This will provoke some heavy thinking… if we could turn the population of the earth into a small community of 100 people, keeping the same proportions we have today, it would be something like this…..

Posted in : Business Process Outsourcing (BPO)

Word on the street at the moment is that several of the leading outsourcing vendors are searching for clients who want to develop resources in Central and South America.  This is especially the case for services that require a higher degree of staff interaction and time overlap, for example software development, HR and finance processes.  I’m not unusually one for commercials, but I was sent this cute clip – for a small software development outsourcing firm called Nearsoft  – which comes up with some very compelling arguments for nearshoring software development work to Mexico for Californian businesses; namely that Mexican nearshoring costs on average 65% of the US costs, compared to 85% for Indian costs for software development services.  The principal reasons are as follows:

• Wages rates are comparable
• Little need to relocate staff into the US
• No need for "bridge teams" which spend their time overlapping development work with both onshore and offshore teams
• Productivity – for every 2 US engineers, 3 Indian engineers are needed to combat staff attrition and less experienced staff
• Staff travel costs are far lower for nearshore
• Staff attrition is lower in Mexico
• IP protection is stronger under the NAFTA laws
• Staff visas are easier and cheaper to acquire under NAFTA visas.

While many of these points make a lot of sense, Nearsoft overlooks the issue of talent availability in Mexico and other central American locales, which is my number one concern.  Moreover, the productivity issue is debatable.  But there is little doubt the LAT-AM nearshore argument is becoming more and more compelling by the day with an ever-weakening dollar and no slowdown with offshore staff attrition rates.

Posted in : IT Outsourcing / IT Services, Sourcing Locations

These are interesting times in the outsourcing world, as typified by Peter Allen’s post last week, where he mentions sporadic, stuttering growth as the leading Indian providers look to gain footholds in the market, and a slowdown in the number of mega-outsourcing deals being signed with the incumbent outsourcing behemoths.  However, we have to look at the underlying drivers behind outsourcing to understand what is going on:

1) Large global enterprises are taking a gradual approach to outsourcing growth.  Most of the FORTUNE 1000 enterprises have their own offshore captives and want to optimize what they have internally before moving more processes over to a third party provider.  Whereas IT outsourcing is relatively mature, the approach of most global enterprises towards BPO is still cautious.  Bottom-line, firms are still exploring which processes are appropriate for outsourcing, versus ones they should keep inhouse. 

2) The service delivery landscape is still maturing.  Whereas moving administrative processes like payroll, accounts payable, benefits admin, loans/claims processing is now a slam-dunk, the onus is moving towards companies sending out higher-value – and higher-cost – process to third-parties that require some degree of business insight, executive contact and critical-thinking.   The financial business cases to outsource are normally very compelling when examined on a straight cost/employee basis, but the bigger issue is the capability of the outsourcing provider to take on these services, and the expertise of the buyer to execute an outsourcing transition successfully and design a retained infrastructure.  While the value proposition is there, the service provider landscape is still in the phase of proving its capability do deliver.  Remember, it took the ITO industry 20 years to get to a stage of relative maturity, and true BPO is barely a decade old.

3) The recent years of economic prosperity have eroded the urgency of many buyers.  Each outsourcing "wave" has been driven by urgent financial needs of companies to curtail expenditure on SG&A.  The waves of ITO deals in the early ’90s, HRO and ITO deals after 9/11, were primarily driven by the need for buyers to experience a "quick fix" with their costs, combined with ambitious provider pricing designed to have immediate financial benefit to clients.  The more recent wave of FAO deals has been driven by manufacturing, automotive and consumer businesses under serious competitive pressures.  However, the relative economic comfort of recent years has allowed many enterprises to take more time over their sourcing decisions, and adopt a more "start-small" exploratory approach to understand what works for them.  When you look at the anatomy of outsourcing expenditure over the last couple of years, we have seen a surge in smaller contracts that do not make the media radar.  BPO is a complex business, so why should a company enter into huge multiple-process outsourcing engagements, when it can afford to take it’s time a move out select functions on an incremental basis.  However, as we stare hard at the prospect of an economic downturn in 2008, will we see companies step up their urgency to cut costs?  Is the maturing provider landscape ready to take on a new wave of more complex services? 

History has so far proven that outsourcing has been aggressively driven by companies in financial distress during economic downturns.  This time, we may be about to witness the coming together of enterprise needs and service provider delivery capability.  Have your say and vote on the poll to the left sidebar.

Is the outsourcing industry primed to grow in a downturn?  Have your say and vote…

Posted in : Business Process Outsourcing (BPO)

It’s taken several years, but Cap Gemini’s newly aquired center in Buenos Aires is a significant development for the country as a sourcing location.  With GDP growth running at 4.7% this year (and expected to remain consistent in 2008 and 2009), inflation back under control, and IT and process skills on the rise, expect an increasing amount of work to shift to this location in the near term.  EDS and Neoris have been reaping the benfits of centers in Argentina for some time now for IT services, but the greater significance of Cap’s investment should be ultimately for BPO services, such as procurement, finance/accounting and even HR.  It’s going to be very tough for South American locations to attract significant IT work away from India in the medium-term, largely because of India’s talent base for IT, but expect to see significant interest in sourcing process work to the area, as a result of the language skills, timezone convenience for US firms, and ability to take on more judgement-based process which require critical thinking and analysis and employee-interaction.

"What seems to be the problem sir?"

Posted in : Uncategorized

To celebrate the return of Horses for Sources, I wanted to feature an excellent piece submitted by Deborah Kops, who is embedded in sourcing folklore, having led global transformation efforts at Deutsche Bank and Bank of America and was also one of the founding partners at PwC’s outsoucing division.  Today, Deborah is Chief Marketing Officer for WNS Global Services, a leading offshore BPO provider.  We will be featuring a lot of debate on the future of shared services / offshore captives and the road to BPO services over the coming months on this site, and Deborah’s insight here typifies the approach many world class organizations are taking with regards to their sourcing journey.  Take it away Deborah….

The microscope is on the performance of the estimated +2500 shared services operations worldwide now reaching performance maturity.  What’s next for these centers as the pressures of competition and globalization demand more and more…

‘

Three to five years in, and step changes in performance has been achieved by consolidating back office operations in shared services centers (SSC). Aggregation of processes has yielded the benefits of scale and scope. Near- shore locations have delivered cost arbitrage and language capability. Best practices have been implemented end-to-end, resulting in standardization across both business lines and geographies.  Business unit customers have adopted new ways of working. And the paraphernalia of good business management—dashboards, service levels, KPIs–have been put in place, supported by reasonably efficient governance routines.  Has nirvana been reached?

Yet the C-suite is demanding more out of the shared services organization. Since outsourcing is no longer a dirty word, all delivery options are now on the table for consideration in order to reach the next level of performance. Corporate strategy could allow a spin off of the one or more of the centers, ‘commercializing’ the captive. Or the time may be right to embrace full-fledged outsourcing as a next logical step? 

There is another, less radical option to evolve shared services—onsourcing could be the right answer for many organizations.

Moving select processes out of existing SSC operations to a more cost effective near- or offshore provider may provide the solution.  In this scenario, the SSC management identify those processes which can be either ‘lifted and dropped’, or further improved, to benefit from the advantages of labor arbitrage and/or consolidation.  SSC leadership retains control of delivery, managing a portfolio of services provided to the business.

Why ‘onsource’ rather than transfer the entire operation to a third party lock, stock and barrel, either through a services contract or a sale?  Onsourcing provides an approach to outsourcing that gives a comfort to those organizations for which full scale outsourcing is difficult from a cultural, process complexity or regulatory standpoint.  Process delivery remains under the control of the company’s trusted services organization; services are then ‘retailed’ to the end user.

With control in the hands of the SSC, onsourcing results in a low risk, gradual approach to outsourcing, adjustable whenever.  It can be structured within a framework contract and ‘gated’ according to the ability to manage the velocity of change.

A challenge of full-scale outsourcing is knowledge retention and customer intimacy. By itself, outsourcing a specific scope is not a difficult proposition; breakpoints come from the point at which the outsourced workflow connects to upstream/downstream client processes. Onsourcing preserves that knowledge because a client layer is still firmly embedded in the SSC, ensuring that corporate knowledge is retained, and delivery remains end-to-end.

Onsourcing alleviates investment in lower cost locations to sustain delivery economics. With a rapidly globalizing services landscape, corporations cannot afford an ongoing investment in program management, property, infrastructure, and local branding to attract qualified staff.

Successful outsourcing implementation requires a change in the capabilities of management.  Good shared services managers have advanced their skills moving the corporation from vertical process delivery to consolidation. Onsourcing represents the next measured, step in evolving the capabilities of the retained team. Onsourcing managers become the ‘switching station,’ managing the expectations of the business by fitting the right ‘made or bought’ delivery solution.

Flexibility to adjust the speed of implementation of outsourcing is a key benefit. If business conditions change, the strategy can adapt.  Alternatively, if the velocity or complexity of transactions increases, onsourcing becomes a flexible delivery mechanism.

Onsourcing also acts as a buffer to the inevitable politics surrounding the decision to outsource. Since the SSC is still the corporate provider of services, onsourcing can be implemented without angst to the business.

Who can argue with the benefits of transitioning quickly and containing implementation costs? Full scale outsourcing requires substantial investment in business case development, sourcing, and transition.  Onsourcing can be implemented under a task order framework, justified by incremental business cases which can be approved quickly.

Onsourcing keeps the SSC competitive, and rate card increases static.  More expensive, high touch, risky or complex processes can continue to be delivered by the SSC while onsourcing can offset increases in costs, reducing the inevitable noise that comes from the annual transfer pricing exercise.

Is onsourcing a new idea?  No–just a simple term for the way in which many organizations would like to outsourcing business processes.  Benefits to the SSC can be easily understood—continuous improvement at a digestible pace, avoidance of investment, lessened impact of change– with control in the hands of an organization with a strong corporate reputation. Many SSCs are seeing the virtues of incorporating selective or phased outsourcing into their delivery strategies. It’s time to give the trend a name.

• Deborah S. Kops is Chief Marketing Officer of WNS Global Services

Posted in : Business Process Outsourcing (BPO), Captives and Shared Services Strategies, Outsourcing Heros

Thanks for your patience over the last few weeks…

Phil

• • • "I hope this comeback is as successful as mine", a delighted "Horses" fan declared earlier…

Posted in : Business Process Outsourcing (BPO)

As the role that the Cloud is playing in transforming the technology landscape continues to increase, it has become the topic that is on the minds of many within the industry, and with those that invest in both software and services. Given this, there isn’t a lack of research reports or bold predictions about how the Cloud will transform enterprises.

However, in covering this market we found that amongst the available research there was a lack of focus on what the effect of Cloud would be on providers of IT services. The companies who have largely been built by providing supporting services to non-cloud products, or to build custom applications and linkages between disparate systems, otherwise known as systems integrators.

What we tried to accomplish in this report was an understanding of what the current transformation could mean to these systems integrators, and what we found formed the basis of this report.

Download The Cloud’s Impact on IT Services
[email-download download_id=”8″ contact_form_id=”9790″]

Posted in : Business Process Outsourcing (BPO)

Loved this post from Mark Stelzner’s Inflexion Point….

Are you wasting time at work?  According to the results of the latest Salary.com 2007 Wasting Time Survey, you probably are. In fact, employees waste approximately 20% of a typical 8.5 hour work day. And guess what – younger employees (ages 20-29) waste anywhere between 10-25% more time than their older colleagues.

So what exactly are employees doing?
* Using the internet for personal needs (34.7%)
* Socializing with coworkers (20.3%)
* Conducting “personal business” (17%)

And why do they do it?
* They don’t have enough work to do (17.7%)
* Their hours are too long (13.9%)
* They are underpaid (11.8%)
* Their work isn’t challenging (11.1%)

Personally, I thought the British went down the pub after lunch, while the Yanks spent all their time in boring meetings eating pizza….maybe times have changed?

   Mark Stelzner… he knows what you’re up to all day

Posted in : HR Strategy

1) I am a sports-junkie (passions include Tottenham Hotspur Football Club and the Boston Red Sox);

2) I grew up in London and Cambridge (UK).  My hometown friends are all lunatics who refuse to act their age;

3) I have lived and worked in the UK, France, US, Singapore and Australia;

4) My wife, Pooneh, is Canadian (pictured) and I am a Brit living in Boston, MA;

5) My favorite things to do (apart from watching sport) involve skiing and drinking exorbitant red wine;

6) I would like to retire as soon as I can swing it;

7) I had this very embarrassing piece written about me by "FAOToday" last year…but it’s worth a giggle:    Download Fersht_FAOCover_Story.pdf

Posted in : Absolutely Meaningless Comedy

Today, for the first time, I got middle-seated – in the back row – courtesy of Delta Airlines.  Not only that, we sat on the tarmac in Atlanta for 2 hours waiting for the “traffic” to clear (heh?).  So I got thinking about some of the things in life that irritate me…..

Being middle-seated – in the back row
LinkedIn invitations from people I don’t know, or will ever have the need to know
Being middle-seated – in the back row
Bacardi (ugh)
Victoria Beckham
Basketball…the first 59 minutes
Bowflex infomercials
Being middle-seated – in the back row
People who talk incessantly about themselves
Stale coffee in airports
Hotel room service charges
Bluetooth headsets
Just being middle-seated
Taxis with no A/C
Taxis that smell
Being middle-seated
The term ‘RPO’
Pay-for-play conferences
American airlines coffee
Trying to get anything with Best Buy rewards points
Disney
British tourists at Disney
Americanized Chinese food (you know the place)
People who stick on 16 when the dealer’s packing a high number
Macdonald’s salads (why?)
Boring blogs
That guy on Fox News (work it out…)
Cheap wine
American commentary on world cup football (soccer) matches
That arrogant Brit on American idol
James Patterson novels
Donald Trump’s sweep-over
Johnny Damon
Bad sales reps

People who pretend to be my friend when they want something
Using snail-mail

Subway
Doing expenses
Steely Dan ‘best of’ albums
Being middle-seated – ESPECIALLY in the back row

The UK’s most Irritating export?

Posted in : Absolutely Meaningless Comedy