You may recall the classic post “Being middle-seated in the back-row”. Well, I think I can go one worse… by being middle-seated all the way to Orlando (gasp). Yes, I was stuck in hell all the way to purgatory…or was I stuck in purgatory all the way to the gates of hell?
Orlando is my version of a very, very bad dream: a world where you can actually buy a fake Guinness in a fake Irish pub, and get stuck behind entire families in lengthy queues where the kids start at 220lbs… you never normally ever see people like this, but somehow Orlando acts as a magnet for over-sized, under-cultured plasticity. Seriously, why bother with Guantanamo for interrogations? Just lock suspects in Epcot for a couple of days and we’ll find out who killed JFK, which Ritz-Carlton Osama Bin Laden resides in these days, and even where Bernie stashed his $50 billion…
It is also the peculiar venue of choice for several industry conferences – year after year. And as hard as I try, I always seem to get routed back here every year for my annual bout of misery and ghastliness. So here are some other ghastly life experiences that come to mind when trapped in this 3-hour predicament:
My one (and only) visit to Jacksonville
Dave Lee Roth bringing in 4th July with the Boston Pops (if you saw it, you’ll know…)
Every minute I have to listen to Simon Callow (a disgrace to the British race)
Donald trump’s fringe (how does he do that?)
My one (and only) visit to an Olive Garden (was 16 years’ ago, but never again)
Sheratons (ugh)
The day Johnny Damon shaved off his beard and turned up at a Yankees press conference (how could he do that?)
Awards ceremonies for outsourcing vendors (take your pick)
Bill O’Reilly (why?)
Hancock (what happened there?)
PF Changs (help)
LaGuardia airport (seriously…)
Trying to use Microsoft Office apps on a Mac (drives you bonkers…)
The London Underground (years and years of purgatory…)
Getting up at 4.30AM to be middle-seated…. All the way to Orlando
p.s. no offence intended to citizens of Orlando… just having some fun at your expense 🙂
I had this private debate with a number of peers in other analyst and consulting organizations recently, and wanted to share some of the discussion points with you all here.
In our recent discussion "Think before you fire: The cost of replacing IT talent", we discussed the issues facing many companies who were too trigger-happy to scale back their IT wage-costs, and ended up spending a lot more in the long-run when replacing the valuable knowledge of their business systems. At the same time, we see even more firms held back by IT departments that have failed to move with the times – and none more so than mid-market firms that simply cannot afford to employ the best quality IT staff. And while we can debate the fine points about business processes moving to offshore or fully outsourced models, you sometimes forget how critical IT is to getting things done.
IT is an impediment to many businesses:Companies need to develop an IT capability that doesn't impede their ability to operate, but acts as a facilitator tying their business needs to their industry. In this this cut-throat economy, companies need to be able to have immediate access to data on their customers, their suppliers and their employees. They need to be able to react to changes in demand, be able to scale-up, or scale -back their staff globally, and need to have immediate insight on their channel to market to keep ahead of the competition. If your company cannot get you the information on your business you need when you need it, you could seriously go out of business in this environment.
Dated IT skills and applications are dangerous: The horror stories of backward IT I constantly hear from people never cease to amaze me. While it's easy to sympathize with IT staff complaining about lack of budget, lack of good applications etc., it comes across loud and clear that many of them haven't had a day of IT training in years. Business executives are constantly finding new ways to provision the IT they need to do their job: for example CMOs signing up for Salesforce .com, or HR VPs Successfactors. Smart application vendors are finding ways around the IT department and developing intuitive SaaS applications that executives can deploy themselves, where they have no reliance on internal IT. And eventually Cloud Computing will enable us to circumvent creaking hardware infrastructures.
So what happened to IT adding value? In the heady days of the 1990's, I recall staff constantly taking themselves on training courses, learning new programming languages, operating systems, network skills – but something seems to have happened in recent years. Did IT staff get too cosy? Why do many companies still have IT staff who can only program in Visual Basic or Microsoft Access and limit email inboxes to 100mb (when you get 20gb with your freebie google account).
In the '80s and '90s, companies could get ahead by having smarter IT than their competitors, but now IT seems to have become a roadblock to success. I'm not going to enter into a diatribe on how outsourcing IT can transform a business, while saving money, but you do start to ask questions as to why so many business leaders today still seem scared rigid to look outside their firms to source the skills and talent they need to bring their businesses into 2009.
The leading IT services firms today are readying themselves for a fresh assault on the middle-market and this will be a key dynamic in the coming couple of years – especially as the high-end enterprise market is saturated. Desperate times will drive many firms to make brave decisions – and disposing of poor IT might just be one of them. What do you think?
I feel like I'm becoming a travel journalist these days, but we're seeing some very interesting locations get themselves onto the global sourcing map. Enter South Africa and the picturesque coastal hub of Cape Town, which is primed to challenge for UK and European BPO services. Read more over at Think Global….
I feel like I’m becoming a travel journalist these days, but we’re seeing some very interesting locations get themselves onto the global sourcing map. Enter South Africa and the picturesque coastal hub of Cape Town, which is primed to challenge for UK and European IT and BPO services.
As the 21st century dawned, South Africa sought to expand its economy with one of the focal points being the English-speaking workforce. Problems existed in the value proposition to potential European customers, most notably in the high cost of telecommunications. Like the dismantling of the Berlin wall, deregulation and the elimination of the telecommunications monopoly have propelled the nation into a rising star as an offshore location for IT support, customer care and BPO work.
For several years, the battle raged with the push/pull between economic development and the predominantly government-owned sole telecommunications provider, Telkom. Competition was injected into the industry with the first competitor, Neotel, commencing service in November of 2007. The government has been committed to reducing costs and implemented notable tariff reductions.
In 2008, the government formed Infraco to provide fiber optic connectivity to telecommunications firms that augments a wired national infrastructure that is 99.9 percent digital. Infraco is also laying fiber optic lines from Cape Town to the UK. Larger municipalities including Cape Town have proceeded to launch broadband networks to provide less expensive voice and data services.
By reducing the barriers of telecommunications costs, business is booming in Cape Town as an offshore location. There are several factors that contribute to the appeal of Cape Town as a destination for customer care. One major key is that there is little issue with accent for customers in the UK as English is the primary language for over one million Cape Town residents. There are also benefits from a compatible time zone to Europe compared to many other offshore locales.
According to CallingtheCape, a nonprofit agency promoting investment in Cape Town, call center employment grew by over 28 percent in 2008 and employs over 20,000 full time agents. The annual call center churn rate is slightly above 17 percent, roughly half the turnover rate of the UK. Further, they state that the monthly salary for an agent ranges from a low of approximately $400 for entry level and up to a high of twice that with four years of experience. Agent salaries have only escalated by around ten percent since 2004 and CallingtheCape reports UK companies saving $17000 per seat annually. While labor costs are double those of Philippines and India, they are 20% less than those in Hungary, and even more that Poland.
The allure of Cape Town is not confined to just serving customers in the UK. In the spring of 2008, Royal Dutch Shell opened a call center in Cape Town to take advantage of the Afrikaans language spoke in the region. Agents service customers in Belgium, the Netherlands and Luxembourg in Flemish and Dutch. Lufthansa also has a center in Cape Town with bilingual agents fluent in English and German. We have also seen Barclays Bank, Carphone Warehouse and a major US credit card develop operational support service in the area.
The growth has been virtually the same for captive and outsourced call centers over the years with captives employing a bit over two thirds of the full time agents. The annual turnover rate is five percent higher at slightly over 20 percent for outsourced agents compared to the captives. This is not surprising as outsource providers typically pay less with reduced benefits and are tasked with a higher percentage of outbound sales.
As we have seen with the development of new locations for offshore work, call center is normally the first work-type to ramp-up, with business-specific services, such as banking and accounting services quickly following suit. South Africa is no exception. Like Guatemala, their next challenge is developing scale, with a labor force of only 2 million in the Cape region. It needs to develop its network of centers across the whole country, and possibly in neighboring countries, while keeping standards high and wage costs low.
The recent changes in the policies of the national government and in the global market place point to a very bright future. It can be expected that many larger established global outsourcing providers will set up shop to follow the leads of major corporations to harness the potential BPO and customer care benefits offered by Cape Town. As competition develops and matures in telecommunication delivery, the costs of doing business will reduce, further increasing the attractiveness of the value proposition as a nearshore hub for European service delivery.
Has the world gone mad? Or is it just the US Senate? One month after Senators Bernie Sanders and Chuck Grassley pushed their amendment through the Senate making it tough for TARP recipients to hire H-1B* or L1 visa holders, we use the same TARP cash to pay retention bonuses to the very people who got us into this mess in the first place. We could create many, many more jobs with that bonus cash than we’d ever had “saved” by blocking a small minority of H1-B applicants.
The original intent of the Sanders/Grassley amendment barred all recipients of TARP funding from hiring any H-1B workers. However, the amendment was
modified on 13th February this year so that employers who receive TARP funding can petition for new H-1B workers, provided they follow the rules prescribed for “H-1B Dependent Employers”, which require employers to:
(1) Attest that they have made good-faith attempts to hire U.S. workers at prevailing wages (or industry-standard wages);
(2) Attest that their hiring of H-1B employees does not displace U.S. workers who have sought those same jobs; and
(3) Maintain records showing that they have complied with wage and other work condition standards.
The bottom line is that the Sanders/Grassley amendment will make it much more difficult for employers who receive TARP funds to file new H-1B petitions because it will be hard for them to survive the enhanced recruiting requirements in this economy.
It’s been a while since the old H-1B visa debate reared its head, but it appears that the original Durbin/Grassley bill to reform the H-1B visa program will soon be reintroduced in the Senate on the tail of Sanders/Grassley, which will effectively attempt to drive similar restrictions across all H-1B and L1 temporary workers.
Durbin/Grassley will have a negative impact on US businesses
This bill, if passed through the Senate, would significantly derail outsourcing engagements where there is a need to bring a handful of foreign staff into the US to help manage their offshore/nearshore compatriots. Moreover, areas where there are significant skill shortages, for example, IT programming, IT sourcing management and business process transformation, will be impacted.
While a couple of years’ ago, there was a coherent argument that IT firms and banks were exploiting the H-1B visa process to exploit low-cost imported IT talent, this is increasingly losing weight in an industry where there is a clear lack of skilled application development and business process engineering talent onshore, and a very apparent lack of staff with expertise managing offshore staff in a global sourcing environment. In many cases today, H-1B staff are bringing skills into the country that are shared with onshore IT and operations staff to create a stronger learning environment for the host business. Noone complains when we bring in temporary workers with academic or scientific knowledge, so what's wrong with talent which can help our businesses be more efficient and competitive on a global level?
Moreover, with the majority of FORTUNE 1000 organizations now involved with offshore IT and business process initiatives, they need to balance their offshore resources with experienced staff with knowledge of managing offshore cultures. For example, having somebody that can act as a liaison in the US that understands the culture and workings of the offshore location facilitates, increases communication and continuity between the two groups.
We need to avoid isolationism, or businesses will move backward
As an increasing number of organizations come to the realization that their dated IT operations and/or business processes are becoming a serious impediment to transforming their business, their need to access third-party skills is often critical to their success. And in an economy where cost-containment is a survival mechanism for many businesses, impeding the capability for IT and BPO service providers to bring talent into the country is only contriving to make US business struggle even further with dated IT and business support operations resistant and fearful of change, combined with bloated costs. Isolating businesses from global talent at this time will only take them further backwards, when they need to be finding new avenues for innovations and growth, in order to survive.
Protecting the US worker is important, however, empowering US businesses will create more opportunities for US workers to develop their skills and expertise. The biggest problem facing US corporate development today is the lethagy of many workers to re-train and re-educate themselves to develop their skills. Isolating them from these opportunites will only make these problems worse. The US has been instrumental in creating – and funding – this globally-integrated economic monster. It now needs to get with this change and help the economy recover globally, not isolate itself and allow new economic powers to step in and become the new US.
*The H-1B program allows American companies to employ foreign guest workers, with the equivalent of an American bachelor's degree, to work in a specialty occupation, for example research, consulting, academia or IT. H-1B visas for IT are capped at a total of 65,000 and allow guest workers to remain in the US for three years with provisions for an extension of three more years. This cap can be changed annually
If you can make it to Eastern Europe, it would be great to have you part of the show and take part in the debate. And if you can't make it in person, log-on and blog your questions live to the panel.
We’ve been debating the opportunities for Latin American countries to take on BPO work for a while now, and spending a few days in Guatemala has confirmed – beyond doubt – the potential of the region.
I had the pleasure of visiting Capgemini’s facility, which is quickly ramping up customer-facing F&A work for Coca-Cola Enterprises (which we picked up on here). I am going to write more about this engagement in due course, but the hybrid nearshore/offshore operating model for Finance and Accounting and Procurement is showing strong signs of being the way forward for the industry. This is also the case for many global strategic sourcing, supply management and HR BPO engagements. For example, Coca-Cola Enterprises is sourcing neashore work to Capgemini’s centers in Guatemala and Krakow, and using its Chennai operation to support these centers with non-customer facing processes.
Guatemala’s population itself is only 13.7m people, with 40% based in urban areas, however, it is the largest Central American hub with strong potential to source activities to neighboring countries, such as El Salvador and Nicaragua (see graph below) to compliment serices and keep costs low. What impressed me most meeting many operations agents and managers was the easy-to-understand English intonation, the obsession with process, the youthful energy and the discipline.
One of the major delivery centers has already made Six Sigma yellow-belt certification as a stipulation for employment among all its agents, and puts many on the green and black-belt courses on the job. The challenge for US onshore centers in the future is not only to compete on cost, but also on quality.
Key sourcing facts about Guat:
4.1m of its total population is “economically active”
80% of its population is under 30
80% are taught English from the age of 5
86% literacy rate in Guatemala City
University-level population of over 200,000 students
Robust telecoms infrastructure (their commerce minister was sporting three blackberries)
20 yeas of democracy
5200 feet above sea-level and 60-85 degrees all-year-round
Strong base of investment from multi-national corporations – for example P&G, Walmart, Scotiabank, Capgemini and ACS
Investing in windfarm projects with the Mexican government
Manufacturing represents its major industry, but increasing exports of coffee, bananas and green tomatoes are driving economic growth
Source: Celade
The core issue behind future growth is going to be where to source the customer/partner/employee facing work versus the non-employee processes. While Philippines and India have proven themselves to be competent with voice work, the time zone differences make it difficult with complex work that requires a lot of management attention (especially during the early engagement years). As one senior sourcing executive said to me, “Guatemala is a 3 hour flight…Manila is 20”.
The business challenge for today’s enterprises is the trade-off between operating costs, times zones and overall quality. For example, if Indian costs for a set of processes are half those of Guatemala, how much more will you spend on management travel to the region? How many more FTEs will you require to compensate for exhaustive night-shifts?
The Coca-Cola Enterprises model is an example of bridging the benefits of nearshore with the low-cost advantages of offshore. They are finding a balance between all the elements that are core to their business: maintaining business relationships, lowering costs while enhancing quality and taking advantage of global sourcing to redefine their process and technology.
Guatemala: Great potential, but beware of strange foreign visitors
Many Americans in the global sourcing industry will attest that they never did quite separate themselves from their old colonial masters (but we let them think they did…). One such example has been the UK’s very own David Poole, imported by European outsourcing giant Capgemini to spearhead its Americas BPO business. Upon his arrival at these shores two years’ ago, David even adorned the title “Deputy”, in the hope he could quickly assimilate himself with the Wild West, installing himself and his family in Chicago, where he could steer them of clear of crime and corruption.
David, today,David has firmly established himself as a veteran of the BPO industry, leading Capgemini to some major new global F&A BPO client wins that have firmly established the firm’s global delivery footprint across the Americas, Europe and Asia (including major operations in China and India). He joined Capgemini in 2004, from PwC in London where he was a partner and a founding member of the firm’s global BPO business prior to IBM acquiring their operations. He’s made a significant contribution to the development of the global BPO industry, helping to craft several major global engagements since the early ‘90s. David is also a qualified management accountant and can wax-lyrical for hours about operational excellence with invoice processing. Enough said – over you Deputy Poole for your take on what outsourcing means to businesses today…
Outsourcing is not for wimps
I spend a lot of time talking about why outsourcing is a smart idea – I talk to clients, at public forums, in meetings, to my staff, heck I’ve even bent the ear of my dog on occasion. So, when Phil asked for volunteers to contribute to this blog, I naturally jumped on the soapbox. I couldn’t resist another chance to make my case, which is this: When the going gets tough, the tough outsource.
Some people think outsourcing is a sign of weakness, but actually just the opposite is true. It takes a strong organization to admit that someone else can do a process or function better, faster, and cheaper.
There’s a good reason the word “outsourcing” has “source” at its heart: sources are good things.
For example if you’re a cop or a journalist, a “source” has “insider” information; the value of the source depends on credibility, reliability, and trust. Same goes in business, where sources are fundamental to success. Where do you get your raw materials? Your talent? Your information? Without good sources, your business would go bust.
When the idea of outsourcing started to gain traction in the 1980s, it seemed like a brand new idea. Companies could off-load non-core processes to a “source” that could do them more efficiently and effectively. But in many ways, outsourcing was ? and is ? just plain sourcing on steroids: a ratcheted-up version of finding the best resources (people, processes, knowledge, and technology) for the job.
And that’s exactly why outsourcing continues to be a great business strategy, not despite tough times but because of tough times. What could make more and better sense in today’s troubled, global economy?
At its most basic, outsourcing is a perfect choice today: it’s still the best way to perform back-office processes more efficiently. Since most businesses do not gain an advantage with administrative activities, why waste any time and money trying to make them unique? An outsourcer can establish a standardized process; the best ones do this quickly with a “speed to value” model that delivers savings faster.
While cost cutting alone justifies outsourcing, that’s not the whole picture.
The real test of outsourcing is the value delivered. Today, many (maybe most) companies are thinking only of reducing expenditures. But a few are actually looking for ways to innovate, and they’re the ones likely to come out of these doldrums with a real, meaningful advantage.
What can be done with the savings that come from outsourcing? How should savings be invested back into the business to support growth? Where are opportunities for continuous improvement? When an outsourcer provides business intelligence to answer questions like those, it becomes a true, collaborative partnership. A good outsourcing partner has ambition to explore, special knowledge to apply, a technological edge to exploit, and unbending ethics to guide its behavior in relationships and in the world.
I’ve been working in business process outsourcing for 15 years and, in that time, I’ve seen outsourcing help companies reach the top of their game, even when the economy was unsteady.
Here are some truths about outsourcing that I’m glad to share.
• Outsourcing can make a company better at what it does.
• Outsourcing can be self-funding.
• The faster a company gets to the benefits of outsourcing, the better.
• The best outsourcers deliver measurable “value” beyond cost reduction.
• Outsourcing is a bold strategy for growth.
The world’s political and business leaders are trying to tackle some tough, global economic problems. I like to think that outsourcing is part of a smart solution – one way for a company to get stronger. The right outsourcing relationship can provide the momentum needed for positive change.
And isn’t that exactly what everyone’s looking for right now?
David Poole (pictured) is CEO of Americas Business Process Outsourcing for Capgemini
While many firms are hunkering down tryng to ride out this turbulent year, we're also seeing an increasing number of multi-national companies use this time to develop business support infrastructures that can scale quickly with the needs of the business. It's not all about cost-reduction – it's about being nimble, and having a firmer handle on accessing critical data on your staff at a global level. You can view the full post over at Think Global.
You may recall the classic post “Being middle-seated in the back-row”. Well, I think I can go one worse… by being middle-seated all the way to Orlando (gasp). Yes, I was stuck in hell all the way to purgatory…or was I stuck in purgatory all the way to the gates of hell?
I had this private debate with a number of peers in other analyst and consulting organizations recently, and wanted to share some of the discussion points with you all here. 
As the 21st century dawned, South Africa sought to expand its economy with one of the focal points being the English-speaking workforce. Problems existed in the value proposition to potential European customers, most notably in the high cost of telecommunications. Like the dismantling of the Berlin wall, deregulation and the elimination of the telecommunications monopoly have propelled the nation into a rising star as an offshore location for IT support, customer care and BPO work.
Has the world gone mad? Or is it just the US Senate? One month after Senators Bernie Sanders and Chuck Grassley pushed their amendment through the Senate making it tough for TARP recipients to hire H-1B* or L1 visa holders, we use the same TARP cash to pay retention bonuses to the very people who got us into this mess in the first place. We could create many, many more jobs with that bonus cash than we’d ever had “saved” by blocking a small minority of H1-B applicants.
