Bringing a smile back to Irish eyes

Every time I’ve heard about Northern Ireland in the past few months it has been linked to a depressing story of decline and redundancies. Usually the BBC is calling me up out of the blue and asking for some comment on another call centre that is laying people off.

So, it’s good to see Firstsource hiring extensively. They recently announced another 100 jobs in Derry and just announced a further 150 yesterday.

I saw the team from Firstsource in London recently at the National Outsourcing Association annual awards – one of which they actually won – and they seemed upbeat about prospects.

Northern Ireland does have a great story to tell, as I kept on reminding the BBC during those bleak on air radio discussions about redundancy. Perhaps those Irish eyes will be smiling again with this latest news and a resurgence of confidence in the services market there.

It's not all doom and gloom in the banking sector

Lloyds banking group just announced 5,000 more jobs will be slashed before the end of 2010. This comes just after the news that 4,000 or so jobs will be going at the Royal Bank of Scotland.

It’s worth noting that the areas most affected are IT, collections and payments – typical areas where outsourcing can be used.

I’m not suggesting that Lloyds is creating job losses because of outsourcing, but take a step back and look at what’s happening in UK retail banking at present. The government is selling off their stake in Lloyds and RBS, the money pumped in to save these banks that eventually meant they became public property. That’s meant to encourage more competition on the high street.

And it will. Within the next five years, there will probably be at least three new names on the market – new national bank chains that never existed before, with Tesco as frontrunner, but how are they going to ramp up so quickly?

All these new banks will need to create the infrastructure needed for a national bank almost overnight. That means they will assemble the best-of-breed systems and connect the dots – it’s going to be outsourcing heaven for retail banking analysts in the UK.

But in any case, one thing is sure and it happened about one year ago. Tesco hired Sandeep Dhar to head up their back office in India, and Dhar has a background in retail banking at Citigroup and ABN AMRO. Is Tesco one step ahead of the game again?

How India's IT industry is changing

The London School of Economics (LSE) Asia Research Centre has just published a paper by a friend of mine, Raja Mitra, titled IT Industry in Transformation: Opportunities and Challenges for India.

I know few people have time to read 100+ pages of academic consideration of what’s happening in the outsourcing business, but Raja has done a good job of making this paper relevant to what is really happening.

Some of his observations on the outlook for the next decade are:

• Global spending on IT and offshoring will grow significantly, creating more opportunities for countries such as India;
• Growth in India, China, and other Asian economies will eventually make these societies very large markets, ready to consume IT services rather than just export them;
• Indian firms in IT services will no longer be primarily servicing clients from India, the firms will offer far more global delivery.

The paper is an excellent overview of what’s happened to the sourcing industry in India since the recession started to bite. And Raja is particularly critical of the lazy habit in India of predictions becoming gospel. We have all read plenty of media stories about growth targets for this company or that company, or the industry in general. Often these targets end up reported as achievements, so Raja is quite critical of the quality of data the Indian industry produces to measure itself.

It’s well worth a read, with some really good observations on recent trends in the industry.

You can download a free copy of the LSE paper here.

When not to outsource

There is an interesting case study for Blank Label shirts in the latest edition of Forbes magazine.

As a new venture designed from scratch, Blank Label outsourced both manufacturing of the shirts and the design of its web site. After months of troubles, now only the manufacturing is outsourced.

The owner of the company found it too difficult to specify exactly what he wanted on the site and so design decisions were left in the hands of the development team, who invariably made poor choices. It’s a nice example of what can be easily specified and outsourced and what’s more difficult to pin down.

Blank Label found developers from sites where the individuals advertise their skills - freelance techies for hire online. Clearly this model works for small pieces of code that can be put together then sent by email, but is it possible for a small startup to outsource software development at a very early stage? I’d suggest that while the platform is still being designed, as a part of the development process, it’s a mistake to use people who don’t have any motivation other than cash. You need people who want to see the entire project, or company, succeed.

In this example, that’s how they proceeded, by bringing the tech work back in-house, but I’d be interested in some more ideas on how it could be managed better in the case of a small company.

The blog of the video of the launch of the book of the blog

Last month I launched a book of this blog. Many readers showed up at London South Bank University (LSBU) to see me talk about the blog and what’s contained in the book – thanks to all of you who did come that evening and I hope you enjoyed the hospitality of Steria who funded all the food and drinks that evening. I can never say thank you enough to people who supply a free bar.

If you failed to show up at LSBU that evening for the launch then you missed:

• Monopoly money being scattered all over the audience as I talked about the recession;
• Me playing football with the audience when talking about outsourcing to Africa and the FIFA 2010 World Cup;
• Me changing shirt four times while still delivering the talk;
• Audience members waving placards to declare whether they are trying to buy or sell services;
• Me serving audience members with McDonald’s food to describe the impact of the cloud and software as a service.

Don’t believe me? Why not take a look at the edited highlights below:

 

The top six mistakes in outsourcing

Another of the speakers at last week's seminar on transformational outsourcing, hosted by KPIT Cummins. Steve Fisher from KPIT Cummins gave a quick guide to the top six mistakes made by organisations when they enter into an outsourcing relationship and I thought it would be worth repeating here:

The top six mistakes in outsourcing:

1. Underestimating the cost and complexity of managing the relationship with a vendor.
2. Overestimating the cost savings (linked to point 1 especially in the short term.)
3. Selecting a country for offshoring plans before defining your objectives.
4. Failing to tell your employees what you are planning and what you are doing when a plan is put into action.
5. Selecting a single-source provider to do everything.
6. Failure to put retention plans in place for talented people.

It’s a short list, but direct and to the point.

Managing a crisis by outsourcing

I spoke last week at an event on transformational outsourcing hosted by KPIT Cummins at the Institute of Directors.

The focus of my talk was on outsourcing trends. At least it meant I could look back at my own blog to see what I had been talking about recently.

I was particularly interested to hear a presentation by Marcus East, the former chief executive of Breathe Internet and these days working on the music technology platforms being promoted by Peter “Sledgehammer” Gabriel.

Marcus came into Breathe when the company was almost falling apart. Multiple acquisitions and fast expansion meant it had infrastructure all over the place, a very expensive billing platform, and customer service was a disaster.

He saw outsourcing as a tool that could potentially save the business, and it was that threat of going to the wall – after all those expensive ads had been filmed – that focused minds at the company.

Marcus took four initial steps:

1. Win new customers and clients;
2. Service those existing clients;
3. Evaluate and optimise the present offerings;
4. Implement and improve the marketing plan.

These might sound obvious when listed like this, but his description of the company at the time he arrived made it sound like someone frantically running up the down escalator; just running to stand still.

Marcus found that by outsourcing to a pool of suppliers, he could get best practice in each different area, along with other benefits such as the increased control over what is delivered. He said: “If you have a big internal team then there is always a culture of it not being their fault when things go wrong. There is always an issue beyond their control so it’s hard to pin down where issues really exist. Once you outsource, there are stiff financial penalties on your supplier and everything is clearly documented.”

Marcus said that Breathe also managed to reduce its headcount because of the outsourcing programme, though it was not an explicit target that drove the strategy. He said that it was more of a bonus that costs were reduced as they tried sorting through the mess.

The most important advantage was that Breathe could start responding to what clients really wanted. He said: “We could start responding to client needs immediately because we had better, more flexible, systems. And importantly, there was far less requirement for capital expenditure. We used to need new routers, switches, and hardware all the time. Once we had outsourced the network, the hardware being used was the problem of the supplier. We only worried that the network was serving our customers well.”

The case was an interesting example of how outsourcing can be used to transform a business, particularly in a crisis. Cost is often cited as the number one reason to outsource, so it’s always fascinating to hear an example where the company had to outsource – or they would be no more.

It's awards season and my lips are sealed

One evening last week, I was at the Philippines embassy in London with National Outsourcing Association (NOA) chairman, Martyn Hart. We were there to present the ambassador with the 2009 NOA award for best offshoring destination.

The awards took place a couple of weeks ago, but unfortunately the Philippines embassy staff had not been present. One of the good things about the NOA awards is that shortlisted candidates don’t get a tip-off about whether they have won or not. These days some people seem to insist on these hints as a condition for buying a table at the awards ceremony, and in my opinion, giving away the winners before the ceremony is all wrong.

I was directly approached a couple of times by shortlisted firms and asked if I could give an “idea” of the result so they knew how many seats or tables to book, and I know from other judges and the organising team that others on the judging panel were approached too.

I’m not being critical of the Philippines government though. They actually seemed to have a genuine mix-up between London and Manila on the budget, so in the end nobody booked any seats at the event. But thanks to that SNAFU, they had the good grace to arrange a drinks reception last night that allowed several NOA directors to meet with the ambassador and his commercial team - that was really nice of them.

We are now in the countdown to the UK IT Industry Awards, this year being held jointly by Computing and the BCS. I was also a judge on these awards and I invested a lot of time in reading about the entrants I had to judge and then interviewing each of them in person. Along with all the other judges, I put a lot of time and effort into that process and I believe that the awards will reward the best IT companies in the UK today.

If an over-enthusiastic PR thinks that a free lunch from their shortlisted client is going to get the result from me then they might need to start thinking of a new career. See you at the next black-tie ball!

Legal services in line for offshore growth

Lloyds Banking Group is negotiating to purchase CPA Global for around £400m. CPA Global is one of the leading lights in the legal process outsourcing (LPO) market, offering services such as patent writing.

The deal is attracting press attention because Lloyds is effectively a public company since being bailed out by the British taxpayer – and most politicians would rather see the banks extending their services to small businesses, rather than negotiating big buy-outs.

Putting the political controversy aside, it shows a strong level of support for the future of LPO in general.

I can recall being invited to give a keynote lecture on LPO at a conference in Bangalore three years ago. The conference was eventually cancelled, not because I was speaking, but because there was still very little interest in the outsourced legal services market.

Last week, I was at a talk by Shalini Agarwal of ALMT Legal. She described how ALMT had started hiring people in India to perform paralegal services and their Mumbai office is now employing many times more people than London. In fact, after acquiring all this offshore experience, ALMT are offering outsourced services to other legal firms.

All this interest in LPO comes several years after the predictions for an explosion in outsourced professional services. By nature, many law firms are quite conservative about new ventures. It seems that conservatism prevented the predicted boom, but the underlying truths of LPO still exist – and now many companies are starting to explore them.

Outsourcing and the recession (which just got worse...)

I just finished my morning keynote talk to the Forrester Services and Sourcing Forum 2009 in London.

My own focus was on three main areas: the effect of the recession on the sourcing market; the effect of consolidation on the IT and business process outsourcing markets; and observations from my recent book Talking Outsourcing. When I wasn’t quoting trends from my own book, I was using recent data from the National Outsourcing Association.

As I started, I noted to the audience that new economic figures were due out while I was going to be on stage. All the economists I had read were predicting that the UK would be out of recession this morning. When the numbers came, it actually showed we have plunged even further into recession. It’s now the worst UK economic downturn since the Second World War.

So, let’s hope that some of the market confidence I talked about in my presentation remains.

My focus on consolidation was really about the willingness of organisations to adopt virtual delivery methods – in particular software as a service, and the cloud. I talked about self-service outsourcing, and every single presentation I heard by someone else talked about the cloud being the future for services.

The slides I used for the Forrester event should be available soon on the Forrester web site. If you want to see what I presented to the forum and you can’t find the slides, then just drop me a mail and I can give you a copy.