Well, the day has finally come.  The so-called “Mystery Vendor Manager” and primary author here at 360° Vendor Management, has formally joined forces with Horses for Sources, which this week announced its entry into the analyst industry with a unique vision and niche – Horse for Sources is the only BPO outsourcing analyst organization focused on buyers.  This is great news for our readers, as you’ll get the benefit of his close collaboration among a pretty amazing stable of BPO veterans that he has personally have come to know, including Phil Fersht (needs no introduction), Lee Coulter (famously interviewed here, here, and here), and Jason Busch (of SpendMatters fame), in addition to a variety of other deeply experienced outsourcing professionals and analysts that are equally talented.  It really is a great mix of analysts and practitioners.  SageCircle covered the announcement with an objective analysis here.

So, what should you expect?  More frequently blogging here regarding vendor management insights, significant use of social media (podcats, blogs, LinkIn, twitter), some interesting collaboration among other analysts, and, most importantly, the information you need to be a successful outsourcing vendor manager.

Stay in touch with us by subscribing to our Google feed here or subscribe to our RSS feed here.

Related posts:

1. How Relevant Is Forrester’s 2010 Sourcing and Vendor Management Roadmap?
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Well, the end of 2009 is quickly approaching. Except for the yearend rush of outsourcing vendors trying to claim a final sign-on bonus or their potential clients trying to book severance into 2009’s blood-lined financials, there’s not much left to do, but prognosticate on what 2010 will hold for vendor management and outsourcing governance teams and their offshore and onshore vendors. So, please pardon me as I share my predictions for 2010.

Quickly, before I get started, lest some troll find my opinions worthless, I would like to warn said troll that, indeed, my opinions are worth as much as you paid to read all the great FREE content I’ve shared with you in 2009. It may be worth far less than the Indian outsourcing paparazzi’s opinions, but, with a little luck, they could come true.

So, without further ado, I bid adieu to 2009 and predict these 10 mighty events will occur in 2010:

1. After testing outsourcing’s shallow waters, companies new to outsourcing will cliff dive into the deep end without further investment in governance, only to find that pool parties should be supervised by a lifeguard and that the pool is more shallow than they think.

Struggling with an economy in transition which caused companies to ration investments, leadership at companies who tasted a tiny bit of outsourcing success will heavily outsource in 2010. Since their outsourcing efforts started small, they didn’t consider investing in outsourcing governance, vendor management professional development, or in advisors. They’ll think outsourcing is easy, and multiple streams of outsourcing will be initiated.

Because of the financial realities of 2010, these companies will skip developing smart price per transaction models and rely on fixed monthly amounts or, in moments of real desperation, hourly models. Again, without investment in governance, vendor management, or advisors to keep things in check.

These companies will find that a) success is not easily replicated, b) that not everything can or should be outsourced, c) that it takes real vendor management and governance skill to ensure vendors perform and companies get what they want, and d) that multi-stream outsourcing is a real challenge to manage without dedicated governance resources in leadership positions.

2. Companies that outsource Tier 2 and Tier 3 services will struggle with developing advanced skills.

Most operations leverage their Tier 1 or simple programs as feeder programs for complex programs. For example, experienced call center agents are promoted to escalation queues or application development testers become business process analysts. With expanded outsourcing programs, companies who planned to keep complex or high-touch processes in-house will struggle with developing their staff. Combined with the higher expense of recruiting experienced staff, companies will experience higher costs and more quality issues while they sort out how to build development programs or bring some work back in-house to rebuild feeder programs.

3. Vendors Will Deploy Governance Applications to Improve Client Governance

Up to this point, the companies selling a new category of applications that automate reporting and workflow (like Janeeva, Digital Fuel, and Enlighta) have focused on the buyer-side of equation. While some companies have purchased this software, most do not. Instead, they find themselves in an Microsoft Excel-induced reporting nightmare (made more hellish by the lack of management processes). Since most companies don’t invest in governance applications, vendor performance isn’t visible – and those high performing vendors are sick of taking the heat for their lower performing competitors. High performing vendors will invest in governance software and deploy it to their customers to aid the governance process and make their stellar performance visible. It will also provide alternative revenue streams as clients request integration of multiple vendors into the same application. Sometime after 2010, governance software will be provided as part of outsourced services, with no additional charges.

4. Someone, somewhere will offer outsourced vendor management services and a frustrated client will go “all in” – the final move in abdication of responsibility.

Allow me to coin a new term, Vendor Management Organization Outsourcing (VMOO), which also has an easy to pronounce verb version: to “vmoo” or “vmooing.” In 2010, the big outsourcing companies, like Accenture and IBM, will begin to market VMOO solutions. They will explain the incompetence of vendor management organizations (which, I have argued, should not exist), link this incompetence to it’s competitor’s performance, and build the case for managing other vendors for companies. In 2010, someone with a moderately complex, underperforming vendor portfolio will will outsource their VMO – leaving a vendor to manage their vendors and clients. The skeptics will call it a lobotomy.

5. Companies will leverage the cloud and move away from customized processes.

Cloud computing is at its hype cycle zenith. However, for non-core processes, it simply makes sense. HRO, FAO, and Procurement are all prime areas for cloud computing. Companies struggling with justifying capital expense related to purchasing and customizing these systems will seek solace in cloud computing models and vendors in this space will begin to provide software as part of their solution.

6. Companies will contract Innovation, not outcomes. At least a few will.

In a shift away from hourly rate, price per transaction, and outcome-based pricing models, Companies will begin to contract for innovation and transformation with their outsourcing vendors. This will also be the result of companies who have mature outsourcing programs, but need to change their operations to remain competitive. This will set the groundwork for sharing the costs and benefits of innovation and transformation.  I admit this is an optimistic prediction, so maybe I wont go 10 for 10…

7. Companies will continue to struggle to justify the expense and politics of governance.

I don’t think 2010 will be the breakthrough year for companies to invest in specialized outsourcing governance organizations. Sure, advisory firms will hype the “retained organization” and governance teams, but companies will continue to have great difficulty defining and measuring the meaningful outcomes these teams create. Consequently, they will have difficulty elevating the role of outsourcing governance leaders. To be clear, I’m not suggesting the outcomes don’t exist. Rather, I believe 2010’s lack of investment will culminate in a groundswell that will bring governance to most organizations in 2011. In the meantime, beware the outcomes of underinvesting in governance.

8. IT will continue its life and death struggle to innovate, creating more demand for transformational business process outsourcing – and therefore creating even more headaches for IT as they struggle to integrate with vendors’ systems.

Up to this point in time, most outsourcing of business processes has been labor arbitrage focused – leveraging lower cost labor using the same business processes and applications with some minor process improvements. Offshore call centers have leveraged their clients’ legacy call handling technologies, document workflow processes have leveraged workflow systems, and complex back office processes have leveraged their financial, supply chain, and customer service applications. However, these companies haven’t reinvested in their technology or product development teams, who are also struggling with outsourcing their own teams.

Exhausted by the slow pace of innovation, business owners will make decisions to couple business process outsourcing with technology outsourcing. Expect more vendors to provide applications and IT organizations to struggle mightily with the complexity of integrating and governing multiple vendors’ applications. Cloud computing may appear simple, until you need to integrate your F&A vendor’s system with your BPO vendor’s CRM system and your infrastructure’s vendor’s network.

9. Clients get smarter, do more deals themselves; Advisors pitch valuable niche services and “fluffy” theoretical services.

With the resources and training available from the IAOP, expect more clients to do their own outsourcing deals. After all, their budgets are tight and they have the ability to leverage contracts and selection processes used in prior outsourcing deals. If clients do need an advisor, expect the independent and smaller guys to play bigger roles. The exception will be the large IT renegotiations, where advisors will continue to earn their keep.

This will leave advisors with small, high value projects, like benchmarking, vendor screening, and contract reviews. Advisors will see a dip in revenue and will attempt to hype intangible projects, like designing governance organizations, “vendor diagnostics,” and price structure benchmarking.

10.  Clients stare geopolitical and vendor risk in the eye – and blink again.

After weathering a terrible economic year and terrorist attacks all over the world, while witnessing the demise of Satyam, companies have heard plenty about diversifying their vendors and geographical footprint. Still, don’t expect clients to heed the warnings. Barring an Indo-Asian nuclear war or a Philippine coup, there won’t be interest in diversification. The pundits will exclaim, “The big one is coming,” but until a major event occurs, don’t expect IT and operations to change a thing.

What?  Your crystal ball tells you something else?  Share you comments with the community of thousands of vendor management and outsourcing professionals that visit 360° Vendor Management by leaving a comment below.

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1. How Relevant Is Forrester’s 2010 Sourcing and Vendor Management Roadmap?
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Will the Forrester Research 2010 Roadmap for sourcing and vendor management professionals get you to where you need to go?

I’m always interested in the professional analysts’ take on sourcing and vendor management.  Paid pundits who spend as much time with paying buyer customers as they do with their pandering vendors’ analyst relations teams should have an interesting look on the industry, right?  For the moment, we’ll ignore the ability of analysts to be objective (such as the alleged charges against Gartner or the open hiring of analyst relations professionals with the intent to “get better placement on key reports”) or the desire by analysts to replace superstar sensationalists with “ambitious” replacements.  Let’s look at the work they intend to do in the vendor management space.  And, since Forrester was kind enough to openly ask for feedback on their 2010 Roadmap, they get my constructive feedback.

In a nutshell, Forrester has four goals: “what’s new”, “next level” governance, improving category expertise in particularly narrow IT areas, and building tools and templates following the hit “Vendor Scorecarding” template they published this year.

We Care About Developments

I definitely am interested in new pricing models, models of service level agreements, and emerging vendors.  The more we can learn about this, the better.  However, I wonder how “new” these items could be.  While there is definitely a shift to transaction-based pricing in BPO and outcome-based pricing in ITO, I’m not really certain there is going to be something downright innovative about pricing in 2010.  The same goes with SLAs.  Frankly, this sounds like the potential for a more rehashing of what we already know.  Emerging vendors, on the other hand, sounds like a great topic.  However, does the Forrester have more of an appetite for plotting emerging vendors in a competitive light than Gartner’s legendary Magic Quadrant analyses, that rarely paint an emerging vendor in an extremely positive manner?

Governance, Governance, and Governance

Getting the value from an outsourcing relationship is definitely a hot topic we should all care about.  In addition, we should care about how we organize around ensuring vendors’ performance meets expectations.  The more metrics, the merrier.  Anything that advances the cause of vendor management as a profession and core skillset is good for everyone.  Of course, I’m skeptical about highlighting IT organizations’ outsourcing governance efforts, as this is the area that needs the more help.  However, sharing best practices is a good thing.  Forrester: give us governance research.

Do Not Bore Us With Uninteresting Topics

Outsourcing professionals shouldn’t care about telecommunication, software, and hardware contracting.  Instead, get your procurement team to hire an expert or bring in an advisor or consultant to handle telecommunication and hardware contracting – items that should be done once every year or so and then simply tracked against contract goals.  You simply wont source enough of these contracts to beat an expert in this area.  Software? Hire a software procurement hire an expert and a good lawyer.  Forrester, publish some outsourcing contracts if you really want to provide some value to outsourcing professionals.

Templates, Why Not?

Personally, I prefer to use trade organizations to swap templates.  If you’re part of IAOP, use LinkedIn, or are an active networker, you should be able to get what you need – with enough variety to illuminate interesting areas and different approaches.  However, it never hurts to have another template.  However, I wonder if this is more about Forrester providing tangible value to their customers – a template spreadsheet is more useful than an article on as scintillating a topic as getting more value from offshore vendors, but only allocating 3 pages of content to it.  Sure, its good to provide templates.  It’s just not differentiating.  Heck, the Forrester vendor scorecard template is a mere 178k size Excel file.  How great could that be?

Definitely Not For the Business Process Outsourcing Professional

To be clear for those who don’t know, Forrester’s SVM team is decidedly focused on IT with a rare focus on BPO.  In fact, one could even question how much true vendor management research Forrester even publishes.  Check out the last 10 posted articles from the SVM team:

• Cut Mobility Costs By Classifying Users (12 pages on cellphone and data card usage)
• Sourcing Professionals Need To Understand The Changing Requirements Of Users (a 11 page look at smartphone and computer usage)
• Sourcing Pros: Don’t Forget About Your Friends In Enterprise Architecture (7 pages on enterprise architecture vendors)
• Status, Challenges, And Near-Term Tactics For Cloud Services In Enterprise Outsourcing Deals (13 pages on cloud computing)
• Do Your Software Contracts Permit External Use? (8 pages, with the presumptive answer of “if not, they should”)
• Looking Beyond Global Providers For SAP Services (6 pages on SaaS)
• Refresher Course: Hiring VARs (12 pages that outsourcing professionals don’t need to read)
• Top Strategies To Ensure Continued Value From Offshore Services (a 3 page research article priced at $499 – how good can 3 pages be?)
• The Forrester Wave™: Oracle Services Providers, Q4 2009 (probably a lengthy, uninteresting article on Oracle SaaS and integration vendors)
• European Offshoring Shows Moderate Growth (5 pages of IT-related content that only a vendor could care about)

That’s almost entirely technology focused.  Admittedly, there are some other articles older than these that could be interesting, but they are decidedly IT-focused and likely not of interest to BPO vendor management professionals.  Exactly how committed to BPO is Forrester?  It is not.  However, ITO vendor management professionals could benefit from some of Forrester’s analysis, for sure.

What I Want From Forrester in 2010

Here’s what I want from Forrester as it relates to vendor management and outsourcing:

1. BPO – Damnit, cover the area will you?  Call centers, data entry, backoffice data entry and transaction processing work.  Industry solutions, functional solutions, countries of choice, and political landscapes.  Someone needs to…
2. Driving Innovation – Take a leadership position in ensuring that outsourcing relationships focus on evolution and innovation, lest they run the risk of being terminated for questionable value in inflexible contracting.
3. Professional Development – Research how to develop a vendor management professionals, provide guidance on sources of knowledge, and advise us on how to take career operations and IT managers and transform them into vendor management professionals.
4. Transparency – Publicly share the revenues you collect from vendors.  I dare you to make us less skeptical of your potential economic biases.  Cloud computing, SaaS, mobile computing, and web 2.0 are at the zenith of the hype cycles – why?  Props to Vinnie Mirchandani’s comments on the topic.
5. Connecting Customers – Use online forums, moderated Q&A, in-person conferences to create networking opportunities for buyers to connect with other buyers, vendors to connect with other vendors, and everyone to network with each other with a strict non-solication policy.
6. Benchmark Key Contract Provisions – Service level risk caps, termination options and costs, key vendor personnel,innovation, intellectual property ownership, and price benchmarking clauses.  That would be interesting to outsourcing professionals.
7. Update Your Outsourcing Tools – Not one useful “Offshoring Tool”, “Outsourcing Tool”, or “RFP and Vendor Selection” has been published in 2009.   Actually, only two items were published in these three categories in 2009, and neither is useful unless you work for one of the last companies that haven’t used a managed service provider to manage contingent IT labor.  And, is that really outsourcing or temp labor?
8. A Vendor Management Forum – There isn’t a single forum scheduled for 2010 that could be of interest to a vendor management professional.  Although, I will note that in the one forum which could be of interest, the 2010 IT Forum, at least in terms of what’s available online as of the date of this posting, you’ve done a fine job scheduling vendors to deliver key presentations despite not scheduling any customer-led talks….

Bottom Line

Forrester Research is a fine firm, but the 2010 roadmap offers little for the BPO vendor manager.  For the ITO vendor manager, Forrester could address the high level items fairly well, but Forrester has some room to grow still – maybe their 2010 roadmap ought to address some additional areas?  Frankly, if compared to the Gartner’s outsourcing analysis, Forrester may have some very insightful analysts, but their offering isn’t as compelling.

What?  You feel differently?  Share you comments with the community of thousands of vendor management and outsourcing professionals that visit 360° Vendor Management by leaving a comment below.

Interested in receiving updates from 360° Vendor Management in you inbox or RSS reader?  Receive updates by subscribing through Google’s Feedburner here or subscribe to our feed here.

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1. Outsourcing and Vendor Governance Predictions for 2010
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Tim’s article on the complexity of contracting exactly relates to what I’ve seen in outsourcing: a basic legal framework with innumerable details memorialized in hundreds of pages of schedules.  The schedules are drafted by technical experts who generally lack any understanding of contracting.  Consequently, Tim argues,

In IT, outsourcers often bid low initially in the belief that they will later be able to improve margins by exploiting the contract’s or customer’s deficiencies. The obvious point to make is that once the contract is signed, it’s set in stone unless both parties agree its variation. So, if contract development or negotiation is rushed, it’s guaranteed that many unpleasant and costly issues will arise after the paperwork has been signed.

Tim is dead-on accurate.  Many schedules, like service level and pricing schedules, are drafted by authors with very limited contracting experience and very often rushed.  These areas then turn into change orders (aka “death by a thousand cuts).

Tim’s article is a very worthy read.

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3. The Black Book of Outsourcing – Invaluable Resource or Red Herring?

Right from the horse’s mouth, as one would say.

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What Differentiates Your Vendors?

Phil Fersht’s fabulous article on the commoditization of the offshore outsourcing industry is definitely thought provoking.  He argues that vendors largely have the same operational capability and clients aren’t ready for transformation, which makes the offshore vendors with the largest marketshare the odds on favorite to win in the future – if they can transform their labor arbitrage-based model into something more.

However, do vendors really have the same operational capability?  Let’s examine that point for a moment.

Let’s start by examining the assumption that many companies in the same industry have the same execution capability.  It is not true in the airline (Southwest Airlines), personal computing (Apple), online search (Google), hybrid vehicle (Toyota), online retail (Amazon), personal printing (HP), online auction (eBay), processor (Intel), or retail coffee (Starbucks) industries.  Each of these companies has a reason why they are not just good, but great.  Why are there no standouts in the outsourcing industry?

Can one really argue that  IBM, Accenture, CSC, HP, ACS, Convergys, Cognizant, GenPact, Teletech, ICICI OneSource, Tata, Infosys, or Wipro have the same operational capabilities?  Some may specialize in particular service categories (IT, data entry, call center) or focus in particular countries, but are they otherwise similar?

After significant offshore travel and participating in a wide variety of competitive bidding processes and vendor performance improvement programs, it is clear that outsourcing vendors may theoretically have the same operational capabilities, but when it comes down to the boots on the streets, the soldiers on the frontline, or people getting it done, there is a difference among the vendors.  Not only on a company-by-company basis, but on a project team-by-project team basis, too.  That means that some vendors invest heavily in better technology than others, and that the vendor resources aligned to the client have widely different capabilities.  Selection of the right firm for a customer is a much more harrowing experience than any outsourcing advisory firm would publicly say, because you simply don’t know how well the frontline agents and supervisors are going to perform.  Great vendor management is essential to create consistent, high performing vendor operations.  With that said, the difference among the frontline agents at these firms is narrowing.

However, if Phil is right, then the reason that some outsourcing engagements fail while others succeed is either the client or the client’s advisory firm.  That means end-to-end, 360 degree, superb vendor management capabilities are an absolutely essential aspect of vendor performance.  If you manage vendors well, you’ll succeed.  Otherwise, you’ll fail.  Period.

Jason Busch’s opinion on the subject from a procurement outsourcing perspective is a good one, because he looks at the top providers as a business process and says, “I honestly don’t see a lot of difference between the approaches of the top half dozen players…”  Among business process outsourcing firms that specialize in niche processes like data entry, procurement, and payroll, he’s right: there is little differentiation.  In fact, if you examine core business processes, they aren’t so different from one another.  So, to the degree that outsourcing firms specialize in common business processes, maybe it’s no surprise that they’ve commoditized themselves.

How does the effective vendor management navigate the perils of commoditized offshore outsourcing?  Through great execution of vendor management processes and the selection of vendors that are investing in innovations that will drive business process performance.  Even if companies aren’t so eager to adopt transformational outsourcing, in the future they will need to transform their offshore operations if they cannot find another labor arbitrage solution.

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After a long hiatus, the issues that previously silenced 360° Vendor Management have been resolved.  I’m excited to continue the development of the #1 resource available to vendor management professionals, in collaboration to a number of professionals.  In fact, thousands of monthly visitors have made 360° Vendor Management their top choice for information about outsourcing, global sourcing, contract negotiations, and vendor management.  I feel the reason for our success is simple: We provide actionable content that can be used in everyday vendor management processes.  That’s enough self engrandizement for the moment.  Here is a quick list of upcoming topics to wet your appetite:

• Organizing and Operating a Vendor Management Organization – A combination of sensational governance capabilities, excellent relationship development efforts, and rigorous day-to-day, week-to-week, month-to-month, and year-to-year activities is necessary to manage a complex mix of talented suppliers and keep pace with your firm’s strategic direction.
• Transformation Isn’t For Everyone – Change management isn’t difficult when you’re outsourcing your mess for less or creating efficiencies in business processes.  Change management is terribly difficult when you need to creatively and collaboratively enhance effectiveness.  We’ve addressed transformational metrics, but how do you go about handling it?
• Running a Successful Outsourcing RFP – Developing scope, evaluation criteria, and conducting site visits are only a part of the activities you must complete to select and negotiate an outstanding service provider.  We’ll address the specific RFP structures, Q&A sessions, communication rules, and how to facilitate vendor evaluation sessions.
• Satisfaction – Client satisfaction + vendor satisfaction + internal stakeholder satisfaction = success.  However, how correlated is SLA performance with satisfaction?  Or account profitability with satisfaction? We’ll present evidence that satisfaction is correlated more with achievement of “hot issues” which are, at times, not measured as SLAs.
• Writing Effective Service Levels – We’ve written extensively about service levels, but we’ll actually present examples of poor, good, and great SLAs, including template contractual service level schedules.

Of course, if there items of interest to our readership, leave a comment below or send us an email and we’ll see what we can do about addressing your topic soon.

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In a baffling reversal of fortune, IBM has offered its newly laid-off employees the grand opportunity of international employment under the local terms and conditions.  Bangalore, here we come!

Those unfortunate souls now have the opportunity to compare their unemployment benefits with their Indian counterparts’ wages.  To give you an idea, California’s benefits for those who made over $11,674.01 in the last quarter (which is pretty much all IT workers) are $450/week.  That’s $23,400/year, or $11.25/hr.  Payscale indicates that the median self-reported hourly wage is Rs 1,000 (USD $20.50) for a Sr. Software Engineer/Developer/Programer.

Sounds like a screaming deal.

In case you’re interested, Morgan Spurlock, the man behind “Super Size Me”, has a TV show called 30 Days, an in one of their episodes available through iTunes, documents 30 days of a laid-off US IT worker finding employment in India.  It’s also available at Amazon: 30 Days: The Complete Second Season
Fascinating.

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