November 8th, 2008

The change imperative: it's back-to-basics time

Posted by Phil Fersht @ 8:03 am

Categories: Business Process Outsourcing, Finance & Accounting Outsourcing, Human Resources Outsourcing, IT Outsourcing / IT Services, Outsourcing & Politics, Procurement Outsourcing, The Future of Outsourcing

Tags:

Even though you are probably more interested in the breed of puppy Barack is going to buy his girls, I have had a chance to ponder the realities of the recession.

In a nutshell, we have reached a crucial juncture in our economic history:  gone are the days we can borrow whatever we want to subsidize ambitious business ideas, buy houses we cannot really afford, or fritter money away on expensive holidays. Walking down Boyslton Street at 7.30pm last night - one of Boston’s prime restaurant areas - every restaurant had vacant tables and was taking walk-ins.  It really hit home to me that things have finally changed.  Years of over-spending have finally caught up with us and we’re now feeling the pinch.  But whether this was to be a rapid banking meltdown, or a long painful slowdown, this had to happen eventually. 

I recall sitting on a panel at at outsourcing conference in New York City back in 2004, and there were protesters outside, demonstrating their frustration about US jobs “moving offshore”.  In response, a sourcing attorney declared, “outsourcing provides a great opportunity for the US - we can offload low-value jobs and focus on higher-value, more innovative work”.  I recall thinking to myself, even then, that that argument didn’t quite add up. 

While it sounds like a nirvana, the reality is we’re competing globally for labor, for making cheaper, better cars, for delivering good quality IT services, for delivering quality finance, HR and supply chain support.  If the US is to truly deliver “higher-value”, the government needs to invest in education programs that develop this talent.  The reality is that the rest of the world caught up.  People in Chennai, Manila, Bucharest, Guatemala City, Guangzhou etc are being trained to compete with American, British, French and German workers, and the Internet and new technology have been a huge enabler to make this happen.  A good friend who works for one of the leading India-based BPOs confided in me recently, ”we should bring over the training leaders from the top Indian outsourcers and have them work with US businesses to get their act together”.

What continues to irk me, is the fact that industry has become so focused on making its quarterly numbers that it has taken its eye off the long-term picture.  We saw this financial meltdown coming - and did nothing (wasn’t the Asian crisis of the ’90s warning enough?).  We are seeing further deterioration of the environment - and still do little.  We saw the US automotive industry grind down to its current predicament - and have done nothing.  And we are seeing the IT and BPO industry rapidly develop across the globe - and have blissfully ignored it to meet these cost-containment targets. 

And how to we respond?  Bailouts.  We’re now talking about bailing out the flagging automotive industry.  How did it come to this?  Years of greed, a deterioration of our work-ethics, and eager developing nations eager to get a taste of what we have.  It’s as if we had a major cardiac arrest and are now hoping we can recover fully from open-heart surgery. 

And this time when we do recover (and we will), we simply have to make sure this never happens again.  Some will argue this is all about natural economics of globalization and a free market - and they are probably right.  However, this time we have truly reached an inflection point. 

It’s about accepting we now operate in a global economy and that we are competing at a level where we need to work as hard, and as smart, as the next nation.  I hope President-Elect Obama can help instill a new work culture in the US.  The US people have spoken that they want change, and they have voted in a President promising change.  The core question now is whether they are really prepared to change.

June 18th, 2008

Outsourcing highlights for June

Posted by Phil Fersht @ 8:00 am

Categories: Business Process Outsourcing, Finance & Accounting Outsourcing, Human Resources Outsourcing, IT Outsourcing / IT Services, Infrastructure Management Outsourcing, Offshoring and Captives, Outsourcing Locations, Procurement Outsourcing, The Future of Outsourcing

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Click on these links for recent happenings in the outsourcing world:

A final word from India: moving beyond “old BPO”

Musings from abroad: Futuristic BPO

The Legacy of Global Sourcing – What is (Y)our Legacy?

NASSCOM dispatch: “We’re now past the era of BPO” (Pramod Bhasin)

How do you feel about Human Resource Professional Organizations?

Musings from abroad… dispatch #3… Indian drivers

BPO: It’s all about taking ownership to get results

IBM/Bristol-Meyers: a shot in the arm for HRO

Finance and Accounting BPO continues its growth path

HRO Redux: 8/10 buyers don’t look back, while the vendors look ahead

BPO partnerships are opportunistic, rarely strategic

Will the EDS acquisition spark a BPO feeding frenzy?

Can this Marriage Be Saved?

Bored? Look no further

HP/EDS redux

Whom do you trust for balanced outsourcing advice?

Is it time to dump the term “outsourcing”?

Are we reaching an inflection point of business globalization?

Quest for an Organic Approach to Offshore Outsourcing

Is the sub-prime lending crisis placing outsourcing engagements on the backburner, or providing an impetus to proceed faster?

Cost-cutting measures for troubled companies in these tough economic times

Blog-culture is ripping up the rule book for the outsourcing services and technology media industry

Taking control of your vendor relationship

Can outsourcing be a catalyst for driving down the cost of healthcare?

May 18th, 2008

Will the EDS acquisition spark a feeding frenzy?

Posted by Phil Fersht @ 12:36 pm

Categories: Business Process Outsourcing, Finance & Accounting Outsourcing, Human Resources Outsourcing, IT Outsourcing / IT Services, Infrastructure Management Outsourcing, The Future of Outsourcing

Tags: HP, EDS

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. 

May 3rd, 2008

Are we reaching an inflection point of business globalization?

Posted by Phil Fersht @ 9:40 am

Categories: Business Process Outsourcing, IT Outsourcing / IT Services, Offshoring and Captives, Outsourcing Locations, The Future of Outsourcing

Tags:

Are we reaching an inflection point of business globalization?

April 27th, 2008

Is it time to dump the term "outsourcing"?

Posted by Phil Fersht @ 4:25 pm

Categories: The Future of Outsourcing

Tags: Outsourcing, It Operations, Business Operations, Outsourcing & Subcontracting, Phil Fersht

Is it time to dump the term “outsourcing”? 

March 22nd, 2008

Spring outsourcing talk

Posted by Phil Fersht @ 10:45 am

Categories: Business Process Outsourcing, Human Resources Outsourcing, IT Outsourcing / IT Services, The Future of Outsourcing

Tags: Outsourcing, It Operations, Business Operations, Outsourcing & Subcontracting, Phil Fersht

Some excellent recent outsourcing discussions:

Can HR Outsourcing rediscover its froth despite a 97% success rate?

March 6th, 2008

Indian outsourcing redux

Posted by Phil Fersht @ 2:39 pm

Categories: Business Process Outsourcing, IT Outsourcing / IT Services, Outsourcing Locations, The Future of Outsourcing

Tags: Forbes.com, Sramana Mitra, Phil Fersht, India, outsourcing

Feisty discussion on where Indian outsourcing industry is headed.  Is it dying, or maturing… what is your experience?

February 25th, 2008

Outsourcing in a downturn

Posted by Phil Fersht @ 11:22 am

Categories: Business Process Outsourcing, IT Outsourcing / IT Services, Offshoring and Captives, Outsourcing & Politics, Outsourcing Locations, The Future of Outsourcing

Tags: Phil Fersht, Outsourcing economic downturn, recession, IT outsourcing, eWeek

Podcast:  Outsourcing in a Downturn:  Yours’ truly discussing the potential ramifications of an economic downturn on outsourcing trends with AMR Research’s CEO Tony Friscia. 

February 19th, 2008

Outsourcing links for February

Posted by Phil Fersht @ 4:29 pm

Categories: Business Process Outsourcing, Human Resources Outsourcing, IT Outsourcing / IT Services, Infrastructure Management Outsourcing, Outsourcing & Politics, Outsourcing Locations, The Future of Outsourcing

Tags: Human Resources, Value, Outsourcing, Government, Strategy, It Operations, Business Operations, Outsourcing & Subcontracting, Management, Phil Fersht

Will China’s Internet purges inhibit their knowledge services industry? :  Interesting commentary on the fact that the Chinese government is working extremely hard to increase its level of censorship and keep the Chinese Internet-world sectioned off from the rest of the world.

Human Resources Outsourcing: Where’s the Value? :  Great insights on the purpose and value firms have experienced outsourcing their Human Resources function.

The NASSCOM 2008 Diaries: More Fog on the Windshield :  AMR Research’s legend, Bruce Richardson, on his experiences and takeaways from the recent NASSCOM event in India.

Renewal Strategies for ITO Relationships : Peter Allen, TPI’s thought-leader on all things outsourcing comes up with some interesting strategies for firms looking to get more value from renewing their relationships with their IT outsourcing provider.

February 16th, 2008

Should your firm offload its offshore operations to an outsourcing provider?

Posted by Phil Fersht @ 10:46 am

Categories: Offshoring and Captives, Outsourcing Locations, Shared Services Strategies, The Future of Outsourcing

Tags: Outsourcing Company, Outsourcing, It Operations, Business Operations, Outsourcing & Subcontracting, Phil Fersht

Some interesting debate going on regarding whether firms which have already established offshore service centers (termed as “captives”) are better off selling these centers to outsourcing providers.  It would be interesting to hear your views - especially if you work with offshore staff within your own firm - on whether you’d prefer to have these staff work directly for a service provider, where they are contracted to perform stipulated services, as opposed to being part of your organization.  The following 10 questions are posed to help firms understand what is the best option for them:

1) Is the work being performed in the captive truly core to our business, or could we move it over to a third party?

2) How much risk are we exposing to our business by transitioning the captive operations over to an outsourcer?  Can we work with the outsourcer to manage the transition process to ensure there is a smooth transition of people and operations?

3) By selling off our captive, how much can we save over a 5 year period?

4) What is our option-value in the future if we want to take some of these operations back in-house?

5) How severe is our attrition rate, and how does  this impact running costs and quality?

6) Is the captive truly a part of our global organization, or is it really a distant support center that doesn’t play a core role in day-to-day business operation?

7) How much management time, and how much cost, is spent flying senior executives over to offshore locations to oversee low-value processes such as accounts payable, help deck support etc.? 

8′) How much experience with offshoring do our firm’s senior executives currently have, or are they learning it by trial and error and substantial cost to our organization?

9) How complex is it to transfer knowledge from our parent operations over to our offshore operations?  Wouldn’t it be cleaner and easier to move the work to a third party outsourcer, who will take on the work they are contracted to do?

10) Is it worth keeping our captive, but re-locating it to a more appropriate location?  And what are the costs / benefits associated with doing that?