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Liam Brown on November 20th, 2009 at 3:58 am :
Comments 000
The Lawyer’s Lyceum Capital injects £25m into LPO start-up and LegalWeek’s Lyceum commits £25m to enter LPO market in Laureate venture articles show continuing investment momentum into LPO, as discussed in my post £400m Acquisition an Indicator of a Maturing KPO Market? This particular investor group has been looking for opportunities to invest in “new business models for delivery of legal services” for some time. I can’t find much about the startup company, Laureate, on the web, but Lyceum’s advisory panel knows a thing or two about the opportunity in the legal market: former Clifford Chance managing partner Tony Williams, visionary legal IT consultant Richard Susskind and Paul Hewitt, who helped develop legal services at the RAC and Cooperative Group. I expect to see some of this private equity money go towards acquiring law firms’ captive, non-core business services operations. It’s certainly a use of capital that Integreon has earmarked.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends
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Liam Brown on November 4th, 2009 at 8:26 pm :
Comments 000
This headline in the Financial Times grabbed my attention: Lloyds in talks to buy CPA Global for £400m. That’s a lot of money by anyone’s standard and made me think how the KPO market has matured over the last decade.
Many people I talk to are surprised to learn that it’s taken Integreon almost nine years to grow from startup to become a $100m business. Back in 2001, most analysts thought “outsourcing” meant offshore IT or call center services and, in the face of scepticism from the investor community at the time, the Integreon management team scraped together the money to launch a KPO business (before the term “KPO” even existed). We were a pioneer in Document KPO for banks, consulting companies and law firms in those early years. Then we became an early leader in Research KPO for the financial sector.
Over the last few years, we’ve become the largest provider of Legal KPO services to corporations and law firms. Over the decade we have slowly expanded our range of KPO services, built or acquired and integrated operations globally, as well as developed our proprietary automation, collaboration and knowledge management technologies. Along the way we have achieved the scale to generate the internal profitability that supports our ongoing investment in services, products, locations, etc. As we come to the end of 2009, we have become the leading global KPO (perhaps), and I feel fortunate to count many of the world’s leading brands as our customers.
These last twelve months have been tough for smaller, niche KPO providers. I have great sympathy for the entrepreneurs, employees and investors of those companies that have gone out of business or are struggling to stay afloat. I hope that they survive or succeed in selling to a larger, more stable entity.
Some industry analysts have recently commented that we are likely to see the serious entry of the large ITO and BPO players into the KPO market during 2010, through acquisitions. Perhaps. I am not sure how many of those firms have the management bandwidth, strategic inclination or patience to acquire, integrate and grow the available small captive or third party KPO operations to build a KPO business of any reasonable scale, which would be required to move the needle for them. Rather, I expect that the industry consolidators will be the handful of scale KPOs that are focused on growing their consistent cashflow business toward an IPO event.
Filed under Economic Trends, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Chris Niccolls on September 11th, 2009 at 9:53 am :
Comments 000
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A recent Reuters article, U.S. banks play catch-up on hiring effort, tells us that Wall Street is ready to hire again, citing a number of high level staff acquisitions and even the return of staff poaching. Well, when the bankers get hired again, the middle office is usually poised for expansion. Anyone who has spent time in investment banking knows that this means everyone’s favorite E-Ticket ride, the Wall Street roller coaster, is getting ready to take on a new crowd of riders! And what a ride it will be, filled with new twists and turns and that oh so dizzying drop at the end… WOW! So, buckle up everyone and let’s see what we can expect this time! |
The drop over the last year was a pretty steep one, so there’s going to be a lot of organizational rebuilding ahead. The problem is that when you’re rebuilding, so is everyone else, which raises costs and extends time lines. It would be nice to bring back all of the good workers who were terminated, but some those have since moved out of the industry while others may now work for your competitors. Eventually, you start to think about poaching staff (it’s not really poaching if they used to work for you), but then other managers start to have pretty much the same thoughts (everyone used to work somewhere).
And where will all of the support staff sit? You may have already reduced your space. So you’re competing with bankers for seating too, which is never a good thing. You’ll also need to consider other support functions that may be spread throughout the firm in IT, HR, Accounting, to say nothing of secretaries, word processors and researchers.
When a decision is made to hire 100 new bankers, are plans made for the 30 or 40 support staff they will need to do their jobs? At least you can avoid a drop off in quality from all of the new staff by getting your dedicated training team to develop a comprehensive training and evaluation program. Hmmm …You do HAVE a dedicated training team, don’t you? Well, if not, then you’d better get cracking because in 30 or 40 months it will be dismantling time again when the roller coaster starts to head downhill once more.
And that’s the ride… over and over again. But for those of you who are not thrill seekers, there are alternatives. Rather than the breakneck ups and downs of the I-Banking cycle, an alternative is to keep a core middle office staff and work with a Knowledge Process Outsourcing (KPO) provider who can smooth out the ups and downs of each cycle.
A good KPO has dedicated trainers and domain experts who can help you plan for upcoming changes and provide the staff you need to execute the plan. Because some banks look at outsourcing strategies as a “temporary” fix that is only applied at one stage of the I-Banking cycle, they have to keep building their services over and over again. And that’s a very expensive way to do business.
A better approach may be to build a balanced blend of in-house, onshore and offshore resources that serves your bank during any part of the I-Banking cycle. The result can be a more efficient organization that delivers greater consistency and responsiveness in support of your bankers, and in turn better service for your clients. Of course, for those adverse to outsourcing strategies, there is always the roller coaster.
Filed under Economic Trends, Knowledge Outsourcing (KPO), Outsourcing Industry News, Outsourcing Tips
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Liam Brown on May 12th, 2009 at 3:09 am :
Comments 000
Outsourcing is back in the news. Come to think of it, when has it not been in the news? Two US national mainstream media had important articles last week.
Outsourcing: Thriving at Home and Abroad (Business Week, 4 May 2009) reports that outsourcing is thriving in the current economy. “Companies looking to cut expenses in the face of soft demand are keener than ever to hand off parts of their operations to lower-cost providers.” That is old news; what’s new is the locations those companies are selecting. Political considerations, internal and external customer perception, availability of talent, currency exchange rates, disaster planning, shrinking cost differentials between domestic and offshore locations, relative inflation rates, now drive companies to consider smaller domestic US cities such as Indianapolis and Boise. The drivers have consistently been, as the article touches on, increasingly sophisticated customers taking “a more nuanced approach” to their operations and sourcing strategy. Core processes are kept captive and non-core processes are outsourced (the so called “hybrid captive/outsourced approach”); some non-core processes are outsourced to multiple providers to mitigate risk (the so called “multi-sourcing approach”); and some processes are sourced offshore while others are sourced onshore (the so called “right-shoring approach”).
Obama’s Plan on Corporate Taxes Unnerves the Indian Outsourcing Industry (New York Times, 6 May 2009) reports on how the Obama Administration’s proposal to tax offshore profits is causing consternation in India. The article suggests the impact of the proposals may not be that great, though they are not yet fully understood. As we read the tax proposal, to the extent it has an impact, it would impact the profits of companies operating offshore captives so it might actually drive demand for third party providers of offshore services such as Integreon. What really caught my attention, though, was the speed at which this tax proposal appeared and at which it has the potential to change the sourcing location landscape - much faster than company operations planners can respond.
The lesson we draw from both articles supports the strategy we have long followed; namely, be flexible about location and have a choice of countries and continents. Companies should select location based on factors such as culture, time zones, cost, business continuity, exchange rates, relative inflation rates, skill availability, turnover, and taxes. Because these factors change over time, sometimes quite rapidly, companies must retain flexibility. For example, the Indian Rupee has had dramatic swings in value versus the US Dollar. And, as the Business Week article points out, the economic downturn has suddenly shrunk the cost arbitrage advantage of India over the US (though it is still large).
For these reasons, we now operate delivery centers in India, the Philippines, US, and UK, with more locations likely in the future. We are not dogmatic about the “best” location.
For onshore locations, we have long been enthusiastic about the types of cities Business Week describes. In 2007, we acquired an existing outsourcing business in Fargo, ND. The location in Fargo was a big factor in our acquisition decision - we recognized that we could hire, and more importantly, retain long-term highly skilled workers there at costs significantly lower than in major US cities.
We have also just opened a delivery center in Bristol, UK. While Bristol is a major city, costs there are up to 30% lower than in London, so it reflects the same thinking - find the right onshore locations that offer a good mix of skill, cost, and cultural compatability.
To drive home the point that location decisions depend on many factors, consider electronic discovery services. For our EDD business, we employ specialized employees, operate server farms, and need to take quick delivery of digital media. For these reasons, we operate delivery centers in “high cost” domestic cities such as New York City and Washington DC.
Global supply chain economics are complex and change rapidly. We encourage those considering outsourcing to think carefully about the right destination(s) for their work and to select a service partner that offers a range of choices, with the location flexibility to accommodate your needs as the evolve. We believe that optimized value chains will operate the right processes, in the right places, with the right people, using the right technology. Each value chain will differ - one size definitely does not fit all.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Onshore v. offshore, Outsourcing Industry News
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Ron Dappen on April 9th, 2009 at 7:23 pm :
Comments 000
In our constant effort to learn more about the market, we’ve just launched a survey co-sponsored by FreePint. In particular, we want to know more about how outsourcing is viewed by those who use or buy any of the following services:
- Research
- Document preparation (word processing, etc.)
- Legal support
- Pitch support (graphics, presentations, etc.)
If you fit the description above, please consider taking this survey. We will share the survey results with all participants.
To receive a copy of the report, just provide your email address at the end of the survey. The survey is completely anonymous. Your email address will not be associated with your responses in any way; it will only be used to send you the survey results.
To link directly to the survey, click here.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Lokendra Tomar on March 11th, 2009 at 10:31 am :
Comments 001
All outsourcers have grappled with how the current economic crisis will affect outsourcing. Evidence is emerging that outsourcing activity will increase.
Few companies or professional service firms made outsourcing decisions at the onset or in the early stages of the economic crisis. As companies try to exit crisis management or adapt to a long-term crisis, however, they are again thinking about more tactical/strategic responses. And outsourcing is back on the agenda.
For example, Business Week, in JPMorgan Chase to Increase India Outsourcing 25% (9 March 2009), reports that JP Morgan “will increase its outsourcing to India by 25% this year to nearly $400 million [and] will also manage the integration of the acquired companies from India to bring down the cost of integrating different information technology (IT) systems.”
This article is consistent with many third-party studies over the last few years that outsourcing is only partly about cost savings. It’s also about rationalizing business processes and freeing up internal resources for higher value work.
In our business, we see the same signs of a shifting mentality. For example, we recently began what we believe is an industry first, outsourcing of an entire research function for a global investment bank (including onsite and offshore teams). This was unthinkable previously. And in the UK, following our announcement of outsourcing the Middle Office of top 30 law firm Osborne Clarke, we have had many inquiries about outsourcing from top 50 UK law firms.
Filed under Economic Trends
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Liam Brown on January 31st, 2009 at 4:12 am :
Comments 001
Industry sentiment is that Q4 08 was very challenging for many EDD vendors as corporations reined in litigation spending. And Q1 09 looks to be the same, if not worse. Tanking Economy Hits E-Discovery Firms (The National Law Journal, January 29, 2009) reveals that some EDD vendors are in financial distress or have simply gone out of business. One can only imagine the consequences of litigation data suddenly becoming unavailable during a lawsuit. Corporations and their legal advisors should now urgently diligence the financial health and capital structures of their EDD vendors and consider those dimensions beyond the usual price, experience, technology, information security and disaster recovery capabilities. It’s not sufficient to be told ”we have big private equity investors with deep pockets” - the wallets of those very investors who were spending their way into the ‘hockey stick’ EDD market growth, e.g. described in the 2008 Socha-Gelbmann Survey (Law Technology News, August 11, 2008) are now superglued shut, despite the pleas for cash from their portfolio companies.
We’re seeing more EDD vendors for sale right now than ever before and we are actively looking to make an acquisition. It’s a good time to be an acquiror of one of these businesses since it fits our overall business strategy, we believe we understand what we are buying (these are very complex, technical businesses), and many of these companies are struggling under a debt burden they cannot service or have investors that want to get out rather than invest more.
Before trusting data to an EDD vendor, we encourage buyers to dig deeper than ever before into the current Q profitability of the vendor, the level of debt, and the management team or investor plans to sell the business.
Filed under E-Discovery (EDD), Economic Trends
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Chris Niccolls on January 16th, 2009 at 6:57 pm :
Comments 000
Simple changes in technology often herald larger changes in the financial world. XBRL is the likely candidate for the “Next Big Thing.” Here’s why.
First, some quick background: the Extensible Business Reporting Language (XBRL) is a way to “mark-up” financial data with “tags” that describe the data. It’s similar to XML (Extensible Markup Language), and is to financial content what HTML (Hypertext Markup Language) is to layout and format.
XBRL’s most important benefit is to simplify reporting and data reuse. This is pretty big when you consider how Wall Street works. Let’s start with two big examples from recent decades.
Example 1: In 1981, the Paperwork Reduction Act reduced government spending on storing documents. The result? The army of couriers and professionals flying into DC every month to file documents in person with the SEC was grounded forever. The BIGGER result? Ubiquitous government and private websites where you can e-file forms.
Example 2: In the 1980’s the UK deregulated and modernized the exchange floor. The result? Within weeks, the floor was almost deserted. Why? Almost as an afterthought, the exchange added online access, thus Exchange workers no longer needed to be physically present to work there. The BIGGER result? As the Internet matured, real-time stock data was readily available for free… which led to day trading, which led to the electronic revolution in stock trading, which led to… well, a lot more change.
The Likely Impact of XBRL: Publicly-traded firms must file SEC and other other regulatory reports and also post them to their company websites. This has resulted in a (literally) free flow of company data. That said, only a few expensive databases provide all of the “as reported” data. Free sources report “adjusted” data, which can significantly alter the analysis. (For example, reports are in dollars even if some operations are foreign, and reports are by calendar year even if some operations use a different fiscal year).
This seemingly minor anomaly has created a large market for vendors to collect and manage the data to fit consistent standards. Moreover, financial firms employ an army of workers (often two armies – one in Investment Banking and one in Equity Research) to recompile this data and recycle it into new reports and financial models. And all this is necessary because computers don’t “know” what the report data really means.
With XBRL, however, filers must tag data to identify what it means. This tagging allows software to do a lot more with the data. Soon, inexpensive computer power will do a lot more of the work, reducing the need for expensive and experienced labor to identify, extract and reuse the original data from company filings. In short, XBRL allows data in the original filing to be tagged for future identification in a standard and reusable way.
The result? The armies of analysts in every financial and market data firm become redundant. Instead, data flows from market data services into new reports with less time and effort. The BIGGER result? XBRL’s robust design makes it easier to pull data directly from company websites, further simplifying the creation of new reports. Adopting a new industry standard for programming spurs an increase in new market data services, and the armies of young analysts and financial knowledge workers transition to different functions as the human labor needed to recycle the “raw” reported financial data fades away.
Of course, XBRL does not solve all consistency problems. There is still the matter of FAS versus IAS (the US versus the rest of the world’s accounting standards). But that is a story for another day.
Filed under Economic Trends
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Lokendra Tomar on November 25th, 2008 at 11:19 am :
Comments 000
How should knowledge process outsourcers (KPOs), their clients, and their employees respond to current crisis in financial markets?
Client Perspective
Choose your vendor carefully - If there was ever any doubt, the current turmoil shows that that service quality and price should not be the only factors customers consider . Long term vendor financial stability is critical as well. Vendors with only a few hundred employers who depend on a handful of clients may find it difficult to survive even a single client loss. Depending on how much business they lose and their financial backing, a key client loss can put at risk continuity of service to remaining clients. Buyers should seek vendors with scale, good financial backing, and a broad customer base.
Outsourcing as a survival tool - Outsourcing is not just about cost savings - it can be a company’s lifeline too. Unless you remain competitive, you may not survive as a business. You may be able to save more jobs (and create new ones) by outsourcing if done smartly and with the right vendor. Choosing the right vendor will help you improve business economics, achieve flexibility, innovation, and help create growth (jobs). The downturn could last quite some time so it is important to consider both your cost basis and operating efficiency, even as your deal with what may be emergency circumstances.
Vendor Perspective
Reduce client concentration - While it’s always good to get more business from existing clients, look to balance the client mix. Otherwise, if your biggest client accounts for 40% of revenues and suddenly disappears (which seems to happen very often these days), you may not be able to survive the impact. Diversify into more verticals and geographies. Winning new business in this economy may be hard, but point your sales team in the right direction now.
Enhance capital - Clients will start asking more probing questions about the financial stability of your business and access to capital. Cover your financial bases. Work towards moving to profitability and get an investor who can be there to support you on your long term business plan/strategy
Leverage opportunities to consolidate /buy cheap assets - A major economic downturn is a time to be simultaneously conservative and bold. Be conservative in managing operating costs but be bold in buying good assets (companies, people), especially when many outstanding properties are available at the lowest price in years. Tight operations coupled with strategic acquisitions will pay handsome dividends when the economy eventually turns around.
Employee Perspective (for India-based personnel)
A downturn is not the end of the world. It’s not first time it’s going to happen. The economy will recover and KPOs will grow again at a rapid clip. This is perhaps first time that global events have had a direct impact in India, specifically immediate job losses. Previously, these types of incidents were limited in scope and barely would even be covered in the press. Now, however, the impact has been pronounced, both in captives and third party vendors. KPOs are not the only ones affected by the global turmoil; many other sectors have shared in the turmoil (e.g., consider what has happened with domestic Indian airlines). The pervasive impact of the Western downturn on the Indian job market shows that the Indian economy is now more tightly integrated into a US/global environment. So it is natural that Indian jobs in many industries will rise or fall based on events in US/global markets.
But, there is hope among this bad news. Outsourcing is expected to pick up even more strongly in the months to come and that should drive new job creation.
Filed under Business Process Outsourcing (BPO), Economic Trends, India Business and Economy, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Outsourcing Industry News
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Chris Niccolls on September 30th, 2008 at 1:42 pm :
Comments 000
Investment Banks are famous (or perhaps infamous) for their analyst programs. The premise of these programs has long been suspect if you examined the facts carefully. Now, with the Wall Street and legislative meltdowns, investment banks must truly re-think the analyst position.
Since the early 70’s, investment banks grew their analyst programs, high paying but physically demanding employment programs that provide entry-level experience for the very best graduates of top tier colleges and universities. A theory existed to justify the 100-hour weeks: employees got high pay, great experience, and a career path to banker; banks got the analytic horsepower they needed.
Several trends, however, undermine the theory. First, banks face increasing competition from other high-paying financial positions in hedge funds and private equity firms. Second, recent graduates now want lifestyle balance more than bragging rights to working the most hours. This makes it hard to recruit the same quality of candidates. And third, earlier traumatic events - specifically industry-wide retractions of offers to analysts immediately following 9/11 - raised doubts for some candidates.
So analyst-employees have been questioning the theory for some time. So too should the bankers and deal makers. They complain about analysts’ outputs and resent the re-work often required. Further, if they really understood the cost per analyst, they might have more than second thoughts. My back of the envelope calculation is that each analyst costs $250,000 per year.
Now comes a crisis many compare to the Great Depression. Can investment banks realistically maintain the analyst programs as they have existed? The trends described above were bad enough. Now, with the increased economic pressure on newly reformed I-Banks, can they still afford to pay hundreds of millions of dollars for these programs?
Does Wall Street have alternatives? Absolutely. In fact, Wall Street has been investing in these alternatives for years… automation, outsourcing, and improved market data services among others. These initiatives, however, focused on tweaking rather than re-thinking the role of the analyst. Today, the new shape of Wall Street is a pretty good indication that analyst programs need to become much more aggressive in defining the real requirements and then cutting the cost of delivery.
Now is the time for a real re-think: what analytic outputs do bankers actually need; how should banks recruit or groom future deal makers; and what combination of human and automated resources will best meet 21st Century needs.
The bank(s) that get this right can gain a tremendous competitive edge. It’s not just about saving money, it’s about creating a well-oiled machine that can pitch and win the most and the best deals, whatever those deals may look like post-crisis.
Filed under Economic Trends, Knowledge Outsourcing (KPO)
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