Taking on the Indian outsourcers: too late to make a splash?
HfS Research Fellow and Sourcing Change protagonist Deborah Kops investigates whether India has bowled an unplayable delivery to the rest of the world’s ambitious outsourcing businesses, or if there’s still a chance to nick it over the slips and get on the scoreboard…
Let’s give Indian-legacy providers their due—they arguably initiated, then accelerated acceptance of the concept of working offshore; they’re well-entrenched in some of the best global clients; they’ve set the bar for industrialized delivery—from hiring to training; from process mapping to technology, from delivery to measurement. As a result, sending critical processes over five time zones away is considered safe and smart today. Other countries want to emulate their positioning, ensuring that the names Brazil or Chile, Malaysia or China, South Africa or Kenya, Ukraine or Poland are mentioned in the same breath when global delivery models are under discussion.
Will the market expand rapidly enough to make non-Indian providers a must-add to business models—beyond a language or regional proximity play? Will clients seriously consider providers based in other geos to deliver critical scale for finance and accounting, knowledge or vertical business functions in the near term?
Despite rising costs and increasing attrition rates, it seems, for the foreseeable future, Indian legacy providers will continue to have a leg up on providers headquartered in other countries, with good reason.
Why is challenging for non-Indian offshore providers to penetrate the global outsourcing market?
Reputation.Bad American sitcoms and call center jokes aside, just as Germany has built a reputation for precision engineering, or Italy for fashion, or the French for fine food, today India’s greatest reputational export is globalizing work. It makes no difference that the Koreans can now go toe-to-toe on the manufacture of quality cars, or some of the best new fashion designers are coming out of Turkey, or London has more Michelin-starred restaurants than Paris—Germany, Italy and France are synonymous with great cars, high style and fabulous eating. Similarly, Brand India is outsourcing.
When buyers think of India, they think of the jobs export destination. Whether that reputation is due to timing, compelling wage rates, undisputable demographics, marketing or luck is unimportant; truth is no other destination conjures up the same meaning in the minds of sourcing decision makers. Buyers are aware of the plusses and minuses of sourcing to India and understand the map– Bangalore has strong analytics talent, Chennai the right location for technology and Pune a Mecca for finance and accounting. By contrast, what sort of talent can be found in Uberlandia, Timisoara or Accra?
For the foreseeable future, unless there are explicit language, market, or portfolio risk issues, India’s providers will dominate every long list. What’s helping India reign supreme? Why can’t providers in South Africa, Colombia, Ukraine, Brazil or even China come close to India?
Scale. We acknowledge that without scale, any business is seen as a hobby. Although there is sometimes room in our sourcing portfolio for small, emerging best-in-breed providers, we tend to gravitate to markets and providers with scale to serve our needs, even if we don’t plan to expand. Scale says that other clients are placing the same bet; that we’re dealing with a financially and operationally sound operation; and that the provider will be able to make the right investments to improve our business. Plain and simple, at this point in time, other outsourcing destinations do not have sufficient scale to challenge India.
There are several dimensions to scale—scale of the indigenous industry, scale of the export industry and scale of the individual provider. Scale of the indigenous industry is important: corporate decision makers want comfort that the location will grow as a sourcing destination and the government’s economic development policies are aligned with their goals. Corporations have no interest in being held hostage to the vagaries of political and economic policy in emerging sourcing destinations.
Second, few corporations have any desire to be the only game in town. Going it alone is rarely an option when it comes to designing a global delivery model; the herd instinct is the strongest justification for offshore location decisions. Being the foundation client for a provider’s new center is fraught with risk—will the provider be able to attract the right talent? Will the provider scale quickly enough to keep costs in check? Few organizations have the desire to be the biggest fish in the provider’s pond, even though providers think playing the “special relationship” card is a great enticement. In a maturing market, clients no longer have to take this risk.
Lack of network.Have you looked at the roster of so-called global sourcing leadership in blue chip companies lately? Along with Smith and Johnson, you’ll find an increasing number of names that reflect the map of India—Gupta, Jain, Singh. These sourcing-savvy executives, often groomed by stints in leading Indian providers, or selected because they understand how to do business offshore (read: India), have, in aggregate, extraordinary power to devise corporations’ global delivery maps—and source more work in India.
Although India is certainly a vast country, as a percentage of the population, experienced sourcing professionals are relatively few. So the game of seven degrees of separation works wonders when an Indian outsourcing salesperson knocks on the door of a major bank, telecom or outsourcing advisor. This is not to accuse Indian sourcing executives of any overt bias toward India as a sourcing destination, or India-legacy providers; rather, they go with what and whom they know.
Providers from other locations just don’t have the same network of countrymen in place. Chances are, walking into a meeting and greeting the exec in Sichuan dialect, or chatting about the best place to eat in Lvov, is highly unlikely. So if shared knowledge or experience is not in place as a platform to build the trust necessary to establish a good relationship, it means the non-Indian provider has to work that much harder to gain credibility.
Lack of strategy. When Indian providers first came onshore, market conditions were nascent. Timing and luck were often enough to attain scale. It was possible to play the IT card one day, and boast mastery of business process delivery the very next. If one client wanted insurance process delivery, and another logistics support, the provider could—dare I say it—fake it, leaning on a relationship to get enough time to figure it out.
But in today’s mature market, it’s impossible to grow without a plan. With an established sourcing destination map, and a recognizable roster of Indian-legacy providers, successful market entry by non-Indian offshore providers means playing it more strategically.
It’s no longer enough for a provider to show up at a trade show, throwing up a value proposition and seeing what sticks—ITO, analytics, horizontal or vertical BPO. Second, the all-things-to-all-people approach that worked 10 years ago is now passé. Buyers have moved on, demanding proven track records and deep skill sets before they entertain a relationship. So the non-Indian player, with limited relationships and brand recognition, is forced to declare his hand relative to process and domain.
Lack of investment in marketing. Granted, with a few exceptions, Indian providers are not masters of marketing. Most of them are still struggling with differentiating their brands in a market where one provider’s declared value proposition looks like another’s. But the news is they have some semblance of brand resulting from time in market and success in client penetration, not to mention a boost from the India-as-the-premier-sourcing-location reputation.
The “me-too” marketing approach taken by non-Indian providers is simply not workable. Believing that brand doesn’t matter and that the market is big enough for everyone is a non-starter. They either spend a pittance in marketing, or when they do open their wallets, they get limited bang for their buck, buying ads or showing up at conferences which few clients attend– because the decisions are being made from marcomms managers in Buenos Aires, Kiev, Dalian or Kuala Lumpur. Little attention is paid to deepening relationships with influencers or developing thought leadership as a differentiator. Marketing is treated as a sideline, when it’s the key driver of revenue for new outsourcing market entrants.
Language.English really rules in the outsourcing world. The vast majority of multi-nationals use English as their lingua franca, even if they are based in Germany, Spain or Russia. Industry research and commentary is written primarily in English. Most conferences are held at least in part in English. Computer literacy is heavily dependent on knowledge of English. Buyers want a range of language capability to service particular markets, but who grows a global outsourcing business speaking mainly Finnish, Chinese, Tagalog or French?
Deborah Kops, Research Fellow, Sourcing Change Management, HfS Research (click for bio)
The concept that providers without strong English language skills can simply decouple tasks as “non-language dependent” in order to move delivery anywhere is a belief of mythical proportion. And assuming that client-facing staff with less-than-adequate fluency can successfully grow a business is a similar fallacy. The charm of a thick accent pales when a buyer is negotiating a contract or the transition team is mapping processes.
Language skills imply a degree of cultural understanding. When a student is immersed in English language study, he learns more than grammar. The syntax tells him something about the way native speakers look at the world. Exercises help the student understand why the English are fanatics about gardening, or why Americans love their baseball. Don’t underestimate how language drives context in outsourcing—it makes all the difference to relationship success.
Let’s face it–India has the English advantage in spades. Granted, not all staff speaks like Bostonians or Brummies, but the understanding necessary to communicate is present. Outsourcing is about crossing an organizational divide to forge relationships; if the language issue rears its head as an obstacle, it’s difficult to justify working with the provider, all other things being equal.
So, with the reputation, scale, client networks and language boxes checked by India, how do non-Indian headquartered providers compete? Stay tuned for Part Two.
One thing’s for sure – we’ve heard a lot of noise from the Indian IT services mammoths over the last five years that they are going to grapple with the likes of Accenture and IBM to become billion-dollar BPO giants. And while Cognizant, Infosys, TCS and Wipro have all made progress developing sizeable BPO businesses, none of them have yet come close to surpassing the size and scale of pureplay Indian BPO leader, Genpact’s $1.5bn turnover. Why is this?
The Indian ITOs have built their companies by occupying “real-estate” in the CIO offices of the Global 2000. They’ve done a phenomenal job piling in the people resources to support application testing, maintenance, help desk and development projects. They’ve developed institutional knowledge of their clients’ IT processes to support the business, which has proven cost-effective for the vast majority of leading global enterprises. Our recent state of outsourcing survey found 97% of $1bn enterprises outsourcing some component of their operations in today’s environment, with most of these organizations involving Indian ITO service providers within their supplier portfolio. However…
Developing BPO footprints requires cementing relationships beyond the walls of the CIO’s office. One of the reason’s for HfS’ success, is our ability to communicate with business function leaders, in addition to IT leaders. This involves understanding and lending value to supporting the business function issues and processes that impact finance, procurement, supply chain, HR and other operational areas. Most of our research competitors are firmly rooted in IT-land and have not invested in personnel that can open communication channels to support the business functions – and most never will.
It’s similar for the Indian IT services firms, as they seek to push business-process led solutions, often enabled by IT, into their clients. While many initially began their forays into BPO by attempting to reach business function leaders through their IT relationship, most have realized that they need a more direct line into the business function than tenuous introductions from the VP of CRM apps. They’ve realized they need to make significant investments in domain-specific personnel (with real process experience) both onshore and offshore, to create awareness and open communication channels, in addition to the scale they need to take on business. They’re also realizing they need patience to convert clients and often start with much smaller engagements and make margin sacrifices.
So let’s take a closer look at one of the up-and-coming Indian firms that’s made a concerted effort to build a top-tier BPO business over recent years: InfosysBPO, who recently invited us, and several other industry influencers, to partake in their anual BPO client event, named “Colloquium 2011“.
Is InfosysBPO ready to challenge for industry leadership? Here is our thinking…
InfosysBPO is now a major BPO contender in the global marketplace. Infosys has quietly gone about building its BPO business streams since its inception via the buyout of FAO provider Progeon, exactly five years’ ago and expects to reach the landmark of $500m in revenues this year. HfS has always been encouraged by the firm’s approach to developing both horizontal and vertical BPO services, and its focus on leveraging its IT heritage to augment its value proposition. Infy is by no means the biggest player in the BPO business nor does it want to be, but it has been able to establish itself as a smart and very respected player in the BPO business.
Overall, it has shown the rest of the industry how to grow profitably and maintain above-industry growth performance. Last fiscal, it grew its business from $352m to $427m, while maintaining operating margins in excess of 20% – the best growth performance than the rest of the BPO market. We believe it has also established strong positions in the retail and consumer products, banking, insurance and manufacturing industry verticals, in addition to the horizontal BPO areas of analytics, sourcing and procurement and finance and accounting.
Consequently, today’s business takes on the following estimated revenue-breakdown:
HfS’ opinion of InfosysBPO’s strengths
Its open culture creates greater customer loyalty. Infosys has consistently been one of the most open BPO firms for introducing its customers to each other and instigating open and transparent dialog with industry influencers. Attend any of its BPO customer events and you’ll be surprised by the refreshing openness of the dialog where customers air their operational issues in an open forum and have practical discussion with their peers to share their best (and worst) practices. Too many of their competitors’ events make you feel like all the content is stringently policed and controlled with constant “rah rah” cheerleading of the provider’s performance. With BPO, we are dealing with real people, real business issues and real processes; clients today are too smart to be brainwashed and want to have the open, honest debate regarding how to get better at managing a BPO engagement.
Its organic growth performance has been exemplary. InfosysBPO has done a fabulous job growing its business organically – the best among its peer group of traditional IT offshore competitors. All its major offshore IT competitors have inherited more than 50% of their business from acquisitions:
TCS –$688m out of $919m
Wipro – $235m out of $508m
Cognizant – $150m out of $250
Strong leverage with IT clients. It has leveraged its existing client base on the technology side with more than 60% of the existing BPO accounts also being relationships on the technology side. At the same time, it has been able to drive new business with its dedicated sales team opening several new annuity BPO relationships and using that as a hook to cross-sell and up-sell other Infosys offerings.
Strong vertical process performance. It has focused, over the last couple of years, on expanding its offerings which impact the direct costs of their clients and, hence, the gross margin line as well as impacting revenue of its end customers. Revenue from these vertically-focused offerings today give Infosys BPO more than 35% of its total business, which is significantly higher compared to the rest of the industry, which focuses most of its energy and resources on horizontal BPO offerings.
Focus on business platforms. InfyBPO has focused its energies on converging operations and technology to drive a multiplier effect for its clients which goes far beyond Six Sigma and continuous process improvement. Its heritage in technology has allowed it to lead leveraging Business Platforms (branded as InfosysEdge for different vertical and horizontal areas with 14 platforms actively in the marketplace) as well launch several Technology Value Accelerators (TVAs). Today, Infosys has more than 100 such TVAs in the marketplace in different vertical and horizontal markets. Today, all technology led BPO revenue constitutes more than 20% of the business and is steadily growing in contribution.
Global expansion is broadening its growth potential. InfyBPO has also been able to create a true global organization with local leadership in each of its centers – for example, its Brazilian operations are led by a local Brazilian, its Mexican operations are led by a local Mexican, its Polish operations are led by a local, as well as its Chinese and Philippines operations.
Speed of response and a high degree of customer centricity. With InfyBPO being a subsidiary of the Infosys mothership, it has provided its clients access to executive management, unlike its parent organization which has been a lot slower off the blocks. Having its key senior leadership (Ritesh Idnani – Chief Operating Officer; Gautam Thakkar – Global Head, F & A and Suranjan Pramanik – Global Head, Manufacturing) highly visible in the marketplace – and always available for a beer – is a huge plus compared to some of the other providers.
HfS’ opinion of InfosysBPO’s future challenges
Ability to continue differentiation in a rapidly evolving marketplace. For now, Infosys’ bet on leveraging technology to drive efficiency and effectiveness in their BPO business is paying dividends and they do have an early-mover advantage here. However, the rest of the pack is aggressively pursuing similar game-plans and it is going to require a lot of continued investment and focus to stay in front.
Ensuring client expectations around transformation and innovation are suitably calibrated. Gone are the days of labor arbitrage and process improvement – that’s now tablestakes for BPO. InfyBPO does seem to have taken some relevant steps here with the constitution of an Innovation and Transformation Board for its clients, which helps drive the transformation agenda in a focused and structured manner, however, several of its competitors also have similar iniatives in play with their clients.
Placing BPO at the forefront of the executive Infosys corporate agenda. BPO only represents 8% of the Infosys business today, but is one of the key growth engines and still an investment business rather than a mature business. Will it be able to get a significant mindshare in the overall Infosys enterprise to garner investments? Will it receive the sales, marketing and investment attention it needs to hit $1 billion in the medium term? Bear in mind that Capgemini recently elevated BPO to one its top tier service lines, while Accenture often leads with BPO at its corporate events. In addition, IBM has recently appointed a true services veteran, Ginni Rometty as CEO, a known proponent for growing IBM business process market share.
Over-ambitious profit expectations at the expense of growth re-investments. The InfyBPO business still has higher profits compared to most of the BPO sector. Worryingly, Infosys lost marketshare in the IT services side in 2008, when its other competitors like Accenture, TCS and Cognizant went after growth while maintaining margins in a lower band. Infy’s BPO business could get similarly trapped if it continues to want significantly higher margins than the rest of the sector and not be prepared to make strategic bets in areasit wants to grow (such as TCS’ recent margin-gamble to win the Friends Life insurance deal).
Being over-tentative with its cash investments to develop capabilities. Infosys needs to leverage its cash chest more aggressively as competitors are fast either plugging capability gaps or gaining advantages in markets on the BPO side (such as EXL’s recent acquisition of OPI, Genpact with Headstrong, Accenture with Ariba services, Cognizant with CoreLogic and Capgemini with VWA). Given the greater stickiness of relationships on the BPO side, this will be a critical component for continued success to avoid its competitors gaining scale.
Attrition and availability of talent. These are common industry challenges and cannot be overlooked, especially in the current environment where quality client executive leaders in BPO are becoming scarce. InfyBPO does seem to have taken steps here to arrest attrition and keep it below industry averages, however, it does have some high-performing client executives it needs to ensure are firmly on the train for the future journey.
HfS’ view of acquisitions Infy should look at to grow its BPO business beyond $1Billion
Infosys has been tardy in its acquisitions although its BPO business has been a lot more progressive with 2 acquisitions in the last 4 years. It acquired Philips’s shared services center in 2007, which has now more than doubled in revenue since acquisition. It made a foray in the insurance marketplace with the acquisition of McCamish, in December 2009, which instantly gave it a leadership position in the life and annuities insurance market. The McCamish business has grown more than 40% since acquisition and the pipeline has quadrupled in the last 22 months.
With such proven success with its two previous acquisitions, HfS is surprised Infy hasn’t been more aggressive with making additional investments in new capabilities to augment its market position even further. The market for acquisitions has been hotting up with several of Infosys’s competitors being aggressive in fueling inorganic growth to compensate for their lack of organic growth in the marketplace, such as the examples we mentioned above. Infy will need to look at bolstering its footprint in the following areas – healthcare, utilities, gaining more scale in traditional sourcing, onshore collections etc to ensure it can grows its business beyond $1 billion over the next few years. With its strong position in insurance, for example, it could take a serious look at insurance BPO provider EXL service to cement its position in the sector. Such investments do not come cheap, and will require some bold management decisions in the coming months, if they are to stave off aggressive competitive behavior.
The Bottom-line: A great job to get to this point, but the crucial work starts now
Having been witness to this organization growing from practically nothing to half-a-billion on barely five years, you can only praise InfyBPO and its leadership for a great achievement. One constant tireless figure that deserves a mention has been COO Ritesh Idnani, who has been integral to the division’s development over this period. However, the challenge for InfyBPO now is not only to go after the traditional western providers, such as Accenture, Capgemini and IBM, but also to stave off the canny moves we are seeing from the likes of Cognizant and TCS.
The speed of development of the competition to develop business platforms and secure new capabilities can change the market outlook very, very quickly indeed, and those who rest on their laurels will get left behind very quickly. The Infosys corporate mothership needs to start viewing its BPO division as a critical avenue for future growth and plan strategic investments that may involve some margin sacrifices. By creating a separate operating entity has been smart, but the time is now upon us, where InfyBPO needs more focus than ever from its corporate benefactor.
HfS Research analysts attended Infosys Colloquium2011 to hear how Infosys BPO is working with its clients. Over 150 attendees (clients, partners, analysts and Infosys employees) came together to share perspectives, learn from customers and understand Infosys’s BPO capabilities and new investments. HfS analysts Phil Fersht, Keith Strodtman, and Robert McNeill attended and joined customer panels.
Are you ready for our next installment of HfS’ Live and Unfiltered series, broadcast live infront of the HfS Research community? Well… wait no longer for more no-holds-barred fun, no sponsors, no schmaltz, no selling – just good banter and discussion to share with our industry peers and colleagues. Amd this time we’ll be debating the very “Future of BPO”…
Here’s the line-up…
The Buy-team
Roxanna Wall, Executive Director, Corporate Development at UBS AG
Colin Provine, Global Commodity Director, Honeywell
Ian Maher, Sourcing Management Office, The Hanover Insurance Group
Srinivasan Krishnamurthy, Vice President, Kronos Inc.
The Sell-team
Anoop Sagoo, Managing Director, Business Process Outsourcing, Accenture
With the paranoia of an impending Double-Dip Recession seemingly forever looming over us, what better than to help your clients get their bills paid?
With competition in Finance and Accounting Business Process Outsourcing (F&A BPO) reaching cut-throat levels (just observe some recent down-select negotiations and you’ll know what I’m talking about), what better than to acquire one of the most attractive onshore order-to-cash (OTC) specialists? With demand for comprehensive F&A BPO coming from both mid-sized, in addition to enterprise-level clients, what better than to acquire an OTC specialist with on-the-ground delivery expertise and a mid-market offering?
Our only surprise at HfS is that is took so long for one of the top tier BPOs to make this move – acquiring the 45-year old heritage accounts receivables and order-to-cash specialist, Vengroff Williams and Associates. A provider steeped in blue-chip clients at the enterprise level, such as Disney, General Electric, News Corp, Microsoft and Tyco, in addition to a raft of mid-sized clients such as Elizabeth Arden, U-Haul, Crescent Healthcare and Office Depot. A provider that has resisted the temptation to develop offshore delivery and focus on smart onshore services. A provider that has developed its own excellent SaaS proprietary order-to-cash technology platform, WebCollect. A provider with an annual client get-together called the “Billion Dollar Forum”, that you just have to go to, as its the closest thing you’ll ever get to feeling like a billionaire…
Yes, Capgemini has made a major move towards strengthening its position in the global F&A BPO market by today acquiring VWA – and leaping to third in the market share spot for F&A globally (which may change when we re-cast our data early next year, but for now they’re on podium). You can also read more about our 2011 F&A BPO market landscape and outlook by clicking here.
We believe VWA was one of the few remaining jewels that the major BPOs needed to take a serious look at to bolster their presence and capabilities in order-to-cash. Here is what they are adding to Capgemini’s global BPO business:
Positives of the acquisition
Expands Capgemini’s US onshore presence. Capgemini has traditionally been very strong as an International BPO provider – especially with its European and Asian presence, but has perennially been perceived as lagging in the US, despite having made delivery investments in regions such as Junction City, Kansas. VWA’s addition immediately solves this issue – and actually transforms the US region into a strength for the Capgemini, especially in light of its strong nearshore LatAm presence, with significant investments in countries such as Brazil and Guatemala to help service US clients;
The merger is a good cultural fit. The two firms have been working together on client engagements for some time, and know each other well. Moreover, VWA has a strong employee ownership culture and didn’t take this decision lightly – they wanted their own staff to ratify the deal. Several other potential acquirers have taken a good look at them and this “fit” was not nearly as strong;
Accounts Receivable BPO is booming and Capgemini is now firmly in the game. HfS is observing this market as topping $35bn this year and too many of the existing BPO providers have relied on subcontracting specialists (such as VWA) to provide the AR BPO services. By owning the process, Capgemini is in a significant positon of strength to price deals more aggressively and has more client exposure and capability to explore outcome pricing options. Plus, Capgemini can also go after standalone AR BPO deals and leverage its global presence to be very competitive in this market. Too many of the current crop of F&A BPO engagements have been dominated by accounts payable processes, and this added capability gives Capgemini the chops to go after deals aggressively with heavy OTC components;
VWA brings to the table a quality order-to-cash business platform called “WebCollect“. We believe WebCollect can really help both new and existing clients standardize on quality standard workflows, which our research is abundantly demonstrating is where much of the future of BPO is headed.
VWA’s business takes Capgemini into the middle-market. With saturation occuring at the high-end of the market, attention is turning to the middle-market (the $500m-$3 billion segment), where clients are frequently seeking “bigger-bang” and more comprehensive deals that the top tier providers can comfortably cater. Our recent State of Outsourcing industry study shows the increasing relevance of the middle-market to BPO services areas such as F&A.
This year, Capgemini has BPO as a top-tier service line which will help it capitalize on the acquisition. Rather than submerging BPO as a secondary service line under ITO, which some other service providers persist in doing, Capgemini’s BPO division now enjoys status as a major front-line services category in its own right. While this brings increased financial scrutiny from the board, it also empowers the division to get access to similar sales, marketing and development funds as those enjoyed by other top-line services divisions, such as consulting and IT services. This added marketing muscle will be critical for branding the VWA capabilities, as they are fully merged into the broader BPO division.
Potential challenges posed by the acquisition
Capgemini’s brand in the US. With all roads traditionally leading to Paris, this has been somewhat of a perennial weakness for Capgemini, when competing for US-centric BPO deals. However, major client wins in recent years, such as Coca Cola Enterprises and Avon Products have done a lot to increase awareness and exposure in the US market. Capgemini needs to leverage VWA carefully to improve further the awareness of its significant onshore US presence and brand awareness as an F&A BPO provider.
Too much focus on horizontals versus verticals. With Capgemini’s increasing strengths in F&A, procurement, supply chain and customer management BPO, the firm does run the risk of losing focus in some of the emerging vertical BPO markets, for example banking, insurance, life sciences, healthcare and energy. Capgemini needs to figure out how to develop and position its vertical strengths effectively and not become overly submerged in a horizontal play.
Potential conflicts with existing engagements. VWA is present as primary OTC “subcontractor” on engagements where Capgemini’s competitors are the primary F&A BPO supplier. This could create some contentious issues with regarding to working relationships and contract renewals. However, it could also put Capgemini in the unique position of potentially edging out some of its primary BPO competitors, so this could ultimately provide more opportunities than headaches.
The Bottom-line: this is a very smart acquisition by Capgemini
VWA fills many of the needs Capgemini has as an emerging F&A BPO powerhouse. There aren’t too many BPO acquisitions that appear to be as solid a fit as VWA into Capgemini, and the market for AR BPO is critical for future growth in this space. The next challenge for all BPOs is going to be creating more utility in the market to take on more clients, and the WebCollect platform has great potential to provide a platform this growth. HfS would like to see Capgemini embrace WebCollect and develop it over time to cater for clients with specific vertical requirements, for example in the retail space versus hi-tech and media.
We’ve been talking about Platform BPO, Cloud BPO and every other permutation of BPO for a very, very long time. So what’s changed, we hear you cry
Buyers are ready to standardize business processes
"Please mind the innovation gap"… click here to find out what Business Platforms are and why they represent the future of outsourcing
Our recent study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of this seemly ever-present threat of a “Double-Dip” Recession, revealed what is motivating buyers to outsource in this current climate.
While eliminating cost is an ever-present obligation, buyers are also equally focused on achieving greater flexibility to scale and support their global operations – and even more significantly – prepared to explore adopting standardized business processes.
Yes: 80% of buyers are willing to move onto standard processes. They are increasingly unconcerned if their closest competitors use the same expense management or claims adjudication processes, the same cash applications or collections tools. They simply want to adopt quality process flows they can deploy effectively and efficiently, if there is no competitive advantage to be gained that necessitates conducting these processes in a certain unique manner:
Providers have a real incentive to position productized and one-to-many (or at least one-to-few) utility offerings onto buyers
The ability to develop some best-in-class processes as “Business Platforms”, whether they focus on horizontal or vertical process clusters, is becoming a real differentiator in the market, as buyers seek more standardized solutions from their outsourcing engagements. Moreover, more process standardization leads to more Cloud-based BPO services where clients can easily tap-into these Business Platforms without having to grapple with cumbersome on-premise software and expensive licenses, or contend with resistance from awkward internal IT staff. In short, buyers can start to look at moving from “A to C” with adopting quality standard processes and miss out much of that painful “B” phase (which is often where many get stuck unto perpetuity).
So what are Business Platforms?
Business Platforms, enabled by the fusion of Cloud Computing, SaaS and BPO innovations in an integrated singular managed service, are emerging rapidly as the desired “one-to-many” utility service provision for providers and a new source of value for outsourcing buyers.
Buyers can now explore transitioning more rapidly to a desired future state for a specific business process, or set of processes. The gauntlet being laid out to providers, with these Business Platforms, is their ability to support their clients’ transitions quickly and inexpensively. Simply selling “products” is not the concept of business platforms – it is the provider’s ability to work with their customers to facilitate and support the ultimate business outcomes of managing the processes associated with the Business Platform offering.
Business Platforms have four key characteristics:
Business platforms provision managed standardized business processes;
Business Platform owners (services providers) are responsible for managing the business processes associated with the Business Platform and provisioning the people that operate them, the underlying software-as-a-service platform, and the supporting public of provate Cloud infrastructure;
Business Platforms focus on business outputs or outcomes rather than inputs such as labor and physical assets;
Business Platforms service more than one client
Well-executed Business Platforms provide customers with compelling technology-enabled business process services that help drive innovation via process re-engineering, greater business agility and productivity improvements. They are flexible and scalable in the face of global demand fluctuations and provide high-quality process workflows.
The Bottom-line: Business Platforms change the focus to the achievement of outcomes
The days of clients being able to spend multiple-millions of dollars to transform processes as part of a complex outsourcing transformation are fast diminishing. Subscribing to Business Platforms that consolidate infrastructure, middleware software, labor, and process/domain expertise including future investments, as OPEX is attractive to clients. Cheaper to get started, and with output or outcomes-based fees, Business Platforms align with the current budgeting trends evident in the market. Buyers of non-core operational processes do not want to go and ask for CAPEX in this economic climate.
How do you execute for Global Business Services? Click to find our more…
The complex sourcing options available to global operations leaders today can prescribe real opportunities for business improvement, but can also pose intricate challenges. As we’ve been at pains to point out on HfS over the years, outsourcing is only one vehicle to provoke change, impact cost and provide process improvement opportunities. 90% of enterprises, with over $1bn in annual revenues, have shared services operations, and these need to be aligned more effectively with the 97% of these organizations grappling with governing outsourcing relationships.
So how do you take shared services leaders and blend their expertise with the outsourcing governors? How do you go from fragmented service delivery with multiple points of contact, to a global governance model with a rationalized and centralized administration of third-party service providers?
» Focusing on the Customer – Global Business Services’ processes and technologies enable business unit strategies. Building alignment and sharing a vision is imperative to achieving successful results.
» Building the Service Delivery Model – Achieving economies of scale and scope requires well-defined and common business architecture. Effective organizations have a strategy to construct and leverage their global business service capabilities.
» Aligning Processes and Technology – Providing best practice back office services requires vision, agility, and coordination across multiple functions. It requires a focus on the provision of solutions, not technology.
Back in the ’80s, every college kid that wasn’t a computer geek wanted to be a marketeer. It’s definition was simply “Satisfying customers’ needs and wants profitably”.
The three top dogs in the enterprise in those days were often the CEO, the CFO… and the CMO. That ’80s CMO had to to understand the company strategy and have in-depth knowledge of the value of the products and services, while communicating that value to customers. Not only that, he/she had to have detailed knowledge of who their prospective customers were and figure out how to reach them, while convincing the world they had a more desirable offering than the competition. Simply put, the top CMOs were the strategists, the analysts, the go-to-market tacticians and the entrepreneurs all rolled into one super-executive.
Somehow, this function lost much of its strategic relevance over the next couple of decades, becoming a morass of (often dysfunctional) processes, data and workflows, with the CMO becoming an increasingly tactical executive, providing fodder for the sales team. Conversely, the cost and importance of marketing has risen as the effectiveness has fallen away. Sound familiar?
So! Like any function in need of a facelift, a cost-gouge and some “transformation”, let’s consider outsourcing parts of it… so without further ado, let’s shift over to HfS Research’s exocet BPO analyst, Reetika Joshi, to discuss her new report “Marketing BPO Services: Solving the CMO’s Dilemma”, which you can download for limited time at our BPO Resource Center…
CMOs have it tough today, whichever geography or market you look at. They’re stretching dollars for myriad activities in a function that’s undergoing major change. The slow recovery from the recent credit crunch has only made the job tougher for marketers. Rising pressure on company profits has increased the need for companies to renew focus on issues such as pricing strategies, customer buying behavior, campaign management, and customer engagement.
A first-of-its-kind new study by IBM and the Economist Intelligence Cell highlights the four main challenges that keep Chief Marketing Officers up at night: the data explosion, social media, proliferation of channels and devices and shifting consumer demographics (for some reason, global outsourcing featured at #11). An overwhelming majority of the 1700 odd CMOs interviewed admitted that over the next five years, the marketplace as they know it will become highly complex. What’s even more disconcerting is that less than half these CMOs felt they were prepared to handle these complexities. Yikes! How will businesses market themselves in the future, what’s the action plan, you ask? The worldwide consensus revolves around three major pillars of marketing improvement, as IBM and EIC’s C-Suite study found:
– Delivering value to empowered customers by bridging the digital divide and getting to know individuals as well as their markets. This also means implementing new technologies (e.g. to handle big data, mobile apps, social media) and advanced analytics to understand and predict buying behavior better.
– Fostering lasting connections by focusing on online and offline community building to manage the customer lifecycle better, and developing strong ‘corporate characters’ that employees can internalize.
– Capturing value and measuring results, which is where the dreaded marketing ROI is tackled through financial analysis, internal and external resource allocation and analytics adoption to measure and act on the results of marketing programs better.
These are ambitious plans indeed, and they’re not going to be implemented overnight. Checking everything off that list will call for a broad multi-disciplinary team working on several new processes and technologies. This isn’t something that every marketing department can maintain successfully. And here lies the strong case for external help that CMOs can seek today, and the opportunity for outsourcing service providers.
Outsourced functions such as finance and accounting, human resources and customer service have become industry norm in the last decade or so. At this critical stage in the maturity of the outsourcing industry, buyers and sellers are both posing questions about the next big function – can marketing make the cut, and be moved out of the organization? We decided to find out, in our new study, “Marketing BPO Services: Solving the CMO’s Dilemma”.
The truth is, marketing departments traditionally already outsource a portion of their marketing function (though this may not be construed as such)– advertising, some promotional activities and event management. Over the years, the services outsourcing industry has started to fulfill demand for a lot more support services under the broad ‘sales and marketing BPO’ category, including customer support and demand generation. The outsourcing of marketing as a horizontal service is in a very nascent stage currently. However, given the increasing pressures for CMOs we just discussed, we believe the scope for outsourced marketing services has expanded exponentially, as the image elaborates.
The range of outsourced marketing services today
Source: “Marketing BPO Services: Solving the CMO’s Dilemma”, HfS Research, October 2011
Now, are companies queued up for miles today, demanding these new fangled ‘integrated sales and marketing solutions’? The short answer is, in comparison with other outsourced services demand in the next year, no.
As recent research shows, 25% of the marketplace currently outsources – or intends to evaluate – marketing outsourcing opportunities in the next 12 months. Moreover, we are seeing first-time-buying intentions in the utilities, media, financial services and consumer goods industries, which roughly 10% of organizations expecting a first foray into marketing BPO services over the course of the next year.
The IBM and EIC study corroborates this, with highly pronounced future intent (next 3-5 years) for external partnerships for lead management, customer and data analytics and direct/relationship marketing, followed by IT, call or service center management and tracking and measurement.
It will be some time before these services are structured and formalized in the same manner as other horizontal offerings such as Finance and Accounting and Human Resources. Strategy teams for service providers are trying to place their fingers on the best approach to this vastly untapped market. The two crucial investments for these services include the right talent and technology/infrastructure. The high level of creativity and judgment in these activities necessitates the need to have people with a strong background in marketing, advertising, campaign management and other allied activities. High-end services within marketing require a lot of investment in the correct tools and technology to work on custom process frameworks and delivery for functions such as design, content management, analytics and database management.
Reetika Joshi is Principal Analyst, BPO and Analytics Strategies (click for bio)
The larger service providers often start with the “big ticket” items such as technical support, customer support and F&A before offering marketing services. These services will be outsourced only once trust has been built up between the client and the service provider (and even then, we’re talking about piecemeal deals currently). Buyers and service providers are likely to show more interest in the category as service offerings mature and buyers start to take stock and implement long term plans to transform their marketing activities.
You can download “Marketing BPO Services: Solving the CMO’s Dilemma” for a limited time at ourBPO Resource Center.
Like everyone else, I am disturbed by the economic and social instability in which our world currently finds itself. While the 2008 crash saw us all face a major economic and fiscal reality-check, 2012’s landscape will see us move beyond bailouts and credit downgrades to a world where governments and business leaders need to deal with the societal impact of growing unemployment, worker insecurity and an alarmingly widening gap between the wealthy establishment and the common workers (or, as the Americans love to call them, “the Middle Class”).
We’re already starting to see visible signs of social unrest developing with the “Occupy” demonstrations spreading across the western world. Worryingly, for business leaders and governments, is the fact that there is no imminent prospect of these movements fizzling out. A Double-Dip Recession will exacerbate these issues further and we could be on the cusp of some dramatic and painful changes to the global economic and political landscape.
As we stumble towards this increasing likelihood of a Double-Dip Recession, these are becoming highly sensitive times for our enterprises, and none more so for the buyers, advisors and sellers of outsourcing services operating right in the midst of many of these issues. So what are their expectations, and how do they anticipate their respective businesses to be impacted if things take a nose-dive?
Providers and Advisors are bullish about profiting from a Double-Dip, but must avoid complacency
Our new study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of a “Double-Dip” Recession, reveals that the folks advising and selling outsourcing services are feeling pretty bullish that their clients will turn to them for even more help, if things really start to get dicey over the next six months. 61% of provider and 44% of advisor executives are expecting their respective businesses to increase revenues:
While the sell-side readies itself to enjoy increased profits, close to half of enterprises are expecting layoffs, 40% are sizing up increasing the labor-arbitrage of IT and 30% similarly with finance, procurement, industry-specific and customer management processes:
Business leaders, like political leaders, must not lose touch with their employees during these difficult times – especially over issues such as outsourcing
While most of us are incredibly frustrated with Greek PM Papandreou’s decision to turn to his people for their opinion, let’s pause for a moment – if your government had mismanaged your economy so badly that you were going to be indebted to the Germans and the Chinese for the next few decades, wouldn’t you be feeling a bit miffed? If your CEO was about to sell a major shareholding in your firm to some other entity, and you were a stakeholder in the business, wouldn’t you want a say? If your company’s board had mismanaged its finances so badly, it feels the need to outsource a whole chunk of its operations to some provider who barely understands the intricacies of your company, wouldn’t you want a say?
Surely, lousy management teams run the risk of ripping the very soul out their corporate cultures if they fail to listen to the concerns and recommendations of their people, just like those awful governments who drove their nations to bankruptcy and think they can still fix their problems with even more bailouts and loans, without consulting their people? Do corporate leaders want their workforces to feel like the “99%”? I don’t think so…
And is the 99% really so ignorant about what’s going on that both governments and their business leaders can now operate in a bubble of their own because they know better? Something’s gotten broken here, and it may simply be that many of today’s politicians and business leaders are actually losing touch with their people. This is an alarming and unsustainable trend, and the outsourcing business could be in danger of getting caught up in the complacency.
While news like this will have some advisors and providers excited about hitting their revenue goals, we have to be highly-conscious of the fact that if this data becomes reality, the outsourcing industry is going to arrive at a highly visible and dangerous phase in its development. As we have been at pains to point out – for five years on this site – buyers need to look beyond labor-arbitrage to find any real long-term benefits from outsourcing. However, these issues are going to move beyond buyers simply improving business processes and cutting costs – they are going to become centered on how companies are managing their workforces. Governments are very capable of passing measures very quickly to restrict outsourcing if things get really bad – and they won’t have much choice if the 99% demand it.
The Bottom-line: Outsourcing professionals need to avoid being perceived as the “1%”
Now, more than ever, the outsourcing industry runs the risk of a backlash, if the worst economic fears are realized in the coming weeks and months. A Double-Dip Recession will polarize governments and most likely paralyze uncertain businesses. Most of you who frequent our blog and research sites make a decent living buying, advising or selling sourcing – and we have a collective responsibility to recognize that the very life-blood of organizations and their employees are at stake in the coming months. And if they fail, we will go down with them.
Outsourcing can be a tremendous help for many organizations needing support with improving their processes, globalizing their business operations and accessing better IT, but it is not – and never should be – the only solution to their problems. It should be a vehicle to help companies perform better, to help its staff become more experienced and knowledgeable. All outsourcing stakeholders – buyers, providers and advisors – need to focus, more than ever, on helping organizations approach outsourcing as one supporting component of a holistic solution. In short, buyers and providers need to come closer together to tackle these issues and demonstrate to the world how they are creating value and improving competitive behavior.
We need to demonstrate how making organizations smarter helps create jobs and drive growth – not how making them smaller makes the 1% that little bit richer…
And now we bring you the long-awaited final installment of our recent discussion with Genpact’s new President and CEO, NV “Tiger” Tyagarajan.
NV "Tiger" Tyagarajan is the new President and CEO, Genpact (click for bio)
In Part I, we asked Tiger about his background and how he’s going to be a little different from his predecessor, Pramod Bhasin; Part II focused on Tiger’s immediate and long-term plans for Genpact; And finally, Part III delves into Tiger’s vision for the future of technology and BPO. So, without any further ado, let’s circle back to the eye of the Genpact…
Phil Fersht (HfS Research): Tiger, There’s been a lot of talk about business platforms and bringing together clusters of standard processes, putting them in the cloud, etc. Do you feel the industry’s really moving that way, or do you think it’s a bit of a mixed bag?
NV “Tiger” Tyagarajan (Genpact): I think it’s a mixed bag. Some global companies have deliberately set up independent businesses to enable a “clean sheet of paper” approach. Within that are questions including, “Can we put everything on the cloud?” “Can we wrap services onto a platform and make it standard?” “Can we all buy in to a standard without fighting like cats and dogs about ‘my process’ and ‘your process’”? Here it all boils down to, are we willing to accept a standard even though different people have opposing views?
The second situation is when large corporations are almost forced to venture into emerging markets, e.g., India, China or Brazil, in search of growth. In this scenario, they don’t have to worry about legacy processes and technology, which are expensive and time consuming. And with speed-to-market being so important, they believe they may as well hit the market running without having to invest in technology, instead investing in the cloud for just about everything.
The third scenario is for bespoke solutions for standalone requirements wherein organizations opt to buy, for example, a front-end sales force management tool on the cloud (e.g., Salesforce.com). But the reality is that most of this stuff is typically never integrated into the financial systems of the company, which actually makes it easy to say “I’m buying it.”
Then there are the mid-market companies that are growing rapidly, sometimes at a rate of 25-30 percent. For them, legacy systems don’t matter, because in three years their business will only be half legacy and within five years, it will have gone beyond that.
Similarly, emerging market companies are easily willing to leap frog onto the cloud because of their up to 40 percent growth rate. And for them, as legacy is pretty archaic, their willingness to jump to the cloud is really high.
Let me switch for a second to large corporations and their legacy platforms. We are finding that to be as tough as it was before. The fact is, if I walk into a global pharmaceutical company, even today its 100 (or however many) countries fight with each other on what is the right payables process for them. They are unwilling to sign on to a standard. So, I would argue, if they aren’t willing to sign onto a standard among themselves, the day of signing onto a standard that is a public cloud is far, far away. But I think if they agree to a standard among themselves, at least they can get on to a private cloud, which would be very beneficial.
But I still see that being quite some time away. There’s not enough push happening, primarily because there’s so much legacy and cost sitting out there, plus entrenched decision-making and vested interests. People worry about what’s going to happen to their job if processes go to the cloud. So, I think there’s a little more hype than reality about everything going to the cloud, except in the cases I already talked about where we’re seeing movement.
Phil: My concern is that you see some of the providers persist in selling in the same myopic way they were three or four years ago, and today’s more sophisticated buyers are saying, “We know there’s cost reduction on the table. We really want to get to what you can do for us beyond that, and how can we trust you?” And if all providers are offering essentially the same thing, how does a provider differentiate itself? Is it ownership of the technology or distinctiveness of domain acumen? I think that’s the holy grail right now, and I’d love to hear your thoughts on this…
Tiger: I don’t think that ownership of technology will determine differentiation. I actually believe the reverse is happening. More and more we’re getting to a world in which technology is not owned by anyone. The best technologies are open. The best platforms are open. The best platforms are the ones on which anyone can build on top of them and tweak and change them.
My fundamental view is that technology is only as good as the intelligence you build into it. So I believe that to differentiate ourselves, we have to search the world for the best technology, and then build in the intelligence.
How do you do that? First, you have to understand a process in its granularity: what makes it best in class, how to get there, what works, what doesn’t, and its contexts in both the horizontal and vertical domains in which it belongs. Then… we all know that the world is getting filled with data. There’s more data generated than ever before. If something today is not electronic, the drive to globalization is actually making it more electronic. One of the things I think we’ve done as an industry is help companies become more electronic. We’ve pushed the envelope harder, because without going electronic, you cannot globalize. So, globalization is actually helping digitization and electronicization of information.
Now when you have so much information available electronically and digitally, and it’s so easy to process from a cost perspective since storage is so inexpensive these days, who is building intelligence out of that data? Our argument is that in every industry there are companies that have decided their strategy is going to be building intelligence out of data. Our view is that those are the companies that will truly differentiate themselves, and those that don’t will start falling behind. And in my CEO job I’ve kind of championed smart decision services, where we build insights out of data for our clients, and then take those insights and build them into technology.
I believe that differentiation comes in your ability to generate and build those insights for your clients, not in your ability to handle the platform.
Phil: So, if you could change one thing about the BPO industry today, what would it be?
Tiger: Can I pick two, one at the front end and one at the back end?
Phil: OK, I’ll let you have two…
Tiger: So at the front end, I really think too much time and effort is spent in repetitively going through the same selection process again and again and again, which keeps everyone at an arm’s length in an “I won’t tell you much” situation, for as long as 12-18 months. With how quickly the world moves today, 18 months is a heck of a long time. I don’t know of any other activity in an organization where people are given 18 months to do something. I’m not given 18 months to do anything.
Instead, if you short circuit that, for example, to three months, then you can spend the next nine months, together with your chosen provider, going into the bowels of your organization and really figure out your roadmap to best in class. Then you can accelerate your execution by at least three months.
But more importantly, because you spent nine months together in this venture, I think your solution is going to be much more robust, and will accelerate you to best in class so much faster. And I think the sourcing world has misunderstood this game as compared to buying laptops or travel, etc. It’s a different world. But any time you can move it along more quickly, you bring so much more benefit to the client.
On the back end, I think the openness with which an organization approaches the relationship in order to accomplish the end goal…I can’t do it alone, and you can’t do it alone. We have to do it together. And yet, conversations around, “can we both put some skin in the game?” “You don’t own this, so you don’t worry about it. Let me do it.” “I can’t pay you for outcomes or I can’t share the gains”, just take too long. When we break through those barriers, both companies can gain so much more value.
Phil: Well, there we have it! Thanks so much for all your time with us, Tiger – and all the best with the new job!
For the very first time in my 16-year career, the major driver behind outsourcing is no longer immediate cost reduction. Hallelujah. Praise the Lord.
In the vast majority of cases, sourcing buyers have already enjoyed a fair amount of cost-reduction in recent years with their outsourcing initiatives, so they already expect the basic financials to work for many of the new endeavors they are exploring… hence, attention moves to other business benefits that outsourcing can deliver.
Moreover, most enterprises today that are experienced with outsourcing have already offloaded many of the conspicuous costs with predominantly labor-based engagements, in areas such as software maintenance support, development and testing, and transactional accounting. Their attention is now moving to other (and often more complex) processes and technology areas where they need to dig out real improvements, and outsourcing can potentially provide that trigger.
In days gone by, the old adage about outsourcing that many executives would often declare (off-the-record) has been “let’s take 30%+ off the bottom-line and if we can make some other business improvements with the exercise that’s a bonus, but let’s get the costs out.” Today, they’re saying, “OK, we know where the cost-savings are with outsourcing, now let’s use the experience to get better process and technology for our business”.
The impetus has changed – and while many outsourcing engagements, in the past, have largely fallen flat with delivering business benefits beyond cost-elimination, clearly many executives are getting more experienced and skilled at driving sourcing initiatives, and are confident they can use the endeavor as a change agent to promote and implement much-needed improvements to their business operations.
Our new study that covered the intentions and observations of 534 buyers, advisors and providers with their sourcing strategies, in the event of a “Double-Dip” Recession, reveals what is motivating buyers to outsource in this current climate, and while eliminating cost is still is a core fundamental, buyers are even more focused on achieving greater flexibility to scale their global operations as a prime motivating factor:
Why are these findings significant?
Buyers see little point persisting with their home-made operational processes and are tired of the excuses and inertia. In days gone by, most buyers only wanted to take their existing mess have have it reproduced with the same workflows, the same spaghetti code, the same quirks etc. They would often declare “let’s lift it out, shift it over there and then see if we can transform it at some future point”.
Many buyers have now had some version of failed lift and shift on their unofficial outsourcing resumés today – they’ve realized that once they’ve shifted it, there’s little money, or board-level volition, left to invest in improving process and technology (read here for more on this topic). They know that their chance to rip out the rot is with the lift and shift – not at some divine point in the future when corporate leadership is suddenly going to issue a holy decree that they are going to make process optimization their number one prority. There’s more chance of Donald Trump appearing in a Just for Men commercial…
Buyers being highly motivated to move to common standards drives the development of Business Platforms. Most significantly, is the fact that 80% of buyers are willing to move onto standard processes. They are unconcerned if their closest competitors use the same expense management or claims adjudication processes, the same cash applications or collections tools. They simply want to adopt quality process flows they can deploy effectively and efficiently, if there is no competitive advantage to be gained that necessitates conducting those process in a certain unique manner.
This is huge news for providers seeking to push more productized and one-to-many (or at least one-to-few) utility offerings into the market. The ability to develop some best-in-class processes as Business Platforms, whether they focus on horizontal or vertical process clusters, is becoming a real differentiator in the market, as buyers seek more standardized solutions from their outsourcing engagements. Moreover, more process standardization leads to more Cloud-based BPO services where clients can easily tap-into these Business Platforms without having to grapple with cumbersome on-premise software and and expensive licenses, or contend with resistance from awkward internal IT staff. In short, buyers can start to look at moving from “A to C” with adopting quality standard processes and miss out much of that painful “B” phase (which is often where many get stuck unto perpetuity).
Buyers are looking to globalize their business service management more effectively. The greatest single major-motivator driving outsourcing in today’s environment is this need to have more flexible global operations (43%). Governance leaders are under increasing pressure to move onto single instances of ERP, and develop real end-to-end visibility across their global processes. In olden outsourcing days, far too many organizations would operate their shared services under one management team, and often brought in elements of outsourced IT and business process into siloed vendor management functions which often became disconnected from the broader shared services function. Today’s shared services leaders know they need to integrate the outsourced services much more effectively with their existing processes in order to get anything close to achieving global process effectiveness. They are also highly cognizant of the fact that they can leverage outsourcing as a vehicle to achieving process enhancements that have been back-burnered for years.
Buyers want better technology support. While in the past, much of the motivation behind ITO was simply to drive out the high cost of maintaining support services onshore, the onus has broadened to both ITO and BPO engagements with buyers simply wanting better technology. You only have to look at the pain in the eyes of the long-suffering process-owners, still trying to develop a standard global template for their P2P processes and tie it to one instant of SAP, who still have to spend a fortune each year on multiple services firms to help with Nota Fiscal, China’s Golden Tax or the Russian Tax Code – or simply wind up dropping huge hourly rates on SAP’s consultants to do it for them. They’re fed up with it and patience is wearing thin, with many firms looking to get more bang for their buck when they look at their global outsourcing engagements. At the same time, the leading providers are investing more than ever in global delivery to up their game with their clients. Whether you’re looking for a global SAP build-and-run partnership, or a multi-process finance and procurement BPO, getting top grade IT support is now a major differentiator. “Good enough” is no longer an option.
The Bottom-line: Buyers are more educated with outsourcing and looking for a whole lot more from the experience
Reading into this data confirms what most of us in the business are hearing and seeing everyday from buyers – they’re getting smarter about sourcing and are upping their expectations. They also know they’re likely to be stuck at some end of an outsourcing engagement for most of their career, so they might as well figure out how to do this properly. Gone are the days when you threw your provider under the bus in five minutes – you’re head is now on the block to make it successful for your organization, because it the engagement fails, you fail and someone else will be drafted into your role to fix the mess. You don’t want a reputation for sloppy governance on that outsourcing resumé.
The Indian ITOs have built their companies by occupying “real-estate” in the CIO offices of the Global 2000. They’ve done a phenomenal job piling in the people resources to support application testing, maintenance, help desk and development projects. They’ve developed institutional knowledge of their clients’ IT processes to support the business, which has 
