Why do outsourcing service providers lose deals?

November 26, 2012

At the recent ISG service provider conference in London I was talking to John Keppel, ISG’s chief marketing officer, about current outsourcing market dynamics – and specifically why outsourcing service providers lose deals. If you want to avoid classic mistakes, read on at goo.gl/UZnOL


Advisors vs Vendors – the latest BPO Backchat column is live

August 16, 2012

What is the role of the third party advisor (on the outsourcing vendor side) and the service provider relations (on the consulting companies side) teams and why are they increasingly important? Find out at Professional Outsourcing magazine http://bit.ly/OkuQ0a

Outsourcing and the Eurozone crisis

June 25, 2012

@prof_outsource has just published my latest BPO Backchat column looking at how the outsourcing industry could help countries in the Eurozone. http://bit.ly/OgClXK

The latest BPO Backchat column is live

April 4, 2012

In this edition, BPO Backchat talks about procurement in the financial markets with Peter Smith of Spend Matters. http://bit.ly/HTEeFK

BPO Backchat moves (again)…

March 17, 2012

Professional Outsourcing magazine has just launched BPO Backchat as a column.

Dell and Perot… and Google

September 24, 2009

I’ve been banging on about the provision of services (BPO and ITO) over the cloud. As we see increased consolidation amongst the hardware manufacturers and their generally smaller services brethren, the news yesterday that Perot Systems is being acquired for a 68% premium by Dell raises questions; and eyebrows.

Perot is still strong in the US, but its European business has suffered death from a thousand cuts. I was speaking to one of the ex most senior executives in PSE and he seems convinced that Michael Dell’s motivation is to disrupt IBM Global Services and HP Enterprise Services (neé EDS) in their expansion plans.

I know it’s a fools game to make predictions in today’s market, but I’m convinced that we will be hearing the words Perot, data centre, cloud, Dell, Google Apps and Chrome OS in the not too distant future!

Futurologist out…

We’re all doomed! – a response

September 13, 2009

Following my missive about the TPI results, Les Potton, one of my contacts and owner of Target HR, wrote:

The irony is that the potential savings from outsourcing could be a key route through the recession, but its the reluctance to commit funds up front or sign long term deals, that is likely to be contributing to the reduced number of contracts.

With purse strings tight, there will be the inevitable reluctance to spend anything, particularly if there is a perceived risk. Even if the potential solution could save a lot of cash, the process and implementation costs of getting there are often huge with the bigger outsource providers.

In my area of HR outsourcing the temptation for the big players is to go only for high value, long contracts, which may scare off some excellent prospects, who might want to start small but expand their outsourcing, as their business grows and once they feel confident it works. It is a big leap of faith for those used to having control at their fingertips.

Overall as a product, outsourcing is still a great opportunity for organisations to get quality service, best practice, specialist experience across multiple sectors and save money. However, I believe the sellers need to use a more creative sales approach and invest time understanding the prospect and helping them gain confidence in the concept (perhaps using pilot schemes etc), rather than putting a long term contract on the table early in discussions.

Whilst I agree with Les’ analysis generally, I think that the HR market is even more prone to delays in spending.

With the HRO World Europe event coming up in November, I’ll be very interested to see the mood of the HRO providers and advisors. Anecdotal evidence suggests that the market is flat/declining… watch this space.

Aligned contracting – the right way to deal

August 25, 2009

I’ve been giving a lot of thought into why clients and outsourcing service providers fall out and I think that in most cases, it comes down to different expectations; i.e. each party provides misaligned inputs leading to misaligned outcomes.

I’ve talked before about how outsourcing is mostly about guessing. The service BPO/ITO provider guesses what the client wants and what the competitive organisations are going to charge. The client in turn guesses what services are going to be provided and how closely this matches their requirements.

I now believe that all service providers must sign up to agreements which reward them for the delivery of a desired outcome. Most current contracts are based on an input specification, i.e. build an integrated finance system to take us from a to b to x specification. The principle here is that this specification would be turned around. The proposed system must enable y millions of transactions to be covered per annum with no or minimal disruption.

This kind of approach would mean instead of letting a contract for the construction of the system,  a contract would be let for say 10 years for its design, build and operation. The client’s governance structure/team leaves it to the vendor to decide how best to achieve this based on strict total cost of ownership criteria, with heavy disincentives for failure and gain share for success, this drives the right behaviour, both with the principle contractor and its sub contractors, it focuses on the purpose of the system not its fabric.

Outcomes of aligned contracting against which key performance indicators would be matched could include: cost savings, better services, economic regeneration in areas of low employment – this is good not only for the client, but leads into the political and economic growth agendas of the current and future government leaderships.

Is LPO the way to go?

August 4, 2009

There is a quiet revolution taking place in the legal market. At the moment, it is being kept hush hush because lawyers in the US, Australia and the UK are moving some of their “turn the handle” grunty back-office processes offshore – mainly to India. Of course, the reason they’re keeping it quiet is that they’re still charging top dollar/pound/euro to clients for these same services.

So far, so capitalist.

But, corporates are getting in on the act. As Matt Sullivan has said:

Organizations have traditionally retained outside law firms when they become parties to litigation or acquisitions. These situations, that create sudden, large volumes of documents to review, are exactly the circumstances for which LPO vendors are well suited. Many LPOs have the ability to quickly deploy large teams of young lawyers using the latest technologies to assess the responsiveness, privilege, confidentiality of litigation-related documents or to review the assignment and termination clauses of acquisition-related contracts. Indian LPOs can typically deliver these services for USD20 to USD50 per hour as compared to USD60 to USD100 or more for legal temps in the US. Low cost legal services sources are also emerging in such places as Israel, the Philippines, South Africa and Costa Rica.

To confirm this, I recently met Andrew Loach from CPA Global who is leveraging his 20 years of outsourcing experience with the general counsels of large corporate clients. As a result, he and his team are helping these corporations save USD10’s millions a year on their legal bills.

I’ve been checking around and his approach is being recognised by many legal luminaries as a brand new model which will change the composition of the legal landscape. Add to this the recent win of the Rio Tinto contract, and Andrew and his team are now probably the dominant force in this area world wide.

He has developed what he calls a “legal heat map” which helps general counsels segment and categorise work done internally and with law firms and then model the financial and operational implications of outsourcing lower level legal work to CPA’s various onshore and offshore centres.

Here’s a prediction for you and the outsourcing markets… KPO is going to be huge and LPO will lead the way. The US and UK magic circle need to pay close attention to this; when someone like Loach engages with law firms’ corporate customers, the legal boys and girls had better watch out. I know Andrew well and he has a track record in the outsourcing industry as someone who is innovative (and obsessive) when it comes to saving money for clients.

TPI, harbingers of doom… in a good way

July 24, 2009

At last, some realism is leaking into the market; fetid and rank it may be, but like all good boils, this one really needs lancing.

The latest research from TPI does not make happy reading for the outsourcing service provider and sourcing advisory/consulting communities. The message is simple;  information technology outsourcing (ITO) is in the dolrums and  business process outsourcing (BPO) has fallen off a cliff.

Providers have returned woeful results. Total contract values (TCVs) for deals worth at least USD25m were down 22 per cent during the first six months of 2009, compared with H1 of last year. In addition the number of signed contracts was down 11 per cent, with only 135 contracts awarded during the last quarter.

BPO deals have declined across all regions and all functions; finance and accounting and particularly human resources have been hardest hit. The value and number of BPO contracts were at their lowest levels since 2001. In fact, at USD2.4bn for Q2, TCVs were down 69 per cent compared to the same period last year.

Let’s put this in context. In order to match the figures for 2008, the outsourcing service providers will need to sign deals with TCVs in excess of USD53bn. Hands up all those that think that this is a probable outcome?

So, we have all of the service providers with clogged pores, pressure building inside until we see such an expulsion of people last seen in the heavy industries in the 1980s.

What should we do, pack up, stay indoors and hide our faces until clients arrive back with ready supplies of Clearasil?

Well, I say lance the bugger!

The medicine is easy to administer, the pain short-lived and the opportunities are better for a glowing complexion afterwards. What are the medicines in my opinion? I’ve discussed cloudsourcing recently and we urgently need to go back to “what clients want and need – not what we think they should want and need”.

The sooner we do this, the better the prognosis.