Monday, September 28, 2009

First Perot-Dell and now ACS-Xerox ... Two Sides of the Same Coin?

I've been asked more than a few times recently whether the recently-announced acquisitions of Perot (by Dell) and ACS (by Xerox) were a surprise. In all candor, I am not surprised in the least that Perot and ACS were acquired and I'm similarly not suprised that Dell and Xerox are acquirers.  The combinations themselves, however, take some pondering.

I resonate with the observations of Phil Fersht at  As usual, Phil cuts to the chase with his observation that "if you combined the new Xerox with the new Dell, then you'd be looking at a company with a lot of future potential...".  Maybe he's prescient?

It's been no secret that Dell has been prowling for an acquisition.  The infusion of ex-EDS leadership within Dell's Services business was an early hint at this.  I've long held the view that the reality (yes, it's real) of virtualized infrastructure services will give rise to a new breed of ITO provider.  I take seriously the ability of Google, Amazon, and Dell to compete for scaleable storage, server, and desktop service.  I think this vision exists within the EDS-HP combination, too (although it's not yet been made evident).

But, does Perot really advance Dell's infrastructure services ambitions?  I think it does.  Perot is a very capable provider of operationally-sound computing and communciations services.  Those skills are essential for a business like Dell's as they serve the operational needs of companies.

The nonsequitor, in my mind, are Perot's applications-oriented and business process services. I imagine that the Clients of Perot's applications services or BPO operations are wondering what benefit they glean from this combination. Perot was, arguably, one of the leading healthcare-oriented service providers - with scope of responsibility well beyond infrastructure operations. I'm not clear on how Dell will advance that position.

Fast-forward a week's time and we have Xerox taking out ACS. Unlike Perot, ACS has very little "vertical" BPO but they are quite capable in both infrastructure and horizontal BPO. I've always admired the ACS leadership for being the first-mover on global delivery solutions. This company is more global than many of their Clients and paved the way for technology-enabled BPO.

Xerox is a very interesting acquirer. They needed a strategy for broader business services and found ACS's portolio attractive. I see a lot of logic in this ... much of ACS's business today is enabling and automating the flow of paper-based work processes.

The paradox with the ACS-Xerox combination, in my mind, is the converse of the Perot-Dell marriage. If you're an infrastructure Client of ACS', do you see value in having Xerox in the middle of your data center operations?  Hard for me to see.  (And, ACS has some very high-profile infrastructure clients).

My take-away ... two different bets are being take with these combinations:

  • Dell is doubling down on the infrastructure services business and is likely willing to see Perot's applications and BPO business diminish (or, maybe they sell that book of business?), and
  • Xerox is betting that ACS will fuel a deep portfolio of business process management offerings, with some risk that their infrastructure relationships are lost over time to a specialist.
I can't help be be reminded of a prediction I made about a year ago that said that the industry Service Providers are facing a choice between the horizontal and the vertical axis. Consolidation would be driven by this choice - either to become leaders in the component parts of business operations (such as infrastructure operations or cross-enterprise BPO) or to focus on the integration of technology + applications + operations for industry-specific business processes.

These two moves look, to my eyes, as examples of the former.  The players for the latter - those betting on a vertical strategy for integrated technology and operations - are still taking form.

Pity those caught in the middle.  The music is still playing, and the chairs are moving around.

Tuesday, September 15, 2009

Shifting to the Real World

Ok, I shared the nuances of my journey to land a new role in the global souricng industry and it's time to shift my focus on this blog to the real world experiences I am enjoying.

Changing jobs is never as easy as it sounds (maybe it actually doesn't even sound easy!), but my transition from the Advise-side to the Sell-side of the industry is going fairly well. What I'm trying to do is perpetuate an emphasis on the "value to the Client" and use that vantage to guide the go-to-market thinking of CSC's Managed Services Sector. Well ... that's how I'm approaching the scope anyway.

Those of you who know me well will appreciate that I won't use this forum to prosteletize for CSC. Just as I did from the TPI platform, I will focus on issues, trends, and observations.

My entry into the Sell-side world of sourcing is enabled by a great network of colleagues across CSC, Advisory firms, Clients, Researchers, and other Service Providers. I've enjoyed great conversations over the past week with several dozen people and they've all been reassuring. That is, the common theme has been "you can make a difference." That's all any of us really want, isn't it?

So, the "real world" orientation that I am going to accentuate is that of vertical value-creation. What's that mean, you ask? I find that Client organizations, and their Shared Services Operations and Service Providers, have grown comfortable living in the world of horizontal thinking. Kind of like laying flat? No ... it's the art of focusing on discrete units of a system - the pieces and parts.

I find that there is diminishing satisfaction, and marginal added value, from perpetuating a focus on improving the performance characteristics of discrete parts. It was a worthy cause - and one which dominated the internal/external sourcing landscape for the past several years. But, its time has passed.

As one CIO recently told me, "The sourcing industry has been focused on productizing its offerings, but what our business needs is the services that unify those products."

I think we're starting to see some industries step forward to unify the infrastructure, applications and operations (the three legs of the proverbial stool) around integrated services. The essential enabling capability here is "the network" - the element of infrastructure that allows the flow of work among participating systems (be those people or applications). Think about the media/entertainment segment. What about telecommunications? And, basic business applications.

So ... that's going to be my "real world" shift in emphasis. I'll share examples of the verticalization (is that a word?) of sourcing. Drop me a note or post a comment with your thoughts, but this is what gets me excited for my new role in our industry.

Source on!

Wednesday, September 9, 2009

Tankety Tank Tank ...

From the road: my first lesson learned from a mega-Provider is that the seemingly simple things (like role announcements) can be problematic. That said, I am thrilled to be back in the game and eager to make a difference. It's great to have a broad array of assets to leverage!

More soon.


Friday, September 4, 2009

Stratifying the Provider World

In my post of Wednesday I characterized the nature of the employment discussions I held with a small number of enterprises that might be considered the "buy side" of outsourcing and offshoring.  As promised, this post will describe my experience with the service provider community.

I was flattered to have a relatively large number of conversations. The level of interest in my services varied, based upon the size and culture of the company, but I appreciated each opportunity to hear about the vision/direction of these firms.

One of the strengths I bring to my next position is a relatively broad view of the service provider universe. From my prior advisory work, and specifically research around vertical industry concentration and functional solutions, I have developed a fairly good sense of the relative strengths of the top 20 or so service providers. This armed me quite well for conversations around market trends, brand equity, competitive positioning, and client relationships.

Lest I give the impression that there was a line at my door, I should say that a couple of providers for which I would have been very interested in a position didn't enter the process early enough. Two, in particular, responded to my outreach only after my evaluation process was far down the road. Sadly, I had to tell the CEOs of these two great companies that they were too late. (In both cases there were "communications mistakes" internally.)

In an earlier post I laid out the criteria I used in evaluating opportunities. What I want to share today is how I have enhanced my perception of the provider landscape as a result of these discussions.

Too Big for Something Different - The first class of provider is one that really wasn't a surprise, but which reaffirmed common perceptions. Despite my connecting at very senior levels, three of the provider discussions took a decidedly bureaucratic and formal approach to considering my candidacy. Ultimately, I was routed to an executive with a clear "status quo" frame of mind. The market discussions were enlightening, but I was left with a sense that these firms are more "machine" than "service partner." There was no passion or energy evident around the value proposition they affirmed and, quite candidly, very little differentiation. The compensation potential was greatest among these companies, but the "feel good factor" was least.

Not Ready for Prime Time - A couple were in the midst of in-flight management realignment and there was just no obvious tempo of executive management decision-making. For these, I was left with serious concerns about how their clients were perceiving the shuffling of chairs.

Desperate Desperados - These companies talked a big talk. They waxed poetically about how their existing clients loved them, and how they were making investments for competitive differentiation. Yet, there was a strong tenor of desperation. Each had a desire for freshened "marketing messages" - which was an aspect for which I thought I could help - but they shared a trait of being "all over the map" in terms of what they wanted to be and how they would get there. All in all, a lot of aspirational hubris here. For reasons that varied by individual company, I just couldn't imagine being able to make a big enough difference.

BPO Day Dreamers - Many of my discussions were with providers that are hanging onto the notion that horizontal BPO - largely delivered via offshore staff augmentation - is a promising proposition over time. Most of these companies lack the transformational expertise for either process or organization, are deficient in their technology enablement, and don't command the respect of their clients for anything more than "turning the crank" of a client-defined business process. I worry about the staying power of these firms.

Committed to Win - My final group was small in number, but there were a few. These were the companies that were honest with themselves about their market position and which had clearly thought through a multi-year growth agenda. They wanted my help ... and were prepared to make changes ... in order to execute their strategies for achieving top-tier status.

Ultimately, I found the greatest variances among these companies to rest with a few key topic areas:

a)  Attitude towards transformation of client business operations - and focus on the tangible results that derive from a services relationship;

b)  Aptitude to bring the power of technology to bear on their solutions - with an appreciation that the legacy ways of managing computing and communications services are changing in real-time;

c)  Awareness of the market dynamics and their respective competitive positioning - a test of being honest with themselves.

d)  Aggressiveness to listen to the needs of clients rather than focus on broadcasting ones own rhetoric.

These conversations occurred over the time span of about 5 weeks, and were quite enlightening for me. I learned a great deal more about these companies as a result. Our market is blessed with strength in capable service-oriented firms and some really great leaders.

Now ... onward. I start my new position on Tuesday and am eager to get back into the game.

Stand by.

Wednesday, September 2, 2009

Paradoxes Abound

Many of you will know that I recently resigned from the leading Sourcing Advisory firm to search for a different role in the industry. For the past month I have been in various states of conversation with end-user companies (a few), research firms (a handful), and service providers (about ten).

I thought it might be interesting to capture here some observations relating to the outsourcing/offshoring industry that derive from these discussions.
Let me start with a characterization of the client-side attitude. Admittedly, I spoke to only a few companies about roles in their shared services and/or technology management functions. This is hardly a representative sampling, but the few conversations had some common elements.

For these larger/global companies (financial services, pharmaceuticals, consumer goods), I deduced a continued emphasis on wholesale restructuring of business support functions. The senior leadership with whom I met each expressed a degree of frustration with their respective "legacy" constraints. They believed that in-place management were not sufficiently creative or aggressive in redefining the cost/service model for back-office functions.

There was a common tenor around technology-related shackles. Each company felt that their ERP and legacy applications environment, coupled with aging infrastructure, were hindering the achievement of "new world" cost structures and related services.

For me, being in a job search mode, those words screamed "opportunity." I often described ideas for flipping the build-vs-buy ratio to more effectively maximize the benefits of variability. I outlined the appetite of the service provider industry to bring the value of domain-oriented investments through the power of leveraged solutions. And, I portrayed the value of sustained process improvement (vs. across-the-board cost whacks) in terms that resonated with the bottom-line emphasis of these executives.

What I took away from these discussions was encouraging in terms of demand for managed services - both shared service models and outsourced. But, I also observed two significant challenges.

First - if these few companies are representative of the broader market, then there is a considerable gap between the vision/aspirations of C-suite leadership and the ability of the internal support organizations to implement/achieve the essential enabling initiatives. This can't be a good thing for either the buy-side or the provider-side. It's a situation that promotes indecision. Fundamentally, it's a "confidence gap" that affects the ability to pull the triggers of transformation.

Secondly - there was almost no acknowledgment among these client leaders that the outsourcing industry was aligned on bringing relevant solutions to bear on their situations. When I asked about relationships with incumbent service providers, the most common response indicated that the provider community is a source of inexpensive labor and little else.

As you can imagine, these were incredibly valuable sources of input to my career decision process. I ultimately decided that a client-side role wasn't right for me - really a decision driven by a personal need for diversity of responsibilities that I thought would be better met through a role in the service provider community.

None the less, the discussions really helped to frame my perspective as I simultaneously met with about ten different service provider firms. In my next posting, I'll outline what I heard from the ITO/BPO providers with whom I spoke.

In the interim, I'd welcome any reactions to the client-side characterization I just offered. 

Have a great day.