Business Process Outsourcing
SEP 25, 2008Is business process outsourcing about cutting costs or innovation? Should you be worrying about service level agreements or focus on business outcomes? And why's there a big tent in the middle of the street outside?
Big questions each of them, and just some of the issues raised at a panel discussion this week at Oracle OpenWorld, the huge user conference run every year in San Francisco. Stretching over five days, it’s an event that leaves an unforgettable mark on the city. Hotels are booked solid: nearby tourist attractions are swamped by delegates touting smart-casual attire and oversized name badges: and one long block of a city center street is shut to traffic so that Oracle can put up a marquee to serve lunch. If you didn’t already know Oracle is one of the world’s largest database and software application providers, you’d need to be out of town or under home confinement to miss the message this week.
As always, the event featured a stream of product updates, along with presentations from customers talking through the benefits and successes of their Oracle-based projects (thinking about it, I never did find the room with the customers talking about how monumentally they’d screwed up). And it included a session from consultants and a BPO analyst focusing on ‘Business Process Outsourcing: the Good, the Bad and the Ugly’. The Ugly part – because let’s be honest, that’s where the fun is – included discussions about why HR BPO in particular hasn’t exactly delivered the results we were all expecting.
Some of the reasons are well versed. As Jeff Croyle of consultancy TPI pointed out, there hasn’t been a lot of innovation in BPO yet – although that’s probably not surprising, given that many of the early deals were less about innovation and more about saving money. And there have been problems with the fundamental BPO model. As Webster Buchanan has often pointed out, outsourcing service providers need to impose a level of standardization to generate economies of scale – but enforced standardization doesn’t always work for the buyer, which usually wants some level of customization to meet its own specific needs.
“Most large multinational clients are still dictating some level of customization,” said Mark Stelzner of consulting firm Inflexion Advisors. It’s a push/pull situation, he added: “Can the suppliers build replicable processes, and are buyers willing to give up some form of customization? It’s yet to be proven.”
Going forward, panelists agreed that the trend towards multi-sourcing will continue –as Croyle pointed out, a supplier who’s good at Finance & Accounting isn’t necessarily good at HRO, and TPI’s advice is to look at the best for each. That puts more pressure on the buyer. Philip Fersht – a former colleague of mine many years back in the UK, and now research director at AMR Research – pointed out the inherent difficulties for customers of managing three or four different vendors (as in every other part of the IT industry, they do have a tendency to blame one another when things go wrong). The key, he argued, is to incent suppliers on the business outcome, and think about business level agreements rather than simply focusing on service level agreements.
Finally, customers will need to take governance more seriously. As Stan Lepeak of consultancy EquaTerra commented, today it’s typically handled in a piecemeal fashion, usually carried out by business function or geography. But governance is a business discipline in its own right – and buyers need both to put budget behind it and plan for it during the sourcing phase.
SEP 04, 2008Sadly, it seems I missed a trick at the Institute of Payroll Professionals Conference in Brighton this week. While we were debating the nuances of multi-country payroll and performance management, everyone else was talking about George Bernard Shaw and the cost of sex.
That at least is what I can gather, second hand, from a presentation given by Professor Adrian Furnham, a psychology guru at University College London. Fittingly for a payroll event, his talk was about the importance of money as a motivator. I wasn’t actually there to listen – I was tied up with last minute preparations for one of Webster Buchanan’s presentations – but my colleague David Longworth has faithfully recorded the highlights.
It turns out that Professor Furnham follows the thinking of many other remuneration experts by arguing that pay is as much of a demotivator as a motivator. He cites a number of familiar factors that increase job satisfaction, such as opportunities for personal growth, recognition, responsibility and achievement. At the same time, he suggests that money only has a short-term effect as a motivator, and is more often an element of dissatisfaction, alongside the other things that make us groan when we wake up on a weekday morning – quality of supervision, company policies, our working conditions, job security and so on.
“If you pay people for something they like doing, they like it less,” Professor Furnham pointed out. Developing his theme, he quoted George Bernard Shaw who is reported to have asked a woman: “Will you sleep with me for £1m?” “Yes,” she replied. “Will you sleep with me for £1?” “What kind of a woman do you think I am?” she replied. To which Bernard Shaw said: “We’ve already established that. We’re just agreeing the price.”
And to think the rest of us were sitting in a room discussing the evolution of business-centric HR and payroll metrics…
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