Guy Kirkwood's BPO Backchat
31 jan 2005
If Andy Green, head of BT Global Services, is to be believed, BT is looking for an acquisition worth "hundreds of millions of dollars" to bolster its services. Although the group is determined to build a services and outsourcing business to rival that of IBM, Green insisted BT had no plans to make his division a separate entity.
A de-merger is absolutely not on the cards. My philosophy is that (building Global Services) is an integrated process. The central reason for Global Services... is to drive sales of broadband and IP networking services across the group".
So, all you BPO firms focused on the telco market should polish and preen for a visit from Green.
29 jan 2005
Is EDS going to buy Towers Perrin? And will Steve Bohannon be growing the European HRO business? As the firm announced the formation of the new company, the details don't seem to add up.
The company is 85% owned by EDS and will incorporate: Towers Perrin's administration solutions business, providing benefits administration capability and EDS' existing payroll and HR outsourcing business.
The price EDS paid - USD420m to Towers Perrin. Is Towers Perrin really so desperate for the money, particularly when it is providing half the revenue for 15% of the equity?
I really ought to do some more digging on this - something does not seem right.
25 jan 2005
The Butler Group prides itself on providing "analysis without compromise". Well, these experts have taken over a week to report on the TPI research discussed here and concludes it's report:
BUTLER GROUP OPINION - The big providers need to watch their backs; none of these organizations can afford to rest on their laurels.
Hardly inspires confidence, does it?
24 jan 2005
As reported by the BBC, India and China have begun their first "strategic dialogue" in the latest sign of improving relations.
Despite closer ties, India and China have still not resolved some of their long-standing border disputes. However, analysts say these differences have been played down as China and India have developed a blossoming economic relationship.
I believe this is a prelude to a huge expansion in offshoring for both countries. Watch this space...
22 jan 2005
Wipro has reported a 60% rise in profit, exceeding market expectations. Net income in the last quarter was RUP4.3bn (USD98m), against RUP2.7bn for last year.
Wipro said demand was strong, allowing it to increase the prices it charged. Q3 sales rose 34% to RUP20.9bn.
On the downside, Wipro is concerned about staff turnover; particularly in the BPO operation. At one stage it was 90%. Not surprisingly vice-chairman Vivek Paul said, "We have to get that under control".
20 jan 2005
Ed Frauenheim writing for CNet News, has been investigating the use of "reverse outsourcing", where Indian offshore firms are now using European and US companies to supply some of their services. He used the examples of IBM and Hyperion providing services to Bharti and Tata respectively.
I think Frauenheim is missing the point.
In my opinion, this has nothing to do with jobs and everything to do with power. As I discussed a couple of days ago, the largest IT service companies are losing market position. These tie-ups are surely preparation for control and acquisition, particularly in the IBM/Bharti case. IBM has already acquired Daksh from General Atlantic Partners last year. If India retains its position of "offshorer to the world", it will not be long before the likes of CSC, Perot, ACS and HP get in on the act.
19 jan 2005
The SBPOA today announced it has established a new US office and is adding new services and training courses to its online and offline portfolio of offerings for both members and non-members. Andrew Kris, chairman of the SBPOA said:
Despite the recent trend in consolidation of industry research firms, such as Gartner/META, Forrester/Giga and Monitor Group/Yankee; the SBPOA is committed to remaining an independent body serving the global shared services and BPO communities. We believe this is the method by which we can deliver the most value and objective expertise to those with an interest in these business transformation alternatives, and is the reason we are expanding our portfolio of offerings and physical locations in the US and Germany.
18 jan 2005
News that IBM has won a "flexible" outsourcing deal in view of yesterday's Backchat's revelation that the "big six" are losing market position, prompted this response.
17 jan 2005
What I predicted on 14 May 2004 has been proven correct. In a Financial Times article published over the weekend, Nicholas Timmins, Public Policy Editor wrote:
The big jump [in BPO] has come in Germany, where outsourcing accounted last year for 12.5 per cent of the global market against less than one per cent four years ago. The UK's share is also rising fast - up from 12.8 per cent in 2002 to just under 20 per cent last year.
Interestingly, the traditional IT service providers - IBM, CSC, EDS, Accenture, ACS and HP - saw their collective market share drop by 38 per cent in just one year, down from 71 per cent of large contracts to just 44 per cent.
14 jan 2005
I was told the day before yesterday that in India, "brown is the new black." Well, this seems to be coming true. A large number of Indian BPO firms which are setting up operations in Asia Pacific, Europe and the US to serve the needs of clients there, according to a study by Assocham.
The report, which will be released tomorrow, says the BPO opportunity in Europe is estimated to be worth USD64bn by the end of 2005 and is expected to grow at the rate of 15 per cent per annum. Further, the BPO demand in Europe will remain concentrated in the UK at the estimated level of USD20bn.
13 jan 2005
Sandeep Roychowdhury at Capco has just written an opinion piece on the "captive" verses supplier debate which exactly reflects my own. I will make it the subject of January's BPO Notes.
12 jan 2005
There have been a number of new readers to the blog - welcome all. I thought therefore it might be time for the Guy Kirkwood KISS guide to relationships... just think of me as that small American marriage/sex counselor.
When outsourcing, an open and happy partnership with good communication sounds like an impossible dream. But there are certain steps you can take that will help you build this kind of relationship.
Firstly, be sure the relationship has a sound base. Is the company financially stable? (EDS please leave the room). Does the outsourcing provider have a strong focus on the process you are looking to outsource? (Accenture HR Services for HR - not F&A). Make sure that your potential partner is fully capable of meeting your needs. Ask it for names of some of its customers and some of the figures for the client operations.
Is the company accessible? Offshore makes sense for some functions, but near-shore has advantages, too. With near-shore operations, you can travel to participate in training, attend meetings or look into the company's due diligence right on site. Changes in contract, auditing processes and quality control procedures can be accomplished on-site. This isn't easily accomplished at offshore facilities.
Evaluating a provider's customer service attitude is an important part of the process. Rapid increases in business and availability to quick response from your customer service representative are essential. Can it provide the necessary staff and infrastructure to meet these real business situations?
As with any relationship, you must clearly understand what each side brings to the table and ensure that it's a match. How will the partnership work, and what are the fees, turnaround times, quality control parameters and security protections?
Write a contract with all specifications included. Verbal contracts will mean nothing when you are left answering angry customer inquiries due to unmet expectations. Think of it as a business prenuptial agreement that's even more essential, because the relationship isn't based on love and trust; it's a business alliance that makes sense for different reasons to the two parties.
Be sure you're getting what you want and when you need it. If both sides are clear from the start, the honeymoon period can extend into a secure, long-term relationship. You should walk into the relationship knowing what KPIs you will receive, as well as what services will be provided, the time frame and your obligations.
(ps - this piece was partly lifted from an IDG article I read and noted last year relating to the ITO market. But I can't find it now and can't remember who wrote it.. but hey, thanks anyway).
10 jan 2005
"The British economy gained GBP16bn in 2004 because of offshoring and more British companies will outsource work to India for skills that are in short supply in UK," Digby Jones, the director general of the CBI, has told newspapers in New Delhi today.
"For cheap manufacturing, British companies go to China while for high-end manufacturing and services, India should be their destination," he said.
"If in 21st century the relationship between India and UK can mean anything, it is ICT," Jones said.
According to the Financial Express, 480 Indian companies have invested in the UK and about 350 of them have been IT companies. India-UK trade in 2003 stood at GBP6bn.
9 jan 2005
A sign of things to come? This is from Halifax Financial Services:
When tracking the long-term (ten year) performance of individual stocks, outsourcing specialist Capita Group has recorded the strongest capital return for investors (1906 per cent).
7 jan 2005
As the "big four, three, two, one..." consultants get their acts together with regards BPO advisory work, Nanette Byrnes for Business Week writes:
For lawyers and accountants, the Sarbanes-Oxley Act continues to be a boon. Its requirements for sharper audits, better-informed board members, and tighter internal financial controls all play to professionals' strengths.
The whole article is worth reading for an insightful look forward. The consultants are definitely in the ascendency again.
6 jan 2005
Ed Frauenheim, writing for News.com, has reported that the Indian government is to build a broadband net to facilitate home working solutions for the offshoring firms.
To complete the picture, I left a little missive myself.
5 jan 2005
Peter Bendor-Samuel, the CEO of Everest Group has made his predictions for the outsourcing market for this year. BPO up; offshoring up; "captives" and "cannibalisation" increasing. There is nothing new or revelatory about this. Anyone with half a brain could have made these deductions.
As usual, what I aim to provide this year is a little more "bite" in reviewing who is doing what to whom, why and why it matters. For instance - will EDS survive? Will Perot be able to build on its success with the NHS across Europe? Will General Atlantic Partners sell all of its remaining holdings in BPO firms?
I will be critical, questioning and when necessary, rude... but then you wouldn't want it any other way!
4 jan 2005
Remember the urge to merge? Quelled since 2000, it's coming back. In the last quarter of 2004, deals for U.S. companies came at a trillion-dollar-a-year pace - and more are in store. Companies are looking to mergers again to cut costs, boost efficiency, and extend their reach. Although mergers dropped off starting in 2001 - a victim of recession, corporate scandals, and a sluggish stock market - the animal spirits have returned.
Although Newsweek does not specifically mention the BPO and outsourcing industry, I think 2005 will see more M&A activity in these markets than almost any other. This is good news as it keeps outsourcing at the forefront of the public (and corporate) mind.
3 jan 2005
Happy New Year. Let me wish all (three or four) readers a healthy and productive 2005. The future of outsourcing has never looked rosier; let's make the most of it.
On a more sober note, if you haven't already done so, please donate some money to the various tsunami appeals. A little really can go a long way. EUR75 will provide enough materiel for a house. Think about it as you munch through another turkey sandwich.