Thursday, March 31, 2011
Tuesday, May 18, 2010
Top 10 Developments which changed Shared Services (KPMG)
It’s remarkable to think that the space in which we operate – now a skein of connected activities across numerous industries and sectors employing millions of people and involving many billions of dollars – has only existed in anything like its current form for a mere handful of years. From concept to delivery, the shared services and outsourcing space has been granted a fraction of the development time which more established activities such as manufacturing have enjoyed – but nevertheless, in that time we’ve witnessed some truly remarkable developments which have utterly revolutionized the business environment – and, indeed, the very nature of business.
As Ed Kirkby, Senior Consultant at EquaTerra, recalls: “Having been involved in the IT industry since 1983 I have seen many changes – and much re-inventing of the wheel. Apart from the technology drivers and the advent of offshore (e.g. India) there are other developments over this period of: one-stop shop versus selective outsourcing (‘best in class‘), new business models (ASPs/ISPs and Legacy), Business Process Outsourcing, complexity and future proofing considerations, more sophisticated financial engineering, partnerships and joint ventures, commoditization of ‘me too’ deals in mature markets as well as Sole-Source versus Competitive Tender. These have all combined to make outsourcing one of the most interesting market sectors to be in, both from a historical perspective and the place to be in the future – why? Because outsourcing works!”
Recently SSON reached out to a number of experts and commentators from around the shared services and outsourcing space to give their thoughts on the developments which have made the space what it is today. Now, we present the result: our Top Ten Developments Which Changed Shared Services & Outsourcing. Enjoy!
1. Technological advances
No surprises that this one’s on the list; pretty much every one of our contributors mentioned technology in one form or another, whether it be the incredible facilitating impact of the internet or the development of specifically process-related tools boosting companies’ efficiencies and productivity. It’s impossible to imagine life today without many of the technological innovations which have taken place, or reached maturity, during the period of time in which the shared services and outsourcing space has blossomed and boomed; it’s even less possible to imagine that space without the technology upon which it is supported.
As The Hackett Group’s Tom Bangemann says: “the one big enabler is technology, because without technology developments – especially ERP 20 years ago – no global business service or shared service organization of any sort would work.”2. Globalization
Alongside purely technological advances, of course, must be placed the dramatic changes in the relationships between nations and individuals, and the contracting or removal of previously obstructive chasms between locations and businesses, which have become known as globalization. It is possible to conceive of a form of shared service, and a variety of outsourcing, emerging in a non-globalized environment – but it’s absolutely impossible to see how either of those two concepts could ever have reached the levels of complexity, or resulted in the remarkable gains in efficiency and effectiveness, which they have achieved thanks to what journalist and academic Frances Cairncross has so elegantly termed “the death of distance”.
“The key development that makes shared services and outsourcing the successful model it is today is globalization,” says CenterPoint Energy’s Julienne Sugarek. “Through technology, we can be connected instantly to people in other cities, states and countries. We can pass work products back and forth as if our offices were down the hall from one another. In addition, the promotion of free trade has led to reduced transportation costs and the harmonization of intellectual property laws has opened the doors to a new way of doing business – business without borders.”
The Hackett Group’s Tom Bangemann concurs: “There are today tens, possibly hundreds of locations able to provide GBS services. The supply side is also bolstered by the growth of the BPO and ITO industries. Without adequate supply the can be no match between supply and demand! Globalization has also led to organizations taking a more business and less local or nationalistic view on labor issues, hence the willingness to deploy GBS SDM has increased and today almost all medium and large organizations use this SDM (to some extent).”3. The development of outsourcing as a distinct profession
As outsourcing first touched upon, then burst into, the economic and corporate mainstream, it of necessity became an activity which required increasing specialization and particularization on the part of those engaged within it. Whereas at the beginning of the outsourcing boom developments were being driven by experts in other fields who were able to envision how radically outsourcing would impact upon business practice, today’s outsourcing practitioners are finely-tuned specialist professionals (you know who you are…) with an understanding of their environment immeasurably broader and deeper than that of those first pioneers.
“There was a time when professionals with general transaction skills were the primary architects of outsourcing transactions, and buyers typically engaged in shared services and outsourcing relationships with limited or no specialized expertise. Over the past 10 years, outsourcing advisory has grown into a distinct specialization for lawyers, consultants and procurement professionals. A host of certifications have also been created to validate this specialization. The specialization of these intermediaries has led to increased competitiveness and standardized industry transaction practices,” maintains Robin Rasmussen, Director, Shared Services & Outsourcing Advisory at KPMG.4. The rise of value-adding finance roles
Just as the development of outsourcing has required the development of outsourcing specialists, so too changes in the nature of the finance function (with the evolution of shared services a notable contributory factor) have required the emergence of a new set of roles within finance – a development which is still very much ongoing. The requirement for added value, and the response of businesses to changes in the nature of businesses themselves, have created a new generation of professionals with remits often far beyond those of their predecessors, wrestling with challenges which previously might not have existed, or might at least have been considered to reside well outside the responsibilities of finance teams.
“Perhaps more ‘work in progress’ than completed development, the growth of value-adding finance roles outside both the traditional finance department and the shared service arena has certainly changed the culture within which SSO and BPO programs are implemented,” believes independent finance and shared services expert Jim Whitworth. “Early shared services had to fight their way through considerable resistance, often from finance management who sought to protect the traditional departmental structure and roles that had shaped their careers to date and had been expected to continue to do so. Businesses fuelled the conflict by failing to get to grips with building and executing a vision for the contribution that finance professionals could continue to make outside the newly acquired SSC or outsource partnership.”
Whitworth continues: “Fortunately, we’re now seeing many more alternatives for finance careers outside the Manager – Controller – Director route in a traditionally structured finance organization. Developing systems and processes in a technically complex world, ensuring compliance and controls to meet ever-increasing regulation and partnering business leaders in decision making have all become careers in their own right in recent years. As this greater range of options continues to develop, the shared services practitioner may no longer be the enemy threatening the finance management status quo but the key to future opportunity. Greater support brings faster implementation, easier stabilization and stronger sustainability as those retained from the old organization focus on new roles that challenge and add value.” 5. The rise (and fall) of the mega-deal
It’s an old lesson in business as well as in math that the numbers just keep getting bigger over time (even if your own share of them seems to shrink by the day…). Once outsourcing built up a full head of steam, and companies got to grips with the advantages and attendant risks (and how to manage them) associated with the practice, it was only a matter of time that the deals taking place grew to occasionally jaw-dropping scale. Of course, that created a whole new realm of risk…
“The ‘mega-deal’ not only helped the outsourcing industry address the needs of large, multi-national companies, but it also elevated outsourcing decisions to the highest levels of the buyer organization, which in turn helped establish outsourcing as a permanent option for operations strategy. Ironically, the ‘mega-deal’ also exposed some of the limitations of the outsourcing business model, as it magnified the impact of execution and governance failures. Service providers, buyers and their advisors continue to look for ways to address the limitations and risks exposed by the mega-deal,” says Eugene Kublanov, Director, Shared Services and Outsourcing Advisory at KPMG.6. Best-practice vision for support functions
Some of the developments that have contributed to the evolution of shared services and outsourcing have been very tangible – technological advances being a case in point. Others, however, have been extremely abstract – and an example of this is the emergence of the concept of best practice within support functions. Abstract or not, however, the impact of this concept has been all but immeasurable: the idea that support functions – particularly within finance – could be optimized and made efficient in the same way as an assembly line or a supply chain has revolutionized the back office and helped drive some of the most important advances in business practice in living memory. “Shared services started in the mid 1980s in finance functions with some enterprising US-based corporations who took a look at finance costs as a percentage of revenue, realized they had a full accounting function in every manufacturing plant or depot, and thought they could halve the cost or better by co-locating it,” explains Philip King of Atos Consulting. “The name ‘shared services’ was invented to make it more palatable to concerned stakeholders. It was purely a cost-reduction play at the time. And to some degree this is still paramount – but, as most people who reads these pages know, there is more to it than that. The words ‘shared services’ now have real meaning: shared resources, shared responsibility and real customer service provision. However the real added value from shared services is realized when it is an integral and fundamental part of a functional transformation preferably aligned to business strategy or transformation. And this is applicable to any support function – e.g. Finance, Procurement, HR, IT, Facilities & Estates, Customer Management/Service.
“One of the key developments that have sustained and enhanced the role of shared services is the development of the best-practice vision for support functions. This can be traced back to consulting firms in the 1990s that began to spread the gospel of ‘the future of finance’ with a best practice organizational architecture including corporate ‘centers of excellence/expertise‘, ‘business partners‘, and ‘shared services’ – the three key functional sub-divisions of an optimal support function organization. This has since been applied to all support functions – the terminology might be slightly different, but the principle is the same. Focusing the right activities in each area and aligning the appropriate resources multiplies the benefits: e.g. shared services support the business partner role by taking away the distractions of routine transaction processing and providing consistent data. The organization will benefit from the strategic value the business partner can provide if the right type of resource is deployed and the objectives of the role are clear.
“Done well all three parts of this support function vision are complementary and the value of change is multiplied. If done poorly this leads to a lack of clarity and belief in the shared services idea, as the full benefits are not realized. The terminology differs slightly from one function to another, but the concept is proven. Many organizations still have not fully grasped this fundamental vision, but it is even more important in the current climate, so for those who have not yet picked up on this key development, I’d urge you to work at it.”7. Increased buyer savvy
Outsourcing providers might be tempted to provide just a minimum satisfactory level of service (well, it’s human nature, maybe) but even if that weren’t a rather short-termist proposition, in today’s outsourcing environment it’s tantamount to commercial suicide. A major reason for this – alongside the proliferation of competing providers eager to snatch away every unsecured morsel of trade – is the increased savvy among buyers of outsourced services. As the industry has matured, so too has buyers’ understanding of what exactly can be gained – and at what cost – from the various providers offering their services.
“Outsourcing and shared services are now central to enterprise strategy and higher up the value chain, with most businesses having invested in new skills and re-organized themselves to identify optimum sourcing strategies, execute deals and govern the new service models. Whilst we still have further to go before sourcing can be thought of as a truly mature industry the trend is increasingly for more educated buyers, investing in new capabilities and expecting more from providers who in turn are maturing, consolidating and specializing to meet increased client expectations. These factors taken together have changed our view of what can be successfully externalized or optimized to include value and knowledge based requirements as well as commoditized services,” says Tony Rawlinson, Managing Director, Financial Services Advisory, Europe & Asia Pacific for EquaTerra.8. The rise of India (and the rest)
“Outsourcing” might be excessively closely linked with “India” in the minds of many consumers in the developed world but there’s a reason why that link was forged in the first place. India has been the powerhouse of the offshore outsourcing boom: its hyperpotent combination of technological prowess, well-educated and -skilled employees and that all-important labor arbitrage has propelled the sub-continent to the very forefront of this dynamic space, resulting in vast gains for the Indian economy – and for many companies worldwide who’ve taken advantage of this incredible boom.
“The unmatched ability of top tier India-based outsourcers to recruit, train, hire and onboard hundreds of thousands of people each year established the offshore delivery center as a viable service delivery model for services providers. It also established a new competitive segment of outsourcing service providers that did not originate in the U.S. or Western Europe. This in turn led to new entrants not only from India, but from various other developing countries that began to compete with the top tier, multi-national service providers,” asserts Eugene Kublanov of KPMG.9. Changes in the accountancy environment
Of course outsourcing and shared services aren’t just about finance – but a significant proportion of activity within the space remains driven by the finance function, and a proportion of that drive comes from the developments within the global accountancy environment which have had such an impact on business within and beyond shared services and outsourcing in recent years. Sarbanes-Oxley and similar regulatory efforts have created new realms of complexity which businesses have had no choice but to address – and shared services has become both a useful tool to address this, and profoundly affected by the very changes which new legislation has driven.
“The evolution of the accountancy space over the past couple of decades has really provided a huge driver for many of the developments we’ve seen in back-office structures and the outsourcing profession,” says independent finance professional Keith Osborne. “Added complexity in terms of compliance frameworks – not to mention the increased severity of sanctions for those failing to comply – has driven compliance up the corporate agenda and created an opportunity for shared services to become centers of accounting excellence, alongside the need to keep down costs during this leap in complexity. And of course several of the leading accountancy firms have been at the forefront of the outsourcing and shared service revolution in an advisory capacity as well as transforming their own businesses…”10. Governments’ acknowledgement of outsourcing’s influence on the economy
The impact of the outsourcing boom on the Indian economy was mentioned above – but of course it isn’t just India that has enjoyed the fruits – and had to deal with the issues arising from – the globalization of outsourcing. Both provider locations and governments of countries from which work is being outsourced have had to face up to the ways in which outsourcing impacts upon local and national economies, and international trading relationships. Policy must now encompass the economic realities which outsourcing has forced upon pretty much every country on earth – giving rise to many challenges to which the solutions have not yet been found.
“Various governments in the developing world (India is a salient example) have acknowledged the shared services and outsourcing sector as a substantial and positive influence on their economy. That acknowledgment has led to policies which encourage human capital development, and the modernization of infrastructure and commercial regulation. This in turn has facilitated the globalization of the shared services and outsourcing sector beyond its geographic origins,” believes KPMG’s Matamba Austin.
For more information, please contact us at sachith@recruiseindia.com
As Ed Kirkby, Senior Consultant at EquaTerra, recalls: “Having been involved in the IT industry since 1983 I have seen many changes – and much re-inventing of the wheel. Apart from the technology drivers and the advent of offshore (e.g. India) there are other developments over this period of: one-stop shop versus selective outsourcing (‘best in class‘), new business models (ASPs/ISPs and Legacy), Business Process Outsourcing, complexity and future proofing considerations, more sophisticated financial engineering, partnerships and joint ventures, commoditization of ‘me too’ deals in mature markets as well as Sole-Source versus Competitive Tender. These have all combined to make outsourcing one of the most interesting market sectors to be in, both from a historical perspective and the place to be in the future – why? Because outsourcing works!”
Recently SSON reached out to a number of experts and commentators from around the shared services and outsourcing space to give their thoughts on the developments which have made the space what it is today. Now, we present the result: our Top Ten Developments Which Changed Shared Services & Outsourcing. Enjoy!
1. Technological advances
No surprises that this one’s on the list; pretty much every one of our contributors mentioned technology in one form or another, whether it be the incredible facilitating impact of the internet or the development of specifically process-related tools boosting companies’ efficiencies and productivity. It’s impossible to imagine life today without many of the technological innovations which have taken place, or reached maturity, during the period of time in which the shared services and outsourcing space has blossomed and boomed; it’s even less possible to imagine that space without the technology upon which it is supported.
As The Hackett Group’s Tom Bangemann says: “the one big enabler is technology, because without technology developments – especially ERP 20 years ago – no global business service or shared service organization of any sort would work.”2. Globalization
Alongside purely technological advances, of course, must be placed the dramatic changes in the relationships between nations and individuals, and the contracting or removal of previously obstructive chasms between locations and businesses, which have become known as globalization. It is possible to conceive of a form of shared service, and a variety of outsourcing, emerging in a non-globalized environment – but it’s absolutely impossible to see how either of those two concepts could ever have reached the levels of complexity, or resulted in the remarkable gains in efficiency and effectiveness, which they have achieved thanks to what journalist and academic Frances Cairncross has so elegantly termed “the death of distance”.
“The key development that makes shared services and outsourcing the successful model it is today is globalization,” says CenterPoint Energy’s Julienne Sugarek. “Through technology, we can be connected instantly to people in other cities, states and countries. We can pass work products back and forth as if our offices were down the hall from one another. In addition, the promotion of free trade has led to reduced transportation costs and the harmonization of intellectual property laws has opened the doors to a new way of doing business – business without borders.”
The Hackett Group’s Tom Bangemann concurs: “There are today tens, possibly hundreds of locations able to provide GBS services. The supply side is also bolstered by the growth of the BPO and ITO industries. Without adequate supply the can be no match between supply and demand! Globalization has also led to organizations taking a more business and less local or nationalistic view on labor issues, hence the willingness to deploy GBS SDM has increased and today almost all medium and large organizations use this SDM (to some extent).”3. The development of outsourcing as a distinct profession
As outsourcing first touched upon, then burst into, the economic and corporate mainstream, it of necessity became an activity which required increasing specialization and particularization on the part of those engaged within it. Whereas at the beginning of the outsourcing boom developments were being driven by experts in other fields who were able to envision how radically outsourcing would impact upon business practice, today’s outsourcing practitioners are finely-tuned specialist professionals (you know who you are…) with an understanding of their environment immeasurably broader and deeper than that of those first pioneers.
“There was a time when professionals with general transaction skills were the primary architects of outsourcing transactions, and buyers typically engaged in shared services and outsourcing relationships with limited or no specialized expertise. Over the past 10 years, outsourcing advisory has grown into a distinct specialization for lawyers, consultants and procurement professionals. A host of certifications have also been created to validate this specialization. The specialization of these intermediaries has led to increased competitiveness and standardized industry transaction practices,” maintains Robin Rasmussen, Director, Shared Services & Outsourcing Advisory at KPMG.4. The rise of value-adding finance roles
Just as the development of outsourcing has required the development of outsourcing specialists, so too changes in the nature of the finance function (with the evolution of shared services a notable contributory factor) have required the emergence of a new set of roles within finance – a development which is still very much ongoing. The requirement for added value, and the response of businesses to changes in the nature of businesses themselves, have created a new generation of professionals with remits often far beyond those of their predecessors, wrestling with challenges which previously might not have existed, or might at least have been considered to reside well outside the responsibilities of finance teams.
“Perhaps more ‘work in progress’ than completed development, the growth of value-adding finance roles outside both the traditional finance department and the shared service arena has certainly changed the culture within which SSO and BPO programs are implemented,” believes independent finance and shared services expert Jim Whitworth. “Early shared services had to fight their way through considerable resistance, often from finance management who sought to protect the traditional departmental structure and roles that had shaped their careers to date and had been expected to continue to do so. Businesses fuelled the conflict by failing to get to grips with building and executing a vision for the contribution that finance professionals could continue to make outside the newly acquired SSC or outsource partnership.”
Whitworth continues: “Fortunately, we’re now seeing many more alternatives for finance careers outside the Manager – Controller – Director route in a traditionally structured finance organization. Developing systems and processes in a technically complex world, ensuring compliance and controls to meet ever-increasing regulation and partnering business leaders in decision making have all become careers in their own right in recent years. As this greater range of options continues to develop, the shared services practitioner may no longer be the enemy threatening the finance management status quo but the key to future opportunity. Greater support brings faster implementation, easier stabilization and stronger sustainability as those retained from the old organization focus on new roles that challenge and add value.” 5. The rise (and fall) of the mega-deal
It’s an old lesson in business as well as in math that the numbers just keep getting bigger over time (even if your own share of them seems to shrink by the day…). Once outsourcing built up a full head of steam, and companies got to grips with the advantages and attendant risks (and how to manage them) associated with the practice, it was only a matter of time that the deals taking place grew to occasionally jaw-dropping scale. Of course, that created a whole new realm of risk…
“The ‘mega-deal’ not only helped the outsourcing industry address the needs of large, multi-national companies, but it also elevated outsourcing decisions to the highest levels of the buyer organization, which in turn helped establish outsourcing as a permanent option for operations strategy. Ironically, the ‘mega-deal’ also exposed some of the limitations of the outsourcing business model, as it magnified the impact of execution and governance failures. Service providers, buyers and their advisors continue to look for ways to address the limitations and risks exposed by the mega-deal,” says Eugene Kublanov, Director, Shared Services and Outsourcing Advisory at KPMG.6. Best-practice vision for support functions
Some of the developments that have contributed to the evolution of shared services and outsourcing have been very tangible – technological advances being a case in point. Others, however, have been extremely abstract – and an example of this is the emergence of the concept of best practice within support functions. Abstract or not, however, the impact of this concept has been all but immeasurable: the idea that support functions – particularly within finance – could be optimized and made efficient in the same way as an assembly line or a supply chain has revolutionized the back office and helped drive some of the most important advances in business practice in living memory. “Shared services started in the mid 1980s in finance functions with some enterprising US-based corporations who took a look at finance costs as a percentage of revenue, realized they had a full accounting function in every manufacturing plant or depot, and thought they could halve the cost or better by co-locating it,” explains Philip King of Atos Consulting. “The name ‘shared services’ was invented to make it more palatable to concerned stakeholders. It was purely a cost-reduction play at the time. And to some degree this is still paramount – but, as most people who reads these pages know, there is more to it than that. The words ‘shared services’ now have real meaning: shared resources, shared responsibility and real customer service provision. However the real added value from shared services is realized when it is an integral and fundamental part of a functional transformation preferably aligned to business strategy or transformation. And this is applicable to any support function – e.g. Finance, Procurement, HR, IT, Facilities & Estates, Customer Management/Service.
“One of the key developments that have sustained and enhanced the role of shared services is the development of the best-practice vision for support functions. This can be traced back to consulting firms in the 1990s that began to spread the gospel of ‘the future of finance’ with a best practice organizational architecture including corporate ‘centers of excellence/expertise‘, ‘business partners‘, and ‘shared services’ – the three key functional sub-divisions of an optimal support function organization. This has since been applied to all support functions – the terminology might be slightly different, but the principle is the same. Focusing the right activities in each area and aligning the appropriate resources multiplies the benefits: e.g. shared services support the business partner role by taking away the distractions of routine transaction processing and providing consistent data. The organization will benefit from the strategic value the business partner can provide if the right type of resource is deployed and the objectives of the role are clear.
“Done well all three parts of this support function vision are complementary and the value of change is multiplied. If done poorly this leads to a lack of clarity and belief in the shared services idea, as the full benefits are not realized. The terminology differs slightly from one function to another, but the concept is proven. Many organizations still have not fully grasped this fundamental vision, but it is even more important in the current climate, so for those who have not yet picked up on this key development, I’d urge you to work at it.”7. Increased buyer savvy
Outsourcing providers might be tempted to provide just a minimum satisfactory level of service (well, it’s human nature, maybe) but even if that weren’t a rather short-termist proposition, in today’s outsourcing environment it’s tantamount to commercial suicide. A major reason for this – alongside the proliferation of competing providers eager to snatch away every unsecured morsel of trade – is the increased savvy among buyers of outsourced services. As the industry has matured, so too has buyers’ understanding of what exactly can be gained – and at what cost – from the various providers offering their services.
“Outsourcing and shared services are now central to enterprise strategy and higher up the value chain, with most businesses having invested in new skills and re-organized themselves to identify optimum sourcing strategies, execute deals and govern the new service models. Whilst we still have further to go before sourcing can be thought of as a truly mature industry the trend is increasingly for more educated buyers, investing in new capabilities and expecting more from providers who in turn are maturing, consolidating and specializing to meet increased client expectations. These factors taken together have changed our view of what can be successfully externalized or optimized to include value and knowledge based requirements as well as commoditized services,” says Tony Rawlinson, Managing Director, Financial Services Advisory, Europe & Asia Pacific for EquaTerra.8. The rise of India (and the rest)
“Outsourcing” might be excessively closely linked with “India” in the minds of many consumers in the developed world but there’s a reason why that link was forged in the first place. India has been the powerhouse of the offshore outsourcing boom: its hyperpotent combination of technological prowess, well-educated and -skilled employees and that all-important labor arbitrage has propelled the sub-continent to the very forefront of this dynamic space, resulting in vast gains for the Indian economy – and for many companies worldwide who’ve taken advantage of this incredible boom.
“The unmatched ability of top tier India-based outsourcers to recruit, train, hire and onboard hundreds of thousands of people each year established the offshore delivery center as a viable service delivery model for services providers. It also established a new competitive segment of outsourcing service providers that did not originate in the U.S. or Western Europe. This in turn led to new entrants not only from India, but from various other developing countries that began to compete with the top tier, multi-national service providers,” asserts Eugene Kublanov of KPMG.9. Changes in the accountancy environment
Of course outsourcing and shared services aren’t just about finance – but a significant proportion of activity within the space remains driven by the finance function, and a proportion of that drive comes from the developments within the global accountancy environment which have had such an impact on business within and beyond shared services and outsourcing in recent years. Sarbanes-Oxley and similar regulatory efforts have created new realms of complexity which businesses have had no choice but to address – and shared services has become both a useful tool to address this, and profoundly affected by the very changes which new legislation has driven.
“The evolution of the accountancy space over the past couple of decades has really provided a huge driver for many of the developments we’ve seen in back-office structures and the outsourcing profession,” says independent finance professional Keith Osborne. “Added complexity in terms of compliance frameworks – not to mention the increased severity of sanctions for those failing to comply – has driven compliance up the corporate agenda and created an opportunity for shared services to become centers of accounting excellence, alongside the need to keep down costs during this leap in complexity. And of course several of the leading accountancy firms have been at the forefront of the outsourcing and shared service revolution in an advisory capacity as well as transforming their own businesses…”10. Governments’ acknowledgement of outsourcing’s influence on the economy
The impact of the outsourcing boom on the Indian economy was mentioned above – but of course it isn’t just India that has enjoyed the fruits – and had to deal with the issues arising from – the globalization of outsourcing. Both provider locations and governments of countries from which work is being outsourced have had to face up to the ways in which outsourcing impacts upon local and national economies, and international trading relationships. Policy must now encompass the economic realities which outsourcing has forced upon pretty much every country on earth – giving rise to many challenges to which the solutions have not yet been found.
“Various governments in the developing world (India is a salient example) have acknowledged the shared services and outsourcing sector as a substantial and positive influence on their economy. That acknowledgment has led to policies which encourage human capital development, and the modernization of infrastructure and commercial regulation. This in turn has facilitated the globalization of the shared services and outsourcing sector beyond its geographic origins,” believes KPMG’s Matamba Austin.
For more information, please contact us at sachith@recruiseindia.com
Tuesday, May 11, 2010
Choosing b/w Strategic sourcing or Outsourcing advisory consultant
Employing a strategic sourcing or outsourcing advisory guide
Strategic Sourcing and outsourcing advisory consultants are aimed on assisting executives with the difficult project of organizing and efficiently completing an outsourcing challenge inside their organisation. It consists of a analysing methods that include a procurement progression and evaluates and assesses getting pursuits within a corporation in a continuing way.
The key aim for this kind of duties is to assess the offer chain managing and make variations which decrease source chain expenses.
Strategic Sourcing is focused on higher levels strategic business objectives and may well include things like benefitial improvements above and above the direct cost benefits from the fast outsourcing relevant alterations. Achieving top fee, progression and good quality positive aspects can signify replacing technologies, buying new solutions or outsourcing total technology dependent aspects of a organization as perfectly as guide functions which benefit from centralisation or economies of scale and leverage a company's acquiring power.
Quite a few terms are applied to refer to sourcing initiatives, which includes off-shoring, next to-shoring, around sourcing, market-aspect, purchase-side, supplier direction, and can be at managing degree and targeted on i.t outsourcing or rationalisation or at c-suite place bringing together significant initiatives inside a world-wide organisation. Strategic sourcing includes a collaborative and continuous relationship between buyers and vendors.
one of the major gains to having an exterior strategic sourcing advisory to help is that is considerably boosts the visibility of the complete provide chain and allows managing to get a obvious audit of their situation and the truth about their recent financial commitments whilst also generating fee personal savings and improved operational effectiveness.
The savings from strategic sourcing arrive from lots of parts and usually highlight lots of techniques that a provider can increase devote consolidation, cope with demand, enhance internal and outside processes, re-set up aggressive bidding situations and produce relationships with inner and outer distributors.
Sourcing initiatives begin with an audit of the ongoing predicament and assessing a company's shelling out inside the context of their market and identifying the most suitable vendors and providers with respect to an overall coherent technique. This can suggest obtaining new vendors that suit the new requirement, negotiating with existing suppliers, or creating new procedures and structure throughout which to take care of accessible dealers so that benefits of any alterations can be assessed and the method modified to improve outcome.
Strategic sourcing advisories are there to deliver sizeable existing encounter in dealing with transform direction, bid techniques, venture operations, outsourcing considerations and negatiations with companies and partners. This assistance can be critical when a firm looks to outsourcing for the first time and has minimal inside experience of managing outsourcing on any important scale.
Strategic sourcing advisory providers are inclined to have a group of extremely encountered marketplace professionals who have relationships and a prosperous observe report or functioning at c-suite point to navigate the mine field on difficulties which an inexperienced provider would run into when wanting to attain a successful outsourcing initiative on their very own. Typically these advisories have worked in just fortune 500 and FTSE 500 corporations with prosperous observe records in managing complex sourcing initiatives at a strategic degree in which associations and sourcing dynamics need to be totally understood.
When shopping for a strategic sourcing consultant, examine for senior executives with this practical knowledge to be certain of obtaining the appropriate final results on your outsourcing venture.
For more information, please contact us at sachith@recruiseindia.com
Strategic Sourcing and outsourcing advisory consultants are aimed on assisting executives with the difficult project of organizing and efficiently completing an outsourcing challenge inside their organisation. It consists of a analysing methods that include a procurement progression and evaluates and assesses getting pursuits within a corporation in a continuing way.
The key aim for this kind of duties is to assess the offer chain managing and make variations which decrease source chain expenses.
Strategic Sourcing is focused on higher levels strategic business objectives and may well include things like benefitial improvements above and above the direct cost benefits from the fast outsourcing relevant alterations. Achieving top fee, progression and good quality positive aspects can signify replacing technologies, buying new solutions or outsourcing total technology dependent aspects of a organization as perfectly as guide functions which benefit from centralisation or economies of scale and leverage a company's acquiring power.
Quite a few terms are applied to refer to sourcing initiatives, which includes off-shoring, next to-shoring, around sourcing, market-aspect, purchase-side, supplier direction, and can be at managing degree and targeted on i.t outsourcing or rationalisation or at c-suite place bringing together significant initiatives inside a world-wide organisation. Strategic sourcing includes a collaborative and continuous relationship between buyers and vendors.
one of the major gains to having an exterior strategic sourcing advisory to help is that is considerably boosts the visibility of the complete provide chain and allows managing to get a obvious audit of their situation and the truth about their recent financial commitments whilst also generating fee personal savings and improved operational effectiveness.
The savings from strategic sourcing arrive from lots of parts and usually highlight lots of techniques that a provider can increase devote consolidation, cope with demand, enhance internal and outside processes, re-set up aggressive bidding situations and produce relationships with inner and outer distributors.
Sourcing initiatives begin with an audit of the ongoing predicament and assessing a company's shelling out inside the context of their market and identifying the most suitable vendors and providers with respect to an overall coherent technique. This can suggest obtaining new vendors that suit the new requirement, negotiating with existing suppliers, or creating new procedures and structure throughout which to take care of accessible dealers so that benefits of any alterations can be assessed and the method modified to improve outcome.
Strategic sourcing advisories are there to deliver sizeable existing encounter in dealing with transform direction, bid techniques, venture operations, outsourcing considerations and negatiations with companies and partners. This assistance can be critical when a firm looks to outsourcing for the first time and has minimal inside experience of managing outsourcing on any important scale.
Strategic sourcing advisory providers are inclined to have a group of extremely encountered marketplace professionals who have relationships and a prosperous observe report or functioning at c-suite point to navigate the mine field on difficulties which an inexperienced provider would run into when wanting to attain a successful outsourcing initiative on their very own. Typically these advisories have worked in just fortune 500 and FTSE 500 corporations with prosperous observe records in managing complex sourcing initiatives at a strategic degree in which associations and sourcing dynamics need to be totally understood.
When shopping for a strategic sourcing consultant, examine for senior executives with this practical knowledge to be certain of obtaining the appropriate final results on your outsourcing venture.
For more information, please contact us at sachith@recruiseindia.com
Monday, November 9, 2009
Captives in India: shut down Mode
Capacity addition by 3rd party service providers (‘Buy’) is likely to surpass additions by captives (‘Make’).
The recent announcement of UBS, a global financial services firm, selling its captive in India to Cognizant Technolgies is the latest in a series of such sell-offs. This only reiterates what Evalueserve had predicted way back in 2007 that the capacity addition by third-party service providers (‘Buy’ option) is likely to surpass additions by captives (‘Make’ option). After a study of about 100 captives of western companies in India, Evalueserve confirmed that a majority of these captives are in serious trouble.
Sixty-one percent of the captives studied have faced significant issues, with many of them already shut down. Smaller captives have been the worst hit; many of the larger ones are not in good shape either.
Captives across all segments—Information Technology (IT), Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)—have fared somewhat similarly.Smaller captives Captives across all segments—Information Technology (IT), Business Process Outsourcing (BPO)
In contrast, third-party service providers have been scaling up during this
period. Access to new markets and increasing maturity of the service providers have helped them stay ahead.
Majority of Captives Face Serious Issues
In April 2007, Evalueserve predicted in a report titled ‘The future of KPO – Make or Buy? that the capacity addition by third-party service providers (‘Buy’ option) is likely to surpass additions by captives (‘Make’ option). The report also identified three distinct phases in the lifecycle of offshore units in the ‘Make’ model: the set-up phase, the honeymoon phase and the stagnation period.
As a follow-up, Evalueserve studied 100 captives, not only from KPO, but also from BPO and IT segments that have been in operation since January 2006. These included 30 BPO, 38 KPO and 32 IT captives, from the 300-odd captives in India. In cases where the captive catered to overlapping areas (which was the situation in 34 percent of the sample), the predominant area of operation (i.e., IT/BPO/KPO) was selected to classify the captive.
The captives were selected randomly and were of varying sizes with 54 percent of them having more than 500 employees. The current study confirms the earlier theories. Sixty-one percent of the captives studied have gone through varying degrees of turbulence in the past four years—27 percent of them either shut down or were sold to third-party service providers.
For example, Citigroup sold its BPO arm, Citigroup Global Services, to Tata Consultancy Services and its technology captive, Citi technology Services Ltd., to Wipro technologies. HCL Technologies bought Adaptech’s India technology centre, Symphony Service bought biotechnology firm Biolmagene’s India R&D centre and the AOL contact centre in India was sold to Aegis BPO. Besides, companies such as Bose Corp., PowerGen, Riya, Inc. and BelAir Networks shut their captives in India.
Thirty-four percent of the captives studied either remained stagnant or have scaled down. These captives are under great pressure, and we may see many of them exiting in the next 1–2 years. However, small captives cannot be sold off at a premium, and they will find the exit much harder.
Small Captives Worst Hit; Larger Ones Also Not Spared
It is well established that smaller captives with fewer than 500 employees are likely to face greater challenges to survive. In fact, 74 percent of such captives have gone through a difficult time in the past four years. Employee retention is a serious issue in small captives since they are unable to provide good career opportunities.
An interesting finding from the study is that many bigger captives (with more than 500 employees) have also been under tremendous pressure to survive in the past four years. It is evident from the fact that only half of such captives have been able to scale up during this period.
What Led to The Decline of Captives?
The change in the position of captives from a seemingly ‘enviable’ position to an ‘unviable’ condition can be attributed to several factors. The most prominent of them are the following:
Significant management involvement is required while setting up a captive. If the support is sporadic, the transitioning and ramp-up process slows down, leading to cost escalations. In case of third-party providers, the parent company can manage the vendor as per pre-agreed Service Level Agreements (SLAs) and engagement terms, which does require some effort, but is much less than what is required for a captive.
For more information, please contact us at sachith@recruiseindia.com
The recent announcement of UBS, a global financial services firm, selling its captive in India to Cognizant Technolgies is the latest in a series of such sell-offs. This only reiterates what Evalueserve had predicted way back in 2007 that the capacity addition by third-party service providers (‘Buy’ option) is likely to surpass additions by captives (‘Make’ option). After a study of about 100 captives of western companies in India, Evalueserve confirmed that a majority of these captives are in serious trouble.
Sixty-one percent of the captives studied have faced significant issues, with many of them already shut down. Smaller captives have been the worst hit; many of the larger ones are not in good shape either.
Captives across all segments—Information Technology (IT), Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)—have fared somewhat similarly.Smaller captives Captives across all segments—Information Technology (IT), Business Process Outsourcing (BPO)
In contrast, third-party service providers have been scaling up during this
period. Access to new markets and increasing maturity of the service providers have helped them stay ahead.
Majority of Captives Face Serious Issues
In April 2007, Evalueserve predicted in a report titled ‘The future of KPO – Make or Buy? that the capacity addition by third-party service providers (‘Buy’ option) is likely to surpass additions by captives (‘Make’ option). The report also identified three distinct phases in the lifecycle of offshore units in the ‘Make’ model: the set-up phase, the honeymoon phase and the stagnation period.
As a follow-up, Evalueserve studied 100 captives, not only from KPO, but also from BPO and IT segments that have been in operation since January 2006. These included 30 BPO, 38 KPO and 32 IT captives, from the 300-odd captives in India. In cases where the captive catered to overlapping areas (which was the situation in 34 percent of the sample), the predominant area of operation (i.e., IT/BPO/KPO) was selected to classify the captive.
The captives were selected randomly and were of varying sizes with 54 percent of them having more than 500 employees. The current study confirms the earlier theories. Sixty-one percent of the captives studied have gone through varying degrees of turbulence in the past four years—27 percent of them either shut down or were sold to third-party service providers.
For example, Citigroup sold its BPO arm, Citigroup Global Services, to Tata Consultancy Services and its technology captive, Citi technology Services Ltd., to Wipro technologies. HCL Technologies bought Adaptech’s India technology centre, Symphony Service bought biotechnology firm Biolmagene’s India R&D centre and the AOL contact centre in India was sold to Aegis BPO. Besides, companies such as Bose Corp., PowerGen, Riya, Inc. and BelAir Networks shut their captives in India.
Thirty-four percent of the captives studied either remained stagnant or have scaled down. These captives are under great pressure, and we may see many of them exiting in the next 1–2 years. However, small captives cannot be sold off at a premium, and they will find the exit much harder.
Small Captives Worst Hit; Larger Ones Also Not Spared
It is well established that smaller captives with fewer than 500 employees are likely to face greater challenges to survive. In fact, 74 percent of such captives have gone through a difficult time in the past four years. Employee retention is a serious issue in small captives since they are unable to provide good career opportunities.
An interesting finding from the study is that many bigger captives (with more than 500 employees) have also been under tremendous pressure to survive in the past four years. It is evident from the fact that only half of such captives have been able to scale up during this period.
What Led to The Decline of Captives?
The change in the position of captives from a seemingly ‘enviable’ position to an ‘unviable’ condition can be attributed to several factors. The most prominent of them are the following:
Significant management involvement is required while setting up a captive. If the support is sporadic, the transitioning and ramp-up process slows down, leading to cost escalations. In case of third-party providers, the parent company can manage the vendor as per pre-agreed Service Level Agreements (SLAs) and engagement terms, which does require some effort, but is much less than what is required for a captive.
For more information, please contact us at sachith@recruiseindia.com
Sunday, March 29, 2009
How to Get Hired In A KPO Job
Jobs in KPO or the Knowledge Process Outsourcing are quite in demand these days given the bright prospects in this field. The industry is fast picking up in India given the wealth of well-educated professionals in India who can be hired at relatively cheaper rates. It is a knowledge based industry and in this regard it is quite different from a BPO. In a KPO, employees are involved in knowledge-based work or research in different verticals. So, people with experience in specialized fields are considered for a KPO job. Unlike BPO, it is not just the youngsters or fresh out of college youth who opt for a KPO jobs but experienced professionals from various fields and even retired people are joining the KPO industry to take up lucrative jobs.
KPO jobs involve work in various fields such as finance, legal issues, intellectual property, analytics, market research and data management for a company. Since this is all knowledge based and confidential work, a lot of risk management is required in KPO jobs in India and abroad. The job would require in-depth knowledge of that area of work. Of course, the KPO centre imparts training to its employees for the vertical that it is working in. High-end knowledge work is executed in these KPOs as directed by the client. It could be data management, petition filing, research oriented work or any other such work that involves proper understanding of that field.
Since India offers good KPO services with a lot of cost advantage, it is estimated that by 2010, nearly two and a half lakh people in India would be employed in this industry. This is an indicative number and given the potential of this industry, it may as well increase. In the past decade, there has been a mushrooming of engineering, technical and professional institutes in India. Thus, there is no shortage of skilled manpower in the country which is capable of handling high-end knowledge work in KPOs. Thus, more and more international companies are either setting shop here or hiring the local talent for research and development work or outsourcing such work to Indian KPO companies that specialize in the particular vertical.
Experienced and qualified professionals are choosing this career option because it is very lucrative. A person with two years of experience can expect to earn remuneration as high as around Rs 6 lakh (Rs 600,000) to Rs 8 lakh (Rs 800,000) annually. Someone with higher experience and knowledge of the industry would easily draw anywhere between Rs 15 lakh (Rs 1.5 million) and Rs 20 lakh (Rs 2 million). However, this industry is fraught with attrition. Since people are not properly aware of the potential of this industry, they tend to leave jobs quicker in this industry.
To get hired for a KPO job, one has to have proper educational qualifications unlike BPO where only a good knowledge of the English language is required. Since in a KPO job, the work requires specialized skills, proper educational qualifications are a must. Qualified people from various diverse backgrounds can look at making a career in KPO. It could be teachers or engineers or MBAs or lawyers or journalists or professionals with financial background. Professionals from all such backgrounds are eligible to work in KPOs. The basic skills required of an employee in KPO job are good analytical skills for data analysis, proficiency in usage of resources for information research, ability to make presentable reports from raw data, good computer proficiency and command over English language.
For a KPO job, one would require domain expertise and knowledge for projects that may involve moderate to very high levels of analysis, research, updating, database creation and cataloguing and indexing. Thus, one must have a basic interest and knowledge in specific domains with an aptitude to working with data and information to thrive in a KPO job. During the recruitment process, candidates are first short-listed on the basis of marks and their previous experience of the domain. Their aptitude and attitude towards doing research-oriented work is also tested during the recruitment process. After selection, all employees are given the requisite training in the domain and the projects involved.
KPO industry employs employees from diverse academic backgrounds. There would be a huge demand for engineers, CAs, doctors, MBAs, lawyers, research analysts, scientific researchers and even PhDs in the near future. KPO is one industry where one can make full use of his/her educational qualifications. Also, good performers in a KPO have remarkable growth opportunities in this field because the number of skilled people is less. They can look forward to a good salary package, in-depth domain knowledge, managerial responsibilities and career growth.
KPO jobs involve work in various fields such as finance, legal issues, intellectual property, analytics, market research and data management for a company. Since this is all knowledge based and confidential work, a lot of risk management is required in KPO jobs in India and abroad. The job would require in-depth knowledge of that area of work. Of course, the KPO centre imparts training to its employees for the vertical that it is working in. High-end knowledge work is executed in these KPOs as directed by the client. It could be data management, petition filing, research oriented work or any other such work that involves proper understanding of that field.
Since India offers good KPO services with a lot of cost advantage, it is estimated that by 2010, nearly two and a half lakh people in India would be employed in this industry. This is an indicative number and given the potential of this industry, it may as well increase. In the past decade, there has been a mushrooming of engineering, technical and professional institutes in India. Thus, there is no shortage of skilled manpower in the country which is capable of handling high-end knowledge work in KPOs. Thus, more and more international companies are either setting shop here or hiring the local talent for research and development work or outsourcing such work to Indian KPO companies that specialize in the particular vertical.
Experienced and qualified professionals are choosing this career option because it is very lucrative. A person with two years of experience can expect to earn remuneration as high as around Rs 6 lakh (Rs 600,000) to Rs 8 lakh (Rs 800,000) annually. Someone with higher experience and knowledge of the industry would easily draw anywhere between Rs 15 lakh (Rs 1.5 million) and Rs 20 lakh (Rs 2 million). However, this industry is fraught with attrition. Since people are not properly aware of the potential of this industry, they tend to leave jobs quicker in this industry.
To get hired for a KPO job, one has to have proper educational qualifications unlike BPO where only a good knowledge of the English language is required. Since in a KPO job, the work requires specialized skills, proper educational qualifications are a must. Qualified people from various diverse backgrounds can look at making a career in KPO. It could be teachers or engineers or MBAs or lawyers or journalists or professionals with financial background. Professionals from all such backgrounds are eligible to work in KPOs. The basic skills required of an employee in KPO job are good analytical skills for data analysis, proficiency in usage of resources for information research, ability to make presentable reports from raw data, good computer proficiency and command over English language.
For a KPO job, one would require domain expertise and knowledge for projects that may involve moderate to very high levels of analysis, research, updating, database creation and cataloguing and indexing. Thus, one must have a basic interest and knowledge in specific domains with an aptitude to working with data and information to thrive in a KPO job. During the recruitment process, candidates are first short-listed on the basis of marks and their previous experience of the domain. Their aptitude and attitude towards doing research-oriented work is also tested during the recruitment process. After selection, all employees are given the requisite training in the domain and the projects involved.
KPO industry employs employees from diverse academic backgrounds. There would be a huge demand for engineers, CAs, doctors, MBAs, lawyers, research analysts, scientific researchers and even PhDs in the near future. KPO is one industry where one can make full use of his/her educational qualifications. Also, good performers in a KPO have remarkable growth opportunities in this field because the number of skilled people is less. They can look forward to a good salary package, in-depth domain knowledge, managerial responsibilities and career growth.
Thursday, March 12, 2009
Hiring People in Tough Market Situations
We all know how this is not the employers market. The slump in the market has brought huge challenges to Recruiters whose hunt is still on for the best talent from the market. As the supply of resources flood the market, there surely is a dearth of opportunities within company for open positions. How do we tackle such this situation?
1) Narrow your search: The job portals are flooded with resumes as potential candidates are uncertain about their current job. In a situation like this, it’s very important as a Recruiter for you to narrow your search to the active job seekers than passive job seekers. The active job seekers are responsive to the job offer that you have to offer and they are surely up for grabs.
As for the candidates, its important for you to narrow your search in identifying the right job for you and follow up regularly with the Recruiter on the open head count to have yourself land your dream job.
2) Networking is the key: In a volatile market situation, the job market is the most affected as the perception is LIFO (Last in first out). As a Recruiter, your potential hire is weary of the situation and is not really keen to move out of his comfort zone. The key here would be to build an active network with your potential hires not just for jobs but to gain knowledge on his side of the story. Then it becomes easy for you to present his dream job and then hire him for your open position.
As for the candidates, it helps you to network with the Recruiters and HR folks to gain knowledge on company situation, their hiring prospects, their growth directions just for you to be aware if the move that you are going to make is worth end of it all.
3) Gain business intelligence: Its important to all of us to keep ourselves updated on what is happening around. Gain knowledge on various industries growth or slump. This will help and comes handy if as a Recruiter, you are talking to your potential hire from that domain. This will give you the insight to attract the candidate and also gives confidence to the candidate that he is talking to the right person in the company.
As a candidate, knowledge on verticals not only helps you weigh your option to move to that domain but also helps you compare the industries. In such a turbulent situations, the managers out there want to hire “only the best” who is far beyond excellence. You have to give an impression in the minds of the Recruiter that its you who is cut for the role and nobody else.
4)Reskill and Reinvent: By now, we all know the traditional method of hiring is not the in thing in hiring in turbulent market situations. As a Recruiter, you too have to reskill yourself to reinvent new forms of recruiting. The candidates out there are becoming more and more passive making a recruiter’s job even more aggressive and tougher by the day. Its very important as a Recruiter to bell the cat in finding out what works best in his favour. Hunt for the best resource from the deep caves, which did not exist for many.
Has this Recession led to more Job Offer Declines??
A new trend seen in recruitment during this recession is the increase in the “post-offer declines” from the offered candidates and “pre-offer declines” from candidates when they receive potential offers. A candidate’s reason for declining offers may be their decision to stay back at their present company. While the cause of the same can be easily identified as being due to the recession, here is how candidates may quote this –
-“I’m concerned about possible lay-offs”
-“My job is very secured and I have got good project pipeline in my present company…. I don’t want to take a risk”
As a Recruiter, some of these questions can really put you in a difficult situation to answer when candidates quote some of the examples of their own dear ones losing their jobs. However, there are many ways a Recruiter can turn such cases to successful hires and I believe on the following ones.
1. Help the candidate realise the importance and value of hiring during recession: Of late many candidates ask this question to me as to why are we hiring during recession and I turn this question as an answer to their question. First of all, we should make the candidates understand and realise the importance and value of hiring during recession. Candidates should be given enough information about the roadmap and future of business and also the position they are hired for as to how it can be a possible “recession proof”.
2. Involve Business/Hiring Managers: Asking the Hiring Manager to call the candidate very often after the offer release would definitely help to keep the candidate’s interest level high. Some time candidates may consider Recruiter as more of a job “seller” but their “trust factor” will be more when a hiring Manager calls up the candidate and talk to him.
3. Re-Brief the importance of the role in the company: Re-briefing is very important during a candidate’s post offer to pre-joining phase. Those candidates who are getting interviewed in multiple companies may forget what was explained to them during their interview. The Recruiter should make an attempt to address all queries related to job roles and responsibility.
4. Give personal touch: Perhaps there is nothing better than giving a personal touch to a rapport built with the candidate to avoid offer declines. Add the candidate to social networking sites like Orkut and Facebook, your chat room etc to make him feel more comfortable with the process. Meet the candidate very often both at office and outside, if possible. Apart from being his “career consultant”, talk to him about his personal part of life and make him feel you are not an outsider.
5. Beware of negative candidates/Window shoppers: Don’t be a victim to those ‘window-shopping’ candidates by letting them to make use of your offer to get what they want from their current employer.
Tuesday, January 20, 2009
Not exactly an outsourcing backlash -2009..
Though some predict an offshoring backlash in 2009, it’s still hard to dismiss the fact that companies looking to save much needed cash to continue operations would ignore the idea of outsourcing. Who wouldn’t want to save money given the global economic crisis and increasing competition?
According to Gartner analyst Linda Cohen, “Whenever there’s a downturn people outsource more, not less. Organizations want to take costs out wherever they can. CFOs are pounding on their CIOs to just outsource it, just offshore it.”
Eugene Kublanov, CEO of California based outsourcing advisory NeoIT, agrees with Cohen. He believes: “The difficult economic conditions will push companies further than before to consider what stays in house and what gets done by others. Additionally, demands by the business for further cost reduction will need to be addressed in an environment where many companies have already leveraged labor arbitrage to source the low-hanging fruit.”
The outsourcing industry has its ‘cheap costs’ provision to thank for its staying power, but relying on this for corporate strategy could spell disaster. Recent developments at Satyam’s fraud scandal sent shock waves not only to clients but to the whole outsourcing industry. As clients evaluate their options, so should outsourcing providers.
Offshore providers need to re-evaluate their market positioning as Vamsee Tirukkala, Co-Founder and Managing Principal at Zinnov LLC explains: “We now expect the clients to closely evaluate options of setting up their own captive centers or alternatively also opt for new vendor evaluation techniques. In fact for those who have operations for very many years now, we feel that it’s the right time for them to consider options of having a direct presence or local program management offices for better control.”
Given that third-party providers need to have another look at their corporate strategies, one would think ‘outsourcing innovation’ is the key to all this right? Wrong. “The focus will shift away from open-ended efforts. Buyers will not have much appetite for transformation in 2009″, says Stan Lepeak, research director of outsourcing consultancy EquaTerra. Outsourcing innovations, such as greening of IT outsourcing deals that blossomed in 2008, all of these would take a back seat as clients will push offshore providers to further lower their costs.
On another note, Rajiv Mathew, VP for corporate communications at technology consulting firm ThoughtWorks, shared his thoughts on the possible steps the Obama administration would take to keep the US economy afloat. Matthew believes “Obama will be cognizant of the importance of outsourcing to the American economy and will probably take a calculated risk, if at all he makes any amendments to the current outsourcing polices.”
More info mail in to sachith@recruiseindia.com
Saturday, January 17, 2009
Worst Recession period expected early 2009
By Symon Ross
Northern Bank economist Angela
Northern Bank chief economist Angela McGowan expects the worst period of the recession in early 2009, but anticipates some improvement in the economy later in the year.
Ms McGowan predicts that the local unemployment rate of 4.3% is likely to rise to more than 5% by mid-2009.
And with UK economic activity expected to contract by up to 2% next year she believes that Northern Ireland will not escape falling into negative territory.
But she adds that “the forecast contraction for the local economy is not quite as bleak mainly due to Northern Ireland's relatively high level of public sector employment and continuing support for the retail sector coming from our euro neighbours”.
The Northern Bank economist also points out that the economic turbulence of the past year has been met with global policy efforts not seen since the 1930s.
“Although the first half of 2009 on first appearance looks gloomy, an improvement in conditions is expected towards the end of next year.
“This will be the result of the accommodative economic policies, which is the combination of cheap money and a massive fiscal stimulus kicking in. This includes the UK's fiscal stimulus of £20bn of government spending and incentives to encourage domestic spending,” she said.
“Northern Ireland policy makers have also taken up the challenge and found ways and means to deliver a stimulus package for the local economy.
“The £1.2bn devoted to public sector construction schemes and the additional £150m for social housing should go some way to reducing the vast numbers of construction workers unemployed in recent months.”
The spending will simultaneously provide the 21st century infrastructure that the local economy requires for the province to compete when the economic shoots of recovery begin to show, said Ms McGowan.
More info, mail into pavithra@recruiseindia.com
Thursday, January 15, 2009
Few Recruitment Stratergy.
Recruitment Strategies
1. Identifying and prioritizing jobs
Requirements keep arising at various levels in every organisation; it is almost a never-ending process. It is impossible to fill all the positions immediately. Therefore, there is a need to identify the positions requiring immediate attention and action. To maintain the quality of the recruitment activities, it is useful to prioritize the vacancies whether to focus on all vacancies equally or focusing on key jobs first.
2. Candidates to target
The recruitment process can be effective only if the organisation completely understands the requirements of the type of candidates that are required and will be beneficial for the organisation. This covers the following parameters as well:
o Performance level required: Different strategies are required for focusing on hiring high performers and average performers.
o Experience level required: the strategy should be clear as to what is the experience level required by the organisation. The candidate’s experience can range from being a fresher to experienced senior professionals.
o Category of the candidate: the strategy should clearly define the target candidate. He/she can be from the same industry, different industry, unemployed, top performers of the industry etc.
The strategy should define various sources (external and internal) of recruitment. Which are the sources to be used and focused for the recruitment purposes for various positions. Employee referral is one of the most effective sources of recruitment.
4. Trained recruiters
The recruitment professionals conducting the interviews and the other recruitment activities should be well-trained and experienced to conduct the activities. They should also be aware of the major parameters and skills (e.g.: behavioural, technical etc.) to focus while interviewing and selecting a candidate.
5. How to evaluate the candidates
The various parameters and the ways to judge them i.e. the entire recruitment process should be planned in advance. Like the rounds of technical interviews, HR interviews, written tests, psychometric tests etc.
For more information, please contact us at Poornima@recruiseindia.com
Thursday, January 8, 2009
Forget Inflation. It’s Deflation Time.
In only a few months the global economy deteriorated with incredible speed and with it came deflation worries. Economic forecasts are clear and so too is the news: consumer and producer prices exhibited a jaw-drop last month in the U.S. with deflation risk rising. But will the outsourcing industry deflate as well? Probably not.
The goods, labor, commodity, and financial markets are all sending the same signals, and no matter what side you take on the issue, deflation is a risk. On a macro level, businesses will look left and right to shorten purchasing cycles, improve productivity levels, and substitute services to maintain profits. Many will try to replace long-term contracts with short-term, deflation-sensitive agreements. That’s because the bottom line is highly sensitive to price adjustments.
And this will have a direct affect on the outsourcing industry. For one, it’ll attract new business as many are facing a decrease in producer prices that will squeeze profits. When they realize it’s cost-effective to buy services instead of laboring in-house, they’ll turn to service providers to weather the storm.
Source-TPI
Small-Business Owners Cut Spending, Jobs as Revenues Fall
Small-business owners were far less optimistic at the end of 2008 than at any time over the past five years. The Wells Fargo/Gallup Small Business Index, which measures small-business owners' perceptions of their operating environments, plunged to a score of 10 -- down from 45 in the third quarter and its lowest level since the inception of the Index in the third quarter of 2003. Two years ago, the Index reached its peak of 114, while last year at this time it stood at 99.
Declining Revenues
Thirty-one percent of small-business owners say their revenues increased over the past 12 months while 47% say their revenues decreased. This difference of -16 points is down from +2 in the third quarter, -2 in the second quarter, and +13 in the first quarter of 2008. The damage surging gas prices did to small-business revenues last spring and summer seems to have been exacerbated by the consumer credit crunch in the fourth quarter.
Less Capital Spending
With revenues declining for nearly half of small-business owners, many owners have cut back on their capital spending on such things as computers, machinery, and facilities, with only 21% saying they have increased such expenditures in the last year and 39% saying they have decreased them. This difference of -18 points is down from -7 in the third quarter and +9 as recently as the first quarter of 2008.
Cutting Jobs
Falling revenues have also forced small-business owners to cut jobs. Only 11% say they have increased the number of jobs at their companies over the past 12 months while 27% say they have decreased them. This difference of -16 points is down from -8 in the second and third quarters, and +4 in the first quarter of 2008. The small-business job situation is now far more negative than at any time since measurement began during the third quarter of 2003.
Commentary
The sharp deterioration in small-business owners' economic perceptions at the end of 2008 is totally consistent with Gallup's other economic measures showing a plunge in consumer confidence and increasing job losses. It also serves as a reminder that while the financial difficulties facing large companies and the related job cuts make the headlines, America's small businesses are also struggling with the current economic environment.
In this regard, President-elect Obama and his economic team should think carefully about what role they want small business to play in their "bottom-up" stimulus effort. If the goal is to save existing jobs and create new ones, small business -- as the major source of private-sector job creation -- needs to play a major role. The trick will be for the new administration to find ways to help small business reverse its job-shedding and capital-spending-reduction habits of 2008, and in doing so, help spur the larger economic recovery.
As 2008 came to an end, there was a lot of focus on too-big-to-fail companies and the need to preserve the jobs they provided. As the new stimulus plans are developed to help these companies and create jobs in 2009, the nation's small businesses and their role in job creation should not be forgotten.
Source- Gallup
Unemployment Rate Likely to Surge
Gallup's hiring measure shows U.S. employees' perceptions of the job situation at their companies continued to deteriorate as 2008 came to a close. The net difference between hiring and firing turned negative during the last weeks of 2008, suggesting that the Labor Department will report Thursday that seasonally adjusted four-week average jobless claims continued to increase, likely exceeding the 2008 high of 558,000.
Jobs Continuing to Disappear
According to last week's government report, first-time unemployment claims unexpectedly plunged to 492,000 for the week ending Dec. 27. As a result, it is perhaps not surprising that the economists whose estimates form the basis for the consensus forecast have projected that jobless claims will increase to 540,000 when reported Thursday. While a number of variables make it hard to predict the exact number of new unemployment claims the Labor Department will report -- particularly given the holidays and the related seasonal adjustments -- Gallup figures suggest seasonally adjusted jobless claims are likely to exceed this 540,000 consensus estimate for the past week.
In addition, the seasonally adjusted four-week average of Gallup's hiring measure suggests the Labor Department will report that seasonally adjusted four-week average jobless claims continued to increase, likely exceeding the 552,250 reported most recently.
Surging Unemployment Rate
On Monday, President-elect Obama discussed his new stimulus plan with congressional leaders. As part of his effort to explain why such a major fiscal stimulus is required, he noted that the U.S. economy is "very sick" and that Friday's report of the December unemployment rate will be "sobering." Regardless of the actual number the government reports at the end of this week, Gallup's hiring measure suggests job losses are soaring and that the unemployment rate is likely to surge past 7%.
The Fiscal Stimulus Will Take Time to Work
Surging job losses and the inability of the Federal Reserve to do much more than it is already doing to help the economy have created enormous political pressures for the new Congress to pass a major new fiscal stimulus plan immediately, so that Obama can sign it as soon as possible after his inauguration on Jan. 20. In turn, this seems to have many Americans -- on both Wall Street and Main Street -- not only expecting swift congressional action, but also expecting that action to have an immediate impact on the direction of the U.S. economy.
Unfortunately, these rapidly building expectations for the federal government to save the economy in coming weeks are not likely to be realized. In reality, it will be considered lightning speed on Capitol Hill if the new president ends up signing a major new stimulus plan by mid-February. After that, it is likely to take months, not weeks, before Main Street begins to realize any benefits from this new stimulus, no matter how large it is or how it is constructed.
In this regard, it may be wise for the new president and the new Congress to remember the behavioral economics concept of "framing." Talk of crisis and solutions are likely to be essential politically, but it is also essential that Americans realize that all of these efforts will take time to work.
At this point, confidence on the part of consumers, investors, and business is at extremely low levels. The nation's new leadership needs to rebuild that confidence -- not create false expectations that may result in added frustration when those expectations are not realized. Rebuilding confidence by creating realizable expectations is key to any real economic recovery, and it is essential if the government is going to re-energize the private sector to create a sustained economic recovery.
Survey Methods
Using weekly results for 2008, Gallup's analysis suggests that its hiring measure has a better than 7-in-10 probability of correctly projecting the direction of weekly jobless claims and a better than 8-in-10 probability of predicting the direction of the four-week average of jobless claims. Gallup's hiring measure is based on aggregated interviews with a nationally representative sample of more than 2,000 U.S. workers each week. Gallup asks current full- and part-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Gallup's hiring measure is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a meaningful indication of the nation's job situation.
Source- Gallup
How should KPOs respond to current crisis in financial markets?
How should knowledge process outsourcers (KPOs), their clients, and their employees respond to current crisis in financial markets?
Client Perspective
Choose your vendor carefully - If there was ever any doubt, the current turmoil shows that that service quality and price should not be the only factors customers consider . Long term vendor financial stability is critical as well. Vendors with only a few hundred employers who depend on a handful of clients may find it difficult to survive even a single client loss. Depending on how much business they lose and their financial backing, a key client loss can put at risk continuity of service to remaining clients. Buyers should seek vendors with scale, good financial backing, and a broad customer base.
Outsourcing as a survival tool - Outsourcing is not just about cost savings - it can be a company’s lifeline too. Unless you remain competitive, you may not survive as a business. You may be able to save more jobs (and create new ones) by outsourcing if done smartly and with the right vendor. Choosing the right vendor will help you improve business economics, achieve flexibility, innovation, and help create growth (jobs). The downturn could last quite some time so it is important to consider both your cost basis and operating efficiency, even as your deal with what may be emergency circumstances.
Vendor Perspective
Reduce client concentration - While it’s always good to get more business from existing clients, look to balance the client mix. Otherwise, if your biggest client accounts for 40% of revenues and suddenly disappears (which seems to happen very often these days), you may not be able to survive the impact. Diversify into more verticals and geographies. Winning new business in this economy may be hard, but point your sales team in the right direction now.
Enhance capital - Clients will start asking more probing questions about the financial stability of your business and access to capital. Cover your financial bases. Work towards moving to profitability and get an investor who can be there to support you on your long term business plan/strategy
Leverage opportunities to consolidate /buy cheap assets - A major economic downturn is a time to be simultaneously conservative and bold. Be conservative in managing operating costs but be bold in buying good assets (companies, people), especially when many outstanding properties are available at the lowest price in years. Tight operations coupled with strategic acquisitions will pay handsome dividends when the economy eventually turns around.
Employee Perspective (for India-based personnel)
A downturn is not the end of the world. It’s not first time it’s going to happen. The economy will recover and KPOs will grow again at a rapid clip. This is perhaps first time that global events have had a direct impact in India, specifically immediate job losses. Previously, these types of incidents were limited in scope and barely would even be covered in the press. Now, however, the impact has been pronounced, both in captives and third party vendors. KPOs are not the only ones affected by the global turmoil; many other sectors have shared in the turmoil (e.g., consider what has happened with domestic Indian airlines). The pervasive impact of the Western downturn on the Indian job market shows that the Indian economy is now more tightly integrated into a US/global environment. So it is natural that Indian jobs in many industries will rise or fall based on events in US/global markets.
But, there is hope among this bad news. Outsourcing is expected to pick up even more strongly in the months to come and that should drive new job creation.
For more information, please contact us at shivaji@recruiseindia.com
Monday, January 5, 2009
Top 10 Trends for Global Outsourcing in 2009
Source:- THOLONS, an Advisory, Investments and Research Firm for IT/BPO/KPO Services Globalization
The ripple of the global economic downturn continues to impact the foundation of the outsourcing industry, both near and long-term. Service providers are experiencing impact of sluggish growth, decreased margins and employee downsizing. Service buyers are reducing IT budget allocations but still under tremendous pressure to reduce cost and survive.
Despite this lingering cloud of uncertainty, Tholons maintains that the long term demand for Outsourcing remains intact. Decreasing margins will push providers to better utilize existing resources, leverage operational levers, implement new technologies efficiently to differentiate themselves and improve service delivery processes. Clients, with reduced IT budgets will be more selective – demanding stringent SLAs, greater contractual flexibility and output/result based payments.
Despite this lingering cloud of uncertainty, Tholons maintains that the long term demand for Outsourcing remains intact. Decreasing margins will push providers to better utilize existing resources, leverage operational levers, implement new technologies efficiently to differentiate themselves and improve service delivery processes. Clients, with reduced IT budgets will be more selective – demanding stringent SLAs, greater contractual flexibility and output/result based payments.
Top 10 trends that will shape Global Outsourcing in 2009:
1. The market downturn will impact revenues during the first 2-3 quarters
2. Focus on domestic market to increase
3. Global economic downturn will lead to increased outsourcing in Healthcare, Education, Retail, Telecom and Legal Process Outsourcing (LPO)
4. Governments to take special initiatives in promoting destinations
5. Clients will increase geographic diversity in their service delivery locations
6. Pricing pressures will result in reduced rates and new measures to achieve cost savings and higher productivity
7. Consolidation imminent for small players - focus away from large deals
8. Outsourcing revival by 2009 end - driven by small to mid sized (SME) clients
9. Strong focus on innovation, R&D and technology adoption will be key differentiators for providers.
10. Sourcing deal sizes will increase for large clients
1. The market downturn will impact revenues during the first 2-3 quarters
2. Focus on domestic market to increase
3. Global economic downturn will lead to increased outsourcing in Healthcare, Education, Retail, Telecom and Legal Process Outsourcing (LPO)
4. Governments to take special initiatives in promoting destinations
5. Clients will increase geographic diversity in their service delivery locations
6. Pricing pressures will result in reduced rates and new measures to achieve cost savings and higher productivity
7. Consolidation imminent for small players - focus away from large deals
8. Outsourcing revival by 2009 end - driven by small to mid sized (SME) clients
9. Strong focus on innovation, R&D and technology adoption will be key differentiators for providers.
10. Sourcing deal sizes will increase for large clients
For more information, please contact us at sachith@recruiseindia.com
Thursday, December 18, 2008
Outsourcing to the Philippines
The level of outsourcing to the Philippines is growing faster than in any other country, according to the Global Outsourcing Statistics Report released last December 15.
The report also states that the Philippines remains a popular destination for outsourcing work. Other popular countries include the U.S., India, Pakistan, Canada, Ukraine, and Russia.
The bulk of the outsourcing jobs received by the Philippines is in the Knowledge Processing Outsourcing (KPO) sector. This includes data entry and virtual assistants. India’s largest work category, on the other hand, is in the software and web development field.
The report also divulged that the Philippines’ average feedback rating surpassed the oDesk average for the first time. The U.S. has the highest average feedback rating and the greatest number of providers.
Here are statistics from the report:
CANADA
Total Number of Providers: 3,581
Average Hourly Rate Charge: $19.60
Average Feedback Score: 4.32 (out of 5.00)
INDIA
Total Number of Providers: 27,454
Average Hourly Rate Charge: $12.52
Average Feedback Score: 4.01
PAKISTAN
Total Number of Providers: 5,960
Average Hourly Rate Charge: $11.13
Average Feedback Score: 4.36
PHILIPPINES
Total Number of Providers: 17,213
Average Hourly Rate Charge: $6.33
Average Feedback Score: 4.30
RUSSIA
Total Number of Providers: 2,721
Average Hourly Rate Charge: $16.86
Average Feedback Score: 4.31
UKRAINE
Total Number of Providers: 2,929
Average Hourly Rate Charge: $15.96
Average Feedback Score: 4.36
USA
Total Number of Providers: 52,637
Average Hourly Rate Charge: $18.32
Average Feedback Score: 4.40
For more information, please contact us at sachith@recruiseindia.com
Tuesday, November 25, 2008
KPO's Outlook on Current Recession
Choose a vendor carefully - It’s not about quality of service alone. Long term financial stability of the KPO vendor becomes important too. A vendor which is small (<1,000>
Outsourcing as a survival tool - It’s not only about savings cost, outsourcing can be your lifeline too. Unless you remain competitive, you may not survive as a business. You may be able to save more jobs (and create new) by outsourcing if done smartly and with the right vendor. A right vendor will help you improve business economics, achieve flexibility, innovation, and help create growth (jobs).
Vendor perspective
Reduce client concentration - While it’s always good to get more business from existing clients, look to balance the client mix. Otherwise, if your biggest client accounts for 40% of revenues and suddenly disappears (which seems to happen very often these days), you may not be able to survive the impact. Diversify into more verticals, geographies.
Enhance capital - clients will start asking more (detailed) questions about the financial stability of your business and access to capital. Cover your bases here. Work towards moving to profitability and get an investor who can be there to support you on your long term business plan/strategy
Leverage opportunities to consolidate /buy cheap assets - these are times to be conservative and bold simultaneously. Be conservative in managing operating costs but be bold in going after good assets (companies, people) specially when they are likely to be available cheap. This will pay handsome dividend when the trend turn (which it will for KPO)
Employee perspective (in India
It’s not end of the world. It’s not first time it’s going to happen. Things will recover. This is perhaps first time when global events had direct fall out in
But, there is hope among this bad news. Outsourcing is expected to pick up even more strongly in the months to come and that should drive new job creation.
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