The recent article on Polandcertainly stoked up some creative discussion about sourcing BPO locations. And none more so than from Ratnesh Mathur, a BPO guru from India, based in Central Europe. Ratnesh has worked in the "outsourcing temples" of Citibank and Infosys, in both India and Europe, for over 17 years. These days, he spends his time traveling to lesser known places in India and Europe, and, when not traveling or working on his upcoming book on Indoeuropean linguistic/cultural links, you can seek his blessings on outsourcing advisory work in India & Europe, through social networks like Linked-in. Anyway, I thought Ratnesh's recent contributions warranted a full-posting:
When selecting a BPO location inside the European Union and in India, its useful to first segregate the City-level metrics from the Country(EU)/State(India)-level metrics and then quantify relative-importance of each metric vis-a-vis others, specific to your unique need:
Country(EU)/State(India) Metrics– BPO/SSC Set-Up time; Visa/ Work Permit Requirements; Subsidies/Government Incentives; Labour Laws; Tax & Accounting Laws; Political stability
City Metrics– People (Labor Pool size / Education – Graduate skills/ Location attractiveness for Senior Foreign Hires/ Understanding of US & Western European cultures/Languages) ; Infrastructure (Real Estate, Telecom, Light/Heat/Water etc) ; BPO/SSC Competition; Travel links with key Client sites
You will discover, from a BPO perspective, that there is little difference between CEE countries. Poland, Czech Rep, Romania, Bulgaria etc. – all present EU stability, consistent ex-communist educational systems, progressive labor/tax/accounting norms more aligned to Brussels roadmaps than Old EU countries, Spirited govt. investment cells etc
Eventually, the one-on-one negotiated government subsidy/incentives (through PaIiz in Poland, CzechInvest in czech rep, SARIO in Solvakia etc) for job creation, is the salient country-level metric for new BPO locations.
Other-wise, its best to focus on City-Metrics to develop a meaningful point of view on a BPO location inside the EU. For example, if you seek to set-up a 500 seats+ BPO venture in the location you select, it's best to validate break-even point for the handful of cities with 300K+ population.
In my experience within the EU (just as in India), its most useful to conduct a location-selection focused on city-metrics and a comparison between 3 Economic (Comparable cost-of-living) Groups of Cities. For example:
a) Prague, Warsaw, Krakow, Budapest, Bucharest, Bratislava
b) Lodz, Wroclaw, Brno, Ostrava, Cluj etc
c) Various Sub-150,000 population towns
Poland and most other CEE countries present several interesting BPO locations. Just as in other industries, the BPO industry too will eventually progress towards a "stateless multinational mindset". See this article from the Economist entitled "In praise of the stateless multinational".
One should mostly trust the NUMBERS of one's business model during BPO location selection within the EU. Inputs to the model are mostly at a city-level.
Comments on a Nation as a BPO location in Europe, still invite a lot of nationalistic demagoguery. As philosopher AC Grayling reminds us – " Nationalism is an evil. It causes unnecessary wars, its roots lie in xenophobia and racism, it is a recent phenomenon – an invention of the last few centuries. The word – "nation" – is meaningless: all nations are mongrel, a mixture of so many immigrations and mixings of people over time that the idea of ethnicity is largely comical. "
Its fairly common these days to find nations presenting themselves aggressively through their investment bodies such as Paiiz, czechinvest, Sario etc. at BPO conferences in the CEE region. A new and meaningless war of words has been underway for the past 5 years. We need to rise to a stateless multinational mindset.
Jason Averbrook on HR and technology: the core theme is about how HR needs to reach outside of the organization to drive performance inside. And technology and social networking tools arethe enabler to make this happen. Here are some of the sound-bites:
"What we thought we were getting from technology is not what we have. We outsourced benefits and payroll, so what are we left with – an address book, and IT tells us it'll cost a million dollars to upgrade!"
So why are people are unhappy with technology?
Because people bought technology without a strategy and LinkedIn knows more about your employees than you do. What people are building outside of work are communities – and who manages all of this stuff? We do – we are all contributing to this everyday. So what's driving technology? We are
People are communicating with other each day using LinkedIn, Facebook, Twitter etc, and employers ask – how do we block this? How can we govern this?
What drives employee engagement? The once-a-year holiday party? Are we providing employees with ways of connecting with each other? So what are these tools and technologies doing? What they are doing..is making us perfectly visible.
Instead, HR should be asking "how can we embrace this to drive collaboration and innovation"
People now average 10 jobs before the age of 38… they are communicating each other in so many ways. The Gen-Ys are growing up with technology – ask a 4 year-old what a mouse is… "it's a thing for the computer". It's a major culture shock to look outside to go inside
It's all about Social Capital – it's the collective value from a group of individuals or employees. HR systems am been built for HR, but what we really need is to have them built for employees.
Been listening to some excellent discussions at Mercer's client event, where the central theme is all about globalization. Mercer's Jeff Miller and Julia Velixon discussed the results of their new study, conducted with the Harvard Business School, based on interviews with senior HR leaders from 60 global corporations. Some key points of note:
Workforces are becoming more globally-dispersed. 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 finding the transition challenging. 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.
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.
Washington D.C.this week: I have the privilege of delivering a keynote address to Mercer's clients on the subject entitled "Creating a Strategic Enterprise Sourcing Strategy and Governing Change" (whatever will I think up next…). I look forward to posting some banter from their conference, where the central theme is "Successfully Managing the Global Journey". I am particularly interested to hear Jeff Miller and Juila Velixon discuss Mercer's recent study conducted with the Harvard Business School on global service delivery models. I promise to share the findings here. Am also looking forward to hearing Jason Averbrook (great blog by the way) attempting to tie together web 2.0, new HR technologies and outsourcing. Big topics – I love it 🙂
San Francisco and New York next week: I am more excited than usual at the prospect of attending Oracle OpenWorld this year. Both Oracle and SAP's signature events have fast taken-over as industry meets to anyone in the hi-tech and services businesses. If you are there and want to meet up, drop me a mail. What's exciting this year is the stage they are giving to BPO – come visit the panel discussion entitled the "The Good, The Bad and The Ugly", Moscone South, 307 at 5.30pm on Monday. I'll be joined on the panel with my long-time industry cohorts Stan LePeak (Equaterra) and Mark Stelzner (Inflexion Advisors). I'll be spending the latter half of the week in Manhattan where I have brought together some of the leading minds in the BPO industry for a behind-closed-doors round-table (no vendors allowed…sorry).
London and India: Am making plans to visit London and India later in November and December, so look forward to meeting up with many of you during my travels.
I received a very interesting synopsis from a senior executive at one of the major global IT-BPO providers on the subject of Poland as an offshore delivery location. From my own personal experience, Poland has proved to be a first-class location for high-quality, multi-lingual support, particularly for BPO functions such as finance and HR. No wonder providers such as Accenture, ADP, Capgemini, Genpact, HCL, HP and IBM have all made significant investments there, in addition to many captive centers that have been established there in recent years.
Siddhartha makes some excellent points, most notably that Poland is simply not an "alternative offshore location", as its value-proposition is not driven by scale and low-cost, but by highly-motivated and educated staff, and is a proven first-class hub for multi-lingual European language support. He also makes a bold assumption that Poland has the potential to be challenging the unique expertise of a country such as Israel, as Poland possesses far more potential that simply being a BPO / shared services location. In many instances, clients have not found significant cost savings using Polish delivery resources – they have used them because of the value and quality they bring to a global delivery model. Over to you Siddhartha:
“Move Over, India: The Shifting Geography of Offshore Outsourcing Creates New Challengers” stated an article published by the Wharton School, way back in 2005. Every now and then a prominent analyst, consulting or a research firms comes out with a report on alternatives to India as far as offshoring is concerned. Today, Latin America and Eastern Europe are integral to the Global Delivery Models of most organizations – both for their in-house IT/Business Processes as well as outsourced IT/Business Processes. In this context, it is interesting to analyze the case of Poland which is the largest of the new European Union member states.
Poland is not a substitute to India for anyone seeking scale:The fastest ramp-up that a company has achieved in Poland is about 500-600 FTEs during a year – this equates the average weeklyramp-up of some of Indian companies in India (26,000 during the year) and half of peak-day hiring (TCS last year and Cognizant this year made about 1000 offers at Anna University in a day).
Hardly Attractive for Outsourcing from the US:6-7% appreciation of the INR (Indian Rupee) against the USD created a hue and cry in India with NASSCOM almost portraying it as a threat to the industry (INR has already depreciated to be back to cheaper than earlier levels). The Polish Zlotych had appreciated in excess of 30% against the USD in 18-months! Even though there has been USD appreciation over last few weeks, I am not sure of many business models which can take a hit of 25-30% and still remain viable.
More a BPO than a ITO Destination:Poland's is essentially a BPO/Shared Services industry with ITO being restricted to smaller scale Polish players (even with significant presence of IBM and Cap Gemini, their ITO work is not that significant, and focus is more on BPO – primarily Accounting Services). Even among BPO/Shared Service centers, captives form more than half the industry which is very distinct from the India story.
Skill Scarcity: If you sought help from any leading recruitment consultants for hiring people with 4-5 years experience even with common technology skills, they would suggest that it requires a ‘direct search’ as it is a "senior level" hiring placement. Initial offers from consultants mentioned rates of 20-25% of annual salary – you could almost hire a VP on those terms in India. I found this shocking but then it was easy to understand why. A software engineer, business analyst or a transition manager with 5 years experience is a European resource rather than Polish or a Romanian resource and hence cannot be source of any cost arbitrage.
Poland makes up its lack of scale through superior quality: Poland has 45% of its population, in relevant age groups, in its universities; compared to only 10% in India. Moreover, until recently, it did not have graduates, but only post-graduates - hence the quality of human resource in BPO and shared service centers is far superior to most such centers in India and other European nations. Most BPOs hire post-graduates in Economics and Finance from top institutes for their operations – a luxury which may not be available in India other than to some high-end KPO operations (see this earlier discussion).
Ability to attract a truly global workforce: In our organization we not only have a multi-lingual workforce, but a multi-national one which includes Portuguese, Spanish, Russian, Italian, Brazilian, British, Polish and Indian nationals. This gives it an advantage which most Indian operations do not have. While most companies currently leverage this facet largely to source language skills, it has the potential to be extended to other areas in the future.
Poland has far greater potential than simply being a multi-lingual hub: I have talked to outsourcing heads of two leading financial institutions – one European and other American – who acknowledge that their Global Operating/Delivery Model is almost a euphemism for an India-strategy backed by couple of other locations for work that cannot be done out of Indiaeither due to EU or local regulatory restrictions or foreign language requirements.
The language skills advantage is significant but if that remains the key driver of outsourcing to Poland, then some really bright Masters in Economics would be in an accounting operation for a German client – not because she knows econometrics but because she knows German. In fact this ‘alternative offshore location’ positioning is unfair to a country like Poland which offers really unique benefits. With the strength of its education system and ability to attract global talent, Poland should challenge the niche positioning of a country like Israel in high-end technology or other niche skills rather than be a generic offshoring destination.
Bristol Myres Squibb today joined a rare breed of enterprises which have bundled apps and business process to two suppliers across finance and HR towers, with the announcement today that Accenture has taken on a 10-year $550m engagement to take on the pharma giant's finance and accounting processes and related application development and management services. This follows on from their recent $324m 10-year deal signed with IBM that covered Human Resources BPO and related applications services.
This strategy builds firmly on our recent discussion on bundling apps, and the related business processes supported by those apps, under a single supplier. This deal is just the latest in a series of contracts where the buyer is clearly recognizing the synergies of tying together process design, knowledge transfer and governance across IT and operations "boundaries". Bundled outsourcing is not the answer for everyone, but it can provide a major spur for some companies looking to shake-up their back office functions, provided the vendor can demonstrate the skills and business understanding to drive this agenda. These "boundaries" shouldn't exist, and bundled BPO is one potential solution that can help eliminate them. (Much) more on this topic to follow…
We completed our survey looking at the world of third-party sourcing advisors this week, with the high-level results being discussed by my friend Ed Nair, over at Global Services Media.
One of the key takeways, which I wanted to share with you, is the importance of the sourcing advisor / vendor relationship. Of the 114 advisors who completed their section of the study, almost half of them revealed they frequently get business through their relationships with vendors. We always knew that vendors refer advisors in certain client instances, but not to this extent:
Normally, you would only expect a vendor to refer a third-party advisor to their client, if there was limited opportunity of a sole-source deal, and it needed an advisor to accelerate the process, with the hope their existing relationship would eventually win them the business. There is nothing sinister in that.
Naturally, a vendor prefers to refer an advisor with whom it prefers working, where it understands its downselection and sourcing methodology. However, the overwhelming extent to which this is happening gives me some pause for thought. Vendors have been referring their preferred consultants and analysts to their clients for years. Consultants can provide education and unbiased advice (which we discussed here), whether it's about outsourcing, software selection, governance, risk management, and so on. However, when you hear about some of the cosy industry relationships where one vendor is always referring the same advisor, you have to pause for breath and think "is this crossing the line between educating a client and overly-influencing a client?".
So… while the smart vendors and advisors are investing in their mutual relationships – which is critical in this industry (there would be no outsourcing industry without the investment of vendors in their global delivery infrastructures), buyers need to be aware of these dynamics and ensure they have other validation points to underpin their decisions. The need for independent forums, research and informal peer networking has never been as great as it is today.
Great Britain's Andy Murray (OK, he's a Scott, but we'll have him anyway), goes for our first major tennis tournament victory in 72 years tonight against the mighty Fed Express in the US Open final. The player, whom our former tennis icon Tim Henman recently described as a "miserable git", proves that being a nice guy doesn't always win you trophies…
I seem to get pulled into daily discussions from people trying to get a blog off the ground. There appears to be a common misconception that all you have to do is post something and thousands of people will flock to your site, eager to listen to your rhetoric and add their own views. I have literally lost count of the number of bloggers who put out a few posts, only to leave the thing stranded gathering web-dust. Cyberspace is littered with blog-junk that clutters web-searches and gives the impression their owner fell off a cliff or experienced some other inexplicable disappearing occurrence. Bottom-line – if you're going to start a blog, stick with it.
Those blogs today that now get substantial traffic and almost cult-like followings are those that developed a personality and kept at it. Let's be honest, you'll pick up a copy of a magazine if there's a story advertised that interests you. However, if the article fails to keep your interest beyond the first paragraph because it is:
a) telling you nothing new,
b) boring, or
c) has little relevance to your interests,
the chances are you will not pick up that magazine again.
The same applies to blogs. Readers are operating entirely under their own volition to click on a blog posting and read it. If any of the three categories above apply, you are likely never go to that blog again. Hence, bloggers need to captivate their audiences quickly, be consistent with content, originality and humor, and post regularly, to have any chance of developing a blog-brand.
Here are some hi-tech/services blog "categories" and how they tend to fare:
The Independent consultants: Tend to be among the most successful bloggers. Good consultants tend to have a lot to talk about and (on occasion) good content, and always a point of view. In addition, many consultants need an outlet to expound their views, especially when they have been on client-site in the Midwest for 4 months with the client from hell. Prone to blog-failure – have seen several big-shot consultants blog for a few weeks and give up (usually with good reason).
Pros: Plenty of content, always a viewpoint. Tend to be prolific.
Cons: Prone to waffling, and going off-point. Occasionally get caught in issues that only they find interesting. Can be sporadic with posting frequency. Often lacking in humor
The Journalists: The most natural bloggers. They know a good story when they see one, and are skilled at attracting attention to their story. Particularly effective where they have comments feature under theire articles.
Pros: Always well-written and eye catching. Punchy and entertaining.
Cons: Can often lack a viewpoint – good at reporting news and inviting commentary from others, but not always the best at delivering pointed opinions themselves.
Analysts: A mixed bag. Analysts expect the world to stop and listen to what they have to say (as an analyst myself, I can get away with saying that). However, a blog post is not a research article – it is an outlet for discussion and needs to be punchy, sometimes creative, informative and amusing. Not in the DNA for every analyst, unfortunately.
Pros: Great content, often prolific, sometimes edgy and thought-leading. Great to stimulating debate and cultivating ideas.
Cons: Can drone on too much, doesn't often invite opinion, prone to being dull and lacking in humour. Occasionally falls victim to an earth-shattering proclamation that is it a little off-base.
Anonymous folks: Can be excellent! These are often practitioners or suppliers who choose to remain anonymous due to the need for confidentiality, or the simple fact their firm won't let them blog (respect to them).
Pros: Untethered, unafraid opinion. Usually have cult followings and great discussion
Cons: Their author(s) get paranoid that they will be outed (they usually get found out…). Often hard to develop a personality when noone knows who the author really is. Can get too focused on the micro-issues of the blogger and miss the bigger picture. Many anonymous blogs have failed.
Corporate blogs: Good, but often lack edge. Most companies feel the need to have a "blog" option on their website, and there's always a willing employee who wants to churn out a few musings.
Pros: Professional quality content is guaranteed. Most posts are vetted / edited by marketing and generally have good information. Can be highly educational and informative. Tend to work better for the corporations's own staff to opine their views, as opposed to external people.
Cons: Bias is inevitable in many cases. People like to go to blogs that are run by individual personalities, not corporates, hence discussion is often restrained and tepid. Often not timely to respond to industry news as they have cumbersome review procedures internally before being released.
Blogger stables: Mixed bag. These are "stables" of bloggers, usually brought together by an online publication that has decided its best blogging strategy is to get a collection of individuals to blog for them and compensate them based on traffic flow them cab generate. Creates a potentially-powerful content-medium for online media who want to embrace the blogshere, rather than risk getting run out of town: see Blog-culture is ripping up the rule book for the outsourcing services and technology media industry. Works for the aspiring blogger who wants to blog, but isn't so bothered about developing a unique personal portal of her own.
Pros: Good traffic, and easy to get a blog up and running on this platform. Easy to introduce new content, concepts etc. Plenty of choice and content for the reader. Usually get some unique, unfettered opinions from bloggers vying for headline posts within their stable. The stable culture drives some "blog-petition" across their bloggers, and improves the quality of some of the laggards, who need to keep pace with the thought-leaders.
Cons: The blogging platform is standardized to the look-and-feel of the online publication, lacking that individual personality. Some of these stable bloggers are likely to be using the stable as a back-up blog to their individual one. Other stable bloggers use these platforms as they do not have the know-how of confidence to run their own blogs – often the content is less punchy or informative and can prone to too much waffling. The traffic is normally from bored web-surfers, often not particularly engaged with that blog and are one-time visitors – hence can be tough to develop a loyal network of followers to that blog.
The recent article on Poland certainly stoked up some creative discussion about sourcing BPO locations. And none more so than from Ratnesh Mathur, a BPO guru from India, based in Central Europe. Ratnesh has worked in the "outsourcing temples" of Citibank and Infosys, in both India and Europe, for over 17 years. These days, he spends his time traveling to lesser known places in India and Europe, and, when not traveling or working on his upcoming book on Indoeuropean linguistic/cultural links, you can seek his blessings on outsourcing advisory work in India & Europe, through social networks like Linked-in. Anyway, I thought Ratnesh's recent contributions warranted a full-posting:
