By Matthew Hall

Businesses and customers are looking for each other in the wrong way.

Is the traditional call centre finished as a customer service platform now that social media and crowd help are the new fashion?

Strutting the floor at a promotional event for Salesforce.com in New York earlier this year Marc Benioff, the cloud computing company’s founder and chief executive, declared landline call centres antiquated, if not entirely deceased.

Benioff would say that – Salesforce sells products enabled by social and mobile technology. That aside, he also has a point. As communication technology rapidly develops, Benioff said businesses must rethink how they approach servicing customers.

Significant numbers of customers today will turn to online FAQs, email, instant messaging, online forums, and virtual agents rather than pick up a phone.

Research from industry analyst Forrester suggested that while a majority of customers in the US at least still use the telephone for customer service, that number is declining. Forrester’s research indicated Twitter was the least-used but fastest-growing channel for customer service.

“There is so much change, there is so much happening today in the world, that the ability to listen to customers, empathise with them and understand them, is the single most important thing that we can do,” Benioff said.

More than 4.5 billion people are connected on social networks, according to Forrester, and each is connecting through social media with friends and colleagues both at home and at work. That’s not only a big audience for enterprise customer service it is a huge platform for customer relations. The market is also growing – more than 1.7 billion touch devices were shipped in 2012.

Research in Australia, however, suggests that while businesses are trying to use social media for customer service, consumers are slower to use those channels for their own benefit.

A report on Australian customer service trends by Fifth Quadrant found that businesses and customers were looking for each other in the wrong places.

Australian consumers consider Facebook to be their number one choice for customer service engagement, followed by online forums and communities, and YouTube.

Networks like Twitter, LinkedIn and blogs were the least popular options. Tweet this – according to Fifth Quadrant, more than seven in ten consumers claimed they “rarely” or “never” turn to Twitter, LinkedIn, or blogs for customer service.

Yet Twitter is used by more than three quarters of Australian organisations and businesses, perhaps tweeting at themselves rather than customers. Company blogs, websites, and online communities were ahead of Facebook, YouTube, and LinkedIn as preferred tools for businesses.

“Simply creating a new service channel then standing back and waiting for the customers to come won’t work,” said Chris Kirby, Fifth Quadrant’s head of research. “If organisations want to offer customer service through social media, they need to go to the networks that their customers use.”

Anecdotal evidence is inconclusive for the merits of social media over a traditional telephone. For every customer that says an issue was resolved through Twitter, another claims their tweet to a company was ignored.

There may, however, be some firmer evidence that call centres have a short-term future. Reaching out to the Philippines, US and Australia, no call centres or industry organisations, including the ATA (previously known as the Australian Teleservices Association), responded to requests for comment on this story.
Read more: http://www.smh.com.au/it-pro/business-it/pulling-the-plug-on-call-centres-20130508-2j6m6.html#ixzz2T4LCDlUa

(In Photo: Ian Walker, Queensland IT Minister)

By Sylvia Pennington

Technology outsourcing ‘will continue to increase’

Hundreds of technology workers in the Queensland public sector face an uncertain future after the government reaffirmed on Thursday its intention to outsource an array of services currently delivered in-house.

The news comes in the wake of the Costello Commission of Audit into the state’s finances, which recommends the government look to outsourcing and asset sales to balance its books.

The government’s commercial service delivery vehicle CITEC and its Shared Services division employ about 500 and 250 staff respectively.

CITEC’s remit includes data centre, network and internet service provision, while Shared Services manages and supports the majority of the state’s finance and human resources systems and processes.

Queensland Minister for Science, Information Technology, Innovation and the Arts Ian Walker, who oversees both units, told IT Pro the private sector would be given the opportunity to compete for this work as soon as possible.

The move would “ensure service meets up to external standards”, Mr Walker said.

Agencies needed to stop providing services and become procurement managers, Mr Walker said.

Details on how the state will move from one model to another, including whether departments will chose their own suppliers or be herded into whole-of-government arrangements, are yet to be determined.

Mr Walker said his department wanted to proceed quickly but cautiously with the transformation process and would formulate “a proper plan to move from one model to another”.

The government was keen to avoid further costly Queensland Health payroll-type debacles, Walker said.

Affected staff would be kept informed, he added: “We will talk it through with them and work out the detail”.

Nitty gritty has been conspicuous by its absence in the government’s ICT strategy to date, although motherhood statements and hyperbole have been in ready supply.

It’s been a year since Walker’s predecessor Ros Bates announced a $5.2 million audit into the state’s aging ICT systems. Originally due to be handed down last October, the audit report has yet to make it to Cabinet and may never be released publicly. Mr Walker took on the job in February promising to ring in changes.

Last September, Ms Bates described the state’s ICT infrastructure as a “1972 Ford Falcon clunker” with a $6 billion repair bill. Edited highlights of the audit report revealed the government runs 1730 applications, most of them bespoke and at least 10 years old, and a slew of duplicated systems.

The prospect of an upcoming outsourcing bonanza comes as welcome news to the local ICT sector, which has seen public sector work dry to a trickle in the past 12 months.

Slow times have compounded the woes of hundreds of local ICT workers who found themselves on the jobs queue after the government slashed hundreds of contract roles shortly after coming to power.

The managing director of the listed IT services company Data 3, John Grant, said the government faced the difficult agenda of reinvigorating the local economy and cutting costs within government.

Pushing more revenue into the private sector could help achieve both goals, Mr Grant argued.

“It’s good to give the industry the opportunity to see some positive future,” he said.

“I don’t want to advocate public sector jobs to be lost but people have to find their place in the transformation.”

While some ICT workers might fear the changes, they needed to “look out the windscreen, not in the rear-view mirror”, Mr Grant said.

Whether the government will require ICT work to be conducted in Queensland remains to be seen.

Offshoring has become a favourite means of containing costs for many large private sector organisations including big banks. The practice has drawn the ire of many in the ICT sector who say it erodes wages and prospects for local technology workers.

In February, Brisbane City Council workers took to the streets to protest against the outsourcing of 55 IT jobs to HCL, a company based in India, to save $7.9 million.

Read more: http://www.smh.com.au/it-pro/government-it/uncertainty-as-government-vows-to-outsource-more-tech-services-20130502-2iuzo.html#ixzz2SHPzPwdb

By Martin Conboy

A few years back, I met former President Arroyo of the Philippines, and she told me that the problem with the Philippines was that in the provinces you have rivers with no bridges and a metropolitan Manila that has bridges with no rivers. The point being that there was a disproportionate level of investment in the capital of the Philippines that was not being spread out around the nation.

Philippine GDP grew 7.6% in 2010, spurred by consumer demand, a rebound in exports and investments, before slowing to 3.9% in 2011, and 4.8% in 2012 – still very respectable by world standards especially compared to Europe. The economy withstood the 2008-09 global recessions better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively robust domestic consumption, large inflows from overseas Filipino workers, and a growing business process outsourcing industry. In 2012, IT-BPO in the Philippines generated more than $13 billion in revenues. Furthermore, the sector employment expanded to over 700,000 people and is contributing to a fast growing middle class.

Many emerging economies rely on foreign creditors to bridge the gap between their exports and imports. The Philippines is a bit different; it relies largely on overseas employees. Over 10 million Filipinos equivalent to about a quarter of the country’s labour force live or work abroad. They are referred to as overseas foreign workers or OFW. The vast majority of these remit part of their salaries back into the Philippines to their families and villages. The appreciation of the local currency has also reduced the peso value of the dollar remittances sent by overseas Filipinos.

In 2012, the Central Bank of the Philippines claimed that official remittances streamed through banks and agents were worth US$21 billion to the Philippine economy.

The remittances are equivalent to 8.5% of GDP, helping the country to plug its trade deficit and amass over $80 billion of currency reserves. As a result, the Philippines is becoming a net creditor to the rest of the world and not just a net supplier of Labour.

The Philippine Stock Exchange Index recently surged to a record high and the Philippine peso climbed to its highest level after Fitch Ratings raised its credit assessment of the nation’s long-term foreign-currency-denominated debt to BBB- from BB+. In contrast, Fitch joined Moody’s in downgrading the UK to AA+ “to reflect a weaker economic and fiscal outlook” that has caused both the budget deficit and national debt to soar above earlier forecasts.

The UK downgrade was blamed on “the weak growth performance of the UK economy in recent years, partly due to private and public sector deleveraging and the Eurozone crisis”.

The Philippine upgrade may boost capital inflows further and confound the job of policy makers as they try to rein in an appreciating peso and curb asset bubbles. One only needs to look at the Fort Bonifacio area on the edge of the Makati business district to see that there is a property bubble in the making. Fifteen years ago there was nothing but fields where a brand new CBD is now standing, largely fueled by the ICT-BPO sector.

Both the current government and its predecessor have worked hard to put the country’s fiscal house in order, reducing its debt from 68% of GDP in 2003 to 41% last year. That’s less than half the rate of some European countries

The Central Bank cut rates by 0.25 percentage points to 3.5%. The move was also seen as an effort to offset some of the capital inflows into the country that has been a favoured emerging markets play.

There is no doubt that the government needs to broaden its tax base as weak tax collection, exacerbated by new tax breaks and incentives, has limited the government’s ability to address major challenges. Now the government is going beyond housekeeping too much needed repairs. The public finances rest on narrow foundations, and collected less than 13% of GDP in taxes last year, an insufficient ratio that helps explain why public investment amounted to less than 3% of the economy. To raise revenues, it last year passed a ‘Sin’ tax on tobacco and alcohol which survived the Senate by a single vote and came into effect on January 1 this year.

The Philippines does not suffer from a lack of foreign investor interest; indeed the Central Bank has been fretting about excessive capital inflows, which might push up the peso or lead to inflation or asset bubbles. The challenge for the ICT- BPO sector is maintaining its costs (as viewed from the outside world) as too much of a raise would see it becoming uncompetitive with other emerging players. Against the US dollar at the last trading day of 2012, the peso has gained nearly 7 percent since the start of the year. Reflecting the boom times in the Philippines is the fact that the peso was the second fastest appreciating Asian currency against the dollar last year. The rise of the peso has made Philippine-delivered services i.e. BPO work more expensive in dollar terms and slightly less competitive in the global market.

On a positive note monetary authorities have been successful in keeping the inflation rate at bay with the December rate at 2.9 percent, bringing the average pace of the price movement to 3.2 percent, within the lower end of the range target of between 3.0 percent and 5.0 percent.

(In photo: Benedict Hernandez, Executive Committee Chairman of the Information Technology and Business Process Association of the Philippines (IBPAP))

The Business Processing Association of the Philippines (BPAP) announced the formal change of its name to Information Technology and Business Process Association of the Philippines (IBPAP) to accurately reflect the range of information technology and business process management (IT-BPM) services provided from the Philippines.

“This move represents the association’s strong commitment to the entire outsourcing sector, where buyers are looking increasingly at bundled IT-BPM services options. We recognize that IT is an important component of these options,” said Benedict Hernandez, outgoing IBPAP president and CEO.

According to Hernandez, who will officially assume the role of IBPAP chairman of the Executive Committee this month, the name change aims to represent the association in the global IT market since members serve customers for both business process services and information technology. “Changing our name to IBPAP will help preserve as well as expand the Philippine industry’s brand. The new name also emphasizes the less-known fact that we provide the whole spectrum of world-class services from here including corporate and complex services, creative processes and products, customer relations and health care information management, and software product development,” he said.

IBPAP also elected a new board of trustees in its recent annual meeting. The newly elected IBPAP trustees representing industry players are Alfredo Ayala, president and CEO of LiveIt Investments Ltd; Rainerio Borja, president of Expert Global Solutions Philippines and lead operations at the NCO Group; Carlo José, president and head of GSC Operations-Philippines of the HSBC Global Resourcing; Danilo Reyes, country manager of Genpact; and Manolito Tayag, country managing director of Accenture Philippines. Trustees elected to represent the support industry were Gil Genio, head of Business and International Markets of Globe; Juan Victor Hernandez, vice president of PLDT and head of Alpha Enterprise; and David Leechiu, regional director and country manager of Jones Lang LaSalle.

“With approximately 300 industry and support industry members and five partner associations, IBPAP has played a pivotal role in sustaining rapid growth of the IT-BPM and GIC industry,” said Hernandez. “With a new board of trustees, IBPAP will continue to work to drive favorable outcomes across multiple areas to achieve the US$25 billion revenue goal by 2016.”

Hernandez also encouraged industry members and stakeholders to work together to ensure an enduring supply of high-quality labor, support service innovation, and country visibility.

“Guided by our industry road map, there were a lot of things we accomplished in 2012. We now have a breadth of IT-BPM voice and non-voice services that continue to grow year in, year out. For 2013, we must keep building our momentum and continue to provide the right business environment,” said Hernandez.

Alfredo Ayala, current IBPAP chairman and newly elected trustee, said that it has been a privilege to be part of the impressive growth of the industry. “The team has always done a commendable job in making sure that the industry is up to speed on securing more employment opportunities and in maintaining the lead in global voice and non-voice services,” said Ayala.

About the Information Technology and Business Process Association of the Philippines (IBPAP)

The Information Technology and Business Process Association of the Philippines (IBPAP) is the enabling association for the information technology and business process management (IT-BPM) and global in-house center (GIC) industry in the Philippines. IBPAP serves as the one-stop information and advocacy gateway for the industry. With approximately 300 industry and support-industry members, including five associations—the Animation Council of the Philippines, Inc., Contact Center Association of the Philippines, Game Developers Association of the Philippines, Healthcare Information Management Outsourcing Association of the Philippines, and Philippine Software Industry Association—IBPAP plays a pivotal role in sustaining rapid growth of the IT-BPM and GIC industry by working to ensure an enduring supply of high-quality labor, supporting service innovation, and providing country visibility.

IBPAP assists investors in setting up operations easily and quickly in the Philippines. Relevant research, introductions to key government and industry officials, and a series of briefings at each step of the investment process ensure a seamless development process. On-going support is provided through a wide variety of initiatives, including programs for HR development, business development, and on-going knowledge sharing and networking opportunities.

Mathematicians and neuroscientists!

BIG Data starting to come into mainstream

Big data. There’s no agreement on exactly what it is; yet companies are spending hundreds of millions of dollars on it and claiming good returns. And when it comes to spend, a handful of Australian companies are up there with the leaders.

Those are some of the conclusions from a study into big data by Tata Consulting Services for which it surveyed 1217 companies in eight countries in four regions of the world.

Big data loosely defines the collection and analysis of myriad unrelated data sources with the aim of drawing meaningful business insights.

TCS vice-president and chief technology officer K. Ananth Krishnan told IT Pro: ”Australia turns out to be the highest in terms of median spending per company, $50 million.” The median spending in the US was $9 million a company.

However, Krishnan said that, overall, Australia had one of the lowest rates of big data usage. ”The way I would interpret this is that those companies that have started have really dived in with both feet to the extent that they are way ahead of everybody else in the world.”

According to the report, only 32 per cent of Australian respondents said they had undertaken big data initiatives in 2012. The overall figure for the 1217 companies surveyed globally was 53 per cent. India led with 70 per cent, followed by Mexico and the US with 68 per cent. One US company alone, General Electric, has pledged $US1 billion to big data over the next four years.

Frost & Sullivan research analyst Vu Anh Tien agreed that a number of large companies in Australia were making substantial use of big data analytics but the relatively low uptake was the result of skepticism and uncertainty.

Hiring practices, training, and management will draw from a deeper understanding of neuroscience and complex behavioural algorithms. Already, start-ups have emerged that promise to train individuals to increase their mental acuity, focus, and efficiency based on brain science. Company- specific algorithms will be developed for software that vets new applicants based on detailed questionnaires. As science comes to work, human resource managers will need to become versed in these new sciences. While most HR personnel will likely not be scientists, they will need to be able to understand the language of these disciplines and collaborate with scientists in order to assess and implement some of the new tools. A manager may not know how to design Monte Carlo simulations to optimise workflow, but he must be able to speak the language of mathematicians to understand the theory behind suggested methods.

See next story about Big Data and BPO

Read more: http://www.theage.com.au/it-pro/spending-big-on-big-data-20130422-2iaho.html#ixzz2RhE1iRyd

By Martin Conboy

BPO has matured, evolving from industrialisation and process efficiency, to a focus on analytics, on demand service platforms and innovation. This creates a significant opportunity for organisations to ‘leap frog’ earlier generations of BPO and drive business outcomes previously not associated with outsourcing. This schism in the BPO journey sits in the space between BPO 3.0 and BPO 4.0 and it is all about greater functionality and process excellence delivered by the latest generation of BPO, including accelerated speed to market, enhanced innovation, stronger customer loyalty, savvier talent management and top-line growth.

Against a background where physical products are commoditising, customer service is seen to be a crucial differentiator of the service offering. It is essential that the service delivered supports the product promise. In the future, it is only those organisations that provide outstanding service that will thrive, since it will allow them to differentiate their products, charge a price premium and maintain their competitive edge in the marketplace.

In the evolution of the BPO journey the reader will recall from previous readings in the Sauce that BPO 1.0 describes the first step on the BPO journey, commonly known as Labour Arbitrage. The next stage is BPO 2.0, which addresses process reengineering and using technology and point solutions to improve processes and squeeze out value and efficiencies. BPO 3.0 starts to incorporate new channels like the cloud and social media. Needless to say BPO 3.0 starts to see a dramatic leap forward in data accumulation inside the enterprise. BPO 4.0 is all about big data and how one can make sense of it and not get overwhelmed by the voluminous amount of data that are generated by all of the information flowing through the new channels.

In parallel the growth of digital content continues unabated. The Internal Data Corporation (IDC) predicts that the digital universe, a measure of content, will have grown by a factor of 300 from 2005 to 2020. And Google’s own statistics show that its total number of indexed pages was one trillion in 2008 and is expected to reach 30 trillion in 2013. The average number of daily searches on Google, another measure of digital demand, has grown by a factor of four from 2007 to 2011, according to comScore.

Marketers have contributed significantly to this content growth. Based on a 2012 survey by Content Wise, marketers increased their total spending on content development by 45% from 2005 to 2012, when the percentage of marketers’ budgets allocated to content creation increased from 31% to 39%.

I caught up with Russell Ives Accenture Australia BPO Lead and he described how this hot new frontier is being constructed around the customer experience and using data analytics and building algorithms and crunching facts and numbers to look for opportunities to improve business outcomes.

Big data is the new business black. It’s a catchall phrase for the billions of transactions and other bits of information about their customers, suppliers and operations logged by businesses every day. Yesterday’s data storage problem has become today’s strategic asset.

The large-scale gathering of data from a variety of sources and the application of sophisticated analytical tools to make sense of that data is quickly becoming the new frontier for organisations seeking competitive differentiation. The BPO and outsourcing industry is playing a pivotal role in developing the processes that overcome many of the challenges associated with data analytics.

Organisations in a variety of industries, ranging from finance to retailing to telecommunications, have started to engage in big data strategies. The reasons for engaging analytical methodologies being deployed is driven by the need to leverage data from a variety of sources and channels to achieve an accurate and universal view of the business in real time. Pulling levers is all very well, but pull the wrong one without knowing all the facts and it can lead to disastrous outcomes. After all we don’t know what we don’t know.

Russell Ives states, “Many companies struggle to achieve visibility around the customer experience when interacting with an enterprise across all channels. We are seeing an increased demand for the use of analytic tools inside the outsourced process that are required to deliver improved outcomes for end clients.”

Mr. Ives argues that there has been a shift from the standard suite of business metrics built into service provider service level agreements to more of a focus on business outcomes  “We are being challenged by our clients to collaborate more as a strategic provider to understand how data analytics can identify in what manner end customers want to interact. We can now construct service metrics built around the real customer outcomes the client is seeking to achieve; channel, sales, service, satisfaction.”

Enterprises are generating large amounts of transactional data about their customers from their internal systems and this is growing at an exponential rate. ‘Big data’ is becoming a key basis of competition, underpinning new waves of productivity, growth, innovation, consumer services and competitive advantage. ‘Big data’ offers a range of opportunities for organisations, but there are also some significant challenges.

According to research from McKinsey Global Institute, organisations and their management teams, in every sector, will need to grapple with the implications of big data. Those who ignore it will be left behind.

Through various online activities, most consumers leave an easy-to-follow trail of digital footprints that reveal who they are, what they buy, where they go, and much more. Organisations want this information to be able to gain competitive advantage and be able to offer the most appropriate offer at the most appropriate time. Organisations not only need to put the right talent and technology in place but also the structure, workflows and incentives to optimise the use of big data

“To achieve and sustain superior outcomes on behalf of their clients, as custodians of their client’s brands, providers need to change their frame of reference from supplier to a broader more holistic perspective that encompasses on continuous improvement and focuses on benefits above and beyond cost reduction,” said Mr Ives.

Mr Ives explained that at a practical level, organisations must shift away from simple SLA metrics like average handling time (AHT) to outcome metrics that might include metrics such as sales delivered by a channel. He also noted that organisations in Australia, except for the very large ones, are in the early stages of developing sufficient expertise and knowledge to develop and make sense of data analytics and lack appropriate processes to leverage data from a range of sources.

By Katherine Rushton

TalkTalk has been fined £750,000 for bothering thousands of would-be customers with nuisance calls, but has ruled out paying any compensation to the individuals affected.

The telecoms company, which has spent the past three years battling to shake off a reputation for poor service, made around 9,000 silent and so-called “abandoned” calls to prospective customers, as part of a drive to drum up new business in 2011.

The calls were made through two of its call-centre operators, who relied upon automatic dialling systems to contact people but did not always have anyone to speak when the call was connected. Although it is legal to make a certain number of these silent calls, or abandoned ones – where people are greeted with a recorded message rather than a human – TalkTalk far exceeded the limits set by Ofcom.

The telecoms regulator said it was coming down hard on TalkTalk to send a “strong message” to companies that they have to stick to the rules about nuisance calls, “or face the consequences”. “Silent and abandoned calls can cause annoyance and distress to consumers,” said Claudio Pollack, Ofcom’s consumer group director.

The £750,000 fine will be handed to the Treasury. TalkTalk has already sacked Teleperformance and McAlpine Marketing, the call centres that landed it in hot water, and has vowed to recover the funds from them.

However, on Thursday the company faced calls to go further and compensate the people who had to deal with the nuisance calls in the first place.

“It’s not enough just to pay a fine to the Treasury,” said Gillian Guy, chief executive of Citizens Advice. “Silent and abandoned calls can be very distressing. The elderly often bear the brunt as they are at home more often and it can be particularly unsettling for people waiting for an urgent call from family or friends.”

Other companies guilty of silent calls, such as Homeserve, have put their hands in their pockets to compensate the people affected. However, TalkTalk ruled out following suit because the individuals being bothered are not customers.

Homeserve, which offers repair insurance for home appliances, was fined £750,000 last year – setting a new record at the time.

However, TalkTalk scoops the prize for the largest ever fine from Ofcom. In 2011, it was forced to pay £3m for billing errors at its subsidiary Tiscali UK. TalkTalk has since focussed its attention on improving customer service, and has made considerable headway.

Regulators are cracking down on nuisance calls after the government called on them to take tougher action and increase the maximum fine they could levy from £50,000 to £2m.

By Katherine Rushton, Media, Telecoms and Technology Editor

UK Telegraph

KPMG and HfS Research reveal findings of new report on outsourcing of finance and accounting operations

Spending on finance and accounting business process outsourcing (F&A BPO) services will surpass $25 billion globally in 2013, and will rise at an annual compound growth rate of eight per cent through 2017, according to new research from U.S. audit, tax and advisory firm KPMG LLP and HfS Research, a leading analyst authority on global business operations strategies.

More than 100 enterprise-level F&A BPO engagements are expected to be signed this year alone, according to the research, which covers 399 major global enterprises and analyzed 745 current enterprise F&A engagements. The research also profiled 17 leading suppliers of F&A BPO services.

The report, “Finance and Accounting BPO Market Landscape, 2013: Market Evaluation, Forecast and Competitive Analysis,” found that key market dynamics fueling global growth include:

• Proven performance: 90 percent of F&A BPO engagements have been consistently meeting their cost-reduction targets and initial delivery performance, making it difficult for finance leaders to avoid evaluating its potential.
• Desire to reduce costs and standardize processes: Enterprises overwhelmingly want to look at new ways to take advantage of lower-cost operations and standardized financial processes, where there is little competitive differentiation to be achieved by operating in house.
• The lethargy of the 2008-10 recession has slowly lifted: More enterprise leaders are now looking at more radical strategies to increase productivity and global business effectiveness.  Recent activity shows an increasing number of enterprises getting more aggressive with globalizing their finance operating models to include outsourcing services.

Ron Walker, a partner with KPMG and the F&A service line leader for KPMG’s Shared Services and Outsourcing Advisory practice, said “F&A BPO needs to be viewed as an extension to an enterprise’s capabilities, not a substitute.  KPMG is helping clients evolve toward a global business services framework that optimizes the mix of human capital, service delivery models, process innovation and technology to deliver services on an enterprise-wide, cross-functional basis to support the business strategy.”

Phil Fersht, CEO of HfS Research and a co-author of the research report, said, “Too many enterprise leaders are approaching F&A BPO with a myopic vision to reduce costs and mitigate risks.  They are kicking the can down the road by failing to invest in better technology platforms, analytics capability and an innovation roadmap.  They should be approaching the F&A BPO as an opportunity to invest in their firms’ futures.”

Click here to request a copy of the report.

In a move seen as increasing group synergies and customer centricity, Edelweiss Air is following Swiss International Air Lines by moving its global call centre services from Zurich to Mindpearl in Cape Town effective April this year.

Nils Flaatten, CEO of Wesgro, the Western Cape’s Destination Marketing, Investment and Trade Promotion Agency, welcomed the news of an additional investment in Cape Town.

“Edelweiss Air currently has two direct flights into Cape Town from Zurich airport. These flights have been well subscribed and have contributed to an increase in Swiss tourist arrivals in the city. The airline has increased its commitment to the destination by investing in the Cape Town-based call centre. This investment taps into the City of Cape Town’s strong BPO sector and makes Edelweiss Air the second international airline to do so. Capetownians will now man this call centre and deliver high class services to Edelweiss’ international passengers.” Flaatten said.

“South Africa has become the location of choice for many of the world’s leading businesses and was recently recognised as the Offshoring Destination of the Year in the National Outsourcing Association awards,” explains Fiona Meijer-Innes General Manager of Mindpearl Cape Town. “At Mindpearl we are looking forward being a part of Edelweiss Air’s rapidly developing business.”

Mindpearl is a specialist, global, unilingual & multi-lingual outsource contact centre provider delivering customer service, sales and business process solutions operating from Cape Town since 2001. Further centres are found in Brisbane, Barcelona and Suva, Fiji.

The Polish Business Process Outsourcing (BPO) and Shared Service Centre (SSC) industry was worth USD 3.4 billion in 2012 an increase of 20% from the previous year, according to ASPIRE, the (Polish) Association of IT & and Business Process Services Companies. Knowledge process outsourcing (KPO) constitutes about 6% of the Polish BPO market. This is negligible compared to countries like India and the Philippines, where the outsourcing market exceeds USD 10 billion annually. However, Poland has certain unique strengths which attracts investment to this sector:

• Language capabilities: Most professionals have a working knowledge of English, followed by German, French, Spanish, and Italian.
• Near-shore: The geographic proximity to Germany, France, Netherlands, and the United Kingdom (UK), which form a major portion of the client base.
• EU member: Since Poland became a member of the European Union in 2004, companies setting up centers can be assured of safeguarding their Intellectual Property (IP) rights.
• Investment support: Companies which setup outsourcing centers are eligible for cash grants from the EU Structural Funds and incentives under the annual budget, subject to certain criteria.
• Government support: At the national level, government support includes tax incentives to outsourcing firms. At the local level some cities, for instance Lublin, have earmarked special economic zones or parks to foster KPO sub-sectors such as LPO and Healthcare Process Outsourcing.

  These above factors have contributed to the growth of KPO in Poland, albeit little. In 2012, there were about 22 Decision Support & KPO centers in the country. Irevna and McKinsey established KPO centers in Poland in 2009. New KPO entrants in 2012 include Hewlett Packard which opened the largest KPO center in the country, and Capita opened a Legal Process Outsourcing (LPO) center to cater to clients in the UK.

  The Polish KPO industry can continue to grow by adopting measures to increase domain expertise, build a talent pool, and advertise its KPO potential.

• Move up the value chain: Existing outsourcing centers need to add more advanced horizontal processes, such as Analytics, to their service portfolio. These “high-performance” services command a higher price in the market, and build domain expertise in the fastest growing KPO sub-sector at the same time.
• Build relevant skill sets: The diverse KPO sub-sectors, from Analytics to LPO, require workers from different academic disciplines. Universities and colleges need to tailor their curricula so that graduating students are equipped to work in these sectors.
• Better marketing: Poland, and its main BPO association ASPIRE, needs to clarify the differentiator of the country’s KPO sectors from others in countries like India, the Philippines, and China. When speaking at international forums and conferences, highlighting the country’s KPO capabilities is a must.

As destinations get saturated, Poland has a great opportunity to tap into the global KPO market. With its unique strengths, it has the capability to become a leading provider of KPO services, as long as the industry leaders, associations, and stakeholders adopt certain measures.

- Deepti Krishnan, Analyst, Sourcing Practice

Thoughts for aspiring outsourcers

By Bernard Sia

Today’s article is a tad more technical; although I have attempted to simplify the mathematics as a function of relative strengths, the formulas are maintained because I sincerely believe that the industry is fundamentally missing the ability to concretely define and quantify the value of outsourcing to the customer and ultimately suffer a Pyrrhic victory through vendor price wars. This is unhealthy to outsourcers because of the bad after taste that customers experience through a shoddy workforce attained from a forcefully undersized execution budget.

Within this article we will breakdown the variables that make up the value proposition of a vendor to a customer and hopefully help both the customer and vendor come to an amicable outsourcing relationship inception.

1.1. The decision to OUTSOURCE (THE BUY DECISION)

Most customers arrive at the tipping point to outsource when managing and executing internal functions become unbearable, distracting or alternatively, require a quantum leap in performance. The formula below describes the situation, where negative outcomes are a function of cost:

$V_c is the value expected from the internal team; while, $CC is the customer’s cost of maintaining and managing the business function internally. Negative perception arises when the value of $CC is larger than $V_c; For example, when the cost of maintaining internal IT resources outweigh the skill set and capabilities available.

Now, here comes the outsourcing vendor who caught wind of your challenges and offers a price to take away your mess for less; $PV.

Unfortunately, most buyers of outsourcing are fixated with comparing only one dimension of cost; the salary of the internal personnel, and not take into account other encumbrances and risks of managing these resources. The challenge then is for the outsourcing vendor to quantify the vendor’s value, $V_v to the customer. In which case, the value of $V_v is expected to be larger than the price of the vendor’s services to the customer.

Not only that, the value of $PV is placed under tremendous pressure to be lower than $CC, otherwise outsourcing becomes moot to the customer. In the customer’s mind, he is already failing with internal IT resources; so why risk failing (or short falling) with an outsourcing service provider that demands a higher cost outlay; despite seeing the increase in value that can be attained from the outsourcer (remember this point; we’ll come back to it in the conclusion). So we can expand the relationship as follows.

Another common mistake from both the customer as well as the outsourcing vendor in justifying their services is to end the comparison of value at this very mathematical relationship.

The customer needs to remember that a management layer is still required to manage the vendor and similarly, the outsourcing vendor needs to keep this management overhead at a minimum. The vendor needs to prove that despite the management overhead, the overall cost is still cheaper than the customer’s internal business function.

Hence the equation now has an extra variable of $CM, the customer’s cost of managing the outsourcing vendor.

Lastly, by accepting the vendor, there are risks involved where the vendor can exhibit opportunism or any variations of principal-agency issues while offering their services; risk in this case, is also an element of cost, defined as $CR_V.

To which we come to the relationship below:-

Where the value provided by the outsourcing vendor $V_v, needs to be significantly larger than the current cost of the customer managing the business function internally, $CC. Also, the sum of the vendor’s price, $PV, customer’s management cost of the vendor $CM and vendor’s risk $CR_V, should also be smaller than $CC!

But there are more to this; essentially two sets of value proposition needs to be juxtaposed – one by the vendor, and the other by the internal customer team.

3.1. THE OUTSOURCING VENDOR’s VALUE DIFFERENTIATOR

Thus, in the customer’s mind, they are comparing two factions of value, $V:-

$V_c, value provided by the internal resources.

$V_v, value provided by the external vendor.

The readers would immediately recognize that in order for the customer to justify outsourcing, a situation where
$V_v > $V_c has to happen; and the excess value attained from the outsourcer should also be ideally be larger than the cost of acquiring the vendor’s services.

So finally, we come to the diagram that captures this comparison.

Bringing together the formula from the discussion on relative comparisons, we need to reiterate that the Value Differentiator $V, needs to be large in order to cover the cost of managing the vendor as well as the vendor’s price to the customer, otherwise, the customer may as well maintain the internal team.

r$V = ($V_v - $V_c) > ($CM + $PV + $CR_V)

By extension, the expected value returned, should ideally be larger than the internal cost of the internal team; bringing the formula together, is the situation where the customer will unreservedly accept outsourcing for his business.

Firstly, thank you for your persistence; the formula above is not a Grand Theories of Outsourcing, I have no such illusions of grandeur and the verbosity is required to break down the conclusions because the caveat lies in executing the recommendations.

Now we begin with the most important summary; the variables that every outsourcer needs to figure out are,

a)    Customer Business Function Costs, including all encumbrances, $CC

b)    The actual work vis-à-vis value delivered by the Customer Business Function,  $V_c

Most outsourcing vendors make the mistake of proposing their terms of services without even figuring out these two crucial factors. Suffice to say, propose at your own peril. Time spent baking the account with an inquisitive sales person does wonders. Having said that, the vendor cannot control $CC or $V_c and can only manage their own variables to put forward a winning case. The table below summarizes:

To end, outsourcing is both an exciting and extremely difficult business. It is a services business after all, and the vagaries of human attitudes are sufficient to throw an occasional wrench into the works. Discipline is paramount and process rigor crucial for success. Unless an outsourcing firm is established with such foundations it will not be long before catastrophic service failures destroys what little credibility the outsourcer has within the market.

Earlier, I mentioned the need to remember situations where customers willingly pay more in order to attain an even larger value payback from the vendor compared to the internal team.

That is a story for another day – cue in Strategic Outsourcing.

By Martin Conboy

The Australian Business Process Outsourcing Association (ABPOA) will be incorporated into the Association for Data-driven Marketing and Advertising (ADMA), the country’s largest marketing and advertising association, at the end of April.

Members of the ABPOA voted unanimously in late February to incorporate ABPOA into ADMA and create a new expert group. Catering for companies interested in outsourcing issues, the group will be named the Business Process Outsourcing Expert Group.

The BPO Expert Group will provide ABPOA with a sense of community and positioning within the ADMA organisation and framework.

ADMA will support the new expert group by providing the structure and resources for ABPOA to deliver on its mission and objectives, and to further the interests of its 50 corporate members.

The mandate of the BPO Expert Group will be to promote industry best practice, identify and respond to key industry issues and trends, provide thought leadership and networking opportunities.

ADMA, which has over 500 corporate members, currently runs 11 industry expert groups which focus on specific marketing specialisations such as multichannel marketing, big data, acquisition, retention and loyalty, B2B, agency and mobile.

“ADMA has a first-rate reputation and was one of the leading voices defending the industry against restrictive legislation and promoting best practice,” said ABPOA President Martin Conboy.

“ABPOA has grown from an idea to a membership organisation with over 50 corporate members. It had reached the stage where it needed to align itself with a bigger secretariat, so that the members can benefit from meeting and networking with all of the existing ADMA members,” he added.

ADMA CEO Jodie Sangster was delighted to welcome the ABPOA into the ADMA fold.

“We have some good experience in incorporating existing associations within our expert group structure and we look forward to representing this sector,” she said.

“We want to support the ability of our members to outsource business processes where it helps their businesses and to connect businesses that provide outsourcing services with those that want them.”

The incorporation approach will provide ABPOA with support through acquisition and retention of members. As well, the new expert group will be able to draw on the ADMA events team for assistance in events planning, ensuring focused and relevant events for their members in the process.

The new BPO Expert Group will determine the activities they wish to undertake which may include creating a code of practice, writing white papers or best practice guidelines on various topics, or undertaking content development, research or networking events. The ADMA secretariat will provide support and resources to help in delivering their annual plan.

To ensure the BPO Expert Group has a strong core base, which can be involved in facilitating the future of Australian business process outsourcing, ADMA is looking for eight current corporate members of ABPOA to commit to joining the expert group this year.

Members interested in participating should contact: Annette Bova, ADMA Membership Director, on 9277 5407 or annette.bova@adma.com.au.