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?
Charles Sutherland is EVP, Research at HfS (Click for bio)
On this week’s HfS Podcast, we’re talking robotics. Hot on the heels of his seminal report, Framing A Constitution for Robotistan, and his presentation at Blueprint 3.0, HfS EVP Charles Sutherland sat down with Mark Reed-Edwards to dig into the key issues around robotics and automation.
What are the five reasons automation may replace BPO as we know it today? What trends will we see over the next year to five years? Who’s leading the way? This podcast will give you the answers to those questions and more.
Reetika Joshi is HfS Research Director, BPO and Analytics Strategies (click for bio)
On this edition of the HfS Podcast, Mark Reed-Edwards talks with Reetika Joshi, Research Director, BPO & Analytics Strategies at HfS.
Reetika recently published the HfS Blueprint Report: Insurance BPO, which evaluated the innovation and execution capabilities of service providers in life and annuities, property and casualty, and other segments.
In the podcast, we examine the following questions: What data is behind the report? What are the key highlights from the report? Which providers made it into the Winner’s Circle? Which ones were close? What does it take to make it into the Winner’s Circle? Listen below for answers to those and other questions.
If I had a rupee for everytime someone had told me that Indian based providers are…
a) Running out of steam;
b) Just offering staff augmentation at lower prices;
c) Suffering from such bad wage inflation that the house of cards is about to come down;
d) Providing services of such low quality that everyone is following Randy Mott’s lead and backsourcing everything;
…I would have at least a month’s worth of app testing at my disposal right now.
However, the sustained growth surge of the leading Indian majors is proving much more resilient than the naysayers are claiming and I would argue has created a dynamic where many of the traditional providers may never find a return to prominent growth. Let’s discuss…
Global business is never going back to the way it was
Many of these people are simply waiting for the world to return the ways of pre dot.com crash days, where clients paid the exorbitant fees of consultants for “transformation projects” and dumped hundreds of millions into dysfunctional ERP projects that often achieved little beyond creating meaningless work to support faltering processes, many of which are now rendered obsolete.
I hate to be the hearer of bad news, but the world really has moved on since then, and the emergence of the Indian majors has been a bi-product of the emerging opportunities for enterprises to shed their bloat and create an environment to do things differently. Cloud computing platforms, improving analytics opportunities and the advantages of lower-cost global delivery are the three main game-changers in today’s business environment – and this isn’t going to change anytime soon.
What we’ve witnessed is the Indian majors literally doubling their share of the global market in barely four years, while the “traditional” onshore-centric IT and business service providers have largely floundered. With the notable exception of Accenture, the onshore-centric major providers have only managed to post growth rates in the low single digits, with both HP and CSC revenues actually lower in 2013 than in 2009. Over the same period, the major Indian-based offshore-centric providers all grew annually in double figures with Cognizant expanding at almost 30% year-on-year over the last four years:
Click on Charts to Enlarge
Nine reasons why the offshore-centric providers have enjoyed their unprecedented growth
It’s time to acknowledge one of the phenomenons of the electronically-connected era of global business – brand India and its emergence as a key component of the IT and operations back office for the Global 2000 – and it’s done it while using Indian delivery as the hub. It would be convenient just to pass this off as the effect of labor arbitrage and resultant price pressures, but over this period of time, all of the onshore-centric suppliers have steadfastly developed significant offshore presence and access to an abundance offshore resources at genuinely massive scale. At HfS, we have identified the following nice elements that have been the main reasons for the success of the Indian majors:
1) Brand. India’s brand in IT services has matured in last 5 years – whereas businesses, in the past, were seen to be using Indian offshore-centric providers for primarily low-cost services, now they are genuinely going to offshore-centric /India-based providers for IT value and knowledge, as costs have leveled out across all providers for bread-and-butter business and IT services. The offshore-centric providers increasingly benefit from India’s growing brand equity, as well as their own.
2) Customer satisfaction. Many clients like the more humble approach of the offshore-centric providers, where delivery managers are more flexible, and “going the extra mile” for clients is never an issue. Moreover, many of the offshore-centric providers’ account managers are not constantly trying to “go up the totem pole” within their clients to sell more services and undermine their client relationships. Client like to feel in control of their provider and the Indian approach often gives then that.
3) Client understanding. The “penetrate and radiate” strategy of the leading Indian offshore-centric providers has worked wonders. Once they have developed an understanding of their clients’ institutional processes, their clients do not want to kick them out – even if they haven’t performed as well as hoped. Getting to know the “warts and all” of clients creates an incredibly sticky and sustainable relationship. While many of the onshore-centric providers shy away from small projects as they like to concentrate in the big, high margin engagements, many of the Indian providers love to take on the small stuff, preferring to take the longer view that once they get embedded within a client, their opportunities will quickly emerge. Any advisors reading this will empathize with the enthusiasm of the Indian firms to chase after all types of business, not matter how small or unappealing it may often be.
4) Incentivized and entrepreneurial employees. Offshore-centric providers have driven success within employees by offering incentive based pay and share options. This has helped to tie employee success and corporate success together. Anyone who’s attended their sales offsites and customer events will quickly see how entrepreneurial some of their staff are – always keen to engage and build relationships.
5) Hunger. The offshore-centric providers are clearly hungrier for the business – always eager for more business and always eager to please their clients. Clients like hunger and determination, as long as it is supported by execution, which the offshore-centric firms work hard of achieving. In addition, when providers show passion and determination to please their clients, they earn a lot more forgiveness from their clients when they do mess up, as opposed to creating constant escalations and issues that can derail a relationship.
6) Aggressive pricing. Both TCS and Cognizant are great examples of keeping the prices competitive, even when the Western providers, such as Accenture and IBM, have also brought their prices down to similar levels. Moreover, the Indian majors tend to carry much less overhead than their traditional competitors, where many have much thinner layers of management and administrative and marketing functions, which enable them to be much more aggressive when they need to drop the price points to win business.
7) Sticking to client commitments. The offshore-centric providers value strong customer relationships and, as mentioned above, often go the extra mile in a deal, this is just as true when things do not go as planned. When things don’t go to plan the offshore-centric providers are less inclined to “change order” their clients to death, which is frequently the criticism of their Western counterparts.
8) Innovation. In many cases client increasingly cite some of the Indian offshore-centric providers as innovative – constantly coming to them with new ideas, offerings and capabilities. They frequently see their client base as fertile ground to develop BPaaS platforms around client situations to be used with other clients, and are often willing to do this at much lower cost when compared to their illustrious competitors. Many take the longer view of building future business through new endeavors than simply trying to maximize revenue from current situations. While onshore-centric providers are also capable of providing great innovative offerings to their clients, some of the offshore-centric providers have surprised their clients with their ideas and capabilities. Sometimes beating client expectations with innovation is more important than selling innovation at $500/hour.
9) Executive relationships. Indian offshore-centric providers have done a great job of having their senior executives available for their clients, when requested – many of them have the mobile phone number of the CEO, even though the provider is well into the billions in revenues. Most senior clients have met the likes of Frank at Cognizant, Chandra at TCS and Tiger at Genpact, while very few clients of the big traditional providers are able to say the same about the Megs, Ginnis, Pierres etc.
The Bottom-line: The future winners will be those which can adapt today’s winning services formula to the evolving technology and business domain needs
Most of the onshore-centric providers need to take a good look at the success of the offshore-centric providers and see what characteristics from these Nine Steps they are lacking. While many arguments can be made the the Indian juggernaut has to slow down (and it eventually will), these firms and their armies of passionate employees are not going away anytime soon. Quite simply, the traditional providers need to offer something different for clients that they actually need – and to be able to offer a level of service at similar costs that the Indian majors are providing. Yes, there are some real factors that could diminish the competitiveness of the Indian majors, namely rising domestic wages, rupee appreciation, robotic process automation, Cloud based offerings and the availability of skilled BPO staff, however they have proven very adept at protecting their existing business, while continuing to grow their market share.
However, everyone needs skilled and affordable labor to underpin delivery, and while advanced in technology and automation will reduce the amount of staff clients may need in the future, there will be the emergence of new skill demands, such as data scientists, process and domain specialists and technology experts in emerging areas such as mobility and Cloud. From what we’ve witnessed over the past decade, the Indian majors have been ahead of the game when it comes to developing a pipeline of young talent, while keeping the management overhead down… their next challenge is to adapt this to the changing demands of the clients and not rest on their laurels. If anything, it may be harder for some of the traditional providers to fight their way back into the services game than the Indian majors to continue their surge…
If you get a fleeting moment to wrench yourself away from your twitter feed, formatting that PowerPoint deck that’s on its 18th cycle, or that excruciating conference call you are seriously not listening to, then you could do a lot worse that take a gander at our new report glamorously entitled, “BPO on the Brink of a New Generation: Technology Transformation“.
In order to attempt to capture your attention, even for said fleeting moment, we analyzed the performance of 189 BPO buyers and the role technology is, could, and will potentially play to help them achieve their desired business goals.
Why BPO clients which have tech-enabled their processes are achieving better performance and outcomes
One of the key takeaways from the research was analyzing the varying performance BPO providers based on the maturity of their client’s approach to BPO across the following three categories:
“Lift and Shift” (49% of the market): Those BPO clients which have merely shifted their existing people and processes, with very limited transformation or standardization, over to the service provider;
“Process Transformation, limited Technology” (23% of the market): Those BPO clients which have performed a genuine transformation of their processes, but have yet to introduce any new technologies to enhance process flows, analytics or delivery;
“Technology Enabled Transformation” (28% of the market): Those BPO clients which have invested in a wide-scale technology transformation of their BPO processes.
Click to Enlarge
Buyers with technology-enabled BPO outperform for standard operational delivery
Firstly, those buyers with technology-enabled transformational BPO are reaping much better results from their standard services (80% view their engagements as quite to highly effective). This is indicative of the impact technology enablement can bring to standardizing processes and workflows that underpin process delivery and enable greater visibility and control for clients.
According to one finance executive at a major media enterprise responsible for overseeing a finance and accounting BPO initiative, “Our provider implemented some workflow tools that enabled our accounts payable process to be fully automated. As a result, we’ve been able to reduce the amount of sub-tasks from 36 to 23, our payments cycle has sped up considerably, and we have much faster access to cash flow data and overall visibility over our processes.” As the chart above illustrates, automation capability is one of the areas that is vastly improved with technology enablement of process workflows (80% see real effectiveness). Technology clearly offers one of the fastest tracks to demonstrable improvement, in terms of ROI, with BPO engagements.
Buyers with better technology-enablement of BPO are able to make the shift away from an FTE-based model
52% of buyers with technology-enabled BPO are seeing real progress towards shifting away from the “lift and shift” BPO model where the only value metric is based on cost per employee. This is twice the proportion of those clients which haven’t undergone technology-enablement of their BPO processes.
According to the finance executive at the media firm, “since we renewed the contract, we now are paying for our accounts payable service purely by cost per invoice processed, we have greater visibility and predictability into our costs now”. Other BPO clients, still operating in less mature models without technology-enablement universally struggle to move away from the FTE model as they simply do not have the data and visibility of their transactions. While some clients have embarked on some gainshare initiatives, for example offering incentives to their providers for speeding up their collections processes, or making greater savings from spend management, they have found it nigh-on impossible to develop the predictability of transaction volume without a strong technology underpinning.
Cloud-enabling process is a major driver for adding common standards and workflows; however legacy ERP implementations are holding back many enterprises
Another key factor in shifting away from an FTE model is to move processes into the cloud, which enables them to be universally accessible across an organization with one set of standards and workflows. Unsurprisingly, over half (52%) of the buyers who have undergone a technology transformation can boast effectiveness of process delivery in the cloud, which is a real driver behind shifting away from an FTE model. However, one key factor holding back many buyers is their heavy reliance on on-premise ERP which proves very cumbersome when it comes to cloud enabling many back office processes which are still mired in legacy software-based frameworks.
“Our finance processes are so tied to our back-end data warehouses and our custom-built ERP that we’re years away from moving them to a cloud model”, stated one BPO client. However, HfS is seeing more progress moving HR process into the cloud, especially with many companies investing in Workday’s emerging HR platform. One client pointed out that “Workday has enabled us to unify our hire-to-retire processes across our North American operations is just a few months. Our provider has been able to help us implement the software and make rapid progress away from many of the manual processes we were relying on previously. Moving to a cloud model has enabled us to unify processes rapidly across manufacturing plants”.
Technology-enabled BPO has enabled buyers to achieve greater analytical insight and innovative capabilities
Most strikingly, technology-enabled BPO buyers are achieving real effectiveness in higher value areas, namely new ideas/initiatives (50%), analytical insight (45%) and even gainsharing with their providers (42%). While clearly there is room for improvement in these areas, it is notable how those buyers, which have invested in technology to enable their BPO, are able to focus on higher value outcomes. One major global hi-tech company has been working with its provider to develop a finance dashboard tool that helps provide real-time access to revenue cycle data. What is innovative about the initiative is that the provider is developing the tool at limited cost, with the agreement with the buyer that they can resell the tool to other clients when fully developed. HfS sees this as a genuine example of BPO gainsharing and innovation that adds significant value to both buyer and provider, and gives the buyer access to the best skills and expertise from their provider without paying exorbitant fees.
Additionally, many of those buyers which have ventured into technology-enabled BPO, are clearly excelling at developing new ideas and initiatives. Much of this is because the more streamlined and standardized the operations become, the more buyers can focus on the higher value areas that can add real value to their business and align their operations with the corporate goals. One finance controller for a leading consumer products firm expands on this dynamic, “We embarked on a major initiative with our provider to roll out a unified financial system after we had undergone the initial BPO transition. Now we’re fully operational, our finance staff is able to focus on planning and analysis activities and providing much more relevant data to our leadership team than previously. In the earlier phases of our BPO they were consumed with just getting through the day with our basic operations – now things are running better than ever and our finance team is performing at a level we have never seen before.”
The Bottom-line: Both buyers and service providers need to up their game if they want to capture more value through BPO
Buyers and service providers need to re-think all of the existing “analog” steps processes which may currently be eased by technology but which aren’t fundamentally digital in nature. The move to digital process platforms is inevitable as buyers and providers continue to search for ongoing savings, but it won’t happen in the near term. The investment budgets of most BPO service providers remain too low to fuel digital innovation, while at the same time the majority of buyers and service providers still think in terms of FTEs more than process outcomes when contracting. Buyers also need to revamp their governance skills to cover these new capabilities, while many service providers need to invest in the higher caliber talent, analytics capabilities and technology platforms required to create this value. In short, the BPO industry’s ability to change is still slower than what buyers claim they want and expect, and what service providers claim they can actually deliver.
Click here to read all related posts from the 2014 “Technology in BPO Study”
Click here to download the full research report “BPO on the Brink of a New Generation: Technology Transformation”, authored by Phil Fersht and Charles Sutherland and conducted with the support of Accenture
Ned May, Senior Vice President, Research (click for bio)
If you think mobile has transformed your personal life, think about what it’s doing to enterprises around the world.
On the latest HfS Podcast, Mark Reed-Edwards talks with Ned May, Senior Vice President, Research at HfS and author of the new HfS Blueprint: Enterprise Mobility Services about the earth-shattering changes impacting the mobile-enabled enterprise.
How have companies started to use enterprise mobility? What’s been behind the great growth? Which enterprises made it into the Winners’ Circle. Listen now to get the answers to those questions… and lots more.
Mike Salvino is Group Chief Executive, BPO at Accenture (click for bio)
If there’s one face that’s been consistent with the growth and maturation of BPO over the last decade you’d have Accenture’s Mike Salvino right up there in the Hall of Fame. (In fact… he did recently get inducted into the IAOP Outsourcing Hall of Fame).
Having begun his career with Accenture’s ITO business in the late 80’s and 90’s, Mike spent time on the BPO front lines with one of the industry’s first pureplay BPO providers, Exult and its eventual acquirer Hewitt, before finding his way back to Accenture in 2006 where he led their F&A business before taking full responsibility for the company’s entire BPO function, where, today, BPO proudly stands as one of the firm’s major divisions and strategic focal areas, alongside the firm’s technology growth platform and consulting businesses.
So we managed to lure “Sal” away from his son’s basketball practice and his beloved North Carolina golf course to discuss the BPO troika – people, processes and technology – and the progress BPO is making to create new career tracks for millions of employees and a long-term sustainable industry of which we can all be proud…
Phil Fersht (CEO, HfS): Good afternoon, Mike, thanks for joining us. So your focus on “BPO Generations,” has really become written into BPO industry lore since you articulated it three years’ ago. You were one of the first to map out the stages the industry needs to go through to be successful with your “Generations” continuum and our new research (see report) shows that buyers are carrying stock in what you call “Generation Three” (Opex) and around half of them expect to be in “Generation Four” (Insight) in a couple of years. Is this realistic, in your opinion, based on the quality of today’s relationships and can both buyers and providers to up their game?
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Mike Salvino (Group Chief Executive, BPO, Accenture): Yes, Phil, I do think it’s realistic. Let me first start with where we’ve come from because I think that will help us understand why I think it’s possible for the industry to move into the fourth generation in the next few years. We have achieved a lot over the last 25 years and we’ve finally built the industry that we wanted way back in the early 90s.
If you think about the industry as a mountain range—we’ve climbed to the peak of one mountain and at that peak I think that we can give ourselves credit for a trillion dollar industry. We can give ourselves credit for global operations – and that’s really third generation BPO. We’ve achieved silent running, we’ve achieved the ability to process transactions and we’ve been able to do it with a 24×7 mind set. The other thing that’s really key at the top of that first mountain, and with third generation BPO, is that we have achieved client confidence. Clients now can look at providers and say “Yes, I can count on them for cost savings.”
Clients today can also depend on this sourcing model to be scalable, meaning we have the ability to scale up and scale down while managing risk. And last but not least, I think we have proven out that third generation BPO works for back office functions like F&A and procurement and also industry-specific front office processes like healthcare and mortgage processing. Now, having said that, most deals still start with us wanting to manage the risk, get the client cost savings and just get the transaction processed appropriately. The sooner we can move through that, I think the better off we’re going to be.
If we turn our attention now to the real industry opportunity, which is to get to the peak of the second mountain and move into the fourth generation of the market, we need to focus on producing real business outcomes. The only way you can do that is if, on top of all that transaction processing, you really have analytics, if you really have industry knowledge and if you really know how to take that information and get it into the hands of somebody that can create the business impact. What I mean by that, Phil, is so many times I think we do come up with good analytics off of the transaction processing and we do have really good industry insight based on those analytics. But if we don’t get the information into the hands of the right people then it goes nowhere. In this day and age of technology, specifically with mobile apps and social media, we should be able to get that information into the right hands. So that’s what is needed to cross that chasm between the two mountains, or third and fourth generation outsourcing, and a long winded way of saying I think we can do it.
Clients may not start there all the time, they may start in third. But I think throughout their journey of outsourcing, everybody will want to aspire to get to fourth gen. It will be a journey but the industry is getting there.
Phil: This takes me to the issues around how we can develop BPO as a career. Do you think there needs to be more focus on BPO as an actual profession as opposed to a job, and do you think that’s at the core of a lot of these change issues clients are tackling right now?
Mike: Absolutely. I keep using this “two mountain” theme because I do want to celebrate where we’ve gotten to today – to the top of one mountain. But I believe the only way we’re going to cross the chasm and get to the top of that that next mountain and achieve greater business outcomes is through investing in our people:
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HfS did some research last year on the “talent gap” in outsourcing. As you know, it showed that as an industry we’re not investing enough in our people. We’re not giving them the skills they need to generate insights and create business outcomes. I saw four key points in your research:
First, and amazingly, two thirds of all outsourcing buyers are struggling to achieve any business value or outcomes beyond cost reduction and efficiency.
Second, and maybe equally as startling, barely one third of buyers believe their governance teams can define business outcomes, or have the necessary analytical skills to drive innovation.
The third key point is that fewer than half of buyers train their outsourcing teams in continuous improvement, and only a quarter train their people in analytics.
The fourth point is key as well. It’s not just training that’s the problem – the lack of career paths for outsourcing managers is creating high attrition.
It’s not a flattering picture. I think there are three steps that we need to take with our people to address these challenges and move the industry forward.
The first thing that we need to do is invest in training our people. Our people need broader skill sets and deep industry and functional knowledge, not just processing skills. They need to be fluent in key technologies that are driving services today, like analytics, cloud, social and mobility. We need to train them in global operations and in what I call “change management,” or the ability to get the information into the hands of the right people. These are skills anyone entering business today would want to have.
The second thing is to inspire people to have a career in outsourcing and to understand their career path. They need to understand the timeline it takes to become an outsourcing professional and then how to do it. So it could be you come out of graduate school, after two years you’re a global operations and functional expert and after five years you know global operations and functions and you may know analytics. After seven years you’re running teams and after ten years you’re running a business.
I think the need is very clear and people want to hear it, from both buyers and providers and analysts, no matter where we are: the industry needs career path. We’ve got to be clear about what I call “recognition and rewards,” and the titles that people will have along the way because those are very important to folks. We also have to be clear about their pay and how to achieve more pay when they perform.
Step three is creating an environment for learning. I’ve seen a lot of people take the next step in their career, Phil, and go from what I call “hero to zero.” In their old role they were fantastic, just phenomenal and then they move into a new role and all of a sudden they’re not getting it done. Now why is that? I think it’s about creating the right learning environment and remembering that learning is 70:20:10 and I love that:
Seventy percent comes from doing. We’ve got to create an environment where people can do, where people can learn, where people can apply the training they’ve been given. And they’re going to fail. It’s important to have the kind of environment where people are allowed to do that. If you watched the Olympics, you can’t tell me that the people doing the half pipe haven’t fallen so many times that they’re just tired of it. It only takes one or two times where you nail it to remember what’s right, that it feels good and you can move forward from there. So you’ve got to create an environment where people can “do” and that’s 70 percent of the learning.
The other 20 percent is coaching and so many times that’s where a lot of the senior folks in the industry come in. They need to coach their people, be transparent and be direct.
The last 10 percent is the training.
In addition to these three steps, I’ve found was there’s also an intangible. People call it “authentic leadership.” You have to make sure that people are engaged and that they know that you care about them both professionally and personally: you care about what they’re doing in their community and their careers.
At Accenture, we created a rally cry called “Grow BPO.” Grow BPO is not a campaign, it’s not a project, it’s not an initiative. It’s a mindset and it stands for growing the business, growing yourself and ultimately, growing others. When we launched four years ago we focused on helping people find balance in their lives and taking time to recharge their batteries.
We made it a priority that you didn’t end focus on your personal life and we thought that if you were good in your personal life you would be even better at work, and you know what, I can’t tell you how well that worked.
The second year of this mindset we focused on the theme of “Pass It On,” to encourage people to give back and share what I like to call their time, treasure and talent both inside the organization and externally in the community. It could be that you were going to have a brownbag lunch with people on your team or it could be going and building houses for Habitat for Humanity. That’s when the mindset really kicked in.
Last year our focus was called “BPO and Me,” and we talked to all 57,000 BPO employees about their career paths and we celebrated the diversity of talent that we had. This year we’re focused on the theme of collaboration and the notion of “Connected BPO” to drive better teaming internally, with folks in the industry and with clients.
So my point in all this is, 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. It needs to be viewed as a unique and rewarding opportunity for people to grow and apply their skills, to do interesting work with top global clients — helping them innovate and transform and become high performing businesses.
Up next in part two, Mike talks about how companies can drive change and what he would do if he was ordained as the Lord of BPO for one week…
A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself “outsourcing”.
If you get a fleeting moment to wrench yourself away from your twitter feed, formatting that PowerPoint deck that’s on its 18th cycle, or that excruciating conference call you are seriously not listening to, then you could do a lot worse that take a gander at our new report glamorously entitled, “
