So here's the eagerly-awaited second part of the Lowell Williams experience, where we decided to give him 30 minutes of fame. Over to Equattera's HRO mega-star with the handbrake firmly in the off position…
Phil Fersht: Lowell, we’ve had a lot of talk on here about “Platform BPO”, where clients essentially take on a standard SaaS-delivered platform, supported by business processing services delivered by a BPO provider. How do you view these “on-demand” business services? Isn’t this just a win-win for the software providers, with limited value for the BPO provider? How can service providers differentiate their offerings in this type of model?
Lowell Williams: As mentioned above, many HR and IT executives
can no longer justify large capital outlays for classic license and install platforms, nor are they willing to commit the operating capital to maintain such systems. A number of smaller, more flexible, and less ready to customize providers is already discernible in this market space, such as Workday, Northgate-Arinso, Caliber Point and recently” Xercs” (our temporary trade name for the combination of Xerox and ACS). For SaaS to work, however, client companies need to realize that customizations will not be possible to any great degree. SaaS is a truly one-to-many model, and the burden of all customizations will fall back on the client company. In addition, allowing any substantial customization or personalization will degrade the cost curve and performance as well. Not all companies can accept that reality. Embedded in many of our HRIT systems today are routines and programs that we believe give us competitive advantages in employee treatment. If we are going to make SaaS work on a wide scale, we will have to find a way to take those custom elements out of the HRIT system. The largest pure SaaS model today is Workday, and it has just over 100 customers, many of which are not in transition to full service yet, so we have a very long way to go on SaaS. We are also a long way off from being able to compare the Total Cost of Ownership of a classic platform such as SAP with an SaaS model provided by SAP.
Phil Fersht: Are clients getting better at governing BPO these days, or are you seeing them making the same mistakes over and over again? Can service providers do more to help their clients govern sourcing engagements better?
Lowell Williams: Generally clients are refining their approaches to governance, although many of them still try to scale a model that was appropriate for the governance of a health or savings plan to a large scale HRO transaction involving multiple countries. Not enough clients use appropriate toolsets, and thus the client team gets bogged down in building spreadsheets and crunching data rather than automating that function and concentrating on structural trends and major developments in building better relationships. The early promise of best practice flow through outsourcing is still a largely unrealized ambition. While some best practices are actively promoted by the industry, those practice improvements tend to be what is beneficial to the provider’s margins or cost structure. There is very little convergence of academic HR work on best practices and improvements with providers or their clients. For instance, I can only name one or two HRO providers that have a functioning advisory council on HR best practices, and we are missing a major opportunity to develop truly grounded, researched and articulated HR practice appropriate for an outsourced or shared service HR environment. Best practices are as much as a part of governance and relationship management as costs and service level performance. If providers truly want to be partners, governance has to become more about a better mutual mousetrap than about reporting on call center statistics.
Phil Fersht: And finally, what’s next in this strange world of outsourcing? What do you see happening in the next decade? And how will the economic crisis change executive thinking with global sourcing in the long-haul?
Lowell Williams: The new Flat Earth Society will become the dominant mindset. We will have to globalize the sourcing of talent as the OECD nations face the retirement or partial retirement of the Boomers. Visa practices, cross cultural training and learning to segment work tasks around the globe are the dominant themes of the next years in HR services, and for that matter in finance, IT and procurement services. Work flow must be globalized, and the race will be to those companies that master best performance for best price in serving themselves and their customers. You asked earlier about legal service outsourcing. Why should we pay to draft patent claims in Washington, DC when we can get the same services in Cape Town at 1/3 the price? Why should be use actuarial services in Chicago for our pensions when we can buy better services in Kiev or Hyderabad and for a better price? Our corporate production and growth engines must use better work flow, better task sourcing and smarter global sourcing models to direct work to service centers that reflect best site/best service/best practice and best value As executives look to their competitive future, this crash has reminded them that competition for mindshare and walletshare is never-ending, and they must retool their organizations to compete though astute sourcing and shared services on a global basis.
Phil Fersht: Thanks for your time, Lowell. Everyone here will love reading your views.
Lowell Williams (pictured above) brings 30 years of international HR, HRO and HRIT expertise to his role as EquaTerra’s executive director for global HR services. Before joining EquaTerra at its inception, Lowell was an HRO executive at TPI, executive director at Exult, vice president for global HR at Bull Information Systems, and senior vice president and general counsel at Elf Aquitaine. He is very engaged in economic and labor policy, active in religious affairs and local community.