Taiwan Aims to Step Up to the Big Leagues of BPO
Remember Taiwan? The place where most of the electronic goods that we use are made. The country that at one point in time had the largest foreign exchange reserves.
The country that is perpetually at conflict with its larger and powerful neighbor, China. Taiwan, which was known for stratospheric growth rates in the 1990s, is a hub for high tech and advanced electronics design and manufacture. Dubbed as a “Tiger Economy” for its astounding growth, the Taiwanese economic miracle seems to roll on and not cease wondering experts who are puzzled as to what makes the country tick. With it’s nearly $500 Billion trade turnover, the country is a serious competitor in the field of hardware and electronic goods manufacture.
With these achievements under its belt, Taiwan is increasingly looking to capture a part of the growing outsourcing pie for software services and products. It is safe to say that with its inherent capabilities in manufacturing and high tech products, Taiwan can indeed become a contender for outsourcing destinations and give the biggies a run for their money. Further, the country is well poised to break out or become the next hot destination for outsourcing.
Constraining Factors
The key aspect that is holding the country back is the lack of English speaking skills among its workforce. Considering the fact that this attribute is behind the rise of India, Taiwan can well emulate the Indian model as well as borrow ideas from the Chinese juggernaut in its quest to make a mark in the field of IT outsourcing. With the country already established in the hardware space, it does not take much to make the leap into the software realm and compete on favorable terms. The implication of Taiwan’s economic progress is that when a country achieves excellence in a particular sector, it can easily transfer the advantages into related sectors, complement them, and actualize synergies.
This means that Taiwan with its high tech capabilities can easily make the transition into software and products development. With its world-class infrastructure, Taiwan can challenge both India with is abysmal infrastructure and China, which is finding it hard to balance growth and sustainability. The articulation of the recent economic policies by Taiwan hints at these ambitions and we can expect more action from Taipei in the coming years with respect to outsourcing and allied activities.
Current State of the Economy and Hyphenation with China
Having said that, it needs to be noted that Taiwan is currently in recession because of its tight integration into the global economy. Further, unemployment has reached around 5%, which by its stellar standards is something of a drag. Moreover, the country is always seen as an extension of the Chinese mainland and there are few major western powers that disentangle Taiwan from China. This hyphenation with China has to do with historical, political, and geopolitical aspects that reveal a lurking danger of confrontation with China any time.
This is something that has been holding back the country from scaling greater heights and the recent disputes in the South China Sea are another reminder of the potentially lethal situation that can escalate in the region and pose an existential threat to businesses operating in Taiwan. It remains to be seen as to whether economic considerations trump other emotional factors like the desire of China to reintegrate itself with Taiwan for historical and political reasons.
There seems to be a thaw in recent weeks but, as mentioned earlier, the present danger makes many western companies uncomfortable about locating their businesses in Taiwan. This is a significant political risk that needs to be managed and mitigated.
Some Future Directions
The other aspects of the state of outsourcing in Taiwan are to do with its proximity to China and Hong Kong, which made it easier for many western companies to have backup locations in Taipei. With near-shoring and geographical need for offsite centers growing in prominence, Taiwan has been quick to exploit this opportunity and leverage on its strengths as a leading destination for hardware. This means that many western companies are also looking at Taiwan with the intention of moving some of their activities from China and Hong Kong to Taipei.
Apart from this, the country is also emerging as a hub for biotech companies that are not constrained by the limitations described above. Finally, what surprises many experts are how can a country that is a leader in hardware not makes the transition to software and outsourcing?
The points discussed until now give us an indication as to why this situation persists and how it can be remedied. It remains to be seen whether Taiwan that currently does not find a mention in the Top 10 outsourcing destinations would be able to shake off the constraints and make the leap into the big league of software services outsourcing.
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Rent or Buy? Doing Your Due Dilligence in India’s Real Estate Game
By Preetam Kaushik
The real estate sector in India is caught between two worlds where one part is all structured and streamlined and the other part where lack of property records and clear titles dog the controversies over the real estate. Hence, it is very important for prospective and potential buyers and renters of real estate to do their due diligence before venturing into agreements. For instance, many real estate sellers of property and those property owners who rent their premises out can insist on some part of the payment to be made outside of the banking system. This aspect known as “black money” means that one has to pay in cash to buy or rent the property. This can seem strange to North American buyers who always deal with every financial transaction through the banking system. This is the single most important aspect of buying and renting real estate in India.
Titles of Ownership and Property Records
The next aspect is of property records and titles of ownership. In many metros in India, there are vast tracts of land that do not have clear titles of ownership, which can be used to track the details of past owners. This makes the process of acquiring property that much more difficult as without a clear title, many buyers would baulk at the transaction. However, the government is taking steps to remedy the situation and improve the process of keeping land records for lands and premises. If the fact that a readymade premises is available for purchase or rent and that it does not have clear titles surprises you, be prepared for more surprises as the proxy ownership of properties is another aspect of the real estate sector in India. Hence, we stress again the importance of due diligence before buying or renting property.
Hiring an Intermediary
The third aspect is that of the commissions to real estate intermediaries or agents and the legal fees for lawyers. Often, it is the case that the real estate intermediaries charge 1% of the total transaction amount as fees. Hence, you should factor this into your costs and ensure that you also select an intermediary who is trustful and sincere. Of course, you need not worry in this respect as many multinational real estate intermediaries have opened their offices in India and hence, you can enlist the services of these companies for your real estate needs. Considering the fact that many of these companies know how to play the system and how to get the work done, it would be a good idea for you to enlist their services right away when you take the decision to buy or rent a property in India. However, you need to remember that their fees are a bit higher than the run of the mill real estate agents and hence, you should consider this as an additional expense.
Hiring a Lawyer
Turning to the legal aspects, you should hire a lawyer who is capable and proficient in the laws of the local corporations. Remember that the rules for buying and renting property in India vary from state to state and hence, you should hire a lawyer who is conversant with the local rules and regulations. Better still if the real estate intermediary whom you have hired also deals with the legal aspects. Indeed, many real estate majors have dedicated legal teams to help you out with the paperwork and the due diligence that you should do is handled by them. This is another advantage that you get when you hire multinational real estate intermediaries to help you in buying and renting property.
Some Points to Consider about the Registration Process
The fourth aspect that you need to know is that of the commissions or the bribes that you need to pay to the governmental officials who register your property. Though this might seem surprising to many American vendors, this is a fact of life in India that is often seen as an additional expense to be factored into the buying process. Now that you are ready with all the details, you can look up the available properties and make your selection based on your requirements.
More Specific Aspects for IT and BPO Companies
Often, IT and BPO centers need to be accessible for the employees as far as commute is concerned. Hence, select a location that is convenient for the employees, one that is well placed in terms of layout, amenities, and facilities. Further, you need to select a location where other IT and BPO companies are already operating, as this would mean that the comfort level with the place is more. Apart from this, there are Tech Parks or clusters of IT and BPO offices located in select cities. The best possible choice would be to move in to a Tech park that is already ready for occupation. Depending on your requirement and your longer-term plans, you can either buy the property or rent it out accordingly.
Does Mynamar Have BPO in its Blood?
By Loren Moss
The Southeast Asian country of Myanmar – formerly known by its British given name of Burma, may have entered an optimistic new era with the relaxing of government repression that has gripped the country since the 1960’s. Myanmar saw last year the historic visit of President Barack Obama, something unimaginable just 6 years ago when the military junta cracked down on the “Saffron Revolution”—a peaceful protest by thousands of Buddhist monks opposed to government oppression with conflicting reports of up to 200 peaceful protesters killed, depending on sources. Many primarily associate Burma with the staunch resolution of Nobel Peace Prize winner Aung San Suu Kyi to bring Democracy to the country her father helped free from British Colonialism and Japanese occupation during the 1940’s. But like Vietnam, positive recent developments in both business and society may warrant a first close look at this country of 55 million.
The primary reason to look at Myanmar, as is the case with any country in the very early stages of developing an outsourcing industry, is the wage structure. According to the Japan External Trade Organization, basic monthly pay for factory workers in Myanmar was $53 (October 2011) compared to $145 in Vietnam, $253 in the Philippines, and $328 in China. On the other hand, the near term challenges are daunting. Myanmar is still one of the poorest countries in the world, with a World Bank estimate of only 1% of the population having access to the internet, and less than 10% owning a mobile phone. There was no Internet access available before 2000, and what was available was heavily censored until the past couple of years.
With this lack of development, Myanmar has a long way to develop before it can compete at the same level as its more developed Asian neighbors, yet still it is taking steps to move forward and generate interest from global companies. The new Foreign Investment Law protects international interests against nationalization, guarantees capital and profit repatriation, and also protects real estate investment.
The Google Glow
Myanmar has caught the attention of Google, with a visit by Google Chairman Eric Schmidt in March, where he pushed for less government interference and more support for an open, uncensored Internet allowing not just for the free flow of capital but of knowledge and information. “The government has to make it possible for the private sector to build the telecommunications infrastructure. If we do that right, within a few years the most profitable businesses within Burma will be the telecommunications companies,” said Schmidt. For the government’s part, President Thein Sein has announced a goal of 80% mobile phone ownership by 2015 and the government is currently conducting a tender for expanded mobile phone licenses.
Crawl Don’t Run into ICT
A tangible sign of progress is Cisco Systems’ announcement of a commitment developing Myanmar’s human capacity with support by the U.S. Agency for International Development (USAID) by establishing two Cisco Networking Academies at the University of Computer Studies in Yangon, and the University of Computer Studies in Mandalay. Says Chris Milligan, USAID/Myanmar’s Mission Director, “Technology is a powerful tool to advance Myanmar’s development while contributing to sustainable and inclusive economic growth. This collaboration with Cisco brings innovative technology and education to build on the strengths and capacity of the country. The initiative will provide ICT skills training and increase the number of job-ready graduates for the country’s emerging ICT sector.”
Like neighbors Bangladesh and Vietnam, Burma is practically starting from scratch with a long way to go to be a major BPO competitor, but the desire is there. Basic commodity services and manufacturing will likely serve as a foundation, then, when the education and infrastructure follow, value added services and technology oriented development will become a feasible proposition. Much development and infrastructure investment is needed to lay the foundation for Burma’s economy, but the long term prospects are bright. It is a country worth keeping an eye on.
Rating India’s BPO Cities: Why Bangalore May Not be Your Best Choice
By Preetam Kaushik
If you are a potential investor who would like to invest in the BPO sector in India or are a western company looking to outsource your BPO requirements to an Indian service provider, here is a quick guide to understand how different regions and cities measure up to the infrastructural, regulatory, and ancillary support services requirements. Like China, India has a few regions that are extremely business friendly and other regions that lag the former. The regional model of development of SEZs or Special Economic Zones that has been followed in both countries has placed certain regions and cities at an advantage over others. The analysis that follows is based on research into how different regions in India are suitable or otherwise for starting BPO operations.
Bangalore Beckons
No discussion on the Indian IT and BPO sector is complete without mentioning the “Silicon Valley of India”. From being a pioneer to the sector to finding itself mentioned as a term of usage (remember how those who found themselves out a job in the west muttered “Bangalored”), the garden city has seen it all. With its salubrious climate and hands off government, the city is host to the largest number of IT and BPO companies in India. However, in recent years, Brand Bangalore has taken a hit with the hitherto advantageous factors of a government that does not interfere turning into a liability as the authorities have been found to be lax as far as the issue of planning for the explosive growth is concerned. Of course, the city is still a hot destination and the Tier II cities like Mysore emerging as alternative destinations and with proximity to Bangalore conferring advantages; Bangalore is still in the reckoning.
Gurgaon Gathers Steam
The NCR or the National Capital Region comprising New Delhi and its outliers is another destination for BPO companies that are attracted to the cosmopolitanism of this region along with top class infrastructure. Unlike Bangalore, the NCR does not have the advantage of weather though it makes up for this with its concept of clusters and hubs that provide the BPO companies and its employees the advantages of working and living nearby. Like Bangalore, a ready workforce is fluent in English and conversant with Western business practices. The added attraction is that it is not prone to political instability in the same way other regions in India are. Given the fact that business continuity is an important component of the BPO sector, the decision of the NCR authorities to include the BPO sector in the ESMA or the Essential Services Management Act precludes closure of the BPO units due to strikes and other disruptions that are common in other regions, including Bangalore.
Chennai Calls
Another favorite destination for BPO companies is the Southern Sizzler (not only because of the weather but also due to the local cuisine), Chennai, which boasts of excellent infrastructure, a business friendly government, and an entrepreneurial spirit among its denizens. With special clusters and SEZs opening up in the city and its outskirts, it has emerged as a destination for BPO that offers the convenience of working and living in a metro and access to quality resources.
Hyderabad Sets its Sights High
This city that at one time in the early years of the last decade threatened to usurp the numero uno position for BPO companies has climbed down a bit because of political and other factors. Having said that, it must be remembered that with liberal land acquisition and cosmopolitan culture, the city is regaining the lost years and is making ambitious efforts to reemerge as a serious contender to other cities. Of course, the risk of political instability and bad governance is rather high in Hyderabad and that can be a deterrent to western investment.
Pune Progresses
Perhaps no other destination for BPO companies in India is as unpretentious as Pune that combines several advantages like access to the commercial capital of India, Mumbai, and a general business friendly climate with the city being on the foreign tourists map much before the BPO companies made it their home. In brief, Pune has progressed rapidly in the last decade and has managed to turn the other cities loss into its gains. Of course, even now many westerners seem to hesitate to invest in Pune and hence, a bit of marketing by the government and hard sell by the entrepreneurs might redress this imbalance. Further, with several ancillary clusters coming up near to the city, the problem of crowding and bad infrastructure can be overcome. Finally, the city is host to more BPO companies than IT companies are and this is something that prospective investors can mull over in their due diligence activities on the destinations to invest in India.
Malaysia, Emerging BPO Powerhouse
By Loren Moss
China and India have long been considered the two BPO heavyweights in the world, but the playing field has more recently been leveling out with emerging markets and other world regions establishing their claims to slices of the BPO pie. One country that has quietly been remaking itself into a major BPO destination is Malaysia.
As of 2011, Malaysia was ranked the number three country in the world on the A.T. Kearney Global Services Location Index, besting better-known emerging destinations such as Singapore, Thailand, Brazil and Indonesia. To encourage growth within the BPO and shared services sector, the National ICT (Information and Communications Technology) Association of Malaysia, a trade industry group boasting with more than 1,400 member companies, is pushing for a top-level government ministry dedicated to promotion and support of the BPO industry.
As chairman Woon Tai Hai told the Malaysian newspaper New Straits Times in an April 1, 2013 article, “We anticipate that as the country moves up the value chain, services will play an increasingly important role in supporting a knowledge based economy. For example, the services sector commanded 18% of the ICT industry revenue in 2012. This is expected to grow by leaps and bounds as the country heads towards developed status by 2020 with a targeted Gross National Income of USD $15,000 or more.”
To support this growth, the government-owned Multimedia Development Corporation (MDeC) is taking steps to ensure that Malaysia has the infrastructure and data center capacity on the ground to support the projected future traffic and demand for rack space.
“Malaysia is gaining attraction. We can say that we are on par with the traditional market leaders in certain levels of services. We have started to see multinational players coming to Malaysia and choosing Malaysia for locating their data center since the past year, and our investors to date are from Western Europe, North America and Japan,” stated Wan Murdani Wan Mohamad, MDEC’s director for EPP3 (Entry Point Project) Datacentre, NKEA (National Key Economic Area) Business Services in a January 15, 2013 piece for the Malaysia Economic News.
These concerted efforts by the government and organized industry groups are showing results. Just this month, BPO provider Convergsys announced the purchase of Datacom Group Ltd. of New Zealand’s call center operation in Kuala Lumpur. The Chairman of Outsourcing Malaysia, David Wong Nan Fay said in a 2012 press event that Malaysia’s BPO industry is already projected to reach $1.9 Billion.
“Despite the (economic) crisis and slowdown, we have not really felt the slowdown in our outsourcing. In fact it is because of the slowdown, people start to outsource,” Fay emphasized.
Expect Malaysia to remain on the BPO destination map, and grow in prominence as the government continues to work with industry groups to bring more business to the multi-ethnic nation of almost 30 million that sits to the south of Thailand.
Sandvik Turns to Capgemini for Global FAO
By Dan Berthiaume
Swedish high-technology and engineering group Sandvik has selected BPO provider Capgemini to deliver parts of its transactional finance and accounting processes. As part of the five-year, multimillion dollar contract, Capgemini BPO will standardize and optimize Sandvik’s global transactional finance activities, implementing the new model in 29 countries across all business areas.
The key part of the project will be migrating Sandvik’s global financial processing for Accounts Payable, Accounts Receivables and General Accounting to Capgemini’s delivery centers in Brazil, Poland, China and India. Capgemini will leverage its “Rightshore” approach that combines best-of-breed talent from multiple locations. Furthermore, Capgemini will deploy its Global Process Model to accelerate the adoption of global finance standards, streamline processes and improve the performance of transactional finance activities.
Hubert Giraud, CEO for Global Business Process Outsourcing at Capgemini said: “We are delighted to be working on this important global project with Sandvik – a valued client of the Capgemini Group for years whose relationship has now extended to BPO. Sandvik prides itself on ambition, speed, flexibility and focus and we are pleased that they have recognized these attributes in Capgemini. We feel a strong cultural connection between the two organizations and are very excited about the collaboration between Sandvik and Capgemini over the coming years.”
Björn Wahlborg, Head of Sandvik Global Finance Shared Services said: “We chose Capgemini due to their evident collaborative and partnership approach, their experience in managing global transformation projects and their strong financial control tools. They presented a robust business case on how they would deliver continuous improvement in our F&A processes.”
Tuning in to Tunisia’s Outsourcing Potential
By Preetam Kaushik
For those of you wondering whether the North African nation of Tunisia, which was the harbinger of the “Arab Spring” of 2011 and which ignited popular revolutions in the Arab world, is also a competitive outsourcing destination, here are some statistics. The country, which has been ranked the most competitive for business in Africa and twenty-ninth in the world, has become a favorite destination for European companies who need French language skills in addition to IT skills.
Furthermore Tunisia, with a business and environment index score of 6.3 and an outsourcing effectiveness score of 4.65, ranks higher than India and the Philippines in these scores. But because of the political and social unrest that has gripped the nation since 2011, the country has yet to take off on a large scale. Coupled with the fact that the pool of employable IT professionals is tiny compared to countries such as India and the Philippines, Tunisia is a contradiction in terms of having the infrastructure but not the “soft power” that makes the difference for Western companies.
Tunisia Experiences Ups and Downs
2010 was an exceptionally good year for Tunisian IT companies, as they secured many contracts from European and American firms that wanted alternatives to India and the Philippines and needed nearshoring centers with European language skills. However, with the Arab Spring and the continuing protests, including the resignation of its IT minister and the ouster of its president, the country slipped somewhat and risked going down the abyss of societal unrest leading to a flight of capital.
Fortunately, 2012 was kinder to the country and its IT sector, wherein there has been a renewal of business activity and a return to normalcy. The key aspect here is that as with other IT outsourcing destinations in the emerging world, Tunisia’s resilience in the face of turmoil has kept it going. As 2013 looks to be promising with a new government and a renewed focus on IT outsourcing being on the agenda, the country looks to regain its past competitiveness that was somewhat blunted in recent years. Given the rather high rankings it has on the competitiveness indices, one could say that the Tunisian IT outsourcing sector is all set for a takeoff.
Where Tunisia Scores and Where it Fails
The biggest advantage, as well as disadvantage, that Tunisia has in comparison with other IT outsourcing destinations is that the country is small and hence, ramping up on capacity is a big problem. The country is taking steps to remedy this imbalance by encouraging immigration in the same way Singapore did with its focus on becoming a regional hub for IT and financial services.
The conscious policy of letting skilled professionals come and work in Tunisia seems to be paying off as many professionals from across the Middle East and Africa are migrating to Tunisia. The size of the country is advantageous in respect of having superior infrastructure, including quality roads and telecom links with the electrical supply index of 5.9 comparing favorably with that of other IT outsourcing destinations.
Perhaps there is nothing more debilitating than having an adult literacy rate of 74%, which has proved to be a drag on the country. Coupled with the low workforce pool, this is another area where Tunisia can better itself. No wonder that the budget for education is higher than all the other countries in the region.
An On Balance Assessment
Taken, together the positives and the negatives that determine Tunisia’s IT competitiveness present a picture of a country that can become another Singapore or Dubai - a regional hub that is cosmopolitan and commercial is a definite outcome. However, to actualize this objective, the country needs to tackle its ongoing political and social problems including instability, corruption, and general sense of being lost in transition.
In addition, many domestic IT companies that have experienced double digit growth before the Arab Spring are floundering for the last couple of years and they definitely need a short in the arm if they are to regain competitiveness. Apart from this, Tunisia’s liberal regulatory regime make it attractive to Europeans who can have the benefit of having an IT outsourcing destination so near and so liberal in its visa and contract honoring system. This means that the European companies need not worry about red tape and widespread French proficiency is an added attraction.
Overall, the country is a “must watch” one for the next few years and if the dust settles on its political and social turmoil, Tunisia has the potential to rival Dubai for the tag of a regional hub for IT outsourcing. The year 2013 could well be the deciding year that would either see the country progress or regress and relapse into chaos and uncertainty.
Capgemini Bets Big on LatAm BPO
By Geoff Woolacott
Capgemini VP of Latin American Business Development Felix Massun recently outlined the Latin American growth rates the company expects going forward and offered insight into the core opportunities and obstacles he believes Capgemini faces in doing business in the region. Government policy represents both an opportunity for sales and an impediment to conducting business in the region.
Capgemini has accelerated its activities in Latin America, growing headcount in the region from approximately 400 employees in the region in 2005 to more than 9,000 today, with 60% inorganic growth and 40% organic growth. Major acquisitions since 2005 include:
1. Network Consulting Group in 2007, which added 200 employees, primarily in Brazil and Argentina
2. CPM Braxis in 4thQ10, which added about 5,500 employees
Massun estimates approximately 2,300 Latin American employees focus on BPO services delivery in to local and U.S. markets, up from 200 in 2008. Massun indicated Capgemini plans to more than double its BPO services staff by 2015 to 4,800 people.
Regional expansion will still split between what TBR defines as high-cost and low-cost functions. Low-cost functions revolve around BPO services delivery and will continue to be performed from Capgemini hubs in Guatemala, Chile and Brazil, while Capgemini’s technology consulting hubs will be built out in Brazil, Argentina, Columbia and Mexico. The intersection of these two discrete labor pools in Brazil results from the country’s high BPO and technology consulting services consumption and its history as an early landing spot for services firms expanding into the region
Massun believes the major opportunities in Latin America are:
1. Offering a standard platform servicing all 20 countries in the region.
2. Technology integration and BPM services reaching across the 20 countries.
3. A global delivery model providing Capgemini with greater coverage than most competitive entrants in the region.
He believes the major obstacles in the region are:
1. Tax costs for cross-border services.
2. Document management for cross-border services requiring the physical invoices to be returned and stored in the country of origin.
3. Regional companies unfamiliar with the concept of BPO services.
Global technology firms operate in a manner that is ahead of sovereign nation’s public policy thinking and best practices. The U.S. benefits from having, for the most part, solved these interstate commerce challenges over a century ago. The EEC struggles to blend disparate and entrenched nation states into a cohesive regional commerce zone that sits in a very precarious position given the sovereign debt crisis confronting their region. As New York Times columnist Paul Krugman suggests, the flaw in the EEC rests in a common currency manipulated by different national treasuries, whereas in the United States the Federal Reserve Board speaks with one voice about monetary policy.
Government Policies and Tax Benefits
In Latin America, therefore, inadequate regional policy coordination represents sales opportunity and staffing threats. Services firms operating in the region have to learn the idiosyncrasies of business commerce and advise their clients on the best way to deliver products and services to be efficient and compliant with country-specific tax policies. At times, Capgemini finds it more efficient to provide support services from India in certain situations rather than from adjacent Latin American countries.
The location of services-delivery-hub depends on available labor resources qualified in both technical and language skills; state-mandated benefits costs and state taxes on business and commerce. In short, firms spend a lot of time and energy looking at ways to minimize tax liabilities based on services point of origin. Massun believes tax liability can be cut in half depending on where the services originate. As services commodization accelerates, that tax liability arbitrage will become a bigger factor in regional resource locations and is increasingly being referenced by TBR clients as one of the factors compelling them to look outside of Brazil when expanding their Latin American presence.
Nations seeking to increase employment can capitalize on the regional policy disconnects with tax credits for local hiring. Massun says Capgemini targets Chile and Guatemala for expansion due to attractive incentives regarding employee education investments. Brazil will be an attractive market for services firms, but many seem to have made the decision to build out their regional hubs elsewhere given more favorable tax treatment.
The free market profit motive will determine global corporate behavior as the firms seek economies of scale. Nations have yet to fully understand global services economics and the way in which their local policies will impact employment opportunities. The need for BPO and technology services will not abate. The need to locate labor in specific countries, however, will be determined as much by market demand as by the economic thought leadership national governments bring forward to plug sovereign parochial interests in the global economy.
Governments have a lot of catching up to do lest they drive jobs out of their countries based on economic shortsightedness. Technology firms recognize this and will increase their focus on public policy impacts to benefits burden as services commoditize. Geoff Woollacott oversees a number of large-scale custom consulting projects TBR’s Professional Services Practice executes. Geoff also content reviews pieces of the syndicated research stream. Stephanie Artigliere covers European players, such as Capgemini, Atos and T-Systems in syndicated reports and project work, such as TBR’s Global Delivery Market Landscape.
Infographic – Traditional BPO Activities Still Dominate
Click image for larger view
By Dan Berthiaume
Although BPO buyers say they have a wide focus for their future BPO plans and there has been a lot of attention given to BPO as a tool for enterprise innovation and transformation, results from several recent BPO Outcomes reader polls indicate buyers remain largely focused on traditional BPO activities.
FAO – The Wave of the Future
For example, finance and accounting outsourcing (FAO), the original BPO practice area, is still the most popular area for planned future BPO engagements – with 18% of survey respondents indicating they are planning an FAO project. Other traditional areas such as customer care (12%), IT (11%) and HR/admin (9%) also scored high. The relatively new BPO practice area of procurement/supply chain did receive a respectable 10% of respondent votes.
FAO – The Wave of the Present
FAO is not just the leading BPO area for planned future engagements. When asked about current BPO engagements, 48% of respondents said they are involved in FAO. This placed FAO substantially ahead of the second-most-popular current BPO area, customer care/social media (28%), which does include the new practice of social media as well as traditional call center services. IT/infrastructure development (28%) and procurement (21%) were also popular choices.
Offshore Most Popular Destination
When it comes to selecting a BPO destination, despite publicity surrounding domestic “insourcing” as a new alternative to offshore BPO, offshore is still clearly the most popular destination for BPO service delivery. Forty percent of poll respondents said they use offshore hosted services, more than double the 19% using a shared services or hybrid model. Thirteen percent use offshore captive services and only 11% currently engage in insourcing.
Poll – Global Instability Not Impeding Offshore BPO
By Dan Berthiaume
The headlines are full of bad news about global social, political and economic instability. Daily reports of North Korea’s provocative threats of nuclear attack are just the latest example of what seems to be a constant barrage of international negativity.
Yet according to results of a recent poll of BPO Outcomes readers, concerns about global social, political and economic instability do not seem to have much impact on decisions to engage in offshore BPO services. Respondents were asked to select one of five choices about how much these concerns affect their offshoring decisions – not at all, a little, somewhat, a lot, and we do not offshore.
A clear majority of respondents (57%) selected “not at all.” Interestingly, the second-most-popular response was “a lot” (26%), with “somewhat” (10%) and “a little” (7%) closing out the total. No respondent selected “we do not offshore,” although this may reflect a tendency of BPO buyers not currently engaging in offshoring to avoid taking the poll. It is also worth noting that this poll started before the current North Korea crisis but ran through the first several days of it.
The results of this poll reinforce recent findings from research firm IDC that worldwide ACV of outsourcing deals worth $10 million or more between 2011 and 2012 grew 9% from $24.8 billion to $27 billion. In the same time period, worldwide TCV of outsourcing deals worth $10 million or more fell about 8%, from $150 billion USD in 2011 to $140 billion.
These results reflect a general trend toward smaller BPO contracts, which can be an effective mechanism for spreading out the risk of offshore BPO arrangements. In addition, they demonstrate that BPO buyers are becoming savvier about governance and risk management practices that can help mitigate the impact of outside events on BPO contracts. And finally the poll demonstrates that like everyone else, BPO buyers have adjusted to the new, more dangerous world we have all been living in since September 11, 2001. Business must continue regardless of how dire things may seem, and BPO is an integral part of modern business.
