Q&A: David Poole, CEO, Serco Global Services UK & Europe
It’s been a fascinating – and hugely significant – few quarters for Serco, with the outsourcing giant making a number of strategic acquisitions and continuing to take huge bites out of the UK and European market. At the 12th Annual European Shared Services & Outsourcing Week in Amsterdam, we spoke with David Poole, the CEO of Serco Global Services UK & Europe, about the thinking behind some of the company’s recent purchases – and to get his thoughts on what’s going wrong, and right, with outsourcing today…
Outsource: The latest economic data coming out of Europe is far from positive – and the ongoing political crisis is hardly helping. What does this unappetising cocktail mean for this space, in your opinion – does the old adage that “bad times are good for outsourcers” still hold true (if indeed it ever did)? – and what are the ramifications for Serco in particular?
David Poole: I think the key message is that, yes BPO, is counter-cyclical to some extent because companies that would look to BPO as a solution would tend to be more likely to do so when they are finding things more difficult. So when the economic environment is tough people will look for solutions to make their business efficient and effective
BPO is really about trying to make companies more competitive in the marketplace – so, actually, the competitiveness of British companies or European companies or American companies does drive to reduce the cost of the back office or of customer service and BPO is an very effective treatment to achieve that.
O: Serco has made some pretty significant acquisitions in recent times – most notable perhaps that of Intelenet but there are several others of note. Can you give us some insight into the strategic drivers behind this non-organic growth and some idea of how smoothly the new organisations have been brought into the Serco fold?
DP: Serco’s mission in life is to be the world’s greatest service company. So what we are trying to do is to make that service offer be a bit broader. Traditionally Serco has focussed on public sector services – and also on front-line services. What we are looking to do is continue to grow Serco’s capabilities into the middle and back office which are also areas where our clients need more help. And we are also shifting the emphasis towards the private sector. So just trying to get the balance right- that was some of the strategic rationale behind our acquisitions.
Now if you look at what we did in acquiring Intelenet – which is a large leading global pure-play Indian organisation with huge industrialisation – and combine that with the other acquisitions we made – for example The Listening Company in the UK which is a very-high-end, very sophisticated customer management service provider very intimate with its customers – and then combine all that with the very trusted brand of Serco you create a really powerful proposition. So actually we are now Europe’s largest BPO provider.
We have created a platform which we hope will continue to help clients leverage their customer relationships; we are trying to make them better at serving their customers. But we are also giving the industrialisation and scale to clients to bring about the huge transformation that is required. If you look at the recent deal we signed with Shop Direct, it is all about the transformation of their business and the channel shift that is taking place from people answering calls from their telephone to a lot more internet, web-interactive type of business. We are able to bring the investment, the technology, the capability, and the scale to deliver that to the UK’s largest online retailer. What we have created is a very interesting model.
O: That also speaks to Serco’s intention to be the largest UK provider too – that business could have gone abroad of course…
DP: Absolutely. We are using an onshore, nearshore and farshore model. Within the BPO business we have 10,000 people working onshore in the UK. and our intention is to continue to grow that as well as growing our offshore presence. We believe that the clients need a mixture of those things to get the best results for their customers. Our mission is to be better for our customers’ customers: to make them more competitive, make them more successful and, hopefully, grow and survive.
O: And the customer journey is obviously a major part of that process.
DP: Customer journey is very significant: the shift of customer behaviours and the use of new technologies, such as new mobile devices, are all part of that challenge we are helping our customers deal with.
O: How do you see the BPO space continuing to evolve over the next few years – particularly in light of the advent of new delivery and pricing models – and how are you positioning your organisation to thrive during this evolution?
DP: The key thing that is happening in the BPO business right now is the shift away from the traditional model – the “your mess for less”, “offshoring for the sake of it” model – much more towards providing solutions to our clients: using the intellectual property, the knowledge capability that we have rather than just having a cheaper option. And that I think is new, so we are able to transform them via new models which we can provide as a provider or owner of intellectual property. I think that is a huge shift that is taking place. We see offshore not just as a place where we can deliver things cheaper – although this is still true, these days it is not the main driver – but as, actually, a way to access talent which you could not otherwise get on the scale that’s required. So in some ways we are importing the talent rather than exporting the work we are doing.
For us it’s an evolution of developing our own intellectual property, our own process models, our own technology which we can then just transform our clients to utilise. I think that’s the main change that is taking place.
O: So it’s all about having that mix available?
DP: It is about having the talent available and also having the process models available and the associated technologies to support those: what we call business processes platforms. A business processes platform in our view is the technology and also the talent, the experience, all wrapped up with our own Intellectual property delivered to the client as a solution.
O: What do you see as being the biggest obstacles to the ongoing expansion and development of the outsourcing model?
DP: I think a challenge at the moment is that there has been some negativity around the whole area of outsourcing. I think people are starting to recognise the importance of outsourcing in terms of the value it delivers to the client, and in terms of the capability that we are able to access through a global delivery model. But there is always a naïve political argument that takes place. And I think that creates a little bit of slowness sometimes, particularly around government change- there is always a reticence to make a move. However most organisations that have moved to an offshoring or BPO solution recognise the value it’s brought to their business – if you think about the fact that they are reinvesting the funds they are saving that’s great for the kind of organisation we’re talking about.
O: The bottom line is: it works.
DP: Absolutely, it works.
O: Do you think enough is being done – both within and outside the outsourcing space – to ensure that organisations have access to a sufficiently large and capable talent pool? What do you look for in new hires – what skillsets and traits do you think are most important within an outsourcer?
DP: As I said before, I think at one point BPO was all about how quickly and cheaply I could get your work out of where it is now and put it somewhere else. Now, it is about looking at the value-added model. So now we are starting to employ people with much more process expertise, and sector expertise. So as we develop our horizontal offers around F&A or procurement or HR, we are really developing them in such a way that they are tailored to the very specific sectors within which we are delivering work. So the kind of individual that would be, for example, selling an F&A deal in the retail sector, would be a real retail F&A expert. We are really trying to match the people we employ with the kind of people buying our services. By having very, very deep ranges of services we can offer within narrow sectors we are much more able to add value for clients, around analytics and so on.
The whole thing about analytics is, at one point BPO providers were just inputting things – but then they started realising the value in analysing them. Now it’s really getting from the analysis into the action phase: really being intelligent and understanding what we are seeing going on within our clients’ businesses and then taking action and responding to type of analysis we are doing. And that’s another shift that is taking place, and that requires much more talent and much deeper knowledge and expertise, so that when people see the teams we are bringing into them, we now know as much about their sector (and almost as much about their businesses) as they do. I think that access to those sorts of capabilities is very powerful.
O: You’re speaking with them from their own space.
DP: Exactly. You come at them from their industry, their sector, their process and you have ideas to bring, you have technologies and you have your own models of how things should be delivered. It’s not to say that “it’s our way or the highway” – it’s certainly not. It’s the ability to take what should be 80 per cent of a standardised model and deliver that in a sector-based way. So the terminologies, the processes are finely tuned to the sectors you are dealing with. In terms of how we are recruiting the people we are bringing into the business, we make sure they are very targeted to understand exactly the very narrow bands of sectors and processes we are working in. That’s really what is changing in the environment.
O: Where do you see the biggest opportunities for geographical growth for outsourcing, and for your organisation specifically, over the next few years?
DP: I think in terms of geographical growth, and the way Serco sees the business, it is not so much now about doing things cheaper: it’s about availability of capability and being able to find enough raw talent to be able to deliver the kind of services required – particularly as we are getting more focussed on the value-add. So I think most of the world’s core service delivery locations have been tapped. So now it’s not so much about doing it cheaper, it’s about continuing to do it better and having the right talent. India still holds huge potential: just the number of graduates it’s producing each year, of a very high quality, is phenomenal.
In terms of new areas: I think South Africa is a growing area – a lot of the BPO providers including Serco are looking at South Africa as an opportunity. Latin America has a huge growing domestic market as well as a huge amount of talent to offer that space. Across Europe, we have got so many different cities and areas and regions now selling their services; it continues to be about where can you find enough pure graduate talent that can do the kinds of things you need to do – and about language capabilities. So the centres which have broad language capabilities that have good business qualifications, good business universities are the ones that are winning. You see a lot of investment: countries like Lithuania are investing in educating their people. The same thing is happening in Poland – and I still think the southern part of Poland is a very powerful place to be working. I think Krakow is now going from the early adopters through the second to the third adopters now; different generations of providers are all using Krakow and southern Poland. And Serco has a centre in Krakow which we leverage in that way.
But let’s not be forgetting the UK. It is a great place to be working. As I said, we have got 10,000 employees in the UK; we have just signed contracts where we are working with the ASP [Anglia Support Partnership] for example which is an Anglian alliance of hospitals, where we are creating centres of excellence in HR, finance and procurement in the UK. So I still say it’s all about continuing to have the right talent in the right place rather than just trying to provide stuff cheaply via labour arbitrage.
O: Similarly, which verticals present the biggest opportunities for growth?
DP: I think all the verticals are continuing to grow. Financial services continues to grow in certain areas; it’s still by far the largest marketplace. We have obviously had a huge amount of success in the retail sector. Retail is under a lot of pressure as we all know: High Street names are just disappearing off the map. So BPO provides a great opportunity in the retail sector. Travel and transportation is another huge area: hugely competitive, very margin-intense at the moment. I see that as a sector that is really moving. I think over time we will see utilities and the energy sector starting to move. So all sectors are active; those are the ones we are focussing on for the time being. Those are the ones where we think we have the most to offer in those areas. But I certainly see financial services being the largest sector for some time and there is still a long way to go before they are healthy.
O: Finally, what’s the secret of outsourcing success?
DP: The secret of outsourcing success is having the greatest value to add to your customers. So it’s really about forming a partnership where they can see you are bringing something to their business – you are bringing change, innovation, transformation capabilities that they couldn’t provide for themselves in-house. I think that’s the key to success: value-added partnerships where you are really adding something to the relationship in terms of a continuous mutually beneficial opportunity and really forming a partnership where you are looking to grow the business on both sides.