Guy Kirkwood's BPO Backchat
30 mar 2005
The latest research from Chart of the Day indicates that inflation-adjusted S&P 500 earnings have accelerated since the end of 2002 and are now at a level that is very near the highs of 2000. I believe that part of this is due to the cost-consciousness of corporate America and the subsequent increase in outsourcing and offshoring. If this is true, then the argument about the ability of outsourcing to generate shareholder value will have been emphatically answered.
29 mar 2005
I want to talk about where things are going. I mean smart-, right-, near-, on- and off-...
In Copenhagen, the F&A brigade, rather sensibly in my opinion, concluded that it really doesn't matter where the accounting and finance functions take place; the critical factors are around customer interaction, service, control and cost.
It certainly makes sense to use local assets to work on the most complex issues in the country where they have most experience (on). Transnational organisations (rather than just international... there is a difference), which need extensive language skills should probably use the central and eastern European centres for this (near). The actual grunt work, the back office transactional stuff, can be carried out in China, India or Indonesia (off).
I predict that a combination of all location solutions will become the norm over the next 24 months. Further, I think that within five years, no-one will care where each function is transacted.
27 mar 2005
We are all affected by the US Federal Reserve. We may not like being dictated to by a small coterie of American "economists", but in the world of Pax-Americana, we have no choice.
It was therefore a joy to read a translation of the latest utterances from Greenspan and friends this week. Here is a typical example:
We may need to hike the rate by half-points at two or three meetings. Yeah, we see the irony, too: The healthier the economy looks, the quicker we want to beat it down with a hammer.
Outsourcers and practitioners around the world, please take note.
24 mar 2005
Wow, busy time = no blog.
I have just returned and found a good briefing on BPO by Danny Bradbury. In this article he illustrates the "you are the weakest link, goodbye" fears of people as soon as they hear the work "outsourcing".
Given that business processes are often wide-ranging activities spanning lots of different departments, including IT, HR and finance, simply ripping them out of the organisation without forethought can create more problems than it solves.
I think this is an intelligent and measured piece from which points should be incorporated into suppliers' literature... For, if you can explain what you are going to do before selling it, you may actually do a better job.
15 mar 2005
An article by Sylvia Carr, writing about the next potential phase of outsourcing customers coming from the SME market, prompted this response from me.
I'm in Copenhagen at the SPBOA's F&A BPO Conference until Thursday - reports on Friday.
14 mar 2005
The "Man from the Pru", in this case John Betteridge, director of investments at Prudential told the Financial Times that his firm would not outsource asset management to third party providers, and said investors should focus on asset class selection rather than manager selection:
At Prudential, we have not taken outsourcing very far at all. The company currently uses external managers for Latin American equities and hedge funds, but has mandated M&G, Prudential’s in-house asset manager, to look after GBP97.6bn of its GBP100bn of assets. In certain parts of the industry, such as unit-linked life, the IFA community has an excessive concentration on seeing lots of different managers on platforms.
I believe that the homogeneity of platform and use of third party suppliers doesn't necessarily lead to in increase in risk, provided that the management of the firm that outsourced is not lazy and responds to the market rather than "what the system" says.
11 mar 2005
Sweden, Finland and Denmark, in particular, consistently outrank some of the larger European economies in terms of the number of U.S. patents registered per million population, a frequently used indicator of a nation's innovation record.
Are we seeing the rise of the Nordic countries as the nearshore option of choice? Yes, according to the World Economic Forum.
10 mar 2005
The thing I like about Nelson Hall is that it has a no-speculation, no-bullshit approach to outsourcing market analysis. So when the firm reports that the outsourcing market as a whole actually fell by 2% for the period 2003-4, we'd better sit up and take notice.
Of course, the good thing for readers of this blog is that BPO now accounts for 25.5% of the total, up from 17.7% for 2002-3.
9 mar 2005
India is not always the best place to generate profits. That is according to the latest research from McKinsey.
The performance of the multinationals that have tried to exploit this [offshoring] opportunity has been decidedly mixed. Many of those notable for their strong performance elsewhere have yet to achieve significant market positions (or even average industry profitability) in India, despite a significant investment of time and capital in its industries. Why? Perhaps because the market entry strategies that have worked so well for these companies elsewhere - bringing in tried and tested products and business models from other countries, leveraging capabilities and skills from core markets, and forming joint ventures to tap into local expertise and share start-up costs - are less successful in India.
6 mar 2005
Following a Gartner report on the added cost of outsourcing customer service operations, and Andy McCue's take on it writing for CNet, I posted this reply.
5 mar 2005
Some time ago I talked about how the Indian BPO firms needed European presence to "legitimise" themselves with European companies - at least in the eyes of most risk-averse European CFOs. Therefore, news today that Wipro opened a new development center in Munich, Germany - it's third after Kiel and Dusseldorf - is good news indeed. It's also not surprising when the firm has seen a 50% increase in Europe and when Europe now accounts for 30% of global turnover.
The Munich office, which will recruit locally, will increase Wipro's exposure still further and I think we will see another surge in business in the second half of this year.
3 mar 2005
With the BBC charter being renewed yesterday for another ten years, it was good news all round.
One of the BBC's foremost presenters, Liz Barclay addressed the Offshore Customer Management conference and talked about how fears of a media, consumer, employee or shareholder backlash were holding some firms back from the benefits of offshoring. Ms Barclay said that honest and timely communications can win their support. She gave advice on how to secure a fair hearing from a media that's hungry for information and insight and to anticipate employee opposition and deal with it head on. She said that the key was to have a watertight argument for moving offshore that took into account the best interests of all parties - before doing it.
Sensible advice indeed.
2 mar 2005
I was asked yesterday about whether outsourcing is ethical and I couldn't adequately answer, so I'm going to do some research... bear with me.
There is also an interesting piece by Gaurav Bhagowati on why Indian suppliers are now looking at second tier cities in their search for labour arbitrage. Labour pools and infrastructure in India's outsourcing hubs are under increasing pressure, causing suppliers to look at alternatives. These cities have the talent pool and fewer infrastructural challenges, two benefits that could sway supplier sourcing strategies in the future.
I predict that by the middle of 2006, any labour arbitrage benefits of offshoring to India will have been so reduced that the disruption of moving work there will be considered to have marginal benefits at best. We live in a cyclical world. We have already seen an increase in "captive" operations, (which I think are frankly a waste of time); is this the beginning of the end of India's BPO adventure?
1 mar 2005
More incredulity about the pending EDS, MOD deal.