Sourcing Superstars: Hubert Giraud, Capgemini BPO

SSON News and Analysis
Posted: 07/09/2012

From its birth as a data processing and activity management entity in the late 1960s, the company that now bears the name Capgemini has bloomed into one of the world's largest technology and professional services firms, with over 91,000 staff working in dozens of countries around the globe and annual revenues in excess of $11 billion. Its outsourcing arm delivers between a quarter and a third of that figure, with Capgemini BPO now recognised as the leading player in the EMEA region for F&A BPO by market share. As part of our Sourcing Superstars series, we spoke with the boss of Capgemini BPO, Hubert Giraud, about how his organization has risen to such dizzy heights, the changes he's witnessed during his career in outsourcing, and the meaning of "Rightshore"...   

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SSON: Hubert, what have been the biggest changes you’ve seen to the outsourcing space during the time you’ve been in the business? 

Hubert Giraud: Now I’m getting old… I’ve noticed a lot of changes. I would say in the past five to ten years clearly there’s been a massive upsurge in work going to India and offshore in general – I mean this has been the whole radical change in our industry, not only in BPO and IT but in all the hi-tech area. What is something changing the economics of the past ten, twenty years is clearly that we’re in a global world – I’m not sure it’s flat, but I’m sure it’s global! I think really this is the most important thing.

After that, there are other changes I’ve seen progressing. There is a geographical move: outsourcing 20 years ago was very much a US story, and then the UK embraced it pretty rapidly; then much later, continental Europe, and now the rest of the world – and the very recent interest of continental Europe is pretty important.

The next trend is an increase in competition. Ten, 20 years ago, the big players were most of them American big firms, some of them European ones – clearly now there are big names from India present in all continents, all sectors, all activities. That’s a massive new trend. The competition has strengthened. Maybe 20 years ago companies were more focused, more targeted towards one thing; now big global players aim to deliver services pretty much everywhere on pretty much everything. So tough, tough competition is I think the third thing.

Fourth, outsourcing grew, I would say, upwards in the value chain from the very basic like managing infrastructure for IT, or managing accounts payable in BPO, or payroll; progressively the capacity of the providers to deliver more and more sophisticated services is clear in the market. From AP to all F&A; from infrastructure management to all management of IT; in all compartments of what we are doing we are seeing more and more capacity to deliver the full range of services. And not only on the traditional, as we call it, lift-and-shift which was just "take over the work and transfer it 10,000 kilometers away", but clearly transforming the process. Penetrate the process, transform it radically, and deliver from offshore.

These then would be the main changes I’ve seen in the last decade or so – a pretty important revolution in our industry.

SSON: And how has Capgemini BPO adapted to deal with those changes?

HG: The first strategic point was to say "we need a global, dedicated focused entity", and we’ve created a worldwide business - a full I would say "P&L" to use the jargon – able to deliver services throughout the world from sale to delivery. It’s very important to have specialized people focusing on what they’re doing with the ability to manage the service on a 24/7 basis in any country in any language. I think this global coverage is one of the answers we gave to this sort of revolution in the market.

Then there’s the growth of skills and capabilities we have been able to assemble: I would say that BPO is the youngest industry in this hi-tech arena, and thanks to the big company I’ve in we’ve been able to attract people from the consulting area, with their big knowledge of sectors, industries and processes; plus people with great knowledge of IT and other technology; and people with outsourcing backgrounds and knowing how to manage continued services, and how to manage SLAs and all that sort of thing. By combining all of these skills I think we’ve been able to create a one-stop shop for people when they have to deal with questions like "what can I do to improve my processes using BPO?".

SSON: In the last few months we’ve seen some fundamental changes to the global financial system and a downturn unlike any we’ve seen for many decades. How do you see the outsourcing sector being affected by what’s happened? Is it too early to make predictions about the state of the sector once we emerge from the current recession?

HG: Clearly it’s a massive shake-up of the whole sector. Once again, what I said about the emergence of new actors; a huge number of Indian firms have grown massively over the past five to ten years on the back of the big UK and US financial institutions. Clearly we’re not at the end of this story but just here it’s going to create huge change. We see some people disappearing, some consolidation, some acquisitions, some restructuring. On the provider side we’ll see some massive changes.

Secondly, I’m not going to make any prophecies, but clearly there are things which are going to disappear. We’re going to face huge new compliance regulations – I don’t know what will happen with individual country bodies and international organizations but the only thing I’m sure of is a massive increase of regulation and compliance. How will we face that? We need to see clearly what’s happening before we answer that. But that’s a new constraint for us.

On the other side, I would say that [the financial sector] is a huge sector which was not really massively driven by cost reduction in the past – they were making so much money with what they were doing that to reduce by five points the cost of doing this or that was not really a high priority for the top execs. Now, clearly, a huge portion of the banks and insurance companies will have to rebuild themselves and they’ll have to find money to pay off their debt, so I’m pretty sure there’ll be a massive reinterpretation of the way they’re organized, the way they’re managing their businesses. And I believe that BPO is clearly in front of a big opportunity: we’re one of the big answers in terms of cost reduction, flexibility, variability of cost – I’m sure we’ll have to develop massively in that sector. It’ll take some months before we can see clearly what will happen; we’re just in the middle of this turmoil so it’s too early to say exactly what will happen.

SSON: Do you see India’s position at the top of the offshore outsourcing pile being threatened by the Satyam affair and the erratic behavior of the rupee? And if so which regions are going to take bites out of India’s pie?

HG: I would say that, OK, Satyam is a real pity. It’s not entirely a surprise, but I’m inclined to believe it’s an accident… So OK, they will disappear – but no, India with its emerging hundreds of thousands of engineers, programmers, hi-tech guys, and the experience they’ve been developing over the past 20 years: I don’t think this will disappear from one day to another. I would say India will remain the number-one country – the pivot – of this hi-tech service industry, BPO and all that.

However, I think two things will happen. The first is: where will we end in terms of political constraints in the big developed countries? Where are we going in terms of regulation forbidding offshoring et cetera? I have no idea – but it could be a threat, not only to India but to everybody. More importantly, I’ve seen in the past six months a very very dangerous move in terms of currency chaos. When you are delivering a service for ten years, you have to have a pretty good view of what will happen to the currency. When currencies are moving up and down by 50 per cent over six months you can destroy all business cases, all clever engineering. Even if you have the right hedging you can’t be covered for five or ten years of chaos. Clearly currency evolution can reorganize the industry pretty dramatically.

But to end on that, I repeat that I strongly believe India will remain the number one – but I’m seeing two areas coming up, maybe causing some threats to India. First of all I believe that Latin America – although it’s pretty new, just two or three years’ experience – is growing very fast and although it’ll never reach India just because of the sheer size of the country, for US companies it’s maybe easier to go within the same timezones, and most of them now speak English. So all Central America and through Brazil and other countries. Latin America will grow very fast.

But the main threat here as in many other sectors is China. Last week I was again ten days in China, and when you look at what the central government is doing – the massive injection of money in building up infrastructure, education – there’s a clear political decision to invest massively in services and not just manufacturing. Clearly, these guys are the kings when it comes to industrialised processes – and they have a large number of people, I must say…

SSON: Yes, that’s certainly one area they’re not lacking in… Hubert, let’s move on. Where (in terms of geography, industry, function) is most of Capgemini BPO’s new business coming from?

HG: If I’m just talking in terms of the last months, and no longer than that, North America is again very strong. We have never seen such huge activity, with telephones ringing from everywhere: "Urgent! We need to reduce costs immediately!" So North America is very hot. I would say also the Nordic countries in the last six months have been pretty active. Those are the main areas. After that, probably Germany and France. It’s pretty new - two years ago I was called in by a French company for a "oh, what is BPO? That’s pretty interesting…" kind of conversation, not very serious. But over the last nine months to a year it’s very serious business discussions. The same in Germany and Holland. Continental Europe is very strong.

After that, in terms of sectors, I would say that leading the way as ever is manufacturing, because all these guys are under huge margin constraints and need to reduce their costs. I would add financial services – except we don’t know what will happen in terms of regulation and who will survive. And last but not least is the public sector. Here clearly the UK is leading the way – not a lot of offshoring due to the political environment, but a lot of outsourcing. And I’m sure all the other countries, after having spent so much money on maintaining the financial sector, will have to massively reduce costs, and I’m seeing huge opportunities coming in the next few years.

SSON: In such an increasingly competitive market how does Capgemini BPO differentiate itself from the competition?

HG: A number of different points. The first is, our trademark which is "listen to the client and offer them a great flexibility in their solution". We’re not saying to the guys "here’s the Capgemini way, just sign here and that’s done". We really believe that there’s no one size that fits all, and clearly we have to be highly flexible. Second is, the ability to use our technology at the creation of the BPO solution, and the technology infrastructure which can improve processes. Thirdly, we have what we call "Business Insight", which is how to inject and use BI processes and analytics to clearly unlock new value from the process we’re managing. And maybe the fourth area is to offer the best – or one of the best – Rightshore delivery model, with the ability to follow our clients everywhere in the world. This is clearly where we see some differentiation.

SSON: Can you define for us the Rightshore approach?

HG: Rightshore is something that was created five or six years ago, believing that we are seeing now a massive offshore solution. But this is just one part of the global service, and the solution is not always offshore, it’s "rightshore" – meaning that sometimes it is  having your guys working in the client’s office, sometimes nearshore, and sometimes in the big offshore solution. I think Rightshore is exactly that: the right price, the right location for your people. Secondly, the evolution of the rightshore approach is again to diversify the answer for the clients and being able to combine front office solutions with back office solutions; for example many times we have for language requirements a front office in Poland and a back office developed in India. This sort of solution can be set up for linguistic reasons, for capability reasons, for timezone reasons, whatever – but I think Rightshore is also the ability to combine the different building blocks of solutions for our clients.

SSON: To conclude on a personal note: what would you say have been the biggest lessons you’ve learnt during your time in outsourcing?

HG: Well, it’s been the most interesting period of my life because you need to craft for each client the answer he wants. You are a long-term partner; there’s no place for bullshit – sorry for my language! – or to explain things away that are not real. You know you are there for the next five, seven, ten years, so there is no place for complacency or for misleading people. You must tell the truth. It’s a strong partnership which I’d never seen at that level in my whole life before.

SSON: Finally, Hubert, what advice would you give an individual or organization just starting out on an outsourcing journey?

HG: For the buy-side, you need two absolutely clear requirements. Firstly, you need to clearly see where you want to go: where is the point you want to reach? And obviously you need to define that very very precisely. That’s the first point – and from that you will understand what’s the design, what’s the roadmap to go from A to B. The second point is, you need to have a strong project management to go through this journey. If you don’t have the right strong people internally, well recognized by the organization, respected, and with the right political support internally, you will face a lot of issues. So a clear roadmap and a strong player leading the journey.

SSON News and Analysis
Posted: 07/09/2012

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