by
Chris Niccolls on September 11th, 2009 at 9:53 am :
Comments 000
 |
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
by
Chris Niccolls on September 1st, 2009 at 11:26 am :
Comments 000
Arpit Kaushik recently authored an insighful article, Making sense of Offshore Outsourcing 2.0 (published in CIO UK, 28 August 2009; and originally in CIO US, 13 January 2009), identifying five principles for outsourcers who want to move to “Outsourcing 2.0″, which represents next generation outsourcing.
Making a correlation with Web 2.0, Kaushik’s five principles for Outsourcing 2.0 include:
- Offshore implemented as a platform rather than as the delivery channel,
- Globally syndicated delivery networks,
- Rich user experience: Success as the measure,
- Rich user experience: Relationships, not complex contracts, and
- Engagement as a conversation: Co-creation, not blame-game.
These principles paint a clear roadmap for Business Process Outsourcing (BPO) companies that want to move to the next stage of outsourcing evolution. Clear as Kaushik’s roadmap is, however, it’s a map for outsourcers, not for business managers.
Kaushik is absolutely correct that for outsourcing to be truly effective it needs to be pervasive and syndicated across the firm as a single, integrated approach rather than a series of disconnected initiatives. To achieve this outcome, the planning and analysis needs to be done at the C-Suite level. The problem is, the C-Suite does not focus on outsourcing; rather, it focuses on core business issues.
This distinction may seem subtle but it’s important. C-Suite executives generally receive staff recommendations tied to specific projects or functions. Whatever they need to move their business forward - building a new building, adopting a new technology, expanding the workforce, or even outsourcing - executives assume that staff have worked out the details reliably. But with the thinning of middle management, not just in this recession but over the last decades, the assumed attention to detail may only hold true with the help of a business partner who can augment these due diligence efforts and then translate them into strategic C-Suite business terms.
Rarely does the C-Suite see their organization as being confronted with an outsourcing problem. Instead they may see unrelated problems to solve or opportunities to pursue, for example, the rise in secretarial costs that needs to be controlled, an unprofitable product that has too many loaded costs, real estate constraints limiting the growth of their workforce, or the need to fix a recurring budget overrun. They do want a solution that works and is complete.
Kaushik ’s last three principles perfectly articulate these needs within the new wave of outsourcing. To be realized, BPOs must first establish a level of trust that quickly goes beyond metrics and penalties and rises to a holistic level that focuses on how the business should work. What this means is moving the conversation away from short term horizons (e.g., did we meet this month’s metrics), to more important business issues (e.g., are we fully supporting the client’s 2010 revenue goals). To achieve this, both outsourcers and customers must work at a higher level than in the past. They need to go beyond a traditional vendor type relationship, often characterized by “hand off” delivery processes, and instead mold a deeper business partnership using integrated, tandem processes.
To achieve such tight integration as well as the full benefit of outsourcing, customers and providers together should begin by considering how an existing or prospective outsourcer performs in three key areas beyond Kaushik ’s five principles:
- Focus on just a few markets: There are subtle and not-so-subtle differences in how similar services are supported in different industries. A BPO needs expertise in specific industries, otherwise solutions will be crafted that take too long to get “just right” and may miss critical opportunities. So customers need to make sure their provider has the right industry experience and expertise.
- Provide the services your markets need: No single BPO can perform every task for every client that every market asks for. Some big BPO’s focus on a single service such as Word Processing, or Accounting… which is perfectly fine. But providers who want to offer the synergies that the C-Suite demands need domain expertise across multiple service lines. So customers must make sure they assess the full range of provider capabilities.
- Support offshore, onshore and onsite strategies: Kaushik is right to say that outsourcing is “not about ‘which’ shore you use”. But if a provider is going to fully provide for the outsourcing needs of a big client, it must have multi-shore capabilities. Clients don’t necessarily come into an engagement knowing that they need support from a variety of geographies. Yet, once the program is underway, details may emerge that the C-Suite did not anticipate, for example, national privacy laws, internal security regulations and the cultural history of a firm all come into play when designing specific programs. A BPO that lacks all of the right locations lacks all of the right tools to fully service the client. So customers must consider the range of geographies and locations, including onsite, over which their provider operates.
Filed under Business Process Outsourcing (BPO), Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Tips
by
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
by
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)
by
Chris Niccolls on August 20th, 2008 at 7:50 pm :
Comments 000
On May 29th, 2008 Judge Paul Grimm ruled in Victor Stanley, Inc. v. Creative Pipe, Inc. that defendant Creative Pipe Inc. production of 165 privileged documents to plaintiff Victor Stanley Inc. waived its privilege. I am a non-lawyer with extensive process re-engineering experience. From my perspective, this case offers an important lesson about resourcing projects appropriately.
Creative Pipe retained an outside e-Discovery expert to develop searches to identify privileged documents. The company did not test the 70 keywords the expert identified which led to producing at least 165 privilged documents. Creative Pipe moved to return of these documents but Judge Grimm rejected this request. He reasoned that the release of documents was too extensive – a systemic process failure of process rather than a single accident. Creative Pipe could have easily and quickly recognized the problem on its own had it sought to but instead, the plaintiff found the problem. He also considered the fact that defendant had proposed a clawback agreement but dropped it when they were granted a 4-month extension.
I’ve heard some lawyers say this case will have a chilling effect on e-Discovery and others say it is a wake-up call to lawyers about the depth of technical expertise required. From my non-lawyer persepctive, these views seem to miss the real problem. Every law firm and legal department is squeezed for discovery resources. Creative Pipe’s fundamental mistake was likely failing to commit sufficient resources to complete work to which it had agreed to do.
When did the company realize that the privilege review was going poorly? With a 4-month extension, they probably thought that they had ample time (otherwise they would not have dropped the request for the clawback). In a perfect world, it might have been enough time. But in the real world, complications and new projects always pop up unexpectedly: staff are unavailable, systems fail, work progresses more slowly than expected, etc. And then the big problems start, for example, not having enough time to test search criteria. Or not having enough staff to check documents before producing them.
The solution to this problem seems obvious - just retain the right resources. A few years ago, that might have been impossible. Today, however, many e-discovery firms can provide support throughout the whole litigation lifecycle. Litigants can select a series of specialists or a “general contractor” who has all the resources under one roof. The key is that lawyers should work with e-discovery vendors before a case heats up. Lawyers need to form relationships and understand the benefits of flexible resources before the next crisis. Moreover, lawyers cannot afford to delay key decisions concerning documents.
As a manager, consultant, and functional proces engineer, for me, this comes down to “Operations 101.” Big problems often start with inconsequential (and therefore overlooked) lapses. Everyone runs out of resources at some point. Take the necessary steps today so that process mistkaes don’t cost you more than handling e-discovery properly from the outset would.
Filed under E-Discovery (EDD)
top of page