The key to achieving innovation, is to nurture today’s young talent, teaching new and creative methods…

Posted in : Absolutely Meaningless Comedy

Asia/Pac: only 60% of the global population…

When you’re looking at the future development of the global sourcing industry, you need to look hard at the diversity of the Asia/Pacific countries to understand from where much of the future demand – and supply – of technology and BPO services will arise. 

With much of the US and Europe’s economic leaders coming to terms with paying for their years of spending excesses, their financial bail-outs and tethering themselves to basket-case economies, the next decade represents a real shift in the balance of economic power.  No longer can enterprise leaders afford to view Asia/Pacific myopically as a single region, requiring a single go-to-market strategy for a “region” that houses 60% of the world’s population.  

When we were developing our research agenda at HfS, we made the concerted decision to focus resources and attention firmly on Asia/Pac, so we can help our clients better understand how to organize themselves for growth across the region though their sourcing strategies.  Our newest analyst at HfS, Andrew Milroy, discusses further some of the incredible diversity across that region.  You can also listen to Andrew discussing key outsourcing dynamics in the Asia/Pacific region with our networking partner, SSON, by clicking here.  Over to you, Mr Milroy:

Notes from a Large Region

I recently attended a briefing detailing APJ results for a major US-based cloud services provider. By the way, APJ is an abbreviation for Asia Pacific, Japan which means Asia Pacific plus Japan. To many, Asia Pacific includes Japan anyway and the letter J does not need to be specified. But sometimes, the letter J is used to signify the importance of Japan which until recently accounted for more than half of the aggregate GDP of Asia. 

I was presented with APJ revenue numbers and revenue growth numbers, and was informed that these growth figures are higher than for anywhere else in the world. I then attempted to interpret this information and came to the conclusion that it was meaningless. Telling me that APJ growth is x%, and that this is the highest in the world, is like telling me that there is a storm in the Pacific Ocean. I want to know about specific parts of the APJ region. In fact, like many, I am particularly interested in what is going on in China. I believe that the vendor in question, like many US services companies, does very little business in China and will struggle to penetrate the Chinese market. Talking about APJ disguises this fact and may lead some to assume that business is strong in China. Right now, the Chinese government is probably creating several Chinese versions of this company. Of course, when I asked if the vendor in question could share its revenue numbers for specific parts of APJ, I was told that this was not possible. 

The notion of placing many, very diverse countries into one region has always seemed very strange to me and not very rational. It seems as though large corporations split the world up in a way that satisfies their own, internal and often myopic view of the world. 

Asia Pacific is a huge area and is made up of an incredibly diverse set of countries. 

From an outsourcing/IT services perspective, it is important to understand the diversity of the region. 

Australia and New Zealand are mature IT markets and the propensity to outsource is high. From an outsourcing perspective, these countries share more characteristics with the UK than with any country in the Asia Pacific region. The combined ANZ economy is becoming smaller relative to other Asia Pacific economies and hence is receiving less focus. Nevertheless, many US-based services companies continue to generate the bulk of their Asia Pacific revenues from ANZ. 

Japan and Korea are also mature IT markets but the propensity to outsource to third parties is relatively low. Japanese and Korean organizations are much more likely to operate captive facilities than to engage a third party to manage business or IT processes. 

India is an enormous offshore destination with a rapidly emerging domestic outsourcing market. Economically and politically, India behaves more like a Western economy than other large economies in Asia Pacific, like China and Japan. Large Indian companies and government organizations have a comparatively high propensity to purchase outsourcing services from third parties. 

The Philippines is the second largest offshore destination in the region but has a disproportionately small domestic market. Most ASEAN countries, including The Philippines, face challenges in maintaining economic and political stability. Furthermore, some ASEAN countries such as Cambodia are among the poorest nations on earth while Singapore is one of the richest on a GDP per capita basis. 

Of course, China is the market that attracts the most interest given its phenomenal economic growth and the size of the economy. In recent years, China has emerged as a nearshore destination for Japanese and Korean captives. However, the government is investing heavily in encouraging foreign and Chinese companies to establish themselves as providers of offshore outsourcing services within China aimed at US and European companies. The establishment of this infrastructure is not driven by current demand but instead by anticipated future demand for services delivered from China. Perhaps of more interest is the domestic market in China. This could potentially be huge. But, it will take time for a sizeable domestic market to emerge for many reasons. One of the main reasons for this is cultural. China is not yet a services-oriented economy and by and large, China simply does not do services well today. There is a sense that you buy products that should work and if they don’t, then you should be able to fix them using your own resources. It is hard to find high quality services in China should you be unable to address a problem with products using your own resources. The other issue that holds back domestic outsourcing is the same as in many other parts of Asia Pacific and that is the relatively low cost of labour. 

So, Asia Pacific has massive variety. It houses two of the world’s three largest economies as well as some of the world’s poorest. It has countries where the propensity to outsource is among the highest in the world and where it is among the lowest. It has the most centrally planned economies in the world as well as some of the most market-oriented economies. In other words, it doesn’t make much sense for these economies to be included in the same category. 

As parts of the region become more influential globally, managers within the region are changing the geographic categories that these use.  Powerful country offices within the region are beginning to refuse to report into regional headquarters and insisting that they should report into global headquarters. If you are running the Chinese operation for a large US-based corporation, you are probably operating a critical part of the business for future growth. So, you will most likely want to report directly into global headquarters rather than regional headquarters in Singapore.   

Andy Milroy, HfS Research's voice from Asia/Pac

In a few years time, the way some large corporations segment the globe will change, Asia Pacific will no longer be a useful geographic category. It is likely to break up into several areas. India and its immediate neighbours will make up one area, Greater China another, ASEAN another and Japan and Korea will be the other.  As mentioned earlier, ANZ will continue to become proportionately a smaller part of Asia Pacific so will probably be thrown in uncomfortably with ASEAN. 

Posted in : IT Outsourcing / IT Services, Sourcing Locations

New York Senator, Charles E. Schumer

Thanks for so many of the comments, calls and emails we received after our recent post discussing “Why Senator Schumer’s proposed call center tax is detrimental and unproductive for the US economy”.  The majority of the viewpoints convey concern and confusion regarding the  implications of the proposals – I’ll let you read on for yourselves.  However, one opinion did standout, coming from a gentleman called Skip Womack, who heads up the US onshore IT outsourcing provider, Advantage Outsourcing, based in Wichita, in the Midwest. 

Now, you really wouldn’t blame guys like Skip for supporting Chuck’s anti-offshoring measures, but it’s refreshing to learn that many of them (and it’s not only Skip), believe the US onshore outsourcing industry – and not only call center – can prosper without such punitive attempts at firms leveraging offshore services:

“This post has captured some great insight into what I strongly believe is a no-win approach for tapping the strength of the US based outsourcing industry. America’s onshore service providers can succeed and prosper without Senator Schumer’s proposed tax legislation and regulations targeted to offshore firms. As noted in this post, many of the best-in-class call centers are located in low cost, high productivity centers in more rural sections of the US. There is no doubt that the US based worker can effectively compete for business and deliver service excellence. Moreover, I see a recent significant shift in the broader, IT Services market as well.

“There is a growing interest among CIOs and business leaders for a new type of outsourcing partner who can tap the strengths of the technology savvy American workforce based in locations where the work ethic and culture foster service excellence in a cost effective manner.

“To meet with this new demand I formed Advantage Outsourcing with Marc Sumner, and based it in Wichita. Being in the heart of the mid-western community, where we believe a handshake still means something, was paramount to our company’s vision. It is our goal to gain community support and create jobs in our market with a highly specialized network of business technology professionals who share our passion for client service, saving our client’s time, money and effort.

“While Senator Schumer may think he is trying to help the American workforce be competitive, I think he underestimates the talent, technology and work ethic that makes the US onshore solution the one to beat.”

Skip Womack is President and CEO, Advantage Outsourcing.

Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services

Now there's some significant innovation potential…

When it comes to achieving innovation when outsourcing, buyers need to identify where real innovation is possible, and where they only really need operational efficiency.  

Innovation is about deploying creative and unique methods to drive new productivity or top line growth into the company.  In reality, some processes have that potential, while others, quite frankly, only offer a means to an end.  

Our new innovation study, conducted in conjunction with our BPO networking partner, the Shared Services & Outsourcing Network, reveals some staggering results from 136 senior BPO buyers, when we asked them where they were achieving significant innovation today, and where they saw the potential to achieving significant innovation within a two-year time frame: 

Determine the ceiling of innovation value 

This data reveals an awful lot about outsourcing today.  Essentially, most business processes can be improved to a certain extent when they are outsourced, whether it be through better workflows, application of new technology, and domain knowledge from experts.  And most buyers today still feel most – or all – of their outsourced processes can benefit from further innovation. 

However, some processes clearly have a ceiling of innovation value that can be attained, which is where the move towards standardization comes into play.  For example, once you’ve got a benefits or payroll solution that delivers the required functionality, is delivered via a hosted / SaaS model, and the provider has the costs and service quality performing to an acceptable level, is there really a whole lot more value your business can gain from them, to increase productivity further and drive new top-line growth?  Cloud Computing and SaaS can further help drive down the operating costs and optimization of delivery, but once you’re happy with the processes and the service, that may be the limit of future innovative value that you can expect to attain. 

Pinpoint where future growth and productivity can be attained with a BPO provider 

Where there is significant opportunity to achieve innovation, is where there is significant room to improve process flows, add domain knowledge, creativity and technology into the mix to achieve impactful business outcomes.  This is especially prevalent with those processes that are often a long way from standardization, and can benefit from consultative business partners to develop a specific innovation agenda (see Part II).  Analytics innovation clearly represents a major opportunity for providers and buyers to work together to make better use of information to drive results, in a cost-efficient manner.  It also encompasses a much greater need for consultative support from the provider.  And it’s the same story as you go through those processes where the innovation opportunity is significant, for example, P2P (massive productivity and cash flow); supply chain (driving product to market quicker); customer–care (driving new income), recruiting (reducing time-to-hire and improving talent selection), and so on.  Each innovation gap tells a story of where the future value lies. 

The HfS Viewpoint: The key lies in determining  and achieving the right balance between operational efficiency and innovative value.  Both are crucial.  

That means, when selecting BPO partners to drive new business value, buyers need to focus on identifying which ones can genuinely help them innovate, versus those who can keep the machine cranking.  In most cases today, buyers are increasingly finding they can source to multiple BPO and consulting partners – those to help them innovate in processes that have real value-potential, and those which can keep the costs down and the operations functioning.  Many buyers today with some BPO experience, are now seriously considering adding more competitiveness to their provider mix to get more creative value. 

On the flip-side, providers need to determine where they add the most value.  For example, ADP has the lion’s share of the managed payroll business – so does it need to broaden beyond that into adjacent processes, for example P2P, that requires greater innovative and consultative support?  Cognizant has a strong portfolio of industry-specific offerings in verticals such as life sciences and banking – does it need to broaden more aggressively into more horizontal processes, such as F&A or procurement?  Accenture and IBM have strong offerings across many of these processes, so where should they choose to invest more of their resources in a tightening market? 

Buyers and providers need to work out a game-plan whereupon they determine what innovation is possible, and how it needs to be achieved.  Some buyers feel they don’t need a hell of a lot of innovation, and some providers are happy delivering standard services with little innovation impetus, beyond a few basic requirements.  In the future, we’ll be drawing up illustrations of the innovators and the operational players.  There is room for both – the key is to determine how much focus to put into each area. 

All-in-all:  Both buyers and providers need to be honest with themselves to determine whether they are truly prepared to invest in either achieving or delivering innovation.  If not, stick to being operationally efficient and stop talking about an innovation game-plan that will never happen.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Finance and Accounting, Financial Services Sourcing Strategies, Healthcare and Outsourcing, HR Outsourcing, kpo-analytics, Procurement and Supply Chain, SaaS, PaaS, IaaS and BPaaS, Sourcing Best Practises, sourcing-change

The new Mahindra Satyam: open for business

Mahindra Satyam recently staged it first analyst conference as a new entity, to announce to industry that its new structure was complete,  and was  a serious IT/BPO services competitor.

Resurrecting itself from the biggest scandal in Indian outsourcing history, a renamed Mahindra Satyam has quietly been going about its business to rebuild trust and confidence in the firm.  In the last year, it expanded business with the base of Satyam customers that remained with the company, despite the scandal, with 54 new customer contracts, although several of these are relatively small-scale engagements.  It has also formed a new senior management team by injecting some Tech Mahindra leadership, in addition to hiring liberally from its competitors.  This new blood joins the existing Satyam leadership that weathered the storm to form an energized and dynamic leadership team.

Noticeably absent was much of the sales glitz that Satyam was famous in the Raju days, with the presentations communicating a more down-to-earth and fact-based approach to services, indicating the engineers are now in charge.

The team was quick to point out that Deloitte has been retained as the new auditor (Satyam was previously using PwC), with KPMG performing the detailed work on restating the financials, which are scheduled be completed by July.  Clearly, the newly merged provider is trying hard to clear the air and start on a new footing, firmly based on solid metrics and hard facts.

All of the employees were very much “on message” that most of its critical staff and clients stayed with them throughout this problem period, despite a few notable terminations, for example, State Farm Insurance. There weren’t a lot of auditable facts to back up that claim, but clearly most of the employees and clients that remain at Satyam are there because they wanted to be. There were also representatives from five clients at the conference, all of which had glowing things to say about the company and the service they had received without interruptions.  This is consistent with our experience from the crisis days, when many customers were happy with their service provision, and opted against contract termination, despite having the opportunity to do so.

The new team has developed an organization structure that has a matrix centered on functional areas and industry verticals. It has also focused on those areas where it believes it has specific domain knowledge and expertise leveraged from both Satyam and Tech Mahindra.  For example, its engineering services (Satyam) and embedded systems (Tech Mahindra) expertise build on the strengths of both firms.  Furthermore, the newly-merged provider demonstrates a list of “fundamentals” that it is concentrating on achieving, which include the following tenets:

Table 1: Fundamental areas core to Mahindra Satyam’s strategy

Satyam Mahindra does not yet have very clear messaging regarding its competitive differentiation, but it did push its strategy that it is highly proficient in enabling the mobile enterprise.  This dovetails well with Tech Mahindra’s expertise in the telecomm vertical and will allow it to expand into other industries , where enterprise mobility is becoming increasingly important. This will be a powerful differentiator, as the enterprise becomes more and more distributed, provided the firm can demonstrate real client success in mobility.

It also showcased its Bridge Consulting acquisition, made in January 2008, emphasizing how management consulting is now a standard capability through which it intends to lead client engagements,  as opposed to positioning it as a specialist offering, such as HCL’s positioning of its acquisition of SAP implementer Axon.  This is concerning, since the industry  has several examples of other firms that have struggled with a similar strategy, such as EDS with its acquisition of AT Kearney,  or the IBM with PWC Consulting.  Mahindra Satyam will have to solve the problem of having Bridge recommend its clients increase its investments with Mahindra Satyam without losing its perceived objectivity.

The three industries it has chosen to concentrate on are BFSI, Telecomm, and Manufacturing, but it also has a unit concentrating on a conglomerate of CPG, Retail Travel, and Logistics. The horizontals are the IT basics of infrastructure and applications, a unit looking at Integrated Enterprise Business Solutions, and Engineering Services which includes programming for imbedded devices.

With regards to BPO, Mahindra Satyam has selected six offerings where it has domain experience, developed offerings and IP,  and  a competitive position in the market.  It is noticeably gaining some traction, for example, creating and delivering knowledge process services, where it has been performing some notably commendable KPO work with global pharma giant GSK.  This is in addition to other KPO services it currently delivers to many of its current IT clients, as adjunct service offerings.

It has pulled back somewhat from the old days of SatyamBPO, where it was gearing up for competing on multiple horizontal G&A (general and administrative) BPO processes, namely procurement, supply chain and accounting.  These are:

Table 2:  Mahindra Satyam’s current BPO offerings

HfS Research believes this is a sensible strategy for the interim, as several of the newer BPO entrants are struggling to compete on horizontal BPO services with the likes of Accenture, Capgemini, Genpact and IBM.  Focusing on KPO work, and some specific vertlcal BPO is clearly a smarter move, as Mahindra Satyam consolidates its position in the market.

The HfS viewpoint:  Mahindra Satyam has weathered the storm, but now it needs to focus on being distinctive, as opposed to following the crowd

The main issue that seem to be of interest to many people, is what Mahindra Satyam has to achieve to return to the ranks of the Indian tier one IT services suppliers , namely Cognizant, HCL, Infosys, TCS, and  Wipro. We believe Mahindra Satyam runs the risk of getting stuck as second tier to these companies if it follows the crowd and attempts to replicate very similar offerings to its larger competitors, without genuine differentiation, beyond operational capability.  It needs to convince customers of its culture and distinctiveness in areas it already has real credibility (for example enterprise mobility, BFSI and life sciences), and how it has harnessed these capabilities to venture into related functions and markets where the firm seeks to gain a foothold.

Currently, the signs are encouraging for the firm: it has not only stemmed, but stopped the bleeding, and stabilized the very serious situation that threatened the future of the whole Indian offshore industry – and not only Satyam’s.  It has decided to concentrate on the functions and industries where it has valuable domain knowledge and IP, and the enterprise mobility theme has real potential whereby to differentiate itself. What it must do now is develop its sales, marketing, and customer interface functions with the same intensity that is has placed on delivery and operations.  Beyond that, it will eventually have to move into the horizontal G&A BPO areas if they are going to get invited to the bigger multifunction deals, which will necessitate future acquisitions and partnerships. 

All-in-all, the signs are encouraging, but this is only the start of a long journey to establish the newly merged provider.

You can download a copy of this HfS Research “Rapid Insight” by visiting our Published Research page

Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, kpo-analytics, Outsourcing Events

In its first industry analyst conference, BPO provider Genpact emphasized its business, today, is much broader than supporting General Electric’s back office and primarily delivering finance and accounting (F&A) services. 

“Tiger” Tyagarajan (COO – see earlier interview) and Bob Pryor (EVP for global sales, marketing and business development ) co-hosted on May 18-19 in Cambridge, MA in what Genpact billed as its first analyst and advisor conference. The event was well attended by all thekey analysts and many of the consulting firms which regularly help clients hire BPO firms such as Genpact.

The headline message was that the majority of Genpact’s business is no longer with its former parent GE (currently about 40 percent). In fact, its GE business actually declined last year as a percentage of total revenues. Furthermore, only a third of its business is now in finance and accounting outsourcing (FAO). As demand in other areas grows, Genpact will continue to verticalize its offerings in areas such as back office processing for financial institutions and healthcare companies, in addition to developing its  IT services, and knowledge process outsourcing (KPO)/analytics offerings.

Genpact’s front and back office client work supports a wide range of industries; mortgage, commercial and consumer banking, investment and wealth management, insurance (property,& casualty, life, actuarial), automotive and pharmaceutical. Genpact’s pharmaceutical vertical provides a diverse range of services, and its banking, financial services and insurance revenue represented 44% of overall corporate revenues in 2009. Its mortgage business has had some interesting changes, which include a new service line in mortgage renegotiation due to recent U.S. government laws.

In addition to the verticals already mentioned, Genpact has grown its presence in the healthcare vertical, as well providing the whole range of services from call center, F&A, analytics, and procurement to large international automotive companies globally.  Many of its clients also utilize Genpact’s  KPO offerings, leveraging MBA types to do all sorts of analyses that enable them to assess and evaluate risk in many different business areas. These offerings have become so popular that they account for 10 percent of Genpact’s revenues.

Genpact’s IT business accounts for approximately 16% of revenues, from ERP implementation/support and IT infrastructure services. This capability allows Genpact to respond to a new phenomenon in the market wherein CFOs are looking to make rapid transformational changes in the operations of the finance function, and pay for that change in a manner that doesn’t hit much against any quarter’s earnings. The solution outsourcing providers say they are regularly asked for is an ERP implementation or upgrade along with offshoring of the F&A function. This deal structure is compelling to CFOs since everything but severance packages can be paid for over time, much like a software as a service (SaaS) deal. Several of these deals have been worked on in the last year, and Genpact has the capability to be considered.

Genpact is also growing its source-to-pay/procurement outsourcing business.  However, it needs to better clarify its source-to-pay partnership and alliance model with ICG Commerce, a significant provider of procurement services.  Procurement outsourcing is clearly a space with a compelling value proposition, not only because of the potential for substantial spend reduction, but also because creative contracting and outcome-based performance pricing, are positioned to allow clients to structure an arrangement with little or no up-front investment or risk to themselves.

Like all businesses, Genpact is working on becoming more efficient and increasing its margin. Its answer is in innovation, productivity, higher-end service offerings, automation, site selection for tax breaks, and spend management.  It also has high expectations for its Smart Enterprise Processes (SEP^SM) offering, a scientific, and granular proprietary approach to business process management which focuses on optimizing process effectiveness in addition to efficiency.

The HfS Viewpoint:  Genpact is addressing critical challenges to standardize processes across its clients, but recognizes the hard work is only just beginning

Genpact has expanded into logically adjacent processes to its core F&A base, and is demonstrating healthy growth.  It is saying all the right things from a potential client’s perspective about its willingness to assume risk and make significant process improvements. 

In its FAO business, Genpact has been at the forefront of the market in recent years, taking on a host of enterprise clients.  However, the main challenge in FAO is to develop process standardization across clients, which will enable further growth and profitability.  Genpact, like its main competitors, has not been immune to this challenge, but claims to be gaining  leverage by sharing resources across its client base. However, in many instances (like the vast majority of today’s FAO endeavors), Genpact uses its clients’ ERP systems and strictly adheres to clients’ controls and risk environments, thus limiting the ability to implement multi-client process standardization .  That is, it has to follow the work sequence, quality checks, data verification rules, etc that the client has always used and they cannot change them with the agreement of the client.

Until it can gain wide acceptance of a largely standardized offering, it will struggle to leverage assets across its FAO clients and make process and cost improvements with multi-client impact. However, Genpact does recognize these challenges and is making concerted efforts to bring  – and gain – acceptance of more standardized processes to its clients.  One of these opportunities to develop process standardization is to provides IT-enablement of processes by delivering a new ERP system to the client. For example, its recent alliance with ERP SaaS provider NetSuite is targeted at mid-market clients which are willing to move to the NetSuite ERP platform and have Genpact service its business processing.  In a similar vein, Genpact has also recently partnered with leading insurance asset provider MajescoMastek.  We believe these alliances are a move in the right direction to deliver more replicable processes to its expanding client base, while providing differentiated offerings to their principal competitors, many of which are caught up in the traditional BPO log-jam of delivering customized BPO services around legacy ERP systems. 

All-in-all, Genpact clearly recognizes where it needs to focus, but it will take another couple of years for the firm to fully demonstrate real business results from many of its new initiatives.  The BPO industry is still largely immature, and Genpact can only move as fast as its clients will allow.

You can download this HfS Research Rapid Insight, by clicking here

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Events

It's all about those regular delights…

We’ve had a lot of dialog (read here) about why most clients aren’t getting much more than they expected, when they signed an outsourcing contract.  And when you have someone one on staff who’s been dealing with the same issues for over three decades, you start to wonder what it’s going to take to drive customers to become genuinely “delighted” with the service they’re receiving. 

 My personal take, based on our extensive research, is that an increasing majority of clients truly want to see some innovation developing in their agreement, but aren’t prepared to upset the applecart to make changes that could spoil their operational status quo. 

Our veteran professor of outsourcing, Mike Atwood, has a simplistic view of what needs to transpire for customers to actually receive regular delights… over to you Mike:

Why aren’t I happy with my outsourcer?

How many times have you heard someone say that all our service metrics are green, but the relationship is red?  This sort of non-specific concern about an outsourcer seems to be as old as outsourcing itself. It has certainly existed as long as I’ve been in the field. I recently attended an analyst conference for a major outsourcer andran into an old friend who I’d worked with at EDS andwe got around to discussing a mutual client. This client wasn’t to the point of saying the relationship was red, but he clearly didn’t believe he was getting the value he expected out of his outsourcing relationship.

In this case, the issue wasn’t that the wrong metrics had been chosen, or that some weasel words in the definitions had caused them to be upset. The problem was in the clients expectations. Those expectations are something that I think fits well into the frame work of the KANO model. (If you aren’t familiar Google it and you will be) . The model says that expectations come in 3 types;  

• The first are “basic” elements, which are things that you just assume everyone knows and you don’t write down.
• The second requirements are the “metrics” that outsourcers, consultants, lawyers, andproject teams spend forever trying to nail down. 
• Lastly, “delights” are those things that you can imagine, but when they happen you are actually excited.

I believe all outsourcers spend most of their time andenergy working on making the commitments around requirements (2^ndtype) that they signed up to in the contract. The smart outsourcers have figured out that the basics are real requirements, and long ago stopped asking “Where does it say that in the contract?” But I know of no firm that takes an organized, deliberate approach to developing delights. There are some individual relationship managers who do, but that’s about it.

This seems to me to get to the heart of the issue about “why aren’t outsourcers proactive?” There are also issues of sunk costs and unrealized depreciation, as well as operational risk, but beyond them all is this desire to have some creative thinking and changes beyond what I’m getting today. By the way, the deeper you get into an outsourcing contract the better the good old days will be remembered!

So what is an outsourcer to do? I’d suggest that every account team needs to set itself a goal of at least proposing, but better yet, implementing one delight on some periodic basis. The team out to have regular brainstorming meetings and the implementation of delights ought to be managed. To many of us this seems let basic account management, client partnering, but somewhere it has gotten lost andcustomers are sitting around wondering why they hired their outsourcer, even if things are all green!

Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Sourcing Best Practises

Scenes from the front row of NASSCOM BPO, Bangalore, June 2010

1) Which country, promoting its datacenter capabilities, do these fine gentlemen represent?

2) Can you identify this statesmen of the BPO industry (I’d just finished speaking, so forgive him his 40 winks…)

Posted in : Absolutely Meaningless Comedy, Outsourcing Events, Outsourcing Heros

It can't be… surely not… is that… is that… a proactive bill that encourages businesses to invest in the US?

When is comes to “bringing US jobs back onshore”, we repeatedly seem to get all sorts of legislation that, quite simply, is focused on restricting our busineses’ competitiveness, when we should be looking at helping them invest in new talent and entrepreneurship, rather than penalizing them for trying to be competitive in today’s global environment. (Read our excellent discussion from last year:  Who’s looking out for the US business these days?)

Senator Charles Schumer’s proposed new legislation, if passed, would tax U.S. companies that transfer domestic calls (at $.0.25 per call) to foreign call centers and require consumers be informed when their call is transferred outside the U.S.  I assume by now most of you know the details of this, so let’s consider what good this does US businesses and the US economy:

1) The cost differential is not enough to warrant routing call center work back onshore.   If the offshore call center is charging $18.00 per hour for each agent, who takes, on average, 20 calls per hour, this only knocks their costs up to $23.00 per agent/hour.  A US domestic call center would likely charge clients $30 per agent/hour (or higher), so the cost differential still doesn’t warrant pulling the work back.  Conversely, offshore providers are more nimble with price flexibility and can easily squeeze rates down if this became an issue.  Benefit to US businesses: none, simply higher taxes.  Benefit to US economy:  additional tax income, but less competitive businesses.

2) There are an estimated 31 million business in the US, according to the latest government stats… er… that’s quite a lot of administration needed?  Even the smallest of firms often use offshore call center support.  The administrative organization needed to manage and audit this number of businesses to ensure compliance would be massive.  You are talking multiple millions of dollars in investment that would likely struggle to be offset by the resulting tax returns.  Benefit to US economy:  none, simply government money wasted on bureaucracy. 

3) Customers will be informed where their call is being taken, which will create negative overtones for businesses.  This is probably the only “effective” component of this legislation, solely based on the fact it will educate the US masses that offshore workers are more competitive that they are, and run most of the call center work these days.    However, what good will this do beyond stir up anti-offshoring attitudes?  Yes, it may encourage a small proportion of businesses to move their work to US call centers, but if all calls are revealing the location, it will simply become an expected procedure and quickly lose its impact (such as the adverse side-effects warnings after pharmaceutical products commercials).  Benefit to US economy:  none, simply the creation of negative overtones towards companies offshoring. 

4) US call centers are very good and becoming increasingly competitive.  The Recession has only helped US call centers, with a lot more work being moved to centers in locations such as North Dakota, Michigan and Nebraska.  Why not use some of this cash to give the US call centers tax-breaks to be more price-competitive, than penalize the offshore centers?  Heaven forbid, why not support new center development in US locations?  Benefit to US cell centers:  a little more clout and a little more price competitiveness, but likely to be minimal overall.

5) Large enterprises may simply route calls to their offshore captives.  Most mid-to-large US enterprises can simply shift call center work back inhouse and run from their own offshore/nearshore locations.   Benefit to US economy:  none.

6) This legislation also raises the potential of retaliation from other countries, under the recent Uruguay Round of WTO Agreements.  Taxing international calls and not taxing domestic calls is a form of discrimination against foreign call center service providers that violates the basic principle of “national treatment”, with the exception of specific situations, such as national security, the environment, local labor, police, etc. Benefit to US economy:  zero, and potentially negative.

All-in-all this legislation is reactive, not proactive.  The old days of outsourcing backlashes are well and truly over.  It’s clear that the way forward is to make the US an attractive location for call center, and other commonly outsourced work-types.  Furthermore, it’s clear that the US needs to be an attractive environment where where firms simply want to function, where they can receive government benefits to help then get established, and to hire US-based personnel. 

Other economies all aggressively support businesses to invest in their own locations (just go through the countries – they all do it, and some very effectively).  This legislation does very little to help US call center jobs and will likely cost the tax payer more in implementing the plan than it can ever accrue from the tax.  Government leaders need to be smarter about “protecting jobs”, which means actually helping to create work onshore, as opposed to scaremongering / taxing enterprises into forced activities that do not enhance their competitiveness.  For example, the proposed “Entrepreneur’s Visa” is a fine idea – it is encouraging top entrepreneurial talent to set up shop in the US and employ US talent, and they will receive  a Green Card.  We need to see more schemes that drive the global entrepreneurial agenda for the US economy, not hold it back.

Posted in : Business Process Outsourcing (BPO)

It can't be… surely not… is that… is that… innovation?

We get some great emailed contributions over here, and “Sumitb” (remaining anonymous for fear of a lynching from the marketing police) has a great perspecitve on some of the realities of today.

While I agree his educated viewpoint represents many of the the realities of today’s innovation “issues”, I do believe our new data reflects operational leaderships’ increasing onus on delivering new and creative ways to find value.  The focus on innovation is starting to shift – and shift quickly.  Anyway, here’s Sumitb’s viewpoint:

Innovation in BPO is more of a must-have cliché that features prominently in corporate presentations and RFP prefaces rather than as a delivered reality which significantly impacts business performance.

And the reason for this is easy to figure, but hard to fathom:

Neither the Client nor the Service Provider really wants it!

From a client perspective Innovation is fine providing:

a. It’s the Service Provider’s dime and time

AND

 b. it delivers the gain without any major internal pain in terms of change management

From a Service Provider perspective,  to paraphrase ‘Me and Bobby McGee’:

‘Innovation’s just another word for something left to lose’ since usually the second or third word after ‘Innovation’ in a BPO contract is the dreaded word ‘reduction’

Enlightened clients have often asked me why as a BPO Service Provider I would drive Innovation if meant reduction of future revenues. At this point, I usually assume a beatific expression of sublime bliss and reverently chant the mantra: Gain-share…Gain-share

Unfortunately – like a lot of mantras – Gain-share ain’t the cure it’s cracked up to be because:

a. The Gain is often difficult to identify and measure in terms of realized business value

OR

b. The outcome of the Innovation often does not result in a tangible business gain – a classic example is improvements in C-SAT often do not correlate to Churn/Conversion/Wallet-share.

It is not surprising that Innovation is becoming the major differentiator for the first time BPO buyer not only because he can select proven BPO innovators but more importantly because he is may be inadequately aware of the real implications of the 3 C’s of Innovation: Collaboration – Co-investment – Change Management.

Even today, BPO is perceived as an answer to a problem rather than a solution for a business objective –i.e. reactive and tactical rather than proactive and strategic.  Consequently, the selected Service Provider is perceived as a provider of services rather than a co-owner of defined business objectives.

It is this set of initial perceptions that shape the structure and remit of the engagement governance as well as tone and tenor of the relationship between the Client and the Service Provider. Consequently the subsequent value delivery – or the lack of it – in terms of measureable business impact and results is almost a self-fulfilling prophecy.

 Bottom line is Innovation is like the Tango – it takes Two.

Posted in : Business Process Outsourcing (BPO), Outsourcing Heros, Sourcing Best Practises