Category Archives: Services

Services Sustainability

Today I’m pleased to welcome John Martin of and Building SaaS.

Sustainability and social responsibility aren’t often associated with services purchasing, as most people tend to think of social responsibility in conjunction with the performance of manufacturing and resource extraction in lower-impact and more-sustainable ways. However, especially with the recent trend toward low-cost-country sourcing of services, the concept of “socially responsible outsourcing”, as one example, is taking root.

Companies buy services to utilize expertise they don’t have internally, to access a different talent pool (at an offshore location), to match their workforce to workload variability, or to take advantage of a supplier’s economies of scale or scope (though this is far less achievable or important for services than for most goods, as many outsourcing buyers have found out the hard way).

Most large companies use a large and growing group of external providers for a broad range of services, from thousands of temporary workers around the world to high-end consulting services. Services are inherently tied to the people that deliver them, and so the key sustainability concept for services is talent pool sustainability. To purchase services in a sustainable and responsible way, companies should adopt practices (and engage with suppliers who adopt practices) that don’t negatively impact the talent pool.

For example, a large employer in a cyclical business has been a significant employer in dozens of small towns for over 50 years. To ensure the development of a talent pool that can support their seasonal business long-term, they have several types of contingent workers such as long-term temps, temp-to-hire, day labor and seasonal part-time temps, each with different responsibility possibilities and education investments. Known as a preferred employer who invests in people long-term, they have worked with their staffing providers to ensure a sustainable talent pool for their highly seasonal business.

Engaging services responsibly is especially important for low-skill services and temporary workers, since they typically receive less training than employees, and hence are more easily left behind by shifts in technology or skill requirements. Responsible companies extend skill-development practices (via their suppliers or sometimes directly) into their contingent workforce. Wages, benefits, and training for temporary workers can often be directly controlled by buyers, and other “Labor Practices and Decent Work” guidelines of the Global Reporting Initiative can also be extended to services suppliers.

When working with services suppliers, some key metrics help demonstrate their commitment to a sustainable talent pool:

  • Staff Turnover: Turnover is the ultimate measure of good employment practices. The specific rate is highly industry-specific, however, so compare suppliers within the same service category.
  • Training Investment: Good training will result in higher productivity and lower turnover – both positive results for the buyer. While training investment is fairly easy to game, it’s still helpful to track it and the positive results that derive from it.
  • Pay Rate: Especially for lower-skill services, many buyers negotiate and track the actual pay rate to the individual worker, to ensure that the worker is getting not only correct pay, but sufficient pay. As a beneficial side-effect, this can also help ensure a sufficient quality level in the work force.

In short, work with suppliers who invest in their services delivery chain – their people.

Supplier development is also important, just as it is for goods. Some types of services that have more innovation are also sourced quite frequently (e.g., consulting engagements, legal services, marketing services), which allows finding and rewarding the innovators who deliver more value.

Part of working with responsible suppliers includes engaging them responsibly. Many services businesses are cash-flow businesses, required to pay their workers weekly, long before the terms of their invoice – so paying them on time can be even more important.

In short, sustainability in services revolves around sustaining and growing the talent pool, which requires responsibly engaging and working with services suppliers who engage in positive practices for their talent.

Is This The Year Austin Tetra Breaks Out?

Austin Tetra has been relatively silent since their acquisition by Equifax a little over a year ago. And it’s not because Equifax is in a hurry to dissolve the name (unlike D&B who appear to be trying to dissolve the Open Ratings brand as soon as possible), but because they want their new division to be well prepared with a solid offering for the B2B and B2C communities before they re-launch the service offering.

the doctor had a chance to catch up with the business leaders of Austin Tetra, Equifax’s commercial business unit, last month and it sounds like they have been making a lot of progress over the last year. They’ve been busy helping Equifax build a unique global identification system that will compete against the as-to-now relatively unchallenged DUNS # of D&B and Austin Tetra has been making good progress integrating the US, Latin America, European, and other global databases in Equifax’s arsenal into one universal database with one universal classification scheme – a task they expect to complete in the first part of this year.

They’ve also been making great strides in their service offering that pulls business and consumer data together for businesses that need to deal with small businesses on a regular basis and need to determine the risk, especially where the financial stability of the business often comes down to the financial stability of the owner. They can now, for a given small business, pull together the credit history of not only the business, but the owners as well and give you a combined risk or credit score where they have the data integrated.

They’ve also been making strides in compiling their supplier master and customer master databases where, for any given business, they can give you its performance history both as a supplier and as a buyer, as well as their employee master, where they can tell you how much the individual earned at his or her last job if his or her previous employer submitted information to the TALX database (another recent Equifax acquisition) – which has income, salary, and compensation information on approximately 150 M employees in the US.

They’ve also made great strides in their balanced scores, which aren’t just about diversity anymore. Their blended financial / risk scores now take all of the following information into account:

  • public filings (which they monitor and append regularly)
  • denied / debarred party tracking
  • blended score on individual & business credit history for small, private, businesses
  • customer credit risk based on past payment trends
  • diversity information
  • predictive supplier business failure score
    the chance of failure over the next 12 months using all available information

In addition, they’ve been extending their web services platform to make the data instantly available through customers’ current platforms and their current customers are now able to access all this data through multiple platforms that include Oracle, Siebel, and SAP.

In other words, now that they have the support of a 20B business behind them, they’ve been making great strides. However, given that they still believe in the “crawl-walk-run” philosophy when it comes to development and release cycles, they believe that it will likely be the middle of the year before everything is complete and tested (by current customers) to their liking, and hence likely the summer or fall before they attempt to make a big media splash. But that doesn’t mean that, if these are the types of solutions that you need, that you can’t start talking to, and evaluating, them now – or that, if these are the types of solutions that you might need down the road, you can’t keep a watchful eye out to see what they announce this year. Regardless of what happens, now that D&B is about to have a major competitor, I bet you’ll see a lot more innovation in this space over the next few years as the new contender in the space begins its fight for dominance – and that’s a good thing.

The 12 Days of X-emplification: Day 9 – Strategic Sourcing Services

Tactical procurement doesn’t cut it anymore. It doesn’t even come close. You need to source strategically, and if you’re not sure how to do that, you need to get help. There’s nothing wrong with asking for help from someone better than you (as long as you make the effort to learn from them so that you will eventually become reasonably self sufficient), but you better make sure they are better and more experienced in the categories you’re handing over before you sign the contract. After all, just because a firm has been in the strategic sourcing business for ten years, it doesn’t mean they’ve ever sourced the categories you’re looking for (especially if they specialized in automotive categories and you’re in retail), nor does it mean that the people who will be assigned to your project are those with the most experience in the categories you need the most help with. Thus, it’s doubly important to ask the right questions, and get the right commitments, before selecting a services provider to help you with your strategic sourcing projects.

1. What experience do the consultants who will be performing the work have?

Every decent size consulting firm (including boutiques) has their standard pitch deck which will read something like “hundreds (or thousands) of years of strategic sourcing support … ten (or twenty) plus years per sourcing consultant … average 10 – 15% savings across all categories … average 20 – 35% savings in these categories relevant to your vertical … etc.”. What’s important is how much experience the consultants who will be performing the work have in general, how much they have in the categories they will be sourcing, and what results they expect to get. Be sure to get resumes of the consultants who will actually be performing the work, and to reserve the right to reject changes in the roster if they are not available at the project start date. Otherwise, you might find that you’re baited with the grey-beard but on the day the project starts you end up with a clean-shaven MBA straight out of school. He might be the smartest MBA you’ll ever meet, but unless the grey-beard is also on the project imparting his wisdom, whether or not he succeeds may ultimately depend on his luck. (Given what some of these firms charge per day, you don’t want your success to come down to luck!)

2. What implemented savings have they achieved? Which customers can you call to back this up?

A negotiated savings of 25% is just that – a negotiated savings. How much of the projected savings was the customer actually able to implement? If the customer was only able to implement 10%, then it’s really only a 10% savings. The firm you want is the one that tracks implemented savings and isn’t afraid to give you some customer references you can call to verify the numbers they give you.

3. How does their approach differ from everyone else’s? Does their answer set off the bullshit detector?

There’s a number of good answers here. The point of this question is to establish their credibility. The fact of the matter may be that their approach is the same approach used by the big guys, like AT Kearney or EDS, or the boutiques, like Denali and Archstone, and that’s ok. Most of the strategic sourcing approaches out there are similar, and, more-or-less, equally correct. What it usually boils down to when selecting between these firms is their experience, their ability to execute, and their willingness to work with you. Thus, it’s okay if they use the same approach, as long as they are willing to be up-front about it (and be able to explain why they think it is the right approach).

To be honest, you probably don’t want an answer that’s completely different from the answer everyone else is giving you. The standard approaches have been working quite well for a while now, and though I believe that constant innovation is critical to continued to success, when it comes to services, sometimes the best route is incremental improvement. After all, most organizations are resistant to change and if the approach is too radical, it could scare off some suppliers – and since you never know who the right suppliers are for you until you go through the process, this usually isn’t a good thing.

4. Do they use their own platform, a third party platform, or your platform? If they plan to use your platform, how do plan to do better than you did? If they plan to use a different platform, why is it more appropriate?

Each of these answers is acceptable, as long as the platform supports the appropriate processes, they understand how to maximize the effectiveness of the platform, and how to get you the data you need when the project is over as well as how to import the data they need. If they use your platform, then you don’t have to worry about getting the data export from someone else’s platform into yours. If they use their platform or a third party platform, then you need to make sure they have a plan for exporting the data in a format that you can archive it for future reference (and comparison purposes when you resource the category when the contract expires). If they use a third party platform, be sure to place extra emphasis on their responsibility to insure that your confidential information is protected.

5. How flexible is the organization in providing sourcing support?

When it comes to sourcing, especially where complex categories are required, it’s not always possible to keep to the fixed schedule you outlined before the project started. Sometimes you need to escalate the project priority and start it early, and sometimes you need to delay the project. During the project, you might have to shorten or extend phases due to unexpected occurrences in the external environment such as natural disasters, demand spikes, or supply shortages. The service provider should have the flexibility to accommodate sudden and unexpected changes during the project as well as the flexibility to take on additional projects as the need arises.

“Demand Shaping” or “Demand Sensing”?

The EE Times ran a great article by Romit Dey and Manoj K. Singh last month on “Demand Shaping” and how it aligns customer trends with supply. But I have to ask, is it really “demand shaping” or is it more “demand sensing”. Is not “demand shaping” what marketing and advertising does? It’s true that supply chain has a supporting role, in terms of letting marketing know how much a product can be produced for, how many units can be produced, and how fast the units can be in consumers hands. However, what supply chain really does, in a company that runs like a well-oiled machine, is sense the demand that has been created, and the demand that is in flux, and adapts to the situation.

So what is “demand sensing”? According to the article, which calls it “demand shaping”, it is a demand-driven, supply-constraining customer-centric approach to planning and execution that aligns process with customer demand at strategic and tactical levels and with an organization’s capabilities which helps optimize use of resources, reducing excess inventory and improving inventory turns. More specifically, at the strategic level, the emphasis is on aligning customers’ long-term demand patterns to long-term resource and capacity constraints and at he tactical level, the focus is on understanding demand patterns and then influencing customers’ demand toward available supply, using the levers of price, promotion and products/services bundling.

How do you sense demand? As the article points out, you need three key capabilities:

  • demand pattern recognition
    who is buying what, when, and in what quantity
  • supply supportability analysis
    how much can be made, when, and how fast can it be delivered
  • optimal demand steering
    if demand patterns suddenly change, and you do not have enough of product A, can product B be used as a substitute and can customers be steered to that product instead

The first skill is obvious – you need to manage inventory appropriately so you aren’t holding too much, and generating excessive inventory carrying charges, or holding too little, and selling out before supply can be replenished. The second skill is less obvious, but easily understood – you need to know how much you can make, and how fast it can be made, to appropriately plan your inventory level.

The third skill is what takes “demand sensing” to a whole new level, to the point that it is almost “demand shaping”, but not quite, and hence the source of confusion. It is, as it’s called, “demand steering”. The Dell example the authors use is the best. By maintaining real-time visibility into its supply chains, Dell knows its inventory levels now and in the immediate future on an hourly basis. If a customer configures an order for a 60GB drive on their web-site, and Dell knows they don’t have enough stock to configure the system immediately, then Dell informs the user of a delayed ship date and presents the customer with an opportunity to replace it with an 80GB drive at a discount – steering the customer towards another product that can meet their needs, even if it is more expensive, but Dell takes a discount on margin to make the sale and keep the customer.

The key to success, as the article points out, is to make sure that all three processes are part of a single, integrated loop. A supply supportability analysis is run on a regular, automated, basis; inventory is updated on a near real-time basis; and short-term forecasts are updated at least daily. Each of these numbers is compared on an automated basis, and as soon as forecasts exceed inventory and obtainable supply, an alert is sent to a planner who determines whether there are alternative products that can be used to meet the need or if marketing and sales needs to be informed that they need to take actions to steer demand on their end. Then, customers are steered towards the alternative products through the appropriate channels – in real-time.

The article also does a good job at overviewing what is required for a demand sensing framework. The elements it outlines are:

  • inter and intra organizational connectivity
  • the ability to capture, structure, and comprehend data from customers and channels
  • advanced business intelligence to identify demand patterns
  • optimization
  • common processes
  • a common data model
  • common performance metrics
  • available-to-process capabilities
  • exception management
  • electronic negotiation and collaboration

The best thing about the framework is that these are basic capabilities and processes a good organization should already have in place. It’s just a matter of tying them together and using them wisely!

What’s In Their Wallet? (Is it Provade?)

A few colleagues of mine were at SIG earlier this month, and they all had (some) good things to say about it. I, of course, wasn’t there as SIG events are typically members only and I’m not a member – as it’s primarily for companies and not bloggers and independent consultants. But I’m always happy to hear someone say “I used a quote from SI, and everyone in the room nodded in agreement as they know what SI is and what it stands for.” since these are rooms full of CPOs and VPs who care about taking their sourcing to the next level. But I digress.

After finding out a few people were there and had positive feedback, I decided to download the brochure agenda and see who else was there. Buried on page 15 is the following:

Finding the Right Approach to Services Spend Management
Ross Creasy, Senior Director of Global IT, Capital One and Ian Sullivan, COO, Provade

A joint presentation by Capital One and Provade! I don’t know about you, but I can’t help but make the obvious inference – that Capital One is using Provade (acquired by Smart ERP Solutions) to manage at least some of their services spend. If true (and I’ll probably never know one way or the other for certain because Capital One is one of those high fallutin’ financial institutions that never announces who they use or makes joint press releases and Provade is not going to confirm anything I can’t print), this means that this innovative little technology-based BPO with a unique view on complex services outsourcing in areas such as HR, Legal, and Marketing that Jason Busch and I have been blogging about off-and-on for a while now has made a major score!

And if this wasn’t enough to get you wondering, a quick look at their website on the events page has them at Oracle OpenWorld 2007 next month. Now, this could be just because they have developed their unique platform on the PeopleTools stack, and, thus, are able to uniquely leverage Oracle applications in their managed services. Or it could be because Provade is a Tier 1 Oracle BPO Partner. However, I’m betting it’s because there’s more here than meets the eye here as well or because they plan on making a major announcement in the next month or so. (Let’s face it, massive events like this are not cheap.)

We’ll have to wait and see, but regardless, for the progress they’ve made in tackling services categories that most solution providers won’t touch with a ten foot pole, they’re my vendor of the week (a SI exclusive through year-end – the 12 Vendors of XMas if you will).

For more information on Provade, I refer you back to the following posts:

Vendor Sourcing Innovation Spend Matters Solution(s)
Provade Outsourcing, Part I
Outsourcing, Part II 		There’s Room For New BPO Entrants * Outsourced Procurement
* Workforce Management

For more information on just how hard it is to source marketing and legal spend, I refer you back to the following posts:

Magic & Logic I
Magic & Logic II
The Creative Challenge I
The Creative Challenge II

Legal Cooperation
Key Concepts for Major Procurements
Procurement Contract Risk Management