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.

ING Group to Sign Outsourcing Deals

Insurance and investment firm ING Group has roped in four outsourcing service providers to install and maintain its computers and telephones. The four major companies that are all set to enter into partnership with ING are Accenture, Atos Origin, Getronics and KPN. The deals are valued at $1.02 billion that will last for five years. It has been reported that about 500 ING employees will be transferred to the outsourcers. The deal is part of an efficiency drive aimed at reducing operating costs by $584 million. It will run in conjunction with an existing seven-year agreement signed with IBM in 2003. ING currently has 114,000 employees all over the world. The company offers insurance, banking and asset management services in more than 50 countries.

ICICI-OneSource to Set up Second Outsourcing Center in UK

India's leading BPO Company, ICICI-OneSource has decided to establish its second outsourcing center in the UK. The outsourcing center would come up in Londonderry. In the past couple of years, ICICI-OneSource has expanded its business to several parts in the world. The outsourcing boom has helped it to carry out its own ambitious plans. The company started its operation in the UK in June 2006 by setting up the first center in Belfast. The second center will offer a range of outsourcing services and provide over 600 jobs to the local community over the next two years.

First Belfast, and now Londonderry for Indian BPO I-Onesource

The Indian BPO company I-Onesource is making its presence felt in the UK. Its first service center in the UK was unveiled in Belfast in June this year, and hot on its heels has come the second unit at Londonderry, due to start functioning in a few months' time. Zee News reports:

The Centre will offer a range of outsourcing services and provide over 600 jobs to the local community over the next two years, the company said in a release.

Virtuos Outsourcing Firm gets New Financing

Game industry outsourcing firm Virtuos announced that it has clinched a new financing deal with Legend Capital. Legend Capital is an independent VC firm under Legend Holdings, owner of Lenovo group. Virtuos exclusively focuses on providing outsourced services to international clients. It has confirmed that it is positioning to address the growing global outsourcing opportunity within the game industry. The game industry in the United States is all set to reach $1.1 billion by the end of 2006 and will grow to $2.5 billion by 2010. Virtuos also indicated that it intends to expand the size of its teams as well as continue its efforts to deliver the quality.

According to Gamsutra -

While Virtuos has been profitable since inception, we are excited to collaborate with a group as strong as Legend,” said Gilles Langourieux, CEO, Virtuos. “We plan to use the new funding to triple the size of our teams in the next 2 years. Virtuos will also invest further in training, processes, security and IT to create a level of service never seen before in our industry.

Convergys to Expand Operations in Asia-Pacific

Convergys Corporation has decided to expand its HR BPO operations in the Asia Pacific region. It has increased its global HR BPO capacity by opening new or expanding existing service centers in Malaysia, India, China and Singapore. The service centers will provide HR BPO services access to more than 150 global and regional clients. Asia Pacific region has emerged as a hot spot for BPO operations. Like most companies, Convergys is planning to explore more opportunities available in that region. As part of its strategic expansion efforts, Convergys will operate in high-tech locations with a highly skilled talent pool to grow its client base and meet the requirements of its clients.

According to SunStar -

Convergys' Asia Pacific service centers provide a broad scope of services such as benefits and leave administration, learning and performance management, recruiting and staffing administration, and payroll administration for clients from multiple industries.

Outsourcing in Northern Ireland

After India, China and Philippines, it is the turn of Northern Ireland to emerge as a hot destination for outsourcing business. Recently, BPO specialist ICICI OneSource has become the latest India-based provider to invest in a UK site. It pledged to create 1,000 jobs over the next two years at new contact centers in Northern Ireland. In the past one year, there have been hectic activities in Northern Ireland's outsourcing industry. Interest shown by major companies has underlined Northern Ireland's status as an attractive outsourcing location for both call center and IT development work. Computing has published an article on the Same Topic.

Hugh Burden, business development director at development agency Invest Northern Ireland, said the trend was likely to continue as more firms demand their IT and BPO service providers have a mix of offshore and nearshore sites, and firms’ in-house IT departments face increasing pressure to cut costs.

Government woes BPO sector

Asian giants like India and China have immensely benefited from the BPO and IT outsourcing boom, and it is likely that this sector will continue to fuel job opportunities in these countries. In the wake of all this activity, Philippines is not willing to be left behind, and is making sincere efforts to attract BPO investors to the country.

In this scenario, the government is beginning to play its role. In a meeting with the 3,000-strong International Network of Business Organization, which includes eleven foreign chambers of commerce, President Gloria Macapagal-Arroyo appealed for a collaboration between investors and the government in expanding the opportunities in this industry for the young generation, thus adding up to faster pace of economic growth in the country.

Philippine Information Agency has more on the story.

PeopleSupport and Global BPO Business

A few years ago, PeopleSupport began its operations as a call center provider. Now it is setting its sights on becoming a global BPO player. PeopleSupport has decided to expand its services across the globe in the coming years. It has a cross-functional operation where all services will be well integrated into large-scale centers. Earlier this year, PeopleSupport took a step forward by acquiring Newport Beach and Rapidtext. PeopleSupport has a strong base in Philippines and expects to make a mark in outsourcing operations in Asia.

Nasscom Ranking of BPO Companies

The much-awaited ranking of ITES-BPO companies has been released by Nasscom. The latest ranking was based on revenues for 2005-06. Nasscom conducted its annual survey on IT industry performance. According to the survey, Genpact has topped the list followed by WNS and Wipro BPO. Although a few companies such as Efunds International and Sutherland Global Services did not provide information on their revenues, the list shows that the Indian ITES-BPO segment grew by 37 per cent in the financial year 2005-06.

Nassocom President Kiran Karnik said that in 2005-06, the industry size and growth exceeded their forecasts. If the current trend is to be believed, the entire software and services industry is expected to record revenues of USD 36-38 billion in 2007. The ITES-BPO segment is growing momentum and exports are increasing at a faster pace.

Nasscom BPO Meet in India

There is an apprehension that all is not well within the Indian BPO industry and it might face some sort of crisis if the present issues are left unresolved. The Nasscom is holding a two-day ITES-BPO Strategy summit in Bangalore (India) on June 7 - 8. Issues such as managing growth and combating competition will be debated in the summit. The ninth annual Nasscom (National Association of Software and Service Companies) event will focus on the challenges faced by the industry and on the next phase of growth. Business Line reports:

The summit will focus on how India can emerge as the benchmark in global outsourcing and continue to offer an unmatched package of benefits to overseas investors. The aim is also to draw attention to the challenges and pitfalls that lie in the path of the Indian ITES-BPO sector and how they can be overcome to maintain the country's edge in this space.

Dispute between Sprint and IBM on Outsourcing

When Sprint started business with IBM, it was confident that outsourcing IT jobs to IBM would improve the company's software, increase productivity and ensure cost saving for the company. However, situation has taken an interesting turn with Sprint suing IBM over the loss incurred by the company because of outsourcing to IBM. According to Sprint sources, IBM failed to meet contractual promises for productivity improvements. Kansas City reports:

In its simplest form, Sprint executives contend that IBM owes them for about 119,000 hours of uncompleted work. That is the equivalent of 57 years’ work for a single employee.

Wage Distribution in BPOs

There is no denying that outsourcing to India is on rise because of the cheap labor and efficiency of the workers. BPO industry in India has been successful in attracting a large number of young people to join the workforce. There is a talk that BPO workers in India are getting high salary. However, experts believe that wage inflation in offshore outsourcing markets is over-stated and it affects labor arbitrage estimates.

It is true that wages for IT outsourcing and BPO services providers in key offshore markets are increasing every year. Those markets belong to the countries such as India, China and Poland. It has been reported that the USA, the UK and France are the major countries that are off shoring their work. The report also suggests that India, China, Mexico, Poland, Philippines and the Czech Republic are receiving the highest number of outsourcing business.

The offshore outsourcing suppliers have been making efforts to control rising labor costs. They make strategies to identify lower-cost cities and countries to expand their operations. Although BPO employees got 13 percent wage hike in 2005, only 40% of the staff have been greatly benefited from it. Hence, the wage inflation is not that much higher as reported. It seems that there is a false hype over the wage growth in BPO industry and it is still under complete control.

Xian: The new outsourcing capital?

Outsourcing has moved well beyond assembling shoes and circuit boards. The trend now is towards business processes such as medical claim forms and car loan applications—processes that are being handled in the city of Xian in Western China for global clients belonging to culture capitals such as New York and Melbourne. BPOs are clearly the future of outsourcing, and China is an integral part of this process of transition.

The Xian High-Tech Industries Development Zone is planned at an ambitious 90 square kilometers, to be built at a cost of 100 billion yuan ($12 billion). This city is determined to become the global back office, and outshine neighboring India in the BPO sector. Skills such as computing and mathematics have become a part of the Chinese populace, and the staff turnover is expected to reach 30-40 percent annually.

Costs promise to remain steady and low, which is an advantage over China's coastal cities. Several leading Indian companies have already established centers in China, and China is surely catching up on India in the outsourcing market. If China can get over the stumbling blocks of good English speaking skills and better computing acumen, outsourcing can progress at leaps and bounds in China.

The Register-Guard has the full story.

Next Generation BPO Operations

BPO vendors have saved a lot of money and at the same time improved the process because of the growth of outsourcing industry. Now they are aiming at extracting value from client processes. This is known as third generation BPO. Processes are now expected to fetch higher returns for vendors as they deliver better value. Most of the companies that outsource work to India and other low-cost destinations belong to Fortune 500 group. As everyone is getting similar cost savings, BPO 3.0 has become an attractive option for clients.

First generation BPO was based on labor arbitrage and direct cost savings for clients. The second generation focused on getting better productivity by using Six Sigma. In BPO 3.0, the billing rate per FTE will remain static. Now companies are entering into revenue sharing agreements with their clients. Vendors now consider them business partners. For most companies, BPO 3.0 is the key element to client retention and growth.

BPO jokes are doing the rounds in the Internet space

India's success story as the outsourcing hub is the very reason it is becoming the subject matter of humor on the net. The fact that the outsourcing phenomenon is being represented in the form of jokes and witty remarks proves that the Indian outsourcing story has become important in the lives of people in current times. Expressindia.com reports:

Sample these: the US Congress has outsourced the office of the American President to India. An economist at Bangalore University is going to take over as chairman of US Council of Economic Advisers. And in a move to outsource obesity, US plans to shed three million pounds of cellulite annually!

Hewitt Associates signs deal with Catholic Health Initiatives

Hewitt Associates has signed a 10 year contract with Catholic Health Initiatives, a national not-for-profit health organization to provide Human Resources BPO services. The contract will engulf a gamut of HR services to about 45,000 employees of the non-profit in the US. Trading Markets reports:

Under the terms of the agreement, Hewitt will provide HR business process outsourcing services, including contact center, recruiting, relocation, health and welfare,and workforce administration services to about 45,000 Catholic Health  Initiatives employees in the U.S.

Accenture acquires Savista's BPO assets

Accenture has completed it's acquisition of the BPO assets of Savista which will give a significant boost to it's presence into the Middle Market. Savista has garnered a prominent place in providing HR and Finance solutions and this acquisition will help Accenture to grab a pie in the market which is expected to grow to more than $25 billion by 2009.

Accenture is now well poised to provide it's high end solutions to middle-market companies and customers can only expect service delivery of global standards as expected from this leading global player. This acquisition has placed Accenture in the top league in the midmarket BPO segment. TMCnet reports:

As a result of the acquisition, approximately 400 Savista professionals have joined a newly established Accenture business, Accenture BPO Services, Solutions for the Middle Market. The addition of Accenture BPO Services brings the total number of  Accenture professionals performing BPO work to more than 18,000.

EDS bids for a majority stake in Indian BPO company

EDS, the US outsourcing behemoth has put a US $380 million offer to grab a majority holding in an Indian BPO company. This deal is in tune with the strategy of EDS to stamp its presence as an outsourcing leader in India. ZDNetIndia reports:

EDS has made the offer for a 52 percent stake in Bangalore-based Mphasis, which has around 12,000 employees.

North America and Europe will be the stage for Outsourcing Forum

Alsbridge will initiate the Outsourcing Leadership Forum on April 19,2006 in Texas. The forum will focus on BPO trends for 2006 and more specifically on Finance and Accounting best practices. The Forums will provide a sound platform for knowledge sharing and at the same time develop a network of recognised experts in the field to interact and know key players in the industry.

The forums will take the outsourcing industry a notch higher as the platform will give rise to new ideas and practices for implementation to derive greater successes. Alsbridge, the outsourcing consulting firm will present real world case studies to drive home the benefits of outsourcing and make industry players more knowledgeable in their implementation of outsourcing strategies. PRWeb reports:

The April 19th event will provide attendees with comprehensive information on outsourcing from three different perspectives: outsourcing consultancy, global law firm, and BPO analyst group. Upcoming Outsourcing Leadership Forums will be held on May 19 in Dallas with Oracle, and May 23 in New York City with international law firm, Mayer Brown Rowe & Maw LLP.

Lason India launches course to train BPO workers

Another new initiative has been launched to tackle the problem of shortage of trained manpower for BPO units in India. Lason India has now introduced at the postgraduate level a three semester course to provide hands-on experience to students and make them industry ready by the time they graduate. The course is being offered as an elective subject to postgraduates.

While the company has launched the initiative in India's Silicon Valley, Bangalore, a company spokesperson said the initiative will lead to introduction of such couses in more cities across India. The Hindu quoting Thomas Denomme, Director, Lason India reports:

There is a need for Indian professionals to be in the forefront so as to explore new avenues in implementing high standards in BPO services.

Corporate governance key to bagging BPO orders

While cost effectiveness is still a key consideration, BPO buyers are increasingly giving more importance to factors other than cost while deciding on BPO vendors. Corporate governance, for example, is high on the list of such non-cost deciding factors, according to IDC.
In its latest study of business process outsourcing trends in the Asia-Pacific excluding Japan market, IDC predicts moderate growth for BPO services in the region. There are several other interesting findings in the study.

Read more: Corporate Governance as a key factor for outsourcers in Asia

Indian BPO cos need to change strategy

With BPO vendors in the West setting up more and more offshore units to leverage India's cheap but huge talent pool, pressure is building up on Indian vendors. They now need to focus more on consultancy and providing complete solutions packages rather than merely offer cheap IT-enabled commodity services since Western vendors are now able to offer similar price advantages using cheap Indian talent. Experts are veering round to the view that firms such as Wipro will have to increasingly use its consultancy arm as a fulcrum to increase its market share in BPO space. In short, Indian vendors now need to seriously think of a strategy shift.

Read more: Outsourcing Strategy Shift

Two acquisitions on the anvil for Aptech

Aptech Limited is planning to buy two outsourcing companies, one each in India and the U.S. Aptech is perhaps gearing itself to combat the imminent consolidation in the BPO and customer relationship segment through these acquisitions. I-Newswire reports:

The American based company does not attach with any type of back office operations in India but the local firm would engage in the BPO and education or training services.

BPO provider opens its doors at Davao with a recruitment center

Peoplesupport Inc. has initiated a recruitment center at Davao to take advantage of the skilled workforce of the region. The leading outsourcing provider has already had good experiences with the eReps it has recruited since 2004 and wants to take it's relationship with this area to a new level. Sun Star reports:

PEOPLESUPPORT Inc., a leading business process outsourcing provider that offers customer management, transcription, captioning, accounts receivable management and additional BPO services, announced Monday the opening of their recruitment center in Davao City.

Accenture picks up Savista's BPO assets to focus on middle market

Accenture, the global management consulting, technology services and outsourcing company has agreed to acquire key assets of Savista, expanding the range of bundled, back office business process outsourcing (BPO) capabilities the company offers to include those designed specifically for the middle market - organizations with fewer than 12,000 employees. The market for these services is estimated by industry analysts to approach $17 billion and is expected to grow to more than $25 billion by 2009.
The acquisition will supplement Accenture's market-leading business process outsourcing capabilities in human resources, finance and accounting, learning, customer care and procurement. The acquisition is expected to close in the next month. Terms of the agreement were not disclosed.

Following the asset acquisition, approximately 400 Savista professionals will join Accenture, bringing the total number of Accenture professionals performing BPO work to more than 18,000.

This acquisition, perhaps, confirms the notion that as far as the BPO market is concerned, we have seen only the tip of the iceberg. A lot more action is in the offing. One can bet on that!

Read more: Accenture to Expand Business Process Outsourcing Offerings with the Acquisition of Savista's BPO Assets; Bundled Back Office Business Process Outsourcing Solutions Will Target the Middle Market

BPO cos need to step up operational excellence, says expert

Today's business process outsourcing (BPO) services providers need to step up their investments in operational excellence to create lasting value for mid-market clients, according to Doug Harrison, COO, Savista Corporation, in a groundbreaking BPO Best Practices Thought Leadership series featured in major trade publications. Harrison is responsible for global service delivery and worldwide operations at the leading firm for F&A, HR and IT outsourcing services to mid-market companies. Prior to joining Savista, he built the HR outsourcing services center at ProBusiness Services and managed BPO services at Morgan Stanley/Dean Witter. primezone.com reports:

The Best Practices Thought Leadership series is part of Savista's commitment to leverage its broad base of intellectual capital to provide strategic BPO insights and solutions for the mid-market.

Margins of Indian BPO cos to rise in 2006, says study

Global consultancy firm Alsbridge has just published its report Outsourcing Trends for 2006. The report is based on Alsbridge's first hand experience in a number of recent large-scale outsourcing, shared-services and offshore transactions. According to Alsbridge the key trends are:

1. US-based outsourcing providers will begin to control and reduce their internal G&A costs. Many still have large, onshore, non-client value adding G&A functions and as a result are burdened with higher overheads when competing against India based providers. Leveraging offshore resources should help them to reduce the strain caused by narrow profit margins.

2. Offshore "client owned" captive BPO and IT centers will continue to take market share away from outsourcing providers. Fifty percent or more of BPO jobs will go to "client owned" captive centers. Alsbridge experience indicates that the term "offshoring" now means "offshore captive" first and "offshore outsourcing" second. US-based outsourcing providers will finally begin to take this as a serious client option and begin to make inroads to be a part of it.

3. India-based outsourcing providers' (TCS, Infosys, Wipro amongst others) margins will continue to improve while US-based providers could be challenged to maintain their dominant positions in the market. Improved profitability and increased market capitalizations will allow India-based outsourcing providers to acquire talent from US and European-based providers. This talent influx will allow India-based providers to move higher up the value chain and win increasingly complex projects.

4. M&A will continue to play a major role in the global provider community in 2006 and could result in the consolidation of one or more of the major outsourcing provider organizations. Any consolidation among the "Global Nine" (ACS, Accenture, Atos Origin, BT, Capgemini, EDS, HP, IBM, and T-Systems) would have a serious impact on the global market as a whole. Of particular interest would be the impact on the current commodity-like procurement process used by buyer organizations. Provider consolidation may allow the providers to opt out of participating in such processes and therefore cause a shift in the market.

Read more: Outsourcing trends for 2006

Shift jobs out to create more jobs!

In this day and age of globalisation any sense of nationalism especially in matters business is always misguided and counter-productive. A recent survey of consumers in the US have come up with the finding that 65% of the respondents said that if they knew that a paticular company was using call centres based in India, Philippines or anywhere else outside the US, they would buy less or even totally stop buying from that company. It does not take an Einstein or the ability to master rocket science to realise what would happen if people really began to do that. US companies would lose their competitiveness and go bust, lay-offs will rise, corporate sector savings will fall, domestic investment would fall - on the whole there will be more unemplyment in the US. It seems to go against intuitive logic but the truth is that the more jobs shift out of the US, the more jobs can be created within the US. Just try to figure that out!

Read more:Is the shine off offshore outsourcing?

New media site to connect BPO players

CMP-Cybermedia LLC has launched a new website dedicated to global technology and business services sourcing. The website www.globalservicesmedia.com is an initiative towards building powerful media solutions connecting the global buyers and sellers of technology and business services. dqchannels.com reports:

Targeted at professionals who want to master the worldwide sourcing of people, processes and technologies, the website offers information ranging from business process outsourcing, IT outsourcing, customer service and the effective management of global business operations.

Big 6 may lose BPO dominance

The ‘Big Six’ of outsourcing – Accenture, IBM, ACS, CSC, HP and EDS – could see their dominance challenged in the coming days, according to a study done by the Houston-based consultancy firm Technology Partners International Inc. With more and more customers splitting up their contracts between several vendors, the average size of deals are coming down and the deals are being spread over a number of players including smaller players. business-standard.com reports:

A spokesperson for TPI said: “Although historically, incumbent providers have tended to be retained almost as a matter of course, the increasing level and diversity of competition, coupled with a trend towards selective or single process outsourcing all mean that providers cannot rest on their laurels. Client retention will increasingly depend on an incumbent’s ability to offer a competitive proposition. This could mean significant changes in price and scope from the original contract.”

BPO boom or bust?

The total value of IT outsourcing contracts is going to shrink by 3 to 5% according to a study done Houston based consultancy firm Technology Partners International Inc.(TPI). While the number of IT services and BPO contracts awarded last year was the highest ever at 293 up from 269, the value of the contracts fell by $3.6 billion to $74.9 billion. The trend is likely to continue this year too, says TPI.

While TPI's figures are certainly accurate they somehow don't reflect the real trend that the total value of BPO contracts is actually growing. The reason for this anomaly is the fact that the TPI study covered only those contracts whose value was more than $50 million, that is, it focused only on the mega deals.

But the real action is taking place elsewhere. More and more small and medium sized companies in the West - in both the US and in Europe - have begun to realise the benefits of outsourcing. And it is these firms who are driving the BPO business today.

Trend within trend

If the value of contracts being awarded by these firms are also taken into account there is no escaping the conclusion that the BPO business is growing and there is no question of any shrinkage. Actually, the TPI figures reflect a trend within a trend - more and more of the bigger customers are splitting up their contracts between several vendors with many vendors signing up contracts worth less than $50 million. TPI has failed to see them and their figures, therefore, give only a part of the picture. Don't get misled by them. Just go ahead and BPO! tmcnet.com reports:

The growth rate in the value of IT outsourcing contracts is slowing. In fact, instead of growing, the value may shrink by 3 to 5 percent in this sector this year, according to TPI. A larger offshore component in the contracts is driving down their value, Schmidt said. In contrast, revenue from BPO contracts is expected to grow by 10 to 15 percent this year.   

India unbeatable - Reasons why sceptics are wrong!

Doubting Thomases have raised two issues in recent times even as the latest strategic review of India's IT and ITeS sector by Nasscom, the country's largest IT and ITeS industry association has predicted that India is well on track to achieve IT and ITeS exports of $60 billion by 2010, and that it will continue to maintain its leadership in the global BPO market.

Rising wages, new challengers

The first issue is: with the demand for BPO/KPO out of India rising, the labour cost arbitrage that is now driving BPO/KPO business to India will narrow down, perhaps even disappear and India will begin to lose its dominance in the global BPO market. Incidentally, India now enjoys a whopping 44% share of this market. To prove their point people are citing the recent move by SAP AG to look outside India for its offshoring needs as it has claimed that labour costs have become too high in India. The second issue is the claim that China and other destinations are fast emerging as major challengers to India in the BPO market.

Mismatch is temporary

Both are really non-issues! Yes, in the very short term there is likely to be some mismatch between demand and supply for labour in India's BPO/KPO industry and that at the moment labour costs in India are moving northwards. But let me assure you that this is just a temporary phenomenon and will be overcome in the very near future. The reason for this is that the Indian government - both at the federal as well as the state levels - is very much aware of this problem and is, therefore, making concerted and conscious efforts to overcome this. Most states have already introduced and made compulsory some kind of IT education even at the primary school level. Most school going Indian kids can now operate a PC, can surf the Internet, play online and offline games and know the basics of standard and widely-used applications such as MS Word or Power Point or Excel. By the time these kids come out of school, all will be armed with basic IT skills.

Training, training, trained!

Second, government, industry and academia are working hand-in-hand to set up new IT training institutes, introducing new courses that will train people in skills required by industry or are fine-tuning existing training courses so that those trained have the skills needed by industry. Third, India being a poor country with a high level of unemployment, both students and their parents are very much aware of which sectors have the highest employment potential with the result that students inevitably rush to get trained in those skills that they think will help them get jobs easily once they pass out of school or college. So, any perceived shortage of skilled workers now is purely a temporary phenomenon. In the very near future, supply will outstrip demand and that is a certainty rather than the other way around!

The Chinese demographic dragon

Coming now to the second issue about other destinations posing a challenge to India. The only destination that can provide any real threat is China with its huge population. At present India leads all other destinations in terms of talent pool by a factor of 2.5 and that figure is surely going to go up in the days to come because of what I have said in the previous paragraph plus the fact that India's population growth rate is around 2% a year and it is going to remain that way for quite some time to come. Secondly, India's demographics are excellent with more than 50% of the population being aged below 25 years. China's demographics, on the other hand, are very much skewed in favour of the aged and despite its larger population, China is all set to see a shortage of people in the working age group in the years to come. You can't really afford to fool around with natural rates of growth and dictatorially impose a one-child per couple norm without having to face some kind of backlash somewhere down the line. If in the short run they have managed to push back the population growth rate, in the long run they are going to suffer for it!

The English edge!

Finally, India will continue to maintain its lead due to the English language factor. No other country can hope to catch up with India in terms of an English-speaking talent pool, not even China despite its larger population and despite its efforts to train people in English language skills. Some time back there were reports out of China that parents there were resorting to surgical interventions on the tongues of their children with a view to make these children better able to pronounce English words. I have no doubt that such moves will only cripple many innocent children but will not really solve the problem. India has too much of an historical edge to beat here. And as long as the United States and the UK continue to be leading global economies with most BPO/KPO jobs emanating from there, nobody can stop India's dominance. If the Chinese have any edge anywhere it is only with regard to the Japanese market. Japan so far has not taken to offshoring as much as the US or western Europe but things are changing. But trust me, India will be there too! So, all those envious of India's leadership position in offshoring will have to remain just that - envious - for a very long time to come. Good news for them will be hard to come by!

Read more: Business Process Outsourcing - Advantage India   

How to bag an LPO job

A hell of a lot of guys and gals out of India - legal eagles all - have reacted to our posting on legal process outsourcing and have asked about how they too can bite into the LPO pie. Well friends, there may be several ways of doing it but possibly the best, cost-less and hassle-free way is to first announce your presence as a willing service provider in the global market for legal process outsourcing. There are several good sites where you can get your profile listed so that your skills, experience and expertise get advertised in the global market.

Some of these sites are www.guru.com, www.offshorexperts.com, www.elance.com, and let me tell you there are many others. These and similar sites are market places and they help you to market your services in the global market. All you have to do is to go to these sites, upload your profile, check if any immediate jobs are available which match your profile and for which you can put in a bid to try get the contract and if no immediate jobs are available just sit back and wait. These sites will send notifications to your mailbox the moment some employer posts a project which requires a skill set that matches your profile.

If you just want to get listed so that the market knows that you are available for providing various kinds of legal services you can do so at outsourcing.org. Then there are the large and well-established  players already operating in the market such as thuriam.com and delhiprofessionals.com to name just two such players. You can visit these sites and get their contact ID  if you want to apply for a job with them. If you don't like any of the sites I have mentioned or feel that you should get registered at more such sites then just type out 'legal process outsourcing' in the search field of www.google.com and you will get the entire list of sites which could of help to you. Just a word of caution, however. If some guys are very upbeat about the prospects of more and more LPO jobs coming to India, many are also quite sceptical. Read the link below to get a contrary view.

Now there, I think I have given you all the dope you need for the moment. So, hey, what the hell you waiting for? Get cracking!

Read more: We've got a long way to go for legal offshoring

Kolkata calling

Even a few years back companies would have thought twice about investing in Kolkata, capital of the world's only state ruled by a democratically elected communist government. But things are changing and in a big way. The city has begun to challenge Bangalore as the hottest IT destination in India. And, the BPO sector is leading the way. A new IT/ITeS company is opening shop in Kolkata almost every day. All the big names are already there -- IBM, Wipro, Cognizant, GE -- they are flocking there.

Now comes ICICI OneSource, the BPO arm of one of India's leading private banks, ICICI Bank. The company is planning to launch its BPO operations in the city by June, 2006. recruitment has started and plans are afoot to hire as many as 1000 professionals form the BPO segment. The company has already acquired 90,000 sq ft of space at the Technopolis IT facility in the city’s Salt Lake Electronic Complex (Saltlec). The Economic Times writes:

Though the official launch of its Kolkata BPO unit is unlikely to happen before June, ICICI OneSource has silently started hiring ITeS professionals in batches for entry-level jobs.

Vendors watchout

There is good news for vendors of IT and BPO services. Two new opportunities have come  up in the last few days for  BPO service vendors to make a killing. The mobile telephone giant Vodafone of the UK is planning to outsource a significant piece of its technological operations. The deal could well run into billions of dollars. The other opportunity has been thrown up by the decision of Swindon Council to go for a $535 billion IT/BPO outsourcing project that would unfold over 15 years. Line 56 writes:

Swindon Council is receiving tenders until February 16, so interested vendors still have a little time to try to get in on the action.

Capita Group PLC and Zurich Financial Services sign 10-year outsourcing contract

Capita Group PLC has announced that it has entered into an agreement with Zurich Financial Services' UK Life operations to provide business processing services over a period of ten years. The contract is worth 300 million stg, under which Capita will also provide customer servicing, policy administration, new business and claims activities and the associated technology. Forbes.com reports:

Rod Aldridge, Executive Chairman of Capita said: 'This contract significantly expands Capita's activity in the Life and Pensions market and reinforces our position at the forefront of delivering added value outsourced solutions for both open and closed books of business.'

Wachovia to cut costs through an offshore outsourcing operation in India

US bank Wachovia will soon have a presence in India, as the bank signed an agreement with BPO firm Genpact for establishing an offshore outsourcing operation. The two parties will work together to analyse business processes at the bank, and then shift some work offshore in the second quarter of 2006. Finextra reports:

In January, Wachovia projected savings of up to $1 billion during the next three years under plans to shed up to 4000 jobs. In June the bank notified 3000 of its US IT staff of its intentions to outsource technology work to one of three offshore factories in India.

BPO sector governed by existing labor laws: Government

The Minister of Labour and Employment has informed the Lok Sabha that the existing labor laws include provisions for the BPO industry, and state governments retain the power to act on any legal violation in this sector. Indlaw reports:

The Left parties have been demanding that labour laws should be implemented in the BPO sector and trade unions should be allowed to function in these units.

Teletech to expand base in the Philippines

Teletech Holdings Inc., a global provider of customer management and transaction-based business process outsourcing (BPO) solutions, will open a new unit in the Calindagan area of Dumaguete City, Philippines. The firm plans to expand its operations in the Philippines with more than 7,000 employees by the second half of 2006. Asian Journal reports:

Javier Fortunato Jr., provincial director of the Department of Trade and Industry in this province of Negros Oriental, said Teletech would be the second ICT multinational company to set up shop in Oriental Negros in a span of 12 months, after SPI Publisher Services, which is operating in the town of Bacong.

The Canadian Document Outsourcing Market

The document outsourcing market in Canada, a form evolving from the BPO industry, is the second largest market within the NAFTA (North American Free Trade Agreement). In order to analyze the directions this market sphere is taking and its future course up to the year 2009, the Canadian Document Outsourcing Market Forecast has been set up. This was announced by Research and Markets in a news release by Business Wire.

The organization is conducting fresh surveys on a regular basis, and the data will be updated based on the results of these surveys and on the economic changes taking place. The Canadian Document Outsourcing Market Forecast will forecast trends in three major business processes: Facilities Management (FM), Statement Printing (SP), and Contracted Print (CP) Services. Business Wire reports:

Informed with the qualitative and quantitative data from customer and service provider interviews, we examined the overall marketplace using its proprietary analytical market model to forecast total markets and growth rates for each of the three primary document outsourcing segments. This model utilizes information derived from primary research as well as secondary data to ensure that the information accurately reflects the market.

ICG Commerce in Forbes "Best of the Web" list

Yahoo Finance reports the recognition of ICG Commerce, a leading procurement services provider, in the Forbes list of "Best of the Web" business-to-business companies. This is a list of 100 best B2B companies in 13 different categories. The criteria used included strategy, execution, innovation, and financial staying power. This is the fourth successive year that ICG finds itself in this list, and this year the company has been nominated in the categories of overall procurement and BPO.

Nelson Hall reports that ICG is the market share leader in the arena of procurement-BPO services. Forbes emphasized the success of ICG Commerce in the rapidly growing procurement sector. Edward H. West, chairman and CEO of ICG Commerce, expressed satisfaction in the recognition awarded to the company and said that the Forbes award is a recognition of the growing demand for specialized BPO providers.

Attrition level in the BPO industry: A major challenge

The BPO industry is facing a shortage in skilled resources even as it fights attrition. Agent-level attrition is at about 45-50 percent for business processes based on voice, and at about 15-20 percent for other sectors. This translates to a growth in operating expenses for both high-end and low-end processes.

Nasscom reports that the BPO industry will experience a shortage of 2,62,000 skilled resources by 2012. When this is viewed together with the HayGroup study report that the cost of attrition for high-end businesses is 9 percent and that for low-end non-voice processes is 12.5 percent of the operating costs, the situation is quite grim. Hindustan Times reports:

The attrition cost is as much as 76 per cent of the annual salary costs for low-end voice based processes while it is 60 pet cent of the personnel cost for these companies. The total attrition cost works out to be 27 per cent of the operating expenses for the low-end voice-based segment where the annual attrition rate is touching 60 per cent.

Los Angeles Department of Water and Power selects Quintek Technologies, Inc. for back-file conversion and management software requirements

Quintek Technologies, Inc. is a leading provider of BPO and technology consulting services to Fortune 500 and Global 2000 companies, enabling its clients to maximize efficiency and minimize costs. Quintek has now been selected to extend its services to the Los Angeles Department of Water and Power (LADWP), which is the largest municipal utility in the US.

According to the mutual agreement, Quintek will provide LADWP with onsite back-file conversion services and install a document management software. Quintek views this opportunity as a means to show the cost-cutting benefits of its services. Marketwire.com reports:

Robert Steele, CEO of Quintek, commented, "This is an exciting opportunity for QSI. As the largest municipal utility in the nation, the LADWP is a showcase client for QSI to demonstrate the efficiency and cost-saving benefits of its services, not only in the private, but now the public sector." He added, "This opens yet another door for growth across North America."

Los Angeles Department of Water and Power selects Quintek Technologies, Inc. for back-file conversion and management software requirements

Quintek Technologies, Inc. is a leading provider of BPO and technology consulting services to Fortune 500 and Global 2000 companies, enabling its clients to maximize efficiency and minimize costs. Quintek has now been selected to extend its services to the Los Angeles Department of Water and Power (LADWP), which is the largest municipal utility in the US.

According to the mutual agreement, Quintek will provide LADWP with onsite back-file conversion services and install a document management software. Quintek views this opportunity as a means to show the cost-cutting benefits of its services. Marketwire.com reports:

Robert Steele, CEO of Quintek, commented, "This is an exciting opportunity for QSI. As the largest municipal utility in the nation, the LADWP is a showcase client for QSI to demonstrate the efficiency and cost-saving benefits of its services, not only in the private, but now the public sector." He added, "This opens yet another door for growth across North America."

IDC Report shows maturity of Procurement BPO market in the US

According to a new IDC market research, the procurement BPO market is growing and maturing at a rapid pace, particularly in the US. What is needed from the vendors is to show procurement domain expertise in carrying forward outsourcing relationships. This will also lead to a visible effect on the client's business prospects.

The maturity of the procurement BPO industry is attributed to the major investments made by the service providers in this sector, and the interest shown by buyers in these services. The IDC study encompasses a detailed analysis of vendor capabilities, strategies, and competitive positioning in the US market. An article published on Tekrati.com lists the main categories of players aspiring for a share in the procurement BPO market and the major findings of the IDC report. Tekrati.com reports:

The IDC report, "Procurement BPO Competitive Landscape" (IDC #33947), provides a comprehensive view of the evolving procurement BPO services landscape. The study identifies and evaluates key U.S.-based players, analyzes their procurement BPO offerings, value proposition, market messaging and strategies, and assesses each vendor's positioning within the procurement BPO market.   

SWS announces expansion in BPO division in Clonakilty

SWS Group has announced that it is investing in developing skills and research to expand its BPO division in Clonakilty. This move will entail growth in exports and the availability of 226 new jobs in the next three years.

This initiative has been praised by Ireland's Enterprise Minister Micheál Martin as extremely positive news for Clonakilty and West Cork. Martin said that SWS subscribes to the main objectives of Enterprise Ireland’s Strategy 2005-2007: Transforming Irish Industry. These objectives include research and development, enhanced productivity, strong management, and export growth. Ireland On-Line reports:

Jim Costello, business development manager of SWS Group’s, Business Process Outsourcing division said: “This represents a major push for us into export markets where we believe we can build on a very strong track record with our existing customers.

Philippines BPO sector employs 132,000 workers between January and June this year

In an article published on October 2, Sun Star reports that the BPO industry has been praised by the Department of Labor and Employment as being primarily responsible for projecting the Philippines as an attractive outsourcing site in the world. The Department took pride in the productive workforce that possessed the necessary skills to match world standards.

According to the statement declared by the Department, the BPO sector in the Philippines recorded the employment of 132,000 workers in the first half of this year. This work force is divided in the sectors of legal and medical transcription, customer care, animation, and software development. Based on this growth path, it is expected that the employment numbers in this sector will increase to 800,000 by 2010. Sun Star reports:

The labor chief said DoLE is implementing policies aimed to ensure optimum, safe and healthy, and non-discriminatory working conditions in the vital industry. House Bills 3792 and 3851, amending Article 131 of the country's Labor Code, and seeking to broaden the legitimate exemptions from the night work prohibition of women.

Read More: Outsourcing industry wins praise

Health and Beauty retailer Boots extends BPO agreement with Xansa

In 2002, the health and beauty retailer Boots outsourced its information systems and technology processes to Xansa in an agreement worth £90 million. Under this agreement, Xansa was responsible for the central applications development and support of Boots. Three years down the line, Boots has now increased the life of the agreement by an additional two years, thus extending the agreement to 2011.

The deal is worth £26 million, under which Xansa will assume the responsibility of the Boots Advantage Card service. The services that Xansa will now offer Boots include applications development, program and project management, application architecture, and business consultancy services. The executives of both companies expressed confidence in the extended relationship. Silicon.com reports:

Boots IT director Rob Fraser said in a statement: "I am delighted that the new expanded relationship with Xansa provides a spring board that will enable further business benefit, and cost savings for the Boots IS&T operation." And Xansa CEO Alistair Cox added in a statement: "Our relationship has been expanded to include the applications process for the Boots Advantage Card. This business process outsourcing service uses our integrated offshore delivery capability and includes the applications management of the supporting IT systems."

Read More: Boots signs £26m outsourcing deal top up

India may lose its competitive edge in the BPO industry, says Gartner report

The boom in the Indian outsourcing industry, particularly the BPO sector, may well be over. The country has exhausted its skilled labor force, and new projects that are outsourced to India may not enjoy the same level of expert work force. Gartner has recently reported on a slowing down in the Indian BPO sector because of a shortfall in skilled workers. Gartner has also expressed concerns over other factors like rising costs and security threats in India, which may hamper outsourcing.

According to a government report, the demand for skilled labor is far outweighing the supply, and there may be a shortfall of 260,000 workers by the year 2009. This will also lead to many professionals switching jobs for career advancement, and in turn employees will be forced to attract professionals by offering them better pay packages. These factors will lead to escalation of costs, and India may well lose its edge as a low-cost destination. The Financial Express quotes the Gartner report:

Quality, too, is likely to suffer as the top available talent has already been absorbed by the industry. As a result, service providers have no option but to recruit from a level below their optimum requirements. This makes high-quality in-house training a critical factor.

Read More:  ‘Poor quality, security may dent BPO industry’