Everest Group’s Phil Fersht is today’s heavyweight champion of sourcing advice and research to F&A outsourcing buyers and providers. You may have seen his writing in this magazine, speaking at an HRO or FAO event, or on a plane to India. As today’s hardest working man in FAO, his secrets are less well known, like where he got his start, what his big prediction is for F&A, how many days a month he travels, and why Phil’s father got knighted by Queen Elizabeth .

by Jay Whitehead

If you were to write a recruitment ad to attract Everest Group’s FAO research guru Phil Fersht, you would have to take a walk on the wacky side.

Applicant must have twelve years’ experience covering the IT, HRO, and FAO markets with six different firms. Oh, and we want you to have covered all of Europe—in both the wine-drinking and beer-drinking countries—from London; covered all of Asia from Singapore; and covered all of the U.S. from Boston and Dallas. We want you to have a gigantic Rolodex of FAO buyers and HRO buyers, all of whom know you by first name, and an entire laptop full of slide decks covering every topic of interest to F&A sourcing executives. Come prepared with your portfolio of dozens of featured columns in the leading F&A and HR trade publications and promotion from your industry keynote speeches. Be willing to spend at least 100 days a year in airplanes, and prove to us you don't mind sleeping in cheap hotels. British accent preferred, but optional.

Fersht’s complex resume is nearly as interesting as his uniquely deep insights into FAO (namely, FAO’s boom years are just now starting, driven by rapid 20- to 40-percent cost savings and guaranteed quality improvements); HRO (the unspoken engine of its high-velocity growth is a deep-seated dissatisfaction of the HR profession); and the state of the global accounting profession (the future is bright—that is, if you live in Bangalore).

The 34-year-old Fersht had an odd start to his journey to the top of the FAO research and advisory world. He was a DJ (but don’t bother whacking him with the old joke about having a face for radio). He was also smart enough to know that midnight gigs spinning tunes is the fast boat to goofed-up sleep patterns…and poverty. So, armed with his CD collection, a bachelor’s degree, and one year’s post-graduate study in France, he landed a job researching the IT market for a UK-based software provider.

After two years, he joined international research giant IDC initially as a European IT and services analyst based in London before moving to corporate headquarters in Boston. He was so good at it that his boss asked him late in 2001 to head up the Asian practice in Singapore, which he did for two years. But during his move back to the U.S., Fersht’s career path took a detour when his boss suddenly defected to IBM. Fortunately, a friend at Yankee Group invited the English native to come back to Boston to cover HRO. Fersht recalled that a series of rapid events propelled him into the international analyst limelight.

NAME BRAND ANALYST
“Within a month, star analyst Marc Pramuk (now a colleague at Everest) left IDC, the space’s other top pundit Rebecca Scholl left to join provider ACS, and I became the only name-brand analyst covering HRO. HRO Today magazine featured me every month, the HRO World conference booked me as a keynote speaker, everyone was lining up to have me speak, and I was suddenly gathering clients by the handful,” he recalled.

He was soon running a 14-person global IT, BPO, and HRO analyst team. Amid all this success, Fersht said, he decided to join high-flying sourcing advisory firm EquaTerra. “But when the EquaTerra-TPI merger talks began, I decided to make a U-turn on that decision,” he said. So, he made a quick decision to join John Wilmott at Nelson-Hall helping it build its U.S. business. While he credits Wilmott with teaching him key insights on the analyst business, his stint at Nelson-Hall only lasted six months.

“At the beginning of this year, my friend Michel Janssen (now with The Hackett Group), along with my CEO, Peter Bendor-Samuel, convinced me to move over to the Everest Group and help them on their journey in developing a world-class research practice within the Everest family,” Fersht said. “Since then, I have worked harder than I have ever worked before, work with a great team of 25 other sourcing analysts, and have constant exposure to many advisors, lawyers, providers and buyers. I have a growing network of most of the top F&A buyers and travel half the time. For better or worse, face-to-face advising and speaking is how you build business and a reputation in this space.”

Business-building, Fersht claimed, is where his DJ experience comes in handy. “Spinning music, you have to demonstrate competence live and in person. One of the hardest jobs in all of London to get is the prime-time slots at the top venues,” Fersht said. “You have to have credibility—playing what you want, but also what fills the dance floors. It’s a balance. It is the same in many respects as an analyst. You have to get the industry excited and build credibility. People will hold you accountable. But you have to take your own point of view; you have to be brave, bold, and true to yourself.”

Ironically, Fersht’s fast-moving career story has radically improved the market value of his opinions. As it turns out, nobody else has covered ITO, HRO, and FAO from six different analyst viewpoints in the fast-moving BPO markets of 1995 to 2006. As a result, his customers have become quite fond of Fersht’s lack of market-specific myopia. Rather than treating HRO or FAO as the end-all and be-all, Fersht’s great strength seems to be in comparing and contrasting the HRO and FAO markets and delivering extraordinary insights.

“The thing we discuss and research the most,” Fersht said, “is valuation of services and vendors’ competitive offerings. We at Everest are always talking with the Global 50s and other major players about the value of services, for example, especially topics such as offshore services and their value points. We are moving into an environment where each organization is slowly realizing it has unique needs that often require a unique sourcing model, which means it has to ascertain which processes should remain in its control and which should be moved over to a third party. The hardest thing is to predict speed of development. It is much easier to predict what’s happening, and who is or who will be doing it.”

To illustrate his point, Fersht compares the factors behind the development of the FAO and HRO markets.

“HRO was driven by the 2001-2002 downsizing that came about as a result of the September 11, 2001 terrorist attacks. It caused businesses to look for savings everywhere,” he postulated. “Within companies, that cost-cutting frenzy also led finance and other corporate leaders to bare their fangs to their most-loathed and -bloated corporate function: HR. HR was underperforming. So HRO and HR transformation became a political bandwagon that lots of leaders jumped on.

“Keith Hammonds of Fast Company magazine really hit the nail on the head with his [September 2005] cover story, ‘Why We Hate HR.’ In HRO, cost savings were modest, but the politics of under-performance were really the driver behind HRO’s big moves.”

By contrast, Fersht claimed, the engine behind U.S. FAO growth right now is Sarbanes-Oxley compliance requirements rather than corporate vendettas.

“Finance functions wield a lot more power in most companies than HR,” Fersht observed. “So there was far less political pressure driving FAO’s adoption, which has made it grow less quickly than HRO to date. But the 2002 Sarbanes-Oxley act forced companies to quickly allocate massive resources to their compliance and financial reporting work. The CPA firms did not have enough people, so a lot of the work got outsourced, which has driven FAO’s expansion and instilled a culture of moving F&A services over to a third party. In fact, the big four firms have all had to go offshore for significant parts of their transaction stuff—payables, receivables, T&E, payroll. And the results have been impressive in cost and quality terms.”

But Fersht claims that FAO’s SarBox ripple is the start of a significant surge in FAO business that is already in the nascent stages, with the market doubling in size over the past two years.

“The fact is,” Fersht said with passion, “F&A outsourcing works really well. The savings are large and real and—most of all—right now. The FAO offshore infrastructure is already robust and becoming more proficient by the day. So when we have the next economic downturn, which will happen soon, FAO providers with the right offshore engines will be ready to accept billions in business.

“CFOs of global companies with limited brand and resources will struggle to build (or maintain) a captive shared-services center. Their only logical business choice will be to outsource it. Many organizations can save up to 30 percent immediately and increase the quality of service delivery. If you have 50 to 120 accounting staff right now, you will find few vendors who can help. But just wait a year—there will be several as soon as the middle-market opens up with workable, profitable supplier offerings.”

The reason behind companies’ FAO-only option, Fersht said, is lack of human capital. He noted that virtually every accounting function is being performed offshore, especially in India, so the future is very bright for Indian accountants.

“In India, accounting is the new IT. The region is becoming a significant hub for the global accounting industry, and there is no sign of this profession shift slowing down. They are doing the transactional stuff well and increasingly taking on higher-value reporting and analytics services over and above the basic processes.

“FAO is the ultimate offshore labor-arbitrage play; it is one area of outsourcing that truly takes advantage of leveraging low-cost offshore resources to radically strip out cost while bringing genuine business value to the table. When you have tens of thousands of qualified accountants coming out of the Indian colleges, well-schooled in American and British accounting practices, the opportunity for buying organizations to make immediate cost savings with limited disruption to the business is staring them in the face.”

Fersht noted that with many back-office function being outsourced today, questions of where western accountants will “cut their teeth” have arisen. One option, he said, is for educational institutions to train graduates to focus on more strategic and value-added accounting areas from day one (including vendor management).

Still, what will happen with Indian accountants, he questions? “Are they going to be happy collecting invoices for Proctor and Gamble or running payrolls for staff at the BBC? The new Indian worker has proven himself to be hard working and ambitious, and with the Indian accountants now getting the ground-up training, surely they are the ones to start demanding the higher-value work in the future.

“There will soon be a growing shortage of accountants in this country and Britain. The offshore people have the accounting talent, and it is now a glamorous profession like IT,” he predicted.

Here, Fersht draws a parallel between the FAO and ITO worlds. In the IT outsourcing frenzy of the 1980s and 1990s, lots of low-level programming jobs were outsourced. The same is happening now in accounting.

“If you have passion and have trained yourself in the high-value analytics, decision-making, and vendor management skills, accounting will be a very exciting profession for you,” he said. “It was the same thing in IT. If you could analyze and make decisions, you kept a job. If not, you got outsourced. But today, there is virtually zero unemployment in IT. Everyone has adapted. The same will happen in F&A.”

THE FERSHT FIVE-FOR-ONE FORMULA
When pressed for the label that Fersht thinks his sourcing advisory and research clients apply to him, he seems to have unlearned British modesty in favor of a certain Texas swagger.

“My aim is to provide as much insight to my clients as I can, so they won’t need to go elsewhere,” he said. “My experience has taken me across cultures, from all over Asia to Europe to America, and across domains, from IT to HR to F&A. In F&A today, there are 20 providers, from the small vendor to the mega-global outsourcer who can do end-to-end F&A work; from EXL to OPI to WNS to Accenture to CapGemini to HP to ACS to IBM, and I’ve worked hard to get intimate and build trusting relationships with all of them, to know their strengths and weaknesses, their sweet spots, their cultures and, most of all, their people who make the decisions.”

As we began to wrap up our interview, Fersht was asked about what has come to be known as the Fersht five-for-one formula, his rule-of-thumb for ROI with India-based FAO providers. “Every hour you put into learning about and training your Indian staff,” Fersht claimed, “will get you five back. I spend most of my time with buyers, who confirm this return ratio. Some buyers even think I am understating the return.”

Getting back to his career record, asked whether he would do anything differently if he could start over, Fersht is clear. “No, I would not do it any differently,” he said. “In forcing myself into so many new situations, I have met the optimal number of people and learned much more quickly than if I had simply stayed in one place. I have some great friends and mentors now in the sourcing business with whom I just love working. I learn something new everyday and feel like I am right at the cutting-edge of a fast-globalizing economy”

Fersht, who was born in Cambridge in the U.K. but raised in London, readily admits that if he had to pick an alternative career, it would have been in an academic role. If he had made that jump into the learning world, he would have come by the impulse naturally. After all, his father is one of the most famous scientists in the U.K. and was widely recognized for his expertise.

Fersht’s father, Sir Alan, was knighted by Queen Elizabeth in early 2003 for being what the PR office at Buckingham Palace called “the father of protein science.” Fersht is clearly proud of the fact that his father, a professor at Britain’s Cambridge University and on the board of several companies, has come to be the most famous guy in his field.

“But his title will not flow down to me,” he said, “since the Queen abolished hereditary peerage a couple decades ago.” So does he have similar ambitions for himself? “I don’t know if the Queen would knight anyone for dedication to outsourcing,” he laughingly said. “I might get an award in India. Maybe they could make me a Raja.”