here in Austin.

Susan Scrupski (pictured above) is Research Fellow, HfS Research.  

We hope to see you when yours truly (Phil Fersht) moderates the “Leveraging 3rd Party Analytics Players : From a Transactional Support Partner to Turbo-Charging your Core Competencies” session taking place on Wednesday, March 13^th at 11:30am along with Allstate’s Ferdinand Dungca and Wells Fargo’s Eric Legrand.

Yes! Its time to head to NYC on March 11-13th at the Sentry Center for a whirl-wind event. And not only have we negotiated our readers a discount, this time we’ve arranged an elephantine 50% off for your attendance:

To register, please email Yash.Maroli@exlservice.com to take advantage of the discounted rate.

We look forward to seeing you in New York City next week!

Bill Payne is Vice President, CRM and Industries at IBM Global Services

Three years after his first appearance here, IBM’s Bill Payne has somehow survived appearing on such a disreputable media platform to talk to us about his refining vision for the future marketing function and, perhaps most importantly, how today’s businesses need to manage their most precious assets in the face of such fundamental change – their customers.

We managed to convince him to take time away from his prized vegetables to talk to use more about this vision for the CCO… The Chief Customer Officer…

Phil Fersht (HfS Research): Good morning, Bill. You recently wrote an article where you spoke about the road to customer centricity and how the world’s leading organizations are putting the customer first. In your experience, how has this been working and what is your vision for the future of the customer centric enterprise?

Bill Payne (IBM Global Services): Companies have always said that they put the customer first, and I think they genuinely believe they do. When the business world was made of just bricks and mortar, and on the primitive edge of the digital age, putting the customer first meant that you had to monitor the customer simply when they walked in the store or if they touched you digitally. The world is way more complex now, and what we have found is in large organizations, there is often no integrated  customer or even consumer strategy driven by the board. In an omni-channel world, there isn’t necessarily anyone at the board level who owns all customer driven channels.

According to IBM’s latest Global CEO study, nearly 90% of 1700 CEO’s said knowing the customer is top of their agenda, yet how many of those companies have a chief customer officer who owns all of the customer driven channels?

Let’s take a look at the CXO picture around 20 years ago. Why did people invent the chief information officer? They invented the CIO because information technology was changing the need to globalize, the need to integrate, and the need to rollout standard technology applications across the organization.

Then, you had the dawn of the chief procurement officer, and the theory is exactly the same, why did companies appoint CPO’s?  To standardize, centralize, harmonize, and integrate procurement across their enterprise,  Similarly, the CFO, allows a  degree of centralization across finance. Then you had the Chief Marketing Officer, for the same purpose. To have a complete view of the enterprise and driving the brand value for the consumer, yet hardly anyone has a chief customer officer.

I would contend now that as the world develops, we as customers own the power. Any enterprise that thinks they own the power is kidding themselves.   The time is now for savvy organizations to put in place a chief customer officer.  The role of that chief customer officer is then to build out the presence and the brand across multiple channels, understand the concept of consumer market data, and bring all of that together with insight.

I would also contest that, that chief customer officer could potentially be the new career model for the chief marketing officer. The CMO is the face of the brand, and therefore could be the person to drive that brand value and take on the role as the chief customer officer. There is absolutely a need in many enterprises that I work with to have someone who understands the changes in the market and be able to bring all of that strategic value together to help the board and the enterprise drive the changes that they need to engage the customer.

Phil Fersht: Something I would like you to challenge here is: Do CEO’s today realize the importance or the complexity of really great marketing anymore? 20 to 30 years ago, marketing was the subject to study at business school. It was all about satisfying customers needs and wants profitably, and aligning a product or a service with the core strategy of the business. Something has seemed to have gotten lost in the last 20 years with how marketing is perceived and managed within the organization.  A), Would you agree with this, and B), What do you think has gotten lost, and what do you think we can do to start to fix that?

Bill Payne: I think the brand actually can be the last vestige of loyalty that companies can leverage. I think historically, many of us have been a lot more loyal than we currently are. We tend now to be relatively open to disloyalty ‘Many of us have a mobile app on our smartphones that allows us to scan barcodes in a store, and immediately be offered lower prices for the same goods. The world is rapidly becoming mobile, so this drives an added degree of transparency, which enables us to find cheaper prices. Now, if brands are less vestiged, and I want to buy a brand, then I will go to the lowest point where I can get that brand for the highest level of service.

I think what’s gotten lost in the last 10 years is that companies have not really thought through their consumer and customer strategy and placed the value on the brand that they need to. What we have seen through many of our CEO study’s and certainly CMO studies is that the brand is still extremely important, but many CMO’s have not gotten their energy and efforts fully focused on how they monitor and drive that brand in the new world of mobile, social media and mobile apps. I think that is a big area that needs improving. The brand value is still hugely important and under leveraged by many organizations.

Phil Fersht: We had a very good discussion recently about elements of businesses that are being outsourced today, and one of the hard realities is: do CEOs wake up in a sweat in the middle of the night worrying about their procure to pay process? Probably not, but do they care about their brand and the way they are perceived in the market? You bet they do!  So, in terms of developing realistic – and useful – metrics that should be used to define, measure and manage real marketing outcomes in an organization, do you have some views on what would be more effective these days, and how companies could change their approach?

Bill Payne: I think we have to step back a little first. We see vast differences between organizations in how they manage their marketing spend and understand the ROI,

I think the first phase here, in the world of transparency, is you have to get on top of where you are marketing. One of our clients has a totally integrated global brand management system through all of their web portals.  They have a 24/7 update of all of their websites around the world so they can rapidly launch new products, test response to them, and work with their customers based on what they see from their digital presence. With this system, it takes about eight hours to completely launch a brand new product or service around the world. One of their main competitors takes eight days to do the same thing. This competitor has individual country based websites and many of those websites are not easily viewed on a mobile device and do not have an integrated update system. Interestingly, between those two companies in the electronics space, one is doing well, and the other is doing  badly. (guess which) That is just an example of the need to start integrating your marketing spend.

I think there are two elements in marketing spend, transactional and creative. Those that are being successful are integrating around the creativity and the transactional piece, such that they are understanding the value of campaigns and understanding the value of the customer. They are able to rapidly respond across global , regional or local markets, and find value in creativity and how they deploy that creativity.  So, they are effectively starting to manage the ROI of marketing campaigns and marketing spend against their brand value on a global basis.

Phil Fersht: You have talked a lot about this Chief Customer officer, and you feel that this individual should report to the CEO and not the CMO.  Can you explain your thinking here and why you feel customer management should be separated from marketing?  

Bill Payne: I think that the CCO should report to the CEO, and the CCO should be the CEO’s best buddy.  I think it actually is a fantastic role for CMO’s to broaden into as the mentor/owner/driver of both the brand and customer in an enterprise. They could grab it with both hands and drive the change

The task list for the CCO in the next 10 years is going to be the world’s biggest job. The reason being is that everything I see, and with every customer I talk to and company I visit, the whole customer dynamic is moving into a new arena of transparency and service and technical innovation.

So that CCO, has got a huge job to get back to thinking about the single view of the customer, using customer data, using market data, collecting all that data, using analytics to drive insight,adapting to fast changing techologies  and then driving (not just cost out,) but revenue up.  So the role of that CCO I think is sitting on the right hand shoulder of the CEO, almost as the conscience of the CEO to drive customer revenue.

As we see in our CEO studies, their top concern is their customers.  Someone is needed along side the CEO that understands the total changes in technology that are changing  customer behavior. I will give you a couple of examples of this: we are in a meeting in Singapore this year with a COO of a major retail organization, and we are developing their digital presence and commerce strategy and website. 30 minutes into the meeting, I say, why are you doing this?  To which there was silence. And then I said, surely, we are not talking about ecommerce, but mcommerce, and more likely scommerce (social commerce)? I put it to them: the world in the next 10 years will be 6”x4” or by 8”x10”. There is no point to build a site for a desktop web base, because the world is becoming mobile.  So you should be designing all of your commerce structure around what will fit on a smart phone or on a pad.  To me, you have to ditch the old thinking. It is not about ecommerce or internet commerce, it is totally about mobile commerce and social commerce going forward.

Stay tuned for Part II where we discuss shifting the corporate mindset, analytics and (heaven forbid) a little bit about IBM…

Bill Payne (pictured above) is VP for Global CRM and Industries at IBM Global Services.  He is a 25-year industry veteran where he has held wide ranging responsibilities in the Consulting, Business Services and Outsourcing sectors across Europe, US and Asia.  He is well-known on the European speaking circuit and is also an Honorary Professor at Lancaster University Management School.

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How do we know all this?  

Because we have a super-brainy data guy called Jamie Snowdon leading our data and forecasting practice, where we pull together data from thousands of supplier contracts, revenue databases, inflation estimates, economic primers and – most importantly – from the thousands of buyers and other industry stakeholders, who have been so religiously responding to our ongoing surveys (we have data from over 3,ooo buyer spending intentions just from the last year).

Yes, we’re so excited about sizing and forecasting global outsourcing markets, we’re delivering to industry the quarterly HfS Market Index^TM that delves into all the ITO and BPO services markets by countries, verticals and discreet horizontal markets.

Why are we doing this?

Because noone else is doing it accurately.  When IDC claims China’s BPO market is $6bn, you just know something is a bit off…

Because we have such a strong day-to-day involvement into the worlds of the buyers, sellers and advisors of outsourcing.  We actually have some peculiar people on staff who wake up in the morning and think about process flowcharts before breakfast.

Because there is very little data out there which really reflects what is going on across outsourcing services, with reliable and realistic capabilities to forecast out four years.

Because we can.

How can you get access to it?

Sadly, we have long tried to run HfS as a non-profit charity, but we found life started getting a bit crappy when the heating got cut off in the offices and we were living off cans of Progresso soup.  So our research suibscribers will get the full benefit.  However, as good Samaritans, the first one is free – yay!  Go register on our site and download your copy now.  This offer will expire with one week, otherwise the only other option to get a free copy out of us is through bribery, extortion or heavy imbibement.

So click here to download your one and only free copy of the HfS Market Index^TM. Now

“HFS Research was an outstanding performer in the Analyst Value Survey. Buyers of analysts’ services rate HFS Research as one of the most valuable providers, and one of a handful of firms whose influence grew most impressively in 2012″

Duncan Chapple of Analyst Equity, February 2013

Leading expert and commentator of the global analyst industry, Duncan Chapple, former board member at the International Institute of Analyst Relations and CEO of LighthouseAR, has announced findings from the Analyst Value Survey, which included 198 enterprise consumers of analyst research to understand how much influence each major analyst firm has on enterprise buying decisions and the media.

Considering this study was focused on major analyst firms such as Gartner and Forrester, which cover broad enterprise IT and services buying trends (not just sourcing), we would be have been happy with finishing somewhere in the middle of the pack, but as you can see, we are making some pretty big waves in the enterprise. It’s pretty cool what you can do with a smart group of analysts a bunch of research and a blog:

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We, at HfS, are proud to represent the sourcing industry among the global analyst firms and help communicate today’s complex issues surrounding sourcing to the forefront of the enterprise agenda. Thanks for all your support.

It's never too late to find redemption...

So if you haven’t been fired yet, here’s how to avoid it happening…

Phil Fersht (HfS Research):  So, Lee, we talk about more of a fluid and evolving outsourcing relationship.  How can we get there? Why is such a large proportion of this industry stuck in the weeds, with so many companies persisting in doing things in such a short-sighted way over the last decade. Why aren’t we evolving these relationships?  What is holding us back?

Lee Coulter (Ascension Health): Phil, I think there are two primary reasons:

One is the most common misconception about outsourcing or shared services is that you can declare success. Some executives like to say “We’re done. We’re done outsourcing. We’re done doing shared services”. No, no you can’t! This notion that there is some finite initiative and there is some specific number of deliverables that you can check off on your old checklist and say “Oh I am done, yay”… that is a very common misconception by the leadership in many organizations.

The second one is that the work to continue to evolve the relationship, is really hard work. You know for anybody who has actually been through a significant outsourcing negotiation, it’s hard work.  You know, not just to get the MSA in place, statements of work, service level targets, KPI’s, units of cost, demand management processes, these are all hard things to do. They really are pretty hard. And when we have taken the time to describe the nature of our relationship in a contract and it takes you know 6, 9, 12 months to do it and then another 12 months to work the kinks out of that. Nobody really looks at re-characterizing that relationship as something that they really want to do.  But, in order for the client to get the best of what a provider has to offer, that’s what needs to happen. And to increase the value and contribution of those services for the business, that’s what has to happen. Continually moving up the value scale to the point where the provider is not only able to bring their expertise and technology to your relationship but has the incentive to do so. You’re in an FTE contract moving to a task based contract, it’s is a minor step. It is a big and important, but minor step.

However, moving into a process component, that is yet another step.  Moving up the value chain from purchasing effort to purchasing tasks to result in purchasing processes to finally purchasing the contribution of that service to the business. This incents the provider to bring their own best thinking their own best technology to your services. But it requires that you completely start from scratch with the description of what it is you are buying and how it is you are paying for it, because you have to go through this process every couple of years of looking at what you are purchasing and the way you are purchasing it and say to yourself, “Is this really incenting the right behaviour from both parties?”

Phil:  Our data is showing that there is a good chunk of clients today, around a third, who probably have that attitude that outsourcing is done, it’s finished – let’s just keep chugging along with that contract.  So, we kind of take the attitude of if that’s the way they approach it, there is not much you can do. But it’s the remaining 66% of clients who have varying degrees of caring about improving and innovating.  Would you agree with that, and do you feel that those clients who are in the bottom 33% should be just left to do it their way, or do you need there should be some overall change in the way the industry approaches outsourcing, in general?

Lee: Well, interesting data – It would be interesting to see the segmentation in the 66% and see how they separate out, in terms of what their appetite is for going up the value chain. But for the 33% that kind of describe it as “done”, it’s going to be really hard for a service provider to bring a client from thinking their “done” to convince them that there is more value to be added.

It sounds unfortunate, but I don’t know really what the service provider could do.  Having been in outsourcing relationships for the last 15 years, I am sure that these providers are regularly presenting things that they could do for the client and their are conversations about innovation and projects and stuff that they could do, and it would fall on deaf ears. But I would probably encourage providers to look at a way to segment their clients and their service delivery to kind of optimize differently for those clients, on “that’s where they are and that’s where they are going to be”.  You are going to be wasting your time trying to do anything else. For the 66% well, I will just leave my answer at that.  I would be interested to hear more about how the 66% break down.

Phil:  Of the 66% who still actually care about value beyond cost, it’s roughly an even split.  You’ve got half of them in the death throes of grappling with antiquated contracts that haven’t been updated in quite some time.  But they want to break out of that – they are showing some desire to do that.  Then you’ve got the upper echelon 33%, whom we have called the “strategic” camp, who are in more regular dialogue with their providers about defining business outcomes, about trying to align stakeholders more effectively and trying to approach things in a different way.  So, we really look at three different camps across the industry –  you got “lights on” camp on the left and this “efficiency camp” in the middle that could go either way, and on the right hand side we’ve got this kind of “collaborative strategic camp” who are trying to break out and change:

Today’s outsourcing industry split into three camps

Lee:  How does this compare, or is that kind of a snapshot of current state?

Phil:  It’s the first time we have really broken it out this way. I think the way to look at this is to realize most enterprise BPO engagements have only really been around for ten years and I think companies are kind of feeling their way, since this the first real view of where companies attitudes and approaches are emerging in all of this.  Whereas ITO is obviously a lot more mature and we are in a very operational phase in that industry. But also, with ITO, is that you still have 65% of IT staff doing ERP development work that are still based onshore. I think it’s just still a market where it’s a lot of the low-hanging-fruit administrative work that’s still moving out there. I think ITO has really struggled to move up the value chain from the very early days. Is that something you would agree with, or do you think it is evolving?

Lee:  Yes. I really would.  The complexities of delivering increased value in technology today and I am going to say the permissiveness or the size of the invitation that the client has to provide to the provider is pretty big. Because every time you talk about evolving your technology portfolio, the number of stakeholders and the level of complexity it takes to do that work – it’s really significant.

If a client isn’t really tuned into that and willing to clear the way for the provider to do that work, and not blame them when there are bumps in the road, it’s really tough for a provider to move out of “run and maintain”, and I make the distinction between “run and maintain” and “evolve and re-transform”.  So, the business of evolving and re-transforming – that’s where there is change management, communication, training, engaging directly with the business there is all of these things most organizations are not really thrilled about offering to a provider.

Lee Coulter, CEO Shared Services, Ascension Health (click for bio)

Phil:  Lee, I can’t wait for our session at dreamSource.  Thanks for your time today, this real is the “hard talk track” so many of the sourcing industry needs to have, to get out of its own way.

Lee:  A pleasure, Phil, and looking forward to meeting a lot interesting folks there!

Lee Coulter (pictured right) is Senior Vice President and Chief Executive Officer, Ascension Health Ministry Service Center, LLC.  As a distinguished practioner in the fields of outsourcing and shared services he has held several senior operations leadership roles at Kraft, AON and GE.  Lee also serves on the board if HfS Research.  You can view his full bio by clicking here.

Lee Coulter is... Lee Coulter (click for bio)

The first time I spoke to Lee Coulter, I was an analyst at the old AMR Research (now Gartner) and managed to get him on the phone, where I hoped to convince Kraft’s global überlord of shared services, IT and outsourcing to spend a day at a roundtable I was organizing.  ”You’ve got 5 minutes to convince me why I should invest my time with you”, was his response. I knew straight away this was a guy who didn’t like to xxxx around.

Since then, Lee has been a great friend in helping us establish the HfS Research organization three years ago, in addition to lending his time and support helping us assemble the most irresistible community of senior sourcing practitioners.  For those of you attending our dreamSource summit this Spring, Lee and I will co-host a session entitled “If outsourcing were an employee, it would be fired“.  Lee, who today has built and now leads shared services for heathcare provider, Ascension Health, caught up with us last week to talk about the session and why we called it just that…

Phil Fersht (HfS Research):  Good morning Lee – a pleasure to get you on the line today. You’ve been a well known figure in sourcing shared services and outsourcing world for quite a few years now.  Can you tell us a bit about your background and how you got to where you are today?

Lee Coulter (Ascension Health):  Sure, Phil, I guess it goes back quite a ways!  Originally, I guess I was starting my career in what wasn’t really an outsourcing or shared services configuration. Actually as a delivery guy, I was a service engineer delivering services to hospitals and health systems. Twelve years, later I had moved from delivering services for diagnostic imaging equipment to delivering services for IT. And it was pretty surprising to me to find that the whole delivery process was a copy-paste, it was the same stuff.  Today, I am in my sixth industry and I have managed every function in a company except marketing.  And every time I come to look at these things I find the service delivery process is the same. So, shared services and outsourcing I don’t really consider them to be different. There happens to be a second set of shareholders in an outsourcing relationship, but the dynamics of establishing the service, the KPI’s, the unit of service, the unit of cost, the drive to innovate and then retransform, all of those things… they are essentially the same.

So, I had an opportunity through my career to sit on a commercial outsourcer as well as a buyer and doing so with long-shore, off-shore, near-shore, in-sources, outsources I have kind of had a chance to do kind of all the major things within the industry.

Phil:  So, what’s changed, would you say, in the last decade? Do you feel that the attitudes and approaches of enterprises have shifted at all, or do you think we are still going around in the same circles?

Lee:  One of the expressions I have been using lately is that the expectation of the business today is far more than simply to “successfully transact”.  When you look at what typically gets included in the shared service or outsourcing scope, it is typically transactional or business-rules based work. If we look back to the 80’s and 90’s, it was really about “getting to OK”. If you got “OK”, meaning you successfully reduced the cost of delivering it and you successfully met the very basic expectation of simply “do the transactions and do them satisfactorily well”, that was the challenge. Today, that is no longer considered a challenge; those are now table-stakes.

So for every practitioner, whether they live inside a commercial provider, or inside a company, the expectation is much bigger. It is around business process effectiveness, business process transformation, business insight through analytics, the addition of certain skill-sets that are created to help manage in a shared services or outsourcing environment, like project management and quality, Six Sigma and that kind of stuff. So, all of a sudden what used to be the objective has now become the table-stake. Now businesses are expecting a whole different level of contribution – I’m not just saying performance, but contribution by the shared services/governance organization.

And now you also introduce a couple of major disruptors, namely technology and cloud. And it’s kind of funny, cloud has been around a very long time. When we go back far enough we could argue that AOL, CompuServe is where cloud and well, I guess in the strictest definition they were.  In the way we talk about cloud today, where you have applications-as-a-service and cloud-based service platforms which are location-agnostic, in terms of whether resources are need to be there delivering service, it really changes the game in terms of what level of contribution you can have to an organization.

Phil:  We’ve got new data that shows the desire to standardize processes is very, very strong behind an outsourcing decision. How much is that playing into the hands of the providers who have good technology?  Do you think that the ability to couple good platforms with the right process is now the way to go?  

Lee:  Absolutely, I would even offer a little bit more, which is the level of variation in core processes is diminishing from organization to organization.  What do I mean by that?  Well, if we go into some of the tried and true world of shared services and outsourcing… let’s take F&A, AP – your basic hire-to-retire services. It used to be that there was a pretty enormous variation. But, over the last twenty years the adoption of things like SAP and other ERP solutions and the broadly available best practice operating models for running these parts of your organization, have resulted in less variation. Well that means a service provider can build a technology platform and it used to be it was a pretty big leap in terms of process transformation to get a client from their existing process to what we’ll call a best practice standard operating model.  More and more companies, to the extent that has been possible for them, have already attempted to adopt these best practice operating models.  So, it increases the speed and minimizes the amount of change and disruption from these transitions.

Phil:  Lee, we are delighted to have you lead one of our core sessions at our dreamSource summit this year.  And, I am going to give you credit for coming up with the title “If outsourcing were an employee, it would be fired”. How did you come up with that and what is the thinking behind it?

Lee:  So, let’s say you have signed an employment agreement with someone to become and employee for seven years with some options to extend.  Your employee starts and you put some objectives out there around getting control of the stuff and delivering these transactions.  You have your annual review and they’re saying, “I’ve now got control of the process and I’m transacting.  Pretty soon it will be stable and I will be consistently transacting these services”.  You get to the next year and you ask the employee what are their objectives and your employee responds “Well I am going to keep right on transacting”. And the following year you ask “What are your objectives this year” and the employee responds “Well, I am going to try and transact a little bit less expensively”. And every year is the same conversation about “Well, I am going to meet my SLA’s, and I am going to try and not disrupt our business”.  Is that the kind of employee you want working in your organization?  It’s really become the longest-lived most frustrating conversations around outsourcing in the nation.

The framework of the relationship between outsourcing as an employee and the employer needs to be driven to change, and the employee needs to provoke that.  For the folks that work for me, if they give me the same goals this year that they had last year, and their performance is simply a “meets expectations”, well if I keep them around that long, my expectation is that we continually increase the scope of our objectives and that we look for ways to increase our contributions to the business and force ourselves, by virtue of establishing these goals, to do that.

The vast majority of outsourcing relationships don’t fit this model. All the FTE relationships that every single year has the same expectation – “Well, I am going to transact and I am going to wrestle with you on forex and inflation to offset the price reduction you think we should get”.   That’s not an employee I want, I don’t know about you…

Stay tuned for Part II (click here) where we talk about how this industry can get out of its own way to evolve these rigid relationships…

Lee Coulter (pictured above) is Senior Vice President and Chief Executive Officer, Ascension Health Ministry Service Center, LLC.  As a distinguished practioner in the fields of outsourcing and shared services he has held several senior operations leadership roles at Kraft, AON and GE.  Lee also serves on the board if HfS Research.  You can view his full bio by clicking here.

The official definition of insanity:

The official definition of insanity in sourcing: recounting how many times a service provider has asked you, ”We’ve got to get to the C-suite to pitch innovative ideas, because middle management is too risk adverse.”

So who better to analyse sourcing insanity than HfS’ own sourcing insanity analyst, Tony Filippone…

Are service providers addressing the right audiences?

Is there really a disconnect between senior executives and the rest of their teams regarding the importance of innovation during service provider selection? Will ideas fall on deaf ears unless a service provider can schmooze a CFO? Are service providers addressing the right audiences? We asked a few questions in our State of Outsourcing survey to delve deeper into the topic…

To begin with, we can bust part of this myth once and for all. Namely, during evaluations of service providers is the executive suite the only group interested in transformational and innovative ideas while the junior ranks are concerned with process efficiency and execution? When asked which was more important, senior executives favored execution over innovation 71% of the time. That result is statistically consistent with opinions of their middle management (73%) and junior management (70%). All levels of buyer organizations are severely and equally biased toward process efficiency and execution issues, which strongly supports our research findings that motivations of buyers are firm focused on cost reduction. Transformational ideas are going to fall on relatively deaf ears at all levels of the organization.

Exhibit 1: “Which is more important: Execution or Innovation?”

Is time spent with the C-suite worthwhile?

But isn’t there value to schmoozing up the C-suite? Aren’t senior executives swayed more often by relationships over delivery capability than their middle management? Is time spent with the C-suite worthwhile?

This is another myth we’ve bused. We asked whether customer relationship skills were more important than delivery capability during service provider selection, and senior and middle management have statistically similar opinions. For both groups, nearly 30% feel relationships are more important than delivery capability, about 40% feel the opposite, and 30% feel the issues are equal. Junior management is where the switch in perspectives appears. While a similar percentage of junior managers find relationships more important (28%), 52% believe delivery capability is more important and just 10% find the areas equally important. Energy to build relationships therefore is best spent on directors, vice presidents, and senior executives who all find relationships more important than their frontline staff.

Exhibit 2: “Which is more important: Customer Relationship or Delivery Capability?”

The Bottom Line: Don’t Sell Execution Capabilities Short

Our newest data should help service providers build the right strategies to address potential customer interests. Most importantly, all service providers should realize:

• The current state of buyer sentiment is emphatic: Today’s market is obsessed with execution, which demonstrates buyers haven’t grasped the potential value of outsourcing. In most competitive bids which sadly provide limited time for buyers and service providers to exchange information, pushing innovation and transformation to hard in evaluation processes may not ensure buyers that service providers can do the work.
• Buyer values are identical throughout their ranks. While a CFO may hold the decision-making power, recommendations from their staff are likely to reflect the same bias of execution capabilities over innovative opportunities. This makes influencing all levels in equally important in a buy-decision.
• Relationships matter as much to middle managers as they do to senior managers. They want partners with great relationship skills and people they can trust. Spending political capital to address these levels of influencers is important, but the focus of these discussions needs to be on strengthening relationships, not on delivery. Pitching quantities of FTEs and systems savvy to senior executives are wasted opportunities.
• Jumping rank over a potential client’s vice president wont win you any favors and doesn’t reach an audience that has a difference of opinion. In fact, vice presidents value relationships just as much as their bosses do and building these relationships may be just as valuable in a competitive bid.

Note to readers:  there are no intended political undertones to this article, based on the picture above.  All good, apolitical, tongue-in-cheek humor

Get ready for the healthcare market to heat up over the next three years as a result of state health insurance market places, the rapid expansion of accountable care organizations, and ICD-10 implementations.

On Friday, Genpact announced its acquisitions of JAWOOD and Felix Software Solutions. This announcement comes on the heels of Cognizant’s November acquisition of Medicall, a BPO specialist provider of medical talent to the payer and provider industries with nearly 800 resources. Clearly, leading IT/BPO services providers sense real growth potential from healthcare insurers (payers) bracing to cope with these seismic changes.  We explain the forces influencing the payer market more thoroughly in our February RapidInsight™, Regulatory Fallout or a New Beginning in Healthcare?

What is Genpact getting with JAWOOD?

JAWOOD is a privately held, Michigan-based firm with 400 employees with three particular strengths in the technology enablement of healthcare payor operations.

1)   It has a variety of existing client relationships with Blue Cross and Blue Shield plans serviced completely domestically. We estimate JAWOOD’s revenues to be between $55 million to $60 million.

2)   The company specialized in ICD10 and HIPAA 5010 readiness and conversion with technical solutions provided by Felix Software.

3)   The company is a regionally strong contingent labor supplier to payers seeking operational and technical skills in McKesson, Trizetto FACETS, and NASCO.

What motivated Genpact to make the acquisition?

With over 60,000 professionals in the Genpact global organization, JAWOOD’s 400 employees would seem a rounding error inconveniently located in Detroit, Michigan, a city better-known for the American automotive industry, music (Motown, Eminem, and Kid Rock), and crime.

Nestled among such non-sequiturs, JAWOOD has exploded on the payer market in recent years, with estimated annual revenue growth of 19% over the last four years. The company’s close ties with BCBS insurers and strong systems capabilities were ideal as payers’ raced to comply with 2012’s HIPAA 5010 transaction standards. Importantly, the company built a portal to automate HIPAA transactions and pre-certify healthcare providers – an invaluable asset as the payers and providers integrate their revenue cycle processes. These customer relationships and technology assets are valuable to Genpact.

Yet, bigger changes are afoot. In particular, ICD-10’s conversion maelstrom looms around the corner with a CMS compliance mandate scheduled in October 2014. Just how big is this change? ICD-9, the current standard, has a mere 13,000 codes describing medical diagnoses upon which billing, claims adjudication, and utilization decisions are made. ICD-10 contains over 68,000 codes, including such gems as T7501XD (shock due to being struck by lightning, subsequent encounter). V91.07XA (burn due to water-skis on fire, initial encounter), and V9542XA (spacecraft crash injuring occupant, initial encounter).

Since historical claims data must still be compared to new data, payers will need to map ICD-9 codes to ICD-10 standards and vice versus. This process is called cross-walking and requires specialized tools and technology, which JAWOOD has developed. We expect solid client results from mixing JAWOOD’s technology with Genpact’s wickedly smart DNA and it puts them in the running with Accenture, Cognizant, and Infosys for ICD-10 conversion work.

More importantly, the change of codes has significant process implications in claims, pricing, and utilization management operations. Every claim must be accurately coded, payer systems must accurately adjudicate claims based on the code, and actuaries must forecast population changes based on these codes.  Genpact already has a reasonably strong healthcare payer BPO bench (over 1,500 mostly Indian-based resources), and this acquisition positions the BPO pure-play behemoth in the conversation to help when payers need operational support. This positioning is doubly important with medical loss ratio mandates that regional insurance plans will struggle to achieve without outsourcing.

The Bottom Line: Ramping up the capability is only one part of the equation.  Communicating them to the healthcare industry is the other

Genpact now has a onshore healthcare toehold upon which it can expand, especially with the availability to talent in Detroit. SourceHOV, the $500m BPO provider with many large healthcare payer BPO clients, has two locations within 20 miles of JAWOOD. The Detroit Medical Center, Henry Ford Health System, Blue Cross Blue Shield Michigan, and St. John Health System all rank in the top 15 employers. With a number of Federal and state regulations prohibiting offshoring, Genpact can now enter the game – and its has thousands of resumes in JAWOOD’s staffing database to jumpstart operations on a moment’s notice.  It is also worth noting that Genpact now has 3,500 staff located across US locations – far more than most leading Indian-headquartered business services providers.

Tony Filippone, Healthcare Payor Expert (among other things) at HfS research (click for bio)

However, as we’ve seen in many past acquisitions, acquisition decisions must do more than add capability or increase economies of scale; they must provide client relationships that can be grown, and new capabilities that can be extended. Take Cognizant’s acquisition of Medicall, which allowed Cognizant to engage the care management units of payer operations. Since care and utilization management drives medical loss ratios, it allows Cognizant to open discussions to address the 80% of payers’ costs that are medically related instead of the administratively focused 20%. With capabilities to address ICD-10 migrations and provide HIPAA-compliant portals, HfS believes that JAWOOD provides this potential for Genpact to introduce its technology-infused BPO capabilities to healthcare payers, while creating a leverage point to enter healthcare provider revenue cycle management discussions.

However, for Genpact to leverage successfully ICD-10 capabilities, they must immediately communicate their operational and transformative capabilities to payers because window of opportunity is closing quickly – by October 2014 payers must be compliant, which means payers are allocating budget in 2013 to their vendors. They also must differentiate from Infosys, Cognizant, and a variety of specialized consultants who are pitching ICD-10 solutions by emphasizing their process expertise, experience in the Blue Cross Blue Shield community, and onshore delivery model.

You can read more about the forces influencing the payer market more thoroughly in our complimentary February RapidInsight™, Regulatory Fallout or a New Beginning in Healthcare co-authored by HfS analysts Adam Luciano and Tony Filippone.

Banks are seeking to grow their revenues in many areas impacted by the recession, most notably lending services. As they regain momentum in areas such as mortgage processing and commercial lending, the operational support and infrastructure that many banks had previously down-sized, is again needed and outsourcing helps add that scale and flexibility in this volatile environment. Hence, while cost savings continue to drive outsourcing business decisions, the capabilities to scale up business volume and meet complex regulations are paramount:

Conversely, banking and financial services organizations are clearly not viewing outsourcing as an opportunity to improve analytical capability or transform operations. Clearly, many banking executives still view outsourcing as a utility solution and are yet to be convinced of the greater strategic benefits… or are simply control freaks who just can’t let go of anything remotely strategic to their organizations.

2013 poses unprecendented challenges

The banking and financial services industry has endured one of the most turbulent times in the history of the global financial markets. While there is no doubt that this pivotal time has re-shaped the industry forever, it is now time to look into the future and move ahead. 2013 is poised to be the year of action. Financial services are poised to have a huge year; there will be mergers, systems upgrades, global expansion and new product launches all designed to regain their positions as industry leaders. Leaders are faced with regulatory changes that can’t be compared to anything seen in history, customers who are demanding improved services, credit policies that seem to change with the weather and shareholders who are tired of waiting for results. Strong business leaders understand they cannot be successful alone and they cannot operate the same way they did a decade ago, so there will be changes, the question that remains to be answered is who will make the right changes for success? It all starts with these two questions:

1. Have companies learned from the crisis and are they taking meaningful action to prevent a future one?

2. How will financial institutions conduct business going forward and regain the confidence of their customers and investors?

In our new report “Business Services Outsourcing in Banking and Financial Services“, HfS Research looks at the willingness of executives to utilize outsourcing in helping the meet these challenges.  BFS leaders have shared with HfS that they do not plan to bring large amounts of work back onshore; they don’t even plan to change providers in most cases.  What they do want is to be able to build stronger more collaborative relationships with their service providers but what does this mean and are providers finally willing to put some skin in the game themselves and step up to support their clients?

HFS' Michael Koontz, author of Business Services Outsourcing in Banking and Financial Services: 2013 Market Report (click to view)

Data shows that providers continue to do a great job at decreasing cost and bringing great process rigor to their relationships but they are not supporting their clients at the next level; technology platforms and innovation.  Our recent survey tells us that buyers continue to want a partner that is willing to help take their business to the next level, whether this is through technology or better processes.  As the businesses have evolved to include in-house processing, captives and outsourced models, both providers and buyers must work together to be able to effectively integrate these into a seamless operation.  Those who do this and do it well will finally realize the value of a global operating model.

HfS Research has calculated that the outsourcing market is now closing in on $170 billion and will continue to grow at just over 5 percent a year for the next five years.   While BPO services are expected to grow at just over 7 percent, ITO and professional services will be around 5 percent.  The difference can be attributed to the overall market ITO and the services business as compared to a more immature BPO market.

However, who will be the providers that will benefit from this growth and which providers will remain in their safe zone of lift-and-shift commodity BPO processing?  For those businesses that are ready to move ahead in 2013, HfS Research has looked at 13 of the top providers in the BFS space and ranked them against their peers based on their scale, capabilities, technology and ability to drive innovation in the financial services space:

Premium subscribers to HfS Research can read on by downloading “Business Services Outsourcing in Banking and Financial Services“.

If you weren’t still sleeping off your champagne breakfast, you may recall we discussed the 2012 market challenges and how they’re impacting 2013’s strategies and priorities.  We also managed to expose KPMG’s Stan Lepeak for who he really is… (Kiefer anyone?)

Well fret no more, as we have the replay now available for your viewing and a full slide deck for our premium research subscribers. Enjoy!