Tag: next generation global services

ITO RFI 2011: Is the Slowdown over for ITO? | Sherpas in Blue Shirts

Earlier this year, Everest Group conducted its annual study of high total contract value ITO deals to gain insight into how a variety of parameters correlates with deal activity. The study, which is part of our ITO Request for Information 2011 report, analyzed 467 ITO deals across 16 service providers (a combination of MNCs, Tier-1 offshore and Tier-2 offshore) against the following factors:

  • Buyer revenue size
  • Buyer geography
  • Buyer industry
  • Provider type

Within each of these parameters, we focused our assessment on scope, duration, size and pricing model of deals in application, development & maintenance (ADM), infrastructure outsourcing (IO), and those with a combination of ADM and IO.

Important findings from the study include:

  • Insights on how buyers in different size groups determined the scope and pricing model of the deals they signed. For example:
    • Large buyers (revenue > US$10 billion) showed a preference for outcome-based pricing models
    • Large buyers took up a higher share of offshore providers’ RIMO offering compared to buyers in other size groups
  • Parameters that define the maturity of engagements service providers have with their buyers. For example:
    • Deal sizes, especially in the RIMO space, were back to pre-recession levels for both MNCs and offshore providers
    • The declining trend in deal duration, across deal types and provider types, was arrested in 2010

Following are a couple of illustrative examples from the report. The one on the left displays a comparison of ADM deal size and duration between different types of service providers, and the one on the right depicts a trend analysis of RIMO deals that offshore providers have signed with buyers of different sizes.

ITO RFI Examples

Is the slowdown over for ITO?

The slowdown in the ITO industry lagged that of buyer industries such as financial services and manufacturing. While they displayed clear signs of negative economic impact in 2007-2008, service providers in the IT industry appeared stable because of contributions from multi-year engagements of the past. It was only later in 2009, because of the resulting squeeze in the IT budgets, that the actual effect on IT service providers’ numbers became visible. Indeed, when we published our RFI on ITO deals last year, the impact of the recession was starkly clear on almost all the parameters we evaluated.

So has the ITO industry recovered from the slowdown? To get a handle on this, we closely evaluated parameters such as deal size, duration, and scope. Having seen bigger and better engagements (larger deal sizes, longer duration and broader scope), it does appear that ITO is coming out of the slump. However, before these results can be termed reliable indicators of recovery, we will have to observe these parameters as trends over 2011.

For more information on Everest Group’s ITO Request for Information 2011 study, click here.

The Evolution of Global Services – Focus on Service Effectiveness | Sherpas in Blue Shirts

While organizations today are feeling the pressure to increase the efficiency and dramatically improve the effectiveness of their global services, we are seeing significant gaps in most global services sourcing models. Service providers (internal and external) have traditionally focused on efficiency over effectiveness, and conventional outsourcing transactions and shared services initiatives have not focused on achieving business impact beyond cost savings. On the other side of the fence, service recipients are continuing to increase their expectations of their providers in terms of business impact, value and innovation.

The graphic below is an example of the multiple constituencies that may be involved in a global services engagement, along with a variety of the delivery focuses and orientations of the two over-arching stakeholder groups. The perceptions and objectives of the stakeholder groups often differ along the spectrum of efficiency and effectiveness. As a result, over the long term a misalignment in business objectives, management priorities and performance perceptions between the service provider/s and service recipient/s occurs, driving value loss within all involved organizations.

Multiple constituencies in a global services engagement

To eliminate this disconnect and loss of value, many global services organizations are reevaluating their services portfolio to determine the optimal delivery model that ensures both effectiveness and efficiency. Inherent in this reevaluation process are a myriad of challenges including:

  • Addressing improvement at all stages of a process, to include touch points with other processes
  • Balancing centralization and decentralization in the most effective manner for the enterprise
  • Refining the roles of captives and third parties
  • Managing location concentration risk
  • Building more effective relationships with service providers
  • Scaling up or down to address the repercussions of M&As/divestitures
  • Expanding services footprints geographically and/or functionally
  • Ensuring regulatory compliance
  • Continuing to improve efficiency while addressing the targeted improvements in effectiveness

To address these challenges and achieve their goals, organizations need to rethink the service delivery model required as the scope of global services becomes broader, deeper, and more sophisticated. Increasing the functional depth of processes gives an enterprise the opportunity to capture both the long-term benefits of strategic sourcing and the short-tem benefits of transactional sourcing, while simultaneously balancing and managing the portfolio of services that remain in-house. This is in contrast to the traditional model in which sourcing efforts have been limited to transactional processes and selective sourcing of judgmental processes. Organizations’ experience and maturity with sourcing has led to expanding the scope of services to include sourcing of newer more complex services, shifting the focus from commodity based services to customized services.

The goal is to identify improvement opportunities that drive and create stronger alignment and increased value between service recipients and service provider organizations (both internal shared services and external third parties). The potential long-term value-added benefits include:

  • Unlocking greater value by doing more (e.g., more coverage, newer markets, more complex processes)
  • Improving global services’ credibility (e.g., increased scale and improved capabilities)
  • Achieving end-to-end process optimization (business process reengineering through all steps of a process, and across functional and geography touch points)
  • Reducing friction in operational delivery and in the relationships between service recipients and service providers (redesign of governance and SLAs)
  • Achieving flexibility of scale (e.g., workload balancing and time-shift via a global delivery framework)
  • Reducing cycle time (e.g., reduce time to market and quickly expand coverage to new functions and geographies)

Achieving this value is not an easy task. It requires a disciplined approach to manage and monitor the associated risks across three dimensions – people, operational and strategic – each of which will vary depending upon the transactional versus expertise and consultative versus strategic nature of the service in question.

Finally, different factors must be emphasized to different key stakeholder groups when positioning the value of service effectiveness and the changes its implementation will require for success. For example, end users will care most about the service output benefits and impact, while the focus with function owners should be on the service delivery benefits and impact. And executives should be approached with an emphasis on extending solution benefits and impact in one or multiple areas of the organization.

Unlocking the value of increased service effectiveness is not for the faint of heart; but for those willing to undertake the journey, the rewards can be great.


See related article on Global Delivery Report, “Transformational” Outsourcing Not for the Meek.

Captivating Clarifications: Don’t Make the Wrong Comparison | Sherpas in Blue Shirts

This is the second in a series of thought leadership articles by Eric Simonson on the continuing role of captives in the global services landscape.

Building upon a May blog post, we recently published a report on the health of the offshore captive model entitled “Captives are Staying Alive.” The report was in partnership with Tesco HSC, a Bangalore-based captive with more than 5,000 employees providing IT, business, and finance services to the rest of the global retailer’s organization. CIO magazine picked up on the report and asked some additional questions for its coverage of our analysis.

In the course of providing additional input to Stephanie Overby (the author of the magazine article), I realized that one critical question was not highlighted strongly enough in our analysis: can you compare the captive sourcing model with the third-party outsourcing model?

On first glance, the obvious answer is “yes.” And indeed, many of us have spent time picking apart the ways in which to compare the costs of both models, plus the merits of outsourcing lowering time to implement and reducing up-front investments (see our deepest, off-the-shelf assessment from almost four years ago).

Any effort to develop a global services strategy that includes a meaningful thought process on the optimal mix of sourcing models will have to sort through how the various strengths and limitations of both models align with a particular organization’s needs and objectives.

But is that really the whole story? Is a one-to-one comparison of models going to provide the right insights to inform a strategy?

First, let me caution that captives require a commitment to scale in order to be successful. Many of the reported failures of the offshore model (bringing jobs back onshore because offshore is too expensive or complicated) are actually caused by lack of scale and associated commitment to manage these issues properly to reduce or eliminate their impact. In others words, do not use the captive model on a whim – only do so if you are deeply committed to ensuring it attains sufficient scale in total headcount and in size and quality of the leadership team. It requires both enough people (say 500-750 minimum for most types of work delivered from “farshore” locations) and enough leaders.

Scale issues aside, there are two fundamental differences in the captive model that need to be considered to understand its potential role in a global services portfolio:

  1. Additional scope of services
  2. Ability to re-leverage human capital investments

Both of these factors are often overlooked because they are second-order implications that derive from successfully building a captive delivery model; as a result, they are not commonly considered a first-order benefit in the target business case.

Additional scope of services

In an outsourced model, scope is primarily defined in terms of process responsibility and number of FTEs completing various tasks. This is also true in the captive model, but captives can further act like offshore corporate centers and take on work that: 1) is not easy to define; and 2) stretches across the front, middle, and back offices. This opens up the ability to deliver from offshore almost any work that doesn’t require close proximity to the end customer. It also helps explain why captives tend to outgrow their initial real estate plans quickly, and with significant “other bucket” work.

Examples of advanced roles I have seen in captives include product management, pricing strategy, corporate communications, talent management strategy, operations research and optimization, and IT standards and security architecture. While these are not normally outsource-able activities, the captive model provides the opportunity to deliver more scope from offshore – it is simply about adding offshore employees in sales, marketing, or other functions to the global team, not signing SOWs with negotiated pricing and service levels.

In short, a captive enables the option to add lots of additional activities that are not initially planned and that do not lend themselves to the outsourcing model. For organizations seeking to manage themselves in a truly global manner, this is an important consideration and can provide value in a wide range of ways.

Ability to re-leverage human capital investments

The process of fully bringing an offshore resource up to speed to complete a job is critical, and takes longer than most like to admit. In an outsourced model, once the time has been invested to make an individual fully functional in understanding all the nuances of a system or the business’ needs, he or she may be promoted within the client service account, or may leave the account to work for another client. (And organizations do benefit by receiving talent from other accounts as the associates do possess certain forms of expertise, although they lack organizational context, which takes time to cultivate.)

In the captive model, fully functional associates remain in the organization and advance to related roles, or may be moved to other locations to cross-pollinate or further deepen their skills. This ability to retain and enhance the understanding of organizational context is an important factor in capturing value from human capital investments in a captive model.

If you’re creating a global talent model, resources gaining experience with your enterprise in an offshore location can prove to be very valuable for the rest of your organization – you have greater ability to predict success in new roles, they inherently understand your  organization from multiple angles, etc. Net-net, specific skills can be developed in both the outsourced and captive models, but deep organizational context is best cultivated in the captive model.

Large organizations must continue to optimize their global services strategies, and the external versus internal sourcing mix debate will continue to be emotional. Emotion is fine; but just be sure you are framing the right comparisons, and don’t forget the real, yet hard to value and compare in a business case, second-order benefits of the captive model.

What unexpected benefits have you seen from internal service delivery in captives? Can those benefits be valued?


Related Content:

Captivating Clarifications: Captive Centers and the Erroneously Published Obituary

CIO: The Captive Model for Offshoring Is Thriving, Says Research Firm

Report: Captives are Staying Alive

Report: Comparison of Outsourced and Captive Solutions for Capturing Value from Offshoring

Procure-to-Pay: Measuring Outcome Beyond Efficiency Gains | Sherpas in Blue Shirts

More and more companies are recognizing the value of end-to-end business process management as it breaks down functional and organizational silos to enable a more holistic approach to enterprise performance management.

Of the common sets of end-to-end processes – which include Source-to-Contract (S2C), Procure-to-Pay (P2P), Order-to-Cash (O2C), Record-to-Report (R2R), and Hire-to-Retire (H2R) – P2P is most often identified as the priority for optimization. There are two key drivers of this trend. First, compared to other end-to-end processes, P2P activities are typically more common across the enterprise, making them easier to standardize. Second, the business case for P2P is frequently the most compelling. Through process standardization, workflow automation, system integration, and rigorous compliance enforcement, companies have been able to achieve rapid and significant spend and operating cost savings while simultaneously gaining the ability to better manage risk.

A case in point: a global software and products company achieved an initial operating cost reduction of 35 percent. It subsequently realized spend savings of US$700 million (~9 percent on a spend base of US$8 billion) and captured more than US$10M in Early Payment Discounts (EPD). The savings and benefits accrued generated a break-even on the business case in less than six months.

Based on Everest Group’s experience, one of the most critical success factors of P2P transformation is the institutionalization of a common set of well-defined performance metrics across the entire organization, including both internal and third party delivery partners. The performance metrics should be closely linked to desired business outcomes, and applicable across segments and geographies. Moreover, both P2P efficiency and effectiveness should be easily quantified, measured, and benchmarked.

The table below presents a P2P metrics framework that starts with clearly defined business objectives that are measured by a small set of outcome-based metrics to reflect the overall efficiency and effectiveness of the P2P process. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities, and are tracked and reported at the operational level.

P2P Metrics Framework

 

We strongly recommend companies follow a structured approach to develop a holistic P2P performance management framework:

  1. Define common metrics, and clearly delineate objectives, descriptions, and interdependencies with other performance measures
  2. Establish a standard methodology and systems to track and report performance; key components include:
    • Measurement scope, parameters, method, data source, and frequency
    • Benchmarking methodology and data source
    • Reporting dashboards, frequency, and forum
  3. Assign accountability for:
    • Measuring and tracking performance metrics
    • Benchmarking and reporting overall P2P performance
    • Identifying and prioritizing continuous improvement (CI) opportunities
    • Reviewing and approving CI projects
    • Implementing and monitoring CI initiatives
    • Calibrating performance metrics based on evolving business objectives

There’s no question that the old management adage “You can’t manage what you don’t measure” holds true in the case of end-to-end process management. Having a common set of appropriately-designed performance metrics is both an enabler for and indicator of successful P2P transformation.

The Changing Role of IT Asset Ownership in Next Generation Global Sourcing | Sherpas in Blue Shirts

Achieving the benefits of infrastructure outsourcing used to require the client transfer IT asset ownership to its service provider. The transfer provided not only a one-time cash infusion to the buyer, but also an increase in return on assets (ROA) due to the reduction of its asset base. By negotiating the costs of assets into the contract, the client could also ensure a predictable cost stream over the contract term. The asset transfer also amplified many of the operational benefits of outsourcing transactions, as the service provider possessed the scale and technology management expertise to drive ongoing improvements in operating costs and efficiency.

However, over time, most of these benefits have become achievable without asset ownership transfer. The key contributing factors include the emergence of third-party financing alternatives, remote infrastructure management tools and the introduction of server virtualization technology. A third party lease-back arrangement allows the buyer to eliminate the up-front investment without relinquishing control of the asset base. Most operational efficiencies can now be achieved through remotely led efforts. And the increase in utilization enabled by virtualization eliminates, to some extent, the scale advantage that was traditionally an advantage for a transaction involving transfer of asset ownership to the provider.

Additionally, pending changes in accounting rules will eliminate the advantage of improved ROA that could previously be achieved by either a sale or a sale/leaseback transaction. Current U.S. GAAP does allow ROA benefit if the outsourcing arrangement can be classified as an operating lease. But in August 2010, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) published a joint exposure draft for public comment that, among other changes, would require that all leases be reflected on the balance sheet of lessees and lessors. In March 2011, the joint boards agreed to several changes to the exposure draft but did not change the requirement to record all leases on the balance sheet. However, I anticipate that in the future all lease arrangements will be required to be reflected on the lessees’ balance sheet, including assets transferred from the client and assets procured by the supplier to provide services that fall within the scope of the lease arrangement. On the other hand, the rules, if changed, will not apply to cases in which the client continues to own the assets, even if the service provider controls and operates them. Ala, ROA benefit from asset ownership transfer is eliminated.

Moreover, recent statistics show an accelerated movement toward adoption of an asset light model in which the client either retains ownership of its assets or engages a third party for a sale/leaseback transaction. Everest Group recently published a research study that found service provider asset ownership in high-value infrastructure outsourcing deals declined from 86 percent in 2007 to 15 percent by 2009. Server virtualization technology and Remote Infrastructure Management Outsourcing (RIMO) versus traditional infrastructure outsourcing will gain even more momentum as the offshore players continue to aggressively expand their market share in this sector.

Additional trends observed by the Everest Group research that support and correspond to this change in business model include a reduction in both term length and annual contract value for infrastructure outsourcing transactions. By 2009, the average term had declined to 4.2 years for traditional tier-one providers and to 3 years for offshore providers. And although at least partially due to the recession, both offshore and traditional service providers saw their deal size reduced by more than half in 2009.

There will always be some segment of the market that continues to prefer traditional data center outsourcing and application hosting models. But I believe that the trend toward next generation models involving RIMO or infrastructure managed services is a long-term phenomena. Although this model results in transactions with lower total contract values, I believe it provides better long-term alignment of client interests and provider incentives. Clients often find it beneficial to retain assets due to the inherent flexibility, control and benefits of scale that it enables. And service providers are able to simultaneously reduce their capital outlays and improve their ROA. Given the trend toward shorter deal terms, this benefit takes on even greater importance.

Some Types of Applications Float Better Than Others | Gaining Altitude in the Cloud

Emerging delivery models and technology advances are altering the risk versus benefit tradeoff for the adoption of cloud computing. However, not all applications are good candidates for deployment to the cloud. Even if the characteristics of a particular application allow it to go to the cloud, the appropriate delivery model depends on the type of workload being deployed. Let’s take a look at how to identify the right delivery model for different workload types, and how to conduct a next generation IT assessment for your organization’s best-fit cloud computing model deployment.

To set the stage (although you’ve likely read this before,) there are multiple models for deployment of cloud services:

  • A Public Cloud is characterized by virtualized hardware and software applications that are shared by all users. The service provider runs and maintains this environment for the benefit of the subscriber clients, and the environment is accessed via the Internet. Amazon Web Services is a primary example.
  • A Private Cloud has virtualized hardware and software that is dedicated to a single client. This environment may be onsite with the client or maintained by a service provider in a collocation facility. Access to the environment is via the client’s corporate intranet. Rackspace is an example of a provider in this space.
  • A Hybrid Cloud is a combination of both environments. Think of a situation in which a company develops a private cloud for its baseline utilization but engages a public cloud provider to enable it to “burst” into the cloud during peak volume periods.

Virtualization, standardization and automated service management are all prerequisites for a cloud environment, regardless of the delivery model. Automated service management refers to an environment in which service catalogs, governance, provisioning logic and usage accounting/billing have been specifically architected for the cloud.

Workloads are defined by the various types of IT work the enterprise needs to perform. Examples of major workload types include:

  • Analytics/business intelligence
  • CRM
  • E-mail/messaging
  • ERP and supply chain
  • Industry/LOB applications
  • Communication/collaborations tools
  • Personal computing/productivity
  • Test and development environment
  • A multitude of infrastructure workloads

Workloads can be identified by how they are classified against several characteristics including business criticality, data security requirements, utilization patterns, and complexity. These characteristics determine the type of cloud delivery model that is most appropriate for a particular workload type. For example, workloads that are highly standardized are normally good candidates for a public cloud, while workloads that require a high degree of compliance, complexity, or data protection are typically better suited to a private cloud model.

Database and application-oriented workloads are good examples that are appropriate for private cloud deployment. To date, the most commonly deployed workloads on public clouds have been CRM applications and web portals for audio/video conferencing. Application streaming is an example of a workload type that has been widely deployed to both private and public cloud environments, as well as hybrids.

Some workload types – e.g., applications that require a high degree of customization, utilization measurement (for chargeback or billing purposes) or auditability – have not yet been targeted for deployment to any type of cloud computing model. In addition, applications that are not readily virtualized are, by definition, not easily deployed to the cloud, regardless of the delivery model.

Everest Group has identified seven steps to developing a next generation IT model utilizing cloud computing delivery models:

  1. Survey your current environment, identifying your current cost baseline, the workloads supported, the current delivery model(s) (traditional, virtualized, etc.), and to the greatest extent possible, the server utilization rates by workload and delivery type
  2. Assess and select potential workload types for migration to a cloud model
  3. Determine the appropriate delivery model for each workload you are considering
  4. Establish a preliminary architecture for service management and hardware configurations
  5. Assess the economics
  6. Finalize your solution
  7. Implement

The process I’ve outlined above may appear daunting, but rigor and detailed analysis are required if you want to develop a viable strategy that delivers both cost savings and performance improvement. Not to heap any more on your plate, but an assessment of the communication and change management strategies required to support the implementation of your cloud solution are also critical.

Good luck!


Learn more about Everest Group’s cloud transformation expertise.

Takeaways from My RPO World (okay, on the ground U.S.) Tour | Sherpas in Blue Shirts

During the past few weeks, I was on the road interacting and engaging with a variety of buyers, service providers, and technology providers in the Recruitment Process Outsourcing (RPO) ecosystem. My travels took me to the HRO/RPO Summit in Las Vegas, Manpower’s analyst day session in Milwaukee, and meetings with numerous buy- and sell-side organizations in multiple cities.

Broad themes I identified during those forums, meetings and some very stimulating conversations include:

Greater pragmatism on global/multi-country RPO. Notwithstanding the continued interest among multinational companies around global/multi-country RPO, there is an increasing realization that a more practical and pragmatic approach is required. For example:

  • Buyers are realizing it’s exceptionally important to understand the “art-of-the-possible” in heterogeneous markets such as Europe, Asia Pacific, and Latin America, even before floating an RFP.
  • Quite often, it makes sense to approach and scope multi-country RPO utilizing the Pareto Principle, i.e., focusing on 80 percent of the hiring that takes places in 20 percent of the operating countries.
  • A phased approach that starts with limited countries in scope and expands into other countries/regions once the relationship stabilized is increasingly preferable.
  • A hub-and-spoke delivery model is emerging as the most prudent choice.

High interest in “understanding” a total talent acquisition approach. Note my emphasis on “understanding,” as opposed to adopting. Currently, I see buyers making RPO and Managed Service Provider (MSP) decisions for permanent hire and contingent hire management, respectively, independent of each other. While a combined approach to permanent and contingent hiring management through an integrated solution looks compelling, the reality is there are organizational (e.g., misaligned objectives of HR and procurement), operational (e.g., difference pricing structure and service level considerations), and technological (e.g., lack of single technology solution for permanent and contingent hire management) challenges to adoption in the current market. Buyers must have a clear upfront understanding of these challenges and need to identify potential mitigation steps. I have even seen buyers comfortable with their organizational readiness but lacking confidence in providers’ capabilities to offer an integrated solution at this time.

I expect adoption here to be gradual and in a phased fashion, with buyers starting with either RPO or MSP and then looking to expand and integrate the other. From a service provider perspective, creation and execution of total talent acquisition requires expertise in both traditional RPO and MSP models. That expertise, if proven, can create differentiation and significant opportunities, while also creating a natural entry barrier for competitors that focus only on RPO or MSP.

Side note: Everest Group’s forthcoming RPO studies will focus on multi-country RPO as well as blended RPO (RPO + MSP) exclusively highlighting the current state of the market and various dynamics at play.

Providers’ proactive investments to enhance their value proposition and create differentiation. It is clear that some RPO providers understand the importance of creating differentiation in a cluttered marketplace. Those that do are proactively investing in building their differentiation themes and associated capabilities. Examples include Kenexa’s focus on quality of talent theme, Manpower’s investment in helping buyers better plan their workforce requirements, Pinstripe’s development of tools to enhance the efficiency and effectiveness of the recruitment process, and SourceRight Solutions’  total talent acquisition solution.

Broader opportunities in emerging markets. With the demographic and economic changes taking place around the world, emerging markets such as India, China, and Brazil are increasingly viewed as markets with immense potential extending far beyond low cost delivery. Manpower’s recent acquisition of China-based REACH HR is a prominent example.

While my current tour in-person has concluded, I am looking forward to keeping a close eye on the RPO industry’s journey, even if from a near-term virtual view.

Is End to End Really the End All? | Sherpas in Blue Shirts

It’s all the rage. Global organizations are starting to take a more “user” centric view of process workflows and operations. As opposed to organizing their delivery capabilities around discrete functions like procurement, finance and accounting (F&A), and HR, the world’s leading firms are organizing around end to end (E2E) processes like Procure to Pay, Hire to Retire, and Record to Report. But is E2E simply a “Hail Mary” pass, a wishful attempt to find value beyond labor arbitrage? Or, as evidence suggests, are the benefits – e.g., better EBITDA, tighter compliance, and greater financial control – real and proven?

A comprehensive CFO survey IBM conducted last year clearly demonstrated that organizations that consistently outperform their peers in EBITDA do, in fact, organize and deliver their global services around principals consistent with an E2E approach. Additionally, these companies all have standardized finance processes, common data definitions and governance, a standard chart of accounts, and globally mandated, strictly enforced standards supporting these E2E processes.

Everest Group’s experience supports IBM’s survey results. And while it seems clear that every large, complex global organization should be chasing E2E in order to improve results and reduce risk, it’s important to note that doing so is neither easy nor without challenges.

To realize the benefits of E2E, Everest Group typically recommends a developing a three- to five-year roadmap with a heavy focus on building the business case, defining the target operating model, and managing stakeholder expectations and change.

Roadmap

Yet even the best game plan will have to address key challenges, including:

  • Fragmentation – The core of many E2E processes, F&A, is often fragmented in large companies. Finance processes are commonly distributed not only by business unit, but also often by geography. A global rationalization of F&A to understand the base case (current state) is a critical first step.
  • Vision – It is essential to document and agree on a common target operating model definition for each E2E process which details:
    • activities, standards, and data definitions
    • a common set of E2E process metrics used to measure performance, provide transparency on delivery performance, and underpin dashboard reporting
    • a framework for controls, oversight, and balance sheet integrity
    • a compelling and thorough business case that clearly defines the current state, investments, and future benefits
  • Technology – Even under the best of technology frameworks, a single, global instance of an ERP system like SAP, a further “thin” layer enabling technologies and tools, may be needed to drive standardized processes.

No, E2E is not a Hail Mary pass, but rather a sustained and balanced drive down the field for a game winning touchdown. Success will require strong leadership, talented personnel, technology, a sound game plan, and solid coaching staff to pull it all together, building momentum and confidence along the way.


Related Blog: Building a Robust Global Services Organization

What if… Breakthroughs That Could Reshape the Global Services Landscape | Sherpas in Blue Shirts

A response to my recent blog – Innovation Junkies – One for your ‘Bucket List’ – posed a question that warrants more than a one-liner follow-up. Thus, I hope that readers will dive in and share their ideas to help answer the question, “What is a breakthrough invention you’d like to see in global services?”

Efficiency EffectivenessTo get things started, I polled a number of my colleagues and it was abundantly clear there are several lenses through which to view this question. Some immediately proceeded down an efficiency path, discussing ideas that would either drive productivity through the roof, or eliminate labor altogether. Others took the fork in the road that might lead to step function improvements in effectiveness, i.e., innovations that would make the service experience more satisfying. Interestingly, these thoughts raised a number of intense discussions about experiences that were graded high due to a satisfying interaction but that actually had less than complete solutions resolved during the service “event.”

Inventions that could/would have a profound impact may even be hard to describe until they have happened. However, some of the ideas that emerged are worth noting – as much as thought-starters as candidates for the kind of breakthrough innovations in global services that reshape the landscape:

  • IT services
    • Real-time, dynamic hybrid cloud IT infrastructure. What if CIOs could manage their server environments at mainframe-type utilization levels, dynamically shifting peak loads to low-cost cloud infrastructure services?
    • Error-free automatic conversion of old code into modern languages. What if automated tools could instantly translate old code bases into the most advanced modern languages that provide superior performance and flexibility advantages with 100 percent accuracy?
  • Document-based BPO
    • Zero defect OCR. What if optical character recognition could decipher any written document in any format (unstructured data) and prepare the data for use by relevant applications?
    • Device independent self-service data input. What if services recipients could enter all needed data on any device, from anywhere, for any process?
    • Ultra-low cost exception handling. What if exceptions that currently require costly human intervention could be resolved by solutions that cost several orders of magnitude less?
  • Voice-based BPO
    • Real-time, 100 percent accurate voice translation. What if language barriers were eliminated due to an ability to translate both inbound and outbound communications into a universally understandable form?
    • Real-time, dynamic matching to customer preference. What if customers could be matched to service providers that align perfectly with their unique preferences?
  • Knowledge-based BPO
    • Crowdsourcing-based knowledge transfer/training. What if the comprehensive experience of those familiar with an activity could be harnessed to train users/service providers in a fraction of the time and cost?
    • Predictive solutioning for customer interactions. What if services shifted from being based on reactions to historical artifacts to being able to craft services in advance of a recipient’s needs based on highly accurate predicted outcomes?

Now that we’ve got you thinking…what are your visionary what ifs?


See related article on Global Delivery Report, Global Services Breakthroughs Wanted: Providers Take Note

Wipro’s New HR Policy Changes Highlight Major Issues Indian Providers Better Tackle…Fast | Sherpas in Blue Shirts

This past weekend Wipro announced it was adding employee attrition and customer satisfaction to the criteria upon which its senior management will be evaluated, and the metrics will be linked to quarterly compensation. This move clearly exposes that the employee satisfaction (and hence retention) and client satisfaction issues arising from Indian IT providers’ tremendous growth and their offshore-based business model are increasing and becoming more visible. (See a related blog by my colleague Jimit Arora) And with so much at stake, they must address the problems, and they must do it now.

Why the urgency? Several reasons, given the inextricable connection between client and customer satisfaction. First, the Indian IT providers’ model of hiring low cost resources and continuing to expand the bottom of their resource pyramid has its own challenges. While they have developed sufficient standardized processes and have very solid training programs to keep churning out “good enough” people to perform client work requiring technology competence, they cannot satisfactorily add critical business value through IT if they stick with hiring associates freshly graduated from college.

Second, constant hiring takes a toll on the system in terms of cost, process flows, and efficient collaboration. Third, because many providers cannot create a career growth path for such a large volume of experienced resources, they actually cause attrition in order to hire the requisite “fresh hands” staff.

Obviously, Wipro’s addition of employee satisfaction (attrition) and client satisfaction being linked to senior management compensation comes with its share of challenges. An employee’s experience in an organization depends on a wide range of parameters including compensation (industry driven), work quality (varies based on the client engagement), feelings toward team members (reasonably independent of the quality of the boss), growth opportunities, work environment, etc. Additionally, how will client satisfaction be measured, e.g., through surveys, general interaction, volume growth, pricing improvement, etc.? Moreover, how much impact does a senior executive have on the kind of people assigned to a given project, and what if an employee is assigned to a project that he/she simply does not want to work on?

Despite these challenges, there is a silver lining in that although these providers have disrupted the IT service market, they now realize their limitations and the need to retool their model and perform more “business value” work. Clearly this change will not happen overnight and will take consistent effort and strategic execution. But it can and must happen. However, we should not expect offshore providers to mimic the resourcing pyramid of MNCs even (and when) they provide business driven higher IT value. They have changed the game of IT service and they will surely attempt to do it again in higher business value services. As the low hanging client fruit is more or less taken, the next phase of growth in the cut-throat IT services market will be led by innovation and client satisfaction. And happy provider employees are the best path for these outcomes.


See related article on IT Business Edge, Outsourcing’s Shift from Arbitrage to Innovation.

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