Recruitment in voice biz slows

(The Economic Times (India) Via Thomson Dialog NewsEdge): After having increased the voice business to over 70-80% of their portfolio, the business process outsourcing (BPO) companies are now slowing it down. Industry-wide attrition is over 60% for voice processes and billing rates have eroded to under $12 per hour from about $15-16 per hour couple of years ago.

In fact, today voice work is a commodity business with over 100 companies claiming to be experts in handling calls. No wonder then that recruitment for voice processes has shown a marginal decrease in the past six months. This is also in part due to an increased focus on acquiring non-voice processes. It's a no surprise then that companies are not hiring people as frequently as they used to.

There are primarily three types of voice processes. Low-end, involving basic calling in non-specialised areas, requires low level of expertise such as answering bank account queries. Then there is mid-tier, where employees work on specialised customer services and technical support and need to have good quality in voice, but medium level of complexity such as handling travel-related or credit card queries and last of all is high-end that involves complex voice processes with high level of expertise.

These could include technical help desk for routers or servers. Running voice business, especially for mid-tier and high-end, is not easy. "This is because voice process is a perpetual activity and by nature it is extremely capital intensive and risk prone," says Susir Kumar, CEO, Intelenet Global Services.

Key challenges in voice are operational excellence, attrition, profitability of the business and scale of operations. It requires a lot of operational management bandwidth and expertise with hands-on focus on day-to-day operations. All voice business is real time and hence running voice processes demands sharp focus, which can be quite a strain.

"Managing voice processes is like managing a Formula-1 car at 300 kmph speed while ensuring that there are no leaks. This is not easy. The moment of truth is in every second of delivery, impacting operations on a daily basis," says Shanmugam Nagaranjan, COO, 24/7 Customer.

Now, that a number of companies have finally realised it is a different ball game than initially conceived, they have slowed down and started focusing on relatively "non real time" business. This in turn has relatively slowed down recruitment.

Over the past one year non-voice processes have increased by almost 75%. Just few years back when the industry was still in the early stages of growth, companies didn't have a choice but to go on a hiring spree as they built up voice capability.

But now, with non-voice gaining ground and various voice processes becoming consonant, companies just don't care that much. In fact, if employees from a certain voice process leave, BPOs simply transfer employees from another process to manage the load. This can now be easily done as processes are becoming increasingly similar.

According to Sunil Mehta, vice president, Nasscom: "The number of voice processes have reduced dramatically. As such, the industry as a whole is focusing more on non-voice processes. Therefore, not too many people are being recruited for voice processes." He further added that this decline had just started and the recruitment rate for voice processes will drop dramatically in the coming months.

The labour pool available for voice processes is very limited. Also, earnings from voice processes are much lower compared to non-voice. They are also less sticky and frequent ramp ups are not possible. "Further, voice processes are more monotonous and repetitive in nature and hence attrition levels are higher in the voice processes," Ranjit Narasimhan, CEO, HCL BPO.

Therefore, this could help companies reduce attrition rates. "The changing market conditions, especially pertaining to global economic scenario, are forcing companies to outsource more of non-voice to India," says Sam Chopra, president, Call Centre Association.

However, companies completely dependent on voice processes could find the going tough. According to Mr Kumar: "Companies who have been overly dependent on the voice piece of the business are likely to feel the heat when there is a drop in business and a subsequent drop in recruitment."

Going beyond costs to measuring value

n 2006, Unisys sees business value metrics replacing service level agreements

Our Bureau / Bangalore December 28, 2005

Outsourcing services will continue to grow in popularity in 2006, dissipating the political haze that has led the public to misunderstand its full benefits and implementation options, say Unisys experts.

�In the last few years outsourcing has been made the focus of a political sideshow - portrayed at best as a way for companies to meet demand for IT services by capitalising on lower labour costs in developing regions of the world, and at worst as a way to employ one set of workers at the expense of another,� says Mukul Agrawal, country manager, Unisys India.

�Really, the discussion needs to be about the significant business advantages outsourcing delivers,� added Agrawal.

�In 2006, enterprises will finally see through the politics and economic half-truths and realise that outsourcing isn�t just global sourcing narrowly applied. They will focus on the business definition of outsourcing: assigning execution of certain tasks to an expert partner, regardless of geographic location, who can deliver demonstrable value to the business.�

This will enable all to �clearly see outsourcing?s benefits: breakthrough visibility leading to secure business operations, better quality of service to customers and employees, improved risk management, remarkable operational efficiencies with lower total cost, and maximised IT investment.�

Spelling out new success measurements that will drive global sourcing decisions and which will emerge as a key market factor, Unisys said that there will be decline of the SLA (service level agreements) as prime outsourcing success metric.

�Business-value metrics will drive increased global sourcing and complexity in engagements will drive the need,� Unisys in its predictions for 2006 noted.

On the decline of the SLA, Agrawal said: �Organisations make substantial investments in management of IT infrastructure and business processes because they understand that outsourcing can deliver significant returns. They must continually demonstrate the relevance of that investment to the business and strategy by measuring the results it yields. SLAs, the traditional yardstick for measuring results, are no longer adequate to that purpose. They are primarily measurements of the vendor�s success in executing tasks, not how the provider impacts or furthers the client�s business imperatives.�

He further said that achieving 99.96 per cent uptime of the client�s network is a typical SLA, but as a measurement of business value it�s so broad that it becomes nearly meaningless.

�On the other hand, the personal uptime per high-productivity or pivotal employee would be a more meaningful metric, because it measures the kind of uptime that most directly benefits the business.�

In 2006 outsourcing performance metrics that are �directly rather than tangentially relevant to business improvement,� will be adopted.

To discover the appropriate metrics, according to Agrawal, an enterprise management has to find the linkages among critical business processes and supporting IT infrastructure elements.

Once this is done, the key next step is deciding which would be most beneficial to the organisation to outsource, assigning management responsibility to the appropriate internal or external party, determining the optimal success metric for each and monitoring progress against those agreed-upon business metrics.

Detailing on the aspect of Business-value metrics that will drive increased global sourcing, he said: �In 2006, to capitalise on the combination of educated workforces and lower labour costs and cost of living, enterprises and their services providers will continue to outsource important support tasks to providers in India, Eastern Europe, China, and even certain areas of the US and Canada. Increasingly, though, measurable value to the business, and not just cost containment, will be a key factor in global sourcing.�

�An enterprise can send IT support offshore to take advantage of lower labour costs, but if its employees spend more time on the phone per call with support personnel due to language or technology barriers, it hasn�t gained any advantage at all from global sourcing. Global sourcing needs to be backed up by a strong business case based on meaningful metrics,� highlighted Agrawal.

He added that complexity in engagements will drive the need for a �manager of managers�. A basic economic reality will continue to drive outsourcing in 2006 and only a relatively few large, multinational companies have the scale to insource management of all their business processes and IT infrastructure.

The personnel and capital costs of wholesale insourcing can be astronomical. Increasingly, both enterprises and government agencies will adopt global sourcing strategies that rely on multisourcing, the use of use both insourced and outsourced resources.

Frequently, enterprises� next-generation multisourcing strategies involve multiple external partners. While retaining internal control and maintenance of its strategic applications, such as those for customer service, a company could outsource management of its IT infrastructure to one partner, its HR processes to another specialist, its procurement and logistics operations to a third provider, and so on. The larger the number of partners, the more value there is in unified, programmatic oversight of their activities, Unisys said.

�Outsourcing specific functions to best-in-class providers makes tremendous strategic and economic sense,� noted Agrawal, �but it can create challenges for management if not done adroitly. I see 2006 as a breakthrough year when enterprises begin engaging a �manager of managers� to oversee and coordinate the activities of all sourcing partners to maximise the business and operational value of their outsourcing engagements.�

This doesn�t involve just implementing a function in software, �It requires choosing a skilled outsourcing provider to ensure that multiple providers make the appropriate connections, which appropriate benchmarks from all quarters of the engagement are linked and reported, and that conflict is surfaced and resolved right away.�

He added that application outsourcing will become more widespread in 2006, but the way enterprises undertake it will be more disciplined. Outsourcing applications can take many forms, from engaging a provider to run the applications in a conventional data centre and perform code maintenance to accessing the applications on a pay-per-use subscription basis from a provider running an IT utility employing a server farm.

To maximise the value of outsourcing strategic applications, enterprises will increasingly take a planned approach, often working with an expert partner, to answer fundamental business questions, such as whether the organisation needs to own the applications, or just the architecture around the applications, or both or neither.

Then they can determine which applications are most strategic, which ones the business will benefit from outsourcing, and what is the best way to outsource each.

�Enterprises will begin to derive as much benefit from planning the way they�ll outsource the applications as they will from actually outsourcing them,� noted Agrawal.

On the issue of what will spur offshore processing in 2006, Agrawal said: �The 2004 passage of the US Check Clearing for the 21st Century Act (Check 21), which provides a comprehensive framework to dramatically reduce the amount of clearing time for paper checks, led financial-services experts to expect a huge decline in US check volumes in 2005.�

�In 2006 I expect what we had initially anticipated for 2005. We�ll see a more precipitous decline in check and remittance volumes, driving banks that previously relied on internal processing capabilities to achieve economies of scale, especially by pooling their volumes with those of other banks in check processing utilities,� he added.

�American financial institutions will demonstrate greater willingness in 2006 to take advantage of payment processing capabilities outside the US to capitalise on economies of scale and lower costs,� predicts Agrawal.

�India has a mature payment processing capability. A lot of US financial institutions and payment processors like the idea of doing something where it�s been done successfully before. Eastern Europe especially, but parts of Asia in addition to India, are well positioned to host an increasing amount of offshore payment processing from the US.�

Global cos keen on outsourcing more R&D jobs to India: Survey

Global cos keen on outsourcing more R&D jobs to India: Survey
About 14% plan to outsource entire business process

New Delhi , Dec. 25

THE Indian dominance over the outsourcing business is likely to continue.

Global firms have comprehensively voted in favour of offshoring assignments to India over other emerging destinations such as Eastern Europe and China during the next three years.

Going forward, the Indian offshoring pie is also slated to extend beyond the traditional IT and call-centre business to include newer areas.

The new areas include research and development (R&D), along with process off-shoring such as human resources, engineering and accounting functions, according to A T Kearney's FDI Confidence Index survey that researched executives from the world's largest companies.

The Indian offshoring business, dominated so far by contact centres and IT services assignments, is likely to see more business in research and development and engineering, along with business process assignments.

About 14 per cent of the global firms responding to A T Kearney said they plan to outsource the entire business process, including human resource and finance assignments.

Around 10 per cent said they planned to outsource R&D and engineering functions to India.

R&D outsourcing is expected to go up in India, with India and China being ranked as the most preferred countries for future R&D investments, according to the study.

Slightly more than 40 per cent of the CEOs indicated that they would be likely make such investments in these markets over the next three years.

In the case of China, manufacturing functions are expected to dominate with 48 per cent of the respondents planning to outsource manufacturing assignments to the country during the period.

While security and efficiency concerns have dominated the outsourcing scene over the last year, an overwhelming percentage of the global firms interviewed expressed satisfaction with their outsourcing experience so far.

Among the firms that are already off-shoring business functions, an overwhelming 51 per cent said the work was up to their expectation, while 9 per cent said it exceeded performance.

Only 17 per cent said that their outsourcing experience was below expectation.

Legal outsourcing to fetch 79,000 jobs

Legal outsourcing to fetch 79,000
PTI[ MONDAY, DECEMBER 26, 2005 01:52:15 AM]

NEW DELHI: Outsourcing is gradually becoming the backbone of Indian service sectors. In the last fiscal India earned $6.7 billion by providing services in software, technology and manufacturing outsourcing.

Legal services are the next destination for a cool BPO. According to a study by the US based Forester Research, the current annual value of legal outsourcing which is worth $80 million can rise up to $4 billion and can fetch 79,000 jobs in India by 2015.

“The benefit of the outsourcing companies in the US would translate into a cost saving of about 10% to 12%. The potential of the Indian resources to absorb the increasing demand in legal outsourcing is because India enjoys the economic advantages of the wage difference and less perks and overheads,” the report says.

National Association of Software and Service Companies (Nasscom) also projected that legal processing outsourcing providers (LPOs) in India will soon rise up to three to four billion dollar.

But this glossy figure has many challenges ahead. The most important challenge to the newly-born sector is the need for Indian lawyers to pass US bar exams, conflict of interest rules and data security.

Legal outsourcing is different from any other knowledge process outsourcing in a fundamental sense. In most jurisdictions lawyers have to be qualified and enrolled in order to advise their clients. Lawyers have to be licensed to practice law (within a certain jurisdiction). Hence legally, one cannot advise, as a lawyer, on laws one is not licensed to practice.

“Similarly, one cannot wholly sub-contract one’s legal work to non-lawyers in other jurisdictions,” says Sumeet Kachwaha of Kachwaha and Partners.

Still the work is of a secretarial nature and includes patent drafting, legal research, contract review and monitoring. However, experts are hoping to receive high-end sophisticated contracts, which require a strong legal base of international standards.

On the flip-side, the Indian Advocates Act, which deals with the professional conduct of lawyers, does not support work for other countries.

On the bright side, there are certain branches of law, which are of a global nature, like intellectual property laws (patents and trademarks) can give LPOs a fillip in their endeavour.

Even, in specific laws governing companies and trade in securities, which hugely differ from one country
to another, may limit LPOs to paralegal and secretarial work.

“As per bar council rules, a lawyer cannot take another job while he is on the roll. He would have to get his licence suspended as a pre-condition. Lawyers would not be able to take employment in legal outsourcing outfits without having to give up their right to be called ‘lawyers’,” says sumeet, indicating that it will be difficult for LPOs to retain the interest of its employees in such a case.

Meanwhile, Khaitan & Co, a leading law firm from Kolkata has already started an LPO by floating a new company ‘neoworth’ and engaged 10 US-enrolled lawyers.

“Although the legal system in India and US are different, the analysis part of the work is the same. We are ready to receive high-end jobs,” says Pinto Khaitan, partner of the Khaitan & Co.

Many lawyers are thinking on the lines of Khaitan. According to them, an Indian lawyer can be as good as his American counterpart in US federal laws if properly trained in US law.

What is required of an attorney, either Indian or American, is not that he should be aware of all laws and regulations but that he should be ready to acquire that knowledge.

“Documentation, standard agreements, plaints, etc can be drawn up in India, quickly processed and implemented through a BPO,” says Asha Nayar Basu of S Jalan & Company. But not all of Basu’s friends agree with her.

“Such businesses will be operated mostly by existing BPOs, junior advocates with an entrepreneurial bent of mind and probably smaller law firms. The larger law ones will not be interested in taking such work as they may not find it intellectually stimulating and rewarding,” says Diljeet Titus of Titus & Co.

Another group reject this idea for a reason more impersonal — technical problems. There is a strong political opposition in the US against outsourcing as may affect the livelihood of US attorneys may also serve as a roadblock.
Titus estimates the LPO industry in India to be worth $50 to $100 million by the year 2010.

He sees a prospective clientele for legal outsourcing in MNCs but not in reputed international firms, especially after the law society of the UK said firms would be liable to bear the loss to the client if it had outsourced work.

Minds Meet - ITES-BPO projections

Minds meet

Statesman News Service
KOLKATA, Dec. 23. — At the IIM-C Joka campus, Intaglio 2005-2006 was a meeting of minds, both from the industry and freshers from business schools across the world. McKinsey Talk Series lectures were delivered by Mr Noshir Kaka, a partner and global practice leader of Business Process Offshoring and Outsourcing practice of McKinsey and Company, and Mr Vipul Tuli, a partner in McKinsey and Company. “IT and BPO can power India’s progress,” Mr Kaka said. “We spent a long time with the Prime Minister, Dr Manmohan Singh, discussing what our research shows, that India’s offshore IT and BPO can contribute seven per cent of the GDP by 2010 and can account for over 44 per cent of exports growth over the next five years. The sector also has the potential to create 2.3 million direct jobs and over 6.5 indirect jobs by 2010. India has the capability to create the largest export industry in the world by 2015 in the IT-BPO sector,” added Mr Kaka, who has played a key role in the establishment of Indian Business School, Hyderabad.
Mr Kaka said that he had placed recommendations before the Prime Minister that he hoped would be considered for the forthcoming budget. “We have suggested: the development of Focussed Education Zones, much like SEZs, to improve the quality of higher education; decentralisation of higher education, we need at least 50 more institutions countrywide like the IIMs; the setting up of a National Student Funding Agency, which will make sure that students have the funds to access quality higher education; in the field of infrastructure, we need the creation of 10-12 integrated townships like Pune and Gurgaon, including international airports, roads and so on; lastly, we need to promote bilateral trade between India and the US and India and Europe,” Mr Kaka said.
In his lecture, Mr Vipul Tuli said: “Geographically, we are in the best possible location for access to gas, oil and coal. We are close to the Middle East and Central Asia and to Myanmar and Bangladesh. But to meet the energy crisis we have to deregulate and restructure the coal sector; strengthen logistics, roads, railways, and ports; focus on technological research; enable a unified government process.”
In the evening, women business leaders from top organisations took centrestage in Cicero’s Senate. The panel discussion was moderated by Dean, Programme Initiatives, Prof. Anup Kumar Sinha. The topic for discussion was Managing Changing Leadership Framework in Business.
All through the day, different B-school competitions were held.

BPO industry should now focus on attaining next level: Experts

BPO industry should now focus on attaining next level: Experts

The Indian BPO industry should now focus on fuelling the next level of growth through consistent innovation and cutting edge technology, experts at a CII summit in Gurgaon opined.

"We need to focus on the outcome rather than the process. Proper access to investment and infrastructure to acquire cutting edge technology and taking advantages of outsourcing happening globally is the key to the development of the industry," said Oracle India Chief Executive Officer Krishan Dhawan at the 'Outsourcing Summit' of CII.

Sharing his thoughts on how India is emerging as a leader in automotive sector outsourcing, Hero Honda Motors Chairman Brijmohan Lal Munjal said while the demand of Indian vehicles increases overseas, India is also catching attention of almost all the global auto giants, under increasing cost pressure in their domestic markets, to outsource auto components.

In his theme presentation, Ranjan Biswas, Partner and Head, BPO Advisory Center, Ernst and Young said that talent pool development, leveraging potential of technology to tier 2 and tier 3 locations, service capability enhancement and creating a world class infrastructure are critical factors in the success of the industry.

Moving beyond outsourcing

Moving beyond outsourcing

Outsourcing has become an integral part of business success, whether it is done by foreign companies which look at India as a viable destination due to price factors, or Indian companies which increasingly outsource non-core processes. The biggest example is ATM outsourcing by banks.

With companies increasingly looking at such alternatives, analysts are worried about compulsive outsourcing. Gartner warns against such a tendency, and advises organisations to begin a more disciplined approach to multi-sourcing—the process of outsourcing and managing business processes among multiple vendors— to achieve business growth and agility.

Building a successful sourcing operation requires a new approach that goes beyond the traditional view of outsourcing. “Companies really need to adopt a new approach, something Gartner calls multi-sourcing, if they are to continue to realise the benefits of outsourcing in future,” said Linda Cohen, Vice-president, Gartner. Cohen has co-written Gartner’s new book, Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility with fellow Gartner sourcing expert Allie Young.

Though Gartner is worried about such trends, organisations feel that sufficient precautions are taken before finalising outsourcing deals. Take the case of Yes Bank, which has outsourced all its IT requirements. The bank’s IT infrastructure is managed by Wipro and the data centre is situated at Reliance’s Dhirubhai Ambani Knowledge City facility.

Explains Aditya Menon, CIO, Yes Bank, “The organisation which takes up the contract has to be geared up with the requisite service levels. Similarly, when we are looking at outsourcing, we need to evaluate what needs to be outsourced as well as the integration issues involved.”

According to the book released by Gartner, multi-sourcing is an innovative discipline that takes organisations beyond quick-fix cost-cutting to enable capability-building, global expansion, increased agility and profitability, and competitive advantage. As such, multi-sourcing requires a new mindset and frameworks for communicating, interacting, and overseeing service relationships both inside and outside the organisation.

Though Gartner is talking of multi-sourcing now, India has been familiar with the practice. Mala Vazirani, Director, Marketing, Transasia Bio-Medicals, is of the view that the sourcing strategy is to be viewed as one of the building blocks of the business strategy, and failure to recognise its significance will amount to planning for evident failure.

“In the Indian context, multi-sourcing is not new. Networking and collaborating between enterprises to build a competitive edge, though unstructured, has been the hallmark of the economic growth of our company,” remarks Vazirani.

The need for outsourcing or multi-sourcing arises from the fact that organisations like to provide value-added features to their customers, but at the same time wish to concentrate on their core business. Explaining the need for outsourcing Menon says, “It’s not that we do not have an IT team. We have, but at the same time we are not looking at having an army of IT personnel. From the IT perspective what matters to us is the value-addition that it allows us to do. Above all, it also allows economies of scale.” He believes that outsourcing, if used effectively, allows organisations to innovate.

The book says that sourcing of services is primarily a procurement exercise where the best price wins. But though price is a criterion it is certainly not the main concern. According to Vazirani, “Pricing can be a decisive factor only when product offerings or services are at par or better than customer expectations.” In this context, the term customer expectations is not to be viewed in isolated reference to the core product. It has to be considered as a packaged delivery model along with other attributes like features, quality, response speed, innovativeness and the technological superiority of the product or service.

Central to a successful multi-sourcing approach is the creation of a strategy that is tightly linked to the overall business strategy and constantly monitored by an effective enterprise-wide governance system. “Companies need new approaches to sourcing strategy, sourcing governance, sourcing management, service-provider selection and service measurement,” says Cohen.

America's Fiserv to invest $10m in India BPO unit

America's Fiserv to invest $10m in India BPO unit

NEW DELHI: US-based outsourcing (BPO) and IT firm Fiserv, which provides services to financial and health care industries, has decided to enter India.

The $3.4 billion revenue company will invest around $10 million, to begin with. The investment will go into a 1,00,000 sq feet facility in Noida, and Fiserv will hire 1,000 people by April 1.

Fiserv Global Services (FGS) has appointed Arun Maheshwari (former CEO of CSC India) as group president, who said that Fiserv India would service some of FGS' 16,000 customers as well as Indian clients.

"The facility is getting ready and will be available in next three months. We are currently working out of a smaller facility," he said.

Maheshwari said Fiserv has started recruitments. He said the company would focus on both BPO and IT sectors, and it would spread to other Indian cities in 2007.

The company also sees India market as a big opportunity. "Feserv India would be an independent profit centre," Maheshwari said. Fiserv, which has acquired 130 companies in the last 20 years, is also looking at acquisitions in India.

"We want to replicate the strategy of acquisitions in India too. We are talking to bankers and acquisitions can be in IT or BPO side," he said. Maheshwari said Fiserv could acquire company with 300 to 3,000 people.

The company already outsources some of its work to Indian vendors. "We can get some of that and we will convince the senior management to send more work to the Indian unit," he said.

BPO work is not low-value: Karnik

BPO work is not low-value: Karnik

‘Do not underestimate wealth creation’
NEW DELHI, DEC 21: Nasscom president Kiran Karnik has hit out at a section of the media for dubbing ITeS and BPO work done in India as “low value” and said contribution of the booming sector in terms of employment and wealth creation among younger generation cannot be underestimated.

At a function in Bangalore on Tuesday, Mr Karnik said a section of the media kept asking him as to “when are we going to move up the value-chain” in this space. “The work being done in India might be of a high-volume-low-margin activity, but the country must not give up something, which is a huge employment generator,” he said.

He pointed out that India’s ITeS/BPO sector had already taken up high-end and cutting-edge work, particularly business analytics, modelling, forecasting and predictive analytics and knowledge process outsourcing.

According to McKinsey, the sector is projected to generate $60 billion in revenues and employ 2.7 million people by 2010. Together, the IT-ITeS sector is expected to account for 7% of GDP by 2010, as opposed to the current 2.1%.

Mr Karnik also likened the major part of the industry to “Udupi hotels” that serve the masses, creating jobs for the younger generation. Young graduates were finding it difficult to get jobs earlier, but the scenario has changed with the advent of this industry.

The sector employs around 4.7 lakh people currently, with most of them being fresh graduates. He also said countries that outsource work to India are beginning to realise the “special value” IT offers. It’s not losing jobs in their countries, but creating new jobs, a whole range of new work by outsourcing. The cost advantage that India has would remain so for many years to come. Quality of service, speed and time-to-market advantages in India are driving outsourcing growth in this country, Mr Karnik added.

Outsourcing to gain more popularity in 2006: Unisys

Outsourcing to gain more popularity in 2006: Unisys

12/20/2005 3:15:59 PM IST

Outsourcing services will continue to grow in popularity in 2006, dissipating the political haze that has led the public to misunderstand its full benefits and implementation options, said Unisys experts.

They made the following predictions for the coming year:

* Decline of the SLA as prime outsourcing success metric
* Business-value metrics will drive increased global sourcing
* Complexity in engagements will drive the need for a “manager of managers”
* A planned approach will boost application outsourcing
* Belated decline in check volumes will drive payments BPO and spur offshore processing

“In the last few years outsourcing has been made the focus of a political sideshow portrayed at best as a way for companies to meet demand for IT services by capitalizing on lower labor costs in developing regions of the world, and at worst as a way to employ one set of workers at the expense of another,” said, Mukul Agrawal, Country Manager, Unisys India.

“Really, the discussion needs to be about the significant business advantages outsourcing delivers,” continues Mukul. “In 2006, enterprises will finally see through the politics and economic half-truths and realize that outsourcing isn’t just global sourcing narrowly applied. They will focus on the business definition of outsourcing: assigning execution of certain tasks to an expert partner, regardless of geographic location, who can deliver demonstrable value to the business. And they will clearly see outsourcing’s benefits: breakthrough visibility leading to secure business operations, better quality of service to customers and employees, improved risk management, remarkable operational efficiencies with lower total cost, and maximized IT investment.”

Decline of the SLA as prime outsourcing success metric

Organizations make substantial investments in management of IT infrastructure and business processes because they understand that outsourcing can deliver significant returns. They must continually demonstrate the relevance of that investment to the business and strategy by measuring the results it yields. Service level agreements, or SLAs – the traditional yardstick for measuring results – are no longer adequate to that purpose. They are primarily measurements of the vendor’s success in executing tasks, not how the provider impacts or furthers the client’s business imperatives.

“Achieving 99.96 percent uptime of the client’s network is a typical SLA,” says Mukul, “but as a measurement of business value it’s so broad that it becomes nearly meaningless. On the other hand, the personal uptime per high-productivity or pivotal employee would be a more meaningful metric, because it measures the kind of uptime that most directly benefits the business. I believe that in 2006 we’ll see wholesale recognition and adoption by enterprises everywhere of outsourcing performance metrics that are directly rather than tangentially relevant to business improvement.”

The key to discovering the appropriate metrics for the organization, according to Mukul, is gaining visibility into the linkages among critical business processes and supporting IT infrastructure elements. Once enterprise management has discerned those, the key next step is deciding which would be most beneficial to the organization to outsource, assigning management responsibility to the appropriate internal or external party, determining the optimal success metric for each and monitoring progress against those agreed-upon business metrics.

Business-value metrics will drive increased global sourcing

In 2006, to capitalize on the combination of educated workforces and lower labor costs and cost of living, enterprises and their services providers will continue to outsource important support tasks to providers in India, Eastern Europe, China, and even certain areas of the US and Canada. Increasingly, though, measurable value to the business, and not just cost containment, will be a key factor in global sourcing. “An enterprise can send IT support offshore to take advantage of lower labor costs, but if its employees spend more time on the phone per call with support personnel due to language or technology barriers, it hasn’t gained any advantage at all from global sourcing, “said Mukul. “Global sourcing needs to be backed up by a strong business case based on meaningful metrics.”

Complexity in engagements will drive the need for a “manager of managers”

A basic economic reality will continue to drive outsourcing in 2006, says Mukul: Only a relatively few large, multinational companies have the scale to insource management of all their business processes and IT infrastructure. The personnel and capital costs of wholesale insourcing can be astronomical. Increasingly, both enterprises and government agencies will adopt global sourcing strategies that rely on “multisourcing” – the use of use both insourced and outsourced resources.

Frequently, enterprises’ next-generation multisourcing strategies involve multiple external partners. While retaining internal control and maintenance of its strategic applications such as those for customer service a company could outsource management of its IT infrastructure to one partner, its HR processes to another specialist, its procurement and logistics operations to a third provider, and so on.

The larger the number of partners, the more value there is in unified, programmatic oversight of their activities. “Outsourcing specific functions to best-in-class providers makes tremendous strategic and economic sense,” said, Mukul, “but it can create challenges for management if not done adroitly. I see 2006 as a breakthrough year when enterprises begin engaging a ‘manager of managers’ to oversee and coordinate the activities of all sourcing partners to maximize the business and operational value of their outsourcing engagements. This doesn’t involve just implementing a function in software. It requires choosing a skilled outsourcing provider to ensure that multiple providers make the appropriate connections, which appropriate benchmarks from all quarters of the engagement are linked and reported, and that conflict is surfaced and resolved right away.”

A planned approach will boost application outsourcing

Application outsourcing will become more widespread in 2006 but the way enterprises undertake it will be more disciplined. Outsourcing applications can take many forms, from engaging a provider to run the applications in a conventional data center and perform code maintenance to accessing the applications on a pay-per-use subscription basis from a provider running an IT utility employing a server farm. To maximize the value of outsourcing strategic applications, enterprises will increasingly take a planned approach – often working with an expert partner to answer fundamental business questions, such as whether the organization needs to own the applications, or just the architecture around the applications, or both or neither. Then they can determine which applications are most strategic, which ones the business will benefit from outsourcing, and what is the best way to outsource each. “Enterprises will begin to derive as much benefit from planning the way they’ll outsource the applications as they will from actually outsourcing them,” said, Mukul.

Belated decline in check volumes will drive payments BPO and spur offshore processing

The 2004 passage of the U.S. Check Clearing for the 21st Century Act (Check 21) which provides a comprehensive framework to dramatically reduce the amount of clearing time for paper checks – led financial-services experts to expect a huge decline in US check volumes in 2005. They anticipated that banks and payment processors would lose economies of scale and see increasing costs per-transaction. To stave off that erosion, many industry experts predicted, banks would aggregate volumes for processing. But none of that happened as quickly as anticipated. “In 2004, the number of non-check payments exceeded those based on checks for the first time in history,” said Mukul, “The industry anticipated a 25 percent decrease in US check volumes in 2005, but it really came in at only 5 or 10 percent as consumer migration to digital forms of payment failed to accelerate as anticipated.” “In 2006 I expect what we had initially anticipated for 2005. We’ll see a more precipitous decline in check and remittance volumes, driving banks that previously relied on internal processing capabilities to achieve economies of scale – especially by pooling their volumes with those of other banks in check processing utilities.”

“American financial institutions will demonstrate greater willingness in 2006 to take advantage of payment processing capabilities outside the US to capitalize on economies of scale and lower costs,” predicts, Mukul. “India has a mature payment processing capability. A lot of US financial institutions and payment processors like the idea of doing something where it’s been done successfully before. Eastern Europe especially, but parts of Asia in addition to India, are well positioned to host an increasing amount of offshore payment processing from the US.”

BPOs set to clock 40% growth in `06

BPOs set to clock 40% growth in `06

Our Economy Bureau / New Delhi December 21, 2005
Malaysia, Sri Lanka likely to give stiff competition, says report.

The Indian outsourcing industry is set grow at 40 per cent and see a significant rise in the number of acquisitions in 2006. According to NeoIT, the offshore Business Process Outsourcing (BPO) advisory firm, Malaysia and Sri Lanka are likely to give stiff competition to the Indian BPO industry over the next one year.

�Beneath the surface of an exciting growth rate of about 40 per cent year-on-year, 2006 will be a year of enormous activities impacting both mature and emerging markets with significant convergence, consolidation and re-alignment,� NeoIT said in its annual report on the projections for the BPO industry for 2006.

The industry will also move away from cost arbitrage being the primary reason for outsourcing to leveraging the full potential of supply markets.

�The industry will witness the advent of �services globalisation�, where it will leverage the full capabilities of supply markets to source IT and other back office services,� the report said.

The other trend that the industry will see is the enhancement of �services sourcing options��the emergence of new supply locations.

�India is expected to maintain its supplier leadership role in the US market, but will be challenged in some areas by the increasing strength of the Philippines, Brazil, Mexico, Israel, Russia, China and other aspiring supply markets,� the report said.

China will remain the most preferred sourcing location for Japanese clients, similar to what the Czech Republic, Poland and Hungary are for Western European clients. The extent of China�s influence on the sourcing options for the US market would be lower than widespread market predictions, the report said.

Last year, the advisory firm�s report had predicted that there will be a steady growth and emergence of new BPO supplier markets, with China, the Philippines and Central Europe, particularly Poland, Czech Republic and Hungary gaining strength.

Trai seeks to end licence fees for leased int'l lines

Trai seeks to end licence fees for leased int'l lines
TIMES NEWS NETWORK[ MONDAY, DECEMBER 19, 2005 01:03:49 AM]

NEW DELHI: This could open the flood gates for international leased lines in India. The telecom regulator now wants to bring in competition in the international leased line segment by doing away with the licence fees altogether. The Telecom Regulatory Authority of India (Trai) has recommended that the government should allow any company to provide international leased lines without paying licence fee.

At present, only international long distance service providers can offer leased lines. Trai has argued that this will increase competition and bring down prices. International leased lines are used by software exporters, BPO units, banks and other financial service companies and internet service providers (ISPs). The success of broadband services also depends on good international connectivity of domestic service providers.

Currently, there are only three international leased line pr-oviders in India — Tata, Reliance and Bharti. In most developed markets, there are more than 30 leased line providers. This is one of the reasons the price of leased lines in India is one of the highest. “Prices in India should be based on competition. This is possible only if there is more competition in the market,” said a Trai official.

International long distance service providers have to pay a one-time entry fee of Rs 25 crore and an annual revenue share of 15% of the adjusted gross revenue. Trai has said that the government should not charge any fee if a company only wants to provide leased lines and is not interested in offering international telephony.

The regulator has also said the government should permit resalers in this business. The ILD sector was opened up for competition in ’02. Trai is of the view that the resale of leased lines should be permitted from ’07. It feels that five years are enough for the development of infrastructure.

Opportunity knocking, act now, says report

Opportunity knocking, act now, says report

Our Bureau / Bangalore December 19, 2005

It is time to act in a faster and more rational manner. This is what Nasscom�s India Strategy Summit 2005 had to say to the captains of the industry and the nation at large. The target for the Indian IT industry is to grow faster to reach the $60 billion mark in exports from the present $17 billion in just another five years.

India is already the leader in IT services and BPO offshoring with a 65 per cent share in global IT services and 46 per cent share in BPO. But the real challenge is how to sustain and improve upon these achievements. In the past six years India has been able to build a virtual platform on which the IT industry can grow.

�This virtual platform has been established, tested and made scalable,� said Ramalinga Raju, founder and chairman, Satyam Computer Services. The need of the hour is to use it effectively to meet the target.

A changed model of increasing thrust on services has to be mounted on the virtual platform that Indian IT industry has built. �The trend is clearly moving towards services and employing innovative techniques but the question remains as to how to balance both,� said Jayant Sinha, partner, McKinsey and company.

Raju said, the two enabling factors that will help the Indian IT industry to reach the target is its software and hardware infrastructure and its leadership position in IT services and BPO. Right now 28 per cent of the global pool of suitable professionals are employed in India as compared to China and Russia which have 11 per cent and 10 per cent respectively.

But there are seemingly insurmountable challenges in terms of infrastructure and talent requirement for the Indian IT sector. The Nasscom-McKinsey 2005 report highlights that the country may, by 2010, fall short of five lakh people in terms of required workforce for the IT sector.

Presently, the total strength of people employed in the IT sector in India is seven lakh and by 2010, according to the report, it needs to add another 1.6 million suitable professionals.

The main reason for the expected shortage is the lack of suitable talent required for the industry. India generates 2.5 million graduates every year, of which only 10 per cent are fit for jobs in BPOs. Only 25 per cent of the 3.5 lakh diploma holders or graduates who come out of the colleges are able to fit into the IT services area.

This highlights the increasing need for improving the suitability of these potential workforce. For this, the higher education system and its curriculum has to adapt to the need of the industry.

�In BPO area, the poor quality of spoken English is the main problem,� says Sinha. There is also a �lack of quality linkage� between academia and industry.

�So the remedy is to train and certify the available talent and generate a competitive advantage,� adds Sinha.

There is also an impinging need for structural reforms in the ways in which universities function. At present, almost 135 universities across the country control almost 17,000 colleges. �There is a need for de-regulaiton in this area,� says Raju. The public money has to flow more to the students than to the universities.

Another challenge for the country is the need for integrated infrastructure development. The Nasscom McKinsey report has suggested that to reach the coveted $60 billion mark and remain an ideal destination for offshoring India needs to have 10-12 cyber cities � five based on the Gurgaon model and the rest based on Pune model.

The report says that these cities must be closer to the tier II cities, not be more than one hour of commuting time. They must have airports and expressways and operate as integrated satellite townships fully funded through public-private partnership.

They should be governed by a centrally run national authority with oversight by eminent individuals and unaffected by political change.

The report also says that an IIT and IIM at each of these proposed cities with a population of 1-2 million should be able to employ 2 lakh knowledge workers each. �This requires an investment of almost $20-30 billion and should follow the public private partnership (PPP) model,� says Raju.

The role for the government is enabling land acquisition for the proposed cities and de-regulating the rules for faster construction.

The country also needs to increase the domestic IT growth which has a low penetration rate and has to stress more on improving the e-governance. �More talent development programmes and innovation driven business processes and models have to be encouraged,� said Sinha.

BPOs set to capture $11-b insurance revenues: Nasscom

BPOs set to capture $11-b insurance revenues: Nasscom

Moumita Bakshi Chatterjee, New Delhi, Dec. 13

THE slow off-take of outsourcing in the insurance domain notwithstanding, the competitive pressure is driving the sector towards higher level of outsourcing adoption now. This has opened up for the BPO service providers an opportunity to capture about $11 billion of insurance revenues by 2008, according to the National Association of Software and Services Companies (Nasscom).

"As observed in other segments of the outsourcing space, once past proof-of-concept, early movers in the industry are beginning to push-the-envelope to expand the scope of activities included in insurance BPO. The rapidly increasing maturity of customers as well as service providers is now enabling them to add more higher-value-adding elements across the insurance value chain to the existing engagements," the latest Nasscom report on `Trends and Opportunities in Insurance BPO' has said.

The report said although outsourcing was primarily viewed as a cost-saving tactic, a few players were beginning to realise the game changing potential it held for the sector. "The ability to offer existing services at a fraction of the costs enables companies to enhance their service offerings as well as tap other segments of the market that were previously `uneconomical' to target — leading to improved cost-margin ratios," the Nasscom report added.

It said that insurance BPO market size for India, which was pegged at $425 million in 2004, is estimated to touch $790 million by 2007.

"Though the insurance segment of the BFSI vertical has had a relatively slower start, compared to other segments such as payment services (credit cards), traditional banking etc., competitive pressure is driving this sector towards higher levels of outsourcing adoption," it said.

Citing projection by Gartner that BPO service providers would capture $11 billion of insurance revenue by 2008, the Nasscom report said that insurers are turning to external BPO providers to expedite their legacy transformation process.

"By 2008, BPO providers are likely to develop the intellectual property and technology platforms to align with various distribution channels (for example, bank and investment houses) and launch insurance ventures.

These measures are likely to capture about one per cent of the global annual premium total of life, annuity, and property and casualty products," Nasscom said.

The report noted that the global insurance industry was witnessing trying times, and said that in the past few years, players had incurred rising claims and serious underwriting losses coupled with poor investment returns and difficult capital market conditions.

"The resultant decline in corporate profitability has led to increased pressures to achieve greater cost efficiencies," it pointed out.

In addition to the pressures, the increasing product and channel complexity and proliferation were driving players in the insurance industry to tap new markets such as banking and brokerage in order to maintain revenue growth and leverage operational infrastructure.

As a result, multiple product and channel customer service initiatives are becoming the norm, with the focus shifting towards integrating or consolidating customer servicing systems, improving the servicing process itself to avoid revisit and duplication, and accelerating new product introduction.

Nasscom said that a study by NeoIT had revealed that cost savings for offshore insurance processes undertaken in India (as compared to those done out of the US) stood at 35 per cent for claims adjusters and examiners, 45 per cent for insurance underwriters, 35 per cent for computer programmers, 15 per cent for insurance sales agents and 15 per cent in case of telemarketers.

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More jobs moving offshore

More jobs moving offshore
3 mil jobs to be sent over decade

Kevin G. Hall
Knight Ridder Newspapers
Dec. 12, 2005 12:00 AM

WASHINGTON - The practice of transferring American jobs to lower-cost countries, called offshoring, is climbing the food chain. It's no longer just software programming and help desks that are being sent to India and elsewhere in Asia.

Fidelity National Financial of Jacksonville, Fla., is looking for tax processors in India. Intelliways, an Indian company that's working on behalf of a U.S. Internet firm, wants someone there to write news releases. India's Cactus Communications Pvt. Ltd. seeks someone in Asia to edit complex English-language research papers about topics in nuclear physics, astrophysics and particle physics for U.S. and other foreign clients.

You get the picture.

With more than 3 million jobs projected to be shipped overseas in the next decade, many analysts question what this means for future U.S. competitiveness.

"Any professional service that can be boiled down to predictable steps, even if they are complicated steps, is now exportable to south Asia," said Robert Reich, who was the secretary of labor in the Clinton administration. "We have to understand there is no longer any sharp distinction between manufacturing and services."

Jim Stachura came to the same conclusion when he was researching where to expand his technology company.

"Any profession that has a language of its own, where professionals from two entirely different cultures can share that work, is a candidate" for offshoring, said Stachura, research director of Aelera Corp., a technology-development firm in Alpharetta, Ga.

Aelera initially sought to expand into India but opted for lower-cost U.S. cities such as Savannah, Ga., and Olympia, Wash.

Broadly defined, the services sector today employs eight in 10 American workers. When global trade eroded U.S. manufacturing jobs in the 1980s and 1990s, experts said the U.S. economy was making the transition to a service economy. Now that sector doesn't feel so safe anymore.

"Labor has always been a commodity, but it has never been so fungible, so easy to move," said Clyde Prestowitz, director of Economic Strategy Institute, which challenges free-trade assumptions, and the author of the recent book Three Billion New Capitalists.

The book concludes that China and India threaten future U.S. job security. Increasingly, skilled professional jobs are being sent abroad, including some in architecture, accounting, law, publishing, finance and insurance.

When the American Institute of Architects surveyed its members last year, it said that 11 percent had shipped design work overseas and another 14 percent were considering it.

"I was a little bit surprised that it was that high; 25 percent had at least thought about it," said Kermit Baker, the institute's chief economist.

Of those who'd shipped work overseas, a quarter cited lower costs, another quarter cited faster production and 50 percent of the architectural firms polled said offshoring helped them cover peak demand. Most of it is computer-aided design work, traditionally done by junior architects.

Lawyers look for help abroad, too. A poll published Dec. 1 by American Lawyer magazine reported that 77 percent of the top 200 U.S. law firms use contract lawyers on a temporary basis, with 6 percent contracting to lawyers offshore.

"When I saw that, my eyes popped out," said Ron Friedmann, the president of Prism Legal Consulting, an Arlington, Va., company that guides law firms about technology issues, including offshoring. "Six percent is, to me, quite a bit when it was barely on the radar screen two years ago."

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Yahoo!   My Yahoo!   Mail Sign In Home - News Home - Help News Finance Sports Movies Welcome Guest Sign In Yahoo! India News:Technology Tue, Dec 13, 2005 Search  News StoriesNews PhotosAll of Yahoo India!  for     Advanced News Home Top Stories Business World Entertainment Sports Technology Health Local News Photos Weather Most Popular  Yahoo! Communities Chat  �  India Infotech -Ride the information superhighway.  �  Linux, Free BSD, Solaris - Discussions about all flavours of Unix.  �  Software Programming - Pick your language: C++, Java, Visual Basic. Message Boards  �  Programming Languages  �  Operating Systems  �  Internet  �  Software  �  All Technology Boards Groups  �  Operating Systems  �  Programming Languages  Tech Resources Full Coverage  �  India Infotech  �  Asia Electronic Commerce  �  Computer Viruses Yahoo! 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The projection, in a study released on Monday by consultancy McKinsey and India's IT association, Nasscom, is roughly in line with the 30 percent annual rise in the past three years and earlier forecasts of $50 billion in exports by end-2008. At $60 billion, India would have almost half the world's IT and business process outsourcing (BPO) exports by 2010 and could add an extra $15 billion-$20 billion over five to 10 years from 2005 through innovation and technological advances, the report said. While India will remain the biggest pool of low-cost global knowledge workers for the foreseeable future, with more than double the combined total in its nearest rivals, China and Russia, it faces a shortfall of 500,000 people by 2010 unless it steps up training. "The reality is that this shortfall can be fairly easily met by industry," McKinsey's Noshir Kaka told reporters in New Delhi, citing India's 2.5 million graduates a year. IT/BPO sector jobs will grow from 700,000 to 2.3 million and indirect employment from 2.5 million to 6.5 million -- adding more work than the communist-backed Congress government's four biggest labour creation programmes, the report said. A bigger hurdle is India's creaking infrastructure, where even leading cities such as Bangalore, Mumbai and New Delhi have massive problems with power, transport and other basic services. NEW CITIES McKinsey's Jayant Sinha said the government and business must go on "a war-footing" to solve the infrastructure crisis, which economists say is also a major brake on broader economic growth. To get around this, the report urges the creation of 10-12 new townships or satellite cities across the country, with their own airports, roads, real estate development and other services. It also proposes special education zones and school reforms. McKinsey and Nasscom estimate barely 10 percent of the potential $300-billion-a-year world market for global offshoring is being tapped, but they expect radical changes by 2015. "We have no doubt that this industry will become the largest export-led industry in the world, rivalling oil from Saudi Arabia or automobiles from Japan," Kaka said. McKinsey and Nasscom publish their outlook for India's fastest growing industry every three years. This is their third. They see the sector's export share of gross domestic product -- itself growing about 8 percent a year -- more than doubling from 3 percent to 7 percent by 2010. The report said the face of the IT/BPO sector will change as its traditional engines of growth, such as application and software development and research and development, slow and customers expect more innovation and value-added services. "Looking forward, the more traditional IT outsourcing lines such as hardware and software maintenance, network administration and help desk services will account for 45 percent of the total addressable market for offshoring and are likely to drive the next wave of growth," it said. This will be focused in areas such as retail banking, human resources, accounting and finance. Email this article to your friend -  View most popular Prev Story: Zensar Tech says to buy software firm OBT Global  ( Reuters) Next Story: New Sober worm expected to hit Jan. 5 - experts  ( Reuters) More Technology Stories � HCL Tech in services deal with Japan's EXA Corp  ( Reuters) � Intel to offer $1.4 billion in convertible debt  ( Reuters) � HarperCollins to create digital warehouse of books  ( Reuters) � Nortel wins Comcast Internet protocol contract  ( Reuters)

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British firms cash in on India's outsourcing edge

British firms cash in on India's outsourcing edge
London | December 12, 2005 9:15:05 AM IST

Roger Smith now gets his banking queries answered in distant India. But he is not complaining. Nor are a growing number of British firms outsourcing jobs to India and other countries.

It was not long ago when Smith's calls to his bank would always be answered by an official of the branch a few blocks down his residence in central London. Today, more often than not, his calls travel thousands of miles to reach India where youngsters work round the clock to answer customer queries over Internet-enabled phones.

The location of the contact centre makes no big difference, says Smith, as long as the financial details are secure and the queries are answered quickly.

The lure of saving money has resulted in more and more British financial services companies like HSBC, Lloyds TSB, Barclays and Norwich Union shifting jobs to offshore locations.

Most of these jobs are increasingly finding their way to Indian cities like Bangalore, Hyderabad and New Delhi where young English-speaking graduate are available in abundance at a sharply lower cost.

"The off-shoring of work to India meets two key criteria - firstly, its low cost," Ian Thompson, director (group operational services) of Britain's banking major Lloyds TSB, told IANS. "Secondly, the quality of work is very high and this has helped us provide the level of service that is consistent with our brand."

Lloyds has transferred some 2,000 jobs to India since commencing operations with a couple of hundreds three years ago. Its mortgage services arm at Cheltenham and Gloucester will next year shift 300 more jobs.

"The service our Indian partners provide is as good as our Britain operations. In some areas it is better. If you look at our customer satisfaction level, that is much higher," said Thompson.

Agrees Hayley Stimpson, director (external affairs) of financial services major Aviva Plc: "We monitor service on a monthly basis and customer feedback shows that our Indian operations are operating to at least the same high standards as Britain.

"This has therefore enabled us to achieve our objective of providing high levels of service while improving our efficiency."

Aviva unveiled its offshore strategy in July 2003 to improve efficiency and rein in high operational cost. The company has created 4,100 jobs in India since then.

Stimpson said Aviva would create a further 800 back office roles in India in the near future as part of its plans to have 7,800 jobs there by the end of 2007. The company will unveil an additional centre in Chennai next year.

The off-shoring boom in the West has helped India's outsourcing firms to collectively earn $5.2 billion through exports of services in the fiscal year ended March 31, 2005.

Global corporations like Siemens, HSBC, American Express, Barclays and British Airways ship jobs to one of the world's fastest growing economies to save costs.

The total annual cost of a call centre agent in Britain is 37,034 pounds. This includes expenses on infrastructure and human resources. For a similar centre in India the annual cost per agent is 10,776 pounds.

"India can claim to be a favoured destination for financial services due to the emphasis placed on it by Western banking investors," said Peter Ryan, an off-shoring analyst with London-based market research firm Datamonitor.

"Indian agents have shown an affinity for this industry, and the commitment of the government to luring contact centre work through infrastructure investment cannot be ignored either," he added.

Unisys Predicts 2006 Outsourcing Trends

Unisys Predicts 2006 Outsourcing Trends: Real Business Metrics and Management Techniques Will Replace Politics and Platitudes

BLUE BELL, Pa.--(BUSINESS WIRE)--Dec. 12, 2005--

New Success Measurements That Drive Global Sourcing Decisions Will Emerge as a Key Market Factor, along with Acceleration of Payments BPO


Outsourcing services will continue to grow in popularity in 2006, dissipating the political haze that has led the public to misunderstand its full benefits and implementation options, say Unisys experts. They made the following predictions for the coming year:

1. Decline of the SLA as prime outsourcing success metric

2. Business-value metrics will drive increased global sourcing

3. Complexity in engagements will drive the need for a "manager of managers"

4. A planned approach will boost application outsourcing

5. Belated decline in check volumes will drive payments BPO and spur offshore processing

"In the last few years outsourcing has been made the focus of a political sideshow - portrayed at best as a way for companies to meet demand for IT services by capitalizing on lower labor costs in developing regions of the world, and at worst as a way to employ one set of workers at the expense of another," says Phil Smith, vice president, Portfolio Management, Unisys Global Outsourcing and Infrastructure Services.

"Really, the discussion needs to be about the significant business advantages outsourcing delivers," continues Smith. "In 2006, enterprises will finally see through the politics and economic half-truths and realize that outsourcing isn't just global sourcing narrowly applied. They will focus on the business definition of outsourcing: assigning execution of certain tasks to an expert partner, regardless of geographic location, who can deliver demonstrable value to the business. And they will clearly see outsourcing's benefits: breakthrough visibility leading to secure business operations, better quality of service to customers and employees, improved risk management, remarkable operational efficiencies with lower total cost, and maximized IT investment."

1. Decline of the SLA as prime outsourcing success metric

Organizations make substantial investments in management of IT infrastructure and business processes because they understand that outsourcing can deliver significant returns. They must continually demonstrate the relevance of that investment to the business and strategy by measuring the results it yields. Service level agreements, or SLAs - the traditional yardstick for measuring results - are no longer adequate to that purpose. They are primarily measurements of the vendor's success in executing tasks, not how the provider impacts or furthers the client's business imperatives.

"Achieving 99.96 percent uptime of the client's network is a typical SLA," says Smith, "but as a measurement of business value it's so broad that it becomes nearly meaningless. On the other hand, the personal uptime per high-productivity or pivotal employee would be a more meaningful metric, because it measures the kind of uptime that most directly benefits the business. I believe that in 2006 we'll see wholesale recognition and adoption by enterprises everywhere of outsourcing performance metrics that are directly rather than tangentially relevant to business improvement."

The key to discovering the appropriate metrics for the organization, according to Smith, is gaining visibility into the linkages among critical business processes and supporting IT infrastructure elements. Once enterprise management has discerned those, the key next step is deciding which would be most beneficial to the organization to outsource, assigning management responsibility to the appropriate internal or external party, determining the optimal success metric for each and monitoring progress against those agreed-upon business metrics.

2. Business-value metrics will drive increased global sourcing

In 2006, to capitalize on the combination of educated workforces and lower labor costs and cost of living, enterprises and their services providers will continue to outsource important support tasks to providers in India, Eastern Europe, China, and even certain areas of the US and Canada. Increasingly, though, measurable value to the business, and not just cost containment, will be a key factor in global sourcing. "An enterprise can send IT support offshore to take advantage of lower labor costs, but if its employees spend more time on the phone per call with support personnel due to language or technology barriers, it hasn't gained any advantage at all from global sourcing," says Smith. "Global sourcing needs to be backed up by a strong business case based on meaningful metrics."

Adds Smith, "An additional upside is that using global resources based on quantifiable business benefits - not just cost reduction - will help remove the negative political connotation outsourcing has unfairly accrued. More and more, it will be recognized as a legitimate way to drive value for the business for all stakeholders."

3. Complexity in engagements will drive the need for a "manager of managers"

A basic economic reality will continue to drive outsourcing in 2006. Only a relatively few large, multinational companies have the scale to insource management of all their business processes and IT infrastructure. The personnel and capital costs of wholesale insourcing can be astronomical. Increasingly, both enterprises and government agencies will adopt global sourcing strategies that rely on "multisourcing" - the use of both insourced and outsourced resources.

Frequently, enterprises' next-generation multisourcing strategies involve multiple external partners. While retaining internal control and maintenance of its strategic applications - such as those for customer service - a company could outsource management of its IT infrastructure to one partner, its HR processes to another specialist, its procurement and logistics operations to a third provider, and so on. The larger the number of partners, the more value there is in unified, programmatic oversight of their activities.

"Outsourcing specific functions to best-in-class providers makes tremendous strategic and economic sense," says Smith, "but it can create challenges for management if not done adroitly. I see 2006 as a breakthrough year when enterprises begin engaging a 'manager of managers' to oversee and coordinate the activities of all sourcing partners to maximize the business and operational value of their outsourcing engagements. This doesn't involve just implementing a function in software. It requires choosing a skilled outsourcing provider to ensure that multiple providers make the appropriate connections, that appropriate benchmarks from all quarters of the engagement are linked and reported, and that conflict is surfaced and resolved right away."

4. A planned approach will boost application outsourcing

Application outsourcing will become more widespread in 2006 - but the way enterprises undertake it will be more disciplined. Outsourcing applications can take many forms, from engaging a provider to run the applications in a conventional data center and perform code maintenance to accessing the applications on a pay-per-use subscription basis from a provider running an IT utility employing a server farm.

To maximize the value of outsourcing strategic applications, enterprises will increasingly take a planned approach - often working with an expert partner - to answer fundamental business questions, such as whether the organization needs to own the applications, or just the architecture around the applications, or both or neither. Then they can determine which applications are most strategic, which ones the business will benefit from outsourcing, and what is the best way to outsource each. "Enterprises will begin to derive as much benefit from planning the way they'll outsource the applications as they will from actually outsourcing them," says Smith.

5. Belated decline in check volumes will drive payments BPO and spur offshore processing

The 2004 passage of the U.S. Check Clearing for the 21st Century Act (Check 21) - which provides a comprehensive framework to dramatically reduce the amount of clearing time for paper checks - led financial-services experts to expect a huge decline in US check volumes in 2005. They anticipated that banks and payment processors would lose economies of scale and see increasing costs per transaction. To stave off that erosion, many industry experts predicted, banks would aggregate volumes for processing.

But none of that happened as quickly as anticipated. "In 2004, the number of non-check payments exceeded those based on checks for the first time in history," said Eric Eisenberg, vice president, Business Process Outsourcing for Unisys and a 20-plus-year veteran of banking operations. "The industry anticipated a 25 percent decrease in US check volumes in 2005, but it really came in at only 5 or 10 percent as consumer migration to digital forms of payment failed to accelerate as anticipated."

Adds Eisenberg, "In 2006 I expect what we had initially anticipated for 2005. We'll see a more precipitous decline in check and remittance volumes, driving banks that previously relied on internal processing capabilities to achieve economies of scale - especially by pooling their volumes with those of other banks in check processing utilities."

In addition, predicts Eisenberg, American financial institutions will demonstrate greater willingness in 2006 to take advantage of payment processing capabilities outside the US to capitalize on economies of scale and lower costs. "India has a mature payment processing capability. A lot of US financial institutions and payment processors like the idea of doing something where it's been done successfully before. Eastern Europe especially, but parts of Asia in addition to India, are well positioned to host an increasing amount of offshore payment processing from the US."

Unisys Outsourcing Solutions: Visibility for Business Advantage

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