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Publishing Bpo in Philippines: Need to Create Differentiators
Valuenotes Outsourcing Practice asked:
Over the last few years, the Philippines has been increasingly gaining traction as an offshoring destination, especially in niches like call centers, medical transcription, animation, publishing and legal services.
ValueNotes has been researching and analyzing the Indian publishing offshoring industry since 2005. With over 100 service providers, some of them with decades of experience, the Indian publishing offshoring industry is quite mature. While India commands a lion’s share in publishing outsourcing, especially in the STM (scientific, technical and medical) segment, service providers in countries like Philippines and China have been around for quite some time.
We estimate the revenues of Publishing BPO industry to be approximately $100 m in 2008. Among the 20-25 vendors, SPi Global Solutions, Innodata Isogen and Asiatype Inc. have been the early movers and have been in existence for two decades or more.
All these service providers have a strong focus on STM (Scientific, Technical and Medical) publishers, and are now beginning to look at the educational and/or corporate publishing segments. These early entrants have positioned themselves as ‘end-to-end service providers’ to the publishing industry. Most large and mid-sized players in the Philippines have been growing at approximately 20-30% per year for the last couple of years.
While publishing BPO industry in the Philippines and India began at the same time, there is a huge difference in their growth patterns. The Philippines industry is approximately one fifths of that of the Indian publishing BPO in terms of manpower. The two leading Philippines players are comparable to the leading Indian players. SPi with an over 5,000 strong workforce in the Philippines is one of the largest publishing BPOs in the world!
However, while almost 80% of the Indian revenues are contributed by the top 10-12 vendors; in the Philippines top 2 vendors comprise 80% of the total revenues. The Philippines vendor landscape is marked by an absence of a strong mid tier (200-500 employees). Apart from Xlibris (captive), Affinity Express, Asiatype and few others, there are very few companies in the mid tier vis-à-vis over 80-100 vendors in that space in India.
On the skills front, India has developed tremendous capabilities in automation and technology. While attributes like cultural proximity to the US, design and copy-editing skills are some of the strong capabilities within Philippines, there is a need to rise to the next level. There is currently an underdeveloped mid tier vendor landscape in the Philippines. Several of these mid-tier companies are subcontractors to the industry leaders. In order to capture the huge opportunity in publishing outsourcing, it is imperative for these Philippines BPOs to build differentiators in their service offerings.
Over the last few years, the Philippines has been increasingly gaining traction as an offshoring destination, especially in niches like call centers, medical transcription, animation, publishing and legal services.
ValueNotes has been researching and analyzing the Indian publishing offshoring industry since 2005. With over 100 service providers, some of them with decades of experience, the Indian publishing offshoring industry is quite mature. While India commands a lion’s share in publishing outsourcing, especially in the STM (scientific, technical and medical) segment, service providers in countries like Philippines and China have been around for quite some time.
We estimate the revenues of Publishing BPO industry to be approximately $100 m in 2008. Among the 20-25 vendors, SPi Global Solutions, Innodata Isogen and Asiatype Inc. have been the early movers and have been in existence for two decades or more.
All these service providers have a strong focus on STM (Scientific, Technical and Medical) publishers, and are now beginning to look at the educational and/or corporate publishing segments. These early entrants have positioned themselves as ‘end-to-end service providers’ to the publishing industry. Most large and mid-sized players in the Philippines have been growing at approximately 20-30% per year for the last couple of years.
While publishing BPO industry in the Philippines and India began at the same time, there is a huge difference in their growth patterns. The Philippines industry is approximately one fifths of that of the Indian publishing BPO in terms of manpower. The two leading Philippines players are comparable to the leading Indian players. SPi with an over 5,000 strong workforce in the Philippines is one of the largest publishing BPOs in the world!
However, while almost 80% of the Indian revenues are contributed by the top 10-12 vendors; in the Philippines top 2 vendors comprise 80% of the total revenues. The Philippines vendor landscape is marked by an absence of a strong mid tier (200-500 employees). Apart from Xlibris (captive), Affinity Express, Asiatype and few others, there are very few companies in the mid tier vis-à-vis over 80-100 vendors in that space in India.
On the skills front, India has developed tremendous capabilities in automation and technology. While attributes like cultural proximity to the US, design and copy-editing skills are some of the strong capabilities within Philippines, there is a need to rise to the next level. There is currently an underdeveloped mid tier vendor landscape in the Philippines. Several of these mid-tier companies are subcontractors to the industry leaders. In order to capture the huge opportunity in publishing outsourcing, it is imperative for these Philippines BPOs to build differentiators in their service offerings.
Domesticating Work – the Remote Staff Philippines Advantage
remotestaff asked:
Networking companies lure members by emphasizing self-responsibility. Among the thought-provoking questions often thrown at us are: Would you like to work from home and earn more? Would you like to be your own boss and be responsible for yourself? Would you like to have a growing career and profit through your network?
These questions would surely entice employees who long to earn extra, fresh graduates who look for a shortcut to high gains and self-employed who are willing to invest their money and see it multiply.
On the other side of the fence, greener promises are offered by reputable and well-established corporations, such as call centers. They attract job hunters with a periodic salary, benefits ranging from health care to car incentives, high-percentage commissions, and possible promotions to the corporate ladder. In a nutshell, its primary charm is financial assurance, thus giving networking companies a stiff competition in luring people from the workforce.
Any member of the workforce whose focus is the achievement of his goals would find both options to be very alluring. Thus, he has to carefully look into not only the advantages but also the disadvantages. Let us proceed then to our investigation.
Multilevel marketing schemes, also known as networking, promote the following benefits:
Work from home. For most people, the home is the most convenience and comfortable place to work in. During lunch breaks, one does not have to eat at an overcrowded pantry where your elbow room is the size of your plate. He may just proceed to the kitchen and scour the fridge for some ready-for-reheating food or prepare a fifteen-minute meal recommended by Rachel Ray. Moreover, one can avoid anxiety attacks brought about by deciding on what to wear the follwing day or the next week to prevent fashion redundancy. He may just wear his peejays at home and start work. Lastly, one does not have to go the extra mile in extending kindness and patience to irksome colleagues because working from home lets him take advantage of the solitude and bliss.
Work stress-free. Apart from the convenience of working from home, stress can be relevantly reduced. No more wasting two hours of your life spent on whining over the traffic congestion in every street of Metro Manila. No more overloaded buses and MRTs with nothing to offer except SROs. With less stress, time and energy are better spent on a more active lifestyle and quality bonding with the family.
Be your own boss. With great power comes great responsibility. Well, it may not be a superpower, but being your own boss still comes with responsibility. You become responsible of your time leading you to learning time management. You become accountable to your decisions resulting in wise decision-makings.
Network marketing vs. Offshore Staffing
Bright as the benefits might appear to be, disadvantages also abound in such arrangements. To have higher profits, one has to sell more of the company products that may vary from discounted beauty products to unbearably priced food supplements. What’s more, he has to recruit more people so as to exceed, not just meet, the high-leverage quotas set on a monthly basis. Another disdvantage is the few success stories of networking members. Hundreds of networking companies promise high profits. What contributes to the dearth of such success stories (despite the numerous testimonials) is the get-rich-quick marketing and recruiting schemes that easily demoralize a member who lacks patience and suddenly realizes the impossibility of such a scheme. On the other hand, the rise of business process outsourcing or BPOs in the Philippines also increased a Pinoy’s awareness to improve his English proficiency and the interest to have financial assurance.
Below are just some of the advantages of being employed becoming an outsourced staff:
Enjoy a regular salary and several benefits. If you do freelance work (read: you’re the boss!), cash flow may not be as regular as what companies can offer. If you are hired by a company, say a call center, as an entry-level employee, you will receive a semi-monthly pay unless stated otherwise in the contract. This way you can easily schedule the payment of your bills, bank transactions, and shopping, of course.
Stay at par with competition. Your competitive spirit will surely be pu to the test once you are hired by a company. As you work with your colleagues, you will realize that some, if not most, can be more talented, skilled or intelligent than you are. So you tend to outperform the others who appear to be better. If viewed optimistically, competition can be healthy and may result in mutual cooperation.
Ascend the corporate ladder. One of the opportunities presented to you as an employee is of career growth. From the ranks, you may find yourself rising to the managerial position. This vertical movement upgrades not only your salary but also your workload. Working from home where you are the boss cannot give you such an opportunity – to visualize yourself clawing your up using your skills and knowldge with a lot of help from perseverance and determination.
Being an employee of such corporations, you are tied not only to your contract but also to the drawbacks. You will be more exposed to stress – time observance, colleague competition, overtime for more profit, corporate standards, payroll deductions and others.
In philosophy, a thesis will always have an antithesis. A concession between the two will lead to a synthesis. Most Pinoys will think that the synthetic solution to enjoy self-responsibility and financial assurance is to look for overseas employment (or romance!). Once they have moved abroad, they become responsible of and to themselves. As an employee, they are also assured of financial security. However, the major disadvantage here is one has to be away from his friends, his family, his home. Thus, the ultimate synthesis to take advantage of all the benefits is opting for the offshore staff career path.
Based in Sydney, Australia, RemoteStaff.com.ph provides offshore staff to several companies in Australia using the internet and softphones as the primary means of communication. Applications and matchings between offshore staff contractors and Filipino professionals are done online. As a virtual staff, you can enjoy the benefits of working from home (self-responsibility) and a periodic salary (financial assurance).
In the succeeding articles, you will find out the advantages far outnumber the disadvantages of becoming a contracted offshore staff under RemoteStaff.com.ph
Intereste in work at home jobs? Visit www.RemoteStaff.com.ph
Networking companies lure members by emphasizing self-responsibility. Among the thought-provoking questions often thrown at us are: Would you like to work from home and earn more? Would you like to be your own boss and be responsible for yourself? Would you like to have a growing career and profit through your network?
These questions would surely entice employees who long to earn extra, fresh graduates who look for a shortcut to high gains and self-employed who are willing to invest their money and see it multiply.
On the other side of the fence, greener promises are offered by reputable and well-established corporations, such as call centers. They attract job hunters with a periodic salary, benefits ranging from health care to car incentives, high-percentage commissions, and possible promotions to the corporate ladder. In a nutshell, its primary charm is financial assurance, thus giving networking companies a stiff competition in luring people from the workforce.
Any member of the workforce whose focus is the achievement of his goals would find both options to be very alluring. Thus, he has to carefully look into not only the advantages but also the disadvantages. Let us proceed then to our investigation.
Multilevel marketing schemes, also known as networking, promote the following benefits:
Work from home. For most people, the home is the most convenience and comfortable place to work in. During lunch breaks, one does not have to eat at an overcrowded pantry where your elbow room is the size of your plate. He may just proceed to the kitchen and scour the fridge for some ready-for-reheating food or prepare a fifteen-minute meal recommended by Rachel Ray. Moreover, one can avoid anxiety attacks brought about by deciding on what to wear the follwing day or the next week to prevent fashion redundancy. He may just wear his peejays at home and start work. Lastly, one does not have to go the extra mile in extending kindness and patience to irksome colleagues because working from home lets him take advantage of the solitude and bliss.
Work stress-free. Apart from the convenience of working from home, stress can be relevantly reduced. No more wasting two hours of your life spent on whining over the traffic congestion in every street of Metro Manila. No more overloaded buses and MRTs with nothing to offer except SROs. With less stress, time and energy are better spent on a more active lifestyle and quality bonding with the family.
Be your own boss. With great power comes great responsibility. Well, it may not be a superpower, but being your own boss still comes with responsibility. You become responsible of your time leading you to learning time management. You become accountable to your decisions resulting in wise decision-makings.
Network marketing vs. Offshore Staffing
Bright as the benefits might appear to be, disadvantages also abound in such arrangements. To have higher profits, one has to sell more of the company products that may vary from discounted beauty products to unbearably priced food supplements. What’s more, he has to recruit more people so as to exceed, not just meet, the high-leverage quotas set on a monthly basis. Another disdvantage is the few success stories of networking members. Hundreds of networking companies promise high profits. What contributes to the dearth of such success stories (despite the numerous testimonials) is the get-rich-quick marketing and recruiting schemes that easily demoralize a member who lacks patience and suddenly realizes the impossibility of such a scheme. On the other hand, the rise of business process outsourcing or BPOs in the Philippines also increased a Pinoy’s awareness to improve his English proficiency and the interest to have financial assurance.
Below are just some of the advantages of being employed becoming an outsourced staff:
Enjoy a regular salary and several benefits. If you do freelance work (read: you’re the boss!), cash flow may not be as regular as what companies can offer. If you are hired by a company, say a call center, as an entry-level employee, you will receive a semi-monthly pay unless stated otherwise in the contract. This way you can easily schedule the payment of your bills, bank transactions, and shopping, of course.
Stay at par with competition. Your competitive spirit will surely be pu to the test once you are hired by a company. As you work with your colleagues, you will realize that some, if not most, can be more talented, skilled or intelligent than you are. So you tend to outperform the others who appear to be better. If viewed optimistically, competition can be healthy and may result in mutual cooperation.
Ascend the corporate ladder. One of the opportunities presented to you as an employee is of career growth. From the ranks, you may find yourself rising to the managerial position. This vertical movement upgrades not only your salary but also your workload. Working from home where you are the boss cannot give you such an opportunity – to visualize yourself clawing your up using your skills and knowldge with a lot of help from perseverance and determination.
Being an employee of such corporations, you are tied not only to your contract but also to the drawbacks. You will be more exposed to stress – time observance, colleague competition, overtime for more profit, corporate standards, payroll deductions and others.
In philosophy, a thesis will always have an antithesis. A concession between the two will lead to a synthesis. Most Pinoys will think that the synthetic solution to enjoy self-responsibility and financial assurance is to look for overseas employment (or romance!). Once they have moved abroad, they become responsible of and to themselves. As an employee, they are also assured of financial security. However, the major disadvantage here is one has to be away from his friends, his family, his home. Thus, the ultimate synthesis to take advantage of all the benefits is opting for the offshore staff career path.
Based in Sydney, Australia, RemoteStaff.com.ph provides offshore staff to several companies in Australia using the internet and softphones as the primary means of communication. Applications and matchings between offshore staff contractors and Filipino professionals are done online. As a virtual staff, you can enjoy the benefits of working from home (self-responsibility) and a periodic salary (financial assurance).
In the succeeding articles, you will find out the advantages far outnumber the disadvantages of becoming a contracted offshore staff under RemoteStaff.com.ph
Intereste in work at home jobs? Visit www.RemoteStaff.com.ph
Outsourcing Alternatives to a Politically and Economically Unstable India
Jack R. Lesley, Jr. asked:
Outsourcing: A love / **** relationship for U.S. I.T. professionals. Ask the average employee in any I.T. organization, and hearing about fear of jobs going to India and China is almost unavoidable. Although many have started the move toward business service management (BSM) to address the chaotic labor trends, I.T. labor itself still consumes over one-third of I.T. budgets. This figure is perfectly in line with a recently published Gartner report stating that 37% of the typical I.T. budget goes directly to personnel costs. What are you as the CIO going to do to manage this frenzied situation? Is outsourcing, or “offshoring,” the answer?
How can you outsource your operations to a foreign country and still maintain compliance with best practice frameworks such as ITIL or MOF? How do you maintain Sarbanes-Oxley, PCI, or HIPAA compliance when utilizing 100% offshore resources with far less control?
Almost everyone in the I.T. sector has at least one story about various operational tasks being “offshored” to India, and no call-center, network operations center (NOC), or infrastructure team has been immune to rumors of jobs going offshore. No longer are the cities of Mumbai and Delhi simple manufacturing hubs and suppliers of raw materials. The country is home to some of the largest corporate call centers and development centers in the world. In late 2005, the Indian outsourcing workforce numbered 350,000 individuals. That total is now estimated at well over 800,000, with many new positions going unfilled due to the lack of qualified candidates.
Eleven years ago this month, USA Today published an article titled “Can political instability be eliminated in India?” Looking solely at the news of the past six months, the answer to that question is an obvious NO.
The trend toward a twenty-first century India has not fostered the sort of sweeping political change one might expect from the world’s most populous democracy. Moreover, the unwillingness of the Indian government to more robustly combat intellectual property theft is the stuff that causes your legal team to lose MANY nights of sleep.
Recession has made its way to India as well. The 4 December 2008 issue of The New York Times ran an article discussing the wave of outsourcing firms scaling back their daily operations in India due to the unhealthy global financial climate. As of this week, the Indian rupee is at a record low.
India makes a strong case as the “global back office,” yet it has failed to produce an environment supporting front-office operations such as product innovation and corporate strategies. The prevailing thought of the past 5 years has been that Indian outsourcing firms are masterful in the art of efficiency and product development measures. What about now?
On 7 January 2009, Indian stocks took a nosedive in the wake of announcements by Satyam Computer Services that corporate profit summaries had been inflated for several years. The announcement by Satyam’s chairman and co-founder that he had directly falsified accounting documents on an ongoing basis has thrown the entire Indian outsourcing industry into dramatic turmoil. As a provider of back-office services for many of the largest banks and healthcare institutions in the world, the result of the SATYAM crisis is nothing short of devastating.
By Friday, January 9, 2009 news sources were reporting that interim CEO Ram Mynampati does not have faith that the firm can continue past the next few weeks. Mynampati stated they were working to find the liquidity to pay current employees, suppliers, and creditors.
In less than a week, the crisis has crossed the Pacific Ocean and hit U.S. shores. Auditing giant PricewaterhouseCoopers is expected to pay a hefty price for the emerging fraud. The auditor has been responsible for Satyam financial oversight for over eight years, and Satyam investors are expected to go to court in attempts to recoup losses. According to legal sources from within India, most are likely to attack PricewaterhouseCoopers directly rather than Satyam.
The tragic events of November 2008 in Mumbai clearly show that the concerns go much deeper. Over 200 people were killed in the attacks, and the entire central business district in Mumbai ground to a halt for several days, resulting in billions of dollars in lost labor. Within one week of the attacks, five high-profile Indian cabinet members were forced to resign. On 1 December, TIME magazine posed the question “Will India’s Government Survive the Mumbai Massacre?”
Many companies are selecting alternate destinations, and some trends show an actual migration OUT of India to other knowledge-rich environments such as Singapore, The Philippines, Armenia, Pakistan, and various Latin American countries. Companies requiring less interaction with the public (for example, a software development center) may select destinations where English is not the primary language, or in some cases, is not a language spoken at all. Companies building public-facing operations such as helpdesks or call centers are being forced to reconsider earlier decisions, and many are moving to more English-centric countries like Taiwan and the Philippines.
Key players are making a strong case for themselves as these trends develop. In the Western Hemisphere, Costa Rica and Peru have marvelous records of rock-solid software development and high customer satisfaction ratings. In Europe, Armenia is emerging as a major powerhouse and model of efficiency. In Asia, many are discovering that the almost-perfect English spoken in Taiwan and the Philippines combined with some labor costs equal to or less than those in India make each a destination of choice. In fact, the November 30 edition of The New York Times Magazine featured a four-page article touting the viability of the Philippines as a premier outsourcing destination.
While China, Russia, and Korea have fantastic talent pools, the labor cost and in some cases difficulty dealing with local and national governments make them less attractive to some U.S. based companies.
While being one of the lesser-mentioned yet more historically colorful European countries, Armenia is a virtual strongbox of extraordinary talent. As mentioned by the CIA World Factbook, 18% of Armenia’s current population is under the age of 15, meaning the talent pool is poised for huge growth.
Armenia declared independence from the former Soviet Union on 21 September, 1991 and is now a bastion of political stability (a particularly attractive factor for the O&O industry). A healthy GDP real-growth rate of 13.7% makes Armenia one of the top producers in the EU.
Additionally, Armenia is rapidly becoming a major challenger in the index of relative economic freedom. As reported by the Heritage Foundation, the change has been nothing short of amazing. In 2000, Armenia ranked 84th in relative economic freedom. As of late 2008, Armenia ranked 28th – ahead of European powerhouses Spain (31st) and France (48th) and just behind Sweden at 27th.
Hong Kong ranked #1 on the list for 2008, with the U.S.A. at #5.
The appraisal of economic freedom is based on 50 economic indicators within the following categories: capital flow and foreign investment; financial systems; monetary, budget, and trade policies; salaries and prices; government interference in the economy; property rights and regulations; and black markets.
Many outsourcing experts are finding a presence in Armenia quite successful for many of their clients and partners. The cooperation offered by the Armenian government to ease immigration and visa restrictions for executives and other technical employees traveling between Armenia and the United States has been a huge advantage to many, and this is compounded by great satisfaction with the talent pool offered by this European country.
Having a stable presence in Armenia is but one example of alternatives to the current Indian instability. There are numerous other alternatives as well, and diversification is going to be the keystone to success over the next few years.
As pointed out by one CEO, “…the logical approach for today’s global economy is to diversify. Many of my contacts who previously invested heavily in Indian resources are already asking for new alternatives, and we believe the best approach is to simply avoid the old cliché of “putting all the eggs in one basket.”
Singapore has emerged as another destination of choice, with an extremely stable economy and government as well as strictly enforced laws on intellectual property rights. Perfect English is widely spoken, and the country is considered one of the top-five technical innovators in the world.
Originally founded as a British trading colony in 1818, Singapore joined the Malaysian federation for a short two years ending in 1965. Now completely independent, Singapore is undeniably one of the most prosperous, diverse, and cosmopolitan destinations in the world and has a per capita GDP greater than that of many “leaders” in Western Europe.
In 2006, the World Bank rated Singapore as “the most business-friendly economy in the world.” Immediately behind London, New York, and Tokyo, Singapore is the fourth largest foreign exchange trading hub in the world.
The country is home to three major state universities: The National University of Singapore, Nanyang Technological University and Singapore Management University, resulting in a literacy rate over 93%. The island nation accomplishes it all with a geographic size only three times that of Washington, DC.
The Philippines and U.S.A. share not only a very similar legal system but the English language as well. Companies in the legal sector consider this fact especially attractive. Once a U.S. colony, the Philippines has a workforce that is already familiar with many legal factors not readily obvious to those in countries with less of a seasoned relationship with the United States.
A few facts about the Philippines:
Population of 91,000,000 as of 2008 550,000 college graduates per year on Average Educated labor pool of Over 30,000,000 Entry-level I.T. salaries average $2500—$8000 USD P.A. Top-quality CBD real-estate costs average $17 PSF 95% literacy rate English as a primary language
One of the top-three law firms in the world relocated their entire network operations center from Chicago to Fort Bonifacio, Manila, in 2003. That operation has since grown much larger, also encompassing legal operations and software development.
From 1997 to 2008, companies such as Citibank, Fluor, IBM, Convergys, Telus, HSBC, Dell, JP Morgan, Siemens, and Deutsche Bank have all opened major offshore facilities in the Metro Manila area of the Philippines.
More than just a country filled with call centers, the Philippines is home to dozens of offshore operations involving network operations, wireless services, energy, shipping and logistics, legal and medical transcription, finance and accounting, and software development.
The country is now recognized by some as the top destination of choice in Southeast Asia. In 2006, the country generated in excess of $3.0 billion in outsourced operations, and that figure is expected to more than double by the end of 2009. The Philippine government has targeted a global market share of 8 to 10% in the O&O market by 2011.
Regardless of where you go, there is no “single best answer” to every situation. When looking for that “trusted advisor” to help you make your next outsourcing, offshoring, development, or infrastructure decision, you need a firm with the knowledge, process, devotion, and proven direction to make it a success.
Only by in-depth knowledge of your core business can any firm help in an effective O&O engagement. You need a firm that endeavors to understand and optimize how the process will enhance not only the I.T. department, but all other business units as well.
O&O will continue to gain momentum over the next few years, regardless of what happens in the Indian subcontinent. The recent events in India and the surrounding territories are but a small stumbling-block to an ever-evolving global business model.
Businesses today realize that three very important factors have emerged in the outsourcing and offshoring industry:
O&O cannot and should not be based on the “one size fits all” methodology anymore. Diversification is the key. Every situation is different. Unless you are prepared to invest in learning foreign tax and H/R systems, unfamiliar holidays, unique infrastructure, governmental regulations, and possibly a few foreign languages, you NEED a trusted advisor on your side.
Companies and their investors who spent the billions of dollars (and thousands of man-hours) building outsourced operations based solely in India have found that trying to separate the technology from the actual business process is not only foolish—it is futile. Outsourcing and offshoring can provide limitless possibilities, but they must be done with precision , care, and proper distribution. Rather than outright withdrawal from offshoring operations, now is the time for diversification.
“There is timing in the whole life of the warrior, in his thriving and declining, in his harmony and discord. Similarly, there is timing in the Way of the merchant, in the rise and fall of capital. All things entail rising and falling timing. You must be able to discern this..”
Miyamoto Musashi , 1645
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Outsourcing: A love / **** relationship for U.S. I.T. professionals. Ask the average employee in any I.T. organization, and hearing about fear of jobs going to India and China is almost unavoidable. Although many have started the move toward business service management (BSM) to address the chaotic labor trends, I.T. labor itself still consumes over one-third of I.T. budgets. This figure is perfectly in line with a recently published Gartner report stating that 37% of the typical I.T. budget goes directly to personnel costs. What are you as the CIO going to do to manage this frenzied situation? Is outsourcing, or “offshoring,” the answer?
How can you outsource your operations to a foreign country and still maintain compliance with best practice frameworks such as ITIL or MOF? How do you maintain Sarbanes-Oxley, PCI, or HIPAA compliance when utilizing 100% offshore resources with far less control?
Almost everyone in the I.T. sector has at least one story about various operational tasks being “offshored” to India, and no call-center, network operations center (NOC), or infrastructure team has been immune to rumors of jobs going offshore. No longer are the cities of Mumbai and Delhi simple manufacturing hubs and suppliers of raw materials. The country is home to some of the largest corporate call centers and development centers in the world. In late 2005, the Indian outsourcing workforce numbered 350,000 individuals. That total is now estimated at well over 800,000, with many new positions going unfilled due to the lack of qualified candidates.
Eleven years ago this month, USA Today published an article titled “Can political instability be eliminated in India?” Looking solely at the news of the past six months, the answer to that question is an obvious NO.
The trend toward a twenty-first century India has not fostered the sort of sweeping political change one might expect from the world’s most populous democracy. Moreover, the unwillingness of the Indian government to more robustly combat intellectual property theft is the stuff that causes your legal team to lose MANY nights of sleep.
Recession has made its way to India as well. The 4 December 2008 issue of The New York Times ran an article discussing the wave of outsourcing firms scaling back their daily operations in India due to the unhealthy global financial climate. As of this week, the Indian rupee is at a record low.
India makes a strong case as the “global back office,” yet it has failed to produce an environment supporting front-office operations such as product innovation and corporate strategies. The prevailing thought of the past 5 years has been that Indian outsourcing firms are masterful in the art of efficiency and product development measures. What about now?
On 7 January 2009, Indian stocks took a nosedive in the wake of announcements by Satyam Computer Services that corporate profit summaries had been inflated for several years. The announcement by Satyam’s chairman and co-founder that he had directly falsified accounting documents on an ongoing basis has thrown the entire Indian outsourcing industry into dramatic turmoil. As a provider of back-office services for many of the largest banks and healthcare institutions in the world, the result of the SATYAM crisis is nothing short of devastating.
By Friday, January 9, 2009 news sources were reporting that interim CEO Ram Mynampati does not have faith that the firm can continue past the next few weeks. Mynampati stated they were working to find the liquidity to pay current employees, suppliers, and creditors.
In less than a week, the crisis has crossed the Pacific Ocean and hit U.S. shores. Auditing giant PricewaterhouseCoopers is expected to pay a hefty price for the emerging fraud. The auditor has been responsible for Satyam financial oversight for over eight years, and Satyam investors are expected to go to court in attempts to recoup losses. According to legal sources from within India, most are likely to attack PricewaterhouseCoopers directly rather than Satyam.
The tragic events of November 2008 in Mumbai clearly show that the concerns go much deeper. Over 200 people were killed in the attacks, and the entire central business district in Mumbai ground to a halt for several days, resulting in billions of dollars in lost labor. Within one week of the attacks, five high-profile Indian cabinet members were forced to resign. On 1 December, TIME magazine posed the question “Will India’s Government Survive the Mumbai Massacre?”
Many companies are selecting alternate destinations, and some trends show an actual migration OUT of India to other knowledge-rich environments such as Singapore, The Philippines, Armenia, Pakistan, and various Latin American countries. Companies requiring less interaction with the public (for example, a software development center) may select destinations where English is not the primary language, or in some cases, is not a language spoken at all. Companies building public-facing operations such as helpdesks or call centers are being forced to reconsider earlier decisions, and many are moving to more English-centric countries like Taiwan and the Philippines.
Key players are making a strong case for themselves as these trends develop. In the Western Hemisphere, Costa Rica and Peru have marvelous records of rock-solid software development and high customer satisfaction ratings. In Europe, Armenia is emerging as a major powerhouse and model of efficiency. In Asia, many are discovering that the almost-perfect English spoken in Taiwan and the Philippines combined with some labor costs equal to or less than those in India make each a destination of choice. In fact, the November 30 edition of The New York Times Magazine featured a four-page article touting the viability of the Philippines as a premier outsourcing destination.
While China, Russia, and Korea have fantastic talent pools, the labor cost and in some cases difficulty dealing with local and national governments make them less attractive to some U.S. based companies.
While being one of the lesser-mentioned yet more historically colorful European countries, Armenia is a virtual strongbox of extraordinary talent. As mentioned by the CIA World Factbook, 18% of Armenia’s current population is under the age of 15, meaning the talent pool is poised for huge growth.
Armenia declared independence from the former Soviet Union on 21 September, 1991 and is now a bastion of political stability (a particularly attractive factor for the O&O industry). A healthy GDP real-growth rate of 13.7% makes Armenia one of the top producers in the EU.
Additionally, Armenia is rapidly becoming a major challenger in the index of relative economic freedom. As reported by the Heritage Foundation, the change has been nothing short of amazing. In 2000, Armenia ranked 84th in relative economic freedom. As of late 2008, Armenia ranked 28th – ahead of European powerhouses Spain (31st) and France (48th) and just behind Sweden at 27th.
Hong Kong ranked #1 on the list for 2008, with the U.S.A. at #5.
The appraisal of economic freedom is based on 50 economic indicators within the following categories: capital flow and foreign investment; financial systems; monetary, budget, and trade policies; salaries and prices; government interference in the economy; property rights and regulations; and black markets.
Many outsourcing experts are finding a presence in Armenia quite successful for many of their clients and partners. The cooperation offered by the Armenian government to ease immigration and visa restrictions for executives and other technical employees traveling between Armenia and the United States has been a huge advantage to many, and this is compounded by great satisfaction with the talent pool offered by this European country.
Having a stable presence in Armenia is but one example of alternatives to the current Indian instability. There are numerous other alternatives as well, and diversification is going to be the keystone to success over the next few years.
As pointed out by one CEO, “…the logical approach for today’s global economy is to diversify. Many of my contacts who previously invested heavily in Indian resources are already asking for new alternatives, and we believe the best approach is to simply avoid the old cliché of “putting all the eggs in one basket.”
Singapore has emerged as another destination of choice, with an extremely stable economy and government as well as strictly enforced laws on intellectual property rights. Perfect English is widely spoken, and the country is considered one of the top-five technical innovators in the world.
Originally founded as a British trading colony in 1818, Singapore joined the Malaysian federation for a short two years ending in 1965. Now completely independent, Singapore is undeniably one of the most prosperous, diverse, and cosmopolitan destinations in the world and has a per capita GDP greater than that of many “leaders” in Western Europe.
In 2006, the World Bank rated Singapore as “the most business-friendly economy in the world.” Immediately behind London, New York, and Tokyo, Singapore is the fourth largest foreign exchange trading hub in the world.
The country is home to three major state universities: The National University of Singapore, Nanyang Technological University and Singapore Management University, resulting in a literacy rate over 93%. The island nation accomplishes it all with a geographic size only three times that of Washington, DC.
The Philippines and U.S.A. share not only a very similar legal system but the English language as well. Companies in the legal sector consider this fact especially attractive. Once a U.S. colony, the Philippines has a workforce that is already familiar with many legal factors not readily obvious to those in countries with less of a seasoned relationship with the United States.
A few facts about the Philippines:
Population of 91,000,000 as of 2008 550,000 college graduates per year on Average Educated labor pool of Over 30,000,000 Entry-level I.T. salaries average $2500—$8000 USD P.A. Top-quality CBD real-estate costs average $17 PSF 95% literacy rate English as a primary language
One of the top-three law firms in the world relocated their entire network operations center from Chicago to Fort Bonifacio, Manila, in 2003. That operation has since grown much larger, also encompassing legal operations and software development.
From 1997 to 2008, companies such as Citibank, Fluor, IBM, Convergys, Telus, HSBC, Dell, JP Morgan, Siemens, and Deutsche Bank have all opened major offshore facilities in the Metro Manila area of the Philippines.
More than just a country filled with call centers, the Philippines is home to dozens of offshore operations involving network operations, wireless services, energy, shipping and logistics, legal and medical transcription, finance and accounting, and software development.
The country is now recognized by some as the top destination of choice in Southeast Asia. In 2006, the country generated in excess of $3.0 billion in outsourced operations, and that figure is expected to more than double by the end of 2009. The Philippine government has targeted a global market share of 8 to 10% in the O&O market by 2011.
Regardless of where you go, there is no “single best answer” to every situation. When looking for that “trusted advisor” to help you make your next outsourcing, offshoring, development, or infrastructure decision, you need a firm with the knowledge, process, devotion, and proven direction to make it a success.
Only by in-depth knowledge of your core business can any firm help in an effective O&O engagement. You need a firm that endeavors to understand and optimize how the process will enhance not only the I.T. department, but all other business units as well.
O&O will continue to gain momentum over the next few years, regardless of what happens in the Indian subcontinent. The recent events in India and the surrounding territories are but a small stumbling-block to an ever-evolving global business model.
Businesses today realize that three very important factors have emerged in the outsourcing and offshoring industry:
O&O cannot and should not be based on the “one size fits all” methodology anymore. Diversification is the key. Every situation is different. Unless you are prepared to invest in learning foreign tax and H/R systems, unfamiliar holidays, unique infrastructure, governmental regulations, and possibly a few foreign languages, you NEED a trusted advisor on your side.
Companies and their investors who spent the billions of dollars (and thousands of man-hours) building outsourced operations based solely in India have found that trying to separate the technology from the actual business process is not only foolish—it is futile. Outsourcing and offshoring can provide limitless possibilities, but they must be done with precision , care, and proper distribution. Rather than outright withdrawal from offshoring operations, now is the time for diversification.
“There is timing in the whole life of the warrior, in his thriving and declining, in his harmony and discord. Similarly, there is timing in the Way of the merchant, in the rise and fall of capital. All things entail rising and falling timing. You must be able to discern this..”
Miyamoto Musashi , 1645
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