Meet us on our travels…
We’ll be making the rounds over the next month, and would be pleased to meet with folks along the way:
London: 15th-23rd May
Edinburgh: 23rd-26th May (European Shared Services & Outsourcing Week)
Nice: 27th May-7th June (actually on holiday, but thought I’d add that in just to make you jealous)
Bangalore: 8th-11th June (NASSCOM BPO Summit)
Boston: 16th-30th June
Posted in : Uncategorized
One of our greatest anomalies has been to run a blog on global outsourcing dynamics for three years and never actually feature a single contribution from anyone at IBM.
A surreal sourcing paradise: IBM's Bill Payne takes it all in on the Peak in Hong Kong
Well, the cycle had to be broken at some stage… and with who better to do it, than the most down-to-earth and outspoken IBMer you’re ever likely to meet: step up Bill Payne. Bill is IBM’s Vice President for Global CRM and Industries for Managed Business Process Services (that’s IBM speak for “vertical BPO”).
Anyhow, we managed to drag Bill away from tendering his beloved vegetable patch to share with us his current experiences of the market and why he’s having another day in paradise, despite the surreal experiences he has when someone stries to sell him their captive center…
Phil Fersht: Bill, how on earth has the global sourcing world changed since the recession? From a macro-level, what is different these days?
Bill Payne: Isn’t there a song and a movie called “Another Day in Paradise”? 😉
Lets not forget that in q4 2008, and q1 2009, the market was the proverbial rabbit in the headlights and deals basically dried up. We all had our doubts about what the future held . At the same time, the Indian and Chinese economies never went near a recession!
The biggest change in h2 2009 and 2010 so far is more opportunities in both IT and BPO and more urgency in the US market. I also think in the companies that have found success in outsourced processes are going to go a lot further: more scope, newer processes, bigger plays. This is really a market where we’ve barely scratched the surface of potential and the smarter guys will keep pushing boundaries.
I think we are now at the wave front of a lot more process outsourcing
Phil Fersht: Are sourcing decisions being made any faster? Are processes being evaluated for outsourcing different?
Bill Payne: Sadly, it seems that there is little real change in decision velocity. We still see some very protracted procurement schedules. Intuitively, you’d think the recession would have driven some dynamism into the procurement process! What greater lesson could there be to teach companies that they need to be able to quickly reduce costs, quickly scale, and really take control of their bottom lines?
Unfortunately, there is still a cultural barrier in many companies opposed to Outsourcing process. Maybe we’ll finally see some real change when there is an SVP of Services in every client whose job is to manage Internal service across the board. Then you will have service strategy as part of a company’s DNA. I think that will change the culture faster than any other single impetus.
Overall, despite a lot of good momentum and energy, we still haven’t quite built a Smart Planet just yet!
Phil Fersht: Being in the UK, what specifically have you seen change over there? How is this contrasting with US firms and other regions?
Bill Payne: I may reside in the UK but given my global role in IBM, I’m able to take a pretty comprehensive view of the dynamically changing world outsourcing markets. I see more urgency in the US to get cost out, and move to “on demand” contracts that allow flex in up and down turns. I see more balanced shore decisions for location of service centers and more interest in industry solution outsourcing.
In the UK, I see Public Sector as the area with some huge opportunities and contracts on the horizon. There is a crushing need to gain efficiency in both local and national government. In other European countries I see no real change in consideration or speed of BPO execution right now. In Asia, we see trends similar to the US. In the Growth markets of Brazil, Middle East, China, India, and Africa we see some very large potential opportunities across BPO, especially in wider Industry solutions that have a transformation agenda.
Phil Fersht: How does this altered landscape impact a giant provider such as IBM? What opportunities and challenges does it present to the firm?
Bill Payne: In many ways it’s Business As Usual, but in many ways it’s a new BAU.
In our traditional view, I think the BPO market is still there to grow substantially whether it be in the traditional BPO towers or in the traditional BPO markets. Where the market has changed however is in both what clients want and where they want it.
I think the winners will need a balanced shore strategy: @home, on shore, near shore and far shore. We will need to take an industry solutions perspective to deliver service value, and we will be able to provide a long-term secure strategy and financial platform for clients.
There are new spaces in emerging markets and many new processes to outsource.
I think the biggest challenge we have is to be selective and choose our service growth areas and markets with care. We have to drive a “Smarter” agenda with our Smarter Process and Smarter Tools initiatives.
We have to choose which deals to pursue. We have to be able to show clients that we deliver value long-term and we are committed to them. We do not want to engage in badly shaped deals that either can’t be delivered or give poor value to the client or break our financial model. We take pride in doing things right. It serves none of us well in this business to have deals fail for either poor execution or poor commercial arrangements. I think all providers have a duty to their clients and the profession we are in to behave in a controlled and never reckless way!
Phil Fersht: How do you see the competitive landscape across both ITO and BPO playing out with the impact of the crisis? Do you see more M&A between providers, or more cautious investments?
Bill Payne: Undoubtedly there are many M&A opportunities. There are many captive acquisition opportunities. Investment cash talks in the market. However, the financials of a number of IT and BPO providers make sobering reading if you go deep into their P&L and some have made some very expensive acquisitions
I think its tough to realize the benefits of cost reduction/efficiency in an acquisition case, but that’s generally small beans to the ‘miss’ on the revenue growth lever on most acquisitions in this market. It is all too tempting in the heat of an acquisitive pursuit to show an exponential growth curve based on the market size and estimate of the impact of the transaction. It rarely turns out that way.
So, given that there are a number of burnt providers out there, caution may prevail on the A side. On the M side it’s quite possible that a merger will take place within the mid-size provider group. It’s not surprising as they are generally the most cash strapped.
Phil Fersht: You mentioned in the G8 summit at SSON that many captives are currently being shopped on the market – and many unsuccessfully. How do you see those unsuccessful captive sales being resolved – will customers phase them out and move onto BPO models, or just stick with what they’ve got and eliminate more cost out of them?
Bill Payne: I’ve always thought the selling the captive debate to be slightly surreal! The purpose of creating a captive in most companies was to reduce cost and increase service to an internal organisation. Only the really good corporations have tried and tested their business case to ensure they got what they wanted, i.e., a very efficient shared service environment!
However, now try to translate this into a saleable asset somebody else would want. In many cases the captive SSC has been built on internal processes not necessarily ‘industry standard’ or even optimised processes. This leaves all the providers in a dilemma: what value is there in someone else’s processes, buildings, desks chairs, computers, and people? It doesn’t take much of a spreadsheet jockey to calculate that the vast majority of captives warrant little or no cash premium in a deal to the client, and actually if you are a major global player already, you probably don’t need the infrastructure.
There may be a case for a platform acquisition and the inherent IP, however, never underestimate the work and cost required to convert an in-house tool into a market ready application.
If you are a medium sized or regional player it may make sense but buyer beware: I don’t see many pronouncing that they met their growth target by buying a captive in BPO world!
Phil Fersht: And finally – what advice would you give to young executives today looking to develop their careers in global sourcing?
Bill Payne: Learn about Transition and Delivery. Do the hard yards! Go work in a delivery centre, learn the ropes, learn the processes, tools techniques, and metrics. That way you can add value to every client.
Most importantly: always act with integrity. Deliver what you say you can, deliver and show the benefits, and give the client what they want. These attributes are how you make your own company successful. Be candid, open, and straight.
Phil Fersht: Bill Payne, thanks for your time: our readers will appreciate reading your views
Bill Payne (pictured above) is VP for Global CRM and Industries Managed Business Process Services at IBM
Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, IT Outsourcing / IT Services, Outsourcing Heros
We are excited to announce a major development in our journey to be a truly distinctive analyst voice in the global services industry. Today, we are officially engaged in a research alliance with global business advisory firm EquaTerra to develop a new category of data-driven research, ‘Actionable Intelligence’.
Actionable Intelligence
We are combining the immediacy of social networks with industry and advisory insight to provide technology services and BPO executives knowledge for improved decision making. We are not merging our organizations, moreover, we are dedicating resources to develop research that we believe will fill intelligence needs in the industry that are currently under-served. You can read the full press release here.
As new research clearly demonstrates, enterprise sourcing and shared services practitioners are increasingly using social networks for insight and knowledge-sharing, and we feel we are creating a compelling platform to take actionable research to an entirely new level with this alliance.
On behalf of HfS, I would like to issue a personal thank you to so many of you who have been coming here over the last three years, now we have reached this exciting point in our evolution. It has been your willingness to engage in our research studies, engage in our discussion and provide so many views and experiences, which has made it possible to take actionable, rapid intelligence and insight to an entirely new level. Combining the talents of our analyst team and our quantitative research, with such an innovative advisor as EquaTerra, is a testament to the power of social networks, and the collective desire of our community to share knowledge and constantly seek to improve everything we do.
Why are we forming a research alliance?
Enterprises are in desperate need of rapid, actionable, forward-looking intelligence. HfS provides a unique platform to rapidly study enterprise and industry dynamics, with a proven team of research analysts. EquaTerra has unrivalled advisory talent close to the enterprise buyer, which lives and breathes sourcing issues every day. Delivering joint research products will provide enterprise with the insight they need in a market that is currently moving at a relentless pace. There has been a strong desire between our firms to increase our level of collaboration – and you may recall the recent paper we co-wrote with EquaTerra’s Bob Cecil.
What are the added benefits to EquaTerra and HfS?
EquaTerra will have access to HfS research depth and vast industry network; HfS has access to key EquaTerra advisor talent and global resources to augment its research.
What will the research products look like?
We will be rolling out some new research products we are co-developing, that will provide rapid, immediate insight and knowledge. These research deliverables will cover buy-side strategies and tactics, service provider performance and satisfaction studies, industry-specific dynamics, and market analyses in key and emerging services and technology domains.
A sneak preview of what you can expect to see unveiled include:
• “Rapid Intelligence” Sessions: designed to provide clients with highly impactful insight, advice and data, supported by combined analyst and advisor experts from both HfS and EquaTerra.
• Expanded Industry Pulse: HfS will jointly develop and co-brand EquaTerra’s existing, established and very successful Industry Pulse survey to encompass an unprecedented view of buyer dynamics, advisor insight and service provider intelligence.
• Service Provider Performance and Satisfaction Studies: HfS and EquaTerra will jointly develop and co-brand these across some critical market domains, such as ITO, Cloud services, Recruitment Process Outsourcing, Multi-process HR Outsourcing and Finance & Accounting Outsourcing. EquaTerra has already been delivering these studies in Europe. We will broaden these into new domains at the global level.
• Joint market studies: We will also be combining resources to explore emerging market domains, such as real estate management, and established markets, such as public sector and financial services
How does this impact existing research clients of HfS?
There is no change to HfS’ existing subscription research services, simply added value and insight provided from EquaTerra. The new products that both HfS and EquaTerra are rolling out are adjunct data services that clients can choose to purchase. Similarly for EquaTerra clients, there is no change to services beyond the added enhancement of HfS research and the ability to select the new adjunct services.
What is the proposed duration is this alliance?
The initial agreement is for one calendar year. There is no co-ownership of equity, with both parties continuing to operate as individual organizations.
Does this impact HfS’ independence?
Absolutely not! This is purely an initiative to develop rapid, data-driven actionable and compelling research. HfS will continue to provide independent guidance to clients when seeking to select a consulting firm for outsourcing and shared services support. Naturally, EquaTerra believe that delivering compelling insight will encourage clients to select their services.
Where can I learn more about this alliance?
Drop us an email and we’ll attempt to get back to you soon with more information
Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Cloud Computing, Finance and Accounting, HR Outsourcing, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Advisors, Procurement and Supply Chain, SaaS, PaaS, IaaS and BPaaS, Social Networking, Sourcing Best Practises
Without further ado, let’s dive back into our discussion with Genpact’s President and CEO Pramod Bhasin, who graciously abandoned his golfing buddies to spend time with us. In Part I, we talked about how Genpact survived the Recession; in Part II we delve into how Genpact is striving to retain a unique identity in the industry as a pureplay BPO provider, in the face of increasing competition and the convergence of Cloud, SaaS and BPO delivery models….
Phil Fersht: Pramod, there is a concerted drive from the service provider community, particularly those with an IT services heritage, to diversify into BPO by pushing “productized solutions”, whereby you have the IT componentry underpinning the BPO. My view is that BPO is critical for these offerings, providing the “personalization” that can mould them effectively into client scenarios. Is Genpact pursuing a similar “product” strategy, or do you have a different angle here?
Pramod Bhasin:You and I are in exactly the same spot on this one. IT companies are going into our industry and I am convinced that it is more because of their ability to access customers than it is with “convergence of BPO and ITO”. I am pretty sure about that. Why do I say this? If you look into how companies are running their business process areas, they are running them very separately. It is not that they are running them to get any great traction, which is where you might say there is real convergence between the two at a meeting point across the board. Of course, there are areas, which have meeting points. There are areas like healthcare claims and insurance platforms where you can process a lot of transactions. There are the HR and payrolls platforms that one can use. So, yes, you can have this kind of convergence.
But I think that the vast amount of movement that we do on the process side is very, very different from the IT side. I think that is obvious when you look at the skill levels, and how these people need to be managed. I also think, Phil, that much of it will be left up to the technology companies because there are more of them. Ninety, ninety five percent of the companies in our space are technology companies. So, of course, they are going to say, “That it fits right in with what we do.”
I do think though – and it doesn’t happen enough – but is happening more and more, that there is increasing recognition by companies that managing business processes is still too much of an art. I think that there is increasing recognition also, and it always been there, that people say “if we automate, we’ll eliminate and that’s the only cure”. Whereas, now there is a greater recognition that there are many capital light, efficient solutions for making business processes much more effective and efficient. Those need to be pursued vigorously.
Most companies can’t tell you how good or bad their business processes are. And yet, their health depends upon it. How much money they make depends on it. How they make their money depends on it. This is an astonishing statement in a world where companies have existed for centuries with business schools and everything else. Yet every company tends to be willing to find a simpler process for accounts payable all by itself, that is brand new in their own way. Everyone reinvents the wheel a thousand times. If you ask someone at a C-level how good of a value processes are, they can never give you a quantifiable answer. All they can give you is “good”, “somewhat good”, “not good enough”, “could be better”. That is really a killer switch for a company. Surely, all of us need to know, “I have process XYZ and how well it is doing, what it is expected to do. Is it 50 percent, 80 percent, 90 percent, how well is it doing? That is the real weird thinking of the world.
We want to build a science and it is a real unique opportunity. We then erect a form firmly in the middle of that space that we think is a large vacuum in the world and we want to be among the best, if not the best in the world at managing and improving business processes. This includes analytics, technology tools, enablers, platforms, call it what you want for processes and expertise. That is what fundamentally companies want. Point solutions are over for them. If not, I hope that it will be. They are saying, “I may put a technology tool in here but leaking on the other end of the system is destroying any benefit that I get.”
Phil Fersht: How can customers achieve process innovation with BPO?
Pramod Bhasin: As long as we can do it at the right level, we see enormous recognition of what we are trying to do, in terms of innovation. They may say, “We are not ready yet, we are trying to solve far too much right now, this is too slow in coming”, (lots of things like that), but the fact is, that all of them recognize and say, “This is what I need. I have no means of assessing how well or badly my processes are running. Maybe you can give me something that allows me to do that. This is the only way that I can anyway.”
The point that we make to them is that good work versus average work is not 15 percent. It is five times that. That is the amazing part about this. It is like what they talk about in cloud computing. The benefit of cloud computing is not incremental savings. Maybe there is an analytic solution, but unless you can look at it end-to -end, and we can help, then we are missing the boat.
I use simple examples. One person processes 4,000 invoices per month for the UK subsidiary of a pharmaceutical company. We make it to 6,000 and everybody is delighted and say how wonderful and what a great job, except if you look at the same company in the US, they process 20,000 a month. The difference is huge and that is because nobody looked at how good their processes truly are.
Phil Fersht: We’re seeing the very first seeds of companies looking at integrating delivery components like SaaS, Cloud and BPO to create new levels of cost arbitrage and efficiences. How is Genpact approaching this?
Pramod Bhasin: It is a fascinating area, everybody is shooting at it, everybody is trying to sail it out. I don’t know how many are trying to get it out – or will. We will find out that answer anyway and I hope that many of us will be successful. We are doing the metrics to align the arrangement to work off of the cloud with the ERP platform. As an example, we just signed an alliance with Netsuite, for example, to do exactly this. We think that we can take this platform, wrapped with our BPO offerings, to our clients. I think that we have a better chance of doing that than the technology companies, because we understand processes much more than they do. At the end of the day, the platform is going to be the common factor that will be provided by companies that make platforms really well.
And so, on the ability to wrap finance and accounting, HR support, payroll, back office, in a box: we are already doing this an aggregator in some recent deals. In India, for example, we have become an aggregator of Cloud Computing power by building the F & A, the contract and process management with the company and its various other suppliers, for its entire IT infrastructure delivery.
On top of that we are building HR systems now to deliver HR off a platform, off the cloud, getting increasingly into gain-sharing. We are really coming out and asking “how much of a slice can we take”. That is the amazing part. Companies will look at that and, in fact, to your point on the relentless economy, they like it because they don’t have to pay me unless I deliver something. So, this whole wrap-around of Cloud with software applications, combined with BPO offerings, will continue.
The Betting’s open as to who wins, we feel very comfortable that knowing business processes as well as we do, that we can do a lot. Now, IT companies are stepping in fast. They say that, “Look, we bring in the Cloud, all of the technology capabtilties, and now we have enough business process capabilities also”. But they are different skills. So, I worry that people who try too much integration manage to get themselves blown up in small pieces all over the place. Where will it strike first? Maybe to small-to-medium scale enterprises, so one of the experiments that we are going to get into is how do we tackle the SMEs.”
In the final part of this interview, we ask Pramod about consulting, the future of labor arbitrage, and his advice for budding sourcing execs today… stay tuned
Posted in : Business Process Outsourcing (BPO), Cloud Computing, Finance and Accounting, Financial Services Sourcing Strategies, Healthcare and Outsourcing, HR Outsourcing, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Outsourcing Heros, SaaS, PaaS, IaaS and BPaaS
I swear by Apollo to meet all service levels…
At HfS Research (sorry, we have to start using that acronym – if I have to keep spelling out “Horses for Sources” every five minutes…), we’re focusing our microscope on the healthcare industry with our new research agenda (drop us a note if you’d like more details on our research coverage). Our resident healthcare analyst, Anthony Calabrese, has a pretty decent point of view here…
Healthcare Payors Reshuffle Their Priorities
Unlike medical product manufacturers and pharmaceutical companies’ industries, healthcare reform will absolutely transform the healthcare payor industry. Mandated medical loss ratios, state-run insurance exchanges, guaranteed coverage, and required purchase requirements will restructure the payor’s business models. The trickle-down impact on operations will be significant, shifting priorities in a manner that will eventually impact outsourcing priorities.
Healthcare Reform – The Big Changes
Few people understand the healthcare reform laws signed by President Obama. While the laws are lengthy, the list of major changes is not:
Healthcare companies have mandated medical loss ratios (MLRs) of 85% for large groups of more than 100 and 80% for small groups and individuals. If payors manage to generate lower MLRs, they must refund the difference to enrollees.
What does this mean to the heathcare payor industry?
The changes are substantial:
First: payors can expect to compete for over 30 million new enrollees that are required to purchase insurance. While some of this business will be generated by small groups who previously did not provide insurance to employees, the bulk of the 30 million new enrollees will come through individual insurance. As witnessed by the payors go-to-market implementation of Medicare Part D, the enormous spike of sales and new customers requires significant planning and operational bandwidth. This impact sales and customer service activities, requiring substantial investment in customer service teams, technology readiness, and enrollment processes.
Second: transactional workflow associated with individual enrollment will need to be completely reengineered. Prior to reform, transactions flowed through underwriting groups who priced each individual plan. With the advent of state-run exchanges, insurance plans will be codified in just four basic formulas (Platinum, Gold, Silver, and Bronze) and offered through online exchanges. There will no longer be a need for underwriting to review enrollments for pricing or previous medical conditions. Furthermore, the implementation of federal standards for electronic enrollment transactions will require investment in transaction gateways and internet portals.
Third: state exchanges will likely greatly reduce the role of the middle men – the insurance brokers. Individual will be able to browse available rates and compare products online – and then purchase plans directly from payors. Without the ability to incentivize brokers on the profitability of different enrollees, broker compensation models will change dramatically. However, the need for payors to compete directly changes their consumer sales operations significantly. Expect more direct marketing investment, greater focus on churn management, and larger investments in direct and indirect sales operations.
Fourth: the implementation of state-run exchanges will also incentivize payors to invest in competitive intelligence systems to track competitive activity, similar to the investment of the airline industry to track similarly complex airfare changes and offerings.
Fifth: the implementation of compulsory MLRs will cause a seismic shift in the industry. While the standard calculation to be used by insurers has yet to be written, the current results are eye opening.
The Outsourcing Buyers Should Brace for Strategic Changes
Outsourcing governance organizations will need to reassess existing relationships and the scope of potential opportunities. Here is some advice as to where they should begin:
Prepare for Significant Change Orders and Terminations – One way or another, the law is going to impact existing operations. It will change how enrollment occurs, at a minimum. It may materially change the size of your programs, causing a need to change locations. Existing inbound customer service suppliers may be needed to provide inbound sales support duties. Margin pressures may create opportunities to renegotiate contracts. Regardless, use these changes to your strategic advantage – map the planned changes comprehensively and prepare you negotiation strategies in advance.
Review Existing Contracts for “Change of Law” Clauses – Depending on how your contract is written, changes caused by health care reform laws could be the buyer or the vendor’s burden or could create unplanned termination options for either party. Ensure you understand the your contract’s specific handling of changes in law.
Brace for January 1, 2014’s High Volumes and Low Predictability – New market entry of 30 million new members plus the high likelihood that all existing individual policyholders will change policies will create the need to support sales, enrollment, and backoffice transaction processing operations. How much marketshare your company will win is uncertain – witness the Medicare Part D free-for-all that was accompanied by substantial marketing efforts. Vendor governance teams will need to develop plans to handle the uncertain volumes, recognizing execution failures could lead to acquisition shortfalls and member churn. Whatever happens, the bracing will begin long before 2014 as operations must be mobilized and ready in advance.
Get Comfortable with Federal and State Outsourcing Compliance Processes – CMS leverages offshore subcontacting attestations filed by all payors with a subcontractor (or a subcontractor’s subcontractor, etc.) operating outside of the 50 states or US territories. You need to seek guidance from Federal and State regulators as to how they will review offshore outsourcing, especially given the difficult economic climate and the negative public attention politicians could attract. Develop a comprehensive public affairs strategy and leverage your current public affairs and state regulatory relations infrastructures.
Reassess Outsourcing Opportunities – Payors have been largely shielded from economic drivers of outsourcing resulting in limited outsourcing of core operations and shared services. Furthermore, the complexity of payors’ claims processing systems means that few companies have entered into comprehensive, transformational application development and maintenance contracts. Given fixed MLRs and what is expected to be a highly competitive marketplace, payors should comprehensively reassess outsourcing opportunities in operations, shared services, and IT. Manage transitions in advance of 2014 to ensure success – you have about three years from today to assess, select vendors, negotiate contracts, transition, and stabilize operations. That isn’t much time, especially in critical medical management outsourcing to disease management vendors and direct sales support operations.
Understand Your Service Providers’s Industry Intelligence – Across the industry, vendors are salivating at the perceived impact healthcare reform will cause on outsourcing deals. New service providers in the industry will develop capabilities and existing ones will need to improve the robustness of their operations. Develop strong relationships with your provider and seek to understand their strategies, their process capabilites, their onshore/offshore models, in addition to what they are hearing from your competitors.
We’ll be delving deeper into the challenges and opportunities facing the healthcare payor sector in Anthony Calabrese’s forthcoming report, as part of our HfS Research program
Posted in : Business Process Outsourcing (BPO), Healthcare and Outsourcing, IT Outsourcing / IT Services, Sourcing Best Practises
As we deconstruct the recording of our interview with Genpact’s President and CEO Pramod Bhasin, one factor keeps springing out of the discussion, that makes me realize how far today’s organizations have to go, before they can truly claim they are satisfied that they are maximizing their potential:
“Most companies can’t tell you how good or bad their business processes are”
Cutting to the chase, those providers which can offer services to help clients evaluate their current level of “goodness” or “badness” and execute a plan to reach the next level, will be the ones which win out. Hence, it’s not solely about sitting down with a client and claiming: “this is the best-in-class claims processing workflow”, it’s being able to help that client evaluate whether it’s worth changing what they currently have, and demonstrating the chops to execute on a plan to help them achieve that next performance level. That means providers need real process experts which have the consultative prowess to help clients think through their options.
Essentially, as the BPO industry matures, it’s becoming an attractive playground for many of the Indian IT services giants to dabble their fortunes, as they look to diversify their business models and take advantage of IT-BPO synergies, the onset of SaaS and the future potential impact of Cloud Computing. They are realizing the importance of genuine BPO capability to help their clients consider end-to-end business-IT solutions, and start to attempt answering that excrutiating question: how good or bad are our processes?
For a long time, most BPO deals were essentially dominated by Accenture, ACS (Xerox) Capgemini, Genpact and IBM, with HP popping up occasionally if it fancied a nibble, but today’s competitive landscape is shaping up quite differently with the likes of Cognizant, Infosys, TCS and Wipro looking to claim their piece of the action.
Pramod poised and primed to preach more process…
However, some providers are finding the transition from IT to BPO a greater challenge than they imagined, with the different skill levels and diverse talent requirements that need to be managed. The scalability and training issues for managing process versus programming is a whole new world. But these firms dominate the global technology industry, they are embedded in all the major global enterprises, and as they see their own IT services business commodotize further, many will increasingly dive into BPO endeavors with their clients. It’s inevitable, and it’s already happening.
During Part I of this discussion, Pramod gave us his take on the recession, how Genpact tackled the worst of it to emerge as a more focused organization, with increased investments in industry-specific processes and geographic regions. Recent financial results indicate he’s practising what he’s preaching with solid performance and a positive pipeline for future growth in both the near-and-medium terms. Part II of this discussion (coming shortly this week) will focus on these IT-BPO synergies, the relentless quest for innovation, and how the competitive landscape is developing as a result of the changing environment.
So where is this all headed? Well, if we told you the entire answer, you wouldn’t keep coming here, but stay tuned for Part II, zoning its way shortly to an LED display near you…
Posted in : Business Process Outsourcing (BPO), Cloud Computing, IT Outsourcing / IT Services, Outsourcing Heros, SaaS, PaaS, IaaS and BPaaS
The opportunity for the service providers to help enterprises and their key talent achieve progress across these four factors is undeniable: some will step it up and become true consultative partners for their clients, while others will remain where they are and hope customer requirements will never really change. Tomorrow’s winning enterprises already know what they have to do, and they need service partners who can help them achieve their goals.
Genpact's President and CEO, Pramod Bhasin
In order to help us grasp how the global provider community is responding to this new relentlessenvironment, we have engaged a number of CEOs of the leading providers to share with us their frank views of the changing world, how they survived the Recession, and how they intend to shape their businesses to support tomorrow’s winners.
To begin this series, we caught up with Genpact’s President and CEO, Pramod Bhasin, and are delighted to feature some his thoughts from a very engaging discussion…
Phil Fersht: Good evening Pramod – thanks for taking time out to talk with Horses for Sources. Can we start by discussing Genpact’s approach to the recession and measures you took to get through the worst of it?
Pramod Bhasin: Our background as a company with GE (General Electric) really helped us. Especially their picking up signs that there was major problem ahead of us, frankly, in the last quarter of ’07. Seeing the nervousness in customers, the nervousness in the pipeline, and talking to those in our industry, all whom were a little jumpy about this. We at once began to put a lot of action into this, in fact, quite early in ’08. Clearly discretionary spending, etc. are all things that we stopped.
More importantly, from a customer perspective, we actually upped the ante and invested a lot more in getting better business development people onboard, getting stronger presence in the European market, actually putting more people out on the street in terms of talking to customers etc., as we felt that the worst thing we can do at a time of recession is pull back. Instead, we have to move ahead even more aggressively to capture, perhaps, other things that others may have left for us, as well as to make sure that customers understood that we were there with them. In many cases, we were willing to help, perhaps in helping them in projects by arranging a model of work that showed them that we were aligned with their goals.
There was a very positive effort to over-invest upfront and over-invest in managing the relationship in working with our current customers, which I think that this allowed us to hold the dam during that time. Otherwise, I think our results would have been worse.
Phil: So you used the recession to get closer to your existing clients?
Pramod: Absolutely. We actually sent a pin-point message out there some time in the middle of ‘08 that said a variety of things out of concern, like get closer to your customer, spend more time with them, invest more in business development, cut back on discretionary costs, focus on cash flows, and so on. We were ready for margin cuts also because we knew that others would come after us on price. But we were ready to tackle price with promises of full volume, come up with monthly billing structures, we changed some of ways we were billing with customers so that we could lessen some of the upfront blows that we know they would have otherwise seen from an outsourcing initiative.
Phil: How did you reinvest in the business in the last year, and how will this bear fruit in the forthcoming months?
Pramod: Our European and UK operation has more than doubled our business development headcount, and our pipeline is up by more than 75 percent. In addition, we have added more domain-specific people in the US in certain areas such as financial services, mortgages, loan modifications (and things like that) healthcare upping people by 25 to 30 percent in the US itself. We made more investments in China and in India, in new businesses that we wanted to purse. So it is pretty much all around the world, Phil. We felt very strongly that it was a great time to diversify to into other geographies that we may not have touched.
Phil: Where are the new opportunities for Genpact? Where are you doubling-down?
Pramod: A bunch of stuff is happening. Companies that needed to restructure have done so. People are more secure about their jobs – that in itself had posed a lot of problems for people. If people are that insecure, they are not about to make any more moves. In addition, IT spending is back somewhat, it is not fully back yet, but its back.
We are seeing a lot more traction in terms of mining new business with existing customers who are saying, “We know where we are at. The market seems to have bottomed out. Let’s get on with it. Let’s do what need to do to get our cost-base changed to adapt to the new reality.” So, that process is actually moving ahead pretty well.
We’re also diversifying quite well – our India business is growing at 100%, and I have just came back for an exhilarating trip in the Middle East and Latin America, which I think which I think offers tremendous opportunity for us which we will go to. Along with that are new areas where we are building our real expertise; for example healthcare, and our process capabilities in terms of what we are able to do to in terms of driving efficiency and effectiveness for companies across the board. All of those things are begining to play out very well.
Phil: In terms of the culture of Genpact emerging from the recession, what would you say has changed and what would you do differently in retrospect?
Pramod: There was a lot of learning, some good and some not so good, frankly. I think that we realized that we have to be a lot more commercially savvy, because companies were pressurizing us for price so on and so forth. I think that we could have come off potentially with different structures to solve some of those issues.
I think the need for (what I call) consultative selling and real expertise we can take to a customer, is very significant at these times. They want real solutions. The same old solution won’t work. So, you really have to have a way within your organization to help people find their solutions and to help them “think” into customers in a way that is different and meet their needs. Customers want to convert capital costs into operating costs. They want to reduce transition times. They want to reduce upfront costs. They need to figure out how to manage change. So out of the recession I am very certain that expectations have hit a completely different level.
Customers are clearly saying, “Bring me real expertise because I am hurting very badly, and I don’t want to hear same old, same old. I need real expertise and creative solutions.” That’s tough for companies like us with our mass of people, so that is something that we have to learn to do much better.
In the next part of this interview, Pramod discusses the competitive landscape, the development of new BPO delivery models and gives some practical advice for young executives. Stay tuned…
Pramod Bhasin (pictured above) is President & CEO, Genpact. Pramod established Genpact (formerly GE Capital International Services) in 1997. Pramod was earlier an Officer of General Electric (GE). His career with GE and RCA spanned 25 years across the US, Europe and Asia. He was most recently the head of GE Capital in India and in Asia, having earlier worked with GE Capital’s Corporate and Finance Group in Stamford, Connecticut, USA. You can read his full bio here.
Posted in : Business Process Outsourcing (BPO), kpo-analytics, Outsourcing Heros, Procurement and Supply Chain, SaaS, PaaS, IaaS and BPaaS, Sourcing Locations
We’ve been having, let’s say, some “interesting” interactions with folks, when we asked them to talk about their innovative experiences with finance and accounting BPO.
I'll show you some innovation…
What’s been a tad disturbing, is how many have tried to pass up any mild form of progress as “innovation”. Our lieutenant entrusted with plowing through these case studies is Bruce McCracken, who shares some of his recent experiences with us, when trying to explain what innovation actually entails. Over to you Dr Bruce…
Innovation?*!@?#!?
Ask six people what represents innovation and you will get half a dozen answers. Three people discussing innovation will consist of a couple of people talking about two different things while the eyes of the third glaze over. Innovation is a term that epitomizes the semantic differential. But regardless of how it is interpreted, it is a very important element for potential buyers of BPO services.
Innovation is the cornerstone of our forthcoming report, “Reaching New Performance Thresholds with Managed Finance Services: Real-world Experiences”. As we progress, our contacts with providers have shown considerable variance in the perceptions of what innovation entails.
Some providers feel that if a solution is new for a particular client, then it is innovative. But what is new to that buyer may not be new to the industry. An example would be digitizing documents utilizing OCR technology to move from a paper-based system. A late adopting client may see this change as transformational (which it is) and the greatest thing since sliced bread. But others in the industry may view it as being as old as sliced bread. In point of fact, I had OCR software on my Macintosh home computer in the early nineties.
The American Heritage Dictionary defines innovation as something newly introduced. Innovation has many synonyms: change, alteration, revolution, upheaval, transformation, metamorphosis, breakthrough; new measures, new methods, modernization, novelty, newness; creativity, originality, ingenuity, inspiration, inventiveness; informal – a shake up.
Irrespective of how it is defined, innovation is high on the priority lists of potential buyers, when it comes to selecting a future service provider, as shown in our March 2010 report, The IT and Business Process Outsourcing Industry Landscape in 2010:
When evaluating vendors, financial stability and operational excellence are the table-stakes. Business transformation capabilities are the differentiators
While on the surface, it may appear that transformation and innovation are only secondary considerations, when it comes to selecting a service provider. However, when you take into account that most service providers are offering similar solutions at similar prices, it is the providers’ proven ability to provide an innovative outsourcing experience that is fast-becoming a major decision-swayer.
So how are we defining it?
Innovation involves going beyond cost savings and transactional work to create added value to the client for business advantage, by deploying new and creative methods. There are many forms it can take, including:
As an example, the worldwide recession spurred a need for organizations to be nimble with the resources available to rapidly seize opportunities for expansion or soften the blow. Many companies and/or business lines were either diners or dinner. In the areas of mergers and acquisitions as well as divestitures, the agility of the service provider in producing innovative solutions to new challenges was critical as many companies would have been caught flat footed otherwise.
A major global financial institution saw a need to offload some business lines entirely and exit certain geographies in others. Their F&A BPO provider was able to take on much of the heavy lifting in transitioning processes to the new owners thereby sweetening the value proposition for the acquiring organization.
Conversely, a global communications provider was able to exploit the opportunities afforded in the dynamic marketplace with seven acquisitions. The F&A BPO provider was able to consolidate the disparate accounting systems into the ERP through extensive experience to significantly enhance efficiency in a reduced timeframe. The client did not have the internal capacity or expertise to do this.
Another aspect of innovation involves doing things differently or creatively within the engagement. A major global IT enterprise teamed with its provider to change the fundamental governance and relationship structure to adapt to potential changes in the business environment. Empowered dedicated teams manage the relationship that involves gain share mechanisms to encourage innovation. The SLA of the seven-year deal is reset annually to provide flexibility in adapting to changes in marketplace and the client’s business needs.
These examples will be chronicled in detail, as will others, in our forthcoming report, “Reaching New Performance Thresholds with Managed Finance Services: Real-world Experiences”.
When it comes to innovation, it isn’t a matter of whether the bread is sliced, but rather if it is fresh, nutritious and tasty.
Posted in : Business Process Outsourcing (BPO), Finance and Accounting
We’ve certainly had some juicy discussion on here regarding the virtues of social networking for enterprises – especially those whose competitive differentiators are centered primarily on the intellectual capital and creativity of their employees.
Collaborate to Innovate? Don't be silly, let your firm do it for you…
Our latest study results already shows that specialist blogs are seriously becoming one of the most helpful sources of information and advice for outsourcing executives (stay tuned for some stunning data on this trend shortly), which begs the question whether “enterprise” social networks really deliver value, when they are only made available for the internal enterprise and its specific stakeholders.
Andy Milroy (see earlier contribution), one of the leading analysts at research firm Frost and Sullivan, shares his views with us:
The Myth of Enterprise Social Networking
One of the most attractive concepts I have ever come across is that of crowdsourcing. At no time in history have ordinary individuals possessed the tools that enable them to engage with such a huge variety of people and to tap such a vast amount of knowledge. Enabling ordinary people to create content and potentially share it with a global audience, using virtually no resources, truly is a massive step forward for mankind. Many of today’s emerging business titans such as Facebook have used ‘the crowd’ to build their businesses and to build fortunes for their founders.
For knowledge based workers, the use of these tools can increase their productivity enormously and engender innovation at a more rapid rate than would be the case for smaller, selected, teams and individuals.
In a traditional corporate environment, knowledge workers predominantly access corporate resources alone. Admittedly, in certain environments such as academic institutions, knowledge sharing and collaboration beyond a single institution has been the norm for centuries. However, today, knowledge workers within corporations as well as within academia have access to infinitely more resources than ever before by using social networking tools.
The massive benefit offered by social networking tools is obvious in some corporate functions such as human resources, marketing and customer care. But, for other activities, the benefits are also huge. For example, a specialist such as an engineer can source best practices or solutions to challenges using social networking tools. These professionals can use these tools to ensure that they are fully aware of the latest developments in their profession and they can do this anywhere in the world. Clearly, these tools can offer huge benefits to professionals ranging from aerospace engineers to zoologists. In fact, those that do not use social networking tools will soon find themselves isolated from the rest of their profession and risk coming across as having a seriously outdated approach to work, a bit like refusing to use word processing software and preferring to write by hand.
Horses for Sources has used social networking to build a business and to engage with a large community of professionals that share an interest in outsourcing. There are no restrictions on who can read the blog or follow Horses on Twitter. Provided, external content does not offend Phil Fersht, it can be added to the blog. But, the main point is that it is open to anybody, anywhere, who wishes to engage.
So what is enterprise social networking? Well, it is collaboration within the enterprise and with selected external stakeholders. To me, this is not social networking, given that if I use these tools, the people with whom I can interact and the content with which I can engage, are restricted by the enterprise. Enterprise social networking tools are the next generation of collaboration tools that are designed to overcome the thorny issue of insufficient collaboration within most enterprises. Intranets were, and in many cases, still are used to engender greater collaboration within the enterprise.
Andy Milroy, Industry Director, Frost & Sullivan
In order to improve performance within many functions within their organisations, management must embrace open, public social networking tools such as Twitter, Linkedin and yes, Facebook. They should not seek to use enterprise social networking tools as more secure or manageable substitutes of the open, public tools. They have very different benefits. Instead, they should use enterprise social networking to help them to address that on-going challenge that they face, namely getting people, within different teams (or within the same team), to work together more closely.
Andy Milroy (pictured) leads Frost and Sullivan’s Australasian ICT Practice. He has previously held senior analyst positions at both IDC, where he led its European IT services research organization, and at NelsonHall, where he started its US business. He can be followed on Twitter at twitter.com/andy1994.
Posted in : Social Networking
George Kimball: author, outsourcing lawyer and father of three girls
I once swore I’d never have lawyers on here – that was until my old pal George Kimball decided to write his first book, which deserves a plug.
George is unique – he’s an outsourcing contracting lawyer with whom you’d actually enjoy a pint or two, and always has the uncanny knack of adding an air of practicality to the most stressful and dicey of situations. However, it may be the three daughters currently running (not ruining) his life that help him deal so calmly with the rigors of negotiating some of today’s toughest outsourcing contracts.
George has become one of the best known lawyers in the industry over recent years, representing both buyers and service providers on some of the largest and most pivotal engagements during his tenure at law-firm Baker & McKenzie, before recently joining the legal team at Hewlett-Packard (so read that small-print carefully next time you buy a printer).
I asked George to share his top tips for approaching outsourcing contracts with our readers; so go to the fridge, crack open a cold-one and take onboard George’s practical postulations…
George Kimball’s “over a pint” tips for first-time outsourcing buyers
Thanks, Phil, for the kind invitation to offer a little advice – “over a pint.” Here are a few suggestions for buyers of outsourced services – especially first time buyers.
Get good advice. Unless you have done this before, repeatedly and successfully, seek outside advice; but don’t just “turn it over to the experts.” No outside advisor can know your business as well as you do. You (and not the advisors) must live with the results. Proven methods, processes and forms have great value, but can be tailored to suit situations. One size does not fit all. Look for consultants and lawyers capable of thinking creatively, and willing to vary familiar forms and methods.
Focus on essentials. Details matter, but spend time and attention where it matters most: on scope, performance standards, pricing and adjustments, transitions, people, governance. “Worst case” scenarios and remedies matter, and must be provided for, but should not lionize attention. Seek long term results, rather than short term advantage. Today, there are great pressures to complete deals quickly, in order to reduce transaction costs and accelerate savings, but there was great wisdom in legendary UCLA basketball coach John Wooden’s maxim: “be quick – don’t hurry.” Err in haste, repent at leisure. Take sufficient time to get things right the first time.
Keep it simple, or at any rate, as simple as reasonably possible. Outsourcing is complicated. There are lots of moving parts – technologies, people, locations and much else. No one should expect to crowd everything on the back of an envelope. Still, contracts need not be as thick as telephone directories, or as inscrutable as hieroglyphics. Lawyers anxious to protect their clients tend to write rules for all eventualities – forgetting sometimes that life largely consists of surprises, and that few things ever happen quite as anticipated. Issues arise inconveniently and unexpectedly. When they do, good processes may be more useful than rule books. Seek clarity, simplicity, and ease of administration.
Service levels matter, but do not equal or assure quality. Service levels are a useful management tool, but easily overrated. Suppliers are rational business people. They never sign up for service levels that they cannot consistently meet or exceed, so credit dollars (“penalties”) are rarely paid (and for that matter, no one on either side ever wants to pay or receive them). Service levels are to success as vital signs are to health – necessary, but not sufficient. Customary measures such as system availability or response time are useful, but consider developing metrics for systems and processes that benefit the business. Users may not notice modest differences in usual metrics – a few tenths of percentage point here, a few seconds there. They do notice shipments, deliveries, payments, production and collections. Consider metrics that measure them.
Prepare to manage the contract and relationship. Weak governance – too few people, without sufficient clout, and accustomed to managing operations, rather than relationships – remain the single most common, avoidable error among customers. Begin building a team long before any contract is signed, and involve that team in making the deal. Build strong organizational consensus behind outsourcing. It is challenging enough when all sing from the same hymnal. When business units and headquarters have different agendas, failure is likely. No one will agree, except that it was a bad idea, whose sponsors should be hanged or at least put out to grass.
Risks have to be managed. This seems obvious, like the truism that contracts allocate risks. Despite the usual effort to shift risks in negotiations, both sides know (deep down inside) that risks can never be reduced to zero, or transferred entirely to the other side. Therefore, build good risk management – regulatory compliance, security, privacy, disaster recovery, and others – into the contract, and especially oversight and governance. Remember also that these same risks exist with internal operations, before outsourcing. Outsourcing may or may not increase those risks (although transferring operations outside or offshore may mean additional points of failure and different perceptions of risk).
Remember why contracts work. Contracts are more than armories of rights and remedies. Termination rights and the rest have their place, and may matter in some (let us hope) unlikely situations; but companies perform contracts for the same reason that nations observe treaties: because it is in their interests to do so. Good contracts motivate parties to perform through a reasonable equilibrium in the allocation of risks, responsibilities and incentives. Performance yields benefits – savings and service for customers; margins, opportunities and references for suppliers. Failures to perform have consequences sufficient to help keep everyone on the straight and narrow. Motivation matters, but fear alone can rarely motivate excellence. Outsourcing works best when both parties succeed. The customer receives good service for a fair price and saves money. The supplier makes respectable returns from good performance, with reasonable prospects for renewal, additional opportunities and good references. Unless both parties succeed, neither is likely to do so.
Propose reasonable terms. On both sides, too many start with “tough” terms – the sort that no one in his or her right mind would dream of accepting. Why bother? The unsophisticated or naive customers will be very cross when they figure it out (as they will, eventually). Suppliers are unlikely to sign harsh contracts unless they are desperate or inept. Time wasted crab-walking toward sensible middle ground is better spent on those important issues, or planning the transition. No one’s allegedly “standard” forms necessarily came down the mountain with Moses and his tablets. Start with something sensible, and remember the wisdom in the Golden Rule: do not unto others as you would not be done unto (especially when you have to live with them afterward).
Tone matters more than people suspect. Collaboration requires good working relationships built on candor, civility and trust. At the negotiating table, people are more willing to make concessions to others they like, respect and trust, than when they are squeezed. (If they are squeezed or bullied into something unfavorable, they will remember. If they should be fooled or misled, they will figure it out later. Depend on it.) Outsourcing is not a love feast. These are unsentimental commercial arrangements with many challenges. Even so, there are no known substitutes for clarity, courtesy, intelligence, integrity, common sense or good judgment. “Tough” methods and terms are not necessarily best. “Scorched earth” tactics singe everybody. In the long run, neither side will succeed unless both succeed. Kinder and gentler is often wiser. Simpler, reasonable documents take less time (and money) to negotiate – an added benefit.
Phil, I think we finished that first pint. Thanks for the chance to share one with you and your readers. Let’s have another soon. In the meantime, I hope that you and your readers enjoy the book:
Click for more info on George's new book
George Kimball’s book (pictured right) is an accessible guide to the legal and practical issues arising from complex outsourcing deals. Written for non-specialist lawyers, executives and managers, the book explains the commercial, legal and contractual issues behind outsourcing. Kimball describes outsourcing as a part of a larger trend toward extended, global enterprises in a world with fewer boundaries than before. Companies outsource critical operations seeking superior performance, greater efficiency and lower cost. His book explains the competing interests of customers and suppliers, and how the contractual, financial, operational and other elements fit together into a coherent whole to deliver good results for both sides because, according to Kimball, “neither [side] will succeed unless both succeed.” Collaborative methods, he contends, yield better outcomes, while saving time and money in negotiations.
George Kimball is an attorney and long-time specialist in outsourcing. While in private practice, he was a member of Baker & McKenzie’s respected technology, outsourcing and communications practice, and ranked as a leader in his field by Chambers and Partners and Legal 500. He is a graduate of UCLA, University College London and the University of Michigan Law School with more than 30 years of legal experience.
Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Outsourcing Advisors, Outsourcing Heros
