We have a new guest columnist – Eric Hochstein, Managing Director of Highstone Associates, Inc., a business and economic development consultancy based in Chicago, Illinois, has been involved in the outsourcing industry for more than 10 years, and previously worked in the telecommucations, contact center, and Internet software industries. He was also a Legislative Assistant to members of the United States Congress.

By Eric Hochstein

Outsourcing bothers many Americans. You hear it when politicians talk about the loss of “American jobs” to places like India, China, and the Philippines. A lot of Americans, particularly working-class Americans who are suffering through a devastating recession, feel that outsourcing is evil and call it one of the causes of the economy’s problems.

President Barack Obama has begun to capitalize on the public’s anger by pointing towards companies that have “outsourced American jobs”. He’s promoting “insourcing”, which combines “reshoring” of jobs that had been sent offshore and “homesourcing” jobs that could have gone to another country. And he’s promoting insourcing as a trend, which is helping to put Americans back to work.

The President pits “insourcing” against the “outsourcing” evil, while the issue is not really “outsourcing” but “offshoring. The President isn’t against outsourcing – he probably doesn’t care who is doing the work as long as it is being done in the United States. And he also combines supply chain/ manufacturing offshoring and technology services/business process offshoring. It’s all about U.S. jobs moving offshore.

In January, he hosted a White House Forum on Insourcing and he talked about insourcing in his State of the Union address. Just this week, he went to America’s heartland to laud Master Lock, a world’s largest maker of padlocks, for bringing 100 manufacturing jobs back to the company’s headquarters in Milwaukee, Wisconsin. It’s a theme he’s bound to return to this year as he simultaneously tries to reboot the economy and runs for a second term in office.

It’s one of the few no-lose political issues for the President in this election year. He can applaud companies that bring back jobs that they shipped out a few years ago because they could not compete profitably. He can vilify companies that continue to send jobs overseas, promise new tax incentives for businesses that keep jobs in the U.S. instead of sending them offshore, and threaten to eliminate tax breaks for companies that send work and jobs offshore.

And political opponents can’t oppose insourcing. Jobs are returning.

It’s just that homeshoring and reshoring may be (re)creating jobs in the U.S., but are not going to be the only answer to America’s economic ills.

The once-vibrant manufacturing sector in the U.S. struggled around the millennium. Employment in manufacturing decreased by almost 6 million jobs from 1999 to 2009. Companies shifted work overseas to meet competition and take advantage of lower costs, while also meeting demands in emerging markets.

Now, it appears that manufacturing in the U.S. is bouncing back. 237,000 new jobs were added in 2011, the most in the sector since 1997. In January 2012, 50,000 jobs were added. A very small portion of these jobs appears to be from work being brought “home”, but some are.

In fact, at Master Lock, the 100 jobs that returned from China, were only a small portion of the jobs that were lost to factories in Mexico and China. In the 1990’s, the Milwaukee plant ran at capacity with about 1,300 employees. Today, the company only needs about one-third that number. The President highlighted the 100, and ignored the larger number.

Yet despite that math, President Obama’s economic fortunes may be brightening at the right time in his first term. With about 9 months left before the election, and with four Republican candidates battling desperately for their party’s nomination, the U.S. economy is slowly gaining momentum and Obama’s approval ratings have just nudged above 50% for the first time in more than eight months.

Until recently, most pundits had hypothesized that American manufacturing was doomed due to lower cost offshore production and were resigned to the “fact” that most American technology jobs could be done by people in lower cost emerging economies at one-third the hourly cost.

Now, realities have hit home –companies are finding that there are things that are better done closer to the customer in both the supply chain and information technology. Distance apart and time zones away hinder innovation, flexibility, responsiveness and time to market. Investments in productivity technology have reduced costs (and perhaps eliminated the need for assembly-line workers), making domestic production more efficient and competitive. Costs are increasing rapidly in both India and China, and the once abundant supply of qualified labor is being stretched thin. As a result, it appears that the velocity of offshoring from America is slowing.

But only a few of the jobs that were lost in the past two decades will ever be reshored. There are still many types of work that can be done cost-effectively and satisfactorily anywhere in the work. Few of these will return to the U.S. And American-based global firms are finding that their customer bases are spreading rapidly around the world and some things are better or more cost competitive when they are produced closer to the customer, who may turn out to halfway around the world from Milwaukee.

By Chris Zappone

Westpac employees are bracing for the loss of as many as triple the number of job losses already announced this week as the bank adjusts to a weak economy and higher funding costs.

As many as 1500 more positions could be at risk, adding to the cuts of 560 already announced.

“We’re conducting consultations to a number of our employees around changes to our staff,” said a spokeswoman for the bank.

The bank has been cutting jobs since the end of last year, when it shifted about 200 back-office jobs offshore.

On January 19, a spokeswoman for the bank said the bank planned to cull more positions this year.

“We can expect that staff numbers will decrease as we reduce higher cost contract-based staff and reduce duplication in roles at head offices,” she said.

Analysts from UBS tip that as many as 7000 banking jobs may be shed in Australia in the next two years, as demand for loans slows and households reduce debt levels.

Read more: http://www.smh.com.au/business/westpac-set-to-announce-job-cuts-20120202-1qulx.html#ixzz1lBm7oHKx

By Martin Conboy, Editor – The Sauce

We spoke on many occasions last year about the rise and rise of the Australian dollar. It’s hard to believe that in the year 2000 one Australian dollar would buy a miserly 55 USA cents. Fast-forward to today and one Australian dollar will buy you a whopping US$1.06. Over the same period the A$ is worth twice as much in Indian rupees and 70% more in Philippines pesos. This started to accelerate in the last 2-3 years and partly explains the rapid uptake in BPO work being shipped off to Asia. From an economics point of view it’s to financially attractive not to consider it. In the last two years, the Philippines has grown to 17,000 seats that service Australia, there has been renewed focus since the GFC as operating costs have become extremely important to companies looking to tidy up their balance sheets.

The Australian mining boom started to become a factor in 2003 and since then, except for the GFC our dollar has steadily grown to be more expensive when measured against other currencies.

This year we’ll see more painful evidence of Australian businesses accepting the new reality: our dollar is likely to stay uncomfortably high for years, even decades. There are causalities as the high dollar is killing our tourism, retail and international education sectors – of that there is no doubt. As I said above, the A dollar is now worth US106¢, compared with its post-float average of about US75¢. But that’s not the full extent of its strength. Currently at about 81 euro cents and 67 British pence it’s the highest it’s been against those currencies for at least the past 20 years. Australians are taking advantage of this and going on overseas holidays in droves.

“We have to face it, Australia is now a high-cost destination,” the former Qantas chief executive Geoff Dixon told the Australian Financial Review a fortnight ago. “We can talk about it, we can wring our hands, but to spend too much time complaining about the currency is self-defeating.”

However by lowering the prices of imports i.e. BPO services purchased in the Philippines or India, it spreads the love to these countries. In effect, it transfers and distributes income to all those Asian businesses that supply BPO services. In terms of social justice that’s a good thing as it makes these countries less dependent on foreign aid as they learn to support Australian businesses and the multiplier effect, as the money ripples through their economies and reaches into all corners of their economy, means that everybody gets a taste. There is no doubt that it helps to float the economy boat in the countries that have BPO service providers.

Australia does not have a people shortage problem, what we have is a skills shortage problem. The mining and construction boom, mainly in Western Australia and Queensland has acted like a giant vacuum cleaner, sucking up all available labour resources to fuel the insatiable demand. Not only do we have a skills problem our young people also have an adversity to working in the service industry, somehow it’s beneath them. So even if their was no mining boom gobbling up all of our human resources we still can not get people to work in call centres and local outsourcing shops.

So what choice do Australian businesses have, they cannot get people and they cannot get people with the right skill sets and the right motivation. Yet their customers still expect first class customer service, telephone calls answered in less than 3 rings by a happy chirpy operator.

This creates pressure for resources – capital and labour – so when Australian companies look at places like the Philippines all they see is plenty of people who are ready, willing and able to work and at about half the price to employ them compared to Australia and with a university education. Once they take the first tentative steps and get going with their projects these companies realise that the quality of the knowledge workers is a on a par with local home grown agents if not superior to them and it all becomes far to easy.

This helps to change the structure of the Australian economy in response to Asia’s “comparative advantage” – the things we do best among ourselves compared with the things other countries do best, like BPO services.

As businesses recognise the rise in the dollar is more structural than temporary and start adjusting to it, painful changes occur, including laying off Australian workers. As I mentioned last week, we need to consider softening that blow. One place to start is to think about retaining our workforce and reskilling them for the new normal.

By Mark Atterby – Senior Staff Writer

A range of countries are aggressively competing for a slice of the global BPO market, which is expected to grow at an annual rate of 5.4 percent to $93.4 billion in 2015, according to analyst Ovum. As India becomes more expensive, the Philippines, , Africa and Latin America are rolling out the welcome mat for outsourced business processes at the low to mid-point of the value chain.

Providers, industry groups and governments at all levels will ally to develop incentives to attract BPO jobs. Lures will include breaks on taxes and fees, as well as free or low-cost courses to improve residents’ business English skills and technological know-how. New locations in South America, Africa and Asia Pacific have emerged where providers have developed global delivery networks to address requirements centred on language skills, time zone proximity, and cultural sensitivity.

BPO is among key sectors the South African government has identified to grow the economy and create jobs. In 2009, South African BPO sector was estimated to be directly employing more than 60,000 people and accounting for a further 75,000 indirect ones. Time zone wise, South Africa is ideal for Europe.

Over the last couple of years a number of UK companies have repaticated projects out of India over quality of service issues. South Africa provides ideal positioning to Europe in terms of time zones and is being promoted as a destination that claims to offer quality had very affordable rates.

Yusuf Timolfrom the South African High Commissioner in London, said in a recent news article that there were huge opportunities for capturing India-based BPO work in 2012 and beyond. “South Africa is well positioned to fill this void as we are able to provide quality at an affordable price.” In 2009, the South African government launched an R1.1bn support programme to enhance the competitiveness of the BPO sector.

English-Spanish language skills, a young, highly skilled BPO workforce, cultural similarities and a good time-zone fit with north America is making Latin America a very attractive outsourcing destination for North American companies. Brazil, Mexico and Argentina have been showing signs of becoming serious contenders as key outsourcing destinations in recent years

Closer to home the Philippines has become a major destination for BPO operations.

The Philippines Government works extensively in offering investors incentives and opportunities. The Philippine government launched a range of fiscal and non-fiscal incentives to attract BPO investors as part of the 2007 Investment Priorities Plan. This plan has helped turn the Philippines into a growing BPO powerhouse.

Since 2007 the BPO industry in the Philippines, according to figures from McKinsey Quarterly, the BPO industry has experienced 46% annual growth and is now valued at over $US 6 billion. The BPO Association of the Philippines estimates that over 600,000 are employed in the BPO industry. 17,000 service the Australian market.

The Philippines is a convenient location for Australian organisations. It fits relatively well into Australia’s time zone and it is not that far to travel to. A highly skilled and motivated workforce that has very competent English skills is available. And it’s in expansive compared to Australia.

According to a recent study by CB Richard Ellis, the Philippines is one of the most cost-effective outsourcing destinations in Asia. Comparing 15 central business districts in Asia Manila was ranked second cheapest with lease rates of $US 19.1per square foot/annum, next to Jakarta’s $16.3. This compares to Sydney CBD, which ranges form $450 to $1,100 depending on building and location.

The Philippines government has developed special economic zones in various cities across the Philippines and are being put in place to serve as central hubs of activity, where the agricultural, industrial, commercial, and recreational aspects of everyday life can work together. Enterprises operating within these zones are offered substantial tax cuts to invest and grow their business.

It seems everyone wants a slice of the BPO pie. The competition between the new and emerging destinations shall fuel the future growth and evolution of the industry. As existing locations become overheated and the availability of sufficient talent dries up, the emergence and development of new destinations will be eagerly fostered by governments looking to give their citizens access to jobs.

India beckons … so too do the Philippines, China and African countries where outsourcing operations like this call centre. Photo: AFP

Finance sector workers are under threat from the global drive towards outsourcing, write Matt Wade and Mark Hawthorne.

ANZ’s global website had 55 jobs advertised at its new Manila operation this week. They ranged from a new head of human resources to credit risk officers and business analysts. Almost all required a high level of university education, two years of similar experience and fluent written English. A further 10 jobs are available with the bank in Indonesia. But not a single job is being advertised in Australia.

It’s a similar story across the financial services sector.

Run the numbers and it’s easy to see why banks are transferring jobs overseas. An Australian-based credit risk officer with NAB told Weekend Business a “reasonable wage” was $60,000 a year, up to $80,000 for someone with more experience.

In Manila, jobs for overseas banks are advertised in local papers, to work out of one of the many brand spanking new offices near the capital.

Jobs for credit risk officers working for overseas banks – which one is never identified – are being advertised at between 20,000 and 30,000 pesos a month, equivalent to $5000 to $7800 a year. For that a university education and a minimum of four years of similar experience are needed. The jobs websites and newspapers in Manila are filled with ads for such jobs.

So far Australian companies have not pursued overseas outsourcing as aggressively as businesses in some advanced economies. One reason is the strong performance of the Australian economy, especially compared with US and Europe.

But as technological innovations expand the range of activities that can be outsourced, the number of service sector jobs that are vulnerable to offshoring has grown, at least in theory.

Modelling commissioned by unions, including the one representing financial sector workers, showed at least 250,000 jobs across Australia’s service sector could be susceptible to outsourcing, especially in finance, telecommunications and IT.

And as economic storm clouds threaten, there is growing scrutiny on business costs, especially in the financial services sector. A report this month by the UBS banking analyst Jonathan Mott predicted Australian banks were set to shed thousands of jobs and come under increasing pressure to move more operations to cheaper locations overseas.

“Opportunities to achieve cost savings by moving processing offshore to India and other areas are now likely to be re-investigated,” the report says.

In the boardrooms of Sydney’s Martin Place and Melbourne’s Collins Street, talk of a “white-collar recession” in banking and finance has been going on for months. It’s only in recent weeks that the extent of the losses has been becoming clear.

After slashing 3309 jobs last year, according to figures from the Financial Services Union, more pain is in store this year. The big four banks are expected to slash a further 2 per cent of their Australian workforces in both this year and next, in the face of rising borrowing costs caused by the euro zone crisis and amid fears of global recession. That’s about 7000 jobs.

“This will be bigger than the job cuts that followed the GFC [global financial crisis],” says an ANZ executive, off the record.

But, while the Australian workforces slide, the number of staff employed in Asia by Australian banks continues to grow.

“If you look at our operations site in Church Street [Richmond], there are now two empty floors,” says the ANZ executive. “All those jobs have been outsourced to Manila. There have been no announcements, just creeping cuts across the staff numbers.”

When discussing international wage discrepancies, the former Victorian premier Jeff Kennett raises an eyebrow. “I’ve long held the belief that in Australia we are pricing ourselves out of global markets,” he says.

“We are a very highly paid nation of people in some areas, and it’s making it hard for many industries to compete. In particular I look at the retail sector, and the penalty rates, the double time and triple time, paid on a Saturday or Sunday. These are the leisure days, when people are out spending money, but the retailers and restaurateurs of Sydney and Melbourne will tell you it’s impossible to make a buck. It’s an issue we have to address as a society.”

The global outsourcing industry has thrived on economic crisis. The dotcom bust of 2001 sparked a boom for IT service providers in India as US tech firms cut costs by sending operations offshore. India’s business process outsourcing firms – or BPOs as they are known – then prospered when the global financial crisis smashed the US finance sector and teetering financial institutions scrambled to slash costs. When the global economy was in the doldrums in 2009, India’s 20 biggest BPOs managed to grow their export earnings by 15 per cent. The industry’s second-biggest player, TCS BPO, grew by 73 per cent.

Now, with tougher times again forecast, the Financial Services Union fears foreign firms will soon be getting more work from Australia.

Leon Carter, the union’s national secretary, says 5000 jobs have been sent offshore by the financial services sector in almost four years.

“The bulk of those jobs have gone to Bangalore, some have gone to Manila and also New Zealand,” he says. The banks’ outsourcing slowed during the global financial crisis but is now gathering pace again.

The big four have adopted different approaches to offshoring. NAB and Westpac have outsourced operations to specialist business processing firms while ANZ has adopted a “captive” strategy where it directly employs staff in lower-cost Asian countries. ANZ has recently opened “operations hubs” in Manila and Chengdu, in China, to go with a long-established centre in Bangalore.

The ANZ’s chief, Mike Smith, has emphasised the importance of these hubs, which facilitate the bank’s operations across Asia, not just Australia. “Our investment in our operations hubs continues to support our productivity agenda and we’re also placing a stronger emphasis on generating ongoing efficiencies,” he said in November.

“This isn’t a matter of reacting to events, but of dynamically managing our costs to reflect our business strategy and the market conditions.”

Commonwealth Bank is the only one of the big four, which has not opted for much offshoring, Carter says. “I think they understand that keeping work here … can be a positive differentiation from the other three,” he says.

Despite the deteriorating outlook for banks, Commonwealth is holding firm. “We don’t offshore and we have no plans to offshore,” a Commonwealth spokeswoman told Weekend Business yesterday.

Like the Commonwealth, smaller “second-tier” banks have not opted for major offshoring.

Among the insurers, Suncorp says about 100 jobs have been “impacted by partnering activity” over the past six months. The union says it has plans to send off many more.

Telstra is another big employer that has reduced costs by outsourcing operations over the years.
Carter says that the profitability of Australian banks means there is no justification for sacking Australians and sending the work overseas. “These institutions, particularly the big four banks, are incredibly profitable and they can afford to protect Australian jobs,” he says.

“They have an obligation to the community, the country, and part of that obligation is protecting Australian jobs. Yet they continue to sacrifice Australian jobs on the altar of profit.”

Attention has recently been fixed on troubles in the manufacturing sector but the political heat could shift to the finance industry if job losses in the sector mount. Banks and insurers are likely to come under pressure not to send operations overseas.

A Westpac spokesman says it continues to “access specialist skills from its global sourcing providers” but has no specific targets.

“Our partners provide us global scale and capability that we could not achieve on our own.”
Westpac’s chief, Gail Kelly, has tried to shift the debate by talking about “best sourcing”. “It’s called best sourcing rather than outsourcing because in some cases we in-source as well,” she said in November.
A spokesman for National Australia Bank says with a workforce of 44,000 worldwide, numbers “will fluctuate in various parts of the business at times due to the completion of programs, outsourcing of some projects and continuing focus on efficiency”.

He says NAB always tries to redeploy people within the business.

The union says offshoring is being done to please big institutional shareholders at the expense of workers and customers.

“If we want our banks to be run to benefit the rich shareholders, then we will see an increase in job losses and in offshoring,” Carter says.

The union wants more regulations to make it harder for banks to send jobs offshore. It has successfully campaigned for a financial sector “right to know policy” to be included in the ALP’s policy platform which, if legislated by the federal government, would require financial institutions to get customers’ permission before sending personal financial data offshore.

If adopted, this rule could make it much more difficult for banks to efficiently deploy back office operations offshore. Surveys done by the union have found more than 80 percent of Australians believe their financial data should not be sent overseas.

“If we can expose the practice and make the banks and insurance companies say out loud that they’re sending Australian data – that is deeply personal financial information – overseas, as well as Australian jobs overseas, that is not an argument they will win with their customers and as a result offshoring will be substantially reduced,” Carter says.

“We are working very hard with the government to get that policy position converted into legislation.”

The government has so far resisted the union’s push but it is working with the independent senator Nick Xenophon to introduce a private member’s bill on the issue.

Carter says offshoring is “all about cost reduction” but advocates for the outsourcing industry, such as Sri Annaswamy, director of the Sydney outsourcing consultancy Swamy and Associates, say it now offers much more than just lower costs.

Cashed-up Indian outsourcing firms are moving “onshore” by buying back-office operations of financial institutions in the US and Europe.

They have developed expertise to “use capital in back offices more efficiently”, Annaswamy says. This includes selling the services of back-office operations, once only available to the financial institution, to third parties. “It’s no longer just a cost game,” he says. “That is a point people often miss.”

Annaswamy sees signs of this process in Australia. Last month, the Indian technology giant Infosys purchased the Australian consulting firm Copeland. “They have found that getting an onshore skill set, particularly for procurement consulting for their BPO, was a great benefit.”

He says it would be counterproductive and xenophobic to introduce regulations to contain or prohibit the latest innovations in outsourcing. Instead, Australia should welcome Indian BPOs and work to create an outsourcing industry here.

“These companies are willing to make massive investments and employ thousands of people.

“To speak of them as some sort of slave traders trying to take jobs away from Australia is an absolute nonsense. The best way is to proactively embrace them and show that our own back offices can be transformed.”

The global outsourcing industry has changed dramatically over the past decade but is still in its infancy.
It is bound to throw up challenges for companies and workers in high-wage economies such as Australia for some time yet.

Source: Sydney Morning Herald

Banking has become a fundamentally more difficult practice in the wake of the 2008 financial crisis, note Celent analysts in their annual discussion of the trends in global banking. Banks in North America and Western Europe remain under pressure, while banks in Asia, Australia, and Canada are beginning to do much better.

“China, Canada, and Australia seemed well positioned for 2011,” says Bart Narter, senior vice-president of Celent’s Banking Group. “The United States has benefited from stabilizing of loan losses, but regulatory pressure on retail revenues loom large. Europe is mired in the crisis.”

The group sees two key business drivers:

1. Many economies are in low-to-no-growth mode: Banks must do more with existing customers in order to grow, and must reduce costs in order to improve profit.

2. Digital channels are taking on new importance in all geographies with smartphone penetration increasing everywhere.

The drive to reduce costs and the reality of the huge growth in mobile and smartphone usage is driving banks to think even more about digital channels. Digital channels can mean internet banking, personal financial management, mobile banking, mobile marketing, and tablets. All have been changing (and will continue to change) the shape of banking. Banks across the globe are building-out mobile capabilities and investing in improving the internet banking experience on both the retail and commercial sides.

Another consequence of huge cost pressures is the increased appetite for outsourcing, which manifests itself in many ways, including:

1. Replacing internally developed systems for off-the shelf systems.

2. Using SaaS through an external provider, perhaps in an external cloud, perhaps in an internal cloud, or perhaps in a bank-dedicated outsourcing facility.

Outsourcing means more than just business process outsourcing. It can mean shared systems in a service bureau, software as a service, internal clouds, or external clouds. It can also mean new business models in existing spaces, or using off-the-shelf software instead of internally developed systems. Banks are more willing to use other parties to solve their technology and operational challenges.

The continuing focus on risk and compliance is putting more emphasis on analytics. That means understanding the customer better through data the bank already has or can acquire. This insight can be used to better retain customers, better market to them, better understand their risk to the bank, and better predict when they will visit a branch.

In markets where economic growth is low, such as the United States and Western Europe, banks need to gain greater wallet share of existing customers. In both areas, banks are realizing that they have lots of data that can inform risk, pricing, cross-selling, and staffing. That realization has yet to turn into reality in most cases, however, but this is an area that is becoming strategic for banks across the globe.

Source:Celent

As more and more Australian banks and accounting firms announce plans for job cuts, the Finance Sector Union has warned that the four largest banks may be poised to send as many as 1,000 finance sector jobs overseas to India and elsewhere in an effort to cut labour costs, according to a report by the Australian Financial Review.

Australia and New Zealand Banking Group (ANZ), Westpac Banking Corp and Ernst & Young’s Australia office all this week announced job cuts, with more expected.

“A whole raft of the jobs will disappear but a number of the jobs will be sent overseas,” FSU national secretary Leon Carter said, according to the AFR.

The Minister for Workplace Relations and Acting Treasurer Bill Shorten commented on the situation, but said it was unlikely the government would intervene. “I’m not going to second guess every banking management discussion,” Mr. Shorten said, according to the AFR. “In my experience, there’s always a cost when you lay someone off, there’s always a cost to retain someone. I think the medium-term prospects for financial services in Australia in the next five years are solid. In the medium term, prospects are good, in the short term, times are tough.”

One analysis suggested the financial sector could see as many as 7,000 jobs disappear as banks cut costs in response to global uncertainty, according to the AFR.

By Mark Atterby – Senior Staff Writer

The smarter use of technology and the expanding use of social media continues to redefine the job role of marketing people. According to a recent study from IBM, marketing professionals need to focus more on measuring and delivering ROI, discover new means of delivering value to savvy customers and develop strategies that generate loyalty. Outsourcing may have a key role in helping marketing professionals meet this challenge.

IBM recently released a new marketing study titled, “From Stretched to Strengthened” based on interviews with more than 1,700 Chief Marketing Officers (CMOs) from around the world. The study highlights three areas that marketing professionals need to work on to help their organisations:

1. ROI. There’s the old adage that states that only half of your marketing spend brings a return on investment, but it’s hard determine which is the half that is working. In today’s business environment, however, marketers have to apply greater financial discipline to all of their programs. In the past, marketing professionals had the tendency to be somewhat laissez fare when it comes to quantifying the return of their marketing expenditure.

2. Delivering value to savvy and empowered customers. Customers have so many interaction choices and not all of them can be treated in the aggregate as marketers have done in the past.

3. Foster lasting connections is all about enhancing customer loyalty and encouraging satisfied customers to ‘share’ the marketing effort by becoming active advocates for the brand, product or company. The companies that achieve this have a huge advantage. Dissatisfied customers have many options today and are very quick to publicly share both positive and negative opinions to their social networks.
Essentially, customers are becoming less loyal, their attention span is increasingly diminished, but their expectations continue to escalate.

To some extent there is nothing new in these challenges – organisations and customer service departments and contact centres have dealt with these challenges for years. But the speed things change these days, which is largely driven by technology, adds a different dimension to them and how an organisation manages them. These challenges are by no means easy to address.

Jeroen de Punder, Chief Marketing Officer, Ricoh, Netherlands, is quoted in the report, “Marketing people will need unique skills in the near future. They’ll need to be capable of integrating marketing and IT — like footballers who can kick with both feet.” From managing a variety of communication channels to understanding customer behaviour through Business Intelligence and analytics, marketers need to be far more savvy with technology and how it can be deployed to achieve their objectives.

Organisations are collecting vast amounts of data about their customers, but few are making effective use of it to create strategic insight. It’s not just up to marketing to manage or make use of this data, it needs to be analysed and used by the entire organisation to deliver the products and services that customers will buy.

In many cases the necessary skills, resources and expertise are not available internally. Increasingly, expertise in areas such as email management, direct-mail management, lead management or customer analytics, is beyond the scope of an internal marketing department. With the addition of social media and the various online and electronic channels for reaching customers, the challenge is made much more complex.

Outsourcing allows internal marketers to focus more on product development and strategic direction in collaboration with other areas of the business, rather than on the day-to-day or tactical marketing activities. The IBM report emphasises the need to develop partnerships with organisations that can provide the necessary resources and expertise, leaving internal resources to develop the strategies, processes and metrics that will create value for the organisation and its customers.