Anyone on the analyst circuit knows the larger-than-life antipodean, Phil Hassey, who’s spent countless hours on soul-destroying coach-class slogs from Sydney to the US to expound the virtues and opportunities in the Asia/Pacific region.
Phil Hassey is HfS Research's new analyst contributor for the Asia/Pacific region
I personally got to know Phil when I was working in Singapore for analyst firm IDC (before I became a cynical blogger), when Phil led the Australian / New Zealand coverage for the firm’s IT/BPO research. I learned quickly that Aussies always make good “whinging” analysts – how many cultures do you know complain all bluddy day long, before hopping off to catch a few waves on Bondi beach at 4.30pm in the afternoon?
Anyhow, Phil’s no-nonsense style led him to establish the Asia/Pacific services research for Springboard Research, before branching out on his lonesome to start his own research venture, “CapioIT”. Well, we couldn’t let a good Aussie slip our gaping need to cover the Asia/Pacific markets, and we’re thrilled that Phil’s thrown hit hat in the horse’s ring to pony up a couple of BPO appraisals of the region for us in 2011. Let’s hear more straight from the Hassey’s mouth…
Phil Hassey muses over the Asia/Pacific BPO market landscape
I am very excited to have the opportunity to work with HfS and the team that Phil has successfully pulled together. As mentioned, I have known Phil for a long time now and have admired the work he has undertaken to drive research innovation in the BPO marketplace.
My first BPO research was undertaken in 2000, when I wrote one of the first reports on the Asia Pacific BPO market focused on CRM BPO. The future was bright at that time as the big offshore providers of CRM services such as Teletech and Sitel increasing investments in offshore centres, particularly in the Philippines with a plan for focus on delivery of services to local Asia Pacific clients. At the same time in late 2000, IBM stated at an AP analyst briefing that they would not be interested in the BPO marketplace.
Whilst a lot has changed in the 11 or years since, embracing of BPO has not been as strong as anticipated. BPO across the Asia Pacific is still a market with clearly unfulfilled potential both in terms of market demand and service provider capability. Obviously the two are linked. IBM, driven by CRM outsourcing through the Daksh acquisition is now a leader in non transactional BPO in the Asia Pacific region alongside Accenture. The call centre/CRM outsourcing market did not mature nearly as quickly as expected.
In Australia, the AP BPO market is at its most mature, however by US standards, unlike IT Outsourcing, it still clearly lags in terms of customer uptake. The last five years have seen a lot of interest in BPO, but ultimately limited commitment from enterprise. I like to joke that 2-3 years ago, there were more BPO pilots in Australia than at Heathrow or JFK airports. The reasons for the lack of enterprise commitment are varied, they include more organised labour forces in Finance and HR and customer care, and outsourcing fatigue through publicised IT Outsourcing problems. Highlighting the opportunity that exists in the market, the lack of providers means that supply side issues are just as important as buy side issues. Accenture and IBM aside, there are very limited services providers that have the requisite scale to successfully provide capabilities in markets in Asia Pacific. This is of course a chicken and egg situation. The deals need to be there to get the investment and I believe the deals will not happen until the investment is made. Some bold calls will be successful if researched well enough.
Across Asia more broadly, strategic BPO is even further from Australia in terms of maturity. The same issues as Australia remain, in a positive note increasing numbers of enterprises are becoming more familiar with the benefits of BPO. Many of the individual country markets do take their lead from a targeted number and type of companies, vendors should firstly identify these enterprises, then focus on them in order to drive BPO adoption more broadly.
Naturally enough, It must be repeated regularly that Asia Pacific is a large and incredibly diverse market that does not take kindly to being generalised in sweeping statements. We have half the world’s population and workforce. A strategy that works in Singapore may not work in neighbouring Malaysia; something that works in India will definitely not work in China. Understanding these subtleties is critical and without practical experience, my experience has highlighted that it takes time and several false steps before success can be enjoyed.
You can read more about Phil’s background here, email him at [email protected], or even find him on the Aussie twitter @phassey
Egypt's crisis: The sticky topic of political risk with outsourcing is firmly back on the table
Like everyone else, I’ve been glued to the news the past few days trying to comprehend the enormity of the Egyptian crisis and the possible repercussions across the global sourcing industry.
Without dragging us into a political debate, what’s alarming is the dependence global sourcing has on the Internet and political stability. When the first response of the government, in times of political crisis, is to shut down the Web, this has a massive impact on the nation’s global sourcing infrastructure to support global businesses. While China clearly has the capability to regulate its Internet, you have to ask the question whether smaller, less affluent nations have that level of sophistication.
This is a major concern for businesses when they invest in critical support services in the region. While top-tier providers, such as IBM, Verizon and TCS rely on Egyptian resources, largely for call center work and software support and development, it’s hazardous when the government shuts off the Internet and all hell is breaking loose. What really concerns HfS is the unpredictability of problems like this surfacing, that can seriously impact the security and availability of key support services in areas such as IT services, finance and accounting, payroll, customer services etc.
Egypt, as an example, has proven capable as a good quality resource location for the Middle East, Africa and European regions in areas such as IT, BPO and call center services, and has invested significantly in promoting its capabilities worldwide. For example, Egypt’s Information Technology Industry Development Agency, ITIDA (website currently down) had planned to have a delegation at the forthcoming NASSCOM conference in India, and has invested heavily with McKinsey to support and help develop its capabilities. The country has invested millions to promote its sourcing capabilities – and now, that investment is looking under threat.
The rampant, viral proliferation of social media is clearly fueling unrest in many nations that have high unemployment and undercurrents of dissatisfaction among their younger people. If situations, such as what is currently happening in Egypt, proliferate to other countries with sourcing support services, the first reaction of governments now seems to be to “shut off the Internet”. You have to question how this impacts ITO / BPO services that are hugely reliant on a robust Internet to succeed – not to mention a stable political environment. The Egypt situation is a serious blow to many of the developing nations seeking to take their share of global services, which have potentially questionable political stability.
Advice to organizations with globally-dispersed support operations
1) Ensure your service provider has proven rapid response strategies to cater for unexpected political and geographical risk. In the case of Egypt, this could entail transitioning services to emergency back up units in locations that can service EMEA countries, such as Jordan, Israel, Dubai, or even Poland, Hungary, Czech Republic, Romania or Bulgaria.
2) Ensure you know exactly how and where your provider backs up all your critical data and protects it in the event of a government coup.
3) Ensure you have financial provisions to compensate for business impact as a result of unforeseen political and geographical risk. Ensure these provisions are clearly structured, with appropriate metrics to compensate for business downtime and associated lost revenues.
4) Invest in a political risk analysis of countries where critical business and IT processes are being supported. Compare the risks of occurrences, such as the Egypt situation, with the cost-savings and business benefits of using these locations. Saving 30% from your bottom line will be moot, if you can’t run your business properly for long periods of time!
The bottom-line
What is clear, is that Twitter, Facebook etc. are rapidly inspiring large numbers of people in nations with high unemployment to protest, where they feel their governments don’t “listen” strongly enough to their grievances, and aren’t pushing political reform at the same pace as economic reform. There is real fear now that the uprisings in Iran, Tunisia and now Egypt will continue to exacerbate in other nations, and this is going to have consequential ramifications on global sourcing decisions. Surely, this puts those nations with more mature political systems in a much stronger position to develop their services delivery industries. And in today’s post-recession global environment, this also includes onshore/nearshore/rural shore locations in countries such as the US, UK and Ireland, which have become more attractive in terms of labor costs.
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?
