Posts Tagged ‘offshore’

Tips on addressing the risks of offshore outsourcing

December 29th, 2014

When a company decides on an offshore outsourcing strategy, due diligence and risk assessment are a normal part of the process. But systematic attention to the cross-cultural dimensions of risk assessment is still rare.Outsourcing28

Identifying and addressing this kind of “soft” risk factor tends to be neglected in favour of the more easily identified “hard” financial and legal factors. Yet repeated research shows that cultural mismatch and failure of cultural integration lead to poor strategic alignment, communication failures, and problems in execution.

Three distinct cross-cultural risk factors can have a critical impact on the success of an offshore outsourcing relationship. The first is commonly recognized, the second tends to receive lip service and the third tends to be unseen or avoided.

Risk Factor 1: Corporate culture differences

What is the degree of “fit” between the client’s corporate culture and the vendor’s? How close are their vision and values? Is one bureaucratic, the other entrepreneurial? What is their respective risk tolerance? Are decisions top-down or based on consensus? How different are their operational processes? Their control systems? Their reward structures? Their corporate policies? How do they hire, develop and evaluate employees? What are their behavioral norms and expectations?

Lack of alignment in key dimensions of corporate culture can present serious obstacles to smooth interactions, with bottom-line impacts for both organizations.

Risk Factor 2: Differences in national or regional cultures

The globalization revolution is in its infancy, while national and regional cultures are longstanding. Cultural conditioning is deep. Despite surface similarities in the globally interconnected world, the underlying attitudes, thought patterns, assumptions and expectations of different cultures vary widely. Do people tend to be individually autonomous or group-oriented? Egalitarian or hierarchical? Situational or absolutist in their ethics and conduct? What is their perspective on time? On relationships? Do they tend towards candour or diplomacy and face-saving? Do they focus on results or process?

In overt and subtle ways, these deep elements of national and regional culture influence every area of business relationships, systems, processes and work interactions across cultural boundaries. If you don’t understand these differences, your risk mitigation approach won’t develop strategies to avoid potential pitfalls and harness opportunities for synergy.

Risk Factor 3: Cross-cultural competencies of key players

In any offshore outsourcing relationship, a wide range of players is involved at both ends: executives, corporate managers, project leaders, members of multinational (often virtual) teams. Some work from their domestic base of operations, others travel or go on expatriate assignments to their partner’s location. All are involved in the challenge of achieving business objectives and performing seamlessly in a culturally diverse global environment.

In addition to the technical, managerial, leadership and interpersonal skills required for their jobs, the people occupying these roles need to have cross-cultural competence if they are to be successful and not put their company at risk. This includes both knowledge about other cultures and the ability to adapt to cultural differences. A due diligence process that doesn’t address the cross-cultural competency of the people who will implement the outsourcing relationship misses a crucial risk factor.

Best Practice: Cross-cultural due diligence rather than “retrofitting”

As offshore outsourcing matures, the neglect of “soft” risk factors shows some sign of receding, at least with some of the leading-edge global organizations setting the next generation of best practices.

“More attention is being paid to the cultural alignment between client and offshore vendor as part of the due diligence process in the offshore space,” says Srinivas Tatavarthy, former Vice President for Offshoring Implementation Risk at Wachovia. “The need has become greater for up-front cross-cultural due diligence rather than ‘retrofitting’ the relationship after having experienced the effect of the cultural differences.”

But how do you carry out cross-cultural due diligence? How do you predict the potential impact of cross-cultural factors and make plans for mitigation? A robust cross-cultural due diligence process should do the following:

Build the cross-cultural dimension into the due diligence model as an integral part of the process, using professional cross-cultural expertise as needed rather than relying on impressions and anecdotal knowledge.

For all three factors (corporate culture, national and regional culture impacts, and key player cross-cultural competency, use both quantitative methods (surveys, audits and psychometric assessments) and qualitative methods (in-person interviews and on-site observations).

Develop risk assessment and risk mitigation strategies to address all three cross-cultural risk factors, recognizing that while they may intersect, they are independent variables, each requiring its own analysis and solution.


UK public sector shunning offshore IT

December 19th, 2014

The UK outsourcing market has enjoyed a big boost from the public sector in 2014, with contracts big and small remaining in this country.Outsourcing24

Market watcher ISG reports, in a research note from its north Europe president, John Keppel, that “the UK public sector has continued its outsourcing journey”, with spending levels reaching nearly double the amount laid out in the commercial sphere.

Spending has been driven upwards by large big-ticket deals. But there has also been a surge in mid-market government business, which has come “as a result of the complexity of the services rquired and a lack of appetite for utilising cheaper, offshore resources”, Keppel believes.

IT outsourcing (ITO) has seen a “resurgence” across EMEA s a whole in 2014, he states, with the number of contracts inked in Q3 rising 16 per cent annually. However, business process outsourcing has seen a “pronounced decline” in activity.

“BPO ACV grew steadily through the global downturn as companies looked to save costs across the organisation, but as the economic outlook has brightened, BPO values have fallen,” said Keppel. “In general, EMEA has not been quick to adopt large HR, F&A and other BPO towers, but the growth of cloud and other new technologies could see a wider take up of business-process-as-a-service in the next couple of years.”

There has been a notable proliferation of outsourcing deals in Spain, Italy, and France in 2014, with the latter seeing annual contract value (ACV) increase by 250 per cent year on year. Southern Europe as a whole has posted its highest-ever ACV total. The more mature UK market, meanwhile, has “broadly remained stable”.

ISG foresees continued growth for the EMEA outsourcing market, particularly as firms grow more confident in the health of the economy.

“The challenge for buyers will be to understand how they can get the most value from their outsourcing efforts, and to understand the real business impact,” concludes Keppel. “We believe that this will start to gain momentum next year.”


Ausgrid to offshore IT jobs

October 22nd, 2014

Publicly owned electricity distribution business Ausgrid is proposing to send 37 IT jobs offshore as unions step up a campaign to protect their workers’  job security.Outsourcing34
The United Services Union said Ausgrid management believes it can save $8.5 million a year by outsourcing the jobs to an overseas company.
The company has flagged the loss of jobs and the use of an overseas contractor to provide IT services.

A spokesman for Ausgrid said it is reviewing the delivery of services in its Information and Communications Technology division as part of a “business-wide restructure to reduce non-essential operating costs”.

“This includes 37 roles in the area of development and technical support,” the spokesman said. “The review includes discussion with unions and staff about the merits of these roles being outsourced to the external market. Ausgrid would expect any external provider to maintain a local presence.

“It’s not unusual for an organisation to test the external market to benchmark the efficient cost of delivering services.”

Ausgrid employs more than 270 staff in its Information and Communications Technology division. This includes labour hire and senior contract roles.

The spokesman said it is important for Ausgrid to “reduce costs in a responsible way so we can keep electricity prices as low as possible for our customers, helping to keep average price increases over the next five years to below CPI”.

“We also remain steadfast in our commitment to no forced redundancies,” he said.

The development comes as negotiations begin for a new enterprise agreement for Ausgrid.

Unions are fighting for the inclusion of job protection clauses that would prevent the offshoring of jobs, restrict the outsourcing of work, and protect staff from forced redundancies.

USU energy manager Scott McNamara said an internal review had found $2 million could be saved while retaining the services within the company, and $3.5 million could be saved by outsourcing the services to an Australian company.

“Ausgrid employees are deeply concerned by the potential loss of jobs and outsourcing of essential support services,” Mr McNamara said.

“For the sake of a few million dollars, Ausgrid management want to send the jobs of 37 loyal staff.

“Not only will they lose the experience and skills of these loyal staff, but service standards will likely drop as work is carried out by external companies in other parts of the world.”

Mr McNamara said the move would not help consumers.

“Networks NSW is driving cost cutting across the business, fattening up the network businesses for NSW Premier Mike Baird’s power privatisation,” he said.

“If electricity network companies are already looking to cut jobs and send positions overseas, it’s no wonder that staff fear massive job cuts from privatisation, which is what happened in Victoria when an overseas buyer took control of the electricity network.”


BPO sector celebrates reduction in illegal activity

October 17th, 2014

A year ago, lotto scamming activities threatened to flat-line the business processing outsourcing (BPO) sector. Today, with a clampdown on the illegal activity, bolstered by the relevant legislation, there is now next to no reports of the illegal activities and the industry is thriving.Outsourcing31

“I would say a year or so ago that was the number one issue affecting not only the sector but more broadly and certainly in the last couple of months I have not heard that as a major issue anymore,” Julian Robinson, the state minister in the Ministry of Science, Technology, Mining and Energy, told the Jamaica Observer West.

Robinson attributed the reduction of complaints to Government’s introduction of legislation to battle the illegal sweepstakes, which not only posed a threat to the existence of BPO industry but has resulted in a spate of killings across western Jamaica.

In the past, scammers would get data from within some of the BPO companies. They then used that data to target their victims, mostly elderly United States residents. As the activity flourished local companies were at risk of losing their contracts from overseas entities.

BPO services target offshore or near-shore back-office operations such as accounting, human resource management and customer service (call-centre facilities).

Meanwhile, President of the Business Processing Industry Association of Jamaica (BPIAJ), Yoni Epstein confirmed that reports of scamming activities within the sector has fallen.

“The reality of it is it is on the decline. We have not heard of any instances, and to me more importantly, I haven’t heard any instances locally as the clients and prospective clients are asking about it less and less,” Epstein told the Observer West.

Both Epstein and Robinson were speaking to the Observer West following the historical signing of a deal between Columbus Communications and the BPIAJ to establish an incubator within the Montego Bay Freezone, which is expected to trigger growth, enhance market access and create new jobs.

The incubator, which is slated to be fully operational by December, will fast-track entry of new players into the business process outsourcing sector as well as facilitate short-term expansion for current investors.

The telecommunications firm — which trades as Flow and has been vigourously marketing its business brand Columbus Business Solutions (CBS) — will install, as part of its workstation solutions, screens and a combination of physical and so-called soft phones.

Columbus, which offers telephony, Internet and cable services, has ramped up its infrastructure to capitalise on businesses’ appetite for one-stop-shop, holistic technology solutions. “The partnership recognises the importance of the Business Process Industry to Jamaica’s national development and is intended to provide a solution that fast tracks new entrants to the local market, a problem that has often been cited by the Government and Industry players alike” said Sean Latty, head of the communications giant.

The BPO sector is a fast-growing industry which local economists and Government officials see as having great potential for growth, as business confidence rises and investment opportunities emerge.

Currently, there are approximately 40 BPO companies in operations, accounting for approximately 14,000 jobs in Jamaica, according to Epstein.

“We believe that this is a small portion of what the industry is capable of and the partnership with CBS will ease one of the challenges that has stifled the sector’s growth,” Epstein said. Epstein’s point is supported by JAMPRO, the government’s trade and investment promotion agency, that has indicated the sector could create 15,000 new jobs over the next five years.

“The BPO sector represents the fastest growing growth sector in the economy right now and we commend Flow as a private sector partner for coming on board and supporting this initiative,” he added.

As Jamaica seeks to improve its rankings in global competitiveness and the ease-of-doing-business indices, CBS’s initiative will help to expedite the entry of new BPO entrepreneurs, making the industry more dynamic and innovative.

Epstein was upbeat over the soon-to-be established incubator.

“The incubator is a 200 seat call centre that will be developed in the Montego Bay Freezone. The goal of the incubator is to attract foreign investors as well as local investors to start up businesses. Its cheaper access to entry, lower barriers to entry and faster uptime to get started into business. We want to make it as easy as possible for investors to want to come to Jamaica as well as for local investors and entrepreneurs to start businesses,” Epstein told the Observer West.

Epstein added: “It is also going to foster growth in existing businesses because if we have the space and someone can’t build out fast. Enough they will have access to the incubator to start-up grow their business while they develop their existing spaces.”


4 Steps to Leverage Offshore Outsourcing for Global Expansion

October 16th, 2014

Once upon time, multinational corporations are the only businesses that can expand offshore. Today, small businesses can expand globally without the need for a corporation-sized budget.Outsourcing23

Here are four steps that you can follow to maximise your outsourcing options and expand offshore:
Pick an offshore outsourcing partner.

Select an outsourcing partner to help you settle in a new market.

Your offshore outsourcing partner should be able to measure success and provide a solution that meets your needs instead of just a cookie cutter approach. Plenty have been said about the need for innovation. But unless you have the right environment to foster transformational change, it will not happen.

Look at the bigger picture.

Consider the location of your offshore outsourcing partner in both the local and regional level.

Make sure that the location of your offshore outsourcing partner has a readily available workforce. This will enable you to easily attract new hires, who will find it convenient that they don’t have to endure hours of traffic to go to work.

Pick an emerging market where you can find opportunities once you have gained experience in doing business in the country. Take a hint from multinational corporations. They use a global service delivery model to streamline their business.

Start small.

Small businesses that are new to outsourcing can start with a simple arrangement to gain experience.

Outsource your non-core business processes through offshore staff leasing. This provides a good introduction to an outsourcing relationship, managing an offshore operation, and handling offshore staff. This will help you to familiarise yourself with local culture.

Set up a managed operation.

A managed operation is a middle ground between outsourcing and having your own company.

Your managed operations service provider will provide support (such as recruitment, finance, expat support, and facilities management) and infrastructure (such as office space, software, computers, and telecom). You and the service provider will work together to manage the operation.

You can customise your operations and implement the level of control that you prefer. If you have a big team, you can hire your own team of expats to oversee the operation. If you have a small team, the service provider can manage the day-to-day operations.

Offshore outsourcing doesn’t need to be just moving jobs overseas. With the right mindset, small businesses can accomplish more and level the playing field.


Minister Decries Offshore Outsourcing of Local Operations

September 18th, 2014

The Minister of Communications Technology, Mrs. Omobola Johnson has faulted the outsourcing of operations generated locally to foreign companies under the   Business Process Outsourcing (BPO) arrangement.outsourcing59

According to the minister, local companies in Nigeria have the capacities and skilled manpower to handle outsourcing within and outside Nigeria, even though Nigeria is not regarded as a destination country for BPO.

She insisted that it would be a disservice to Nigeria, if local operations are outsourced to foreign companies that are established outside the country.

Johnson, who stated this in Lagos, while inspecting the operations of Communications Network Support Services Limited (CNSSL), a local BPO company with over 6,000 employees, said she was impressed with the facilities and manpower of the company. The minister told THISDAY that CNSSL has all it takes to operate outsourced services in Nigeria and still offer such services outside Nigeria, noting that it would be out of place if local BPO companies are not given the chance to do what they are capable of doing.

Johnson said Nigeria has local content agenda (LCA), which dwells so much on local content implementation.

According to her, the LCA was introduced was because the government  discovered that multinationals were  taking over businesses in Nigeria. Although she said multinationals doing business in Nigeria is not bad, she added that there is the need to protect and support the growth of local companies through policy implementation, and the LCA would address all of that.

“The truth is that if we must create jobs and develop Nigeria to the level it should be, then we must grow successful and sustainable local industries. China, Germany and Japan are doing well today because they have over the years, developed their local industries, making them to contribute substantially to Gross Domestic Products (GDP),”Johnson said.

Speaking on the operations of CNSSL, the Chief Executive Officer of the company, Mr. Gbenga Adebayo, said the company had been in operation since 2007, servicing the telecoms, oil & gas, banking & finance sectors of the economy, as well as state governments.

According to him, CNSSL has been managing the  operations of these companies and states, through  call centre operations in some parts of the country that are driving the initiative.

He however called for government policies and regulations that would protect local BPO companies since Nigeria has no such policies in place.

Adebayo said: “We are one of the local pioneers of BPO in Nigeria. When we started operations in 2007, most people thought we will not be able to deliver, but today our call centre operations are so standardised that local companies now patronise us, and international companies want to have a stake in it, which of course will increase foreign direct investments (FDI) and boost knowledge transfer. However good this may sound, there is a threat about the foreign interest, since BPO destination countries that are mostly foreign are now coming up to say that the local companies in Nigeria are not supposed to do outsourcing and that the BPO business should be carried out by the foreigners alone because it is their trade since they have the international expertise and technology.”

Adabayo stated that should this be allowed, it will expose local companies to a lot of vulnerabilities, since Nigeria has no policy protecting local BPO companies.


First IT jobs went offshore, now they’re being automated

September 3rd, 2014

The US and European IT roles that were pushed to offshore service providers will increasingly be automated, as the outsourcing giants look to preserve their margins. outsourcing30
By 2016 almost 1.1 million IT jobs are expected to have been sent offshore by major US and European companies.

The drive to send jobs abroad has, in part, been fuelled by low labour costs relative to western countries, with recent entry-level salaries for engineers in India falling between $4,200 and $5,900.

However, after years of double digit growth in Indian IT workers’ wages and with western customers demanding more for less, offshore service provider margins are being squeezed.

To protect their profits, major providers are beginning to automate an increasing number of roles traditionally carried out by systems adminstrators.

Milind Govekar, VP with analyst firm Gartner specialising in IT operations, said the push towards automation is partly being driven by the complexity of IT systems these service providers run on behalf of their clients.

“I often call IT an archaeological science, because nothing dies. You have generations of applications and infrastructure buried in an organisation. There’s a bank in the UK that has applications running from 1957. You can imagine the complexity that particular environment has,” he said.

“It’s a combination of old systems, new systems and everything co-existing. At the same time demand is going up as well, as almost all organisations have launched digital business initiatives.”

Customer expectations of service providers are also rising. Govekar referenced a large European bank outsourced to India’s largest IT services company TCS that expects demand on its systems to grow by 25 – 30 percent each year but wanted its costs to increase by no more than five percent.

“A lot of these service providers are saying ‘It’s just not sustainable to hire people and get them to maintain these systems’.”

For example, the CEO of TCS recently said in an interview the firm is working on up to 15 platforms to automate different aspects of its work. For its part Wipro is building its FixOmatic framework, which it says will enable automation of up to 40 percent – 45 percent of all level 1 and level 2 support tasks, reduce downtime and lower operational cost.

What sort of roles are being automated?

Automation software maker IPSoft has deals with some of the largest IT companies operating in India – such as Wipro, Cognizant, Infosys and Accenture. The firm is one of a growing number of businesses providing automation technologies for running and maintaining an IT estate.

A look what IPSoft does demonstrates the types of tasks that are being automated. The firm’s main product is IPcenter, a software platform that is designed to monitor and automate the running of IT infrastructure, and respond appropriately when a problem arises.

“If you’re driving a car a light will come on to tell you to go to the garage. What IPSoft is doing with their technology is basically trying to solve any issues before it gets to the stage where the warning light needs to come on,” said Martijn Gribnau, chief change officer at IPSoft.

IPcenter relies upon “virtual engineers”, autonomic software that can handle incidents across the corporate infrastructure – from configuring a misbehaving firewall to reducing the load on a server running virtualised machines. Virtual engineers control their own operations, monitoring the network for incidents and are able to adapt and change tasks if a higher priority incident occurs.

“It’s basically a third generation expert system. It’s not cognitive yet, but it’s smart automation of virtual engineers. What we basically do is look at what an engineer is doing and automate it,” said Gribnau.

The product is designed to automate what Gribnau referred to as level one and two support engineers, as well as part of level three engineers’ responsibilities, as defined under the Information Technology Infrastructure Library service management practices.

IPSoft says that IPcenter autonomically resolves an average of 56 percent of incidents without human intervention and up to 90 percent of level one support incidents.

What effect is it having on IT hiring?

Fierce competition for the hundreds of thousands of newly qualified engineers India’s universities produce each year has pushed up salaries and encouraged service providers to poach staff from competitors.

Gartner’s Govekar said as demand grows for outsourcing and external services, including cloud, providers are looking at automation as a way of “not hiring more people”.

“They are also using automation as a way of buffering themselves against this huge turnover of people, where people are jumping from one organisation to the other. They look at automation as a way of filling those gaps, of making sure that certain repeatable tasks that systems administrators undertake are very much automated.”

The desire to control labour costs is already evident at the major service providers. After years of paying engineers double-digit salary increases, Infosys and its competitors are offering no more than 10 percent this year, in spite of projections by the Indian IT association Nasscom that the industry will grow by 15 percent, an improvement on 2013.

When contacted, Wipro had no comment to offer and Infosys declined to share its views.


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