Monthly Archives: Feb 2011

Happy Birthday... HfS Research!

February 28, 2011 | Phil Fersht

Yes, quite how this ramshackle outfit today celebrates its first birthday is quite beyond me. Exactly one year ago, we bravely declared we were a research company, with a bunch of friends, stringers and part-timers.

Today, we are a fully-loaded experienced research organization with depth and breadth of analyst talent across North America and Europe - with further expansion plans imminent.  Hell, decisions used to be so much easier when we had no money...

But seriously, all I can say is a big fat thank you for all your support, encouragement and belief in us as we've built something truly  game-changing in our industry - and one stat says it all:  One year ago we had 16,000 subscribers; today we just surpassed 50,000. One can only guess where we'll be in another 12 months.

Here's a shout out to a few of you who've played your part...

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Posted in: Absolutely Meaningless ComedyHfS Research Company News



EquaTerra + KPMG - a new era, or a new error for outsourcing advisory?

February 22, 2011 | Phil Fersht

EQ + KPMG = ?

EquaTerra, or "EQ" as they are commonly known in the trade, has formed part of the heartbeat of the sourcing industry over the last eight years.  When three frustrated TPI consultants had finally despaired of their employer ever "getting" BPO, they snuck off to set up their own shop, coined a goofy name, convinced all their buddies to take a leap of blind faith with them, before stripping off at a Luau and shaking their booties at their unsuspecting followers.  Yes, these guys were clearly on a path to building a multi-million dollar global advisory outfit that would be submerged into a highly respected auditor and management consultancy.

What was amazing, was the sheer speed with which EQ caught up their industry to become, initially, the leading advisor for HRO and F&A BPO engagements, while quietly developing its competency in ITO.  From there, the firm had excited Glen Davidson so much, he publicly resigned from his Accenture job during an awards dinner acceptance speech to announce the establishment of "EquaTerra's Public Sector" organization.  From that moment on, the firm knew no bounds, establishing its software process evaluation tool, EquaSiis and taking over Morgan Chambers' European advisory organization.  They even reached the spectacular heights of doing some research with us!

Meanwhile, the leading management consultancies were still raking in so much coin selling shared services advisory engagements, it was easier for many of them to advise their clients against outsourcing, than actually help them through a sourcing evaluation process.  Why risk your $20m-a-year engagement doing shared services improvement for a $1m project to look at outsourcing?

However, the boom in outsourcing had really taken hold by 2006, and the management consulting firms realized they were not equipped to deal with these complex, stressful operational deals (to quote the CEO of one of the boutiques, "This is real workman's consulting").  AT Kearney, Deloitte, KPMG, PwC - to name a few - started hiring consultants in earnest to win outsourcing advisory work, hoping their superior brands would be enough to swat away these pesky boutiques and their fancy methodologies.  "We're focusing on the strategy side" said one management consulting partner, "And leaving the transactional work to the specialists". However, the management consulting firms quickly were discovering they could rake in a cool $1m-$3m+ managing an outsourcing transaction cycle,whereas a "Phase 1" strat evaluation rarely netted them more than $500K.  Plus, there was never much action with the governance work, as buyers were not resourcing for "change management" (more on this topic to follow soon).

So the management consultancies realized they need to poach the specialists from the boutiques, but were in for a rude awakening when they discovered how much the top talent at Alsbridge, EQ, Everest, TPI et al. were raking in.  Plus, these guys were a unique breed - they actually liked the boutique culture, along with the specialism and IP their firms were generating.  Bottom-line, these boutiques didn't fit their compensation models or their cultures.  Add to this the fact that "outsourcing" had always been something of a dirty word, and poorly understood by the other consulting practices.  Hence, it was pretty clear, as long as five years' ago, that the best route into the outsourcing game for some of the management consultants was to do the unthinkable and actually acquire one of these boutique firms.

So why didn't any of them bite the bullet and snap-up up a boutique?

Quite simply, the top consulting brass have struggled with the "build versus buy" decision for the following reasons:

They have persisted with the MBA-model, which just doesn't work with complex outsourcing deals. Several management consultancies have struggled to understand why they can't stick a team of 26-year old MBAs onto their clients to crunch through a deal, while the boutiques have a cost structure that enables them to put experienced "workmen" with genuine deal experience, whose rates are often cheaper. And while you can get away with some juniors on ITO deals, with BPO you actually need experienced process experts - not kids.

Outsourcing is still something relatively new and foreign to their classical consulting practices. Outsourcing of IT, and more recently business processes, has grown rapidly over the last decade and many of the consultancies have been slow to adjust.  Only now are they recognizing they need this competency, or risk getting edged-out of long-standing clients who are morphing into global outsourcing operating models.

The "hire the leader" tactic to build competency has largely failed. In years gone buy, if niche consultancies were overpriced, the large shops would simply hire the top one or two partners, safe in the knowledge their main delivery guys would follow.  This just hasn't worked too effectively with boutiques, as the top outsourcing advisory talent is well-paid and happy in their boutique environment.  Plus the fact there are literally only a couple of dozen real "market makers" in the outsourcing advisory space worth hiring.

The boutiques have wanted too much money. Some of the boutiques today will be wishing they took offers on the table before the Recession, as the consolidating and commodotizing market has knocked down the market value considerably.  However, with EQ now out of the frame, there are only a small handful remaining with sufficient scale and IP, and these firms will have renewed hope they can cash-out sometime soon.

So... has KPMG made a wise move purchasing EquaTerra, and how will this impact the industry?

*The outsourcing advisory business is all about talented people, experience and relationships.  What has impressed me most about this deal is the fact that KPMG has created 17 new partners from the EQ organization. These people have stuck together for years, have considerable IP, experience and relationships, and are moving over to this new environment together.

*It would have been extremely messy if KPMG had tried to hire away these folks one-by-one. They have retained the top talent and have created careers for them within their organization.

*Quite simply, there is a really bad (and worsening) talent shortage in our industry, and KPMG has just snapped up a good portion of it in one full swoop.

*Now their challenge is to integrate EQ and create a culture the new partners and their teams can get used to. Retaining the core team is critical to the success of this venture. If they can do that well, they will likely have recouped their investment in a few short years, not to mention the new client relationships they can forge as a result of their extended competency.

*If KPMG can't keep it's new partners happy and there is a mass exodus, then this acquisition will have failed.  Having hired a close-knit group, it does run that risk, and needs to work hard to integrate the EQ people.  This merger is all about talent and IP - and they are intertwined.

*KPMG is also very excited about this and took a long, hard look before they took the plunge - it is a big, big deal to them and they have put a stake in the ground to show how serious they are about this business.  The firm has clearly chosen this space as the one they want to lead, and should be applauded for making a bold move that none of their competitors have (so far) chosen.

What will be the competitive reaction and new market landscape?

The one "prize" boutique left on the market is TPI, even though it can hardly be called a boutique anymore, with its new-found alignment with Compass.  The outsourcing market will have a solid year and its valuation should start to pick up, so I would surprised if any of the large consulting firms, such as Deloitte and PwC, makes a serious move this year.

My prediction for 2011: we now have 4 major players, and they're no longer boutiques:  Deloitte, KPMG, PwC and TPI.  Providers will have to re-evaluate their influencer strategies, as more intricate and finessed relationships are required.  The old "referral" model is pretty much dead.  The remaining boutiques, namely Alsbridge and Everest, should be able to pick off more business, now they have less competition, and can take better advantage of their more flexible cost structures.  Yes, we have a sea-change in the industry, but the buyer still has choice and we have better integration of the traditional consulting model and the boutique methodology.

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



Outsourcing your leadership team: build it... or buy it?

February 21, 2011 | Phil Fersht

Would you buy a goal from this guy?

One of the newest additions to the HfS family is Brian Robinson. Born in Ohio, raised in Florida, educated in Florida and Virginia, Brian was living in the UK when we started talking to him about working for us. In fact, he was renting my London flat, so I was guaranteed he'd give the place a good clean when he moved out to embark on his Italian adventure.

He's now based in Rome, where he's starting to learn the language. Give him a few more weeks and he'll be ordering the Pasta alla Carbonara in the local tongue, while explaining it'll be far easier to outsource Berlusconi than trying to lock him into a captive.  Hmmm... maybe CNN can sign him up for a double-act with Elliot Spitzer?

Brian is an internationalist to say the least, so it comes as no surprise that this Ohio boy uses football (you know, the one where you can't use your hands) as an analogy for how to nurture leadership teams.

Is it better to build or buy? For the answer, over to you, Brian...

Outsourcing your leadership team: The build vs. buy debate heats up

Were you surprised that Rooney biked home the winning goal in the Manchester derby? I wasn't. Hands down, the goal was amazing. And it may well go down as one of the best goals ever scored in the Barclays Premiership.

Rooney’s ability to catch the ball at this angle speaks to his unrivalled skill as a footballer. The fact that he was in the match to score the goal speaks to strength and intelligence of the management team running arguably one of the most prolific football teams in the world today. To date, Rooney’s 2010-2011 performance has been lackluster: a mere seven goals in 27 matches. Other players would have been benched or traded by now, but Rooney has something special. He knows it and so does his management.

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



Industry-specific analytics: where providers can differentiate or disappoint

February 17, 2011 | Phil Fersht

Time to improve your analytics capabilities?

In today's ITO/BPO market, it's getting harder and harder tell providers apart, when selecting a sourcing engagement partner. Once they can compete on price, have a reasonable track record for operational effectiveness and can transition you to a globally-sourced environment, we really get down the nitty-gritty of how can they really help my business achieve growth and productivity?

HfS is engaging heavily with both buyers and providers of sourcing to understand how buyers can benefit from genuine operational and industry insights to improve their business performance - and we believe the capability offer these analytical insights thought smart governance models is quickly emerging as a major differentiator.  And if your main provider isn't passing muster with their insights, can you find a specialist to add to your sourcing mix that can?

Over the last 15 years, the importance of analytics as a business activity has grown dramatically. While the top brass once used guts and intuition to guide decision making, today, data is the prime weapon in the management arsenal. As data analysis techniques have gotten smarter over the years, analytics have emerged as a specialized function of business employed broadly across industries and functions.  Our new HfS Report, imaginatively titled Where offshore analytics is heading in 2011 investigates...

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Posted in: Business Process Outsourcing (BPO)Financial Services Sourcing StrategiesHealthcare and Outsourcing



Bill grills the Madonna of HRO herself: Mary Sue Rogers

February 16, 2011 | Phil Fersht

If there's been one consistent face of the HR Outsourcing industry over the last decade, one stalwart who's been staying true to the principles of global HR delivery, despite all its bumps and bruises along the way, its been the former shift foreman at a Detroit car bumper factory who left the New World to join upper-crust English society.

Click to listen in to MSR and BK, noon Eastern time on 16th Feb (recording available)

Step up Mary Sue Rogers (known in local circles simply as "MSR"), who's General Manager for IBM's Global HR, Learning and Recruiting Process Services organization.

And if there's one person qualified to find out more about her passion for payroll, who can slow down her machine-gun talking-speed to the firing rate of a semi-automatic, it's the indomitable Bill Kutik, who hosts his own aptly-named "The Bill Kutik Radio Show".

Anyway, MSR will share her insights into why full-service HRO has had a mixed scorecard in its first 10 years; what she will be doing differently in the next 10; the unique technologies used in HRO not usually found in a traditional HR environment; and the critical role of third parties and what they do in successful HRO engagements.

Click here at noon Eastern time today to hear Mary Sue Rogers.  Recording is available, so don't worry if you miss it

Posted in: Business Process Outsourcing (BPO)HR OutsourcingHR Strategy



"Cloud BPO"? C'mon... stop talking cobblers

February 13, 2011 | Phil Fersht

Is it just me, or is it just really irritating when people start using jargon that's a load of cobblers?

One of the things I have loved about BPO is that the IT evangelists have always steered clear of the topic by a county-mile, because they really don't understand it.

When I was an analyst covering BPO in the traditional research world, I was fortunate enough to be left alone to get on with my craft, because there were very few analysts who could tackle anything that wasn't centered on a piece of software, hardware or communications equipment.  To them, BPO is the unsexy grunt work that has to support uncool things like actual business processes.

Then along comes the Cloud, and a few ambitious souls from the IT world have dared to mention that mysterious "BPO" word in tandem with their wonderful, nebulous, ill-defined, confusing world of Cloud Computing. Yes, some IT knuckleheads are starting to use phrases like "Cloud BPO players" and "FAO in the Cloud", or just plain "Our Cloud BPO strategy".  They've been dying to use the BPO term for years - and now they've seized their chance.  Oh my.

Sadly for them, "Cloud BPO" is, simply put, really a load of nonsense in today's environment.  The core fulcrum processes of BPO are the toughest to move into the Cloud, and only the small-to-medium business sector is going to enjoy any modicum of success of moving genuine "BPO" processes, such as finance and HR, into the Cloud in the near-term.  And this is mainly with very standardized and straightforward Internet-hosted apps (i.e. simple interface, no integration requirements), as opposed to genuine Cloud-enabled ERP apps that leverage IaaS/PaaS/SaaS architecture.

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Posted in: Business Process Outsourcing (BPO)Cloud ComputingConfusing Outsourcing Information



Announcing - our new company website!

February 10, 2011 | Phil Fersht

We've known each other for a while, haven't we? You've seen us evolve from a blog to a research analyst firm over the last four years. Now we're taking the next step in our evolution and launching our official company website for HfS Research (gasp):

Don't worry, Horses for Sources will remain right here (and with these HuffPo multiples, it's going nowhere for a while!), but we've created a spiffy new home for our research.  A special thanks to our marketing chappy, Mark Reed-Edwards and our developer/designer Melanie for burning the late hours these past few weeks.  Over to you, Mark, to explain more...

We've created an entirely new website for our research content., featuring our new logo (which you may have already seen here and there), went up quietly last week. After working out a few of the bugs you expect (and get!) with a new website, I want you to rush over there right after reading this post. First, though, let me tell you a bit about the site.

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Posted in: HfS Research Company NewsSocial Networking



HfS Research announces two new analyst additions to boost data analytics and strategic research acumen

February 05, 2011 | Phil Fersht

We're excited to announce a couple of terrific new additions to the core research team at HfS. Our goal is to provide our research clients with a unique blend of "real world" sourcing expertise, backed up with real-time research, market data and analytics. We're also working with multiple buyers to develop the industry's first realistic transaction-based BPO pricing model.

To achieve these lofty ambitions, we're pulling together a blend of quantitative analysts with sourcing experts who "get" what this industry is all about, which takes us to our two new analyst hires, Brian and Jamie:

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



Phil Hassey gets on his horse to pony-up unbridled Asia/Pac BPO coverage for HfS

February 03, 2011 | Phil Fersht

Anyone on the analyst circuit knows the larger-than-life antipodean, Phil Hassey, who's spent countless hours on soul-destroying coach-class slogs from Sydney to the US to expound the virtues and opportunities in the Asia/Pacific region.

Phil Hassey is HfS Research's new analyst contributor for the Asia/Pacific region

I personally got to know Phil when I was working in Singapore for analyst firm IDC (before I became a cynical blogger), when Phil led the Australian / New Zealand coverage for the firm's IT/BPO research.  I learned quickly that Aussies always make good "whinging" analysts - how many cultures do you know complain all bluddy day long, before hopping off to catch a few waves on Bondi beach at 4.30pm in the afternoon?

Anyhow, Phil's no-nonsense style led him to establish the Asia/Pacific services research for Springboard Research, before branching out on his lonesome to start his own research venture, "CapioIT".  Well, we couldn't let a good Aussie slip our gaping need to cover the Asia/Pacific markets, and we're thrilled that Phil's thrown hit hat in the horse's ring to pony up a couple of BPO appraisals of the region for us in 2011.  Let's hear more straight from the Hassey's mouth…

Phil Hassey muses over the Asia/Pacific BPO market landscape

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Posted in: Business Process Outsourcing (BPO)Outsourcing Heros