Posted by Global Sourcing Forum on Tue, Jun 08, 2010
By Chandan Das, BPOVoice
Business process outsourcing firms, which have profitably worked for their clients in the United States and Europe for over a decade now, are now bracing their 'onshore' manifestation in these foreign locales with a view to take advantage of new business prospects.
In brief, offshore outsourcing denotes a procedure whereby a company engages an outside firm to execute some of its business operations in the latter's country at lesser rates. When the job is executed in the same country, it is called 'onshore' outsourcing.
Thus far, business process outsourcing firms have conventionally provided solutions from favored outsourcing destinations, such as India, the Philippines and other top outsourcing countries with a view to offer their clients inexpensive, but advent-grade facilities. However, presently an increasing number of BPO firms are simultaneously reinforcing their onshore presence to take advantage of the new business prospects in the space of healthcare and financial services.
According to Sanjiv Kumar, senior vice-president of Patni Computer Systems, previously the BPO industry was operating more or less offshore. This was contrary to the operations of the IT sector which always maintained a robust presence onshore. Kumar pointed out that looking at things from the BPO viewpoint; it is shifting from a 95% to 97% pattern to a 70% to 75% offshore standard, while the remaining 25% of the jobs being executed onshore.
Nevertheless, Kumar was of the view that though the trend is towards augmenting their onshore presence, offshore operations would still keep on playing a vital role for the BPO industry owing to the advantages on the cost and quality aspects. According to him, it was essential for the BPO firms to have a strong presence in their respective home countries since some specific types of work, such as actuarial evaluation and underwriting, would have to be executed only onshore. In fact, Patni Computers recently won a contract from the US insurance major Universal American which led the Indian BPO firm to acquire CHCS Services, a subsidiary of the US company, and to on its rolls around 200 employees of acquired unit in Pensacola in Florida. Of late, Patni Computers has made a similar acquisition in El Paso in Texas.
Echoing Kumar's views, N V Tyagarajan, the chief operating officer of Genpact, pointed out that as a firm enters into established associations, specific portions of the jobs need to be executed onshore. Citing examples of the insurance and health sectors, Tyagarajan said that when a BPO firm is serving such clients, it becomes essential to perform some segments of the job in the clients' countries. Interestingly enough, earlier in 2010, Genpact entered into a deal with the US online pharmacy Walgreens which witnessed Walgreens relocating its entire accounting processes and 500 jobs to Genpact. In return, the largest Indian BPO service provider took over the firm's drugstore chain in Danville.
Elucidating the change in trend, industry experts say that earlier clients were more interested in cost savings, but now they want their service providers to develop and transform to harmonize the client's future requirements and demands. They said that compared to an offshore establishment, onshore activities may result in a drop in the profit margins, but eventually the approach bears fruit in the long run as it helps to win more deals. The fact that many BPO firms have been able to get business even during the global economic slump bears testimony of the success of the onshore stratagem, they added.