Over the Easter weekend I had what ended up being a rather disturbing conversation with an old friend, which I thought sufficiently relevant to this space to share with you. This friend has very recently started a new job, working in an outsourced contact center providing advice to, and processing applications by, users of local (public sector) health and social services (I need to be relatively vague here, for obvious reasons...).
One of the main tasks she has to perform is vetting people who call looking to get access to one particular healthcare-related service. Due to the nature of this service, applicants are invariably over pensionable age (65, more or less, here in the UK) and suffering from illnesses or disabilities that restrict mobility - this is an important point: we're dealing with some pretty vulnerable people in (often serious) need. My friend has to take them through a survey and, at the end of the call, inform them whether or not they've qualified to receive this service.
The problem - one of the problems - is that certain responses to some of the survey questions can disqualify applicants outright. My friend explained some of these to me and, frankly, it's an outrageous situation. For example, applicants who say they're using certain medical apparatuses which haven't been prescribed by their General Practitioners (GP) won't qualify, even though these specific items are the kind of thing one might buy oneself, be given by relatives/friends/charities or procure in some other way simply because they're useful, rather than even considering going to the GP to be prescribed them.
The mini-supermarket at the bottom of my road is closed for a couple of weeks for refurbishments (this may seem like an incredibly mundane topic with which to start a blog, but bear with me). The signs announcing this closure were only put up a couple of days beforehand, and somewhat surprised I asked the cashier - with whom, like many in my neighborhood, I have a friendly relationship – what was behind the chain. The shop is part of a very large national chain, but has a "local" atmosphere unlike, in my experience, most such establishments. She replied that the shop is being redesigned to include several self-serve tills - and was, of course, unwilling or unable to answer when I inquired if that means job losses amongst the current staff.
An elderly man being served next to me then said something which got me thinking: "It's computers, isn't it? Everything will be run by computers soon, and there'll be nobody left to talk to." In this particular instance, at least in the short term, that gentleman was of course being premature - that shop will still have a complement of human staff, and won't be entirely based around self-serve points of sale (POS) - but there as everywhere else in the country, technology is driving vast change in the retail sector, with ramifications that go far beyond that industry and which have the potential to affect the whole fabric of society.
Because we're not short of positive perspectives on outsourcing: again, anyone attending even one SIG Summit would come away with plenty of evidence for its value, and the outsourcing community and media such as Outsource have more than enough material to make an overwhelming case for why the model has been a good - a great - one for organizations right across the size spectrum. But the benefits aren't confined to individual companies: a wealth of scholarly work has been carried out to demonstrate how, in direct opposition to the assertions of its detractors, outsourcing (even offshoring) is good for those very economies it is supposedly corroding.
A 2006 Harvard University study entitled 'The Politics and Economics of Offshore Outsourcing' articulates the truth of this superficially counter-intuitive position very nicely. Authors Gregory Mankiw and Phillip Swagel found that "outsourcing appears to be connected to increased US employment and investment rather than to overall job loss. Some US jobs are certainly lost to other countries. On the whole, however, firms involved with offshore outsourcing are not shifting net jobs overseas but instead are creating jobs both in the United States and in other countries... Outsourcing will create winners and losers, and the pain of dislocation will be real for workers and their families. Taken together, however, these conclusions suggest that offshore outsourcing is likely to be beneficial for the United States as a whole."
A recent episode of 60 Minutes investigating outsourcing and the increasingly under-fire H-1B visa program in the USA has prompted a good degree of debate on social media and elsewhere, about this always-controversial practice. As readers of SIG blogs (and indeed members of the sourcing and outsourcing community globally) will need little reminding, outsourcing and its practitioners present an easy target for anyone with an economic axe to grind looking for someone or something to blame for the perceived ailments of the American (or any other) economy, especially unemployment: those giving voice to the old lament that outsourcing (conflated, of course, with offshoring) "sends our jobs overseas" now also point to the H-1B visa and charge those companies not "guilty" of exporting jobs with the equally heinous crime of keeping them onshore but giving them to foreign workers instead.
Yet despite decades of such negative PR the model continues to prove an indispensable tool for organizations large and small. Earlier this month, to take just one recent example, Lloyds Banking Group in the UK announced plans for a £1.3bn ($1.6 bn) ITO deal with IBM which will see over 1,900 jobs transferred to the latter; the deal is intended to save approximately £760m ($948 bn) in costs, according to the Financial Times (which, incidentally, quoted the Lloyds Trade Union - "which is no longer recognized by the bank" - as writing to its members that "staff transferred to IBM will be kept on for a year but most would be laid off within four years and replaced by cheaper, offshore workers").
Of the many laws that affect the international outsourcing space, one of the most important must be that of diminishing returns. At its heart outsourcing is about efficiency – a provider can only offer a decent value proposition, and turn a profit, if it can achieve a desired output more efficiently than can a would-be buyer of its services – and yet there’s only so much money in the hypothetical pot to invest in driving efficiencies: as a very basic example, if one can spend $x to achieve 10% savings, by the fifth investment of $x the savings made are only around 60% of what was achieved with the first tranche. The returns diminish. After a while, it becomes less and less worthwhile to invest $x in that project, when the same amount put into another deal can yield significantly more.
Finding the right balance between investment and returns (and knowing where is the line beyond which further investment will yield returns too paltry to justify) is vital in any business, but especially one as efficiency-based as outsourcing, where relationships have historically often featured buyers demanding constant and consistent efficiency gains and savings – and, moreover, where the necessary investments in technology and people can be gigantic. Hence the desire on the part of providers to share the value gained by any given investment across as many clients as possible – and the complications resulting from buy-side demands for bespoke work and customisation without a simultaneous understanding of why this of necessity means higher costs, which need to be passed on somewhere, somehow…
The word “revolution” gets thrown about a fair bit at present (not least by me…) when discussing the new wave of automation technologies which are transforming the way organizations do business. But are we talking about “revolution” or “evolution” – sudden and dramatic, or gradual change? Well, it’s a bit of both: the technology itself is evolving. We can trace, for example, the evolution of IBM Watson back to the Deep Blue chess computer which beat Gary Kasparov back in the mid ‘90s...which can in turn be seen to have evolved from its predecessor Deep Thought...which itself was a successor to ChipTest (developed in the 1980s at Carnegie Mellon University)...and so on, back to Turing and beyond. While there have been revolutionary moments along this path – the transistor, the integrated circuit etc. – it’s clear that this is an evolutionary sequence, at a pace which may seem very far from “gradual” to those who’ve been alive to observe it but which, nevertheless, consists of successive advances built upon what’s gone before.
At dinner recently, a guest held us all entranced as he described his current work: a post-doc at a prestigious London university, he has been working for nearly two decades in artificial intelligence (AI), specializing in trying to teach computers how to teach other computers. While much of his work is simply too esoteric to explain here (that's my code for "it went right over my head"), what was very obvious to me was the extent to which things have advanced since we first met - as he was just setting out upon his journey in this field - and how rapidly theoretical advances are becoming practical innovations which then, in turn, move out into the mainstream. Problems he and his peers were wrangling with only a few years ago now seem like ancient history, he said, and while "the future is always infinitely far away, tomorrow seems closer than ever."
If any of us at the table had had any doubts before that we're on the verge of tremendous social change as a result of automation and smart technology - and I don't believe anyone did have such doubts (as one would have to have had one's head thoroughly buried in the sand not to be aware of the whirlwind approaching us), they would have been thoroughly dispelled by the end of our companion's passionate and impressive address. But, of course, how to react to the automation revolution is immeasurably more difficult than simply to assert that it's coming...
Last week I had the honor of giving the closing session at SIG’s latest event on my side of the Atlantic: the SIGnature event in London, hosted by Mayer Brown. At that event, Peter Dickinson, global co-lead of Mayer Brown’s Business & Technology Transactions practice (and a great friend of SIG) gave a fantastic presentation in the morning on “Reimagining Sourcing for the Digital Age” where he looking at emerging technologies and services, the benefits and challenges that they provide, and why a new approach to sourcing is required when it comes to operating in this brave new world.
Sourcing and outsourcing lawyers benefit from a very useful – if hard-earned - combination of perspectives, in that they are as deeply immersed as anyone in the minutiae of specific deals while at the same time needing to maintain as broad an understanding as possible of the macro-level trends and developments driving the evolution of the space: it’s impossible to serve a client adequately, let alone superlatively, without knowing what’s happening far beyond the confines of one deal and/or partnership. Peter demonstrated to our London attendees just how potent that mix of perspectives can prove with a fascinating “state of the nation” address examining how the key emergent technologies are driving change in the outsourcing landscape, in how providers are serving their clients (and who’s doing both buying and selling), and in how corporate strategies and behavior are being transformed by an extraordinary complexity of overlapping factors – all illustrated on a micro level by well-chosen examples pulled from the extensive experience of Peter and his team at Mayer Brown.
With so much attention currently focused on the political arena (most obviously, of course, in the USA with the inauguration of President Trump) it’s easy to become carried away in one’s assessments of the extent to which “politics” drives actual change. Of course, there’s no doubting the scale of the significance of the Trump election, or the Brexit vote, or similar “watershed moments” – but the nature of that significance is somewhat less clear, especially when it comes to the impacts on specific aspects of our lives. It’s somewhat comforting (or perhaps not, depending on one’s affiliation) to think that the person nominally in charge of a country is indeed that – it plays to our natural human desire for order, comprehensibility, justice – but in a world as interconnected and complex as this one, is it not a serious error to overstate the ability of a President Trump, a Prime Minister May and others in similar positions around the world truly to steer a course, rather than simply to keep their ships of state upright in the storm?
Look at the sourcing and outsourcing space specifically. In a number of particular areas President Trump could well have a huge impact: a crackdown on immigration and the offshoring of work, changes to NAFTA, the reversal of the ACA and other policies would affect very substantially certain tranches of the space and those working within them. Likewise, in the UK the way Theresa May is approaching the exit from the EU and the Single Market has deep significance for businesses working in and with the United Kingdom for data protection, for accounting and a host of other areas.
In our final installment in the discussion on the importance of education and the value of options like SIG University, Jamie Liddell shares key takeaways from students who hailed from Honda North America, PNM Resources and Florida Blue.
Students Become Teachers An "enthusiasm for feedback" was highlighted by Esteban Valenzuela, a project manager with Honda North America Indirect Procurement, as a critical aspect of SIG University. According to Esteban, the suggestions made by the students as they went through the course as to how it might be improved were assessed, and solutions implemented in real time by the SIG U staff (in Esteban's words, "Throughout the course I have made many recommendations and the SIG staff have already made many changes.")
Having come to the end of the course and with the ability to look back holistically on the experience, we asked our students what other suggestions they could make to keep SIG University firmly on the continuous improvement pathway. Without revealing too much, the depth and variety of the feedback (from the structural - with Tammy Way, a Sourcing Consultant for Generation at PNM Resources, who suggested we launch two new certifications; to the tactical - with Esteban’s advice to develop workbooks, videos and enhanced interactivity) was heartwarming evidence of the degree to which the students had embraced the course and wished to contribute their own efforts to SIG University's success: exactly the kind of philosophy which SIG U and the broader SIG family seek to develop within the sourcing profession as a whole.
Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG