The Rise of the Good Global Services Customer

By September 11, 2012April 12th, 2021Archive

In most nascent marketplaces, the first provider of a service or product enjoys initial market supremacy — that period of time when product offering, terms of purchase, pricing and quality are dictated by the offer. Call it first-mover advantage, market maker or innovation premium — the market naturally takes some time to respond, embrace, accept and then put pressure on the offering to change or adapt to requirements.

This very same lifecycle is apparent in the global services industry, which is a fall-out of the evolution of the information-process outsourcing market. When the industry first took form, the buyer primarily bought what information technology providers offered (the “provider knows best” syndrome). Fast forward years later, corporations have become quite skilled at shaping strategy to meet specific business requirements using all the tools at hand — insourcing, offshoring, nearshoring, build-operate-transfer, managed-services agreements and so forth.  As a result, information-technology services delivery is a far cry from what it looked like at inception, with new players, strategies, alliances and internal management structures.

A parallel can be easily drawn with the delivery of business processes. With a market less than 10 years old by some accounts, first-in Business Process Outsourcing (BPO) providers have historically dictated the shape and form of process services constructs. As a result, the marketplace is defined by a veritable alphabet soup — BTO, RPO, HRO, BTS — to name a few, all trying to lead the customer to services nirvana by serving up a brand and a point of view.

However, the industry is at an inflection point where clients are becoming more dominant in shaping the future of global service delivery — call it the end of buying off the peg, so to speak. Customers now require the marketplace to provide services in more flexible offerings and varied scopes, with higher expectations for service levels and an increasingly transparent trajectory to performance.

Available data. The industry, though somewhat unorganized and anecdotal — some might say akin to a “cottage industry”— is relatively easy to interpret. We all read the same reports and speak to the same experts. Base intelligence extolling the virtues of approaches and providers is freely available through the rising armies of intermediaries (advisors, lawyers and pundits), while providers are more than willing to invest time in education in their quest for clients, hopefully positioning themselves for an eventual sale in the dialog. Customers no longer need to be told about Bangalore or Manila as they have often taken the tour, and are entirely capable of calling Gartner or IDC to obtain vendor profiles themselves.

Lengthening track records. As a corollary to market intelligence, customers can speak with peers about the virtues of India delivery versus onshore, or commodity provision as opposed to a business transformation as they develop a services construct. And the importance of the internal track record should not be underestimated. Even companies that have not yet implemented major changes in their business operating models have enough experience in managing commodity services such as payroll or desktop to understand what the role of the customer entails.

A longer corporate track record also brings a heightened awareness of the risks and challenges inherent in creating a wholesale change in the service-delivery model. Compliance focused internal departments — business-continuity management, insurance, internal audit, information-technology risk management — now have a point of view regarding the tracking and mitigation mechanisms appropriate to a such a degree of change.

Higher levels of confidence. Evolving the global operating model is no longer a corporate advantage but rather a competitive imperative. Almost every corporate agenda includes challenging the current business model just to keep up with the market. Most organizations acknowledge this, as the concept is no longer met with “someone else first, we’ll follow,” strategy. The managements now undertake the decision to change the operating model with increasing levels of confidence. It is now “safe” to mention the O word, invest in a trip offshore, or attend a shared services conference in order to evaluate alternative services delivery strategies.

Heightened management focus. Structuring a new global operating model is now more often part of an executive job description at the C-suite level — CEO, COO, CAO or CFO. This top-of-the-house ownership gives latitude to query, explore, design and evaluate a broad range of services options, rather than revert solely to a procurement department led sourcing strategy to solve for the most readily available option.

Better understanding of the degree of change. Corporations are beginning to take on board the fact that introducing a new operating model is not a one-off event but rather represents radical and ongoing change which is their sole responsibility. Forcing an agenda by taking business lines and people with the program is the difference between success and failure. Transforming an organization is no longer seen as announcing a service modification on an internal website, or a task ceded to a provider, but rather as a daily hand-to-hand combat incorporating a robust program of listening, finding solutions, negotiating and using communications skills.

Emerging internal competencies. Although there is no recognized construct for sourcing, implementing and managing services delivery, the customer has now gained enough experience from first attempts at globalization to broadly understand competency requirements. In some corporations the sourcing or technology unit houses enough of these skill sets to seed a new organization, while others must formally or informally cobble together expertise from a range of corporate departments, such as procurement, corporate development, finance, operations and mergers and acquisitions.

Skill sets critical for effective services management are now being specified in job descriptions. As staff experience is evaluated to identify any onshore or retained organization, customers know that process-management skills may have less corporate currency than program-management prowess — the ability to manage providers’ or captive operations’ outcomes. Relationship and commercial managers, with skill sets interchangeable with those valued by the provider community, are now recognized as more and more important.

Why Does the Market Need Good Customers?

Good customers make informed decisions and those decisions in turn ensure delivery performance. Investing in a services program appropriately resourced and sponsored by the business is key to success. Too often corporations use a sourcing process as their initial foray into the world of global services delivery, trying to shortcut key tasks such as scoping, developing a business case, gaining the right level of sponsorship, assessing the appetite for change and designing the best relationship construct. While a good sourcing process incorporates these steps, unless the business owns the opportunity from concept through the entire implementation, benefits will most likely be illusory.

Good customers are imperative for the future development of the global services industry. Pushing the proposition and promoting and developing the processes, tools and practices falls squarely in their court. Customer leadership is the only way for services globalization to grow and prosper. Poor customers will set the industry back several years, leaving corporate dissatisfaction, huge costs to unwind and bankrupted providers in their wake.

Providers, both internal and external, deserve good customers. When sourcing is used as a window-shopping expedition, providers waste precious pursuit in dollars by responding to opportunities which are not clearly defined, promulgated by customers who may or may not have the right level of conviction about what and how the operating model should change.

Are You a Good Customer?

Understanding the location landscape, or lining up the right advice to do a deal does not make a good customer. Fundamentally, to reap the greatest benefit out of the change in a services model, a good customer makes a radical change in mindset, capability and approach, understanding that he becomes an integrator for a series of relationships. These relationships are underpinned by a strong command of commercial principles, skill in managing change and ability to manage complex programs. A good customer can be distinguished by several traits:

Mindset. The good customer knows he must have a clear point of view as to how to effect the right change in the operating model. He has a good understanding as to the art of the possible in terms of structure and outcomes given business context, culture, level of sponsorship and sourcing strategy. This understanding is based on asking good questions and challenging existing processes in order to change the status quo.

Capability. He knows that changing the delivery model requires a huge investment in time and resource, tools and methodology. Simply going to the market to buy services is not enough. Inconsequential investments in program management, training, communication, service-level management and governance must be factored into the business case.

Approach. The good customer understands that a contract — whether with an external provider or an internal shared-services center — should be the culmination of a relationship with a high probability of success, rather than the kickoff of a series of implementation tasks. Global services implementation is about evolving relationships, roles, and responsibilities.

Will clients rule? The next two years will tell…

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