Shared Services & Outsourcing Week 2011

Review of Shared Services & Outsourcing Week 2011, Orlando, Florida

Day 1: SSON Observations, Predictions and Trends, Oh My!

March 2, 2011

At the close of the first day of the Shared Services & Outsourcing Network (SSON) conference, it’s hard to say which topics have me pondering the most: that cloud didn’t have much of an impact in 2010 and won’t in 2011, that the trend over the last 15 years in services has shifted from "go slow" to "get ‘er done," that services are coming back onshore to find a new home in Tier 2 and 3 U.S. cities, or one of the myriad other trends in the industry that are developing daily.

Here are a few takeaways from day one.

Why should this matter?
The multimedia sequence that kicked off the opening keynote set the stage for the rest of the event by highlighting some interesting facts about the future of global outsourcing. A few of them are:

• There are 5,000 delivery centers globally;
• In 2004 24% of executives thought outsourcing was a strategic requirement, yet in 2011 89% believed outsourcing was a strategic initiative;
• China has more honors students than the entire population of the U.S., and will become an integral part of the IT services industry.

This sample of data points underscores the need for organizations to incorporate a shared sourcing strategy in their operations to stay competitive. An interesting trend I noticed is the ability of smaller organizations to leverage a cloud offering to support their unique outsourcing needs and budgets, yet the limited impact of cloud as an offering. When Rakesh Sangani, SSON Editor-at-Large, polled the audience about the impact of cloud on their organizations, there were very few attendees that felt the impact was significant. My opinion is that while cloud is still receiving considerable hype and there is a great deal of opportunity, the understanding of and commitment to cloud has yet to catch up to the marketing by vendors.

What’s coming next?
The review of 2010’s predictions showed that the team at SSON is more accurate than any fortune teller could hope to be. Of the eight predictions they made, seven came to fruition over the course of the year.
While we’ll have to wait 12 months to know if this year’s predictions will come to pass, I’ll add some color around a few of their predictions.

• No major acquisitions in the BPO space – There are very few organizations talking about an acquisition, but there are a few that will buy pieces to help build out their portfolio. TBR believes Fujitsu Global Business Services will acquire a firm to help combat rising yen appreciation and smaller Indian vendors will try to acquire to keep pace with larger competitors.
• Political stability will become a crucial factor to location selection – As the turmoil continues to rock the Middle East/Northern Africa, investment in that region will fall precipitously. The vendors already in the region will pull out non-locals and batten down the hatches to ride out the storm. I do not believe any firms will give up on the potential there; however, as predicted by SSON, the Philippines will gain greater traction and, as TBR predicts, Latin America’s investment will see a clear uptick.
• Cloud computing and BPO-as-a-service will have minimal impact – We are starting to see vendors win deals on cloud, like the recent HP contract with Centrica in the U.K. As end-users come to understand the issues around risk, scalability and pricing of this model the adoption will be quick; until then, however, there must be some obvious "winning case studies" that executives and IT departments can point to before this model is taken up en mass.

One more thing
I’ve participated in my fair share of group introduction exercises, but the networking/relationship understanding effort led by Doug Spence was a pretty interesting way to get vendors, end-users and media to break the proverbial ice. Taking roughly 500 or so people in a room, identifying them as either a promoter, supporter, analyst or controller, and breaking into smaller groups to discuss how they communicate, what they could do better, and what motivates them is a great way to set the stage for an interactive, informative few days to share ideas and learn some best practices.

Moreover, understanding the difference in communication styles can be critical for organizations implementing a shared services model so that corporate culture can be accommodated, consensus can be built and organizational buy-in achieved.

Day 2: Outsourcing isn’t strategic, but managing the people who do it is

March 3, 2011

Things I learned on day two: It’s all about people and culture, and outsourcing really isn’t that strategic. I’m hesitant to say that there’s nothing new under the sun, but it’s hard to ignore that adage when everyone from Home Depot, their provider TCS, and the entire panel of the main stage presentation called G6 (additional details below) are saying virtually the same thing. The difference is in the candor of the statement and the details around the deals.

We’re not outsourcing the functions that are really strategic
Mattijs Backx, Vice President & Head of Global Business Centers at JTI, and Duane Portwood, VP & Corporate Controller at Home Depot, shared some of their experiences and best practices from areas like legacy clean-ups, vendor selection and solution implementations. The common theme wasn’t "it’s all about technology," but rather how crucial it is to understand existing challenges at an organization, select a provider you’re "willing to marry" for the next 3 to 7 years, and getting the home team excited about the impending changes. In response to a question about how Home Depot and TCS are partnering, and foreshadowing commentary during the main tent presentation, Portwood acknowledged that Home Depot is not willing to outsource functions that give it a true competitive advantage in its vertical to prevent that IP from walking out the door to vendors like Wal-Mart or Lowe’s.

The G6 Panel – featuring industry heavyweights like Kevin Campbell from Accenture, Peter Allen from CSC, Ritesh Idnani from Infosys, Tiger Tyagarajan from Genpact, Chip Wagner from Alsbridge and Abid Ali Neemuchwala from TCS – covered myriad topics ranging from how to select a vendor to how to manage the process. An interesting question posed was, "how strategic can an outsourcing and shared services solution really be?" The more interesting reply, delivered by Kevin Campbell of Accenture: "it’s not." Outsourcing and shared services aren’t strategic functions, but the support that it gives other internal processes makes it a strategic requirement. At the end of the day, the strategic benefit isn’t from the technology itself, but from the ability to cut costs and improve efficiencies affecting the bottom line.

This realization reinforces my assertion that for vendors to take their game to the next level, they must reinvest into the development of tools and automation innovation to create additional opportunities for themselves and bring more value to their customers; however, based on our research, many vendors are taking a limited approach to this investment, which equates to creating incremental steps to improve operations.

Our people are our biggest asset
Given that the actual technology and processes of outsourcing aren’t strategic game-changers, a theme ringing like a bell was that the people associated with outsourcing are the most important part of outsourcing. Businesses aren’t successful – the people who work there are.

During the FAO & The Cloud presentation, the panelists were all in agreement that outsourcing was about people, yet the biggest resistance comes from these people not understanding the process and the risk (or lack thereof) of outsourcing. One solution to that resistance is to change technology people to business people, as Leopoldo Toro, Managing Director & COO from AltiusPAR, explained; however, moving the focus away from technology management to business solutions has helped AltiusPAR with technology adoption. An interesting side note from this session: During an informal poll of the panelists and audience, Toro was the sole believer that cloud computing has already arrived as a viable solution. This reinforces my assumption that the industry still hasn’t reached the nexus of understanding cloud and the practicality of using it, but early advocates like Toro are ushering the rest of us along toward adoption.

Moving from many to one
A final trend that I’ve noticed is the shift from support of outsourcing, which has moved from a model featuring several global locations to a global process in one location. In the Deloitte services survey it was stated that older, more mature centers host multiple processes. The Deloitte survey also revealed that the healthiest growth in contracts is in corporations under $1 billion in revenue. The scalability of shared services and the affordable nature of this model ties into the global shift of processes and the current trend of datacenter consolidation. I expect that creating these global processing centers will then attract staff, and eventually develop SMEs at vendor sites, which could be leveraged to speed the development of innovative technologies. This change in model will be a boon for end-users and vendors alike.

This event was very well attended and TBR was pleased to see so much interactive discussion. We’re looking forward to attending future events in our industry and learning more about developing trends for 2011 and beyond.

Kudos to SSON on 15 great years and future events.

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