We got some face time with flamboyant Massolution CEO, Carl Esposti (and founder of the Crowdsourcing.org community platform) about next week’s first-ever crowdsourcing & crowdfunding conference.
Phil Fersht, CEO HfS Research: Good morning, Carl, we’ve been keeping tabs on your firm’s development over the last few yearsin the enterprise crowdsourcing and crowdfunding space. Can you give us a quick snapshot of the company and the premise behind it?
Carl Esposti, Founder Crowdsourcing.org and CEO Massolution: Yeah, absolutely Phil. Thanks for the discussion. So growing up in outsourcing, offshoring and shared services, I realized few years ago that a big shift was underway, one that was much greater than the shift off-shoring had on outsourcing. The next stage of the globalization of services was occurring and work was now being distributed more broadly through the development of online communities where you can tap into workers to do a whole bunch of different things. Whereas offshoring just made outsourcing cheaper, this new distributed online model was also making things quicker and better. It was a very different model and it was really going to shake things up!
So, seeing that this was going to be a big play for large enterprises, I established Massolution to help companies explore and implement crowdsourcing and crowdfunding solutions and Crowdsourcing.org to really organize and publish information and data around these new models so that enterprises
could understand how they fitted with the more traditional models they understood so they could learn what new things were possible with these new approaches.
Phil: Crowdsourcing hit the sourcing industry with quite a lot of hype about three or four years ago – and we ‘re still waiting to see how it’s going to become part of the broader outsourcing scenario. What’s been going on, here, and how do you see this evolving?
Carl: So, I think the first thing is to try and help people put their arms around exactly what crowdsourcing is and it’s pretty straightforward when you describe it in simple terms. Think of it like this; unlike outsourcing where you award larger packages of work to companies, with crowdsourcing you outsource much smaller packages of work, sometimes discrete tasks, to the best worker for the job. This could be based on availability, price, skills, etc.
It’s about using distributed workers that are connected online that you reach through worker communities. You can tap into these workers, as and when you need them to fundamentally do two things: perform work (e.g., find and organize this data) or to solve problems (e.g., we are losing customers, how can we improve our retails stores?).
Crowdsourcing gives you an opportunity to integrate new ways of performing work into current outsourcing models or to outsource different types of work into crowd where traditional outsourcing models don’t fit.
You have access to abundant capacity provided by all of these workers; over six million are currently engaged performing crowdsourcing work. They can perform high volume routine tasks quickly with many; often thousands of workers, working concurrently or you can use them in a whole new way to solve difficult problems. Giving you ideas and feedback on products that you are developing, providing ideas on how to improve your brand or it can be solving complex problems like supply change issues around material forecasting, for example.
If you look at how crowdsourcing is impacting outsourcing, we are now seeing the innovation, strategy folks in large enterprises and in the big ITO/BPO providers, responsible for looking out onto the horizon, starting to embrace this model and explore it. Seeing the model as a way of processing work faster and at lower cost that traditional outsourcing. Also, requirements to outsource new types of work that have come about because of the new internet-centric businesses that simply just didn’t exist 10 years ago. This work can be crowdsourced more effectively than other sourcing options: big data problems, content problems, problems with connecting with customers globally. Crowdsourcing offers us a solution to address these new types of issues. These types of new business needs haven’t needed to be addressed before in such a scale or so rapidly as in previous more traditional businesses that move more slowly.
The big BPO and ITO providers know that for most enterprises, outsourcing and offshoring has become table-stakes so they are looking for the next level of change in terms of delivering new services or processing work cheaper and quicker. And they are looking at it really from two perspectives. First of all, what can they do in crowdsourcing that allows them to go to market with new offerings to generate additional revenue streams. They are looking at these plays either to establish a stronger footprint with existing clients or as a competitive differentiator to help win new logos. Then the other side is that they are looking at how crowdsourcing is changing service delivery in terms of their own back office operations whether that’s client work or whether it’s their own work. They are also realizing that as well as using ‘public crowd” workers, crowdsourcing technology and processes also allows work to be distributed into the internal workforce, we call that the “private crowd” – which allows them to drive much higher utilization within their captive workforce and to tap into internal experts that aren’t necessarily assigned to a particular client account but they might have the right answer to a given problem.
Phil: So would you say it’s more small- to mid-sized businesses which are being taking advantage of crowdsourcing today, than the enterprise? Or are you beginning to see enterprises look at this more strategically?
Carl: So it’s a great question and it’s best answered by looking at the supply side of the market. In the crowdsourcing provider side of the market is there are three types of company. There are the freelance market places that have traditionally serviced small to medium sized businesses. We all know that there is a big cost of entry to outsourcing so utilizing freelancers allow smaller companies to access work on a more sort of agile basis. Those freelance companies, the likes of oDesk, are building technology to enable larger enterprise to utilize their labor pools on a task-bases (aka crowdsourcing) rather than the more common “worker for hire” basis. So larger enterprises are now able to start to tap into the freelance market labor pools for crowdsourcing task-based work.
So the predominant customers of the cloud-labor forms of crowdsourcing at the moment are enterprises under a $100M that are predominantly tapping into to it through the freelance market places or very large enterprises that are using a range of crowdsourcing providers to solve some of the big enterprise problems around data, content and analytics and things of that nature. And then on the problem solving side, ideation type of activities, that’s mostly the larger enterprises that have large problems to solve, new markets, new competitors, new customer demands. Most of the adoption in the ideation side is in the larger, more established companies that are finding that in some instances, there are better or fresher ideas outside the enterprise than inside.
Phil: What are the hot areas of crowdsourcing now where you are seeing real traction? What types of processes and expertise are clients leveraging?
Carl: So in one area there’s this what we call micro-tasks. And these are pretty straightforward; they are very short tasks that require a simple workflow. So there are jobs that can be done in very high volume and processed by lots of people at any one point in time like data management and categorization. There are more complex tasks we call expertise-based tasks like content creation, transcription, localization and analytics.
Take for example large online retailers. In order for ecommerce retailers to have their products found by the search engines, their catalogues have to be created, optimized and simply found! A lot of content has to be written to create unique product descriptions in order to be indexed by the various search engines. As companies expand internationally, they need that content translated or localized. So the crowd is doing massive amount of work in these type of area.
There is a lot of general data management type of activity. You can use the crowd to improve data sets and organize them. There is a lot of crowdsourcing work being done to validate documents that have been scanned by OCR systems. Machines are able to read handwritten forms at an accuracy level of 85-90 percent but if think about claims processing and invoice processing etc., at the end of the day it requires a level of human judgment to be able to accurately compare electronically scanned forms with what’s on the paper, when 100% accuracy is needed and 90% isn’t good enough. So there is a tremendous application of the crowd around improving further the work that can’t be performed by machines. So that’s one of the largest use cases in the simple micro-tasks category.
Computer systems can do an awful lot in terms of processing data but there’s an awful lot that computers are too dumb to do where a human needs to use judgment in order to be able to do creative things and things like entity matching, determining whether two data field are the same or different or two phrases are the same or different.
A lot of crowdsourcing work is being done in the area of sentiment monitoring and analysis. A particular division in tweet maybe a positive or a negative reference and it requires human judgment to make these sorts of calls and it’s very difficult for machines to determine those nuances. So when big companies are looking to see what their customers are saying about their products and brands and how they are reacting to campaigns for example, the crowd is being used very extensively to mine, organize and to filter sentiment and the type of information that’s being communicated around brand and around companies.
Phil: Do you see the BPO’s really looking to leverage crowdsourcing in their own models or do you think some of them see it as a threat to their traditional model?
Carl: We absolutely see some of the most progressive BPO companies looking at how crowdsourcing affects their market model and what opportunity it presents and what new doors it opens. I mentioned earlier that a number of large ITO/BPO providers are already investing in crowdsourcing strategies. I can tell you that during the course of the next four-six months, a number of the big ITO/BPO providers will be launching different types of crowdsouring market offerings. For example we are aware of a number of Tier 1 companies that are launching crowdtesting market offerings. Basically that’s about testing, mobile and web applications, faster, cheaper and more thoroughly and under real world circumstances rather than relying on lab simulations. There are a couple of big Tier 1 providers that we are working with are very aggressively exploring crowd as a very central part of the competitive strategy over the next five years.
Phil: So – finally – you are having an enterprise crowdsourcing conference coming up in New York next week and hopefully we will get some HfS readers to attend as well. In a snapshot can you just give us a quick lowdown on what to expect?
Yeah certainly. We have a one-day main event on the 19th of September. And there is also a half-day pre-conference workshop for the large enterprises that already performing crowdsourcing work or are really serious about exploring it and are wishing to set up pilots. We have structure the content for the conference with a focus on how is crowd relevant around four key elements of enterprise strategy – how does “crowd” affect an enterprises strategy regarding innovation, sales, growth, and customers. How does enterprise crowdsourcing affect these aspects of the business?
And we have got a very strong line up. Some of the biggest enterprises including LEGO, Xerox, Walmart, Amazon, Google, LinkedIn, IBM, Genpact, will be presenting, talking about their uses of crowdsourcing. So the event will help attendees learn how the most progressive companies are developing enterprise crowdsourcing models and strategies. And then we have got some of the leading crowdsourcing providers who are really developing the technologies and new models for how crowdsourcing can being applied.
The other thing that we are going to cover is enterprise crowdfunding. We will be looking at crowd funding from the point of view of how does it affect the enterprise not just how small businesses are raising capital via crowdfunding. We have use cases of enterprise crowdfunding projects by the like of Coca-Cola, American Express and ABN AMRO – talking about how these large enterprises are using crowd funding as a new model for market validation of products and how crowdfunding is being modeled as an online incubator. You have companies like Proctor & Gamble and General Mills for example that have realized that through crowdfunding they get access to human capital, Intellectual Property, and demand signals on what the market actually needs and at what levels of demand, far better than traditional focus group models. So we’ll be hitting on that as well.
Phil: We’ll look forward to seeing you folks there. And thank you very much for spending some time with the readers today.
The first 20 HfS Readers to email[email protected]will receive a complimentary 1-Day or 2-Day event pass.
Carl Esposti (pictured above) is CEO of Crowdsourcing and Crowdfunding insights and advisory firm Massolution. You can learn more by clicking here.
Concentrix’s investors, SYNNEX, were clearly so impressed with IBM’s performance in reaching the Winner’s Circle for customer experience management they wanted a piece of the action for themselves.
So what does this mean – wasn’t IBM such a stalwart call center BPO provider? And wasn’t Concentrix a small player?
In short, IBM is exiting the customer services call center arena, which began with its purchase of Daksh in 2004. It will focus on its core business of providing the enabling technology services and tools for customer experience management. Concentrix increases its footprint massively and becomes one of the significant providers in the customer experience management industry. The big question, now, is whether Concentix can maintain IBM’s vaunted position in the Winner’s Circle for customer experience management services.
IBM has stated that it wishes to focus on its higher-value BPO businesses, namely finance and accounting, supply chain management, procurement, HR, and mortgage services, with a specific focus on its analytics and Smarter Workforce initiatives. During the analyst call, IBM stated it wants to move more into cloud-based service provision, where it is steadily spending its way through its $20 billion war chest.
HfS sees Concentrix quickly becoming the new “IBM of contact center services.” This deal represents a significant play for Concentrix, increasing its footprint from 5,000 to 45,000 in one fell swoop. Concentrix has strong customer lifecycle management capabilities, and, combined with IBM’s enterprise CEM clients, experienced delivery organization and leadership, strong account management team, and technology integration capabilities, Concentrix will be a significant company to watch in all things customer care.
The Bottom-line: The end of an era for IBM and the dawn of a new one for Concentrix
So many of the leading BPOs started off in the call center business before evolving their offerings across the back office into HR, finance, supply chain and industry-specific areas. IBM was no exception, making a concerted play with Daksh nine years ago. But – today – the firm’s leadership clearly sees limited value (and profit margin) continuing to grow its footprints in CEM, despite an encouraging series of client wins and high-end customer marketing focus in recent years. IBM wants to focus elsewhere… especially with its dedication to the cloud.
Our question, simply, is where IBM’s focus will be in another couple of years. Call center alone is completely commoditized, and it’s understandable why IBM decided it was time to exit while retaining its technology enablement opportunities. Will the same happen eventually with finance or HR? Will IBM tire of processing paychecks and invoices, as it has done with taking customer service calls? With significant client investments, such as Cemex (F&A) and Kraft (HR), it doesn’t appear that the firm will do a 180 anytime soon, but this decision to exit CEM does raise doubts as to the company’s long-term focus outside of technology services and software.
With the intense proliferation of customer communications channels, there’s a huge strain on CMOs, like never before, to keep up and stay ahead of the competition.
Management of an omni-channel environment that is effective across all customer touch-points is a brutal, but necessary, reality for competitive success in today’s business world. Leveraging service providers which can deliver the customer-centric marketing savvy, the business processes, global scale and technology capabilities to support these secular changes to the customer environment is critical to the success of so many organization’s today.
We are proud to reveal our first Blueprint report that has gone deep into the innovation and execution capabilities of today’s leading service providers in the customer experience management industry – and many congratulations to Teleperformance, IBM/Concentrix and Convergys for making the inaugural Winner’s Circle:
Here are the top 3 factors necessary to create a valuable customer experience in the future:
*Capabilities to Monitor, Understand and Proactively Serve the Expectations of Customers are the Crucial Ingredients. The elements that touch the customer are increasingly originating from the digital realm. Organizations will need to adapt to this change and develop competencies to understand the expectations of customers and align each touch point with brand expectations. This is critical now, and becoming even more so in the future.
*Understanding the Customer is becoming More Complex, but Creates Competitive Opportunities for Ambitious CMOs. Although more channels need to be developed (social and mobile) if an organization utilizes monitoring technology and builds models around the flow of customer data, more complete pictures of the customer will become available that were not previously available. This can enable organizations to align marketing activities better to customers through more specific segmentation, as well as to understand, and proactively address, customer sentiment and customer trends.
*Customer Experience Alignment Across All Customer Channels is Imperative for many Brands. Aligning expectations to an organization’s brand image across all channels is a make or break proposition. For example, many organizations are fighting to align traditional brick-and-mortar stores with online and mobile experiences. There are increasingly more channels to contend with, including SMS usage in emerging economies such as Africa.
Getting customer experience management right will matter to all organizations, especially larger organizations that have sizable product portfolios across multiple geographies. Organizations will need to monitor, understand, and align their brand to the right customers, at the right time. The three service providers that we found best placed currently to service organizations with customer experience management services are Teleperformance, IBM (whose call center assets have been recently acquired by the Concentrix division of Synnex), and Convergys.
The CEM Blueprint utilizes our Blueprint Methodology (click here to read in detail), which measures both execution and innovation against a set of crowdsourced criteria derived from the State of the Outsourcing Survey 2013. We assessed data from over 130 live multi-process CEM BPO engagements to ascertain provider market shares, depth of client base, breath of execution and geographic scope of delivery. We examined the CEM value chain (consulting, product design, marketing and sales, and service and support) and interlaced what we know will be important to CEM buyers in the radically evolving CEM sector with the capabilities and vision of the service providers in our assessment.
Report Author, Adam Luciano, Principal Analyst, HfS Research (Click for bio)
Our analyst team conducted exhaustive interviews with multiple buyers and market advisors to help score providers against each other across all the sub-categories of the Blueprint using ExpertChoice, an advanced statistical analytics platform. We also received a tremendous amount of cooperation from (almost) all of the providers above, as we went through this exhaustive process to understand their concrete plans for the future, get really deep with their current client relationships, their overall vision and their appetite to evolve and invest into higher-value areas of CEM BPO.
Rich Lechner is tasked with defining IBM's sourcing strategy (click to access his new research paper)
When you have over $100 billion in software, services and systems revenues and 440,000 staff worldwide, what can be simpler than running sourcing engagements for clients? Meet the man tasked with formulating a sourcing strategy for the firm: Rich Lechner, another one of these tech guys who should probably have become an industry analyst after 10 years of writing code, but somehow found himself piecing together the many facets of the world largest computing company to help devise this roadmap. We were fortunate enough to drag Rich away from his electric powered Tesla to spend a few minutes sharing his experiences with us from over three decades with Big Blue…
Phil Fersht, CEO HfS Research: Rich, great to have you talk to our readers today. You’ve been in IBM for over 30 years – did you ever expect to stay at one company for so long.. and how have you winded up doing what you’re doing today?
Rich Lechner, Vice Business & IT Services Marketing, IBM: First of all thanks for having me. It’s hard to believe it’s been that long. I will say that I feel like I’ve worked in many different parts of the industry but had the luxury of working for one great company. In the sense that I started out as a microprogrammer working on ATM’s and check processing machines and then went into a range of software development, strategy and sales roles for mainframes, OS/2, distributed systems management, Linux and eBusiness. I then moved to the hardware part of our business where I had the privilege of leading sales and marketing for mainframes for several years globally as well as working in our storage business. I then had responsibility for IBM’s broad portfolio of sustainability capabilities including green datacenters, water management, supply chain optimization, smarter traffic or smart buildings. And then finally coming to services. The common theme has been leveraging technology and innovation to address real world challenges and bringing differentiated value to clients.
Phil: In your recent research study “Why Partnering Strategies Matter” (HfS readers can download their copy here), where you surveyed 1350 participants, you talk about sourcing motivations and how they’ve shifted and why sourcing strategies need to shift with them. Can you expand on this some more?
Rich: As a leader in business and IT services, IBM works with many clients around the world and increasingly we were encountering customers who were looking not just to shed cost or to outsource some component of their environment, whether it be infrastructure, process or application, but rather increasingly they were also looking to acquire capabilities to address some need that they have. In many cases these needs were driven by the desire to harness important forces like social, mobile or big data in order to fuel growth and drive market expansion. And so in seeing that in our own engagements, we commissioned an extensive piece of research with a third party to assess partner strategies. The survey involved clients who had experience in outsourcing some element of their environment and there was broad participation across geographies, industries, and customer size. What we found was that clients were, in fact, increasingly looking to acquire capabilities that mattered most and not just to outsource a non-critical piece of their business for cost or efficiency benefits. And that those organizations who were being successful at doing that were seeing significant financial benefits of their business. They were also behaving significantly different in terms of the objectives they were setting for the partnership, the capabilities they were looking for in their partners, and the way they were executing the relationships.
Phil: You talk a lot about optimizers and innovators as contrasting partnering strategies. What do you mean by these terminologies and why are they different?
Rich: The study focused on clients who had experience outsourcing some element of their environment – in fact they could identify over 80 discrete elements of their infrastructure or set of applications and processes. One dimension of measured how broadly they’re outsourcing or leveraging partners. The second dimension was what was their primary motivation: was it primarily for cost take out and operational efficiency? Those who cited that as their primary reason we characterized it as “optimizers”. “Innovators” were those clients who said that their primary objective in developing a sourcing partnership was to achieve a business outcome; to gain access to innovation; for assistance in harnessing some new technology like social or mobile; were looking to expand globally; , or who were looking for a partner could infuse a culture of innovation into their organization. It is important to note that across all segments cost takeout and efficiency were important. But the relative priority varied between the innovators and optimizers and what the innovators did with the cost savings was significantly different in that they chose to not just throw those savings to the bottom line, but they were consciously leveraging efficiency to fund innovation in growth in other parts of infrastructure.
Perhaps most interesting was that the research showed that those clients who were broadly partnering for innovation had substantially better financial performance relative to those who were partnering in a very narrow fashion with a primary focus on cost optimization. The ‘ienterprise innovators’ saw 2x the revenue growth and 5x the profit growth compared to the ‘focused optimizers’
Phil: Rich, in terms of enterprises achieving measurable business outcomes from sourcing, I was reading about how metrics have been tied more effectively to outcomes in your paper. Did you learn more about how sourcing can improve a company’s access to critical data that they didn’t have before?
Rich: Phil, we found markedly different behaviors between the optimizers and the innovators. The innovators were looking for business outcomes beyond operational efficiency and they were far more likely to to define metrics that were directly tied to business outcomes. So for a retailer it might be the revenue per store or inventory turns. It might be subscriber retention rate for a telco or bed utilization for a hospital. So, the metrics for the partnership were very outcome based and by doing that, these innovators were also finding that to achieve those kinds of outcomes, they had to look more holistically. They needed data, or operational data, and they had to be able to link the financial drivers to the specific key process indicators and metrics, business metrics, and then needed to be able to aligning the relevant elements of their business and IT environments, the infrastructure components, the applications, the processes across those businesses that affected those outcomes. And then to develop a partnering strategy that allowed them to affect those in an integrated way.
Phil: You also talk a lot about integrated governance. I would love to hear a bit more about your thoughts here – we’re obviously looking a lot at evolving global business services frameworks at HfS. Do you think there is something unique evolving here, or is this more lipstick on the same old pig?
Rich: I think there is significant evolution with the governance model required to meet the expectations of the innovators. If you think about traditional focus on operational governance, you’re really focused on service quality and continuous improvement. Of course that’s foundational and will always matter. As does the tactical and functional governance focused on some of the business relationship and fulfillment against contracting services. But – as you begin to move into the space of business outcomes and partnerships premised upon outcomes then there is an additional need for strategic government that’s really focused on the alignment of the business strategy in the transformation of a client’s business. This to me is incremental to the governance model that most clients are putting into place as they form a relationship with their partners or their outsourcing vendors.
Phil: Rich, not many people have been as close to the technology and service model shifts as you have really over three decades. What’s really different today? I mean, are we seeing similar inflection points than the ones we saw in the 80’s and the 90’s… or do you think things have really moved on in the last few years?
Linking inputs, execution, cost of ownership and outcomes… Rich Lechner's automotive strategy
Rich: I think, in some regards, we’re seeing many of the same trends continue, but the emergence of several key forces: big data, the instrumentation of everything, the ability to analyze in real time all aspects of your interaction with your clients or of some of your business. The expectations of end consumers, based on the emergence of things like social and mobile. And Cloud as not only an important technology, but acting as an accelerator to the adoption of services. If you think back to client server computing two decades ago, it changed the way that IT capabilities were acquired by organizations. Prior to the emergence of client server, computing capability was sort of the exclusive domain of the IT organization, but now departments were able to acquire servers and storage and pc’s to perform critical business functions independently and it fundamentally changed the way that IT was acquired and applied inside business. Cloud is having the same sort of transformative affect. Because it’s allowing any individual or organization to acquire capability as a service, whether it be a process, an application or a bit of infrastructure as a service. Those forces coming together are creating this opportunity for significant transformation, but increasingly clients realize that they don’t have all the capabilities they need to address these issues or the opportunities that these forces present. And so what’s really changed is the acceleration of some of these traditional trends with these new forces.
Phil: Ok, so try and look out ten years from now… What do you think the world of sourcing is going to look like when we peer that far into the future based on everything you have lived through over the last few years?
Rich: I noticed that said “sourcing” which is great, because I think the idea of taking the “out” out of outsourcing will occur very rapidly and in fact it is already occurring. What I mean by that is that it will become much more prevalent for companies looking to acquire or source a key capability that they lack as opposed to shedding something that is noncore. And we are seeing that occur already and that will happen very rapidly. Secondly, I would say I think if you look ten years out, increasingly today we talk about infrastructure as a service or software as a service I think that you will see everything as a service. The idea of any capability, whether it be marketing insights or compute capacity or real time analytics of consumer behavior or what have you as a service will be the norm. Everything as a service will be what people will be sourcing. Again whether it be infrastructure, or application or processes, or industry insights, or marketplace insights, or technology.
Phil: Rich, it’s has been very refreshing to hear from somebody like you who has been so close to the industry for so long, so I do thank you for your time, and I look forward to sharing your thoughts very much with our readers.
Rich: Thank You, Phil – a pleasure to share some thoughts and I hope your readers find the time to reads our new research paper.
Rich Lechner (picture above) is Vice President for IBM’s Business and IT Services Sourcing.
Well, we have some shocking news for you all… these things are only making the “nice to haves” category when it comes to provider selection, as buyers look at more immediate, tangible benefits from providers.
Our seminal State of Outsourcing Study, conducted with the support of KPMG, where we delved into the views and dynamics of 399 enterprises, has revealed that today’s wizening outsourcing buyer is looking at industry experience and the provision of talent that can do more than just the basics, when it comes to choosing between their providers:
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The answer’s simple – most providers are tooled up to deliver what was contracted, not what the client really needs. Most large outsourcing deals today were (and many still are) initially negotiated and brokered by different teams, on both the provider and buyer sides, than the teams which ended up running the engagements. Too many enterprise outsourcing relationships, today, were (and many still are) brokered to solve yesterday’s challenges – namely, driving out labor costs, mitigating risks, and achieving a basic level of operational performance.
These are now “table-stakes” – or should be – for any serious enterprise buyer or provider. However, if your talent pool was hired and developed only to perform against those objectives, and you contracted with a provider to deliver precisely what was agreed five years’ ago, then how, exactly, do you expect to rise to an improved level of performance? Until enterprise buyers make these attributes critical during negotiation and selection, providers will continue to push their table-stakes capabilities, and throw in all the “nice to haves” as marketing frosting – because they know they can never likely to be held accountable to them. How many times have you heard the cry “we were promised innovation, better analytics and all these wonderful new capabilities, but haven’t seen anything“? Well, that’s because they didn’t actually buy those things…
Then why are we so obsessed with the act of sourcing, as opposed to the management and success of a long term relationship?
The problem we have – as an industry – is that we’re obsessed by the act of sourcing, as opposed to the practice of managing it effectively over the long haul. However, as the data insinuates, as buyers become more experienced, and governance executives get more involved in future decisions, the approach from many providers has to change. We’re already seeing this with several contracts coming up for renewal, where the buyers are inviting others to the party, seriously looking to see if they can get more value from another provider (and many forlornly wishing it wasn’t so damned hard to kick out their incumbent).
Their problem has, simply, been that they opted to go with a provider to achieve the basic table stakes, and they now feel that said provider cannot deliver anything much beyond the current performance, due the constraints of their current contract – and, in several cases, because their provider simply does not have the acumen or talent availability to help them attain improved new levels of performance.
Until governance executives, with real working experience of outsourcing in their organization, get involved in the brokering of contracts and provider selection discussions, we’re going to be plagued with many outsourcing engagements where the provider is never really delivering much value beyond cost.
Most enterprises are looking for help getting from “mediocre” to “better-than-average” – they’re not yet ready for “world-class”
The other issue we are dealing with here, is that providers are obsessed with positioning themselves as having solutions that are, simply, far beyond the immediate realities of their clients – many are simply looking for better mileage form their Chevy before considering a Cadillac. Achieving incredible “business outcomes” is a journey both a provider and buyer can work on over the years of getting to know each other. It is not something that can be bought and sold on day one. Moreover, the same can be said for reaping great value from analytics, or developing a realistic innovation roadmap – these are delights that take years to achieve – and competent providers will provide the right teams to create the environments in which their clients can progress along their journeys.
It’s clear, when you examine the key topics on the minds of enterprise executives, that it’s baby steps for most of them, as they look for more value from outsourcing:
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Two items dominate: how to change, and how to move leadership away from the legacy “cost reduction” mindset. It’s clear that enterprises need to tackle these two areas before they can really get stuck into the longer term benefits that can be achieved.
The Bottom-line: Providers are being judged by clients expecting more… and many need to up their game
You don’t need to spend hours cutting up survey data to fully realize what is happening in outsourcing today – you just need to talk to a few clients to get the fuller picture: essentially, many are trying to fight their way out of the corners in which they unwittingly found themselves, where they were signed up to receive low-cost, adequate operations.. and expected to be “content” with that. At the same time, it’s nigh-on impossible to attain better performance and efficiencies from your operations if you have the provider’s C-team delivering your processes from some far-flung location.
And there lies the Catch-22; Your firm bought “cheap and adequate” and if you can’t turn around in 3 years and show where that next 10-20% of productivity is coming from, your job may well be next on the line. There’s a scary attrition rate of buyers who got pushed out of their firms after a couple of years of grappling with the mediocrity, where settling for the status quo clearly wasn’t an option.
The only solution is for the majority of enterprises to change their whole approach to selecting – and working with – providers, and most of them are only now in the process of asking some very tough questions… and trying to figure out how to change their whole approach to managing engagements.
Click here to view our full array of blogs that discuss our “State of Outsourcing” study findings, conducted in partnership with KPMG LLP
And back to the exploits of “Dr Charlie”, alias the Last King of Sourcing, Charlie Aird, who completes his diaries from his recent sabbatical to East Africa, where he got some time to visit Uganda. Over to you Charlie…
Country Spotlight: Uganda
Uganda attained independence from British colonial rule in 1962, and after a decade of stability, had political and economic challenges from the 1970s through the mid 1980s. In the late 1980s, Uganda was one of the first Sub-Saharan African countries to liberalize their economy and initiate pro-market policies and has a stable macroeconomic environment today. GDP growth has averaged over 7% per year during the 2000s, and is above the Sub-Saharan Africa average.
Uganda has an agrarian economy, and is still working on providing basic needs to its population, for example, a 2009/2010 national survey showed that only 12% of households used electricity for lighting. Development differs widely across different regions of the country. Education development results have been mixed, for example, reading and mathematics are lower in Uganda than in Kenya or Tanzania, but gender equality is near parity in net primary or secondary enrollment rates.
The Ugandan government identified Information Technology Enabled Services – Business Process Outsourcing as one of the key sectors to enhance economic growth and reduce youth unemployment in the country. They have established a BPO incubator named the National Information Technology Authority – Uganda (NITA-U) which focuses on delivery of public BPO services. NITA-U is expected to:
Co-ordinate, supervize and monitor the utilization of IT in the public and private sectors
Identify and advise Government on all matters of IT development, utilization and deployment
Set, monitor, and regulate standards for IT planning, acquisition, implementation, delivery, support, organization, sustenance, disposal, risks management, data protection, security and contingency planning
Regulate and enforce standards for IT hardware and software equipment procurement in all Government ministries, departments and agencies
Provide first-level technical support and advice for critical Government IT Systems
NITA-U has worked with Makerere University to train 500 youths in MPO skills, and plans are underway to train 3,000 in the next year to ensure a critical mass of BPO trained skills in Uganda. To ensure this volume of specially educated youths continues, NITA-U is working with the Ministry of Education, Universities and other institutions to incorporate BPO training in their curriculums.
To develop the shared services skills in the country, NITA-U has created a 250 seat BPO call center in Kampala and is in process of facilitating setting up more, including Lake Victoria Information Communication Technology & Bio Tech Park.
MNCs who are interested in developing their presence in East Africa and are willing to invest in the area can find employees with BPO training and high level English skills. Unemployment is still a problem even among the educated youths in Kampala, and there are many opportunities to fill positions by educated workers with excellent English skills
At this time, Uganda is not attractive for investment from global outsourcers, due to the lack of tax incentives and limited infrastructure. The government is aware of the current state gap, and to create an enabling environment for the BPO sector in Uganda, NITA-U is currently undertaking the following:
Developing guidelines for the provision of Government incentives to BPO operators
Developing the required BPO standards and accreditations
Finalized the national BPO strategy and roadmap for Uganda
Developing IT infrastructure to support BPO operations in Uganda, by:
Commercializing the NBI (National Backbone Infrastructure) to deliver subsidized internet bandwidth
Developing and connecting alternative link via Mutukula to NBI to avoid single link via Kenya
Developing the last mile connections of NBI to districts
As the NITA-U makes progress in their goals, Uganda may become a great opportunity for investment. This opportunity may be a few years out
Critical success factors for continued growth in East Africa
When India or Costa Rica decided to try to attract foreign direct investment in the BPO industry, the governments offered incentives to outsourcers to invest in their countries, for example, an eight year tax holiday where profits were not taxed, removed duties on anything imported to the country and excise taxes on energy and telecommunications, and only required a minimum level of investment to receive these benefits. When Costa Rica set up a tax free zone, companies like P&G and Chiquita invested heavily in shared services delivery centers.
For Uganda to kick-start the growth in shared services and outsourcing, the government needs to set tax incentives that are similar to those set up for manufacturing and agro-processing industries, and include specific incentives for BPO, including the creation of Free Trade Zones and subsidies for operational costs and staff training. These incentives will attract the large outsourcers, whose investment will also encourage shared services centers. In addition, Uganda needs to invest heavily in education and training. A model to consider is India’s NIIT, a for-profit organization that has trained people for the past 20 years in computing in urban and very rural locations. NIIT helped establish a base of trained workers, from which India’s outsourcing industry grew.
For Kenya to continue their growth, they need to continue to invest in training and infrastructure to help current operations attract higher level processes and achieve higher level of profitability. Public schools require significant investment to be a springboard for a career in BPO. Costa Rica’s commitment to high quality, free public education has provided them with a base of very educated youth from which to build their shared services and outsourcing success. Costa Rica devotes at least 6% of its GDP on education and training, and targets 8.5% in future years. Greater investment by entrepreneurs or the Kenyan government on education and training could reap significant rewards in providing a pool of skilled workers. The government must to continue to support the outsourcers who have established a foothold in the industry and consider developing more robust incentives to attract larger outsourcing service providers and MNCs.
With increased government incentives for MNCs and education and training for the local population, the shared services and outsourcing industry could be a great opportunity for East Africa and for MNC investment in the near future.
This article is authored by Dr. Charles L. Aird, and assisted by Meagan O’Brien.
For those of you who think they’ve escaped being outed as a public irritant, it’s time we put you back in your place… Here are the latest irritations plaguing our world today:
People who buy iPads and never use them.
People who not only bought an iPad, but ensured they bought the 64 gigabyte, retina display model for about $850… just to check their gmail occasionally and read people magazine.
People who spend inordinate amounts of time scheduling a 30 minute conference call… then reschedule at the last minute.
People who spend inordinate amounts of time scheduling a 30 minute conference call… then don’t show up for it.
Germany shutting down for the entire month of August.
People who insist on using their webcam on skype… at 8.00 AM.
People who send out emails when they are clearly three sheets to the wind.
People who use Foursquare to announce they just checked in at JFK… on Facebook…
People who constantly complain they are always just soooo busy.
People who get paid wads of money and seemingly don’t do anything.
American news channels.
People who get paid scandalously low wages and seemingly do everything.
France shutting down for the entire month of August.
People who get paid well, but constantly complain they are underpaid.
People who are really well organized and get boatloads of work done between 9 and 5, and never work evenings or weekends…
People who are just really, really lazy and complain how tough they have it.
People who just lie, lie, lie and lie until they believe it themselves (ugh!).
People who just talk, talk, talk, talk…. and never listen.
British public holidays.
People who clearly spend 95% of their productive time stalking people on Facebook.
“Massolution”, the first-ever crowdsourcing & crowdfunding conference, focused on the Fortune 1000 enterprise, is just about a month out, and we jumped at the opportunity to get some discounted tickets to HfS subscribers. We’ve also been talking to crowdsourcing kingpin and Massolution CEO, Carl Esposti (and founder of the Crowdsourcing.org community platform) about the approaching conference, which we will publish shortly.
Join senior executives from Fortune 1000 enterprises, government agencies, and leading crowdsourcing platforms to learn how crowdsourcing and crowdfunding are changing the ways companies compete and reduce costs. Also learn how today’s innovative outsourcers are looking to embrace crowdsourcing models to break away form the flagging FTE approach to business services. Doors open on September 18th in midtown Manhattan.
Enter the promo code HFS when you register to save an additional 10% by clicking here.
When vendors, particularly hardware and software vendors, were running around and talking about ‘Cloud this and Cloud that’, and ‘Big Data this and Big Data that’, we felt they were missing the point, because they weren’t driving conversion. Whereas the SMAC Stack, when it is integrated, does start to drive business solutions.
– Malcolm Frank, Cognizant, August 2013
Now to the real meat of our discussion with Cognizant’s strategy lead, Malcolm Frank, where we discuss the future of the CIO’s role and the IT function, the SMAC Stack and those Things of Internet, or is it the Internet of Things…
Malcolm Frank is EVP, Strategy and Marketing for Cognizant
Phil Fersht, CEO HfS Research: Malcolm, we’re hearing a lot about CIO turnover – in the last year, in particular. I think many companies emerge from recession and the needs and demands on the CIO clearly shift. What do you see as the attributes that make a successful CIO today?
Malcolm Frank, EVP Strategy & Marketing, Cognizant: Yeah, it is really two primary items. The first is what I just described that, if you look at the prior market through a CIO lens, there were these austerity programs between the Internet bubble to Bear Stearns – that eight year window. Make sure you have the IT backbone secure, rock solid stable and cheap. I mean you look at what’s occurring today and we’re getting to a world where a CIO is being asked through the SMAC Stack to fundamentally innovate, not just provide the backbone of the company, but to innovate into the product itself or the service itself of the company. So you see this in many different realms. It could be in automotive where all the auto manufacturers are saying if “We want to transform what the car really is. Our consumers are saying a $300 iPhone is so smart but my $30,000 car is so dumb”. So the CEOs turn around to the CIO and say, “You are the technology person. We presume you should do that.” And IT turns around and says, “We don’t have that skill yet”. And so that gap needs to be closed. And I think in closing that gap, you’re seeing new demands on the CIO office and in many cases it is driving CIO turnover.
Phil: And one of the things which you guys coined at Cognizant, is this term the ‘SMAC Stack’, the Social Mobile Analytics and Cloud platform. But what do you really mean by that when you talk to a CIO or even a COO / CFO today? How should you think about those four elements as you evolve your technology strategy?
Malcolm: We’re trying to convey a few important issues when we talk SMAC Stack. The first is it is integrated. So that’s the stack portion of it. And there is a multiplier effect when you can have a mobile solution in the cloud that’s driving tons of customer analytics. And so it’s important for clients to conceptualize these as an integrated stack. When vendors, particularly hardware and software vendors, were running around and talking about ‘Cloud this and Cloud that’, and ‘Big Data this and Big Data that’, we felt they were missing the point, because they weren’t driving conversion. Whereas the SMAC Stack, when it is integrated, does start to drive business solutions.
A second important point is that enterprise IT has gone through multiple phases. And each phase is cumulative – they build upon one another. For example we had mainframes leading to minicomputers, then to client/server leading to the Internet. We think that the SMAC Stack represents that fifth wave but it needs to be integrated and sitting on top of the prior waves. So we’re not going to see legacy environments go away. The issue is how do you take the SMAC Stack to then tap into your ERP backbone or your CRM infrastructure to leverage those in ways that you haven’t before. So that’s we were pushing into the market place and it has resonated reasonably well.
Phil: So when you look at enterprises 10 years down the road, Malcolm, trying to look out a long way out here, what do you think they are going to look like?
Malcolm: It’s a great question, Phil. 10 years is a long, long way particularly these days! But I’ll give a try. A couple of things, Phil, that we do know, if you look at technology. I think the Internet of Things is a very big deal, and we have underestimated that to date. In some pockets, I think people really do get it, but the overall market has to yet to fully digest what that means when we have, today, about 10 billion computers that are IT addressable and online. And ten years from now that’s going to go up by an order of magnitude. In order to make this massive shift where today, most data that’s created is created by human beings. But we are going to cross the line where most data which is generated is by machines. So it can be machine-to-machine communication or machine-to-human communication, and vice versa.
So that shift is going to,I think, redefine what is the role of IT and also redefine what is the value of a product. And we’re already starting to see instances of this. For example, look at General Electric. And their whole marketing, now, is around brilliant machines, where they are saying ‘it’s not the value of a jet engine per se, but it’s that halo of information that’s around it from this smart machine’. And with their locomotives and generators and the rest. You’re seeing it with Nike and FuelBand, or from Disney in creating their Magic Band. And so I think we’re making the shift where our customers, Fortune 500 firms, are recognizing if they can actually generate more value or economic value from the information around people and products as opposed to the actual asset themselves.
And some of the eBusinesses think that way already. Google, Netflix, Apple, Pandora, they already think that way. But I think we’re going to have a sea change where a lot of traditional sectors start to conceptualize their businesses that way and want IT to support it that way. And I think that’s where we’re going, when you look at a lot of these trends.
Phil: You’ve had a very successful career in the technology industry, Malcolm, but if you could go back 20 years and start it all over again, is there anything you do differently?
Malcolm: It’s one of those things one does in life, if you look at the mistakes you’ve made and obsess over them and think “Wow, how could I have avoided those mistakes?” But the more time that goes by I am actually feeling fortunate of having made those mistakes, because it opens your eyes to how you avoid them in the future. And I think some of the contributions I’ve made in the Cognizant context is the direct result of recognizing what goes wrong when you don’t pay attention to some of these issues. So, I think from that view, Phil, of course, you look back at some product innovations, such as Youtube today or Facebook today and think, “Why didn’t I come up with that?”. But one has to be realistic. So the short answer is ‘No’. It’s been a great journey. I think all of us in this business have to remember just how quickly the market moves and you really have to pay attention to that. And if you don’t then companies can get punished and it’s a great lesson. So it’s always an exhilarating ride in our business. It means you’re going to have some really exciting highs but it also means you’re going to have lows that come with it. I think it’s nature of the beast.
So given that context, I don’t think there’s not much that I would have changed.
Phil: Well, thank you very much for spending some time with us today. We look forward to sharing this discussion with all our readers, Malcolm.
Malcolm: Okay, great, appreciate it and would welcome any ideas or questions from them.
Malcolm Frank (pictured) is EVP, Strategy and Marketing for Cognizant. You can read his full bio by clicking here.
