Head-to-Head: Jef Loos & Eleanor Winn
It’s always great to be involved in ground-breaking research – especially when it’s backed up by some of the sharpest advisory minds in the space. Ahead of the release of Whitelane’s latest report on the UK’s ITO market, we asked that organisation’s Head Sourcing Europe, Jef Loos, and his collaborator Eleanor Winn, Managing Partner at Source, to go Head-to-Head to discuss the research’s findings – and its implications for the outsourcing space both within the UK and beyond…
Eleanor Winn: Jef, what have been the most interesting findings from this year’s research project?
Jef Loos: Number one is the strong position, still, of the Indian players. They remain strong and are growing: outstanding performance. A second point which is very interesting is the gap between the western companies and the Indians is closing; that’s the first time we’ve really seen that in Europe. The third important point I see is clients still have work to do, because I still see that the governance capabilities from the client perspective are still not sufficient to make successful outsourcing deals. Those are probably the three biggest points coming out of the UK research this year.
EW: And what are the differences between that market and some of the other locations that you’ve done the studies in, such as the Nordics, France, the Netherlands…?
JL: There aren’t so many differences, it’s just that the UK market of course is the most mature market, so it’s quite interesting to see what happens in the UK, because after two or three years you see the same things in other countries. We saw the Indian service providers first find success in the UK; we can also see now that the western world took everything in order to compete with the Indian companies – and I think it’s good news for the end-user clients that the bar has been set much higher now. Everybody is doing a lot of work. I don’t mean only that offshoring is increasing, but also quality and productivity: the quality of project management, account management has improved.
EW: It’s quite interesting how, if you look at the results, you’ve got the Indian players who dominate, but some of the European providers come out very strongly as well. Why do you think that is?
JL: Capgemini is really competing with the Indians. On the first position in our survey, it’s Capgemini together with TCS. And if you ask why that is, I think it’s the quality of the people.
EW: What do you think of the difference in customer satisfaction across the towers? There are four different towers covered by the study, do you think that there are clear differences between those four towers? What anomalies would you pull out if you look at the towers individually?
JL: The application outsourcing towers had the best scores and the networking towers had the score showing the players are not doing so well… In other countries it’s often the network providers who score best so there is clearly room for improvement there in the UK…
EW: The reasons why companies are doing more outsourcing – which in previous years has just been about cost reduction, or that’s been one of the top drivers at least – are now more skewed towards transformation and innovation. Do you think that’s where the network providers can’t hope to compete in the same way as the applications providers?
JL: There is a lot of room for creativity and new technology, especially in the networks, so they should do it also. They have enough possibilities to improve the qualities of their services. I think it may be that the organisation of those companies may be a bit behind, or maybe there is less competition. Maybe one day they will be there – but the bar will be higher and the pressure on the players will also be greater.
EW: It’s quite different, isn’t it, if you look at the results of the survey between the apps and the infra towers where you’ve got 20 providers and then you look at the networks and there are still only a handful of providers – they don’t have to up their game in quite the same way.
JL: So, you just mentioned new drivers for outsourcing in the UK. Five years ago cost savings were clearly number one; but you’ve just mentioned business transformation and service quality for example. Do you see that as being the reality in the UK now?
EW: Yes, absolutely. People tend to do first-generation deals to reduce cost and they look at what else they can get out of their outsourcing relationships and their sourcing strategy generally. So a lot of that first-generation stuff has been done, and people have already got the efficiency of shared services, they’ve got the labour arbitrage of moving things offshore and now they’re looking at what other benefits they can access – and that’s bound to be around innovation, around access to new technology, process improvement, the sort of things that are quite difficult and costly to implement internally. But it can absolutely be accessed through the third-party providers, and that’s where some of the Indian players are really strong because they invest a lot in research and development – and if you look at the European providers who are doing well on the list, they are the stronger organisations in that area as well I think.
Our clients are talking about innovation and access to new skills and transformation in a different way, I think people have used those words for a long time but they didn’t really know what that meant; now people are smarter, they’ve had more time to develop their thinking around innovation and transformation and what it really means in the context of their business; and they can track things differently – they can measure results in a different way because they’re a lot more mature.
You’ve got clients who are looking at measuring completely different outcomes from their outsourcing relationships; it’s not just about cost and hard metrics anymore. We’ve got one of our clients who are a consumer-facing business, a charity actually, and their KPIs and the contracts with their third-party providers are around third-party satisfaction, and their IT providers, their network providers, their application providers are measured on their end-user satisfaction, not on their IT services, but their overall satisfaction with the brand – it’s cool.
JL: We sometimes recommend clients go for sole sourcing. From your perspective as an advisory expert can you give some practical advice to the end-user audience on that?
EW: Considering the type of advisory that we are, which is about relationships – and outcomes from relationships – it totally makes sense to us to go for sole sourcing – if that’s feasible: public sector organisations can’t; the governance structures within some organisations mean that sole sourcing is impossible. But where a lot of time has been invested in setting up and managing a relationship, it’s sometimes better to spend the time that would have been spent on running a procurement on transforming that relationship instead, thinking properly and thinking hard in a structured way about the way that the relationship works, where the sources of value are, and how the provider and the client are living up to their potential in that relationship. And putting in place a program of work, instead of going out through a procurement exercise which ultimately adds much less value. Of course there are exceptions to that, but from a client’s point of view, and in terms of the outcome that’s delivered, the relationship that comes out the other end, that’s a much better use of resources, time and money.
JL: One point that was quite interesting that we noticed, when looking at the satisfaction of clients in terms of suppliers’ account management and project management skills, is a lack of proactivity in the deals. Can you comment on what vendors can do in order to improve that?
EW: This is about perception, you get providers, you’ve got account managers who hold that title but they’re not there living the day-to-day life of the client – and if you’re not visible, then it’s very difficult to be proactive. You need to be part of that conversation. To be honest it kind of goes on both sides: where a provider is knocking on the door to get involved in this strategic conversation and talk about the vision, and the customer won’t let them in, then they can’t possible expect them to be proactive. In some instances the provider lets themselves down by being too shy and not even trying to be part of those conversations; striking the balance between being too pushy and being proactive is really quite difficult but I think it’s really difficult. I think the English and the European providers can be a bit too polite, the Indian providers are actually much better at working their way into those conversations and the Indian provider myths about those organisations being less proactive and more likely to just say yes and not challenge the customer – I don’t think that’s true anymore., You can see that if you look at the KPI coming out of the survey; that absolutely reflects that.
JL: A final point, and I’d like to hear your views on this: if I see an unsatisfied client, in my view 50 per cent of that responsibility is at the client’s side. That means we see a lack of governance skills, a lack of transition skills – and I think the client should take more and more responsibility for that.
EW: Yes I absolutely agree: a relationship is created by two parties, and it will never go wrong purely because one person or one organisation is doing the wrong thing. You have to take responsibility on both sides – and it might be that sometimes the provider is the one not approaching the customer in the right way, not engaging in the right way, not managing the relationship properly; but often when you ask all the right questions you find out that the customer hasn’t told the provider what it is that’s really wrong and isn’t having the fierce conversations around “This is what’s falling down and this is what I really want and this is what I need in order to make this relationship work”, and as a result the provider kind of doesn’t have a chance.
Also, I think, about 50 per cent of the contract management, vendor management or relationships management teams that we look at are winging it, so they’re not working in a structured way: they’re not working consistently across the providers portfolio and they’re not even working consistently over time with a clear structured governance process, a consistency of approach, a consistency of activity – all of which means you’re constantly undermining the relationship because people aren’t secure enough to know what’s coming next and how to handle it. So I definitely think on both sides there’s insufficient thought about governance. It’s really interesting coming out of the survey where the client was asked “how mature do you feel you are in governance and relationship management?” and the providers were asked “how mature do you think your clients are in governance and relationship management?”. There’s quite a big delta between how each party perceives this. The clients evaluate themselves much better than their providers do.
This article was first published in Outsource #36 (Summer 2014).