Guy Kirkwood's BPO Backchat
29 jun 2005
Mike Corbett has set up the International Association of Outsourcing Professionals (IAOP). I went to the inaugural meeting of the London "Chapter" hosted by Simmons & Simmons and was rather disappointed.
The theory of setting up an organisation to promote professional standards and subsequently accreditation is a good one. My concern is that the IAOP is too closely aligned to Corbett's business in the US and that the barriers to entry will be too low. As Groucho Marx said: "I don't want to belong to any club that would have me as a member".
If David Barrett of Simmons & Simmons, the chair of the London chapter, can assuage me of my concerns, then I might consider joining, but my current thinking is... no.
24 jun 2005
In the latest (US-centric) world figures from HRO Today, the HRO market has been through some dramatic changes in the the past 12 months.
Last year's list of [the top] 23 became this years 21. All the incumbents got bigger, mostly by acquisition. And the newcomers CGI, Adecco, and Manpower are huge companies in their own right. The Tier 1 large-account game is becoming the Land of the Big. And the mid-market players are not doing too badly either.
The article predicts more M&A activity and I would agree. But what I see happening is a convergence between HR and finance and procurement. I'll be speaking about this at an event organised by MercerHR and Management Today in London on 7 July. (Entry is free if you would like to attend and email me your contact details).
23 jun 2005
"The Sun says" is the voice of Britain. This UK tabloid newspaper is regularly credited with making or breaking political lives. When the Murdoch-owned newspaper comments in its editorial, politicians and business leaders have to take note. Not only in the UK, but as Prime Minister Blair prepares to take on the presidency of the European Union, throughout Europe too.
Worrying news then when an undercover reporter manages to procure personal banking details from an Indian call-centre employee promotes this response:
The world’s financial authorities should be shaking in their shoes this morning. The scandal The Sun has uncovered in India has frightening repercussions for anyone who lends money — not to mention anyone who has a bank account or owns a credit card.
The ease with which our reporter was able to buy the confidential financial details of 1,000 people at £3 a time is staggering. Crooked computer experts at Indian call centres have created a lucrative market in sensitive information. It enables criminals to clone genuine credit cards to buy expensive goods over the internet or to delve into people’s bank accounts and steal their money. That is bad enough. But our man was told he could also buy passport details, medical records and mobile phone numbers.
What havoc could a terrorist group cause with information like that at their fingertips? British firms have invested millions in Indian call centres, which provide good service at a low cost. But they will want guarantees from the Indian government that the full rigour of the law will be used against the crooks.
This opinion piece is not actually negative about offshoring, nor Indian companies in general. We should be grateful about this, but as I said yesterday, too many of these "scandals" will not do any of us any good. In that way I agree with the editor of The Sun, proper policing and adaptive legal protection is needed, and it is needed now.
22 jun 2005
Offshoring fraud! reads the headline.
The arrest last week of a man in western India in an alleged offshoring fraud case went unreported. This was despite the high-profile reporting on the case in April when 16 others were arrested.
This has suited India's BPO companies, especially Mphasis, whose four employees have been implicated in the case. Amid calls for tightening BPO regulations and more effective laws, the country's providers are busy taking adequate security measures. Another one or two such cases and the industry is doomed according to the BBC.
One case does not make an entire industry suspect, political pressure and union backlash aside, the case for offshoring has been made. We in the industry need to ensure that negative publicity does as little damage as possible.
20 jun 2005
In a new set of reports, the McKinsey Global Institute, a research group known for its unabashedly favorable view of globalization, argued that 160 million service jobs - about 10 percent of total worldwide employment - could be moved to remote sites because these job functions don't require customer contact, local knowledge or complex interactions with the rest of a business.
Yet after surveying dozens of companies in eight sectors, from pharmaceutical companies to insurers, it concluded that only a small fraction of these jobs would actually be sent away.
The report estimates that by 2008, multinational companies in the entire developed world will have located only 4.1 million service jobs in low-wage countries, up from about 1.5 million in 2003. The figure is equivalent to only 1 percent of the total number of service jobs in developed countries.
This insight comes from a New York Times article by Eduardo Porter. Again, it is worth reading in full.
19 jun 2005
Is KPMG to become the next Arthur Andersen? Almost certainly not. But the smallest of the large accounting firms is under attack in Washington for "problematic" tax shelters that cost the US tax man hundreds of millions of dollars in lost revenues in the late 1990s.
Hard hats all round, I think.
18 jun 2005
Having previously reported that consultancies are doing more business than ever in the outsourcing space, the corollory is that in terms of outsourcing deals (as opposed to consulting on outsourcing), is actually falling for the six major (big) outsourcing suppliers.+
In an article for the Consulting Times, Mick James discusses the change in the shape of the market in a cojent and efficient way. It is worth reading in full.
+Some clarification needed here as to which are now the big six - Accenture, ACS, CSC, EDS, HP and IBM.
13 jun 2005
Is outsourcing going to drive the M&A market? The value of announced M&A deals - which rose in the US more than 40 per cent last year, to USD825 billion - is likely to break the USD1 trillion mark this year. This is at a time when the US stock market rose by only 10 per cent in the same period.
I believe that outsourcing could drive this in two ways: first, by the continued convergence in outsourcing and consulting as evidenced by the figures we discussed last Thursday, more and more BPO firms will get acquired by their bigger brethren. Second, those corporate organisations that outsource, become (generally) more successful, in that the firms tend to be leaner, cleaner and better to manage. This makes them attractive in their own right to approaches to merge or for outright acquisition.
9 jun 2005
How important is the outsourcing market to consulting firms? Well, according to the latest figures from the Management Consultancies Association, the answer is amazing. 38 per cent of of total revenue is now related to outsourcing.
The figures speak for themselves.
8 jun 2005
Clients are increasingly dissatisfied with offshore service providers, prematurely terminating contracts and struggling to harvest the full value of their outsourcing relationships - even as many of those same companies plan to increase their level of outsourcing over the next 12 months, according to new research by DiamondCluster.
83% of respondents went against what was expected when they said that the key benefit of offshoring was not cost but "the re-allocation of internal resources to more critical functions".
This is in and of itself interesting, but country expertise is not covered by this report. Sure, DiamondCluster mentions an increase in work to China, but I see a future where the back-office functions split three ways: CRM and direct contact with the internal customer needs to be onshore. For trans-national companies the language intensive processes need to be near-shored (in the EU accession states, perhaps), and the purely transactional, turn-the-handle stuff can be done for lowest cost (and least pain) in India, China or Indonesia.
Division of Labour is the key. Do what you're best at and do it a lot. That is the only way you can drive down cost and drive up shareholder value.
6 jun 2005
It's nice to have been picked up after my comments yesterday.
5 jun 2005
Does outsourcing work? This was the question posed to the "CIO Jury" by silicon.com. The responses from the likes of Tony Johnson of Virgin and Steve Richie of Investcorp were cogent and interesting, but the response of Hugo Smith from Sporting Index got it completely correct in my opinion. He said a "strategic sourcing" mix of in-house and outsourcing always works best.
Until suppliers realise that outsourcing may not be the first and only solution to a client company's back-office problems, mistakes will continue to be made. These mistakes are costly to the supplier, potentially disastrous to the client and damaging to the entire industry.
My recommendation is to discuss the costs and benefits of insourcing, shared services and outsourcing with an independent third party, one that has no vested interest in providing a fixed answer; and proceed from there. To my knowledge, there are currently only two such groups operating in this way in Europe, one is a not-for-profit networking organisation, the other is in effective start-up phase.
The answers are out there, you have to know whom to ask.
4 jun 2005
It was not in the French or the Netherlanders' long-term national interest to say "non" or "nee" but the people have spoken. We must now ensure that politicians in Bruxelles, Den Haag and Paris are not tempted by Socrates who said, "When the debate is lost, slander becomes the tool of the loser."
Frankly I'm not that confident.
3 jun 2005
Ben Verwaayen the redoubtable CEO of BT certainly has his finger on the pulse.
Globalisation is a good thing, a very good thing and I would like to remind everyone for a long time the West did a lot of talking about how aid should transfer into trade. Now it's happening and we say 'oh my god, it's not what we intended'. It's not the outsourcing of a call centre to India, that's the next step in drive to productivity. It's the next step in a global world where people will compete individually.