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.

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.

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.

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.

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.”

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 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.

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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.

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.

From RFP to RFS
According to a new white paper from sourcing advisory firm ISG, “The RFP Will Never Be The Same,” an emerging trend known as “Request for Solution” (or RFS) holds the key to evolving BPO beyond the limitations of outdated RFPs. Designed to address complex requirements and problems, the RFS is a collaborative process where participants focus on broad criteria, multiple options and open dialogue.

By avoiding the narrow checklist approach of the traditional RFP, ISG says the RFS allows the BPO buyer to describe the general characteristics of their operating environment, objectives and concerns, and desired future state. The BPO provider is then allowed flexibility to develop unique solutions that meet the specific needs and characteristics of the buyer.

Benefits of the RFS
According to ISG, the RFS offers a number of significant advantages over the traditional RFP. These include giving providers the leeway to develop new and innovative services and solutions, a lower cost of entry that widens the range of prospective providers, a better means of communicating complex requirements and goals, and lower costs for buyers.

Challenges of the RFS
Of course, the RFS does also bring its own set of challenges. These include a need for qualitative as well as quantitative assessments that attempt to measure the impact of “fuzzy” factors such as cultural fit, a need to focus on relationship management rather than execution of specific contractual obligations, and greater trust between buyer and provider than is typically found in an RFP relationship

How to Start
ISG recommends that organizations seeking to create an RFS start with an open-ended situation requiring innovation and/or transformation. They should then create a broad description of their business landscape (including financial information and service level/quality measurements), followed by collection of data and definition of business goals and objectives. BPO buyers may also want to consider engaging a third-party advisor with RFS experience.

By starting correctly, BPO buyers greatly increase the odds of successfully implementing an RFS relationship. RFS will not fully replace the RFP and is not best suited for all outsourcing situations, but can prove a valuable means of driving innovation where it is needed.

Big Data Programs and Data Governance: Key Mistakes to Avoid
Here is a short list of large concerns to be aware of when implementing a Big Data program:

Not including Data Governance at the very beginning of the program. Data governance is the process of creating and agreeing to standards and requirements for the collection, identification, storage and use of data. It should not be viewed as optional when undertaking any data-driven project. Data governance must include structured, semi-structured data, unstructured data, registries, taxonomies and ontologies as it contributes heavily to organizational success through repeatable and compliant practices. It is critical to consider all types of data, especially today when we have Twitter and Facebook, which most likely will come in all forms of unstructured and semi-structured formats. Guidelines from governance need to address all of these types of new data requirements that must be considered as part of any new program.  Ignore data quality and data relevancy and people skills. Running your big data program without a data governance program running concurrently is a recipe for disaster. A data governance program will be required to help you understand which data is relevant and which should be removed. It is also imperative to understand the level of accuracy, consistency and applicability of the data. Being unprepared for change.

The structural and process changes that will likely occur with a Big Data effort need to be managed very carefully. Structural and process changes include new ways to capture and store these Big Data requirements and new ways to analyze and build analytics against these new data sources along with the data you’ll receive through the program. Strategically, the added efficiency should do more than speed up existing processes. Efficiency should be married to and go hand in hand with data governance.

Excluding consultants. When looking at a consultant’s role in the Big Data arena, one should look no further than the business intelligence resources most large systems integrators employ. After all, Big Data issues are not new; they are simply more complex than they were in decades past. Consulting professionals still need to do what we have always done best to address “Big Data” – identify, acquire, organize, cleanse, store, and analyze.

Your data governance may not be that strong to start with. Big Data will make it worse. Big Data Governance requires performing governance over many different types of data, not just what’s in relational databases. The scope obviously needs to include non-relational databases and unstructured data and documents, which in itself will require new tools to deal with these other technologies. Assessing, profiling and managing a larger volume of unstructured data without strong data management in place becomes unfeasible.

In conclusion, because of the variance in opinions at the highest level of management on the acquisition and use of this type of data, it is critical to gauge the importance and usefulness of the data through a data governance program. The data governance program must also be able to address how to show this data in a dashboard type format to executives on laptops, phones, i-pads and other mobile devices so that the information can be disseminated quickly, efficiently, effectively, and most important, TIMELY, to the “powers” throughout the organization. Governance should drive the ability to create and disseminate this information to executives worldwide in a manner and timeliness for decisive action by the right people.

Scott Schlesinger, President; Head of North America Business Information Management, Capgemini with contributions from Luc Durocq, Principal, Business Information Management, Capgemini

However, there are downsides to this phenomenon as the work that is outsourced is mostly lower- and middle-end maintenance and system development. Western multinationals outsource this work so that they can concentrate on value-adding work like R&D and knowledge-based initiatives. This means that the West is primarily interested in the Indian ITO sector as a source of cheap labor for the work that their employees would rather forego.

Apart from this, the fact that Western companies want to move up the value chain is another reason why they outsource to India. The implications of this are that the Indian ITO and BPO sectors have become less innovative as it is busy with performing the routine maintenance and business processing work that is placed in the lower and middle ends of the outsourcing spectrum.

Indian ITO – A Historical Perspective
The Indian ITO sector came of age during the Y2K scare that resulted in a massive transfer of work to India. Since the work involved the tedious and relatively simple (but time-consuming) fixing of digits in computer programs that would enable the systems to continue functioning beyond the Millennium, it was mostly outsourced to India where labor was plentiful and cheap.

Taking advantage of this, Indian IT majors like TCS, Infosys, and Wipro ramped up their workforces significantly and took on more work as the projects progressed. To this day, the Indian IT sector has not yet shed its Y2K mindset where the majors still look at the maintenance and system development as their bread and butter instead of going all out for higher end research and development work. No wonder there are so few patents being filed from India though the country boasts of a large IT-enabled workforce.

Similarly, the BPO sector does routine Processual work and procedural work instead of higher end knowledge work. This has saddled the Indian IT and BPO sector with a legacy mindset that is becoming hard to overcome as it tries to make the transition to the next stage in the value chain.

Indian Outsourcers Recognize Situation, Take Steps
Indian ITO and BPO players are finally realizing they need to ramp up on the value chain, resulting in some proactive moves being taken which include migrating to research and development and moving up the innovation curve. Though this has come belatedly, it is better late than never and hence, Western companies are increasingly looking at India for innovation and higher-end work.

Of course, this kind of work patterns poses a threat to Western monopoly and dominance over patents and innovation, so the need of the hour is for collaboration instead of competition. Furthermore, there is the need to collaborate with western multinationals to encourage them to setup base in India and take advantage of the workforce that is now ready for higher things. Added to this are the returning Indians from the technology Diaspora, which would add further value because of their knowledge and expertise in higher end work. Therefore, the road ahead looks promising and challenging at the same time and it is entirely up to the Indian ITO and BPO industries as to whether they would seize the initiative and reap the benefits or is left behind in the race for excellence.

Finally, it makes sense for Western companies to setup captive units in India, as they would then be assured that their inventions and discoveries would remain within their copyright and the patents filed would be in their name. These are some of the points that need to be taken into consideration when the western companies outsource to India. In conclusion, while it is not the case that the Indian IT and BPO sector is mired in the lower and middle end of the value chain, much needs to be done by it to ensure that it moves up the value chain.

New speakers added this week include:

■Former high-profile outsourcing analyst at Forrester, Stephanie Moore has joined the “Sourcing Domestic Vs. Sourcing Foreign” Panel, where she will look to champion the positioning of the “onshore” given her new role as President of Ameritas Technologies, a U.S.-based provider.
■Anthony Porter, Director of IT Vendor Management, Procurement, Legal & Strategy at Humana (a managed health care company with over 11 million customers) shares some of his experiences doing business in the Nearshore on the “Maturity, Process and Performance: How Do Nearshore Markets and Vendors Rate?” panel, moderated by one of the most knowledgeable experts on the Nearshore, David Rutchik of Pace Harmon.
■ Juan Ruiz Coronado, Senior Vice President of Global Strategic Sourcing at Citi, will deliver some insights on “What Global Banks Really Want from Sourcing Partners” with current and former executives from Wells Fargo, Tata Consultancy Services and Bank of Montreal.

Also, in what Next Coast Media considers a true reflection of the bullish strength of Latin America services and investment, Nearshore Nexus has sold-out of sponsorships for the third year in a row. (The Nexus model limits the number of sponsorships). For “buy-side” finance and IT decision-makers interested in attending, there is still have room! Please submit a request for an invitation here.

Joining as sponsors in the last two weeks include Grupo Karims (Honduras); ProBarranquilla (Colombia), Beltraide (Belize), Xerox (U.S.) and Laurus International (Dominican Republic). For the complete list of sponsors and partners visit the Nexus sponsor page.

Keynote speaker Joe Nocera of the New York Times has an unusually candid, matter of fact style – and is preparing some insightful remarks about the current political and business landscape in the U.S. that continues to directly impact the decisions U.S. businesses make to more aggressively explore and invest internationally. (Joe co-authored “All the Devils Are Here: The Hidden History of the Financial Crisis” – which provides some great insights into the institutional flaws that led to the historical financial collapse in the United States).

Next Coast Media is especially grateful to once again receive support and participation from virtually every single country in the Nearshore that is “open for business” – exporting services and attracting foreign business operators. It reflects the conference’s primary tagline: “The Right Hemisphere at the Right Time.” Make sure to show up bright and early on April 24th!

The implications are huge as the traditional profile of the Indian ITO industry has been to focus on providing outsourced solutions to the West that mainly provide routine maintenance, development and management of the service delivery chain. With increasing competition from low wage countries that threaten its low-cost, high volume business, the Indian ITO industry is now focusing on leveraging its talent pool and wide knowledge of business processes to make the leap to the next rung in the value chain – i.e., to tap the emerging mobile wave and the nascent startup culture in India.

Statistics show that India lags behind ITO-providing countries such as China that have already leapfrogged into the higher end of the value chain, creating work by investing in infrastructure, and having the business ecosystem that makes it possible to file patents and spur innovation.

Riding the Mobile Wave
One way the Indian ITO industry can move up the value chain is to “ride the mobile wave.” Adopting mobile technology is crucial as it allows the industry to circumvent the abysmal Indian infrastructure for physical lines and fixed line connectivity. Furthermore, as the Indian ITO industry did initially when it bypassed the industrial component of development and leveraged the services space, it can also moving beyond infrastructure bottlenecks with mobile technology..

Two Tiers to One
A two-tier model wherein the “biggies” including TCS and Wipro occupy the top spots and the rest follow them characterizes the current Indian ITO marketplace. This situation can change as the bottom-up transformation of the many ITO startups that have sprung up across the country is heralding the emergence of convergence. This means that with adequate support from angel investors and venture capitalists, the Indian ITO industry use these strengths to converge with the rapid spread of mobile technology to create the next boom in outsourcing.

Go East, Young Man
With the rise in protectionism in the West, the Indian ITO industry has to focus more on the domestic consumption and “look East” for growth. This is already happening as many top tier and middle tier companies are expanding into China, Japan, and South Korea in a bid to sustain the momentum that would otherwise lose steam because of the stagnation of the traditional markets in the West. Hence, the combination of innovation, expansion into the East, and domestic focus can prove to be the solution that the Indian ITO sector is looking for to beat the recessionary blues.

Apart from this, the fact that leading Western innovators are looking to tap into the rapidly growing numbers of the “Indian Diaspora” that is returning home to head their ventures and make India a research hub should be music to the ears of those policymakers who want the Indian IT Renaissance to continue.

Finally, the Indian ITO industry is currently in the painful throes of the transition from the old order to the new. As the captains of industry retire and make way for the younger generation, the change of guard can be used to herald a shift in focus to the business drivers discussed here. It remains to be seen as to how well the initiative is seized by the Indian ITO industry as it matures from a back office hub to the knowledge hub that appears on the horizon. The move would certainly be difficult and arduous but with its experience in circumventing governmental and bureaucratic inertia, the Indian ITO industry can certainly overcome the internal lethargy and the external competition to emerge stronger and fitter.

A recent HfS Research report, “Enterprise IT Outsourcing Trends 2013,” shows that hybrid cloud is the leading area of planned infrastructure outsourcing spending this year, selected by 18% of respondents as their top infrastructure outsourcing priority. Flexible contract terms (13%), outcome-based pricing (12%) and infrastructure as a service (IaaS, 10%) followed.

In addition to demonstrating that cloud technology has “arrived” in the enterprise and moved beyond the stage of pundits wondering if it would ever be widely adopted, the report says these results show that IT infrastructure outsourcing buyers are losing interest in traditional five-year contracts. Instead, they want options such as “pay as you go” and easier and more frequent renegotiations. And outcome-based pricing, well-established in the world of BPO, is now gaining momentum in the ITO space.

Long-term Goals Include IT Utility
Looking ahead five years, 19% of respondents said their top priority will be IT utility, or the bundling of IT outsourcing services vertically with other outsourcing services. Benefits of IT utility include reduced costs and an easier process of switching providers.

Hybrid cloud and cloud service brokering are tied for second place (15%) each as long-term priorities and cloudsourcing (12%) comes in fourth, reinforcing cloud’s firm footing as an established enterprise IT infrastructure tool.  Also reinforcing the importance of the short-term priorities listed are true pay-as-you-go (12%) and outcome-based pricing (11%) showing up as popular long-term priorities.

Packaged Apps Leading App Development/Outsourcing Trend for 2013
Examining trends in app development and outsourcing spending this year, report findings indicate that migration to packaged apps (18%) is the top priority, followed by migration to cloud apps (14%), reducing app lifetime costs (11%) and nearshore app development (11%). According to HfS Research analysis, the popularity of migration to packaged apps shows that ITO buyers desire industrialization and standardization, while reducing app lifetime costs ties back to the 70% of IT budges going toward maintaining existing services. Nearshore app development is clearly gaining traction, and can offer lower costs than traditional offshoring as well as easier management.

The HfS Research Global IT Trends Survey consisted of a phone interview fielded to 468 IT decision makers in large US and European enterprises in September and October 2012.

The contract builds on an “as-a-service” commercial model where the costs will be adjusted based on the services that are provided. Capgemini will leverage its “Rightshore” approach that combines best-of-breed talent from multiple locations using its delivery centers in Oslo, Norway, Helsingborg, Sweden and Mumbai, India.

Capgemini, which has already been working with Norway Post for more than 10 years, will act as a strategic partner to support Norway Post with modernization in an industry that faces many challenges – including decreasing mail volume with the popularity of email and pressure on margins due to the tough global economy and competition from smaller competitors willing to operate on a low price point. Capgemini will support Norway Post in their ambition to achieve integration across different Nordic countries and business cultures into one set of seamless operations.

The contract includes outsourcing of central applications, such as ERP and data warehousing. Capgemini aims to introduce an industrialized way of working and standardized processes which are transparent and can be fine-tuned over time, so that Norway Post will be able to reduce costs and still gain higher flexibility within IT.

“This is a significant and innovative contract for Capgemini here in Norway and Capgemini as a group. We are both humble and proud that Norway Post, with whom we’ve build a long-standing relationship, has entrusted us with this important delivery project,” said Ola Furu, CEO at Capgemini Norge AS.

Capgemini also serves postal outsourcing customers in the UK, Germany and France.

For example, a majority of BPO buyers intend to increase their BPO spending this year compared to 2012, according to results of a recent BPO Outcomes reader poll. When asked about their plans for BPO spending in 2013 compared to 2012, a leading 36% of respondents said they plan to increase BPO spending a lot. In addition, recent projections from HfS Research indicate that the global BPO market is set to grow 5.1% in 2013.

So what is driving this growth spurt in BPO, assuming late-blooming adolescent hormones are not the culprit? To me, there are three likely sources of this BPO growth.

BPO Covers All the Bases
BPO was initially synonymous with FAO, or finance and accounting outsourcing, and slowly started expanding to include outsourced tasks from areas of the business such as human resources and customer service. However, in recent years BPO has morphed into a means for companies to transform their entire enterprises to achieve greater operational efficiencies and innovative business practices, as well as cost savings. Every area of the business, from procurement to marketing to “new technology” (see below) practices such as social media activities, can be and is being outsourced. This all naturally leads to BPO growth.

Technology Eases Outsourcing
Another factor driving growth in outsourcing is the emergence of new technologies such as mobile, social and cloud that make outsourcing easier to conduct. Mobile and cloud technologies allow work to be outsourced remotely with minimal investment in physical infrastructure and also make the physical location where outsourced work is performed much less relevant. In addition, social technologies provide instant communication capabilities and allow outsourcing buyers to efficiently develop large stores of corporate knowledge that can be easily imparted on remote third-party workers.

Furthermore, social technologies enable the form of outsourcing known as “crowdsourcing,” or the outsourcing of typically (but not exclusively) lower-end business processes to individuals and service providers throughout the globe via open call on the Internet. Crowdsourcing offers considerable cost savings even compared to traditional outsourcing but does also carry inherent risks including lower accountability, sharing intellectual property with anonymous, remote workers, and a lower likelihood that skilled and experienced workers will engage with the crowdsourcing model.

BPO Comes Home
The third factor likely driving BPO growth is “insourcing,” or outsourcing tasks to low-cost domestic locations. The surging economies of traditional offshore locales such as China and India, coupled with continuing economic hardship in many traditional North American and European BPO buying regions, is producing an increase in insourcing. The practice avoids potential tax and public relations liabilities associated with outsourcing and also eliminates hassles such as currency exchange, time zone/language/cultural differences, and dealing with foreign courts, laws and political systems that may be less reliable and transparent than those in the US and Europe.

Whatever the cause, the BPO industry should welcome this growth spurt and nurture it as much as possible. Late adolescence is more or the less the end of the period when humans undergo any significant growth, but nothing is preventing BPO from continuing to grow well into its adulthood.

Cities like New Delhi and Bombay (now called Mumbai) were already international hubs but now people, especially from the corporate spectrum of the West, knew about Bangalore and Pune as well. Names like Convergys, Genpact, EXL, WNS, Wipro, etc. suddenly found their way into resumes. The BPO business was booming and an entire generation was swimming in the ‘work all night’ and ‘get rich fast’ lifestyle.

Saturation in the Indian BPO Industry
Every industry has a saturation point. The reason all this business from companies like IBM, HP, Bank of America, etc. came to the subcontinent in the first place was that it cost a lot less to run back offices there. The average pay was lesser than what a corresponding worker would earn in Western companies’ home countries. The original idea was that people working from these branches would be happy even though they had to work around24/7 shifts, something that most US/UK/Australian workers would not agree to. As the standard of living in the areas, where these businesses ran, increased (albeit only for the middle class), the cost of living increased as well.

Suddenly, people were aiming for jobs that helped them sustain that lifestyle. The “foot soldiers” of the BPO industry, as they reached their late twenties and started families, could not simply continue the night shifts at the kind of money they were making. This saw a lot of people leave the BPO industry. It wasn’t difficult to get new recruits in India; after all it is a country of 1.23 billion people. But the cost of recruiting new people rose every year and then training them defeated the whole purpose of presenting India as a “cheap” option. Suddenly there was a need to find a more “economic” location where these outsourced businesses could thrive.

The Other Big Player
The Philippines and India share one very common trait among the developing nations in the South Asian region – they both have a significant middle class that is fluent in English. What promoted the success of the Philippines in the BPO sector was the fact that it had the option to learn from the mistakes India had made. The problem of attrition was addressed by ensuring that the employees treated their jobs like a career and not a stop gap option.

The government in Philippines also allowed both fiscal and non-fiscal benefits. Special Economic Zones (SEZ) were also opened up so that these business hubs could be run right in the middle of ‘metro’ zones. All of this is quite amazing considering the first voice process in Manila started only in 1997. Now, the Philippines generates an annual revenue of $11.1 billion leaving behind India as the largest exporter of BPO services and it also has 638,000 people working in this customer service industry.

The Filipino Dilemma
However, the fairy tale for Philippines might soon be ending and the irony is, its budding economy could be the cause of its downfall. The nation’s currency, the peso, has gained 5% against the US dollar while the Indian rupee has depreciated by 8.4%. Suddenly, the dream of getting things done for “cheap”  is shattered again. Another aspect that has had undesired effects on the Filipino BPO industry is the lack of skilled technical processes like engineering and finance. With mainly voice processes in their kitty, the future of BPO in the Philippines might not be as secure as the numbers suggest.

To sum it up, we can clearly say that the problems of the two of the largest BPO hubs in the world are drastically different. While India’s main issue is attrition because of all the other options available to the youth, Filipinos need to deal with the western fear of the rising peso. The “Indian call center” has come to have a negative connotation in the west and the light Filipino accent is more welcome to customers in the US.

But the vast experience that Indian BPO providers come with cannot be ignored. According to the latest survey by Tholons, India still lists six cities among the top 10 BPO sourcing destinations in the world. Manila, however, has pushed New Delhi from the third position. It is interesting to note that Bangalore in India still tops the list.

Today’s outsourcing deals are of shorter duration than in years past. At present, deals are typically signed for three-to-five year terms whereas 10-15 year terms were common in the not-so-distant past. Given the need to rapidly and efficiently integrate and leverage a vendor’s services into an IT organization, it’s important to develop an advanced vendor management capability. Otherwise, an outsourcing buyer never realizes the true value of their investment and is ill-prepared to monitor the market (price, service levels, etc.), renegotiate, or efficiently migrate services to another outsourcing provider without taking a step backwards.

The new directive on outsourcing for CIOs is to look beyond the traditional advantages of labor arbitrage to ensure they leverage their vendors for innovation and sustainable transformational efficiencies. The internal IT organization must become more effective at integrating vendor capabilities and continually aligning them to reinforce changes that enable the business to adjust to dynamics in their economic environment. For CIOs to be successful in this endeavor, it requires advancements in vendor management capabilities, both in terms of leadership and structure.

From a structural perspective, the IT organization needs to institutionalize a comprehensive vendor management framework that enables the organization to continually advance its IT and business operational capabilities throughout the entire vendor relationship.

From a leadership perspective, the IT organization needs leaders that are capable of developing collaborative vendor partnerships that drive continual advances in the organization’s support capabilities. This requires movement away from past practices where leaders have relied on contractual terms and conditions (often punitive) to control vendor behaviors and actions. Leaders must now have the capability to create partnerships that rely on establishing and sustaining a mutually beneficial operating environment in which both organizations can succeed and share in the benefits that result from the advancements in improved service capabilities.

Vendor management spans the culture, organization, policies and processes that provide governance and control across five key areas:

1. Vendor Relationship Management - is responsible for partnership development and strategic alignment. Vendor relationship management makes certain the internal alignment of the business strategy and IT strategy is translated and communicated to vendors with respect to services and projects thereby ensuring that the IT organization is designed to drive maximum business value from its vendor relationship.

2. Vendor Performance Management - is responsible for ensuring adequate measuring and monitoring is occurring and issues are being rapidly resolved at the appropriate levels in the organization. Vendor Performance Management must also drive operational efficiency which includes on-going reviews of vendor contribution to the business and the delivery of promised business value.

3. Vendor Contract Management - is responsible for supporting any contract disputes or negotiations as well as coordinating formal changes to the contracts including amending, changing, and deleting terms and provisions. Vendor contract management ensures the fulfillment of contractual obligations and that contract compliance is monitored and tracked, which includes conducting (or coordinating with third parties to conduct) audits of the vendors.

4. Vendor Financial Management - is responsible for validating and managing vendor charges and for monitoring the economics associated with the contract. Vendor financial management manages financial risk associated with the contract, ensures the accuracy and audit-ability of all related financial transactions and that proper financial controls are in place for the term of the agreement. This enables regular financial reporting such as budgeted vs. actual expenses, forecasts, and financial trend analysis to ensure the value proposition is realized and the expected ROI is achieved.

5. Vendor Service Management - is responsible for ensuring vendor’s services are properly aligned and integrated into the IT organization’s service portfolio and service catalog. Vendor service management is responsible for working with the organization’s process and service owners to continually improve the IT services underpinning the business processes. Vendor Service Management also is an agent for change to facilitate business transformation by driving the approach to systematically integrate the vendor’s advancements into its internal IT service and process structure.

The current economic environment of cost reduction and budget restriction has resulted in new levels of expectations regarding IT resource and capability management from both internal and external sources. CIOs must now ensure steps are taken to organize these IT resources so that vendor capabilities and efficiencies can continually be regenerated and improved throughout the outsourcing lifecycle. This requires retaining knowledge and IP that is more readily transferable at the end of the sourcing lifecycle to transition to more capable and less expensive vendors. An advanced vendor management function enables an IT organization to leverage their vendors, optimize the transitions, and thus take advantage of market dynamics.

Ben Trowbridge is Chairman and CEO, Alsbridge Inc.

Multiple Providers, Offshore Services, Regulation Pose Risks
According to a recent white paper from sourcing advisory group ISG, “The ‘Uh Oh Moment,” in 2011 the financial services sector accounted for 35% of global outsourcing total contract value (TCV) and generated 29% of the global outsourcing industry’s revenue. Although average TCV of financial services contracts has remained constant in recent years, average contract size has contracted, which ISG says reflects the growing number of third parties becoming involved in the delivery of services to financial services organizations. Furthermore, the concentration of service delivery centers in emerging economies expose financial services companies to concerns such as access to skilled labor, fluctuating exchange rates, and security and stability of third-party services.

Another concern driving financial services BPO buyers to focus more closely on governance is a more aggressive approach by government and industry regulatory bodies. For example, the industry is still sorting out tough Dodd-Frank regulations, and ISG also cites increased scrutiny from entities such as the Office of the Comptroller of the Currency (OCC), Consumer Finance Protection Bureau (CFPB) and Securities and Exchange Commission (SEC). Part of the increased regulatory scrutiny of the financial services industry is directly aimed at monitoring the activity of any third parties involved in performing processes for and delivering services to industry members.

Governance Often Lacking
ISG data indicates that many financial services entities do not have the type of governance processes and supply chain risk management tools necessary to assess, evaluate and mitigate risk in their outsourced service delivery supply chains. In addition, financial services companies with well-established outsourcing governance processes tend to focus on performing due diligence before signing a contract rather than ensuring contracts are fulfilled properly and according to regulations.

Steps to Thorough Governance

ISG recommends that financial services companies seeking to enact substantial governance and risk management programs for their BPO efforts take the following steps.

1. Assess data, reports and processes used to make BPO decisions and identify gaps between theory and the reality of stringent regulatory oversight.
2. Create an initial risk assessment profile that identifies areas of internal and external risk with the most potential impact on the enterprise, as well as possible solutions.
3. Collaborate with BPO supplier teams to identify problem areas and develop means of monitoring issues and creating improvements.
4. Work with the BPO supplier(s) to create joint standard taxonomies, roles and responsibilities, sources of real-time data, etc.
5. Tier BPO suppliers based on level of risk they represent, including layers of subcontractors, and assign work accordingly (i.e., high-risk providers should only be allowed to perform low-level transactional processes).