Services Safari

Who's IP is it Anyway?

           Protecting Your Hard-Fought Intellectual Property

I was talking about services contracts a few weeks back with some colleagues and was surprised at how many of us were encountering contractual language from clients that was especially grabby when it came to our (not their) intellectual property.

I have developed some exceptional IT marketing databases over the last few years. Ditto for some interesting application software architectures and other products. I don't mind sharing these with paying clients and my fees reflect the cost of this. However, once I depart, those assets remain my property and no one else's.

Bob Lewis of Infoworld recently posted in his blog (http://weblog.infoworld.com/lewis/archives/2006/12/advice_for_a_ne.html ):

Of all the advice I could give, one issue stand out. The first is that you'll be bringing your intellectual property (IP) into each engagement. You'll refine it while on the clock, and you'll develop new intellectual property as well. Which brings up the question of who owns it when you're done.

Most large companies these days have onerous IP clauses in their contracts. I've personally run across quite a few companies that try to reassign ownership of my IP, so that once I include it in a work product I no longer have the right to use it anymore. I've run across it enough to be pretty sure it's a trend.

Some companies may argue that they are entitled to the IP you create while working for them. I can certainly appreciate their position if the product was not an extension of another product you brought with you on the job. In a spirited conversation I had with one firm's attorney, I reminded him that I was not a contract programmer who was developing an application. I was a marketing research and IT research firm employee who was bringing my company's IP to bear for them. My company was not tendering or surrendering its rights to any of its IP for them.

As with any business contract, if you're not sure what it says or what you're giving up, get a lawyer. The best money you can spend is the money that keeps you out of court and keeps you from getting into a nasty dispute with a soon-to-be ex-client.  It's always easier to fix a proposed contract before a deal is inked than to live with the after-effects later. With IP and contracts today, let the consultant beware.

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.

Let the Adjusting Begin

Offshoring Meets the Legal Profession

   

Did you see the BusinessWeek piece “Let’s Offshore the Lawyers” (9/18/2006, www.businessweek.com)? This article describes DuPont’s decision to use OfficeTiger to assist in collecting and processing evidence and documents. The goal is to materially shorten the elapsed time in reviewing documents and to cut overall legal costs. The article also states that DuPont estimates that 70% of labor “in a typical insurance or liability case can be outsourced.”

   

Consultants, lawyers, researchers, architects, engineers and more are finding that lower-cost service professionals will do the same work for less. (See attached slide with Forrester dat for information on Architecture job changes). The lessons from prior outsourcing waves will apply to law firms, too. Specifically, law firms should:

-          develop a global service delivery model so that lower cost resources can be incorporated into more of your cases

-          change your compensation methods to reward those who structure high margin, not necessarily high dollar fee, work

-          accept the fact that the market is changing and that clients will no longer accept traditional rates

-          alter work processes and incorporate more collaboration tools to permit 24/7 global teams to excel

-          create the methods, tools, training, protocols, etc. that permit successful trans-national collaboration

-          re-think the need for local paralegals and young staffers. Your new business model may require more ‘sales’ and client relationship talent locally with the more junior skill sets outsourced or offshored.

 

The wood paneling in the offices may need to go, too. Entering many law firm offices feels like taking a step back in time, a very expensive step. Remember, clients are scrutinizing the SG&A costs of every systems integrator, outsourcer and contractor they use. They will look at your cost structure and want to know what value they get from your leather-studded office furniture, Grecian statues in the lobby, oak paneling in the washroom, etc. If your cost structure is out of line/out of date with the times, expect to hear about it from clients.

 

I know – many people hire attorneys based on their reputation not cost – but corporations don’t. They see many law firms as big talent farms and are interested in securing the services of those who match their lower cost ethos. Clients, in any service environment, want value and the offshore movement in legal simply serves as a wake-up call for this industry to re-invent itself.

New Services Magazine

                 New Title from CMP: Global Services

CMP, publishers of InformationWeek and Optimize, have a new publication out called Global Services. While I've penned several pieces for Optimize, I have no connection to this publication. In fact, I just became aware of this publication in the last few weeks.

I mention this as there are only a few publications for services professionals. Consulting magazine is a very good publication (www.consultingmagazine.com) and I welcome more publications in this space. Global Services (www.globalservicesmedia.com) is very global in its editorial bent and content but it's not as sharp yet as Consulting. That's not a criticism - that's an aspirational nudge for this new publication. Qualified readers can get a free subscription to Global Services (follow the link above).

I welcome the additional coverage another magazine brings to this industry. I also think the global focus is spot on given the way our industry has changed over the last decade.

Let's hope this publication (and others in our industry) makes it.

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)

China - A Service Opportunity? Part 2

The China Workforce for Services

When you get a minute, there’s a short article in Forbes this week on hiring China personnel (Get Me Personnel). It’s a fast read but packed with insight into the job market in that country.

For service firms, the problems identified in this article are serious:

-          no national databases to verify employment history, criminal records, etc.

-          very high costs incurred to perform background checks

-          a culture not conducive to reporting bad news about people

-          rampant resume fraud

-          forged recommendation letters

-          etc.

The story goes on to report the issues a US manufacturer encountered as its work force sold secrets, sales professionals led double lives, etc.

As more and more service firms build out their global delivery models, expansions in China (with its low cost, abundant and increasingly skilled workforce) will become more common. The lessons and risks identified in this article are important to understand and anticipate. Does your firm have what’s required for China?

Where are Services Going Now?

Big Themes in Recent Services Stories

Here are some stories you might want to follow:

“HP Goes Distance for P&G”, eWeek – This piece describes how “to win P&G’s accounting, HP rebuilt Cincinnati in India”. This piece illustrates how far companies are willing to go to develop and capture business process outsourcing (BPO) work. Not content to move application development and maintenance to offshore sites, we can expect more firms (both US and Indian) to build out more BPO processing centers in low cost country sources. More information available at:  www.blog.eweek.com

“BPO: The Next Frontier”, eWeek – Also, in the same issue, is a piece with IDC (International Data Corporation) statistics on the size and growth rates of the BPO market. Logisitics and Sales/Marketing were the big dogs in BPO with Customer Service a solid third. If you don’t know how big these spaces are (and how small some others like Procurement are), you should check this data out.

Wal-Mart and Dell also announced large planned increases in offshore workers.

M&A activity is hot in BPO. R.R. Donnelley picked up OfficeTiger for $250 million. OfficeTiger provides a number of back office BPO services to firms. Accenture’s acquisition of assets of Savista is maybe more noteworthy that a quick glance would suggest (see story at http://www.finextra.com/fullpr.asp?id=8311 ). 

Behind all of these stories is something much bigger. First, the services space is evolving and service providers are adapting – rapidly. The most immediate change underfoot is the creation of true global delivery models (GDM). High concentrations of workers in one (e.g., India or China) or a few countries is no longer economically viable or is unresponsive to end-customer needs. Service buyers want the flexibility of using blended groups of people in nearby/lower cost, remote/very low cost, and local/high cost countries. This flexibility in locales allows them to tailor which service professionals will be used to solve specific customer needs. This only makes sense as an all-U.S. solution is too expensive and an all-India solution may be lacking in certain functional, culture or other sensitivities. Choice is what’s driving some of this change. With choice comes the ability to offer more tailored solutions to service buyers.

But, another force is driving the rollout of GDM: diversification. In a speech I gave this week to procurement and supply chain executives, I discussed how one company’s, one industry’s and one country’s over-reliance on one country as its source of key products or services is potentially ruinous to a company. When Enron collapsed, those employees who put all their retirement savings into Enron stock were effectively wiped out. Buyers of services need a diversified approach to services acquisition if only to better manage risk.

The other big thing afoot is the growth of BPO and BPO into new markets. We can reasonably expect BPO to take off for some back office functions (e.g., Finance, HR). Furthermore, BPO into the mid-market is ripe for an explosion, too. Let’s see what happens once the M&A dusts settles.

Comments?

China - A Service Opportunity?

China – When is this a Services Opportunity

In this month’s McKinsey Quarterly, the consultancy has published its “Ten Trends to Watch in 2006”.  Their list highlights several macroeconomic, social, environmental, business and industry trends. Interestingly, many of these have profound implications on service firms and the people who work within them.

Their first trend indicates that centers of economic activity will shift profoundly. The gross domestic product (GDP) of Asian governments, which today is half of Western Europe, will be reversed in the next 20 years. The Associated Press this week indicated that China’s economy grew 9.9% in 2005 but many economists believe this reported growth is substantially less than what actually occurred. The reason for this doubt is simple: increased exports out of China (and corresponding rise in imports by other countries) rose by more than this sum. The absolute growth here is less important to another fact: as the economies of China, India and other Tiger economies grow rapidly, services will become more important in this sphere of the world. The issue for many service executives is therefore: What are we doing to properly position our firm for some of this growth and opportunity?

Services are growing in China but the bulk of economic growth is currently going to new construction, infrastructure and factories. Once a strong industrial base is in place, services will begin to blossom. This evolution is similar to the one witnessed in many Western countries. Western countries moved from an agrarian society, to an industrialized society, to a latter services society and now information age.

Speed will define these changes now as developing nations have access to global capital markets, extraordinary telecommunication infrastructure, and, most importantly, the help of tens of thousands of post-industrial firms. Your firm will likely benefit an emerging firm and its attendant economy. Make sure you and your country are getting something back in kind.

Service professionals need to answer three questions now:

-          When will we enter China and other countries to deliver services locally?

-          What will need to deliver these services profitably and competitively?

-          How do we build a human capital recruitment and development program for new in-country services personnel?

China and its developing brethren are currently well underway in their move to an industrial economy. However, where it took Western countries a century or more to make this move China and others will break speed records in their transitions.