Talkstar Australia: Russell Ives, IBM

In the run-up to Shared Services & Outsourcing Week 2012 (Australia), SSON is presenting some key speakers, and asking them to share tips on this year’s sourcing challenges. Barbara Hodge interviews Russell Ives, Director, Global Process Services, IBM Australia & New Zealand.

To listen to a podcast of this interview, and to watch a brief video-clip of Russell, click here.

Barbara Hodge: Russell, to start off, could you describe IBM’s operations in Australia and comment on the impact of the last two years on your business?

Russell Ives: Sure. IBM has close to 15,000 people in Australia and we provide services in the IT and the business process outsourcing space, we provide consulting and advisory services, and we sell hardware and software. One of the things that we’ve seen in the last couple of years, particularly with the impact of the Global Financial Crisis, is an increased pressure on all business in Australia to be a lot more efficient and a lot more effective at utilising their resources. We’re engaging in a number of discussions across the market at this point with organisation that are also looking, not only to be efficient, but to adopt best practices. One way to do that is through implementing shared service and outsourcing solutions to achieve faster implementation of best practices, and drive significant improvements in service delivery and cost reduction.

Russell, what about your own operations? How is the "new normal" of the marketplace impacting IBM shared services?

IBM was one of the earlier adopters of shared services, going back to the late ‘90s when we aggressively moved into a shared services environment – first, in-country, and then inside of regions, and now globally. We use the term "globally integrated enterprise" and it’s been a significant driver to cost reduction inside our organisation and one of the key factors behind the outstanding performance of the business over the last three or four years, when faced with the challenges of the GFC. As a user of those shared services I now can tap into our best HR, Finance and other specialist resources from around the globe to help me with my day-to-day activities.

Russell, when you talk about global shared services, how are you defining this?

Our operations are truly global. We have a number of global areas or centres of expertise that actually service multiple countries and multiple regions. These become focal points for best practice in those particular domains and it means we can deliver the best service, the best cost-point to our users inside of our organisation. It’s off the back of that that we’ve actually leveraged those skills and capabilities and gone to market ourselves to deliver best practice, business process and business transformation outsourcing solutions to our clients.

Outsourcing is becoming increasingly important within a shared services model. In fact, hybrids are becoming the norm for many organisations. In Australia, historically, there’s been a certain resistance to outsourcing – do you think attitudes are changing?

I think there are two things in particular that are happening. Number one: there’s increasing cost pressure across the board for all businesses and as a result, outsourcing in its own right – whether that be IT, BPO, etc – is becoming very important as a business strategy to actually drive cost savings. The other thing, which is perhaps equally, if not more, important is the role that Australia is playing in the global environment and the global economy. Increased globalisation means that Australians have to look more broadly at best practices, at how they operate in an integrated global environment. One of the things that we are tapping into is how you link outsourcing with the achievement of best practices. How can you tap into global best practices as quickly as possible? How can you acquire the best practice process, the best skill sets from the around the world so that you can deliver not only cost reductions but high levels of service to your particular customers? That’s where we see this intersection of shared services as a concept being accelerated by outsourcing as a vehicle to deliver those shared services outcomes.

Are you actually seeing more outsourcing contracts being signed?

One of the things that we did see in the early part of the post GFC phase was a number of organisations thinking about how they should do things more effectively and also waiting to see what the impact of the GFC was. Now that it’s becoming increasingly clear that we are in for turbulent times for a while to come, organisations are wanting to really do something – to get on top of their shared services strategy, to understand what value outsourcing can bring in that context. We’re seeing a lot more interest in not just shared services, but also outsourcing as a result of that. I think over the next 12-18 months we’ll see an increased uptake in both shared services and outsourcing as an accelerator to that.

In terms of promoting or encouraging economic growth in Australia, how do you think companies should adjust their sourcing strategies to make the most of the growth potential?

I think there are a couple of different angles there. When you’re looking at sourcing from a service provider perspective you need to consider: Number one, are you going to be able to achieve your cost savings? That’s the simple part. Number two: are you going to be able to achieve your transformational outcomes? Have you selected a partner that actually understands what best practice is, knows how to apply it and can actually align commercially with the transformational outcomes that you’re trying to achieve?

One of the things we’ve seen in the shared services and the outsourcing industry over the last 10 years is a shift from very simple labour arbitrage-based cost reduction to a very strong focus on process improvement and process transformation. The questions being asked today are: How can I change the way that I deliver products and services to my customers? How can I leverage my partners’ best practice expertise and their global experience so that they are now part of my team? That’s an important aspect now – how clients are actually looking at that sourcing question in terms of whom, why, and how they should engage with a service provider in that space.

What role do you think that Asian providers or Asian-based centres, whether captive or third party, might play in growth of domestic companies? Do you think there’ll be a trend towards setting up more offshore centres in Asia?

I think when you look at growth you need to consider the fact that you want to be able to invest in new products and services to your customer base that will actually drive increasing revenue and margins in the medium to long-term. If you can change your business model such that you can deliver some of those underlying capabilities to the organisation cheaper, faster, and more effectively, that means you free up capital to be able to invest in these growth initiatives and I think that’s where businesses are now looking at shared services and outsourcing as part of the growth engine. In other words: How do I optimise the middle, how do I take cost out, how do I free up capital such that I can accelerate the drive to new products and services to fuel my growth? It’s in that context that I think the offshore centres, whether they be in Southeast Asia, in India or in some cases even onshore – we’re actually seeing an increase in the use of regional centres – become part of that growth engine by optimising the middle.

Russell, the Australian labour pool is fairly tight – how are you at IBM fostering the talent you need to support your own growth in the region?

As I mentioned, we’ve got a "best-shoring" strategy and we’re actually investing quite heavily in regional centres and tapping into regional markets that do have labour. We’ve actually got a very focused strategy around investment in regional centres, quite often with universities where we can tap into a highly skilled labour pool. That regional centre provides a great labour pool, highly skilled at a slight cost reduction to the city centres; that’s part of the strategy. The second part of the strategy is to focus and continue to grow our global capabilities, particularly in the Asian region, and make sure that they’re skilled up appropriately, that they are trained to the skill levels that we require globally within IBM, so that they can service our clients regardless of which country they operate in.

In parallel to that we’re continuing to invest in our own skill sets and capabilities, because to really drive value across shared servicing and outsourcing you need people on the ground that understand our clients, who understand the market. We need delivery centres that have highly skilled, highly trained, highly capable people and we need to be able to stream them together effectively as part of our clients’ teams.

Russell, thank you so much for your time today. We look forward to hearing a lot more from about IBM at Shared Services & Outsourcing Week in Australia 2012.

To listen to a podcast of this interview, and to watch a brief video-clip of Russell, click here.