Guy Kirkwood's BPO Backchat
31 aug 2003
I have just finished this month's BPO
Notes. Better late than never.
29 aug 2003
What is wishful thinking? Well, according to Top-Consultant.com, the large consultancies are rushing out to hire people from agencies like theirs.
"It seems that larger order books are finally translating into higher utilisation rates and a renewed interest in recruitment."
Just because they say it, it doesn't make it so.
The major consulting firms still have utilisation levels way below what is required for any serious growth, add this to the lack of energy in the market (with the sole exception of public sector work), and I predict that all recruiters will have to wait a little longer yet before we see an upturn.
28 aug 2003
Forbes in an article about off-shoring looks at the strengths and weaknesses of various countries including Ireland, Canada (?), Russia, India and China. At the bottom of the piece they say they got the info from AT Kearney (the consulting arm of EDS, for those that don't know). However, to me the information is simplistic to the point of childishness. A typical quote is:
"Russia can claim the third largest population of engineers and scientists per capita. The bad news: Not many of them speak English."
Well, now there is a surprise. Remind me to think hard before retaining a consultancy who can produce insightful analysis like this.
27 aug 2003
In HRO Today's regular column Follow the Money, Randall Mehl writes on the "Rise of Recruitment Outsourcing." As part of a portfolio of offerings, outsourcing the recuitment function makes sense; vastly reduced costs for the client, strict SLA's keeping the supplier in check, reduced administrative burden and therefore very little downside. But, as a recruiter who lives and dies by the quality of the work he produces, I can say "pah, fiddle-faddle and tosh!"
How can a company that has grown over many years, fostered a culture that is unique (at least to it) and where the management need to see the whites of the eyes of their 'personal headhunter' - for that is surely how the market still operates - give all that up to a faceless, nameless group who do not understand the business imperatives?
Well folks, you had better start asking these questions, because recuitment outsourcing is coming whether we like it or not.
26 aug 2003
IBM Global Services is eyeing BPO and 'human capital solutions' in India. Asish Kumar, country executive based in New Delhi, said last Thursday:
"In India, our strategy is going to be services-led, primarily. With the rise in BPO call centres business in India, human capital solutions is assuming increasing significance and offers a major area of growth."
It seems that India is showing the way to the the US and Europe.
BPO providers in Europe have got to watch their backs, Big Blue is
finally moving.
22 aug 2003
According to Bloomberg, Philips, Europe's biggest consumer electronics maker, may close or sell as many as one third of its factories in coming years as it contracts out production to lower-cost manufacturers. CEO Gerard Kleisterlee said:
"The trend for reducing our manufacturing base will go on, mainly through outsourcing... That could mean, roughly speaking, we could go down by one third to 100 factories. There are no concrete plans or timeframe."
Since taking over in 2001, Kleisterlee has reduced the workforce
by a fifth, moved production off-shore and reduced spending to
revive profit after two straight years of record losses. Philips
reported net income of EUR42m in the second quarter, the first
profit in five quarters. The news that the outsourcing of
production will increase can only be good news for Philip's
shareholders. Now might be a good time to buy.
21 aug 2003
Bank of Ireland could be on a war-footing according to silicon.com. The source of the problem seems to be the USD600m HP deal. Job security is still the main issue worrying staff, especially in the light of poor financial results from HP this week. A spokesman said:
"There is a lot of unease about it among the ordinary members, especially those who have worked for the bank for a long-time and thought they had jobs for life. That is the achilles heel. If they don't accept the deal it will be total war with the bank."
The spokesman said it would be a difficult situation if members rejected the deal as it would probably mean an escalation of strike action against the bank that could "totally close it down". Let us hope that the situation is resolved, or this deal could be facing real problems before it has really started.
20 aug 2003
One group of companies that has been an active proponent of BPO for many years is the pharmaceutical market. The pharma companies outsource research, sales, manufacturing, in fact almost all of the business functions.
It is time for the BPO suppliers to wake up and learn the lessons provided by these companies when addressing their own targets. Not only are the pharma companies natural targets for outsourcing HR, finance or procurement, but as advocates for the outsourcing model, there can be few better examples.
I firmly believe as the pharma companies come under cost pressure for the first time, that more should be done to understand this unique market and capitalise on it's opportunties.
19 aug 2003
I have been extremely remiss with the blog over the past few days. But the reason is that there is a marked increase in activity. There are roles that need filling, all within the BPO space.
On another note an article in IT Director caught my eye. There is apparently a move to increase the outsourcing of information research - Antiphon was set up in 1995 to provide exactly this service - it is nice to know the market has only taken eight years to catch-on!
15 aug 2003
IBM has announced three Business Transformation Outsourcing (BTO) deals with UTC, Avnet and the US Department of Education. All three are procurement deals and all three are extisting clients of IBM.
Let us not under-emphasise this news, Kathy Hegmann, General Manager of IBM Global BTO is quoted as saying:
"This trend is indicative of customers working with IBM not just to transform and manage IT systems, but to help transform and manage core business processes in a more flexible, on demand manner."
This is exactly as I expected and although there is no movement in Europe yet, I guarantee that it will not be long before IBM become a real force in BPO.
14 Aug 2003
I have been in business development meetings for the first three days of this week. (Hence, the lack of blogs this week). I have met senior people at Xansa, Oracle, IBM and Xchanging and all are talking about hiring again.
My brother-in-law is a recruiter to recruiter, ie he headhunts headhunters. Over the past three weeks he has suddenly seen an increase in the number of people being required.
Both these events are extremely good indicators that the market is about to move up a gear.
11 Aug 2003
Bob Evans who is editor-in-chief at Information Week, wrote an excellent article in the UK's Computing newspaper, on offshore outsourcing. In it he says:
"Many people still believe it's nothing more than paying lower wages for lower-quality work.
No offence to those who believe this. But in today's extremely competitive business climate, that theory is preposterous.
The truth - as galling and bitter as it might be for many in this country to accept - is that companies are turning to offshore outsourcers because they can get better quality in shorter times at lower cost.
As economic, political and technological forces continue to shape a more truly global economy, such situations will become not the exception, but the norm.
9 Aug 2003
We are hopefully going to be working shortly with our fist Indian
outsourcing provider, so the following news is
good to hear. (Particularly as our potential new client will
certainly be on the shortlist):
Sprint is close to outsourcing work to an overseas information
technology company, the Kansas-based phone service provider is
evaluating bids from two such companies. But a final decision isn't
expected for another 60 days. Sprint has already relocated customer
service jobs overseas, but has yet to outsource IT positions
abroad.
8 Aug 2003
It does not need a genius to figure out that the Life and Pensions
insurance market is in a mess. One solution to the need for reduced
costs is to outsource all the administration for the policies of
schemes that have closed. The economies of outsourcing closed-book
admisitration are compelling with savings of between 30-40%
achievable. UK-based Liberata
and its competitors charge a fixed price per policy over the life
of the book. In general these deals are signed over ten years, but
with inertia and migration cost issues, they end up being
evergreen.
The business model relies on the outsourcer migrating the policies
off legacy systems on to a consistent platform. This vastly reduces
the fixed cost of running these books and generates profit for the
outsourcer.
The main competitors in this market are
Unisys, Capita, Liberata itself
and
Marlborough Stirling. But Liberata is the only one which has
perfected the migration of books from legacy to modern systems.
They have completed this 18 times and have gained in experience
with each one. As this is the pre-cursor to reducing costs, the
other competitors have been unsuccessful thus far in generating
real savings. (It has been reported, but unconfirmed, that Unisys
have still not completed the migration of the Abbey book some 30
months after signature. And Marlborough Stirling have recently
taken a GBP3m profit hit as a result of them being late with the
migration of the Canada Life deal).
As a result of this success Liberata, which is backed by BPO
specialist VC
General Atlantic Partners, has a backlog of some GBP3bn on
revenues of GBP180m.
The plan is for growth and the business has a realistic chance of
IPO in the medium term.
7 Aug 2003
On 21 July, I asked whether CSC was going to buy SchlumbergerSema's outsourcing business. In today's briefing by Jo Best at silicon.com, the answer now seems more likely to be "no."
"While it seems that Sema's UK and Scandinavian operations were a big draw for the outsourcing and consulting company, CSC couldn't afford to take on the loss-making French and German parts of the business."
With HP's success this year, they could perhaps afford to take
the pain of buying Sema's loss-making elements in order to get into
the lucrative government market in the UK.
6 Aug 2003
Gartner has
estimated that globally, the BPO market will grow from USD119bn in
2000 to USD234bn in 2005 at a 14.4% Compound Annual Growth Rate
(CAGR). The agency predicts that by the year 2005, the number of
outsourced business processes will be doubled.
With the globalization of business processes and the ubiquity of
IT, more and more business processes are getting standardized, and
hence in some areas, for example finance and accounting, up to 80%
of what can be outsourced could be moved to a BPO model over time.
In the absence of artificial restrictions, work flows to where it
can be done best and as the global marketplace is getting more and
more open every year the prospects for strategic location of
services is very positive.
India's growing community of BPO companies are currently enjoy
operating profit margins as high as 40% to 50%, but this will level
out to between 20% and 25% as the market matures, according to a
new report from US-based IDC and India's Associated Chambers of
Commerce and Industry (Assocham).
The study claimed that sales of BPO services from India are
projected to grow from USD709m in 2003 to about USD2.57bn in 2006,
at a CAGR of 52%. It also said that almost 90% of the BPO services
in India are currently being delivered through voice. But given the
rapidity of advancements in technologies like VoIP, the usage of
more cost-effective web-based channels will increase, and a number
of processes currently requiring human elements will be
automated.
The BPO suppliers in India do not find it as easy to generate
business in Europe as they do in the US. But, we saw this in the
early nineties at the start of the race for IT outsourcing. I
peredict it will not be long before the likes of Wipro, Tata, Daksh
and Infosys are as well-known as IBM, CSC or EDS.
5 Aug 2003
Just to prove there is humour in outsourcing... You have tried
shared service centres, you have consolidated and redefined your
back-office processes, you have fired all of the IT staff and
outsourced IT to CSC-EDS-IBM.inc, they outsourced it to India who
in turn off-shored to a small Chinese province. But wait, the
ultimate resource has just come on-stream. The world's IT
outsourcing companies might as well pack up and go home. Welcome to
the future ladies and gentlemen, welcome to Primate Programming Inc:
The Evolution of Java and .NET Training.
4 Aug 2003
As a member of and writer for, the Shared Service and BPO
Association (SBPOA),
this may be seen as a shameless plug. But, the SBPOA are hosting
one of the most innovative networking events I have ever seen.
Shared services executives are to challenge consultants and service
providers in a 36-hour event to thrash out ways of transforming
back offices into value-added service enterprises. If you are
thinking that BPO might be the solution to your back-office
problems, I urge you to attend, in Brussels on the 16-17 October.
3 Aug 2003
I found an interesting article on external collaboration by David Taylor. It was not specicifcally aimed at the outsourcing community, but its findings are easily transferrable. Taylor says that suppliers want the following (and in the order in which they appear):
- Endorsements from customers
- To be paid on time or, as an incentive, to be paid early if the work is completed early
- Clarity of role and purpose
- To be valued and involved in the decision-making process
And customers want, in this order:
- Freedom to fly by their own wings/skill transfer
- Trust, honesty and integrity
- Information and advice on the market out there
- Flexibility in service support/supply
I think Taylor is on to something here. If each side can answer
these points to their satisfaction. Then both comapnies are not
creating a 'deal' but a true 'partnership'. I wrote one of our
BPO
Notes at the start of the year asking if 'win-win' deals
are possible. I believe now, by using Taylor's eight questions, it
should always be possible to reach this point. More
importantly, if both sides cannot get to this point, perhaps they
should be asking themselves if it is worth doing at all.
2 Aug 2003
Fran Howarth is an analyst with Bloor Research. She wrote about one of our main clients, Xchanging in an extremely favourable piece for IT Director. Howarth said:
"...you can't improve what you can't measure - if business processes are to be outsourced, change management will be required and strict guidelines should be put into the outsourcing contract with regard to service delivery and performance levels."
This is something at which Xchanging are exceptional. Any number
of firms trying to get into the BPO space must learn from
Xchanging's experience or bad deals and a backlash against BPO are
sure to follow.
Howarth also mentions ULogistics a UK-based
supply-chain BPO firm. I will be looking at them this week.
1 Aug 2003
Firstly, I am archiving each month as it finishes to reduce page
size. July's logs can be found here or by using
the menu on the left. This does not mean that the information is
out-of-date; you should try and look at the logs if you haven't
seen them as there is still useful information contained therein.
:)
Next, I have registered with Chart of the Day providing stock
market information in tabular form, with some surprising results:
today's lesson - The US call this recovery?
