Tag: delivery models

80/20 Stands on Its Head in the Services Industry | Sherpas in Blue Shirts

May 18, 2015

The mantra of 80/20 (80 percent offshore, 20 percent onshore) has been the war cry for the services industry for the last 10 years. It has stood for the absolute sweet spot for a services player, particularly in terms of maximum leverage of offshore talent. This has been the most profitable space. Providers that approached this sweet spot have been the fastest growing and most profitable players.

It has been a thing of beauty and a joy forever … well, not really forever. Things change.

What we’re seeing in a segment of the industry is that customers now ask for 80/20 in the opposite way – 80 percent onshore and 20 percent offshore. They’re not asking for their entire delivery platform to do this. But in discrete segments they are looking for a much more intimate onshore model – more industry domain knowledge, more company knowledge and the provider’s teams stood up next to their teams or intermingled with their teams where they can drive to functionality very fast. They also want less churn.

To be clear, it’s not happening everywhere. But the desire to move to this alternative 80/20 model is happening in some of the fastest-growing and most lucrative segments of the industry. For instance, we see this model approaching in digital. We hear customers voice this aspiration in healthcare. And we talk with many large, sophisticated clients that express the desire to change the model.

They’re not looking to lose labor arbitrage completely, but they want to turn the 80/20 model on its head. And they are willing to give up some of the cost benefits of the old factory model for the speed, intimacy, and agility of the new model.

Photo credit: Flickr

Lessons from IBM | Sherpas in Blue Shirts

May 11, 2015

Have you noticed how few service providers have the ability maintain a market leader role when the market changes to favor new technologies, or new service models? It’s very difficult to make this shift, and I’ve seen very few companies achieve the shift – let alone do it three times. Just one. Wow!

If we look back at the service provider landscape in the early 1990s in the classic outsourcing space, the leaders in the service industry were Accenture, CSC, EDS, IBM, and Perot.

Then the growth opportunities shifted to the labor arbitrage model in the late 1990s and early 2000s. Suddenly the group of leaders changed to Accenture, Cognizant, IBM, Infosys, and Wipro.

Now as we move away from those classic leaders and shift to the new models (SaaS, BPaaS, platforms, and consumption-based), there are three leaders: ADP, IBM, and Salesforce.

Lessons from IBM

Looking back at the market leaders over the years, some have disappeared, as the figure above illustrates. EDS is now owned by HP, Perot is owned by Dell, and ACS is owned by Xerox. What stands out in the graph is that only one company has been able to consistently shift when the market shifts – IBM.

How have they managed to do this? Here are some lessons we can learn from Big Blue.

  1. Be willing to divest. IBM has been absolutely ruthless and relentless in forcing itself to divest businesses that constrain the firm and prevent them from successfully moving into the markets.
  2. I blogged about the noise in social media earlier this year about IBM’s potential layoffs and explained it was a reskilling issue. I think this is yet another example of the firm having the discipline to take the medicine and do the things that allow it to succeed and maintain a leadership position.
  3. Buy, don’t build. IBM’s approach to entering new markets is often through acquisitions. The firm is quite willing to learn from others and leverage an existing business. IBM recognizes that business models are different, and it’s very difficult to build a new business model inside of the old one. Therefore, they buy new companies.
  4. Protect new businesses. After acquiring a company, IBM protects that business. They incubate them and allow them to grow. In the last two years, IBM launched two new divisions: analytics (Watson) and cloud. The firm pulls those businesses out of the rest of the company and connects the R&D to Big Blue’s customers in a tight loop. It also protects these businesses from IBM’s mainstream businesses, which would tend to prey on them and inhibit their progress.

These four strategies have enabled IBM to maintain market leadership despite market shifts. They stand out as lessons for other firms seeking to stay relevant and stay in leadership positions in the market.

Photo credit: Flickr

Hybrid Sourcing: A Win-Win Scenario for GICs and Service Providers | Sherpas in Blue Shirts

April 20, 2015

The Global in-house Center (GIC) model continues to grow across industries, functions, and emerging markets ‒ from the financial services and technology industries to most verticals, from call center and R&D to a diverse set of functions, and from India to most emerging markets.

As the model continues to grow, with GICs evolving from low-cost service delivery centers to strategic entities driving value beyond cost savings, they face strategic and operational challenges: demand fluctuation management, talent management, driving further optimization through adoption of industry best practices, and knowledge management, to name just a few.

Third-party service providers can come into play here, helping GICs overcome these challenges by providing:

  • Additional cost savings through economies of scale and delivery pyramid optimization
  • The flexibility to ramp-up and ramp-down the capacity based on demand
  • Expertise in tools/technology and best practices on processes/control mechanisms
  • Large global footprint and language capabilities to serve for all regional centers across geographies
  • Niche skills such as digital and analytics

In this hybrid sourcing model, the GICs use service providers and/or manage their delivery on behalf of the parent organization. This also includes situations in which the GIC is driving or supporting sourcing initiatives (e.g., service provider selection or contracting) on behalf of the parent organization.

Everest Group, in collaboration with the Shared Services and Outsourcing Network (SSON) and NASSCOM, recently conducted a survey on hybrid sourcing adoption trends in offshore GICs. Eighty percent of the respondent GICs have adopted hybrid sourcing, leveraging service providers predominantly to manage volume fluctuations, lower costs, and access best practices. As the graphic below shows, most (80%) responded that hybrid sourcing is meeting or exceeding their expectations.

 

Our research shows that service delivery improvements and governance enhancements are the top priorities for the GICs. Therefore, it is not surprising that GICs collaborate with service providers across three key associated areas – supporting service provider delivery, supporting/implementing the parents’ service provider sourcing program, and identifying global sourcing opportunities and designing the sourcing model strategy. As GICs evolve in their operating models, they are likely to look for more opportunities to work with service providers in these priority areas to enhance the overall impact.

Areas of GIC-Service Provider Collaboration

Going forward, it is safe to assume that there are multiple opportunities for service providers to work with the GICs. However, further adoption of hybrid sourcing in GICs will be driven by their ability to influence the mandate from the parent organization, and service providers’ ability to assess the opportunities. Understanding GIC maturity will also be a critical factor driving these collaboration opportunities.

Everest Group has recently released a report on adoption of hybrid sourcing that provides a detailed landscape of current adoption and future trends for this model. For more information, please download a preview of the report, “Adoption of Hybrid Sourcing in GICs – Driving Impact through GIC-Service Provider Collaboration.”

GICs Are Here to Stay! Getting Bigger, Better, and Brighter | Sherpas in Blue Shirts

April 14, 2015

Do you remember back in 2009 when questions were raised on the sustainability of the Global In-house Center (GIC) model? The GIC market was shaken up with multiple divestures, giving rise to speculation that the model was dying. Since then, confidence in the construct has been a little precarious, even though the number of divestitures has remained low (except for in 2012.)

But here are some recent facts that will quell those concerns:

GIC facts

Now, after recognizing that the shared services model is flourishing, let’s look at key developments that occurred in the GIC space in 2014:

  • Business Process Services (BPS) continued to witness growth due to increased demand for Customer Relationship Management (CRM), Finance and Accounting (F&A), and Human Resource (HR) services

GIC Annual Report 2015 I3

  • Activity in the Manufacturing, Distribution, and Retail (MDR) vertical picked up considerably, especially in the retail sub-vertical, as companies set-up GICs for IT services delivery
  • Several locations made their mark on the location radar for the first time for specific industries. For instance, Romania and Ghana emerged as new GIC regions for BFSI firms, Croatia for healthcare companies, and the UAE for the hospitality sector
  • Share of GIC activity by U.S.-based firms declined, as most of the large companies are already adopters of the model; moreover, other geographies are increasingly embracing the GIC model.

While the model continued to see considerable momentum in 2014, the overall market is gradually shifting toward getting better and becoming more relevant for their adopters. Changes that have surfaced and are expected to shape the future course of the industry include:

  • GICs are no longer seen as only a support unit or cost-saving mechanism for the parent entity; rather, they are becoming a partner in their companies’ growth journey
  • Due to the increased value that the GICs are adding, or are capable of adding, buyers are willing to invest more for the additional advantages they can reap from the model
  • Cost arbitrage is not the only factor for GIC location selection. Talent scalability and sustainability, and linguistic and cultural affinity, are also playing a critical role in the decision making process
  • Realizing the value of diversification and the concentration risk involved in the mature markets of India and Philippines, companies are increasingly leveraging locations in other geographies such as Central and Eastern Europe, Latin America, the Middle East, and Africa. Ericsson, Intel, Johnson & Johnson, and Robert Bosch are among the firms that have spread their wings in the last few years to explore delivery locations in countries including Ghana, Mexico, Romania, Ireland, and Vietnam. Still, India remains the top location for GIC set-ups, with 28 centers established in 2014
  • Several delivery locations are also becoming attractive for their domestic market opportunities. Thus, some organizations are leveraging offshore centers for dual purposes; for their GIC operations and to tap into the local market
  • In addition to the pure GIC model, hybrid sourcing constructs, such as virtual GICs, that require a partnership between the buyer and the service provider to deliver services, are being considered.

For those of you who may have been questioning the health of the GIC model, it’s clearly vibrantly alive and kicking. The data speaks!

For more insights on the GIC model landscape, please refer to our recently released report “Global In-house Center (GIC) Landscape Annual Report 2015.” The report provides a deep-dive into the GIC market and an analysis of the GIC trends in 2014, comparing them with the trends in last two years. The research also delivers key insights into the GIC market across locations, verticals, and functions. It concludes with an assessment of the hybrid sourcing constructs.

The Tantalizing Crowdsourcing Model | Sherpas in Blue Shirts

March 13, 2015

Crowdsourcing is a tantalizing business model. It leverages access to free or very cheap labor through technology platforms or through social media. We see examples of it, and we sense intuitively that they have broader application. So why does it seem to be just out of reach for most services firms? Why do service providers struggle when trying to apply this model to their business?

There are several highly successful, intriguing examples of crowdsourcing.

  • Uber’s technology platform allows individuals to collaborate and coordinate to provide a transportation service that is different from traditional taxi and limo services.
  • Trip Advisor’s platform relies on individuals reporting and rating their travel experiences. The result is a superb way to better understand the kind of service you’re likely to get at a bed and breakfast, hotel or restaurant.
  • IT Central Station puts crowdsourcing to work providing user reviews of software.
  • Urban Spoon provides crowdsourced restaurant reviews from diners and critics.

Wikipedia is also a great example of the power of crowdsourcing. The success of these and other businesses tantalizes us with the model. But it’s a radically different model and it’s frustrating to try to apply a crowdsourcing capability to most businesses. Here are some of the issues that make it difficult to develop this kind of business:

  • It requires different philosophies about sourcing information such as reliability of the information and using information from multiple sources rather than a high-quality, expert single source. Crowdsourcing businesses rely on people who are motivated to share information that helps others or makes them appear to be an expert.
  • It requires scale advantages before it’s useful.
  • It often necessitates change in security as well as intellectual property rights.

Resolving these issues is really hard to do under the constraints of an existing organization.

Most, if not all, crowdsourcing businesses evolved without being inside an existing organization and thus having to navigate the concerns and insecurities of the existing organization. They were built from the ground up, which allowed them to resolve or iterate through these issues and come up with a complete working model that was then usable.

To avoid the tantalizing call of revenue from crowdsourced platforms, we need to study crowdsourcing‘s successes and learn how to duplicate them in our normal services businesses.

Photo credit: Flickr

When Is Impact Sourcing the Right Fit with Your Global Sourcing Strategy? | Sherpas in Blue Shirts

October 7, 2014

This is the final blog in a series of three on the topic of impact sourcing. In the first one, I covered the fundamentals of the model and in the second, the value proposition and business case.  Now, I’ll share insights on the nature of work it is best suited for and the activities the model can potentially deliver.

Work suited for impact sourcing

Given that the targeted talent for impact sourcing are individuals with disadvantaged backgrounds, their skills levels are typically suited for specific types of BPO activities as given below.

  • Transactional, repeatable, and high volume: Typically includes non-voice support for back-office work and voice-based work on a selective basis when business needs align with talent capabilities
  • Bespoke work, not amenable to “industrialization”: Typically requiring human intervention to handle case-to-case customization or work that cannot be fully automated
  • Work that is generally suitable to offshoring: Typically includes work with no regulatory or legal restrictions on offshoring or in situations where cost savings and efficiencies are key objectives

Having said the above, impact sourcing employees have demonstrated a wide-range of aptitude from basic data entry to complex data processing. For example, Pangea3 used impact sourcing to deliver complex contract abstraction services; Deloitte in South Africa is using impact sourcing to deliver accounting services and is considering hiring impact workers in its other offices across Africa.

Is impact sourcing actionable?

So, what does this mean for companies considering impact sourcing for BPO work? Are there tangible examples of work where companies use impact sourcing in a meaningful manner? The answer is an unequivocal yes! To illustrate impact sourcing in action, consider the example of a typical optical character recognition (OCR) image validation process given in the box below. The blue text represents activities that fit with impact sourcing and may be completed by impact workers.

A typical OCR image validation process
  • Documents prepared for scanning
  • OCR software process converts document to TIFF, JPEG, PDF image. Software reads text block by block and translates into machine language
  • Agents validate translation by software
  • Agents index data or text to enable content based retrieval
  • Quality control by supervisor/manager
  • QA releases to database or document management system

 

There are many more such processes where impact sourcing can be an attractive fit for delivery of BPO services. Some of these are given in the table below.

Sales & marketing
  • Sales data capture and validation
  • Telemarketing
  • Content conversion, editing, and tagging
  • Document digitization (e.g., customer forms digitization)
Supply chain management
  • Data entry (e.g., order entry, package tracking)
  • Document digitization and archiving (e.g., claims forms)
Finance & accounting
  • OCR image validation
  • Invoice data entry
  • Indexing invoices
  • Paper invoice digitization and archiving
Industry specific operations
  • E-commerce support (e.g., transcription, translation, content tagging, basic online research)
  • Debt collections
  • Location tagging
Customer service
  • Domestic voice support in vernacular languages
  • L1 technical helpdesk
Human resource
  • Document scanning and indexing (e.g., employee expense claim forms)
  • Data entry in HR information systems

 

The notable point is that there are companies already using impact sourcing to deliver many of the services mentioned above. For example, RuralShores is delivering invoice processing, mortgage document digitization, customer care, logistics management services using impact sourcing. Accenture uses impact sourcing to deliver not only basic F&A processes but also more complex HR, PO, F&A functions. These are also echoed in the examples from Aegis, Infosys, and Quatrro. We also saw earlier how Deloitte and Pangea3 are using impact sourcing for complex work. These examples substantiate that impact sourcing is actionable and a viable alternative to traditional BPO.

Conclusion

In conclusion, in this series of three blogs, I discussed how impact sourcing is an established phenomenon that offers access to previously untapped talent pool, lower attrition and the ability to achieve corporate social responsibility and diversity objectives as compared to traditional BPO. There are many large, global companies that have acknowledged the benefits of impact sourcing and have adopted it in their business process service delivery. It is a win-win business service delivery model with optimized enhancements and creates tangible positive impact on people that extends to communities as well.

Everest Group, supported by The Rockefeller Foundation, conducted an in-depth assessment on impact sourcing (IS) as a business process service delivery construct. The study presents a detailed, fact-based business case for IS that substantiates the benefits of the IS model for Business Process Outsourcing (BPO). Additionally, it sizes the current IS market for BPO work, profiles the landscape, details the business case, and shares experiences of companies through case studies and testimonials. The report focuses on Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, India, and the Philippines.

The Rockefeller Foundation aims to catalyze the IS sector in Africa through its Digital Jobs Africa Initiative. The Foundation’s role is to ensure positive social and economic impact on 1 million people by supporting high potential but disadvantaged youth to work in the dynamic outsourcing sector in Africa, benefitting them, their families and communities. The Foundation recognizes that the most sustainable and scalable path to achieving this impact is because of the tangible business value impact sourcing provides. Impact sourcing enables companies to purposefully participate in building an inclusive global economy, gaining business efficiencies while changing people’s lives.

Visit our impact sourcing page for more information.

Be sure to join our webinar, The Business Case for Impact Sourcing on today at 9 a.m. CT / 10 a.m. ET / 3 p.m. BST / 7:30 p.m. IST. Register now.

Photo credit: The Rockefeller Foundation

The Business Case for Impact Sourcing | Sherpas in Blue Shirts

September 26, 2014

This blog is the second in a series of three on impact sourcing. In my first blog, I gave an introduction to impact sourcing in terms of what it is, its constituents, and why it matters. Now I’ll focus on its value proposition and business case.

Impact sourcing value proposition

The graphic below provides a snapshot of impact sourcing value proposition, which is based on five key elements, i.e., low cost, reliable delivery, access to alternate talent, stable workforce, and social benefits.

IS value prop

Low cost

Impact sourcing offers significant cost arbitrage over source locations for offshore BPO. At 70%+, this arbitrage is comparable than the arbitrage offered by traditional offshoring. In fact, as compared to traditional sourcing, impact sourcing offers savings across both “in-house employment” and “outsourcing” models. For example, in South Africa, people costs for impact workers are 8-10% lower than traditional workers when averaged over a three year period for in-house employment. In India, impact sourcing offers 35-40% savings as compared to traditional BPO in an outsourced model.

The drivers for these additional savings over traditional sourcing models vary by location. For example, in South Africa, lower costs are driven by lower attrition and some differences in salaries. In India, the savings are primarily driven by lower people cost and facilities cost in tier-3/rural location for IS operations as compared to tier-1 locations for traditional sourcing. To get a better understanding of cost for impact sourcing across different locations, check-out the detailed report.

Proven and reliable delivery

Our research shows that the performance achieved from impact sourcing is comparable to traditional BPOs with a robust track record of meeting client SLAs/KPIs and expectations. There are multiple examples as illustrated in the case studies of Teleperformance, Accenture, RuralShores, and SureHire. Even in cases where the performance of impact workers is not tracked, there is strong endorsement of performance being comparable to traditional workers.

Furthermore, companies have successfully mitigated the concerns (e.g., lack of talent, data security, and infrastructure) linked to service delivery using impact sourcing by focusing on skills development initiatives and replicating security infrastructure similar to traditional sourcing. For example, Aegis SA provides 12-16 week training program for impact workers that teaches basic office competencies and behavioral skills. In addition, there are several training institutes (Impact Sourcing Academy, Harambee, Careerbox, Piramal Udgam) that focus on developing the skill-sets of impact workers. Many pure play impact sourcing service providers (e.g., RuralShores) have implemented robust infrastructure to mitigate concerns on data security.

Large and untapped talent pool

Given most locations in Africa (South Africa, Kenya, Nigeria, Egypt, Ghana, Morocco) and Asia (India and Philippines) where impact sourcing is largely used have a high unemployment rate among the youth, impact sourcing provides an opportunity to access this large, untapped qualified pool. For example, there are over 155,000 unemployed graduates in South Africa. Over 35% graduate youth (age 15-29 years) in rural India are unemployed. Through impact sourcing companies tap into this alternate pool to augment talent supply. For example, impact sourcing has become TCS’ primary source for entry-level talent during non-campus-hiring season and enables extending its recruitment throughout the year. A detailed case study on TCS illustrates this in greater detail and provides insights on its outcome.

This talent pool is especially suited to serve the domestic market. Companies leverage this talent pool as source of competitive advantage for domestic service delivery, given local language capabilities and cost arbitrage. For example, RuralShores uses impact sourcing for vernacular language support for domestic market.

Stable and engaged workforce

One of the strongest elements of impact sourcing value proposition is the stability and motivation levels associated with impact workers. Our research shows that impact workers have 15-40% lower attrition than traditional BPO workers and exhibit high motivation levels that leads to improved performance over a period of time and lower hiring and training costs. This is endorsed by many companies using impact sourcing. A study by Careerbox comparing the performance of impact workers with traditional workers shows about 10% higher retention for impact workers measured after 90 days and 180 days of recruitment.

The lower attrition rates are driven by the strong emotional bond and loyalty towards the employer that helped educate, train and provide employment to the disadvantaged worker. In addition, impact sourcing provides a strong fit with personal/family aspirations (e.g., opportunity to work in local community without migrating to urban centers). Furthermore, for most impact workers BPO is a preferred career option compared to alternatives (e.g. agricultural, industrial labor), as it offers higher salaries and better work environment.

Social Impact

These four value proposition elements – low cost, reliable delivery, access to alternate talent, and stable workforce – are built around the fifth one – the social impact. In fact, the value proposition for impact sourcing exists because of the types of employees hired. Impact sourcing employees are high potential but disadvantaged economically, socially or some other way. For example, they may come from a low-income area or not have had the opportunity for a university education. Impact sourcing offers these types of people an opportunity to earn and build transferable workplace skills. As a result, employees improve their well-being, and the well-being of their families and communities. (See my blog Impact Sourcing 101: The Fundamentals of a Powerful Global Sourcing Model for a full explanation.)

A study done by RuralShores among 650 respondents across 11 of its centers shows significant improvement in the living standards of its employees after joining RuralShores. To illustrate this with a few indicators, 46% of its employees purchased mobile phones, 56% purchased consumer durable goods, average of 20% increase in family savings. This is echoed in Accenture’s experience of impact sourcing where annual income of impact workers increased by ~33% post employment.

Impact sourcing really is a win-win with tangible positive impact on business and on people. Any which way you look at it, the combined value proposition of impact sourcing is compelling, especially for certain types of BPO work.

In my next blog, I’ll share my perspectives on the aptness of impact sourcing to business.

Everest Group, supported by The Rockefeller Foundation, conducted an in-depth assessment on impact sourcing (IS) as a business process service delivery construct. The study presents a detailed, fact-based business case for IS that substantiates the benefits of the IS model for Business Process Outsourcing (BPO). Additionally, it sizes the current IS market for BPO work, profiles the landscape, details the business case, and shares experiences of companies through case studies and testimonials. The report focuses on Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, India, and the Philippines.

The Rockefeller Foundation aims to catalyze the IS sector in Africa through its Digital Jobs Africa Initiative. The Foundation’s role is to ensure positive social and economic impact on 1 million people by supporting high potential but disadvantaged youth to work in the dynamic outsourcing sector in Africa, benefitting them, their families and communities. The Foundation recognizes that the most sustainable and scalable path to achieving this impact is because of the tangible business value impact sourcing provides. Impact sourcing enables companies to purposefully participate in building an inclusive global economy, gaining business efficiencies while changing people’s lives.

Visit our impact sourcing page for more information.

Be sure to join our webinar, The Business Case for Impact Sourcing on Tuesday, October 7, 2014.

Photo credit: The Rockefeller Foundation

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