The Phoenicians were the greatest entrepreneurs of their time, dominating the trade of the ancient world and founding colonies throughout the Mediterranean. We will never see the likes of them in the modern business world, where a nation of business hungry folk could possibly develop their own real estate within today’s Global 2000 organizations through savvy barter of their own wares. Or will we? Deborah Kops investigates…
India’s Sourcing Leaders — the New Phoenicians
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At a sourcing conference cocktail party in Singapore, I was chatting pleasantly to a gentleman who– Indian by nationality, Kenyan by upbringing—was leading a global sourcing strategy team in Dubai for one of the largest of multinationals. As he politely tried not to blow smoke in my face, I had one of those eureka moments— I was speaking to a Phoenician!
(Be patient with me, readers…I’m drawing an analogy in order to make a point. Perhaps a little history lesson might be a diversion from treatises on governance or the consolidation of the outsourcing industry. I’ll try not to be too much of a bluestocking.)
For those of you who are not familiar with Phoenicians, it’s not a dirty word. Phoenicians —the “red people”—that dominated the regions proximate to the Mediterranean from the ninth to the six centuries BC, were a significant cultural and political force. They grew rich trading the commodities of the time—olive oil, wine, timber and precious metals, and were unmatched city builders, developers and stonemasons, hydraulic engineers and superb mariners.
But their greatest contribution was as globalizers of the only region that mattered in the ancient world. As developers of the modern alphabet (yes, without Phoenicians who knows how you’d be reading this), and acting as cultural middlemen, the Phoenicians disseminated ideas, myths, and knowledge. As a result, the Mediterranean arguably became the first example of a world economy.
So much for togas, olive oil and wooden ships. When I talk to the likes of an Anirvan Sen of GE, a Jay Desai of Northern Trust, a Vinoo Mehra of Colt, or any number of executives from the likes of Genpact, Accenture, Infosys or EXL, I am chatting with the progenitors of those ancient globalizers. Born in India, perhaps degreed in the US or Europe, climbing the career ladder in a range of industries, holding a breathtaking number of increasingly challenging positions in multi-national corporations, these folks are the true evangelizers of process globalization, whether they are on the buy or sell side, or even advising and warning as consultants. Builders of outsourcing companies and shared services platforms, masters of process excellence, spokespersons for global delivery—they do it all. And today they are found in Indian-legacy outsourcers, global outsourcers, consultancies and a myriad of corporations.
The Bottom-line: our Indian industry colleagues play the role of globalizer so well
—Common ways of working. Although often castigated as being too “Indian” in approach, their shared, monolithic code of conduct actually supports implementation of globalization. Whether located in Manhattan, Manchester or Mumbai, our Indian colleagues know the handshakes and the rules when they work together, and have the ability to cut through the chase to get things done. In effect, the sourcing industry benefits from a common way of working.
Take this a step further, dear reader. Contrast the results when an American, a Brit, a German or a Swede (or all of the above) work with an Indian to source processes. First, they have to study Culture 101, spending sufficient time to understand that when a German says no, he means that the case for change has not been made, or that to a Brit, a meeting is not where decisions are taken. Overlay an Indian on the other side of the table, and you get a cultural stew of nuance, decision-making style, sense of timing, and hierarchy. But with a number of savvy Indian leaders in the room, with shared experiences, it is generally possible to develop a commonality of understanding, bridge the cultural divide and keep moving on.
–-World citizenship. As a group, the Indian members of our industry have substantially more experience working globally than our country compatriots. Perhaps they left at 18 to study in the US, the UK or Switzerland, quickly absorbing local ways of working and living, knowing that Yankees and Red Sox are the ultimate in sports rivalries, that May is the time to eat spargel in Germany, or that passing out red envelopes to children is the done thing at the Chinese New Year. Cultural understanding and experience are underrated attribute in the sourcing world; the ability to straddle and translate two or more cultures is golden to the implementation and operation of a global operating model.
–Strong networks. Global operating networks are even more successful when they are underpinned by effective professional networks. Our Indian colleagues went to college and university together, and have many shared experiences; their ability to collapse the proverbial game of “seven degrees of separation” into two or three is awesome. Seemingly, everyone knows who has what expertise, who is looking for new talent, where the latest innovations are occurring, and who is developing leading-edge applications. Now you might think that this is a bit of an over-the-top characterization, but in an increasingly more complex world, networks matter; often, they are the best way to get things done quickly and efficiently.
Deborah Kops, Research Fellow, Sourcing Change Management, HfS Research (click for bio)
–Understanding how destination economies really work. Despite many trips to places such as India and The Philippines, most of us never develop a deep understanding of their inner workings—specifically cultural values, acceptable mores, and how to get things done. Because they do not evaluate a situation through a wholly western lens, our Indian colleagues are able to bring a level of local understanding which is so critical to global sourcing success.
Some say that we’re entering the age where it’s very cool to be a non-Indian in the outsourcing industry, or in the words of one of my sourcing industry headhunter friends, “ American companies want Americans. Indian companies want Americans. Everybody wants Americans.” And to my mind that’s a good thing; after all, successful globalization involves leaders from all cultures and geographies, not to mention that every decision can’t be made by dialing +91. But I’ll place my bets that our Indian friends cum/Phoenicians will continue to play an outsized leadership role the sourcing world.
We’re very excited to announce that we’ve partnered with ACCA (the Association of Chartered Certified Accountants) to conduct the largest-ever global study of finance professionals to understand adoption trends, experiences and dynamics of shared services and outsourcing for the finance function.
Are you achieving sourcing success for your finance function? Click to take part in our survey
Members of the ACCA global membership and HfS Research’s own network of finance and sourcing professionals are being surveyed over the next couple of weeks across organizations of all sizes, industries and regions.
We will gain an unprecendented global picture of finance and accounting sourcing from well over 1000 organizations:
What CFOs and senior finance executives really think about shared services and outsourcing;
How organizations’ adoption patterns of finance and accounting sourcing are differing across industry sectors and countries;
What are the experiences of finance professionals to date and how they rate their sourcing performance in terms of both cost control and productivity improvements;
Whether today’s finance functions are realizing finance transformation improvements with the right level of finance talent and technology they need;
Whether finance leadership’s business objectives are being met by a shared service or outsourced finance delivery model – and have these business objectives changed since they started on their transformation journey;
How finance leaders are measuring sourcing success.
Does your organisation use finance shared services or outsourcing? If so, we would like to hear from you.
Your feedback will be aggregated with that of others and will be a key input into our series of research and insights looking at finance transformation by both ACCA and HfS. At the end of this survey we welcome you to register for a copy of the report findings from this survey and enter a free prize draw for an iPad 2 as a thank you for time and feedback.
As per usual, election year brings up the age-old argument about how to combat the “threat” of outsourcing. However, let’s not forget this is nothing new..I recall in 2004 when an HR Outsourcing conference was subjected to a vociferous demonstration by anti-outsourcing protesters (I mean – seriously – HRO? Most of it is onshore in any case).
Today’s angry hoards of protesters are (and quite rightly so) expressing anger at the obscene wealth generated by Wall St, and barely even notice the fact that real “American” companies, such as Apple, employs 500,000 people in Chinese factories and that lovely “American” Hanes underwear brand employs thousands of people in Vietnamese sweatshops.
Yes, the argument is boring, flawed and jaded, and while politicians need to be seen to be against it, they do little to prevent it. However, one major stride of progress that Obama emphasized during his recent State of the Union speech has been how the US automotive industry has been brought back from the brink:
“This blueprint begins with American manufacturing. On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s number one automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs.
“We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.
“What’s happening in Detroit can happen in other industries. It can happen in Cleveland and Pittsburgh and Raleigh. We can’t bring back every job that’s left our shores. But right now, it’s getting more expensive to do business in places like China. Meanwhile, America is more productive.”
Why is the experience of the resurgent US automotive industry significant to resurrecting its flagging IT industry?
Let’s not beat around the bush here. The US onshore IT industry has ceded much of its dominance to India in recent years. While three-quarters of ERP development work was performed onshore in 2008, the proportion has today decreased to 65%:
I’m not going to get into the tedium of this latest wave of toothless “protection” acts aimed at creating tax incentives / disincentives, and other various penalties and inconveniences for US organizations which dare to employ foreign labor outside of the country to service their business operations and manufacture their wares. Simply put, there are already US IT services firms, such as Systems in Motion, pushing services at US enterprises with wage rates comparable, and often even cheaper, than those of Bangalore – especially those which leverage resources in low-cost onshore locations such as Michigan. And while some niche onshore providers are finding pockets of business and growth for themselves, you can’t ignore the bigger picture that the US onshore IT industry is on the decline. At HfS, we’ve even seen enterprises actually declining to use onshore US IT services firms which underbid their Indian competition, because many of these buyers of services are so invested in the Indian IT brand. Today, many senior IT executives within US organizations actually prefer to invest in their Indian IT relationships than their US ones!
The Bottom-line: It’s time for government to help re-brand US IT services
While the US IT services industry is nowhere near the state of distress that the US auto industry found itself during the last Recession, isn’t it now clear that the only way for the government to stimulate the success of its onshore industries is to invest in them, to aggressively help them, to encourage them to hire locally with real investment? By investing so heavily in their automotive industry, they also re-branded the entire American automotive business. Nothing’s worse than a business in financial decline, and by giving automotive a helping hand, they also improved the perception and credibility of the entire US automotive industry.
The Chinese and Indian governments, as examples, constantly invest in their local business to help them grow and be successful – so why can’t the US government do the same for its flagging IT industry, that it did for automotive?
I, for one, would be happy to see my tax dollars being re-invested in stimulating local industries and job creation in growth industries like IT services and Cloud computing, BPO, social media and medical research, so why not follow the example of how the US automotive industry was salvaged and do the same for IT? Invest in some local companies… hire train and their local workforces to support our organizations’ IT systems. Small measures never work, waste everyone’s time and allow our more aggressive foreign counterparts to advance further ahead in industries such as global IT services. Isn’t now the time, in an election year, to stop the rhetoric and actually make commitments to growing local industries that have a direct impact?
Any BPO veteran will recall Affiliated Computer Services (ACS) as one of the early darlings of BPO, which existed right at the top of the competitive tree in the early 2000’s, whenever a large Finance & Accounting, HR or call center deal was up for grabs. They were also a pretty handy domestic IT services shop before the Indian offshore pureplays arrived on the scene. It would always give Accenture and IBM a run for their money in BPO pursuits, and had a compelling client-focused culture and engagement methodology for many of the old world BPO engagements (i.e. a lot of lift and shift and staff re-badging).
Two years into its $6.4 billion acquisition by Xerox, management has finally decided to phase out this famous old brand… HfS Research’s Tony Filippone and Phil Fersht take a closer look into why Xerox brass has now decided to do this, what it means to this heritage business, and where it needs to focus in the future to strengthen its market position.
ACS finally gets its re-brand as Xerox zeros in on integrating the businesses and cultures
Corporate-naming consultants must have pitched ACS a dozen better names, but none better than the one it interred today. The fact is, straight-talking ACS has never spent the billions its competitors have on branding. In fact, even their unremarkable logo remained nearly identical for the company’s 24-year history. All this makes us believe that today’s announcement that ACS will now market itself as Xerox, rather than “ACS, a Xerox company” is a sign of opportunity and synergy.
As its branding has reflected and its customers know, ACS’ success is not because it is smarter than everyone else. Rather, ACS simply outhustles its competitors. Its Midwest American values make the company the likeable, down-to-earth service provider that gobbles up government deals one after the other. Moreover, it is focused on technology-based outsourcing solutions, not headcount. Its vertical experience is a marvel, with strong positions in government, healthcare and financial services.
The acquisition announcement had analysts everywhere wondering exactly what the offspring of a toner cartridge mother and a call center father would be like. Mixing this capability with Xerox’s traditional business has clearly not been easy. Our discussions with buyers suggest that Xerox’s aggressiveness has put off clients who don’t want to hear sales pitches, while Xerox’s recent acquisition of the Breakaway Group indicates that Xerox is supporting ACS’s industry-focused approach. However, we’ve also heard that Xerox’s rigid financial management process at times conflicts with clients’ needs for flexibility.
When the acquisition was announced, it was obvious that Xerox saw Dell’s Perot acquisition and HP’s EDS acquisition as examples of technology manufacturers entering the services business. “With ACS, we take another step forward, expanding our leadership to include business process outsourcing that helps simplify document-driven work,” claimed Xerox CEO Ursula Burns at the completion of the acquisition.
Well, a lot has happened over the last few years that shows just how difficult corporate transformations can truly be: IBM’s transformation from a manufacturing company to a services organization continues to much ballyhooed success, HP’s public leadership brouhaha has held the firm back, and Dell Services (formerly Perot) continues to grow, but it’s clear that Dell remains a technology product organization.
Xerox’s 2011 Q4 earnings release held a mixed bag as it relates to services revenues. While its BPO earnings increased 8 percent, its ITO earnings dropped 6 percent. When compared to its competitors in the BPO arena, Xerox has slipped further from the top tier into the middle of the bunch since the Xerox buy-out. Accenture and Infosys’ recent quarters featured increases of at least 20 percent in outsourcing revenues, while IBM showed a 3 percent improvement and HP stayed flat.
The easy story this tells is simple: printers and ink relationships aren’t going to win you an outsourcing engagement given the aggressive ADM marketplace and sophisticated sales approaches of their competitors.
The harder story to decipher is the development of the marketplace for document management outsourcing. While companies clearly don’t want to print more, they certainly want to redesign processes in a manner that eliminates the need for documents to manage. Based on numerous discussions with buyers, we’re confident that buyers want to redesign their processes to reduce the source of costs, instead of simply managing them more cost efficiently. The question is how Xerox will cope with the more complex projects this shift generates.
The Bottom Line: The hard work starts now for Xerox
Having two names confused the marketplace and hid any synergies from view. Having one name suggests that there aren’t two different teams providing services to buyers (buyers hate multi-party deals and the politics they cause). The elimination of the ACS brand will clarify Xerox’s account management strategy and should encourage groups to continue to work together. Xerox also needs to complete the naming soon and eliminate the decision to keep the ACS brand in Asia Pacific. This sort of decision confuses the marketplace of global buyers.
Xerox needs to pursue the vertical focus that its competitors, such as Cognizant, have mastered. Xerox has long maintained a geographic focus, but they need to refocus on global industry leadership as ACS does (did). The elimination of ACS’s brand is one step down this path, but it would be a mistake to stop here. Xerox should organize its services team by vertical and focus its effort on strengthening vertical expertise through acquisition and internal development (Xerox is well-known for its R&D capability).
Document management isn’t a growth horizontal, it’s a cash cow. If Xerox wants to demonstrate leadership, it will need to develop strong consultative skills to help clients alleviate their reliance on documents as part of solutions. Positioning ACS’s industry leaders and improving their internal thought leadership is a critical step. Hard work is important, but this effort takes the type of intelligence the Indians love to exhibit – and Xerox will compete against them heavily. ACS needs to focus on thought leadership to battle the brainy Indians and smart consultant-wielding Accenture and IBM. They need to hire more consultative resources, invest more in their services leadership team, and be bold in their R&D efforts.
Build on ACS’ strengths in healthcare, government and financial services. Xerox needs to bring more consultative skills and technology to the table, beyond what it inherited from ACS. While its competitors are hurriedly investing in developing business platforms that combine their business process and technology (Cloud) capabilities, we are yet to see Xerox put a stake in the ground to develop solutions beyond document management that can set the industry alight.
Revitalize ACS’ horizontal BPO businesses. While ACS’ position in F&A BPO has slipped in recent years, it has a great chance to leverage the Xerox brand and significant customer base in document management to open up more client conversations and opportunities. Adding more consultative capability in finance transformation would help elevate Xerox’s differentiation from much of the competition- solely relying on brand isn’t going to fly for many customers. Xerox has also inherited a stellar HR outsourcing capability, with the respected Buck consulting division helping cement its position in the market in recent years, while also developing a strong business line in benefits administration services. Like F&A, Xerox needs to give its HR business plenty of investment in terms of sales acumen and market awareness, but is well positioned to challenge for market leadership with many of the leading HRO providers struggling to grow their businesses in today’s environment. Procurement BPO is also a market where Xerox has a belated opportunity to make a push, with such strong internal manufacturing competency, but needs to make some specific investments in platform development, category expertise sales and marketing to make up for lost ground against the likes of IBM and Accenture.
Its ITO business needs a serious overhaul. Losing revenues in a growing market indicates a real weakness. While ACS still had a strong ITO business two years ago, today’s ITO environment is too commoditized to be a “me, too” player. Xerox needs to differentiate its ITO offerings through development of business platforms, build on its strong US domestic capabilities, get aggressive in search of strong acquisitions (such as Genpact’s acquisition of Headstrong), or exit the business. ITO cannot be built on the back of toner cartridges and multifunction devices, while other service providers show aggressive tenacity to win marketshare.
Xerox has a market awareness problem when it comes to services. When you talk to Xerox, what are you talking to them about? What is the company focused on today – are they selling a machine or a business platform? Xerox needs to develop some real thought leadership in the markets it chooses to go after.
Click here to listen to Friday’s excellent web-discussion involving HfS Research’s own (and definitely not SOPA-rific) Jim Slaby and Terametric’s tera-fic Chris Selland.
And for those of you who can’t be bothered, here were the main points of note:
* SOPA/PIPA have worthy anti-piracy goals, but are highly problematic in technological, political, legal, and commercial terms. They would shift considerable cost and liability for policing copyright-infringing websites and links onto businesses that aren’t engaged in piracy.
* SOPA/PIPA reflect the media & entertainment industry’s latest effort to assert control over the Internet as a content distribution channel. This is fundamentally at odds with how consumers and businesses now use it, and would crimp many valuable, legitimate commercial uses of the Internet, not just piracy.
* The many objections to SOPA/PIPA demand a smarter, more technologically-savvy, less one-sided approach to fighting piracy than this onerous legislative one. Better enforcement of existing copyright laws and pursuit of new entertainment-industry revenue models were among the panel’s suggestions.
So if the lovely SOPA legislation gets passed, here’s what would happen to HfS:
YOU (the taxpayer) would help foot the cost of policing our blogs (they’d have to hire an army of administrators), and if we got a complaint, we could be shut down while we fought it out in court;
HfS would have to monitor closely every comment on every blog post to make sure it didn’t link to anything infringing, or we could be blacked out… we can already sense our competitors rubbing their hands with anticipation.
So, without further ado, here’s our security analyst, Jim Slaby, explaining why this legislation is akin to cracking a walnut with a sledgehammer…
If you were surprised to find Wikipedia offline yesterday, you weren’t alone: many Internet users were unaware of the widespread one-day online protest against SOPA and PIPA, two bills before the US Congress designed to fight online media piracy. Participation ranged from outright shutdown to the display of prominent protest messages or symbols. High-profile players included Wikipedia, Craigslist, Google, and many media sites, but thousands of other less-trafficked sites also participated.
What got them up in arms? The Stop Online Piracy Act (SOPA, the US House of Representatives’ version of the bill) and the Protect IP Act (PIPA, the US Senate version) are aimed at curbing online piracy of movies, TV programming, music, and other copyrighted content. Largely written by lobbyists for the RIAA, the MPAA, professional sports organizations and media conglomerates (Sony, ESPN, et. al.), its aim is laudable: ensuring that the artists that create original content, broadcasts of professional sporting events, and the companies that distribute them get paid for their work. We at HfS Research feel the sting of piracy ourselves — at least intellectual piracy, judging from some of our competitor’s eerily familiar-sounding reports – but it’s obvious to us that SOPA and PIPA are going about the problem all wrong.
Critics call the implementation of the legislation grossly heavy-handed: it gives the Justice Department the authority to order a blackout (using Internet domain-name filtering) not only of any website accused of hosting copyrighted content without authorization, but worse: any site that links to such a site. With nothing more than a letter of complaint, copyright holders could force payment networks (like Visa and Paypal) to block payments to such sites. If your corporate website has a blog or discussion forum that accepts comments, a link posted by a user in a comment could offend copyright holders.
To quote The Daily Show’s hilarious illustration of the problem, your site could be shut down for some commenter on one of your blogs linking to a YouTube clip of you dancing in footie pajamas to a Beyoncé song while a rerun of the Bob Newhart Show plays mutely in the background on your TV. (Incidentally, the copyright violation would be the Newhart clip.)
Viewing it in terms of the Constitutional protections of due process and free speech, it’s a disaster: it effectively reverses the hallowed American legal precept of “innocent until proven guilty”. The possibilities for rampant abuse are chilling, as it grants the Feds with virtually unchecked censorship powers. But let’s look at it purely as a commercial proposition. Your corporate website could remain blacked out for extended periods while you fight a copyright suit in court. You’d have to scrutinize every comment posted on every blog or online forum or discussion board on any or your websites to scrub potentially offending links.
For buyers of outsourcing services, you’d have to start renegotiating for contractual protections to ensure that your provider does nothing to get the websites they’re running on your behalf blocked, too. You would have to assume the burden of proof, and all the costs of doing so, to demonstrate that nothing on your websites, and no website any of them even link to, infringe on any legitimate copyright.
James R. Slaby is Research Director, Sourcing Security and Risk Strategies, HfS Research (click for bio)
HfS Research is all for the protection of copyright holders: we gladly pay for our movies, music, and on-demand reruns of The Wire and Deadwood. And we hope our subscribers aren’t giving pirated copies of our reports to their friends. (Come on: we give you tons of great content for free already!) But in essence, this boils down to an issue of digital rights management (DRM), and in the marketplace, that’s a thorny one. Even Apple, with perhaps more power to move the consumer market toward standards than any other vendor – it effectively killed Flash, forcing Adobe to move to HTML 5 – largely threw in the towel on traditional DRM a few years ago.
In the interest of zealously protecting the interests of copyright holders, SOPA and PIPA trample due process, and in turn place far too much of the economic burden for their enforcement on the vast majority of Internet-connected businesses that don’t engage in piracy. Smarter people than our elected officials in Congress, few of whom seem to have a clue about the workings of the “series of tubes” that is the Internet, need to go back to the drawing board on this problem.
And if you want to hear Jim live discussing the SOPA issues on your business, click here.
Jim Slaby (pictured) is Research Director, Sourcing Security & Risk Strategies. You can view his bio here.
“We did our BPO deal in 2005 and now we’re reaching our 7 year-itch”, confided a client governance executive last week. “Essentially, it’s operational – it works – but we’re now trying to focus on the what next. How can we find new value and new ways to tie our BPO operation to our company’s growth and renew the enthusiasm and passion of our staff?”. No single sentence has reinforced how far the BPO has come – from tales of woe and messy delivery in the mid 2000’s – to clients today complaining they’re getting bored?
The BPO industry has been going through such a remarkable evolution since the first major deals were cast barely more than a decade ago, that it’s high time we took stock and considered the phases – or generations – through which our industry has progressed.
Mike Salvino is Group Chief Executive, Business Process Outsourcing, Accenture
And there are few people who have lived and breathed these generational shifts more closely that Accenture’s BPO leader, Mike Salvino (or “Sal” to those who know him). 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, before leading the HRO sales organization post their merger with HR services giant Hewitt. Mike rejoined Accenture in 2006 where he led their F&A business before taking full responsibility for the company’s entire BPO function.
We managed to grab a few moments with Sal to discuss these generational shifts in the BPO industry before he had to run off to coach his kid’s basketball team…
PHIL FERSHT: Mike, when we spoke two years ago, our discussion focused on what you termed third generation BPO, which is a vernacular many others in the industry are now using. But I know your thinking and Accenture’s delivery model, has evolved quite a bit since then and you’re now talking about fourth, fifth and even a sixth generation. Please talk us through this evolution and these new and upcoming generations of BPO.
MIKE SALVINO: Third generation BPO, where some of the providers and their clients are a bit stuck, was focused on global delivery of end-to-end processes using either operational excellence or Six Sigma-type techniques on those processes to achieve what I call “silent running.” For the most part, providers can now do third generation BPO, but it’s a very commodity-based business, it’s very price competitive, and very competitive in terms of differentiating yourself as a provider.
So we set out to define what we at Accenture call fourth generation BPO, which is focused on business outcomes, either helping a client increase its revenue or further decrease its costs. To do this, we applied analytics to all the transactions we were processing in our global delivery network. And by looking at the past to try and predict the future and showing real-world examples to our clients, we were able drive tangible business value. Very few providers are delivering fourth generation BPO.
The fifth generation, which Accenture is into right now, is taking the investments we’ve made in the cloud, in analytics, in social media and in mobility and applying them to BPO to build business platforms. Our best example is what we call our Accenture BPO Navigator, which is built in private clouds and allows our clients not only to see the end-to-end service level performance but also the business results and the business outcomes we’re driving for them on a regular basis. Access to the BPO Navigator is also enabled for mobile devices so they can carry it around with them…it makes a big impact in terms of how they are managing their businesses.
But the whole overarching concept around fifth generation BPO is creating a more flexible and scalable delivery model so our clients can really do what for 10 years they’ve been asking for – to start small and scale fast.
Sixth generation is creating learning communities of clients around these fifth generation business platforms using social media technology to create a force for future innovation and a glue between those clients and providers.
If you look at the colored columns in this graphic, you’ll get a solid idea of our perspective on each of the generations:
PHIL: Mike, my read on this is that you have clients that have been doing this for a very long time, where you’ve been able to help them evolve along this path as they’ve become more mature, more in control, and have more visibility into how they want to perfect their processes. Do you feel the experienced adopters are going to be the first ones to progress to these fourth, fifth and sixth generations, or do you think there are going to be a lot of clients – new to BPO adoption – coming into play?
MIKE: I think it’ll be a combination of the two. Our existing book of business is the most intuitive group to move directly into fourth generation in terms of business outcomes because they’ve seen us process their transactions for years and they’re asking the same questions we asked when we developed the concept for the fourth generation BPO…what can you tell us about our business, given that you process our transactions every year?
The new clients want to move into it more quickly. I haven’t spoken with a new client that doesn’t want to try to start small, scale fast, and use the latest and greatest technology, whether regionally or globally.
The sixth generation is a very new concept where we invite people into those communities to do business, exchange insights and to further advance the standardized platforms and processes that actually do the work. And while the fourth and fifth generations are realities today, the sixth generation is what we’re shaping now.
PHIL: Our new research has shown that, for eighty percent of today’s buyers (see link), standardizing on best practice process flows is now one of their major BPO drivers. So in terms of that, how are you building your future business around this willingness to standardize more and adopt these “pre-packaged” best practices?
MIKE: So that’s where we partner with our management consulting and with technology experts. You’re exactly right. We’ve seen this movie before in terms of people saying that there’s a product out there that’s all of a sudden going to standardize everything. Are there better products out there? Absolutely. Are people more willing to go to them? Absolutely. Our strategy is clear. We want to own those platforms, especially for the industry-specific areas. We will take our clients to platforms, much like we have taken them into our centers to do the work. The reality is that the platform discussion is no different than the debate we had five years ago about whether service providers do the work at the client’s site or can actually take the work into their own delivery centers.
So now that the work is in our centers, we can get them to a standard platform, but that’s old-type thinking. What I think is different is that once we get them to those platforms, we can we get them to fourth and fifth generation BPO by looking at the transactions. We use our management consulting talent and industry knowledge to determine what those transactions mean, and then be as flexible as we possibly can to enable our clients to start small and scale fast.
PHIL: This takes me back to the ‘90s when companies were pushing ‘buy this suite of enterprise resource software and you’d have best-in-class processes across all these domains, and we ended up with a situation where companies were buying full-scope licenses for products like SAP, but struggled to standardize their processes to conform with the ERP. Isn’t this happening all over again, where buyers are being sold some type of “productized” workflow, however this time the onus has shifted to the providers to take them through the transformation? Doesn’t this emphasize the need for buyers to rely heavily on their providers’ consultative transformation capabilities, as opposed to solely this kind of just low-cost, productized approach?
MIKE: Okay, but if we delivered exactly what you just said, that isn’t good enough. That’s just third-generation BPO. As I said earlier, most of what we’re talking about is industry specific because I don’t believe that clients are going to come off SAP or Oracle for the horizontals. So if all we do is take you to a standard process globally based on a new application, all that does is get you to third generation, with lower cost and more efficient end-to-end processes.
But today, when you sell to the C-suite, they don’t care that we process invoices, port telephone numbers or support wellness programs better than anybody else. What they really want is what the analytics data tells us about how we can have a better impact on their business either by increasing their revenue or further decreasing their costs.
I’m not positive you have to go to a new platform. But I am positive that you have to understand what you’re processing and how that’s going to impact your clients’ business.
PHIL: This is interesting, when we look at how the ITO industry developed – it kind of got stuck in its own version of “third generation” for a very long time, and arguably, a lot of it still is. But I think there’s a much bigger opportunity in BPO, because of the level of depth and intimacy you have with the clients, and their institutional process that you have to learn over time to help them move to outcome-based delivery situations. So I do think that BPO is more uniquely positioned to move buyers towards these fifth and sixth generations than some of the other outsourcing models in the past.
MIKE: But don’t you think that’s what people wanted out of BPO when we started this? It’s just taken us 10 years longer than we thought. The significant difference between ITO and BPO is that we could finally get into the business. I know it started with taking transactions that weren’t core, and by the time we got to third generation we were certainly doing non-core. But now, with fourth, fifth and sixth generation BPO, we can finally give the industry what it’s been asking for years. Do you agree?
PHIL: Yes, I think the clients have got a lot smarter over the last couple of years, and they are demanding much more innovation from their relationships. They’re also realizing they’re more accountable and until they play out the agenda, it’s going to get tough for them. So I do think that the industry has really moved on in terms of the conversation, in terms of what it’s looking to achieve. In fact, we’ve done more in the last two years than the last ten, and these current economic conditions are driving people to look more long term at their businesses, and really try to be a bit more radical with making some changes to their businesses that need to be made.
Additionally, the competitive dynamics are at a point where I think we’re already seeing three or four players break from the rest of the pack quite aggressively now, and I think in a year’s time we’ll really start to see a mature market. So I do feel that this sixth generation you’re talking about is going to happen sooner than we think. I think it’s already creeping in. Our research clearly demonstrates decision-makers are increasingly going to each other – we’ve got the data to show it. Peer experience is more impactful now than anything else, so I do feel the quicker we can get people to the community concept, giving them the ability to share best practices, worst practices, ideas and get better at this, the better off the industry will be.
MIKE: Again, the purple column on the chart that represents sixth generation BPO is what people have been asking for over the years. We used to call them user groups. We still do an event every year, and bring our clients together because they want to talk to each other about what’s going on, about what they’re dealing with, about how they’re resolving issues, whether old or new. So to be able to set up that community in an invited, exclusive-type way where you can really conduct business will be key.
PHIL: We’re in an interesting age where there seems to be a follow-the-leader scenario going on where someone comes up with a great concept and before you know it, everybody else has jumped on it. And with this concept of “generations” that you initially developed, I remember us going through it a while back and we started seeing competitors of yours coming up with similar messages and stories. What goes on in your mind when you see this …and how are you going to win?
MIKE: I love the fact that the industry has taken on the generations vernacular, as it’s the best form of flattery. And when the industry wins, Accenture BPO wins, and if we’re moving the industry into the fourth, fifth and sixth generation BPO, then clients, as a whole, will expect more from us and we’ll deliver more value. So it’s a win for clients too.
PHIL: Mike – thanks for taking the time to discuss your BPO Generations with our readers – we appreciate it, and look forward to sharing your insights.
Mike Salvino (pictured above) is Group Chief Executive, Business Process Outsourcing, for Accenture. You can read his bio here.
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