If I had a Bitcoin every time someone claimed that BPO is “dead” / “hitting the bottom” / “merely staff augmentation that’s going away soon”, I could commission a whole team of robots to write this blog until the new year. And Accenture’s recent decision to drop outsourcing from its tag-line and submerge “BPO” under the broader term “Operations” felt somewhat like a death-knell for the troubled terminology.
However, I would argue that BPO is just at the beginning of a much more dynamic phase of its existence and is at least three years’ away from the term being put to bed. BPO will evolve into “progressive operations” in time, but as our research illustrates (read on), the BPO market is still immature and has some room to grow before it becomes mainstream.
BPO is a powerful term – it genuinely implies the transferral of the management of processes
As negative as the connotations of BPO have been in recent years, it has a powerful meaning for businesses today. “Outsourcing” has always signified the transferral of the management of work to a third party, while the broader term “services” just means “work”. “They performed services for us” can mean anything, from little projects through to a much larger array of operational delivery. “I outsourced my xxxx to them” means you actually transferred work to the third-party to manage for you on a consistent, ongoing basis.
I would also argue that “outsourcing” is appropriate during the early stages of transferring work to a third party. Once that relationship is fully operational and the management of said work already outsourced, then both the client and provider will naturally start calling it something else.
Outsourcing is the correct term to use when the externalization of operations is nascent
Synonymous to this theory is IT. Remember how everyone used the term “ITO” in the late ’90s through mid-2000’s to describe their sourcing of IT to the EDSes, IBMs and so forth? But today, “ITO” is pretty old-hat – people just call it “IT services”, even though so much of it has already been outsourced. Outsourcing was a more appropriate term during those years clients and providers were grappling with all the challenges to make outsourced IT operational and effective.
However, once outsourcing had become the norm with how most enterprise clients received a portion of their IT services, it was no longer outsourcing – it merely became the way they ran their IT. It’s the same with manufacturing, which has been outsourced longer than anything else, for example, many years ago, Apple outsourced its manufacturing to a Flextronics, but now it’s merely how Apple makes its gadgets.
Four-fifths on business operations are still in inhouse
I believe the same will eventually happen to BPO as more companies do it, but as our recent study of 343 major enterprises with KPMG discovered, around four-fifths of business operations are still sitting inhouse, either in decentralized business units or in shared services, still burning up the payrolls of the majority of global enterprises:
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On average, close to 40% of IT (apps and infra) is outsourced today. “Outsourcing” of IT is pretty mature – it still clearly has a lot more wiggle room to grow, as close to half of IT is still run from shared services operations, but the level of outsourcing of IT is double that of finance, HR, procurement and supply chain. Until these business process areas surpass at least 30% outsourcing penetration, most firms are still in these early, nascent phases of externalizing the management some of these processes and are hence doing “BPO”.
BPO isn’t the dirty word anymore… it’s “operational labor costs”
Cutting to the chase, today’s corporations are on an inexorable quest to reduce their reliance on operational staff and align as much of their talent with the “front office” where they interpret data, sell, market or strategize. Noone wants to hire operational staff these days unless they really have to. And BPO is just one of lever of several levers for COOs to pull these days, as this quest gathers steam.
Hence transactional/operational labor costs are the new no-no – and if you’re in IT or business operations today and merely doing operational work, there’s a strong chance, over the next 2-3 years you will be:-
a) Replaced with a SaaS app;
b) Outsourced;
c) Robotized; or simply…
d) Fired.
So that means many IT/ops staff may be forced out of their firms into manual jobs, or (if they’re lucky or smart enough) will shift to the “front office” where they interpret data, sell, market or strategize. And many may opt to ply their trade with BPO providers.
The biggest single problem facing the future of the white collar industry is what to do with all these “operational” people as they can’t all be reemployed as “value-add staff” – there won’t be as many vacancies to fill and many staff simply do not have the skills. In short, we’re likely facing an employment crisis of unforeseen proportions, due to the sheer speed of automation and commoditization today – and this will especially affect the mid-career folks who have waited too long to re-skill themselves.
The Bottom-line: BPO is one of several levers for COOs to pull as they seek to refocus their internal talent on front office activities
In short, providers can call “BPO” whatever they want. In their eyes they are providing managed expertise – and the leaders like Accenture, Capgemini, Genpact, Infosys, HP et al. want more than just the BPO piece of the pie – they want the IT enablement, the end-to-end process… they want the operations to run. And the BPO opportunity is much more than simply taking on a few back end processes at lower cost – it’s about freeing up enterprises to focus on areas that are relevant to their growth and competitiveness. The better the providers get at delivering the standard BPO services, the greater the opportunity for them to take a bigger piece of the pie. And this is eventually when BPO will fizzle away as part of a broader operational service that is being provided… but it’s not for a few years yet as the data above clearly tells us.
But let’s not get caught up in terminology – the real issue is how ambitious enterprises are taking a much more mercenary approach to running their operations in today’s market – why add staff to support processes that are becoming obsolete? In areas where common standards represent an acceptable level of performance, SaaS will rule – such as payroll, accounting, indirect procurement and so forth. You can buy your SaaS and be done with it. Smart firms “born in the cloud” are not looking to hire operators anymore, unless they absolutely have to. You can run a company off Legal Zoom, Intuit, Google etc with a small number of (or none at all) operators.
However, in the areas where enterprises can still gain competitive advantage, namely where there is room for innovation, growth and productivity improvements, this is where companies will need help selling, marketing, strategizing, analyzing, designing etc. It is these people in the “front office” who need to lead the decisions on an operations backbone to support the business, but it’s how these operations and their supporting systems are configured to support business usability that really matters.
The core questions will be “how can I get the data I need to make this decision” and “how do I find the right supply chain partners to get my products to XYZ quickly” and “how do I find the right channels to promote my product” etc. Their systems need to support answers to business problems, not create more problems (like how do we get the stuff from Salesforce into that new analytics tool we bought and run a profit/loss scenario in the accounts system etc).
And the scary part that is coming, is if operational heads can’t design these operations and supporting systems effectively, their COO (or whomever) will cut a deal with a partner who can. There will be no room for prisoners any more.
So when firms like Accenture drop the term “Outsourcing” and replace it with “Operations” they are really saying “stop trying to fix the little things, just hand it all over to us as you know you can’t run them effectively yourself”.
When you’re feeling a tad queasy as a service provider and the prognosis is for lower-than-expected growth in the year ahead (4-6% in this case), one of the prescribed treatments is usually a healthy dose of M&A activity to boost market potential and make the competition sweat instead.
This inorganic medicine can be especially effective when the treatment aligns to a client vertical where you have a strong competitive position. So when Genpact announced the acquisition of Pharmalink Consulting earlier today, a global provider of regulatory services to the life sciences industry, it seemed like the patient was on the right treatment regimen. Charles Sutherland takes a deeper look into the merits of this new acquisition…
Genpact has been a leading performer in the life sciences vertical for several years now, being especially dominant providing finance and accounting BPO for a host of the leading pharma giants such as Astrazeneca, Pfizer, Sanofi and GSK. In addition to Genpact’s horizontal strengths in pharma and life sciences, the firm has been competing head-on with the likes of Accenture and Cognizant in industry-specific process areas such as Clinical Data Management (CDM), Pharmacovigilence (PCV) and Commercial Services. These BPO/IT service providers also compete in these industry-specific processes with a specialized set of life sciences companies called Clinical Research Organizations (CROs) who include such brand names as Quintiles.
All of these offerings are designed to reduce operating costs for life sciences companies, in particular to address the single most important business outcome in the industry, which is increasing the likelihood that a new drug will come to market with increased speed and with greater commercial success. BPO service providers have been helping clients for years to reduce time to market through improving the efficacy of clinical trial information through CDM capabilities and in tracking the efficacy of new drugs and compounds including measuring their adverse effects through PCV but until recently they weren’t in a position to help clients bring those together with support for managing the regulatory environment under which new drugs are evaluated by the Food & Drug Administration (FDA) and other bodies.
Accenture took a gamble at bringing these services together when it purchased another regulatory consulting company Octagon Research Solutions (read analysis here) in August 2012 to get access to their regulatory management software and consulting skills and now Genpact appears to be following a similar path with today’s announcement. We know that service providers also looked at a third regulatory services company, Liquent prior to it being swallowed by a CRO, Parexel in January 2013.
Charles Sutherland is EVP Research, HfS (click for bio)
Prior to their being acquired, all of these regulatory services firms primarily focused on software platforms and consulting services but both Accenture and now Genpact clearly believe that their life sciences clients are ready to move traditionally project based regulatory work into longer-term BPO arrangements. These arrangements will allow greater efficiencies in regulatory management and bring together CDM, PCV and regulatory services together with additional analytics services to have a meaningful impact on reducing regulatory times and bringing new blockbuster drugs to market sooner.
With this new model beginning to prove itself out with Accenture, we look forward to talking more with Genpact in the weeks ahead to see how they are going to create their own blockbuster compound of clinical data management, pharmacovigilence, commercial services and regulatory services in the life sciences BPO marketplace. We’ll be back with more insights and views on where this market is headed after that.
After all the hype… after the endless stream of blogs and articles every woman, man and dog have found irresistible to conjure up (or just cribbed from whatever we’ve already published and passed off as their own, but who cares…), we’re enraptured to publish the first Robotic Premier League Table of service providers delivering robotic-esque automation to their clients.
And congratulations to Sutherland, TCS, HP, Capita and NorthgateArinso for making the early pace in this race for robotic royalty.
So, without further ado, let’s hear from HfS’ own commandant of cognitive computing, Charles Sutherland…
Kicking off the first Robotic Premier League (RPL)
At HfS Research, we really enjoy our sport and so with the English Premier League season in its final throes and the Indian Premier League just starting, we thought it would be an excellent time to launch the Robotic Premier League of BPO Service Providers.
While it is too early in the evolution of robotic process automation (RPA) to apply our comprehensive Blueprint Methodology to this market as sufficient reference clients don’t yet exist to feed into our execution criteria, we still wanted to provide our assessment of where the innovation in this market is coming from. Having been the first analysts to start exploring RPA back in 2012, we have had the benefit of dozens of service provider and technology supplier briefings and have taken that insight and applied it to 5 major scoring criteria (using a 1-5 scale) to create an initial pre-season league table of BPO service providers in RPA.
These five equally-valued scoring criteria are as follows:
Credibility of RPA strategy
Support of business leadership for RPA
Breadth of internal tools and external partnerships for RPA
Effectiveness of marketing effort behind RPA strategy
Apparent actual client activity underway
Like the English Premier League, we have 20 teams (BPO service providers) in the premier division that we felt had showed some level of interest in RPA so far in 2014. Using our own judgment and experience against these criteria, and some pre-season comments and observations from the providers’ training sessions, here is our initial RPL league table:
We also want to recognize emerging start-up specialist RPA solution provider UK based Genfour which is our current candidate for the mostly likely service provider to be promoted into the RPL over the coming year.
As we said before, it’s still the “pre-season” for RPA in BPO and as we see the first client pilots turn into reference clients in the months ahead this initial league table will likely be turned upside down and around by service provider efforts. In the meantime, reflect on where your service provider(s) are in our rankings and watch to see how aggressive they are in moving up this table as the “real season” of client delivery for RPA begins.
Patrick Cogny is Genpact's Global Business Leader for Manufacturing (Click for Bio)
I think it was back in 2006 sometime that I was working with a major global enterprise which was deliberating a wild swathe of BPO deals, and there was this upstart little Indian company, which had just shed its weird name (“Gecis”), and was vying to win the F&A business, in spite of fierce competition from the likes of the traditional establishment that included Accenture, ACS, IBM et al. The conversation quickly turned to “which one of these providers can actually do supply chain accounting for multiple European destinations”.
“Not to worry everyone, we have ze perfect set up in Romania for you” piped in a dashing young Frenchman. And there closeth the deal, at the time one of Genpact’s largest, and I first met Patrick Cogny. Since then, Patrick has quietly developed a very strong reputation as a deep thinking and very personable executive, helping first grow Genpact’s European capabilities before taking on the role of leading one of G’s largest industry practices, manufacturing and services,almost three years’ ago.
Anyhow, we managed to lure Patrick away from his newly-formed habit of wandering aimlessly around the streets of his adopted New York City to get some lowdown on the crazy early days of Genpact, and how the firm is approaching the manufacturing sector with what he calls the “New Industrial Revolution”…
Phil Fersht (CEO, HfS): Hi Patrick, thanks for spending time with HfS today. You’ve been one of the real characters behind Genpact’s rapid growth, both in Europe, and now in the States. However, before we get into your current role and plans, can you give some insight into your background – how you started your career and why you found your way into the Genpact organization.
Patrick Cogny (Genpact): I started my career with GE a long time ago – disclosing details would betray my age – I spend 12 years in the Healthcare business of GE, most of them in a high-tech division designing and manufacturing X-ray sources. I held roles there in supply chain, sourcing, manufacturing, Six Sigma, Quality and After Market Services, and worked both in beautiful Paris, France and Milwaukee, Wisconsin.
So I was a real industrial guy, and then a phone call from an ex-boss got me into a role at GE Corporate in Brussels to lead the back-office optimization initiative for GE Europe, across all of the GE businesses. Genpact – then known as Gecis, the then captive unit of GE – thus became a key supplier and partner. I loved what I saw, so when Genpact was spun-off as an independent business, I immediately accepted the offer to join them as their CEO for Europe in early 2005. It was lots of fun to build that business from the grounds up, getting our first clients, recruiting folks, training them in the arts and science of our trade, and setting up new sites in Bucharest, Cluj, Rabat, Lublin…
In the summer of 2011, I took on a global role leading our Infrastructure, Manufacturing and Services vertical, leading a global team of about 15,000 associates. I’m now based in (really beautiful) New York, after having lived in the past 10 years in Paris, Brussels, Budapest and Bucharest.
Phil: So tell us a bit about the crazy early days when Genpact was still a little upstart frightening the life out of the established BPOs. Looking back, you guys really changed the industry and brought a whole new competitive bit to BPO, as we know it today. What was it like to be part of it?
Patrick: Loads of fun is the obvious thing that comes to mind! It felt like being in a start-up – albeit a large and well-funded one. But it was also scary – we were going up against the big boys, competitors who had literally decades of relationship with their clients, who knew everyone on their leadership teams. But as my first client in Europe said – “having an established relationship works both ways” – his company was simply fed up with being taken for granted by their large incumbent, tired of a track record of poor execution, and for them like many others we were a breath of fresh air.
Phil: And how different is Genpact today? Have you gone all “corporate” now, or do you still have some of the old spirit, attitude and values?
Patrick: Some things have not changed at all: the absolute maniacal focus on customers satisfaction, the hunger for growth, the curiosity and the passion for bringing new solutions to life, and a very hands-on “get it done” culture that comes from our deep operational roots. At the same time, we have changed a lot of things, every year. This market has been everything but static, and year after year has presented new challenges and opportunities.
When I look back, I see a huge evolution in the way we do things compared to 10 years back. Labor arbitrage is not a topic anymore, productivity and business impact are. We’ve gone from being IT agnostics to having strong points of view on technology solutions that drive process transformation. We used to rely extensively on Subject Matter Experts experiential knowledge, we now leverage the Smart Enterprise Processes compendium of benchmarks, practices and best in class designs. We would only do outsourcing and offshoring, we now do design of end-to-end processes and help our clients setup captives and GBS models.
So, along the way we’ve become more sophisticated but I see the same basic principles on how we operate on a daily basis in terms of culture and values. There is one tradeoff though we had to make – due to the growing sophistication of our offerings and solutions, we had to focus – focus on select verticals, where we have folks who grow their deep understanding of client context, and focus on key solutions where we can invest and provide transformative solutions.
Phil: You talk a lot about the New Industrial Revolution. Can you share your vision with our readers – and how your role plays into this?
Patrick: Well the industrial world is becoming sexy again ! There’s a lot happening in Manufacturing itself, such as nanotechnologies, 3D printing of parts, that will make new types of products possible, and will enable unprecedented levels of flexibility and customization. This will require a reshaping of supply chains, and an entire new level of Analytics there, for which we are very well positioned.
But the piece that most excites me is that products are becoming intelligent and communicant. You just read the papers today, we are just starting to realize how much data our phones, but also large pieces of equipment such as aircrafts, are constantly collecting and broadcasting. And we are just starting to realize that few organizations (apart from the NSA!) are equipped to handle and leverage that information. We have been associated with the most advanced manufacturing organizations for a long time, and have worked side by side with them to Connect their equipment, Collect the data they gather, Compute the information to gain insights, and use it to Control the equipment and improve its reliability, output, or profitability. We are bringing this experience and the tools and methodologies we are developed there to the field of Industrial Machinery in a big way, and we are doing this with a combination of Engineering depth in understanding the equipment’s applications and features, Analytics skills to exploit the Big Data that is collected, and Process management skills to setup industrial strength reliable and repeatable control and feedback loops. This Machine to Machine, or Internet of Things space is very fascinating, at the intersection of engineering, after market services, big data, cloud, and we believe Genpact can bring tremendous value and impact there, so watch this space for more!
Finally, as all these changes take place, I think that large industrial conglomerates will realize they have an opportunity to drive the next generation of outsourcing. Most large industrial organizations went on the SSC journey very early on, and have established already a footprint of back-office centers, often captive. There is still huge value to be realized for them by moving to modern outsourcing constructs. See when they were setting up their captives a decade ago, the game was labor arbitrage, and industrial companies had already started setting up plants in lower cost locations.
The BPO providers landscape was also not mature, with little competition among very few large providers, so it was a very logical step to build captives at the time. The situation has changed a lot, there is a healthy competitive BPO offering now, and the game going forward for back-office is one of automation, analytics, which frankly is completely outside of industrial companies’ core expertise. We can now build solutions for a company that has already a low cost SSC footprint, that save them 30%-50%+ on costs, whilst giving them the flexibility they need in a rapidly changing environment, and freeing up investment capacity for their core areas of focus.
Phil: Our latest research into the future of BPO and its technology-enablement is quite startling – namely 50% of BPO buyers expect to move into a transformational environment within two years, where they have re-engineered and standardized their processes and engaged in some degree of tech-enabling them. What’s more, providers are even more confident that their clients will “cross this chasm”. Do you think this is realistic, or are you skeptical?
Patrick: No I’m not skeptical at all. Of course we are going through the usual cycle of over-hype and over-selling on expectations and capabilities, but it is happening and the process of the future will be IT enabled. Where I would offer a different point of view to what we hear today in the market is really how it will play out. Large legacy IT providers are finding themselves in a pickle as the large ERP implementations are losing steam. They have delivered on implemented a single platform of record, but the costs have been huge, and these ERPs have largely failed in being effective platforms of engagement – they have poor workflows, weak and cumbersome reporting capabilities, and don’t have any flexibility to adapt process flow and business rules to new requirements.
So we believe the future is in cloud-based platforms of engagement, and that’s effectively a new space for everyone, where legacy SAP or Oracle knowledge is not that relevant, but instead understanding of business process design and configuration is the key relevant skill. We have a huge advantage there, with our experience driving Smart Enterprise Processes and process re-engineering over the past decade with our clients.
But we also needed to upgrade our tools-set – tools which again the IT providers don’t have as they have been focused on the platforms of records, and with our acquisition of Akritiv and the subsequent investments we have made in technology and partnerships, we are now extremely well equipped with the suite of best in class, cloud-based platforms of engagements that we are bringing to the table in the areas of F&A and Industrial Asset Optimization.
Just to give you an example: Genpact’s cloud-based F&A BPaaS solution helped a large door manufacturer drive growth and accelerate expansion in emerging markets – this involved successful completion of three acquisitions in less than 6 months and a fully operational back office in 12 weeks’ timeframe.
Phil: And finally….if there were two things you could change about BPO today, what would they be?
Patrick: Our ability to drive business impact to our client has gotten to be really strong, but it is still hugely under leveraged. We have to find ways to work through political agendas of various stakeholders to unlock these big projects that will make them and us successful in the eyes of the CxO suite. We also have to convince clients that giving more end-to-end responsibility to your partner is a good thing, not a threat, so that we can drive more impact. I would also wish that some consultant’s “Source to Stay” push for captives would abate. Captives have their place, but too often the reason for them being set up are the wrong ones : a few internal stakeholders looking to preserve their jobs, or consultants wanting a steady multi-years revenue stream.
Phil: Thank you for your time today and for sharing some of your views and thoughts with our readers.
Patrick Cogny (se bio) is the Global Business Leader for Manufacturing at Genpact. On a more personal note, he enjoys reading, especially about technology, economy and social science. He also loves walking around New York, which remains an amazing place to discover after 3 years. He would like to have time for other hobbies, but these will have to wait till an elusive retirement, as in between business trips he prefers to spend time with his family and friends.
As we predicted last year, TCS has now become the first of the Indian majors to break the Global IT Services Top 10 for revenues, replacing CGI.
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Talk to any incumbent Western service provider today, and the one making them all tremble from the sub-continent is TCS. So what’s the secret sauce?
TCS’ aggressive targeting of renewals and new business, particularly in continental Europe is an important factor in driving its assault on the leaders. Moreover, TCS is frequently seen as being the most flexible service provider on pricing and terms, and has a developing reputation for winning any deal anywhere in the world at any price, if it really wants: it depends on what its leadership thinks is important, what its perception of the market is, and what it needs to tell its stock-holders.
The firm is increasingly being perceived by many today as an alternative provider to the Western Tier 1s, that can come in and fix messy contracts and implementations; it has shown an appetite and willingness pick up a lot of the low margin, low value work that seemingly every Western Tier 1 wants out of and make the deals profitable and leverageable across clients. Not only that, TCS is having much more success de-linking the direct correlation of revenues from FTEs: the firm has a laser-sharp focus on managed services, fixed price projects and has successfully monetized its product group. The sheer size of its referenceable client base and the executive connections of its leadership, is a huge strength. In addition, its tunnel-vision on developing its platform-based solutions is really helping the firm move gradually away from the FTE-pricing model, with real progress already being recognized in banking and insurance verticals.
Cognizant highly likely also to make the Top Ten in the next 2-3 years – most likely at the expense of CSC
It is interesting to note another important characteristic that is starting to differentiate the providers in this list, is the margin of the providers – and we believe the need to maintain margin is slowing growth for many of the Western incumbents. As can be seen in the chart above, the average operating margin for the Top 10 (excluding SAP and Oracle) is 11.5%, with IBM, Accenture and TCS the only top 10 providers with margins in excess of 10%. IBM and Accenture growth may have slowed in the past 24 months, but they have maintained margins. What is worrying for some of the other providers is growth and margins have been compressed by recent market conditions, namely price-squeezing and service commodotization, making it more difficult for them to invest in restructuring / offshore infrastructure / technology imperatives needed required to halt the decline.
As a result, the next likely entrant with strong Indian roots will be Cognizant, where the likely formula for entry being CSC to lose a further $1 billion in revenues and Cognizant to gain another $3 billion – a very likely occurrence based on the recent trends, when you consider Cognizant’s recent growth surge and ability to maintain margins at the 19% level.
The Bottom-line: The naysayers will claim the Indian majors will run out of steam, but who’s really going to challenge them as the delivery model matures?
Jamie Snowdon is Applications Services guru, HfS (click for bio)
As we discussed last month, the Indian majors doubled their market share in global services in barely four years – and while access and management of lower cost offshore talent is a key factor, even when that advantage peters out, the sheer passion and culture of the Indian firms sets them apart from many of the flagging Western incumbents. Moreover, as IT services continue to commodotize, it’s becoming almost impossible for many of the incumbents to come back.
At HfS, we see longer-term disruptive factors, such as advances in automation and robotics and cloud platforms, which could actively negate the need for outsourced labor, as the bigger threats to the Indian majors, but these are still a few years away from making significant inroads into the mighty IT Indian services model.
You can read more about the HfS IT Services Top 10 in our new report “TCS Breaks into the HfS IT Services Top 10”, authored by Jamie Snowdon and Phil Fersht, by clicking here.
No joke, but where else can you hear a discussion about reproducing the cerebral cortex in a piece of software? Where else can you truly understand how paychecks will be processed and IT systems will be remotely operated by robotic human clones in the near future?
Had something better to do than be one of the 800+ registrants for yesterday’s Ultimate Robotic Automation Debate? Or, were you so enthralled with the debate that it’s left you hungry to devour more information on how and when to deploy your very own, round-the-clock robot?
Well, fret no further as HfS Research’s powerful, little, semi-automated, back-end assistant makes it a practice to disseminate our webinar slides and replay for your robotic revelry.
Oh – and a special thank you to our excellent panelists: Lee Coulter (Ascension Health), Pradip Khameni (Blue Shield of California), Chetan Dube (IPSoft), Alastair Bathgate (Blue Prism), Ian Barkin (Sutherland) and Charles Sutherland (HfS).
A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself “outsourcing”.
Accenture dropped the term from its strategy line, “Consulting, Technology, Outsourcing”, which it had been using for more than a decade, changing it to “Strategy, Digital, Technology, Operations”. In addition – and perhaps more significantly – it renamed its BPO growth platform “Accenture Operations”. The BPO term is still used when you drill right down to the specific business service lines, but Accenture wants to emphasize to its clients that it provides end-to-end services that go beyond just BPO.
As many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful identity and establish recognized career paths for almost two decades, and much of this is because so many of the service providers, advisors and enterprise customers have failed to create a positive brand perception – and communicate effectively – the value of partnering with service providers to improve and extend operational capability and productivity.
Accenture was one of the last bastions of the outsourcing term, and its de-emphasis of it may be the final nail in the coffin for the dwindling band of outsourcing diehards still clinging to the fantasy that an “outsourcing industry” actually exists. In fact, the term IT Outsourcing is already practically dead, with only a couple of advisors and IBM (oddly) still using it, so let’s see which of the providers actually still use BPO as their official terminology:
Well – there you have it – most have actively distanced themselves from the term, with only Capgemini, Dell, Infosys, Wipro and Sutherland still wed to it. Oh – and for some inexplicable reason, the major HR services firms like ADP still use it, even though the HR profession looks more negatively at outsourcing than any other.
The Bottom-line: It doesn’t ultimately matter what the providers call it, more how the enterprise clients view it
In my view, “outsourcing” really describes the initial act when an enterprise moves the responsibility for processes and operations over to an external party. Once that act is complete, those processes being executed form part of an externalized service or operation for the customer. “Operation” signifies more than merely a service, but the orchestration of an end-to-end suite of processes, so I give Accenture credit for the being the first provider brave enough to use the “operation” term. Now we can sit back and observe many of the above providers also slip that word onto their websites and marketing copy.
However, whatever these providers name their offerings, the real litmus test is going to be whether the buyers of services will start approaching service partnering as a genuine opportunity to improve their capabilities. Ultimately, they are the ones who would need to drop the O word and view services as what they are: services.
Accenture’s move is the most significant yet in terms of rebranding the outsourcing business – my best guess is that O will be pretty much gone from our business vernacular within a year.
If we’re going to cross the chasm and seize the opportunity before us to grow the industry, we need to make outsourcing a career people are attracted to
– Mike Salvino, Accenture, March 2014
Mike Salvino is Group Chief Executive, Operations at Accenture
And finally it’s time for the long-awaited second tranche or our interview with outsourcing hall-of-famer, and the man who’s steered Accenture’s BPO juggernaut these past few years, Mike Salvino. During Part 1, we talked about the challenges and opportunities facing enterprises striving to move up the “BPO Generations” continuum and Mike’s philosophy about how BPO can provide a genuine career opportunities for such a broad diversity of people. We finish our discussion talking about how companies can drive change and what Mike would do if he is ordained as the Lord of BPO for one week…
Phil Fersht (CEO, HfS): Mike, you’ve talked a lot about what needs to change within companies, to move towards more value and away from these transactional engagements. But what do you think really can drive change within enterprises? What do you think has got to happen within themselves to alter the mindset and their approach to developing their governance teams and their staff?
Mike Salvino: I think we will get people to change based on delivering business outcomes. Remember, business outcomes mean that you’re helping clients increase revenue or further decrease their cost –beyond the normal cost savings of outsourcing.
And when we do that, people step up and take notice. They want to understand how you did it. The first step in delivering business outcomes is doing global operations and achieving silent run. That eliminates any discussion amongst ourselves about “Are the transactions getting done?” Then because of that silent running, we we’re able to apply analytics and study what’s going on. Sometimes descriptive looking at past history to try to predict the future, sometimes running algorithms that will help us predict the future, but you can only get to the analytics stage if the operations are silent.
Once you can get to the analytics and produce some data you can hand it over to people that have industry knowledge to get to those insights and generate business outcomes. The last step is getting it into the right hands of people to make a difference. When we’ve done this for our clients, we’ve delivered on fourth and fifth generation BPO. The next step is to turn around and say, “That’s how we want to get paid in the future.”
We want to get away from the FTE based deals, we want to get away from the deals where they can’t scale up and scale down. Clients should pay for what we deliver—and that’s where this industry can go. Now, when you show clients that we can do that it always comes back to people. Once clients see you start producing business outcomes, they never want the people to leave because they value what they can do. That reinforces the need to develop and grow talent in the industry.
It’s been my experience that if we train our folks, if we produce an environment with our clients where people can learn, if we’re clear about their career paths and care about them personally, and if we are authentic leaders, we’ll achieve the business outcomes. But it’s like anything else, once you have been successful at something, it just catapults and snowballs from there. There’s nothing like winning to create positive momentum.
Phil: So that brings me to my final question: You’re ordained by a higher spiritual power as the Lord of BPO for one week, this is even greater than being in the Hall of Fame for the IAOP, right 🙂 You can do two things to change this industry in your one week reign. What would those be?
Mike: Actually, let me have three! The first thing I would do is erase everybody’s memory banks because there’s still too many people that want to remember the failures of the industry versus the successes. In any business it always takes longer than you thought it would to get to where you wanted to be, but we need to celebrate how far we’ve come. So I would first erase the failures of the past because I don’t think that’s the reality of where we are today and that would give me the platform to do the next two things.
The next thing is delivering and getting paid around business outcomes. Deals would be crafted based on business outcomes and people would absolutely understand exactly what that meant. We would contract to it and the impact we were making on the business would be clear.
Then third is an industry that, for instance, my three kids would want to go into. If I had my wish the industry would achieve the business outcomes that would create the growth in the industry for many years to come and that it would be such a good industry with great career paths that our kids would want to run to it to spend the next 20 years. That would be pretty neat if we could get there and maybe we can if we get enough people telling the story.
Phil: I would agree, Mike. I think we need more good people who can share their vision and whip up enthusiasm and excitement – and I think you are being one of those guys who has helped to do that and have been a real credit to this industry. So I thank you for your time today and sharing some of your views and thoughts with our readers.
Industry analyst authority HfS Research has today announced a strategic partnership with leading Robotic Automation software company, Blue Prism to develop the first automated analyst prototype.
HfS has been conducting some major research studies into the emerging trend of Robotic Process Automation (RPA), which is threatening to revolutionize the IT and business process outsourcing world by mimicking and automating repetitive back office tasks such as order management, accounts payable and employee performance management. As HfS was developing its research findings, the firm’s research leadership started to realize its own research processes could potentially benefit from RPA and approached Blue Prism to prototype a beta-robot to produce the first ever automated analyst report.
“Developing new research on an automation platform could be the new game-changer in the world of research and analysis”, commented HfS Research CEO Phil Fersht.
“We’ve been searching for a while now to break the linear growth cycle of the research industry – that is hiring human analysts everytime we need to cover new research areas for our clients. Being able to leverage the capabilities of a world class automation platform like Blue Prism will enable us to become thought-leaders in whole new corners of the market without adding stifling incremental costs to our research delivery.”
As part of HfS and Blue Prism’s first pilot Robo-Analyst project, the development teams have been able to produce the first Robo-Quadrant in the area of “Digital Transformation”.
Commenting on the project, Fersht added, “We have been blown away by the results – we programmed the robot to trawl vendor websites and create complex algorithms based on their usage of technical terminology. Essentially, the more they used terms such as ‘Big Data’, ‘Transformation’, ‘Digital Solutions’, ‘Social Media’ and ‘Cloud’, the further the robot moved their position over to the right of the quadrant. Then we created an API to our accounting system, and based on how much the vendor was spending in proportion to its competitors, the robot proceeded either to raise the vendor performance towards the upper-right corner, or lower it in the direction of the lower-left. Then we checked the results with the same quadrant being run by one of our human analysts and the results were a 97% match”.
After the initial success of Robo-Quadrants, HfS is quickly turning its attention to the use of Robo-Analysts directly with its clients. In order to minimize any risks to its key client relationships, HfS has been soft-launching its first client-facing robo-analyst in Australia, which has resulted in the creation of Robo-Analyst Clive, who has already been working with a series of local clients.
Commenting on Clive’s recent performance, Blue Prism’s CEO Alastair Floodgate personally sat in on a recent telephone briefing between Clive and a local provider of technology services. “I was amazed at how well the briefing went – we’d pre-programmed Clive with phrases such as ‘you are simply wonderful – clients will be thrilled by your outcomes, mate’ and ‘its so refreshing to hear an original value proposition that genuinely differentiates you from your competitors’. However, it did get a bit weird when the provider asked Clive out for a drink – we’ll need to work on that aspect.”
Based on the success of Robo-Analyst Clive, HfS and Blue Prism are planning to roll out a series of Robo-Analysts across the globe, including Robo-Analyst Grace for China, Robo-Analyst Hank for North America and Robo-Analyst Gary for the UK. They are also experimenting in the sourcing advisor market, and have a Texas-accented Robo-Advisor call Rate-card Rick in the works.
If you would like to learn more about the revolutionary HfS and Blueprism venture, you can email your questions to [email protected]
And of course… this was an:
Please, please don’t tell me you fell for this again! Even though the solution might kinda work…
And while we’re reminiscing about falling for April Fools’ gags, here is 2013’s classic:
The author is not is a particularly good mood and may say things that are not entirely objective, not completely rational and potentially insulting to some readers. His opinions are based entirely on tons of research and his own experiences – and prejudices. Do not read this if you have a thin skin or hate reality checks… otherwise read away, nod vociferously and weigh in 🙂
One fact I would challenge anyone on is the abject failure of the outsourcing industry to brand and market itself to corporate society at large.
Lousy events, third-rate publications, meaningless jargon that only “outsourcing people” actually understand, poor branding and too many old white dudes who remain lost somewhere in the 80’s and 90’s, are culminating in a directionless mess that used to be an emerging industry, but is now becoming a confusing collection of activities, business strategies and provider offerings.
Where’s the fresh thinking, the new ideas, the spark of youth and enthusiasm for what we do? I don’t think I can remember sitting on a call with anyone under the age of 40 for quite some time now.
This business needs a complete overhaul with how we approach outsourcing careers, how we communicate what we do and – most importantly – how we define ourselves. I hate to say this, but we really haven’t created an “outsourcing” industry, more a functional capability that only a select few people understand and care about.
One of the biggest problems facing the services and outsourcing industry today, is the constant failure to market the use of third party services providers as value-added services for enterprises. Good Lord – is it really that hard to promote the fact that our enterprises today should drive down their operating costs and improve how they do their IT, finance, procurement, HR, supply chain management, etc?
While business leaders are falling over themselves to blow more corporate moolah on the sexiest new SaaS solutions or the latest ERP upgrade, when it comes to soliciting real help to drive down costs, improve technology and service quality, suddenly every excuse under the sun is used to delay decisions and investments. Buying new tech is about automating processes – and ultimately eliminating unnecessary tasks and jobs, while engaging with services is more often about improving the way that processes are delivered… so clearly the tech industry does a far better job marketing itself that the services industry does. Why is this?
Very poor and boring communication to corporate society about the benefits of services and outsourcing. We’ve done the “O” debate to death and there isn’t much that can be done to mask the term, however, that is no excuse for the poor job most people in the services and outsourcing industry do to communicate what we do. Complicated, badly-written and (frankly) boring white papers that only very sophisticated outsourcing people can understand do not help. Why do so many providers and consultants persist in churning out unreadable stuff that probably costs a small fortune to produce and virtually noone, bar their competitors and the people who write them, actually read. Scratch that, I bet even their competitors do not bother to read the stuff anymore… probably only the authors. And let’s not forget the turgid webcasts that keep getting churned out, where barely a handful of people turn up and pretend to listen to the painful conversation. Whatever happened to people talking and writing in plain English and having a personality to make this stuff interesting? We’re talking about how businesses can re-invent themselves and get much smarter at how they operate – does that need to be boring?
Failure to create “outsourcing careers”. Most companies, once they outsource, fail to rotate their best talent into the outsourcing governance function, and view it as some weird anomaly that only procurement people should do. Not enough people stand up and talk about the potential career opportunities it can create despite the fact that many of us have developed very interesting, challenging and rewarding careers in this business. One of the problems is buyers and providers are only looking to hire people with an “outsourcing” track record on their CVs. How many jaded provider sales execs do you know of their third, fourth, fifth or even sixth provider? And why do buyers only look for people with major outsourcing experience? Why not hire real ambitious practitioners and train them how to understand outsourcing and develop real career tracks, rather than groping for the same ol’ dwindling pool of old timers who know the lingo?
After the deal the real “operators” get neglected. This one really starts to irk… in so many instances both buyers and providers roll out their big guns to negotiate a deal, but, once the ink is dry, they dump it all off onto middle managers to figure out what was actually sold and how to deliver the stuff. At HfS, we are increasingly finding the executives managing the deals, especially on the buyside, are often junior managers desperately trying to figure out how to get through the day, let along do anything remotely “innovative”. Not having enough senior day-to-day visibility and support is highly detrimental to an enterprise seeking to achieve more than “lights-on” effectiveness with their engagement.
Western media always views outsourcing as negative. Every time I get a call from a reporter from a non-Indian publication, they are always trying to dish dirt on outsourcing. And this ranges from the small rags to the most respected broadsheets. There is a stigma that just needs to be broken through better education and communication to the media masses.
Events only promote the paying sponsors. Most events in the outsourcing and services industry struggle to serve up good speakers – they tend to be paying advisor or provider sponsors who just want to get up and preach the same four trends, receive awards and take us through their worn out PowerPoint paraphernalia. And now they can even do them on their iPads…
Niche outsourcing media is poor quality.Ugh – it’s just bad. Most of these publications and websites just copy each other’s rubbish. Some even hire ghost writers to put together “interesting blogs”. Does anyone actually read this stuff? And why do some firms persist in sponsoring it?
Too many advisors are tired old dudes who stopped learning about new stuff more than a decade ago. For example, we estimate that close to 20% of the current application services deal flow today is actually being driven as digital projects from the CMO and there are virtually no advisors today which have any clue how to approach them, according to the providers bidding on them. In so many cases today, providers just prefer it when the advisor is not even there, so they can have decent direct conversations about what the clients need. Advisors have their boxes into which they want to shoehorn everyone, when what they really should be doing is helping tailor the solution the client needs with what providers have the capability of delivering. As someone once said, outsourcing is a game of “horses for courses”.
Big analyst firms have shied away from it.Where did they go? Do they even cover this space anymore? Do they care? Did all the good outsourcing analysts really go work for Cognizant’s marketing department?
Buyers still feel everything is just so “NDA”. When 97% of the Global 2000 “outsources” some element of its IT and 90% some element of its business processes, isn’t the cat out of the bag these days that most big firms “outsource”. Then why do the majority of buyers refuse to allow their executives to talk openly in public channels about their experiences and best practices? Are there really trade secrets that will leak out about how GM uses Prasad to process some invoices? Surely when buyers can talk about their global services experiences more openly, more operations executives will learn what this is all about, and we can get on with the business of creating a more open, developing industry?
Most providers are still not investing in the right sales talent.This one just continues to baffle. If you want to sell F&A BPO, then hire someone who can hold a meaningful conversation with senior finance people, and if you want to sell Cloud services, hire someone who understands the real issues needed to get there and can articulate them to their clients. Is it really so hard, or is there some other reason why the same old blokes keep showing up at different providers every year, who really would be better suited to a BMW showroom?
Can we have more women please?At our recent HfS summits, about 60% of the buyer execs were female, but about 90% of the provider and advisor execs are male. Isn’t it smart business practice to level the playing field a bit here, folks?
If I had a Bitcoin every time someone claimed that BPO is “dead” / “hitting the bottom” / “merely staff augmentation that’s going away soon”, I could commission a whole team of robots to write this blog until the new year. And Accenture’s recent decision to drop outsourcing from its tag-line and submerge “BPO” under the broader term “Operations” felt somewhat like a death-knell for the troubled terminology.
No joke, but where else can you hear a discussion about reproducing the cerebral cortex in a piece of software? Where else can you truly understand how paychecks will be processed and IT systems will be remotely operated by robotic human clones in the near future?
A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself “outsourcing”.
