Guy Kirkwood's BPO Backchat
halloween 2003
It is appropriate for the halloween weekend I suppose, but when the
CEO of IBM says that the US has to buck-up in order to avoid
offshore related job losses, I just know we have entered the
twilight zone.
Sam Palmisano said the US needs to step up the pace of
innovation to help stem the flow of technology jobs overseas. He
expects 13m jobs to be created in the next two years around the
world, including in rapidly-developing countries such as China ,
India and South Korea.
"We are at a critical moment, because if we’re not careful, the US will fall out of step with the new realities of innovation. If that were to happen, the innovators and risk-takers would go elsewhere. Because today they can."
Someone please remind me, what is IBM trying to do in the BPO
space? Oh yes, move everything offshore.
30 oct 2003
Well, we knew it was coming. Price pressure is finally reaching the
pharmaceutical
industry. I can just see all of the service suppliers queuing up in
a USD30bn land grab. 2004 will be a big year, I can just feel
it.
25 oct 2003
You see what comes of being busy - no blog. Borderless Executive Search, (of
which I am a consultant), has just won a substantial piece of work
from one of the big 4. This is excellent news not only for us. With
Ovum Holway predicting only doom and gloom for the recruitment
market in this space, this firm is going to be doubling in size
over the next two years - sooner if it can manage. The majority of
this growth will be in the BPO and Shared Service space. This
vindicates what I have been saying over the past two years. So, if
you are interested, please get in touch.
22 oct 2003
Today's chart from Chart of
the Day compares S&P 500 earnings with the capacity
utilization rate. What does the chart show? Since 1970, changes in
the capacity utilization rate have correlated well with earnings.
Notice how capacity utilization has bottomed (and peaked) 6 to 15
months before earnings. It is also worth noting that, as of late,
earnings have been improving while capacity utilization has
declined to below 75%. There are some that have voiced concern over
the quality of earnings as a similar divergence occurred in
1999-2000. Another school of thought is that US companies that can,
are outsourcing to low cost countries (i.e. China), which is
driving up profits at the expense of US manufacturers. Stay
tuned...
20 oct 2003
I have been at a conference on shared services in Brussels. This
was run by the SBPOA. I
recommend that you visit the site and join the not-for-profit
association which already numbers over 5500 other BPO practitioners
- it is worth it.
I have also over the past few days been discussing other
outsourcing areas, you know, the ones that no-one else is looking
at at the moment; logisitics, real estate, etc.
I will be doing more in this area over the next week or so, but in
the meantime, I will whet your appetite with this quote from one of
the global leaders in third-party logistics, Brian Bolam.
third-party logistics (3PL) firms as a whole are failing to seize the initiative by embracing leading edge technology in order to differentiate themselves and move up their clients' value chains.Connectivity, Visibility and Flexibility should be their mantra. Much of the industry is in a downward margin spiral. The road to significant margin enhancement is paved with technology enablement.
We will look at the business model for 3PL and write a longer
article over the next four weeks.
15 oct 2003
Bob Pryor, Leader of Outsourcing Services for CGE&Y, North America, in a recent paper was reported as saying:
"The idea of a single offshore approach has received a great deal of attention, however, we believe that the concept of Rightshore(TM) (sic), which blends onshore, near-shore and far-shore delivery, at a committed price and service level, will produce maximum benefits for our clients."
Isn't this what most firms plan to do anyway? I'm sorry, but
"Rightshore(TM)" is just so much consulting bollocks. When
suppliers start delivering real results to clients, then they can
make up any silly name they like. Until then, consultese is exactly
what we don't need.
13 oct 2003
For anyone who knows me well, this day will go down as historic,
because - I agree with John Prescott - Wow, that was
difficult to type. (For international readers, I am talking about
the UK's normally extremely left-wing Deputy Prime Minister).
Why do I agree with "two Jags"? According to Computing,
he was quoted as saying:
"The trade unions here must show a sense of fairness towards India vis à vis winning outsourcing deals from some of Britain's biggest firms. The furore is unfair and India must be given a chance to develop its skills and markets."
The fact that UK Unions Amicus and Unifi are violently opposed
to outsourcing, and indirectly pay their Labour dues to Prescott,
this is bravery personified.
12 oct 2003
In a report published by McKinsey in August, entitled Offshoring:
is it a win-win game?, the firm paints a picture of health
for the US, as redeployed employees of US companies move on to
"better things" following their jobs being outsourced to India or
China.
Charles Stein, writing today in
The Boston Globe about the report says:
"History would seem to be on McKinsey's side. Other jobs, even whole industries, have gone overseas in the past. The production of televisions is one example. Yet over time the American economy expands and new jobs are created. In a recent essay, David Henderson, a researcher with the Hoover Institution, another think tank, put the matter simply. "The history of economic growth is the history of people making more with less and shifting into new jobs that were unheard of in the previous generation."
This may come as small comfort to the above mentioned
"redeployed", but I am convinced that the US, followed by Western
Europe, will benefit in the long-run from this trend.
11 oct 2003
Stephen Roach is chief economist with Morgan Stanley and he has written an excellent opinion piece on the US pre-occupation with blaming everyone but themselves for the increase in off-shoring.
"Tough economic times always produce scapegoats. Politicians and policy makers are invariably quick to point the finger elsewhere rather than face up to their own failings. Such is the human condition. America's jobless recovery is a case in point. The US body politic is now taking dead aim at China - making it the poster child for the latest outbreak of scapegoatism."
I recommend you read the whole piece.
In the pursuit of new business, I forgot to mention, I have written
a follow-up to my article in
March, looking at Mentoring. It can be found as the
Borderless Leader or as one of our series of BPO Notes.
10 oct 2003
The latest news from
Infosys, is that it has hired a staggering 2,025 employees for its
software operations and BPO subsidiary Progeon during the second
quarter between July and September 2003.
The business has seen net profits for the same period rise by 33%
and is planning a development centre in China. This is certainly a
company to watch carefully over the next few months. Particularly
as the majority of its business comes from the US and if there is a
major back-lash against off-shoring, they will surely be hit
hard.
9 oct 2003
More good news for Accenture courtesy of the
Washington Post. The firm has seen quarterly earnings
rise sharply as gains in outsourcing of 41% have offset sliding
profit margins.
Grab those surfboards people, it looks like the wave is coming, not
only for Accenture who are expecting a "robust" 2004,
but for the whole outsourcing and BPO market.
8 oct 2003
This item comes under the heading "Who wins?"
SchlumbergerSema have announced
that it has won a GBP64m NHS contract for a national electronic
booking system. All good news I am sure. But this is small change
in the huge bidding process currently underway for the GBP2.3bn IT
programme.
I do not know if AtosOrigin are involved with any of the consortia,
but as it has just bought Sema,
might it not be the case that the firm will sell this deal and the
people on to one of the future winners. This would be a nice little
earner for AtosOrigin, but I am not sure where it would leave the
poor NHS.
7 oct 2003
According to Gartner, in
outsourcing deals you need more staff, not less.
Ian Marriott, VP of IT Services and Sourcing at Gartner, said in a
statement:
"While there is a lot of focus on reduced headcount as a result of outsourcing, contrary to popular belief, enterprises must gain staff and add new skills to make outsourcing work."
This is both interesting and true. Where deals have gone wrong,
a lack of control or communication is usually cited as one of the
main causes. So, I repeat my mantra: "outsourcing should make a
business process more efficient and therefore cost less. Not the
other way round."
6 oct 2003
Sarah Arnott, writing in Computing, tots up how much the UK Labour government will have spent on outsourcing by the end of this parliament. It equals a not insubstantial GBP16bn. New projects include:
- The DEFRA infrastructure worth 85m a year for 10 years
- The NHS has a budget of GBP2.3bn over the next three years
- The GBP5bn Defence Information Infrastructure deal is due to be signed at the end of 2004
- The Inland Revenue's GBP4bn Aspire project comes into effect in July, superceding the NIRS2 national insurance contract and the existing infrastructure deal.
Arnott says that with so much more money now on the table, the
government must learn from previous project failures. Mmmm, we'll
see.
5 oct 2003
Synstar have released a study today
saying that half of European IT directors are in favour of
selective outsourcing. One may think that the firm has a vested
interest, but the study polled 700 people, so I think it is
probably fairly accurate.
We have already seen that where IT leads, other process leaders
will follow.
2 oct 2003
My Birthday.
1 oct 2003
Last month's blogs have not suddenly gone out of date, if you
missed any, they are worth reading. Also
check the (short) archive. The good news is that my
<sarcasm>fame</sarcasm> has resulted in more writing
assignments. I will be launching a regular column within
outsourcingleader.com called, rather egotistically, Guy Kirkwood's
BPO Backchat. I will give more details on this later in the
month.
1 oct 2003
Last month's blogs have not suddenly gone out of date, if you missed any, they are worth reading. Also check the archive.