Kraft's BPO Guru Says Global Mega Deals Do Not Work

A deep debate over outsourcing dogma could be in the works following a statement by Kraft's SVP of shared services that "there is very little truly global scale advantage" in BPO deals and that the best approach is regional best-of-breeds involving regional pairs, such as North America and Asia-Pacific. The interview with AMR's Phil Fersht is a must-read for anyone involved in outsourcing strategy.Fersht sets up the Q&A by describing Kraft SVP Lee Coulter as a near-mythical titan in the BPO world - "service providers tremble at the very sound of his name, consultants run for the hills" - who's among the leaders at Kraft in transforming the giant company's operations within a project called "Organize for Growth." And Coulter's outsized ideas live up to that billing, in particular his thoughts in reaction to Fersht's question about global sourcing and what's worked and what hasn't.

"Simply put, there is very little truly global scale advantage," Coulter says in the Q&A on Fersht's blog. Noting that such synergies work very well in but not beyond regional pairs, Coulter adds, "It is rare that there is any advantage to including more than two regions either as a client or a provider. All the trends today support a regional best-of-breed approach."

That's an interesting perspective during these days when so many global businesses seem to be going in a somewhat different direction as they're battling to establish global consistency in applications, business processes, product lines, and customer engagement. But in spite of that conventional wisdom, Coulter strongly advises to stick with the regional pairings and eschew the global mega deal.

"So I would say the global mega deal didn't work out so well, and the regional best-of-breed strategy is working pretty well."

Coulter also pointed to the need for significant improvement in how clients and BPO providers work out a clean and mutually beneficial contractual relationship.

"Despite literally thousands of relationships that exist in the BPO industry, the industry as a whole has not cracked the code on how to contract for a successful relationship," Coulter tells Fersht. "It seems there is little science here, and mostly art…. I am certain it's more about client and provider behavior than anything that is written in the MSA, but I think we should have come farther in being able to predictably create sustainable and satisfying relationships." On his outsourcing blog, called "Horses for Sources: Upfront Outsourcing Insights," Fersht has posted a 3-part interview with Kraft's Coulter; the comments above are taken from Part 1 of the 3-part series. I would strongly encourage all of you who are working on outsourcing and/or shared-services strategies to have a look because Lee Coulter knows whereof he speaks.

As Fersht says in his introduction, Coulter "is responsible for Kraft's IT services, global finance and HR shared-service centers, in addition to the firm's BPO activities…. Lee has a practical and experienced perspective on how enterprises today should approach global sourcing, and we have enjoyed his exuberance and candor in our buyers' group meetings."