New Exit Strategy for Mature Manufacturers—Acquisition by Asian Firms shows how process excellence can inject new vitality into ailing manufacturers.
 Picture this: you are the CEO of a venerable manufacturer that has been besieged by price pressure, increased imports and high capital costs. Revenue has been barely edging up, and profits have been negative three of the last five years. You have had to lay off a significant portion of manufacturing personnel, many of whom had been with you more than a generation.Your ship is still taking on water despite best efforts, and you do not know where to turn.
This was precisely the situation of several U.S. firms that took the unusual route of selling themselves to Indian firms that turned the companies around very quickly by applying sophisticated process and management expertise. In many cases, local employment increased because the companies became much more competitive. Here are two examples:
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Part of the IDC Outsourcing Forum Midwest Report
 The Williams Companies is a Fortune 200 energy company that currently distributes 12% of all the natural gas consumed in the United States and is a major employer in Tulsa, Oklahoma. Marcia MacLeod, Vice President of Business Process Outsourcing, and Karen Caldwell, Director for Energy & Utilities at IBM, explained how the company pulled a Houdini in the early 2000s, using outsourcing to survive a near-death experience in which its stock dropped from $48 to less than one dollar. This case reflected outsourcing’s potential in dramatic turnaround situations while confronting some outmoded stereotypes about its impact on local employment.
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Part of the IDC Outsourcing Forum Midwest Report
IDC analysts Brian Bingham and Barry Rubenstein cited extensive IDC research to describe how outsourcing is developing as a business practice. Although they didn’t explicitly delve into adoption itself, their treatment of ITO (IT outsourcing) and BPO (business process outsourcing) provided significant insight into how outsourcing is being adopted by global enterprises. ITO is several years ahead of BPO for several reasons, namely that IT has traditionally been managed as a support function and cost center in most enterprises and, as such, it has been a textbook candidate for outsourcing. BPO is often more intertwined with the business’s core competencies; in addition, it almost always requires sophisticated IT support. Clearly, ITO had well publicized failures in the early 2000s, but this proved to be part of the normal learning curve, and ITO successes have emboldened buyers and providers to push further into the business. This contrast between ITO and BPO patterns is particularly instructive.
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At the turn of the 21st Century, converging social, technological and political changes demand profound changes in how organizations relate to their customers. These changes question many of the assumptions on which 20th Century businesses are built. To turn this situation to their advantage, executives need to approach how they create value for their customers, quickly and proactively. They must build a collaborative network of partners to discover, design and deliver differentiated experience to customers.
The new meaning of customer experience Pervasive e-business and global sourcing are creating new centers of excellence for knowledge, services and manufacturing around the world—these clusters of people and companies are technology-enabled, well educated and highly motivated. They will impact incumbents in several ways: 1) they represent new collaborative resources that can add significantly to the enterprise expertise network; 2) they are developing into high-growth consumer markets; 3) they will create new offerings that may change the rules of your business since their companies do not have legacy organizations and cost structures. Web 2.0 is mobilizing customers in high-value mature markets—”Web 2.0″ technologies are user-friendly, collaborative tools and work processes that enable customers to connect with each other and collaborate spontaneously. Examples are […]
Clear Outsourcing Adoption Curve Emerges
The IDC Outsourcing Forum Midwest convened sourcing thought leaders from global enterprises, world-class outsourcing providers and IDC’s leading analysts in Chicago September 11-12, 2006. They shared pioneering experiences that are pushing the transformational boundaries of outsourcing, one of the most important management practices to emerge in the 21st century. Case studies from the Williams Companies, AOL, Lucent, Barry-Wehmiller and Procter & Gamble explained how to use outsourcing to satisfy multifaceted business objectives, and a clear adoption curve is emerging that describes how outsourcing is reshaping the world’s largest organizations.
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Surprising Manufacturing Case Study Featured at IDC Outsourcing Forum shows how outsourcing is creating more onshore manufacturing jobs.
 Readers of U.S. and European press are too familiar with the plight of manufacturers—and how outsourcing is increasing cost pressures and sending even more jobs overseas. What is less known is that leading edge manufacturers are beginning to use outsourcing to increase local employment by making local companies more competitive.
Forum attendees will hear how Midwest U.S. manufacturer Barry-Wehmiller, which was featured in BusinessWeek’s The Future of Outsourcing, is creating a new business that turns around manufacturers by improving their business processes, which makes them more competitive and ends up increasing local employment in many cases. Forum presenter Vasant Bennett is President of Barry-Wehmiller International Resources (BMIS) and a chief architect of BWIS’s emerging service offerings. He spoke to the Global Human Capital Journal last week.
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Part of the IDC Outsourcing Forum Midwest Report
Midwest executives will have an excellent opportunity to learn how to take their outsourcing strategy to the next level next week, when IDC will bring their Outsourcing Forum to Chicago. Themed “Reinventing your business through BPO and ITO,” the Forum will feature speakers from Proctor & Gamble, Lucent, The Williams Companies, NiSource, Goodyear, Barry-Wehmiller and Hydro One Networks. In addition, world-class outsourcing providers such as Capgemini, IBM, Hewlett-Packard will offer practical advice, and several of IDC’s lead analysts will offer their insights.
I was able to catch up with event chairman Bob Welch, who previewed some of the Summit’s key themes. I also have information on a special registration deal.
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Accelerating Forces Buffet the Enterprise
Volatility of customer wants and diversity of markets around the world will increasingly demand that enterprises innovate if they want to remain relevant because their current product introduction and innovation processes are woefully insufficient. In addition, several “structural enablers” are driving down the cost of collaboration—globalization, enterprise software maturation, e-collaboration tools and BPM solutions. I think it’s beyond dispute that “emerging” markets around the world look at India as a model, and there will be a cascading wave of new outsourcing providers entering the market in the years ahead, keeping downward pressure on supplier prices and forcing increased innovation across the supplier value chain. For example, many educated young people in these markets are native with e-collaboration tools, which should lead to new models of collaboration. SOA and Web services are increasingly ingrained in enterprise software, opening up legacy and new solutions to web-based, granular sharing of information. BPM, because it digitizes an increasing spectrum of the business process, is an enabler of outsourcing.
Reposition Outsourcing as Iterative Transformation
Outsourcing in 2006 is where e-business was in 1998, when the Internet was a tech playground in the mid-late 90s. The mission of “e-business strategy” was […]
The current revolution in enterprise software is only a preview of a much larger, more pervasive shift that will transform the global economy within the next decade. Service-oriented architecture and Web services are two of the more well-known elements of the maturation of distributed computing, which is changing the rules of the vaunted software development life cycle.
In short, we are on the way to becoming a real-time market for global human capital whose ascendancy will increase with the growth of the knowledge economy and global standards for work processes. If we classify economic value according to knowledge/information, manufacturing and agricultural products and services, the knowledge portion has been steadily increasing its share of the value chain, and this trend is accelerating. Of course, information technology facilitates the creation, distribution and sharing of knowledge.
What does this mean for outsourcing and offshoring? By understanding how standards-based technologies have combined to transform enterprise software, we can learn how the coming standardization of work processes will drive explosive demand for an always-on market for knowledge workers and real-time value chains.
Read a longer version of the article published in the Technology Executives Club Journal. Forthcoming next month, my point of view […]
The Emerging Global Labor Market: Don’t Panic! calls out leading research from McKinsey Global Institute on global development of many industries.
When the U.S. saw manufacturing companies move significant operations offshore during the 80s and 90s, most people were unhappy, but many understood that certain industries were maturing, facing global competition and price pressures. Consequently, they were forced to remain competitive through lower labor costs. However, as awareness of IT offshoring spread in the context of the Tech Bust in the early 2000s, it sent a chill of fear up and down the collective spine: “How could the high tech juggernaut be outsourced and offshored? Would this development prevent its recovery?” Noisy gnashing of teeth, protectionist legislation and demonstrations. The longer term question was:
As “the world” graduates many more engineers, MBAs and scientists than does the U.S., will they threaten the employment of U.S. high value professionals?
That’s an excellent (and important) question. The McKinsey Global Institute (MGI)published a significant study in June 2005, The Emerging Global Labor Market, in which they reported results of an in-depth analysis of the supply and demand of offshore outsourcing. In short, they found that:
Offshoring will create a “relatively small” global labor […]
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