Outsource More, Spend Less

By Paul McDougall
InformationWeek

Jan 16, 2006 12:00 AM

American workers hate it and campaigning politicians attack the practice. Despite all that, U.S. businesses are outsourcing work at record levels.

The number of outsourcing contracts worth $50 million or more increased 9% in 2005 to 293, according to research by Technology Partners International. It's the largest number of deals that size seen in a single year, the consulting firm said last week. TPI relies on outsourcing announcements and its research of unpublicized deals.

While the number of deals is up, businesses actually are spending less on outsourcing. That's because more of the work is performed in India or other places where labor is cheap. Indian service providers grabbed 6% of all outsourcing contracts worth more than $50 million in 2005, compared with 2% the previous year.

At the same time, big U.S. outsourcers such as IBM and EDS are increasing staff in their own offshore facilities to stay competitive. Also driving down contract values is the tendency to parcel out work in smaller chunks and for a shorter duration. The total value of contracts let in 2005 dropped 5% to $75 billion, TPI says.

Outsourcing is controversial because critics say U.S. workers pay the price for businesses' desire to use low-cost labor.

Not all work that's outsourced goes to foreign shores. The majority is still performed domestically. In fact, outsourcers are beefing up their local workforces. According to the Labor Department, payrolls among IT-services firms grew by nearly 32,000 workers in 2005, a 2.7% gain for the year. But that's small comfort to IT workers whose jobs have gone overseas.

SITEL to ramp up presence in KPO segment

Company scouting for locations to expand operations

Our Regional Bureau / Hyderabad January 18, 2006

SITEL India, a contact centre service provider, is scouting for locations to expand its operations.

This apart, the business process outsourcing (BPO) player is looking at establishing its presence in the knowledge process outsourcing (KPO) segment this year. The company is also looking at focusing on non-voice based interaction as a growth strategy.

Addressing the media on the occasion of the inauguration of SITEL India�s contact centre in Hyderabad, Safir Adeni, chief executive officer of the company, said, �It is important for us to expand our operations to various locations. We are looking at Chennai, Kolkata, Chandigarh, Kochi and Vizag as potential destinations.� The company currently has its presence in Mumbai and Hyderabad.

�This year�s strategic focus for SITEL India will be the KPO segment. We have dabbled in high-end data analytics work and will now position ourselves seriously in this sector. We would like to have a leading edge in the KPO sector,� Adeni added.

The company will be holding its annual strategic plan meetings next week and will outline its plans in this regard.

SITEL India is a 50:50 joint venture between the billion-dollar SITEL Corporation, a global provider of outsourced customer support services, and the Tata Group. At present, 77 per cent of the company�s business is via voice-based interaction.

�Two years down the line, we would like to balance this and have a 50:50 ratio between the voice-based and non-voice based sectors,� Adeni said.

According to Chris Gates, co-chief operating officer of SITEL Corporation, the company would be doubling in India in the near future. At present, it employs around 2,000 people in India out of the around 36,000 worldwide.

�This is my first visit to Hyderabad and I am amazed at what I see,� he added.

Adeni added that the company is looking at tremendous growth and performance from Hyderabad for their company. The company plans to hire 1,000 people in Hyderabad initially.

`Domestic BPO market to grow 60 pc in 2005-06'

Moumita Bakshi Chatterjee

New Delhi , Jan. 17

MOVE over Sam, it is time for Shyam to ride the next business process outsourcing (BPO) wave. After exports, the domestic BPO market is now set to take off in a big way, and grow at an estimated 60 per cent to touch about Rs 4,200 crore in 2005-06.

"The domestic BPO business is expected to grow at 60 per cent to clock Rs 4,200 crore during 2005-06 compared with Rs 2,640 crore in 2004-05. As much as 60 per cent of this would be call centre work. Other activities include HR and finance and accounting operations," Nasscom's Vice-President, Mr Sunil Mehta, told Business Line here.

The domestic BPO business is expected to employ close to 50,000 people in 2005-06, he said. In terms of revenues, the market had grown 85 per cent in 2004-05, from Rs 1,425 crore in the previous year.

"Enterprises have begun to realise that the call centre work is not their core competence and that it is easier and more efficient to outsource this work. Moreover, the growth of exports have helped BPO and call centre companies attain economies of scale and understand business," Mr Mehta said.

Although the domestic pie is still miniscule compared to massive BPO exports of $7.3 billion (Rs 32,850 crore) estimated for 2005-06, the high rate of growth back home combined with lucrative deals — such as the one announced by Bharti last year — is prompting players to actively look at the domestic opportunities.

Earlier today, Spanco Telesystems announced it has secured a five-year outsourcing contract worth Rs 5 crore for its domestic call centre operations under the brand name `Sparsh' from the Delhi Government. The contract involves setting up a voice and Web-based public grievance management system and providing contact centre services. Sparsh would manage Citizen Relationship & Grievance Management System (CRGMS) in Delhi.

In August last year, telecom major Bharti had announced a Rs 1,000-crore deal with four business process outsourcing companies to outsource its call centre operations for the next 4-5 years. The deal signed with IBM Daksh, MphasiS, TeleTech and Hinduja TMT envisaged setting up contact centres in each of the four zones of the country. The same month, MphasiS BPO, formerly MsourcE, forayed into the domestic business process outsourcing market with a multi-crore, multi-year order from State Bank of India.