Mark Stelzner recently posted someinteresting statisticson the plummeting average tenure of C-suite executives:
CEO: A 2007 Harvard Law School study shows that a “manager CEO” of a S&P 500 firm averages 5.5 years of tenure. Crist Associates’ 2007 Volatility Report also shows the majority of CEOs with less than 5 years of service.
CFO: Spencer Stuart has CFO tenure at 4.3 years – and falling (Crist at 5 for all CFOs).
CIO: According to the 2008 State of the CIO poll results, a Chief Information Officer’s average time in seat is about 4.4 years, down from 5.1 years in the prior period.
CMO: Spencer Stuart’s annual study shows Chief Marketing Officers at a mere 26.8 months, which is actually up from 23.2 months in the prior year.
CHRO:Workforce Magazine’s analysis putting an average CHRO in their seat for approximately 3.1 years.
These stats got me thinking more about how organizations today are rethinking their organizational strategy in a challenging economy where talent management is ever-critical to the business, and non-core functions are becoming increasingly subjected to lower-cost outsourcing solutions. So why are C-suite tenures all getting shorter?
Marketing: is far too tactical in many organizations, and often a scapegoat for poor sales performance. Marketing managers are focused far too much on administrative tasks, such as distributing press releases, managing mailing lists etc. Refreshing the CMO every couple of years can add some gloss to the lipstick on that pig.
HR: like marketing, HR is often far too bogged down in administrivia such as benefits admin, compensation management and compliance. High attrition, low worker morale and a general lack of strategic involvement in the core business drives many CEOs to revolve the CHRO door every three years.
IT: until recently was a shining star in the company, but the prevalence of lower cost third-party services is rapidly transforming the role of the CIO from technology evangelist to cost-containment expert. Inability to keep costs down and failure to meet punishing deadlines is seeing the CIO’s tenure shrinking close to the four-year level.
CFO: Y2K, the dot-com bust a vicious 9/11 fueled recession, and now a credit crunch and a further economic squeeze has made the life of the CFO about as easy as being Elliot Spitzer’s publicist. Like their CEO bosses, the CFO is taking the fall every 5 years for poor financial performance.
In short, the support functions for a business are becoming increasingly less ingrained with core business strategy and revenue-generating activity. Effective business line managers are constantly becoming smart people managers; retaining and nurturing their talent which adds dollar-value to the enterprise is now a core managerial skill. They are also honing their ability to manage their P&Ls to further their careers and use front-office applications effectively to help drive their business forward. In addition, effective sales managers increasingly encourage smart, targeted marketing activities to generate new business opportunities; they know what their clients want and how to reach them.
As today’s enteprises become more global, they increasingly need to structure their core business units to push their products and services into new markets quicker than ever, with their cost of sales at a minumum. Developing talent, marketing to new customers and managing the finances are more important than ever to the global enterprise as they learn to become more nimble and competitive in this business climate. However, these real value-add activities are less frequently taking place in siloed HR, marketing and finance departments – they are becoming pervasive across business functions that are core to developing and running the business. Is this what is really driving BPO and ITO – the desire to drive out high-cost services that have lost much of their value to the enterprise? And are the traditional business support functions losing their relevance?
All-in-all, the business support functions need to be more closely aligned to the core business lines to add greater value to the business. So by shedding the routine low-value work, CEOs can focus their C-suite executives on driving better people-management, better marketing, better financial planning across their product and service lines globally and set performance metrics that hold them directly accountable to aligning their craft with corporate performance. And yes, tenures may still reduce even faster in the short-term, as support functions become more accountable for adding value to the business, but how else can you change executive behaviour?
I recently had the pleasure of meeting with Kulwinder Singh, who heads up marketing for SatyamBPO in Hyderabad. It's great to meet a marketing guy who generally get's it. Check out how he placed a picture of Kishore Rao, SatyamBPO's Head of Quality, receiving a Six Sigma IQ Excellence Award on a giant billboard in New York's Times Square…
I wanted to share an article from last year that discusses how enterprises today can better prepare their key staff for life after outsourcing:
The outsourcing debate over recent years has been dominated by the operational ability of companies to transition processes to a third-party supplier to manage. Too many companies have presumed their business will carry on as it was pre-outsourcing, but with third-party staff managing some of the business functions. However, in the majority of outsourcing efforts there is a degree of employee transition, and when this happens there are leading practices for both transitioning and restructuring the retained organization.
Experience demonstrates that those companies that proactively prepare their management effectively to:
(1) Modify their roles, responsibilities, and management styles,
(2) View outsourcing as a strategic tool,
(3) Learn new skills, and
(4) Change their daily routine…
…are those that are able to achieve value from an outsourced environment.
The full article is featured in Crossing media’s HROToday magazine, and can be accessed here
There’s been a lot of noise in the market this week concerning the TSA’s award or their HRO contract to Lockheed Martin. While this is clearly a bold move into HRO for Lockheed, this isn’t likely to prove a major loss for Accenture. Why?
Times have changed for HRO. The initial contract was established in 2002 – a time when the HRO market was on a major upswing and the 9/11 attacks had put Homeland Security firmly under the microscope. While the Federal sector is clearly a crucial market for Accenture, you’d have to question whether Accenture would be so interested in Federal HR services in today’s outsourcing environment. With the presidential election looming and a possible de-emphasis on massive investments in Homeland Security, this sector is not as attractive as it once was for a services provider. Demand for application services is rampant, combined with some areas of BPO (notably F&A), where Accenture is a market leader. Add to this the fact that HRO has slowed and will take time to rebound, and you have to question whether Accenture is as motivated as it once was to invest resources into this area, when they have so many other growth opportunities. Their recent 20% revenue hike from last year and record quarterly revenues, coupled with further double-digit growth in consulting and outsourcing, are testament to the fact this company is firing on all cylinders.
The Federal Government sector isn’t primed for the traditional sourcing model. Most of the established sourcing advisors are not accredited to work with the Federal government (with the exception of Equaterra). Moreover, most of the Federal agencies use their inhouse procurement arms to evaluate those vendors on the accredited supplier list, and only use the traditional consultancies, which have Federal approval, for their sourcing decisions. Often this is not to the benefit of the outsourcing providers from the commercial sector, who are unfamiliar and uncomfortable with the Federal Government procurement process.
It wasn’t as big a deal and many people think. While Lockeed assumes a new deal size estimated at $1.2 billion, Accenture’s previous tranche of the TSA HRO contract was far, far smaller than this ($214 million). It only handled the post-hiring employee support activities, benefits admin and payroll, while CPS Human Resources Services handled all employee-verification, recruiting and pre-hire activities and Avue Technologies the recruiting workflow systems.
For Lockheed Martin, this creates a great testbed to develop an HRO offering. Lockheed Martin is a well-respected government services provider. The firm clearly has its eye on supporting the Homeland Security Department’s headquarters operations. This could be up to three times the size of the TSA engagement and the sheer size of this engagement gives them the platform and resources to develop a competitive HRO offering. I’d be surprised if Lockheed has serious HRO aspirations outside of the government sector, although it’s not inconceivable it could compete for HRO contracts in the aerospace and hi-tech sectors. However, it will take time for the firm to develop a workable HRO model for the TSA that can be leveraged across other entities.
All in all, it’s refreshing to have new domestic entrants into this sector, in addition to the offshore giants, which has had its challenges in recent years, and it’s the end of a chapter for Accenture, which put a lot of effort into getting the TSA fully operation (not a simple task for any provider). It will be interesting to check back in with the TSA in a few months’ time to see how they are fairing with such a complex engagement.
I was recently engaged in an excellent conversation witn Gianni Giacommelli, who leads marketing strategy for SAP’s BPO division, on the way forward for the Procurement BPO market. One of the aspects about SAP that has impressed me, is their strong view of BPO as a opportunity, as opposed to a threat, to their business. Gianni’s boss, Christain Baader, has performed an excellent job driving this strategy in recent years, and made his case-in-point last year where he discussed why technology is an important key to BPO-sustainaility. BPO is all about driving common strandards that can help service providers leverage their service staff and technology applications across multiple clients in a utility model. So what better opportunity is there to encourage enterprises to standardize on a common ERP archtecture than when they evaluate BPO opportunities for their business? And it’s not solely about BPO, it’s also about globalization: the more global enterprises can encourage their country-level businesses to operate within a global process template for functions such as finance, HR, sales and procurement, the quicker they can access critical data to make global business decisions. Without digressing further, I asked Gianni to summarize our conversation regarding the development of procurement BPO solutions, where many of the leverage points for cost savings are driven through process and platform optimization, and not solely labor arbitrage. Over to you Gianni:
Procurement outsourcing burst onto the business process outsourcing scene with great promise, but it has changed of face in the last two years. While early deals delivered tactical benefits such as procurement operations cost savings, many companies are still not realizing the more substantial advantages that can be gained. In early procurement outsourcing deals, service providers did not consistently manage to deliver more substantial spend-related savings. With the cooperation of clients, they need to complete designing and deploy integrated, end-to-end, sourcing-to-settlement procurement processes – and be allowed to contribute experience and best practices. At the very least, the provider should be able to bring in an infrastructure (i.e. a pre-configured best practices platform, ideally with some procurement-specific services on top e.g. level-1 support and supplier onboarding) that would allow the client to focus on executing seamlessly. Technology utilization has a key role here and, while theoretically understood, is often a contentious ground – and in our experience requires more than a “business as usual” treatment.
Realizing the Full Value of Procurement Outsourcing
Basics first – and a home truth: procurement outsourcing success requires the CPO, COO and CFO to do their part – collegially. The only way theoretical savings negotiated at the sourcing level (which is where often CPOs incentives are confined) can be turned into actual savings is 1) ensuring compliance within the client company and 2) ensuring the results can loop back into strategic sourcing where the observation of the actual company behavior (what is bought, when, where, in what sizes) can provide additional levers to the category managers. Most of the remaining savings come from controlling one-off purchasing and vendor payments and from cost avoidance as a result of demand management and reduced costs of enterprise procurement activities (this is where the CFO and COO typically have a say).
While companies can realize procurement outsourcing value by leveraging the provider’s economies of scale and labor arbitrage, process optimization (defined as processes and knowledge including securing category-specific knowledge and related usage) is the single most important lever. To maximize the impact of this lever a unified technology platform must support and consolidate sourcing and purchasing processes. A key aspect in securing procurement savings, compliance is ensured in the purchasing and ordering process. This can be accomplished by leveraging the use of procurement cards, approval and other workflows, as well as data analysis and reporting based on standard procurement reports within the business intelligence component. Strategic sourcing savings are obtained by enforcing stronger compliance, as the customer converts results from sourcing events into contracts and catalog items from which requisitioners can choose. Poor performance in activities such as one-off purchasing and problems like high costs of demand management and enterprise procurement activities (such as the cost of the procurement organization) can be addressed with internally hosted catalogs that contain only approved purchasing items (both goods and services) and respective vendor contracts.
Four years of experience in procurement outsourcing, two simple views
1) Providers that are striving to deliver optimum procurement outsourcing solutions typically offer processes based on best industry practices and – in order to achieve that – have realized the importance of strong relationships with the software suppliers underlying their offerings to ensure effective design and execution of service delivery. BPO-specific implementations are different from typical system-integration jobs (due to the search for replicability leading to heavier templatization and multi-client architectural choices). For this reason such collaboration must go beyond a simple joint go-to-market effort, and must encompass service delivery design – so that the solutions are deployed in a way that they address the business problem and they are cheaper to implement and run. As an example, SAP has signed such partnership agreements with Accenture, Hubwoo, IBM, Infosys and Quadrem and spends a significant amount of resources in those activities.
2) Customers that have achieved long-term benefits from procurement outsourcing are shown to be consistently open to using their providers’ standard processes and platforms. By doing so, providers can achieve the economic model they need to deliver innovation. Again as an example SAP has a few dozen customers operating on the basis of the BPO program and we continuously collect learnings from such experiences. The learnings are exceedingly interesting, and the sad truth is that – in the absence of such program – those experiences would be lost between (and within) BPO provider and software vendor
Gianni Giacomelli (pictured) is Director of global strategy and marketing for SAP’s BPO business unit. He previously worked as an outsourcing sourcing advisor for Everest Group in Europe..
So the long debated and much anticipated saga of the Aviva BOT (Build-Operate-Transfer) has finally been resolved, with WNS Global Services taking on a $1 billion contract to become the British insurance giant’s BPO provider of choice for the next 8 years. WNS will be assuming all of the current 24/7 Customer contact center work and some of EXL Service’s F&A work, with the latter’s contract remaining until 2012. This contract follows a storming 2007 for WNS, where the Mumbai-headquartered firm has made significant inroads into both financial services and retail sectors, in addition to its already dominant position in the airline sector.
Some key points
This deal will likely propel WNS close to a 10% marketshare for F&A BPO
WNS’s recent acquisition of BizAps gives the firm much-needed ERP enablement skills at a time the firm is making aggressive strides to compete for enterprise BPO deals – a key requirement
Not a vote of confidence for the much-vaunted BOT model for business processes – and Wall St. also seems to be going cold on BOT. It’s interesting that Aviva is electing to move to a straight BPO model at the same time it is expanding aggressively into the US domestic insurance market
WNS’s revenue has rocketed to $460m for fiscal 08 – a 32% hike over 2007, ever since our popular guest columnist Deborah Kops took over their marketing.
During this year’s NASSCOM BPO summit, we were subjected to a deluge of three-lettered acronyms which (let’s face it) aren’t particularly relevant today – as Pramod Bhasin so eloquently opined. And while “BPO” is clearly a broad and fluffy term that is now used to to describe any type of outsourced process solution that isn’t IT, “KPO” is even more vague. In fact, I discover a new firm daily which claims to have a “KPO” solution, ever since I invited every man and his dog to partake in my new research effort. And when you have the Chairman of NASSCOM asking “what the hell is KPO?”, you know there is a communication issue out there.
So why should we care?
Because “KPO” is truly the next phase of Business Process Outsourcing. Until now – and for a little while to come – BPO has represented largely transactional processes being offloaded to offshore locales with a service provider, sizeable employee remediation from the buyer, and quickfire cost-savings resulting. And if the service provider can muck through to some sort of adequate operating state within a couple of years, the engagement can be largely deemed a success. All-in-all, most firms have pretty much trimmed their payroll, accounts payable and customer service staff as much as they can feasibly manage, and once they have moved into a BPO engagement, this is normally the limit of savings they can hope to achieve from offshoring their transaction processes to a third-party provider. Within a couple more years, there won’t be many medium-to-large firms left which haven’t outsourced most of their transactional processes where is makes business sense to do so.
The next wave of savings will occur from buyers moving elements of higher-value processes over to third-parties, where onshore costs are high and skilled resources often scarce, in areas such as analytics, front-office finance, legal contract development, marketing, clinical data analysis, research and investment services.
Moreover, the manner in which this next outsourcing wave will happen is going to be different. Instead of broadscale employee remediation, buyers will take-on piecemeal services in relatively small initial projects delivered by high-qualified personnel, whose rates are still three times lower than the cost of using qualified onshore employees. And many buyers will not move immediately into multi-year outsourcing contracts, they will pay for these “PhD Services” by the drink – often weekly, monthly, or by the project.
Nervous CFOs, previously anxious about moving too much too quickly to an outsourcing provider, will be much happier to experiment with services they need, find a comfortable medium that works for them, and not have to make tough employee-remediation decisions off-the-bat. They can take their time, transition into an outsourced environment at a pace that suits them, and get access to the incremental talent that they need. Moreover, financial services firms, suffering from the credit-crunch, will be intrigued by this model, as they seek quickfire solutions to resolve resource constraints that do not require major surgery on their own operations. These guys are simply trying to get through their next quarter in this economy, and the thought of major multi-year commitments are simply indigestible for them in this climate.
This new model is beginning to have a significant impact on the way companies are sourcing services globally. And it will move quicker than we expect (remember F&A BPO). And it will threaten other incumbent services providers that deliver high-value business services. The leading consultancies better wise-up to this model, or they will find their share of the total knowledge-services pie being gradually eroded.
Legendary technology columnist Bill Kutik ran an interesting piece today discussing the betrayal of LinkedIn members. Basically, it’s becoming a mammoth database of 23 million professionals, which can be sold en masse to advertisers wishing to peddle their services to targeted members; it’s a direct marketeer’s dream. Moroever, Bill described LinkedIn as becoming a job board dressed in social-networking clothing.He explains:
“Without so much as a notification to its members (perhaps a new privacy policy appeared in tiny type somewhere) and certainly no opportunity to opt-out, LinkedIn burst open its entire database to recruiters with its new Enterprise Corporate Solution.
“The pricing is not public but account holders can search all 23 million members and get back their names and profiles, up to 1,000 with each search. They can do customized InMail blasts to groups of candidates (err … I mean … members), annotate their profiles, forward them to hiring managers and post jobs to LinkedIn’s home page.”
Thanks Bill for pointing this out – I did not know this, but suspected as much. No wonder it’s now valued at $1bn.
While LinkedIn certainly has its limitations, I have to admit I’m better off for using it. I recently set up the BPO and Offshoring Best Practices Forum recently, which now has close to 2000 members. I’ve been making acquaintances with literally hundreds of people with whom I would never had otherwise ‘met’. However, where I once had a couple of hundred treasured professional acquaintances on LinkedIn, I now have well over 1000. There needs to be some sort of filter where we can assign tiers to our online acquaintances – i.e. I actually have met this person, versus some guy with a funny name and strange photo who claims to be some independent evangelist / CEO / author. I also want to have that degree of privacy where I am free from recruiters and mortgage firms plying their trade. I’d use Facebook more, but I really don’t want my CEO co-mingling with old college friends who haven’t changed a bit in the last 15 years and know far too much about me…. I’m getting quite Linked-off.
I recently had the pleasure of meeting with Kulwinder Singh, who heads up marketing for 
