Posts Tagged ‘offshore’

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.


Infy betters TCS, Wipro in revenue per employee

August 14th, 2014

IT services firm Infosys has been consistently improving its revenue per employee in the last few quarters. Its numbers are better than those of its top two Indian competitors, Tata Consultancy Services and Wipro, due to higher returns from consulting and systems integration (C&SI), says a company official.

Revenue per employee is a function of various things, including price points, portfolio of services, onsite-offshore mix, utilisation and client mix. However, “our proportion of revenues from C&SI is higher than leading offshore peers,” said a company spokesperson.

Reduced hiring

Reduced hiring by Infosys in comparison with TCS, especially during the last two financial years, has helped the Bangalore-headquartered firm boost its revenue per employee metric. However, attrition remains a challenge.

The recent improvement in utilisation for Infosys was mainly due to an increase in attrition, which forced other employees to bear the increasing workload, said Bozhidar Hristov, Analyst, Professional Services Practice, Technology Business Research, US.

If Infosys wants to maintain healthy (above its peers) revenue per employee and utilisation, it will need to pick up hiring of both freshers to support large-outsourcing deals and laterals to add value to C&SI opportunities. It should also invest in automation tools and IP-backed assets to sustain non-linear growth.

Infosys is leveraging its expanded foothold in Europe following the acquisition of Lodestone to boost brand awareness and drive high-value C&SI sales. In comparison, while TCS’ ability to provide operations execution remains its key lever, consulting on operations hinders its ability to expand high-value C&SI sales, said Hristov.

Automation helps

According to Moorthy K Uppaluri, CEO, Randstad India, in the IT sector, revenue per employee indicates the overall growth of the company, employee productivity and the non-linearity of the business model. Most IT majors have been winning large, multi-year project-based engagements, and they have built efficiency through automation to execute these projects. This has had a positive impact on the revenue per employee equation.

Companies are investing in development of products in core banking, IT infrastructure management and IT accelerators for emerging technologies to improve non-linear revenue. Such measures have helped improve the revenue per employee consistently, by around 15-20 per cent over the last five years.

A higher onsite ratio of employees also impacts this metric as for the same number of people, the billing is much higher, he said.

Rituparna Chakraborty, Senior VP & Co- Founder, TeamLease Services, said the top IT companies have vastly improved productivity.

Wipro this year had a flat headcount for revenue that last year would have required it to hire 10,000 people.

The role of HR for most IT companies is shifting from selecting to upskilling.


Why and when should your startup outsource offshore? 3 successful MENA entrepreneurs weigh in.

June 18th, 2014

Despite the controversy, offshore outsourcing is attracting more attention than ever from companies worldwide looking to streamline. It offers all the advantages of both outsourcing (time and energy saving, optimization of human resources and access to rare profiles) and offshore (reduced costs and local know-how).Outsoucing Strategy

Entrepreneurs in the Arab world are part of the global trend. We spoke to three of these who are using a foreign workforce, in Eastern Europe and India, to address challenges associated with the shortage of skilled developers workers in the region so as to remain as flexible and efficient as possible during a site’s crucial beta period.

Hervé Cuviliez, co-founder of the Lebanese online media startup Diwanee, Talal Jabari from the Palestinian startup Fariqak, an Arabic fantasy football platform, and Kamal Bouskri from MyVLE, a new offering from Morocco in the ed-tech sector, give us the pros and cons of offshore outsourcing based on their own experiences, in this, the first of a two-part series.

Finding qualified developers

Shortly after its founding, Diwanee was working with Lebanese developers. But its leaders soon realized that “in Lebanon, it’s easy to find four or five good ones,” explained Cuviliez, but finding “a big number of good, experienced developers” is pretty much an impossible mission. As the company grew, its team realized it would need to look offshore to fulfill its increasing coding requirements.

By chance, a Diwanee co-founder of Serbian origin, while on vacation in Belgrade, met a person working for a tech offshoring company who offered to help for a few hours a week. After he did a great job, the Diwanee team hired a few employees from this company full-time. Four months later, all 30 employees of the Serbian company were working for Diwanee.

Fariqak has also resorted to offshore outsourcing due to the lack of a deep pool of qualified workers, as well as the fact that developers in other parts of the world are cheaper than those in Palestine. When he didn’t find qualified candidates in Palestine, the startup decided to outsource to India.


According to Kamal Bouskri, co-founder of MyVLE, resorting to freelance offshore developers was a matter of flexibility, in terms of time and money. He explained: “for us, the logic was simple. We have a concept that requires development while spending as little as possible. We wanted to have minimal losses in case the project didn’t meet market needs and couldn’t be modified.” This meant no hiring of employees or managing a team, renting offices, investing in furniture or IT hardware.

Flexibility is also the center of Diwanee’s strategy. The startup continues to use freelancers for some aspects that are very technical or require specialties not needed by the company full-time. The company, specialized in creating online media, also uses freelancers to create content, especially during busy periods such as Ramadan or to develop content tailored to a specific geography.

When to develop internally?

If your product is very technical or critical to your product or service, it is better to develop internally, according to the three entrepreneurs. Even though the Diwanee and MyVLE teams are aware that they wouldn’t have made it without outsourcing, they are convinced that some things shouldn’t be developed externally. Hence, after an initial period, they quickly sought to take control again of certain aspects of technical development.

“It’s too risky,” argued Kamal Bouskri, to continue outsourcing after an initial period. According to him, once an entrepreneur has proven to be on the right track, i.e. once the MVP (minimal viable product) stage is done, “they must ensure they have total control over the product and do not depend on uncontrollable external factors.”

The company now has a local team in Morocco and only occasionally resorts to using freelancers.

Diwanee’s approach is similar: once the thirty employees of the Serbian outsourcing company were all working for Diwanee, the Lebanese startup bought the agency and made the CEO a shareholder in Diwanee. Cuviliez explained, “it is a very strategic part that we cannot afford not to control.”

For those who cannot afford to buy outright an outsourcing company, Kamal Bouskri suggests a gradual approach: start for example by hiring a CTO who can divide the code between freelancers, supervise the work, and if necessary redistribute the work internally.

Check back in the coming days for more information on how to go about scouting for and hiring an offshore outsourcing firm, and what to do when things go terribly wrong.


Captive Offshore Centers Remain Cost Competitive With Outsourcing

June 9th, 2014

Despite speculation that the cost competitiveness of captive offshore centers may be fading, most global in-house centers still save companies money over keeping the work local, according to recent research by outsourcing consultancy Everest Group.Outsourcing22

Many delivery locations have seen significant shifts in currency valuations and inflation leading to the perception that operating a company-owned IT or business process center offshore is less financially beneficial in the past, says Salil Dani, practice director in Everest Group’s global sourcing team. Wage inflation in India of as much as 20 percent for certain roles and functions, for example, has created questions around the sustainability of the cost arbitrage associated with a captive center.

in-house offshore centers, outsourcing, cost savings
However, Everest Group found that global in-house centers today deliver 30 to 70 percent savings when taking into account total cost of ownership including salaries, real estate, technology and telecom expenses as well as amortized costs associated with the setup, transition, and ongoing governance of the center.
Factors that Affect Total Cost of Savings From In-House Offshore Centers

Total cost of savings for captive centers vary by location and function. Typical captive center cost savings are 65 to 80 percent in India, 60 to 70 percent in the Philippines, 45 to 55 percent in China, and 35 to 45 percent in Poland, according to the research conducted in conjunction with India’s IT service trade group NASSCOM. In addition, more transactional roles like application maintenance deliver greater cost savings in-house than more complex functions like analytics, according to the study.

New setups of global in-house offshore centers were down slightly in the first quarter of 2014, but the first quarter of the year typically sees lower demand for global services in general, says Dani. This quarter, new captive center activity is steady, and, long-term captive center creation will far exceed divestitures, says Dani. In the last year, companies have opened 70 new in-house centers and divested just two due to company-specific issues, according to Everest Group.
In addition, the appetite for captive centers in locations outside of India is increasing. Companies are setting up shop in Latin America for bilingual English and Spanish support and Central and Eastern Europe to service nearby European operations, for example. And some are expanding beyond India for increased diversification and risk management, adds Dani.

In-house centers should remain cost competitive for as many as 8 to 16 years for most geographies and functions, according to Everest Group. But exceptions will exist. For example, captive centers in Brazil and those for high-end analytics services may be more difficult to justify financially.
In the meantime, companies are taking steps to further improve the cost competitiveness of their internal offshore operations. Those include reducing general and administrative expenses, increasing capacity utilization, adopting robust talent management practices to reduce attrition, and leveraging tier two locations, says Dani.


India, China still the top out sourcing destinations

March 31st, 2014

India is the clear global leader by revenue, while China is the most serious challenger by scale, according to a study of nine Asia-Pacific (APAC) countries as potential offshore service locations.Outsourcing30

Bangladesh, Indonesia and Vietnam are continuing to gain regional traction for offshore service delivery, while more mature countries, such as Malaysia and the Philippines, are refocusing on their core capabilities. The capabilities are higher-end IT infrastructure, help desk, application and business process services, the study by Gartner said.

Historically, cost attractiveness, quality of service and scalability were key drivers for using Asia as an offshore outsourcing destination. However, in the last few years, growing concern about high inflation, attrition and quality lapses in offshore and nearshore locations have been driving chief information officers to consider alternatives such as low-cost onshore sourcing and sometimes crowd-sourcing.

Despite these trends, India and China are still among the most popular destinations for offshore services. Over 48 per cent and 45 per cent of clients surveyed in 2012 were using these countries for nearshore or offshore outsourcing respectively.

Countries in APAC offer cost-competitive, typically stable and scalable locations for offshore IT and business process services, but Latin American and Eastern European countries now compete more aggressively for offshore deals, it said.

The currency fluctuations and rising delivery costs are also an issue for Asia, it added.


Business Process Management to touch USD 50 billion in next six years

February 10th, 2014

The BPM industry has indeed transitioned from the delivery of simple, repeatable processes of non-core functions at offshore locations as BPO to driving business outcome of clients’ complex, industry-focused processes from global locations.outsourcing56

“The industry that has demonstrated resilience in the face of economic uncertainty by constantly re-inventing itself to meet market needs, is forecast to touch USD 50 billion by 2020 from the present USD 21 billion,” Nasscom BPM Council Chairman and WNS Group CEO Keshav R Murugesh told.

An integral enabler for growth in these times has been the industry’s smart use of technology to create innovative solutions, Murugesh said.

The world of BPO or business process outsourcing as it was known, has evolved into a brand new identity – Business Process Management (BPM), Murugesh said.

“While BPM 1.0 in the late nineties was centered on cost efficiencies and productivity, BPM 3.0 in late 2000 focused on specialisation, process re-engineering, technology-enabled platforms and taking BPM to the rural areas. I believe that the era ahead is that of clients and
providers working together even more closely on disruptive innovations,” he added.

Commenting on the focus of the Nasscom BPM Council, Murugesh said, “We have a rather audacious goal ahead of us as a Council. We are looking to rebrand the image of the industry from BPO to BPM to signify the evolution and the value that it creates for client companies globally.”


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