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.

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