Have you ever wondered what would happen if you pulled together the views, intentions and experiences of over 1000 buy-side enterprises and the real deal industry view of all the FAO engagements to-date… AND THEN pulled this all together into a one hour festive feast of FAO that you can access for free on December 15th?

Have you ever wondered what would happen if you pulled together a motley crew of Americans, Brits, Italians and some French-sounding chap, who claim to be the world’s foremost experts in FAO?

Well then – we have the show for you, featuring the following cream-of-the-crop from the HfS-EquaTerra Actionable Insight alliance:

• Phil Fersht will reveal new HfS Research industry findings from its 2010 FAO deal review and present the views and intentions of several hundred HfS research subscribers
• Stan Lepeak, Claudio Altini and Rick Bertheaud (see bios) will give you the low-down of best practices and insights from their client interactions, in addition to revealing some snippets from their brand new FAO service provider performance study.

If you are interested in attending the webcast on 15th December at 11.00am Eastern Time, email Allison Norman with the subject header FAO webcast, and she’ll set you up.  Be quick to reserve your spot as places are limited.

We look forward to having you with us

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Finance and Accounting, kpo-analytics, Outsourcing Advisors, Outsourcing Events, Outsourcing Heros, Procurement and Supply Chain, Social Networking, Sourcing Best Practises

Learn to assemble a plane in mid-air like Coca-Cola's Bill Johnson (click for more info)

According to our buddy Bill Johnson, who runs global finance Finance Shared Services for Coca-Cola Refreshments:

“Launching a Shared Services organization more than a decade ago was a bit like assembling an airplane in mid-air.”

And to add to the experience, try on-sourcing some of these processes to an F&A BPO provider…  Bill is very involved with our conference partner, SSON, and he adds, “We ultimately prevailed thanks to knowledge sharing on the part of our fellow practitioners, many of whom with which we connected at SSON events. Having now available a formal set of learning materials in a one-stop-shopping format will provide a great supplement to that traditional approach.”

So it’s time to learn-up and sign-on to the SSON Managed Certification® and Online Learning Program, which kicks off its second session next Monday 29th November.

And we’ve arranged for HfS subscribers to enjoy a 10% discount – just drop them an email by clicking here.

Posted in : Captives and Shared Services Strategies, Finance and Accounting, Outsourcing Events, Sourcing Best Practises

New data from the Central & Eastern European Outsourcing Association (CEEOA) points toward more sourcing dollars, pounds and euros being spent in the region. However, reaching the Promised Land isn’t always the smooth ride you may have been anticipating when the train was leaving the station.  Here’s our take…

Global Sourcing Buyers: Tread Carefully Through Europe

Buyers care where their providers are because stability, talent pool, infrastructure and the business and legal environment, determine how successful the relationship is going to be. Central and Eastern Europe is a fragmented region where cost, quality and scale varies.

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, Financial Services Sourcing Strategies, IT Outsourcing / IT Services, Sourcing Best Practises, Sourcing Locations

Did you hear that one about the British geophysicist who became an accountant, ran an African engineering business, has been a COO, CIO and CFO, before winding his way into the sourcing business with Accenture, and subsequently Capgemini, where he helped jump-start their BPO business?

Today, Chris Stancombe has worked in BPO for nearly a decade, and now heads Capgemini’s Global Finance and Accounting Outsourcing practice.   And one of the first things you’ll notice when you meet Chris is he doesn’t mince words… he cuts right to the chase.  And that’s exactly what we wanted him to do with the HfS crowd when we recently caught up to ask Chris how he sees sourcing in this economy shaping up, and get his views of what customers are looking for (or should be looking for) today…

Phil Fersht: Chris, thanks for joining us today. When you look at the market landscape today, how do you sum it up in terms of what clients are looking for, and how things have changed since the recession, in terms of the kinds of conversations you are having?

Chris Stancombe, Global Head of Finance and Accounting Outsourcing, Capgemini

Chris Stancombe: I think it is quite interesting because it depends upon the maturity of the client and of the advisor. We are in an interesting time where there are renegotiations happening. There are some mature clients who have achieved the benefits from labor arbitrage. Now, they are looking for a partner who is going to help them with process expertise and driving realization of technology investments. I think that there has been a fair degree of wasted money invested in technology without really building and improving process. Consequently they believe that they lost the return on their investment. I think with some of the more mature clients and some of the more mature advisors the conversation is much more amicable. “You have got the capability. Yes, you have the global delivery centers. What we really want to talk to about now is your process expertise. How are you going to help us solve our challenges and how can we work together as a partner?”

At the same time, you do also have some clients who are still dipping their toe in the water and still thinking outsourcing is just about “lift and shift”. I think that the trick is finding those clients who you believe have the potential to mature into much more of a partnership relationship because they think that more than just lift and shift is interesting to an organization like Capgemini. We want to showcase what we do. We want to provide low cost process delivery and be an extension of our clients’ finance function. We should be challenging back to them as we work for that organization and we are employees of that organization. At Capgemini, we want our people to have that attitude back to their clients: challenging, supportive and making a difference.

Phil: Okay, so you talked about those who are still undecided that are dipping their toe in the water. What do you think would drive them over the edge and actually encourage them to take the plunge?

Chris: There are many internal things where they are in desperate need for a business case. Maybe they are not getting the quality or the transparency of information that they want, or the strategic intent to reshape their organization. We work with companies like Unilever who are creating global business services and service companies to support their initiatives and create strategic value. They are used to outsourcing. They understand it, and recognize how they bring benefits through partners. Internally, they recognize that they need a strategy, and that they need to be positioned and have the authority to make change in process and technology so they can drive towards that realization. They can eliminate waste if they have the authority to eliminate steps, automate, and use that investment in technology for the better.

Phil: Do you think that the attitude towards finance and BPO now is any different than it was maybe two or three years ago?

Chris: I think that it depends upon the client. It is more accepted and the suppliers are more mature. We aren’t the only people who have matured. There is more separation and fewer horror stories in the marketplace. Some days I feel very positive about it as you meet people who understand. Other days you meet people who it is all new to. So I think there is still some way to go.

Phil: In terms of shared services, a few years ago I think many people in the industry were forecasting the demise of shared services and this truly hasn’t happened. What is playing now for the company that is very invested in shared services operations and do see those companies morphing more into BPO or do you think that the larger opportunity is with those firms that don’t know very matured shared services?

Chris: I don’t see why anybody would invest in a shared-services center – it doesn’t make any sense to me as it is not their core business. However, people do. They think that they have the scale to make it worth their while. We clearly advise them that we can do it for them.  You need to look at your long-term vision for a shared services center. A big part of the benefit is through consolidation but you only get that once. The next part is labor arbitrage and you choose the right price. The ability to continue to provide the right price is something that we will not lose. It is not just the location e.g. Eastern Europe, India, or the Philippines. As the inflation of prices increases in India, the potential for low cost delivery is worldwide. There will be a constant need to reinvent and to move and this is something that an outsourcing partner is much better positioned for.  Once you start looking at these challenges, what is the long-term future for shared service organizations? We have used shared service centers and captives to grow our business model and I think that will continue.

Phil: So, in a nutshell, how is Capgemini different? Why would you see your company, in the marketplace, as being different from your competitors?

Chris: Although we are of European origin, we are a truly global company, embracing different cultures. We are a very collaborative organization.   We have an absolute passion, seeing ourselves as a professional services organization. The qualified accountants that work for me are proud to be accountants and finance professionals. They are not just managers. They want to make a difference and are motivated by driving the industry forward. I think that is a big change.

Phil: Chris, we’ve talked about types of clients that are right for these companies, and it’s getting clear now that certain value propositions work differently with certain clients with F&A services. We’ve also talked a little bit about providers being extensions of companies’ finance departments, so does that mean that you’re selectively choosing which clients to go after now? I think that, until recently, it’s been a bit of a rat-race in the market, everyone bidding on every opportunity. Do you feel that the market now is maturing a bit where you are picking and choosing, that this might not be the right client us versus this is?

Chris: We have a stringent qualification process in which we evaluate whether or not we can win. To those that we qualify in, we match the value proposition that we just discussed giving us a greater chance of winning. If a company is just focusing on the lowest costs, then clearly you can’t change control of that. That’s fine but this is not the way we work so we would disqualify it.  We know the type of cultural fit so we also take that into account.

Phil: You talked a bit earlier about most clients need to have a longer-term vision for their finance function whether they have shared services or not. Coming out of this recession and looking at the new landscape do you see BPO as heavily embedded in that vision still or do you think it’s becoming a bit of a mixed bag?

Chris: Absolutely. There are some enlightened clients that recognize now that they can use BPO not just for the short-term processes, but to help deliver cultural and transformational change into organizations. In most global companies there is a strong desire to operate and be seen by their clients as one standard global enterprise regardless of which entity you visit. They recognize that the discipline of shared services and the discipline of BPO can bring help and resources to drive that change. They can rely on providers like Capgemini to be a partner to help them achieve their global vision.

Phil: There is so much talk about transformation when companies go through F&A in particular, that we have seen so many examples of companies who seem to jump at the low cost option moving transformation further down the road. What is going to happen to companies that don’t transform? They do a cheap BPO and in two years time the CFO can turn and say, “That was great but what comes next?” What is going to happen to those businesses? Do you feel that every provider out there is going to be able to help them get to that next level?

Chris: We have a number of those types of transactions. Within two years the client comes back to you, “That’s great, but what have you done for me lately? You made budget cuts or whatever it was, but what is the step change now and how are you helping me?” I think there is a constant demand from clients to be excited which is not unreasonable. If the client isn’t chasing you asking for more, then that is a pretty stagnant relationship. As you know, we have innovation reports twice a year with our clients and we are constantly investing in assets. We are always trying new things to keep our clients excited and to deliver value to them whether that is around driving efficiency or effectiveness, delivering more value for the organization or increased control. We try to organize around those four things. We also bring innovation in pricing and commercial terms, whether it is FTE based, fixed, or transaction based pricing. We assess what is the right commercial mechanism and the right measures and the key performance indicators that you should be using and how can we better align our delivery to them. We are constantly challenging ourselves and being challenged by the client to get better. Our obsession is to be the best at what we do. We invest in our product offerings, capabilities and in our people to make sure that we deliver value to our clients. If someone has a rather boring and mundane relationship with their provider then that is probably the fault of both parties and they both need to see whether they can do something exciting about it. If the provider hasn’t got good assets, good people and a strong desire to be the best at what they are doing then they aren’t the best provider for that organization.

Phil: When we look at the build out in the IT business, we have very much reached a stage now where clients will tend to use one predominant provider their offshore work, but then bring in a different provider to integrate it, to do more of the complex work and be more aligned with the business. Do you think that is going to have to happen in F&A eventually where if you are using a low cost offshore provider to do a bunch of back office but they are clearly not up on the skills and the expertise to transform and drive innovation, that the buyer is going to have no choice but to look into bringing in additional talent from other providers?

Chris: I think they should be. It is interesting that you talk about that. To some extent when we structure solutions, we have an industrialized piece so we are tempted to look at finances. You record transactions and that should be very industrialized and then through the reporting period function you report those transactions so that you’ve got some data and current information. Then you analyze that information to produce some insight. We take some action that then delivers a different outcome. It should be done as efficiently and effectively as possible. You produce a receivables report; someone should look at it and say, “Okay, where do I now prioritize? How do I improve my collections?  How do I get my cash in quicker or more cash in the door?” You produce lots of insight and pass back to the collections group, who then drive that improvement outcome. We segment our view of the world in that way.

Phil: Do you feel that you are having more technology conversations with the clients now when you talk about F&A? How can you bring in new financial systems or upgrades? How can you build analytics and dashboards? Do you feel that is very much part of the conversation now or do you still feel it is a process conversation first and the IT stuff comes in later?

Chris: It is interesting. They want to do the process issue first. People still think about what is your cost in India versus your cost somewhere else and then deal with it. Then you get, “How are you going to help me with my processes, how are you going to drive that change?” On the more mature conversations we have the command center concept where we standardize all of our dashboards. It’s all about enabling different multi-shore delivery centers through lots of communication and lots of reporting. We use standard KPIs, and standard definitions in every different center that we work. As you know, we have created a  global process model to enable standardization of delivery and consistent measurement from one center to another because you need to know the stop points of the transaction and all activity within a process. So we have invested quite heavily in standardization of definitions and underpinning enablement workflow modules for each process to provide visibility, which makes sure we always understand how we do those things and where we should focus our efforts to improve.

On the Cott Beverages engagement that has just gone live, we took the client’s new SAP build, and in parallel, used the global process model and worked with our technology services [TS] colleagues to build a new SAP platform for the client. We went live on that in less than nine months from start to finish. The benefits that we move into the BPO situation in that scenario pay for the TS bill. The whole story on Cott is pretty strong and it’s what clients are looking for. In such tough business conditions you have to contemplate a little more risk. Obviously they have pushed that risk to us, we contracted for that risk and we will deal with it. We used some SAP template work that TS had already invested in. We used a metal process model to deliver process designs that were built into it so the whole process was accelerated. We don’t need to train our people on the old processes because we switched straight from the old process to the new process. We used our finance academy approach, to train people on the new process model and it was done. I remember when I started ten years ago that transformational outsourcing was a big buzz word. No one believed in it. I think it’s here. We built a process model and took over 300 roles on the client side within nine months delivering service across Europe. The client released some of their 300 people. We brought 200 people in India. So it worked out a business case itself all through this transformed process model. Not lift and shift and then fix it. There is another example of a company that had a strong desire to make change happen quickly.

Phil: So finally, Chris, if you could have your time again… you are graduating from the university… would you choose to do this or do something different?

Chris: (laughs) All right. I have no regrets in my career really. I like working cross sector and I like working with very bright people. I like being at the forefront of my profession. So when I think about everything I could have done, I probably should have left industry sooner. But, you know, I learned a lot, I did a lot, and traveled a lot, lots around culture and how change happens. I think I probably should have spent a little less time with one industry sector. Multi-sector working with very bright people is very exciting, very interesting.

Phil: Excellent – that was a very good answer! Thank you very much, Chris, for the interview and we look forward to sharing this with our readers.

Christopher Stancombe (pictured above) is Global Head of Finance and Accounting BPO for Capgemini.

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Finance and Accounting, IT Outsourcing / IT Services, Outsourcing Heros

Posted in : Absolutely Meaningless Comedy

In today’s sourcing business, many people just love to evangelize on the realities of the cut-throat global business climate to greedy executives, eager to hit profitability targets.

However, the one time I can truly tell you this is a highly sensitive and (often) harsh business, is when I have had to trawl the offices of organizations to spend time with staff whose jobs were clearly on the line.  I had to reassure them they had to “get on the train” and go through a detailed activity analysis of their day-to-day job, so we could document how to replicate some (or all) of their tasks for someone to conduct in some lower-wage location.  I can honestly tell you my experiences in the field will stay with me thoughout my career… and beyond.   It’s one thing actually firing someone – that’s a 15 minute cut-and-dried conversation –  however, convincing someone they have to help train their potential offshore replacement is another conversation entirely!

Our new contributing analyst, Deborah Kops (visit her website at www.sourcingchange.com), gives us some practical advice on how to tackle these change management issues with sensitivity and practicality.  Over to you, Debs:

Outsourcing Change Management: No fun for the soon forgotten

Most religions have a name for the deliberate avoidance of association with, and the habitual isolation of, an individual or group. Jehovah’s Witnesses call it disfellowshipping; Jews call it cherem; Wiccans call it reculement, and the Amish call it medung, or avoidance.  Whatever it’s called, the implicit ostracism that those who are politely called “affected staff” feel as a result of outsourcing is destructive—to them, to the retained staff, and ultimately to the success of the sourcing.

Deborah Kops, Contributing Analyst, HfS Research (click for bio)

Whether our jobs have been outsourced or not, many of us have experienced the workplace version of shunning. The scenarios look something like this: you’re on someone’s list for termination; or Sally got the promotion rather than you; or the organization’s being downsized and there is not an easily identifiable role for you. Sometimes we know intuitively because the boss and his henchmen become less cordial, or cannot look you in the eye, or omit to invite you to the weekly meeting; in other situations, you’ve been told you might be restructured but the jury’s still out. In any event, if you show any distress or your performance declines, management quickly uses your behavior to justify whatever decision they have made about your future. And that very same management writes you off their proverbial books, already moving on to the next business challenge.

Outsourcing is the only business change I know where employees are told their jobs are moving offshore, yet they are expected be good really sports and continue to process checks/answer calls/manage claims until the day they are escorted out the door, personal effects in arms. And our managers think their “restructuring” tasks are over, and it’s on to making sure the transition doesn’t go pear-shaped.

While we all sympathize with the pain of the affected staff, few organizations train their managers to deal with the fine art of making teams redundant and keeping productivity high in preparation for a change in business architecture like outsourcing.  And the task isn’t something we can toss over the transom to our HR partners, which is the common outsourcing change management technique. They are not walking the office each and every day, dealing with visible angst, dwindling morale, loads of coffee room chitchat and challenging knowledge transfer.

Without the right approach to redundancy, transformation leaders are drained of emotional energy, and respond inappropriately. The retained team closely watches  management’s behavior, and develops a lack of trust. The departing staff demoralizes those who are staying, and trash the corporate brand. And processes have the potential to break down, performance declines and knowledge transfer is subpar. But by following a few simple rules, the pressures on all parties can be reduced.

Want to do a better job? Click here to download your freemium copy of “Outsourcing Change Management – No fun for the soon forgotten“

Posted in : Sourcing Best Practises, sourcing-change

Lisa Ross

Who has much time these days to read big clunky whitepapers, or (dare we admit it), long-winded esoteric research reports?

People are increasingly demanding their daily serving of content served up in more digestible and less headache-inducing chunks, as our latest industry-wide study reveals, where more than 1000 study participants across the sourcing industry have voiced the increasing importance of blogs and social media as one of their preferred learning tools for Cloud Business Services.

Lisa Ross, our Senior Vice President, Market Development & Operations, has done a lot of thinking about what we call “social sourcing.” So we thought there was no better place than here on the blog to have her air her views about the importance of blogs and social media to the sourcing industry.  Lisa, take it away…

The Social Sourcing train is leaving the station. Are you on it?

The proof really is in the pudding for us all to see –just ask the professionals who recently took part in the Cloud Business Services study we ran jointly with The Outsourcing Unit at the London School of Economics. As this graphic shows, blogs, especially, are already mainstream social mediums for education to guide major strategic investments.  And analysts are the most sought-after information sources too.  (Good thing that we, at HfS Research, have both a media brand and a research powerhouse – lucky break!).

Click chart to enlarge

In our industry, advisors, providers, and other analyst firms are trying to hop on the social bandwagon – visit many of their websites and you’ll find all sorts of takes on social sourcing reality, like Share, Stay Connected, etc.

The huge challenge, however, is that they continue to struggle with positioning themselves as thought leaders:  What should I say?  How often should I say it?  Who am I even talking to?  Will anyone read past the title? And…in the end, will anyone really care (especially sourcing buyers)???

Having the courage (operative word!) to say what you mean, the conviction to back up your perspectives, the intelligence to make a bit of sense, a twist of humor, and the audience that really pays attention (easy to analyze via analytics) are challenges that Horses for Sources / HfS Research has conquered – and an additional reason why I joined here.  I see huge benefits in sharing energy, innovation, collegiality…and a bit of smarts sprinkled in…all feelings of “fitting in” to a larger whole that HfS’s social networking scene has created.  Having a voice, a collective platform, a safe environment, and a listening ear – with a global reach – is something that no other firm in our industry has been able to crack.  The last time I looked, 37,000 others agreed and opted to sign on here!

You can ignore it, rebel against it, say you have no time for it, or think it’s just plain dumb. BUT…c’mon, the reality is that you can choose to either accept our pop culture reality and be part of a broader community than just your own, or you can run from it back to your nest.   The data doesn’t lie, and it’s clear which industry stakeholders are struggling to reach their audiences, and those which are getting the message across.  Clearly consultants and advisors, whom I have had extensive experience with during my career, need to do a much better job of educating both the IT and business buyer, when it comes to leading edge issues, such as the Cloud.

Yes, you can run and hide OR try to go it solo, but, at the end of the day, when you ask yourself “what did I do today to make the world a better place?” you ought to consider having tapped into a larger social network – at least once – to find the answer. I’ll bet once won’t be enough.

Lisa M. Ross is SVP, Market Development & Operations at HfS Research.  You can reach her at lisa dot ross at hfsresearch dot com and Tweet her at @LisaRossHfS

Posted in : Cloud Computing, Social Networking

This morning I nearly choked on my cornflakes to the incredible revelation on CIO.com from analyst firm, Gartner Group, that outsourcing doesn’t save money.  Everything I thought I’d learned over the last 15 years suddenly went up in smoke:

In Sydney for the Gartner Symposium, analyst Linda Cohen spoke to CIO Australia and said the idea that outsourcing is a problem solver is not always the case.

“We ask our CIO clients to consider outsourcing as an operating strategy rather than a problem solver,” she said. “Historically, outsourcing has been a bandaid and a way to fix the problem.”

Cohen said another misconception CIOs may have about outsourcing is that it will save the business money over a period of time.

“The number one reason they choose to outsource is this theory that they can lower their costs… honestly, history tells us the act of outsourcing doesn’t save money,” Cohen said. “The real problem is how do you sustain the lower cost to operate?”

So, let me get this straight, you do receive a lower cost to operate when you outsource, but face a challenge to sustain it?   That’s a little strange, because when we spoke with 50 of the largest enterprises across the US, Europe and Australia recently, they all outsourced IT to save a lot of money, and the majority were looking aggressively at increasing their outsource scope to find further savings, while others were pretty content with the status quo.   Noone felt their firm hadn’t benefited financially from the exercise, and those that had initial teething problems had largely got on top of them.  And most of them actually liked the value and the access to specific software expertise they received from some of their providers – and their only real complaint was that they wanted more.

Moreover, when we spoke to another 209 enterprises earlier this year, 52% were planning to increase their application outsourcing scope this year, which also jives with the stellar growth results of many of the leading IT services providers this year:

In all honesty, I know where Linda Cohen was going with this, but – c’mon –  most enterprises moved a good chunk of their operational ADM work to low-cost locations years and years ago, and are way beyond saving money on the operational stuff.  Their challenge is to align innovative IT with the business to drive productivity and revenue, to explore Cloud Computing and smarter governance / multi-sourcing models.  To advise CIOs that “the act of outsourcing doesn’t save money” is simply WRONG.  Honestly, Linda…

Posted in : Confusing Outsourcing Information, IT Outsourcing / IT Services

Who's prepared to step up to the plate?

No one single provider can claim to have impacted the world of BPO with such verve and focus over the last five years, than that of Genpact.

During the “boom” years of Finance and Accounting BPO adoption, between 2005 and 2008, the Gurgaon-headquartered firm aggressively pursued nearly every large deal on the table, with a no-nonsense approach of lift-shift-transform BPO at aggressive pricing, bolstered by the GE Six-sigma and LEAN heritage and branding.  However, the mindset-shifts of the Recession, combined with a more knowledgeable buyer, more credible competitors, and the ability of several Indian-headquartered and Western providers to compete more aggressively on price, have conspired to create a much more challenging environment for any provider competing for BPO business.

Most importantly, serious questions are now being asked of the leading service providers jostling for marketshare and position in the BPO business.  Some providers are growing frustrated, and beginning to question whether they got their approach to BPO right. And the current speculation over Genpact ‘s future is forcing many of the BPO wannabes to gaze deeply into their navels to decide whether they want to get really serious about BPO.  There’s been a lot of chest-beating, a lot of marketing, a lot of huff and puff right across the industry… now’s the time to see who’s really going to step it up.

Our view at HfS Research is that if any of the emerging service providers want to have a billion-dollar-plus BPO business that touches all industries, horizontal processes and provides a platform for that next phase of growth, once the low-hanging IT projects start to dry-up, they need to decide whether they have the appetite to swap-out a sizeable portion of their stock to acquire Genpact.  Because if they don’t, another party eventually will, and there aren’t too many billion-dollar BPO firms left which will provide instant top-tier status and massive BPO global scale.

And if that acquirer doesn’t come from the sub-continent, if could well eventually come from a Japanese, European, or a Western business.

Here’s why the issue over Genpact’s future is so important to the future direction of the BPO industry:

Recent BPO market entrants are primarily IT services providers, which focus on rapid “penetrate and radiate” strategies.  They are approaching BPO with the same strategy, and finding it much more resource-intensive, slower-going and lower-margin work.

When you look at the huge success of the leading offshore providers in the IT services market over the last decade, they based their growth strategy on starting small and doing whatever the client wanted to grow their “real-estate” within their back office.  IT services providers such as Cognizant, Infosys, TCS et al. would quickly increase their presence within major global enterprises from 10 to 50 to 200 to 500 to even 1000 FTEs working on software support and development work – and with alarming pace.  These providers were smart enough to realize they would quickly gain institutional knowledge of their clients’ processes and make it almost impossible to be displaced in the future.  They  brought offshore IT work into the corporate mainstream and branded India as the leading destination for low-cost programming work.  To quote the CIO from a large German corporation recently “Ve prefer to use Indian firms for programming – that’s vot they do”.  Kind of sums it up, right?  However, BPO’s different…

The leading offshore IT providers are quickly realizing BPO’s a very different ball-game and may be forced into making a much larger investment than they ever intended, if they want to develop any BPO business of significant scale.

With the exception of a few transactional-based processes such as invoice and payables processing, order management, indirect procurement, the growth in future BPO areas is dependent on talent that can’t be picked up a en-masse from University training programs, or from infiltrating the campuses of neighboring lower-tier competitors with drive-by recruiting sweeps.  With much of today’s BPO engagements, providers are creeping from 5 to10 to 15 to 20 staff in their clients… it’s at a completely different pace and scale,  as the requirements are often more customized, more specific and it’s simply harder to find, train and retain the talent they need.  They are simply not finding anything like the margins and growth that their IT business have enjoyed over the years.  However, if they want to have a shot at winning the larger-scale engagements today, they will simply finding themselves running out of time to get a foothold in that game, if they persist with a “penetrate and radiate really slowly” strategy.

The Bottom-line:  There aren’t many entry points left to get into the top-rung of the BPO business.  Genpact may well be the last lever to pull.

All the leading providers have, or claim to have, both horizontal and vertical BPO capability.  They know that having deep processing competency is incredibly “sticky” for growing deeper client footprints, and can help them develop institutional knowledge and comfort with clients, to remain with them for many years to come.

However, gaining BPO competency and scale isn’t like IT – there simply aren’t the hoards of dying European and tier 2 providers eager to get picked up.   There’s really only Genpact left standing at the top-end, Xchanging and WNS in the mid-tier, and EXL, OPI and a few select others as the only really viable pureplays that will give an immediate leg-up in terms of immediate BPO scale and competency.  Moreover, the old “let’s hang around and pick up a juicy captive” won’t wash anymore.  Everyone’s run the rule-book over all of these, and there aren’t many worth considering, that make a lot of financial sense or provide suitable client scalability.

So this brings us back to price-tags and sensible investments.  There haven’t been many past BPO investments that have been very successful – all have involved painful transition and slower-than-expected business growth – a fact that has put off a lot of firms making aggressive acquisitive BPO plays in recent years.

However, Genpact is another proposition entirely.  It has massive BPO footprints across many major enterprise clients.  It has global scale, industry competency and a good operational track record with clients.  It really does represent one of the last major entry points for ambitious providers to make a “big bang” play into the BPO space.  The big question we ask now is – who has the appetite, and who is serious enough about this business, to make it.

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, Financial Services Sourcing Strategies, Healthcare and Outsourcing, IT Outsourcing / IT Services, kpo-analytics, Procurement and Supply Chain

Still struggling to find that right governance model?  Well you’ll probably still be after listening to this, but they’ll at least validate all the things that you should be doing, which you  know you should probably doing, and are probably not, for whatever reason, but would love to if you could just get your boss to listen to you.

Or maybe your didn’t know what you were supposed to be doing, and will be guided down the path of enlightenment when you listen to HfS Research’s  Esteban Herrera and Stan Lepeak from our research partner, EquaTerra, when they discuss “Outsourcing Governance Models: Which One Fits Your Needs?”

Click to hear Lepeak and Herrera's Podcast – "Outsourcing Governance Models: Which One Fits Your Needs?"

Click here to listen to the podcast:
Outsourcing Governance Models: Which One Fits Your Needs?

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, IT Outsourcing / IT Services, Outsourcing Advisors, Outsourcing Events, Sourcing Best Practises