We are very pleased to present a recent interview with Chip Wagner that was conducted by Frank Casale, Founder and CEO of The Institute for Robotic Process Automation and originally published on its website.
[divider]FC: As we dive right in here, what do you see as maybe two or three things that are new and exciting in the outsourcing arena?
CW: I think the changes, Frank, that are emerging in outsourcing are pivot points we’ve seen in the past. First, there was the ubiquitous amount of telecommunications bandwidth put out there that enabled players never who had trodden in this space to become behemoths. Then came the labor arbitrage model, enabled by technology. Today, we see new inflection points like robotic process automation, autonomics, which will eliminate labor or create digital labor, as we like to say.
Those inflection points are going to change outsourcing. This may be the biggest one yet and it will probably come in the most compressed period. If you look at the length of time it took for the other two to ripple through the world; this one probably ripples through the world in a more geometric pace.
FC: I agree. We’ll come back to your point in a moment. I wanted to ask you this question. I was in a room full of about a dozen buyers a couple of weeks ago where we had a roundtable. It was clear to me that outsourcing doesn’t seem to get any easier for these guys, although we’re tracking 21 years and you can argue that it’s obviously been done before that.
You would think it would evolve and mature, but it’s still a challenge and still seems to be fairly painful. Why do you think that is? Or do you agree with that statement?
CW: I think, happily for the third party advisory space, it is still challenging. If you go way back in time into the 60’s when it was all brand new it was hard for everybody. Nobody knew what they were doing, but if you get into 20, 30, 40 years later, you would think by now everybody has kind of figured it out.
Along came all new players who changed the game, such as the whole India offshore model. Now there are some other disruptive factors. People take these monolithic, huge (remember the 10 year mega deals we used to refer to, five billion, two billion revenue), wonderful transactions for the provider community, present this beautiful backlog, give us lots of business to work on, but some number of years into that, the customers weren’t happy. They didn’t see innovation. They became nervous that they had too many eggs in one basket, so the pendulum swung to the notion of multi-source and ecosystem of providers, and best of breed.
When you get into that, you’re building a house and suddenly you have 23 contractors crawling all over the house trying to do it all at the same time, and create a beautiful house, that’s harder to do than the monolithic single contractor who has most of those resources in his vertically integrated housing company. I think that’s why.
People are now recruiting their deals. They’re generation 2.0/3.0/4.0. They’re much smarter. They’re more selective about what they want. They have a lot of new partners they want to bring into the ecosystem.
Now they’re confronted by the ultimate challenge, which is how on earth do I govern and vendor manage that ecosystem. The more things change the more difficult they become and it’s obviously why there’s a business that we’re in.
FC: Makes total sense. In light of this, is the role of the adviser changing in this new world order as compared to what it used to be maybe five, ten years ago?
CW: I think it is. The standard let’s go to do a transaction, let’s go help somebody figure out how to outsource something and presume that maybe it’s their first time, there are still first timers out there which is remarkable. Every year, we encounter them. I sit there and scratch my head, and wonder if over the course of the last ten years, what have they been doing?
The new world order is ecosystems of providers, multisource, short term contracts, stronger ties between the technology provision and the SLA achievement and a business outcome, always talked about, always promised, rarely contracted for.
FC: As far as it changing, there are the first timers that need the traditional advisory help.
CW: The transaction side of this is still there but it’s becoming increasingly small. If you’re a third party adviser and you’re used to doing this, what are you trying to help people do? You’re trying to help them adapt to the new world order. The new world order is ecosystems of providers, multi-source, short term contracts, stronger ties between the technology provision and the SLA achievement and a business outcome, always talked about, always promised, rarely contracted for.
Some of those more subtleties, those nuances, and from our perspective in our business, we’ve opted to go away from a pure transaction model and even go away from a business where we’re predominantly outsourcing advisers. It might surprise you to know that the outsourcing advisory business at Alsbridge is one third of our revenue.
We, at Alsbridge, have gone into other areas that are going to make the CXO community happy and services that we believe our clients are interested in buying so we can expand on our relationship and our history of success with them by bringing them other offerings that will enhance their business.
FC: I think you are spot on. We touched on this earlier, but the word, innovation seems to be the holy grail for many enterprises the past couple of years, certainly within our network. All we have to do is drop that word in one of our conferences and there’s going to be a bunch of people showing up. I wonder how much of it is real versus fantasy.
We still see a lot of deals being done based on plain old-fashioned low price wins. Are you seeing innovation out there?
CW: Innovation is the thing that frustrates the enterprise customer who buys outsourcing the most. It is the promise that is made the strongest, particularly by those that make some of the innovation toys if you will, that make the software, that make the hardware that in theory is going to be the technology around which innovation should be levered and business results should come from. Unfortunately, it has not been as well received by the enterprise customers, and hence they go back out to market, they’re looking for new providers.
You might wonder what a company like HP or an IBM, (and I just use them as examples), who make the technology toys, could do if they leveraged those toys into their managed service arrangements and made some sort of guarantee by saying, listen, this technology will, let’s say it has an affect on inventory for manufacturing, we will triple your turns of your inventory by the application of this technology, and we’ll guarantee it? And the way we’ll guarantee it is we’ll make some economic adjustment if we don’t get there, or we’ll take a share of the turns that we’ve improved by the application of this technology. We’ll invest in the technology on our nickel. You pay us on the return in form of the better balance sheet mechanics that come from tripling returns.
Now put your money where your mouth is. Take your toys and say, I will show you how they’re better, and you now have a services relationship that is one of co-dependence, as opposed to one of I provide services and you buy them.
FC: Very interesting. What is your prediction? Do you see that playing out? Is it more based on good buying or good selling, or a little of both?
CW: Sure, there’s no question that good buying, good selling would contribute to that but it’s going to take somebody who is in the toy manufacturing business and services business, so the two examples I used earlier were HP and IBM, and they’re not alone but they’re the easy ones to think about. It’s going to take someone at the top of those two companies saying, I want to figure out how to do this. I’m going to disrupt my own book of standard old plotting along manage services business by using my technology to explode the contract and go in and change the dynamic by which it’s measured, and show someone I’m prepared to partner with them by putting my money where my mouth is.
FC: That’s a great point. What’s your take on robotic process automation (RPA) and its impact on outsourcing? You and I spoke about this before. I’m amazed at how about two percent of our network, our membership is all over it, and the other 98% has no clue what we’re talking about, so still really new to many. What’s your sense of the reality versus fantasy with regard to RPA?
CW: Fear of the unknown is why you see people slowly put their toe in the water.
They want to be careful. Let’s let the other guy go first. Let’s let two or three of my competitors try it out. If they’re successful and people don’t get fired for trying it, and there aren’t meltdowns as a result of it, then I’ll try it but that’s always true of every step function change that comes along, every pivot point in technology, even the cloud.
The cloud is now getting more ubiquitously absorbed but imagine, think 10 years ago, the cloud was out there for us and there were only a few people willing to try it. I think we’re going to see the same thing here but this pace of adaptation, of disruptive technology in time will only increase because the world is more competitive. It’s more difficult.
Who wouldn’t? I’m always reminded of the cartoon where the guy is sitting at a rock and he’s shooting a single bullet weapon at this oncoming hoard of people. The guy behind him is tapping him on the back and he has this machine gun that shoots 1,000 bullets a second. The guy says, listen, I don’t have time for that. People do have time for disruptive technology.
FC: Robotic process automation is the new Gatling gun maybe.
CW: That may be right.
FC: I get the sense in speaking with you and others on your team that Alsbridge sees itself much different than a traditional outsourcing adviser. Is that the case and how so?
CW: It is because we’re trying to assemble a portfolio of service lines that bring value well beyond simply, let me outsource something. Some of them are more tactical and cost compression in nature or cost takeout in nature. Those are going to forever be valuable to CFOs/ CIOs because they always want to run their business as efficiently as they possibly can. They want to pay a fair price but really not more than that fair price.
People that can help them get there, they’re always going to warm to that. Across the strategic spectrum of, let me think about business models and what should be different, and how can I transform myself? How can I run vendor management for this ecosystem that is now so complex that I don’t know what to do?
Someday there will be a degree in vendor management and governance services. At that point, maybe the world changes a little bit. Meanwhile, people need that kind of help.
I go to any university I want and I say to the director of placement, a guy who is desperate to have us come and hire his people, hey, show me the people who have a vendor management and governance services degree. He says, what’s that?
If we can help people figure that out, someday that void will be filled, whether it’s by the universities in India, the universities here. Someday there will be a degree in vendor management and governance services. At that point, maybe the world changes a little bit. Meanwhile, people need that kind of help.
Our traditional outsourcing advisory business is a third of our business so we’ve changed dramatically. We don’t make a big deal about it. We don’t go out and try to be too big about publicizing it. We’re just trying to be able to produce value for our clients across the whole spectrum of their business, not just how to do outsourcing advisory.
FC: Great. Chip, it’s hard to speak with you and not get a sense of real passion, real energy. I get the sense that you know secret, wonderful things about the future for all of us. What has you so enthused in your current role leading the organization?
CW: I wish I had a crystal ball or I wish I had some unique insight to what’s going to happen that no one else knew. That would be wonderful. I probably don’t have that.
We have had this marvelous opportunity within Alsbridge in the last year and a half to take this company in a different direction. We have the backing of an absolutely spectacular private equity fund called LLR Partners, out of Philadelphia that has just been so supportive and so helpful that it’s just enabled us to do things that we’ve dreamt about before, and we’ve been able to put a couple of them together in a way that has us very excited.
We think we’re differentiated. The market seems to be supporting us. This will be our best year in the firm’s history by orders of magnitude on every measure, so we’re just feeling very good about ourselves. We’re having a lot of fun, and it’s just that enthusiasm has been infectious.
FC: It has been indeed. Last question, maybe you can provide some free advice for our members. Any parting advice for those currently struggling with their outsourcing relationship? Any tips?
CW: I’ll tell you what we went through – this is going to be a roundabout way of answering your question – we went through a reevaluation of our firm a little bit, and we came up with a little tag line. The tag line is challenge the future. I would encourage your clientele, your members, challenge the future. Don’t take today’s status quo and say, it is what it is.
Challenge it. Ask questions. Try to figure out ways to proactively disrupt the status quo to get to a level of performance that you can’t even imagine getting to because it is out there. There are providers who are willing to take extraordinary risk with you, not improving risk but good risk. Challenge the future. Don’t expect that you know how to do all of this stuff.
Your job in an enterprise is not to be the best at everything; it’s to figure out how to get the best results from whatever level of resources you can draw upon.
The reason the third party advisory space exists, the reason we help people with telecom network contracts, which is a pretty basic thing, we do 150 of them a year. A great procurement person, the greatest in the history of mankind does four in a career. We do 150 in a year. If you are a generalist, you cannot hope to be as good as the specialists are.
We’re specialists. Go get some help from some people. Don’t try to figure it all out by yourself. The reason people like Alsbridge exists is because we do actually have some insight garnered from concentration and garnered from volume. We do know some things by virtue of what we do, not by virtue of us being any smarter than anybody else; but if you do something 150 times a year and the other guy does it three times in a career, the guy who does it 150 times a year is going to be better at it than the guy who does it three times in a career.
Go ask for help. Get the best of breed people to help you figure out your business. Your job in an enterprise is not to be the best at everything; it’s to figure out how to get the best results from whatever level of resources you can draw upon.
About Chip Wagner: Chip has nearly 30 years of experience, including 25 years in professional services, IT outsourcing, and business process outsourcing. He has worked with hundreds of companies and has been directly involved in over $15B in sourcing transactions.
Chip joined Alsbridge in 2008 and was appointed CEO in June 2013. His prior career experience includes management and executive roles within GE’s Lighting Business, EDS (where amongst other responsibilities he was a Member of the Board and President of the Manufacturing Division for EDS Germany GmbH), Origin, MSI, Marconi (as President of U.S. operations and CEO of Marconi Wireless), Adea Systems and USAA. He has also served on the Board of CTIA.