Kirk LaughlinKeith Kerrison looks at the Nearshore region not in isolation but sees it for what it really is: part of the much bigger world. He’s been involved in sourcing applications projects (“mainly SAP”) for about 15 years, back when he was with Proctor & Gamble.
He came to HP as part of an outsourcing arrangement with P&G and now, as director of the Best Shore Application Services for the Americas Region within Enterprise Services, essentially has the job of running HP’s global applications delivery system. Besides being an expert on sourcing, Kerrison is also numbered among the Nearshore Americas Top 50 Power Rankings.
We asked him about global-sourcing challenges, the Nearshore region, what it takes to make clients happy, and Canada.
What’s it like to go from P&G to a giant tech company like HP?
Obviously it’s a big change to go from a company’s internal IT functions to a company where IT, rather than packaged goods, is the business. At HP there’s the scale of depth and capability, and you can always find the capacity to get things done. You can also leverage solutions developed at HP Labs. HP has the software and other tools, the infrastructure, the technology, and the people to be able to have that end-to-end reach to deliver solutions. In a typical IT shop you’re making relationships with contractors…. You don’t have all that scale and breadth that a company like HP can offer. That scale, those capabilities, and outsourcing experience became even richer after the acquisition of EDS [in 2008].
A consultant told us recently that no one has really figured out how to operate globally. You’ve helped define a global delivery model at HP. What does it take to make that global approach work effectively?
You have to think holistically about models. Early on the company assembled a brain trust to work through process models, best practices, and so on. One of the things we decided is that global delivery wasn’t just applications delivery but also infrastructure delivery. We integrate the applications work we do with our counterparts in the infrastructure area. We define a model that integrates onshore, nearshore, and farshore. We pull resources from various regions, various functions, and we have systems for passing the baton back and forth.
You need common terminology, you need consistent language, you need consistent standards and metrics, and you need the tools to make sure that everything is consistent across a network of centers. We’ve developed consistent processes for moving work. We had global methods for applications services at HP but were able to combine that with process methodology at EDS. With EDS we picked up a lot of expertise in how to move work. Consistent processes are deployed across all our centers. We’ve invested a lot of time and training in this, educating our workforce. How we operationalize applications management should be the same no matter where it’s coming from.
We wanted more than an India-centric capability. India of course is always going to be important, but we developed an approach that lets us leverage multiple connected hubs. This gives us scale but also proximity to clients. Large multinational clients look for our capability to be close to them.
What we did not want was a collection of distinct delivery centers. We put a governance structure in place to manage all our centers as a global structure. We invested in building capabilities across centers, creating a community of people and expertise across that organization.
Our largest multinational clients might take delivery from as many as 10 different locations around the world. We’re able to put that together seamlessly. But we only use, or would only add, a location that makes sense for the client.
Everyone expects that a provider will deliver on their SLAs, but that’s not enough to make a happy customer. To be successful you need to focus on the relationship and how to bring more value to the client. More value can come in various dimensions, like innovation.
Tell us how the Nearshore Americas region fits into HP’s world.
Our model is a global model, so we need to think of the Nearshore in that way. I manage my team as part of a global system rather than strictly regional. Our centers in Costa Rica and Argentina, for example, have a role to play in serving the U.S. but they are also woven into our global delivery model. A team in Argentina might serve clients in Spain because of the language affinity, but also might give clients elsewhere in Europe a better price. We think of our Nearshore centers as part of that global model, but they might also provide a local solution. Sometimes the best place is local. Sometimes it’s best to have that resource closer to the client.
But for reasons of scale, to get the capabilities you’re looking for, sometimes you have to go to India or China. Our ability to grow resources is better in those two countries. That’s why we’ll see more growth going to those farshore locations. The Nearshore will grow because we have multinational clients who want support in their time zone or want to follow the sun, but it will not grow as fast as farshore.
Many customers are looking for “India Plus One” capabilities. India provides depth, but for reasons of business continuity, some customers may not want to have all their eggs in one location. Maybe they keep two-thirds of their resources in India but the rest in a place like Argentina. They want to have some redundancy. In the Philippines, periodically a typhoon goes through there, so you may want some resources in another location. That’s smart business.
How do the Latin America centers differ?
Costa Rica today has a strong focus around SAP as a technology and applications management. Argentina has great capability around applications development, and Java for industries such as manufacturing and transportation. Brazil has a higher cost but a higher level of capability and a higher level of maturity. They’re focused on healthcare and communications. Costa Rica has the best cost structure, with Argentina now coming close, but if you’re trying to hire a high-level developer, for example, it’s going to be easier in Buenos Aires or Rio because of the size of the talent pool. Brazil we think of in a different context. We mainly focus on leveraging Brazil for domestic opportunities. We’ve grown these centers in a complementary way. We make sure we have a network of centers that don’t cannibalize themselves.
What do you think businesses do not know or appreciate about the Nearshore region (Latin America especially)?
Many corporations would consider outsource providers or delivery centers in the Nearshore region as places to get work done for local projects. But they might not have considered how Latin America can play into a broader model, a global delivery system. People gravitate to India, China, the Philippines, but may not think about how these Nearshore centers can play a role. I’ve worked with this region. There are great people, there is great talent in this part of the world. It would be a mistake if people think of those countries only in terms of Latin American delivery. Costa Rica, for example, is closer to Houston than parts of the U.S. are.
And how about our friend to the North?
I probably started with Canada back in the late 90s with P&G, and the cost structure then was about two-thirds of the cost of the U.S. Over time, though, the cost structure has become close to the U.S. The cost advantages have slowly eroded. But Canada still has a big role to play. In the Toronto area, for example, there’s a really great talent pool. There are high-end skill sets for client-facing roles and solution architecture. If you need those resources and need them close to the client, it makes sense. We have to recognize that for things like application maintenance, it makes no economic sense to do that in Canada anymore. High capabilities but relatively high costs compared to other locations.
What are the reasons some outsourcing projects do not succeed?
Everyone expects that a provider will deliver on their SLAs, but that’s not enough to make a happy customer. To be successful you need to focus on the relationship and how to bring more value to the client. More value can come in various dimensions, like innovation. Customers expect us to have all the resources to execute the work, but they look for more than meeting SLAs. They want innovation and thought leadership, even if they don’t mention it at the beginning. They want a partner who can deliver innovation that helps drive down costs or helps them achieve their business goals.
The biggest mistake is to look at outsourcing as a transaction. Customers are expecting more from a partner. We have to strive for service excellence but also a strong relationship with the client. If we wait for the client to ask us for that, we’re too late.
How do you think outsourcing is going to evolve in the next few years?
Everyone has played the labor arbitrage game. There’s going to be a bigger focus on leveraging software tools and automation to eliminate work, getting more for less. There’s a lot of noise right now around how cloud services will change the game. People will be thinking less about services and where they’re delivered from and be more interested in quality. Companies that will be successful are the companies thinking about those challenges today. How do you automate, how do you integrate? How do you streamline and virtualize that whole thing, service delivery from end to end? Where services are delivered from will become invisible.
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