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 Sun, Jul 25, 2010
from ValueNotes
There is much talk about IT and BPO industry growth, fuelled by the recovering global economy. Expected offshore business that was stalled 2009 onwards, is now on the cards again, as management focus and financial situations are more conducive. Studies have shown that organizations of all sizes are planning to outsource more in the next two years, to countries such as Mexico, China, India and Philippines. What this signals for Indian providers is that business is about to boom in the next financial year. Several analysts have forecast an industry uptick. But while the signs all point towards growth, there have been no significant new deals to corroborate this sentiment. In anticipation of the growth in business, this much has become clear for Indian IT-BPO firms: the level of scale offered will be paramount to exploiting this expected growth period. Employers have in fact realized this, and the ‘demand environment’ is already affecting the industry’s human capital.
Rise in attrition in Q1
Attrition is rising once again, across IT and BPO segments. The first quarter saw attrition rates of over 15% for many software exporters. Infosys’ Q1FY11 attrition rates, at 16%, were its highest in the last four quarters. Even TCS faced an escalation, with 13.1% LTM attrition, compared to 11.5 in Q1FY10. Attrition in the company’s BPO wing was significantly higher (at 20%), compared to IT services (at 12.3%). As the economy recovers, industry opportunities are opening up again, and attrition has naturally been higher in the first quarter. In fact, most IT-BPOs have formulated their hiring strategies in anticipation of higher attrition rates this year. Voice processes in BPOs have particularly high attrition (anywhere between 50-70%). Some of the ways in which BPOs are trying to lower attrition is by looking at Tier III cities and rural locations for setting up centers, and diverting voice processes into multi-channel contact processes (involving non-voice, email/chat/web based support).
NASSCOM has predicted a drop in attrition rates by September 2010, nearing campus recruitment time for many employers. To counter this temporary churn, retention of critical resources, coupled with aggressive capacity addition will be key for industry growth this year.
Revised hiring targets
Companies are revising their annual and quarterly hiring targets upwards. To illustrate, TCS is now targeting 40,000 new recruits, in lieu of the previously estimated 30,000. Infosys is also looking at hiring 36,000 from the 30,000 outlined in April. The majority of these will be campus recruits, and of the 14,000 to be added in Q2, the Infosys BPO itself will absorb 9,000 employees.
The capacity addition for these companies is mainly in new centers, and new markets. The reasons attributed for both upward revisions are strong deal momentum and consistent ramp-ups for both companies. While companies such as Wipro and WNS are yet to declare their Q1 results, it can be expected that aggressive human capital development will be a crucial element in their strategies as well.
Aggressive retention plans
NASSCOM believes that remuneration is extremely important in motivating an employee to continue with his company in the long run. In line with this, most large outsourcers are pre-empting the exits, and offering salary hikes as a retention strategy. Current BPO wage inflation of 10-15% is definitely increasing costs for employers. But as it is expected to lower attrition rates in the next few quarters, the costs associated with new hires will reduce significantly. Retention is being termed as a ‘major priority area’ for the industry and remuneration is one of the most important ways it may be addressed. TCS, Infosys and Wipro have introduced salary hikes of 10-20% (on average) in this year to ensure that their workforces are not motivated towards global rivals such as HP, Accenture and IBM.
To further enhance retention, IT-BPOs will have to evolve a stronger employee value proposition, with greater scope for learning and career development opportunities. These factors will be the strongest source of differentiation for employers, once the dust from the attrition settles down.
So even in anticipation of strong growth, IT-BPO companies are striving to match pace with global demand, in terms of human resources. Companies are in a bid to extend service capabilities for the expected international business, and aggressive human capital development seems to be the ace up their sleeves this year.
Posted by Global Sourcing Forum on Mon, Jun 21, 2010
By Chandan Das, BPOvoice
The hostile response to outsourcing to India notwithstanding, India continues to be the most preferred global destination for businesses keen on offshoring their non-core information technology and back-office operations. The fact unveiled during a survey is not surprising keeping in view that India still holds on to its low-cost benefits alongside additional alternatives. In addition, India also possesses a high-tech business atmosphere together with an advanced talent pool proficient in English speaking skills and a flourishing economy.
While outsourcing to India has been successful in maintaining its pristine position status, other outsourcing countries continue to reel under the backlash against outsourcing jobs from overseas, especially the United States. A recent study says that during the number of outsourcing locations worldwide has decreased notably. In fact, as per the Global Services Location Index, India, the Philippines and China have secured the top three preferred outsourcing locations worldwide.
The prevailing economic crisis as well as the currency crash have put the European nations far behind in the race for securing berths among the top outsourcing countries globally. Industry experts are of the view that had the misfortunes not affected the European nations, the developed economies in Western Europe would have enhanced their position with the help of jobs outsourced by the Eastern and Central European countries. In fact, while Poland, Hungary and the Czech Republic missed out on opportunities, they were secured by their rivals in the Middle East. While the Middle East nations like the UAE, Morocco and Tunisia scored heavily, several new nations, including Egypt, Jordan and Vietnam have secured their places among the top 10 most favored outsourcing destinations in the Global Services Location Index.
While the fact remains that India and the Philippines together comprise half of the global BPO market and the Philippines is regarded as a strong Indian rival, the fact is that India still remains miles ahead of the Asia-Pacific nation. The study points out that since the industry in the Philippines in basically call center motivated, it cannot be considered as a genuine competitor to India. Similar is the case with the other emerging markets, such as China, Vietnam, Sri Lanka and other Asian nations. India not only has a high-tech business atmosphere, a large pool of talented workforce and an experience of over two decades, but its booming economy too is assisting the BPO sector by eradicating the effects of the recent global economic recession sooner.
On the other hand, India, thus far known as the traditional contender to the United States as software developers, is now the architect of unrestrained business growth. Since the last few years, Indian software development firms have been establishing their marks in the global markets providing inexpensive facilities to clients regardless of their dimension and vertical. Most importantly, after the global economic slum, India has emerged as the redeemer of such organizations worldwide and this single aspect has contributed to India's numero uno position in the IT and ITeS industry globally.
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.
Posted by Warwick Davies on Sun, Dec 20, 2009
by Martin Hart, BPOVoice
They took our jobs! Cry the detractors. Thousands of UK jobs are simply disappearing as big "Indian" (insert outsourcing location as applicable) outsourcers continue do our work at lower cost. They even start work five and a half hours before us - how can we possibly compete?
It seems the battle lines are being drawn again as we stare into another encroaching protectionist maelstrom. Just this week we have seen silicon.com release its annual offshoring survey, finding that ‘47.5 per cent of respondents said their organisation has "probably" offshored IT jobs' and 32 per cent believe, or are convinced, that offshoring "could" see them lose their jobs.
Meanwhile the Equitable Life and Thames Water are receiving a pummelling in the media for outsourcing deals to HCL and an unnamed Indian provider respectively. To top the week off, the Association of Professional Staffing Companies (APSCO), a recruitment association, has hit out at Indian providers, for using UK intra-company transfer rules to bring thousands of Indian IT staff to the country which they say ‘damaging" the job prospects of British workers'. So now India is not only taking our jobs offshore but onshore too?!
In response the UK Government has implemented a largely symbolic change to the Tier 2 (Intra company transfer) rules, meaning that Indian IT workers will need to demonstrate 12 months IT experience rather than the current six. My cynical side expects this is simply a move to placate dissent around this issue as most IT workers being brought to the UK will usually have much more than a year's experience anyway.
But don't worry, the NOA hasn't been offered a Daily Mail column or anything like that. We just believe it is important to meet these criticisms head-on, and the best way to do so is inject a little common sense into the argument with the following points:
• The fact is that all staff brought to the UK under a working visa will also need to be paid a UK wage. This means the argument isn't about cost as APSCO states, but skills. Why would a UK company bring a worker in from India if an equivalently-skilled Brit is also available? In this case, the debate should be about whether the UK has an IT skills gap that these companies are trying to fill, and if so, what are we doing to fix it?
• Indian companies and those using Indian staff are cutting their overheads, streamlining processes and augmenting the customer's capabilities to ‘do business' and grow. This means businesses are growing in the UK, creating more high level positions and ultimately paying more tax into the UK purse.
• It is important to keep in mind that the numbers of Indian workers being brought to the UK compared to indigenous IT staff are still small. The government also does not oppose these kind of transfers: immigration minister Phil Woolas defended the practice in a recent FT article, saying: "Intra-company transfers are an important part of making the UK an attractive place in which to do business, and therefore keep industry and the economy moving."
• It has also been detailed in various studies, most recently from Nottingham University, that offshoring jobs does bring overall benefits to the UK economy. Their Globalisation and Economic Policy centre (GEP) found that the ‘efficiencies it [offshoring] has brought has actually boosted business and led British businesses to employ more people in the UK, not less.'
• To top this off, Indian outsourcing giant, FirstSource, has created over 1,500 call centre jobs in the UK since 2006. Plus Indian investment in the UK, and consequently in the UK economy, is only likely to increase going forward creating further examples like this.
And that's the most important part, the offshoring of certain jobs to lower cost or better-resourced locations, makes business sense in some companies and overall UK economic sense. Of course, it is painful on a case-by-case basis, but this is usually a symptom of outsourcing mismanagement by those engaging in such contracts.
Those looking at sending work offshore should first make a clear business case. They should then work to understand the impacts on their staff, whether they will need to make redundancies, and take responsibility for what happens to staff after outsourcing. Can they be re-deployed, aided in developing their skills going forward and so on? Communication throughout the process is vital so employees are respected and have as much time possible to take their own decisions.
By all accounts, outsourcing and offshoring is set for a big boost in 2010 and beyond as UK companies look to rebuild after the recession. This will be a good thing for UK business and will continue to create new employment and business opportunities. The opportunities may look different from before, but this is simply the evolution of industry. The UK must ride with this evolution rather than get bogged down in the protectionist offshore-bashing once more.
Posted by Warwick Davies on Thu, Dec 17, 2009
From BPO Voice:
Hinduja Group is one of the largest diversified groups in the world spanning the globe. Their foray into the BPO business started in the year 2000 with one client and 25 employees. Today, Hinduja Global Solutions has 23 delivery centers with around 15,000 employees across the US, Canada, Mauritius, the Philippines and India all working towards creating leaders out of their clients. BPOVoice talked to Partha De Sarkar - CEO Hinduja Global Solutions limited (HGSL) on various important issues that the industry is facing in the midst of turbulent times. Below is the 1st part of the interview.
In your opinion, by how much did the downturn reduce attrition and increase business in the Indian outsourcing industry?
The Indian BPO industry successfully re-engineered itself to face the challenges of the global financial meltdown and emerged as a net hirer even during the worst phase of recession. It has reaffirmed the faith of the global community in the robust and cost-effective models of the Indian Outsourcing Industry. The global slow down has impacted the IT companies differently when compared to the ITES (BPO) companies. That is because, spends on IT projects represent capital expenditure for our clients, whereas spends on ITES projects represent savings in their operating expenditure.
In this downturn, client companies have gone slow on their capital expenditures. That has impacted the IT companies more than the ITES companies. The most diversified ITES companies have continued to show good results even in the current difficult circumstances. The players who have been affected in the ITES space are players with high sector concentration in the banking and financial sectors, especially the mortgages sector. Well diversified businesses like ours have in-fact benefited positively from the slow down, because it has increased the pressure from our clients to outsource/offshore. That is the reason why HGSL has shown consistent and strong financial performance for the last six quarters, even in the midst of the financial crisis. Though the problem of attrition hasn't been arrested, the recession has definitely slowed it down. I would like to believe that the Indian BPO industry is slowly becoming an employer of choice, albeit not a compulsion.
You have recently opened a new center in manila? What turned the tide in favour of Philippines? Which other destinations you think could be the one to watch out for?
We have recently opened our second centre in Manila which has 1000 seats. We are already operating a 2000 seat centre in Manila since the last 5 years. HGSL has generated local employment and served fortune 500 clients through its presence in Philippines. This new centre has come up this year due to increased business from both the existing clients as well as the new clients. This incremental business flow from our existing clients is a testimony to the quality of our service offering. We are confident this new facility will further strengthen the first mover advantage that we have in Philippines. Other than the cost advantages, this country has cultural similarities to the US which simply means that the call centre employees can relate better to Americans.
Due to continued expansion of European Union, there is a growing demand for European call centers which will serve non-English languages. Vendors are exploring different methods such as setting up local centers, acquiring companies, hiring expatriates and foreign language professionals in India. There is no single perfect strategy for selecting an ideal destination - the appropriate method varies from region to region. The twin factors of scalability and quality are major influencers in this regard.
The temptation of rushing into regions based solely on cost advantages should be resisted. Our parameters for selecting an ideal location for outsourcing are: Knowledge Pool, Infrastructure, Social Environment, Business Environment and Government Support System. Our strategy at HGSL has never been a contest between quality and cost. We have always successfully provided best quality services at the most competitive prices. And this would remain our guiding mantra in all our future global forays.
Recent reports suggest that with over $110million cash chest you are eyeing acquisitions. Would you like to share some information on the same?
We are certainly exploring the inorganic route for increasing the accessibility of the European markets and further strengthening our presence in the North American region. At this moment, I wouldn't want to comment on the status of our exploration. All I can promise is that we will evaluate all possible parameters before finalizing a target. With a proven history of successfully integrating the businesses of all our acquisitions with our core business, we believe we can take good care of the post acquisition stage. Let me also make it very clear that we have embarked on this exploration solely on a need basis and not just because we have a good amount of cash in hand!
What are your views on the Satyam's buyout? Did you miss the bus somewhere?
We didn't miss the bus. We let it go because it didn't lead to our preferred destination! As I have said above, we always take informed decisions on prospective acquisitions. We explore the targets till there is no ambiguity.
For the rest of the article, go
here.
Posted by Warwick Davies on Fri, Sep 25, 2009
From our friends at BPO Voice...
http://www.bpovoice.com/forum/topics/india-bpo-workers-stressed-to
Posted by Warwick Davies on Thu, Jul 23, 2009
by Magdalena Szarafin of BPO Voice
Multisourcing is defined as outsourcing of processes or sub-processes to two or more parties. Multisourcing has something common with investing: The rule "Don't put all your eggs in the same basket" holds true for both. It allows to avoid risks connected with dependence on one party and/or one geographical region
http://www.bpovoice.com/news/topics/multisourcing-dont-put-all