Outsourcing Times

HSBC On An Indian Romp

HSBC is expanding its offshore outsourcing operations in India with a new BPO facility in Kolkata (Calcutta) and a software development center in Hyderabad. The bank already has one wholly owned BPO subsidiary - HSBC Electronic Data Centre - in Kolkata, which has 2,000 employees working on back-office operations, and is now planning to set up another center in the same city. Silicon.com reports:

Last year HSBC said it plans to double the size of its offshore operations to 25,000 employees within three years to help reach a target of cutting costs by $1bn by the end of 2007. HSBC CIO Ken Harvey recently revealed that almost half (42 per cent) of the bank's IT development work is now done in low-cost offshore centers.

Read more: HSBC ramps up Indian outsourcing presence

Outsourcing Re-engineering Services: Rewards & Dangers

--By Priya Jestin, Staff Writer

When a firm outsources its re-engineering services, it can do away with the necessity of having to provide large infrastructures with the requisite machinery. Not only is this method more practical, it is also very cost-effective. This way, the firm can concentrate on its core activities. And now that the market is expanding, there is a growing business segment that offers re-engineering services.

While all this sounds very good, there’s one worrying aspect. Does the outsourcing argument allow for quality management in re-engineering services? One of the biggest problems a firm may face is of ensuring that the final quality is as good. Also, the work should be in line with original-equipment manufacturer specifications. These are important factors that influence the operational reliability of plant and equipment.

Israel’s Native English Speakers Has US Excited

While India and China may still be outsourcing hotspots, there are other countries trying to woo US firms. Israel, which differentiates itself from India and the Far East by offering a vast pool of highly educated workers who are native English speakers and share a cultural affinity with the West, is one that has attracted a lot of attention. Boston.com reports:

The heightened interest comes as the government is offering firms a $200-per-month subsidy for each worker employed by foreign companies. While Israel's workforce still doesn't come as cheap as its rivals, salaries are far less than in America. And perhaps surprisingly, all the figures for economic growth, credit ratings, and investment this year indicate the instability in Israel has not affected business at all.

Read more: US firms turn to Israel as outsourcing alternative

Move Over India, The Filipinos Are Coming

--By Priya Jestin, Staff Writer

Well, it’s not yet move over time for India. Rather the country has moved up-market in outsourcing. This means there is a market for customer-service call center businesses. And the Philippines has quickly jumped into the fray It may be a low-end, low-margin business, but for the Philippines it has been an employment boon.

The main attraction when it comes to the Philippines is that it is very cost-effective when compared to India. There is however a bigger advantage here: cultural similarities to the United States and employee loyalty. The country has an exceptionally long history of contact with the United States, which includes several decades of American colonial rule. This means call center employees here can relate better to Americans and are also quick to adapt to a variety of accents.

Another benefit of outsourcing to the Philippines is that the attrition rate in the industry is a quarter of what it is in India. One of the biggest reasons for the rise in Indian BPO salaries is the poaching of employees. According to estimates, in some Indian call centers annual staff turnover has been around 200 percent. In Philippines, the corresponding rate is 40% or lower!

India’s huge employee turnover means that the company has to regularly invest in educating and training new employees. This doesn’t look too good on the company’s balance sheet. The longer an employee stays in one company, the better the quality of service. This means the Philippines has a definite advantage over India with its low attrition rates.

Rebuilding In-House Capacity Is Not Feasible, Say Australian Majors

This one’s for those who thought that this outsourcing problem was a passing phase: It is NOT. The problem does not lie with the great capabilities of the people in the country to which work is outsourced. The problem lies with the company that outsources its capability. Once a company outsources, it is next to impossible to rebuild in-house capability.

According to a Gartner study that was conducted last year, only 23 per cent of the Australian companies that outsourced managed to bring services back in-house. And the outsourcing deals today are nothing like they were in the past. This is the age of selective sourcing which focuses on getting assistance in areas where the company either faces an IT skills shortage or wants to free up staff and resources. Computerworld.com reports:

One high profile recent example is Qantas, which has outsourced internal IT applications support and maintenance. The transition will take over 15 months and Qantas will shed some 340 Australian IT staff. Qantas chief executive officer Geoff Dixon said it would require an investment of up to $100 million to develop an in-house capability, an investment it could not support.

Read more: Outsourcing a done deal with very few able to rebuild in-house capability

Tips To Know When It’s Time To Outsource

Outsourcing has today, become more of a need as companies feel an increasing need to reduce costs and focus on the core business of developing, manufacturing, and marketing their products. Pharmaceutical companies are no different. Only problem is, how does a company know when the time is right to outsource? Manufacturing.net reports:

There is no better indicator of a company’s health than its financial results. All companies are driven by their return to shareholders or owners. If the results are not as strong as they should be, it is time to thoroughly examine the cost structure. This is more than a financial analysis; it is a strategic and organizational exercise as well.

Read more: Determining When To Outsource: Indicators For Pharmaceutical Companies

Outsourcing Is Beneficial, Says IDC Study

--By Priya Jestin, Staff Writer

Outsourcing has helped may industries reduce costs and increase profits. But businesses have as yet been unable to properly convey the real-time benefits of outsourcing. This has led to increased sensitivity to the offshoring of jobs, which have seemingly led to loss of employment opportunities in the local economic system. I say seemingly because such is not the case. Agreed, for a short while it may seem that people are losing their jobs to outsourcing, but in the long run, as profits rise, the economy improves and with that new jobs are created.

Agreed, there may be cases of abuse and poor management. But the global delivery mode is a reality of business and so is the fact that this mode delivers significant benefits. And I’m not the only one saying so. In a recent study, 'Does Business Process Outsourcing Reduce IT Jobs in Asia/Pacific (Excluding Japan)?’ IDC answers the question of whether or not BPOs reduce jobs locally.

Obviously, not everyone is going to get immediate and direct benefits from outsourcing. But if you look back in history, every time there’s been a change in the way industries function, there’s been an upheaval – one that cost many jobs. In the long run however, things did turn out for the better. What needs to be done is find alternative employment opportunities for the people who are being displaced by this trend. At present, outsourcing operations will force high-cost countries to look at new ways of operating in a more efficient manner so they can compete at a global level. And as the economy gets stronger, more jobs will be created.

One also needs to remember that while outsourcing is happening on a large scale, only services like finance, HR, or IT are being offshored. Core areas such as corporate strategies, sales, governance, and policies still need to be retained in-house.

TCS Bags $ 100 m Kimberly-Clark Contract

TCS seems to be on a deal-winning spree. The latest deal TCS bagged is from US healthcare company Kimberly-Clark, which owns brands like Huggies and Kleenex. The US$100 million deal follows on the heels of the $90 million deal TCS signed with Qantas Airways last week. The company is also said to be closing in on a major deal from Bank of China.

The Indian outsourcing industry is dependent on oversees clients for a major part of its revenues. The US is one of the largest markets for Indian software firms. If the Bank of China deal comes through, it will be one of the largest outsourcing deals in Asia. Sda-india.com reports:

Earlier, TCS announced that it was working on at least five deals and was hopeful of garnering over USD 100 million in this quarter. A 200 million euro contract from ABN Amro and a USD 200 million deal from CitiGroup were the other major deals bagged by the company.

Read more: TCS Wins USD 100 Mln Outsourcing Contract from Kimberly-Clark

Retail Giant Myer, IBM sign 5-yr Deal

On Demand Zone Retail giant Myer recently announced a five-year IT outsourcing deal with IBM Australia. IBM will now supply a host of IT services to Myer. This includes AS400 support, midrange services, data networking, desktop, applications maintenance and development as well as help desk services. Computerworld.com reports:

IBM Global Technology Services general manager Peter Campbell said the company aimed to help Myer reach its full market potential. In a statement, he said: "IBM is delighted to work with Myer on its transformational journey, and will draw on the breadth of its technology services and retail industry expertise to support Myer's overall business strategy."

Read more: Myer inks five-year outsourcing deal with IBM

New BPO Mantra: Divest & Rule

--By Priya Jestin, Staff Writer

First global firms set up the BPO or business processing outsourcing units in India and other countries where they could get cheap labor to handle their myriad tasks. As time wore on, these global giants realized that their BPO units were a profit-making industry in their own right. And that’s when the recent trend of divesting outsourcing units began. Today, a growing number of multinational firms are divesting their outsourcing units, cashing out while maintaining their outsourcing relationships.

BPO is big business today and according to industry predictions, by 2010 India’s BPO operations alone will touch $25 billion from the current $7.5 billion. So if the BPO industry is so big, why are the multinationals selling out? Because they have found that there are other big, global outsourcing firms that can easily handle their requirements.

This means an unnecessary in-house unit could be a drain on precious resources. Probably what we are now seeing in the BPO industry is a trend similar to the ongoing changes in the steel industry. Consolidation seems to have become the keyword required for survival and growth. And if you cannot consolidate, divest your unit and use somebody else’s resources to grow your organization. Whichever way you look at it, it’s sunshine time for India’s BPO industry.

Painful Problems, Difficult Solutions

Outsourcing is a pretty difficult subject – both for a firm as well as for the customer. For some reason, despite having been around for quite some time now, outsourcing is still viewed upon as a necessary evil by the firm and by the customer as something that is leading to the erosion of his/ her relationship with the firm. Is it really so bad? Well, we don’t need to look into the macro picture because we only want to deal with one issue right now – customer relations and outsourcing.

A recent survey found that an American consumer doesn’t mind dealing with a rude or even condescending customer service agent from the homeland. But s/he definitely doesn’t like one that speaks with a foreign accent. The survey conducted for NetReflector, a provider of customer feedback applications, showed that respondents were not so put off by agent rudeness or even by unnecessary wait time. What they couldn’t stand was the accented English. That makes one think if the problem really is the accent or something deeper, more foreboding.

The problem could lie in the fact that the outsourced rep may not be equipped to solve the customer’s problem. That’s not to say the rep is not qualified for the job, it’s just that s/he doesn’t understand the customer’s problem and hence cannot help the customer. Result – customer dissatisfaction. So how do you solve this simple yet pertinent issue? One thing is to better plan your outsourcing operations right from scratch. It isn’t enough to save money by operating out of a cheaper country. You have to make your reps competent enough to deal with clients.

If your firm has not yet begun outsourcing work, you must do a soul-search and check if you really need to outsource. Is there an absolute need for it and will the firm gain from it are questions that need to be answered.

Research Outsourcing Worries US Academic Circles

While outsourcing has been widely accepted as a necessary evil across the United States, there is one area, which is still held as sacrosanct in academic circles – research (where effective communicating and conferencing can be difficult across oceans). Now, there is growing concern that the US might lose its competitive edge by outsourcing jobs, which are on the bleeding edge of research to countries like India and China. DNAIndia.com reports:

University of Texas Professor Ted Rappaport’s research shows that all but five of the 57 major research initiatives announced were located outside the US. “The professor believes that as a result, US students have lost interest in entering graduate school to pursue research in the telecom field,” said the BusinessWeek column.

Read more: Research outsourcing worries US

Qantas Signs Deals With Indian Firms

Australia’s Qantas Airways recently announced a seven-year deal with Satyam, India's fourth largest software exporter. This deal is worth over $54 million. Satyam has to maintain information technology services and develop software for more than 150 applications for Qantas.

Another Indian firm Tata Consultancy Services (TCS) has also signed a $90 million technology outsourcing deal with Qantas. Under its contract with Qantas, TCS has to provide software services to upgrade airport operations and commercial systems over the next seven years.

This recent development clearly indicates that Indian outsourcing firms still have a huge lead over their counterparts in other countries thanks to the availability of skilled and relatively cheap manpower.

Deutsche Post To Move Operations To Eastern Europe

Deutsche Post AG plans to reorganize its financial operations and may outsource some of its operations to the Czech Republic and Poland. This move is expected to save 500 million Euro a year, according to Deutsche Post management. Forbes.com reports:

'We will make a decision in the next 12 to 18 months, where our accounting services in Europe are to be located,' Frank Appel, Deutsche Post manager for Global Business Services told the newspaper.

Read more: Deutsche Post to move accounting ops to Eastern Europe; save 500 mln eur a year

Bell Layoff Leads To Ugly Union Scenes

Outsourcing, while good for companies that receive orders, can be pretty ugly for laid-off workers of firms like Cincinnati Bell. The company recently laid off 45 workers, prompting a demonstration by union members. They are accusing the company of increasing its profits and executive pay at the expense of employees.

According to a Cincinnati Bell spokesman, the layoffs followed failed negotiations with the Communications Workers of America to achieve cost reductions by other means. The company is now proceeding with an outsourcing plan for certain support functions in the company. Employees of outsourcing firms will assume the jobs of mechanics, truck drivers, supply workers and clerks. News.enquirer.com reports:

The union also cited the irony of layoffs when the company reported $22 million in third-quarter profit and paid $1.6 million in bonuses to its five highest-paid officers. "The loss of jobs is inevitable," said Dottie Vories, a 16-year employee who was laid off Friday from her $22-an-hour clerical job in the company's Engineering Department, "but we were never treated with respect or integrity."

Read more: Union protests Bell layoff

Africa Is Next BPO Hotspot

Guess what, we’ll soon have one more continent to dislike and blame for all our ills. It seems the number of call center agents in Africa will lead global growth through 2010. This information was based on research by independent market analyst Datamonitor, which predicts a rapid growth in western investment in this region. Most governments and private sector firms on the continent are aiming to make Africa a Business Process Outsourcing (BPO) hotspot.

One main benefit African countries offer is price competitiveness. They also provide excellent language capabilities and agent sophistication. One of the most cited examples is that of Egypt. The country has managed to impress western investors with its mix of savvy and linguistically talented agents, and low costs. Now countries like Kenya, and Ghana among others are also following Egypt’s lead.

Sharp Initiates Reverse Flow

Now this is what I call a reverse flow. Sharp Document Solutions Co. of America, a division of Japanese consumer electronics maker Sharp Corp. recently announced its plans to establish a network of 20 branches in America over the next two years. Reuters.com reports:

It is forming a new division, Sharp Business Systems, which opened its first branch on Wednesday, in Phoenix, Arizona, through acquisition of local company Davidson Imaging Systems. It plans to open the other branches, in major U.S. cities, through similar acquisitions.

Read more: Sharp to establish outsourcing network in U.S.

India Still Preferred Outsourcing Destination

According to the Global City Competitiveness 2006 report released by offshore advisory firm NeoIT recently, the National Capital Region of Delhi is the best city in the world for offshoring or outsourcing business. Indian metros like Bangalore, Hyderabad, Mumbai and Pune occupied top seven positions followed by Ho Chi Minh City, Manila, Shanghai and Moscow. Financialexpress.com reports:

While Delhi with a score of 100 points topped the competitive index, Polish cities of Krakow and Warsaw ranked the lowest with scores of 70.6 and 71.1, respectively. Blasting myths of a Chinese threat to Indian BPO supremacy, the survey ranked only three Chinese cities of Dalian, Shanghai and Guangzhou as attractive for offshoring compared to seven Indian cities.

Read more: NCR, the best city for outsourcing in the world

Quality Test For Outsourcing Personnel

--By Priya Jestin, Staff Writer

Finally, you may get to hear some decent service. (Not that it was all that bad but well, it wasn’t too good either.) Recently, the main trade body representing software services companies in India announced that it would hold entry-level tests. These tests will help them gauge the capability of people seeking jobs outsourced by U.S. and other overseas companies.

This new move means two things. First that the Indian outsourcing industry is finally coming of age and secondly, that it has learnt to master the fast pace of growth. This recent move will help the industry tap new talent and cut the time and expense of recruiting new hires. This will help keep the industry churning and the economy growing at its present level. And it will help us consumers as well.

Admit it, outsourcing is here to stay. And we cannot always bang our heads in frustration when we realize that the guy at the other end hasn’t understood us or mistaken our request. We should welcome this new move because the industry finally understands the fact that there is a need to satisfy the consumer.

Candidates who pass this test will be regarded as having the basic skills to work in the outsourcing industry. However, this doesn’t guarantee employment. The test, to begin Nov. 18, is based on the Test of English as a Foreign Language (TOEFL) and the U.S. Graduate Record Examinations (GRE). The latter measures verbal reasoning, quantitative reasoning, critical thinking and analytical writing skills. The scores will also help recruiting companies screen candidates and determine their training needs.

The main purpose of this initiative is to counter a potential shortage of talent over the next decade. The test will help them tap new talent pools in relatively remote parts of the country as well.

Now We’re Outsourcing Drug-testing As Well!

Now every time you pick up that phone to call a help line, you probably wonder if your call will be routed to India. If you say you didn’t think of that possibility, you are only kidding yourself. The fact is that the names India and China have become a byword for almost all kinds of work. Now if this latest bit of news is to be believed, even the drugs we take will not be spared of the India/ China effect. How?

There is a very strong likelihood that these drugs will have been tested on people who live outside the United States. This means they live in places like India, China or Russia. I really don’t know if this is a good thing or a bad thing. But let’s face it. Human clinical trials are a necessary part of any drug’s development. Courierpostonline.com reports:

Big pharmaceutical companies are increasingly looking outside the country to find locations to conduct the human clinical trials that are crucial to the development of new drugs, according to Gannett News Service. Drug companies are finding it quicker, easier and cheaper to test subjects overseas rather than in this country, experts say.

Read more: Outsourcing extends to clinical trials