Posted by Global Sourcing Forum on Tue, Sep 07, 2010
Despite the best efforts of Infosys, Wipro, HCL, TCS, and other Indian BPOs, they have failed to change the general impression as being linked to the country of their origin, but Mark Kobayashi-Hillary predicts that cost management still plays a major role in favor of Indian IT service providers
By: Mark Kobayashi-Hillary, IT Editor, Shared Services & Outsourcing Network (SSON) ,
It’s always good to see some detailed analysis from Horses for Sources. The blog has always been a great source of information so it’s really nice to see them as the research partner to SSON. One story really caught my eye recently - (Is it time for Western Indian cultures to blend?) , which made me think a lot about some of the issues I have observed over the past decade or so as the Indian IT outsourcing supplier community rose in prominence
And there is the problem. I referred to them as Indian suppliers. Despite the best efforts of Infosys, Wipro, HCL, TCS, and several others we all know, they have consistently failed to change the general impression of them as somehow being linked to the country of their origin.
Contrast some other IT suppliers against these names and you can see what I mean. IBM, Steria, Capgemini, Siemens Information Systems, Stefanini… I wouldn’t attach national labels such as American, French, German, or Brazilian to these companies. Well maybe I would with Stefanini as the smaller and less familiar of that group, but even they feel less defined by where their headquarters are located than many of the Indian companies.
Sticking to the facts though, many of the Indian technology firms do a great job. They are professional and many are industry leaders. So where has this cultural tic developed?
Unfortunately I think it is from a sense of shame. Cast your mind back to the heady Champagne-fuelled days of the millennium and you might just recall the millennium bug. It was a problem with a delivery date that could not be changed or missed. The need to test a vast number of IT systems all over the world created an opportunity for the Indian technology firms. They seized it and many companies tried outsourcing offshore for the first time ever – because they were forced to by a shortage of resource.
The Indian technology firms became known as body shops. They offered skilled IT resource as cheap as chips – the potato kind. They also made an immense amount of money and perfected the art of remote service delivery by shaking down standards written on US college campuses and using them in the real world to prove they could offer repeatable quality from the other side of the world.
As the noughties boomed, after the minor downturn of 2001, all of these firms professionalized their marketing. They hired PR firms and employed marketing directors. They set up innovation labs and published white papers offering thought leadership.
They did everything possible to rebrand and shift emphasis away from the lower cost of the service they provide to the fact that in many cases they were now offering a global best-of-breed service. When you are the best in the world it must be painful to keep on reading journalists focusing on the Indian option as low cost, low cost, low cost.
In many ways their efforts worked. Most of the analysts and senior decision makers in the industry now have a respect for these firms and an appreciation of the quality they offer. I think it is usually business journalists who persist in calling them a cheap option – much exacerbated by the global economic slowdown when nobody wanted to talk about blue-sky thinking anymore. Cost became king once again.
But though the worst is now behind us, I guess it will take a long time for many industries to be thinking purely in terms of strategy, so that intelligent cost management emphasis is going to linger. And, so too, will the national moniker.
Posted by Global Sourcing Forum on Tue, Aug 31, 2010
By Jamie Liddell, SSON
Last week’s news that the US economy grew during the third quarter of 2009 is further evidence that the global economic torpor of the last year and more may well be drawing to a close. Although serious problems remain - and some economies have yet to demonstrate the same degree of recovery - the outlook for world business is, at least, less depressing than it has been for some time, and while it would be a foolhardy organization indeed that, overnight, ramped activity back up to 2007 levels, it certainly seems that the worst of the storm has passed and that now could well be the time to kick off organizational recovery strategies to enable firms to enter the next economic phase full of optimism (and having learnt the crucial lessons of the last year).
To give network members some pointers on what those recovery strategies might entail, SSON reached out to some of the shared services and outsourcing space’s best-known commentators asking for their advice on what firms should be doing to ensure success over the next months and years. The result is here: SSON’s Top Ten Tips for Preparing for Recovery. (Indeed, we received so many good responses we’ll be publishing more tips shortly: watch this space.) See what you think - and don’t forget, if you want to share more tips you can send your own ideas to the editor or post your thoughts on the website. Enjoy!
1. Make all necessary preparations to meet increased demand
When the good times return - whenever that may be for your particular organization - companies the world over will be looking to make hay while the sun shines. Whatever form this hay-making takes, however, it’s likely to require significantly more (in gross terms) of a company’s shared services organization than has been the case during the recession. If your firm’s been able to get through the downturn without too many cutbacks in the back office, this might not prove too tricky a task. However, for those organizations which have reduced headcount or closed down sites altogether, it’s an altogether more taxing proposition…
“Truly manage the supply-demand tension,” advises Peter Allen, President, Strategy & Business Development, Managed Services Sector, CSC. “As the economy turns, businesses will be eager to step on the pedal of growth and will expect that the enabling capabilities of their back-office functions will be able to lay the rails ahead of the train. Most shared services and outsourcing teams have spent the past two years drawing capacity down and it will be essential to manage the tension that is ahead. Socialize a prioritization and decision-making process well in advance.”
2. Become more nimble
The need for increased agility and flexibility within shared services and within business in general was prominent even before the financial crisis. After a year-long slump it’s more pressing than ever. Organizations need to be able to adjust - and quickly - to the changes in their markets of interest and in the wider business landscape which will result from both the recession and the recovery. The time when sluggishly trundling forwards could get a firm through a sticky patch is gone for good: far-sightedness and the ability to react faster than your competitors will prove invaluable assets during the next few months and years.
“Businesses coming out of a crisis caused by an economic downturn are NEVER the same as the businesses that entered the crisis,” says Rick Bertheaud, EquaTerra’s Managing Director, Procurement. “There are always structural changes in the markets they serve . . . evolving customer demands, changes to competitive landscape, etc. These are permanent changes. The dinosaurs of industry are the companies that don’t recognize, or worse, reject those structural changes. What’s changing about your industry and markets and what will your company need to change to better compete? Answers to those questions will help to shape strategy for your SSC group – and allow it to more nimbly address the company’s needs.”
3. Conduct a clean sheet review
It would be going a bit far to say that the events of the last couple of years have completely overturned the global economic order; however, while not exactly representing a “Year Zero”, the recession and forthcoming (we hope!) recovery do offer a once-in-a-lifetime opportunity to reassess organizations’ roles, aims and strategies. Taking a holistic view of your firm and going “back to the drawing board” - on a theoretical basis, of course, at least initially - in terms of what your various corporate functions might be able to achieve within different operational parameters could well open up new horizons for efficiency and effectiveness gains. Now might be the time not just for thinking outside the box, but for rethinking the box itself…
“No one has been unaffected by the downturn, and many organizations have seen changes to their business volume, service provider landscape and overall nature of their work. Now is a good time to assess corporate functions and undertake a ‘clean sheet’ review of the extended global enterprise, to re-align the delivery organizations with the new needs of the business. Considerations may include outsourcing, insourcing or standardizing functions and migrating to a shared services or offshore environment,” says Cliff Justice, National Leader of KPMG's Shared Services and Outsourcing group.
4. Reformulate your recruitment strategy
Whether or not your organization was forced to downsize during the downturn, bringing in new talent remains a constant necessity for companies of any significant size. As mentioned above, it’s going to be crucial to get an early grasp of the likely demand your back-office functions will have to cater for during the recovery and beyond. However, it’s also critical that the new entrants to your workforce are taken on for their ability to cope with the challenges of tomorrow, not those of yesterday. Use this opportunity to take a very granular look at your recruitment strategy and processes to ensure they’re properly tailored to the future needs of your organization.
“Recruitment may be far more selective (very large, experienced pool to draw from) and the profile of candidates may change – less of a focus on what you used to do (old, out of date and inefficient process knowledge) and more on how you can help bring about future change (mindset, behaviours, innovation) and this may go right through the resourcing model - not just at senior positions where it traditionally resides,” advises John Sheridan, Senior Manager at Alsbridge.
5. Take advantage, if required, of more affordable real estate
The financial crisis had at least some of its roots in an over-inflated real estate market in the US and elsewhere; property prices in many corners of the world have fallen in real terms - often by very significant margins. For companies looking to set up, or expand, captive operations, this market readjustment could prove very rewarding: greenfield locations which - although attractive on many other levels - might previously have been considered too expensive may well now have fallen into the “affordable” category. Companies looking to rent, rather than buy, office space can also take advantage of lower rental rates and the need for cash-strapped landlords to work harder to encourage business from new tenants.
“According to recent testimony before a [US] congressional committee, commercial property values have fallen by up to 45 per cent since 2007,” points out property expert Pik Gruene. “In many other locations worldwide similar doldrums prevail. Much high-quality office space is standing empty and many landlords will now take significantly less than what they were demanding only a couple of years ago - or will consider selling outright where previously this was simply unthinkable. Furthermore, more attractive costs are rendered even more so by the newly resurgent banks’ need for borrowers and lower interest rates… Move quickly, though: in some key markets the green shoots of real estate recovery are already sprouting.”
6. Consider unloading the captives
The old “make vs. buy” dilemma hasn’t been removed by the downturn: far from it. Shifting market environments and changed priorities for individual organizations make the choice between in-house and outsourced service delivery just as crucial as ever. Meanwhile, those companies who found in favor of the captive model before the downturn might want to take another look at their operations to see if the in-house option remains the best one: the possibility of selling off captive infrastructure and reinvesting that significant income elsewhere in the business, at a time when a little capital goes a long way, may well be too attractive to resist for long…
“A number of companies built nearshore and offshore captive centers when the economy was strong. However, they found that as they needed to scale back in the more difficult economic conditions, these centers often became stranded assets with not enough scale to be sustainable. While the market valuations for captives have come down, this has prompted a number of private equity and service providers to become much more interested in buying captives. Companies should carefully evaluate whether they should stay in the offshore or nearshore captive game,” recommends Bob Cecil, Executive Director, Business & Financial Processes, EquaTerra.
7. Align services with strategy
This really should have been on the agenda long before the downturn: now there’s absolutely no excuse for keeping it off the table. It’s no longer good enough simply to provide a service, no matter how high-quality that service may be: if the service isn’t fully aligned with a coherent corporate strategy - possibly newly formulated in line with the clean sheet review posited earlier in this article - the organization won’t be getting the best out of its component parts.
“As companies rethink their service delivery models, they are now looking for their advisors to take less of a staff-augmentation/extra-pair-of-hands role and more of a strategic role,” says KPMG’s Cliff Justice. “However, many of the purchasers of these services, such as in-house procurement departments, as well as outsourcing advisors, do not have the experience or skills to think beyond the initial need and the areas that can be outsourced. Outsourcing and shared services professionals need to shift their focus from deal analysis/economics to helping companies build and implement services capabilities across multiple delivery models.”
8. Get into the cloud
The rise of cloud computing is taking place alongside, rather than as a result of, developments in the global economic environment. There’s no doubt, though, that the potentially game-changing nature of cloud technology will play an important role in determining how companies move out of the downturn, through the recovery and into the next business epoch. Firms without a cloud strategy now will be shooting themselves in the foot just before a long and arduous race to future market primacy.
Alsbridge’s John Sheridan recommends “understanding how to access and exploit the benefits of cloud technologies and more flexible business models to bring further improvement (commercial and operational flexibility) to existing shared service/back-office operations and process delivery (developing private clouds) and looking at how to overcome the various data protection, security, and compliance challenges that are obstacles to fully utilizing this hugely powerful model”.
9. Give credit where credit’s due: reward your loyalists
Having negotiated its way through seriously tumultuous economic times, and having come out the other side stable, solvent and potentially in a prime position to expand where its competitors might not have been so successful, an organization should of course be busy looking to the future. However, one essential element to this involves looking backwards - at those employees (and partners, customers and providers) who stuck with the firm and helped to bring it out into the sunshine. Recognizing the indispensable efforts of those workers and isn’t just good manners: it’s good business, as when competition for talent heats up once again when the good times return, your staff are more likely to stick with you - and similarly, if times get tough again further down the line, they’ll be more likely to tough it out on your behalf a second time around.
“In every organization there will be people who weathered the storm and endured the pain of contraction. These folks need to see some sunshine, and having those colleagues serve in key roles during the up-turn in demand is essential to creating a healthy culture,” advises CSC’s Peter Allen.
10. Don’t forget the basics
The aforementioned sunshine might well prove pretty dazzling after so many quarters in the gloom… However, allowing your organization to be so dazzled, and taking your eye off today’s ball while planning for a glorious future, could be just as catastrophic as not preparing properly in the first place…
“In your rush to do the other nine tips, don’t forget about why you are there and what you are charged with delivering,” reminds Claudio Altini, EquaTerra Managing Director, Shared Services. “Nothing you do will drive as much success as delivering to your remit and keeping the customer happy!”
Posted by Global Sourcing Forum on Wed, Aug 25, 2010
By: Atul Vashistha | Chairman | atul@neoadvisory.com
Staffing augmentation. Labor arbitrage. India.
For many out there, outsourcing seems to be defined only by the above – people working for low compensation in locations such as India helping the client save significant monies. That is outsourcing to them. However, the recent and continuing downturn in 2009 and 2010, has upset many notions and models that have been in place for over a decade. What was considered to be the norm or the normal as far as outsourcing is concerned, is now in flux and so requires different responses. The recent downturn has fundamentally changed how firms look at outsourcing. This period also revealed the challenges with current models and practices.
Over the next ten or so articles, I will touch on a topic each time and explore it in more detail.
This blog’s topic is Trend: Location Take for instance, the call center business. There was a time when India was the only market given due consideration, as far as setting up call center operations was concerned. That notion has been dispelled by other markets such as the Philippines and Costa Rica, which have showcased themselves in exemplary fashion as far as the provision of voice-based customer support services is concerned.
In similar manner, we see the rise of engineering services and local players in Brazil and Russia, increasingly emerging as a premier destination for the outsourcing of complex engineering and applications activities.
The above instances are just some of the many shifts and changes we are likely to continue to witness. In particular, they point towards an endeavor to be on the lookout for markets with newer skill sets, and not just go by established norms wherein predestinated markets such as India have long been considered to be the haven for any and every kind of outsourcing. In the same breath, it is vital that markets with access to equal or better technology processes are also identified. The situation is akin to the age old maxim wherein stock diversification is key to a healthy nest egg; depending on just one or more markets for all of one’s outsourcing needs is really not a very good idea. Increased attrition and competition for resources point to the need for geographic diversification.
Besides skill sets and technology, there are other reasons for which alternate markets also need to be actively considered. Take for instance the aspect of time zone. Many of the Latin American locations lie at the same time zones as the US.
There are various outsourcing opportunities that may be tapped here, especially if we are to look at the large Spanish speaking population of the region and juxtapose it with the equally large Hispanic population of the US. We see the following clusters developing:
- Asia Pacific: The key locations in this cluster are India, Philippines, China, Malaysia and Vietnam. Others such as Thailand, Sri Lanka and Indonesia are expected to contribute too.
- Europe: The key locations in this cluster are Czech Republic, Poland, Russia, Hungary, Ireland and Romania. Middle East/Africa: The key locations in this cluster are Egypt, South Africa, Jordan and Ghana. Other locations such as Kenya, Nigeria and Morocco can contribute too.
- North America/South America: The key locations are USA, Canada, Mexico, Brazil, Colombia, Chile, Costa Rica and Argentina. Panama and Guatemala can contribute too.
I will be doing a key note at the Global Sourcing Forum in NYC on the 13th of October. Join me in NYC and learn from an industry expert and I on the trends, traps and emerging opportunities that will be the “New Normal” and what you can do to leverage it to your benefit. Learn about rising destinations, new pricing models, leading engagement models, governance technologies and knowledge management models. This keynote is led by Former J&J business unit CIO and Head of eJNJ, John Hammitt and I.
Posted by Global Sourcing Forum on Mon, Jul 12, 2010
Anupam Govil, Founder-CEO, Global Equations LLC has been ranked as one of the most influential outsourcing thought leader and visionary on Americas by Nearshore Americas in its latest “Top 50 Power Ranking of Most Influential Executives”.
http://www.mynewsdesk.com/us/view/pressrelease/global-equations-global-equations-ceo-anupam-govil-among-top-50-power-rankings-recognized-as-one-of-the-most-influential-executives-by-nearshore-427775
Posted by Global Sourcing Forum on Thu, Jul 08, 2010
Posted by Pentalog High Tech
If at this point one returns to the question of how big is global production sharing, the
answer clearly is ‘very big’. (Yeats, 2001)
Historically, companies in the United States, Europe and Japan have led globalization, because those countries pushed products and services into developing countries. As the business of offshore sourcing grows, globalization is beginning to become widely accepted elsewhere. With "nearshore" and offshore sourcing, the global equation has changed.
You can't separate outsourcing and globalization anymore - they are directly connected and reinforce each other. Now it is a global job market for many types of work. Cheaper labor, more skilled expertise, freer cash flow, a more flexible working environment and the more effective use of staff has made outsourcing a global phenomenon. Industrial countries like - US, Germany and Japan are top outsourcers. Top insourcers such India, in particular, but also China and Russia are also among top twenty outsourcing countries. This shows that enterprises in developing countries and emerging markets are now reaching into developed economies, offering a talented workforce at a fraction of the price. Developed and developing economies are exploiting each other’s markets, economies and labor forces. Outsourcing is not just one way street from developed to developing countries. A new report “How America Benefits from Economic Engagement with India” shows that India has created through nearly 500 investment and acquisition deals worth $26.5 billion about 60,000 jobs in the United Sates between 2004 and 2009. Many of the countries that are witnessing an outsourcing wave have experienced rapid growth in exports of business services and information services.
Profitable global companies have good visibility into their operations across the world and with suppliers, implying a tighter, more effective relationship. These companies can determine their true distribution and logistics costs - invariably higher as you globalize - they can calculate profitability by customer and by product and they do planning across different functions and divisions in order to test the true effects of a global strategy across the company. Top companies use more IT on a global basis. They are much more likely to use e-sourcing/e-procurement, CRM, advanced planning and scheduling and product lifecycle management applications. This suggests that IT capabilities indeed matter to unlocking the value of the global corporation.
While globalization and outsourcing are fantastic opportunities for any business, they may not always be welcomed by the employees of an organization who fear change as a loss of job security. It is natural to expect that those disadvantaged by globalization — irrespective of market — will protest and make known their issues. More than trade or international financial flows, outsourcing has become the particular target of critics of globalization and some of the most frenzied defense by defenders of globalization. Likewise, local politicians and political parties may try to protect jobs and obtain votes through legislation such as the ones currently being debated in the US aimed at blocking the outsourcing of work to offshore enterprise. The positive effects of global sourcing are undeniably real and large but depend on an environment where public, business and worker relationships are fostered.
Pentalog has been for many years a driver in the globalization of many IT companies, or IT departments in various enterprises over the world and has become one of the leading players in Europe in the sector known as “offshore and nearshore”. Our Western Europe workforce is now moving forward and we have several software concepts that are being studied in order to “better exploit” and to participate in the globalization which will necessarily be a matter of collaboration. We also continue our expansion strategy with new locations - the most recent one added is in Israel. In addition, there will be not less than 3 other countries in which we are preparing to launch new operations in the near future. Pentalog is now able to generate and multiply very quickly all kinds of opportunities to produce and sell outsourcing services with high added value in the world. And it is by establishing strong partnerships in complementary geographical, economic, technical and cultural environments that will ensure further sustainability of our growth and globalization strategy.
However, the information technology sector offers an explicit example of the real and potential gains of the economy from globalization of both goods and services. This sector is one where the synergies and dynamic interaction between technological and global forces are significant and where firms are rapidly changing products and activities, with both positive and negative effects on the economy.
Posted by Shelley Ballarino on Tue, May 04, 2010
Focused Content, Valuable Networking, New Location!
Global Sourcing Forum (GSF)'s primary focus is on showcasing latest strategies, trends and best practices in the industry through an interactive forum that encourages discussions and peer to peer learning. In addition, GSF offers a Global Showcase for exploration of established and emerging global destinations for outsourcing solutions and partnerships.
Executive Forum: Participate in two days of insightful and educational sessions provide a unique perspective on the most current issues impacting this sector as well as solutions that will stay the test of time and rigor.
Pre-Conference Workshop: Before the main Forum, take part in an in-depth, comprehensive review of the most pressing and timely topics to help successfully source, manage and deliver global services.
Global Showcase: Meet top service providers, and discuss your BPO/ITO needs with established and emerging outsourcing destinations.
Valuable Networking: Take advantage of the valuable networking opportunities available throughout the day and into the evening to interact with peers and make connections.
New York City has it all! Utilize your attendance at Global Sourcing Forum as an opportunity to experience NYC in July. Enhance your trip with outstanding restaurants, shopping, museums, Broadway shows, sightseeing and many other attractions and activities.
Join Us! Registration is Now Open at http://www.globalsourcingforum.com
Posted by Global Sourcing Forum on Mon, Apr 12, 2010
By Audrey B, of the Outsourcing Insider
It was English historian Edward Gibbon who said that that, "all that is human must retrograde if it does not advance", and in outsourcing, this is likewise the case. As the end of the first quarter draws near, it is noticeable that business expansion among outsourcing companies have become more marked, and is in various different parts of the world. Companies are expanding their global presence in anticipation of more business in different fields such as legal process outsourcing (LPO), business process outsourcing (BPO) and information technology (IT) outsourcing. It is encouraging that the anticipation of the influx of business for the outsourcing industry has been steadily rising since the start of 2010. It would seem that despite the effects of the recession having barely begun to wane, outsourcing companies are still expecting a better outlook.
In the US, IT consulting and outsourcing company ENTAP Inc announced its expansion into the Washington DC market on the 22nd of March. The company opened a new facility which will cater to federal government agencies and prime contractors. Government outsourcing contracts have become a big trend now, as governments try to find ways to stretch their limited budgets. Meanwhile on the following day, business process outsourcing company Knoah Solutions also announced the opening of a new contact center in Las Vegas, Nevada in order to meet the growing demand for contact center outsourcing services. It's certainly good news for the US as it tries to maintain the steady recovery of its economy and increase employment opportunities.
Down south in Mexico, Indian IT outsourcing provider Patni Computer Systems (NYSE:PTI) opened a new IT delivery center in Queretaro on the 12th of March. The new facility is slated to be the company's hub for its expansion efforts in the Latin America markets. Patni joins other outsourcing companies such as TCS (NYSE:TCS), who also entered into the Latin America market through Queretaro. Other IT companies from India are also eyeing expansions into Latin America as well as Africa for new and non-commercial markets in order to expand their businesses.
Speaking of the African outsourcing market, two companies were featured on the 24th of March for their planned expansion into the region. Stream Global Services (AMEX:SGS) announced the opening of their new service center in Cairo, Egypt. This is following an agreement by Stream with Egypt's government to employ and train more than 1,000 Egyptian employees over the next three years. On the other hand, Tech Mahindra (NSE:TECHM) is also planning to expand into Africa as well as the Middle East in anticipation of a surge in contracts for data analytics, and other services. Aside from that, legal process outsourcing companies such as Integreon are also planning to pursue expansion into Africa, as well as the Philippines and China.
In Asia and Europe, business process outsourcing provider, Startek (NYSE:SRT), announced on the 8th of March that they are expanding their company into the Philippines with a second facility, while Indian BPO company, Genpact (NYSE:G) will be expanding into Romania with the establishment of a facility in Cluj-Napoca as announced on the 25th of March. Both are expected to be operational by the third quarter of this year.
These are only some of the advancements that are happening globally since the recovery began and although there is still much to be done, it is clear to see that the recovery is well under way. It is good to know that although some progress may be slow, outsourcing is far from retrograding.
For more from BPO Voice go here:
http://www.bpovoice.com/profiles/blogs/economic-recovery-brings-more
Posted by Global Sourcing Forum on Tue, Mar 09, 2010
By Jacob Cherian, at BPO Voice
Outsourcing has been termed the sunshine industry for a long time and rightly so. It has been able to survive the recession and going into recovery, it looks like outsourcing is here to stay. But there are a couple of glitches that may hinder its progress.
With India being one of the top outsourcing countries and host to outsourcing giants like Wipro, Infosys, and Tata Consultancy Services, the declining dollar stands in the way the Indian economy can balance its flux.
It's no surprise that the dwindling dollar has sent some pain down financial markets worldwide. And it looks like the dollar is facing the stark realty of having to be dealt with when it comes to investing. The International Monetary Fund has forewarned that the fall of the greenback can create an economic problem for the global economy. It is also not a secret that we might see another currency like the yen or the Euro replace the dollar as the currency of choice for many investors.
The reason for the dollar's adverse effects is because financial markets have a negative reaction to a declining currency. The greenback has already dropped 5 percent against the Sterling pound and the Euro, just this year, and it continues to plummet downhill.
The impact on outsourcing is also clear as exposure to the dollar for majors like Infosys as high as eighty percent of their total business, the drooping U.S. currency could be the most likely risk for software and IT firms. To provide an example, Infosys, the No. 2 outsourcer in India, lost $21.6 million in revenues during the April-June quarter in 2003-2004.
Outsourcenews.com reports that one study revealed that, "Indian software firms get 60 per cent of their revenues from the US and a one per cent appreciation of the rupee against the dollar can impact earnings before interest and tax margins by between 30 and 50 basis points. Irrespective of the fact whether the company is big or small, all of them have been hit. The margins may be impacted by as much as 4 per cent."
Nonetheless, the trade body NASSCOM is optimistic on the outlook on outsourcing. Kiran Karnik, president of NASSCOM said in a statement, that the impact of the declining dollar would not be very significant and would be along the lines of 2-3 percent. He added, that NASSCOMdoes not think it will adversely effect the competitiveness of software firms.
Jacob Cherian writes for SourcingLine, a leading provider of directories on top seo companies and mobile application developers
Posted by Global Sourcing Forum on Sun, Mar 07, 2010
Our contributors look back on the key developments which made the space what it is today...
By: Jamie Liddell, SSON,
It's remarkable to think that the space in which we operate - now a skein of connected activities across numerous industries and sectors employing millions of people and involving many billions of dollars - has only existed in anything like its current form for a mere handful of years. From concept to delivery, the shared services and outsourcing space has been granted a fraction of the development time which more established activities such as manufacturing have enjoyed - but nevertheless, in that time we've witnessed some truly remarkable developments which have utterly revolutionized the business environment - and, indeed, the very nature of business.
As Ed Kirkby, Senior Consultant at EquaTerra, recalls: "Having been involved in the IT industry since 1983 I have seen many changes - and much re-inventing of the wheel. Apart from the technology drivers and the advent of offshore (e.g. India) there are other developments over this period of: one-stop shop versus selective outsourcing (‘best in class‘), new business models (ASPs/ISPs and Legacy), Business Process Outsourcing, complexity and future proofing considerations, more sophisticated financial engineering, partnerships and joint ventures, commoditization of ‘me too' deals in mature markets as well as Sole-Source versus Competitive Tender. These have all combined to make outsourcing one of the most interesting market sectors to be in, both from a historical perspective and the place to be in the future - why? Because outsourcing works!"
Recently SSON reached out to a number of experts and commentators from around the shared services and outsourcing space to give their thoughts on the developments which have made the space what it is today. Now, we present the result: our Top Ten Developments Which Changed Shared Services & Outsourcing. Enjoy! (And remember: you can send your own thoughts to the editor.)
1. Technological advances
No surprises that this one's on the list; pretty much every one of our contributors mentioned technology in one form or another, whether it be the incredible facilitating impact of the internet or the development of specifically process-related tools boosting companies' efficiencies and productivity. It's impossible to imagine life today without many of the technological innovations which have taken place, or reached maturity, during the period of time in which the shared services and outsourcing space has blossomed and boomed; it's even less possible to imagine that space without the technology upon which it is supported.
As The Hackett Group's Tom Bangemann says: "the one big enabler is technology, because without technology developments - especially ERP 20 years ago - no global business service or shared service organization of any sort would work."
2. Globalization
Alongside purely technological advances, of course, must be placed the dramatic changes in the relationships between nations and individuals, and the contracting or removal of previously obstructive chasms between locations and businesses, which have become known as globalization. It is possible to conceive of a form of shared service, and a variety of outsourcing, emerging in a non-globalized environment - but it's absolutely impossible to see how either of those two concepts could ever have reached the levels of complexity, or resulted in the remarkable gains in efficiency and effectiveness, which they have achieved thanks to what journalist and academic Frances Cairncross has so elegantly termed "the death of distance".
"The key development that makes shared services and outsourcing the successful model it is today is globalization," says CenterPoint Energy's Julienne Sugarek. "Through technology, we can be connected instantly to people in other cities, states and countries. We can pass work products back and forth as if our offices were down the hall from one another. In addition, the promotion of free trade has led to reduced transportation costs and the harmonization of intellectual property laws has opened the doors to a new way of doing business - business without borders."
The Hackett Group's Tom Bangemann concurs: "There are today tens, possibly hundreds of locations able to provide GBS services. The supply side is also bolstered by the growth of the BPO and ITO industries. Without adequate supply the can be no match between supply and demand! Globalization has also led to organizations taking a more business and less local or nationalistic view on labor issues, hence the willingness to deploy GBS SDM has increased and today almost all medium and large organizations use this SDM (to some extent)."
3. The development of outsourcing as a distinct profession
As outsourcing first touched upon, then burst into, the economic and corporate mainstream, it of necessity became an activity which required increasing specialization and particularization on the part of those engaged within it. Whereas at the beginning of the outsourcing boom developments were being driven by experts in other fields who were able to envision how radically outsourcing would impact upon business practice, today's outsourcing practitioners are finely-tuned specialist professionals (you know who you are...) with an understanding of their environment immeasurably broader and deeper than that of those first pioneers.
"There was a time when professionals with general transaction skills were the primary architects of outsourcing transactions, and buyers typically engaged in shared services and outsourcing relationships with limited or no specialized expertise. Over the past 10 years, outsourcing advisory has grown into a distinct specialization for lawyers, consultants and procurement professionals. A host of certifications have also been created to validate this specialization. The specialization of these intermediaries has led to increased competitiveness and standardized industry transaction practices," maintains Robin Rasmussen, Director, Shared Services & Outsourcing Advisory at KPMG.
4. The rise of value-adding finance roles
Just as the development of outsourcing has required the development of outsourcing specialists, so too changes in the nature of the finance function (with the evolution of shared services a notable contributory factor) have required the emergence of a new set of roles within finance - a development which is still very much ongoing. The requirement for added value, and the response of businesses to changes in the nature of businesses themselves, have created a new generation of professionals with remits often far beyond those of their predecessors, wrestling with challenges which previously might not have existed, or might at least have been considered to reside well outside the responsibilities of finance teams.
"Perhaps more ‘work in progress' than completed development, the growth of value-adding finance roles outside both the traditional finance department and the shared service arena has certainly changed the culture within which SSO and BPO programs are implemented," believes independent finance and shared services expert Jim Whitworth. "Early shared services had to fight their way through considerable resistance, often from finance management who sought to protect the traditional departmental structure and roles that had shaped their careers to date and had been expected to continue to do so. Businesses fuelled the conflict by failing to get to grips with building and executing a vision for the contribution that finance professionals could continue to make outside the newly acquired SSC or outsource partnership."
Whitworth continues: "Fortunately, we're now seeing many more alternatives for finance careers outside the Manager - Controller - Director route in a traditionally structured finance organization. Developing systems and processes in a technically complex world, ensuring compliance and controls to meet ever-increasing regulation and partnering business leaders in decision making have all become careers in their own right in recent years. As this greater range of options continues to develop, the shared services practitioner may no longer be the enemy threatening the finance management status quo but the key to future opportunity. Greater support brings faster implementation, easier stabilization and stronger sustainability as those retained from the old organization focus on new roles that challenge and add value."
5. The rise (and fall) of the mega-deal
It's an old lesson in business as well as in math that the numbers just keep getting bigger over time (even if your own share of them seems to shrink by the day...). Once outsourcing built up a full head of steam, and companies got to grips with the advantages and attendant risks (and how to manage them) associated with the practice, it was only a matter of time that the deals taking place grew to occasionally jaw-dropping scale. Of course, that created a whole new realm of risk...
"The ‘mega-deal' not only helped the outsourcing industry address the needs of large, multi-national companies, but it also elevated outsourcing decisions to the highest levels of the buyer organization, which in turn helped establish outsourcing as a permanent option for operations strategy. Ironically, the ‘mega-deal' also exposed some of the limitations of the outsourcing business model, as it magnified the impact of execution and governance failures. Service providers, buyers and their advisors continue to look for ways to address the limitations and risks exposed by the mega-deal," says Eugene Kublanov, Director, Shared Services and Outsourcing Advisory at KPMG.
6. Best-practice vision for support functions
Some of the developments that have contributed to the evolution of shared services and outsourcing have been very tangible - technological advances being a case in point. Others, however, have been extremely abstract - and an example of this is the emergence of the concept of best practice within support functions. Abstract or not, however, the impact of this concept has been all but immeasurable: the idea that support functions - particularly within finance - could be optimized and made efficient in the same way as an assembly line or a supply chain has revolutionized the back office and helped drive some of the most important advances in business practice in living memory.
"Shared services started in the mid 1980s in finance functions with some enterprising US-based corporations who took a look at finance costs as a percentage of revenue, realized they had a full accounting function in every manufacturing plant or depot, and thought they could halve the cost or better by co-locating it," explains Philip King of Atos Consulting. "The name ‘shared services' was invented to make it more palatable to concerned stakeholders. It was purely a cost-reduction play at the time. And to some degree this is still paramount - but, as most people who reads these pages know, there is more to it than that. The words ‘shared services' now have real meaning: shared resources, shared responsibility and real customer service provision. However the real added value from shared services is realized when it is an integral and fundamental part of a functional transformation preferably aligned to business strategy or transformation. And this is applicable to any support function - e.g. Finance, Procurement, HR, IT, Facilities & Estates, Customer Management/Service.
"One of the key developments that have sustained and enhanced the role of shared services is the development of the best-practice vision for support functions. This can be traced back to consulting firms in the 1990s that began to spread the gospel of ‘the future of finance' with a best practice organizational architecture including corporate ‘centers of excellence/expertise‘, ‘business partners‘, and ‘shared services' - the three key functional sub-divisions of an optimal support function organization. This has since been applied to all support functions - the terminology might be slightly different, but the principle is the same. Focusing the right activities in each area and aligning the appropriate resources multiplies the benefits: e.g. shared services support the business partner role by taking away the distractions of routine transaction processing and providing consistent data. The organization will benefit from the strategic value the business partner can provide if the right type of resource is deployed and the objectives of the role are clear.
"Done well all three parts of this support function vision are complementary and the value of change is multiplied. If done poorly this leads to a lack of clarity and belief in the shared services idea, as the full benefits are not realized. The terminology differs slightly from one function to another, but the concept is proven. Many organizations still have not fully grasped this fundamental vision, but it is even more important in the current climate, so for those who have not yet picked up on this key development, I'd urge you to work at it."
7. Increased buyer savvy
Outsourcing providers might be tempted to provide just a minimum satisfactory level of service (well, it's human nature, maybe) but even if that weren't a rather short-termist proposition, in today's outsourcing environment it's tantamount to commercial suicide. A major reason for this - alongside the proliferation of competing providers eager to snatch away every unsecured morsel of trade - is the increased savvy among buyers of outsourced services. As the industry has matured, so too has buyers' understanding of what exactly can be gained - and at what cost - from the various providers offering their services.
"Outsourcing and shared services are now central to enterprise strategy and higher up the value chain, with most businesses having invested in new skills and re-organized themselves to identify optimum sourcing strategies, execute deals and govern the new service models. Whilst we still have further to go before sourcing can be thought of as a truly mature industry the trend is increasingly for more educated buyers, investing in new capabilities and expecting more from providers who in turn are maturing, consolidating and specializing to meet increased client expectations. These factors taken together have changed our view of what can be successfully externalized or optimized to include value and knowledge based requirements as well as commoditized services," says Tony Rawlinson, Managing Director, Financial Services Advisory, Europe & Asia Pacific for EquaTerra.
8. The rise of India (and the rest)
"Outsourcing" might be excessively closely linked with "India" in the minds of many consumers in the developed world but there's a reason why that link was forged in the first place. India has been the powerhouse of the offshore outsourcing boom: its hyperpotent combination of technological prowess, well-educated and -skilled employees and that all-important labor arbitrage has propelled the sub-continent to the very forefront of this dynamic space, resulting in vast gains for the Indian economy - and for many companies worldwide who've taken advantage of this incredible boom.
"The unmatched ability of top tier India-based outsourcers to recruit, train, hire and onboard hundreds of thousands of people each year established the offshore delivery center as a viable service delivery model for services providers. It also established a new competitive segment of outsourcing service providers that did not originate in the U.S. or Western Europe. This in turn led to new entrants not only from India, but from various other developing countries that began to compete with the top tier, multi-national service providers," asserts Eugene Kublanov of KPMG.
9. Changes in the accountancy environment
Of course outsourcing and shared services aren't just about finance - but a significant proportion of activity within the space remains driven by the finance function, and a proportion of that drive comes from the developments within the global accountancy environment which have had such an impact on business within and beyond shared services and outsourcing in recent years. Sarbanes-Oxley and similar regulatory efforts have created new realms of complexity which businesses have had no choice but to address - and shared services has become both a useful tool to address this, and profoundly affected by the very changes which new legislation has driven.
"The evolution of the accountancy space over the past couple of decades has really provided a huge driver for many of the developments we've seen in back-office structures and the outsourcing profession," says independent finance professional Keith Osborne. "Added complexity in terms of compliance frameworks - not to mention the increased severity of sanctions for those failing to comply - has driven compliance up the corporate agenda and created an opportunity for shared services to become centers of accounting excellence, alongside the need to keep down costs during this leap in complexity. And of course several of the leading accountancy firms have been at the forefront of the outsourcing and shared service revolution in an advisory capacity as well as transforming their own businesses..."
10. Governments' acknowledgement of outsourcing's influence on the economy
The impact of the outsourcing boom on the Indian economy was mentioned above - but of course it isn't just India that has enjoyed the fruits - and had to deal with the issues arising from - the globalization of outsourcing. Both provider locations and governments of countries from which work is being outsourced have had to face up to the ways in which outsourcing impacts upon local and national economies, and international trading relationships. Policy must now encompass the economic realities which outsourcing has forced upon pretty much every country on earth - giving rise to many challenges to which the solutions have not yet been found.
"Various governments in the developing world (India is a salient example) have acknowledged the shared services and outsourcing sector as a substantial and positive influence on their economy. That acknowledgment has led to policies which encourage human capital development, and the modernization of infrastructure and commercial regulation. This in turn has facilitated the globalization of the shared services and outsourcing sector beyond its geographic origins," believes KPMG's Matamba Austin.
Posted by Warwick Davies on Wed, Dec 30, 2009
BPO Voice had this great opportunity to interview one of the authority writer and speaker on globalisation, outsourcing, and corporate change - Mark Kobayashi-Hillary. Here are the excerpts:
BPO Voice: From Outsourcing to India (Your first book) till who moved my job (the latest one), how much have these factors changed - Market, Perception of the masses and the corporate Outlook?
Mark: The market has changed and obviously has grown. Outsourcing has moved from a strategy that needs to be explained to something that is accepted as a part of the management toolkit - the question now is just how to use it and where is it appropriate to use. The EU has become a larger market than the USA leading to a lot more interest in what European companies are planning. People on the street still don't like outsourcing for a couple of reasons. Either it involves off shoring, so they see jobs being created far from home, or it leads to a decrease in customer service standards. And the people are generally right. If companies make their service to customers worse because they outsource tasks then they deserve to be criticized.
BPO Voice: Tell us more about your new book. What inspired you to write this book and whom are you trying to address?
Mark: I've written several books about outsourcing and globalization. In 2007 I wrote a book called 'Global Services' for the British Computer Society. Take a look at it - I know I am biased, but I think it's the best exploration of how the entire IT industry is changing and moving to a new paradigm. I was writing about the cloud and globalization of services in that book, yet hardly anyone bought it. Maybe they were scared off by the British Computer Society label, but I can assure you that it's a fairly easy read!
I wrote Who Moved My Job as a response to that experience. It's a bit like entrepreneurs and their elevator pitch - if you can't explain your business plan in a few seconds then it won't work. I just applied this to a book about globalization, outsourcing, and jobs. I wanted to write something short, punchy, and as a story. So people could read it, understand, and then pass on the book to a friend.
BPO Voice: Your thoughts on Cost cutting vs. Cost Optimization.
Mark: When off shoring really came on the scene in a big way, companies were blinded by the potential for savings by shifting work around the world. Fundamentally though, you can optimize what you do in your supply chain and increase efficiency, but if you only ever go for management measures that cut costs then will you win the long game?
BPO Voice: In your view what are the foremost challenges for the companies, those who look to outsource and for those who offer their services?
Mark: The biggest challenge is to reach a state of true partnership. The biggest problems in outsourcing come from this client/supplier mentality. The client is all-powerful and can screw the supplier down for lower prices, more service, better free theatre tickets... yet we sometimes forget that all companies sit in their own supply chain. If a major international bank is commissioning IT from a supplier in India then don't forget that the IT supplier is probably a multi-billion dollar outfit buying services all over the world in just the same way the bank has to keep their own customers happy. If more managers remembered this and made the outsourcing process less adversarial then it could be a lot more successful - and fun.
BPO Voice: What is your view on the present market scenario i.e. recession and its effect on outsourcing industry world wide. Do you think this recession would bring more outsourcing destinations and thus would affect the Indian outsourcing business significantly?
Mark: More destinations will happen anyway. I've been invited to Iran and North Korea and if those guys are exploring the possibilities then everyone knows the story!
The Indian companies will shoot themselves anyway if they continue to try selling the low cost story to foreign customers. India has built up a reputation for being an IT leader - now you need to deliver on that reputation, not sell on price alone. In general the recession should not hurt the big guys too much. Yes, they might halt recruitment for a time, but they have big ongoing contracts that should ride them through a rough patch. It's the small and medium sized companies that will really suffer.
BPO Voice: In your opinion which country/region offer the best outsourcing destination for the future and why?
Mark: It's hard to just pick a country as different places have different attractions in terms of the infrastructure or people, but in general I'm most excited about how east and south Africa is developing. Lots of great people there with excellent qualifications and the infrastructure is now improving. Nothing is going to stop them.
BPO Voice: How much would the "Obama" factor work against the outsourcing industry, if it will.
Mark: Obama needed to recapitalize a large chunk of American industry. It was natural that the bailout money would come with strings attached, particularly regarding sourcing from the USA only. However, I don't see this as much of an issue going forward - unless you think that American industry is going to be perpetually bailed out by the government. Let's assume that America is going to recover and reclaim much of its former economic glory - even if China and India are likely to surpass it this century.
BPO Voice: You are one of the most influential authorities on outsourcing, what are your views on the downfall of Satyam? What are the probable lessons to be learnt?
Mark: I don't think it had anything to do with the outsourcing or IT industry in particular - it was a crooked boss cooking the books. If anything can be learned though then I'd suggest more professional company boards, particularly with more diverse non-exec directors who can kick up a fuss if they see any funny business taking place. So in short, don't stuff your board full of family members and friends. Diversity is the key.
BPO Voice: Do you think there might be more Satyam(s) around in India or elsewhere?
Mark: Of course something like this will happen again at some point and in some country - maybe not India and maybe not in the IT business. But to assume that the regulatory authorities will be able to spot every crooked CEO is possibly hoping for too much. However, if a more professional board structure can be introduced then many issues can be averted. This doesn't just apply to India though, just look at a country like France. Major companies have boards stuffed full of friends all sitting on the board of each other's company - more like country clubs than executive management.
BPO Voice: On the lighter side, as you wrote in one of your blogs- Did you receive any call from Tech Mahindra about taking over the sponsorship of Satyam for the next FIFA world cup?
Mark: The England football team is performing well this year, just like our cricket team. I was looking forward to seeing some of my friends down in South Africa and hopefully getting there thanks to FIFA or Satyam offering to host me while I take a look at their technology, but alas, it looks like I'm going to have to start cycling from London soon if I want to be in South Africa in time for the first kickoff!
About Mark Kobayashi-Hillary: Mark Kobayashi-Hillary is a British writer with a long history of commenting on globalisation, outsourcing, and corporate change. He has written several books, the most recent being 'Who Moved My Job?' and he is a regular contributor to Computing magazine in the UK. His new book 'Talking Outsourcing' will be published in July 2009. www.markhillary.com