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Outsourcing: Persistent Systems Interview (Part 12)

Posted on Thursday, Jun 10th 2010

By guest author Tony Scott

Human Capital – The Critical Limiting Factor?

Tony: Your three key points about the future of outsourcing all make good sense. Those three points that I picked up that are as follows: One is that moving out of the labor arbitrage value proposition and into a pure competency-based value proposition where you are managing the entire context of a product is a big macro trend. The second thing is the trend toward a “cloud” infrastructure. Personally, I think that trend is going to be focused more on the vendor side as opposed to the CIO side. And the third trend is that the next level of outsourcing for you is an IP royalty type of economic structure with your clients.

But those trends all indicate to me that human capital is going to be critical in terms of the ability of companies to meet the challenges of those three macro factors. What are the issues that you have faced on that front as your clients have transitioned along these factors? As an example, you were talking about the fact that you are moving toward dealing with customers in very different ways than in the past – that you need help solve problems for your clients, not simply work for them at their command. Has that presented challenges for you in terms of both your sales and marketing organizations and your delivery organizations, and do you believe you have the skill sets you need within those organizations to deliver on a solution-based approach?

Anand: No, not totally. Clearly, we are building some of those skill sets.  The place we are starting to address this is more on the sales side and support side rather than engineering or development.

Tony: The market-facing people are really the front line – you have to have solution-oriented sales and marketing if you are going to get clients to understand a consultative value proposition.

Anand: Right! So the sales people need to be in a position to have a conversation of this kind with people who are senior enough within our clients’ and potential clients’ organizations so that they can actually influence these decisions. And they need to be credible, because you don’t get to have that level of meeting that easily.

Tony: And you typically have only one shot to tell your story if you do get that meeting.

Anand: Absolutely. So the sales people have to set it up and position it correctly. If a senior executive sees us only as a solution to the cost equation, meaning they think, “OK, these guys reduce my cost,” but they don’t see anything else beyond that, then they are not really going to be interested in meeting us in the first place – we aren’t that different from anyone else.

Tony: Which means you become viewed as a commodity, and that means you are no better than your ability to deliver the lowest cost possible.

Anand: Right. So having the opportunity to have consultative, problem-solving conversations, and the ability to convince clients that you know there is some differentiated value that we can provide is important.  That’s a challenge, and that’s one of the things that we are trying to work on within our sales organization. Of course, the other related next step is that after you convince a client that you can add value, you then need to put the delivery side together and develop a way to monitor such a project. How do you make sure you make money out of this kind of project? You are increasing the risk profile of the projects that you are taking on, and now you have to be able to ensure that you are able to actually deliver results. That’s not that easy, and if you use the same methodologies you’ve used on cost-savings-focused projects, then you may not succeed. That’s been one of our big challenges as well.

Tony: In terms of looking at the market-facing side of your organization, how have you started make changes in your positioning, in your marketing, and in your sales approach and the capabilities of people in those organizations?

Anand: The new people whom we have been hiring have been of the type who are capable of dealing with these kinds of things.

Tony: What have been their typical backgrounds, and how has their profile changed from the kind of people you were hiring earlier in your company’s history?

Anand: They all have engineering backgrounds to some extent, because they need to understand what product development is all about. They tend to be people who have had more experience and worked in more senior roles within companies, so they have the experience to be able to think about the kinds of issues our clients are facing. We find that some of the people are not really pure sales types, because it’s not really a transactionally based deal; we are creating an ongoing relationship with our clients. We need people with that kind of attitude. If clients need to have a relationship with us for this to work, and part of the relationship is to have trust, unless the customer trusts you, you are not going to get anywhere. So it takes a different kind of sales process, and some of these deals take much longer to come to fruition. Now, remember, we are not doing this for everybody, we have an existing business that is doing well, and it needs to continue. Some of that will continue over the very long run. But we are definitely very conscious of making sure that we have at the least a small team of people who are capable of doing these kinds of consultative sales. We are trying to make sure that among the larger clients we work with we are working at the right level of seniority so that we can get to that type of relationship, rather than being satisfied with whatever work that may be coming to us because they have decided to outsource that small piece.

So we have to create a mixture of skills within our client-facing organizations. That’s a challenging situation in some sense, because if we are already working with a particular customer at a particular price point, and then we are trying to provide a completely different value to them, there is a tendency for clients to relate the high-value item to the price point that they have been accustomed to paying. So there is a little bit of a tricky situation in terms of how you demonstrate that you really can deliver value to them that justifies a higher price point.

This segment is part 12 in the series : Outsourcing: Persistent Systems Interview
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