Guy Kirkwood's BPO Backchat
29 jul 2005
Why am I not surprised? Siemens yet again demonstrates its inability to run a successful outsourcing business.
As Reuters so eloquently put it:
...service unit SBS widened its operating loss to a worse-than-expected 109 million euros as it struggled to make big outsourcing deals profitable and took restructuring charges... Unlike its competitors... IBM and Hewlett Packard in IT services, Siemens' Com and SBS units have not been through any radical restructuring... Many analysts say they simply have too many staff.
It is not that the business has too many staff, although that may well be the case. The real problem lies with the management. Siemens is a large, corporate manufacturing firm. The leaders have never and very possibly will never "get" outsourcing. Investment in the right people and a realisation that BPO requires waiting for profits for two, possibly three years, does not compute. If there is no real appetite for this then SBS is better off being sold to another organisation that does "get" it.
I predict that this will happen in the next two quarters.
27 jul 2005
July's BPO Notes is published by Management Today.
26 jul 2005
Here is some more on the Dixons/LogicaCMG outcome. Looks as if the CIO had outsourced to LogicaCMG when he was in his previous post at Britannia Airways. I find it hard to understand how they had got this far through the deal without having seen details of the (thick and onerous) contract! What were the advisors doing? Maybe the CIO Iain Andrew was trying to pull a fast one, too far in bed with Logica, but it MUST have had executive attention and sponsorship, you would have thought.
This, from an unnamed source and respected commentator on the market. So now you know all I know. Oh, and the advisors were Quantum Plus who trumpet previous success at... you've guessed it, Britannia.
22 jul 2005
What a mess! LogicaCMG has just been unceremoniously dumped by Dixons on a deal that Logica thought was in the bag. The deal to offshore of 250 technology staff to India has collapsed because, according to one person close to Dixons:
The contract was a foot and a half thick but clause after clause wasn't acceptable. By the time we'd struck out a dozen or so without getting very far into it, it was clear that the deal wasn't going to hold together.
It sounds as though the advisors - if there were any - produced a standard contract with no view as to how this would be perceived by the client. This smacks of arrogance or stupidity - I'm not sure which yet but be assured, I will find out.
21 jul 2005
Far from lowering salaries in the technology sector, outsourcing and specifically offshoring has caused remuneration levels to rise.
In the latest research from Foote Partners, the thing that drove this was increasing investment by companies and individuals in gaining new training and qualifications - and therefore increases in pay.
In the survey of 50,000 IT workers, pay for 89 non-certified and 87 certified technical skills grew 3.8 percent and 1.3 percent respectively in the first six months of 2005.
It's true that 18 months ago, many tech skills were subject to declines in pay. But companies have become more aware of the difficulties in doing offshoring successfully. They're once again investing in their own people to build and maintain systems critical to their business strategies.
I predicted this would happen over three years ago. Offshoring should be seem as an opportunity and not a threat. This research, although confined to technology, proves it. I look forward to the time - probably in the next 18 months, when we see the same thing happening to HR and finance departments. Of course, I believe that we will only see this behaviour in organisations that have outsourced. So, the message is clear if slightly counter-intuitive, lobby for outsourcing and see your salary increase!
16 jul 2005
Ed Frauenheim, reporting on a Wall Street Journal interview with IBM VP Bob Moffat has questioned the motivation of big blue to set up a "marketplace" for talent within the company on a global basis. Frauenheim believes that it is driven by a desire to offshore internally.
I think this is a fantastic idea and more trans-national corporations should take this as a lesson on how to maximise their investment in human capital. I will find out how the system works, the technology infrastructure required and speak to the individuals driving this through the business.
6 jul 2005
In a survey of 25 European banks by Boston Consulting Group, over two-thirds did not gain the full expected savings from their first outsourcing projects. Ralf Dreischmeier in the study reported that on average firms expected savings of 20 to 30 per cent and achieved 10 to 20 per cent.
What is the problem here? Is it that the suppliers are over-selling their capabilities or is it caused by resistance internally pushing out saving timescales? Of course, it is both. When will the market learn that to under promise and over deliver is a surefire way of killing the negative hype around outsourcing. If suppliers are achieving a 10 to 20 per cent saving for their clients and paying 17.5 per cent value added tax (if in the UK) and making a profit, I do not see this as bad news at all.
5 jul 2005
Alsbridge, a sourcing advisory firm, today announced the appointment of Chris Price as global head of the firm's new government and public sector practice.
I know Chris as an expert in shared services and BPO, particularly in public sector. Most recently, he has been leading a team working within the central government in the UK, assisting a number of departments to implement shared services and BPO as part of their drive to deliver the targets set by the high-profile Gershon review. This report has identified that the UK government could save over GBP20bn each year through greater efficiency through changes such as the implementation of shared services.
Given the rate of change required in order to hit the Gershon targets, I'm sure that Chris will be on 100 hour weeks for the next couple of years.
4 jul 2005
Proclaim Liberty Throughout All the Land Unto All the Inhabitants Thereof
This inscription, from the Province Bell, should act as a calling to the leaders of the G8 when they meet this week. A timely reminder on this day particularly - happy Independence Day to all US readers.
3 jul 2005
If outsourcing can be seen as a tool for the redistribution of wealth, particularly with regards to offshoring, the Make Poverty History movement is something that should be supported by all of us in the industry. Those of you who were at the Live8 concerts yesterday and all those who have signed their names to the movement, I urge you to persuade friends and family to do the same.
The three central themes of the movement are aid, debt and trade. There are many arguments about the efficacy of aid and writing off debt, but I believe that fair trade (and outsourcing's role in that) is the key to ensuring that third-world countries do not remain that way forever.