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Outsource magazine: thought-leadership and outsourcing strategy | July 21, 2017

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Q&A: Cathy Tornbohm, Gartner

Q&A: Cathy Tornbohm, Gartner
Outsource Q&As

Cathy Tornbohm is VP BPO Research for Gartner, and one of the most prominent analysts in the global outsourcing space. We got together with Cathy in March to get her views on the state of BPO today, the potential impact of robotics, developments in India, and much more…

Outsource: So, Cathy: what’s going on in BPO right now?

Cathy Tornbohm: Well, what do you mean by BPO in 2014? BPO is going through a metamorphosis from discrete outsourcing deals to business services that are no longer just siloed per client. Payroll has led the way here: for example, people don’t just get in touch with us to say “we want to buy some payroll business process outsourcing”, they just want to buy “payroll”. And other business activities – front, middle and back office – are starting to become identities in their own right as business services. Hence changing the name of our global outsourcing conferences to Gartner Sourcing & Strategic Vendor Relations Summit [in London, June 2-3], as sophisticated sourcing skills are the key to successfully balancing internal and external process delivery.

O: What’s driving that change?

CT: It’s recognising that you could use a specialist; and buy a full-blown service.  Either on the one hand for an activity that is becoming more commoditised; or to support more strategic needs to get ready for the digital business era, so you’re looking to get sophisticated help with sophisticated contracting styles, to get you to that next level of business outcome.

O: And how are providers coping with these rapidly evolving and increasingly disparate requirements from the buy side?

CT: In BPO in general, marketing is a fairly poor art – it’s not well invested in – and BPO providers are managing to sell the more sophisticated things to more sophisticated clients rather than being able to portray a portfolio of services. To cope with the commoditisation from a delivery point of view they’re investing in robots and automation, standardising and industrialising; on the other hand they are investing in embedded analytics, best practice methodologies, and are promoting business outcomes typically with clients they have a long-standing relationship with, where there’s trust and skills for more sophisticated deals. It’ll take a very clever marketing ploy to take a non-BPO believer to the end of that continuum and an outcome-based result. For example, “reduce my client churn by 50%” is a very sophisticated ask that can only happen in a place where you already have built up a great deal of sophistication about the client and your operations. That seems to be a challenge unless you’ve already been running a high-quality shared service centre or BPO operation to date.

O: You mentioned robotics there; do you feel we’re on the verge of something particularly transformative?

CT: In terms of what the robots can do, that proof point is almost there: there are a couple of deals out there where they’re looking to replace a few hundred people in a short period of time. But that’s in a very specific type of activity. The robot isn’t going to replace people wholesale. The question for me has two sides to it: firstly, what is the capability of the robot? And secondly, there are an awful lot of long-running deals out there that people won’t touch, for the next five, seven years: the robot is coming into its own in a rebid capacity, but it’s not the necessarily the perfect answer – as digitalising data to flow between systems automatically is really the Holy Grail. So in 2014 we will get to a place where one could show robotics working in different process areas, in client sites; but you’re looking at easily three years before it’s in a significant percentage of deals, simply because of the style of contracting of the deals in place.

Providers have proved appalling at going back to their existing client base and just selling in what I call the PETS tools: if they’ve not been able to go back in and do the technology retrofit let alone the outcome-based proposition to their existing clients – and sometimes just leaving them to rot – how is robotics going to change the market? It has massive potential to be a game-changer –but it’s a long game… and only one part of the puzzle of process improvement.

O: It is indeed. Moving on: you’ve recently returned from a rather enlightening trip to India – what were the main takeaways from that?

CT: So, one exciting thing is this move to increasingly embedding analytics and turning it into a service. The science of operations… Turning it into a service – not as-a-service, but a service – is where the industry needs to go; seeing the investment that providers are making into enabling that to happen was very exciting.

There’s also a desire to talk more about corporate social responsibility, and I think the initiatives there around working with clients to promote more socially responsible buying of BPO services are going to be really important over the next few years – partially because it’s going to be increasingly important for clients to have a socially responsible supply chain.

It wasn’t exciting, on the other hand, to hear that working in BPO still hasn’t, in many cases, progressed to a career; in fact yesterday I heard about a client who’s taking some people back from their outsourced finance centres and feeding them back into their own shared services organisation so they can build them up to be the future of their finance. Managing talent, so talent actually has a career path within professional disciplines such as accountancy, is something that the BPO providers have only paid lip service to at best. And that needs to change.

O: You do get a lot of big talk around that from some providers though…

CT: If you’re the best in the team at processing something, you become the team leader, and you might actually have no team leadership skills at all. But instead of going down a specialist career path you’re promoted into a management path. I think that, on aggregate, more could be done to focus in on making those with specialist business skills truly specialist.

One of our recent surveys said that 50% of companies are not ready to embrace the digital business world. They’ll need a lot of support – especially with the forthcoming move to having digital sensors everywhere pumping out lots of data; there’ll be a lot of opportunity there for managed services. BPO providers will be able to combine their analytics offerings, their process excellence, their service offerings, to support clients becoming digital enterprises. And that will only happen if the BPO providers are able to present that capability in a way that clients will see it as the solution.

Another thing that is happening is, there’s very limited awareness of all the things that people are doing BPO for, in India. There’s still a lot of ignorance suggesting that you can’t have complex decision-making done in India, or complex analytics done there, and there are now significant numbers of proof-points of complex activities taking place within BPO deals. And meanwhile pretty much anything you can put a rules-based process around can be outsourced.

The message I want to convey is not that BPO is the answer; the message I want is that every organisation must get skilled at rapidly considering BPO as a strategic option at the same time as considering other potential options.

Another thing people are talking about, of course, is global business services. My take on that is that sourcing leaders will spend the next five or ten years routinely taking things in and out of their GBS centres to fit their needs. As certain services mature, they will become more appealing under a cost benefit analysis as an outsourcing proposition. As certain activities start displaying more capacity to become business outcomes-based, and somebody can demonstrate they can get me to that outcome quicker than I can get there, to support my digital business, then a service provider becomes very appealing.

O: A lot of this depends on the buyer really engaging with the provider at quite an advanced level. Do you feel that the maturity of the big mass of buy-side organisations considering or doing outsourcing is matching the maturity level of the providers? Is there a gap that needs to be closed?

CT: I think the gap is the BPO providers’ inability to articulate the value proposition –matched by clients’ lack of awareness of what their strategic options are. It’s a very difficult time at the moment because the buyer’s dilemma is “should I spend a lot of money with somebody configuring my core system, customising it more, trying to shore up my fading ERPs – or should I buy a SaaS tool, or should I buy some BPO support, either to cut costs with cheaper fingers doing the work or as a BPaaS solution through the service provider?” That dilemma is something that is very hard to see the perfect answer to; what I’m conscious of is that people aren’t understanding the BPO option, and if they keep just buying labour to plug the gap they’re just buying in the style of 20 years ago: they’re just into a discussion about wage rates, and that’s such a pointless exercise because it doesn’t allow you to improve the process, make step changes, modernise processes, even if you’ve got some productivity gains in there – which a lot of people haven’t. They’re still using an old-fashioned, body-shopping approach to BPO.

The challenge with BPO is, it’s very different by industry, and that’s the problem with generalising; but worst-case scenario is that you’ve got a separate provider for your contact centre than for your web channel, and you still haven’t figured out how to incentivise fewer calls to your call centre and more visits to your website. That’s a very prosaic example but it’s one of people who have actually done some BPO but are still buying in an old-fashioned manner, with an old-fashioned mindset, not looking at their customer channels and their digital business holistically, just able to comprehend only small pieces of their problem.


This article originally appeared in Outsource magazine Issue #35 Spring 2014.

Comments

  1. tectl

    Interesting read that left me wondering almost universally…. what is being said? It seems as though I hear allot of cliche terms and double speak but nothing concrete, specific and even remedial in terms of ways to get the train back on the track. Still trying to determine if its the questions, the interviewee or the industry malaised character with little direction that presently exists. Outsourcing, whether BPO or any of the other “O’s” need to start operating as businesses and not mad scientists conjuring up yet another twist on the same old story to which possibly there is no value to be had in it.

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