Monthly Archives: Sep 2010

SAHP? Stranger things have happened

September 30, 2010 | Phil Fersht

With Leo Apotheker taking the helm at HP, all sorts of questions arise as to why they hired a software guy, who wasn't exactly a wild success when he was top dog at SAP.  Leo is the man you'd want if you are planning to acquire SAP.  He knows the company inside and out and is savvy enough to work out some sort of game plan to integrate the German giant into the HP empire.

Firstly, I am not going (like so many others) to criticize this appointment - give the guy time to show what he can do.  I always like to see someone have a second chance - especially when they can build on their previous experience and do things differently.  Besides, when you're trying to sell printers, servers, laptops and services - why not get a software guy to just pick it all up from scratch?

And secondly, I am not going to go into another diatribe about how he needs to develop a compelling ITO/BPO value proposition after Hurd had left that business to go stale (but you do wonder if he even knows what BPO is...).

And thirdly, doesn't HP have a track record for buying up tech giants whose best days are behind them (Compaq... EDS), with the confidence to absorb them into their organization and perform miracles with their products and services?

HP and EDS are very strong SAP integration shops, and are very adept at doing the complex stuff.  HP has never really done much with its software business, and its hardware and services lines are not exactly in high-growth mode these days.  I think they fancy having a go at picking up SAP, and going headlong after Oracle and IBM.  With Ray Lane supporting, he has the service chops to try and figure this out, while Leo knows how to push product.

While HP taking out SAP could mutilate its services business initially (who would want to have their lock-in software vendor providing its services), we are in a world where the rule book is being re-written.  IBM seems to do just fine selling its middleware with its services, so why couldn't HP at least try it?

Stranger things have happened...

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



The expression barrier in outsourcing: say what you mean!

September 28, 2010 | Phil Fersht

Esteban Herrera: Research VP for HfS' buy-side enteprise sourcing practice

One element of sourcing which constantly baffles me, is the inability of firms to be open about why they're doing it.

If I have a dollar for every outsourcing engagement which was decided purely on price, with a "nod and a wink" for the innovation that was going to be achieved in the future, I would be, well, about a grand better off!  Our new enterprise sourcing dynamo, Esteban Herrera, expands further...

The expression barrier in outsourcing

Almost a decade ago, I had the honor of doing some research with MIT Sloan’s Peter Weill, one of the most influential voices in IT management in the world. Over the course of that project, I became exposed to many of Peter’s concepts, and I remember one in particular, which he called the expression barrier. I could never do it justice, but what I recall is that IT customers aren’t particularly good at telling their IT organizations what they need; and even when they do, IT organizations aren’t particularly well equipped to interpret it.

This should ring a bell for anyone who has ever tried to build, manage, or repair an outsourcing relationship. I think the expression barrier in outsourcing is a) even more prevalent than in IT and b) even more serious, as any breakdown occurs across enterprise boundaries rather than within them.

It starts during the sales cycle: If I had a dollar for every past client who declared that “price cannot or will not be the deciding factor” and then proceeded to make their decision almost entirely on price, I would have many, many more dollars. Providers, of course, have figured this out, and greet such statements with great skepticism borne from real and painful experience. The result, then, is that often when a client legitimately will pay more for a higher standard, they still don’t get it because their deal was built on price out of fear that anything different was a losing proposition.

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



Outsourcing marriage counselling... with Liz Campbell Evans

September 22, 2010 | Phil Fersht

Liz Campbell Evans is Managing Director of EquaTerra’s Governance and Transformation Advisory Services

If your outsourcing relationship is on the rocks, one person who can provide some tried-and-trusted therapy is EquaTerra's Liz Campbell Evans, who actually does outsourcing marriage counselling for a living, running EquaTerra's transformation and governance practice.

Now Liz is one of those people who just makes us depressed - she's a triathlete, scuba diver, fluent linguist in both English and American, actually loves her job -  and just gave birth to her first baby boy (and still managed to squeeze in this discussion with us).  Her only flaw is she actually enjoys intervening in broken outsourcing relationships to earn her bread.

And before we go to the discussion with Liz, we'd like to invite you to meet Liz and the EquaTerra team in my home town of Boston on 14th - 15th October, where you'll get some serious advice on how to work more effectively with your outsourcing partner.  Click here for for details on an excellent agenda and email Alison Norman for more details.

Phil Fersht:  Hi Liz – so how, on earth, did you manage to end up in this business as a governance expert?

Liz Campbell Evans:  Good question and one a ponder from time to time.  I’ve been involved in outsourcing for a number of years now, over thirteen and I soon realized that while the seemingly exciting part of the process was getting to the “deal” the rubber really meets the road post deal.  I have spent much of my time in outsourcing focusing on help organization work better together within the boundaries they jointly agreed and established as part of the contract.  The frameworks and tools that I use on a day to day base really help to enable effective governance.
Phil Fersht: Is it fun at all, or just lots of stressful clients, and sorting out strained relationships? 

Liz Campbell Evans:  I’m going to confess it’s great fun, I often describe my job as an opportunity to meet interesting people and help them solve tough problems.  No outsourcing relationship is the same, different people involved, with differing experiences and expectations.  As you would say, Phil, it's a case of "horses for courses"!   Having the opportunity to realign all of these difference and sometime, opposing perspectives is a challenge, especially to preserve a fair and sustainable way of working together.  I also get to work across multiple functions / subject areas, IT, Procurements, F&A etc etc so I get to see how the marketplace is evolving and adapting to changes in deals.  Helpful insights when you’re trying to fix things, believe me.

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



New HfS Market Landscape: Is insurance BPO ready to grow up?

September 18, 2010 | Phil Fersht

The global insurance industry faces a challenging and unprecedented market environment; insurance premiums are falling, and insurance firms' profitability is nowhere near the pre-recession era. Added to this, insurers in the US and Europe need to battle several regulatory and compliance requirements in the next few years.

The US healthcare reform calls for innovation in risk/price modeling for insurers who will cater to whole new segments of customers in 2014. Similarly, the Solvency II regime has brought risk management and disclosure to the forefront of the European insurance industry.

Compliance is already driving up documentation and administrative workload, and there is a shortage of risk analysts and actuaries to take on the higher level work. Insurers now have an urgent need to manage enterprise risk by harmonizing market, credit, operations and organizational security. In this scenario, outsourcing of select business processes is a highly viable strategy, as several insurers are discovering today. And expense reduction is only one angle; it is no longer the only important reason driving the insurance segment to outsource.

Providers are now business partners, offering to diagnose current and future resource requirements with a focus on efficiency, not cost arbitrage. Outsourcing is increasingly empowering insurers by integrating and transforming processes, tools, technology, as well as risk strategies. These are the major points of discussion we cover in this new HfS Research report, relating to global insurance BPO:

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesFinancial Services Sourcing Strategies



Cog and Gen getting it on? Naaaahhhhh

September 16, 2010 | Phil Fersht

Cog and Gen earlier... denying any romance

Lots of frantic noise this week that Cog has been making romantic overtones to Genpact - with India's press jumping on "speculation".

Like any other industry observer, you can certainly see lots of romantic potential here - Wall Street's darlings of BPO and ADM tying the knot to frighten the life out of Accenture, IBM, Infosys  et al. However, while its seems like Brad and Angie Part II, I'm afraid this one just ain't gonna happen anytime soon.  And if it does, I will personally send a box of chocolates to Senator Schumer.

Here's why this is highly unlikely:

Industry media is bored and yearns for big M&A across the new breed of services providers, but they're not (quite) ready.  Everyone's been predicting major M&A for the last couple of years, but it's only really happening in very mature industries (for example payroll and benefits administration) or with companies that have been around for many years and need to be acquired to have them broken up and re-balanced (i.e. Perot Systems, EDS etc.).  Firms such as Cognizant and Genpact have been on such a high growth trajectory these past 3-4 years, they're simply not ready to drive such a thunderbolt of disruption into their business operations.  We'll need to observe a significant slowdown of growth for at least two consecutive quarters, before mergers of this magnitude will be entertained by the leading offshore providers.

Both Genpact and Cognizant have been developing their own unique cultures and brands - merging them now is risky. The speed of development of these firms has been staggering, and much of the energy behind this, has been the unique cultures created by dynamic leadership of taking the offshore model to the global enterprise.  The management style required to lead a  BPO business is also different from ITO - the margins are often tighter, the skills needed to run certain processes often harder to attract, develop, train and cross-train.  Taking a unique BPO culture and trying to shoe-horn it into a dynamic ITO culture could very quickly derail a secret sauce that took years to develop.

General Electric is an unlikely proposition for Cognizant to take-on. GE still dominates 40% of Genpact's business (see earlier post), and Cognizant is unlikely to see major growth potential in this client.  It also has a reputation for being a tough one to ingest.

The Indian-centric providers are more focused on cash-based "tuck-in" acquisitions. For several years, the leading Indian-centric providers have been looking at acquisitions that tend to be largely cash-based, relatively inexpensive, and ones they can pick up and grow with their scale-model.  For example, InfosysBPO recently acquired the McCamish insurance platform, whereby it could look to turn $1m insurance clients into $50m clients with its BPO scale.  Cognizant picked up the UBS Indian captive where it could start to develop BPO/KPO client opportunities based on the niche capabilities it had acquired.  Genpact is frequently picking up niche deals that adds piecemeal process competencies.   If these firms wanted to buy big, they'd need to entertain stock-based acquisitions, as once they shell out a few hundred million of their cash on one or two larger acquisitions, that money's gone, and so does their room for future strategic investments.

The more likely M&A will be between a Cowboy and an Indian. As discussed here recently, the more likely M&A in the ITO/BPO industry will come from Western providers and Indian providers coming together, in order to benefit from each other's competencies and cultures.  And this could take many shapes or forms - there is no set way for providers to develop their solutions with the onset of Cloud computing, hybrid sourcing models and verticalization of IT/BPO solutions. Genpact is a highly attractive proposition for many Western firms seeking to take a market leadership position in BPO.  And who would discount one company from Redwood shores with the reputation of making bold acquisitive moves, in casting its greedy eyes at the subcontinent?

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesProcurement, Engineering & Supply Chain Outsourcing



Sal-sourcing in the real world, Part I

September 15, 2010 | Phil Fersht

Mike Salvino, Group Chief Executive for Business Process Outsourcing, Accenture

One of the great double-acts in the early years of the BPO business was always the Kevin Campbell and Mike Salvino show (read our interview from last year).  ...And it still is!

Not too many people have been on the front lines of the BPO business since the very early days (remember Exult, anyone?), so it was no surprise when Kevin yanked Mike out of Hewitt Associates in 2006 to have him join him at the helm of Accenture's outsourcing business.

Now, neither of these guys are your typical silky-smooth Savile Row-clad consulting partners - they're wholesomely direct and open about the trials and tribulations of succeeding in a very complex global environment.  Their impact on Accenture is notable - not only among many industry observers, but also many of their clients.

Mike Salvino - or simply "Sal" to his friends and colleagues, has brought a real air or pragmatism to Accenture, where he now leads the firm's global BPO business.  And while everyone else was getting carried away with mixing Cloud computing with nanotechnology (at a recent analyst meet), Mike's response was simply "well, how about those clients who are just trying to get some results out of their business process deal today".  I realized, then, it was high-time to have Mike on here to grace us with his views of the real world, and he kindly ducked away from his son's basketball practice to spend some time with us...

Phil Fersht: Mike, since you’ve been on the front lines of the BPO industry from the early days in the 90’s, how do you think things have changed in the last decade? What’s different today compared to 10 years ago?

Mike Salvino: Let’s look at this across a number of different factors. If you dial the clock back 10 years, BPO was about pure cost savings and non-core transaction activities. So in 2000, clients were supposed to define what was core to their businesses and then get rid of everything that was non-core.  In the early days of HR BPO I remember having debates that there was no way service providers could do things like recruiting, learning or even expatriate administration because clients viewed those processes as core and would never want to give them up.

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



Horses for Sources and the London School of Economics Launch Groundbreaking Study into Cloud Business Services

September 14, 2010 | Phil Fersht

Horses for Sources and the London School of Economics to collaborate

Folks - we're delighted to announce that today we launched a groundbreaking study, in collaboration with our friends at Outsourcing Unit at the London School of Economics, to gain real insight into how business plan to adoption Cloud Business Services. 

When we spent time with Professor Leslie Willcocks and Dr Will Venters to discuss their research work with CERN and it's parallels with a Cloud business environment (see our recent blog interview), we realized the industry was in dire need of a definitive study that looks at how Cloud computing will impact the future of work for both business and IT professionals. 

Key dynamics being surveyed will include those aspects of Cloud that appeal to both business and IT professionals, inhibitors that are holding back adoption, current intentions and future plans, intended use of third party service providers and consultants, and determination of specific organization functions where Cloud will have the most impact.

Professor Leslie Willcocks, The London School of Economics

Professor Leslie Willcocks (pictured), Professor of Technology Work and Globalisation at the LSE, and renowned expert and author on global outsourcing and technology dynamics, is leading the initiative for the LSE. He added, “In our 2002 book Netsourcing, we predicted a strong move towards renting applications, services and infrastructure over the Net. It seemed to peter out with the bursting of the e-business bubble but in fact we are now witnessing the ten year convergence of streams of technology and capability that pose the question: how do we leverage this strategically for business advantage? That is one thing we want to investigate. The other is the longer game – is this going to be a dominant trend, the only game in town, or, if not, what sort of hybrid futures are likely?"

CEO of HfS Research, Phil Fersht, who will co-lead study, commented, “There's been so much noise focused on the technology implications of Cloud, and not enough attention placed on how business executives intend to apply Cloud services within their own business environments.  At the end of the day, some firms will succeed in driving down IT infrastructure costs using Cloud models, but the real momentum will come from the business processes that can be delivered to organizations that have all the associated application workflow and infrastructure already provisioned in the Cloud.  This study will be the first in industry to draw out these dynamics to help us visualize the future of work.”

HfS is inviting readers to take 10 minutes to complete our online survey.  Respondents will receive a report on the report findings, co-written by both HfS Research and the LSE study teams.


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



Smart governance will avoid blow-ups

September 11, 2010 | Phil Fersht

Posted in: Absolutely Meaningless Comedy



Esteban Herrera: why I joined the Horses

September 09, 2010 | Phil Fersht

Esteban Herrera: Research VP for HfS' buy-side enterprise sourcing practice

So while we're busily creating more employment onshore, one of our new recruits, Mr Esteban Herrera, has already been found guilty of submitting us a headshot that makes him look about 18.  So we're delighted to present the young gentelman looking a little more like his true age of 35 - which is still pretty young, but getting nearer that "you should be a home with your pipe and slippers" stage in life.  And here he is to explain why exactly he made the move to the orange side...

Hello everyone! I’ve been anxiously waiting the moment I could address the Horses readership from the “inside.” I’d been an advisor for the last ten years, so this move was deliberately considered—I was just getting good at what I used to do! Yet no career change has ever felt so right. Now that moment is here, I thought I would start with sharing some of the many reasons I am so excited to be where I am:

1. The outsourcing industry as a whole has grown stale and it needs innovative delivery models and deal structures to realize its potential. Nobody is truly addressing the dissatisfaction that colors so many outsourcing relationships, but HfS will.

2. HfS is a unique and timely platform from which to influence the entire industry—how much more exciting could it get (for an outsourcing geek)?

3. As a committed globalist, I am thrilled with the global nature of this community, and I believe that learning to do business (well) across geographies, regions, and cultures will be my generation’s lasting legacy. HfS gets this—I am not sure that others do.

4. I believe the “traditional” outsourcing advisory model is fundamentally broken and will not last as currently configured. HfS offers me and my (hopefully plentiful) future clients a new and improved way to add value.

5. I get to join my good friend and blogging hero Phil Fersht, and the brilliant team he has built (in no time flat, in case you did not notice), on the professional adventure of a lifetime.

I could go on, but I’ll be exploring these and other topics soon and there’s no sense in boring you, our loyal “reader”, right off the bat. The quotes around “reader” signal what makes this company different and special—we actually don’t have readers, we have a dialog of some of the best outsourcing minds from all sides of the industry. With your permission, I’m ready to throw myself into the conversation.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesHfS Research Company News



Renowned outsourcing advisor Esteban Herrera joins HfS as Research Vice President

September 07, 2010 | Phil Fersht

Esteban Herrera to join HfS as Research VP, Enterprise Strategic Sourcing Practice

These are exciting times for HfS as we expand our global remit to build out an analyst team with a powerful combination of research skills and real life  "feet on the street" outsourcing experience.

Since we launched HfS six months' ago, our prime area of focus for business growth has been with the buy-side practitioner who needs solid, expert advice on how to tackle outsourcing, which service providers they should evaluate, and how to find "new thresholds of performance" once they've moved into an outsourcing end-state.  They want us at the end of a phone, to turn up for workshops, to distill data and explain what this all means to them, and validate what they should do next.

We are delighted to announce that one of the most highly-respected (and popular) outsourcing advisors has decided to make the career switch from consultant to analyst and join HfS to head up our buy-side sourcing strategies practice.  No more endless billable hours trudging hallways in enterprises labelled as the "outsourcing guy", Esteban Herrera can now give HfS clients the real deal based on his years of vast experience, where he has lived and breathed every aspect of the complex outsourcing environment.

Esteban joins the HfS executive management team as Research Vice President for the firm’s strategic sourcing practice for buy-side enterprises. Herrera will drive a definitive research agenda that encompasses strategic advice, best practices and governance support across all aspects of IT outsourcing, BPO and shared services.

He joins HfS from leading outsourcing consultancy Alsbridge, where he served as Managing Director, overseeing several major ITO and BPO contract negotiations and strategy endeavors with global enterprises. Prior to Alsbridge, he served as President of NovaSphere Group, and an Executive Vice President at The Concours Group, where he led both the Sourcing Advisory Services and Global Shared Services practices. He has also held executive positions with both Infosys and Accenture, where he managed large global delivery P&Ls. Today he is a recognized thought-leader on outsourcing strategy and highly sought-after by clients needing expert advice.

Herrera brings deep international experience to HfS clients, having lived and worked in four continents. He is fluent in English, Spanish and Portuguese. He also co-authored the influential book “Outsourcing: The Definitive Point of View, Applications and Implications”, and led the landmark Research “Life After Outsourcing”, which was the first to focus on the behaviors and processes that can make or break outsourcing success.

Esteban is also a prolific blogger and writer - a great table-stake for life on this side of the fence.  Now he has sold his Porsche, his chief pastimes involve his wife, Patricia, and baby son Lucas, and when he's not wasting his time watching the Dallas Maverick's he can be found tuning into the Speed channel to watch Formula 1 motor racing.

We're delighted to have him start with us shortly - and you can reach him at esteban dot herrera at horsesforsources dot com.

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



Star analyst Euan Davis joins the HfS analyst stable

September 03, 2010 | Phil Fersht

Euan Davis to join HfS as Research Vice President

Six months to the day we launched a research organization, we're delighted to announce the first of several really exciting additions to our analyst team.

Euan Davis is a great friend of mine since university days, whom I coerced into the analyst industry in 1996 - and he still hasn't forgiven me.  After a five-year spell at IDC where he cut his teeth on European services (he also set up their Spanish services market coverage from their Madrid office), he went onto lead Yankee Group's European IT/BPO research before an excellent five years at Forrester Research, where he has cemented his reputation as Europe's premier - and most prolific - analyst covering services markets.  He once even guested here.

Now he's coming back for his revenge as Research Vice President for HfS, fulfilling a global analyst role for HfS, in addition to spearheading our European research practice.  We'll be rolling out our beefed-up research agenda very shortly that will include much of Euan's planned research.

In his spare time, Euan is a formidable skier, retired party animal, father of Rosa and Oliver with his long-time partner Hannah.  He's also based in Cambridge, UK, about a mile from my parents house...

You can reach Euan at euan dot davis at horsesforsources dot com - but he doesn't start until 20th September, so don't expect a rapid response.

Posted in: Uncategorized



Finding a needle in 20 million haystacks: CERN's Computing Grid creates a vision for Cloud Business Services

September 01, 2010 | Phil Fersht

In order to understand better the business potential of Cloud-esque environments to drive innovation, you could do a lot worse than have a look at the scientists who've been using their own version of Cloud for years:  Grid Computing.   When you get into areas such as particle physics, these folks need all the computing grunt and pooled brain-power they can muster to succeed. 

At HfS, we've partnered with the Outsourcing Unit at the London School of Economics (LSE) to determine the future potential of Cloud Business Services by studying the needs, concerns, intentions and views of business-line executives, and not solely the IT department. 

There's been so much noise focused on the technology implications of Cloud, and not enough attention placed on how business executives intend to apply Cloud services within their own business environments.  At the end of the day, some firms will succeed in driving down IT infrastructure costs using Cloud models, but the real momentum will come from the business processes that can be delivered to organizations that have all the associated application workflow and infrastructure already provisioned in the Cloud.    

We'll be launching a study very shortly with the LSE and will appreciate all of you taking part, but first we wanted to talk about the LSE's experiences with the Worldwide LHC Computing Grid (WLCG); a global collaboration phenomenon that links grid infrastructures and computer centres worldwide. Its purpose is to distribute, store and analyse the immense amounts of data generated by  a gigantic scientific instrument on the Franco-Swiss border, called a Large Hadron Collider (LHC) at The European Organization for Nuclear Research (CERN), which is used by physicists to study the smallest known atomic particles.  This LHC is the largest scientific instrument on the planet, producing 15 Petabytes (15 million Gigabytes) of data annually, which thousands of scientists around the world access and analyse.

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Posted in: Buyers' Sourcing Best PracticesCaptives and Shared Services StrategiesCloud Computing