In the short time Keith Strodtman has been with us he’s already produced an insightful piece on the Future of Work. And now he’s out and about. On April 19, he went to NorthgateArinso’s analyst day and filed this report as well as a new RAPIDInsight. Take it away, Keith…
NorthgateArinso’s HR and payroll outsourcing roots stem back to its days as a payroll service provider in the United Kingdom called Peterborough Software, later called Rebus Human Resources Services. Northgate Information Solutions acquired Rebus in 2004. Over twenty acquisitions later the company has emerged as one of the largest pure play HR service providers in the world, offering HR outsourcing, HR technology, and HR consulting services. At its analysts and advisor day in Atlanta on April 19th, several of the company’s executives provided an overview of their recent accomplishments, their growth plans, how they operate their business, and the latest on euHReka, their global HRMS solution.
Keith Strodtman, HfS Research Fellow (click for bio)
For those not familiar with NorthgateArinso (NGA), the company, now owned by the private equity firm KKR, was formed when Northgate, the largest payroll service provider in the UK acquired Arinso, a Belgium based HR systems integrator and HRO provider in 2007. While Arinso had a presence in the United States prior to last year, the company made a big splash in the US market in 2010 when it acquired the HRO business of Cincinnati-based Convergys. Smaller acquisitions in Europe and the Asia Pacific region have rounded out the company’s service delivery capability around the globe. According to CEO, Mike Ettling, the company has the assets it needs to compete in the global HR market and has now cemented its focus on customer service improvements and growing the business to $1B in revenue over the next few years.
There is evidence that the company is making progress toward those goals. Despite a challenging economy, the company grew revenues 8.5% in its 2009/2010 fiscal year and increased win rates in its HRO business. The company has made significant investments in its core technology platforms, established an extensive global delivery infrastructure, created a massive library of process standards, is in the midst of a company-wide rollout of Six Sigma, and has been developing the culture and skills it thinks are required for execution excellence and improved customer satisfaction.
NGA has developed an extensive service delivery network spanning more than 30 offices around the world. Major delivery centers can be found in India, Philippines, Malaysia, China, Spain, Argentina, Brazil, Canada, and the United States. They serve thousands of customers from these centers, including 100 global HR BPO customers. One of the fastest growing areas for NGA is global payroll, a service that currently counts about 400 customers.
One of the more interactive parts of the analyst day was during the euHReka overview and demonstration – you have to love the passionate debates between technology leaders and technology analysts. While certainly not the only arrow in NGA’s technology quiver, euHReka is clearly the most critical to the company’s growth plans. The solution can be deployed in both an on-demand (SaaS) model and on-premise at the client site. NGA claims 50 customers currently use euHReka around the world. One final note of interest on the technology front was news of a soon to be announced learning solution partner that will be tightly integrated with euHReka.
Under the leadership of Ettling and several new management team members that include US industry veterans Trey Campbell, Paul Hutchinson, and Brad Everett, the company has bolstered its leadership team with a lot of HRO experience. This combined with several marque wins in 2010 and several more promised in the near future, I don’t expect NGA to remain the relatively unknown brand, at least in the North American market that they once were.
While most of you were out toasting the Sunday dawn sunrise with a glass of Cristal, after a marathon night of ballroom dancing and karaoke, HfS analyst Brian Robinson was busy pouring over the issues surrounding the now-infamous Amazon Cloud-outage. So what better than that 1,301st perspective you must be eagerly craving… over to you Mr Robinson:
Amazon’s Cloud outage created significant buzz in the markets this weekend: Google’s news archive showed that by mid-day on Friday nearly 500 news sources were reporting on the topic with over 1,300 articles written. I was surprised to see how little coverage some other world events received, many of which are arguably more important. And then I saw a true media casino – the upcoming Royal Wedding.
A quick review of Google stats shows that over 11,000 articles have been written from between 600 to 1,400 sources. It’s not hard to imagine why the Prince has asked for a two year hiatus from the intense pressure and scrutiny post the wedding. I bet Amazon wishes it had a similar ‘get out of jail free’ card to use this weekend. But as a public company, they don’t. Nor have they earned their seat amongst the world’s largest service providers, which has its privileges.
Going forward, Amazon can expect a similar spotlight to highlight both its successes and failures. Why? The Cloud offering is a disruption to the tried and trusted IT and BP services model. Much is at stake and whether it likes it or not, Amazon is one of a few companies that now sits at the fulcrum. I am certain Amazon will improve their response to and management of similar situations should they reoccur. As important, I hope the other participants in the sourcing ecosystem (i.e., buyers, research groups and consultants, and providers) also gain some much needed perspective:
Perspective #1
Buyers: Know your customers’ availability requirements inside and out
Not that M. Zuckerberg and Facebook need any more airtime, but Mark gets his customers’ uptime requirements. As quoted from the Social Network, “…the difference between Facebook and everyone else, we don’t crash, ever! If those servers are down for even a day, our entire reputation is irreversibly destroyed!” Mark understands the value his customers put on availability – do you? Moreover, do you know what you have contracted for and how you are compensated if failure occurs? If not, then it may be worth investing some resources into finding out. Granted, Facebook has a single platform to worry about. Large enterprises have poorly integrated, multi-vendor supported, multi-technology beasts of systems, so there are more points of failure and determining who exactly was responsible for an outage could take longer than measuring the customer impact of said outage.
Perspective #2
Research analysts and consultants: provide pragmatic and objective advice
Traditional media outlets are responsible for reporting on the issues that may impact both customers and businesses. As respected and experienced industry analysts, our responsibility is to further focus discussions on the facts without feeding the media frenzy.
Following a review of the articles written immediately after the incident, I noticed a couple of comments from respected research houses that rained down on the future prospects of Cloud computing. Are these houses becoming as conservative as the IT organizations they influence?
Other, more pragmatic analysts, shared views similar to my own. For example, Vinnie Mirchandani, makes it clear that all service providers have delivery issues but few rarely receive the same media scrutiny. He goes on to propose that all public providers should face the same level of transparency. Although not pragmatic, his point is clear: Amazon has been singled-out: not for what is abnormal in the industry, but for bringing to market a disruptive service that some look to discredit.
Bottom line, big enterprises do not call the media when their own, mostly ancient, data centers take the shape of pears. We are quite certain this happens with more frequency than in outsourced data centers of both the “traditional” and “new” variety. Big data center providers are at greater risk, which is why their data centers tend to be more reliable—but they have downtime too. In fact, traditional providers are just more adept at handling it because, well, it happens more often than any of us ever get to hear about.
Perspective #3
Providers (really the new guys/gals on the block): experience counts in the lion’s den
The world’s largest service providers have many more years of experience than you do – some with 20 with others reaching 30. Yes, your technology is disruptive, but that does not mean you need to drudge through the same pitfalls that your predecessors have already navigated.
Brian Robinson is Senior Analyst, HfS Research (click for bio)
The best organizations will reflect on what has already been learned from the industry veterans and incorporate it into their service delivery plans. This includes, for example, robust disaster recovery plans and proper communications plans. Today’s largest providers have perfected how to be profitable while managing their client expectations and guarding against future failures. They did not learn these lessons overnight, and today’s new companies will benefit by hiring managers that can bring this to light.
And finally here’s even more perspective—the questions we should really be asking:
What is the relative reliability and security of the “new” Cloud offerings from Amazon? Are these offerings objectively a greater risk? Bring us data—not innuendo!
How much money was lost as a result of this outage? We know the damage done to the Amazon brand, but what about its customers’ brands?
Tony "The Governator" Filippone joins HfS' research leadership (click for bio)
Fed up leading BPO initiatives for a $60 billion healthcare insurance firm for the last nine years of your life?
Bored with developing new governance structures that cater for multiple back-office processes and managing an assortment of onshore/offshore providers?
Exasperated from pouring though reams of SLAs and pricing schedules?
Stultified by the incessant deluge of PowerPoint from providers and advisors regurgitating and repackaging that same old dog n’ pony show in the vein hope you’ll spare them a few dimes for their efforts?
Finally realized it’s high-time to climb those steps into your very own ivory tower and start telling everyone else how it’s done (or not done)?
Ladies, gentlemen and members of the outsourcing business… please welcome Mr Anthony M. Filippone to the hallowed ground of HfS analyst, industry thought-leader, and, most notably, the role of Governator-Extraordinaire.
I have got to know Tony well over the least four years where he has contributed to our thinking, added some real value to our buyers’ groups, and developed an industry-wide reputation for challenging the status quo of vendor management and governance. Not only is he an out-of-the-box thinker, but he is a prolific writer with a slightly snarky sense of humor, and a great sense of irony. And from mail-and-print through to strategic sourcing and revenue cycle, you won’t meet many people with such a deep, working knowledge and understand of those operational processes that make business tick.
While you can read his bio here, and view the lovely press release here, I’ll hand you straight over to our brand-spanking-new, feisty, no-holds-barred, Research Vice President for Governance, Sourcing and Healthcare strategies himself to tell you why he’s joining the ranks of the crazy-horses…
Why Tony joined HfS Research and what he intends to do here (in his own words)
I am absolutely thrilled to join the experienced, no-nonsense, fun-loving HfS Research team. I’ve formed and led outsourcing and strategic sourcing teams for the last nine years, but the time has come for me to help more organizations make great outsourcing decisions and optimize their outsourcing programs to achieve success. Here is what my aggressive research agenda will bring you:
The “Other 90%” – No organization has truly focused on what happens after the deal is done and the work has transitioned. The vast majority of the discussion in the outsourcing industry focuses on outsourcing solutions, service provider selection, and post-deal transition. I offer two examples:
The IAOP offers a certification program for outsourcing professionals and less than 40 pages of the 353 pages of their body of knowledge covers post-transition governance for buyers and service providers.
Brown and Wilson’s “landmark” 366-page “The Black Book of Outsourcing” has four pages focused on governance and vendor management.
Putting this gap in research and industry focus into perspective, no organization has offered expert, research-based assistance on how to handle the last 54 months of your 60-month contract. My primary role at HfS Research will be to help buyers and service providers learn how to succeed together in managing simple and complex outsourcing programs.
Deep Buy-side Experience – Advisors have extensive experience shaping deals and service providers have extensive process experience. However, HfS Research’s objective, no-BS coverage of the industry, HfS’s relationship with the Sourcing Interests Group (SIG), and the oversubscribed HfS 25 give HfS a unique position to advance the experienced buyer’s perspectives within the outsourcing industry. Since I have lived in the buy-side trenches for the last nine years in governance and procurement roles, my real-world experience will be invaluable to HfS’s community.
Broad BPO Experience – While ITO remains an important part of any organization’s strategy, BPO goes far beyond FAO and HRO and into the hardcore operations of a company. I’ve led large outsourcing initiatives focused on inbound customer service and sales centers, complex back-office transaction processing, inbound mailroom/imaging/data entry, outbound mailroom, and HRO. I will play a critical role at HfS’s development of research in more horizontal BPO categories for buyers and service providers who seek to learn key industry trends.
Healthcare Industry Experience – No American industry is undergoing more change than the healthcare industry due to regulatory changes, the need to provide more cost effective healthcare, and the need to improved health in our communities. Changes in the payor and provider industries will necessitate increased use of outsourcing to lower costs, obtain improve process efficiencies, and improve health outcomes. I will lead HfF’s coverage of the healthcare outsourcing industry.
Tony Filippone (pictured above) has joined HfS Research’s leadership team as Research Vice President, Governance, Sourcing and Healthcare Strategies. He can be emailed at tony dot filippone @ hfsresearch.com, or tweeted @360VendorMgmt
This week has marked a pivotal occasion in HfS’ development as a research analyst organization, with our official launch of the HfS BPO PriceIndicator™. As a special thank you for all your support, we are making our flagship 2011 F&A BPO market landcape report available as freemium for our subscribers – but only for one week! So download your copy today. Oh – here’s the exec summary:
The F&A BPO market landscape in 2011:
Re-emerging from the Recession, re-focusing on business outcomes
HfS believes the market for finance and accounting business process outsourcing (F&A BPO) services is poised for a new phase of growth, as businesses recover from the Recession and focus on new strategies to drive more efficient operations in an increasingly global economy. F&A BPO fits the bill for an increasing number of organizations, while some still prefer to maintain their finance and accounting operations in-house.
Outsourcing the number-crunchers… are you ready?
However, one thing is certain – once a company makes the decision to outsource F&A processes, it will be committed to working with a service provider for many years, if not decades, hence, getting this right is going to have a major impact on its culture and operational performance over the long-haul.
This report delivers an unprecedented view of the F&A BPO industry, based on 788 live engagements, where organizations have outsourced two or more core F&A processes to a service provider. In addition to exhaustive contract information, HfS draws upon recent demand-side survey analysis to deliver the complete view of the market dynamics, the service provider landscape and the future expected direction of the industry. Key findings are summarized as follows:
» Untapped market. The market for F&A BPO is largely untapped moving into 2011, with fewer than 800 live engagements and only one-in-six enterprises outsourcing transactional accounting activities to a third party service provider.
» Recovering economy rekindles outsourcing motives. While the F&A BPO market grew rapidly between 2004 and 2008, interest cooled during the Recession as enterprises focused on shorter-term survival measures and put disruptive initiatives, such as BPO, on the backburner. However, with recovery under way, many businesses are refocusing attention on global outsourcing opportunities as a means, not only to reduce operating cost, but also to provide an impetus to globalize operations and transform processes. Consequently, 13% of enterprises are now intending to move into an F&A BPO model over the next year, with strong motivation coming from mid-market organizations ($750m – $3bn revenues).
» Availability of smaller engagement models drives sustainable growth. With engagement sizes falling below $20m total contract value for the first time, and service providers developing more “repeatable” delivery models that can be provisioned across multiple clients, HfS expects 15% annual growth in total F&A BPO expenditure over the next two-to-three years.
» Gainshare incentives becoming an integral component of F&A BPO engagements. With close to 50% of recent engagements involving gainshare (outcome-based) incentives, the aggressive competitive climate will provide attractive opportunities for many enterprises evaluating their first steps into F&A BPO, in addition to experienced buyers seeking more value from their current model. Moreover, gainshare initiatives can provide the differentiation between providers, as opposed to simply low-cost provision, which HfS views as a major step forward in taking F&A BPO value beyond short-term labor-arbitrage savings for clients.
» The competitive landscape takes shape with four clear market leaders. The global F&A BPO market is dominated by Accenture and IBM, with both Capgemini and Genpact providing the major competition for large-scale engagements. However, aggressive competition is expected from a host of other providers eager to secure a stronger market presence, including multi-billion dollar offshore-centric service providers Infosys, TCS and Wipro, in addition to BPO pure-play specialists EXL Service and WNS. Other providers with strong BPO businesses include Xerox and HP, but they have not proven to be as aggressive in the marketplace since recent mergers with ACS and EDS respectively. HfS expects further consolidation in the competitive environment.
» IT-enablement of BPO becoming pivotal to development of services. HfS anticipates increased hybrid IT-BPO engagements where service providers provide application wrappers to enhance process standardization for buyers. More than over half of today’s buyers are now enhancing or replacing their existing finance IT systems with their BPO engagement. However, HfS Research shows that adoption of Cloud computing with finance applications is still some way off for most high-end enterprises.
HfS Research’s new report entitled “The F&A BPO Market Landscape in 2011: Re-emerging from the Recession, Re-focusing on Business Outcomes” is authored by HfS Research’s Founder and CEO Phil Fersht. You can download your freemium copy at our research site.
Leo's game-plan: Inspired, or just surrounding himself with old chums?
Today, we were greeted with news of the latest in a series of executive hires moving from SAP to HP (see last year’s post on Leo’s appointment), with the announcement that Marty Homlish has joined as Chief Marketing Officer – and yes, his previous employer was… you got it… SAP! This follows several other high-profile executive appointments from… you got it… SAP, such as Marge Breya, Bill Wohl and others.
No disrespect to Marty, who has a stellar reputation from his recent decade-long marketing tenure at SAP, but what is HP doing? Once a thriving hardware and services business locking heads with IBM, its services business has been slipping since even before its EDS acquisition, its BPO business seems to be dropping off a cliff, and now it’s filling its management ranks with ERP veterans. Unless something is brewing that we don’t know about, HP isn’t an ERP vendor.
If HP isn’t plotting a radical move to buy SAP, or some other ERP business, it seems to be letting itself down badly – the firm needs new thinkers who can drive innovation and a new direction into the business, because right now, most industry observers are left scratching their heads trying to figure out what the game-plan is. If HP is looking to acquire SAP, and is readying itself with an already-in-place management team of old-school SAPers, then Leo may be pulling off a masterstroke in forward-thinking leadership that will go down in technology history.
Whatever the case, HP needs to put a stake in the ground – and soon – to let the world know its true strategy, as I, like many of my industry colleagues, am baffled.
PriceIndicator™ is launched! HfS becomes the first analyst to deliver BPO price-benchmarks (click to view details)
Today marks a very special day in the life of HfS Principal Analyst Jamie Snowdon. Not only does he turn the ripe old age of 40, but his life’s work is revealed to all and sundry: the brand-spanking new HfS BPO PriceIndicator™ is officially born (SEE PRESS RELEASE).
Thanks to Jamie and his team’s superhuman efforts, we’ve managed to crank through our database of over 800 live BPO engagements, sift though insurmountable reports on local wage rates, tax policies, inflation and exchange rate fluctuations, infrastructure costs and provider margin-uplifts, to deliver an incredible database of BPO rates across 12 countries and multiple staff roles. Want to know how much a Chinese Sox expert during transition costs? Well, you’ve come to the right place…
So why did we enter this market?
For all the right reasons one offers a new product. There isn’t anything comparable available in the industry, we are in unique position with visibility to over 800 recent BPO deals, and most importantly, our clients are telling us they really, really want it! The number one request we get from buyer clients is for support with pricing – most analyst discussions with buyers (and this applies to most analyst firms) results in the their requesting the analyst validates their rate-cards . We’re simply developing a methodology to support these needs, but use our analyst time to advise them towards smarter pricing strategies. Moreover, one of the main purposes of PriceIndicator™ is to steer the industry towards business outcomes and transactional models (if possible), and away from the creaking rate-card model.
HfS Research’s network produces the largest, most accurate and up to date deal database. Because we’ve earned the trust of both buyers and sellers of outsourcing, we can validate and ensure accuracy in real-time. And because we have an incomparable team of BPO experts who cover, in-depth, all the core horizontal and vertical business processes that are being sourced by enterprises today,
What does the HfS BPO PriceIndicator™ do?
It gives our clients access to up-to-date pricing information for the BPO market. And we’ll soon add Application Development and Maintenance PriceIndicator™, to give our research members even more value from their investment in HfS Research.
It provides all of our clients with a quarterly report on pricing and the trends impacting the fees associated with BPO services
It ensures accuracy by doubling back—we take deal data and normalize it so it is useful, but we verify our conclusions with detailed “ground-up” analysis of all the inputs in over a dozen popular outsourcing destinations. Finally, we leverage our powerful network to validate both of the analyses.
It gives our clients the option of ordering specific data-cuts from our database, narrowing in on pricing, for example, within a certain industry or a secific type of role.
It enables HfS to give clients knowledge and coaching to steer them away from simply relying on “bums on seats” FTE pricing, and to evaluate more strategic pricing methodologies, namely outcome-based and transactional-based approaches.
It addresses a woefully underserved and historically unreliable sector of the benchmarking industry.
So please forgive us – just this once – for a rare sales-pitch. This capability is borne out of years of hard graft and experience from our analyst team, and marks a major inflection point in HfS’ development as an analyst organization, just 14 months after we launched our business.
For more information on HfS BPO PriceIndicator™ please click here for a detailed methodology, and feel free to email Tom Ivory directly here.
Cloud Cloud Cloud. Whenever you talk to a provider, or IT analyst, consultant or investor these days, the C word inexorably oozes out during whatever dialogue or monologue is taking place. And what we love most about the Cloud, is when we ask that person to define it, there is this inevitable pause before he or she stumbles through various unstructured sentences, before asking us how we define it.
Are you really ready for the "HfS Private Cloud Challenge"?
Never before have we come across such a vague, poorly-defined piece of terminology so many people utter so freely without really understanding it, but feel an irrepressible urge to vocalize it at every given opportunity. At HfS, we’ve become so depressed by the repeated fuzziness of the Cloud, and the startling inability of anyone to put forward a convincing, proven case for the Private Cloud, that our hot-blooded analyst, Esteban Herrera, has deemed it high-time to lay down the gauntlet to you all, so over to you Esteban to explain our new challenge…
It has suddenly become almost as popular to bash the Cloud, as it has to hype it. Personally, I have been a skeptic all along, and don’t even get Phil started on Cloud BPO!
The Public Cloud mostly makes sense, but all of the technologies required have existed in some form for quite some time—they are available and people use them today, so I am not sure what is so “new” about it. At least the economics make sense: lots of companies invest in a single infrastructure with overcapacity, but because of the consolidation and standardization of the offerings, it costs them a whole lot less than developing their own infrastructure, and gives them the ability to scale. Given its limitations, the Public Cloud has been mostly popular with small and medium size.
But the Private Cloud makes my blood boil. Private Clouds are a cynical oxymoron. The whole point of a Cloud is that you share resources and don’t have to own the capacity you need, because its available on demand, so you can pay by the drink. Well, if you own the resources and the capacity, it is inherently limited to what you own, and you’ve already paid for everyone’s drinks at the bar whether they consume them or not!
Check out Wikipedia’s definition:
Private Clouds have attracted criticism because users “still have to buy, build, and manage them” and thus do not benefit from lower up-front capital costs and less hands-on management,[52] essentially “[lacking] the economic model that makes Cloud computing such an intriguing concept”.[54] [55] Enterprise IT organizations use their own private Cloud(s) for mission critical and other operational systems to protect critical infrastructures. [56] Therefore, for all intents and purposes, “Private Clouds” are not an implementation of Cloud computing at all, but are in fact an implementation of a technology subset: the basic concept of virtualized computing.
But HfS is about dialog, and believe it or not we don’t mind being proven wrong, so we are launching the HfS Research Private Cloud Challenge—a fun contest for true innovators in the Private Cloud. Here are the rules:
Entries must describe a Private Cloud solution that has been implemented. Not a server virtualization initiative, not the purchase of Software as a Service, but a true, full-on Cloud model where the technical infrastructure, software, and services are Cloud-based, available on demand, and can scale up or down painlessly.
Each entry must be accompanied by a business case. That’s right, real numbers on spreadsheets, folks! Entries must show in real money the benefits of the Private Cloud implementation. You may also share other benefits that are hard to measure in dollars, but assume we are taking a CFO perspective here.
Your story must be verifiable. We are happy to protect the innocent and will not disclose any name you don’t want us to, but we want to talk to real people who are close enough to the solution and to the numbers to be able to tell us its real.
Do not send us more than 10 pages plus a spreadsheet with the REALIZED business case (not the expected business case). The legions of HfS minions who will have to sort through your thousands of entries are quite busy.
What do you get if you “win”? If you are the first person or organization to convince us that there is business value in a Private Cloud, you will get unparalleled fame in the form of:
Your story will be published on this very blog, where 50,000+ loyal and adoring readers will understand the benefits of private Cloud. You will be tweeted and re-tweeted the world over and every major social media outlet will know you have won the challenge.
You will earn the satisfaction of having crushed my gargantuan ego by proving me wrong, and demonstrating conclusively that I am an ornery, luddite fool.
I will publicly eat my fedora in front of all said subscribers, and have to admit that the Private Cloud is indeed not an oxymoron, but a valuable new way for enterprises to do business.
Email your entries to me at [email protected]. I’m fully prepared for a flooded inbox.
Outsource Magazine, Spring 2011 issue. Click image to give it a read.
As you may recall, we recently partnered with Outsource Magazine. I’m happy now to share the first issue that includes our contributions. Jamie Liddell (despite jetlag and a screaming 4-month-old) and his crew have put together an absorbing issue – check out the packed table of contents, with features on IT security, call center tech, and labor arbitrage.
If you already scour Outsource, you know what a readable pub it is. If you’re not a regular reader, start today with this issue. I think you’ll enjoy it.
Deborah Kops has some interesting insights into the current shape of the BPO market, with those providers leading the charge originally emanating from strong consulting backgrounds… over to you, Debs
Consultants in BPO – still lurking in the background, or gone forever?
You’re probably not aware of a very subtle, but tectonic shift going on in the business process outsourcing industry which has implications for all those things that we all tout as benefits of sourcing—innovation, deep domain experience, true client partnerships.
No, when I refer to consultants, I’m not talking about the likes of the sourcing advisors. They’ll continue to survive in one form or another. I am referring to the fact that the pioneers of the outsourcing industry, primarily BPO, came out of consultancy backgrounds. And as they leave the industry due to retirement or the pursuit of other interests, the sourcing community is much less well off.
Think back to the heady early days of BPO in the mid 1990s. Consultants from the Big-whatever-it-was, the then Andersen Consulting and even the likes of the white shoe strategic firms, got a bee in their bonnets that their intimacy with and knowledge of their clients could be harnessed to improve and deliver business processes. They formed business lines with skin in the game, exclusively focused on doing rather than just advising, tapping not only into their own expertise, but that of their partners and colleagues. At that time, moving work to India or even to Poland was a very hard sell to clients, so the value proposition came not from labor arbitrage, but the application of real business improvement tools and techniques in context.
Today, the makeup of provider teams has inextricably changed. Increasingly, those with deep consulting experience are rapidly moving out of the picture, while the leadership now comes from armies of managers whose base of experience is solely time in grade in the outsourcing industry. It’s unfortunately a detriment, not only to the creation of value for the buyer, but for the provider side of the equation. Experience in context–attaining knowledge by working side by side with a client, understanding how they work, and what makes their industry tick—is the greatest benefit of a consulting career.
This is not to say that providers’ rising leaders cannot deliver sourcing benefits beyond cost reduction and follow-the-sun operations; perhaps over time as they gain experience and wisdom, they can. But, in the main, they haven’t acquired the soft and problem-solving skills that come from having the training, intellectual freedom, proximity, and the ability to connect the dots that only consulting experience allows. Rather, their experience is limited to time in grade in delivery centers, or perhaps the five or six times a year when they have direct access to a client during the solution-development process. Their problem-solving skills have been shaped by process, not perception.
And the organizational paradigms in which they operate either can’t-or won’t—adjust due to competitive margin pressure, or perhaps even myopia. As a result, the sourcing landscape is in danger of increasingly becoming commoditized process shops with only a whiff of business value.
Not convinced? For just one proof point, look at HfS Research’s recently released finance and accounting sector analysis. It hasn’t escaped my notice that the majority of the top players come from a consulting pedigree. Are these players better innovators? Do they have a more consultative approach to client relationships? Do they deliver more value? The results beg the question.
Deborah Kops, Contributing Analyst, HfS Research
Call this post the mad musings of a former consultant. But I look around me and see a provider class which is fanatic about process delivery at the expense of those capabilities which create value. They forget that real sourcing benefit comes from the ability to solve a problem, the skills to develop a relationship with a client team at the highest level, and the knowledge of what drives value in an industry from the top down, not the arrogance of process mastery. Perhaps it’s time to change the provider paradigm, or entice a few of those consulting pioneers out of retirement…
Deborah Kops (pictured here) is a regular contributor to HfS Research and runs Sourcing Change, a specialist strategy boutique focusing on the dire need for change management in sourcing. You can read her full bio here.
Tom Ivory, our newest Vice President, will keep HfS' clients honest (click for full bio)
No, we haven’t quite emulated McKinsey (just yet), but we have managed to acquire a genuine ivory tower from where we can postulate and preach to the masses… by hiring Tom Ivory. Yes, the Tom Ivory, who once had the audacity to work for research firm Tower Group, where his email address actually was[email protected]…
Tom’s joined HfS’ leadership lead as our Vice President for Client Services to prove that we do actually care about our clients. No really, we care. Despite all out abuse, criticism, mickey-taking and berating, we do want our clients to stay with us – which is why we hired an incredibly tenacious account director with the face of an angel.
Prior to joining HfS Research, Tom served as a Regional Sales Manager for Metastorm (acquired by OpenText in 2011), a leading provider of business process management software. In that role, he successfully managed a territory enabling Fortune 50 companies in the manufacturing, retail and telecommunications industries to improve operational excellence, transformation and business process efficiency. Prior to this appointment, Tom was Manager of Strategic Accounts for TowerGroup (acquired by Corporate Executive Board in 2009). During his tenure at TowerGroup, Tom grew revenue among strategic accounts such as Goldman Sachs, Wells Fargo and JP Morgan Chase and strengthened client relationships by consistently delivering solutions for the challenging and dynamic business and technology needs of the Banking, Insurance and Capital Markets industries.
Tom’s excellent buy-side relationships will be extremely valuable for HfS as we grow our research advisory business, expand our HfS-25 buyers’ council and (soon-to-be-launched) price-benchmarking services. We have also charged him with looking after some of our favorite existing clients, whom we promise we really do care about…
Tom lives in Dallas with his wife Lindsay and their two sons Carter and Cameron. He enjoys travelling around the world with his wife and experiencing new cultures. When he is back at home in Dallas he can usually be found cycling or running around White Rock Lake.
Tom holds a bachelor’s degree from the University of North Carolina at Chapel Hill.
You can tweet Tom @tivory and email him at tom dot ivory at hfsresearch.com, to welcome him into the HfS family. You can view his full bio here.
