Mr. Rob Restivo is an independent advisor to business leaders, helping them to shape and align their business strategies with the optimal sourcing solution. He counsels organizations with complex challenges related to the use and delivery of global services.
Over the past 15 years Mr. Restivo has been involved in outsourcing transactions and has managed and participated in over 40 distinct client projects. Projects involving outsourcing of services range in total contract value from $1 million to $1 billion, resulting in organizational savings between 10% – 25%. He has been involved in projects including implementation of governance organizations, optimization of processes and services, and development and implementation of business strategies. Mr. Restivo has worked in several industries, including projects in the Oil and Gas, Hi-tech, Financial Services, Healthcare, Pharmaceuticals, Utilities, Defense Systems, and Manufacturing industries. Mr. Restivo brings experience working with global outsourcing advisory firms like Everest Group.
If you would like to contact Mr. Restivo, email him at rob@archwayadvisory.com, website: www.archwayadvisory.com
DistilNFO IT ADVISOR – FEATURED INTERVIEW
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DistilINFO: What do you see as outsourcing trends in the next five years?
Mr. Restivo: For existing buyers of outsourcing services, I expect to see a focus on developing end-of-term strategies to determine the next steps with their current service providers. Buyers will be looking to renew, restructure, re-compete, or repatriate services. I also expect new deals will continue to be a part of the landscape. There are still companies out there that have not yet explored outsourcing and in today’s economy those companies will be forced to explore it as a means of reducing costs and overhead. Regardless of ITO or BPO, I also expect to see the return to shorter deals. With the exponential rate of change and advancement in technology, it just simply does not make sense to enter into a long-term services agreement. What is priced today by a service provider is based on the underlying technology and processes they have in place to deliver it. That same technology and those same processes will not (and should not) be the same 5 years from today. And lastly, buyers (both existing and new) will continue to look at service providers to bring more value than simply performing a function. When a buyer partners with a service provider, they are typically expecting that service provider to be an extension of their organization. Just as the buyers expect their own employees to be proactive and help the organization determine how to do things better, faster, cheaper, the buyers expect the same from their service provider.
Also, you can not discuss trends, expectations, or crystal ball forecasts without bringing up cloud computing. It is a positive, disruptive force in technology today. Although there are literally hundreds of cloud computing service providers out there, the Tier 1 outsourcing service providers are trying to figure out how to best approach this offering. They have competing internal interests in how they approach their offerings. They have to be careful they don’t cannibalize their legacy revenue stream by implementing a technical solution that has such a significant cost advantage to its buyers. Over the next 5 years, I certainly expect these outsourcing service providers to have advanced this nascent technology through acquisitions of cloud providers and to have service offerings that provide the cost savings and flexibility that cloud computing is promising.
DistilNFO: How has the ITO/BPO services market changed in the last two years?
Mr. Restivo: Without question, cloud computing is a disruptive advancement that is changing how services are delivered by all organizations, whether service provider or internal organization. In addition, there have been several significant mergers and acquisition that will lead to more integrated offerings between services and hardware. See the answer to question 6 below for more on this topic.
DistilNFO: What would be the source of differentiation for the ITO/BPO vendors going forward?
Mr. Restivo: I believe the differentiation factor for these service providers will be in a couple of areas…
1. Cloud computing service offerings. Those that can provide and demonstrate a successful solution that integrates across technologies and business functions will be a clear differentiator.
2. Additional value. What can a service provider do for me, beyond the day-day delivery of services? Again, if a service provider can demonstrate where and how they have brought additional value to clients beyond what’s expected, this will be a winner for both buyer and service provider.
DistilNFO: What do you see as the impact of SaaS & Cloud on Outsourcing?
Mr. Restivo: Cloud computing is certainly a positive, disruptive technological approach to driving down cost and increasing flexibility for organizations. Any organization that is exploring how to utilize this nascent technology should first and foremost identify what they are trying to accomplish by taking this route, followed by a clear strategy to determine the best solution for them.
Outsourcing service providers must determine what role they want to play in the ‘X-as-a-Service’ environment. Do they want to be an integrator of sorts, bringing 3rd parties together to provide the solution? Do they want to be a provider of cloud services, providing the shared infrastructure or do they want to be an advisor in this space? Certainly they may want to do it all, but each path will impact their business strategy, their compensation models and their services delivery models. They also run the risk of severely impacting their current revenue stream with their ‘legacy’ services.
Other areas that will change include performance measurements. Why will there be a need to monitor and measure an individual server’s uptime, when it is access to the application or service that you are paying for? This really brings forward the elusive ‘end-end’ service level that so many buyers have been trying to get to for so long, but it never emerged. In a cloud environment, the buyer just wants to be able to get to the application when they want it and to have it respond quickly. No more concern about the network or servers or what is the reason for the failure.
Outsourcing deals that include an element of cloud computing will also have different focus on the MSA. Currently there are literally hundreds of cloud service providers. If the tier 1 service providers utilize any of them, there should be more focus in areas such as business continuity; what happens to the data if the hosting company goes out of business and how can I ensure that it is still accessible? Access control and security will also take a front seat in the MSA discussions as we continue to store data somewhere else besides in our own location.
DistilNFO: There have been a number of significant mergers of ITO/BPO companies. How has and how will this change the landscape?
Mr. Restivo: Significant mergers such as Xerox/ACS, Dell/Perot Systems, HP/EDS are bringing together services with HW. IBM has been doing this for years. However, I believe there continues to be challenges in bringing these organizations together to obtain the true synergistic value of integrating the 2 environments. Selling services is not in the HW vendors DNA and selling HW is not in the services provider DNA. Part of the issue is that the HW company is trying to ‘productize’ the services. This might work in some situations, and certainly as these companies build out their cloud offerings, I believe it will still take some time for the true benefit of these mergers to be seen by the buyers.
DistilNFO: Do you think the Indian pure plays will continue to grow against tough competition from the IBMs, HPs, Accenture and other multinationals setting up large operations in global locations?
Mr. Restivo: Based on recent financial reports of tier 1 service providers, both revenue and operating margin have increased for both Indian pure plays and multinational companies. In addition, the top 5 Indian pure plays (TCS, Wipro, Infosys, Cognizant, HCL) have witnessed revenue growth between 17-40%, according to some recent research. I don’t anticipate any significant slowdown in the near future by the top 5 Indian pure plays.
DistilNFO: Employee retention, or lack of, was a hot topic in India a few years ago. What are your thoughts on that now?
Mr. Restivo: Attrition among the Indian suppliers continues to be a problem. With the continued growth and expansion of not only Indian companies, but the multinational companies as well into other parts of the world, this will continue to be a problem. I suspect the issues go beyond just throwing more money at employees. Employees need opportunity for career advancement and recognition of the job they are doing. Recognition typically provides a sense of belonging that results in loyalty.
DistilNFO: What industries are poised for outsourcing growth?
Mr. Restivo: If I were a service provider, I would have a healthcare practice, an energy practice and a government practice.
DistilNFO: What locations are poised for outsourcing growth?
Mr. Restivo: Whereas India, China and Brazil are all considered “mature” locations, Mexico, Chile, Argentina, and parts of Eastern Europe (Poland, Czech Republic, Hungary, Romania), and Malaysia are all “emerging” locations for outsourcing delivery centers.
DistilNFO: What advice do you have for customers considering outsourcing?
Mr. Restivo: Be very clear about the objectives you are trying to solve for, and then build everything else around solving for those objectives; your strategy, your RFP, your solution, your evaluation criteria and your negotiated contract. ALWAYS come back to your objectives.
DistilNFO: There has been a lot of talk about the opportunities in Healthcare industry due to reform, what are you views on its impact on outsourcing?
Mr. Restivo: Outsourcing in healthcare is one of the best options healthcare providers have to obtaining compliance under the ARRA. And with Saas models available for EHR systems, it is a faster solution and the healthcare providers no longer need to make the obvious decision between spending capital dollars on IT systems or medical equipment. There are outsourcing solutions for not only the top tier hospital systems in the country, but the rural and community hospitals as well. The challenge for all providers is once they are in compliance, they must stay in compliance to continue receiving their Medicare/Medicaid reimbursements. For the rural and community hospitals those reimbursements can represent as much as 85% of their overall revenue. Therefore, I would expect a hospital provider to put some type of continuous maintenance program in place to ensure continued compliance.
DistilNFO: What are the top three ways to measure a vendor’s performance?
Mr. Restivo: Obviously you need to measure the service provider’s ability to deliver its services at an expected performance level. This is really ‘table stakes’ for being in the game. Beyond that, service providers should be measured against their ability to meet the pricing expectations. So often this is not monitored throughout the term of the agreement and if not managed, can lead to the buyer spending more than keeping the services in-house. And lastly, although less tangible, service providers should be measured against their ability to bring additional value to the buyer. Every buyer clearly wants and expects an outsourcing service provider to be the expert in their field and as such, expects them to help the buyer become aware of ways to do things better, faster and cheaper. How often do you think this really happens? Not that often…
DistilNFO: Any final thoughts?
Mr. Restivo: With cloud computing, both ITO and BPO are changing. It’s not your typical approach to “take my mess for less”. It clearly has its advantages, bringing cheaper and more flexible solutions to buyers. However, there is still a lot of work to be done before it becomes a mature offering. There is work around security, integration, and standards. These are significant issues that need to be further refined and are being refined, but have a ways to go. Just like ITO and offshoring back in their nascent days, proceed, but proceed with caution and purpose.