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.
By Dan Berthiaume
Traditional outsourcing requests for proposal (RFPs) may be standing in the way of innovation in the BPO arena. Overly prescriptive RFPs that focus on how services are delivered rather than the end results make it difficult for BPO to move beyond traditional “lift and shift” functionality to truly collaborative and transformative activities.
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.
BPO provider Capgemini offers insight and advice on a wide range of BPO-related topics on its “Capping IT Off” blog. Every month, BPO Outcomes takes a look back at highlights of postings from leading Capgemini BPO practitioners.
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
By Preetam Kaushik
Outsourcing is a phenomenon that historically moves work and jobs from the West to the East although with the development of trends such as nearshoring this is changing). In particular, a significant volume of IT work from the US and Europe has moved to India in the last few decades. This has resulted in the Indian ITO sector becoming global in scope and world-class in nature.
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.
Next Coast Media, parent company of BPO Outcomes, is putting the final touches on the Third Annual Nearshore Nexus conference. More than two dozen carefully selected speakers, an all-star collection of 18 sponsors (the show is at capacity on sponsorship) and business representatives from some of the biggest names in the Fortune 1000 will join in for robust debates on the most important trends in services, innovation and Latin America market expansion.
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!
By Preetam Kaushik
Each industry or sector faces a moment of truth where it has to choose competing paths to prosperity and growth. The Indian IT outsourcing (ITO) industry faces such a fork in the road where it can either continue doing what it is doing or choose to move up the value chain and the path to innovation and expanded business.
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.
By Dan Berthiaume
Flexible contract terms and outcome-based pricing are among the top priorities of IT infrastructure outsourcing buyers for 2013. These goals probably reflect the fact that 70% of the average company’s overall IT budget was spent on maintaining existing services, creating a need to reduce their cost.
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.
Capgemini Norge AS, a Norwegian subsidiary of global outsourcing provider Capgemini, will deliver application management and develop core applications for Norway Post, the public postal service of Norway. The agreement has a value of close to $44 million USD and will last throughout 2019.
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.
By Preetam Kaushik
When India opened its markets to the world as a result of the liberalization of the 1990s, one of the most significant things to take shape was the BPO boom. Stories of young people earning more money than people with degrees, books written on call-centre culture, films adapted from such books, mini-cities established to fit the yuppies who suddenly had purchasing power – these were some of the highlights of the BPO generation in India, based around the late 1990s to the first decade of this century.
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.