Monthly Archives: Sep 2009


September 30, 2009 | Phil Fersht


As many of you close to me already know, after 14 years in the analyst and management consulting community, I am going to take a little break and make a few changes.

I'd like to thank publicly AMR Research for a wonderful couple of years, where I got to spar with some great people, service more clients that I care to remember, and have a lot of fun bantering with so many of you who frequent the Horses.  I'd especially like to mention some great analysts with whom I'd had the pleasure of working: Dana Stiffler, John Hagerty, Simon Jacobson, Bruce Richardson and Mickey North-Rizza - a real credit to the analyst industry (and will, hopefully, be featured here in the future).  I'd also like to thank Helen Scott for her sheer perseverance... 

If you're wondering how to get hold of me, you can always mail me here. Onwards and upwards my friends -:)

Posted in: Business Process Outsourcing (BPO)



Xerox copies Dell's example and acquires ACS, but again, where's the fit?

September 28, 2009 | Phil Fersht

Is there a recurring theme here?  US-based giants with faltering commodity business models from yesteryear, making very late plays to get into the IT-BPO services business?

While I could see some synergies between Dell and Perot, this one's even tougher to fathom, unless Xerox has further plans to marry ACS with a stellar IT services acquisition. 

ACS was one of the early darlings of BPO, and was right at the top of the competitive tree in the early 2000's whenever a large Finance & Accounting, HR or call center deal was up for grabs.  It would always give Accenture and IBM a run for their money in BPO pursuits, and had a compeling culture and engagement methodology for many of the old world BPO engagements (i.e. a lot of lift and shift and staff re-badging). 

Sadly, ACS has rather fallen away in recent times, and has struggled to cope with the aggressive entry of the Indian-centric global competitors into the BPO space.  The new generation of global services providers are bringing passion and combined IT-BPO prowess into the mix, in addition to global sourcing models that are driving down the price-points.

Xerox, on the other hand, has been eyeing broader business services for a while, and I can see why they'd find part of the ACS portfolio attractive - a broader client-base, great presence in healthcare, government, hi-tech and consumer business, a strong BPO brand and global delivery presence.  ACS also has a strong IT services business, but not on the same scale as the top tier. 

The real challenge for this combined entity, is to cope with the new throng of competitors in this space:  Cognizant, Genpact, Infosys, TCS et al., and not solely the incumbents such as Accenture, Capgemini and IBM.  The combined Xerox-ACS business will have a short-term potential to consolidate a commanding position in back-office BPO areas such as document management, call center, payroll, benefits admin and accounts payable. 

However, clients today are spoiled for choice with other service providers which can offer the same services at lower cost.  Xerox also needs to make a quick move to push a utility delivery model, based on common processes and standards, with compeling industry-alignment.  Continuing to push old-world BPO, where the customer shifts existing processes with limited transformation, is not a recipe for success. 

My take?  If this combined entity were to merge with a strong IT services provider and develop a coherent IT-BPO strategy, then we really have something to talk about.  Funnily enough, if you combined the new Xerox with the new Dell, then you'd be looking at a company with a lot of future potential...

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT Services



Forget Platform BPO, it's really about the Business Services Cloud (Part II)

September 27, 2009 | Phil Fersht

We inspired a lot of offline debate when we discussed the challenges facing BPO providers delivering so-called "Platform BPO" solutions.  Bottom-line, if BPO service providers are competing for commodity services engagements which are underpinned by software platforms that are widely deployed by several other service providers, they face a major challenge of differentiating themselves to win new clients and avoid a price-war for new business.

Cookie cutterAt the enterprise level, selecting a BPO provider to process transactional business services for a major Oracle or SAP-based engagement is dependent on the providers' global scale, brand and competency.  For these large-scale transactional BPO engagements (i.e. accounts payable, payroll etc), it's largely a commodity market these days.  However, the battle is on to provide industry-specific solutions, such as health insurance processing and revenue-cycle management, banking-specific services (i.e. netting, lock-box services), retail merchandising, legal services, healthcare informatics etc etc.

For example, I had a great conversation last week with Mark Stiffler, CEO of sales compensation provider Synygy. He was faced with two choices for his business:  either to provide an on-demand managed service to his clients, or license his software through BPOs in the channel.  Sales compensation is an area that can be delivered on a set of standard processes, with some unique personalization to the client.  It's also an area where there's a hell of a lot of value an outsourcing provider can add to optimize their clients' sales performance management processes.  Hosting the software provides the utility offering that can enable a high-value growth engine for the business.  However, when enabling clients to make the most of out these services, they need some quality support that understands both their industry and their business.  How many times have you heard of clients who buy a software package and only use a fraction of its functionality?  The BPO channel should be there to enable clients to maximize the process flows on offer.

While Mark has pursued this managed services (BPO) strategy, some of his nearest competitors have opted to pull-back from a services-delivery model and push their software package through BPOs in non-exclusive agreements.  While the latter strategy might make sense for the software vendor in reducing its own cost-of-sales, the BPO providers are unlikely to invest a great deal of money in high-quality support for a standard software package they don't own.  They'll simply add the hosted software into a broad portfolio of adjunct services.

Today, we don't know whether Mark's strategy will ultimately win out in his market, but sales compensation is an area where most clients need quality support, so you have to assume Synygy will continue to grow organically as a managed services provider, and could ultimately become an attractive acquisition candidate for one of the BPOs.  You have to applaud Mark's firm for making a successful transition from a software to a managed services provider.  Too many other software providers simply find that shift in business model too much of a cultural change, and often too much of an initial investment to stomach.  My fear is many software providers will go out of business if they fail to choose the right managed services strategy for themselves and invest in making that cultural shift.

In commodity markets, such as payroll, the scale-game through the BPO channel is clearly the way forward (for example ADP/SAP) because the managed service will normally cover all the key areas the client needs for successful delivery.  Once you have your payroll and accounts payable up and running, how much "innovation" do you really need, if you're happy with the performance and price?

However, for business areas where clients really could really benefit from best practices, especially when they can be tied to industry-specific scenarios, the "Business Cloud" model is clearly the way to go, where the provider can deploy the computing, business support and alignment services its clients need to maximize the use of the software in a on-demand model.  And will we be even be talking about "software" in a few years?  It's the process IP that software supports which is really what's at stake here.

Posted in: Business Process Outsourcing (BPO)Cloud ComputingSaaS, PaaS, IaaS and BPaaS



Swine Flu can impact your service levels

September 24, 2009 | Phil Fersht

If you wake up looking like this...

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Posted in: Absolutely Meaningless Comedy



Scale the peaks of FAO... in Tampa

September 22, 2009 | Phil Fersht


As a wise man once told me, "there's nothing  quite like visiting Tampa in late October".  Many years on, his prophecy is coming true, with the second annual North American "FAO Summit", being held in the Saddlebrook resort, 20-22nd October. 


Anyhow, come and meet a compeling line-up of speakers, panelists, hobnobbers and politicians that include several outsourcing PMOs (for some strange reason they managed to attract several from beverage producers...), former senator John Sununu (one of the five panel members responsible for the oversight of TARP funds), a bunch of advisors, service providers and some crazed blogger.

As usual, a large discount is offered to the cheapskates who visit here, so click on the icon to the left to register quoting the code "FERSHT2".  If you are on the buyside and evaluating BPO strategy, drop me a note.

Posted in: Outsourcing Events



The Dell finally tolls - but is this the right fit?

September 21, 2009 | Phil Fersht

So Dell finally made its major play into the IT services enterprise arena announcing a $3.9bn deal for the Texas-based Perot Systems.  Unlike the HP/EDS mega-merger of last year, there is a lot less overlap between the merging entities, however, you have to assume this is more of a play by Dell to transform its commodity hardware business by refocusing its future strategy on services-led engagements.

However, while there isn't much overlap, there also isn't a lot of synergy.  Why should Perot customers want to buy Dell equipment all of a sudden?  Most CIOs today are looking to move away from hardware-centric IT delivery models, and onto more on-demand cloud computing models.  If anything, it's more of a play for Perot to push services onto Dell's customer-base.  It also opens up the lucrative healthcare IT market to the newly-merged entity.

While I applaud a bold move by Dell to transform its business model, work has yet to be done to elevate Perot's IT/BPO services business to the top echelon of service providers at a global level.  Namely, Perot hasn't  yet fully exploited its presence in healthcare to position leading edge IT/BPO offerings in that space, especially with the market ripe for exploitation in light of the new government initiatives, namely ICD-10 compliance and digitization of patient records.  If Dell can quickly leverage this merger to make a further strategic acquisition in this space, then you can see a new player emerging.  However, if they spend a whole year trying to restructure these firms and take their eye off the ball with regards to broadening the service offerings, this could present a window for several of Perot's services competitors in the healthcare space to step in...

You also have to wonder whether the largely US-dominated vendors are going to continue to consolidate in light of fierce competition from the Indian-dominated global providers.  ACS-CSC anyone?

Posted in: Business Process Outsourcing (BPO)Cloud ComputingIT Outsourcing / IT Services



Independence Statement

September 19, 2009 | Phil Fersht


Posted in: Uncategorized



Independence Statement

September 19, 2009 | Phil Fersht


Posted in: Uncategorized



The art of blog: credibility is in the eye of the beholder

September 18, 2009 | Phil Fersht

Pink_eye Mark Stelzner roused some passions last week with a great blog post discussing how some traditional media are highlighting the need to regulate bloggers with possible "conflicts of interest".  For example, Workforce Magazine's online article discusses the impact of controversial HR bloggers, such as Cheezhead's Joel Cheesman.

At the heart of the debate are the issues surrounding which industry entities are more credible for regaling information to the marketplace.  My take is that

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Posted in: Social Networking



Stephanie Moore's Law

September 15, 2009 | Phil Fersht

Steph Moore One of the most prominent industry analysts in sourcing over the last decade-plus has been Stephanie Moore.  Steph started out at Gartner, before spending time at Giga, and most recently Forrester Research, where she built an industry-wide reputation as an outspoken and respected figurehead of the IT services and outsourcing world. 

Earlier this year, Steph made her first venture over to the service provider side, and when she's not busy entertaining her three kids, sailing around the Westport beaches, or regaling stories of her junior golf open triumph (she swears they had color-TV back then...), Steph assumes the role of Chief Marketing Officer for IT services firm, UST Global.  I thought I'd take this oppountunity to grab a few words with Steph to share some of her views on where the industry is headed, and how she's finding life on the vendor-side of the fence...

PF: Stephanie, how has the world of offshoring changed over the last decade?

SM: Phil, it has changed dramatically. In 1999, people were using offshore outsourcing to save money, but also to execute on very low-value tasks. There were also a lot of people scrambling to fix the Y2K problem. Today, it couldn’t

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Posted in: Business Process Outsourcing (BPO)Captives and Shared Services StrategiesCloud Computing



Derail the Healthcare gravy-train: introduce competitive multi-sourcing

September 11, 2009 | Phil Fersht

Gravy_Train Being a relatively recent immigrant to US society, it's fascinating to observe the political games corporations and politicians play to reach their desired outcomes. 

What I find a little absurd is how easy it is to decipher the real political motives behind all the rhetoric; especially those ridiculous commercials sponsored by insurance companies trying to protect their monopolistic positions and keep their gravy-train chugging along.

Working in the sourcing industry forces you to cut quickly through complex issues to find sensible solutions, and healthcare doesn't seem a whole lot different - despite the sheer scale of the issues and requirements.  Trust me,

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Posted in: Buyers' Sourcing Best Practices



Forget Platform BPO, it's really about the Business Services Cloud (Part I)

September 09, 2009 | Phil Fersht

The recession has upped the ante for today's BPO providers: the move to providing business services in a cloud-like model is accelerating, and the real challenge for today's service providers lies in answering the following questions:

1) Do we want to play in the BPO space? 

2) How do we play in this market?  What's our angle?

3) How can we compete?  What's our differentiation?

The challenge today is whether a provider is adding value beyond low-cost processing services.  If you are only really providing an arbitrage solution, someone is going to come along and offer it for even less money, and someone else will eventually come along and provide it for even less.  It's a no-win game, unless you want to become the lowest-cost provider in town and make a razor-thin profit margin.

What's interesting is this coming together of the IT/BPO model.  And it's becoming much more sophisticated then simply providing a platform and some low-cost processing services.  It's about  integrated business services where the provider delivers the hosting, the application skills and the business services needed to help clients achieve specific business outcomes.

IT services providers have made a living differentiating themselves by providing expertise in technical areas that allowed them to charge a premium to their clients.  However, as technical skills became a commodity, some IT services providers are moving up the value-chain by providing expertise that apply technical skills to specific business needs, while others have opted to scrap around for the low-cost "price per developer per hour" commodity business.  Those IT services providers which think they can get away with charging a premium for commodity development services are having a rude awakening in today's post-recessionary marketplace.  Most clients today are insisting on greater transparency with the costs of services.

This is where BPO gets interesting, as the similarities are striking as services commoditize, and the winners focus on providing value.  Let's take an example in life sciences:  an IT services provider is performing technical clinical data management services for a phama client.  This entails providing programmers skilled in integrating Oracle's clinical data repository into the pharma's legacy applications.  That pharma has five other IT services shops working on its systems, all of which can provide the same skillset to performthe same work.  It's become a price-play.  At the same time, the pharma is spending millions a year on analysts to extract that data and apply it to research projects for new drug development.  If that IT services provider delivering the clinical data development work can step up and also provide analytical services to help interpret and apply that information to the pharma's research operations, new business value is now being created (not to mention the huge cost-savings if these services are delivered offshore).

However, this isn't about providing cheap bodies to crunch data, it's about having systems analysts working in tandem with bio-informatics analysts to ensure the right data is being made available and subsequently analyzed for the pharma's scientists to make critical judgment calls.  The differentiation is in providing the integration of technical capability, business process execution and then applying it to the client's business.  Moreover, if the provider has performance-based incentives to help its client develop new drugs and achieve medical breakthroughs, it is becoming intrinsically tied to the success of its business.  This scenario is similar in other industries, for example merchandizing support for retailers, or supply chain optimization for manufacturers. This is where the whole IT services/BPO industry needs to go.

In Part II of this article, we will discuss how BPO providers can differentiate themselves by developing / acquiring IP to deliver holistic business services that integrate the application hosting, development and business processing within a single cloud-delivery model and then apply it to client situations.  And is there really a role for the pure-play BPOs, or is the power shifting to the IT services shops developing domain-specific industry BPO expertise?

Posted in: Business Process Outsourcing (BPO)Cloud ComputingIT Outsourcing / IT Services



Join the world's largest social-networking sourcing community

September 06, 2009 | Phil Fersht

The BPO ForumYes, there is such a thing as a free lunch... Horses For Sources' official LinkedIn Group, the aptly-named "BPO and Offshoring Best Practices Forum" now has 7,000 members. This is a forum for leading sourcing practitioners to share their experiences, views, opinions, best practices and lessons learned in the worlds of IT Outsourcing, Business Process Outsourcing, Shared Services and Offshoring. You also get a free subscription to the Horses Digest. And it's FREE...



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