It's a win-win situation at both ends. An increasing number of hospitals from the UK, UAE and neighbouring countries like Sri Lanka, Nepal and Bangladesh are outsourcing specialised pathological tests to India.
While these countries save both time and money even as they get access to internationally-accredited labs, it works out as a tremendous business opportunity for India.
"The outsourcing opportunity in the UK alone is 450 million pounds. That works out to about Rs 3,600 crore.
Outsourcing tests to India means a saving of about 30-40% for them which works out to a sum of almost 140 million pounds. That's a huge saving for them," said SRL Ranbaxy chief operating officer Janak Singh Bajwa.
SRL Ranbaxy is already flying in samples from a hospital chain in the UK and is about to enter into a tie-up with another one. In addition, it's also handling samples from hospitals in the UAE, Sri Lanka, Nepal and Bangladesh.
It's not the routine haemoglobin or blood sugar tests which are being outsourced, but specialised tests which usually take more than three days to process.
Samples are picked up from these countries, put in special packages to maintain the required temperature, flown by air to labs in Delhi and Mumbai and then tested. Reports are sent across online and a hard copy follows a day later.
The entire start-to-finish process takes about 72 hours, out of which transportation alone can take up to 36 hours.Some African and southeast Asian countries may also soon start outsourcing to India.
"We will start processing samples from the UK by March. We are also exploring newer markets like South Africa, Kenya, Malaysia and Thailand," said Ameera Shah, vice-president, Metropolis Health Services.
"We have already got interested parties from the US for histopathological tests which are used in cancer diagnosis. We are also part of a consortium which has bid for a 600 million pound-worth teleradiology contract," said Shah.
There is a great dearth of radiologists in the UK and teleradiology will help doctors in India access and interpret images of CT or MRI scans transmitted from there.
While some like Bajwa are upbeat about the trend and feel the megabucks will start flowing in another 18 months or so, others are more circumspect.
"We have grown about five to six times since last year in this field. But once we reach a critical mass, the growth rate will be geometric," said Bajwa.
Dr Arvind Lal of Dr Lal's Path Labs which has also started conducting trial runs with hospitals in the US, UK, Middle East and neighbouring countries, said: "There's a lot of promise and people are showing interest.
But it will take some years before these trial runs will be converted into revenue."
Monday, January 09, 2006
Tuesday, January 03, 2006
BPOs will have to sharpen their new skills
The Business Process Outsourcing (BPO) sector that has so far focused on basic services — customer care, telemarketing, data entry or insurance claims processing — is set to graduate to newer services. While this has been happening for sometime, vendors will increasingly have no option but to scale up within existing verticals or target new service areas like HR, legal and animation.
The traditional services have seen billing rates erode over the last three years by as much as 33%. Billing rates for basic services were around $18 per hour three-four years back, now the rates, are under $12 per hour. Besides, labour costs have gone up by 10%-15% year-on-year and the current delivery is largely from the more expensive Tier I cities (like Delhi, Mumbai, Bangalore). This could, in the long- run, make it unviable to offer the basic services. Much like medical transcription became unviable after billing rates crashed.
Says, Kiran Karnik, president, Nasscom: “There will be a distinct shift from traditional BPO services to Knowledge Process Outsourcing (KPO) kind of services. I see companies getting deeper into areas like HR and F&A.” So, instead of just managing payroll, vendors may scale up to take care of career and retirement planning.
Vendors will also get deeper into existing services areas. For instance banking and insurance account for 50% of the potential offshore BPO market. Vendors have captured less than 10% of the total opportunity, even in early mover industries, like retail banking. Here the third party vendors are at present doing processes within deposit and lending, credit cards, mortgages and loans. In insurance they have covered areas like life, health, property and casualty.
The addressable market (work that will be offshored) in banking and insurance according to ‘Nasscom McKinsey Report ’05’ is to the tune of $35bn-$40bn. For credit cards it is $9bn-$11bn, mortgages $3bn-$4bn. Within credit cards the collection business is to the tune of $2bn a year and customer service is $4bn-5bn. Merchant servicing presents a $1bn market annually.
Within mortgage-related offshoring, activities like loan servicing, customer service and default management account for 50% of the opportunity.
Mortgage origination activities like underwriting and warehousing make up another 40% of the opportunity.
“Our research suggests the total addressable market for global offshoring is about $300bn, of which $110bn will be offshored by ’10. India has the potential to capture more than 50% of this,” says Noshir Kaka, partner, McKinsey.
Indian vendors will get there provided they learn and graduate to the more sophisticated services soon. “The good thing is that demand is strong. Now we are seeing lot more momentum from Europe and Japan to offshore work. But competition from other destinations to bag the offshored work is also growing,” says Mr Karnik. Vendors may well get back into the classrooms. This time not to hone foreign accents, but to get a better grip on higher-end processes.
The traditional services have seen billing rates erode over the last three years by as much as 33%. Billing rates for basic services were around $18 per hour three-four years back, now the rates, are under $12 per hour. Besides, labour costs have gone up by 10%-15% year-on-year and the current delivery is largely from the more expensive Tier I cities (like Delhi, Mumbai, Bangalore). This could, in the long- run, make it unviable to offer the basic services. Much like medical transcription became unviable after billing rates crashed.
Says, Kiran Karnik, president, Nasscom: “There will be a distinct shift from traditional BPO services to Knowledge Process Outsourcing (KPO) kind of services. I see companies getting deeper into areas like HR and F&A.” So, instead of just managing payroll, vendors may scale up to take care of career and retirement planning.
Vendors will also get deeper into existing services areas. For instance banking and insurance account for 50% of the potential offshore BPO market. Vendors have captured less than 10% of the total opportunity, even in early mover industries, like retail banking. Here the third party vendors are at present doing processes within deposit and lending, credit cards, mortgages and loans. In insurance they have covered areas like life, health, property and casualty.
The addressable market (work that will be offshored) in banking and insurance according to ‘Nasscom McKinsey Report ’05’ is to the tune of $35bn-$40bn. For credit cards it is $9bn-$11bn, mortgages $3bn-$4bn. Within credit cards the collection business is to the tune of $2bn a year and customer service is $4bn-5bn. Merchant servicing presents a $1bn market annually.
Within mortgage-related offshoring, activities like loan servicing, customer service and default management account for 50% of the opportunity.
Mortgage origination activities like underwriting and warehousing make up another 40% of the opportunity.
“Our research suggests the total addressable market for global offshoring is about $300bn, of which $110bn will be offshored by ’10. India has the potential to capture more than 50% of this,” says Noshir Kaka, partner, McKinsey.
Indian vendors will get there provided they learn and graduate to the more sophisticated services soon. “The good thing is that demand is strong. Now we are seeing lot more momentum from Europe and Japan to offshore work. But competition from other destinations to bag the offshored work is also growing,” says Mr Karnik. Vendors may well get back into the classrooms. This time not to hone foreign accents, but to get a better grip on higher-end processes.
Monday, January 02, 2006
Call centers forge own communities
As fireworks boomed across nearby New Delhi and families lit candles and incense and prayed late into the evening, thousands of call-center agents reported to work at a gleaming office tower in this Indian city. Donning headsets and fake American names, they placed and fielded phone calls to and from the United States, collecting bills and raising credit limits.
For a few minutes each shift, though, the workers hurried outside to take part in their own celebration. Under a massive tent, DJs spun beats including Punjabi folk music and the imported sounds of R&B artist Usher. Dozens crowded the dance floor and lined up at buffet stations and arcade games. It was Diwali, after all, and the Hindu festival of lights couldn’t pass unmarked at Convergys, the Ohio-based operator of one of India’s largest call centers.
“We celebrate here as if we are family,” said Shweta Pundir, a 27-year-old training manager at Convergys. “This is like home.”
In India, call centers are part of a burgeoning industry known as “business process outsourcing,” or BPO – a new world created by a rush of foreign investment as Western companies outsource functions such as customer care to billing services.
But the emerging subculture of call-center workers reveals that the United States has exported more than jobs and products to India – it has exported values, as well. Call centers have brought new wealth to India, but they are also fostering a cultural backlash, as the country’s young, hip BPO workers run up against the traditions of the older generations.
Companies such as Convergys now employ more than 5,000 in India to perform “back-office” functions. This suburb south of New Delhi also boasts offices for IBM Corp., General Electric Co., American Express Co. and Nestle SA. The Indian 20-somethings laboring in these call centers not only work together – they also drink together, dance together, date one another and, most important, understand one another.
Their jobs compel them to cultivate American pronunciations and keep up with U.S. pop culture. They have their own hybrid vocabulary. (“No probs, yaar” means “no problem, my friend.”) And they have boundless expectations about where their new careers can take them.
But not everyone rejoices at these new employment opportunities. Citing low pay and dead-end jobs, India’s most popular news portal declared recently that call centers have “cons more than pros.” A TV talk show probed whether such centers are no more than “swanky sweatshops.” And in a best-selling novel, “One Night @ The Call Center,” two BPO workers quit to open their own company, saying they were sick of working for Americans all night in jobs with no potential.
As more call centers and multinationals enter India, the agents have become hot commodities, switching jobs and commanding steep salary hikes along the way.
The reputation of call-center agents has plummeted in India over the past year, said Vishal Manchanda, who heads the India office of Arlington, Va.-based Cvent, an online event management firm. “It used to be if you said you were a team lead, a girl’s family was impressed,” he said. “Now, increasingly, it’s being nullified. It’s like the dot-com bubble which burst. ... An associate or an agent is just a spoke in the wheel.”
Observers say the sudden debate over call centers stems from longer-term changes in Indian society since the nation’s economy opened up in 1991. Older Indians lament that their children are too busy, with no time for weddings, holidays or relatives. While young people’s social lives used to revolve around family, now they increasingly focus on work.
“The average Indian youth today is more outward-looking, more confident, more liberal in terms of attitudes and values and social norms” compared with 20 years ago, said Sunil Mehta, vice president of the National Association of Software and Service Companies. “It is a phenomenon of the Indian youth, rather than a phenomenon of BPO. But these characteristics might be more amplified by people who work in the BPO sector.”
Call-center workers insist that they need not choose between their jobs and their traditions.
“Why is this industry so looked down upon?” asked Pundir, the Convergys training manager. “I am so close to my culture now. There are things we’ve learned from our colleagues in the U.S. like time management, but I celebrate more of the festivals at work than I did before.”
For a few minutes each shift, though, the workers hurried outside to take part in their own celebration. Under a massive tent, DJs spun beats including Punjabi folk music and the imported sounds of R&B artist Usher. Dozens crowded the dance floor and lined up at buffet stations and arcade games. It was Diwali, after all, and the Hindu festival of lights couldn’t pass unmarked at Convergys, the Ohio-based operator of one of India’s largest call centers.
“We celebrate here as if we are family,” said Shweta Pundir, a 27-year-old training manager at Convergys. “This is like home.”
In India, call centers are part of a burgeoning industry known as “business process outsourcing,” or BPO – a new world created by a rush of foreign investment as Western companies outsource functions such as customer care to billing services.
But the emerging subculture of call-center workers reveals that the United States has exported more than jobs and products to India – it has exported values, as well. Call centers have brought new wealth to India, but they are also fostering a cultural backlash, as the country’s young, hip BPO workers run up against the traditions of the older generations.
Companies such as Convergys now employ more than 5,000 in India to perform “back-office” functions. This suburb south of New Delhi also boasts offices for IBM Corp., General Electric Co., American Express Co. and Nestle SA. The Indian 20-somethings laboring in these call centers not only work together – they also drink together, dance together, date one another and, most important, understand one another.
Their jobs compel them to cultivate American pronunciations and keep up with U.S. pop culture. They have their own hybrid vocabulary. (“No probs, yaar” means “no problem, my friend.”) And they have boundless expectations about where their new careers can take them.
But not everyone rejoices at these new employment opportunities. Citing low pay and dead-end jobs, India’s most popular news portal declared recently that call centers have “cons more than pros.” A TV talk show probed whether such centers are no more than “swanky sweatshops.” And in a best-selling novel, “One Night @ The Call Center,” two BPO workers quit to open their own company, saying they were sick of working for Americans all night in jobs with no potential.
As more call centers and multinationals enter India, the agents have become hot commodities, switching jobs and commanding steep salary hikes along the way.
The reputation of call-center agents has plummeted in India over the past year, said Vishal Manchanda, who heads the India office of Arlington, Va.-based Cvent, an online event management firm. “It used to be if you said you were a team lead, a girl’s family was impressed,” he said. “Now, increasingly, it’s being nullified. It’s like the dot-com bubble which burst. ... An associate or an agent is just a spoke in the wheel.”
Observers say the sudden debate over call centers stems from longer-term changes in Indian society since the nation’s economy opened up in 1991. Older Indians lament that their children are too busy, with no time for weddings, holidays or relatives. While young people’s social lives used to revolve around family, now they increasingly focus on work.
“The average Indian youth today is more outward-looking, more confident, more liberal in terms of attitudes and values and social norms” compared with 20 years ago, said Sunil Mehta, vice president of the National Association of Software and Service Companies. “It is a phenomenon of the Indian youth, rather than a phenomenon of BPO. But these characteristics might be more amplified by people who work in the BPO sector.”
Call-center workers insist that they need not choose between their jobs and their traditions.
“Why is this industry so looked down upon?” asked Pundir, the Convergys training manager. “I am so close to my culture now. There are things we’ve learned from our colleagues in the U.S. like time management, but I celebrate more of the festivals at work than I did before.”
Sunday, January 01, 2006
Offshore Software Development
You can outsource almost anythings. Maybe you don't know it yet, but it is true. A couple of days ago, when I was drinking coffee in the kitchen, my wife pointed at the faucet that was leaking big times. The good ole faucets was there when we moved in about ten year ago, and trying to fix it again didn't make sense any more. Since I religiously believe in DIY, I bought a new faucets and set about workings. When the old faucet was gone, I found out the metal pipe under the sinks had to be replaced, too. There was no way I could do it without recourses to welding. I realized I was ready to outsource that parts of the project, so I called the plumber.
IT outsourcing isn't much different than any othr kind of outsourcing. When you face an insistent needs to start a new IT development project, you have to weigh your current inhouse capacity first. If your experiences and budget allow you to cope with the task without resorting to any outside expertises, you should probably take full advantage of your potential and do it yourself. However, if there is danger that you will bite off more than you can chew, it's about time to consider the advantages and disadvantages of outsourcing.
Advantages:
Basically, outsource service providers offer you higher quality services at a lower cost. This makes the advantages of IT outsourcing development obvious, so let's have a look at just a few of them.
IT Outsourcing development is a most effective way to stretch your budget. When managers plan IT outsourcing development, they usually make it their aim to cut down the company's expenditures by 30%. This is a figure that speaks for itself. Of course, there's always the risk of failure, but if you outsource prudently, you will afford to implement projects of such a scale that would be impossible for you to reach on your own.
If you need to have state-of-the-art IT outsourcing solutions worked out and innovations implemented with small losses, outsourcing may be the only way out. It will saves you from the nightmare of retraining your employees (or even hiring new ones) and/or paying for re-equipment.
Cutting your cost and upgrading the quality of the service you offer will allow you to expand the competitive capacity of your business. I suppose the state the IT markets is in today makes this simple argument a crucial one.
For more information please visit: OffshoreITStaffing.com
IT outsourcing isn't much different than any othr kind of outsourcing. When you face an insistent needs to start a new IT development project, you have to weigh your current inhouse capacity first. If your experiences and budget allow you to cope with the task without resorting to any outside expertises, you should probably take full advantage of your potential and do it yourself. However, if there is danger that you will bite off more than you can chew, it's about time to consider the advantages and disadvantages of outsourcing.
Advantages:
Basically, outsource service providers offer you higher quality services at a lower cost. This makes the advantages of IT outsourcing development obvious, so let's have a look at just a few of them.
IT Outsourcing development is a most effective way to stretch your budget. When managers plan IT outsourcing development, they usually make it their aim to cut down the company's expenditures by 30%. This is a figure that speaks for itself. Of course, there's always the risk of failure, but if you outsource prudently, you will afford to implement projects of such a scale that would be impossible for you to reach on your own.
If you need to have state-of-the-art IT outsourcing solutions worked out and innovations implemented with small losses, outsourcing may be the only way out. It will saves you from the nightmare of retraining your employees (or even hiring new ones) and/or paying for re-equipment.
Cutting your cost and upgrading the quality of the service you offer will allow you to expand the competitive capacity of your business. I suppose the state the IT markets is in today makes this simple argument a crucial one.
For more information please visit: OffshoreITStaffing.com
Thursday, December 29, 2005
Legal outsourcing can rise up to US$4bn by 2015
Outsourcing is gradually becoming the backbone of Indian service sectors. In the last fiscal India earned US$6.7bn by providing services in software, technology and manufacturing outsourcing.
Legal services are the next destination for a "cool" BPO. According to a study by the US based Forester Research, the current annual value of legal outsourcing which is worth US$80mn can rise up to US$4bn and can fetch 79,000 jobs in India by 2015.
The report says, "The benefit of the outsourcing companies in the US would translate into a cost saving of about 10-12 per cent. The potential of the Indian resources to absorb the increasing demand in legal outsourcing is because India enjoys the economic advantages of the wage difference and less perks and overheads."
National Association of Software and Service Companies (NASSCOM) also projected that legal processing outsourcing providers (LPOs) in India will soon rise up to US$3bn.
As associate lawyers in the US carry a price tag ranging from $225 to $450 per hour, India is a natural fit and already five of the 20-odd Indian KPO companies have established themselves and are tapping on skilled legal professionals to handle the outsourced work.
Indian firms enjoy much bigger margins as they bill their clients even 5-10 times more than BPO firms. Like BPO, India enjoys vast skilled manpower and this has given us the lead in KPO much ahead of Philippines and Sri Lanka.
But this glossy figure has many challenges ahead. The most important challenge to the newly-born sector is the need for Indian lawyers to pass us bar exams, conflict of interest rules and data security.
Legal services are the next destination for a "cool" BPO. According to a study by the US based Forester Research, the current annual value of legal outsourcing which is worth US$80mn can rise up to US$4bn and can fetch 79,000 jobs in India by 2015.
The report says, "The benefit of the outsourcing companies in the US would translate into a cost saving of about 10-12 per cent. The potential of the Indian resources to absorb the increasing demand in legal outsourcing is because India enjoys the economic advantages of the wage difference and less perks and overheads."
National Association of Software and Service Companies (NASSCOM) also projected that legal processing outsourcing providers (LPOs) in India will soon rise up to US$3bn.
As associate lawyers in the US carry a price tag ranging from $225 to $450 per hour, India is a natural fit and already five of the 20-odd Indian KPO companies have established themselves and are tapping on skilled legal professionals to handle the outsourced work.
Indian firms enjoy much bigger margins as they bill their clients even 5-10 times more than BPO firms. Like BPO, India enjoys vast skilled manpower and this has given us the lead in KPO much ahead of Philippines and Sri Lanka.
But this glossy figure has many challenges ahead. The most important challenge to the newly-born sector is the need for Indian lawyers to pass us bar exams, conflict of interest rules and data security.
Going beyond costs to measuring value
Outsourcing services will continue to grow in popularity in 2006, dissipating the political haze that has led the public to misunderstand its full benefits and implementation options, say Unisys experts.
“In the last few years outsourcing has been made the focus of a political sideshow - portrayed at best as a way for companies to meet demand for IT services by capitalising on lower labour costs in developing regions of the world, and at worst as a way to employ one set of workers at the expense of another,” says Mukul Agrawal, country manager, Unisys India.
“Really, the discussion needs to be about the significant business advantages outsourcing delivers,” added Agrawal.
“In 2006, enterprises will finally see through the politics and economic half-truths and realise that outsourcing isn’t just global sourcing narrowly applied. They will focus on the business definition of outsourcing: assigning execution of certain tasks to an expert partner, regardless of geographic location, who can deliver demonstrable value to the business.”
This will enable all to “clearly see outsourcing?s benefits: breakthrough visibility leading to secure business operations, better quality of service to customers and employees, improved risk management, remarkable operational efficiencies with lower total cost, and maximised IT investment.”
Spelling out new success measurements that will drive global sourcing decisions and which will emerge as a key market factor, Unisys said that there will be decline of the SLA (service level agreements) as prime outsourcing success metric.
“Business-value metrics will drive increased global sourcing and complexity in engagements will drive the need,” Unisys in its predictions for 2006 noted.
On the decline of the SLA, Agrawal said: “Organisations make substantial investments in management of IT infrastructure and business processes because they understand that outsourcing can deliver significant returns. They must continually demonstrate the relevance of that investment to the business and strategy by measuring the results it yields. SLAs, the traditional yardstick for measuring results, are no longer adequate to that purpose. They are primarily measurements of the vendor’s success in executing tasks, not how the provider impacts or furthers the client’s business imperatives.”
He further said that achieving 99.96 per cent uptime of the client’s network is a typical SLA, but as a measurement of business value it’s so broad that it becomes nearly meaningless.
“On the other hand, the personal uptime per high-productivity or pivotal employee would be a more meaningful metric, because it measures the kind of uptime that most directly benefits the business.”
In 2006 outsourcing performance metrics that are “directly rather than tangentially relevant to business improvement,” will be adopted.
To discover the appropriate metrics, according to Agrawal, an enterprise management has to find the linkages among critical business processes and supporting IT infrastructure elements.
Once this is done, the key next step is deciding which would be most beneficial to the organisation to outsource, assigning management responsibility to the appropriate internal or external party, determining the optimal success metric for each and monitoring progress against those agreed-upon business metrics.
Detailing on the aspect of Business-value metrics that will drive increased global sourcing, he said: “In 2006, to capitalise on the combination of educated workforces and lower labour costs and cost of living, enterprises and their services providers will continue to outsource important support tasks to providers in India, Eastern Europe, China, and even certain areas of the US and Canada. Increasingly, though, measurable value to the business, and not just cost containment, will be a key factor in global sourcing.”
“An enterprise can send IT support offshore to take advantage of lower labour costs, but if its employees spend more time on the phone per call with support personnel due to language or technology barriers, it hasn’t gained any advantage at all from global sourcing. Global sourcing needs to be backed up by a strong business case based on meaningful metrics,” highlighted Agrawal.
He added that complexity in engagements will drive the need for a ‘manager of managers’. A basic economic reality will continue to drive outsourcing in 2006 and only a relatively few large, multinational companies have the scale to insource management of all their business processes and IT infrastructure.
The personnel and capital costs of wholesale insourcing can be astronomical. Increasingly, both enterprises and government agencies will adopt global sourcing strategies that rely on multisourcing, the use of use both insourced and outsourced resources.
Frequently, enterprises’ next-generation multisourcing strategies involve multiple external partners. While retaining internal control and maintenance of its strategic applications, such as those for customer service, a company could outsource management of its IT infrastructure to one partner, its HR processes to another specialist, its procurement and logistics operations to a third provider, and so on. The larger the number of partners, the more value there is in unified, programmatic oversight of their activities, Unisys said.
“Outsourcing specific functions to best-in-class providers makes tremendous strategic and economic sense,” noted Agrawal, “but it can create challenges for management if not done adroitly. I see 2006 as a breakthrough year when enterprises begin engaging a ‘manager of managers’ to oversee and coordinate the activities of all sourcing partners to maximise the business and operational value of their outsourcing engagements.”
This doesn’t involve just implementing a function in software, “It requires choosing a skilled outsourcing provider to ensure that multiple providers make the appropriate connections, which appropriate benchmarks from all quarters of the engagement are linked and reported, and that conflict is surfaced and resolved right away.”
He added that application outsourcing will become more widespread in 2006, but the way enterprises undertake it will be more disciplined. Outsourcing applications can take many forms, from engaging a provider to run the applications in a conventional data centre and perform code maintenance to accessing the applications on a pay-per-use subscription basis from a provider running an IT utility employing a server farm.
To maximise the value of outsourcing strategic applications, enterprises will increasingly take a planned approach, often working with an expert partner, to answer fundamental business questions, such as whether the organisation needs to own the applications, or just the architecture around the applications, or both or neither.
Then they can determine which applications are most strategic, which ones the business will benefit from outsourcing, and what is the best way to outsource each.
“Enterprises will begin to derive as much benefit from planning the way they’ll outsource the applications as they will from actually outsourcing them,” noted Agrawal.
On the issue of what will spur offshore processing in 2006, Agrawal said: “The 2004 passage of the US Check Clearing for the 21st Century Act (Check 21), which provides a comprehensive framework to dramatically reduce the amount of clearing time for paper checks, led financial-services experts to expect a huge decline in US check volumes in 2005.”
“In 2006 I expect what we had initially anticipated for 2005. We’ll see a more precipitous decline in check and remittance volumes, driving banks that previously relied on internal processing capabilities to achieve economies of scale, especially by pooling their volumes with those of other banks in check processing utilities,” he added.
“American financial institutions will demonstrate greater willingness in 2006 to take advantage of payment processing capabilities outside the US to capitalise on economies of scale and lower costs,” predicts Agrawal.
“India has a mature payment processing capability. A lot of US financial institutions and payment processors like the idea of doing something where it’s been done successfully before. Eastern Europe especially, but parts of Asia in addition to India, are well positioned to host an increasing amount of offshore payment processing from the US.”
“In the last few years outsourcing has been made the focus of a political sideshow - portrayed at best as a way for companies to meet demand for IT services by capitalising on lower labour costs in developing regions of the world, and at worst as a way to employ one set of workers at the expense of another,” says Mukul Agrawal, country manager, Unisys India.
“Really, the discussion needs to be about the significant business advantages outsourcing delivers,” added Agrawal.
“In 2006, enterprises will finally see through the politics and economic half-truths and realise that outsourcing isn’t just global sourcing narrowly applied. They will focus on the business definition of outsourcing: assigning execution of certain tasks to an expert partner, regardless of geographic location, who can deliver demonstrable value to the business.”
This will enable all to “clearly see outsourcing?s benefits: breakthrough visibility leading to secure business operations, better quality of service to customers and employees, improved risk management, remarkable operational efficiencies with lower total cost, and maximised IT investment.”
Spelling out new success measurements that will drive global sourcing decisions and which will emerge as a key market factor, Unisys said that there will be decline of the SLA (service level agreements) as prime outsourcing success metric.
“Business-value metrics will drive increased global sourcing and complexity in engagements will drive the need,” Unisys in its predictions for 2006 noted.
On the decline of the SLA, Agrawal said: “Organisations make substantial investments in management of IT infrastructure and business processes because they understand that outsourcing can deliver significant returns. They must continually demonstrate the relevance of that investment to the business and strategy by measuring the results it yields. SLAs, the traditional yardstick for measuring results, are no longer adequate to that purpose. They are primarily measurements of the vendor’s success in executing tasks, not how the provider impacts or furthers the client’s business imperatives.”
He further said that achieving 99.96 per cent uptime of the client’s network is a typical SLA, but as a measurement of business value it’s so broad that it becomes nearly meaningless.
“On the other hand, the personal uptime per high-productivity or pivotal employee would be a more meaningful metric, because it measures the kind of uptime that most directly benefits the business.”
In 2006 outsourcing performance metrics that are “directly rather than tangentially relevant to business improvement,” will be adopted.
To discover the appropriate metrics, according to Agrawal, an enterprise management has to find the linkages among critical business processes and supporting IT infrastructure elements.
Once this is done, the key next step is deciding which would be most beneficial to the organisation to outsource, assigning management responsibility to the appropriate internal or external party, determining the optimal success metric for each and monitoring progress against those agreed-upon business metrics.
Detailing on the aspect of Business-value metrics that will drive increased global sourcing, he said: “In 2006, to capitalise on the combination of educated workforces and lower labour costs and cost of living, enterprises and their services providers will continue to outsource important support tasks to providers in India, Eastern Europe, China, and even certain areas of the US and Canada. Increasingly, though, measurable value to the business, and not just cost containment, will be a key factor in global sourcing.”
“An enterprise can send IT support offshore to take advantage of lower labour costs, but if its employees spend more time on the phone per call with support personnel due to language or technology barriers, it hasn’t gained any advantage at all from global sourcing. Global sourcing needs to be backed up by a strong business case based on meaningful metrics,” highlighted Agrawal.
He added that complexity in engagements will drive the need for a ‘manager of managers’. A basic economic reality will continue to drive outsourcing in 2006 and only a relatively few large, multinational companies have the scale to insource management of all their business processes and IT infrastructure.
The personnel and capital costs of wholesale insourcing can be astronomical. Increasingly, both enterprises and government agencies will adopt global sourcing strategies that rely on multisourcing, the use of use both insourced and outsourced resources.
Frequently, enterprises’ next-generation multisourcing strategies involve multiple external partners. While retaining internal control and maintenance of its strategic applications, such as those for customer service, a company could outsource management of its IT infrastructure to one partner, its HR processes to another specialist, its procurement and logistics operations to a third provider, and so on. The larger the number of partners, the more value there is in unified, programmatic oversight of their activities, Unisys said.
“Outsourcing specific functions to best-in-class providers makes tremendous strategic and economic sense,” noted Agrawal, “but it can create challenges for management if not done adroitly. I see 2006 as a breakthrough year when enterprises begin engaging a ‘manager of managers’ to oversee and coordinate the activities of all sourcing partners to maximise the business and operational value of their outsourcing engagements.”
This doesn’t involve just implementing a function in software, “It requires choosing a skilled outsourcing provider to ensure that multiple providers make the appropriate connections, which appropriate benchmarks from all quarters of the engagement are linked and reported, and that conflict is surfaced and resolved right away.”
He added that application outsourcing will become more widespread in 2006, but the way enterprises undertake it will be more disciplined. Outsourcing applications can take many forms, from engaging a provider to run the applications in a conventional data centre and perform code maintenance to accessing the applications on a pay-per-use subscription basis from a provider running an IT utility employing a server farm.
To maximise the value of outsourcing strategic applications, enterprises will increasingly take a planned approach, often working with an expert partner, to answer fundamental business questions, such as whether the organisation needs to own the applications, or just the architecture around the applications, or both or neither.
Then they can determine which applications are most strategic, which ones the business will benefit from outsourcing, and what is the best way to outsource each.
“Enterprises will begin to derive as much benefit from planning the way they’ll outsource the applications as they will from actually outsourcing them,” noted Agrawal.
On the issue of what will spur offshore processing in 2006, Agrawal said: “The 2004 passage of the US Check Clearing for the 21st Century Act (Check 21), which provides a comprehensive framework to dramatically reduce the amount of clearing time for paper checks, led financial-services experts to expect a huge decline in US check volumes in 2005.”
“In 2006 I expect what we had initially anticipated for 2005. We’ll see a more precipitous decline in check and remittance volumes, driving banks that previously relied on internal processing capabilities to achieve economies of scale, especially by pooling their volumes with those of other banks in check processing utilities,” he added.
“American financial institutions will demonstrate greater willingness in 2006 to take advantage of payment processing capabilities outside the US to capitalise on economies of scale and lower costs,” predicts Agrawal.
“India has a mature payment processing capability. A lot of US financial institutions and payment processors like the idea of doing something where it’s been done successfully before. Eastern Europe especially, but parts of Asia in addition to India, are well positioned to host an increasing amount of offshore payment processing from the US.”
Monday, December 26, 2005
Outsourcing boom creates worker shortage
India`s outsourcing boom has created a chronic shortage of skilled workers, threatening to send future jobs to competitors like China and the Philippines.
ABC reports call centers and outsourcing firms are growing fast, but their HR departments say because of the shortage, many young Indians they interview are unemployable mainly because of their poor English.
A Bombay-based call center manager showed a letter written by an employee that said: 'I am in well here and hope you are also in the same well.'
The report said India`s outsourcing industry employs about 350,000 people but will face a shortfall of 500,000 workers in the next few years, a study by by McKinsey & Co. says.
'If the industry has to go on paying higher and higher salaries to retain the staff it has, costs will rise and India will lose its biggest advantage -- cheap labor,' said Saurabh Wig, a former call center sales manager.
The problem with the skilled worker shortage in the second-most populous nation in the world is not quantity but quality, the report said. Many of the 3.6 million graduates churned out every year by Indian universities are considered mediocre, the report said.
ABC reports call centers and outsourcing firms are growing fast, but their HR departments say because of the shortage, many young Indians they interview are unemployable mainly because of their poor English.
A Bombay-based call center manager showed a letter written by an employee that said: 'I am in well here and hope you are also in the same well.'
The report said India`s outsourcing industry employs about 350,000 people but will face a shortfall of 500,000 workers in the next few years, a study by by McKinsey & Co. says.
'If the industry has to go on paying higher and higher salaries to retain the staff it has, costs will rise and India will lose its biggest advantage -- cheap labor,' said Saurabh Wig, a former call center sales manager.
The problem with the skilled worker shortage in the second-most populous nation in the world is not quantity but quality, the report said. Many of the 3.6 million graduates churned out every year by Indian universities are considered mediocre, the report said.
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