A Michael F. Corbett & Associates Publication

SPECIAL EDITION: THE YEAR IN REVIEW
January 2005


1. The Year in Review
2. Web Poll: Is Outsourcing a Profession?
3. Humanizing the Offshore Debate
4. Interactivity is the Name of the Game at the Upcoming 2005 Outsourcing World Summit
5. 'The Outsourcing Revolution' - What Readers are Saying


1. THE YEAR IN REVIEW

From Madras to Main Street

Without question the biggest story in outsourcing for 2004 was outsourcing itself. Although consistently equated with offshoring and fueled by decidedly-negative press coverage and the contentious Presidential elections, 2004 was the year that outsourcing became part of the public lexicon. (Of course, folks who attended The 2004 Outsourcing World Summit knew this was going to be year outsourcing hit the front pages when we were visited by a couple hundred protesters from the Communications Workers of America!)

The reason that this is so important is that even through the shouts of protest and confusion of terms, the basic 'idea' of outsourcing is now understood by just about everyone - both inside and outside business. Guy Trebay's December 19th New York Times article entitled "Happy Outsourced Holiday; O Perfect Tree, O $3,500" was a fitting capstone to the year outsourcing became known from Madras to Main Street.

The debates will continue, and every executive team will reach its own conclusion on how best to shape outsourcing to meet their organization's unique needs, but the days when the basic concept was either not understood or could be rejected out-of-hand as simply wrongheaded are gone - probably for good.

Growing Up Is Hard to Do

But understanding and excellence in execution are very different things and 2004 is also the year that professionals in our field began to step up to the need for real change to how we craft and implement engagements.

The average customer executive now reports, based on data collected at The 2004 Outsourcing World Summit, that poor working relationships between itself and its providers are costing more than 13 percent on average of a contract's potential value. Twenty-one percent report that a quarter or more of outsourcing's potential value is lost for this reason.

There's clearly work to be done and it needs to be done by both parties - the customers and the providers. For example, although flexibility and innovation are important reasons for outsourcing for many customers, less than half of today's relationships are specifically designed and managed to deliver these benefits. Only about half of organizations have in place processes and systems for managing their outsourcing relationships and only one-third have a program for training the managers responsible for overseeing them.

Organized efforts to close the gap gained momentum in 2004. Case in point is Carnegie Mellon's eSourcing Capability Models (eSCM) - one for providers and one for customers - which has now gained support from a number of IT and business process outsourcing industry participants, including: Accenture, EDS, IBM Global Services, Mellon Financial Services, Satyam Computer
Services Limited, the Standardization, Testing and Quality Certification (STQC) Directorate of the Indian Ministry of Communications and Information Technology, and most recently TPI and The Outsourcing Institute.  Additional information on this initiative is available at: http://itsqc.cs.cmu.edu/.

Danny Ertel's recently published HBR article, "Getting Past Yes: Negotiating As If Implementation Mattered" (available online at http://www.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0411C) also set a new standard for a published work that both acknowledges and takes head on these execution issues. At www.Firmbuilder.com we continue to focus on outsourcing execution with scores of articles on everything from setting up program management offices, to relationship alignment, and governance.

Deals, Deals, Deals

2004 was also the year of the deal. Although there has been much discussion in the industry about a shift away from larger, so-called mega-deals, towards a more selective approach to outsourcing, the actual deals announced in 2004 don't support this conclusion. Both large integrated relationships as well as more selective contracts were announced all around the world and all across the industry in 2004.

At the same time, there were a couple of very high-profile contracts cancelled. Although noteworthy, if for no other reason than for the size and scope of the organizations involved, any attempt to extrapolate from the deal activity in 2004, including these cancellations, to suggest an overall industry shift would be presumptuous. Growth rates across the industry continue at a torrid 15 percent-plus annually, with the size, shape and character of the actual contracts continuing to reflect the very individualized nature of executive decisions of this magnitude.

The following is a representative snap-shot of deal announcements across the industry in 2004 (grouped by continent, type, and provider):

New Contracts - North America:

ITO: Cummins, Hallmark, McDonald's (ACS); Prudential (BT), TXU (Capgemini); Cott (CGI Group); AON, Sears, Textron (CSC); Bradley Memorial Hospital, Carson Tahoe Hospital, North Shore-Long Island Jewish (Eclipsys); Aspen Valley Hospital (FCG); Fortum, MCI, Nokia, Starwood, Standard Register, TD Bank (HP); British Columbia  Government, Dun & Bradstreet, Nokia, Morgan
Stanley, Williams Cos., Marathon Oil, Sprint (IBM); National Life Group (Keane); Indianapolis, Marion County (Northrop Grumman); Key Safety Systems (Perot); Hyatt (Telstra)

BPO: Best Buy (Accenture); Missouri Courts, Rohm and Haas, Symetra Financial, United Cargo (ACS); California Casualty (Ceridian); National Bank of Canada (CGI Group, Intria); Unitrin (CSC); Material Support Resources (Ephinay); Dime Savings (Fidelity); Sun, TXU  (Hewitt); Procter & Gamble (HP); TIAA-CREF (Mellon);The Schuster Group (XactiMed)

Logistics: General Chemicals (Cendian); Sunny Delight (Transplace)

Manufacturing: Dana (Federal- Mogul); Nortel (Flextronics)

New Contracts - Europe:

ITO: Barclays, Deutsche Bank (Accenture); Outsourcing Solutions (AT&T); KarstadtQuelle AG (Atos Origin); Global Solutions (C&W); Schneider Electric (Capgemini); Swiss Re, Zurich Financial Services, SAS Braathens (CSC); Banca Popolare Di Sondrio, Societe Generale (EDS); Visa (Fujitsu); WestLB (HP); Lloyds TSB, Michelin, Shell, Zurich Financial Services, Department of Environment, Food and Rural Affairs, NTL, Harel, Delta Lloyd Group, Danske Bank, A.P. Moller-Maersk (IBM); Interbrew  (LogicaCMG); BBC (Siemens); TUI UK (Sonata); Aviva, Shell (Wipro)

BPO: Sandvik (Accenture); Cox Insurance (CGI Group); F&C (Mellon); Hi 3G (Proffice); National Savings & Investments (Siemens)

Logistics: Coors (TrenStar)

New Contracts - Australia, Asia:

ITO: Airtel (Ericsson); Tower New Zealand (Hosting and Data Services); Bank of India, Singapore Government (HP); BHARTI Televentures Ltd., Esquire-Korea, Singapore Airlines, Qantas (IBM); YES Bank (Wipro)

BPO: Citibank India (Euronet)


Renewed/Expanded Contracts - North America

ITO: City of Carrolton, Texas, U.S. Chamber of Commerce (ACS); Nokia (HP); General Dynamics (CSC); Bank of America (EDS)

BPO: Nextel (Amdocs); Deluxe (eFunds); Continental Airlines (Hewitt); Northern Trust Corporation (Metavante Corporation)

Renewed/Expanded Contracts - Europe

ITO: Barclays, Deutsche Bank (Accenture); Swiss Re (CSC); Michelin, Zurich Financial Services (IBM)

Renewed/Expanded Contracts - Australia, Asia

ITO: Australia Customs (EDS); Telstra (IBM)


New/Expanded Offshore Initiatives

Bank of America, HP, Philips, Tenneco Automotive (back-office); Cypress Semiconductor, Qualcomm (engineering); J. P. Morgan, Morgan Stanley (financial analysis and research); IBM (information technology services); Reuters (journalists); Microsoft (software development)

Acquisitions/Spin-Offs

Barlcays' spin-off, Edotech, acquired by Astron; 50 percent stake in Intelenet Global Services acquired by Barclays; e-Serve International acquired by Citigroup; IBM sells controlling interest in government and small enterprise business to Oslo-based EDB Business Partner; GECIS spun-off to General Atlantic and Oak Hill Capital Partners; Daksh acquired by IBM

Major Contract Cancellations

Gateway (ACS); Dow Chemical (EDS cancelled, IBM hired); JP Morgan (IBM)

READ NEXT MONTH'S ISSUE OF OUTSOURICNG INSIGHTS FOR "2005: THE YEAR AHEAD"


2. WEB POLL: IS OUTSOURCING A PROFESSION?

Because of the high response rate and critical nature of the current web poll question on Firmbuilder.com, "Is outsourcing a profession?" we're going to continue this polling question throughout the month of January.

If you haven't made your voice heard are this essential question about the future development of this field, go to: http://www.corbettassociates.com/firmbuilder/tools/survey/sur_v1.asp?SID=17
.

Results* will be reported in the February issue of Outsourcing Insights.

*As with all Web polls these results are not scientific and reflect only the opinions of those who chose to participate, some of whom may vote multiple times.



3. HUMANIZING THE OFFSHORE DEBATE

Regardless of your political affiliation, and short- and long-term economic views, everyone can agree that offshore outsourcing and offshoring in general affect people in very real, very personal ways. As Tom Friedman, columnist for The New York Times once put it, "When you're out of work the unemployment rate is not 5 percent, it's 100 percent."  The resulting frustration and anger is even more palpable when you can point to someone in another country who is clearly the recipient of the job you lost.

Humor has always been a great way to humanize issues that engender so much passion, and it's in that vein that I offer the following link to recent segment from Conan O'Brien show. Not only is it one of funniest skits you'll ever see, it does a wonderful job of using humor to put a human face on the whole 'offshore' debate.

http://www.vritti.net/conan.wmv


4. INTERACTIVITY: THE NAME OF THE GAME AT THE 2005 OUTSOURCING WORLD SUMMIT

Always known for great speakers and a global audience, the name of the game at this year's Outsourcing World Summit® is Interactivity. To take the learning and networking to a whole new level, this year's Summit features the following new and expanded program elements:

'Meet the Experts'

On Monday morning, February, 21st, delegates can schedule half-hour one-on-one meetings with some of the field's top experts. Individuals making themselves available for these exclusive sessions are: Bill Metz, Section Manager Global Business Services PMO, Procter & Gamble (Information Technology Outsourcing); Abe Eshkenazi, Managing Director, American Express TBS (Business Process Outsourcing); Darren Dolcemascolo, Sr. Partner, EMS Consulting (Manufacturing Outsourcing); Jag. Dalal, Principal, JDalal Associates LLC (Offshore Outsourcing); Kyle Andrews, VP, Pretium Partners (Outsourcing Sales); Jean-Francois Poisson, General Manager - Contract Management, Bell Canada (Real Estate Outsourcing); Holly Muscolino, Director, InfoTrends/CAP Ventures (Document Process Outsourcing); and David Barrett, Partner, Simmons & Simmons (Contracting and Legal Issues)

'Customers-Only' Luncheon

From 11:30 am to 12:30 pm on Monday, February 21st, I will be hosting a private luncheon designed exclusively for current and prospective outsourcing customers. Not only will this be an excellent opportunity to meet fellow customers before the program begins, but we'll have a lively debate on some of the key issues customers face in designing, implementing, and managing outsourcing relationships that last.

'Topical-Tables' Luncheon

This favorite networking session, held on Tuesday, February 22nd, is being expanded this year to cover more topics, give delegates greater opportunity to input and prepare for the discussions, and even stronger facilitation to make sure that the right questions get asked and answered.

Program 'Photo and Bio Gallery'

Every delegate can now have their photo and a brief bio included in conference proceedings manual. Not only will this make it easier to identify fellow delegates you'd like to meet during the program, it's a powerful networking tool to take away form the Summit and use through 2005.

'Share Your Views'

All delegates have the opportunity to answer and have shared in the program guide, their view on three questions of direct relevance to the future of outsourcing. It's a great way to start the dialogue!  This year's questions are: What was the most important outsourcing development of the past 12 months? Are U.S. tax laws and regulations pro-outsourcing, anti-outsourcing, o neutral? What will it take for outsourcing to gain a positive public image?

These new elements are on top of the great networking venues built into the Summit program, including evening receptions in Exhibition Hall, morning networking over continental breakfast, and numerous small-group private breakfasts and dinners.

FOR ADDITIONAL INFORMATION ON THE 2005 OUTSOURCING WORLD SUMMIT, go to Corbett Associates  and REGISTER ONLINE at Corbett Associates

TO RECEIVE A COMPLETE REGISTRATION PACKAGE BY MAIL, SEND YOUR REQUEST AND MAILING INFORMATION TO Corbett Associates or call 845.452.0600 ext. 110.


5. "THE OUTSOURCING REVOLUTION"  -- WHAT READERS ARE SAYING

Released in September, "The Outsourcing Revolution: Why It Makes Sense and How to Do It Right" (Dearborn Trade Publishing), continues to be Amazon.com's bestselling book on outsourcing.

Some selected comments from readers of the book are:

"Author Michael F. Corbett boldly stakes out the territory for his book on outsourcing. As a consultant and as an advocate of the offshore outsourcing movement, he states plainly that he wants this to become the essential guidebook for anyone considering outsourcing. Impressively, he takes great strides toward achieving just that. Clearly written and easily readable, his book refutes exaggerated concerns about job loss while providing nuts and bolts advice on getting started, picking a leader for your outsource project design team, negotiating contracts and maintaining your relationship with your outsourcing vendor." Rolf Dobelli (Luzern Switzerland), December 22, 2004

"I am an executive that has been actively involved in the outsourcing arena as both a buyer and a provider of outsourcing services for critical but non core administrative functions. And I truly believe that this book is clear, concise, and compelling, and is ultimately a "must read" for any executive that is contemplating utilizing outsourcing services. The specifics Mike Corbett provides, all within the framework of a sound strategic approach to outsourcing, blend theory and practice in a way that no other book on the topic has previously done. I think it's required reading for everyone in business and for everyone trying to understand how outsourcing is affecting the U.S. as well as the global economy." Nader Samii, November 9, 2004

"We learn on the first page of this book that in 1987 Michael F. Corbett helped put IBM in the outsourcing business, ultimately one of that company's most important sources of revenue and profit. It becomes clear in the course of the book why IBM must have chosen Corbett for that role, and why over the past 15 years he's become the industry's leading pioneer, practitioner, teacher, catalyst, and statesman. From everything I know about the field, Corbett knows more than anyone else, and no one writes better about it than he does. Well-organized, informative, insightful, and thorough, if you're going to read one book about outsourcing, this is the one." Donald S. Warner, October 22, 2004

"This book is the best so far on the subject because of its balanced view, clear explanation of the value of outsourcing (most people think it is just about cutting costs) and examination of outsourcing from all different functional areas of a company - financial, IT, HR, etc. It is also one of the easiest business books to read because of his writing style - which must have been hard to do on such a complex subject. This is a must read for any executive trying to manage in the 21st century." David Schnitt (Los Angeles, CA), October 4, 2004