March madness: little advisors, Starbucks redux, F&A is bubbling back... and EDS gets active

March 30, 2008 | Phil Fersht

So what was the month of March all about?

Marchmadness_2Little outsourcing advisors.  The outsourcing advisor debate continued on Deal Architect.  We opened the debate here where we discussed the plethora of small boutique outsourcing advisors that continue to be influential advising on outsourcing engagements.  We also kicked off a heated discussion thread when we discussed what enterprises should look for in an advisor.  Vinnie makes some interesting comments on why many firms find advantages with the smaller players, especially when established advisors can suffer from Stockholm Syndrome and refrain from aggressive negotiation tactics with large vendors.  Bottom-line, it's "Horses for Courses" when enterprises decide what's best for them... now where is that recurring theme from again?

Starbucks redux.  Returning CEO Howard Schultz made a quick decision to perform a U-turn on the retailer's HR Outsourcing (HRO) engagement with Convergys, which got debated here.  HRO has proved too much of a distraction for the firm’s management and staff, as the firm goes through a major restructuring to improve its offering to its customers, close some US stores and slow down opening new ones.  With the contract only eight months old, you cannot cite operational issues as a prime reason for this reversal of strategy.  As only Convergys was involved in the initial blue-print deployment work, both parties can exit the agreement before any serious implementation efforts have started. With the press trying to find flaws in the HRO model, I have been at pains to point out that only a small handful of HRO deployments (3%) have actually been terminated.  While comprehensive HRO deals may be under continual scrutiny, the demand for smaller scope HRO solutions in transactional areas is still healthy, with ADP announcing it is servicing payroll for 100,000 of Sodexo's employees.  The fifth annual HROWorld show this year should be interesting... and yes, I will be there.

Finance & Accounting (F&A) Outsourcing is bubbling again.  There are a number of major F&A BPO pursuits well underway at the moment, with the market showing strong signs of a pick up this year after a slowdown in the latter half of 2007.  Watch-out for my upcoming report on this market in May.  My old friend Clarence Schmitz, who runs F&A BPO specialist Outsourcing Partners International, has also been busy expanding his company's footprint.  Only a week after he announced his firm had opened a new F&A service center in Gurgaon (New Delhi), I was invited to the opening of their new 280,000 sq foot facility in Bangalore in May.  OPI now boasts three facilities in India (their other center is in Kochi),  in addition to its Central European center in Sofia, Bulgaria.  And if you ever wanted some excellent - and low-cost - skiing, don't discount Bulgaria...

EDS is back onboard the public sector gravy train. It's been an interesting few weeks for EDS, with its contact center outsourcing and government businesses.  No sooner had it announced its joint initiative with Microsoft to develop its Dynamics CRM solutions for its call center business, that it announced it had been named one of the preferred suppliers to the General Services Administration's $2.5 bn Indefinite Delivery/Indefinite Quantity contact center services contract.  This comes hot on the heals of a mega $1.3 bn contract with the Singapore government's iDA to provide desktop services across Singapore 74 public agencies both domestically and worldwide.  Having lived and worked in Singapore, I can personally attest that the country is a true pioneer in developing Internet-enabled government services for its citizens. With EDS' recent initiatives to restructure its SAP services practice and its renewed focus on developing its legacy integration services, are we looking at a new era for the Plano TX firm?  My view is it needs to fill the F&A BPO gap in its delivery portfolio and it will have a completing array of BPO and IT services.  Don't bet against an acquisition this year to remedy this.  Drop me an email if you want to speculate further...

And more from Blogsphere in March....

Hello Out There! Any Internal or External Auditors Reading the News? - Superb rendition of how accounting and regulations failed shareholders from Brian Sommer.  We don't need more regulation and accounting standards. We need innovation in the accounting industry and we need accountants willing to develop new forms of communication beyond the balance sheet, income statement and sources/uses of funds reports. Innovation and Accounting are two words that rarely exist in the same sentence but should.

Foreign Currency Considerations Should Not Be Foreign - TPI's Ted Botzum discusses the impact of foreign currently fluctuations on outsourcing contracts.  "Our advice is to keep the focus on practical issues from all sides involved in a complex transaction. Make certain that everyone is able to fulfill the financial setups that have been contracted."

Pro-Globalism View of Outsourcing and Outsourcing Critics - the view from the "school of hard outsourcing knocks". The savings are just temporary, as the labor arbitrage or a vendor contract negotiation will find equilibrium again.  Consequently, outsourcing critics speak truthfully about the impact of outsourcing to local jobs, although most see only the short term impact.  A company that outsources and does not invest in innovation or transformation misses the great value of that could be created by infusing the freed capital back into its operations.  The long term impact of the failure to innovate is devastating because competition will, eventually, find balance again.

Choking in China? India's Worse - Jason Busch comments on India's pollution issues, in comparison to China's. A person suggested that when he was there in recent months during a particular dangerous pollution day, he swore that he could visually make up the individual particulates in front of his eyes causing a dense smoke fog across the capital. The thought of it makes me want to cough.

FedPitch - How Would You Improve Federal Workforce Management? - Hilarious.  It’s just you, five prominent judges and hundreds of audience members in a tent on the National Mall in Washington, DC.  Your goal?  Come up with an innovative idea or approach to attract, engage, motivate, lead, develop and reward the nearly 2 million members of the nation’s federal workforce.

The end of the software suite? - And finally... Dennis Howlett's retort on this article on whether the on-demand software suite might replace the behemoth systems usually found today.  As an exercise in futility, the piece reminded me that regardless of how much you or I might believe in a particular approach to software, there is always the risk of believing your own....  I worked with Dennis back in the '90s when I was a 20-something analyst... and he hasn't changed much...

Posted in: Finance & Accounting BPOHR OutsourcingHR Strategy

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