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GMANews.TV - BPO workers seek better schedules, not higher pay - Technology - Official Website of GMA News and Public Affairs - Latest Philippine News
Sunday, July 26, 2009
Outsourcing 2009: is the writing on the wall?
One of the biggest issues the outsourcing industry is facing is a major case of the jitters. Despite the natural advantages of outsourcing - cost-cutting, headcount reduction and ability to refocus on core competencies - offering a major positive in troubled times, firms are naturally suspicious of each other, knowing that financial stability cannot be taken for granted.
You can evaluate the quality in terms of processes, but there are concerns on financial integrity and the quality of the company. Is it a family, private or listed company? What is the quality of its auditing? People are looking at the issues of the corporate governance of organizations and reputation.
In its recent report, Global Sourcing Trends in 2009, legal group Morrison Foerster concurs: "Consolidation in the service provider community may mean less leverage for customers in future negotiations, and the recent high-profile Satyam scandal in the Indian service provider market may prompt a ‘flight to quality' by outsourcing customers."
The outsourcing industry has additional battles to fight at the moment, one of those being the problem of rising unemployment. At a time when firms in all industries are shedding jobs at a rate of knots, the notion of outsourcing precious jobs to an offshore provider is losing much of its shine, particularly for those institutions surviving on government handouts.
In the US, as Morrison Foerster comments in its 2009 sourcing report: "The new administration of President Obama has an overt US jobs-creation policy. Combined with organized labor pressure and caps on visas, this could mean more outsourcing solutions biased towards onshore delivery."
Other jurisdictions, particularly in Europe, share this view; labor laws in countries such as Germany, for example, have long made outsourcing challenging. So with the Indian markets already struggling with a tarnished reputation, does this sound the death knell for offshore outsourcing?
The Tower Group's McDowall believes a strategic approach is called for, at least in the short-term. "If some can be done onshore, it sweetens the pill. Companies can outsource within the US, etc. The location where services are provided becomes sensitive due to the job situation. It may not be the most efficient or cost-effective solution for the outsourcing provider, but it may help them to keep business. They need to wait for conditions to change."
There are also other options for outsourcing providers keen to lower their costs and access the skill base they need to provide a competitive service to their clients. There are too many problems now associated with offshoring. "The issues that people have with offshoring are cultural differences, resources that are not as good as expected, creating overheads and communication problems, and people move companies easily for the right money.
Other issues are also putting pressure on the outsourcing providers. At a time when financial firms are putting all their energy into staying afloat, it is difficult to think strategically, and a long-term strategy is fundamental to any outsourcing deal. While firms may look at the cost-cutting benefits and hope for a short-term fix, this is often not the case.
In the current environment, there is a degree of knee-jerk cost-cutting, and there is a danger of jumping in too soon. We recommend that people look at outsourcing as a business transformation. There are still risks to manage including those related to data security and service quality, and we are anxious that clients may try to move too soon without looking at the traditional risks.
So, among all the doom and gloom, are there any rays of light for outsourcing providers? Yes, of course there are. It has often been the case that the trend towards outsourcing has risen during a recession, and although this time may turn out to be the exception, the drivers and benefits are still the same.
Companies are still looking for ways to decrease expenses significantly and quickly, to streamline operations and to reduce head count and save money. Outsourcing offers cost-cutting measures via, for example, offshore labor arbitrage, but also by enabling companies to shed fixed costs in favor of the variable pricing that characterizes many outsourcing deals.
This climate also provides opportunities for start-ups and these firms need to get up and running quickly, committing as little capital as possible to infrastructure.
Where concerns remain over the stability of service providers, some jurisdictions have already put measures in place that allow outsourcing but in a controlled way that affords additional protection for the outsourcer.
There is still much hope for the outsourcing industry, but the next year or two is likely to be a time of treading water. Few people would expect the remainder of 2009 to be a time where firms are able to think strategically enough to enter into long-term outsourcing arrangements. There may be good times around the corner, but it will be a case of who is left standing - providers and customers - to enjoy them when they arrive.
You can evaluate the quality in terms of processes, but there are concerns on financial integrity and the quality of the company. Is it a family, private or listed company? What is the quality of its auditing? People are looking at the issues of the corporate governance of organizations and reputation.
In its recent report, Global Sourcing Trends in 2009, legal group Morrison Foerster concurs: "Consolidation in the service provider community may mean less leverage for customers in future negotiations, and the recent high-profile Satyam scandal in the Indian service provider market may prompt a ‘flight to quality' by outsourcing customers."
The outsourcing industry has additional battles to fight at the moment, one of those being the problem of rising unemployment. At a time when firms in all industries are shedding jobs at a rate of knots, the notion of outsourcing precious jobs to an offshore provider is losing much of its shine, particularly for those institutions surviving on government handouts.
In the US, as Morrison Foerster comments in its 2009 sourcing report: "The new administration of President Obama has an overt US jobs-creation policy. Combined with organized labor pressure and caps on visas, this could mean more outsourcing solutions biased towards onshore delivery."
Other jurisdictions, particularly in Europe, share this view; labor laws in countries such as Germany, for example, have long made outsourcing challenging. So with the Indian markets already struggling with a tarnished reputation, does this sound the death knell for offshore outsourcing?
The Tower Group's McDowall believes a strategic approach is called for, at least in the short-term. "If some can be done onshore, it sweetens the pill. Companies can outsource within the US, etc. The location where services are provided becomes sensitive due to the job situation. It may not be the most efficient or cost-effective solution for the outsourcing provider, but it may help them to keep business. They need to wait for conditions to change."
There are also other options for outsourcing providers keen to lower their costs and access the skill base they need to provide a competitive service to their clients. There are too many problems now associated with offshoring. "The issues that people have with offshoring are cultural differences, resources that are not as good as expected, creating overheads and communication problems, and people move companies easily for the right money.
Other issues are also putting pressure on the outsourcing providers. At a time when financial firms are putting all their energy into staying afloat, it is difficult to think strategically, and a long-term strategy is fundamental to any outsourcing deal. While firms may look at the cost-cutting benefits and hope for a short-term fix, this is often not the case.
In the current environment, there is a degree of knee-jerk cost-cutting, and there is a danger of jumping in too soon. We recommend that people look at outsourcing as a business transformation. There are still risks to manage including those related to data security and service quality, and we are anxious that clients may try to move too soon without looking at the traditional risks.
So, among all the doom and gloom, are there any rays of light for outsourcing providers? Yes, of course there are. It has often been the case that the trend towards outsourcing has risen during a recession, and although this time may turn out to be the exception, the drivers and benefits are still the same.
Companies are still looking for ways to decrease expenses significantly and quickly, to streamline operations and to reduce head count and save money. Outsourcing offers cost-cutting measures via, for example, offshore labor arbitrage, but also by enabling companies to shed fixed costs in favor of the variable pricing that characterizes many outsourcing deals.
This climate also provides opportunities for start-ups and these firms need to get up and running quickly, committing as little capital as possible to infrastructure.
Where concerns remain over the stability of service providers, some jurisdictions have already put measures in place that allow outsourcing but in a controlled way that affords additional protection for the outsourcer.
There is still much hope for the outsourcing industry, but the next year or two is likely to be a time of treading water. Few people would expect the remainder of 2009 to be a time where firms are able to think strategically enough to enter into long-term outsourcing arrangements. There may be good times around the corner, but it will be a case of who is left standing - providers and customers - to enjoy them when they arrive.
Monday, July 13, 2009
Saturday, July 11, 2009
Monday, July 6, 2009
Outsourcer 2009: 3rd and 4th September at Cambridge University
Outsourcer 2009 is the Leadership Summit for directors, shareholders and strategic clients in the outsourced CRM and BPO sectors.
The Outsource Junction is poised to help the industry by initiating this kind of event. I certainly hope this is just the first of many!
Check it out!
Saturday, July 4, 2009
Wednesday, July 1, 2009
RP an emerging global IT and ITES leader
| Written by Cai U. Ordinario / Reporter |
| Tuesday, 30 June 2009 22:29 |
The Business Mirror Online Space
THE Philippines has joined the ranks of the world’s emerging information-technology (IT) and information technology-enabled services (ITES) players which are slowly catching up with India, the world leader in both industries.
This is the assessment of the World Bank, which, in a report titled “Extending Reach and Increasing Impact” in its publication Information and Communications for Development 2009 listed the Philippines, China and Mexico among the world’s emerging IT and ITES leaders.
IT services include hardware and software maintenance, network administration and system integration, help-desk services, application development and consulting, as well as activities in engineering, such as mechanical design, production and software engineering.
ITES are services that can be delivered remotely using telecommunications networks. These include services for industries like banking, insurance and telecommunications, as well as functions that exist across industries such as human-resources management, finance, administration and marketing accounta.
“Developing countries have been very successful in IT services and ITES. Undoubtedly, India is the global leader in both industries. However, China, Mexico and the Philippines are also emerging as potential players in this space,” the study stated.
The World Bank said the global distribution of offshore IT service markets showed the Philippines already accounted for 1 percent of the market. In IT services India accounted for 54 percent, followed by Canada with 29 percent; Ireland, 8 percent; China and Central and Eastern Europe, tied at 3 percent; and other sources, 2 percent.
In terms of the global distribution of offshore ITES markets, the World Bank study showed the Philippines accounts for the third-biggest market share at 15 percent. India accounted for the biggest share with 37 percent, followed by Canada with 27 percent.
ITES markets that trailed the Philippines were Ireland and Mexico with a market share of 5 percent each, Central and Eastern Europe with 4 percent, China with 2 percent, and other sources, 5 percent.
The same study said the Philippines is now considered the leader in the East-Asia and Pacific region, accounting for as much as 56 percent of all Information and communications technology (ICT) goods exports.
Other economies in the East Asia and Pacific also considered leaders in ICT goods exports are Singapore which accounted for 46 percent; Malaysia with 45 percent; Hong Kong, China, 42 percent; and China, 31 percent.
The World Bank said the expansion of IT services and ITES creates significant economic and social benefits, especially for developing countries like India and the Philippines.
India, the World Bank said, exported more than $40 billion worth of IT services and ITES in 2007. This represented one quarter of the country’s total exports and nearly half of its service exports.
The study cited data from the Business Processing Association of the Philippines (BPAP) that IT services and ITES employed 345,000 people as of mid-2008 and are projected to directly employ close to 1 million people by the end of 2010.
“Employment of this scale means that the sector would account for 27 percent of all new jobs created in the Philippines by 2010” the bank said.
Another important positive impact of the growth of IT services and ITES is on the status of women. The study said that in the Philippines, women account for 65 percent of the total professional and technical workers in IT services and ITES.
In India, women make up 30 percent of the IT services and ITES workforce—a much higher rate of female participation than in the services sector in general—and this share is expected to grow to 45 percent by 2010.
“More than half of call-center employees are women. In both countries, women fill a greater number of high-paying jobs in IT services and ITES than in most other sectors of the economy,” the World Bank said.
One of the advantages of the Philippines, according to the World Bank, is an American-based approach in education. This not only refers to a bilingual education system but in specific areas of study that are crucial in delivering IT services and ITES.
Universities in the Philippines, the bank said, offer courses in finance and accounting modeled after the US’ Generally Accepted Accounting Principles (GAAP). This has made the Philippines a natural choice for US banks and financial institutions seeking to offshore portions of their operations.
“Developing globally benchmarked skills in partnership with leading standards organizations helps not only maintain a certain level of quality, but also align skills with industry requirements,” the bank stressed.
Services growing globally
The services sector is growing globally—it already accounts for 70 percent of employment and 73 percent of gross domestic product (GDP) in developed countries and for 35 percent of employment and 51 percent of GDP in developing countries.
The study said IT services, a component of the services sector, represents a $325-billion annual potential market, according to McKinsey & Co. estimates.
As for ITES, estimates of the size of the market varies. The bank said analysis by McKinsey & Co. suggested that the annual potential market for ITES was $150 billion in 2007.
However, the bank said a Gartner Research in 2008 saw the global market growing from $171 billion in 2008 to $239 billion in 2012. There are more optimistic estimates, the bank said. This included the one from Nasscom-Everest in 2008, which suggested that the global ITES market will be worth $700 billion to $800 billion by 2012.
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