Archive for January, 2013
Captive technology centres of global corporations, which appeared to have gone out of fashion, are coming back into prominence, a development that is not good augury for Indian software companies such as Tata Consultancy Services BSE -0.08 %, Infosys BSE -0.13 % and Wipro BSE -0.83 %.
A combination of factors, including higher scrutiny by regulators in the US and Europe, and a desire for tighter control of intellectual property, is resulting in multinational corporations increasingly relying on their own units in India.
A recent example of the change of course is the move by Allstate Corp, one of the largest insurers in the US, to set up its own facility in Bangalore, resulting in a shrinkage of work for TCSBSE -0.08 %, Infosys and Wipro. The $32-billion (Rs 1.7 lakh crore) company carved out portions of the contracts it had awarded to India’s top three software companies and decided to carry out the work itself.
“The level of regulatory oversight has certainly increased visibly in the recent past, especially in the banking, financial services and insurance space,” said KS Viswanath, senior vice-president of the National Association of Software and Services Companies ( Nasscom), the body that represents India’s $100-billion IT services and business process outsourcing sector.
Starting from the mid-1990s, captives were an important proving ground for the offshore outsourcing model for many global corporations.
70 Captive Units Set Up
Once they discovered that India offered the benefit of low cost and an abundant talent base, many of them, among them Citi and UBS, gradually relinquished their captives and handed out their technology operations to be managed by Indian service providers.
Besides heightened regulatory activity in the US in the aftermath of the 2008 financial crisis, two recent incidents involving Standard Chartered Bank and HSBC, where outsourcing was blamed for critical compliance breaches, have also contributed to greater vigilance by clients.
A recent report by the Everest Group said last year, around 70 captive centres were set up, most of them new facilities.
US-based accounting and advisory Grant Thornton, Barclays, online trading and trading platform company Trade Station Group and Zurich Insurance Group are also either setting up new centres or expanding their existing facilities in India, according to people familiar with the developments.
Chetan Garga, managing director and country head at Allstate’s India centre, said as the large technology outsourcing contracts signed 7-10 years ago are now coming up for renewal, corporations have an opportunity to re-examine what they want to give out versus what to keep in-house.
Bedfordshire, Cambridgeshire and Hertfordshire police forces have backtracked on a plan to outsource IT and human resource services to G4S.
The forces said in August last year that they were still considering the deal, despite G4S coming under fire for under-supplying security staff for the London Olympic Games over the summer. However, according to the BBC, the plan has now collapsed after Police and Crime Commissioners rejected it.
Bedfordshire, Cambridgeshire and Hertfordshire are now planning to increase collaboration to cut costs. The three Police and Crime Commissioners are in the process of formalising the decision.
G4S’ CEO, Nick Buckles, confirmed to MPs in July that problems with the company’s scheduling system was partly to blame for the shortfall of over 3,000 security staff for the Games.
Speaking at a parliamentary committee meeting, Buckles told MPs that he got a call from the group’s COO, David Taylor Smith, on 3 July, while he was on holiday in the US, citing problems with the company’s rostering software.
Do you help recruit new talent into your organization? Would outsourcing your HR and payroll administration help you increase quality and compliance along with saving money? Do you want to transform your classroom-based learning into e-learning? Do you have operations across the Asian region from Dubai to Wellington? Then Talent2 is a company you should know.
Talent2 is the Asia Pacific leader in HR Managed Services, headquartered in Australia, with operations across the region.
Talent2 has always had Business Process Outsourcing (BPO) operations in the Philippines, but due to growth it is expanding.
Talent2 has had great experience with its two delivery centers in the Philippines — Makati and Cebu — and is building on this by continuing to invest in the Philippines.
This expansion will ensure that Talent2 has the right quality and capacity for its clients around the world. It will be officially opening its new 500-seat service center in March, which demonstrates its commitment to its clients, people and to the Philippines as a BPO strategic delivery location.
Mary Sue Rogers is the Talent2 Global General Manager with overall responsibility for the Shared Service operation in Manila, and is far from being a new comer to the Philippines.
Having previously worked for IBM as its global leader for the HR BPO business, she knows what quality of talent, customer dedication and experience is available in the Philippines.
Building on the track record established in IBM, Mary Sue is looking forward to leading the design, built and operation of the “next generation” of HR, Learning and Recruitment BPO delivery.
The next generation of BPO delivery centers developed by Talent2 will provide an exceptional quality of services for our clients, and just as importantly will establish people processes inside the centre that allow for development and career expansion of the Talent2 team.
Talent2 is focused on the Asia Pacific region and will provide an opportunity for experienced HR and Recruitment professionals to work in a “day shift” environment — something that many competitors in the market cannot provide.
Delivering a high quality work environment that focuses on people, facilitating “work life balance” along with career development is quite unique in the BPO delivery market in the Philippines. This will ultimately benefit not only the
Talent2 team but also Talent2 clients.
Over the years, Canadian HR Reporter has tackled the issue of HR outsourcing from many different angles.
On June 4, 2001, we ran an article outlining CIBC’s move to outsource nearly all of its HR operations to EDS in a $227-million deal, resulting in the transfer of 200 CIBC HR personnel to EDS.
On June 2, 2003, we detailed BMO’s signing of a 10-year, $750-million deal with Exult to outsource most of its transactional HR work. We also told the stories of companies such as Rogers, Air Canada, Home Depot and Starbucks that went down similar roads.
In the Sept. 22, 2003 issue, a headline read “Can you outsource 70 per cent of HR?”
There was so much outsourcing of HR that we even dedicated some space to discussions around what skills HR professionals would need in order to land a job with an outsourcing firm, because that was starting to look like the only viable career path for many professionals — especially entry-level ones.
But then cracks and dissent started to show in the outsourcing wall. RBC, which at one point outsourced recruitment, brought it back in-house. In the early 2000s, RBC was hiring about 20,000 people per year — but about 60 per cent of those hires were internal and it found the outsourcing firm couldn’t properly evaluate employees already on the payroll.
Other concerns began to arise, such as privacy. In 2004, British Columbia introduced legislation to prevent personal data from landing in the hands of foreign governments. It made the move after the B.C. Government and Service Employees’ Union (BCGEU) raised concerns about the outsourcing of the Medical Services Plan to a company in the United States, governed by the USA Patriot Act.
Ontario’s eHealth debacle also gave outsiders a black eye. In 2009, the province’s program to move health records online had 30 full-time employees and 300 consultants on the payroll. It wasn’t exactly a textbook lesson on the benefits of outsourcing work. (Though it’s a great business case for the benefits of full-time staff.)
The HR outsourcing train seems to have lost plenty of steam over the last decade.
Yes, firms are still outsourcing HR work. Less than two years ago, Air Canada inked an eight-year, $80-million deal to outsource its HR contact centre, employee data management, employee travel support, recruiting services, benefits administration, leave management and payroll to IBM, which does similar work for American Airlines.
But the tone of the conversation around outsourcing seems to have shifted.
As I write this, I’m back in the office for the first time in nearly a week. I had the opportunity to attend the Human Resources Professionals Association (HRPA) annual conference in Toronto.
I enjoy conferences for a number of reasons but first and foremost is the chance to talk to professionals who I wouldn’t ordinarily have the opportunity to meet — the ones who are on the front lines of their organizations every day.
One conversation I had focused on outsourcing. I asked this woman, a mid-level professional at a financial institution, what part of HR she would consider outsourcing. I wasn’t taking notes during our conversation but, to paraphrase her, she said: “None of it.”
Not payroll, not benefits administration, not HR call centres? The answer came back, adamantly and repeatedly: “No.”
The gist of her argument was HR is simply too important to shovel off to outsiders. HR departments need to be robust, not skeleton-staffed, for various reasons — prime among them is building knowledge of the business and grooming the next generation of HR leadership.
It’s an interesting point. It would be naive — and wrong, at least from these quarters — to say HR should be completely untouchable from an outsourcing standpoint. There are plenty of tasks that can often be done better and cheaper by external experts.
But we’re writing less frequently in Canadian HR Reporter about outsourcing deals and more about the importance — and huge benefits — of getting HR right.
For both employers and HR professionals, this can only be seen as good news.
Many marketers still turn to the use of telemarketing when doing IT sales lead generation. For IT companies that seek to increase new business, then using the phone is must when it comes to finding new leads. This is what we call teleprospecting. Many businesses still make use of this method of looking for new prospects. As such, telemarketing remains strong in the eyes of marketers.
So what about email marketing? What about social media? Why rely on the phone to find new business leads – IT consulting leads, web hosting leads, cloud computing leads or IT outsourcing leads? As a direct marketing tool, marketers use telemarketing because it allows them to get in touch directly with the decision makers they need to be talking to. In email marketing your message still has the chance to not reach your target prospect, or get sent to the wrong email address. Social media is no different – people will see your ads and content, but you can’t be sure that those people are your target prospects.
As such, when it comes to IT sales lead generation, telemarketing gets the job done for marketers. However, why is it that your calling campaign doing as well as you would have hoped it would? Well, the answer could be that there is something wrong with your call script.
No call script is perfect, especially at the start.
If you are just starting out with using B2B telemarketing as part of your lead generation strategy, then I’ll have you know that no call script is perfect, especially right at the onset of your campaign. Even if you plan for months before you start calling, you’ll be surprised to find that you won’t get the results you want at the beginning of it all.
If the problem with your campaign is your call script, then you may need to know a few things in order to help make your campaign produce results.
Make tweaks as your telemarketing campaign goes on – Your call script may not be perfect at the start, however, you can refine it as you keep making calls. The longer your lead generation campaign goes on, the more data you can collect on which parts of your script need to be tweaked.
Take note of words that get reactions, be they bad or good – We cannot deny that there are just some words which make use react. For example, when we hear the word free from a marketer, we either become enticed or skeptical with their offer. There are lots of others words which could make your prospects react so it is a good idea to know what these words are and how they make your prospects react. This will help you in modifying your call script.
Trust your gut on when to deviate from your script – Although you have a call script, referring to it all of the time will only make you sound like a broken record to your prospects. A lot of the people you call will actually be able to tell of you are trying to pitch them or sell them something just based on your opening spiel. As such, learn when you should deviate from your script; know when to trust your gut. Your call script may be good, however, it can only ever take you so far.
Generating IT services leads is very doable if you make use of telemarketing to do teleprospecting. If your lead generation campaign is ailing, however, you may want to take a look at your call script.
One problem that economists always have in analyzing the economy is separating cyclical effects, which are temporary, from structural effects, which have long-term implications. In real time, it is almost impossible to separate the two, yet the distinction is important because policies to deal with the wrong problem may be ineffective or even counterproductive.
This is especially a problem when analyzing the labor market. If the central problem is a lack of aggregate demand, then the vast bulk of the unemployed are jobless through no fault of their own. This macroeconomic problem requires a more expansive monetary and fiscal policy.
But if the problem is structural, increasing aggregate demand is unlikely to reduce unemployment and is more likely to raise the rate of inflation.
Structural unemployment is much more difficult to deal with. Workers may require extensive retraining because the businesses and industries that employed them no longer exist, and their skills no longer have the value they once did.
The distinction between cyclical unemployment and structural unemployment is further complicated by something called hysteresis, which, basically, is the process whereby cyclical unemployment is converted into structural unemployment.
The longer someone is out of work, the less likely that person is to find a job. Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.
Another factor that contributes to structural unemployment is automation — the replacement of human labor with machinery, computers and robots.
Economists have been concerned about this since the time of Adam Smith.
Perhaps the most famous anecdote in the history of economic thought is Smith’s discussion of the pin makers and the division of labor in “The Wealth of Nations.” One pin maker working by himself could barely make one pin per day in the 18th century. But a group of pin makers working together, each specializing in one aspect of pin-making, could manufacture 4,800 times more pins per day. Ten pin makers could manufacture 48,000 pins rather than just 10 pins per day.
Smith’s story also points to another problem in dealing with unemployment, which is that productivity growth is sometimes the worker’s enemy.
Generally speaking, higher productivity — that is, higher output per man-hour — is a good thing. That is what generally gives workers higher real wages over time and increases the standard of living for everyone.
But it is not obvious that higher productivity will lead to higher output rather than lower employment. In Smith’s tale, the owner of the pin-making shop could have decided to lay off all his workers after one day and simply sold off the massive inventory over a period of years.
Usually, this doesn’t happen. Increased productivity tends to lower prices and increase demand, thus leading to increased employment in industries where productivity is rising. But in the immediate aftermath of some productivity-enhancing improvement, the first-order effect may be to reduce employment.
Unfortunately for workers, productivity gains may take place during times when cyclical unemployment is high. Indeed, some economists contend that in the long run recessions have a positive effect on the trend rate of economic growth by forcing businesses to adopt labor-saving technology, purge redundant workers and invest in productivity-enhancing machinery.
It is small comfort to workers suffering simultaneously from cyclical and structural employment, as is the case today for many in the manufacturing sector, but preventing businesses from laying off workers or investing in robotics is penny-wise and pound-foolish. Jobs may be preserved in the short run at the expense of better jobs in the future.
It is especially important for advanced economies, like those in North America and Europe, to facilitate investment in labor-saving technology even if it leads to higher unemployment. Increasing output per hour is the key to competing with low-wage economies like China’s.
People who are not economists often believe, incorrectly, that the United States can never compete with countries like China, where labor costs are a fraction of those here. This leads them to think that tariffs and import restrictions are an appropriate policy response.
In fact, what businesses really care about is not wage rates but unit labor costs; that is, labor costs adjusted for productivity. Thus a country with a poor, uneducated, unskilled labor force with minuscule wage rates is not necessarily the best place for a business to set up shop. A highly skilled, well-educated and well-equipped labor force may well produce more output at a lower labor cost per unit.
Although many workers still worry about offshoring, or the outsourcing of their jobs to China, this is a fading problem, in large part because of automation and rising wages in China, which have eroded its cost advantage. Some companies, including Apple, that previously moved production to China are now bringing it back to the United States, as unit labor costs have risen in China and fallen domestically.
According to a recent report from the Congressional Research Service, other companies have found hidden costs in overseas production that offset the lower wages. These include quality, transportation, safeguards for intellectual property, loss of managerial control and other factors. Benefits of situating manufacturing in the United States include close proximity to research and development and falling energy costs.
Unfortunately for workers who may have lost their jobs to outsourcing, the return of these jobs to the United States is unlikely to benefit them, because they aren’t the same jobs. New factories are unlikely to be situated where the closed factories were and the newly hired workers aren’t going to have the same skill set.
Instead of doing manual labor, workers increasingly are using computers to control robots or other sophisticated machinery. That raises productivity and allows well-paid American workers to compete with those working for a fraction of their wages in developing countries. But it also means that workers require more education and different skills, working with software rather than drill presses.