Q&A: Patrick Cogny, CEO, Genpact Europe
At the recent Shared Services and Outsourcing Week in Budapest, Patrick Cogny, CEO of Genpact Europe participated at the European premier of the G8: Global Sourcing Think Tank, ( which you will be hearing plenty of here in the coming days). In this interview, he shares his thoughts on future trends in the global sourcing market.
SSON: Patrick, I just wanted to get your thoughts today on sourcing trends for the future. Here at the Shared Services and Outsourcing week in Budapest – we have heard some surveys which have revealed that outsourcing will grow by 50% - what are your views on that?
Patrick Cogny: I think it will remain at a very dynamic rate for outsourcing so the growth rate that you are talking about is nothing new. If you look at the past five years we probably exceeded that, so I just think that dynamic will continue with different attributes probably. The providers are gaining in maturity so they will tend to take on more end-to-end services. End-to-end services will mean that providers will compliment their offshore footprint with nearshore and onshore footprints. Some of them already have a global delivery footprint – I think that footprint will become more diversified because they need to locate to a more diversified need on the client side.
On the process side, the provider will have to keep investing more and more in technology, because I think as they handle more and more of the clients’ processes, the onus will be more on them to develop the technology stack to drastically improve the processes. And finally providers will not be able to retrench behind contractual terms but will need to become a bigger strategic partner of their clients and look at end-to-end impact of the processes they run for their customers and be measured on the same metrics as their CFO,CEO, CIO of the company the server is measured.
SSON: So currently there are 1300 Shared Services Centers in Europe alone, do you see this number going down?
PC: Absolutely. In Europe the pace of change is always a question. The problem with the 1300 captives in Europe is that probably most of them are sub-scale. The issue does not lie with companies who have made strategic investments that are well-run and there the question is how long the companies think this is strategic for them to invest in this. But they work. There is a flurry of captive centers especially in Eastern Europe, which are subscale and are not working well.
The time pools in Eastern Europe are fragile, they are much smaller than the time pools in India or other more Eastern locations. And I think there has been a thing in Europe where the comfort, more than data and the resistance to change has driven, what I would call, short-sighted decisions. Again not in the large captives, but more on the small captives side. And I think we will see those disappearing all the time.
SSON: But surely within Europe there is comfort as it is more nearshore for western organizations, rather than offshored. Do you think there is a fear of losing control by outsourcing elements of organizations to the likes of India and Manila etc.?
PC: Absolutely there is a fear and a concern. That is something as providers we need to address - we can’t just ignore it. And again there are a number of ways of doing that by lining our objectives with company objectives and being smarter about that. Being smarter in terms of governance and change management. I think these are some of the things which we invest in.
Its less and less for us a game about pure labor arbitrage. It’s becoming a game of bringing additional value whether it be controllership or activity, business impact in terms of cash reduction and reduction in cost of procurement etc. So as we are bringing those values to the table, we are showing to the clients its not just an offshore or onshore labor arbitrage game, it’s a readers process excellence game. As we do this we look more and more like our clients’ footprints. Today we have got 2, 200 people in Europe for example, which are spread across Eastern Europe in locations and also across Western Europe in locations. At some point we ourselves go and get that talent, wherever that talent is.
SSON: In terms of contracts are you finding clients have more control of contracts with BPO providers, compared to a few years ago because of the current state of the economy?
PC: I am not sure because the state of the economy is driving more people to look at outsourcing, to probably leverage the fact that there is competition between providers so that drives efficiencies up and that is healthy, but that is nothing new. I think that competition has been around for the last four or five years and that has actually helped our industry grow fast. So I don’t see the crisis itself. The crisis is giving us more opportunity. Contracts have never been a walk in the park for us to deliver on. They were demanding and we have always met on the productivity and the impact commitments that we have made to our clients.
SSON: Why is it do you think that Shared Servcie Centers and stand alone captives don’t have the same type of contract arrangemnets that ourtsouricng organisations do?
PC: Some of them do and they are successful. We were a captive with general contractual agreements with our parents when we were part of General Electric, so we know how that works and that works well, but it was completely managed at arms-length and nobody would have called us a captive or a shared service center at that time, we were sticklers about that actually. So when we had to sell or services internally inside GE, we were in competition with outside parties, because at the end of the day competition keeps you fit and healthy – so few, but some captives remain able to stay fit because they have those contractual relationships internally. But you need to have a successful captive and you need to have an intersection of two strong things. One is to have this spirit of competiveness, of contractual relationship. The other thing is you need some scale, because it very difficult to compete without a similar amount of scale as the outside market place – it is very difficult to compete because you can’t invest if you don’t have enough scale and you can’t attract the best people etc.