Archive for the Trends Category
Posted on August 25, 2010 by Atul
“Global Sourcing in the New Normal: Adapting to Economic Uncertainty, Changing Markets and Competitive Dynamics”
by Atul Vashistha
Staffing augmentation. Labor arbitrage. India.
For many out there, outsourcing seems to be defined only by the above – people working for low compensation in locations such as India helping the client save significant monies. That is outsourcing to them. However, the recent and continuing downturn in 2009 and 2010, has upset many notions and models that have been in place for over a decade. What was considered to be the norm or the normal as far as outsourcing is concerned, is now in flux and so requires different responses. The recent downturn has fundamentally changed how firms look at outsourcing. This period also revealed the challenges with current models and practices.
Over the next ten or so articles, I will touch on a topic each time and explore it in more detail. This blog’s topic is
Trend: Location
Take for instance, the call center business. There was a time when India was the only market given due consideration, as far as setting up call center operations was concerned. That notion has been dispelled by other markets such as the Philippines and Costa Rica, which have showcased themselves in exemplary fashion as far as the provision of voice-based customer support services is concerned.
In similar manner, we see the rise of engineering services and local players in Brazil and Russia, increasingly emerging as a premier destination for the outsourcing of complex engineering and applications activities.
The above instances are just some of the many shifts and changes we are likely to continue to witness. In particular, they point towards an endeavor to be on the lookout for markets with newer skill sets, and not just go by established norms wherein predestinated markets such as India have long been considered to be the haven for any and every kind of outsourcing. In the same breath, it is vital that markets with access to equal or better technology processes are also identified. The situation is akin to the age old maxim wherein stock diversification is key to a healthy nest egg; depending on just one or more markets for all of one’s outsourcing needs is really not a very good idea. Increased attrition and competition for resources point to the need for geographic diversification.
Besides skill sets and technology, there are other reasons for which alternate markets also need to be actively considered. Take for instance the aspect of time zone. Many of the Latin American locations lie at the same time zones as the US. There are various outsourcing opportunities that may be tapped here, especially if we are to look at the large Spanish speaking population of the region and juxtapose it with the equally large Hispanic population of the US.
We see the following clusters developing:
Asia Pacific: The key locations in this cluster are India, Philippines, China, Malaysia and Vietnam. Others such as Thailand, Sri Lanka and Indonesia are expected to contribute too.
Europe: The key locations in this cluster are Czech Republic, Poland, Russia, Hungary, Ireland and Romania.
Middle East/Africa: The key locations in this cluster are Egypt, South Africa, Jordan and Ghana. Other locations such as Kenya, Nigeria and Morocco can contribute too.
North America/South America: The key locations are USA, Canada, Mexico, Brazil, Colombia, Chile, Costa Rica and Argentina. Panama and Guatemala can contribute too.
I will be doing a key note at the Global Sourcing Forum in NYC on the 13th of October. Join me in NYC and learn from an industry expert and I on the trends, traps and emerging opportunities that will be the “New Normal” and what you can do to leverage it to your benefit. Learn about rising destinations, new pricing models, leading engagement models, governance technologies and knowledge management models. This keynote is led by Former J&J business unit CIO and Head of eJNJ, John Hammitt and I.
Posted on August 12, 2010 by Atul
Posted on August 12, 2010 by Atul
WoW! I am starting to see “Cloud Computing” being put forth as the “Internet Boom” of the late 90s. Think it has tremendous potential and just like the internet will take its time to mature…. Let’s make sure we “Look Before We Leap”.
FROM COMPUTER WORLD
Arjun Sethi doesn’t equivocate. “In the next five years, outsourcing as we know it will have disappeared,” says the partner and head of the outsourcing practice at consultancy A.T. Kearney. “New players, which have yet to enter the market, will soon rule the industry.”
At the heart of Sethi's prediction of a “massive reconfiguration of the outsourcing industry” is the rise of cloud computing. Most existing providers simply won't adapt quickly enough. As a result, Sethi says, Amazon, Google or a vendor we've not yet heard of will become the market leaders. Meanwhile, traditional infrastructure providers like HP, Dell and Xerox may struggle to keep up, and many Indian providers will disappear completely.
CIO.com talked to Sethi about his vision of the next generation of IT outsourcing.
via The End of IT Outsourcing As We Know It – Computerworld.
Posted on August 12, 2010 by Atul
In a statement on its website, the ministry said the policy covers firms specializing in information technology outsourcing ITO, business process outsourcing BPO and knowledge process outsourcing KPO in 21 Chinese cities, including Beijing, Shanghai, Dalian and Shenzhen.China is currently the worlds second-largest outsourcing market for such services, after India
via China gives tax break to service outsourcing firms.
Posted on July 16, 2010 by Atul
Tata Consultancy Services: Investors.
Yesterday, TCS announced a strong performance in the first quarter of the fiscal year. Is the market really improving dramatically or is this the pre-summer bump?
Revenues at $1,794 million
up 6.4% sequentially; up
21.2% Y-o-Y
Financial Highlights for Quarter Ended June 30, 2010:
- Operating Profits at $487 million; Growth 32.5% Y-o-Y and 5.1% Q-o-Q
- Profit After Tax at $403 million; Growth of 29.3% Y-o-Y and (4.9) % Q-o-Q
- Earnings Per Share at $0.21
Business Highlights for Quarter Ended June 30, 2010:
- Gross Addition of 10,849 Employees (Net Addition of 3,271 employees)
- 36 New Clients added
Please use the link below to view the entire press release.
http://www.tcs.com/news_events/press_releases/Pages/Q1-2011-Revenues-USD-1794-million-up-6.4-percent-sequentially-up-21.2-Y-o-Y.aspx <http://www.tcs.com/news_events/press_releases/Pages/Q1-2011-Revenues-USD-1794-million-up-6.4-percent-sequentially-up-21.2-Y-o-Y.aspx>
Posted on July 5, 2010 by Atul
Danville Express : McNerney introduces bill to fight outsourcing.
Here we go again! Another politician working on making America less competitive and forcing American companies to have more disadvantages as they compete globally.
Jobs are not created by putting more hurdles in front of companies. Jobs are created by providing incentives for companies to invest in communities and new opportunities.
Has anyone done a study of how many jobs are being created by foreign outsourcing companies in the U.S.A.? Has anyone done a study to see what impact outsourcing is having on the fortunes of the buyers? Are they competing better and thus creating more jobs and better futures for their employees?
We are lot more connected than when most of these politicians started their careers. They need to spend more time understanding the connectedness of our world and how one needs to compete NOW!
Posted on June 5, 2010 by Atul
Global Services -Voice-based BPO Industry is Reviving.
Voice-based services or call center services– the offering that actually started it all for the BPO industry in countries like India and the Philippines, has changed a lot since inception. The very purpose of outsourcing this service has undergone a radical change.
“Initially, clients preferred to turn the work to service providers because the service providers offered a cost advantage or some type of ‘peak volume overflow’ capacity that the clients could not staff themselves,” says Sid Pai, Partner & Managing Director, TPI India.
Offshore call centers offering voice-based services were the perfect answer to this and one saw a massive build up of call centers in the early part of the decade. Very soon, the industry matured. Many call centers reached a point where they couldn’t scale up or they couldn’t retain key clients. This led to a shake-up in the call center industry, especially in India, where many of them were snapped up by IT services companies ( e.g. Infosys-Progeon, Wipro-Spectramind, IBM-Daksh, etc) seeking to enter the BPO industry.
BPO’s addressing the voice market had growth challenges. The way out was to shift the focus to other areas of BPO like finance/ accounting, mortgage, insurance and other niche sectors like KPO and LPO. Says Atul Vashishtha, CEO of Neo Advisory, “The market for non-voice services was expected to grow faster, as the call center sector was more mature and significantly developed .”
Revival and New Hope
The voice-based BPO industry is reviving. “Investments in technology platforms, process improvements, equipment and facilities and acquiring specific vertical capabilities, made by the service providers are outpacing those by the client. Service providers are moving up the value chain,” says Pai.
Voice- based services continue to expand their domain and tailor their offerings according to the needs of their clients. “Today customers are looking at unified communications to integrate various communication systems with their business applications to improve their business processes. These improved business processes lead to higher productivity for employees and greater customer satisfaction which in turn results in higher revenues and profits,” says Minhaj Zia, National Sales Manager, Unified Communications, Cisco India & SAARC.
Expanding scope of services
Clients today have access to a wide spectrum of services under voice. “Cisco subscribes to a range of services covering the entire gamut from technology services desk for customers and employees, human resources support for employees , escalation options for customers for quick access and marketing access to and from Cisco,” says V.C. Gopalratnam, Vice President (IT) and Chief Information Officer, Globalisation, Cisco, on the internal deployment of voice services in the company.
Providers are also developing expertise in niche areas within voice services. Andrew Kokes, Vice President of The Americas, Sitel, cites an example. “Revenue generation is one of the key metrics that Sitel is measured against for most customer care programs (revenue per month, revenue per call), and is a large part of our core expertise. More than half of all Sitel-managed inbound programs incorporate some form of upsell or cross-sell offer.”
The maturity of this segment allows outsourcing to many more locations as compared to emerging areas of BPO and thus finding price points and capabilities according to the specific needs of the client. “In all cases the services (we subscribe to) have a “follow the sun model” with sufficient geographical spread to cover all time zones effectively,” says Gopalratnam.
Collaboration and integration- the new formulas of growth
Collaboration and integration of communication platforms and capabilities are the new formulas of growth in this sector. “Collaboration is slowly moving towards new forms such as Enterprise Social Software, UC as a Service, TelePresence etc. Cisco’s Unified Contact Center solution…. provides a VoIP contact center solution that enables organizations to integrate inbound and outbound voice applications with Internet applications, including real-time chat, Web collaboration, and email. This integration provides for unified capabilities, helping a single agent support multiple interactions simultaneously, regardless of the communications channel the customer has chosen,” elaborates Zia.
Voice services are set to move to a higher degree of integration at multiple levels. Kokes says, “Voice-based contact center services are rapidly moving beyond traditional “voice” communication to include a blend of voice and live-chat (i.e., text based) engagement. In such arrangements, contact center agents are provided with real-time indicators of a website visitor’s propensity to purchase, and can invite that online consumer to chat via IM before the customer navigates away from the site. Such a model also opens the door to Pay-for-Performance client arrangements, whereby the call center fees for service can be aligned with the program’s overall success in producing incremental online sales.”
Zia also sees integration and improved technology as growth drivers for this sector. He says, “Enterprises will move beyond contact center to a customer interaction network with hosted contact centers for both enterprise customers and service providers. In a central office or data center, service providers will host the contact center infrastructure software, which will be shared by multiple business customers. Subscribing business customers will have IP or time-division multiplexing (TDM) infrastructures or a combination of the two.”
A suite of integrated services can also be introduced, he says, like virtual call centers, network routing with computer telephony integration (CTI), networked interactive voice response (IVR), intelligent call routing (routing calls between contact centers based on call context information, agent availability, and customer information from databases) and multimedia applications such as Web collaboration and e-mail response management.
With so much innovation happening and set to happen in this ‘traditional’ sector of BPO, analysts are optimistic of its transformational capabilities for businesses. “(Its potential to transform) looks evident given the investments made by the service providers on technology and platforms. In addition, leading service providers have built modern global services delivery infrastructures and implemented best practices that allow them to effectively and efficiently leverage their scale, volume, global capacity and technology to better serve their clients.” says Pai. To this, Atul Vashishtha adds that this is a market that will become increasingly global and Tier 2 players will need to specialize to succeed.
Posted on May 24, 2010 by Atul
Why Chief Information Officers Are Second-Class Citizens Among Top Executives – WSJ.com.
I have been working with CIOs since 1991 and have come to admire many of them. CIOs at Applied Materials, Ron Kifer and Jay Kerley; CIO at Family Dollar, Joshua Jewett; CIOs at P&G, Fedex and others are not just senior leaders, they are helping transform their firms. They are leading key initiatives.
While the articles has good pointers for CIOs on how to better evolve their future careers, wish they had talked to one of the above to show how many are already doing it!
Posted on April 30, 2010 by Atul
Global Services -Outsourcing Firms in the Gulf Boot Up.
Traditionally outsourcing companies have provided service for back-office operations. But countries such as the UAE, Egypt, Jordan and Morocco have been making efforts to build up infrastructure, people and funds to grow the sector. And industry experts believe the outsourcing industry has been growing at 20 per cent annually in the Middle East.
Amin Khaireldin, Strategy Advisor and Board Member at Egypt-based Information Technology Industry Development Agency (Itida)Information Technology Industry Development Agency, said: “In Egypt we put resources in a business park-like Smart Village. From the premises services such as financial analytics are conducted by 200 analysts for a Dubai-based company. Technical as well as packaged implementation services (PIS) are the focus.”
Business process outsourcing (BPO) is another area gaining relevance in the region. BPO involves the contracting of operations and responsibilities of specific business functions (or processes) to a third-party service provider. “Gulf-based companies are now considering taking BPO services from outsourcing firms in the Gulf. And Itida has been making investments towards acquiring international standards in this segment,” said Khaireldin.
IT service companies such as Patni Computer Services (PCS) have noticed this change in this region. Derek Kemp, President (Emea), PCS, said: “The Gulf economies have been building resources for a three-tier model. This is mainly onshore, nearshore and offshore. They are trying to inject the culture for IT services. However, not all countries in the GCC are human intensive as the scale is not available. But the growth potential is immense, for instance, a country like Egypt has been able to grow in its GDP because of outsourcing. The opportunities from oil, gas, telecom and financial services are immense.”
According to Kemp, long-term contracts in outsourcing have started happening, which was not the case earlier. “Traditionally the market in the Gulf depended on buying rather than a service model. Therefore, now even companies based in the Gulf are looking at working on an outsourced model. This attitude change will raise the profile of the region.”
He also explained that although the market size is small the ICT (Information and computing technology) spend in the region would help other sectors grow. “The ICT spend in the region is the same as in the UK. Markets are flat in the UK currently and US is starting to pick up while continental Europe has picked up in offshoring.”
Khaireldin said the UAE is not human intensive, but it provides high-end financial services. “For low- and mid-level services human capital is essential along with low labour costs and incentives.”
Gulf states are looking at upgrading skills of graduates in the BPO and PIS segments. “PIS is expected to hit $3 billion (Dh11bn) by 2020 from the current $200 million in the region,” Khaireldin said.
Source: zawya.com
Posted on April 8, 2010 by Atul
The “A” word attrition is back | Outsource Portfolio.
The “A” word (attrition) is back in outsourcing companies
With uncertainty easing, attrition, the biggest nightmare for HR managers in IT services and outsourcing companies, is on the horizon while for some firms, it is already here. So just how are the big 3 IT services firms faring on the attrition and hiring front? Consider the following attrition rates (as of January):
- Infosys. Attrition at Infosys rose from 10.9% the last quarter to 11.6%. However, a March Wall Street Journal article quoted a CLSA Asia-Pacific report as saying that there are unconfirmed rumors that 4,000-4,200 employees have resigned at Infosys for the month of February alone – well beyond the 1,200 employees who should be resigning each month (as of December 31, Infosys had about 109,882 employees). Nevertheless, it was also noted that Infosys had the largest bench strength in the industry at almost 20,000 free resources.
- Tata Consultancy Services (TCS). Attrition at TCS has been stable at around 11.5% – although company officials expect this rate to rise. However, the Wall Street Journal noted in February that TCS will go on a hiring spree and hire up to 30,000 new employees after the next fiscal year begins on April 1. This is on top of the 11,500 planned hires for the first quarter of 2010. It was also noted that 70% of new hires for the new fiscal year will be fresh graduates and more than 2,000 employees will be recruited from outside India.
- Wipro. Wipro had an attrition rate of about 13.4% – up from an average of 8.9% over the past three quarters. Hence, the Hindu Business Line noted that they were planning a salary hike for February along with promotions to help prevent attrition from rising further while recruitment initiatives would happen on a demand basis and include a mix of campus hires and science graduates along with experienced talent. Meanwhile, the Hindu Business Line quoted Girish Paranjpe, the Joint-CEO of Wipro’s IT Services group, as saying that the company’s bench strength was around 7,500 to 8,000 on an employee base of about 103,000 while the industry bench strength standard is usually twice that.
However, another Hindu Business Line article noted that the brunt of any rise in attrition rates will likely be borne by mid-size software outsourcers who could see attrition rates reach the 15% level. Moreover and since the big players have mostly not been hiring for some time, employees with midsize firms are more likely to consider jumping to larger companies if they are offered the right opportunity.
Meanwhile, utilization rates (that is, the number of employees billed per hundred verses those who are on the bench) are also increasing at the big 3 IT services firms. According to the Hindu Business Line, utilization rates rose from 67.3% to 68.8% at Infosys, 73.6% to 77.2% at Tata Consultancy Services (TCS) and 70.8% to 73.2% at Wipro.
Nevertheless, as both utilization and attrition rates rise, its time for companies to once again think about long-term strategies for retaining employees. As Raman Roy, the chairman and managing director of BPO firm Quattro, noted in the Financial Express, meddling with salary and benefits is a short-term strategy (he chooses to focus on in-house training to create an efficient group of high achievers) while attrition is merely a symptom and not a disease. In other words, its the symptom of an increasingly healthier job market and economy for outsourcing.
« Older Entries
