Outsourcing Times

Sexy Indian Call Centers?!?

Indian call centres are known for providing cheap labor for completing what many consider the most mundane work imaginable.  They have not ever been considered romantic or in the least bit sexy...until now.  In what is perhaps the most entertaining story related to Indian call centres ever, a recent report by the India Times reveals that call centres have become for many workers a place of sexual intimacy.  Citing the long and odd working hours, call centre workers have stated that often their only source of relational intimacy is that attained through the office.  In fact, the India Times took their investigation a bit further by placing hidden cameras in a Mumbai based BPO where they caught a couple having sex in their cubicle, an act which apparently is rather commonplace in such an environment. The Register Reports:

First instances of compromising behaviour (kissing, smooching in the office premises) are let off with a sterm warning as such kind of behaviour to misuse of facilities given by the organisation and is therefore liable for punishment."

Read More: India call centre staff in sex romp shocker

Amey Breaks UK Contract; Move Seen as an Indicator of Future Contract Breaks

Amey, the business support firm who just three years ago signed on of the UK's largest local government IT outsourcing contracts, is calling it quits.  Amey signed a contract valued at 168 million pounds in just 2002 to provide services for 10 years.  The company has cancelled the deal early however, citing the fact that it has been unable to grow its public sector activities to such a level that the project becomes cost effective.  This particular failed transaction is immensely important because according to Martyn Hart, chairman of the National Outsourcing Association, this is the first time a major outsourcing provider has backed out of a deal this big because of cost ineffectiveness. 

This broken deal may provide the outsourcing community with some insight into the profit margins of such deals.  While historically outsourcing has been an immensely profitable industry, providers are increasingly being sqeezed by intense competition so that margins are so tight that often contracts cannot be profitable standing alone.  This event may be a harbringer of other defaults and broken deals to come. nvunet.com Reports:

'If it could not pass savings back to the council, there is probably little point in continuing. 

It looks as if Amey has made quite a sensible decision, and that it has some professional and commercial sense.'

Read More: Supplier calls early end to 10-year outsourcing deal

Outsourcing…. A Commentary and A Plea

The following article was written by Sreelata Menon of Moti Bagh, Dehli to represent the 'Indian' position in the increasingly heated offshore outsourcing debate.  While certainly this author will take issue with some of the lesser points in the article, it is a very vivid first hand commentary by someone on the opposite side of this debate as well as an insightful reminder of the contradiction between our purported 'public' belief in the complete profitability of the extension of the free market and our hesitance to extend such a model internationally.  I hope you find this at least thought provoking...

In 1989 when Kodak's CIO Katherine Hudson broached the concept of outsourcing, by negotiating the Kodak –IBM deal she would not have known that she was introducing a whole new lifestyle in business that would catch on so fast that it would soon transcend borders, go global and create havoc among the then existing ethics of business and exchange. The Kodak IBM deal, apparently it would seem, changed the rules of IT management irreversibly in the United States. If a company such as this could do it to save costs and protect its core competency, would others allow themselves to lag behind? IT service vendors became the 'in' thing within the country. And soon, sure enough it went global!

Today 15 years later, the world, specifically the western world, has moved onto outsourcing practically everything including medical services to third party vendors not only in their own neighborhoods but right across the world as did GE to India and China. Why did they? It wasn't that they didn't have the manpower or the where withal or even the required skills within their borders. They did it because they needed to cut costs! Undoubtedly and indisputably so!

They did it not out of any philanthropic notion, any love of mankind or even for mobility. It was pure and simple economics, and the need to survive in their own market place. They needed to cut costs and protect their core competency interests. The American economy had been in recession and they had needed to fire or go under. Then when it turned around, they needed immediate results to pull themselves out of the doldrums and so willy-nilly found themselves in a position of having to go looking for instant skilled labour that was cheap.

So it was outsource or close shop. If they couldn't find it at home, they would find it elsewhere. They had to and so they did, in India and other developing countries, even as the outsourcing debate of whether it was a boon or a bane raged on domestically. Then suddenly 'outsourcing' became the new hate word. The probable boon suddenly became the absolute evil bane. Why?

It was no longer domestic it had gone foreign. The workforce of the outsourced world was now ripe for targeting, ridiculing and disparaging, even while its skills were being celebrated. Everyone in America, England and elsewhere was ready to jump on that particular bandwagon even while running after it. India or indeed the entire outsourced world didn't invent outsourcing or even create it. The west chose to introduce it to India and elsewhere for their own selfish reasons. The Indians only chose to grab it with both hands and turn it around to their advantage no doubt, but primarily, again, to suit American and British purpose. And in doing so if they were able to match them strength for strength surely the benefit would be mutual?

The US and UK companies are doing well, their profits are up, their costs down. Who benefits? To the average American and Englishman on the street it needs to be said, that they do. It may have come at the cost of some of their jobs but the decision to sack and outsource arose from amongst them to save their own skins so to speak! Their CEOs who chose to come to India are solely responsible for their pink slips, not the Indians. When layoffs occur in the normal course do they blame the fellow who gets their jobs or the company? So then how are the Indians to blame? Call Centers, BPOs, Banks and entire government departments begging to outsource. Is it that Indians are as good or even better despite being termed' inferior' that is annoying, or is it just losing to one, not of their kind that rankles? America herself a nation of cross cultures could surely not be that intolerant? As also England. If the quality of service is what irritates, has theirs always been picture perfect? Would conditions at home been better off without outsourcing?

To be 'Bangalored' is a decision that is being taken by many of their own. So it would perhaps be better if they turned their ire against them rather than the Indians or they could change their mindset and embrace globalization just as their courageous chief executive managers have done, as a phenomenon that has come to stay. Wouldn't it be wiser not to let provincial animosity kill the proverbial goose! A prosperous world could be a happier world! So the next time someone in the United States or the United Kingdom hears a strange accent over the phone please be kind. Isn't America and even England a cross bed of accents? Please don't be rude. Be patient. Make an effort to understand the person. She is doing the same. She has in fact had to change her name and speech to suit and accommodate you. She didn't put herself there. Your countryman did. In order to cut costs and make money for his company, for you. The fact that she isn't sitting in your country shouldn't bother you. Would you have been able to see her even if she were?

Next time some of these youngsters come to your country on OJTs please be nice to them. Please don't be nasty; don't be unkind even if you can't make them feel at home. They didn't come on their own. Your companies sent them to be trained in your operations. Don't blame them. Blame the profits your firms are hoping to make. To make life more comfortable for you! Their knowledge of your language is your strength. Whatever a few of you might say, the educated youth speak it and write it exceptionally well .You are using it to your advantage. Please don't decry it, Please don't denigrate it .Use it well. Not just their IT skills but the entire educated workforce of the Indian subcontinent is also yours for the asking; please don't belittle it even while using it. Most of all please don't blame them, for your ills, even while you are using them to get rid of them!

Outsourcing Changes Focus From Cost Cutting To Resources

The recent 2005 Global IT Outsourcing Study by DiamondCluster indicates that big companies perceptions of the outsourcing practice and its integration in their business model is radically changing.  It argues that cost cutting was previously seen as the be all end all in approaching outsourcing.  As the practice has grown, however, and service providers have improved their quality and capabilities outsourcing has become ever more integrated into large firms' business models.  Companies are now increasingly viewing outsourcing as an opportunity to free up resources for more critical and strategic purposes than was previously available.  A practice commonly referred to as outsourcing peripherals to focus on core practices.  This shift in emphasis is underscored by the fact that on-time delivery and user satisfaction rank alongside cost-effectiveness as the three most important factors in an outsourcing provider. ADTmag.com Reports:

When rationalizing outsourcing, the study found there has been a "gradual shift away from cost as the dominant driver for outsourcing decisions." Enterprises are now redeploying resources, freeing them up for more critical and strategic purposes, rather than just reducing head counts.

Read More: ANALYST SPEAK: Outsourcing is not just for cutting costs anymore

Microsoft's Bill Gates Prioritizes Investment Over Outsourcing

Microsoft Corp. Chairman Bill Gates epitomizes savvy industry strategists.  Consequently, when he advises, managers listen.  His most recent recommendation was that companies should not outsourcing their core business functions and staff.  He argues that some companies have gone too far in trying to cut costs through outsourcing and as a consequence have encountered a number of difficulties in retaining the security of their intellectual property as well as their creative abilities.  Gates argued that a company's competitive edge should be maintained through re-investment rather than overzealous cost-cutting.  He argued that rather than relying too heavily on other companies in other nations, large companies should foster a culture in which more domestic students become well-trained engineers so that companies will have an adequate resource pool from which to pool.  Currently he argues, both Japan and the US are not keeping up competitively with India and China as their numbers of engineering and IT students increase in the face of first-world declines. ComputerWorld Reports:

Too many U.S. companies were cutting their research and development budgets at a time when investment in these areas is needed to cope with an increasingly competitive global market economy, he said.

Read More: Gates warns against reliance on outsourcing

Princeton Prof Touts Economic Benefits of Outsourcing

Despite the heated US domestic debate over the overall effects of outsourcing on the US economy, a Professor Gene Grossman of Princeton Univesity says the verdict is pretty clear.  He argues that outsourcing, when applied to non-core activities in companies helps them gain greater comparative advantages and efficiencies.  His contention is that the debate has intensified since the last presidential election because while previously outsourcing was limited almost completely to manufacturing, it has shifted to the service industry and thus many white-collar workers.  He has argued that despite the rhetoric, there is little short-term danger of the loss of jobs by high-end white collar work such as accountancy, financial research, and other analysts.  The long term fate of such jobs, however, is contingent upon the ability of the US to remain powerful in education, technology, and its current macroeconomic growth. Bankok Post Reports:

Prof Grossman said that limiting outsourcing would not help the US, and the country would be better to retrain and to compensate workers made jobless from outsourcing.

Read More: Outsourcing is good for US, says professor

European Outsourcing Conference Heralds Growth of Industry

The recent second annual European Outsourcing Association conference brought together companies, advisors and clients to discuss outsourcing and its many components.  The success of the event is being touted as greater evidence of the growing influence of outsourcing in the world business market.  The diversity of attendees also indicates how complex the industry has become, with specialists covering minute aspects of the outsourcing process rather than outsourcing merely being between a single domestic company and a single foreign provider.  In addition, the title of the the conference, "Outsourcing and Shared Services" indicates the growing importance of peripherals to the outsourcing community.  In fact a growing proportion of the outsourcing community is not focused on the direct service of contracts, what one normally considers in outsourcing, but rather fill the many niche needs of such transactions.  ZDnet.com Reports:

Deals are no longer a simple hand-over of processes and staff to a vendor, but can be complex structures involving multiple vendors and a miz of in-house and off- or near-shore solutions.  The title of this conference is significant in this respect -- not long ago a BPO consultant confided in my that his firm didn't push shared services so much, because once a client had implemented a shared service structure there wasn't enough value left in the outsourcing contract.

Read More: Outsourcing--an increasingly mature market?

British MPs React to Outsourcing Security Breach

A widely touted undercover investigation by the British newspaper the Sun found supposedly secure personal information readily available in Indian call centers for a price of $5 per grouping of information.  This has caused a great deal of commotion in the British government where a transfer of British genealogical data to India was about to take place.  British MP’s have argued for a halt to the transfer while the British government investigates the security of data in Indian call centers.  Currently the plan however is to continue ahead with the transfer despite the MPs’ protests.  British officials worry however, that if the Sun was able to attain access to 1,000 files with a promise of delivery of 250,000 more files a month it will be a relatively simple matter for any criminal to attain such files.  Webindia 123.com Reports:

"Not only is this highly irregular, it is also outrageous that a government will so readily dismiss concerns of parliament in handing over the records of 250 million people to a third party halfway across the globe, he said.

Read More: 'Scam-tainted' Indian outsourcing under fire in Britain:-

Identifying Problems in Outsourcing Expectations

Most companies entering into offshore outsourcing contracts do so for one reason alone, cheap labor.  A recent report by Gartner indicates however, that such a singleminded approach to offshore outsourcing is the primary culprit for those offshoring contracts which fail to yield dividends for the company.  Companies often fail to account for hidden transaction costs, increased staff training and turnover costs, as well as worker inefficiencies when creating cost savings models.  In fact, the Garter report indicates that start up costs are so high that real savings in outsourcing cannot be achieved until the contract reaches a maturity of one to two years.  Many companies have ignored this fact and entered into short-term contracts, almost eliminating entirely the possibility of achieving major cost savings. ZDNet Reports:

"For the same reasons, short-term offshore deals lasting less than one year are unlikely to realize any cost savings," the report said.

The high turnover of offshore staff, particularly in countries such as India, also has a negative impact on productivity.

Read More: Outsourcing flops blamed on tunnel vision

Panel Discusses US Professional Labor Shortage

A recent panel out of New York commented this week on the hidden complexities of offshore outsourcing.  The panel, which was titled “New Trends in Globalization of Services” discussed the recent surge in reports from those who are finding their outsourcing experience less than was initially hoped for.  It also pointed out that as outsourcing to a few particular countries such as India becomes more competitive, companies will begin to have to explore yet other labor markets to maintain the margins they originally estimated.  That is not to say however that the panel gave a negative impression of offshore outsourcing.  Rather, Alok Aggarwal formerly of IBM discussed the labor shortage of professionals within the United States which will grow to 5.6 million by 2010.  This shortage will mean the loss of $2 trillion in output if the void is not filled via immigration or outsourcing.  The Journal News Reports:

Other nations are happy to step into the breach, from the comfort of their own offices. Aggarwal’s company employes 725 people in India.  About half have MBA degrees, and the company employs a cluster of people with doctorates and law degrees, he said.

Read More: Outsourcing comes with complexities