Guy Kirkwood's BPO Backchat
29 nov 2005
Our UK client at PwC will be delighted with news from the UK government that nuclear energy is back on the agenda. Of course, we knew this was going to happen eighteen months ago, but that's the problem with "the politics of the now"... no vision for the future.
As the US slowly wakes up to the idea that Katrina et. al. may be the result of global warming, clean (non fossil) fuel is going to become more important. (Allbeit, that the oil companies used to lobby the US government, but don't need to anymore as they are the government).
Energy and not communications is now the limiting factor for third world development. The outsourcing and offshoring community must recognize that it is up to us to ensure that clean, cheap and limitless energy is important for us, important for our communities and important for all development.
Here endeth the sermon.
27 nov 2005
Club class offshoring - If Bangalore to just too, too common darling, let's relo to Dubai.
The city-state, part of the United Arab Emirates, has kicked off an effort to land some of the outsourcing work that is heading to countries with low labour costs like India and China. But instead of trying to compete head-to-head against those giants, the country is positioning itself as a place where companies can place their more senior or more qualified employees who may not want to live in Bangalore or Mumbai.
Give me strength!
26 nov 2005
Calling all IT outsourcing sales people in the Nordics, Switzerland and Russia - I need to talk to you. Contact me for further details.
24 nov 2005
Is deal size important? Not according to the IDC.
...reveals fundamental changes in the outsourcing marketplace, including a dramatic shift to more business process outsourcing (BPO), an increase in the number of players, and a reduction in total deal value. These developments reflect increased competition and expansion in the marketplace, and create pressure for traditional outsourcers to alter their business models in order to successfully compete in the coming years.
Thanks to Mark Wiggins for the pointer
22 nov 2005
What is it with the big IT outsourcing firms? It seems that several of them have completely lost their way (Siemens is almost never out of the news and for all the wrong reasons). Now, it appears that Computer Sciences Corporation (CSC) is following the route to doom.
Reported by Reuters:
Computer Sciences shares dropped 12 percent on Monday following reports that a group of potential buyers abandoned talks to acquire the computer services company.
The stock had gained 20 percent in one month on reports that defense contractor Lockheed Martin and three private equity firms were in talks to buy the company, whose biggest client is the U.S. federal government. Those reports cited people familiar with the matter.
Yesterday, two securities firms--Legg Mason and Wachovia--cut their ratings on CSC, saying the stock's recent gain was attributable to the talk of the company's sale and not its earnings prospects.
CSC insisted on USD65 a share as a starting point for negotiations, but its suitors had not made a binding commitment to that price, according to the Wall Street Journal, which first reported Saturday that the talks had broken down - That figure was a 20 percent premium over CSC's closing price on Friday.
With EDS in a mess, Siemens withdrawing from the market and now CSC floundering; IBM and Accenture must be rubbing their hands with glee.
21 nov 2005
Does outsourcing spell the end for manufacturing onshore? Madsen Pirie of the Adam Smith Institute thinks not...
The other day I was interested to be invited to reception in the House of Commons held by the Manufacturing Institute, which has a campaign to 'dispel the myths' about their sector. Can UK manufacturing compete with China or India? Not if we're talking plain white T-shirts, admits the Institute. But manufacturing isn’t dead. It can compete by developing products that improve on the low-tech components made in low-wage regions, or by creating products so advanced that the intellectual property is inherent to the production procedure itself.
An example of the first is Dyson, the vacuum-cleaner company, outsourcing its production to Thailand, allowing the high-value-added processes such as R&D and design to stay in the UK. And even the textile industry in the UK has evolved from the mass production of basic products to the manufacture of high-tech, high-performance fabrics serving important but niche uses such as in medicine and defence. At Congleton in Cheshire, for example, is probably the largest car airbag manufacturing plant in the world.
The press might tell you that, after Rover, the UK car industry is dead, but my Manufacturing Institute hosts scoffed at that. There is plenty of volume car making in the UK – albeit most under foreign ownership. But niche marques, like the new Bentley GTC (made in Crewe) shows how first-class creative design can create a better product – and better production – that allows the UK to make a world-beating product.
Of course, intellectual property is probably the hardest kind of property to defend. Build a better mousetrap, and soon others will be copying it. Which means that the UK can only succeed by having a highly flexible labour market that enables it to move nimbly, and a low-tax economy that encourages people to be inventive. It's a lesson that EU regulators and governments would do well to learn.
19 nov 2005
A new report from the UK's National Audit Office, says the welfare system is now so large and so complicated that nearly GBP3bn is lost through fraud and mistakes. They're right. Britain sends about 600m benefit cheques a month to 30m people – that's half the population. There are dozens of different benefits and scores of forms. The Income Support claim form is 45 pages long, with an extra 19 pages of instructions and supplementary forms, totaling 602 multiple-choice questions and one "essay" question. You would need a Harvard PhD to get through it without mistakes.
But not only are claimants confused. So are the civil-servants who run the system. The NAO says that staff mistakes cost about GBP1.5bn a year – roughly GBP50 on each taxpayer's bill. The complexity of the system also encourages – and conceals – fraud. While unemployment compensation only lasts six months, for example, Incapacity Benefit goes on indefinitely: so many people cheat to get it, costing taxpayers GBP67m last year. And things are getting worse. Politicians love adding and tweaking benefits, but never remove them. Chancellor Gordon Brown has invented 30 variants of Tax Credit (and the rules for 25 of them are changing again this year).
A few years ago the NAO calculated that 10% of Housing Support – designed to pay the rent of poorer people – was lost to fraud. That is why the government is now testing a simpler, flat-rate version. Why not do the same with all benefits?
I believe that the time has come with the changes wrought by the Gershon Review and the subsequent simplification to government departments to have a complete rethink on both tax and benefits.
17 nov 2005
For vnunet.com, James Bennett who is editor of the august Management Consultancy magazine, looked at the outsourcing market in terms of the hokey cokey:
This just goes to show how divided businesses are, and how strategies will continue to change even faster in the future. Despite a slight dip in contract values, outsourcing is growing at a healthy rate. But on top of their original investment, companies now want added value, as well as a blend of onshore, offshore, nearshore, outsourced and insourced work – depending on what suits them best. As a result, firms have to react positively to meet their clients needs.
Securing outsourcing contracts is tough, but if you’re prepared to go in, out, in, out and do the client hokey cokey, then that’s what it’s all about.
15 nov 2005
EquaTerra and TPI today announced they signed an agreement to merge the two companies. In response to increasing demand for strategic, cross-enterprise outsourcing and shared services advice, the combined firm will provide expert advisory services across all geographies, all industries and all business support functions including human resources, finance & accounting, procurement, technology and customer relationship management (CRM). Together, the new firm will have approximately 550 employees in the Americas, Europe, and Asia-Pacific. The merger is expected to close in January 2006.
The new firm provides the expertise, scale and global delivery capabilities to improve the business support functions of its clients. With deep functional expertise and industry knowledge, unique market analytics and research capabilities, the new company is positioned to create value for its clients through increased efficiency, improvements in service quality, and sustained reductions in operating costs.
As Jay Whitehead so eloquently put it, "Equaterra/TPI is now the biggest dog on the porch".
14 nov 2005
I'm in Brussels until Wednesday for Europe's largest conference (ever) on HRO.
The socialists (remember them?) support outsourcing.
The level of output is close to capacity which limits supply and can lead to more price increases of goods. Globalisation has tended to keep inflation low with cheap immigrant labour, cheap imports and outsourcing jobs to low-wage economies.
Or did I read that incorrectly?
11 nov 2005
Today, the US Commerce Department reported that the trade deficit widened to a record USD66.11 billion. Today's chart of the day helps explain why. For one, despite the fact that China removed the 8.28 yuan to the dollar peg back in July, the change was not all that significant (see bottom chart) and the US-China trade imbalance has soared to a record USD20.1 billion. It is also interesting to note that since September 2003, the trade imbalance with OPEC has followed a similar path to that with China. This provides some evidence that China's rapid economic build-up has impacted global demand for oil and with it oil prices. While there are many other factors that are impacting the US trade imbalance (i.e. NAFTA, Hurricane Katrina, Boeing strike, etc.), China's currency manipulation along with the subsequent increased demand for oil explain a significant portion of that USD66.11 billion trade deficit.
10 nov 2005
The latest analysis has come out from Everest (which is rapidly building a European presence) and it's quite astute:
Last year Hewitt jump-started the acquisition trend by buying Exult. The trend continued this year. Mellon sold its HR business to ACS. EDS formed a joint venture with Towers Perrin to form an HR unit called ExcellerateHRO. And CSC purchased Aon Consulting Inc. "It's about acquiring capabilities," says Jim Konieczny, HR Outsourcing Global Operations Leader for Hewitt. "Suppliers are searching for people with skill sets they need to build out their business." In addition, acquisitions come with "some built-in market share."
Suppliers come from two distinct gene pools, Janssen points out. BPO's gene pool has process and domain expertise, and EDS' and IBM's have the global outsourcing gene pool and global presence. "Today the traits from both of them are required to be a winning combination," says the Everest executive.
6 nov 2005
This from Business Week:
Two years after President Hu Jintao and Premier Wen Jiabao placed urgent priority on developing China's hinterlands, and five years after the Develop the West policy was launched by their predecessors, China's bureaucrats have unleashed a charm offensive to persuade more companies to move inland.
Anxious about a rising tide of industrial and farmer protests in central and western China, Beijing is giving top billing to narrowing the yawning income gap between rich coastal cities and the rest of the country. Billions of dollars have been spent on bridges, expressways, and power plants to boost the economies of inland China. Now provincial delegations increasingly are trekking to Beijing, Shanghai, and Guangzhou to trumpet their edge over the coast.
No wonder Indian outsourcers are worried.
4 nov 2005
Busy time developing business to lead up to the new year.
This from a "friend"...
British retailer Sainsbury’s has announced the termination of its 10 year, GBP 1.8 billion IT outsourcing deal with Accenture. The company is expected to bring the operations back in its fold in the next 6 to 12 months. The decision to bring the IT department in-house is part of the "Make Sainsbury’s Great Again" initiative by the company. The move will also result in a number of Accenture IT employees joining Sainsbury. The retailer will treat all termination and transition costs as an exceptional item in the year ending March 2006. Accenture does not expect any material impact on its result for fiscal year 2006.
It's a good job Accenture HR Services has just won Unilever - a huge deal.