Due to popular demand, we’re adding an additional category to the 2008 Horses awards for Awful Outsourcing: “The Calamity Clients”. Yes, it’s not always vendors which are responsible for outsourcing calamity – it often takes two to tango, and this is the vendor’s chance to counter-punch.
As there are several well-trodden paths towards calamitous outsourcing, we will be distributing several awards across the following non-specialist areas:
The Multisourcing-mayhem maestro
Did your client get a bit too clever and decide to multi-source to everyone under-the-sun with no idea how to manage the pandemonium? Then nominate your little multi-source maestro…
Governance-goulash
No idea what they’re doing? They think a service level is a button in the elevator? Oh dear…
The Bring-it-Back buccaneer
Client trying to bring back half the stuff they tasked you with from day-one… ended up re-hiring half the department?
HRO-hellraiser
Your HRO client thinks HRO stands for “Hell-Raising Outsourcing“? Their HR execs spending their entire existence trying to hang you out to dry? You’re not alone…
The Pricing-poker protagonist
Getting squeezed by some CFO who thinks contract negotiation is like procuring a Persian rug? You suspect he spent his youth pulling off the legs from spiders…one-by-one? Your margins getting a closer shave than Roger and Tiger combined? You know what to do….
In light of all the recent banter on the credibility of awards, I thought we'd serve up our own awards ceremony - and I reckon we can put all of the other lists/awards companies out of business in a heartbeat, because only one vendor will get upset with each award (genius 'eh?)… Here are the categories:
Worst Outsourcing Provider of the year:
Vendors – are you just so plain awful you can't hold down a client? Then, this could be for you! This is restricted to vendors which have had a minimum of three clients bail on them over the last 12 months, whether they "backsourced", or paid millions to switch to another provider.
The "Awful Advisor" award:
Rarely is a sourcing advisor ejected from client-site, but it's happened – and a few times! Buyers – please nominate that team of consultants that drained you of billable hours, before coming up with recommendations that you could have got from a taxi-driver.
The "Bait-and-Switch" special:
Buyers – did you sign up with a vendor, when the minute the ink was try, the entire team who worked their guts out to woo you simply vanished? Those Six Sigma black-belts, LEAN luminaries and Kaizen karate kids never materialized? They leave a zero off from the attrition-rate in their Hyderabad call center? Then nominate your favorite bait-and-switcher today.
The Lousiest HRO provider:
We're spoiled for choice with this one - how many payroll runs did your supplier miss? Do you blame it for all your dysfunctional HR processes? Of course you do! Here's your chance to throw your HRO provider fully under the bus.
The Funkiest FAO supplier:
Still closing the books from Q4 2007? Got 2,748,547 unpaid invoices? You know what to do…
And finally…. Thought Laggard of the Year:
Sick of the same old bleating from past-it, out-of-touch old industry windbags? Tired of reading their dreary old articles that they probably got some freelancer to write for them anyway? Worn-out with ego-filled luminaries starting their own blogs then leaving them stranded after three posts? Well, now it's time to recognize their anti-contribution to the outsourcing industry!
Outsourcers Hone European Savvy: Niraj Sheth, of the WSJ, comes up with some compelling examples of how the leading Indian outsourcers are training their staff to understand European business etiquette. With a weak dollar and tight economy, the offshore leaders are increasing their focus in the high-cost European countries, where expensive currencies, high wages and a challenging economic climate are driving outsourcing to the top of the agenda. However, it's not quite as simple as adding americanisms to English…
Carl, a German customer, gave Indian programmer Koshal vague instructions to get a report done by the end of the month. Koshal, expecting to receive more details — such as what the report should cover, what method to use in his analysis — and a firmer deadline than "the end of the month," didn't deliver on time.
A programmer attending the class defended Koshal, arguing Carl should have sent out a reminder, as would have been customary in India.
"Why would Carl have to remind anyone?" replied Ms. Ashok. "He doesn't have to. He's German."
China: Low Cost No More: Jason Busch (pictured here) picks up on some recent examples as to why China is no longer a low-cost provider and is rapidly moving up the manufacturing food chain.
Foxconn will be opening new factories in low-cost markets like Hungary and India to reduce the pressure caused by cost increases
(I assure readers that Jason is far more of a corporate hippy than this picture suggests)
Clients tend to put off making decisions about the retained/governance team for multiple reasons, including:
All energies and efforts are focused on “the deal” in terms of contract terms, conditions, and pricing, with no time/resources devoted to post-contract issues.
Clients may postpone making staffing decisions and communicating changes until they are sure about the final outcome of the outsourcing agreement.
Clients expect that since they are outsourcing the work, the service provider will take care of everything and the client can “wash its hands” of ongoing management responsibilities, resulting in a lack of governance staff.
Shawn – we can bleat these lessons until the cows come home, but will they listen? But thanks for pounding-out the common sense…
Outsourcing the Offshore Operations : Businessweek's Steve Hamm has become the mainstream business media's authority on outsourcing over the last couple of years and articulates well the movement away from captives in this article. Nothing new to many of us here, but he articulates to a mainstream audience why it no longer makes a lot of sense for many firms to continue to invest in their own offshore operations:
There has been a steady drumbeat of similar large deals in recent years, but industry executives and analysts say the pace is quickening—driven by currency swings, the increased costs of doing business in India, and the need for some Western financial services to raise cash to handle shortfalls elsewhere.
I get asked this question from someone nearly everyday, so here is the reason: It's a horse-racing term. Certain horses run better on certain courses.
HORSES FOR COURSES – "A mostly British expression urging someone to stick to the thing he knows best, 'horses for courses' comes from the horse racing world, where it is widely assumed that some horses race better on certain courses than on others. In 1898 a British writer noted in the first recorded use of the expression: 'A familiar phrase on the turf is 'horses for courses.'" From the "Encyclopedia of Word and Phrase Origins" by Robert Hendrickson (Facts on File, New York, 1997, Page 339); "A course of action or policy that has been modified slightly from the original to allow for altered circumstances. A horse that runs well on a dry course will run less well on a damp course and vice versa."
I always felt this phrase sums up the experiences of both vendors and buyers which have danced around with outsourcing relationships over the years. An outsourcing engagement that works well for one firm in its particular circumstances, may not be as successful for another; there is no one-size-fits-all solution, when you are dealing with a company's people, processes and technology. It took me about 30 seconds to come up with this goofy name after a few glasses of vino when I decided it was high-time to get a blog going…
Capgemini is making some waves in the world of F&A BPO this year, winning some major global engagements, one of which is likely to be down in Tampa. Not a bad return from new Sheriff David Poole (he claims he is no longer a deputy). I have gone on the record to describe the current climate as crucial for Capgemini to break heavily in the global F&A BPO business – and they seem to be doing just that in a highly-competitive market. They will be pushing hard for the number 3 market share position in the F&A BPO market by year-end behind both Accenture and IBM, but leading the large pack of outsourcing vendors jostling for position.
Apologies to several of you who voted on a poll I ran on Sunday/Monday that was evaluating the credibility of the list-makers and award-givers in the outsourcing industry. Unfortunately, I received a very large number of suspicious survey responses from a host of "FORTUNE 500 buyers", whose IP addresses – for some reason – all seemed to emanate from the same couple of locations. I received a very large number of these survey submissions clustered within a short time-frame, and they had no names or email addresses attached. They also all had selected one particular list-maker as "highly credible", while simultaneously describing the same 2 others as having "poor credibility".
It saddens me that on-line surveys can seemingly be so easily manipulated by entities that seek to sabotage results, or skew them in favor of themselves. I have become a little more cynical (than usual) this week as a result. As an industry analyst, I try hard to be impartial and deliver information to clients to help them make informed, unbiased decisions. I run this blog to drive healthy discussion, promote ideas and share knowledge with others. It seems that not everyone shares my ideals.
There's my rant. Issue closed. Thanks for listening. I just hope that there are still many of us who want to drive out bias and impropriety from a challenging industry in these complex times.
I am honored to welcome one of my earliest – and long-time – mentors in the services and hi-tech advisory business to guest on Horses for Sources. It's taken me over a year to persuade her to showcase her insights here, so I guess now she has submitted me a piece is testament to the power of blogging, and the fact that it is fast-becoming a preferred medium for industry luminaries to opine their views to the industry-at-large. The fact that she felt she could be a little more "edgy" and freer to express her views here makes me feel like I am doing something useful for the outsourcing industry hosting this blog 🙂
Ladies and gentlemen, please welcome the honorable Naomi Bloom and her take on the future of Human Resources Management service delivery. Naomi has over four-decades of experience in HR delivery and technology in a number of advisory roles and is widely-regarded as the pre-emeninent authority in HR platform delivery. Over to you, Mrs Bloom:
During the analyst panel at the HR Technology Conference in 2003, I made a bold (many said foolhardy if not wrong-headed) prediction, that continues to haunt me about the role that comprehensive HRM BPO would play in human resource management service delivery.I was in a wheelchair at the time, recovering from a bad fall at Machu Picchu, so perhaps I was emboldened by the pain medicine.What I wished I had said, and what may in fact be the case, is that by 2010 comprehensive HRM BPO will be the dominant approach considered by HR leaders (and their C-suite colleagues) to HRM service delivery as an alternative to "roll your own"via some flavor of shared services.What I actually said, which was clearly dead wrong, was that within five years (i.e. by 2008) half the Fortune 500 would be using comprehensive HRM BPO.
How could I have been so wrong about something so important? And why do I continue to believe that comprehensive HRM BPO, where uptake is moving much, much slower than I had predicted just five years ago, will eventually become that dominate approach to HRM service delivery? Perhaps I was seduced by the obvious business case for comprehensive HRM BPO, a business case which, if anything, has grown stronger over the last five years:
* Expectations for HRM service delivery go well beyond what even large organizations can (or want to?) envision, create, manage, sustain, afford and do reliably on their own — and those expectations now include global service delivery with local language and regulatory expertise; intelligent, role-based, integrated and content-rich self service; analytics at every level and, especially, re: business outcomes; and deep and integrated automation for both administrative and strategic HRM (a.k.a. talent management) to reduce costs and improve service consistency, quality, breadth and availability.
* Piecemeal outsourcing and the associated vendor management, governance, and systems integration challenges, especially as to self service and data analyses, are also more than most end-user organizations can (or want to?) handle, and it’s getting tougher as end-users add SaaS-delivered point solutions into their mix of HRM software.
* We’ve gotten used to trusting vendors for critical applications software development and providers for critical outsourced processes, and we’ll get used to trusting our core HRM data and HRM delivery system to equally valued, comprehensive HRM BPO providers — what could be more sensitive than health care claims data, and we routinely outsource claims processing.
* Corporate leaders have better uses for their capital, bandwidth, scarce expertise, risk-taking, frustration tolerance and other resources than to sustain their own HRM delivery system — much more competitive advantage can be created via HRM strategy and plan, policy, program and practice design than from operating the “factory” that delivers them.
* The industry's move to Web services and SOA by all the ERP/HRMS package vendors, with the attendant overhaul of thirty year-old data designs and semantics by the established players, will be the kiss of death to in-house implementations — CEOs just won’t pay to do this one more time no matter how much migration support is promised by the vendors — but I was SOOOOO wrong, back in 2003, to think that Oracle or SAP would bring their next generation application suites to market by now. Beyond the slow arrival of disruptive next generation HRMS software from the ERPs as well as specialist vendors, the nascent HRM BPO industry is still trying to recover from a number of flawed assumptions which were made by early buyers, sellers, and investors, including:
* Lift and shift” is not a sustainable business model;
* Highly customized and configured in-house implementations of SAP/PeopleSoft/Oracle/etc. cannot be easily commercialized, nor can highly tuned (to one company) shared services organizations;
* Labor arbitrage will not save the day when customer contracts still express their reluctance to accept foreign CSRs and many HRM practices are too convoluted and undocumented to be taken offshore;
* Global call centers are not as effective as global intelligent self service, and the HRM challenges of running huge HRM operations centers are big and growing;
* The lack of an agreed and precisely-defined vocabulary (i.e. an HRM domain model) for discussing scope of services, data definitions, processes, expected outcomes, SLAs and business metrics, standardization, configuration, and customization (G-d forbid!), etc. adds big $$ to every aspect of the sourcing and HRM delivery system life cycles;
* Comprehensive HRM BPO is not the same as ITO, and many of the early pioneers, firms and leaders, came from ITO; and
* Comprehensive HRM BPO is also not the same as payroll or benefits admin, and most of the rest of the early pioneers, firms and leaders, came from payroll or benefits admin outsourcing.
The flaws in these assumptions are now well-understood and the industry is working hard to undo the damage caused by them, but there remain many deals that were based upon or made captive to these assumptions that have and are continuing to drain the industry's resources. Furthermore, maximizing labor arbitrage, rolling out truly intelligent self service on a global basis, and getting to an industry standard (or even provider standard) HRM domain model are by no means accomplished as yet, and there's a good bit of heavy lifting still needed to overcome the lack of these critical industry enablers.
What else stands in the way of comprehensive HRM BPO becoming everything I predicted it would be? One glaring barrier is that we are taking far too long, as an industry, to figure out what in HRM should be standardized, within and across organizations, and what MUST be unique in order to create/sustain competitive advantage. We're also taking far too long to create and deliver Amazon.com-like HRM self service (in your language, with your cultural and regulatory sensitivities considered, and by cell phones, smart phones, or whatever our customers have at hand). Doing so would not only get rid of those pesky CSRs and allow the BPO providers and their clients to focus on the few but highly skilled HR generalists and COEs needed to handle what can’t be done self service, but it would also allow those BPO providers who have the right KSAOCs to deliver the insights and advice on improving HRM which were promised.
We are also continuing to pay a very high price for not having, particularly at the high end of the market, HRM BPO software platforms that are the best possible fit for this business. We're running factories here, and you can't make M&Ms profitably in an oil refinery any more than you can make profitable HRM BPO using software designed to be implemented and operated separately for a single client. I've written monthly since 2003 in HROToday about our software platform needs for comprehensive HRM BPO, but so far none of the major ERP/HRMS vendors have committed themselves to meeting my HRM BPO architectural requirements.
The biggest barriers to greater adoption of comprehensive HRM BPO are (1) the lack of proven, high capacity, and profitable providers across all of the relevant markets who are offering compelling, global and integrated HRM delivery services, (2) the lack of HR leaders and their teams who are ready to accept standard HRM service delivery processes and even some lower value HRM business rules where uniqueness carries no competitive advantage, and the lack of truly BPO-ready software platforms. The best providers are working tirelessly to overcome the sins of the past, and new entrants are learning from those early mistakes so as not to repeat them. Since no factory can achieve high quality at low cost without a very high degree of reuse and repeatability, the providers really need their software partners to deliver BPO-ready architectures and their customers to deliver BPO-ready expectations to make this new business model as successful for all interested parties as I believe it must be.
Am I embarrassed by the prediction I made in 2003? Of course I am. But to me the end game is still very clear. Even with the tremendous growth in SaaS among HRM software vendors taking a large chunk out of the TCO (total cost of ownership, alias the direct IT costs) of using that software — and I'm a staunch supporter of this software deployment option — end-users are still faced with minimizing the TCSD (total cost of service delivery, alias the full process costs and attendant liabilities), and that can only be done through effective, comprehensive HRM BPO.
Naomi Lee Bloom (pictured) is managing partner of Fort Myers, Florida-based Bloom & Wallace
There’s been a lot of heated discussion in the outsourcing industry of late regarding the issue of lists, rankings, awards and proclamations of vendors, advisors, tought-leaders etc. As per expected, emotions are strained when some come out looking good, and some not-so-good.
However, with such a ramshackle swirl of information out there… from consultants, media, bloggers, analysts, associations, researchers, there has never been a more critical need for the ultimate target – the buyer – to have balanced, unbiased and accurate information and advice. The real issue here is that rankings or “best of” lists are only as valuable as the rigor and independence of the evaluation methodology.
Deborah Kops, who has guested here with some intriguing viewson outsourcing issues, has offered to share her thoughts with us on this whole issue. Deborah is widely recognized as one of the outsourcing industry’s most experienced voices, having spent the majority of her career on the advisory and practitioner-side of global services, leading global transformation efforts at Deutsch Bank and Bank of America, before helping to establish PwC’s outsourcing division. Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO and KPO provider, and has greater exposure than most people in the industry to these “lists”, now she is leading marketing for a services provider with revenues of half-a-billion dollars. Over to you Deborah:
In May 2006, I published an article in Global Services magazine called “The Book of Lists.” A series of events drove me to take up a pen; I had recently served as a judge on several rankings, and had been amused that I was personally ranked a “superstar” on a list in a category that I in no way, shape or form could be termed an expert, even by my father who thought me a wunderkind.
The article seemed to have been overlooked by the chattering classes. I got no feedback and relegated the topic to my personal annals, thinking, “there I go again—seeing disconnects where no one else does.” And subsequently moving to the provider bench, I experienced the full force of “list mania;” the requests for lists and rankings were incessant, but I grumbled privately as I pushed my team to find the most arcane of data for every inquiry, concerned that missing the submission of even one application was the ultimate of marketing faux pas.
Now, two years later, the industry is all abuzz on the topic of lists. So I went back to that article to see if it still was relevant. I think it is.
Two years ago, I wrote about those determined to grab onto the global services delivery trend by pronouncing the definitive judgment on the industry’s best and brightest providers and individuals, identifying the latest trend or dimensioning the marketplace.
And I found, after reviewing what was then a relatively small group of list makers caught in the act, that, one list’s number four was another’s number 26. If in the variations within any crop of “global,” “best,” “emerging” and “top” service providers or advisors is any indication, beauty is definitely in the eye of the beholder. And what is magic about being in the top 100 or five or 10 in a market as big and diverse as our global services industry?
We generally acknowledge the usefulness of lists. Lists give us a simple framework to evaluate relativity and test importance in an increasingly complex world. They can serve as an elegant communication tool by allowing us to compare, contrast, and prioritize a range of factors and opinions. But faced with all these lists, what is the business line sponsor or the corporate sourcing staff to think? Are these lists bogus exercises or helpful tools to evaluate the supply side of the services-delivery equation?
What do the lists tell us?
First and foremost, independent provider and advisor lists serve as a good public barometer of brand recognition and a market reflection of image in a relatively immature industry without one industry-wide voice, unlike the Royal Institute of Chartered Architects, or the American Medical Association. They are used as stand-in as the services industry’s only current broad indicator of brand value. As the industry matures, the use of scientifically-constructed and tested brand indices should become more common; however, at this juncture in services evolution, it’s about all we have to rely upon.
Provider claims of excellence or advisor claims of differentiated methodology can sometimes be supported by the independent opinion of third party lists, especially if the industry’s best and brightest are sitting judgment. While ranked lists are by no means scientific or purportedly meant as an endorsement, they are often used in collateral to provide seeming accreditation in an industry that has no common, recognized standards of excellence of its own at this point in its evolution.
Lists can uncover market trends. At their most useful, list makers may be comprised of industry watchers — journalists, consultants, advisors, buyers and academics — who look closely and thoughtfully at the applicants, trying to isolate new trends in service provision or employee management, allowing them to determine whether certain offerings are finally ready to meet with market acceptance.
Lists are also a gauge of marketing prowess. Honest list evaluators privately admit that the completeness of the applications and the quality of presentation, not to mention grammar, weigh heavily in the evaluation process. The ability to succinctly communicate a value proposition to industry insiders may be a good test of market positioning and messaging. If the insider gets the proposition, chances are that the marketplace might just understand the message, too. And for those lists that are styled as vox populi? Well, those are a reflection of marketing prowess, too. Some of us on the sell-side have the time and the wherewithal to focus on getting our clients and friends to answer questionnaires.
Lists both influence and reflect current industry values. Size and scale seem to matter. It appears that there is a direct correlation between service provider or adviser size and relative ranking on most of the lists, which include a best category, or are ordinal in evaluation. Over time, as provider and advisor track records become more transparent, and the industry really centers on what is a value proposition or whether the advisor’s deal was really well structured, rankings may imply other values.
Emerging offerings may first reach the buyer’s attention through the list process. As a relatively easy marketing and inexpensive marketing exercise, emerging or stage one outsourcers or advisors can avail themselves of an opportunity to broadcast the news of their process innovation or new approaches to delivery, judges permitting.
Over time, lists can serve as a good indication of the maturity of the marketplace. As new entrants and new offerings enter the marketplace, lists serve as a good archive of marketplace movement and development year-on-year. Over time, call it the ancestry.com database for the industry.
What Don’t the Lists Tell Us?
Read the methodological fine print if it is available. Although the data points evaluated may be substantial, not all lists are formulated based on the same or consistent level of rigor. Consider factors of sample size, statistical application, and criteria weighting. And realize that, human nature being what it is, each evaluator will bring his own personal biases for certain delivery strategies, provider profiles and approaches to the exercise. At the end of any judged exercise, for example, individual judges’ lists are assimilated into one publishable list, further adding a degree of whim, taste and fancy to the process. These lists are not the last word, but rather should be the first in selection.
A key component of editorial calendars and other sponsorships in the outsourcing industry, rankings and lists can provide a service to communities by identifying players and trends. But let’s not delude ourselves; they are also a business imperative for publishers, associations and pundits to build membership and/or circulation and sell adverts, publications and reprints, playing on the sell side’s need for recognition. They generally make someone money! This is not necessarily a negative, but is rather the way the world goes around. What’s critical is that that which is editorial and that which is financial should be kept completely independent at all costs. Pay for play in any form must not be the modus operandi.
And another problem inherent in list making is that the lists do not necessarily always evaluate the entire universe of sell-side providers or advisors. They often evaluate those who “opt in,” having deemed the application exercise a good use of marketing time and dollars to develop an estimation of market perception. Some providers and advisors determine that, for a range of business reasons, that inclusion is not beneficial at a moment in time because of business performance or the priority of other corporate events. Careful consumers of lists understand that the tallies are by no means exhaustive or inclusive of all offerings that may meet a corporate need, but merely serve as a boost to research.
The Effective Use of Lists…
In the right context, sell-side rankings can be exceptionally useful tools. Between all the lists, most providers and advisors — established and emerging — are covered, providing some of the initial legwork to identify the universe of players. This enables the quick assembly of a short list for further desktop investigation. The rankings can also softly suggest relative movement of the industry over time. As provider/advisor positioning changes, factors such as market size, buyer values and performance may be implied.
Sometimes corporate managers cross-reference their decisions through third-party opinion. Using a list to effectively support selection ex-post facto could be a good way to help outsourcing sponsors become comfortable with a value proposition or an advisor selection, especially when the consultant’s or provider’s brand is not yet a household name.
…And the ineffective use of lists
Now comes the rub. When I was younger and absolutely intransigent on most issues, the family retort always was ‘who died and made you queen?’ By extrapolation, who is to say that one list is the absolute authority on the industry best and brightest? Are the publishers, the industry pundits, the academics, the consultants the last word? Each of us can at best see only the smallest piece of the puzzle, and the “truth” we trumpet, whether backed by the numbers of ballots, or the experiences on which we base our opinions, is in the end only perception at a point in time.
Watching the debate in a range of media–blogs, articles, private conversations, and analyst calls– is certainly a distraction from the day-to-day hardships of this economy and this industry, but it takes me back to my school days, watching Tommy Brennan beat the dickens out of Karl Kurth on the playground of Cumberland School. At the end of the day, it’s a completely useless fight because of the inherent and unavoidable biases in lists— no matter how every list maker beats his methodological chest.
The only list which ultimately matters is the client’s own ranking of advisors and service providers. Factors such as process scope, geographic reach, value proposition, qualifications of the team customer approach and performance record…these are just a few of the criteria that drive evaluation. Best advice as when reviewing the growing crop of lists — each to his own.
Deborah S. Kopsis Chief Marketing Officer of WNS Global Services. You can email her direclty herewith your views on this topic, or discuss openly on this blog.
I was a sad day this week then Lisa Ross announced that FAO Research is ceasing its operations. I have known Lisa for several years as a good friend, and have rarely met such a talented industry networker and marketeer with a strong perspective on the industry. Lisa has also guested here during the early days of Horses.
Lisa’s recent work bringing together the sourcing advisor and vendor communities in targeted forums created a platform for valuable industry interaction that only Lisa made possible. All is not lost, however, as she will continue her recently launched blog. Knowing Lisa, we will see her re-invented and re-energized in the not-too-distant future.