Detroit - where it all began!

Last week I made a day trip to Detroit for a client meeting. Although Detroit is the quintessential Auto town, it was not an Auto or Auto parts company that I met with, but a Telco…still the visit and the events of the day conspired to provide me an almost perfect launching pad for my reflections around Sourcing in general and Outsourcing in particular that I plan to post in my new blog on outsourcing (www.advisource.blogspot.com) .

Detroit is the home of the erstwhile Big Three in the Automotive industry – GM, Ford and Chrysler. I say ‘erstwhile’ because Toyota recently pipped GM as the largest car manufacturer in the world. And therein lies a story, just one story out of several hundreds I am sure, but something that will be of relevance to readers of this post…the story of how over the last 3 decades, Outsourcing, specifically Modular Global Sourcing, changed the rules of the game in this industry, upended established conventions, and created a new breed of winners. Outsourcing in the way most of us understand in today’s world was first seen as being practiced in this industry. So, in a sense, Detroit is also the place where it all began…In one of my subsequent posts, I will explore the evolution of outsourcing in the automotive manufacturing industry and draw parallels to the growth curve of the outsourcing of IT and Business Process services.

One of the local newspapers had a screaming headline, ‘GM posts surprise profits in second quarter 07…’ Surely news to gladden many hearts in a town that has been starved of good news on the business and jobs front for months, if not years, now. Later that day I also found out that Detroit actually has many casinos (MGM Grand has a big casino cum hotel here!) and they had all reasons to expect booming business that night due to the GM turnaround. It was not just GM that has injected optimism in Detroit – Ford has posted record profits and Chrysler too seems poised for a turnaround after being bought over by Cerberus, their new Private Equity buyer, and the appointment of Bob Nardelli, the former embattled CEO of Home Depot and the never-became CEO of GE. The private equity angle is an interesting one in terms of impact on Outsourcing…within my team we have started discussing and formulating our plans to leverage private equity players in terms of outsourcing deals generation and closure. One of my future blogs will be dedicated to this topic.

During the meeting with a senior decision maker at the client, someone who has worked with my company for several years, I heard a couple of interesting observations that cut through to the heart of the issue in a flash. This company has grown through acquisitions and is now a leading national service provider in all the various segments – landline, wireless, mobile, residential, corporate, you name it… Along with the acquisitions have come multiple platforms and systems, duplicate functions and processes, and a myriad legacy outsourcing service providers. We have been providing IT services to the parent company for several years now, and have a substantial and growing book of business, so it was one of those a-ha moments when she mentioned that their new CIO is now looking at consolidating the ‘Outsourcing’ vendors list and did not want to add us to that list right now – because my company is an ‘Offshoring’ service provider!

This was the second time in two weeks that I was hearing that distinction being made – the first time when I was at dinner with partners of a leading deal advisory firm and they had not only spoken about Outsourcing and Offshoring in a similar fashion but also published it in their quarter-end index. Three years ago, when I had analyzed and researched this topic to come up with our point of view, one of the key trends we had concluded was that ‘Outsourcing’ and ‘Offshoring’ are no longer seen as distinct buckets, as most of the so-called legacy outsourcing firms are delivering from offshore and the mostly India-based providers are bidding for and delivering same or similar scope as a legacy player. So, when very senior and influential people in the industry still fall back on a distinction that probably made sense half a decade ago, what gives? How does one explain it is just ‘Global Sourcing’ now, that it is a brave new world out there? I will attempt to tackle this subject next week.

Something else that was equally interesting, and worrying, happened in that meeting. We were talking about potential re-badging of client personnel and she said that since they are seen as an American icon, they wouldn’t want to re-badge in large numbers to a company like ours that is not seen as a local provider! They of course wouldn’t mind re-badging to a legacy outsourcer that is seen as an ‘American’ company…this at a time when my company is planning to hire several thousands in onsite, local country operations, whereas companies like IBM and Accenture are shifting their resource mix to hire aggressively in countries like India and are actually, in some cases, retrenching people in the US. Across the college campuses in the US (and elsewhere as well), my company is fast acquiring a cachet of a cool place to work in, a flat world company that is acknowledged as a pioneer and leader in the industry, and one that hires hundreds of Interns and fresh recruits from around the top b-schools to create the global workforce of the future. Maybe we are not emphasizing our brand and corporate image loud enough – otherwise why would a top decision-maker in an existing client of ours not feel comfortable enough in our ability to absorb and provide rewarding careers to her critical employees? Or will she always buy a Ford or a GM over a Toyota or a Honda?! I will come back to this topic about re-badging and our local presence in one of my later posts.

There are so many myths and realities in the enchanted world of outsourcing – These Reflections on Sources of Advice on Sourcing (www.advisource.blogspot.com) will hopefully shine the blogspot-light on the hidden nooks and crannies of what has become the defining trend of our times – Outsourcing!

Happy Reading and Posting…
Rak