Yes folks, we’ve unveiled our agenda for the Eighth Blueprint Summit this November, which includes C-Suite executives from all the major service providers and sourcing advisory firms, in addition to a host of speakers from leading buy-side enterprises.  So let’s take a peak at the providers putting themselves in the firing line…

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services, Outsourcing Events, Outsourcing Heros

This man founded WNS, built up IBM's Middle East and African Practice and today leads KPMG's European shared services and outsourcing advisory. He also cycles a lot…

Did you hear the one about the Mamil (middle aged man in lycra), who got off his bike, donned a suit and tie and joined a Big 4 consulting firm to wax lyrical about sourcing strategy?  And not only that, he is called Shamus Rae, the shameless sourcing strategist from Islington…

Shamus has been in the sourcing business since 1993, where he started off working with British Airways and overseeing a lot of outsourcing of IT services to India. This is when he came up with the idea to build a company to act as an offshore BPO for the airline industry, which became WNS. In addition, Shamus built IBM’s BPO Service from zero to 17,000 people in MEA (Middle East and Africa). In total, he’s had 21 years in the industry working for suppliers, including 13 years working with clients on multi-functioned shared services and outsourcing around the world. And all this in addition to his 120 km a week cycling addiction.

So let’s hear from KPMG’s European Partner for Operational Transformation and Advisory Leadership, Shamus Rae.

Phil Fersht, CEO, HfS Research: Good afternoon, Shamus, and thank you very much for taking the time with us today. Let’s cut to the chase – are US enterprises ahead of the British/Europeans with sourcing?

Shamus Rae, Partner at KPMG, London: Categorizing “Europe” as one homogeneous region is too generic. The United Kingdom, plus Switzerland, are as sophisticated as the United States, and sometimes more cutting edge. However, other European countries are in catch-up mode. We’ve been doing some work recently for a large French bank helping them build a global sourcing strategy for their finance function. I asked the CFO whether he wanted to simply do a strategy or whether he was actually going to execute. We get many requests for sourcing strategies for organisations, of which a high number are never executed, but take up a significant amount of time for my team. To be fair to this client, he said that this time the bank is going ahead, and in fairness to him, he’s now built an offshore center of excellence on a global basis. In a nutshell, Europe is in catch-up mode but they’re positioned to leapfrog the United States.

Phil: At our recent UK Blueprint event at HfS, attendees were more open with their issues than many of the Americans that we regularly deal with…

Shamus: The fashionable trend is talking about robots in shared services. The way these concepts are branded is a bit too much sometimes. If you talk about operational efficiency and the future of robotics with French and German colleagues or clients, it can be too American. The best approach is to engage different countries in the right way for them and ensure there are relevant discussions on all of these topics and trends that are emerging

Phil: Is the industry vastly different from five years ago when we were going into the recession? Has there been a lot of shift, or is it more noise?

Shamus: There’s been a massive shift. I’ve been through a few recessions but none quite as significant as 2008. Previously companies were mostly focusing on straightforward labor arbitrage and people were trying to find quick cost savings. This recession was different, in terms of the way it drove the sourcing industry. People wanted cost savings for sure, but they wanted to put in the right governance, and handle more complex work within the sourcing environment. They wanted to think about the next step beyond offshoring.

There’s a lot more of a drive towards process standardization—what’s going to happen within a retained organisation to ensure that the business benefits are delivered? Therefore, it’s a more interesting time. The impact has also seen dramatic growth in multi-function shared services organizations within clients as well. The global business services piece has really taken hold. It’s a dramatically different environment. Some of the outsource players are not seeing as much work as they would expect because people are being more sophisticated about the way they’re building the “above outsourcing” functions and the way they’re approaching simplification and standardization.

Phil: The joint research that HfS Research has done with KPMG (see link) has pointed to a sharp increase in the amount of investment that clients are making in their offshore shared services (captives) but a little bit of a slow-down, and more of a moderation, in their investment in outsourcing. Is this because they’re moving more high-level services to shared services and want to keep them in-house first, or do you think there’s a general swing to a shared services model and leveraging outsourcing as a kind of “flex-tool”? What’s your view? 

Shamus: I think you hit the nail on the head when you said they don’t want to outsource more complex work; companies are looking at the skills continuum. It’s fine to outsource AP and AR, and so on, offshore, but clients are building centers of excellence in order to handle more complex work. Like treasury, some of the big deals we’re seeing are to automate more transactional work and aligning some of the complex work to come back in-house. A large FMCG company that had a big HR contract made a lot of fanfare about renewing its big contract, but in reality the more complex work all went back in-house, to help create more critical mass for the complex work. There’s more talk about BOTs as a way to transition to more complex work.

Phil: I want to talk with you about the change process that some of the companies need to go through. Clients are fairly willing to admit that they’re not very happy with their own talent. Only a third of them feel that their existing Operations talent can balance their existing capability analytics or add creative thinking or ideas. It sounds like we’re at an impasse where providers can’t deliver everything the clients want, but at the same time clients seem to be struggling to develop their own talent base. Do you agree, and what do clients need to do to develop their own talent? 

Shamus: Most people are unhappy with their own support functions. People always have great expectations about what those should deliver. Professionalising your support functions, with the global business services trend, is helping to meet the growing expectations of the Board and the end user. However, transforming the support functions with people who really care about the services provided to the end business, changing the culture of the support function to be customer orientated, and minimising the amount of transactional work that takes place through automation has made a big impact. In reality, there are lots of people who are automating or outsourcing transactional work and expecting the staff to suddenly become great at customer service and business partnering. That takes a lot of time to do.

Analytics is a really interesting “crunch point.” We’re all bored of hearing about big data but it’s a massive trend, both for KPMG and for our clients. The number of people who can work in that space, relative to demand, is dramatically out of kilter. Does that talent, wherever it is in the world, want to be working for a client organisation or for an outsource organisation? There are great pure-play analytics that are attached to consulting businesses. For example, Prophet in the United States is a great brand consultancy organisation and they’re building great analytics capabilities underneath it. At KPMG, we have a great brand and organisation and have deep capability in analytics.

Phil: What about young talent—the Millennials? Is it important to embed more young talent into the sourcing model? 

Shamus: Back in 1993, especially in India, it was full of young talent. It’s an industry that was built on grabbing people from universities to satisfy the demand for labour arbitrage and starting new organisations. It would’ve been nicer to have a better culture within the companies, which is appropriate for the new generation coming through. In reality, the work is getting more sophisticated. You need people with more experience to start work here. Relating this back to culture, it’s a major deal. Everyone is trying to find a way to get the young, current graduate way of thinking. We have one client, a US FMCG, that is trying to move completely towards a project-based, rather than a standard, hierarchical organisation, so that they can tap into creative ideas and revolutionary thinking which comes with the current generation of people who use mobile apps. It’s a major bet on a new way of working, coming from 25-year-olds today.

Phil: We’re seeing more development in, oddly enough, the IT space where there’s a lot of pressure around digital and plug-and-play capabilities—people who can understand cloud and programming and analytics. The Indian majors have a really good Millennial model stemming from building out the ITO delivery three or four years ago and it’s now bearing fruit. On the BPO model, it’s hard to find people who want to build their careers around finance and accounting. It’s a professional issue, not a skills issue.

Shamus: I think that’s right. If you look at what KPMG’s up to, we’re rapidly building our Customer Advisory piece, with great teams in the United States and United Kingdom, and lots of great people in Analytics from lots of acquisitions (Link Analytics, Cynergy, etc.). We’re reshaping the business to be the front office as well as the back office. It’s a great, crazy environment, not like any KPMG office you go to normally. There’s a massive shift going on. A lot of the previous pieces will be automated away.

All the Big Four are building cloud-based advisory proposition and mobile app teams, not because they’re trying to compete on price with mobile apps, but because they’re trying to help clients go through the digitalization journey. All the companies that built big ERP centers will find these dramatically reduce down in the next 10 years.

Phil: It’s almost like the Global 2000 will be trying to get smaller. They’re getting focused on the products, on middle- to front-office activities. We’ll have a larger SME sector. 

Shamus Rae is Partner at KPMG and Heads Operational Transformation in Europe

Shamus: This is a reality when you look at the 10- to 15-year window. There’s a lot of great talent because jobs get digitized away. KPMG is trying to find models in which they can create the atmosphere of working in a smaller organisation. KPMG in the US  recently acquired Cynergy US, a mobile apps company, and we will build a new customer and digital office here in London leveraging this asset. The firm has always been good at allowing entrepreneurial spirit yet getting the economies from acting at scale.

Phil: Final question: if you could change the industry in one way, what would it be?

Shamus: I want to make this industry global rather than Indian, getting more sophisticated with analytics or mobile apps. I’m not saying it shouldn’t happen in India because I believe it should—I’ve been a 20-year fan of India. However, the brand that’s associated in legacy BPO is actually holding back organizations’ ability to play in new IT and KPO; the brand needs to move from legacy BPO and labor arbitration.

Phil: Shamus – it’s been refreshing!  We’ll definitely have to have you back soon 🙂

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Global Business Services, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Advisors, Outsourcing Heros, Robotic Process Automation, smac-and-big-data, Sourcing Best Practises, Sourcing Locations, sourcing-change, Talent in Sourcing

We’ve been calling it for seven years now, and finally the chickens are coming home to roost for the outsourcing business:  clients are genuinely walking away from outsourcing relationships which provide mediocre value.

And, while some savvy providers are sensing the defections with a few notable re-bid wins of late, many still have their heads in the sand and hoping that once they win a new client, they’ll never leave them… oh how wrong they could be, as revealed by 312 enterprise buyers during our new State of Outsourcing study with KPMG:

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So, why are so many outsourcing relationships hitting the skids?

While we’re at pains to point out that relationships fail to deliver innovation where buyers lack the skills and capabilities, it’s also blindingly obvious that many providers are not coming to the table with the goods either:

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As you can see, it’s the same old story – in fact, buyer satisfaction has actually got worse over the last three years (see our 2011 State of Outsourcing results).  At least, back then, the large majority of enterprise clients enjoyed some degree of value from their relationship, while today, barely a third of buyers are seeing positive impact in terms of having improved strategic talent, better operational analytics support, better technologies, process transformation, automation… the list goes on.

The three main issues driving this churn problem – and how providers can address them more effectively

1) Buyers’ expectations – and impatience levels – have markedly increased.  The world of business operations has evolved at an almost alarming clip over the last five years – it’s as if the recovery from the worst recession in living memory has driven an impatience from business leaders to advance their capabilities and cost efficiencies much faster than the snail’s pace of yesteryear, when ERP rollouts were calculated by the decade and outsourcing evaluations took three years just to get a meeting together. Suddenly, buyers want to talk about where they expect to be in a couple of years, they’re asking questions about robotic automation and developing meaningful analytics capabilities, they’re asking how their provider can help them improve the way they do things – not merely manage their legacy processes at cheaper rates.

How providers need to respond: Prepare more diligently to manage your clients over the longer-term.  You know many are going to start asking for the “what’s next?”  quicker than you expected, so be prepared with a plan to deliver it.  Otherwise, they may no longer be your client when the re-bid process kicks in….

2) Most providers are still obsessing with the next deal, as opposed to cementing their existing relationships.  The real “tangible” money on the table for providers today, is when they win a brand new deal that adds to their win-rate, their Wall Street scripts and feeds their PR machine.  However, the cost of losing a client is far, far worse – the lost income, the ignominy, the negative perception from the industry.  As more deals begin to churn, the focus will shift to protecting the base, and not just pursing the new.

How providers need to respond:  Start replacing the old-school sales guys with the fat expense accounts and standard issue BMWs or Jags (you know the type) with operationally-savvy account managers who understand how operations need to be run.  While they may be less fun on the golf course, they’ll be much better-placed to develop your clients down the road. 

3) Buyers still think that innovation should be free, despite the fact they bought labor arbitrage.  If you didn’t pay for it, why should you get any? The perennial problem with outsourcing is the fact that low-cost still wins the day, with most sourcing advisors strong-arming providers to respond to RFPs in three weeks and allowing very little (if any) interaction time for providers to interact with their clients in advance to develop the right solution and get a stronger balance between delivery capability and desired outcomes.  In most these cases, the buyer and provider teams brokering the deal hand them off to the operations teams on both sides to manage, with little room for investment on either side to do anything more than basic delivery with low-end resources.

How providers need to respond: Invest in more direct communications and sales cycles with clients, and be less reliant on the advisor channel for your future business.  You need to develop relationships where you can spend more time with your clients to get this right, not second guess their needs and rely on some fudged math to get a deal done.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, HfS Surveys: State of Outsourcing 2014, HfSResearch.com Homepage, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Advisors, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, smac-and-big-data, Sourcing Best Practises, Talent in Sourcing, the-industry-speaks

During the recent 2014 State of Outsourcing mega-study, conducted with the support of KPMG, we polled 312 enterprise outsourcing buyers and 347 outsourcing advisors on how they perceived each of the major 19 IT outsourcing services providers across our Execution and Innovation categories (click here for the full definitions).  And the ultimate results might not be quite what you expect:

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HfS’ Charles Sutherland, takes a deeper dive into these results, to understand better the reasons why these IT Outsourcers are being perceived this way:

With 50% of IT outsourcing deals at risk, how are IT Outsourcing providers being perceived?

The fact that Amazon and Google were the highest perceived ITO service providers on Innovation doesn’t come as a huge surprise, after all they are continually lauded for innovation in the press and don’t carry the breadth of “legacy” service offerings that the other ITO service providers do. However, they were also perceived as being at the top for Execution; in fact just 4 of the other 18 ITO service providers were perceived as well or better than they were for Execution capabilities.

What we also see, when we look at these results, is that the best Executors of IT Outsourcing services are generally also perceived as the most Innovative. It suggests to us that as 50% of enterprise IT Outsourcing buyers seek to churn their current IT service provider in the near future, many are also likely to seek out those positioned to the upper-right which can fulfill their higher-value needs, beyond the bread-and butter executional service delivery.

It also suggests that in the wake of greater market differentiation in IT services, both in capabilities and commercial performance, those providers lingering in the lower-left face some very significant commercial challenges over the next several years to remain competitively viable.

We broke the perception map out into 4 quadrants that have some common characteristics:

Messaging Opportunity.  These are the ITO service providers which scored lower on the perception of execution and innovation relative to their peers.   For these ITO service providers, the task ahead is to increase awareness of their capabilities and, in particular, to highlight investments in innovation for ITO service offerings and perhaps to break away from potential linkages in buyer minds to legacy ITO offerings, especially given the levels of potential market churn that the survey identified.

Solid Delivery.  These ITO service providers were perceived as strong execution partners for buyers, but still being perceived as lower than the leaders on innovation, although they were seen as more innovative than the service providers in the first quadrant.  This does not mean they are necessarily candidates for churn, although if their areas of execution become less significant going forward, that could spell future trouble.

Future Promise.  Currently an empty quadrant, this area where perceptions of innovation out-strip those of execution, can be the resting space of up-and-coming ITO challengers, whether new or coming up from Messaging Opportunity, where they start rolling out leading edge services before they are necessarily fully time-tested.

Tomorrow Today.  ITO service providers in this final quadrant are leading the way in terms of buyer perceptions, both on innovation and execution, relative to their peers.  An interesting group of asset heavy (Amazon, IBM, Google) as well as asset lite (Accenture, Cognizant, TCS), they have as many or more differences between themselves in terms of offerings and market strategies, as they have anything in common, other than being the service providers best positioned today to take advantage of the high level of potential market churn.

The Bottom-line: The traditional IT outsourcing market as we know it is being disrupted, and the next year will likely flesh out the thrivers, the survivors and the also-rans

Report author, Charles Sutherland, is EVP Research at HfS (Click for bio)

The intention from an enterprise to churn a current service provider, may be much less complex than actually completing the process of switching out to another provider, and we will be looking at the market dynamics over the next 12 months to see just how many significant contracts in ITO are moved. In particular,  we will be observing closely how many hosting and IT management deals make their way over to the disruptive presence of Amazon and Google from incumbent service providers.  In addition, how the ITO service providers at the lower left and upper right hand portions of our perception study fare, will provide a good input on the understanding as to how the ITO market is changing and what measures incumbent service providers need to be taking, not merely to survive, but also thrive in this fast-evolving marketplace.

HfS subscribers can click here to download the full POV “With 50% of IT outsourcing deals at risk, how are IT Outsourcing providers being perceived?”

Posted in : Cloud Computing, HfS Surveys: State of Outsourcing 2014, HfSResearch.com Homepage, IT Outsourcing / IT Services, Outsourcing Advisors, Sourcing Best Practises, sourcing-change

Yes, the HfS Blueprint Sessions are coming back to North America for an eighth installment this November, at Chicago’s famous Drake Hotel, for the biggest naval-gaze yet at our analog present and digital future of global services.

This will be the most intimate and significant gathering yet of enterprise buy-side operations leaders, who will come face-to-face with the prominent thinkers and operators from the service provider and advisory world. This will be the time when the global services and outsourcing industry takes a collective long-hard look at itself to develop a future roadmap that is sustainable and value-driven; where operations executives can progress their careers, and challenge themselves to stay ahead of the changing needs and skills demanded by today’s ambitious enterprises.

We are on a mission to legitimize the industry of services professionals and break from the bad-old habits that have been plaguing us for far too long. We need you to be part of this with us – and have some fun in the process.

We’ll be tackling two key themes throughout the two days:

Posted in : Business Process Outsourcing (BPO), Digital Transformation, Global Business Services, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, Outsourcing Events, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing

The act of “outsourcing” is really only that initial phase of activity where an organization takes a technology/business process or function and transfers the management responsibility over to a third party to ensure the smooth running of said process or operation.

Once the outsourced processes are running functionally with the third party, the “outsourcing” is now complete and those activities on the buy-side become “service governance” activities, and the third party provider is delivering a “service” or an “operation” to its client.

The clients’ needs now fit into a set of governance functions that are centered on managing the provider relationship(s); communicating with – and reporting to – the internal business units and various stakeholders; aggregating, analyzing and reporting the appropriate performance and process metrics; managing risk, compliance and issue escalations.  The more sophisticated and experienced the governance unit becomes, the more of a high value consultative entity the team can become for their organization as it seeks to centralize more operations under the governance function and align them to the business goals.

Simply put, an increasing number of mature enterprises governance teams are doing a lot more than managing vendors and periodically bashing them up to lower their rates – they are using advanced software platforms that help drive real value, continuous improvement and insight from the operations under their oversight. Most clients need realtime support to help them do this, and a small handful of ambitious advisors are developing managed governance services functions to support this need.

So we tasked our resident governance guru, Mike Beals, to venture in into the post-outsourcing transaction services industry to develop an HfS Blueprint Report that evaluates the managed services and software solutions available today that support clients managing their global shared services and outsourcing operations.  And here is how they shook out:

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So, Mike, what exactly are these Governance Solutions providers?

HfS Research defines Governance Solutions as the set of software applications or managed services focused on the management and optimization of shared services and outsourcing service delivery environments for business service functions.

These software applications and/or services are one level of management removed from operational delivery management tools and services. For example, an enterprise that uses a Service Management Software (SMS) tool like Remedy, Tivoli or ServiceNow for operational management still needs a tool or service to manage the complexities of a commercial outsourcing relationships and their peculiar methodologies.

Based on your many client interactions, why are Governance Solutions needed in this market today?

First, let’s start with some of the trends we see impacting the shared services and outsourcing industry, then I’ll drill into the answer. The big trends we saw in 2013 and confirmed in the 2014 State of Outsourcing Study are rapid adoption of GBS, or at least a hybrid delivery model, a shortage of skilled talent, and the desire to accomplish more strategic objectives than in the past.

Without delving into too much detail about those trends, the implications to overall enterprise SSO governance capability is the need for consistency in the way shared service and outsourcing environments are managed. Going forward, enterprises can’t afford to let each governance group define and execute governance its own way based on who’s in the group.

Because of the hybrid model most enterprises are adopting, the number of data sources has grown dramatically. Governance needs a way to aggregate that data into a structured repository. Without this ability, providing end-to-end service level and organization-specific financial reporting and analytics is virtually impossible.

Descriptive analytics that tell you what happened have been available for quite some time, but predictive and prescriptive analytics that forecast what will happen and what you should do about it are incredibly important to accomplishing the strategic objectives enterprises seek.

To address the talent shortage, enterprises must fully leverage their available resources. Since a significant portion of the work of governance is routine in nature, it can be automated. That frees up limited staff to focus on higher value activities like collaborating with service providers or consulting with the business.

Governance Solution providers, whether delivered via software or services, help address each of these challenges.

What capabilities do these Governance Solutions bring to enterprises?

Depends a bit whether they are a product company or a services company. Software firms can assist by taking documented governance process flows and enabling them using workflow. All of the business rules and decisions are codified, so when key team members move on to other jobs, their knowledge is retained and leveraged. Additionally, this drives consistency across multiple governance groups if they use the same core processes and only configure procedures peculiar to their environment.

The benefits of automation can also be significant. For example, these software applications, once configured, can extract source data from operational systems, calculate service levels, determine consumption buy business units, create pro forma invoices for verification, and many other routine, but time consuming tasks. Governance tools can also automate a huge percentage of the associated reporting requirements.

Governance software tools also provide a repository for all agreements and governance forms. Having a full-text searchable, secure, version controlled repository can save a huge amount of time and effort, particularly when you are reporting on that information or status.

From a managed governance services (MGS) perspective, each of these providers leverages an enabling platform and provides additional services to compliment the software capabilities we just discussed. Additional services range from governance staff augmentation, to providing compliance and risk audits, to offering coaching, to providing strategic sourcing recommendations based on industry trends or proprietary market benchmark data. There are a number of options to quickly improve a governance group’s overall capability and maturity.

So… who are the leading providers and what differentiates them?

Enlighta, ISG, and KPMG are the top providers in this year’s Blueprint Axis. Enlighta offers a software application called Govern that provides comprehensive governance functionality. It is the most robust and flexible tool that we evaluated in this study. Enlighta also offers another product, Deliver, that actually runs on the same platform as Govern, that competes in the Service Management Software (SMS) category against products like Remedy and Tivoli. A key differentiator is that enterprises seeking an integrated service management and delivery platform for their business service functions can go with Enlighta.

ISG (formerly TPI) has been in the sourcing advisory space since the beginning. They were also the first to offer managed governance services to their clients. Their approach has been to partner with various tool providers to create an enabling platform configuration unique to each client. Some of the software partners include Enlighta, StatusGreen, Apptio, and Blazent into what they call “ISG Labs.” The ISG Managed Governance group offers managed governance services as well as Service Integration and Management (SIAM) services.

KPMG’s Managed Governance Services (MGS) offerings originated at EquaTerra, which was acquired by KPMG in 2011. EquaTerra had a proprietary governance platform called EquaSiis Enterprise that was sold as a software application. When EquaTerra, and EquaSiis, was acquired by KPMG a managed governance group was formed that leveraged EquaSiis Enterprise, now renamed Governance Workplace. The KPMG MGS group leverages the comprehensive functionality of Governance Workplace with a well trained staff to provide as set of very competitive services to Information Technology and non-IT business service clients alike. As you would imagine as part of an audit firm, particular attention and functionality on risk management is emphasized.

And finally, what are the key takeaways you would like to leave us with?

Mike Beals is Vice President, Governance Research and Strategy, HfS Research (click for bio)

There are many, but let me focus on three. First, risk and compliance are having an increasingly important impact on governance and these solution providers. The increasing amount of regulatory requirements, and the specificity on outsourcing governance means that these governance solutions, both products and services alike, are investing in risk and compliance functionality and capabilities.

Second, there is blurring of the lines between Service Management Software (SMS) products and governance tools/services — both categories of products access the same data, but for slightly different purposes. We see the potential for SMS products to move into this space via acquisition, or building out specific outsourcing governance functionality into their existing products.

Third, analytics is becoming increasingly important. As companies shift their sourcing objectives from tactical to strategic, having access to sophisticated analytics will be critical. We believe that governance solutions that provide this functionality will be a key success factor in the ability of enterprises to mature their overall governance capability.

Mike, we really appreciate learning from your experiences and research into the emerging Governance Solutions marketplace and look forward to reading more of your insights from the HfS Governance Institute.  HfS readers can click here to view highlights of all our current 16 HfS Blueprint reports.

HfS subscribers click here to access the new HfS Blueprint Report, “Shared Services & Outsourcing Governance Solutions”

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Cloud Computing, Global Business Services, HfS Blueprint Results, HfSResearch.com Homepage, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Advisors, SaaS, PaaS, IaaS and BPaaS, Security and Risk, smac-and-big-data, Sourcing Best Practises

Time to crack open a cold one, turn up the volume… and relax!

Posted in : HfSResearch.com Homepage, Sourcing Best Practises

Our new research reveals the majority of enterprises are failing to develop the talent they need to be effective in the Digital Economy.

Working environments have become increasingly difficult to manage and too many staff are simply not motivated to drive value to their firms. Simply put, the old way of managing staff in today’s self-entitled employment world is just no longer working, and there needs to be a significant mindset change from both employers and their staff to re-humanize the enterprise.  Otherwise, the ROI of hiring people will really become unattractive.

When I penned the now-infamous post “Welcome to the age of Digital cruelty, where two-thirds of operational jobs are under threat“, I was thinking about how enterprises can develop change programs to reorient staff to add more “Digital Value” to their organizations, and how they can leverage their partner relationships to help plug the Digital gaps and improve their existing talent potential.

Then HfS’ workforce and talent analyst, Christa Degnan Manning, shared her insights with her new Talent Acquisition Services Blueprint, which brought forward many of the issues surrounding talent retention and creating a work environment where (motivated) staff can develop their careers with their employers with a long-term goal in mind.

So we revisited our recent workforce study which covered 5,000 enterprise employees globally, to understand how motivated today’s talent is to stick with its current employers:

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Barely 4 out of 10 staff intend to stick with their employer for more than a couple of years

Ouch. Yes, people, the day of the long term company job is truly dying on the vine, where close to half of today’s workers are already looking for a new employer, while another third are readying to move on in another year or two. At the same time, as our recent State of Outsourcing Study fleshed out, two-thirds of enterprises feel their existing operations talent is falling well short in “Digital” areas such as analytical capability, being creative with new ideas, driving better automation etc.  So what does all this mean?

Poor talent leadership and unmotivated staff is a recipe for corporate failure

It’s becoming abundantly clear that many staff that stay with a single employer for too long are losing relevancy, when it comes to delivering new value and insights.  This is because most employers are clearly failing in reorienting existing – or hiring new – talent to stay ahead of the curve and keep adding value beyond routine transactional activities. Moreover, the majority of staff are clearly not being motivated by their employers to want to build long-term careers in a single company anymore (or may just not be motivated at all).

Clearly, there is a major employer-employee breakdown occurring: employers are not focused on investing in the right talent strategies, and their talent isn’t that focused on investing their careers in them either. The result is management being pissed off with the value their staff are delivering, and their staff being pissed off with the value they get from their organization – it’s a recipe for failure and poor enterprise performance.  And if internal labor investments are fast becoming a negative commodity for many firms, they will naturally look elsewhere to achieve its goals – such as improving automation and leveraging third party services relationships, where the talent can quickly plug the gaps.

The old ‘nine-to-five job mentality’ must quickly evolve into a value-based work culture for organizations with emerging Digital Cultures

Simply put, most effective workers today do not start work at nine and clock-off at five.  As peoples’ personal lives become digitally-entwined with their professional responsibilities, most want to spend time during the day on their electronically-driven social activities, which means they frequently need to compensate for this during their evenings and weekends.  Moreover, the working styles of management and staff need to evolve to become most outcome-focus and less task-focused.

Managers need to think less about “what do Jane or Peter actually do between nine and five” and more about “what business outcomes have Jane and Peter produced for the firm this week – and how are they adding value to the organization.”  This means that enterprises need to ensure they have forward-thinking managers who understand the shifting mindsets and lifestyles of their staff in order to get the best out of them.

Workers who cannot motivate themselves to add value beyond ‘just enough not to get fired’ will see their career potential rapidly decline

It is also the responsibility of employees to adapt to being judged more on outcomes than “time served”.  There are far too many staff today who still “work the nine to five mentality” but barely spend 2-3 hours today actually working (we all know many, I am sure!).  These people need to understand they will be quickly replaced if they cannot adapt their working styles and motivate themselves to add value.  From my experience, staff become motivated when they are encouraged to use their creative energies and are judged on the quality of their outcomes – when they are simply checking the boxes and doing just enough not to get fired, is when the employment model falls apart.  I would bet a champagne lunch on the fact that most of the 62% of frustrated staff only do barely enough for their employer to avoid the sack.

The Bottom-line:  The working cultures and attitudes of management and their staff both need to evolve to be effective in the Digital Enterprise

The current employment model is broken.  There is a sense of entitlement among too many workers that all they need to do is show up to warrant their paycheck and all the accompanying benefits.  At the same time, there is too much legacy management going on, where enterprise leaderships persist in judging their staff on effort-based inputs, as opposed to value-based outputs.  Yes, the old “time sheet” for knowledge workers is probably the worst invention for the enterprise since on-premise ERP software…

I recall when I graduated in ’94 during the pit of an economy and you couldn’t find a job anywhere – you had no choice but to hustle and adapt to whatever job you could get not only to build your career, but also to earn a living.  My first job was answering the phone is a burglar alarm firm – you turned up, you worked hard and you kept at it until something better came along.  Sadly, that “hustle mentality” is clearly shot in today’s workforce – I find people either want to work, or they don’t – and smart employers are figuring that out in today’s much looser, more complex, work environment.  You basically need to hire people who want to work and manage them by their outcomes – it’s really that simple.

So there needs to be a significant mindset change from both employers and their staff if we want to re-humanize the enterprise, otherwise we might as well give it all up to the robots…

Posted in : Digital Transformation, HfSResearch.com Homepage, HR Strategy, kpo-analytics, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, smac-and-big-data, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing

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Posted in : Cloud Computing, Digital Transformation, HR Strategy, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, sourcing-change, The Internet of Things

Has anyone noticed a much harsher mentality towards “labor” these days?  I can recall presenting at an HR Outsourcing conference in 2004 where there was a large gathering of anti-globalization protestors outside the hotel bearing placards and shouting obscenities are us through the window.

“Outsourcing” was a truly dirty word, and shame on any callous corporate executives for instigating the use of low cost foreign labor to substitute their own. Even poor old Mitt Romney was associated with evil “outsourcing” practices during his corporate days at Bain Capital, which hurt his (unsuccessful) attempt to become elected US president.

But all of a sudden, noone really seems to care about protecting jobs anymore – if people are just performing “transactional” tasks, for chrissakes automate them quickly, or buy a SaaS platform to get rid of the unnecessary waste. Where are the demonstrators outside of SAP headquarters in Waldorf, or Oracle HQ in Redwood Shores as these firms desperately try to convince the world they are cloudifying their products so their clients can start to do away with some of those unnecessary jobs on-premise software provides.

And what about that evil Workday, which only provides cloud-based software and enables its clients to do away with HR admin people making a living cobbling together archaic hire-to-retire processes? And where are the tears shed for all those lovely marketing admins who used to earn a crust managing customer databases… their jobs literally obliterated by Salesforce.com?  Not to mention those jovial IT maintenance people no longer needed to support crappy old email systems now their companies have started using Google apps or Office365…

Why did companies get such terrible rep for using lower cost overseas labor, but get a completely free PR pass when it comes to eliminating positions altogether through better technology?  At least they were providing jobs somewhere…

Job protectionism really has left the building 

In all seriousness, organizations are already democratizing their decisions to do IT outsourcing and BPO and, instead, looking at ways simply to erase labor altogether (see earlier). If you only outsource your labor to a provider, you’re likely going to be stuck with it for some considerable time – just at a lower price point. You’ve simply passed on your labor costs to someone else to manage for you – more efficiently and cheaply. And once it’s been outsourced, it’s not as easy to eliminate those passed-on labor costs – you have to convince your provider to replace the labor with better automation and make less money from you, which it is not going to do unless create genuine incentives in place to do it.

Hence, the pressure is really now on for corporate leaders to eradicate that need for labor in the first place to ensure those costs are expunged for good… never to return.  Suddenly, reducing transactional labor has become the accepted norm for enterprises – not some wicked, insensitive capitalist strategy being driven by greedy corporate leaders. Essentially, if you’re only managing routine operational work with limited interpretation of meaningful data, or failing to provide creative ideas that drive value or income for your company, you may already be on that short-list to be eliminated.

Why the new wave of Digital capabilities is challenging the workforce like never before

Organizations have been trying to reduce their labor costs for decades, but something feels very different about the new Digital reality in which we operate.  Many people thought the onset of web technologies would be the big game changer with how we utilized labor, but it actually increased our reliance of humans – many business processes became web-enabled, which necessitated training on new applications and helped us work more effectively – but they didn’t fundamentally change how we operated – the web really just enabled us to run things the same way as perviously, just with more global capabilities and much more efficient communication. It was this previous wave of Digital which really enabled the great outsourcing boom of the last 15 years, as communication costs plummeted and web applications made it possible to work with people anywhere/anytime.  The initial web evolution helped globalize the workforce, but didn’t have as much impact on how we could automate processes, mine vast pools of data, leverage mobile applications to interact with our employees, partners and customers.

We have entered an era today where there is real capability to change how we run our businesses – from the back office processing to the front office customer interaction:  we have tools and apps to target and interpret meaningful data, we have developing software solutions to automate and even robotize processes like we never could in the past and we have all submerged ourselves in a mobile culture where all forms of business are conducted on all types of devices and interfaces.  Perhaps even more importantly, cloud-based platforms are being developed which allow us to share these capabilities, re-invent the way we run services and process transactions that require such a lesser amount of human intervention and oversight.

Hence, the onus shifts to the capabilities of our talent to add value to their organizations that are insightful to help base decisions; that are creative, which help try new ways of doing things, or targeting new markets; that are innovative, where their organizations can find entirely new ways of competing, or developing unique products or services.  Whether their work in finance, HR, marketing, procurement, IT, supply chain… their job is to leverage Digital technologies and platforms effectively so they can refocus their time adding value, because the need to people to sit around and fill in spreadsheets all day is being gradually eliminated. People need to do a lot more thinking, and less executing.

Two-thirds of today’s operations talent is falling short when it comes to supporting Digital Transformation

Which brings us to our new State of Outsourcing study, conducted with the support of KPMG and covering the experiences of 312 enterprises, where two-thirds of operations jobs are now under threat. Simply put, barely a third of enterprises today are happy with their internal talent’s ability to drive positive outcomes from their analytical and creative capabilities with their current outsourcing engagements:

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Steps enterprise leaderships should undertake to prepare for Digital Transformation

What’s clear, is that company leaders are bemoaning the lack of capabilities of their operations staff to adopt Digital technologies and provide the acumen to make them effective for the business. If two-thirds of them are not providing the capabilities to help automate processes, analyze meaningful and targeted data, or come up with creative ideas and solutions for the organization, then their leadership needs to take on the following measures:

1) Evaluate the Digital Transformation capability of existing internal staff

The burning issue today is whether people have the capability to change the way their work, as doing things the same old way and expecting different results is the known recipe for failure. Staff need to be evaluated whether they not only have the intelligence to develop their analytical and creative skills, but more the willingness and motivation to do things differently. Simply put, most people in the white collar workplace are smart enough, but whether they have the mental fortitude to change the way they work is another matter.  Future research will tell, but we already see millennials and younger generation staff showing a more Digitally-aligned mindset to how they work, and can embrace their technology environment to be effective. The mid-career people can go either way – some embrace change (or do it through fear), while others just seem incapable of deviating their work habits – and choose to jump jobs than step up to the challenge of actually being better at how they apply their skills to the workplace.

2) Introduce formal training to change the way capable staff approach managing operations

Once organizational leaderships have evaluated the right candidates which want to re-align their skills, then lies the challenge of beginning the training. Consultants can be useful at bringing in organized programs, structured methodologies and smart learning tools, but ultimately organizational leadership needs to drive the change.  The change is more than merely “doing things differently”, it is about thinking differently, it is about changing the work culture.  It is about having staff understand how they are going to be measured in the future, what is expected of them, and how they need to spend their time.  It is about these staff understanding how to embrace the technology toolsets around them to do their job smarter and collaborate with other like-minded staff to come up with better ideas for the business and better ways to achieve results.

3)  Evaluate and engage with existing and future potential partners to create a Digital culture across your organization

Most companies really struggle with change, and only relying on steps 1 and 2 might not be that effective alone. However, the nature of third party relationships can forge a very powerful catalyst to do things differently. The successful providers of the future will be those which can work with their clients to advance their skills beyond transactional.  For example, if you buy finance and accounting services, a provider which only does the transactional grunt work isn’t going to be very relevant in the future when you can get much of the work done using automated technology.

Providers need to be the ones helping develop the Digital mindset with your staff, so they can work with them to be more analytical and creative. They need to provide teams of data scientists and creative thinkers who can work in hybrid teams with your own staff to create a whole new training ground and environment to take advantage of the new wave of Digital. If your current provider cannot offer those capabilities, then evaluates those who can. And these partners aren’t necessarily the usual suspects of today, many of whom have already become legacy (and are only just realizing it).  The partners of tomorrow are going to look very different, may have different brands, working styles, leverage different platforms and tech. Many aren’t traditional service providers, but operate with different models where delivery staff might be in the less traditional locations, or may simply be consulting firms which prefer to work with clients on longer-term service models. They may simply be SaaS vendors with great support capabilities.  The landscape is going to look very different in three years’ time…

The Bottom-line:  The business world is becoming a harsher place to be, and many workers will struggle if they can’t adapt

The talent crunch is already coming.  The old safety nets of years gone by have bigger and bigger holes in them – you only need to look at the job ads and the types of skills smart companies are now looking for to understand quickly how irrelevant you could become if you don’t embrace the Digitally transforming world we are now living it.  It really is time to get with the program, people, or start preparing for an early retirement…

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Digital Transformation, Global Business Services, HfS Surveys: State of Outsourcing 2014, HfSResearch.com Homepage, HR Strategy, IT Outsourcing / IT Services, Mobility, Outsourcing Advisors, Robotic Process Automation, SaaS, PaaS, IaaS and BPaaS, smac-and-big-data, Social Networking, Sourcing Best Practises, sourcing-change, Talent in Sourcing, The Internet of Things, the-industry-speaks