Outsourcing Times

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.

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.

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.

Outsourcing your insurance

Do not be surprised if your insurer is looking to outsource services to a third party to improve operational efficiency and enhance growth opportunities. According to a report by Dublin-based consultants Research and Markets (R&M), outsourcing among insurance companies is a growing trend.

R&M based its conclusions on interviews conducted with insurers from the American continent, the Asia Pacific region, and EMEA. More than 50% of the interviews use BPO-based insurers.

The bulletin released by R&M, and quoted by Insurance Journal, goes on to say:

The horizontal processes such as HRO, F&A and CRM continue to grow significantly despite their dominance in terms of absolute usage. However, the fastest growth going forward will be in the industry specific processes such as claims processing and policy administration.

India marches on with its offshore cost advantage

If you have been following the outsourcing trend in India, you would have definitely felt the gathering storms over India's potency as the leading outsourcing destination. These storm clouds mainly stemmed from the fact that the mushrooming of outsourcing vendors in India directly contributed to major wage inflation in the country, and there was also a perception emerging that the pool of skilled resources in India was drying up.

However, US-based research firm Everest has conclusively dispelled all these storm clouds. In its "2006 Global Sourcing Market Update", Everest clarifies that the concerns related to wage inflation and skill shortages were grossly exaggerated, and India continues to enjoy its offshore advantages.

Maneuvering firmly on its tracks, the Indian BPO industry accounts for half of the global business in this arena, and Nasscom has predicted that the industry will chart a growth rate of 40% over the next fiscal year:

The Indian BPO sector is expected to maintain the current export momentum and grow by 35-40 per cent in this fiscal (FY 07) to achieve $8-8.5 billion as against $6.3 billion in the previous fiscal (2005-06).

Industry analysts feel that India will hold its offshore advantages and continue to rake in the outsourcing bucks for the next thirty years. It's certainly "Advantage India"!

Investor Ideas has more information on the current scenario and the future directions that the market could take.

IBM to Offer BPO Solutions for Banks

Recently, I had written a post titled "PSU Banks in India Planning Outsourcing" about how Indian banks are contemplating outsourcing. Now IBM has decided to offer BPO solutions to banks in Malaysia. As competition from foreign players intensifies, local banks are planning to become more innovative to boost profitability. According to IBM Malaysia sources, banks need to focus on their core competencies and outsource other functions such as human resource and payroll to remain competitive. Banks are looking to outsource their service centers in order to boost efficiency and reduce costs. Do you think that outsourcing will really help banks to improve the quality?

Zurich Bank Finalizes BPO Deal with Infosys

Zurich Financial Services has recently finalized a BPO deal that would replace its existing legacy systems with a core banking system from Infosys. Infosys's solution will allow the Swiss banking company to standardize processes and systems at Zurich Bank. Zurich Financial Services is hopeful to reduce costs by improving process efficiency. It is also expected to reduce duplication and bring products to market faster.

Are BPO Employees Over-stressed?

There has been a debate over the stressful life living by BPO employees in India. This is a sensitive issue and requires proper attention. A few days ago, I came across a news article titled " BPO firm employee held on charge of killing colleague". It immediately caught my attention, as I believe it is somehow related to the stressful BPO lifestyle.

The incident occurred in Bangalore, where an employee of Aviva 24/7 BPO unit, murdered his female colleague and dumped the body on a different location. According to the police sources, the murder was the result of a love-hate relationship between the duo.

If an argument or a conflict results in a brutal murder, then we have every reason to believe that the accused was not living a healthy life and he was not a stable frame of mind. Can it be attributed to the burnout in BPOs? It seems that the concerned BPO and the police are dubbing the incident as a fatal attraction that ended in a tragedy. However, nobody bothers to see the other side of the incident. It's high time we wake up to such incidents and find out the exact reason why our well-qualified employees go brutal and violent in small matters.

BPO-focused Indian firm debuts at the NYSE

If you are keen to invest in an out-and-out BPO company that handles the entire gamut of business functions, the opportunity is going to come knocking later this week. India-based WNS Holdings is slated to go public soon at the New York Stock Exchange.

The timings couldn't have been more in sync with the times; market research firm International Data Corporation has predicted that the global outsourcing market will grow to $641 billion by 2009. Other major Indian players in the BPO industry have recorded outstanding success rates—I have already recorded the growth rate of Infosys in an older post—WNS becomes the first solely BPO-based firm to go public. CNN Money reports:

While WNS serves a diverse group of clients—including Virgin Atlantic Airways, insurer Marsh and British grocer Tesco—its five largest clients accounted for a staggering 41 percent of its revenue in the most recent fiscal year.

Outsourcing in North America Driven by IT Outsourcing

According to a research made by an independent BPO analyst firm, outsourcing activity is stronger in North America than Europe. The report also revealed that North America outsourcing activity was primarily driven by IT Outsourcing. In North America, BPO contract activity declined by 20%, whereas it grew steadily in Europe. On the contrary, IT outsourcing has witnessed a sharp growth in North America. BPO still has the potential to become a much larger market than outsourcing. However, in the current scenario, IT has dominated the outsourcing market share.

According to Tekrati -

The NelsonHall report observed that new sector patterns are emerging. For example, manufacturing and retail combined to account for 28% of BPO contract value in the past 12 months, compared to 12% in the prior equivalent period.