Wiktor Doktór talks to Kerry Hallard, President of Global Sourcing Association.
Wiktor Doktór: The outsourcing world keeps on changing, and we see a number of trends. In 2017 AI and RPA had significant media coverage: will they also be the hot topic in 2018?
Kerry Hallard: Absolutely – though it's important to remember (difficult sometimes in the face of all the hype!) that they aren't the only hot topics... Artificial intelligence and automation are transforming this industry and the pace of that transformation continues to accelerate. Thus far robotic process automation (RPA) has really been the big story, and we already see solutions in the marketplace with fascinating capabilities and huge potential being implemented in more and more organisations globally. Indeed, at many if not most large organisations RPA is now at least at the "proof of concept" stage and we're moving along the maturity curve at a very healthy pace.
This trend will clearly deepen and broaden this year as engagement continues to grow and as existing technology improves and becomes ever more sophisticated – and a new raft of even more powerful solutions comes to market. However, probably the most exciting developments will come as AI moves further into the mainstream: although "AI" and "automation" often get lumped in together in this space, AI is a different and infinitely more powerful beast and one longer in gestation: thus far AI adoption has lagged behind that of technology like RPA but things are changing fast, and we'd expect 2018 to be a huge year for artificial intelligence.
Take-up of this kind of tech will grow this year as buy-side organisations become more comfortable and familiar with what automation can – and cannot – do for them, and as those responsible for creating and refining outsourcing contracts continue to develop a deeper understanding of the compliance and risk ramifications of this technology. Meanwhile providers will continue to pour vast – and growing – sums into R&D in this area – and to put substantial effort into working with their customers to identify new areas of potential value, bringing automation into all sorts of uncharted territory.
What other trends do you notice currently? Is there something new that we should expect this year?
ould expect this year? There's always something new in outsourcing and business services! Every day, let alone every year, sees something new come into the global arena – whether it's a new software solution, a new centre opening up, a new take on putting together a contract... So I suppose the most important trend would be something like "the continued acceleration of change, evolution and growth in the industry".
Getting into specifics, one trend that's going to make a lot of waves is blockchain. Many people – even plenty in this community – would know of blockchain primarily because of its role as the foundation technology for Bitcoin, but its potential applications within business go far beyond that and it's a technology of huge significance for sourcing and services. The GSA has already done a lot of work in this area (and we'll be doing plenty more in 2018, so watch this space!) and we're expecting blockchain to be generating a lot of media coverage and community attention this year and in future.
Another very important trend – one that's not at all new for 2018 but which will have a big impact on the industry this year – is the ongoing shortage of talent at many levels in developed economies (which of course provides an opportunity for outsourcers with access to multi-geography talent pools) and in a fair few offshore service delivery locations too (which concomitantly creates something of a challenge for many providers). This is proving especially problematic at the middle management stratum. Expect to see recruitment process outsourcing and contingent labour companies thriving this year as buyer organisations call for help getting the right people in place; expect, also, more and more resources being directed towards training and professional development to facilitate more optimal internal recruitment.
Obviously, here in the UK 2018 will be dominated by Brexit and all its mind-boggling consequences – and that applies just as much, if not more, to sourcing and outsourcing as anywhere else. There are so many ramifications right across the sector, and they're so complex, that it's impossible even to scratch the surface in an interview like this – but it's safe to say that key questions like trade barriers, movement of labour, regulatory structures and many more will be ago nised over by countless organisations on both sides of the English Channel, and we'll all be hoping to get some kind of clarity on these issues as soon as possible.
The Global Services Association is based in London. What does the CEE’s outsourcing market look like from your perspective?
Outsourcing in the CEE region is now a familiar option, and a respected one, for many buyers in Western Europe and beyond, and the fundamentals re main strong: a large and well -skilled talent pool, nicely culturally and geo graphically aligned with home markets, available at costs which are still competitive (though rising), in a secure and business -friendly environment. Obvious ly the region is not entirely homogenous, and it's absolutely vital to remember that the CEE region is made up of a number of distinct countries (some quite large with their own internal variations) each with its own idiosyncrasies, pros and cons: one thing the GSA has been stressing for some time is the importance of differen tiation through branding so, for example, potential buyers can become more aware of Poland, Latvia, Ukraine, Slovenia etc as individual markets rather than thinking merely of "outsourcing to CEE" – which can lead to a failure to take full advantage of a location's particular benefits.
While generally speaking the prospects continue to be good (especially as more and more work is done to move the re gion's collective proposition up the value chain – utterly crucial, considering the impact automation is likely to have on the old headcount -based model which has traditionally been the cornerstone of services offshoring) there are neverthe less a few clouds on the horizon for the region, most notably perhaps the shifting political landscape in Poland and the on going conflict in Ukraine (and, perhaps, on a broader level the region's relation ship with Russia). Addressing potential in vestors concerns regarding such matters will be vital if the region is to have the success it wants and needs in 2018 and beyond.
We know you are travelling a lot and running projects around the world. You have already mentioned CEE: what do other regions or countries look like when it comes to outsourcing opportunities and/or challenges?
In some aspects, the world of outsourcing looks very similar wherever you are, in the sense that there are some macro-level challenges (and opportunities) affecting everyone: we've talked about the impact of automation which will have consequences in every corner of the world, but many other trends and events – Brexit, US isolationism, the rise of China to name but a few – also reach right across boundaries (with different implications for different regions of course). Moreover the general outsourcing proposition remains strong everywhere: the ability to provide high-quality, secure services at a good price point is just as much of a benefit in Bangladesh as it is in Bulgaria and everywhere else.
On the other hand every region, every location – every organisation, even - has its own issues with which to contend. Again it's impossible to go into any real detail on a comprehensive level in an interview: there is simply too much going on! However, one thing which can and must be done is the continued improvement of communication and dialogue between professionals from different parts of the world so we can all learn from each other and apply those learnings where appropriate to the challenges we each face in our particular environments. A global outlook is now indispensable when it comes to solving local problems and capitalising on local opportunities; the announcement of the GSA's first Global Sourcing Summit & Awards in South Africa in March 2018 is an indication of how important we feel to be the maintenance of such international dialogue between all the countless distinct corners of this industry, while our inaugural Top 30 rankings (to be published in January 2018) will shine a light on those locations which are outperforming their neighbours and competitors.
Casting a quick eye across some of the most important offshoring destinations, we can see some interesting activity in India, with a strong digital agenda being displayed by both domestic players and multinationals with a presence on the subcontinent. A couple of years ago, India looked at times like something of a "rabbit in the headlights" paralysed by trepidation about the likely consequences of automation, but while it's still not the quickest to transform the Indian market is looking much more optimistic as we head into 2018. On the other hand, China still remains a puzzle in terms of its inability to take off as a genuine global business services powerhouse: it's doing a fantastic job in manufacturing, coding, but remains an also-ran in many fields – however, much of this may simply be the result of a firm focus on its (gigantic) domestic market.
South Africa is an interesting example of a market transitioning rapidly from voicebased service provision to a broader customer-service BPO and shared services location. It's not yet a huge space in terms of the number of professionals currently deployed but can punch above its weight thanks in part to good cultural alignment with target markets. Meanwhile Latin America continues to be a very strong and extremely important nearshore option for North American organisations, but thus far hasn't made (nor perhaps needed to make) many inroads into the European market (beyond some significant work in Spain and Portugal). This region too has good cultural synergies with Europe and some important linguistic assets, so the potential is there for more success on this side of the Atlantic should a concerted effort be made.
Outsourcing service providers are hungry for new contracts – and also hungry for the know-how. What would be your recommendations of what to do - and what not to do - for CEE-based outsourcing companies who would like to start working with UK-based clients?
Firstly, don't panic over Brexit! We don't know the full details yet but whatever happens after the UK leaves the EU, the demand for offshored and outsourced services will still be strong (perhaps much stronger!). Stay involved, keep up to date with what your customers and prospects are expecting from Brexit and stay confident that you will still have an attractive proposition for UK firms in the post-Brexit era.
More generally, do whatever you can to build not just a deep understanding of the various sector landscapes in the UK, but a good relationship with key individuals – not just those within client and prospect organisations, but also the major thought leaders in UK outsourcing (be they advisors, analysts, academics or anyone else). Networking remains as important in outsourcing as it has ever been (that is to say, indispensable) and the UK has always been a society where "it's not what you know, but who you know". If it's not feasible to set up a UK footprint (and having boots on the ground will always be an advantage) getting over to the UK for conferences when possible – and certainly attending those in your home countries which attract UK professionals – is key, as is leveraging relationships you may have with any employees of UK organisations (either buy- or sell-side) who are based where you are.
One very basic – yet terrifyingly costly – error many organisations make is not to get marketing material checked over by native speakers: substandard English is a real no-no since it immediately causes the reader to question the writer's capabilities and attention to detail. There's no point going to all the expense of marketing only to waste it through shoddy communication: do the little things right and you'll win approval and, hopefully, deals.
Service providers are one group; another is cities which are looking for new investors representing BPOs/SSCs or R&D organisations. Which, from your perspective, are the locations the BSS industry will be most interested in in 2018 – and what would you advise to city representatives to increase their investment appeal?
Without wanting to repeat myself, investors will always be interested in stable places with large, highly skilled talent pools available at a competitive cost. Smaller locations with fewer potential hires available may want to focus on specific niches within the broader services umbrella rather than going up against their larger neighbours, but first and foremost it's about doing the basics right:
Some locations fall over themselves offering tax incentives, grants etc to potential investors, and of course such things can't really hurt (anything in this day and age which boosts the bottom line will get people's attention) – however, compared with things like access to talent, such incentives tend to be pretty far down the priority checklist when it comes to making a decision re locating service delivery, so I would advise those in charge of marketing locations to the wider world not to get too hung up on the incentives side if other elements of the proposition need greater attention. One kind of incentive which is definitely worth pursuing is local support for professional development (for example, if the region creates a fund which would-be investors can access as long as it's spent on training): that ticks a couple of boxes at a time when, as I have said, investing in development is simply a must.
It's worth adding, too, in relation to the branding piece I just mentioned, that marketing remains an area of underperformance for many locations – there's no point in being a high-potential service delivery location if nobody's ever heard of you! So I would recommend being both more active and smarter in marketing both nationally and internationally. Yes, there's a cost to that – but compared with the cost of being left behind it's negligible at most... This is especially important in Poland right now as smaller (Tier 3) cities are coming to the fore (in part because of a certain saturation in larger locations). Buyers tend to look at "region, country, city" in that order – and as the industry has matured and professionalised, many people will now already have reached the "country" stage before starting any conversations, so cities need to be promoting themselves harder and ever to get and stay front of mind.
Poland is an especially dynamic market and, like the rest of the outsourcing and service delivery space, is experiencing a rapidly evolving ecosystem with a lot of potential for start-up success. This is a great situation – but it's not without its challenges, one of which is the need to demonstrate an ability to work to industry norms. Concepts like the GSA's Global Sourcing Standard, driving demonstrable flexibility, agility, good governance, good relationship management on both buy- and sell-side, are very useful in this regard and we look forward to robust adoption in this region as a diverse set of organisations seek to prove their capabilities to an equally diverse group of buyers.
Thank you very much.