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.


  1. Peter,

    Do you think organizational change is constrained primarily by cultural, financial, or political barriers? Is the industry just not drawing the right leaders to address the changing needs of clients?

    I am extremely interested in why you think there is strategic latency in the highly competitive managed services industry.


  2. Joe;

    Great to hear from you.

    First, I'd hate for my observations to be overly-generalized. They derive from a relatively small number of outsourcing provider firms. And - more importantly - they relate to my candidacy in an executive role and, therefore, could be colored by that situation.

    That said ... I continue to feel that many provider companies are hamstrung by the same challenges facing their clients - an inability to shed their own legacy business models.

    If you built a multi-$B business on the back of staff augmentation, then being a transformational partner for your clients is a stretch in a number of dimensions.

    Having the right aspirations is a start, but being adept at really implementing the changes is quite difficult. The reasons you mention are all evident in the firms I met with. But there's one more factor that's important to note: do the clients of the provider give it "permission" to reach beyond the comfort zone around which the initial relationship was formed?

    Maybe that falls in the "political" category. Being known by your clients for being really good on one domain does not convey permission to move into an adjacent segment.

    Bottom line: the industry has a deep roster of very smart executives leading solid companies. But, the acceptance (by the buy side) of transformational relationships is still specious as best. In my view, this is an artifact of the staff augmentation emphasis of the past 5+ years. Clients came to view the industry as bringing value through labor arbitrage and little other levers.

    So ... how do we change perceptions?? I have some ideas on that which I will post soon.

    Best regards,