Guy Kirkwood's BPO Backchat
30 sep 2003
Chief Financial Officers of US companies are optimistic about the
economy and their own companies' prospects. They expect the
recovery to become more robust, and they predict increases in
corporate revenues, earnings, capital spending, employment and
inventory. This outlook is more upbeat than it has been for over a
year.
According to the September CFO
Outlook Survey, conducted by Financial Executives International
(FEI) and Duke University's Fuqua School of Business, three out of
four CFOs (74%) are more optimistic about the economy this quarter
than they were the prior quarter and only 8% are less optimistic.
This is the highest level of optimism recorded in more than a
year.
At bloody last!
29 sep 2003
Earlier this month, I discussed the advantage
of using an HRO firm that owns its own software, as almost half the
cost of implementing an HR outsourcing programme is normally taken
up with updating the HR systems.
I was not surprised therefore to learn
that Accenture and SAP have today signed a deal to partner all HRO
business in the financial services space.
Accenture will become SAP's largest development partner in
financial services, and the two companies plan to assign
approximately 800 people - to be based in the US, Spain and Germany
- to a combined development effort.
Accenture and SAP will also work together to integrate their
respective software solutions on to SAP NetWeaver to "drive
down implementation costs and accelerate return on investment for
their clients." Hmmm, does this mean they're currently too
expensive? I wonder if their current clients should ask for a
refund?
27 sep 2003
I like silicon.com. I like it because Andy McCue understands the
outsourcing and BPO markets as evidenced by
this report on the outsourcing potential in the banking market.
I also like it because of Peter Cochrane, who can always
be relied on to brighten my day with his Uncommon Sense
column.
26 sep 2003
The US insurance market is obviously gearing-up for outsourcing and off-shoring on a massive scale, if a report from ICICI Onesource is to be believed. The report says that the market will grow by as much as 20% in Q4 alone:
"...as companies continue to address shrinking margins by outsourcing cost centres like customer contact centres and domain-specific functions like trade reconciliation to lower-cost areas overseas."
In related news, AT Kearney recently estimated that US financial
services firms will off-shore 8% of the total workforce,
representing more than 500,000 jobs, over the next five years. This
process is expected to reduce annual operating costs by more than
USD30bn.
If either or both of these figures are even close to being true,
the future for the global outsourcing market looks extremely
rosy.
24 sep 2003
CGEY, GeorgiaTech and FedEx have just released the results of their
annual report on third-party logistics (3PL).
So, AtosOrigin have bought Sema. As I
According to the study, involving 400 logistics and supply chain
executives from all over the world, more than three-quarters of
North American and Western European (78% and 79% respectively) and
more than half (58%) of Asia-Pacific respondents indicate they use
3PL services. In addition, operating performance, cost management
and service delivery are the three biggest ongoing concerns to 3PL
customers in each of the key regions studied.
Later today, I am speaking to Brian Bolam, CEO of Columbus
Logistics Corp, (and an old friend of mine). He is an acknowledged
expert on the global logistics market. I will ask him for his views
on the market, it's potential and it's impact on BPO and
procurement outsourcing. This will probably become a full article.
Stay tuned.
23 sep 2003
Sema's main problem, certainly in the UK, is a lack of strong
management, if AtosOrigin can inject some verve into the staid
culture that is Sema, then there is a chance. But the history of
the Origin purchase does not fill me with hope.
22 sep 2003
Accenture has
announced revenues, for the period ending 31 Aug 2003, of
USD11.82bn, an increase of 2% compared to last year. Although this
may not sound that great, the breakdown make interesting
reading.
Just under half of the total revenues (USD3.57bn) are now coming
from outsourcing. The consulting business has dropped by 10%,
whilst outsourcing has increased by 37% year-on-year. This is
fantastic news for the whole outsourcing industry. Provided that
the margins are reasonable, we should be in for a bumper year
starting in 2004.
21 sep 2003
Something for the weekend sir? This
test has no relevance to outsourcing, except that it would be
interesting for senior management of our friendly outsourcing
suppliers to take it.
I was amazed at my result. I had always assumed, as a former
President of the Conservative Association at university, that I
would be to the right of Attila the Hun. But my result was a
(-1.38, -2.46) which makes me a slightly left-wing libertarian.
Much more "bazaar" than "cathedral." (If you understand the
allusion, great. If not, read
this).
20 sep 2003
Today's lesson is "When things get scary, blame the
foreigners."
I sat open-mouthed reading a report
from the San Francisco Chronicle. I know things in silicon
land are not going well, and Henry Kissinger (no less), has been
quoted as saying that the US needs "to develop incentives to
prevent increasing outsourcing of economic activity from the US to
other countries."Cole Gunther, who wrote the article follows
up with this:
"Wisely, Kissinger was addressing the big picture of our survival as a nation. What could be more dangerous than continuing to outsource the manufacturing of critical defence technology offshore?... [there is] the massive danger posed by foreign and domestic access to our infrastructures by workers with loyalties to other countries. Offshore outsourcing means that more and more computers in Bangalore, Beijing, Riyadh, or elsewhere will be connected to American infrastructures through corporate networks and the Internet."
He didn't include Kabul, Baghdad and the Gaza Strip in his list,
but you get the idea. My suggestion is that Mr Gunther should
immediately get a job with Microsoft's most aggressive marketing
department. He is quite clearly an expert at Fear, Uncertainty and
Doubt.
19 sep 2003
I have finished the latest Borderless Leader column and it should
be up tomorrow. (It will also be reproduced as September's BPO
Note, as a follow-up to the Note and survey in
March).
But today, as a special treat(?), take a look at the new site. It
is not live, and still needs a lot of work, but it will give you
some idea about how comprehensive it is going to be.
18 sep 2003
I have been corresponding with a lady who is anti-outsourcing. She
is based in the US and has seen several of her friends lose their
jobs to off-shoring firms, particularly in India.
Following this exchange, there is news today
that a conference instructing companies on off-shoring has been
picketed by a group of about 50 labour organisers and out-of-work
technologists.
The one-hour demonstration was organised by a chapter of the
Communications Workers of America (CWA) union. Picketers held signs
that read: "Stop Off Shoring!" and elicited honks of support from
drivers passing by.
As I said to my correspondent, the evangelical nature of anything
new, faster, better and cheaper than existing alternatives will
always illicit a negative response from those who are
affected, this is where the expression "Luddite" comes from.
Although "Luddite" has many negative connotations today. We in the
outsourcing industry, advisors, analysts, suppliers and clients
have to take note that thoughtless bragging is not going to help
our cause, far from it. We need to educate the unions, labour
market and workers, if we cannot do that, I think we really have to
question our motives.
17 sep 2003
I have mentioned Chart of
the Day before. Today's provides a crumb of comfort for all...
hopefully.
The chart, which presents the ECRI leading index, suggests that
there is hope. The index is a composite of seven indicators chosen
for their ability to signal both the beginning and the end of
economic recessions. Over the past five decades, a downturn in the
index of leading economic indicators has preceded the beginning of
a recession by about 10 months; an upturn in the index has preceded
the end of a recession by an average of two months. Where do we
stand now? The index has recently moved up strongly which suggests
that better days lie ahead. Stay tuned...
16 sep 2003
I have the "do not disturb" sign up. I am following-up from the
article on mentoring which
came out in March of this year. Through the SBPOA, we carried out a survey
and the results are illuminating. (available from all good
bookshops, and this blog, over the next few days).
While I am in the writing mood, I am also producing some copy for a
new site, outsourcingleader.com, don't look for it, it doesn't
exist yet, but this blog will become a daily column.
We are also launching a European version of HRO Today in November. Whew,
all will hopefully become clear over the next few days.
15 sep 2003
As reports came in last week that IBM BCS has been awarded a
USD400m HRO deal by Procter & Gamble, we must reflect that the
HRO market, at last, is here.
The sterling work done by Exult (although now sadly depleted in
Europe), has paved the way for HRO and as I predicted in early
2002, the 'big' boys are now ready to play.
It is now only a matter of time before the pure-play BPO firms get
bought by the likes of CSC, IBM, Deloittes, etc. For those firms
that have IPO'd already (Exult et al), the senior management teams
will be cashing out over the next year. For those that missed the
March 2002 bubble-bursting, they still have work to do, but a
trade-sale is almost as good... to use and old Army expression,
"watch and shoot."
13 sep 2003
I think it is worth summing up the last few days. I have been in
the UK meeting six of the major existing (or wannabe) BPO players.
(no names, no pack-drill). All have found 2003 difficult and all,
with one exception, expect to do better next year. There are deals
in the pipeline and they are going to start recruiting again in
January and February 2004.
How much does it cost to implement an HR outsourcing programme?
Well, of course it depends on how large the business is, how many
people would TUPE to the supplier, and so on and so on. (In fact a
specialist in HRO recently told me that the tasks covered by HR run
to 14 closely typed pages). Most companies have no idea what the
base-line is for HR and that can cause major problems in comparing
the pricing information from the supplier community.
To sum up from the headhunters point -of-view, good business
development, but no business... yet.
8 sep 2003
One of the biggest costs generally, is the migration of the HR
systems to something that was written in the last thirty years.
(You will not be astounded to hear that many companies have no HR
system at all). So, the recent
5 sep 2003
As news that Royal & Sun
Alliance is to reduce its UK head count by 1000 as it steps up
its cost-cutting drive, the company also posted a 17% rise in first
half profits and launched a GBP960m cash call.
The generally parlous state of the insurance market makes it an
ideal target for the outsourcing community. My prediction is that,
as with the IT outsourcing insurance specialists who where bought
up by the global 'big boys,' (ie Continuum bought by CSC) in the
early nineties, so the BPO leaders of today, like Xchanging must
expect to be approached in exactly the same way.
Now is the time to generate as many new insurance-based deals as
possible, to increase revenue and concomitant valuations. If the
leading BPO firms can IPO all well and good, but I think they will
not get the chance.
3 sep 2003
Do analysts get paid to question perceived wisdom? Certainly, one
can increase ones column inches by saying "hell, is the new place
to be", or "heaven is over hyped." This came to mind with the
heavily copied
report just released by Forrester. Apparently "BPO is over
hyped" by vendors, and the boys and girls at Forrester see a
"fragmentation of the market."
You will note that they still say BPO is a good thing which can
save money, but what is their conclusion? "Vendors will
differentiate based on their analytics tools." Now I do not mean to
be skeptical, but what is it that Forrester sell? Oh yes, analytics
tools.
2 sep 2003
What is IM? Well it is Instant Messaging, ("instant spamming" if you use Microsoft Messenger - do not get me started), but in the context of outsourcing, it is Institutional Memory. Charlie Demerjian, writing for The Inquirer, says that IM is a casualty of outsourcing. His argument is cogently presented and persuasive:
"When the next round of tech support bidding comes around, and Sitel looses out to Convergys, all those jobs get flushed down the toilet, and a new crop comes in. This new crop has no IM. They don't know that the IBM HDDs from two years ago have a congenital defect, or that when the XR-2 series of motherboards make a humming noise, things are about to get ugly in a hurry."
It is not often that I actively recommend articles that argue
against the use of outsourcing, but (the odd typo
excepted), Demerjin is absolutely spot-on. As outsourcing
suppliers, we do not need to do anything about what he says... yet,
but we have to think about it now or we will suffer in the
long run.
1 sep 2003
Today is the start of Q3 for most people. This is the time most
commentators predicted that the long-awaited upturn in the market
would start to be felt. I get the feeling that as people come back
from the holiday period, there will be a marked increase in
activity. We will know by the end of this month whether
2003 will be a year of "making do," as I suspected at its start, or
whether we will see the start of a real growth period. - I know
which I would prefer.
Two things else: one, as usual last months blogs have not suddenly
gone out of date, if you missed any, they are worth reading.
Secondly in the preparation of a proposal, I wrote an introduction
piece on HR outsourcing. You can find this in antiphon's
BPO
Notes series.
Here is to the next quarter, may it not be like the last
three!