Monthly Archives: Jun 2011

ManpowerGroup – a whole lot more than a staffing company?

June 30, 2011 | Phil Fersht

Our resident travelling HRO impressario, HfS Research Fellow Keith Strodtman hit the road earlier this month to head to Milwaukee. Top of his agenda, other than sampling Milwaukee's finest cheese and ale, was ManpowerGroup's industry analyst and influencer day. As the headline on this post may indicate (and Keith's RAPIDInsight shows), Manpower is more than a staffing company now.  It is?

Keith files this blog report. Take it away, Keith...

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



The CPO in 2011: The Toughest Job in the Global 1000

June 28, 2011 | Phil Fersht

Tim McBride, Microsoft CPO

Tim McBride, Microsoft's Chief Procurement Officer

Think you have a tough job?  Imagine one where only flawless execution is acceptable, despite the piles of paperwork, scads of emails, phone calls and faxes to plow through every day.

Try being a CPO for a day.  It's a straight shot to failure... unless you can find execution support that makes your function indispensable - and actually appreciated by your executive peers and colleagues.

Tim McBride lives that life at Microsoft, and we talked with him about his procurement execution and BPO experience as part of a case study in a paper Tony Filippone and Phil Fersht wrote in partnership with Denali Group.

Tim's a 15-year veteran of Microsoft, and has lasted 4+ years as CPO. So he must be doing something right. To get a sense of how he handles his job, and what the key challenges are for CPOs, read our new paper: The CPO in 2011: The Toughest Job in the Global 1000 by filling out the form below (we'll email you a link to the file).

Download The CPO in 2011: The Toughest Job in the Global 1000
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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesOutsourcing Heros



Why I wrote that piece...

June 22, 2011 | Phil Fersht

Having been blogging for over four years, I'm used to putting down my thoughts and concerns about things I care about. I normally don't think about it too much, I just write and enjoy the banter and discussion it creates.  It's like having a "virtual pint" with friends, peers and colleagues.

So when I received many notes, emails, calls and comments after my weekend rant (which I barely categorized as a "rant" when I published it on Sunday), I suddenly realized this thing was going "viral" - especially when dangerous Dennis Howlett picked it up! How had I managed to hit such a raw nerve?  I throw the outsourcing business under the bus everyday, and noone bats an eyelid!

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Posted in: Confusing Outsourcing InformationSocial Networking



Will the industry analyst business be dead in five years?

June 19, 2011 | Phil Fersht

Having been in and around the analyst business since 1996, I've never been short of an opinion or two about the industry. And neither are most people I know... love them or loathe them, analyst firms and their unique individuals stoke the emotions of many who come in regular contact with them. But are the days of the traditional industry analyst firms numbered?

I've been both analyst and consultant during my career and work with many buyers, sellers and intermediaries of both technology products and professional services.  I've worked with the best and worst analysts on the planet.  I've seen great research developed that was truly unbiased and objective, and also - sadly - been witness to some that was, quite frankly, not.

I've seen analysts ride waves and become rock stars, and then lose the plot somewhere along the line before either exiting the industry altogether, or plodding along on the vendor-briefing circuit, eking out their paychecks towards retirement.  I also know level-headed analysts who quietly go about their job and produce decent stuff - never making a lot of noise, but effectively doing their job.  I've also worked with egomaniacs who pander to paying clients and scare the living daylights out of anyone who dare criticize them - or refuse to buy their services. I've also worked with absolute numb-skulls who somehow remain employed, despite knowing very little about anything.  And I've worked with analysts who really know very little, but somehow persuade the world they are visionary thought-leaders.

Yes, the analyst business is a strange place, creating all kinds of weird and wonderful individuals, fueling all kinds of emotions from their respective spheres.  However, the world has changed so much these past five years, that it gives me real concern whether there'll be much of an "industry analyst" business left in another five.  Here are my reasons for concern:

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



The undisputed facts about outsourcing, Part 4: Mid-market buyers are enjoying better outsourcing outcomes than enterprises

June 16, 2011 | Phil Fersht

Outsourcing is like ripping off a Band-Aid.  Do it slowly, it's a slow and painful experience.  Do it quickly, and the pain is gone before you know it...

Outsourcing of IT and business process has always been a game for large enterprises, where well-executed large-scale employee transitions have resulted in profitable endeavors for both providers and buyers.  But while the large buyers like saving the money (see Part 1), it’s actually the mid-market sector ($1bn-$3bn revenues) which is getting a lot more out of the experience:

This graphic shows where outsourcing has been very effective for organizations.  And the mid-market buyers have been enjoying considerably more success in every area – from cost reduction through to global effectiveness, through to getting better business process improvement and technology.

HfS believes much of the reason for this is that mid-market buyers are forced to jump into outsourcing more aggressively to attract a quality provider, which, in turn, is forcing them to transform their operations much more rapidly to incorporate the provider's global delivery infrastructure.  Let's examine this further...

Why mid-market buyers are enjoying more successful business outcomes when they outsource

Mid-market firms appreciate the global scale, expertise and process acumen providers bring to the table

In the mid-market, organizations are less well-resourced – they often have legacy IT and can’t often afford to have well-paid top-notch finance, procurement, HR and operations talent.  Hence, having skilled service providers take on their stuff has been – by and large – a positive experience for them.  Their bigger counterparts tend to have more sophisticated ERP and empires of IT, finance, procurement and HR.   When the large firms outsource, they don’t really want to change the way they do things – they simply want to run them the same way at a lower operating cost. While a mid-market organization may not wield the same level of aggressive cost reduction through large-scale labor arbitrage as larger enterprises, they clearly enjoy the benefits of accessing improved technology and process expertise.

Mid-market buyers initially outsource a greater proportion of their staff and processes to make the economics work, which is leading to more positive business outcomes

Enterprises usually have a lot more staff supporting business functions, and many of them are today outsourcing in increments, perhaps starting, for example, with accounts payable, before extending to receivables, reporting, procurement and analytics.  They are large enough to be able to dictate to suppliers their preferred pace of outsourcing.  Many mid-market firms may only have, for example, 150 people in finance and 25 in procurement.  They're pretty much going to have to bundle as many staff into the first deal to attract a top tier provider and don't have the "luxury" of outsourcing step-by-step.

Moreover, the fact that most of the mid-market buyers have to outsource more processes and staff faster correlates with the increased satisfaction ratings - a more rapid transition to an end-state clearly helps drive transformation and improvements in process.

Many enterprise buyers are outsourcing in an incremental fashion, which doesn't encourage business transformation

Large enterprises continue to dominate the lion's share of current outsourcing activity - because they are tending to outsource in smaller increments which, in turn, is inhibiting change and encouraging them to muddle through with their existing processes, which are often inefficient and not very effective in a global outsourcing delivery model.

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



The undisputed facts about outsourcing, Part 3: With outsourcing demand at unprecedented levels, can new buyers get across the finish-line?

June 12, 2011 | Phil Fersht

Outsourcing is a cyclical business - when economies nose-dive, organizations batten down the hatches and wait for the uncertainty to clear, before making decisions that are longer-term in nature and potentially disruptive to the business. Recessions drive short-term behaviors, namely immediate cost-cutting, re-orgs and layoffs. Hence, shaking up the finance, HR and procurement functions with complex, stressful outsourcing initiatives could well detract from the short-term tactical measures to ride-out the economic misery.

Having come through the worst Recession since the bubonic plague, it's little surprise that much of the outsourcing energy dissipated between 2008 and 2010.  Lots of low-risk application development and support work was moved to low-cost providers during this time, as it fitted the "cost-out-quickly with minimal disruption" mentality of many organizations. Consequently, many enterprises still operate their core general and administrative work much the same way they've been doing for the last decade or more, and most business function leaders know they have to change.

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



Nobody doesn't like Sara Lee... and everyone loves an iPad 2

June 08, 2011 | Phil Fersht

If you participated in our State of Outsourcing 2011 survey (see here and here), you may have been anxiously monitoring your inbox for a notification that you'd won the iPad 2. Well, the anticipation is over, and we can announce that the winner of the drawing is Stephen Kincanon, Vice President - Shared Services at Sara Lee Corporation. Congratulations, Stephen!

We managed to get a moment to talk with Stephen once he'd settled down from the excitement...

iPad 2 winner Stephen Kincanon, Vice President of Shared Services at Sara Lee Corporation

HfS Research: Congratulations Steve on winning the iPad 2.  Can you share a little about your role and your involvement with outsourcing?

Stephen Kincanon: At Sara Lee, I am responsible for shared services for North America and the overall relationship with our BPO provider (IBM).  As related to outsourcing, I was involved in the business case development, RFI, RFP, vendor selection and transition of Sara Lee's activities to the BPO provider.

HfS Research: Based on your experiences to date, what would you say are the biggest opportunities and challenges for today's organizations looking at moving into a global outsourcing business model?

Stephen Kincanon: I believe one of the biggest challenges for today's organization is making sure there is flexibility with your BPO provider due to the number of changes within the organization such as mergers, acquisitions, divestitures, restructuring, etc.  Having a provider that is willing to work with you during these time is critical to the success of your outsourcing and shared services.

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



The undisputed facts about outsourcing, Part 2: Despite huge untapped potential, many providers aren't convincing buyers of their capabilities

June 05, 2011 | Phil Fersht

During Part 1 of the largest-ever study that’s looked at outsourcing across both IT and business process, we revealed - beyond any doubt - that outsourcing is now a proven business model for reducing operating costs, with 95% of buyers reporting positive outcomes.  Moreover, our study also reveals huge untapped potential for future outsourcing right across both IT and business functions, so surely this means the market is set to explode and we can wield new hockey-stick growth projections? Perhaps... but a few things need to happen first. Let's investigate...

Strong outsourcing growth potential exists across both mature and virgin outsourcing areas

Established outsourcing areas have a lot of runway. As our data across global enterprises illustrates, as many as four-out-of- ten enterprises still primarily conduct mature outsourcing-friendly processes such as IT support, ERP maintenance and application development, payroll and benefits administration inhouse. In fact, with the exception of IT help desk, more enterprises still predominantly manage these processes inhouse than choose to outsource them.  This seems unfathomable - right?

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



Libertarians, Outsourcing, Lobotomies and FINRA

June 04, 2011 | Phil Fersht

FINRA is the largest independent regulator for all securities firms doing business in the United States and its recent proposed rule changes are rattling the world of outsourcing.  So what happens when you mix these proposed FINRA regulatory rule changes, a well-known outsourcing partner from law firm powerhouse Loeb & Loeb, LLP, and the HfS Governator?

Well, today’s discussion, reserved especially for your weekend reading pleasure, is co-authored by Akiba Stern and Tony Filippone and focused on getting the dirty, detailed work of governance done right.  And for any of you who have the good fortune of never having met Akiba, he is the most feared sight for any service provider around the negotiating table. Don't let the Jewish jokes and Manhattan charm fool you - this rabbinic lawyer can lobotomize the lox and matzah balls from any proposed litigation.  Apologies, Akiba, but when you send us in a picture of Charlie Sheen for your mugshot, you're asking for trouble :)

Anyway, who knew that you could have this much fun making regulations meaningful...

Libertarians, Outsourcing and Lobotomies (LOL) and FINRA

Akiba Stern

There is a vocal group of "anything goes" executives that say crazy things like, "It's not my problem anymore.  It is my vendor's problem." and "You hired us to manage this.  Don't stick your nose in my business."  These executives are the libertarians of outsourcing.

For some bizarre reason, they view an outsourcing contract as a lobotomy.  Apparently, they believe that, upon signing a contract, they instantaneously have no responsibility to ensure their vendors have the expertise to perform the work or to ensure the outsourced function performs as expected.

Year after year, the buy-side responsibility-lobotomized libertarians do as little work as possible.  They look at SLAs and assess performance credits, and angrily call with complaints.  Their site audits are international junkets, resembling the Fiesta Bowl marketing “events”.  These libertarians eschew statistical methods of quality auditing and rigorous, frequent performance management processes in favor of annual qualitative bitch sessions performance appraisals.  The effort to compete renewals is too internally politically overwhelming and the thought of a vendor-to-vendor transition is stroke inducing, no matter the level of incompetence.

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Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesOutsourcing Advisors