Folks – I can exclusively reveal – and you heard it here first – that President Obama will shortly be announcing a blanket ban on the offshoring of US jobs. My government insider tells me that he will take the following measures:
Any employer seeking to replace US staff with an overseas employee will have to prove it was unable to source a US employee for the role for a period of 90 days, where the position was widely advertised on national media;
A task-force of leading US-headquartered outsourcing service providers, including IBM, ACS, CSC and HP, will be tasked with assisting US firms with their backsourcing initiatives, their fees being footed by a proposed budget ammendment that is likely to total as much as $50 billion;
Leading outsourcing service providers which are not US-headquartered, and have more than 50% of their employees based outside of the US, will have their US trading licenses revoked and will have 30 days to wind down their US operations;
All jobs that have moved offshore within the last 8 years, that are currently being performed for any US-domiciled organization, are to be replicated back to a US location within the next six months. The US government will reimburse 20% of the reinstated onshore employee’s salary to their employer upon completion of their first year of employment;
CEOs who fail comply with the ruling will face a disciplinary panel headed by Lou Dobbs.
So the battle is on between the USA’s onshore locations. Who will win out? Albuquerque, Detroit, Nashville, Jacksonville, El Pazo? Love to hear your thoughts…
You’re good sports! And my sincere apologies to the service provider which called an emergency meeting with the CEO and executive team this morning as an result. You will never live that one down…
In all seriousness, while this was intended as April 1st humor, the fact that so many people fell for this does get you thinking about how close to reality this wave of protectionism could get. C’mon – I thought the Lou Dobbs reference would be the big give away 🙂
Having witnessed the rampant growth of Finance and Accounting BPO over recent years, the common thread among the leading service providers has been cost-arbitrage through offshore labor. There is, however, one exception: Vengroff Williams and Associates (VWA).
Naturally, the core differentiators among service providers is the ability to innovate with process and technology, and provide great people to service their clients, however, the offshore element has created the cost-lever to entice companies to move into a BPO end-state. VWA is the one service provider which has resisted the lure of offshore/nearshore delivery to drive down costs even further, and has chosen to focus on its onshore delivery centers underpinned by its order-to-cash technology solution to service its clients.
VWA achieved a 5% share of F&A BPO engagements in 2007, which was greater than several of the leading BPO providers in the market, and boasts some blue-chip brands in its client portfoilio, namely Ford Motor Company, Federal Express, Kodak, Microsoft, Yamaha and others. Moreover, in this age of protectionism, in addition to the increased focus on healthcare reform, you have to consider VWA in a unique position in the industry today. I recently caught up with CEO Mark Vengroff to ask him to share with us the reasons for VWA's success.
PF: Mark – you have been in the finance and accounting services business for the last couple of decades. Why has growth really taken off in the last couple of years? What has changed to drive this?
MV: VWA has always been ahead of the curve in providing new services and innovation to the industry. We were one of the first to introduce automated collection tools, automated work flow, imaging technology/ OCR where we used to process hand written accident claims submitted by insurance companies on paper, early introduction of credit scoring to drive specific account treatment, deduction management and one of the first in the industry to provide O2C outsourcing services. Our largest growth came from the globalization of O2C Outsourcing which we had successfully launched by having a long proven history with several F100 clients from various industries. This was also combined with our ability to capitalize this growth without the need to take on any debt. Over the past 45 years we had invested well as a company.
PF: We’ve been through the dot.com bust, Y2K, SOX and now The Great Recession. How is the role of the CFO changing today to accommodate for all this turmoil to our businesses?
MV: A CFO today is required to focus primarily on reducing costs, and evaluating risk in both customer credit and critical vendors. With the limited availability of credit, a focus on the preservation of cash is the priority. This drives, cost cutting, reduction of labor, reducing capital expenses and creating strategies to improve working capital and review of additional efficiencies that can be gained through the chain.
PF: VWA is employee-owned; how does that impact corporate culture?
MV: VWA goes through a bi-annual internal ESOP Representative Election process, allowing employees to campaign bringing additional focus and enthusiasm into VWA’s business. ESOP creates a cultural of employees who are more engagement and care for the company since they now have ownership in. A sense of self empowerment to make and look for improvements. Owners make better Employees. As a service provider, we are only as strong as our people.
Having an ESOP Rep on the board at first was difficult to become accustom to but we gained two big advantages by doing so:
Forced the board members to deep dive into the history and present strategy in a more holistic approach, to capture the thought process from various levels though out the organization. This resulted in well thought out strategies and a better understanding on how new programs would be perceived or would affect the business at multiple levels within and outside the organization.
The ESOP Representative attending the board meetings, sit with the regional ESOP Rep’s after each board meeting. This helps to drive the corporate message from various channels and creates better understanding, employee buy-in, and a clear focus on that message. .
PF: Is being employee-owned an advantage in this economy, and what advice would you give to other CEOs on this issue?
MV: We have noticed our employee owners doing more to help watch the bottom line and question spending. i.e. Turning off the lights when someone leaves the conference room, turning off their monitors when leaving for the day. Employee Owners are not afraid to present creative ways to prevent waste in a job function or improve work flow by introducing and adapting to new innovations being introduced.
PF: You are the one “player” in F&A managed services which has resisted heavy reliance on offshore delivery. Has that been a major disadvantage when competing on price? And are you finding this strategy helpful with this wave of job-protectionism? Or do you find when it comes to saving money, these value often go out the window for many US corporate?
MV: VWA has received several new contracts in the recent past from clients that have previously have used off-shore models and looking to recapture savings through better A/R performance. In our experience, VWA has been reluctant to move to primarily off shore model because we have had more success than our competitors in reducing costs and creating a stronger ROI through cutting costs through improvements in DSO, greater performances, improved client sat and automating most of the functions that would normally be considered for lower labor. Typically, we have found that after servicing a portfolio for 12-18 months the remaining labor are more exception handlers, dealing with more difficult issues that require strong communication skills and understanding of the relationship between our clients and their customers. We have been using higher skill sets to focus on the route causes that create the issues, in order to design solutions to mitigate / eliminate future incidences and/or monitor, adjust the effectiveness of automated functions
PF: It seems as if the fog is lifting and we’re all looking around at the new economic environment. So what next for the F&A managed services market and the industry in general?
MV: Primary focus is now on credit, global financial risk analysis, and customer payment behavioral tools. These will drive the limited resources to focus on the primary areas that require their attention. VWA has been working on a state of the art software application that is called, WebCollect. It has been 3 years in development and is about to be rolled out into the marketplace in the next three months. We have been beta testing the software with various large clients of VWA and having extremely good success in eliminating a lot of unnecessary risk and driving costs down and out of the process. Also, the Mid-Market space has been our largest growth area in the past year.
PF: And finally, what advice would you give for young CEOs today in the services industry?
MV: Keep your organization flat – Select great managers then empower them to make decisions. Flexibility and your ability to adapt to individual clients changing business requirements are critical.
Service is about delivering value and introducing innovation to your clients. Pushing this down the organization must be your top priority.
If you’re working with and listening closely to your top clients and strategic partners, you will always have your finger close to the pulse of your industry and know exactly what you will need to do next to stay ahead of your competition.
Mark Vengroff (pictured) is Chief Executive Officer, Vengroff, Williams & Associates, Inc. He is responsible for VWA’s extensive growth over the last three years and expansion of the company’s service offerings to include complete order to cash Business Process Outsourcing (BPO) and high volume deduction management Solutions.
When I made the move back to research from the sourcing advisor world last January, many of you may recall providing input into what research you wanted. This blog has proved to be a great medium for driving debate and cultivating ideas – in fact, someone even said recently this was becoming the "Huffington Post" of the sourcing industry.
But blogs are not research reports, they let you test the temperature, get the high-level insight, but not always the deep-dive data points that we all need to base decisions. I wanted to share with you some research highlights we've been putting out at AMR Research over the last year or so, and would love to get more feedback from you on what you want to see in the coming months:
Folks, one event I've always found a lot of value attending over the years has been the Sourcing Interests Group's Global Sourcing Summit. The organization always attracts a diverse group of professionals with responsibility for all types of sourcing responsibility, from supply chain through to finance, HR and IT. I've been especially impressed with the new direction the association is taking under the guidance of Dawn Evans, since she took the reigns last year.
Come along to Baltimore this week if you can – there are some excellent sessions taking place all week at the Waterfront Marriott, Baltimore. I'll be speaking about the BPO market outlook this Thursday if you want to come along and ask me some easy questions. And then I get to meet with Newt Gingrich prior to his keynote address later that day, where I'll blog his talktrack to you all (no Twittering…).
For more information contact Jeff Felix – he is offering a 50% discount for corporate buyers who read this blog. Click here to access the main webpage for the event.
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.
Folks – I can exclusively reveal – and you heard it here first – that President Obama will shortly be announcing a blanket ban on the offshoring of US jobs. My government insider tells me that he will take the following measures:
A task-force of leading US-headquartered outsourcing service providers, including IBM, ACS, CSC and HP, will be tasked with assisting US firms with their backsourcing initiatives, their fees being footed by a proposed budget ammendment that is likely to total as much as $50 billion;
Mark Vengroff (pictured) is Chief Executive Officer, Vengroff, Williams & Associates, Inc. He is responsible for VWA’s extensive growth over the last three years and expansion of the company’s service offerings to include complete order to cash Business Process Outsourcing (BPO) and high volume deduction management Solutions.
When I made the move back to research from the sourcing advisor world last January, many of you may recall 
You may recall the classic post “
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.
