An interesting study conducted by WorldatWork, one of the leading HR executive organizations for F500 companies, has cited firms’ abilities to deploy a global strategy towards its workforce, the advancement of technology and the increase in outsourcing as having core implication for workforces in 2008.
"Organizations will look for ways to pull jobs apart to find pieces to outsource. Thought must be given to the motivation of workers assigned “pieces” of the work."
No great surprises here, but hearing the "O" issue becoming so prevalently and openly debated by one of the most reputable HR bodies is a step forward. The majority of other leading HR bodies are still sweeping the importance of outsourcing under the carpet, so it’s a significant mind-shift to see it reaching the top of the HR agenda. I discussed here the crucial role HR strategy must take on when companies go through the outsourcing process (earlier this year).
Burger King is certainly stepping up its customer retention initatives, as typified with this creative new campaign highlighted by the Human Capitalist. Not only is the fast food giant driving customer loyalty, but it also is leveraging the latest sourcing models to drive down costs and improve the customer experience….
It’s been quite a year in the world of FAO, with a current of deal activity, new entrants into the industry and a lot of new faces to drive the business and address the market (some of whom we highlighted back in May). I wanted to mention a few characters who are making some waves:
Accenture has accepted the cultural divide across the pond and put Tony Chambliss in charge of the Americas and Jean Pierre Bokobza, Europe. When I learn more about these guys, I will embarrass them further.
Cap Gemini is still refusing to admit there are any such cultural issues and has flown Brit David Poole in from the UK to get some traction with Uncle Sam. David likes burgers and cold windy weather – so Chicago it is for him….. David uses the title "Deputy CEO" for Cap’s BPO business, so I guess he’s being positioned as some sort of Sheriff. Not to be outdone, David Kaminski has also joined Cap’s US business to drive their F&A solutions, previously leading Microsoft’s global financial services business line.
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David Poole (before his first Chicago winter)
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ACS has made a sharp appointment in Ron Gillette to "lead and transform its global F&A Outsourcing business". Ron comes from Accenture, where he was a senior partner for its outsourcing business. Ron’s headshot is in black and white so assume he’s 10 years’ older than this…*grin*.
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Gillette… the best ACS could get
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Ritesh Idnani has played a particularly active role leading Infosys BPO’s market and business development, including closing their major F&A engagement with Philips earlier this year. Ritesh is a keen racer of fast cars and loves rock music, so quite what he’s doing in accounting services is beyond me….
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Idnani… accounting for life in the fast lane
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Ritesh’s former colleague, Devesh Nayal, is now CEO for his own offshore FAO and KPO firm, CompassBPO. Anyone who agrees to have a briefing with me at a Dunkin’ Donuts deserves a mention…
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Devesh Nayal… Dunkin’ it with the best
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Cognizant has been making a move into BPO of late, and has installed Kaushik Bhaumik to lead its charge into this space. Kaushik is based on the West Coast and comes from McKinsey.
WNS has also made investments in new senior personnel, and has brought Deborah Kops on board to lead marketing and strategy. Deborah contributed a great piece here a couple of weeks’ ago.
And finally, I wanted to give a mention to Rob Sherman, who is market-maker for Vengroff Williams and Associates, one of the FAO industry’s best-kept secrets, which delivers AR BPO solutions to a plethora of F500 firms. When not modeling, Rob likes boating and ice hockey. Again, a great fit for accounting services… *grin*.
Going pretty much unnoticed last week was the acquisition of receivables management firm Outsourcing Solutions Inc by the global market leader in Collections BPO, NCO Group, to create a combined accounts receivable (AR) BPO giant with revenues of $1.5 billion, and adds nearshore service center capability in Puerto Rico, Canada and Mexico to NCO’s current global delivery portfolio, which includes the USA, UK, India, Australia and the Philippines. NCO has steadily been focusing on developing offerings in reporting, analysis and budgeting areas, and now only needs to acquire a major capability in accounts payable services to boast a pretty impressive full-service F&A offering. What’s impressive about this expanding portfolio is the multiple geographic locations being developed, and the avoidance of over-reliance on India. The added capabilities in the Philippines and Latin America put the firm in a strong position to compete for global AR contracts, service all the necessary major languages, and jostle service delivery across several low-cost locations to accommodate multiple time zones, combat attrition issues and the appreciation of currencies such as the Rupee. NCO boasts several high-profile clients, where it delivers outsourced AR services, often as augmented offerings to existing shared services operations.
NCO’s expansion into F&A BPO is not dissimilar to the approach taken by Human Resources services giant ADP, which developed its HR solutions around its global payroll business, which grew up through multiple acquisitions of payroll bureaus across global locations over many years. ADP developed a comprehensive HR outsourcing solution in the middle market, based on its strengths in delivering administrative areas of HR – notably payroll and benefits administration – before adding HRIS and workforce administration to complete end-to-end HR capabilities with its GlobalView solution, underpinned by SAP. The company is now competing for global high-end HR BPO contracts, and has multiscope HRO engagements with clients such as Carmax, IKEA and Rhodia.
NCO’s approach of focusing heavily on centering its capabilities on receivables management is putting the firm in a strong position to take on middle-market F&A contracts, but it does need to develop a competency in accounts payable before it can effectively compete for the higher-end multi-scope F&A engagements. With several accounts payable services firms currently ripe for acquisition, surely this is not a far flung reality for the firm in the near future…
To emphasize the global nature of outsourcing, I downloaded this fancy "Feedjit" widget onto the blog the other day to show a regional map of visitors to this site (see left column). I was excited to see visitors from places as far flung as China, Belarus, Sweden, Malaysia, Brazil and Australia, but started to get concerned when I got a hit from….er…. CANADA?
What’s going on – I didn’t think that Internet thing had made it up there yet? I must complain to Feedjit about the accuracy of this tool "grin*…
OK… I didn’t get middle-seated today, but having had successive days of dental work, overdoses of Novocaine, followed by blood-work… then slipping on ice and spraining my ankle, I am a leetle beet cranky….. so here we go:
People who NEVER do any work, but always complain how busy they are;
People who pretend to be your best pal to get you to do them something, then you never hear from them again;
People who are constantly "selling", to the point where you have no clue who they are anymore;
Company politics…aargh (what more can I say);
Project managers;
People who hide the fact they have limited knowledge in something by gibbering a load of b******* to the point that everyone in the room switches off;
People who are constantly re-arranging a meeting, when the amount of time they spend re-arranging the damn thing, they could have just called you and had the necessary discussion (besides, how can their schedule be so packed if they are sitting in front of outlook all day);
People who cancel meetings at the last minute – ALL the time;
People who accept meeting invitations and blow you off with no explanation;
People who try to make you look incompetent;
Project managers;
Former colleagues who simply "must get together for a drink" and ALWAYS take a rain check at the last minute;
People who keep changing their mind to the point that you want to throttle them;
People with ADD (I may fall into this one too….);
People who fly somewhere for an internal meeting they could just have easily have had on the phone;
People who fly 1st class for sub- 2hour trips;
People who leave their cellphones on their desks when they wander off somewhere and subject you to a very cheesy ring-tone;
People who eat some stinky microwaved meal at their desk and pollute the entire area;
People who have to run to Starbucks every hour;
People who just aren’t very nice;
Sales people who take credit for anything that got sold, even though all they did was process the PO;
People who start using their Blackberry while you are talking to them;
Europeans who drop everything at 5.00pm… (I’m a Euro, so can get away with saying that…);
Project managers;
People who complain all the time, then claim that YOU complain a lot to someone else…..
My good friend David Sheinfeld, who wrote a great piece here back in May, has contributed some very forthright views regarding how an economic downturn will impact the BPO industry and the fact that cost reduction is not the only medicine many companies need in these times… take it away David:
So much has been made of the downturn in the economy and the credit crunch that it is hard to believe that any industry stands to gain over the short term let alone the BPO market.But as they say with every downturn, an opportunity is created.The traditional story line sounds something like this; the company’s outlook is bleak and its financial model is flawed.
Credit is hard to come by and even though many companies may have financing in place, the covenants and other requirements make it difficult to access those funds.The key executives are looking for areas to save money so the company can ride out the storm.Where do they go?Sure they can cut labor where possible but that may not be enough.Then they can look to cut capital expenditures.One of the areas that could experience this cut is enterprise spending.These are some of the questions being raised every day.Furthermore, the outlook for enterprise and other technology spending is bleak for 2008. This will undoubtedly affect many of the decisions companies will make in its business strategy going forward.While the cut in enterprise spending may help the BPO industry since many companies may turn to spending on projects that help them reduce costs and be more efficient I wouldn’t count on it being the reason to see a surge in BPO business.
I have no doubt that in the process of cutting costs that the BPO market should see an increase in the number of companies looking to outsource as a way to control or cut internal costs.But the reduction in costs is not the only medicine many companies need in these times.The company should be concerned about how to get its business back on the right foot rather than just looking to cut costs.In this time of scarce credit most companies will not be inclined to spend any considerable amount of money on systems or anything related to its infrastructure.If they are interested in outsourcing they will leave that to the BPO provider to provide whatever is needed as part of their proposal.The client will still require the provider to prove it can deliver cost improvement and quality processes all the while by reducing any measurable risk associated with outsourcing.And while the labor component may get the BPO provider invited to the party it may not be enough to land additional business even in this market.Assuming they even get invited to the party they will be up against an onslaught of many other BPO companies who are trying to feed their infrastructure and existing labor pool.The BPO provider should also be careful during negotiations with the client so as not to put itself in the position of affecting margins to the point of jeopardizing profitability.So what should the BPO provider do to take advantage of this downturn in the economy?For one, it needs to understand the markets it is going after.Certain markets are still in their infancy as far as utilizing outsourcing and hold great potential in the future.Second, the BPO provider needs to be innovative and offer more than just what comes with labor arbitrage.While labor was the main component that carried the day in the past it is clearly not the only reason to consider outsourcing even in these times.The provider needs to be able to deploy its own solutions to either compliment what the client has or to provide a solution that the client might consider when deciding to outsource.Third, with margins continuing to be under pressure the provider needs to make sure that its delivery model and infrastructure is efficient and can in fact withstand the pressures of competitive pricing from the market.
‘So while the economic downturn presents an opportunity for Outsourcing in the future it is by no means the only reason to believe that outsourcing will see growth.Like everything else there still needs to be value creation for the recipient of those services.
David Sheinfeld is a consultant and a Managing Director of Horizon Business Advisors, LLC which provides strategy, management and merchant banking services and can be contacted at [email protected] or [email protected]
A small handful of enterprises have pursued a strategy of "Build-Operate-Transfer" (BOT), whereby they engage a service provider to develop a captive service center (normally offshore) for them. The service provider will utilize its experience and resources to hire the personnel, source and acquire the infrastructure, develop the center, manage the knowledge-transfer activities and get it up and running – a process which will take 2-3 years to become fully operational and running in a stable state. The advantage of this model is that the enterprise has the future option-value to decide whether to retain the service center as its own "captive" operation, or sell off to an outsourcing provider to manage the services for them in a fully-outsourced arrangement. The disadvantage of this is the cost of doing so… outsourcing vendors won’t want to build service centers for other firms if they can’t leverage those facilities to service other customers – the model isn’t very scalable and doesn’t help them develop their delivery resources to expand their outsourcing business. Hence, they will only enter into these arrangements if there is a tidy pile of profit on offer for doing so. The enterprise needs to decide whether it is worth the investment, or, alternatively, explore the trade-off of moving down the less-expensive direct outsourcing route.
However, one high-profile foray into BOT – that of Aviva, the UK-based Insurance giant, appears to be turning into a highly lucrative venture for the firm, according to a recent article in The Economic Times. With the insurance sector poised to become a hot-bed of BPO adoption, Aviva finds itself in the lucrative position of having several top tier BPO providers vying for its service center, and thus acquire a quick-fire delivery capability to sell insurance BPO services to other customers. Aviva, could – of course – seek to commercialize its own captive to become a BPO provider in its own right (like Genpact did when GE spun out the business, and WNS from British Airways), or alternatively, the insurance firm could choose to focus on delivering insurance as its core business, and sell of its offshore operations at a tidy profit to an outsourcing provider, as the article suggests. Not a bad piece of business for Aviva, for being a pioneer in developing offshore delivery expertise before most of its competitors.
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…..
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.
An interesting study conducted by WorldatWork, one of the leading HR executive organizations for F500 companies, has cited firms’ abilities to deploy a global strategy towards its workforce, the advancement of technology and the increase in outsourcing as having core implication for workforces in 2008. 
