Even though you are probably more interested in the breed of puppy Barack is going to buy his girls, I have had a chance to ponder the realities of the recession.
In a nutshell, we have reached a crucial juncture in our economic history: gone are the days we can borrow whatever we want to subsidize ambitious business ideas, buy houses we cannot really afford, or fritter money away on expensive holidays. Walking down Boyslton Street at 7.30pm on Friday night – one of Boston's prime restaurant areas – every restaurant had vacant tables and was taking walk-ins. It really hit home to me that things have finally changed. Years of over-spending have finally caught up with us and we're now feeling the pinch. But whether this was to be a rapid banking meltdown, or a long painful slowdown, this had to happen eventually.
I recall sitting on a panel at at outsourcing conference in New York City back in 2004
, and there were protesters outside, demonstrating their frustration about US jobs "moving offshore". In response, a sourcing attorney declared, "outsourcing provides a great opportunity for the US – we can offload low-value jobs and focus on higher-value, more innovative work". I recall thinking to myself, even then, that that argument didn't quite add up.
While it sounds like a nirvana, the reality is we're competing globally for labor, for making cheaper, better cars, for delivering good quality IT services, for delivering quality finance, HR and supply chain support. If the US is to truly deliver "higher-value", the government needs to invest in education programs that develop this talent. The reality is that the rest of the world caught up. People in Chennai, Manila, Bucharest, Guatemala City, Guangzhou etc are being trained to compete with American, British, French and German workers, and the Internet and new technology have been a huge enabler to make this happen. A good friend who works for one of the leading India-based BPOs confided in me recently, "we should bring over the training leaders from the top Indian outsourcers and have them work with US businesses to get their act together".
What continues to irk me, is the fact that industry has become so focused on making its quarterly numbers that it has taken its eye off the long-term picture. We saw this financial meltdown coming – and did nothing (wasn't the Asian crisis of the '90s warning enough?). We are seeing further deterioration of the environment – and still do little. We saw the US automotive industry grind down to its current predicament – and have done nothing. And we are seeing the IT and BPO industry rapidly develop across the globe – and have blissfully ignored it to meet these cost-containment targets.
And how to we respond? Bailouts. We're now talking about bailing out the flagging automotive industry. How did it come to this? Years of greed, a deterioration of our work-ethics, and eager developing nations determined to get a taste of what we have. It's as if we had a major cardiac arrest and are now hoping we can recover fully from open-heart surgery.
And this time when we do recover (and we will), we simply have to make sure this never happens again. Some will argue this is all about natural economics of globalization and a free market – and they are probably right. However, this time we have truly reached an inflection point.
It's about accepting we now operate in a global economy and that we are competing at a level where we need to work as hard, and as smart, as the next nation. I hope President-Elect Obama can help instill a new work culture in the US. The US people have spoken that they want change, and they have voted in a President promising change. The core question now is whether they are really prepared to change.
Wipro has continued its aggressive surge into the BPO world by announcing plans to open a BPO delivery center in Curtiba, Brazil, to service it new client, AmBev, the South American bewing giant, and subsidiary of global brewing giant InBev. InBev recently had its merger with Anheuser-Busch approved to create a global beer monolith – not a bad industry to be developing your outsourcing business, in this economy (to quote a CIO at a major brewer recently: "we love the good times, but we REALLY LOVE the bad times"…)
Following on from Capgemini's agreement to take over Unilever's South American BPO operations, we are clearly seeing signs – as we discussed last year - that Latam countries have great potential for delivering BPO services, such as finance and accounting and HR, in addition to supporting IT engagements (particularly with the legacy development skills that have sprung out of the Latam financial services sector). This latest development further augments the discussions that the leading outsourcing providers see Latam as a major addition to a global delivery framework, especially when you consider the investments Accenture, Genpact, IBM, Infosys, TCS and others have also been making in Latam resources.
Moreover, this announcement follows on from several major recent BPO wins from Wipro, which has been performing a stellar job taking on multi-tower BPO services for a number of global clients across finance, HR, customer care and some industry-specific domains.
I had a distressing conversation regarding the future of the US automotive industry today with a guy from Detroit. Their main concern these days is the widely-speculated acquisition of Chrysler by General Motors.
The expectation is that if GM buys Chrysler, it will only retain the Jeep and Minivan businesses, close all the other Chrysler plants, and lay off 75% of Chrysler's engineering staff, for a direct loss of 90,000 jobs – not including ~6x more jobs at suppliers – throughout North America. If no merger happens, one or more of the "Big 3" will go bankrupt, resulting in a total loss of all jobs – more than 120,000. One of his neighbors is putting his house on the market tomorrow, anticipating losing his job soon. Several other friends and neighbors expect to lose their jobs by the end of the year.
This reminds me of the situation in the UK in the 1980's when
the majority of the British coal-mines had to be shutdown due to unprofitability. Entire cities were left with mass-unemployment, leaving the British government with little choice but to invest in attracting new business and investment to cities. One of the most notable success stories has been the development of 650,000 call center and BPO jobs across many of these cities where old industries were dissolved. Many of these jobs are also in the financial services sector, supporting such businesses as MBNA and Sun Life.
Whomever gets elected on Tuesday night is facing a massive task to redeploy workers in consolidating and declining industries, such as automotive manufacturing. As we discussed so animatedly last week, could creating BPO jobs we an answer? Could the USA become a competitive BPO location?
With the ever-closing barriers between ERP strategy and BPO – which we discussed at length back in August, it's important to understand enterprises' activities with their ERP maturity in order to get a solid picture of future potential outsourcingactivity. The performances of both SAP and Oracle are now a sure-bell-weather for the IT and outsourcing industries at large.
Bruce Richardson, AMR's Chief Research Officer, offers some keen insight into SAP adoption in his recently launched blog "First Thing Monday", which is an extension of his popular e-newsletter that hits the wires at the beginning of every week.
Bruce points out some key indicators of what we can expect in the coming months:
Many SAP customers he is talking to are continuing to expand their footprint at present and are still planning for further upgrades;
SAP is not planning any labor reductions, despite heavy growth in recent years, and will reduce costs with a hiring freeze and travel restrictions;
SAP is likely to push new programs in the short-term to encourage mid-size business to move into SAP environments.
While we're clearly moving into a difficult economic climate, it's encouraging that many enterprises are continuing to invest in their ERP backbones. I anticipate that as we see more companies seeking cost-containment outsourcing avenues, many will be able to benefit from upgraded (or new) ERP platforms as they evaluate their options. Common ERP standards ultimately support more scalable and lower-cost outsourcing strategies.
With the US Treasury yesterday making an initial $125 billion stock purchase of nine beleaguered financial institutions, it makes me think seriously about how these colossal investments also could be deployed to create new jobs, better technology investments, and more efficient support processes.
Our recent survey shows that many financial institutions are ready to grab the low-hanging fruit of outsourcing offerings, where they can make quick cost-savings and transition costs are offset by arbitrage.
However, while outsourcing clearly has its benefits, what about the
significant costs of integrating these merging institutions, the systems integration costs, the re-drafting of contracts with suppliers, the divesting of bloated captive operations etc.?
How about investing 1% of that $125 billion in setting up a shared services facility to support banking services in areas such as systems integration, application development, HR services, finance support, customer service, global trade processing, compliance support, image processing, risk analytics, mortgage processing, credit checks and so on. Each bank could initially be allocated a fixed number of staff, based on business volume, and service providers can take part in a tender process to help set up and support the center.
This would have the impact of:
1) Creating new jobs;
2) Saving banks a lot of money in a very tough market;
3) Making M&A activity less complex.
Guess I'm not the best lobbyist…I can't even vote…but I can blog -:)
The most dominant discussion thread I constantly have with clients today is about change management, and this is massively relevant in these times of rampant globalization, and this uncertain climate.
Companies today simply cannot go out and hire teams of executives with deep outsourcing and offshoring experience – they are hard to find, expensive and often don’t understand your specific business needs (horses for courses…). There simply is no defined curriculum for managing change. Companies need their change leaders to lead from the front and bring out new qualities and skills from their existing people. To this end, I am humbled to receive this guest article from one of the most respected practitioners in sourcing folklore…and certainly the finest to hail from Canada 😉
In her recent past, Linda Tuck Chapman led the sourcing efforts at Fifth-Third Bank (as Chief Sourcing Officer), Scotiabank and BMO Financial Group and now runs her own boutique strategy firm called ONTALA Performance Solutions. Linda also studied under the tutelage of my father-in-law during her MBA, and claims to have been a model student. Anyway – over to you Linda to discuss executing a change strategy in this economy:
In all companies, 15% of employees are change leaders. To successfully implement change in your company’s culture or operations, you’ll need to find this amazing 15% and recruit them as your champions of change. Unleash them and you’ll find the energy and power necessary for effective change management.
At the heart of any change are people helping, hindering or indifferent to the change agenda. So how will you lead them?
Most business leaders are familiar with change guru John Kotter’s eight step change management process. These steps …. 1) create a sense of urgency 2) pull together a guiding team 3) develop the change vision and strategy 4) communicate for understanding and buy-in 5) empower others to act 6) produce short-term wins 7) don’t let up 8) create a new culture….. will guide your journey.
Chaos in financial markets and a looming recession create a burning platform for change. It can just as easily paralyze organizations. Your people, your customers and the market are looking for leadership. For your organization to survive and thrive, they need to find it.
As a leader, you must be decisive. You also need to trust your own judgment and accept advice from people who have proven to be reliable. Fact-based decisions are critical, but you can never have all the answers and may have to act before you’re ready. In an orderly world, “ready, aim, fire” makes sense. Today’s order may be “ready, fire, aim”.
In the words of management guru Peter Drucker “start with the end in mind”. But any road will take you there if you don’t know where you’re going. So, do your homework, make decisions, commit to those decisions, and then get on with it! Indecision is a killer, and wrong decisions still produce better results than no decisions at all.
It is surprising how frequently leaders are unable to articulate what the end state should look like. Whether you call it a vision, a strategy, or an action plan the organization is looking to you for leadership, and followers can’t follow if they don’t know where they are going.
The first step, working with a handful of trusted advisors, is to describe what success looks like. What are your guiding principles, timing and expected outcomes? Be clear, be concise, be brief. This is the elevator speech, rallying call and beacon for the organization.
Once your vision is clear, work backwards to establish the milestones that will mark progress. Your guiding team should be that magical 15%, and should be drawn from all levels in the organization. They know the landscape and will establish meaningful milestones. At this point, you should build the 10 minute synopsis of the strategy and key action steps. You’ll need them to sell the change agenda across the organization.
Next, subject matter experts and leaders will need to develop a detailed execution plan. You may have to begin executing the plan before it’s finished, so make sure you articulate key milestones. This will ensure you stay on track, size the effort, can celebrate successes, and keep moving forward. In cases of significant change, establishing a program office to enable momentum, deal with issues and sustain gains.
The most common cause of a failed change agenda is a failure to adequately communicate. A comprehensive communication plan addresses internal and external stakeholders will determine what they need to know, how to communicate, and how often they’ll need information. In times of change, no matter how well and how much, it is rarely enough.
People fear the unknown. At a deeper level, they fear it will adversely affect them personally. Can you tell the difference between fear and a healthy sense of urgency? Here’s an easy test. People who are overwhelmed or gripped with fear stop blinking. When they regain control, they start blinking again. Look around, you need everyone to be engaged and contributing.
As a leader you must be open, be truthful, deal with conflict and personally deal with people issues. Especially when outsourcing. Especially at this time when many people have lost their savings and are worried about their future, the future of the company, the future of the economy. An outsource service provider recently told me that a client company transferred employee terminations to them when the contract was awarded. Imagine their reputation within the client company after the terminated employees were transferred to them, then immediately terminated. What were they thinking?
Make use of communication vehicles like company news letters, which are read from cover to cover during turbulent times. Executive Steering Committees can have a powerful influence on change laggards. No one wants to see their department or division sitting in last place on a scorecard. Nor do leaders enjoy explaining to peers why they are so far behind. When outsourcing, have you thought about introducing two-way satisfaction surveys? They can shed a light on progress and issues if you invite your service provider to score business units and relationships.
As change is implemented, bring visibility and transparency to the results. Quarterly scorecards that mark progress against milestones should be published and discussed. Highlight successes and recognize change leaders and their accomplishments. As a leader, try to let your people to “fail forward”. Listen when they bring forward viable new ideas. Help them to become change leaders and support them even if things don’t turn out quite as planned. Mistakes are essential to progress, and the objective is to succeed, not to count mistakes. Don’t turn your tigers into turtles.
Under thoughtful and decisive leadership, your magic 15% will lead by example, bringing about positive change. Their example will motivate the next 15%, who will soon catch fire and embrace change. And so on, until change leadership becomes part of your culture.
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Linda Tuck Chapman is CEO and founder at Ontala Performance Solutions Ltd. and can be emailed here.
The BPO and Offshoring Best Practises Forum was set up a few months' ago on LinkedIn to allow senior executives in the sourcing industry to share views, news, best practices, discuss current industry issues and network. We already have close to 3000 members active in this group.
Julia Velixon at Mercer recently presented a new study conducted with the Harvard Business School, based on interviews with senior HR leaders from 60 global corporation, focused on the challenges of HR leaders moving from local to global roles within an global HR function.
Key findings from the study:
Workforces are becoming more globally-dispersed. The increased globalization of many of today’s businesses, both in terms of their penetration into new international markets, in addition to their adoption of global sourcing models across IT and corporate support functions, is significantly increasing the need for global HR practices. More than 50% of respondents’ workforces reside outside of their corporate home country – the pressure to standardize policies and processes, manage increased workforce mobility and manage compliance needs is greater than ever.
Many senior HR executives are stepping up into global roles, but are failing to divest of their localized issues. 45% of the executives have moved into global roles over the last two-to-three years, many of these transitioned in the last year alone. However, while roles are being structured globally, most of the executives have been struggling to get away from dealing with local and regional issues. For those working in global roles today, 9 out of 10 have less than 3 years experience and a failing to move away from their previous localized job roles:
HR… stepping up into global roles?
Lack of standardization. The lack of a consistent approach to governance and compliance, especially in Europe and Asia – where employment and tax laws vary widely in different jurisdictions – creates further challenges for HR leaders. There is also a lack of standardization around the approach to global mobility, which hinder’s HR’s ability to apply consistent procedures to the compensation and benefits of a workforce that has been growing rapidly. It is becoming increasingly important for companies to properly manage the logistics of moving there employees from country to country.
More on the recent survey we ran (to which many of you contributed) on the immediate outsourcing intentions from the beleaguered financial sector.
The financial services sector has held back from many outsourcing opportunities in recent years through a stubborn resistance to change and a fear of losing control over non-core business processes.However, with this current tough financial climate, executives have little choice but to embrace global opportunities that afford both short and long-term cost-savings, access to process acumen and new technologies.When we delve deeper into the new survey data,
the major banks are clearly the most aggressive with ramping-up their plans to pursue outsourcing strategies:
Figure 1: Over the last month, has your firm been looking to increase / decrease your expenditure on outsourcing services (IT and BPO)?
n= 44 Major US Financial Institutions
It is those outsourcing services where initial investment outlays can be offset by a heavy labor arbitrage component that are now top of the agenda for the beleaguered banking sector.
To this end, the main service-lines where banks are focusing are banking-specific BPO services, application outsourcing, and Finance and accounting BPO (see Figure 2).Insurance companies also stated a strong focus on adopting insurance-specific BPO services in a 6-12 month period.Service lines not being so aggressively pursued are primarily HR outsourcing and IT staff augmentation projects:
Figure 2: How do you foresee your demand changing for the following outsourcing services over the next 6 months?
n= 29 Major US Banks
“Tough times call for tough measures, and outsourcing fits the bill for some financial organizations”
This data supports the position that banks are now seriously evaluating the lower-hanging fruit right now – they are looking to find solutions that can support their changing business models, and the more they can be supported by cost arbitrage, the more likely they are to move into an outsourcing transaction.
While current leadership discussions in this sector have clearly been dominated by mere survival strategies, the sourcing strategy talk will follow soon afterwards, whether they are going into an M&A situation, or simply looking to strip out cost. I predict a very bury Q1 2009 in this sector. What do you think and what are you seeing?
Even though you are probably more interested in the breed of puppy Barack is going to buy his girls, I have had a chance to ponder the realities of the recession. 
I had a distressing conversation regarding the future of the US automotive industry today with a guy from Detroit. Their main concern these days is the 
With the US Treasury yesterday making an initial 
