I'm leaving for a tour of the sub-continent next week, stopping in Delhi, Mumbai, Hyderabad and Bangalore, where I will be speaking at the Nasscom BPO strategy summit chairing a CEO Panel looking at BPO competitiveness. Key discussion points will focus on:
The survival prospects of pure-play BPO providers to compete effectively with the IT and business process The importance of knowledge process outsourcing to the future of successful BPO solutions
Whether BPO vendors should take more responsibility for helping their clients establish stronger and more effective governance capabilities
Measures BPO providers should take to add more value-added servicesinto the engagements to ensure their clients receive ongoing quality
India's major strengths and challenges with BPO in the medium-to-long term and whether Latin America, China, and other regions could threaten India's current dominance in BPO
Drop me an email if you want to meet up while I'm at the show.
I am extending an invitation to HFS readers apply to join our new networking group on LinkedIn entitled the "BPO and Offshoring Best Practices Forum" – we already have 850 members signed up. This is intended to be a forum for leading outsourcing executives to share their experiences, views, opinions, best practices and lessons learned in the world of business process outsourcing and offshoring. You will also get a chance to participate in a "State of the BPO Industry" online survey next month. And it's FREE.
I'm currently on a three-week outsourcing excursion across France, UK, Belgium and then India… so I thought I'd entertain you all with some pictures and musings along the way. Am currently enjoying the hospitality of a outsourcing provider which owns this rather charming estate… can you guess which provider it is?
My friends over at FAOToday magazine (Crossing media) are staging an "FAO Summit" at New York's Union League Club on 2nd and 3rd June, entitled "The Art of the Deal". They have kindly offered free passes to the first 5 "Horses for Sources" readers to register: Register here, or email Adam Bleifeld for more information.
Unfortunately I will be in India at the time, otherwise would definitely have been there, but thanks for the award nomination chaps.
Having worked closely with both ICG Commerce and Genpact for the last few years, it was a positive step forward for the firms to announce a partnership, but I believe the companies should go a step further and merge. Partnerships like this are normally opportunistic; they help the firms team up for broader finance/procurement customer bids, as they can be vulnerable when competing with Accenture and IBM, which have broadscale finance & accounting (F&A) and Procurement BPO solutions.
BPO solutions that cut across finance/procurement and payroll functions, normally require process knowledge that can be shared across delivery staff and technology. How easy is it to transfer these processes to two separate suppliers, whose staff work in separate locations, work for different organizations with different cultures and may not be overly familiar with each others’ technology platforms? Your BPO services are only going to be as good as the people delivering them, so you need to know your provider is investing heavily in ongoing quality improvements, enhancing the technology on an ongoing basis, and constantly developing its personnel. I like partnerships where two parties set aside budget to co-invest in developing a platform, or jointly establishing a delivery center, as opposed to opportunistic arrangements set up for competitive purposes to win deals.
Both Genpact and ICGC are great masters of their areas, and, in-fact, resemble each other quite closely: Genpact was the rogue little guy that came along and upset the F&A BPO apple-cart and won multiple contracts away from the big boys, through a unique combination of low-cost labour underpinned by the GE culture and process methodology. The firm is now the third-largest F&A BPO provider and has recently gone public. ICGC has had to operate in a similar fashion, competing against much larger competition, but has enjoyed some notable blue-chip client successes, winining procurement engagements with companies such as Kimberly-Clark, Hertz and Nordstrom. F&A BPO is a much larger and more lucrative market, based on the major labor arbitrage advantages of moving transactional processes offshore, whereas procurement BPO has been a tougher sell to companies, with the challenges of moving work into low-cost locations and transitioning unique expertise sets in distinct category areas over to third-parties providers.
The business case for procurement BPO is based on future savings from managed spend, not on immediate savings from the bottom-line through moving hundreds of positions offshore. Moreover, procurement is one of those functions which has, in many firms, been cut to the bone, and the only means to find new avenues of optimization is through having better technology and access to skilled staff, who normally reside in the regions where the procurement transactions take place. Most companies moving into procurement BPO today are often motivated by the fact they have already outsourced transactional finance work, have become experienced with outsourcing, and want to take a longer-term and more strategic view of managing their global sourcing mix. Hence, ICGC needs to be close to the F&A BPO action to get into the procurement BPO discussions. Being joined at the hip with Genpact is a very smart strategy – and Genpact – at the same time – needs to have that procurement story.
However, when we look back at BPO partnerships, it’s difficult to find examples of ones which have genuinely worked. ARINSO, the Belgian-headquartered HR services firm, which was acquired by Northgate in May 2007, secured a famous reputation for becoming the “outsourcer to the HROs”. The firm was simply one of the best feet-on-the-street SAP payroll integrators in Europe and knew how to knit together complex pan-European payroll solutions. Firms such as ACS and Accenture subcontracted their European payroll work to them as part of several major HR BPO deals. They didn’t want to be European payroll providers, and ARINSO did, so this made sense for individual deals. These firms didn’t partner, they signed contracts to work together when their clients required it.
In Genpact’s case, the need for the major BPO providers to broaden their solutions across business processes tied to core ERP is intensifying. Many current BPO discussions are being dominated by the broadscale ITO/BPO suppliers pushing harder for bundled IT and business process options. HP now has EDS and should become a major force in broader BPO offerings, while Capgemini, Infosys, TCS and Wipro are all focusing on going after these broader engagements. They realize the risk of Accenture and IBM running away with the high-end market if they can’t scale up and bundle their offerings more effectively.
Let’s cut to the chase – we’re in a very competitive market right now, and the battle is on to take control over the top clients. Long-term BPO contracts are the way in – they give outsourcing providers the runway to build credibility and broaden their solutions in developing areas such as procurement BPO. BPO is not ITO, which is far more mature and clients have options to multi-source areas such as application development and IT infrastructure. BPO is not as cut and dried – processes blend across functions and it’s really more about people than simply machines and programmers, which is why we don’t see a lot of companies sharing out functions such as HR, finance and procurement to multiple suppliers and try and manage them all. We’ve seen some do this, laregely big brands with big resources – and to some extent this has worked, but it will take years for the majority of buyers to develop the internal governance skills to manage multi-sourced BPO environments successfully. We’re moving to a state where companies will select one major BPO supplier, and they will subcontract to niche specialists where necessary, but they will own the overall client relationship.
124 posts, 548 comments and ONE YEAR later, this blog continues to (somehow) prolong the dialog on the "O" topic. I have learned so much from some of the excellent views, opinions and insights from so many of you – I hope some of you have too.
You may recall the excellent guest post "Upward, Onward, Onsource!" by my good friend Deborah Kops, back in November last year. Deborah is widely recognized as one of the outsourcing industry's foremost thoought-leaders, having led global transformation efforts at Deutsche Bank and Bank of America before helping to establish PwC's outsoucing division. Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO and KPO provider. BPO today is all about governing your service provider relationship, and whether or not you view your vendor as your partner, the whole experience is certainly like a marital relationship (better hope my missus doesn't come here…). Thanks Deborah for sharing this great article with us… over to you:
When I grew up, moms stayed at home and spent their free time between school runs poring over the latest offerings from Good Housekeeping and Women’s Day — recipes, childcare tips and hints to please (and keep) a husband. Before you think this discussion is completely tangential to the implementation of global services, read on.
Those of us baby boomers know that most mothers assiduously read the Ladies’ Home Journal column, “Can this Marriage Be Saved?” My mother was no exception; before I understood the carefully worded root causes of marital failure, my pre-teen sensibilities picked up on the fact that leaving a towel on the floor or coming home late without explanation were not all that good for a marriage.
Fast forward many years and perhaps there should be a similar advice column for outsourcing relationships. We ascribe so much hope for better performance, lower cost and new heights for business value, yet, we have not evolved a way to detect and track those subtle changes in behavior, which taken in aggregate, signal relationship distress. And, when ignored, they can dash the hopes and dreams of the business equivalent of marriage.
The signs and signals are so easy to see, yet … we generally ignore them until the damage is done, and it is much more difficult to put the relationship back on track. We tend to forget that outsourcing arrangements are comprised of a series of complex human transactions — customer to outsourcer, customer’s customer to outsourcer, customer to business line, individual staff to client staff — where the nuance around and tenor of any interaction are as or more important than meeting a service-level agreement.
At no time is a relationship more vulnerable than during transition, especially if there are many moving parts, and the deployment plan timeframe is overly aggressive. By the time, the relationship is on the skids, minor miscommunications, individual disagreements and missed deadlines have been magnified into battles royal.
Because it has been drummed into us that logic and motive drive business relationships, and because we have been sold on the ultimate importance of a logical, comprehensive governance framework as the key to outsourcing success, both parties tend to ignore those subtle behavioral signals that suggest that a relationship is going sideways. Tactics to effectively deal with the behavioral symptoms that indicate relationship distress are not addressed in any governance framework with which I am familiar. Perceptions — fraught with emotion — must be managed effectively in order to make governance work.
Having sat on both sides of the table, here are 10 behavioral signals that, singly or in aggregate, send out the outsourcing relationship equivalent of an SOS.
1. Preparation for executive governance meetings becomes all consuming. Scripting of reviews for executive sponsors becomes time consuming, carefully choreographed pas de deux. Wordsmithing for governance presentations and decks makes bilateral negotiation of nuclear non-proliferation treaties look like child’s play. The goal of each party? Get the point across, but not at the expense of personal or program credibility, hoping that the right orchestration will turn into a skillful game of public gotcha, placing the blame for program blips squarely and publicly on the other party.
And, after the decks are complete, each party spends inordinate time briefing executive sponsors and governance representatives before going into a battle of positioning and specially chosen words.
2. Consultants are brought in by one or each side to take a relationship health check. A new face under the guise of an independent look is analogous to one partner in a marriage going to his/her own counselor. Unless agreed to by both parties, the consultant is by definition partisan; his/her patient is only the one who pays the bill, not the partners in the marriage.
Dueling consultants make relationship repair even more complicated. They are not necessarily dealing with the same fact base; in most cases they are used to justify their customers’ perceptions, not facilitate a real alignment. Only a jointly appointed consultant can have a prayer of getting the relationship back on track.
3.Sudden changes in daily scheduled activities become obvious. This is no different a relationship distress signal than that of a marriage where one party suddenly starts to work late. If longstanding routines, especially those that reflect the rhythm of a tightly controlled transition, inexplicably change, leaving chaos behind, it’s the sign of a problem.
4.Routine discussions are held behind closed doors. At the start, outsourcing relationships bask in the glow of the post champagne period — that time when the sense of achievement coming from signing a contract after protracted sourcing and negotiation leads both parties to believe that all things are possible. Behaviors are relatively relaxed, office doors are kept open and key decisions are easily made around the coffee machine. But when unresolved frustration hardens into formal behavior, suddenly doors are closed and each meeting results in reams of copious notes.
5. Requests for data suddenly go through the roof. Like any good marriage, outsourcing relationships are built on trust. And when reams of data are demanded, requesting information that more than proves a point, it suggests a lack of transparency in the relationship that can only be fixed by reams of data.
6. Meetings are held in windowless conference rooms. A sure sign of distress comes from the choice of meeting venue. However, scheduling these rooms has the opposite effect of an invisibility cloak. Where previously meetings were held in the open, with everyone on the floor fully aware of attendees and generally in on the agenda, now windowless interior rooms become the meeting venues of choice, keeping the table pounding and pointing fingers out of sight from the rest of the teams.
7. Meetings, which were formerly attended only by principals, are now standing room only. The solution architect, or the account manager, is no longer left alone in a room with his customer counterpart. Account execs and customer sponsors now insist that any discussion, which affects the critical path, cutover or performance be witnessed by at least three team members on each side. As a result, productivity drops and blood pressure rises from meetings, which have now morphed into confrontations.
8. “Let me come back to you” becomes the stock response to any request, either casual or formal. Where previously decisions — both big and small — could be made over lunch or at the coffee bar, now any suggestion, regardless of cost or impact, is quickly dismissed with one curt sentence. Inability to commit because the ramifications may further exacerbate whatever is wrong quickly strains the relationship.
9. Joint partying ceases. In the lexicon of outsourcing transitions, partnerships mean partying together. Joint milestone celebrations, or team building happy hours are integral to fostering a good working relationship, especially when there is a substantial systems implementation component.
10.Referencing stops, or is tightly meted out. In the first blush of the outsourcing relationship, all parties bend over backward to be accommodating and support each other’s business goals. However, when the relationship starts to experience stress, the global services equivalent of withholding affection happens, and references to potential customers are often stopped or starkly curtailed.
Naturally, there are variations on each of these behaviors; each relationship can spawn its own unique list of hurts and slights. But as in all situations, the little things matter. And the outsourcing relationship is, at its heart, comprised of a myriad of brief human interactions.
Do these distress signals mean that the relationship is doomed to failure? Not at all. Savvy customers and outsourcing providers are sensitive to subtle changes in routine and interaction, and move quickly to source and sort out the root causes that result in the outsourcing version of “acting out.” Outsourcing marriages can be saved.
Deborah S. Kopsis Chief Marketing Officer of WNS Global Services
So HP acquired EDS. Wow. Biggest services news since HP acquired Compaq a week before 9/11? In my opinion it is, anyway.
We discussed here in January the issue of consolidation among large outsourcing suppliers, and the general view was one that we would be unlikely to see acquisition among services firms that were similar in nature:
Outsourcers like to acquire firms that bring something new to the table to enhance their outsourcing offerings – for example new technologies, or a niche expertise that gives them competitive advantage. Too many large outsourcers are too similar… they overlap too much and a merger would often end up as an unprofitable exercise and result in a mass exodus of key talent.
So the HP / EDS merger goes against the grain. We noted some specific areas where there are some strong complimentary offerings – namely in BPO areas – but the overwhelming motive for the merger is one of scale and going-big to compete more effectively with IBM. The increased BPO delivery capability also puts HP on a firmer footing against the other global BPOs, namely Accenture, ACS, Capgemini, Infosys, Wipro and TCS. The newly-merged entity needs to examine how it builds out its business consulting and transformation expertise further if it wants to challenge the both IBM and Accenture’s BPO market leadership.
This merger-event could change the game considerably, and we could see other BPO suppliers to re-evaluate their acquisition strategies to generate more global scale and increase their client-bases. With the cost of client acquisition becoming increasingly prohibitive, the valuations of services firms decreasing in these market conditions, and the desire of many enterprises to move into more rapid outsourcing engagements, the leading vendors need additional scale and capacity. So this begs the question whether we could see some similar-scale outsourcing services mergers in the near-term?
Please vote on the toolbar to the left whom you think is likely to be acquired over the next year – you can have up to three choices. I included major BPO suppliers with revenues under $9 billion and significant BPO client-bases. I would also love to hear your views on how the HP/EDS merger will impact consolidation in the BPO industry.
Update: The polls are now closed: here is how you all voted:
Congrats to ACS, the lucky winner… or should that be TCS?
I am in the throes of writing a series of research articles in this area and welcome any contributions from people in the Knowledge Process Outsourcing (KPO) industry. If you are a user of KPO services, or an outsourcing vendor providing them, I would like to hear from you.
As companies tackle how to leverage third-party services for activities that require a certain level of customization, we are seeing new and established outsourcing service providers branching into KPO services in areas such as financial, legal, marketing, sales and accounting services. While BPO typifies services that are relatively standardized, KPO represents those that require tailoring to the needs of the customer. The benefits go beyond simple cost-savings and provide resources and skills that many firms simply do not have, or do not wish to employ inhouse full-time. For example, most enterprises today cannot afford a full-time inhouse attorney, so use third-party legal services as and when they need them. But why go to a top-end law firm when you can now get many legal services provided from offshore outsourcers, such as Infosys?
Clearly you have far too much time on your hands if you’re spending time here, so here are more places to go to fill those vacant hours. This is especially for all you sourcing consultants who went out of your way to vote for yourselves as the "top place to go to get balanced advice on outsourcing" – c’mon chaps get real -:)
IBM vs. Tata: Who’s More American? – Businessweek’s Steve Hamm raises some incisive points, namely, TCS, India’s largest tech-services company, collected 51% of its revenues in North America last quarter, while 65% of IBM’s were overseas. Builds upon some of the issues we discussed here last year;
Are You in Personal Branding Prison? Copyblogger raises the burning issue of "over-branding" yourself on the web. Too much personal branding can be damaging to a professional. If you brand yourself too strongly, you can’t take a break, because there’s no one else to fill your shoes. Without you, your business has no value….Start building value into your business so that potential customers think of your business name first and your name second. Get people interested in working with your business, not you;
I am in the throes of writing a series of research articles in this area and welcome any contributions from people in the Knowledge Process Outsourcing (KPO) industry. If you are a user of KPO services, or an outsourcing vendor providing them, I would like to 
Clearly you have far too much time on your hands if you’re spending time here, so here are more places to go to fill those vacant hours. This is especially for all you sourcing consultants who went out of your way to 
