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SPEAKING FREELY
Outsourcing's next
outing
By Richard Mills
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click
here
if you are interested in
contributing.
"Outsourcing in
India has reached a near-term peak and meaningful
expansion from this point forward will result in
higher costs and lower quality delivery." Business
leaders in Asia have been saying this for months
now. Today, we are seeing the reaction: efforts
are being made to move capacity from India to
next-step destinations like the Philippines, China
and Vietnam.
Major business publications
have picked up on the evolving situation. Both
Forbes ("India: Good Help is Hard to Find") and
BusinessWeek ("India's IT Challenge") recently
published features that address the growing
problems in India and the viability of the
next-step destination countries.
Looking at
current events in the Philippines, we can get a better
idea what is going on. Sykes, a large US-based
contact center and information-technology (IT) support organization,
has operations in both India and the Philippines.
The company said it would shift much of
its Indian capacity to the Philippines, where it
already has 7,000 employees. "We moved calls to other
facilities in Asia to get a higher rate of return,"
was the official statement from Dan Hernandez,
Sykes's vice president for global
strategies. But knowledgeable observers in the
region say the rate of return differential must be
large for a company of Sykes's size and prominence
to forgo India after already putting capacity in
place.
Ambergris Solutions
is another large contact center organization
with operations in the Philippines. The company just
received a US$43.5 million investment
through Telus International, a Canada-based
global IT solutions provider. Jim Evans, who
played the key local role in coordinating the
deal, says his company wanted a "strategic
investment" in the outsourcing industry in Asia,
and the Philippines offered the best long-term
opportunity given all the options, including
India.
As Asia Pacific vice president for global
business-to-business (B2B) services provider GXS, Victor Lee
oversees the professional and customer services
operations in the region. His company made the
decision to direct functions with a strong
customer component to the Philippines because of
better economics and results there. His company's
analysis also indicated that costs were increasing
disproportionately in India, unlike the
Philippines. Lee says: "Having product development
in India and professional and customer services in
the Philippines reduces risks."
More
outspoken than most, Rick McGonegal is clear that
India will not be part of his company's plans for
the foreseeable future. He is the managing
director of RCG Information Technology, another IT
solutions provider. The company already has a
strong offshore presence in the the Philippines
and has assessed the Asia Pacific region for
future expansion. India, he feels, is already too
crowded with numerous companies scrambling to hire
from each other. The result is destructively high
staff turnover rates, mounting salary costs and
poorer English communications skills compared to
what is available in the the Philippines. He also
cites overstretched infrastructure in India as a
further reason RCG would not consider this
destination at present. According to McGonegal,
his company has its "radar set on Vietnam and
China" should their current best option, the the
Philippines, give way.
Others that appear
to be moving work to the the Philippines include:
Hewitt, which has just started hiring staff for
its newly commissioned business process
outsourcing (BPO) facility; and HSBC, the global
banking organization.
Long live the
King
No one is saying that the King of
Outsourcing will lose its dominance or its
long-term attractiveness as an outsourcing
destination. India created the offshore
outsourcing model and it will continue driving the
industry forward because of its huge size and the
remarkable competence of its managers. If India
does experience slower growth because of
constrained resources in the near term, it is only
because of its tremendous success over the past
few years. India's recent hiring growth has been
roughly double that of the crazy dotcom boom times
in North America. So current constraints are not
indicative of weakness, but of great success.
Besides, rising costs may be a big deal to
business leaders who have to somehow budget for
them. But for individual workers, who see their
paychecks rise by 30% from a well-timed job
change, "rising costs" probably don't warrant the
same degree of concern.
If countries like
the the Philippines and Vietnam are better options
today, it is only because they have been less
successful at developing and attracting quality
outsourcing employers in the past. The pioneering
accomplishments made by India have now opened the
door for these countries to receive their share of
the blessings. And as for India, we can be sure it
will soon be back stronger than ever.
Richard Mills, CFA, is director
of executive search firm Chalre Associates. He can
be reached at rmills@chalre.com.
(Copyright 2005 Richard Mills)
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here
if you are interested in
contributing. |
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