Procurement BPO engagements aren’t about dating. They’re about getting married, something we actually think many people don’t realize. Remember this one point, and your chances of success with procurement BPO will increase on a log scale.
HfS and SpendMatters' Jason Busch team up to discuss procurement BPO marriages
Never mistake a BPO relationship for advisory or software. You can scrap a consultant’s deck and trash a software package overnight, but BPO is different. Just as in a marriage, you can’t fundamentally fix things if they’re already broken going in.
In Part II of our Procurement BPO market appraisal with SpendMatters’ Jason Busch (pictured here at a recent HfS strategy session), we get straight to the heart of the issues that buyers need to watch out for when evaluating a Procurement BPO endeavour. Essentially, you’re going to be sharing your proverbial corporate bedroom with a service provider, so you may be wise to read our joint paper “Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement” first:
It’s remarkable how quickly an outsourcing concept can spiral from concept to reality, when the ability to achieve real cost-savings is augmented by accessing insights and flexible resources. And that’s exactly what’s been going on with Legal Process Outsourcing (LPO) since we first broached the concept here two years ago.
Since then, we have witnessed a remarkable confluence of forces establishing the field of Legal Process Outsourcing (LPO):
*A maturing supplier market that cemented confidence in the theory of LPO;
*A growing volume of LPO supply that puts downward pressure on prices but confirms the wisdom of the early movers;
*Law firms remaining under margin pressure;
*In-house legal departments in the public sector and private sector facing significant cost pressure.
They may take away our lives, but they'll never take… OUR LAWYERS!
At HfS, we came across a stray Scotsman wandering the streets of Manhattan, eager to espouse the virtues of LPO to anyone who wanted to hear them – and, guess what, we did. Ed Brooks joins the HfS contributing analyst stable, having had 11 years in the outsourcing and offshoring sector leading over $5 billion worth of deals for the likes of Accenture, EDS and more recently TPI, in areas as diverse as Finance and Accounting, HR, Clinical Research, Customer Services, and Legal Process Outsourcing. Today, Ed runs his own expert program to support LPO buyers, discretely named “The LPO Program“.
Ed has contributed his first RAPIDInsight for HfS, entitled The Legal Process Outsourcing Landscape in 2011, that sets the scene for the industry. He begins with the edict:
LPO: Act Fast; The Offer Ends Soon; First Come, First Served
Anecdotally, these movements are summed up by two specific events in late 2010. First, in November, Thomson Reuters acquired one of the major LPO providers, Pangea3, buying out the same VC firm that had invested early in YouTube, Oracle, etc. While LPO has been around for many years, this was a major global corporation buying into this sector, giving it a new level of validity. No one would have been surprised if a traditional outsourcer like Accenture, IBM, or Wipro had been the buyer, but Thomson Reuters is a data and information company that sees the value of the “Knowledge” more than the “Process Outsourcing.” Combined with the astonishing number of LPO suppliers (we are currently tracking 135 on our LPO Market Watch database), this demonstrated genuine supply-side maturity.
Second, around the same time, at a conference in the Scottish town of Stirling (think Braveheart and you are in the right place), a survey showed that 15% of local authorities were considering outsourcing their legal departments. Public sector cost pressures in the UK are well documented, so the attraction is obvious. The surprise is that the legal department ranks as high as fourth in the priority of functions companies consider outsourcing.
Ed Brooks, Contributing Analyst for Legal Process Outsourcing Strategies, HfS Research
In the wider context it now appears that the Public Sector “gets” LPO, in-house legal departments “get” LPO, and our research shows that even the 83% of law firms that “would not comment” on their use of LPO are at least investigating it. If the Pangea3 deal confirmed the supply-side maturity, this fully confirms the demand-side market maturity.
Ed Brooks (pictured) is an HfS Contributing Analyst covering the field of LPO and leads his own expertise program The LPO Program. He can be contacted via email here.
You won’t see a CEO being removed after achieving a double-digit growth rate too often, but that’s just what happened, when Wipro’s co-chiefs Suresh Vaswani and Girish Paranjpe stepped down last week.
Wipro eyes a new rhythm after Suresh Vaswani steps aside
And while I am personally excited to see TK Kurien take the helm, with whom I have had some excellent discussions over the years, I am concerned that some of the Indian service providers are so blinkered by today’s short-term explosive growth spurt, they may taking their eye off the long-term plan.
Remember, Mark Hurd was at HP for 5 years before leaving due to non-corporate activities, Sam’s been at IBM for donkey’s years, Vineet’s been leading HCL since 2005 and Frank D’Souza at Cognizant since early 2007. All these guys have led their companies though short-term pain to establish their long-term plans, and I would be highly surprised if any of them stepped away from their roles for a while yet, provided they avoid any late night HfS parties, or dodgy game show panels at conferences.
Wipro’s in good shape… but that’s not enough for Chairman Premji
Whatever the reasons behind the leadership change, you can’t mask the fact that Wipro’s financial performance hasn’t stacked up as impressively as the likes of Cognizant, HCL and TCS, despite reporting third quarter earnings of $294 million, up 10 percent from a year ago, revenues up 12 percent from a year ago, and IT services revenue was up 19 percent from a year ago. However, as we laid out in our 2011 predictions, the offshore IT spurt isn’t infinite, and we fully expect it so slow to a more modest pace towards the end of the year. So will Premji’s impatience to produce numbers as stellar as his competitors be rewarded, or has he already missed this phase of hyper-growth in offshore services?
Wipro has been at the heartbeat of the Indian IT services industry, and more recently BPO, during the offshore services industry’s entire rise to prominence. The firm has been more ambitious than many of its competitors on the acquisition front, notably picking up Spectramind, Infocrossing, Enabler and Inbev’s LatAm BPO center in recent years. Moreover, Wipro has today achieved a larger marketshare of the F&A BPO market than its prime India-headquartered rivals, Infosys, TCS and Cognizant. However, while Wipro delivers IT services as competently as most of the competition – especially with its capabilities around SAP, the company has suffered from a brand identity. It has too often finished second in a down-selections and customers have often struggled to fully understand the firm’s DNA.
The seeds have clearly been sewn for a bright future for the firm, and it clearly provides a wonderful platform for TK to make some telling tweaks. Let’s hope Premji gives him a bit more wiggle-room to take the company in a direction where he feels that Wipro’s not only pushing TCS et al. harder for marketshare, but also is readying itself for the next wave of offshore service growth beyond the current spike. We’ve been promised an interview with TK soon… so stay tuned.
Wipro’s new challenges are industry-wide and not solely confined to them
All-in-all, the challenges facing India’s offshore industry are the same for all the service provides – both traditional incumbents and the expanding offshore firms. These are challenges you can’t mask under a few quarters of rampant profit, they have to be embedded in the very infrastructure of the provider’s delivery model. This means the winners over the long-haul are already re-investing some of these profits on the following areas:
*Moving beyond operational IT work to position themselves as service integrators for clients
*Developing industry domain knowledge to be true consultative partners to clients, and not simply effective implementers of Six-Sigma and LEAN
*Blending business process acumen with industry analytics
*Executing employee development strategies that cross-trains talent across multiple business process and IT disciplines to work proactively with clients to support their innovation roadmaps
*Developing true IaaS and PaaS development capability to take industrialized solutions into a Cloud (shared service) utility model
*Developing real BPO scale that can flex with client needs as deal sizes shrink
Suresh Vaswani (pictured above) steps down as Co-CEO of Wipro. You can read our recent interview with him here.
The “Amazing Horse Race” is the ultimate public bloodbath of the sourcing industry, as the “Buy Team” defends the title it so gloriously won last year in Edinburgh. However, this time it’s not going to be quite as easy…
Your host: Phil Fersht, Founder and Chief Executive Officer, HfS Research
1) The “Sell Team” has been bolstered by signing up Kevin Campbell from the Green Bay Accentures, Sheriff David Poole from Capgemini, Don “Shoot ’em up” Schulman from IBM, and Bob “Pokerface” Pryor from Genpact;
2) The “Influencer Team” miraculously appears from nowhere to feature such sourcing savviness as KMPG’s Cliff “The Judge” Justice, TPI’s Mark “Marvelous” Mayo, EquaTerra’s Bob “Bulldozer” Cecil, alongside HfS’ own Esteban “Evil” Herrera;
3) The “Buy Team” has recruited HfS’ own emeritus, the veteran of dodgy conference game-shows himself, Lee “Anti-vertical silo” Coulter (now with Ascension Health), the MSA master from MassMutual himself, Srini “KPI crusher” Krishnamurthy, Northern Trust’s Jay “Dangerous” Desai, and is rumored to be in discussions with Wal-Mart’s Michael “The Miracle” Lockard about securing his quarterback services. And a mystery buyer, endowed with special sourcing skills, may well be unveiled shortly…
We’ll be at The Peabody in Orlando for the 15th Annual North American Shared Services & Outsourcing Week with our friends from SSON. And on Thursday, March 3 at 8:30 AM, we’re expecting some fireworks.
We’ll be staging the ultimate contest of unbridled wits and cunning, by challenging contestants from the very peaks of the outsourcing industry: those who buy it, those who provide it… and those who influence it. We’ll discuss (and maybe, if you’re lucky) argue about these questions:
HfS Research, in partnership with the Outsourcing Unit of the London School of Economics, is hosting a webinar, sponsored by Accenture, featuring the key findings from the groundbreaking study of Cloud Business Services.
Cloudy with a chance of Davis, Willcocks, Fersht and Harris
Join HfS Research Founder and CEO Phil Fersht, HfS Managing Director Euan Davis, Professor Leslie Willcocks, Professor for Work, Technology and Globalization at London School of Economics, and Managing Director of Cloud Services at Accenture Jimmy Harris.
The issues on the table include:
The contrasting views and intentions of business and IT executives towards Cloud Business Services
The impact of Cloud on work culture and delivering competitive advantage
How both business and IT executives need to tool-up and prepare to adopt Cloud Business Services
The crucial role service providers need to play as Cloud Business enablers for today’s organizations
Cloud Will Transform Business As We Know It: The Secret’s In The Source
Thursday, February 17, 2011
11:00 AM – 12:00 PM EST
Tune in, crank up the volume, or pop in your headphones in if you’re in the office. A few memories from the HfS team, as we ready for something just a little bit special, coming very soon to a laptop near you. And ask yourself – are you ready?
Join Phil Fersht, Susan Cramm and Scott Liebs for "Which Cloud is Right for You?"
As you know, we recently published a groundbreaking study of more than 1000 business and IT executives on the future of Cloud Business Services, based on our work with the Outsourcing Unit of the London School of Economics, which we will be webcasting to the industry next month (stay tuned for the announcement). So we jumped at the chance to join up with CFO Magazine to give you some snippets of what you can expect.
On Thursday, January 27 from 2:00 to 3:00 PM EST, we’ll join CFO Editor-In-Chief Scott Liebs and Susan Cramm, the founder and president of Valuedance. Susan, a former CFO and CIO, is an expert on IT leadership and is the author of 8 Things We Hate About IT. Hmmm, only eight? She obviously doesn’t come here much 🙂
We’ll give you a glimpse at some of our data from our Cloud Business Services study, in additional to helping you get the lowdown on your Cloud options. Please join us.
When our COO Esteban Herrera joined us last year, we definitely got more than we bargained for… try a fluent Spanish and Portuguese speaker with a deep working knowledge and affinity of the assortment of cultures south of the border.
Yes, there’s more to Esteban than merely a sourcing consultant sporting a painful grin after 14 consecutive hours of negotiations. So who better to examine Latin America, the Gigante Durmiendo of outsourcing. He’s written a great RAPIDInsight on the promise (and realities) of Latin America as a sourcing destinations, so let’s hand you over to Esteban to give you the 411…
Latin America: The Next Sourcing Frontier or an Afterthought?
I’ve been encouraged to see many providers paying more than lip service to Latin America as a region for growth and business opportunity.
Sourcing to LatAm: reaching new heights?
Previously the un-loved stepchild of the outsourcing geographies, Latin America does hold promise for those who approach it the right way—and there is more than one right way to approach it.
I have a personal soft spot for the region, since I got my start in offshoring managing service delivery from Brazil and Mexico before the word “offshoring” came to mean what it does today. I had a great time personally, but still to this day I have yet to find a more creative technical team than the one I led in Brazil, or a harder-working team than the one I was privileged to lead in Mexico. I could tell great stories about the quality of work I managed in Argentina, Colombia, and Costa Rica as well.
But you no longer have to take my word for it.
There are hundreds of multi-nationals and service providers delivering back office support from Latin America. A good friend who runs F&A BPO for a provider recently confessed that they had lost a number of deals because they could not adequately support their global clients’ Latin American needs.
I doubt the region can catch up to the Asian powerhouses in scale, but there are a number of value creating approaches to Latin American outsourcing/near-shoring that are proving successful. You can read about them, as well as the region’s advantages and challenges in our latest RAPIDInsight: Latin America: The Next Sourcing Frontier or an Afterthought?
Ever wonder where those banners and pop-up ads you see as you surf the internet come from? We did, too, until we met Scott Golas, VP at Centro and Transis MediaOps, which serves up millions of ad impressions every day.
Scott Golas, VP at Centro, Madman of Outsourcing
Scott has developed a unique reputation in the sourcing industry over the years, having been a practice and strategy leader in his earlier career with the likes of PwC, Aon Consulting and, more recently, Booz Allen Hamilton. Hence, it is no surprise to us that he is now helping take the world of online advertising into smartly sourced business models.
What’s caught our attention with Centro, has been the firm’s creation of Transis, a self-described “digital platform surrounded by services”, which forms the centerpiece of a revolutionary new outsourcing service for ad agencies’ online media functions. Transis essentially streamlines the process of planning, negotiating, trafficking and billing so agencies can devote more resources to strategic thinking for their clients.
Centro is now taking the function of advertising-process sourcing to an entirely new level with a new managed services offering, called MediaOps, that will enable advertisers to outsource their entire digital media operations, which are typically onerous to run, and complex to get right. This will allow the ad agencies to focus their talents on creative and targeted ad campaign management.
HfS Research’s Phil Fersht and Mark Reed-Edwards had the chance to catch up with Scott recently. Rather than diving right in to a discussion of Centro, we were interested in learning how Scott got where he is…
Scott Golas, MadMan of Outsourcing
HfS Research: Scott Golas, good morning to you and thank you very much for spending time with us today. Before we dive into talking about Centro and the work you’re doing there, you’ve had a very colorful career, Scott. You’ve worked for numerous different companies. Can you talk a little bit about how you got to where you are today?
Scott Golas: Sure. I won’t go back to the very beginning; you probably don’t have enough tape on your recorder. I began a consulting career prior to Y2K with PwC out on the West Coast around HR transformations and outsourcing large system implementation. I spent most of 2000 after making a foray into the dot-com land bubble with a VC incubator here in Chicago called divine Interventures. For the remainder of the decade, I was either with Aon which is a large insurance brokerage, consulting, and outsourcing firm bringing their offering to market or with an analyst researcher consulting firm. I landed here at Centro in early 2008 and that was really—as most good job interviews or good job offers come—over cocktails at a restaurant. One thing led to another and I joined Centro several months later.
HfS Research: Centro offers some proprietary technology in the media business. Can you tell us a little bit in broad terms what it is Centro does and what’s the core value proposition of the business?
Golas: Yeah, I’ll try not to use acronyms or specific industry technology, but you can think of Centro as basically an operations service provider to agencies, and occasionally directly with brands. It’s all around digital advertising. Anything from the pop-up or banner you see on your laptop to digital out of home (DOOH) to widget that scroll at the bottom of your mobile phone. Anything related to digital. We don’t currently do anything in traditional media, TV, radio, or print. At the end of the day, we facilitate massive amounts of transactions (from concept to cash) between advertisers and publishers.
In this case the publishers are online publishers. Because of the complexity of executing digital, it’s very difficult for agencies and brands to do that efficiently. If you think of an ad that you see for vodka or something like that, that same ad in print is going to be the same ad whether it’s in Forbes, Sports Illustrated, or Fortune. That same ad digitally, if you were to place that on 20 different publisher sites could require 20 different versions depending on the size of the ad, where it was placed, where it fits in the publisher’s rotations and on and on. Digital advertising is much more complex that traditional.
There was a study done not too long ago by the AAAA (American Association of Advertising Agencies) that said that executing digital advertising is three times more difficult than any traditional media. So it’s complicated and expensive to do. The buys are typically smaller and we help advertisers and agencies do that much more efficiently.
HfS Research: So MediaOps is almost like—in simplistic terms, almost like a human platform for digital media?
Golas: That is probably an easy way to explain it, yeah. It’s a digital platform surrounded by services. From one end of the spectrum you can—as an agency, do it all yourself, research, plan, buy, etc… with the publishing community without our involvement, just by utilizing Transis, or we can do it all for you, via Centro Media Service. The new offering, MediaOps, is a hybrid, once you have planned and bought advertising using Transis we’ll help execute, optimize, bill, and collect.
HfS Research: So if I’m trying to sell a product and I want to maximize awareness in advertising through the internet, if I were to use traditional means it would go to media buying agencies or an ad agency. Can you just talk about how much more cost effective and how much—how different it would be leveraging your platform versus a traditional model?
Golas: I guess the biggest distinction is that we focus on the entire spectrum of the advertising continuum, including the mid- to long-tail of the advertising world. So if you just want to buy a network, for example Yahoo or something that’s pretty easy for you as the agency media planner buyer to do, you can do that without us. With most networks, you’re not really sure where your ad is going to end up or when it’s going to run but it will be cheap and you’ll get the impressions (aka volume) that you’re looking for. However if you’re trying to target buyers, if you want to reach 18-34 year old males who bought a Chevy truck in the last year and eat pizza, in certain geographies—you’re going to have difficulty doing that as a media planner buyer. It’s especially difficult to do that for many clients in multiple markets with varying launch dates. This industry still relies heavily on email, faxes, and spreadsheets. If you try and do that with a few publishers you might be able to do that. You’re going to have to negotiate rates, you’re entering into a contract, and you exchange digital assets. Now if you extrapolate our example and want to target the example we just talked about but need to do it nationwide with 30 publishers…you would be hard pressed to do that. That’s where we come in and we help out.
HfS Research: How typically do you support clients when they engage with you and your technology platform (Transis)? Do you generally provide them with round the clock or is it very much the client has to figure it out for themselves? How does that work?
Golas: It’s a fully supported model. It’s a SaaS-based platform. We’ll go out on site and sit with your media planning and buying team for as long as it takes them. We transition them off their spreadsheets, faxes, and paper intensive processes. We’ll upload all their contacts that are sitting in their Outlook databases. We’ll spend days there or a week, whatever it takes to build a plan, get them comfortable with Transis, and eventually wean them off that until they’re more comfortable with it. You find the early adopters within an organization and work with them and they’re the evangelist for the new technology and services.
HfS Research: Okay, so is the idea eventually to have the media buyers access the SaaS platform (Transis) directly, with a license model, and then they essentially get what they need. Or is this normally like a custom approach? How is that model going to work in terms of how the use it on a day to day basis?
Golas: The technology that we launched in 2010 is in adoption by over 50 agencies right now. It’s the initial the beta version of the product. So we’re working very collaboratively to address any kinks and bugs. Right now Centro is involved in about 1 percent of all the digital transactions that happen in the US, that has historically been done through our full service model. We still think there’s a huge marketplace with that other 99 percent of the pie that we can help agencies research, plan, buy, and execute digital. Whether it is completely self-sufficient using the Transis technology or the hybrid model.
HfS Research: Scott, that 1% is not an insignificant number, is it?
Golas: No, it’s a huge dollar amount. There’s a huge advertising market and it’s coming at an ever increasing rate from traditional media to the on-line world. It doesn’t matter what analyst or research report you read it’s about a 90/10 split right now between traditional and digital. The gap between traditional and digital will close at an ever increasing pace.
HfS Research: Scott, what’s your biggest competition out there? Is it DIY, or are there other agencies doing this?
Golas: We’ve got a couple. When I say traditional business, it’s not like we’ve been around as long as Ford or GM. We just celebrated our ninth anniversary, so we haven’t been around that long. Our traditional business is that model I mentioned before; working with agencies who are our primary customers—and hammering out everything once they complete the creative.
Our biggest external competitors—we’re about ten times their size. For the sake of this conversation, a formidable competitor would be Cox Cross Media coming more so from the traditional world than digital. But your comment at the end is on target: our main competition is agencies wanting to do it themselves.
Assuming that they’re even doing digital, and it’s mind boggling how many agencies don’t offer that now, simply because it’s too difficult to do. As you can imagine, most agencies began with traditional roots, and they’re migrating over to learn the digital world. But they were hit hard during the recession we’re coming out of, and budgetary cutbacks, and all the new channels they have to learn, they need help figuring it out so they come to us.
HfS Research: So when you deal directly with a company do you also help them find people to do creative or will you take what another agency has created?
Golas: If it’s a brand directly, the creative work is more so cleaning it up so it works on all the different ad services and technologies on the publisher sites. We’ll get it, we’ll QA it, we’ll check it, we’ll make sure before we load it up, before the campaign is scheduled to go live, that it actually works on the publisher’s site. A lot of our creative work there is fixing it to match standard ad units and sizes. We do work with a lot of smaller and regional agencies that don’t have the creative capabilities, and we help them out as requested.
HfS Research: Okay. How is this platform going to change the traditional advertising model scope? Obviously it’s bringing technology and capability into play, but do you think this could eventually start to cut out the middle man and start so you could just work directly with the corporate buyers?
Golas: Here’s our hope: We’re big fans of advertising in general online and the creative world and what we think has sort of drained out of advertising in the last couple years is that creativity. We hope that by peeling off all the commoditized, very high transactional work that agencies spend time doing, they’ll be able to focus more on what their clients are trying to accomplish and build very cool, creative ads. By working with us, they enhance their capability to find the buyers of their products and have a lot more time to devote working on this strategy and creative with their clients. It’s not an area that we want to play in to be frankly honest with you. We know we do what we do really well and that’s operations and execution. Our bailiwick is anything from post creative to collection. Anything before that is the purview of an agency.
HfS Research: In terms of a lot of the broader outsourcing industry I’m thinking of here, you know I’m thinking of companies like Accenture or Infosys who invest a lot of money in their own—in their own sort of digital content and support services for clients, do you actually think that they might become a future channel for a company like Centro as clients need to get more savvy just around traffic on internet, understanding how to maximize awareness of products and things? Do you think that this at all is going to become bigger than just intelligence for placing advertising but something that can be used more broadly in terms of marketing for clients?
Golas: I would think after a period of time if you look through a genesis of most of outsourcing products or solutions, you know someone is going to make a foray into this arena and prove it can be done really well. It’s usually someone who comes from a strong operational background and marries that up with technology that’s been accelerated or that is going to garner attention. It’s either going to garner attention from the large consulting firms, existing outsourcers, or an existing technology company in the digital landscape who have a lot riding on this, like the Google’s of the world or Yahoo or Microsoft. They all have huge vested interests in search, display, and digital online. If they can make the dollars flow online, which is what we do, I would assume that would be attractive.
HfS Research: How can people actually leverage a tool like this to help them in very quick terms understand how to maximize their digital presence?
Golas: I think one thing to note about Centro—and Transis, which is the name of the technology—is that we’re agnostic. Compared to some of the other ad server or technologies that are out there I can think of—let’s use the biggest one: Google’s purchase of DoubleClick and their ad server a few years ago. There’s a pretty violent reaction from agencies to put their data and all their information on the DoubleClick ad server—just a fear of what Google could do with it. Likewise you hear a lot about demand-side platforms (DSP) and networks. Those are all items that are, I won’t say proprietary, but generally a demand-side platform is only as good as the access to inventory that you have. A DSP by nature is not going to get every publisher on a buying platform. They’re just not, well, one, physically able to do it and publishers are not going to give up that control. Where we fit in is—we don’t care. We plug into any of the back office applications that an agency or publisher works with.
Our SaaS tool Transis sits on the desktops of thousands of publishers right now to help manage these transactions. So if you’re an advertiser worried about rationalizing numbers between ad servers it is a huge task. But that’s how people get paid nowadays. You know, we take that pain out of the process and we try to make it work for both sides. We’ll rationalize the numbers between different servers and technologies so people feel comfortable about getting what they paid for and not over paying.
HfS Research: Okay, that’s interesting. So in terms of how the outsourcing model is going to work or where you think it’s going to play out in the medium term, do you think it’s mainly going to be a product which is going to be a product leveraged by the media agencies and clients will still go to the media agencies and the media agencies will talk with Centro or do you think it’s going to be a mixed model where you’ll have some clients directly with the buyers and others directly with the media agencies? Have you nailed down that strategy yet?
Golas: I haven’t nailed it down. I mean, you hit on really the two major components. The outsourcing solution that we’re bringing to market is called MediaOps and we have clients right now in both of those models so—we have a couple retailers that have Transis on their desktop and we’re handling the execution and likewise we’re working with agencies directly. So the plan as it looks right now is an agency (or brand) utilizing Transis will do all their research, planning, negotiating, and buying. Once an agency executes a contract (insertion order) with a publisher they will hand it off to us and we’ll take the creative assets and pretty much run it all the way through to billing and reconciliation.
HfS Research: Okay. When you look at the growth of the broader BPO market it’s interesting when you look at companies like Aditya Birla Minacs, for example, who do a lot of marketing operations already for some global clients. For example, they work with Apple on distributing iPods through certain networks. I can think of other service providers that are getting intimately involved in the marketing process. Do you think that could be a future channel as well? As these companies get more involved with their clients marketing process to start offering the management of your platform through that channel?
Golas: Yeah, I think that is a very good suggestion. One that we have frequent discussions about on where we should go—whether it’s new technologies to pursue or partner up with or new geographies to go into. This industry is the most dynamic one I’ve been involved in. In the near term it’s really focusing our attention on our full service platform, or Transis (self-service SaaS solution), or the MediaOps service. Getting them up, getting them ready, making sure we’re delivering on what we’re doing and now expanding the access to technologies or geographies. Both Transis and MediaOps are less than a year old. We want to make sure that we have them fully operational and that we’re doing what we’ve committed to before we get over our ski tips.
It’s an excellent suggestion, Phil, one that I’ve seen up on white board amongst many others. But we want to just stay focused though.
HfS Research: Okay. Where do you see the biggest growth potential in this short medium term for the company in terms of services versus the software based solution? I mean I’ll give you an analogy here of a couple of companies who did sales incentive management solutions for sales folks. There is one company called Callidus and another company and they’re called Cipher and it was interesting because Callidus decided they were going to do the one to many model and sell the product through IBM and they’d sell it at like five cents on the dollar and go purely for a licensed sale and have IBM manage all the clients and services rendered around that. Whereas this other company they realized that something like sales incentive management wasn’t something that you could put entirely in a software package without having some element of semi-customization to the client’s needs. They started to build like a support center with about 200 staff in it where they could actually support clients on a kind of subscription model as they leveraged the package. It’s interesting to see how both companies are growing in terms of revenues. Do you think that you’ll be moving more down the line of having a sort of services layer that sort of supports the products than just going straight for licensed sales down the road?
Golas: Right now I believe the later model you described is what we’re pursuing right now. I want to maintain ownership over the technology; we’ve got a large development staff here in Chicago. By nature of our agile development methodology, we roll out new product features every two weeks. So Transis is very dynamic, and we can adapt to handling changes being requested by clients, we can fix things very quickly. We’ll be out in the market really soon. There will be a dedicated software sales force and support organization and also someone selling outsourced services in the support organization.
HfS Research: This has been a fascinating story to hear this unfold and to hear a company that is moving into a broader sort of sourcing strategy with its technology. I mean, for you having spent so many years of your career in the traditional outsourcing business, having been out of it for a while would you ever want to go back to it?
Golas: I’m jumping back in with both feet. I think, unfortunately, outsourcing gets a bad rap at times. People automatically equate it with offshoring, they equate it with layoffs, which is just unfortunately a bad rap for outsourcing guys. I think it’s valuable to us look at how outsourcing has been around organizations back to the early days of payroll outsourcing. I’d be hard pressed to find an organization that doesn’t outsource some component of their operation. I think it’s just the next evolution. The advertising world has been a little slow to jump on the bandwagon but we know that they’ve outsourced IT operations, and some finance operations. So this is a huge component of their business. It’s a component that they frankly, if you could talk to anyone over a drink one night, they’ll tell you that they hate doing. They tell you that they love doing strategy and working with the clients. They love building creative—and solving problems for them, you know—how to get products off the shelf. And what we do is take all that operational, highly transactional, high volume work off their plate so they can focus on doing it.
It sounds repetitive or it sounds like it’s probably a mantra you’ve heard from other outsourcers, but that’s sort of the nature of the beast.
HfS Research: It’s almost comparable to what we’ve seen going on in the legal profession for the last couple of years with legal outsource processing. Where a lot of these little LPO firms have popped up which take on a lot of the administrative work. They can do a lot of discovery work, a lot of the really time consuming administrative tasks, and—which allows lawyers to spend more time with their clients and less time dealing with trivia so the client gets the benefit as well as the lawyer.
HfS Research: It’s interesting to hear these types of models developing in general and it’s great to hear the story that you’ve come out with so would you ever go back to the world of HR outsourcing?
Golas: Typically most companies have no idea where that money’s going, meaning their investment in human capital. So anything you can do to peel away the administrative transaction components of work and allow people to focus on what they’re coming to work to do, not HR—HR as the work that they’re involved in and HR as the functions. It typically comes with newer technology, newer programs, and access to people who are leaders in their areas of business. They are staying abreast of changes and new ideas and they know what’s going on and they can bring new plan designs and new technologies that you wouldn’t have access to. I’d hop back in it, sure. I still maintain that role and responsibility here at Centro. It’s one of our differentiators we believe in the marketplace, our focus on raving fan service is what we’re known for. We have great people, highly motivated, supported with some pretty bad ass technology. I think we’re going to be hard to beat.
HfS Research: Okay and one final question before we wind this up. If you could have your career all over again what would you do differently? Or would you do anything differently?
Golas: I think there’s very little I would do differently. I would have probably stayed working at the Grapevine Lounge, my first night there the Rolling Stones showed up after having played a concert downtown in Soldier Field (Chicago) and did their final set at 3:00 in the morning. Unfortunately I left two days later to take my first union job in the supermarket industry. So that sounds like a pretty cool place to hang out but I’m pretty happy in general. And I’ve learned a hell of a lot.
HfS Research: It’s definitely a matter of doing what you do best—and ad operations is not what agencies do best so it just seems to be an idea whose time has come.
Golas: There was a recent article in Forbes that I remember one interviewee saying the agency of the future’s is going to be ten really cool creative people, a lot of technology and they’re going to outsource everything else.
Our job is to help agencies be successful and I’m sort of paraphrasing our mission. But the way we can do that is to take what they would consider mundane and monotonous, transactional work off their plate. That makes us sound kind of masochistic but that’s what we do. We love it. Those are problems we love to solve and we solve it with great process and cool technology and just a great team here.
HfS Research: Scott – it’s been great catching up after all these years, and seeing you having such an impact on your industry with your experience of the sourcing world. HfS readers will surely be intrigued with all the great work Centro is doing.
Scot Golas (picture above) leads the workforce development, administration, real estate and several business development efforts at Centro, an online media buying technology services company. Scott has been a pioneer in the sourcing world for nearly two decades, having been a practitioner, consultant and strategist with the likes of PwC, Aon Consulting, PA Consulting and Booz Allen Hamilton. He can be reach at scott dot golas at centro dot net.
Jason Busch: Expecting more cowbell… and more from Procurement BPO
The struggle with procurement BPO has typically been the belief that either moving labor from higher to lower cost regions, or re-badging employees from corporate to a BPO provider, would alone be enough to achieve results.
This is especially the case where BPO providers streamline transition costs over the duration of a multi-year contract, allowing the BPO customer immediate cost savings and limited (if any) upfront payments for resource investments. The results are often a “one-time” savings, the sourcing general who masterminded the deal is flavor of the quarter, and everyone goes back to their daily grind.
When the sourcing general eventually realizes she or he needs to make additional investments in process transformation and technology, they find it exasperating to go “back to the well”. The CFO is hunting for that next bite of cost-efficiency and is shocked to learn they should have made some discreet investments in their BPO engagement from the onset. Costs are always like hedges… if not carefully managed, they grow back with a vengeance.
To tackle the issue we teamed up with HfS Expert Contributor, Jason Busch of SpendMatters fame. Jason also assumes the role of senior advisor for the coveted HfS Single-Malt Foundation, where he has excelled in his duties.
Lo and behold, our research suggests that this type of behavior, along with other indirect spend challenges, ultimately resulted in many initial BPO endeavors targeting indirect spend inside companies to come up short.
