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identify and isolate these forty to fifty components and then sit down and ask 'the 
company'; 'How much money are you spending in each component? Where are you best in 
class? Where are you differentiated? What are the totally nondifferenti…ated 
components of your business? Where do you think you have capabilities but are not 


sure you are ever going to be great there because you'd have to put more money in 
than you want?'〃 
When you are done; said Tropiano; you basically have an X…ray of the company; 
identifying four or five 〃hot spots。〃 One or two might be core competencies; others 
might be skills that the company wasn't fully aware that it even had and that should 
be built up。 Other hot spots on the X…ray; though; might be components where five 
different departments are duplicating the same functions or services that others 
outside the company could do better and more cheaply and so should be 
outsourced…provided there is still a savings to be made once all the costs and 
disruptions of outsourcing are taken into account。 
〃So you go look at this 'X…ray' and say; 'I have these areas here that are going to 
be really hot and core;'〃 says Tropiano; 〃and then let go of the things that you can 
outsource; and free up those funds and focus on the 

projects that could one day be part of your core competency。 For the average company; 
you are doing well if 25 percent is core competency and strategic and really 
differentiating; and the rest you may continue to do and try to improve or you may 
outsource。〃 
I first got interested in this phenomenon when an Internet business news headline 
caught my eye: 〃HP bags 150 million India bank contract。〃 The story on 
Computerworld。com (February 25; 2004) quoted a statement by HP saying that it had 
inked a ten…year outsourcing contract with the Bank of India in Mumbai。 The 150 
million contract was the largest ever won by HP Services in the Asia…Pacific region; 
according to Natarajan Sundaram; head of marketing for HP Services India。 The deal 
called for HP to implement and manage a core banking system across 750 Bank of India 
branches。 〃This is the first time we at HP are looking at the outsourcing of the core 
banking function in the Asia…Pacific region;〃 said Sundaram。 Several multinational 
companies competed for the contract; including IBM。 Under the contract; HP would take 
charge of data warehousing and document…imaging technology; telebanking; Internet 
banking; and automated teller machines for the whole bank chain。 
Other stories explained that the Bank of India had been facing increasing competition 
from both public… and private…sector banks and multinational corporations。 It 
realized that it needed to adopt Web…based banking; standardize and upgrade its 
computer systems; lower its transaction costs; and generally become more 
customer…friendly。 So it did what any other multinational would do…it gave itself 
a chest X…ray and decided to outsource all the funtions it did not believe were part 
of its core competency or that it simply did not have the internal skills to do at 
the highest level。 
Still; when the Bank of India decides to outsource its back room to an American…owned 
computer company; well; that just seemed too weird for words。 〃Run that by me again;〃 
I said; rubbing my eyes。 〃HP; the folks I call when my printer breaks; won the 
outsourcing contract for managing the back room of India's 750…branch state…owned 
bank? What in the world does Hewlett…Packard know about running the backroom systems 
of an Indian bank?〃 


359 
Out of curiosity; I decided to visit the HP headquarters in Palo Alto to find out。 
There; I met Maureen Conway; HP's vice president for emerging market solutions; and 
put the above question directly to her。 
〃How did we think we could take our internal capabilities and make them good for other 
people?〃 she answered rhetorically。 In brief; she explained; HP is constantly hosting 
customer visits; where its corporate clients come to its headquarters and see the 
innovations that HP has brought to managing its own information systems。 Many of those 
customers go away intrigued at how this big company has adapted itself to the flat 
world。 How;they ask;did HP; which once had eighty…seven different supply chains…each 
managed vertically and independently; with its own hierarchy of managers and 
back…office support…compress them into just five supply chains that manage 50 
billion in business; and in which functions like accounting; billing; and human 
resources are handled through a companywide system? What computers and business 
processes did HP install to consolidate all this efficiently? HP; which does business 
in 178 countries; used to handle all its accounts payable and receivable for each 
individual country in that country。 It was totally chopped up。 Just in the last couple 
of years; HP created three transaction…processing hubs…in Bangalore; Barcelona; and 
Guadalajara…with uniform standards and special work flow software that allowed HP 
offices in all 178 countries to process all billing functions through these three 
hubs。 
Seeing the reaction of its customers to its own internal operations; HP said one day; 
〃Hey; why don't we commercialize this?〃 Said Conway; 〃That became the nucleus of our 
business process outsourcing service 。 。 。 We were doing our own chest X…rays and 
discovered we had assets that other people cared about; and that is a business。〃 
In other words; the flattening of the world was both the disease and the cure for 
the Bank of India。 It clearly could not keep up with its competitors in the flattening 
banking environment of India; and; at the same time; it was able to get a chest X…ray 
and then outsource to HP all those things that it no longer made sense to do itself。 
And HP; having done its own chest X…ray; discovered that it was carrying a whole new 
consulting business inside its breast。 Sure; most of the work for the Bank of India 
will 
360 
be done by HP employees in India or Bank of India employees who will actually join 
HP。 But some of the profits will find their way back to the mother ship in Palo Alto; 
which will be supporting the whole operation through its global knowledge supply 
chain。 
Most of HP's revenues today come from outside the United States。 But the core HP 
knowledge and infrastructure teams who can put together the processes that win those 
contracts…like running the back room of the Bank of India…are still in the United 
States。 
〃The ability to dream is here; more than in other parts of the world;〃 said Conway。 
〃The nucleus of creativity is here; not because people are smarter…it is the 
environment; the freedom of thought。 The dream machine is still here。〃 


Rule #6: The best companies outsource to win; not to shrink。 They outsource to innovate 
faster and more cheaply in order to grow larger; gain market share; and hire more 
and different specialists…not to save money by firing more people。 
Dov Seidman runs LRN; a business that provides online legal; compliance; and ethics 
education to employees of global companies and helps executives and board members 
manage corporate governance responsibilities。 We were having lunch in the fall of 
2004 when Seidman casually mentioned that he had recently signed an outsourcing 
contract with the Indian consulting firm MindTree。 
〃Why are you cutting costs?〃 I asked him。 
〃I am outsourcing to win; not to save money;〃 Seidman answered。 〃Go to our Web site。 
I currently have over thirty job openings; and these are knowledge jobs。 We're 
expanding。 We're hiring。 I am adding people and creating new processes。〃 
Seidman's experience is what most outsourcing is actually about…companies 
outsourcing to acquire knowledge talent to grow their business faster; not simply 
to cut costs and cut back。 Seidman's company is a leader in one of those completely 
new industries that just appeared in the flat world…helping multinationals foster 
an ethical corporate culture around an employee base spread all over the world。 
Although LRN 

is a BE company…founded ten years before Enron exploded…demand for its services surged 
in the PE era…post…Enron。 In the wake of the collapse of Enron and other corporate 
governance scandals; a lot more companies became interested in what LRN was 
offering…online programs for companies to forge common expectations and 
understandings of their legal and ethical responsibilities; from the boardroom to 
the factory floor。 When companies sign up with LRN; their employees are given anonline 
education; including tests that cover everything from your company's code of conduct 
to when you are allowed to accept a gift to what you need to think about before hitting 
Send on an e…mail to what constitutes a bribe of a foreign official。 
As the whole issue of corporate governance began to mushroom in the early 2000s; 
Seidman realized that his customers; much like E*Trade; would need a more integrated 
platform。 While it was great that he was educating their employees with one online 
curriculum and advising boards on ethics issues with another; he knew that company 
executives would want a one…

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