This is the first in a frequently recurring column in Outsourcing Buzz Blog focusing on thought leadership in outsourcing, as seen from the perspectives of two industry leaders with unique views into the workings of how outsourcing deals really get put together – or why they don’t. Insights in this recurring column come from sourcing advisors, Joe Vales and Kerry Ann Vales of Vales Consulting Group and Vales Consulting Lite.
This week I asked Joe and Kerry Ann this question: What should never be underestimated as valuable – but often is – when it comes to outsourcing? Their immediate response was “people;” and after they considered the question for a while, they still said it’s “people.” Here’s why.
Joe:
For large multinational firms considering outsourcing, a service provider’s failure to recognize the importance of people in outsourcing engagements can be seen in the selling process. At the end of the day, People Buy People. This is even more important when selling and managing outsourcing contracts that may run from hundreds of millions of dollars to more than a billion dollars.
Even though most service providers have years of experience in managing large outsourcing contracts, the risks of failure are very real for every buyer. Just about every quarter, the industry hears about a mega contract that is in trouble with threats of lawsuits or forced restructurings. Buyers know this; so to reduce the risks of a contract, they require service providers to submit detailed Statements of Work with Service Level Agreements covering all the key metrics. Service providers do this and submit hundreds of pages in a typical proposal for a large contract. Unfortunately at the end of the day, most service providers sound the same with similar solutions, governance, and transformation processes.
In doing so, many service providers fail to recognize that people can be the clear-cut differentiator. For example, nearly all requests for proposals (RFPs) ask the service provider to identify the teams that will manage and run operations.
Nevertheless, service providers struggle to identify the people in the proposal who will run key aspects of the engagement. They consistently state that it’s tough in the RFP process to identify and hold the key executives who will run a relationship in six months or more when a contract is signed. Yet, the service provider still expects the buyer to agree to a five or 10-year contract based on the people in to-be-filled positions. It is crazy and a reason why many service providers lose the must-win deal.
Service providers counter that their delivery teams will participate in the orals. Yet, instead of showcasing the operations team in the orals, service provider presentations are frequently led by sales teams and company executives who will not be involved in the delivery of services.
That one person that the buyer needs to see and touch, the Client Service Delivery Executive, is often sitting at the end of the table with only a minor role in the oral presentation or even the follow-up site visit. Because they underestimate the value of people, the providers waste an opportunity for the customer/buyer to feel good about the people who will run the account on a day-to-day basis.
Kerry Ann:
For the small and many midsize business owners considering outsourcing, People are Everything. People drive the success of the selling process, the transition, and all ongoing operations. Owners of small businesses and even many midsize firms are typically hands-on managers who touch and drive all facets of their business.
To a CEO who owns a handful of restaurants or dry cleaners, his business is 100 percent personal, as the business represents a very large percent of his personal net worth. He frequently runs his business with a small staff of trusted friends and long-time employees who have a deep understanding of the business and industry.
An outsourcer who serves the small business market or even the lower end of the mid-market has to fully understand the people-intensive culture of its client. It is a culture that demands personal attention, quick decision making, and a razor-like focus on quick results with a high return on investment.
This is an environment where a handshake is often more important than a detailed Service Level Agreement or a new technology platform. To succeed in this environment, an outsourcing service provider has to assign a sales and delivery team that can earn the respect of the small business owner and become part of his/her inner circle of trusted advisors.
The small business owner has to feel that the service provider is a partner, not a vendor.
The owner has to have confidence in counting on the CEO or the leadership team of the service provider to resolve any problems and know that the service provider’s delivery team cares about his business and fully understands his industry. This people-intensive focus requires a special breed of service provider, and it’s why so many outsourcing firms have had difficulties penetrating the small and midsize market.
Joseph Vales, Founder and Senior Partner, Vales Consulting Group, has over 30 years of experience holding senior management and consulting positions in strategic planning, marketing, and sales. He is a recognized authority on Business Process Outsourcing (BPO) and has been cited by many outsourcing and business magazines as the “BPO Pioneer,” “Father of BPO,” the “Dean of BPO” and “The Universally Acknowledged Marketing Guru of the BPO Business.” He was also selected as one of the “Superstars of Human Resources Outsourcing” each year from 2003 – 2008 and also given the prestigious “HR Outsourcing Thought Leader of the Year” Award in 2005 by a leading industry magazine. He has developed strategic marketing projects, corporate identity and branding programs, value propositions, key marketing/sales messages, and thought leadership and internal/external communications programs for several large BPO, ITO, and software firms. Joe is recognized by leading research firms/analysts as one of the top 10 influencers in outsourcing and, as such, is in a unique position to introduce clients to outsourcing providers seeking alliances and to the outsourcing investment community. You can contact Joe at jvales@valesconsulting.com.
Kerry Ann Vales, Director of Marketing Services, Vales Consulting Lite, has eight years of diversified corporate marketing and communications experience, as both a freelance business writer, and for the past seven years with Vales Consulting Group, a strategic advisory firm. She leads all client services and deliverables of Vales Consulting Lite, a new form of marketing and sales support service that allows younger, entrepreneurial firms to receive world- class advice at a fraction of typical consulting fees for project-based services. Kerry Ann contributes to the development of go-to-market strategies, value propositions, sales presentation toolkits, and thought leadership white papers. In addition, she manages the public/press relations program for Vales Consulting Group, writing and issuing news releases and working closely with the media to arrange interviews with client executives, and plan/contribute bylined articles. Kerry Ann has a deep understanding of business and a keen ability to communicate the right message to targeted audiences to both meet and exceed client expectations. You can contact Kerry Ann at kvales@valesconsulting.com.
Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.
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Hi, I couldn’t agree more; this approach has served me well over many years and has been the reason why TCS has won a number of deals in Europe recently against fierce competition. One client even told us that in some parts of the assessment that although the competition had scored higher, the client teams wanted to work with TCS
Strategic outsourcing is a trust issue between executives. All the SLAs and contracts merely support this bond and intent and certainly when times get difficult as they always do, it is the relationships between people at all levels that drive the resolution
Mark Bretton
VP., Head BPO UK & Europe
Tata Consultancy Services Ltd
Among outsourcing providers, the smartest (and most successful) ones recognize and consistently nurture a key people policy – building leaders from within the ranks. By giving its employees a variety of roles in the early stages of their career with team responsibilities, the outsourcing industry creates leadership from within effectively.
This article by Shailaja Sharma, Vice President, Organizational Development at WNS describes a real life example of home-grown leadership.
http://bit.ly/ag01rX
The team is crucial to deliver the great service. Definitely, in case with BOT (Build-Operate-Transfer) IT outsourcing, customers will always get a practical feeling of the technical specialists who will work on the projects and deliver the service. Therefore the chances to succeed are significantly higher indeed.
Kerry Ann is right saying that a service provider must “fully understand the people-intensive culture of its client”, because this lets remote dedicated teams to be part of the customers’ infrastructure and work in harmony toward most effective deliverables.
Great article, thank you very much! No matter what business, it´s ALWAYS the people …
You point out an important distinguisher, Mark, in what your client said about wanting to work with TCS. In my interviews of hundreds of outsourcing customers over the years (some happy, some very dissatisfied), I’ve noticed there are a lot of customers who state this same sentiment when describing why they selected their service provider. The trust and relationship factor built from the initial interactions is a major factor shared by many outsourcing buyers. However, the providers’ ability to pull that off, as TCS does, is not a widely shared characteristic. I can’t name even 10 providers who consistently can do this. Is it because this is not their aim from the outset, or they just don’t know how to do this? Or is there an aspect of the RFP process itself that constrains the ability to achieve this?
The failure to recognize the importance of PEOPLE in outsourcing is not just a service provider problem. Buyers share part of the responsibility for this problem.
While buyers emphasize the importance of people in choosing a service provider, the RFP process frequently restricts the service provider from interactions with the client that could form the basis for close relationships . Service providers need to have a deep understanding of the buyer’s needs but with shrinking time frames for responding to RFPs and ground rules that frequently limit customer contact, it is not easy for the service provider to build relationships and develop breakthrough solutions .
Joe Vales
Kerry Ann Vales
Vales Consulting Group, LLC
jvales@valesconsulting.com
kvales@valesconsulting.com
The growth of onshoring in the US is a direct reflection of the growing importance of people in outsourcing.
Clients are increasingly looking for outsourcers who understand their day-to-day culture and can build a closer bond with their company and employees.
There are great people who care about clients throughout the US and this is fueling the growth of onshoring across several industries and processes. But what we have found at Advantage Outsourcing in Wichita, is that there is a special work ethic in midwestern cities where a handshake agreement between a service provider and buyer is frequently just as important as a detailed SLA. Wichita, in particular, with its strong base of IT professionals and community support for local firms, is poised to become a central hub for the delivery of onshore IT services in the US.
Skip Womack
CEO, Advantage Outsourcing
skip.womack@adoutsource.com