Services Safari

Name Your H-1B Legislation

       When Congress Gets Creative - The Selling of H-1B Legislation

Two new bills are being introduced in Congress to raise the cap on the number of H-1B visas. One would double the number initially and eventually triple the number of visas granted annually. The other takes the limit up to 195,000 in 2009.

Take the H-1B Legislation Naming Game!!!

Can you guess which legislation names are legit and which aren't?

1. The Innovation Employment Act
2. SUSTAIN - Strengthening U.S. Technology and Innovation Now
3. Replacement Work Force
4. Full Employment Act for Outsourcing and Global Competitiveness
5. The North American Job Security and Economic Stimulus Act
6. American Workers are Lazy, Uneducated and Ignorant of Technical Disciplines

The correct answers are the first two although numbers 4 & 5 could also work. The congress persons leading these efforts should be applauded for the creative names they've chosen. You'll notice that the bills are named around innovation as any name that would imply loss of jobs to offshore workers would be death to their political careers.

If you'd like to learn more about these bills (e.g., exactly who is sponsoring them and where they are from), please read: http://www.eweek.com/c/a/Careers/Bills-Would-Double-and-Triple-H1B-Cap/ .

   

Let The Fighting Begin - H1B Issue Goes to Washington

                The Best Reading on H-1B: Issues, Testimony, Fraud....

                        Can't We Make a Hit TV Show From This?

Ever get the feeling that someone's making money on those H-1B visas you read about? Check out U.S. Senator Chuck Grassley's letter to the Bush administration re: H-1B visa abuses: http://grassley.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=9af53fa4-b99b-5638-8db2-5021e681c258&Month=3&Year=2008 There's some really juicy stuff in this. It discusses the blatantly illegal job advertisements here in the U.S. where advertisers are only looking for holders of H-1B visas. It details how visa factories are being established to create false employer fronts within the U.S. There's the story of an Iowa businessman getting harangued by an offshore firm with all of these potential visa holders on the bench. The fact that Homeland Security is being alerted to these abuses suggests something is really rotten here. Great reading - really.

Computerworld expands on the Senator's letter in this story: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9067738&intsrc=hm_list . Like the above, it's a great read, too.

We also have Network World chiming in with their piece: http://www.networkworld.com/news/2008/031208-h1b.html.

Bill Gates, of Microsoft fame, testified before Congress and a synopsis of his remarks can be found here: http://www.networkworld.com/news/2008/031208-gates-immigration-reform.html

All this comes at a time when the U.S. government is being asked to raise the limits on H-1B visas from 65,000 to 110,000/year.

Here are the questions U.S. policy makers must address pronto:

• Does bringing in more non-US workers actually motivate US students to pursue technical degrees or does it achieve the opposite effect?
• The H-1B program was intended to bring in people with unique skills and talent. How do green, low-level tech coders meet that standard? What aren't more PhDs being granted this visa?
• Why are large tech outsourcers allowed to hog the number of available visas? Should U.S. based tech companies get an equal or better opportunity to import scarce, unique talent?
• Why are students at U.S. colleges electing not to pursue careers in technical areas? Is it because of bad employer behavior? Is it because these positions are vulnerable to outsourcing? Is it because potential employers send mixed signals to colleges, employees and job seekers? Or, is it that U.S. college students can't be bothered with these degrees? What is the real root cause?
• Is the L-1 visa program as messed up as the H-1B? Should both be addressed?

Approving or disallowing the increase in visa permits is not the issue. Congress must address bigger concerns (e.g., national security) and discover the answers (and appropriate remedies) to the matters above and more.

Update re: DOJ Kickback Allegations

                         PWC/IBM Settle With DOJ

Recently, I wrote about how alliances between systems integrators, hardware and software providers impact independence and objectivity. I also told the story of the U.S. Government going after some prominent firms for alleged kickback schemes that were part of their alliance programs.

ComputerWorld this week has reported that IBM and PWC have settled with the Department of Justice (DOJ) to the tune of $5.3 million. (see: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9031042&intsrc=hm_list)

Transparency in this post SarbOx era requires even alliance details be fully disclosed to prospective clients. While there may be significant benefits an integrator can derive from bundling their services and intellectual property with another firm's hardware or software, the benefits must pass through to the client and not remain with integrator or its alliance partners. If you're going to keep or reuse these savings, you need to fully disclose this information.

Furthermore, if you have alliances and you have chosen not to disclose material aspects of same to your sales professionals, you're probably doing something the government would frown upon.

This case with the DOJ is not over yet. Additional tech firms are still in the cross-hairs. This one should be interesting to watch.

Merrill Lynch Event

                 Three Leading Service Firms & Major Market Observations

I attended last week's Merrill Lynch Internet, Software, and Services analyst conference in NYC. It was a frightful travel adventure getting (and returning from) there but quite worth the while. Incidentally, I posted a couple of exclusive write-ups on the show to the Enterprise Irregular's site. Follow this link to read a lengthy post on the big issues/challenges keeping these top executives thinking (http://www.enterpriseirregulars.com/EI/21736).

Three particular highlights were the the individual briefings by Cognizant, IBM Global Services and Accenture. As a cautionary note to readers: all three of these firms are successful service firms and my comments in this post may seem slightly skewed to the positive. That said, let's get into the insights.

Gordon Coburn, CFO, and Francisco D'Souza, CEO of Cognizant offered a number of insights into the services space. This New Jersey firm has been a darling in the services space for several years. If you listen to an earnings call of theirs, be sure to stay on for the Wall Street Q&A. Many of these analysts positively gush when they get to speak to these folks. Cognizant today has revenues of $1.4 billion and will likely grow this to $2billion by end of year. Merrill's got a great report on other financial and operational stats for them, so I won't be redundant with their work.

What's fascinating about them is this:

• all of their revenue originates from only 400 or so clients. That's it.
• they are plowing back a fair bit of their profit margin into developing the future of the business. They're investing in methods, vertical knowledge, people and infrastructure.
• of their 400 clients, 87 are 'strategic' (i.e., they generate $5-40 million/year in fees) and another 5 are deemed to be 'mature'

This firm does almost all of its delivery via India but it uses a lot of Big 4 executives to develop and grow the accounts they establish footholds within.

I've always liked this firm as it seems to be what you'd get if you cross-bred Accenture with a great Indian services company. While their client focus is "a passion for building stronger businesses" may be easy to say but they do seem to have the offshore execution, on-site sales account management and other business processes under control to realize it.

During Q&A, these two executives fielded a number of questions re: attrition in India, growth in markets beyond North America and Britain and growth into China. If you'd like more info, drop me an email or give me a ring.

Accenture's Joellin Comerford discussed:

• the firm's complete closure with any matters related to the NHS outsourcing contract.
• how the mix of outsourcing contracts they're getting now contain a large quantity of smaller and medium sized outsourcing deals. Mega-deals are far less commonplace today but this represents a new level of understanding by clients when it comes to managing risk and other factors. This phenomena is actually good for everyone involved.
• Accenture's investments in SOA. Media sources peg this at $450 million over 3 years.
• How outsourcing advisory services have changed in recent years. A new consciousness has come over these advisors and they now see that squeezing all the margin out of a deal creates bad (not good) long-term deals for clients.
• Accenture's global delivery model, particularly when backed with extensive numbers of vertically relevant local country executives is still hard for others to beat.

Steve Mills of IBM had a number of market observations in line with the other services executives. One of my posts to the Enterprise Irregulars covers his remarks in quite detail.

Now, allow me to comment on the other issues raised by analysts, investors and service executives.

• ERP vendors and service firms are on two different ends of the SOA space. The service executives see a very complicated systems environment in their client base. They don't see these companies getting everything covered with a single, closed/proprietary SOA solution set provided by a major ERP vendor. Because companies acquire software organically and via M&A activities, apps diversity and apps bloat is still a problem out there. My vote: Services firms will do much better with SOA, near-term, than ERP vendors.
• ERP vendors do not need to worry about services firms getting into the application software space. Except for IBM's middleware and traditional systems management/OS products, none of the services executives want to be in that space.
• ERP vendors are definitely not tuned into 'real innovation'. Nope, the consultancies are the clear leaders here as ERP firms see innovation as a platform, not functionality, play. This is an almost criminal abandonment of innovation by ERP players and represents a huge loss to the buyers of applications and, potentially, to US GDP.
• Consulting is making a comeback. Accenture booked a $3 billion quarter recently in good old consulting (not outsourcing). While Accenture considers outsourcing to be counter-cyclical to consulting, when both practices are firing well, that makes firms like their's a double threat.
• Weak service firms were expected to die but somehow have managed to still survive. We should expect some prolonged, lingering deaths of some of these. I doubt acquisitions are possible given the legal woes some firms possess.

Indian?? Outsourcing

            American Indians - Another Outsourcing Option

Story: The Other Indian Outsourcer, BusinessWeek, 11/6/2006, www.businessweek.com

I had written previously about rural outsourcing but this piece in BusinessWeek about Accenture committing to a five-year outsourcing arrangement with a native American group was interesting. Here is a business opportunity to use on-shore workers whose employers are in low cost of living areas and pay no corporate taxes.

Great business leaders find ways to make things work in their own country. Swatch bucked the decline in Swiss watch making a couple of decades ago by finding a new way to keep making and selling Swiss watches. More U.S. based firms should do likewise. It doesn't take much work or thinking to offshore or outsource much of one's business. That's something anyone can do. But, finding a unique way to stay onshore and/or keep functions in-house while still staying cost-competitive is more challenging.

I like executives who think outside the box and I support any new business idea that provides jobs and opportunities to the one's own countrymen, especially to the original Americans.

Understanding Today's Services Marketplace

I'm in Austin, Texas this week and have spent some time at the QuickArrow user conference. QuickArrow is a Professional Services Automation (PSA) vendor that has been experiencing solid growth in recent years.

                                   Big "A-Ha" Highlights

In meeting with industry experts, QuickArrow management, speakers, etc., I have made the following observations:

• The marketplace for PSA software continues to expand beyond traditional service providers (i.e., consulting, Legal, Accounting, etc.) and is branching into some interesting spaces (e.g., Oil & Gas firms, Mapping companies). The diversity of clients and prospects here was eye-opening.
• Project and Program management disciplines are still big needs in many companies.
• Transparency in service firm operations is why companies initially buy PSA solutions; however, a new vision for the space is needed as customers will have this problem (mostly) solved in a few years.
• Regulatory problems (e.g., SarbOx) and revenue recognition issues still give service firm executives the shakes. As I recently posted, the documentation requirements of BPO operations are an even bigger concern area.
• Service executives are really hungry for operations and other statistics that can be used to better benchmark their operations. However, several participants and speakers bemoaned the industry's appalling lack of consistency in capturing and reporting data.

On that last point, I spoke with Scott Fletcher who is undertaking a deep dive benchmarking effort on service firms. He's part of the PSVillage advisory group (www.psvillage.com) and would welcome more firms joining this effort.

Innovation in Indian Service Firms

                 Competition - Innovation - India

Azita Gandjei is one of the folks I've met over at Primavera Systems (a sponsor of this blog). She's a former founder of Stonebridge Group, Columbia MBA, etc. She recently co-authored a white paper on Innovation and Indian professional services organizations (PSOs).

This is a 9 page piece that addresses a series of challenges Indian PSOs are facing and why they must innovate. Innovation is defined beyond more than just the creation of more innovative service offerings. Azita looks at trends like how Indian PSOs and domestic PSOs no longer are much different. It's a fast, solid read for anyone who wants insight into this slice of the market.

I read the report cover to cover. Unlike so many vendor sponsored pieces these days, this one is totally devoid of a sales pitch. If you'd like a copy, just send me an email (brian@techventive.com) with your name and I'll forward you the pdf version right out.

Cobbler's Children

                     Re-Engineering Service Firms - NOW!

As part of some client work I've been completing lately, I've had time to reflect on a few major points concerning professional service firms, especially systems integrators.

Finding #1 - Margins are not where they should be. When I examined the margins of companies all across the technology stack, I fully expected margins to be at their greatest when companies and products are closest to end-user/buyers. By and large, that was true except for two notable exceptions: Software Companies and Commercial IT Service Providers. The former had stupendous returns (mostly due to exceptional returns by MSFT, SAP and ORCL) while the latter did poorly at around 5%. (see Margin Map graphic)

Finding #2 - The competition for commercial systems integrators has changed yet again. One of the new combatants are ERP vendors who have been clawing back services revenues from these players for years. However, if ERP vendors are successful in rolling out newer versions of products that require less implementation effort, the effect on SI revenues could be chilling. Other competitors, like offshore firms, have really cut into the meat and potatoes of SIs. Moreover, corporations just don't want or value the old type of general consulting these firms offered in abundance in the 1970s-1990s. Specialized hosting and BPO firms (e.g., Hewitt) are chipping away market share, too.

Finding #3 - Global Service Delivery Models are easy to claim in sales presentations but are an expensive and difficult feat to pull off. Several commercial SIs that are dragging down group margins are still trying to sell and organize around an obsolete business model.

Finding #4 - Consultancies are finding that it is easier to give advice than take it. Telling a client that they are not operating at first quartile performance is one thing, but, doing something internally is a real change management challenge.

________________________________________________________________________________

Change strategies are needed now.

There is no magic one size fits all answer here. However, I recently re-discovered this chart in the book "Strategy Safari" by Mintzberg (no connection at all to my site). Way back in the book is this graphic by Ulrich (see below).

Every service firm should assess where they are in this curve and see what strategy is appropriate is right for them.

To illustrate, I conducted a Point of View sales training day the other day for a major ERP vendor. I gave them a case study involving a major systems integrator. When they read the background materials on this firm, one team after another expressed shock at how dysfunctional and troubled this company was. While the intent of the case study was to get them to see how they need to prep more before doing their old 'dialing for dollars' sales practice, it also shocked them to see how messed up a major, publicly traded SI could be.

Look over the Ulrich chart - where does your firm need to focus?

This brings me to the quote of the week:
"I don't think competition causes companies to fail. Much more often, they rot from the inside". 

(Source: InfoWorld 5/22/06 pg. 48)

Fun, Expensive Reading

             What's in a Name? A Lot of Money Perhaps...

If you're looking for an interesting read, check out Law.com's piece titled "The Name Game" (see www.law.com/jsp/article.jsp?id=1039054539959 ). I ran across this piece while doing a little research for a client. While this document is a couple of years old, it provides a great deal of insight into the choice of service firm names (e.g., Accenture, BearingPoint, etc.) and some that didn't make it (e.g., PWC's original choice of "Monday").

The article describes the secrecy involved in these choices, the speed required to make them happen and the cost. Oh, yes, the cost to do these deals is spectacular. Prices varied from $20 - $150 million.

If your service firm is considering a name change, read the article mentioned above and also see the sight, www.brighternaming.com . That site rates names of companies. They gave "BearingPoint" an 8 for technical and 7 for Presentation.

Name choices are not the same as branding, though. A brand is that immediate, sometimes emotional, reaction a prospect has when a company name is mentioned. A brand is not name recognition but rather what people attribute to that company, its people, products, services, culture, etc. I can assure you though that a company that has no name recognition also has no brand.

We've seen some interesting names over the years: MarchFirst, Tuesday, RazorFish, etc. And, we're seeing far fewer names of founders used as company names (e.g., Peat Marwick Mitchell, Arthur Andersen). However, whatever you name it, the brand is more important.

For service firms, the best companies make sure that they only accept work that is consistent with the image they want to cultivate in the market. I run into dozens of consultancies every year and too many of them lack the discipline to decline work that is not consistent with the image they wish to cultivate/expand. For example, if a business development manager is bringing in a lot of opportunities where you are cleaning up failed projects of other companies, your firm could get associated with failed projects even though it had nothing to do with the cause of the failures. Branding, successful branding that is, is a touchy matter to get right.

Clearing off the Desk

               News in Outsourcing/Services

If you're interested in outsourcing, here is a peek at some of the outsourcing related pieces that have crossed my desk. The sooner I tell you about them, the sooner I get my desk back. Enjoy.

Earlier this month, Nasscom reported that Indian exports of software and services were up 33%. (see InfoWorld's article, India Reaps $23.6 B in Outsourcing Revenue, 6.1.2006, www.infoworld.com) . Of the $23.6 billion, approximately $13.3 billion was software and services while call centers and BPO were $6.2 billion of the total. Engineering and other services made up the remainder.

BusinessWeek had a piece out last week titled "EDS: Getting Out Front in Outsourcing" (see www.businessweek.com, 6.28.2006). The article mostly lauds the mPhasis deal that EDS is completing and how EDS' new global delivery capability will make it more cost competitive. The piece also highlights other big outsourcers like IBM, Infosys and Tata.

itSMF will have its itSMF USA 2006 conference this August 25. Details are available at www.itsmfevent.com.

Infoworld had a long piece in its 6.12.06 issue title "Looking Up" (see www.inforworld.com). While this document details the results of a very significant compensation survey conducted by Infoworld, it does point out how outsourcing is affecting job jitters among U.S. workers and is acting as a damper against some wage increases. The fear of outsourcing is now second (to budget cuts) on employee and management employment concerns. It's a nice piece and the data has broader wage implications.

eWeek has a nice piece in the 6/12/2006 issue titled "Russia Revealed" (see www.eweek.com). They describe what kinds of projects are most appropriate for sending to Russian outsourcers. What I particularly liked in this piece was the description of the cultural differences with doing business with Russian outsourcers versus Indian outsourcers. The short version is that Indians are more culturally attuned to say 'Yes' to any client request whereas the Russian outsourcers may very well tell you 'No'. Russians will debate the merits of some of your ideas.  This is a good read.

The Conference Board is having its HR Outsourcing Conference this September here in Chicago. TPI and Fidelity are two of the sponsors. See www.conference-board.org/hroutsourcing.htm for more info.

The McKinsey Quarterly has a Research in Brief piece online titled "Taking Offshoring Beyond Labor Arbitrage" (see www.mckinseyquarterly.com). While I thought this piece would be promising it really just advises readers to combine other productivity improvements as part of labor arbitrage driven outsourcing deals. That's really the power behind the better BPO deals out in the market today. Users get better processes, better systems, and top quartile efficiency and effectiveness improvements while simultaneously reducing the cost of the service.

BusinessWeek SmallBiz, Summer 2006 issue, has a piece titled "Here or There". The article describes how 6 entrepreneurs decided whether (and what) to outsource. For those of you selling outsourcing services to the small to mid-market. I often find a couple of good anecdotes in these kind of features to share with my tech/services marketing clients especially when I need to remind them of the psycho-graphics of their prospective buyers.

Well, now my desk is lighter and I can do some client work. I hope some of the pieces above help you win more service deals.