I know several of you are hounding me for my views here… we’ve put out a couple of pieces on this today at AMR – check out Bruce Richardson’s blog where he raises the discussion.
I have to confess this one came completely out of left-field while I was traveling, but does tally well with HP’s focus on bundled BPO. All-in-all, these are my key takeaways from this eventful day:
No-one saw this one coming, most of us were expecting one of the Indian providers merging with EDS. This now raises the possibility of further mergers in services, even though this was looking unlikely until recently. The incumbent Western providers need scale and depth to compete effectively with the lower-cost Indian firms, and we could see a response from one of the other top tier firms to swallow up one of the vulnerable services firms.
On the BPO side, this is a great move, with the merger filling both companies’ BPO portfolio gaps, most notably in finance and accounting (F&A) and HR processes. As we discussed a few weeks’ ago, BPO market leaders Accenture and IBM have already been aggressively pushing their combined portfolios of finance and accounting and HR BPO services, with increasing emphasis on bundling these services with their application outsourcing services. HP is looking to follow suit, with the likes of Cap Gemini, Infosys, Wipro and TCS avidly observing how they can broaden their global BPO and IT services depth, scale and industry specialization. Now HP has deep HR delivery expertise to draw on, which elevates its bundling capability, in addition to EDS’s $1 billion call center outsourcing and global IT services business.
Culturally, this is definitely an odd one to fathom, but Mark Hurd has the track record and financial discipline to make this merger a success. He also got a good valuation for the firm, so now was probably a good time to strike.
Interesting times… maybe we’ll have some more days like this in the coming months?
I wrote a piece entitled "Blog-culture is ripping up the rule book for the outsourcing services and technology media industry" a few weeks’ ago which raised a few eyebrows. OK, it’s a litttle biased and I was on my high-horse, but it did raise several questions on where people go to get balanced, insightful information on the outsourcing industry that they can rely on. So, please choose your preferred three information outlets on the poll to the left side-bar. And please be honest 🙂
For the results of this poll, please click on the continuation sheet.
Having worked on a large number of "O" initiatives with enterprises over the last few years, the term outsourcing has given me nothing but problems. The minute the "O" word is uttered, staff get defensive, passions get stirred, resistance occurs. Often staff quickly brush up their CVs for a hasty exit before the axe falls. Staff and management tend to associate outsourcing with job losses, and their firms using low-cost labor from service providers.
But what else can you use when you are looking to move into a multi-year engagement with third-party service provider, where you will use their staff, technology and processes and likely reduce your own inhouse overhead? I have experienced companies trying to disguise the fact they are outsourcing by labeling their service initiative as "out-tasking", "co-sourcing", "right-sizing", or even "resource-optimizing" (oh, there is more…). Peter Allen also chips in with his preferred term "services contracting". However you want to spin it, your staff will view it as outsourcing, and the more you try and disguise the taboo term, the more suspicious your staff will be that you are simply trying to ship them out for lower-cost labor.
Personally, I prefer the term "managed services", as staff are not always transitioned out of the organization, and management responsibility for running the contracted services is transitioned over to the third-party provider. However, outsourcing has become ingrained in modern business vernacular, not dissimilar to information technology. It describes the activity a company goes through when it engages a third-party to take on the management of specific IT or business services on a long-term basis. However, I would stress that outsourcing these days describes the activity of evaluating and transitioning the processes and not normally the long-term management of them. For example, if a company decides to engage ADP to take on its payroll services, it will say "we’re outsourcing our payroll to ADP". However, ask the same company how they run their payroll a couple of years later, and it will say "we use ADP for payroll". It won’t say "we outsource our payroll to ADP".
So all-in-all, if you are looking to outsource processes, be upfront with your staff and tell them you are looking at outsourcing opportunities. Explain they are a key part of making this outsourcing initiative successful and you need them onboard to support the initiative. It will be good for their career, and they will have the chance to take on new tasks that are more core the the business – for example vendor and service-level management and higher-level business activities that directly impact senior management decision-making. The more upfront you are with what you are doing, the more your key staff will appreciate the honest communication, and the more likely they will be supportive and proactive in making it work. If they still resist and try to derail the process, at least you know who the dissenters are and who may not be onboard the train once it has left the station.
If you have any preferred terms for outsourcing, I’d love to hear from you…
I’ve been enjoying some great comments from people these past months and thought it time to highlight the occasional contribution that got me thinking "good point!". The recent post entitled "Is it time to dump the term outsourcing?" has – and still is – produced some superb discussion, in particular one comment from Robert Jakobson, a program manager and 15-year veteran with IBM, Microsoft and Sun Microsystems, who puts forward a great argument on why some enterprises use the "O" term in the first place. Enjoy.
I’m going to give you several magic terms. They’re accurate, they’re descriptive, they’re honest and they’re truthful.
Work. Team Assignments. Teams. Project(s).
Why are you calling it outsourcing in the first place? You’re hiring people to perform a job. You don’t need to give them a name. Haven’t for years. If the people involved on the project(s) you’re doing don’t understand that all that is happening is that certain portions of the work in the over all project are being performed by contracted or vendor assignments then you’ve already blown it.
People fear outsourcing for one reason … if the work is being sent "outside" then it’s not being done "in-house" and that means that "in-house" is not benefiting the project. What part of the project is being done by in-house resources? Focus them on the work they need to be doing instead of making them wonder why they’re not doing the other work.
The people (the Team) on the project needs to know what they’re supposed to be doing. And you need to specify this in advance and let everyone understand their role. If someone says, "Hey why are we doing <blah> in house?", be honest. "Because it’s not beneficial to do it that way. We get more benefit out of having our in-house team members working on <blah>".
Don’t sugar coat it. But don’t be all gloom and doom either. Just tell them the truth why – and show them what their roles are. If they worry about long term roles in the company – then you need to show them the work you have for them and reduce those fears. If on the other hand … they have a reason to be worried then you need to let them know that as well.
If people are going to be outsourced – if their jobs are going away you are not doing them a service by candy coating it or deflecting the question. There is a reason why Doctors tell patients the truth even if it’s brutally painful. It’s easier on the patient.
Be honest – if you are often enough, people trust you regardless.
Calling it outsourcing isn’t accurate. It’s just a vendor – a contractor. And the work being done is just work. You’re not "outsourcing" it. The work is no different if it’s done in India than if it’s done in the next state. If it’s not "in-house" it’s still just work. Pointing out that it’s being done somewhere else globally should not make a difference.
I can’t help feeling we are entering into a critical phase of business globalization, due to a convergence of factors. We have seen these global dynamics in play for the last 30 years, but we are now in an economy where today’s CEOs are aware they need the tools at their disposal to become truly integrated global enterprises.
I was privileged to have a preview of IBM’s new study of 1100 CEOs this week at its analyst event in New York, and, while the findings are under embargo until next Tuesday’s public release, I can say they reinforced one thing for me: the vast majority of today’s CEOs recognize the need for change, and are more prepared than ever to be bold and adopt measures that can drive rapid change through their organization. So why is now different from that of 5 years’ ago, or 25 years’ ago?
1) Many enterprises began rationalizing and optimizing their infrastructures in 2001 during the last downturn, and they need to look further outside of their organizations to find further business efficiencies.
2) The Internet and global communications revolution have created unprecedented access to global talent, where you can have your mainframe computers managed from Brazil, your general ledger consolidated in Hungary and your logistics analytics performed in India.
3) Enterprises are moving ever-closer to developing common standards to support processes that can enable them to operate and compete as global entities. When you have rapid access to your global financial, HR, supply chain, customer and product information, you are in a position where you can make quicker informed decisions to enter new markets, sunset dwindling product or service lines and mobilize your resources and partners accordingly to respond to your existing and future customers. ERP platforms are far more globally-integrated now than they were a decade ago, which provide a crucial backbone for supporting global business initiatives, and developing technology standards such as SOA are helping firms re-use and optimize a lot of what they already have.
4) Global services providers are going through a marked phase of healthy growth despite a flagging econom: look at the latest quarterlies from Accenture, EDS, Genpact, Infosys, IBM, TCS , Wipro, at al. This is enabling them to develop further their global delivery infrastructures to accommodate talent across Asia, Europe and Latin America. The majority of today’s CEOs realize they do not have all the talent they need internally to take full advantage of global resources, and they are increasingly turning to services firms for support, whether it’s large-scale outsourcing of business and IT functions, or augmented staff support to provide them with scarce skills.
5) The current economic downswing has upped the ante for global companies. Business leaders are becoming increasingly knowledgeable about what they need to do to rationalize costs further, develop common business standards and integrate their businesses on a more global basis. Their challenge is executing, and they are realizing the exigence to make braver decisions to achieve the change they need on a more rapid track, as opposed to making slow, painful, tentative steps.
Bottom-line, the current downturn is magnifying the scarcity of managerial talent with the experience to manage offshore resources, develop metrics and service levels, possess the process acumen that eliminates waste and drives ongoing quality, and the global business intelligence to move into new markets. Yes, some of these are age-old issues for improving business performance, but the reality is that today’s CEOs need support like never before, and many are increasingly willing to make more radical decisions to avoid seeing their business underperform or sink in a troubled economy. Today’s leading service providers are becoming critical players in providing the assistance CEOs need to become globally integrated businesses, however, as we have mentioned many times before, while services providers provide the tools and skills companies need, ultimately it’s how effectively enterprises engage their services partners to develop their own talent inhouse to acquire the experience and tools they need to make their enterprises successful.
The Indian Government has clearly been reading this blog and bowed to our pressure to extend the Software Technology Parks of India (STPI) tax holiday. The Indian finance minister has now proposed to extend the STPI tax holiday to expire on March 31 2010, a year later than the originally stipulated March 31 2009 date.
This is a shot in the arm for the Indian offshore services sector, and the shares of Infosys, Wipro, TCS, Cognizant, WNS, Patni, Satyam, EXL Service, Genpact et al. are all expected to jump by up to 10% as a result. The additional year should give the Indian outsourcing industry the time it needs to stabilize its current issues with Rupee appreciation and wage inflation.
Thanks to all you for you great contributions on this issue.
Following hot on the heels of our recently debated issues regarding the future health of the HR Outsourcing industry, I was delighted to see Convergys renewed its multi-scope HRO engagement with Avaya today for a further five years. I have some personal experience of this engagement from its transition a few years’ ago, when Avaya moved onto a global hub-and-spoke model underpinned by SAP’s HR platform, that included a complex global payroll roll-out. Convergys is also in the midst of global transitions with both DuPont and Johnson & Johnson (both signed after Avaya), and the successful – and lengthy – Avaya renewal spells good news to these more recent adopters of HRO seeking reasurance that their firm chose the right HR deployment model.
In my view, you can only truly judge the success of an outsourcing business when the initial wave of adopters renew for long periods. We have discussed many of the issues this industry faces, but the ultimate proof is in the pudding, and so far, we are seeing the early adopters choose to remain in an HRO delivery environment. These are the companies which have worked through the early complexities and found their status quo with their service providers. I’d like to congratulate both Convergys and Avaya’s HR leadership for their renewed relationship and finding a successful balance.
Braving the annual industry HRO schmooze fest this year, I realized I was emulating Roger Federer’s extraordinary Wimbledon run by making it to my fifth-consecutive show.Only an elite few have made all six – at least I can’t claim that honor -:)
From the moment I stepped into Naomi Bloom’s Brazen Hussies event on Tuesday night and was ordered to eat a heavily-garlicked vol-au-vent with the instruction “we’ve all had one, and so should you”, I knew something interesting was in the air this year.
For starters, all the industry big-guns were there; the leading HRO providers with all had their head honchos; the sourcing advisors; both SAP’s and Oracle’s BPO teams espousing the virtues of outsourcing on their ERP platforms; every staffing, benefits, talent management, data-something-or-other firm you’d never heard of; and even a few mercenary analysts dotted around the place.We even had a new double-act to entertain us – the Elliot and Richard show, moderated by the vivacious and cabalistic Jay Whitehead.This was one networking event when you just had to be there.
So, in true HROWorld tradition, I slammed myself with 20 back-to-back meetings over the two days, supplemented with a constant supply of stale coffee and a constant stream of sales literature I will cherish for a long time (ahem).
My overall impression of the state of HRO is one of re-engineering to get this right.This was the resounding message I got from several discussions with the market-makers in this industry. OK, we’ve had a few non-startersrecently, but let’s emphasize these were projects that were cancelled before any implementation work had taken place, and in several cases, the contract had just never quite made it to fruition.This doesn’t imply that HRO is failing; it implies that some businesses have made strategic decisions that now isn’t the right time to undergo open-heart HR surgery on themselves.And do you blame some of these firms, when the bottom has fallen out of their industry and they might just have some other urgent priorities to rectify?
I wrote a year ago that the industry crystallized around the Convergys/J&J deal, and I was right.What I liked about this show was the serious discussion on what works in HRO versus what doesn’t.There was a refreshing honesty from almost everyone regarding the steps suppliers and buyers need to take to make this work…and so much less hype.In fact we had so little hype, we could have used some.Most of the suppliers are seriously focusing on what they are good at, and crafting HRO solutions based on their core strengths.The need for standards and common service levels was discussed at length, with several ongoing initiatives in the industry currently focused on the joint-development of common HR standards and technologies that enable a more robust, repeatable HR delivery model.
There was universal recognition that HRO works when solutions are crafted from the bottom-up, with services added incrementally and HR leaders having more time to develop successful governance practices, as opposed to some of these massive end-to-end “big-bang” deployments, that have often resulted in a misalignment of expectations and delivery.This isn’t failure or disaster; it’s a 9 year-old industry testing the boundaries of what works – and what doesn’t.I’ve been at pains recently to point-out that 97% of HRO deals have succeeded – and by succeeded, I emphasize that they are plugging away to get this right.
Let’s be brutally honest here, this is business process outsourcing – and this is a tough complex business, where things can only go wrong.You really cannot judge the “success” of any major outsourcing engagement until it’s at least 3 years’ along and transition has been completed.The day of the billion-dollar mega-HRO deal may be over for now, but take some time to look at the plethora of these “bottom-up” engagements taking place, where companies like ADP and Ceridian are racking up their HRO clientele at double-digit growth rates; look at Hewitt’s re-focused strategy on centering its core benefits outsourcing business as the kernel of its HRO delivery model; and look at Accenture‘s and IBM’s continuing efforts to optimize their global HRO engagement models, with HR service-delivery centers employing thousands of service personnel across several global locations. The seeds of this industry have been sewn, and we’ve had our reality check.Now it’s time to move on and watch some great companies make this thing work.
I know several of you are hounding me for my views here… we’ve put out a couple of pieces on this today at AMR – check out Bruce Richardson’s blog where he raises the discussion. 
I wrote a piece entitled "
Having worked on a large number of "O" initiatives with enterprises over the last few years, the term outsourcing has given me nothing but problems. The minute the "O" word is uttered, staff get defensive, passions get stirred, resistance occurs. Often staff quickly brush up their CVs for a hasty exit before the axe falls. Staff and management tend to associate outsourcing with job losses, and their firms using low-cost labor from service providers. 
The Indian Government has clearly been reading this blog and 
Following hot on the heels of our recently 
Braving the annual industry HRO 
