OUTSOURCING PERSPECTIVES

Incredible India

As I watched BBC News in my hotel room before checking out on Saturday, October 25th (after a long 2-week stay in India), I saw a beautiful commercial for a website called "Incredible India".  The advertisement featured a lovely Indian woman dressed in traditional clothing and scarfs in a deep red color, with her long, shiny, dark hair blowing in the wind and images of India embedded into the background.  The scenery included: a dessert, a busy city view, colorfully-dressed women, a garden of hue-filled foliage, a historic castle with a backdrop of terra cotta mountains, and the white-marble designed Taj Mahal.  It simply was lovely, and in a very brief moment, amazingly summed up my first trip and experiences in India.

India is a country of stark contrasts.  For those who have never been, India is rooted in tremendous history that still lives on today - forts that stand from year 1100 and earlier and a culture dependent heavily on traditions and a moral code of the past.  In stark contrast, India is riding a wave of tremendous economic expansion and development, as exemplified by the new mall structures and high rise office complexes being constructed throughout all of India, sometimes even in remote villages.  Its people exude an air of excitement about this "new world" at the same time as having a true commitment to their deeply spiritual and family-centric belief system.

The culture shock I faced initially was beyond anything I could have imagined.  The standard of living for tens of millions of Indians is what we, in the US, would deem as sub human, with homes built of recycled cloth and tarps and sticks and tin.  Many sleep on sidewalks, cushioned only by a towel and no blanket for the cool evening temperatures of low 70's versus 90+ during the day.  The outside air reeks with dust and smog - diesel fumes penetrate all of the four cities I visited in north (Delhi), central (Jaipur) and south India (Hyderabad and Bangalore).  My eyes burned constantly for the first full week, and I never once let the sink or shower water enter my mouth - even brushing my teeth with sealed bottle water. Simple "necessities", such as toilet facilities, do not exist in many urban and even rural societies.  And the vehicles on the antiquated road system include by foot, bicycle, rickshaw, three-wheeled taxi, mini truck, large construction vehicles, very old buses, economy-sized cars, mopeds, taxis and cows - all literally converging from 15 lanes to 3.  Speaking of traffic, it's nothing like you have ever experienced...even in the height of New York City rush hour!

HOWEVER, in stark contrast, the Indian people and culture are among the most beautiful I have ever had the pleasure to experience in a significant way. Despite the relatively difficult way of life for most Indians, the rich included, they accept their existence and go from day to day just the way it is.  The caste system still is predominant in this culture - although its significance is deteriorating thanks to the advancement of job opportunities country wide.  People find many, many reasons to be positive.  As a general rule - and I have experienced not one exception - they are courteous, respectful, and take much pride in their work and efforts.  Most of the men wear ironed long-sleeved shirts and trousers - even amongst the most poor - and the women largely wear all styles of traditional Indian dresses in bright colors and with beautiful jewelry and simple hair styles.  The professional workers (as in my new company, Genpact) are the most hard working I have ever met, beyond enthusiastic, highly committed, focused heavily on education, very reserved, and extremely curious. The majority are of the Hindu religion (their "Indian Christmas" was celebrated last week, by the way, called Diwali), although there also are Christians, Muslims (more so in parts of south India where I visited), Sieks, and many others.  I think that Hindi, their language, has 16 or so different dialects!  (I stayed in a hotel in Hyderabad for 3 days wherein every morning at 5am, I was awoken by morning prayers on the loud speaker of a mosque 1/4 mile away!!!  With a 5x/day regimen, now I feel majorly guilty about my lack of "prayer schedule"!) 

I took so many photos and video clips that could serve as "armchair travel".  India and China are among the most fast-growing economies of the world, with the Middle East not far behind it - so I am just grateful and fortunate to have experienced the depth of this country as I had.  (Oh, and I also was invited to the homes of two relative strangers - one who is a distant work colleague and another who is the hotel fitness manager whose wife invited me for a home-cooked meal (I declined both) - and I borrowed $200 from another person I didn't even know (but who works for my company) because I had run out of Indian currency and wanted to spend the day sightseeing and shopping...he insisted.  Also, my driver, who earns $90/month, bought me a bouquet of roses on my day of departure.)  We would consider it unusual hospitality - they consider it a way of life.

I think that most of us tend to get silo'd in our own little universes - focusing heavily on work and advancement and less so on the values and individuals who truly make our lives worthwhile.  I am not sure exactly how "life changing" this trip was, but it certainly has been fascinating on many different dimensions, especially in helping me see the value of India as a service location.

We should count our blessings.  I guess that's the most meaningful lesson of this trip, my first experience in India.

My New Role

With the stars aligned and good fortune on my side, I have decided to accept a fantastic career opportunity offered to me three weeks ago by outsourcing service provider Genpact. Genpact was my very first customer of FAO Research, way back in 2005. They even bought a subscription before I had any real products or services to offer!

I have been impressed by the cautious, yet determined approach to market success that Genpact has pursued since splitting from GE. Instead of traditional means to build its brand, the company has invested in building its book of business and penetrating existing accounts to yield satisfied customers. With an impressive (yet mostly proprietary) client list and a truly likeable management team, Genpact now appears on the short lists of the most significant outsourcing engagements worldwide, especially with regard to FAO.

I am grateful for this new role which they customized to enable me to repurpose my outsourcing skillset of the past 12 years. I am working most closely with Tiger Tyagarajan and Shantanu Ghosh to help with business development, account management and external thought leadership. I also have tremendous opportunity to continue meeting with outsourcing buyers, advisors, supplier partners and other constituencies.

It's a small world, this outsourcing space in which we live, so I look forward to continued interactions, but in a slightly different way. I will post comments on this site that reflect my personal views, not those of my company, and especially look forward to sharing my perceptions from spending the past two weeks in India.

There is much to look forward to in the outsourcing space, especially in this global economic downturn, so I am excited to continue being a part of it.  Reach out to me at any time: [email protected]; I now have TWO blackberry's, so...running and hiding is no longer an option for me.  :-)

Job Prospects in Outsourcing

I am embarking on my next-steps journey after a month-and-a-half hiatus "on the beach", figuratively AND literally, with a great deal of enthusiasm for opportunities in the outsourcing space. (You might like to check out this picture I snapped a few days ago in the White Mountains of New Hampshire; imagine the color scheme during foliage season about a month from now. Fall is a beautiful time here in New England.)

For those of you with a job, you are fortunate. In our challenging global economic climate, you are lucky to have stability of income, intellectual challenge and a deepening of expertise. With a career in outsourcing, you are at the forefront of an industry that even lay folks now understand.

If you currently seek employment (and I have spoken with many of you in that boat), then you are in a great position too. Job sites and headhunters are scrambling for candidates with outsourcing experience - for leadership positions, middle management and operations. Sales jobs abound in a climate wherein competition is intense and growing, and the marketing function finally is getting the respect it deserves, with many opportunities in supplier organizations. Buyer companies are seeking sourcing managers. Law and consulting firms are entertaining queries from ambitious, smart experts. Publications and associations are looking for freelancers to help keep their readers abreast of outsourcing activity.

Demand for outsourcing is at new heights, despite an extremely cautious approach by potential and existing buyers, so job opportunities are high too. Networking is still the most tried-and-true approach to getting ahead in this industry...not only for the job market but also getting solid referrals for new and add-on business. I see no signs at all of a tightening outsourcing job market...not yet, at least.

Closure of FAO Research

For those of you who are unaware, I decided last week to no longer operate FAO Research.  The closure came down to my foreseeing difficulty monetizing a research-based business in 2009 due to the increased availability of free information available via Google Advanced Searches, free stuff being distributed by advisors, suppliers, magazines, bloggers, etc.  I had suspected for quite some time that the economics of a research model simply no longer makes sense for me, so last Monday, I decided “why wait”.

I say this with a bit of sadness, as, on one hand, we finally achieved a position wherein FAO Research had gained the reputation and trust to work with the biggest outsourcing suppliers in the world as well as major advisors, members of the press, industry associations, and the like.  On the other hand, however, as much as I have loved my “job” since 1996 as an outsourcing research analyst, I am anxious to pursue opportunities outside of this current business model.

I am grateful for the more than 160+ email messages I received late last week from outsourcing suppliers, buyers, advisors and all sorts of industry experts.  I am especially appreciative for a blog post today by renowned analyst and blogger Phil Fersht who has been my colleague, competitor, at times, and dear friend here in Boston.  Apparently, I made an impression in this domain.  I am humbled.

It’s a small space this outsourcing world in which we live.  I shall continue to post “outsourcing perspectives” regularly.  I thank you for your continued support and encouragement on my professional outsourcing journey.

A Strong Case Against Captives

Finally, FINALLY someone in the business community is taking note of what I have been preaching all along - that financially-strapped businesses in a tightened global economy will turn to outsourcing increasingly to achieve overall business objectives versus pure cost savings.  Yes, the sales cycle may be a bit prolonged right now, and some projects may be on hold, but our business climate is just perfect right now for an FAO deluge.

Steve Hamm wrote in today's BusinessWeek article - "Outsourcing the Offshore Operations" - particularly about captive centers transitioning to an outsourcing approach.  He penned this piece in light of WNS' recent, most significant win, one with a mega pricetag that commanded lots of media attention.  We see many examples of captives - and shared service centers - making the shift to FAO...proving that they could not ignore the "O" word any longer. 

I trust that this article in BW will shed light to readers who may not otherwise be keyed into our world so that they too can realize the tremendous advantages and near-term benefits that outsourcing can provide.

Leverage Our Economic Woes

The Associated Press has painted yet another extremely grim picture of our U.S. economy, as published in its finance-related article of yesterday morning - not quite the way I had hoped to wake up on a Sunday morning!  The piece discusses the loss of the dollar's purchasing power.  It highlights exports as one of our few mainstays and points out that acquisition-minded, foreign-based investors are knocking at business' doors, with Anheuser-Busch as a current example (by a Belgium-based firm, btw, run by Brazilians...go figure!).  It's a lengthy read, but take a look...quite sobering and worrisome indeed. (Link to AP article here.)

Fear not, though, if you are an outsourcer, as this is exactly your chance to shine.  Afterall, everyone deserves their special "moment," so to speak, right? 

Suppliers must point out the fact that FAO can be a panacea for companies feeling the pains/strains of our sluggish economy.  And I mean comprehensive FAO - from the transactional pieces to the more strategic services that truly can impact a company's way of seeing its world. 

I know the sales shpiels of nearly every major outsourcer, and the fact is that very few are leveraging our economic woes to demonstrate the business impact of their FAO offerings.  Granted, you may mention the drivers and pros of outsourcing, but how truly can your services result in real change for your prospective customer...in their specific industry...of their specific company size...in their specific geography...within their specific operational requirements.  Make it more real.  And more personal.

Sounds like Sales 101 advice, but trust me - and I get the same feedback from most of the sourcing advisors with whom I interact - most outsourcers are not getting this point together yet with regard to FAO.

Maybe I'll conduct a mini study in 3Q08 to re-visit exactly how suppliers are leveraging our economic woes and demonstrating what it all means.  I know that if they do, this entire market will be in a much better position to succeed.

Size Does Matter - Well, Not Always

As analysts, we are constantly pressured into creating ranking and ratings charts - determining the fate of who belongs in the upper-right "quadrant" versus the unfortunate souls who end up falling into the lower left.  The assumption is that size/scale/mass is better, making for a better ranking/rating.

But truly, at the end of the day, does size really matter?

Yes, there is something to be said about size - high market share, large # of employees, wide range of capabilities and industry depth, long tenure, etc. - which pushes the "been there, done that" bar that much higher.

But I say, no.  At the end of the day, although size is definitely something that's taken into consideration significantly, what really matters most in FAO relationships is the trust, communication, cultural feel and attention that is felt by all involved parties.  FAO is a service, not a product, business.  What may look like the best, in the upper right, may just not feel right for you, as a buyer.  And what's in the lower left at the bottom, may suit you absolutely perfectly.

Please take a few minutes to read the short article below brought to my attention today by Helen Ricardo, a leading consultant in London from global sourcing advisory firm Alsbridge and big supporter of this blog.  This little thought piece by her colleague, John Sheridan, indicates exactly what people should focus on - supplier and buyers alike - as related to selecting the right match in a services firm.  I agree fully.

Download 61808_alsbridge_just_one_of_the_little_guys.pdf

Case in point yet again, as the FAO market matures and becomes more and more competitive.  Be careful of market statistics, rankings and even opinions...we know best what matters most to suit our individual needs.  Indeed, size has many, many benefits, but it's not always the clincher.

A Few Trends Developing in FAO

The FAO market has matured significantly compared with three years ago when FAO Research launched and this market was relatively nascent.  Here are just a few tidbits that I find interesting about what has happened in the FAO space recently and some of the directions this market is heading:

Online Outsourcing:  It may not be a significant concern today, but products like Microsoft's foray into outsourcing with www.taskmarket.com proves yet another way that small and medium-sized companies may go when opting to outsource select functions. It's VERY new, but developing the concept out into the future, FAO technically can take some of that route. Not quite the leverage that the traditional FAO model can offer, but still...for those ambivalent to outsourcing finance either at all or offshore - it's an interesting concept.  Same with SOA.  I know of another company getting ready to launch an online portal/marketplace for suppliers/buyers, specifically SMEs, to engage in outsourcing.  The model is shifting...

New Outsourcers:  The supplier landscape continues to shift also. Although not quite "new", services companies Cognizant and Logica have popped up lately in terms of getting business successfully in FAO.  Many sourcing advisors with whom we work closely still are unfamiliar with their total packages, coming to us with questions.  Outsourcers like these, including Quattro, are on a tear to educate the market.  Buyers certainly are starting to listen.

Blended Sourcing Model:  It's not a new term, or a shift in something familiar, but one that I have heard in the FAO sales process moreso than not lately to describe a flexible, user-friendly type of approach to FAO - onshore, offshore, nearshore, onsite.  Certainly may help allay fears with regard to third-party management of Finance functions.

Big P&G Deal:  The huge industry buzz is P&G's new HRO deal with IBM valued at $400M. (You might remember that P&G outsourced ITO to H-P in a $3B, '03 deal also after lots of competitive in-fighting.) For a company with huge competitive concerns AND an appetite for outsourcing, P&G definitely will put FAO next. Same with Bristol-Myers Squibb and others undergoing restructuring. (Btw, I know this not of fact but from insinuation.) BMS just indicated that back-office operations, finance, IT and human resources departments will be hit the hardest by the intended job losses, with outsourcing and offshoring being a strategy that it plans to embrace.

Rise of the Middle East and Africa:  I've seen this two years coming, but Middle Eastern countries finally are organized enough to have just hosted the first-ever "Middle East International Banking, Financial Technology and Services Exhibition and Conference" in Dubai. FAO is a market they definitely want to tackle also, as FAO Research had worked with the head of their Dubai Outsource Zone when it first launched. We also are seeing South Africa trying to woo FAO supplier/buyer investment.

Outsourcing now is a PLUS:  And we see this concept finally becoming mainstream - so much so that it's actually a "positive" growth factor in the eyes of many stock analysts' ratings of companies. Check out this comment on American Axl (AXL): "It's focus on improving its product mix, diversification of client base, and outsourcing to low-cost countries are some of the positives of the stock." Another great article that I suggest you read came out a few days ago in a UK-based financial publication.

It's an exciting time to be part of this industry.  Ever changing indeed.

Finance Worldsourcing Is What We Research (?)

As an analyst, I love to challenge ideas - and here's yet another opportunity presented in this "must read" article from today's BusinessWeek online issue - Beyond Outsourcing, to Worldsourcing".  The author talks about how we used to live in a world called Global 1.0 in which all business ideas and innovations came from the West, ignoring all that lesser-developed countries had to offer.  We supposedly are now in a Global 2.0 paradigm in which the rise of the Asian middle class primarily drives our current absorption in "worldsourcing", leveraging the unique cultures and ways of operating that countries outside of the West are bringing to modernize the ways we do business.

I get it.  I like it so far.  And worldsourcing is kind of a cool term too, actually, isn't it?

But here's the clincher -> he says that Global 2.0 "turns strategies such as outsourcing and offshoring on their heads."

Wh-wh-what?????

The mere fact that we live and operate in a global economy (or 2.0 as he puts it) implies that outsourcing/offshoring/global sourcing (call it what you like) is the only way to survive business wise.  And furthering my proposition that companies are now outsourcing finance with an FAO 2.0 mindset, we see innovation, creativity and new ways of doing business abounding, all literally being propelled, in such a case, but leveraging third-party expertise to improve products and services being brought to market.

This author was doing so well until this blunder.  It proves that there's still a huge misconception that outsourcing is all about job loss and limited career choices.  I see this time and time again - and BusinessWeek is no exception (and it's quite the well known, global publication at that!).

All FAO service providers that I know are engrossed deeply in "worldsourcing" by expanding their capabilities, amping up their hiring and retention strategies, broadening their geographic reach and helping deliver more innovation and flexibility around the globe than ever before.  They still have to provide intense education, however, about outsourcing, including the human resources part, because as seen today yet again, it's still very much a top-of-mind issue.  And with Finance being such a "close to heart" business process, it's even moreso at that.

"Finance Worldsourcing"...how's that?  It takes away the "out" part which may minimize part of the problem and emphasizes globalization.  Hmmm.  Something to think about as we enter the weekend...

Comments re: HP Acqusition of EDS

First off, please accept my apologies that you may have received yesterday's post SEVERAL times!  I haven't a clue what happened but hope that I've resolved the tech issue.  (Dang outsourcing!)  Please let me know if it happens ever again (and thanks to those who had!).

Just as a point of note, the "purpose" of this blog has evolved over the past few months since inception.  Interestingly (well, at least to me!), nearly every post I write spurs "comments", or feedback, delivered personally to my In-box versus directly to the site.  I also get many referrals from subscribers to their colleagues.  Very rarely do I stir online discussion as is the case with the very successful blog/discussion forum created by my analyst colleague and close friend Phil Fersht.  And there's good reason for this, which I understand, so I am grateful for the trust that has developed of me and FAO Research.

If you are not a current FAO Research subscriber or one of the very few industry insiders who truly knows me well, you may have been "shocked" with my candor from yesterday.  "Wow, what prompted such a harsh critique?" said one advisor I know on a friend level.  The one, though, that made me smile the most was this below, from a global offshore supplier (Europe BPO head): "Wow, Lisa.  That was straight from the heart. I have not read such strong worded commentary for years, on a merger news.  And above all everything based on facts.  I must compliment you for crafting such a powerful note." The value I strive to bring with this blog (and FAO Research reports) are perspectives crafted to advise based on educated guesstimates not ego, and also to educate/assist not to slaughter.

To close the loop on the HP-EDS situation, in less than 24 hours, I heard from more than 50 industry leaders who all concur with my estimations...and even from an HP senior exec (gulp!!!) calling the post "an interesting perspective."  I rarely post feedback from others, but am compelled to present you with some astute comments, with names excluded (and I thank them for their insights):

Sourcing Consultant (managing director of a well-known firm):  " Something you might want to point out, although not directly relevant to FAO, is that advisors and lawyers alike are licking their chops over the prospects of reopening and renegotiating every existing EDS outsourcing arrangement in consideration of the "change in control" provisions.  I would bet that many EDS customers have already received multiple calls from both advisors and counsel, and that other advisors and lawyers are now busy compiling lists of EDS' clients."

Direct Competitor to HP/EDS - Head of FAO:  "I am not at liberty to give you an official view (from my company), but suffice it to say, we have a strategy that we are happy with, and this actually doesn't impact the space we wish to occupy."

Another Direct Supplier Competitor, Globally - Head of FAO:  "I found the comments very interesting and thought provoking.  I also happen to agree.  This is in marked contrast to some other industry "watchers" who are not reading behind the facts and are not using intimate knowledge such as yours."

Yet Another - Head of its US Business Overall:  "I read this and agree 100% + !!  Very insightful...no one else has come out with this."

Europe-Headquartered Global Outsourcer:  "We agree by the way!  Little or no effect.  We don't see them going anywhere on F&A here in the UK or in Europe for that matter."

Partner at a Global Law Firm:  "Very interesting commentary and correct in my eyes of the effect of the merger - don't worry about F&A - just generally, I don't think size is everything, and, in fact, it could be a big pain for existing clients if there are large cultural / integration issues."

Consulting Firm's Lead Principal for Financial Advisory:  "Good insight. I concur."

Tier 2 Outsourcers:  1) "Great insight"; 2) "Thank you for the fresh perspective"; 3) "I loved the forthright way that you've penned down your thoughts.  Keep going...!"

Chairman of Offshore Advisory Firm:  "I like it...Grrrr!"

I appreciate your comments - public on the weblog or private to my In-box.  They help keep me grounded and provide insights that affect the services/products we plan to bring to market.  (And two people even gave me a grammar lesson yesterday for my improper usage (use?) of AFFECT versus EFFECT.)  I encourage you to test your own "hypotheses" and spark challenges on these topics with your colleagues.