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Business Process Outsourcing: Taking the Lead with IT

Steve Stubitz leads HP's BPO business for the Americas, which includes the US, Canada, Central America, and South America. HP, which has been in the BPO business for three years and built capacity from the ground up, is focused on delivering complex finance and accounting outsourced services for Global 500 clients.

Stubitz explains how he feels about Thomas Friedman's best-selling book, which discusses HP's facility in India. He explains why the lessons of Jerry McGuire resonate and why suppliers need to send the A-team on every transition.

Q: What are the biggest challenges in BPO as we face 2007?
A: Buyers and suppliers each have their own challenges. Buyers have to deal with the relative immaturity of the market. In addition, there are a lot of players entering the market. Those two things create a lot of uncertainty and confusion.

Q: How will things shake out?
A: I think the BPO market will end up looking like the mature ITO market that we see today. I think there will be a handful of larger players who will dominate the field with HP being one of them.

Q: What are the suppliers' challenges?
A: Suppliers are taking their customers and implementing a variation of lift and drop, move and improve, or transform and go. This migration makes the transition critical. My advice: send your best people to handle the transition!

Suppliers are finding successful transitions are the toughest part of the process because they have to validate a lot of assumptions. The project plan covers many phases and thousands of activities. And all the changes have to be done seamlessly. Our customers can't say to their vendors, "We can't pay you today because we are going through a BPO transition." We've had customers whose plants would shut down if they didn't pay their vendors in seven days. In some cases we need to process payments and issue a check in 24 hours.

Q: How are BPO deals changing today?
A: Today a BPO deal looks more like a merger and acquisition (M&A) transaction than an outsourcing deal. They work best when there are synergies in capabilities between the buyer and the outsourcer. It's like working with a partner to do things they don't want to do or aren't good at.

In addition, today it's much more important that the two organizations are in sync. Today's BPO deals demand a higher degree of cultural affinity because it is impossible to predict what will happen over the seven-year term of a deal.

Q: Are BPO deals going to look like ITO deals?
A: Today ITO deals are fairly standardized. That's possible because both sides understand the process and the deal contours. Already, some BPO processes do have some standard options. In finance and accounting, for example, you can find a lot more standardization than, say, in HR outsourcing.

Q: How does offshoring fit into HP's service offering?
A: To us, offshoring does not equal outsourcing. Offshoring is just one component in a global delivery model that can close the books for customers in over 150 countries.

What is certain is that offshoring has proven economic benefits. Customers do receive significantly lower costs by leveraging the offshore delivery models.

Offshoring also offers economies of scale. Once you have consolidated a particular process, you can apply all sorts of industrial engineering techniques to improve productivity and quality that is difficult or impossible to do otherwise.

Q: Now that offshoring is accepted, are there other challenges?
A: In Bangalore we are finding wages are going up 15 percent. Suppliers have to manage turnover better. At HP, we have the lowest turnover in the BPO industry because we provide a steady career path for people so they don't leave for the center that just opened across the street. At HP we are working hard on the people-management side in India and it is paying great dividends.

Another thing that's changing is the perception about geography. India is just one place in the offshoring firmament. We also send work to China, Singapore, Poland, Mexico, and Costa Rica.

Q. A lot of IT suppliers purchased a BPO portfolio to get into the BPO arena. Why didn't HP?
A: It's easy to buy capacity, but it's hard to buy scale. We felt it was impossible to purchase an integrated BPO model. So we leveraged our internal shared services model. We tell our buyers, "We eat our own cooking." We think it's a tremendous advantage to leverage our own assets than integrate a disparate group of parts. Why should customers pay for a supplier's integration headaches?

Q: Where did you grow up?
A: I grew up in Arlington Heights, Illinois. I received a bachelors and master's degree in engineering at the University of Illinois in Champaign. I received an MBA from the University of Chicago.

Q: What was your first job?
A: I started my career at Arthur Andersen installing and customizing ERP systems. I left the accounting firm to join IBM in 1984, where I worked for 11 years; I worked in the large accounts group. That's where I got introduced to outsourcing. My boss found me going to meetings to learn about this new thing called outsourcing. I got to work on IBM's first ITO deals. After IBM I spent the next six years at Keane, joining it through the acquisition of Bricker and Associates. There I focused on I/T and application outsourcing.

After Keane, I joined a BPO company called Brigade, which was owned by General Atlantic Partners, a private-equity firm specializing in BPO investments. I made my first trip to India in 2002. Brigade was focused on buying shared-services operations and rolling them into one F&A BPO company. I visited one of HP's facilities in India. We approached HP about commercializing its BPO business. I spent a year trying to convince HP's leadership it was a good idea. In 2003 HP decided it was a good idea and hired me to do that.

Q: What was the last book you read?
A: "The World Is Flat," by Thomas Friedman. I wanted to read the book because Friedman visited our BPO site. It was really interesting to read someone else's opinions about an operation you are so familiar with.

What I really liked about the book was that Friedman talks about the importance of "hope" and comments that the BPO industry has provided a ladder step to the middle class in India. I thought that was a profound thought.

Q: What's your favorite movie?
A: "Jerry McGuire." I really appreciated the transformation he went through. Getting fired forced Jerry to reexamine his life. That reexamination turned out to be the best thing that ever happened to him.

Publish Date: December 2006

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Copyright © 2006 - Everest Partners, L.P.

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