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ISSUE #17, 2010

PREMIER MAGAZINE ON BUSINESS AND TECHNOLOGY SERVICES INDUSTRY

ISSN

1 9 8 5 -1 0 0 6

Emerg ing nat ions
People Management Practices at Learning Organisations Challenges of Offshore Outsourcing Conversation: Tholons CEO Avinash Vashistha Aligning Business & Globalisation Objectives

Global LookingServices: Mainstr Beyond eam Lo cations

editor’s note
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ing.com outsourc www.the7/02/201 PP1496 9 KDN NO: 140/07/200 (P) MICA

, 2010 ISSUE #17
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Emerging nations
Global Services: Looking Beyond Mainstream Locations
People ement Manages at Practicng Learni isations Organ

es Challeng re ho of Offsurcing Outso sation: Convers CEO Tholon Vashistha Avinash ng Aligniess & Busin lisation Globa tives ec Obj

theteam
Managing Editor/PublishEr Sritharan VellaSamy Consultant Sundra Surian

editorial editorial@wordlabs.com.my sub Editor Simon Vella journalist Julia Hoo art dirECtor Steven CHoo graPhiC artist Shafie oSman Contributors Tamyne menon Dorothy llew, mohd arSHaD

sales sales@wordlabs.com.my Vikraman ViSno resh naTHen

contact admin@wordlabs.com.my

Recently, I had the opportunity to have a drink and quality conversation with Avinash Vashistha, a renowned thought leader in the global services landscape. It was an interesting tête-à-tête, where the co-author of “The Offshored Nation” effortlessly provided a comprehensive snapshot of the outsourcing industry. One of his key observations is that Knowledge Process Outsourcing (KPO) – being the “sexy” term it is in the outsourcing sphere right now – is being bandied around aimlessly by many locations to mask scalability weaknesses. While not discounting the fact that KPO could work well if properly approached – as shown by the success of Sri Lanka in the recent years – Avinash advises prudence in this matter. He opined that the issue is not about KPO but about creating a niche and sustainable value. Essentially, the South Asian nation is a prime example in this. With a population of only 19 million people, the Sri Lankan industry has little problems with scalability in the niche Finance & Accounting Outsourcing (FAO) domain due to the good availability of a fully competent and aligned labour pool. Be sure to read his comments on other pertinent issues surrounding the sourcing space in the inside pages. Meanwhile, in our cover Story – Jerry Durant takes a look over beyond mainstream locations in global services trade. Durant likens emerging nations and companies to diamonds in the rough. They have yet to be polished but they’re gems, nevertheless. He reckons that strong government participation is one of the essential components for emerging nations to present themselves as a viable destination for outsourcing buyers, besides correcting negative perceptions along the way. Governments must be prepared to tackle and solve variables that are within their control for a start. At the same time they must insure that endorsed suppliers command the highest level of respect in relative to viability and ability to deliver. This must be done with utmost care, of course. Certainly, it only takes a hand full of ill-vetted vendors to devastate a country’s credibility as a viable emerging location, he stresses. In the Management column, Dr Arlyne Diamonds provides simple “Dos & Don’ts” when dealing with alcohol while doing business in other countries. In her own words: “Above all, please remember you are there to win the deal, not to win the drunken bout.” – Sritharan Vellasamy

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Outsourcing |

news bits

Huawei, local organisations to develop telco expertise
uawei, which provides nextgeneration t e l e c o m m un i ca t i ons network solutions for global operators, inked a four-way agreement in Shenzen, China with three Malaysian companies to promote local telecommunication human capital development. The three companies are Technology Park Malaysia Corp Sdn Bhd (TPM), Multimedia Development Corporation Sdn Bhd (MDeC) and Dream Catcher Consulting Sdn Bhd. Under the agreement, the four parties would initiate collaboration

Outsource infrastructure, businesses urged
Malaysian businesses have been advised to outsource their infrastructure to enhance profitability and avoid unnecessary costs. Regus Group Vice President for South East Asia William Willems said that without having to pay attention and time to aspects such as maintenance of property, equipment and even office staffing, an organisation would be able to concentrate on its core business. In the event of a crisis, outsourcing of infrastructure would also offer businesses the flexibility to downscale without having to be stuck with extra resources, he said in a statement. “Property is the second largest fixed expense for most companies, yet recent research by CORNET suggests that as much as 50% of corporate office space goes unused at any one time,” he said. He said an ideal infrastructure to source for would include a client-driven mix of offices, meeting rooms, common areas, advanced communications systems, network access and IT, and administrative and technical support. “A flexible property portfolio leads to reduced overheads, lesser liability and easier way to manage your property,” Willems said. He said outsourcing of infrastructure would contribute to the expected 20-25% rise in revenue of the Malaysian outsourcing industry that was estimated to be worth US$1.1 billion last year.

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to develop the necessary human capital for the telecommunication segment. It includes setting up a telecom data centre infrastructure within TPM and developing a structured certification programme to benchmark trained human capital resources which can be deployed globally. The agreement was signed in conjunction with the official visit of Deputy Minister of Science, Technology and Innovation (MOSTI), Tuan Haji Fadillah Yusof to China, said a statement released by the ministry on March 15.

Malaysia a prime spot for contact centres: inin
InteractIve Intelligence Inc. (ININ) says Malaysia is well on its way to become one of the top locations for contact centre businesses in the Asia Pacific region with a current market size of RM94 million. Last year, Malaysia’s contact centre market contributed 13-15% to the Asia Pacific Actuation Centres (APAC) market, making it one of the leading country contributor and important growth country of focus, ININ regional general manager for Asia, Simon Lee said in a statement. The country’s call centre market is also expected to grow 20-30% this year compared with a 17% growth last year, with contact centres’ total number of seats this year anticipated to reach 32,470. “We firmly believe that Malaysia can be the hub of contact centres, as a spillover of outsourcing from traditional markets like India and Philippines is taking place. “This has further strengthened the attractiveness of Malaysia as the emerging hub for outsourcing,” Lee said. He added that another advantage Malaysia had was its multilingual talents serving apart from the English, Malay, Chinese and Tamil speaking communities, the growing Korean and Japanese speaking communities in the country. ININ is also projecting a 20-25% revenue growth for Malaysia in 2010, which will stem from the evolution of contact centres, undergoing a shift from voice centric to multimedia centric and the desire of companies and business to turn their contact centres from a mere cost centre to be a profit centre.

Savings for Inti with Ricoh tie-up
Malaysia’s Inti Education Group is foreseeing cost savings to the tune of RM1.1 million over five years under its collaboration with Ricoh Malaysia to manage the print services of the education group. Ricoh said the managed print services agreement was signed recently where Ricoh would have exclusive rights for Inti’s print services. Inti is a member of the Laureate International Universities network, with links to other institutes of higher education across 21 countries. “By appointing Ricoh as a strategic partner, Inti will extend and expand its use of Ricoh’s print and document management devices and solutions to its facilities within the entire education group,” it said. INTI will use Ricoh’s devices and solutions exclusively to achieve a more streamlined and cost-effective environment, compared to the current system and equipment. Ricoh said this was in line with Inti’s efforts to become a “green” organisation, which is part of its commitment to environmental sustainability.

“We firmly believe that the country can be the hub of contact centres, as a spillover of outsourcing from traditional markets like India and Philippines is taking place.”

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| Outsourcing | March-April 2010

news bits | Outsourcing

eaders from Family Dollar Stores, Luxoft and NASSCOM were recently inducted into the IAOP Outsourcing Hall of Fame for their contributions to the industry and society. The International Association of Outsourcing Professionals (IAOP) honoured Joshua R. Jewett, Senior Vice President of Information Technology and Procurement, and Chief Information Officer, Family Dollar Stores, Inc.; Dmitry A. Loschinin, President and Chief Executive Officer, Luxoft; and the late Dewang Mehta, Past President, Nasscom. The newest inductees were honoured at a luncheon ceremony during The 2010 Outsourcing World Summit in Florida. Established in 2006, the Hall of Fame recognises individuals not only for their contributions to the management practice and industry of outsourcing, but also for their contributions to society through outsourcing. “IAOP is thrilled to recognise these leaders who have reshaped outsourcing and inspire us to higher achievements and contributions to the world around us,” said

iAOP inducts three it leaders into Hall of Fame L

IAOP Chairman Michael Corbett. “These leaders have shaped the outsourcing profession and we all benefit from their contributions today,” said IAOP’s Advocacy and Outreach committee chair, Atul Vashistha, Chairman, Neo Group and Neo Advisory. Family Dollar’s Jewett was recognised for his long standing knowledge and contributions to the outsourcing profession, leveraging IT capabilities through outsourcing to better the discount retailer’s business and also giving back his leadership and technical skills to a non-profit. Luxoft’s Loschinin has led Luxoft from its inception in April 2000 in Russia into a leading global IT outsourcing provider serving some of the world’s most successful companies. The late Mehta was lauded as a transformation leader in India’s IT industry. He led Nasscom, India’s premier trade body and the chamber of commerce of the IT-BPO industries, from 1991 to his death in 2001. Dr. Ganesh Natarajan, immediate past chairman, Nasscom, accepted the award.

Dhaka ranks third in global freelance outsourcing work
DHaka has become one of the top destinations for freelance online work, outshining Indian cities such as Bangalore, as the Bangladeshi capital is fast emerging as a major centre for data entry work that employs tens of thousands of people. According to a new report by oDesk Corp, a United States-based leading marketplace for companies and online workers, Dhaka is now ranked third among global cities where online jobs are outsourced from the West. A combination of cheap labour and good English skill has made Dhaka a “surprised winner” in freelance outsourcing jobs such as graphic design, data entry and check-up, translation and web development. Bangalore ranked fifth on oDesk’s list of top cities for online work, the report said. The top four cities with more freelance work are: Chandigarh and Mohali of India, Dhaka of Bangladesh and Quezon City of the Philippines, it said, adding half of the freelance online workers in Dhaka do data entry work.

MaLaysIa Airlines (MAS) and TATA Consultancy Services have sealed a five-year contract for IT infrastructure services. “The partnership is part of MAS’ strategic outsourcing programme to transform its IT operations. It is in line with Business Transformation Plan to align the role of IT to the airline’s profit and loss,” MAS Chief Information Officer, Faridah Abdul Rahman, said in a statement. The contract was signed by Faridah and

MAs and tata hook up with five-year deal

TCS head of Asia Pacific, Vish Iyer. Faridah said one of the key initiatives included fine-tuning MAS’ IT outsourcing strategy to deliver the required business results at lower cost. “We will also continue to work with our key vendors to maximise service delivery and to proactively address other business requirements,” she said. TCS will undertake IT infrastructure management of MAS’ data centres, IT networks and IT security.

april 15-18, Kuala lumpur
To register for Malaysia’s COP Master Class event please email: > Outsourcing Malaysia and MSC Malaysia members: alanfung@pikom.org.my or victor@pikom.org.my > Non-members and all others: bobby@matryzel.com

COP Master Class

EvEry day, business journal headlines and industry reports alike are making one thing clear – outsourcing is now essential to business success. In turn, this tremendous growth in outsourcing has caused businesses worldwide to recognise that they also have an exploding demand for outsourcing professionals who can effectively lead these initiatives from beginning to end. As thE global-standard setting organisation, the International Association of Outsourcing Professionals (IAOP) works with buyers, sellers, and advisors worldwide to develop these professionals. thE CErtIfIEd Outsourcing Professional (COP) Master Class course sets the stage for COP candidates who aspire to consult at all levels of their organisations and to lead their organisations’ outsourcing programmes.

March-April 2010 | Outsourcing |

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Outsourcing |

news bits

Indian Finance Ministry signs outsourcing contract with Wipro
The Financial Intelligence Unit India, part of the Indian Government’s Ministry of Finance, has signed an IT outsourcing contract with Wipro Infotech in March. The project is due to be completed in 24 months with a further service period of 36 months. As part of the deal, Wipro will manage the Unit’s IT in a bid to enhance the efficiency and effectiveness of its collection, analysis and dissemination of financial information and highlights the Government’s intentions to use technology to bring efficiency into analysis of data. Arun Goyal, director of Financial Intelligence Unit India, said: “We are keen on timely implementation of the Project as it will significantly enhance capabilities to collect financial information from various reporting entities, analyse it and disseminate actionable information to various law enforcement and intelligence agencies.”

industry feels Obama’s ire
a
ccusing US companies outsourcing business to India of following unfair business practices, American President Barack Obama says his proposal to tax firms shipping jobs overseas was only intended to provide a level playing field. “If you are a business here, entirely located in the United States, and investing in the United States, and hiring workers in the United States, you are paying a 35% rate,” he said in an Oval office interview with Bloomberg/Businessweek. “If you are a multinational and you are investing in India, and your workforce is in India, and your plants and equipment are in India, but your headquarters are here, you are taking deductions on all the expenses in India, but you are keeping your profits outside the United States, that just doesn’t seem entirely fair,” Obama said. “The same is true where you have companies that have 90% of their sales in the United States, but are posting 90% of their profits overseas.” “ Yo u g e t a sense there that the accountants have been busy,” he said, suggesting that these companies were taking unfair advantage of current tax laws. “But our goal here is simply to make sure that there is an even playing field between businesses who are investing in the United States, hiring US workers, selling to a lot of customers here as well as overseas, and those who are operating across borders,” Obama said. “And that is an area where there can be some legitimate debate, but certainly shouldn’t be portrayed, somehow, as being anti-business.”

starwood ties up with Accenture
accenture is providing Starwood Hotels & Resorts Worldwide Inc. – one of the world’s largest hotel and leisure companies – with a range of IT outsourcing services under a multi-year contract worth more than US$200 million. Under the terms of the contract, Accenture is providing Starwood with an integrated IT solution, including end-to-end application and infrastructure management. Application outsourcing services include development, testing, maintenance and running of the applications. Infrastructure outsourcing services include server and storage management, data centre management, end-user computing, network management, and service desk management. These services are enabling Starwood to improve the quality and the efficiency of its IT operations. In addition, Starwood IT is better able to focus on driving new innovations into the marketplace to enhance Starwood’s competitive positioning. Todd Thompson, CIO of Starwood, said, “This programme with Accenture is key to the continued transformation of IT at Starwood into a team that is outstanding at execution and delivers initiatives that drive business results. In addition to improving quality and efficiency, we are excited about the ongoing opportunities to work with Accenture to increase and accelerate innovation to our business.” “Accenture is delighted to have a vital role in the IT transformation at Starwood,” said Umar Riaz, a senior executive in Accenture’s Products practice. “By combining our experience in providing application and infrastructure outsourcing ser vices, along with our deep knowledge of the hospitality industry, we are able to deliver consistent, cost effective and innovative IT solutions to Starwood as they seek to further drive a platform for profitable growth.” Accenture is delivering the services to Starwood leveraging teams based in the United States and utilising its Global Delivery Network.

TCS bags US$915m UK pension deal
Software major Tata Consultancy Services (TCS) is all set to bag a £600 million (US$915m) outsourcing contract from the UK Government for managing a state-sponsored pension scheme that is still in the works. UK’s Personal Accounts Delivery Authority said that TCS has emerged the successful bidder for a ten-year arrangement to ‘set up’ and ‘administer’ the National Employment Savings Trust (NEST), a scheme to be launched by 2012. NEST, which is being designed and implemented to augment the existing employerprovided schemes, is expected to benefit nearly six million British citizens, when it becomes fully operational. “The contract is divided into two stages and runs for 10 years, with possible extensions for up to a further five years. The first stage will run to October 2010, allowing TCS to begin the activity required to set up and administer NEST,” PADA said in a press statement.

MDeC zeroes in
tHe MuLtIMeDIa Development Corporation (MDeC), the custodian of the MSC Malaysia initiative, said it has churned out 9,000 K-Workers for the Malaysian ICT industry in 2009 alone. Its CEO Datuk Badlisham Ghazali said the talent demand for the highly skilled knowledge workers is growing in parallel to the increasing number of MSC-status companies.

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| Outsourcing | March-April 2010

news bits | Outsourcing

dominates global document management services market
X
erox Corporation leads the global document management services market, according to analyst firm NelsonHall, in its “Document Management Market Forecast: 2009-2013” study. In addition to being named the overall global leader in document management services, Xerox tops the individual lists for each major region including North America, Europe, the Middle East and Africa, Latin America and Asia Pacific. “The global document management market is predicted to increase to more than US$45 billion by 2013,” said Rachael Stormonth, senior vice president, NelsonHall. “Xerox’s strength in document management is a significant force in this growing market, and by revenue it is the market leader.” NelsonHall, a specialist business process outsourcing (BPO) analyst firm, tracks worldwide and regional BPO activity. The document management services study covers managed print services (MPS), inbound document services, outbound transactional services and outbound print management services. As the world’s leading enterprise for business process and document management, Xerox helps companies optimise their printing infrastructure with MPS, and streamlines their communication and business processes to grow revenue, reduce costs and operate more efficiently. Meanwhile, Xerox recently completed its acquisition of Affiliated Computer Services (ACS). ACS is the largest diversified business process outsourcing (BPO) firm in the world. “For the past 50 years, Xerox has fortified its leadership in document management, creating new markets through our renowned innovation,” said Ursula M. Burns, Xerox CEO said in a statement. “With ACS, we take another step forward, expanding our leadership to include business process outsourcing that helps simplify document-driven work. The new Xerox provides the technology and services to help our customers reach new levels of efficiency and effectiveness, giving them the freedom to focus on what matters most: their real business.”

British telecoms, O2 come full circle
British Telecom and its former cellular arm O2 have come full circle, with the UK incumbent winning a five-year agreement to manage the mobile and fixed core networks for O2, now part of Telefonica. The multimillion pound managed services deal is one of a series of wins for BT Wholesale, building on the telco’s new all-IP 21CN (21st Century Network) platform. By converging the fixed and mobile core on this ultra-modern system, BT says it will enable O2 to handle the data explosion far more flexibly, and support a wide range of highly targeted next generation applications, Wireless Rethink website reported. BT already provides core network management support for O2 on the mobile side, as well as a managed network service for the cellco’s fixed and broadband services for businesses. The UK’s largest mobile operator has been diversifying its business in order to become a full service operator in recent times, following Vodafone and others as the ‘mobile-only’ tag becomes a burden rather than an advantage. This has brought it closer to its former parent, which may also have its eye on an entry point into the huge Telefonica empire in Europe and Latin America.

Capgemini takes over ibX
capgeMInI Group announced recently its acquisition of on-demand purchasing solutions provider IBX and with it, the availability of the industry’s first global end-to-end, Procurement-as-a-Service offering. Having collaborated together since mid-2009, Capgemini and IBX decided to join forces in order to drive development of a new global procurement service offering and further expand the addressable market for IBX’s best-in-class technology. The deal adds IBX’s strength in softwareas-a-service purchasing technology to Capgemini’s global sourcing, business process outsourcing (BPO) and transformation expertise. According to AMR Research, outsourcing of supply management processes has grown in recent years: “The market grew 30% in one year, driven by procurement and strategic sourcing services being offshored to India in record numbers.” With a solid track record on the BPO procurement area, Capgemini is ready to tackle this new growth opportunity and will make use of its Rightshore delivery network including strong offshore operations in India, China, Brazil and Poland. IBX, a recognised pioneer in the field of e-purchasing, is headquartered in Stockholm, with 240 employees located across Europe and in the US.

NEC, Fujitsu increase outsourcing
Asia’s contract chipmakers will likely see their earnings improve sharply this year, as the global economic recovery lifts demand, and as more semiconductor companies worldwide look to outsource more production, reports The Wall Street Journal. Rising outsourcing orders, especially from Japanese integrated device manufacturers such as NEC Electronics and Fujitsu Microelectronics, are likely to lift the earnings of contract chip makers Taiwan Semiconductor Manufacturing and United Microelectronics of Taiwan, analysts say. Both NEC and Fujitsu are IDMs - traditional chipmakers that handle semiconductor manufacturing in-house. But as they continue to struggle with losses, analysts say they are expected to boost outsourcing to save production costs.

on talent development
“While we managed to generate 9,000 knowledge workers for the market, we foresee that an additional 12% is needed to fill positions in the market by 2012,” Badlisham said. He was speaking at an awards ceremony to recognise graduates and institutions that have participated in MDeC’s Knowledge Worker Development Initiatives (KDI). MSC Malaysia KDI has trained over 22,000 trainees consisting of undergraduates, unemployed fresh graduates, and retrenched K–Workers since 2006. Badlisham said MDeC is intensifying the KDI programme by conducting finishing school lessons to equip jobseekers with skills to work in the IT industry. He said that MDeC plans to have its own finishing schools and hopes that it will be part of the 10th Malaysia Plan, which will be tabled next year.

March-April 2010 | Outsourcing |

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Outsourcing |

Disaster recovery

While no one wants a disaster to occur, the reality is that they happen – whether a fire, power outage, water pipe leakage, earthquake or typhoon.

“But while SMBs are powerful economic forces, they often forgo basic protections against business risks due to lack of time, budget and staff resources.” 10

| Outsourcing | March-April 2010

Disaster recovery | Outsourcing

in the eye of the storm
By David Dzienciol

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he recent natural disasters have served as a stark reminder that businesses of all sizes face increasing uncertainty and risks. Yet for small businesses, the stakes can be much higher. If disaster strikes and renders a company’s critical information lost or inaccessible, the cost for small businesses, in terms of financial loss and reputation can be irreparable. Combine these consequences with the gap that exists between perception and reality of how prepared SMBs in Asia Pacific and Japan are for disaster and business disruptions; we are faced with a very worrying situation.

believe their customers will understand and be patient if there is a disruption to their computer or technology resources. Despite these perceptions, the reality is these companies are not prepared and their customers will likely not wait around for them to fix the problem. Almost half of SMBs in Asia Pacific and Japan do not have a plan for disasters or business disruptions. The subsequent cost of this lack of preparedness to their customers can be as much as US$15,000 per day on average and eight hours or more downtime. It is therefore not surprising that 42% of SMB customers have actually switched vendors because their vendor’s computer or technology systems are not reliable.

Mighty tips for sMall Business
Prevention is undoubtedly better than cure and luckily, there are simple, effective, measures SMBs can take to mitigate risks and retain customers despite the disasters they may face: > Determine your needs: Decide what critical and confidential information should be secured and protected and prioritise in order of importance. > Engage trusted advisors: Look to a solution provider to help create plans, implement automated protection solutions and monitor for trends and threats. > Automate where you can: Automate the backup process to ensure that it is not overlooked when demands on staff time intensify. > Test regularly: Implement non-disruptive test backup. Recovering data is the worst time to learn that critical files were not backed up as planned. > Combine prevention and protection: Take an all-in-one approach is chasing technology that combines protection against today’s complex security threats with rapid recovery capabilities. Small and midsized businesses (SMBs) are the lifeblood of our regional economy, accounting for about 90% of all businesses and employing as much as 60% of the workforce. But while SMBs are powerful economic forces, they often forgo basic protections against business risks due to lack of time, budget and staff resources. Disaster planning can all too often appear at the bottom of the investment priority list as SMBs focus on channelling all their efforts into business growth. While no one wants a disaster to occur, the reality is that they happen – whether a fire, power outage, water pipe leakage, earthquake or typhoon. The average SMBs in Asia Pacific and Japan experienced three outages over a 12 month period according to Symantec’s SMB Disaster Preparedness Survey. A majority (84%) feel protected against these potential disasters and two thirds (69%) The misconception is that disaster recovery will be costly. What it should be seen as is a balance – as you spend on disaster recovery plans, your operational efficiency should benefit in turn. You will surely not want to be going hell for leather on disaster recovery planning, but rather take a more structured approach – protecting your most crucial assets first and prioritise the rest in order of its importance to your business. This approach means you can be protected without breaking the bank. It also means you will need to ask the right questions for your business to ensure optimal disaster recovery results. David Dzienciol is the Vice President for Channels, Global Strategic Partners and SMB, Asia Pacific and Japan, Symantec.

March-April 2010 | Outsourcing |

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Outsourcing |

Cover Story

Broad strokes … Why does it have to be a question about cultural acceptability when it comes to outsourcing engagements?

emerging nations: Locating the sweet spots
Looking beyond mainstream locations in global services trade
By Jerry Durant
people talk poorly of a region, and rattle off a batch of ill-informed and often prejudiced comments. Why does it have to be a question about cultural acceptability? Had there been a shred of credible evidence provided, I would be inclined to accept the hypothesis. However, it is often veiled as a justification to support a purchase decision. This shapes the disrespectful attention given to nation-based purchasing decisions. For over 22 years I have traveled to and dealt with over 90 nations, discussing, advising and directing their interest in expanding international commerce. Yes, it’s not about outsourcing of services, it’s about developing a trade channel that will allow nations, emerging or not, to provide a credible life for their citizens. As we move forward in our unstable and seemingly complex world, we are constantly challenged by matching and balancing delivery with purchase capacities. Many outsourcers soon discover that outsourcing is not a key to instantaneous wealth. In fact, the rude awakening of those first few years of struggle makes one quickly appreciate the complexity of global

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utsOurcing is constantly under the microscope for criticism for a variety of reasons. Therefore people making buying decisions are much less apt to stick their necks out and consider a new region than sticking with the tried and tested locations. Yet as the economy continues to erode capital and challenge operation funds, focus is being placed on a more global view of all sourcing locations. It really bothers me when I hear

“It is no longer a matter of single purpose cost rationale that is driving sourcing ties.”

| Outsourcing | March-April 2010

Cover Story | Outsourcing

service trade. So what would compel one to look to other locations for outsourcing services? With established regions like India, China, Philippines and Russia, each with referenceable delivery history it seems that there would no reason to look elsewhere. Today, there are three reasons why other locations are being evaluated: •  Improvements  in  buying  practices, • Supplier strengths and  • Additional alternative outlets that  afford same or better engagement relationships. It is no longer a matter of single purpose cost rationale that is driving sourcing relationships. It is multi-objective and dynamically considered in terms of the global context. When you only have a few choices, the issue of location is much less a factor than the sought after business goals. In fact, in the context of emerging nations, many of their sourcing enterprises are being utilised as a resource by established nations. If such practices were risky, then why would emerging nations be utilised either as a collaborative partner or by establishing a domiciled operation?

governmental Forces of Capitalism Corruption Enforcement Geopolitical Conditions Economic/Currency Stability Law Enforcement Secured Legal System

Environmental Terrorist/Rebel Threats

Weather/Climate Threats

Looking beyond mainstream

Simply put, it’s too easy to be lulled into the belief that mainstream locations offer a safe haven for business. When bad buying practices are followed, no good will come from it – regardless of the market. Using sound judgment and responsible evaluation will greatly increase a successful engagement even in perceived risky locations. Sufficient evidences show that engagement relationships can succeed or fail anywhere around the globe. It is very unusual that a simple interest in particular location would solely determinate the purchase decisions being made. Yet so little attention is given to many facets behind why one region should be considered over another. In 2009 Doug Brown and Scott Wilson (authors of the Black Book of Outsourcing) stirred quite a fuss when they produced the Top 10 List of Most Dangerous Places to Outsource. Many were surprised at locations that were listed and the obvious absence of others. The framework that Brown and Wilson used contains all of the elements that one would expect to evaluate when making a location-based relationship decision. Factors were divided between those involving government factors and the other related to the environment (refer image above). Control over location-based risk is managed through governmental

Simply put, it’s too easy to be lulled into the belief that mainstream locations offer a safe haven for business.

activism, preparatory measures and in extreme cases, simply avoidance. It should not be assumed any of these measures are easy or that they cannot be brought into a level of acceptable tolerance. Recognition and attentive action by the government and outsource service suppliers can significantly increase the possibility of interest in their emerging market. Buyers have to realise to compare their basis of evaluation (a Western Perspective) with the realities of specific regions and cultures. Therefore, what might appear to be of concern from outside may be normal and controlled within the local region and any alterations could in fact serve as a catalyst for chaos.

Government as catalyst

Strong government participation is essential for having successful local markets. Simplistic supplier initiatives create frail, and often exploited, business relationships. Marginal buyers are often exploited in these emerging regions with those with ill intent. These malicious activities often range from slow non-payment to cases where legitimate suppliers are exploited to pilfer funds based on non-existent business. Capitalising on a thirst for sales, a weak legal system, and the absence of a formed supplier community, suppliers are at grave risk for these predatory conditions. Governments play a critical role

March-April 2010 | Outsourcing |

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Cover Story

in the development of a credible emerging supplier market. It is more than glitzy marketing campaigns and exhaustive exposure at conference venues. It also involves the formative development of a credible business climate. At the same time it is essential that outsourcing companies be adequately supported in the early years of their development. This may entail training grants, support for a community-based collective industry development initiative and business trading platforms that show these companies in the proper context. It is quite ironic that the developed sourcing regions (India, Philippines, etc) are often used as the yardstick for comparison when in reality the measure has to be evaluated differently. Is it appropriate to compare a country with a history of service against a country that has only recently emerged as a source?

Does ever y buyer have to gravitate to a specific region that has a large human resource pool when they only need a handful of dependable individuals to service the contract? These are a couple of examples why mature vs. emerging nation comparisons have little to do with value. The government must be prepared to address and resolve issues that are within their control. At the same time it must insure that endorsed suppliers command the highest level of respect relative to their viability and ability to deliver. Unfortunately it only takes a hand full of ill-vetted suppliers to destroy a country’s credibility. Before venturing ahead both the government and outsource providers need to be fully prepared and in the best form. The “bigger is better” rule does not apply to making sourcing decisions. Economics of scale often create conditions that are unfavourable for

Sufficient evidences show that engagement relationships can succeed or fail anywhere around the globe.

buyers and suppliers. In these trying economic times one cannot afford to make blind decisions and expect positive outcomes. The beauty of emerging nations is price affordability and the ability to scale rapidly. Even though not the largest, they offer significant abilities. Founded on the experience of larger nations, they quickly become a part of the mainstream. Unique brand identification is as pertinent to emerging nations as it is to companies. This goes beyond simply a logo or a slogan, it involves establishing a credible identity for what they do and represent. For buyers, they may only be operating from an impression of what the emerging nation is about. Biases formed through a superficial lack of knowledge can overlook havens that are worthy of consideration.

Where initiatives go wrong

Fundamentally it all starts with desire

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| Outsourcing | March-April 2010

Cover Story | Outsourcing

“Unique brand identification is as pertinent to emerging nations as it is to companies. This goes beyond simply a logo or a slogan ...”

that is acted upon either without a strategy or one that is terribly flawed. We see a lot of money being spent by both emerging and established nations where the return isn’t there. Often the results that are touted as the fruits of these labours would have occurred naturally without any intervention. We must remember that the buyer drives the purchase cycle and that the promotion by governments and business is more of a catalyst for awareness, visibility and to draw interest. It is a quantum leap to imply that the spark behind these programmes are directly attributable to the development sales. With this said it is still critical to be recognised and for emerging nations to make themselves known in order to let buyer know that they are available for business. What are some of the ways to work wisely and promote your emerging nation? As mentioned

earlier there are three fundamental objectives that any emerging nation campaign must have; awareness, visibility, and attract interest. Historically governments and their outsourcing business partners have relied on conferences and advisory reports. Both generate visibility and provide awareness but have the potential risk of adverse comments about the status of their outsourcing sector. This is not to say that if they are frail and prone for problems that it should be hidden. However, it is often that these emerging nations are compared against mature markets and in doing so are held to an unrealistic standard. This benchmark seldom has a significant impact on delivery and often reflects the need for government to attend to issues as noted by the Brown & Wilson framework. In reaching the buying population, the message needs to be taken to the consumers of outsourcing services. While conferences have traditionally been used as a means to attain campaign goals, more needs to be done to attract one-on-one dialogue between suppliers and buyers. Unfortunately the conference venue does not provide a climate conducive to this interchange. The use of virtual venues, web-based video introductions, social networks and open collaborative forums not only removes the negative hard selling, but encourages friendly interaction (even with a bit of education). One last point is that governments and suppliers need to be creative. Emerging nations tend to follow a shopkeeper approach. The sign is throw up and buyers are expected to arrive and buy. Buyers who have an interest are often apt to have a narrow view of what

they need. A facilitated brainstorm session helps to expand the scope of opportunity, which allows for a plan for long-term consideration. Why is this important? It shows to the buyer/party of interest, that as an emerging nation, you are looking at not just capturing their opportunity but that you have the depth of understanding to help, support and anticipate their needs. This is critically important. If the relationship remains at only a superficial surface level the potential future mobility of the buyer to another market is very real.

Who is emerging?

The short answer is everyone other than the established nations. The much longer answer and more complex one is everyone is emerging. At this very moment even long-standing established nations are constantly emerging through reinvention, whether in services or the means by which these are delivered. The lead can be both insightful as well as deceptive. Insightful in the context of laying down years of experience and learning in a concise and summary way. But deceptive by means that of past success practices that are either not true today or were the result of timing coincidence. One example of this was the pre-2000 demand for sourcing services that exceeded supply. People were willing to sell outsourcing services because it was easy and on a commission basis. Today we see excess supply by comparison to demand and therefore finding commission based sales personnel is nearly impossible. This has given rise to scammers who prey upon the naïve and sell hope and promise of sales that do not exist. It is critical for any emerging nation

“The beauty of emerging nations is price affordability and the ability to scale rapidly. Even though not the largest, they offer significant abilities.”

March-April 2010 | Outsourcing |

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Cover Story

to have sound and trusted guidance to breach the understanding gap as they enter into the global market. A common issue surrounding emerging nations is the availability of an appropriate resource pool. In small countries like Bhutan, the pool of both companies and individuals is small (but with a credible Englishspeaking population). Should they be excluded if they are not massive or should we consider the reality that not every buyer needs a resource base in the tens of thousands? Some of these stem once again from the “bigger is better” mentality, or that we might need more. In both cases we are overlooking the need to right size any engaged relationship. Just because you can buy more for less does not mean that it’s an appropriate position to take. Likewise, suppliers need to right size engagement in order to be socially responsible in their delivery of services. Emerging nations require a commitment to global outsourcing trends and industry behaviour. It is very easy to overlook what is happening around you, if one is steadily focused on making sales. There is an abundance of information about market behaviour, often disseminated on a quarterly basis. Lurking inside of summary information lies a intelligence about shifts in buyers goals and initiatives. These shifts often have related impact on other sourcing disciplines. Without awareness and an acute understanding, significant impact may occur in the emerging nations’ outsourcing sectors. An up-trend in one sector may be an indication that future erosion will ensue in another. This can be either

taken as a preparatory warning or a sign of a potential opportunity for the emerging market. Emerging nations have the potential to be highly flexible but suffer from a lack of confidence because they aren’t established.

Nations fail because…

Aside from the points expressed earlier, a leading contributor is the lack of outsourcing sector cohesion. This is based on fear that someone might get business that you could have got. As a result companies create a wall around themselves and work very hard to survive. The need for a collective community in emerging nations is needed to foster dialogue. Unifying messages to the buying public send a sign of strength. Countries like India that form an organisation dedicated to outsourcing (Nasscom) are able to rally a unity to develop quickly with a common message. China on the other hand has formed their unification around a common plan (1000-100-10) but focuses their collectivism at the municipal level (due in large part to size of the country and the diversity that exists). Not every company that is your competition will be attractive to your buyers. Maybe it’s price, perhaps it’s approach or it may simply be you keeping the buyer satisfied. The destiny of your country and your company is dependent upon you. While you may utilise the support of others, there is no one that can promote you better than yourself. Leaving to much in the hands of others, as a strategy, is dangerous. I cannot emphasise the importance of trust in any working

Strong government participation is essential for having successful local markets.

relationship that you have. We all know that we work to generate revenue but without a strong bond involving these core values, the likelihood for success will be elusive.

rough diamonds

“It is critical for any emerging nation to have sound and trusted guidance to breach the understanding gap as they enter into the global market.”

Emerging nations and companies are diamonds in the rough. They are not polished and they aren’t perfect but they are genuine. The energy and effort that they are willing to put forth to be respected and to deliver a credible service is often lost in those companies who have developed an attitude of complacency. Access to governmental decisionmakers is real and solid bonds can be established easily. Bonds that help to overcome some of the fundamental challenges that Western buyers consider as risks. Organically they are grounded on helping the people and their nation to develop a life, and not just a business empire. For buyers who want a faceless service, an emerging nation is probably not your best choice. But for those who want to establish a lasting relationship, based not just on solid business pragmatism but also in the lifeblood of personal relationships, than emerging nations have much to offer. Jerry Durant serves as Chairman Emeritus (founder) for The International Institute for Outsource Management, a trade organisation dedicated to the assessment, development, and guidance of outsource service providers in the ITO, BPO, Call Centre and KPO domain areas.

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| Outsourcing | March-April 2010

ThoughT Leader | Outsourcing

aconversation with avinashVashistha a
Outsourcing magazine’s Sritharan Vellasamy has a friendly chat with the co-author of ‘The Offshore Nation’ in Kuala Lumpur. Vashistha is also the CEO and Chairman of Tholons Inc. – a global investment, advisory, research and management firm for business, knowledge and IT services globalisation.
Is Knowledge Process Outsourcing (KPO) the way to go for countries with limited ability to scale? I think one has to be careful with the definition of KPO. In some ways it seems to look like a little place that lesser populated nations hide behind because of an inability to scale operations. Having said that, I feel that there’s nothing wrong with this KPO approach altogether – but then it becomes relatively a small operation. The question is not about KPO but about creating a niche and sustainable value. How many niches can a country develop? One good example is Sri Lanka. The population is only 19 million people, however it is one of the top countries when it comes to Finance and Accounting Outsourcing (FAO). The industry has no problems with scalability in this domain due to the availability of a fully competent and aligned labour pool. I think the whole idea is to start thinking about what you can do in certain verticals essentially. Service vendors used to say in the past that they can provide services in financial accounting and IT, but now vendors are starting to offer specialised services in IT, financial accounting and supply chain expertise thrown in for a particular vertical. Providers companies must have the ability to go to a client and speak the client’s industry language. For example, oil and gas royalty payment calculation is part of FAO. This particular process will not be a part of a retail operation, which has a different set of processes and subsequent requirements. One must understand that financial accounting is a very mature process. So there is a very specific FAO processing particularly for an industry and that’s what providers must start to learn in order to bloom in the KPO landscape. What is your take on Legal Process Outsourcing (LPO)? In my opinion, LPO has not really

“How many niches can a country develop? One good example is Sri Lanka. The population is only 19 million people, however it is one of the top countries when it comes to Finance and Accounting Outsourcing (FAO).”

been successful in the past few years. There are a lot of good companies that have grown to a certain size and eventually disintegrated. Why is that so? First of all, I believe the paralegal part of the work is probably the only one component that can easily be outsourced. The rest are very high-end stuff and we can’t expect law firms in the West to outsource those. For example two years ago, American giant GE dropped the rate that they pay to their lawyers for paralegal work to about US$75 an hour. Understandably, for the American lawyers the rate was too low – in fact it was not even cost price to them. Due to this, I think GE definitely drove some of the paralegal work out of the US in some sense. But then again it’s something that probably doesn’t create enough scalable volumes. So you have a very fragmented marketplace that has not made sense for the larger guys to get involved in. So right now it’s just moving from small clients to small LPO providers. Is location or a good supplier pool the prime concern for you as a sourcing adviser? Location is one element but I don’t think arguments necessarily go always that way. Considering most multinational outfits, such as IBM and Accenture, they have delivery centres in many global locations as a bid to address globalisation needs of their own clients. Hence it becomes pertinent for vendors to offer a global delivery network of locations. Lack of such a network of centres is a clear disadvantage. The only Indian company that has any reasonable presence across the globe is TCS. For example, TCS has 9000 people in South America. Most of the other suppliers would probably have around 1000-2000. This is a significant advantage for firms like Accenture, IBM and TCS. This gives clients comfort about both scalability and location-specific experience. A need to have a comparative supply pool is vital, else the best value cannot be sourced for clients. There is no favouritism to the suppliers’ side, because we feed the needs of the clients according to the processes that are outsourceable. We need to make sure that there
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engineering

nasscom predicts the worldwide spending on engineering services to reach around US$1.1 trillion by 2020, of which the offshored engineering services market is expected to grow to US$ 150 billion – US$ 225 billion by 2020.

engineering a resurrection
By Harish Baliga
erospAce and automotive industries, globally take a lead in driving the engineering design and services outsourcing space. Both these industries were badly hit by the economic downturn in 2008-09. To counter the impact of economic turbulence, aerospace and automotive companies had started restructuring their businesses

A

to remain competitive. These manufacturers relied on retrenchment as a step to handle the near-term projected reduction in customer demand. Exhibit 1 (below) lists some of the major announcements of downsizing during 2009 in the automotive and aerospace industry. Large aerospace and automotive companies are reeling under tremendous cost pressures across the

entire product life cycle. Moreover, there is the constant pressure to innovate using newer technologies. Cost saving is an immediate as well as one of the long-term imperative to all these enterprises.

gradual recovery post recession

Exhibit 1: Major retrenchments announced during 2008-09 recession in auto-aerospace sector Aerospace/Automotive manufacturers Boeing Bombardier GE Aviation Nissan UK Jaguar Land Rover UK BMW General Motors Announcements 4,500 job cuts that will reach 10,000 by year ending 2009 4,360 job cuts in Canada, US, Mexico and Northern Ireland by April 2009 Closure of GE Aviation facility in Albuquerque during Q3-2010, with the axing of more than 400 jobs commencing in Jul 2010 1,200 job cuts of the 5,000 strong workforce at its Sunderland plant announced in Jan 2009 450 job cuts announced in Jan 2009 850 job cuts at its Mini car plant near Oxford announced in Feb 2009 Proposal to cut its global white-collar payroll from 73,000 to 63,000 announced in Feb 2009
Source: ValueNotes Research

Conflicting outlook has been presented by the aerospace industry stalwarts on industry recovery. Boeing expects a gradual recovery in the economy, followed by growth in airline traffic by 2012. Airbus, on the other hand is quite positive that the aviation industry will demonstrate growth in 2011 itself. Airbus also revised its 20-year forecast for the period 2009-28 to sell 25,000 passenger and cargo planes with a total value of US$3.1 trillion as compared to their previous forecast of estimated 24,300 planes to be sold over the 20year period 2007-26. As per Airbus projections, Asia-Pacific will be the largest aircraft demand driver in the next 25 years ensuring overall future aircraft demand. Within the automotive industry, Volkswagen AG, predicts that the worldwide automotive market will

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engineering | Outsourcing

not match pre-recession levels until 2013. While this might be true to some extent, we are also witnessing auto-industry market recovery globally. Auto-major Nissan reported in Feb 2010 that it has returned to profits in the last quarter (¥44.9 billion or US$490 million between Oct-Dec 2009, compared to ¥83.1 billion or US$905 million loss a year earlier). It has also revised its earlier projected losses for year ending Mar 2010 of ¥40 billion (US$435m) to a profit of ¥35 billion (US$381m). This revision is backed by its cost cutting measures and focus on emerging markets like China and India. Honda and Toyota have also raised their full-year forecasts. Jaguar Land Rover has already made an operating profit of US$68 million in the quarter ending Sept 2009 and its net loss reduced to an estimated US$92 million from US$369 a year ago. Ford goes further ahead and claims to remain profitable for the entire year of 2010. Ford has neither requested nor received any bailout funds from the US government unlike its rivals General Motors and Chrysler, and has made profits of US$2.7 billion for 2009. The reasons for Ford’s success in these trying times can be attributed to cost cuts, new model introduction coupled with Toyota’s global recall of millions of vehicles.

exhibit 2: Buyer challenges
Adapting to new technologies Addressing new geographies Pressure from competitors Supply-chain issues Identifying key vendors/suppliers Cost/margin pressures Lack of in-house capabilities Key challenge 18% 20% 28% 40% 38% 28% 63% 45% 43% 60% 38% 45% 50% 23% 13% 3% 23% 28% 28% Not a challenge 8% 13%

Manageable challenge

Source: Valuenotes report - engineering Services Outsourcing: Perception vs. reality industries in India, predicts the worldwide spending on engineering services to reach around US$1.1 trillion by 2020, of which the offshored engineering services market is expected to grow to US$150billion – US$225 billion by 2020. included engineering service buyers (manufacturers 24%), service providers (68%) and industry analysts (8%).

growth cues

With gradual economic recovery globally, the engineering industry is moving ahead, as is evident from an upswing in deals being signed. Some major outsourcing deals signed by leading industry players indicate a gradual return to business as usual. Infotech Enterprises and Hamilton Sundstrand Corp signed a fouryear, multi-million dollar avionics contract in January 2010 to provide embedded software and electronic engineering design services worldwide. Mahindra-Satyam and Saab signed an estimated ten-year, US$300 million contract in November 2009 to develop solutions in India for the global defence and homeland security market. QuEST Global and Belgian aerospace major SABCA announced in November 2009 that they signed a ten-year deal worth US$100 million to manufacture metallic parts and assembly work for Airbus A-350 XWB aircraft’s flap track structures. Such deals are indicators of a strong growth potential for the Engineering Services Outsourcing (ESO) industry in the years ahead. Nasscom, the trade body and the chamber of commerce of the IT-BPO

“Despite issues, a significant majority of manufacturers that already outsource will continue to do so and will even increase outsourcing by 25% in the next two to five years.”

What’s the reality?

On the backdrop of several deals being signed recently and projected ESO market size estimates, ValueNotes decided to do a reality check on the situation by conducting an industry-wide survey “ESO Survey 2010: How Does the Engineering Industry Feel About Outsourcing?”. The purpose was to assess the global reaction to outsourcing in the engineering services segment – to gather perspectives on the engineering industry in terms of its challenges, outsourcing experiences, favoured outsourcing destinations, cost savings and future proclivity to outsource. The survey was participated by over 200 participants globally, across industries. The participants

ValueNotes identified some of the major challenges faced by engineering manufacturers and asked them to rate them as key challenge, manageable challenge or not a challenge: (See Exhibit 2) Consistent with the industry actions in the recent past, the survey indicated that cost/margin pressure was a key challenge. Pressure from competitors was another major challenge, followed by issues in supply chain. Interestingly, in-house capability (in terms of resources) was not a constraint for most buyers. Buyers were further asked which of their major challenges could be most effectively mitigated via outsourcing. (See Exhibit 3) While 28% of the buyers said that the lack of in-house capability

Key challenges faced by buyers

exhibit 3: Buyer perception on challenge mitigation via outsourcing
Adapting to new technologies Addressing new geographies Pressure from competitors Supply-chain issues Identifying key vendors/suppliers Cost/margin pressures Lack of in-house capabilities None 13% 15% 30% 35% 43% 50% 15% 30%

Source: ValueNotes report - Engineering Services Outsourcing: Perception vs. Reality

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engineering

exhibit 4: Buyer vs. service provider perception on cost savings via outsourcing
32% 30% 25% 22% 19% 16% 16% 11% 8% 22%

No cost savings

Cost savings of 10-15%

Cost savings of 15-25%

Cost savings of 25-40%

Cost savings of more than 40%

Buyer

Service provider

Source: ValueNotes report - Engineering Services Outsourcing: Perception vs. Reality

was not a challenge, 50% said that lack of in-house capability could be addressed via outsourcing. A further analysis revealed that out of the above 28% buyer category, only 8% addressed the issue via outsourcing primarily when they had less specialised in-house resources or when there was a resource crunch. Another 8% didn’t think that they could address any challenge via outsourcing. While pressure from competitors was a major challenge, buyers did not perceive outsourcing a better solution to mitigate this challenge. Cost savings was a major challenge, but there was a strong belief that it could be mitigated via outsourcing. However, our survey revealed some insights on the varied perceptions of cost savings. (See Exhibit 4)

Savings: Buyer vs. service provider perception

A substantial disparity existed between the perception of buyers and service providers on the actual cost savings via outsourcing. A significant number of buyers believed that there were “no cost savings” due to outsourcing but the service providers had a more optimistic view. While 62% of the service providers believed that outsourcing resulted in cost savings between 15-40%, only 44% of the buyers agreed with this.

Within the automotive industry, Volkswagen Ag, predicts that the worldwide automotive market will not match prerecession levels until 2013. While this might be true to some extent, we are also witnessing auto-industry market recovery globally.

Will eSO grow?

Some findings from the survey on service providers’ perceptions indicated that: > Almost three fourths (76%) of the service providers claimed that their customers were repeat-buyers. > Most of them believed that their key strengths were their domain expertise, service quality, and understanding of customer needs. Interestingly, satisfaction levels of buyers did not corroborate this perception of service providers. Only 14% of buyers are highly satisfied with their outsourcing vendors, 59% are moderately satisfied and believe that there is scope for improvement, whereas 27% have indicated low satisfaction levels on account of poor vendor execution. The reasons for outsourcing were not purely the

perceived cost savings but also work quality. Buyers who were not particularly keen on outsourcing believed that the ‘inability to maintain the promised quality standards’ was one of the key reasons behind their decision to not outsource. The ValueNotes ESO survey 2010 results indicate that despite issues, a significant majority of manufacturers that already outsource will continue to do so and will even increase outsourcing by 25% in the next two to five years. India, China and Eastern Europe will be the most favoured

outsourcing destinations. Apart from developing strong domain expertise, engineering services companies at this stage will need to partner with the buyers rather than just being service providers. The research indicates that ESO industry is here to stay and will grow at around 20-25% in the next two years and beyond. Harish Baliga is an Analyst at ValueNotes – a research provider focused on the outsourcing industry.

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OffshOre | Outsourcing

When coordination with users or internal people is critical to the project, rich communications is important. This is the main reason why some organisations locate 15-30% of the offshore supplier’s staff onsite and use video conferencing to communicate between the onsite and offshore teams.

Challenges of offshore outsourcing
This first of a two-part article by Dr Wendell Jones that examines the geographical, cultural, organisational and managerial challenges of offshore outsourcing
ttrActed by the potential for significant cost reductions and staffing flexibility, many companies around the world have

A

outsourced offshore the past decade. But despite this remarkable growth, outsourcing success seems to elude some companies. One offshore outsourcing challenge is distance. Outsourcing is usually more complex as the work moves outward from on-site to near-shore and offshore. Geographic separation makes it particularly challenging to communicate clearly and timely between the teams and individuals

across distant borders. Interfaces and handoffs between organisations with different values and languages present ample opportunities for communication failures. Embedding the use of common project management tools and supporting techniques with useful metrics is difficult in any situation, it is particularly vexing and challenging across distances and time zones.

March-April 2010 | Outsourcing |

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OffshOre

“Before taking work to an offshore location, it is essential to evaluate whether the country has an uninterruptable power supply, backup generators, and redundant communications facilities.”

Inadequate management of inevitable conflicts between people involved on both sides can seriously jeopardise the offshore outsourcing relationship and performance.

Sharing data and software across organisations and teams requires strict version control to protect the integrity of programs and data. It is important to keep versions of critical components in more than one location to apply backup and version control procedures and to use shared configuration control tools. A second challenge is communications richness. The proximate location of supplier managers in relation to the customer organisation’s outsourcing managers can affect the spontaneity and richness of communications. The richest is face-to-face communication because sound, sight and body language all convey meaning. The second richest is video conferencing, third is telephone, and the least rich form of communication is written messages (memos, letters, emails). Several dimensions of location affect the ability to communicate with, work with, and manage a supplier. One is the nature of the work. When coordination with users or internal people is critical to the project, rich communications is important. This is the main reason why some organisations locate 15-30% of the offshore supplier’s staff onsite and use video conferencing to communicate between the onsite and offshore teams. Spontaneous and rich communication is easiest for people located in the same suite of offices. It is still not difficult for people in the same building, or people who work in different buildings on the same campus.

The communications difficulties increase from working in different locations in the same city or region, in different regions of a country, or in different countries. If the customer and supplier people, who must communicate regularly, are located on different continents with widely differing time zones, effective communications is more difficult. Video conferencing capabilities and other technologies can improve the richness of communications across time zones and continents. A third challenge is continuity of operations. In developing countries, services may be more prone to disruptions or slow recovery. Before taking work to an offshore location, it is essential to evaluate whether the country has an uninterruptable power supply, backup generators, and redundant communications facilities. Disaster recovery and backup contingency plans are essential and should include plans to quickly shift work between locations as well as designate supplier and customer teams ready to travel on short notice to restore operations in a new location. Providing physical security and protecting intellectual property and trade secrets is a fourth challenge, particularly when outsourcing in less developed countries. These are important issues in any situation but are particularly critical in countries with different legal systems and enforcement mechanisms. While the leading near-shore and offshore suppliers maintain strong security measures and procedures to protect intellectual property, it is advisable to limit outsourcing to countries and companies

that provide security guarantees. The larger service providers and established outsourcing countries typically provide these guarantees. A fifth challenge is conflict resolution. Inadequate management of inevitable conflicts between people involved on both sides can seriously jeopardise the offshore outsourcing relationship and performance. Successful client and supplier managers reconcile differences in their approaches and strive to develop a unified and cooperative approach to resolving disputes. They resolve disputes at lower levels and follow a defined escalation process that involves both companies. They watch for negative and positive patterns in dispute resolution over time, and then openly discuss and encourage positive approaches as permanent ways to resolve future disputes. Offshore outsourcing managers in both companies are periodically trained in dispute resolution methods, and the customer managers avoid using a power over the supplier to resolve disputes. Habitual use of power advantages erodes most relationships. Dr Wendell Jones is a Professor of Management and a former senior executive at Compaq, NASDAQ, and McDonnell Douglas. He is recognised as a leading outsourcing practitioner, advisor and thought leader. He is the co-author of “Outsourcing Information Technology Systems & Services” – recognised as one of the best outsourcing references. The book was recently released in a Chinese edition.

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InnovatIon | Outsourcing

Even in the best of times, the margin of error on innovation is razor-thin.

In-Sourcing innovation
Innovation investment in a time of economic uncertainty
aced with recession, how have companies changed their innovation strategy? Answer: Increase or hold investment steady. Worldwide spending on R&D touched US$1 trillion in 2006 and has continued to grow. Global R&D spending topped US$1,140 billion in 2009 (3.2% growth over 2008). Studies also indicated a rise in R&D spending by the world’s top 1,400 R&D-investing companies in 1 2007-2008 despite the onslaught of recession. Despite readjustments3 (the US private sector is forecasted to see an inflation-adjusted dip in R&D investment in 2009, but the Federal stimulus package is expected to have

F

“While the mechanism for imple-menting innovation investment may vary greatly based on a company’s, the need for systematically analysing the underlying needs and drivers for investment is universal.”
2

raised total spending to US$383.5 billion – an increase of 1.75% over 2008), the global innovation spending remains strong (refer Figure 1). While local companies from India and China have small research budgets (total R&D spending for major companies from India and China totals US$3.5 billion), their spending is growing fast: 21% over 4 2007 for China and 50% for India. The concern for executives is to prioritise the “right” kind of investment on innovation. Even in the best of times, the margin of error on 5 innovation is razor-thin. “Globalisation of innovation investment” is a remarkable trend. Companies have continued to

increase innovation investment in countries outside their home bases. And, companies that performed a substantial fraction of their R&D in facilities outside their home countries showed above-average business 6 performance. As businesses look to maximise the returns on innovation investment in multi-geography/ multi-business unit universe, the sourcing model – which has been matured over decades of interaction between clients and sourcing partners – can be leveraged to deliver better outcomes.

need for framework

Figure 1: Global R&D Investment – US/EU/Japan
$250
Total 2008 R&D Investment (in billions $)

$200 $150 $100 $50 $0 US EU Japan 6.3% $210 $175

8% 7% 6% 5% 4% $101 3% 2% 1% 0%

Growth in investment from 2007

8.6%

8.8%

10% 9%

There are several key issues that impact strategic innovation investment: > What is the right balance between desire-driven targets and conditiondriven limitations to maximise the company’s value added? > What is the best way to allocate resources to achieve, and sustain, success? > Will the experienced cycles in the industry, and overall economy, continue or will there be fundamental shifts in the marketplace? To systemically study and address these issues, a robust framework to analyse innovation investment is required. The concept of Return on Innovation Investment (ROLL) needs to be factored in to this framework. An innovative model can be building centres of innovation within the firm that will leverage

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InnovatIon

Figure 2: Product Adoption by Consumers in Different Economic Cycles
Embryonic
Impact of Economic Cycles i.e. It can affect the slope

Growth
Economic boom/ Economic uncertainty low Regular cycle

Mature

Aging

and drivers for investment is universal. The following section describes one such framework which can be used by leaders to help shape the direction of innovation investment.

Recession / Economic uncertainty high

Innovation investment

Characteristic Strategies of Companies
Establish generic market Take risks Develop technology Respond rapidly Develop market position Become market leader Establish distribution Establish technology Establish manufacturing Invest for the future Invest to reduce costs Improve operating efficiency Maintain market share Rationalise Improve profitability Maximise cash value of investment Manage investment Maximise cash throw-off

the same kind of performance measures as in a sourcing relationship, albeit factored for creative outcomes. As sourcing relationships matured over time, many buyers expect the suppliers to not just provide the contracted services, but improve business models through innovation. Sourcing contracts often incorporate this factor today. Effectively managing innovation through a series of contractual measures might seem counter-intuitive to the set norm of research. But, it does have the positive impact of supplier bringing truly out-of-the-box ideas to the buyer. If a third party can be ‘made to innovate’, an in-house team – no matter where they are situated globally, can be made to do so too. Arguably, with greater

effectiveness since employees are more invested in the well-being of their firm. Setting measures, which vary based on economic situation/ market cycles is important. The impact of economic cycles on product adoption should influence innovation investment decision making. In a recession, cautious spending by consumers leads to slower product uptake and companies maximise end-of-life profits by prolonging product lifecycles (refer Figure 2). While the mechanism for implementing innovation investment may vary greatly based on a company’s DNA (discretionary 20%-time at Google versus process-driven innovation at 3M), the need for systematically analysing the underlying needs

This framework (refer Figure 3), which needs to be tightly coupled with organisational corporate strategy, facilitates discussion and decision-making on innovation investment. The exercise can be broadly segmented into five phases. Innovation investment planning focuses on Stages 3 onwards. The vision deliverable is vital to the innovation investment strategy. Genesis of a successful innovation investment strategy is a vision which takes into account several elements and dimensions (refer Figure 4). A realistic vision channels innovation investment in the right direction resulting in higher returns. Risk diversification might suggest that a company pursue a mix of end-state visions for its portfolio. For instance, Microsoft aims at being the ‘market leader’ with Windows 7, while it is a ‘pursuer’ with its music player ‘Zune’.

Benefits from formal strategic framework

Figure 3: Innovation Investment Framework
Setup Stage 1
Create Change Readiness

Creative Stage 2
Envision the future

Analytical/Organisational Stages 4 5
Develop implementation roadmap

3
Define innovation goals

Evaluate & select preferred strategies

Considered complete when corportate strategy has been clearly formulated. Considered partially complete when corporate strategy has been clearly formulated.

Stage • Create Change Readiness

Goals • Create readiness/ urgency for change • Identify drivers of change • Develop high level plan and approach

Example Key Deliverables • Clear understanding of feasibility, drivers and barriers

Example Measures of Success • Effectiveness of internal communication (mobilisation of teams, understanding of goals, surveys) • Quality of scenarios (measured against real-world outcomes) • Quality of goals (measured against real-world outcomes)

Overall Effectiveness Measure

The planning framework enables the company to identify major challenges and answers fundamental questions that will influence the future of the company’s innovation investment. With strategic innovation planning the financial performance of the company can be substantially improved in terms of: > Sales: Improved commercial realization of innovation initiatives > Cash flow: Targeted, and phased, innovation investment frees up cash Profitability: Improved “hit rate” on innovation investment > Return on investment: Not just deliver higher return on every invested innovationdollar, but also enable tracking it reliably over time > Strategic planning creates a framework for the strategic allocation or resources. It helps to improve the R&D/ technology group’s function within the entire company and to create improved transparency on its functions.

• Envision the future

• Develop future • Limited set of scenarios detailed future • Foresee potential scenarios business implications • Identify exciting ambitions • Characterise ideal companies • Develop vision statement • Construct detailed strategic options • Evaluate attractive options • Select best strategy • Develop long-term transition plan • Build strategic plan • Manage implementation • Vision Statement

• Define innovation goals

ROLL (Return on Innovation Investment) measured as: Incremental cash flow resulting from innovation goals (product introductions, process changes etc.) to total innovation investments

• Evaluate & select investment preferred strategies • Develop roadmap

• Ambition and underlying assumptions

• Effectiveness of strategy selection mechanism used • Evaluation against strategies chosen by competitors • Cost effectiveness of implementation • Leadership overhead required • Risk management

• Strategic action plan

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InnovatIon | Outsourcing

In a recession, cautious spending by consumers leads to slower product uptake and companies maximise end-of-life profits by prolonging product lifecycles.

Figure 4: What does the business want to be?
Elements: • Performance • Governance • Values • Products/Services • Markets • Employees • Technology • Customers Dimensions: • Understand internal strengths • Stretch targets • Address stakeholders • Leadership involvement • External and internal visibility Vision Examples: Be the … • Leader (Product) • Leader (Market) • Leader (Technology) • Pursuer • Long-term Exiter

day-to-day activities and focus on transaction generation and management inhibits attention to the question: What must we do differently to meet our objectives?”7 While long term bets are hallmarks of visionary companies, tactical management of some innovation objectives will lead to better overall outcomes. Sourcing relationships are an ideal hunting ground for such measures.
1,2,4 Source: EU Industrial R&D Scoreboard (October 2008) 3 Source: Battelle, Ohio, and R&D Magazine report (December 2008) 5 The reference is to Motorola, Inc. which, owing to innovation missteps, cut its cell phone market share by half in two years following the introduction of the pathbreaking RAZR product line 6 Source: EU Industrial R&D Scoreboard (October 2008) 7 From “Management” by Peter Drucker

Innovation need not always stem from cutting-edge technology or tectonic shifts in consumer preferences. a tweak in a mundane business task can turn out to be your organisation’s iPod.

Conclusion

This write-up on strategic innovation investment planning is meant to serve as an overview of the key elements of innovation investment. The path to innovation in a company can be diverse – visionary managers (like Steve Jobs), technology breakthroughs (like creation of Lithium-ion battery), radically new service models (like e-commerce) or even incremental improvements leading to innovative products (like Cisco) – but the need for an underlying framework for facilitating and managing the innovation process is universal. Innovation need not always stem from cutting-edge technology or tectonic shifts in consumer preferences. A tweak in a mundane business task can turn out to be your organisation’s iPod. A wise manager told us “The rush of

Deepak Bharathan is a Principal at PA Consulting Group, a global strategy and management consulting firm. He specialises in strategy initiatives for clients in Private Equity, Telecommunications, Media, Technology and Life-Sciences. • Special thanks to Louis J. Kaczmarek,  Massachusetts Department of Public Health, for his work on innovation stages.

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Gaining buy-in from stakeholders
By Danny ertel and Joseph Bubman

T

he success of outsourcing deals depends heavily on a very challenging activity: gaining internal buy-in around both the decision to outsource and the changes it brings. Gaining alignment from senior stakeholders, including the heads of business and functional units, is difficult because of the need to manage competing views on budgets, timelines, and trade-offs between service customisation and cost savings. And getting buy-in from end-users is a challenge because they may resist making the significant process changes required of them, upending the business case in the process. If gaining buy-in is a struggle in outsourcing engagements, it is even more difficult when services are delivered offshore. Offshore outsourcing presents all the alignment challenges associated with onshore deals, in addition to two unique factors explored throughout this article: stakeholders fear the additional risks of sourcing services from overseas, and cultural differences contribute to user dissatisfaction

and make it difficult to establish a strong working relationship with the service provider. In this article, we’ll explore how these challenges in offshoring deals make alignment difficult and provide guidance for overcoming them.

Figure 1

Top challenges in offshore relationships, as opposed to onshore

Stakeholders’ fear

Offshore outsourcing presents all the risks associated with onshore deals – losing key people and their knowledge, suffering diminished organisational morale, partnering with a service provider with uncertain financial strength – as well as many that are unique to offshoring. The first buy-in challenge in offshoring is gaining alignment among stakeholders around the decision to offshore, and the risks described below make that effort more difficult than in an onshore deal. Customers in offshoring deals may need to worry about potential disruptions in business operations caused by events in the country from which services will be delivered. The possibility of infrastructure breakdowns, political instability, and corruption may drive some stakeholders to voice concerns about In reality, many claims about inattention to confidentiality overseas may be overstated, and reputable providers have overwhelming security safeguards to prevent compromises to confidential data.

1

2

3

4

5

Figure 2

Customers view their offshore provider differently from how they view themselves

% of customers who attributed the characteristic described below to their offshore provider and their own organization
80% � Customers describing their offshore provider � Customers describing their own organization 60%

40%

20%

0%

Tendency to agree even when not sure can deliver
*Note: Only customers who said creating buy-in is made difficult in their relationship by cultural differences

Preference for indirect communication
n=55

going offshore. If these risks are not actively addressed by assessing their likelihood and potential severity, and developing a plan for managing them, stakeholders may question whether the alleged benefits

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Table 1 Offshore outsourcing presents all the risks associated with onshore deals – losing key people and their knowledge, suffering diminished organisational morale, partnering with a service provider with uncertain financial strength – as well as many that are unique to offshoring. of the deal outweigh the potential downsides. The protection of confidential data represents both real and perceived risks. A real risk in a business process outsourcing deal is that the customer violates regulations (e.g., the EU directive 95/46/EC) that prohibit personal data from crossing national borders. Well before making the decision to offshore, the customer needs to assess this risk, develop an approach for dealing with it, and determine how the approach will impact the business case. There are also perceived risks, such as the worry that confidential data is simply less likely to be protected overseas because of limited appreciation for confidentiality or insufficient security safeguards. In reality, many claims about inattention to confidentiality overseas may be overstated, and reputable providers have overwhelming security safeguards to prevent compromises to confidential data. Nevertheless, stakeholders will be reluctant to buy in to an offshoring deal if their fears about confidential data protection are not addressed. In addition to the risks described above, participants in Vantage Partners’ “Managing Offshoring Relationships: Governance in Global Deals” study cited currency fluctuation, local labour laws, and incompatible public holidays as additional issues in offshoring deals. Because of the perceived impact of these risks on the business case, stakeholders worry that offshore is riskier than onshore and are more likely to mount resistance to sourcing from overseas. Sample business case outline Feature Executive summary Process summary Current state of services in scope today to Desired future state of services in scope Recommended solution Purpose Explain why the expected benefits outweigh the drawbacks and risks Provide update on what has transpired in the exploration of offshoring and what will be happening next Describe how the services potentially in scope are delivered ensure that all key inputs and outputs are understood and properly mapped in the future state Give sense of how services may be delivered in the future based on internal discussions and consultations with potential service providers Describe recommendation for how to source services most effectively, subject to development of solution with the provider: • Which services should be outsourced • Which services should be delivered from which locations • Which provider(s) will deliver the services • What type of pricing model should be negotiated • The potential scalability of the solution to service additional geographic locations • Approximate timeline for development of solution and transition to future state Provide clarity into what benefits stakeholders can expect to gain and how those objectives will be measured Describe offshoring arrangements pursued by competitors and their results Identify and assess the various risks in a potential deal and develop a plan for managing them Outline the specific behaviour changes that will be required for different types of stakeholders and describe a plan for overcoming resistance to making those changes Present current state costs and expected transition and future state costs so that stakeholders have a shared view of the expected financial impact of a potential deal

Key objectives and measures of success Industry comparison Risk register Change management plan

Financial model

Ineffective governance can manifest itself in slow decisionmaking, unresolved conflict, and unmet commitments.

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Table 2 Purpose: This Risk Register catalogues risks that would be created or heightened by a decision to offshore. Some of these risks would also have some bearing on the selection of a provider, whereas others would not afford any meaningful opportunity to differentiate among potential providers. We have estimated the probability and potential severity of each risk and developed commensurate risk management strategies to undertake as we approach selection of a single provider. Risk category Specific risks Impacts provider selection? x Estimated probability Estimated severity (potential lost revenue or added cost) Medium General risk management approach Governance Specific actions for preventing, mitigating, and transferring risk • Stipulate in contract Establish governance structure that is aligned with the objectives and complexity of the relationship • Align around protocols for working together, including information-sharing and reporting procedures • Educate the provider on our corporate culture • Provide joint skills training and coaching, including cultural awareness training • Implement best practices for managing cultural differences in offshore relationships • Stipulate in contract terms for continuity of contract under various conditions • Develop contingency plan for any eventuality • Consider purchasing insurance to cover sudden loss of information through unforeseen circumstances • Select provider with multiple delivery locations • Stipulate in contract clear conditions related to data exchange, access, utilisation, storage and allotment – and indemnification for any violations • Secure rights to conduct audits to ensure security of data and protection of confidential information • Scrutinise delivery centers to assess how confidential data is treated Interview delivery team members about company policy and culture around confidentiality • Conduct due diligence to determine whether any of provider’s clients have experienced violations of confidentiality • Stipulate in contract that services are being fixed in our currency to avoid bearing risk of currency depreciation over contract period • Inquire into effectiveness of providers’ currency risk management program • Research impact of Indian Accounting Standard-11 on foreign exchange-related gains and losses 90% of survey respondents believe customer-provider differences in offshore deals have at least some impact on gaining buy-in with stakeholders. And among customers who said creating buy-in was difficult in their relationship, culture ranked as the most significant challenge (see Figure 1). For example, when it comes

Governance

Cultural differences result in slow decisionmaking, unresolved conflict, and unmet commitments

Medium

Business continuity

Political instability, social unrest, violence, terrorism, or corruption disrupt business operations

x

Low

Medium

Contract negotiation and co-design & due diligence

Confidential data protection

Disclosure of confidential client data negatively impacts business of clients, damages our reputation, and/or results in regulatory action

x

Low

High

Contract negotiation & co-design and due diligence

Contract

Currency fluctuations result in higher prices for services than originally anticipated

x

Medium

Low

Contract negotiation & co-design and due diligence

This fear is reflected in common contractual provisions that specify how and when a provider can move services offshore after having already been trusted to take over the services. Overcoming stakeholder resistance, therefore, requires customers to present a business case that takes these risks into account and outlines a strategy

for dealing with them.

user dissatisfaction

Cultural differences, if not properly addressed, contribute to user dissatisfaction and make continued buy-in among stakeholders and end-users even more difficult. Because of the added difficulty of managing a global relationship,

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to directness of communication, customers typically believe their offshore provider avoids communicating when problems arise, shies away from suggesting ideas for improvement, and defers discussion of the need to charge for additional services. In fact, 48% of customers believe their provider tends to communicate indirectly, while only 20% of customers describe their own organisation that way (see Figure 2). Providers, though, see things much differently; only 25% believe they communicate indirectly. What drives these differences in perceptions, and how do they complicate the challenge of gaining buy-in? A UK-based customer and Brazil-based provider, for example, bring different communication styles to the relationship that can result in frustration if they don’t discuss explicitly how they will communicate in their deal. The differences in approaches to communication can be overcome by establishing clear processes for resolving issues, generating innovation, and managing scope. The failure to get governance right at the start of the deal can doom an offshoring arrangement before the ink on the contract has dried. Cultural challenges in offshoring deals therefore make governance more difficult than in onshore deals. Ineffective governance can manifest itself in slow decision-making, unresolved conflict, and unmet commitments. And the impact can be felt in the form of scope overruns, poor quality, service complaints from end users, lost savings, and low staff morale.

Potential solutions

Gaining buy-in around the decision to offshore requires facilitating alignment around the business case for outsourcing, addressing risks associated with sourcing overseas, and consulting appropriately on the services to outsource and the provider that will deliver them. And building alignment throughout the deal requires aligning stakeholders around important financial, strategic, and operational decisions and enabling users to make key behaviour changes. All these activities require effort and are difficult to achieve, but customers and providers can leverage best practices to achieve the necessary buy-in required to achieve success in their offshoring deals.

a uK-based customer and Brazil-based provider, for example, bring different communication styles to the relationship that can result in frustration if they don’t discuss explicitly how they will communicate in their deal.

Develop compelling business case

and risks. Development of a comprehensive business case (see Table 1) is a critical tool for representing to stakeholders the expected impact of the offshoring initiative. The business case should include a description of the key objectives of the engagement (for example: cost savings, improved service quality, greater efficiency, freed-up management time) and a plan for meeting potential challenges (for example: resistance to change, diminished morale). Table 1 outlines key components of the business case and their purpose. One key feature of the business case, a risk register, warrants special attention.

be present in onshore deals. Overcoming resistance to the decision to offshore requires a demonstration that the organisation is aware of the risks and is taking action to prevent, mitigate, or transfer them. A systematic approach to handling risks is not only critical to achieving buy-in but will of course serve the organisation well once the deal is underway. See Table 2 for an illustration of how a risk register might be designed. Danny Ertel is a founding partner of Vantage Partners, while Joseph Bubman is a consultant at the global management consulting firm. A spinoff of the Harvard Negotiation Project, Vantage Partners helps customers and providers enter into, manage, and remediate working relationships.

Given the impact of an offshoring deal, stakeholders need to be convinced that the expected benefits outweigh the undeniable drawbacks

assess risks, develop strategies

As described above, offshoring presents unique risks that may not

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too often Globalisation initiatives are taken on with no real strategy. Or an organisation allows its Globalisation strategy to drive its business strategy.

align business and Globalisation objectives
This is the fourth in a series of an excerpt from the newly published book by Atul Vashistha, ‘Globalisation Wisdom: The Seven Secrets of Great Globalisers’

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’ve said before that a company that wishes to flourish in today’s global market must adopt a services Globalisation strategy. However, not every company is ready to Globalise each of its processes today. A successful services Globalisation strategy takes diligent planning and thought – and that takes time and focused effort. In the previous article on adopting a lifecycle approach (Secret #3), we talked about answering the following questions: > Should the organisation Globalise? > Why will the organisation Globalise? > What will the organisation Globalise? > When will it Globalise? The last two questions are more operational than strategic; the first two – about why the organisation is Globalising and if it even should Globalise, are purely strategic. In answering those strategic questions, an organisation must look at Globalisation in relation to its overall business strategy. This is the fourth secret: Align business and Globalisation objectives. If the two don’t align, the organisation is wasting its resources and should not Globalise. When talking about GE’s Globalisation strategies, former CEO Jack Welch, arguably one of the best strategists of modern business and a highly successful Globaliser, says: “If GE’s strategy of investment in China is wrong, it represents a loss of a billion dollars, perhaps a couple of billion dollars. If it is right, it is the future of this company for the next century.” Not every organisation will risk billions of dollars in its Globalisation strategy, but each runs the risk of unsuccessfully Globalising and missing out on the opportunity to complement business strategy with Globalisation. In order to successfully leverage services Globalisation – to “be right” in Globalisation decisions – organisations must ensure that their strategy is driven by and aligned with their business strategy. As services Globalisation becomes a business imperative for industries from financial services to health care, companies will be even more inclined to jump on the bandwagon with their peers. Afraid of being left in the dust, too many companies Globalise without really considering whether services Globalisation is right for them – and whether their particular approach to services Globalisation is the right one. While it’s true that services Globalisation is becoming a business

I

a successful services Globalisation strategy takes diligent planning and thought – and that takes time and focused effort.

By atul Vashistha

imperative and should receive due consideration from executives at every organisation, it is not a onesize-fits-all proposition: the way Company A executes its global strategy will not necessarily work for Company B, just as the reasons for Company B to Globalise are not necessarily the same as Company A’s reasons. In other words, too often Globalisation initiatives are taken on with no real strategy. Or an organisation allows its Globalisation strategy to drive its business strategy. Successful Globalisers, in contrast, develop very clear Globalisation strategies before setting one foot out the door, and those plans are driven every step of the way by the corporate strategy. Applied Materials’ Group VP and CIO Ron Kifer says that aligning business and Globalisation objectives is really about securing the future for the company. “Your business strategy should be the primary driver of the Globalisation strategy because Globalisation doesn’t happen in isolation. If you look at what Applied Materials is doing with Globalisation, we’re all-around optimising performance and focusing on the core, critical competencies of the organisation, the cost-effectiveness of the solutions closer to our customers, and that means a different geographic footprint.” Successful Globalisers thoroughly assess their business process portfolio, financial state, goals, objectives, risk and transformation needs, as well as the supplier landscape and market capabilities in provider loca-

tions. Using information from those assessments, successful Globalisers build a Globalisation strategy that includes the following elements: > Future proofing > Risk management > IP protection > Transformation > Service extension > Resource redeployment > Innovation management Armed with a Globalisation strategy, successful Globalisers develop an execution roadmap, which includes: > Geographic placement > Ownership model > Third-party supplier relationships > Transition timing > Financial return > Governance organisation

too much, too fast

One S&P 100 global investment bank offers a good example of a company that did not allow its business strategy to drive its Globalisation strategy. Instead, perhaps eager to jump on the bandwagon of financial services firms adopting services Globalisation, the company did too much, too fast. The organisation Globalised its application development, application support and maintenance, IT infrastructure management, and internal IT help desk all at the same time. Overloaded and lacking a clearly defined strategy, the investment bank began to experience performance and quality issues with its offshore internal IT help desk services.

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cessful offshore operations. While it’s true that services Globalisation is becoming a business imperative and should receive due consideration from executives at every organisation, it is not a one-size-fitsall proposition.

Leading with strategy

your global initiatives to those business and strategic directions.”

Lack of clarity & definition
To remedy the problem, the organisation had to backtrack, taking steps that it would have been wiser to take initially, including securing buy-in from key client stakeholders, providing for effective knowledge transfer, and building a well-planned, solid governance framework. After taking those steps and determining that its newly defined services strategy did follow its overall business strategy, the company was able to successfully resume its initiative. In addition to aligning its Globalisation strategy with its business strategy and ensuring that it is the business strategy that’s the driver, the successful Globaliser has a clear idea of what part of its business strategy Globalisation will help execute. Former Lenovo CIO Steve Bandrowczak explains that Globalisation is not just for the sake of lowering costs. “We were lowering costs not because we were not competitive in the industry. We were lowering costs because our stakeholders expected it and competition demands it. You keep getting back to what are the strategic objectives of your business.” Bandrowczak added that in his staff meetings, the alignment between Globalisation and business strategy was crystal clear. “If you had sat in my staff meeting, we didn’t say ‘Okay we’re going to shut two data centres down and we’re going to save three centres’. Instead, we said ‘We’re going to improve our expense-to-revenue ratio from an IT perspective because we’re going to get in line with industry standards and we have to deliver US$100 million to the bottom line of Lenovo’. You constantly have to keep tying

A Fortune 500 electronics company provides an example of an organisation that did not develop a clear idea of the part of its business strategy that Globalisation would help execute before beginning its Globalisation initiative. As a result, the organisation encountered a number of (avoidable) problems. The company initially decided to offshore its corporate business customer service, retail customer service, levels 1, 2 and 3 customer support, order processing, accounts payable and receivable, and orderto-cash processes to third-party suppliers as well as a captive centre in India and the Philippines. Once the initiative was underway, the electronics company found significant performance and quality issues with corporate business customer service processes within its captive centre. Additionally, the ramp-up of higher-end, customerfacing processes was slower than the company had originally expected. After analysing the problems that had occurred within its services Globalisation initiative, the organisation realised that its fault lay in not fully analysing its portfolio of processes to understand the fundamental what, when, where and how questions that services Globalisation requires. Additionally, the company found that its fragmented processes needed to be aggregated and that an effective transition needed to be based on a detailed analysis of processes. This Fortune 500 electronics company responded to the deficiencies it found in its services Globalisation rollout, re-planned the initiatives by answering those critical what, when, where and how questions, and developed a clear picture of how Globalisation would help the company accomplish its business objectives. Now it has a very suc-

“If GE’s strategy of investment in China is wrong, it represents a loss of a billion dollars, perhaps a couple of billion dollars. If it is right, it is the future of this company for the next century.”

A Fortune 500 health and life insurance company provides a good example of the strategic considerations a company might make at different levels of the organisation. This company had a very fragmented and inefficient life claims process, with no existing manuals or desktop procedures. Each examiner had his/her own version of the process and method for calculating claim amounts. In addition, the organisation was bogged down in paper-based calculations that were full of errors with no audit trail. Furthermore, process output/productivity, accuracy, and efficiency were not tracked. As a result, the firm was unable to leverage its systems and knowledge to compete in the market against new players. This organisation resisted the urge to adopt services Globalisation as a fix-it solution to its inefficiencies. Instead, it considered its strategic goals and how it could accomplish those goals with an aligned services Globalisation strategy. Each executive team member contributed in a different way to the strategic development: the CEO had a strategic focus, concerned with leading the business into the future; the CIO took a performance focus, concerned with flexibility, productivity, guaranteed services levels and proven technology. The CFO took a bottom-line focus, concerned with reducing current costs and managing future costs. Instead of using services Globalisation as a substitute for sound business strategy, this Fortune 500 health and life insurance company used a well-developed services Globalisation strategy to complement its business strategy, which was geared in part towards overcoming several process inefficiencies. Atul Vashistha is Chairman of Neo Advisory (formerly neoIT), a leading management consultancy since 1999, focused on independent, objective and actionable advice to enterprises that seek to transform their organisations by capitalising on services globalisation. His latest venture is BestOutsourcingJobs.com, an online job portal focused on outsourcing careers. He can be reached at atul@vashistha.com

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ThoughT Leader | Outsourcing

from page 17

is a vendor base to be able to perform. An absence of a supplier base increases risk of failure, a situation during which we advise clients not to outsource. We focus, then, on other business models like insourcing, centralisation /or shared services. Yo u r o p i n i o n o n c u l t u r a l compatibility in an outsourcing relationship? Basically, if one goes to a certain country, one must feel good about doing business there. Work culture is important in this equation. If a country does not have the same work culture of a client, then I believe it’s a ‘no go’. It makes a big difference. A good example is Philippines, which has a very Americanised culture and work ethics. Personally, I like Philippines as a country to work in. From a work perspective it’s better than even India, in my opinion. This is however incumbent on the client culture too. For Japanese clients, Philippines or India may not be appropriate in terms of work culture, while Dalian in China is – owing to cultural similarities there. What are your thoughts on Latin America as a contender to AsiaPacific? Latin America is a good example of growing supply nations. Chile has excellent government support that’s similar to what you see in Malaysia. Funding, support you name it all! Given a small population base and among one of the most expensive countries in Latin America alongside Brazil, Chile has done very well. Clients are coming in still at higher cost and still putting work out there because productivity is high, the quality of supply is high, the government support is excellent. On the other hand in Brazil, though the association is very proactive, costs are very high, government has done nothing, while in the local context, high income taxes on both people and businesses has made the cost of doing business in Brazil extremely high. So right now, it’s extremely difficult to think of outsourcing work to Brazil. Then, why Brazil? Because Brazil is the largest and fastest growing economy in the region and companies that want to do business in Latin America have to be in Brazil. When they are in Brazil they have to get work done in Brazil. They are getting work done by a vendor and they say ‘let us get this vendor to deliver services from Chile, Mexico and Argentina as well’. This augurs well as it enables companies to offset higher costs of Brazil with lower cost structures in Mexico or Argentina while still leveraging Brazil’s high competencies in technology. Ar-

“Personally, I like Philippines as a country to work in. From a work perspective it’s better than even India, in my opinion. This is however incumbent on the client culture too.”

gentina is an interesting country to watch. It has got one of the best cost structures in Latin America along with Colombia. It’s very cost effective. But the government really doesn’t support much. The industry associations are also fragmented. The Argentinean government is wary of supporting this industry for fear of shifting the focus of its citizens’ capabilities from serving domestic needs to international ones. What we are seeing is the issue between higher cost structures in Latin America in comparison to APAC on one hand, and lack of coherent strategies to leverage a large competence base on the other hand. We term this as “Point of Scale Resistance™”. Our recent study on a host of countries resulted in an interesting finding – national population indicates the potential size of the industry a country can develop. However in reality, the availability of skilled employable work force, government support, existence of a service industry and sustainability decide on the Point of Scale Resistance. For example, Costa Rica with a population of four million has a scale resistance of 1000 vs Chile with over four times the population has a scale resistance that is less than 2000. Malaysia on the other hand has a lot of potential that is pre-dominantly latent. Important aspects to note are that growth of industries in nations depends on a host of enabling factors and not just availability. Service economies vs. Emerging economies, and their success with creating an outsourcing industry. Are these important to consider? Yes they are important as they have a key impact on workforce availability. The construct of the GDP reflects on what the country will absorb and what the country will need. When you look at the outsourcing need on top of it, then I think most countries will fall short by a long shot. Workforce development initiatives through vocational and institutional training programme

can attract young people into the industry but the industry then needs to create those attractive jobs. Hence any country that wants to go in that direction will actually end up having a problem with scale. Most economies today are moving more and more to services anyway. Three years ago McKinsey established that only 23% of the large pool of engineers from India is employable. With pace of services increasing, this number will potentially go up to 25% or 30%, leaving bulk of engineers unemployable for their core skills. This indicates a slow pace with employability in comparison to supply. Following up with our own study, we established that appropriate assessment, skilling and training fitment programmes can add to this pool of employable engineers by another 15%. The question therefore is – whose onus is this incremental increase going to be on – government, industry or both? Given lack of alignment of educational institutions with professional/ vocational training, it becomes the responsibility of government and industry to build tertiary skill development initiatives to increase employability. Malaysia for example does a good job in this context. Is domestic outsourcing important to increase the maturity of emerging destinations in the global services marketplace? India has been a leader in outsourcing with no comparable domestic adoption. Likewise has been the case with Philippines. Both these countries have created a leadership position in the marketplace for themselves. I therefore don’t think it is an important requirement today. In fact most of emerging countries really do not qualify on these criteria. It will be very hard for us to prove that domestic consumption is a prerequisite for outsourcing industry growth. What are your opinions on emerging nations from Africa? I think the big issue is some of the hygiene factors surrounding business environment, political stability and cost of doing business. These need to be clearly understood. In addition there are questions relating to security when you want to take clients to Kenya or Nigeria. Hence clients are quite wary of exploring new emerging nations. While they are not willing to commit they are beginning to explore the continent. The lack of clarity around capabilities and sustainability are making it difficult for African countries to gather any mindshare yet.

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InsIghts

People management practices at Learning Organisations
BY ADItYA BhALLA AnD t sAnDEEP BAnERJEE
earning organisation is an Organisation that expands its capabilities by facilitating its members’ learning and continuously transforming itself to meet strategic goals. Capability building of staff at learning organisations is mapped to process improvement initiatives with well-articulated business objectives to take the organiSpectrum of Educa�onal Psychology sation into higher Behaviourists Non-behaviourists Cogni�vists ts Construc�vists ruc� Humanists levels of maturity. The maturity of Learner of machine Learner as brains Learner as living organism the People Manage-

L

ment Practices at learning organisations is reflected in the maturity of the competency development framework. There is an entire spectrum of educational psychology approaches for imparting education and learning organisations leverage the strengths of each approach in varied work environments. At one end of the spectrum we have the Behaviourists who view

teaching human beings very similar to training a rat in a lab through defined learning objectives aided by incentives or reward mechanisms and at the other end is Humanism, which believes in real life learning (refer image, below left). One of the critical outputs of the competency framework at learning organisations is the Competency Development Plan (refer Figure 1). This is where the education system must integrate to enable the successful competency development for each level of employee. The education system adopted by learning organisations forms the backbone of competency growth

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InsIghts | Outsourcing

Educational Psychology

ModE of tEaching It is a teacher-centric model where teacher defines the learning objectives within the narrow design of the training programme. It is most suited for operations or tasks at introductory level of learning such as learning a software application. Learners are encouraged to test their self notions about the world against new information before they internalise them. Works well for those areas where the deep knowledge about that area is well defined and available through subject matter experts. Some examples of these include training staff on software programming of languages, designing solutions based on known product features and options. Strategies can involve cognitive apprenticeships where experts model and coach a learner toward expert performance; presenting multiple perspectives and using collaborative learning to develop and share alternative views; and using examples as realistic illustrations. Constructivism has been widely used in the education of doctors, architects, lawyers, and retail staff (how to provide superior customer experience). Real learning is what we discover for ourselves, not something we’re told or led to by someone else. Typically those aspiring to achieve perfection in their profession tend to follow this path of learning. Organisations such as Toyota promote the concept of Mentor-Mentee based on principles advocated by Humanism.

humanism … Real learning is what we discover for ourselves, not something we’re told or led to by someone.

Behaviourism Cognitivism

Constructivism

Humanism

Figure 1

Figure 2
Process Improvement Life Cycle Diagnosis Planning Process Definition People Management Practices Staffing Competency Analysis Training & Development Communication & Coordination

COMPETENCY ASSESSMENT WORKFLOW
Iden�fy workforce competencies for each role/func�on based on business needs Perform assessment of the workforce based on the criteria defined (need to have atleast two cycles)

Define competence descrip�ons for each competence

Analyse the exis�ng workforce competency against the target level of competencies

Process Implementation

Process Review
Define criteria for categorising levels within each competency

Performance Management

Input to workforce plan (establish/modify)

Process Enhancement

Figure 3
Defini�on Adaptability is the ability to adapt to ad work with a variety of situa�ons, individuals and groups. It is about being able to think on your feet, and not being disconcerted or stopped by the unexpected. Proficiency Levels: Level 1 Beginner

Figure 4
Human Resources Communica on

Administra on

Level 2 Learning

Level 3 Intermediate

Level 4 Advanced

Level 5 Expert

Technology

Opera ons

S.No
1 2 3 4 5 6 7 8 9 10 11 12 13 14

Behavioural Indicatior: S�cks rigidly to Has difficulity in procedures even adap�ng to new sitwhen inapproriate ua�on and changing and fails to reassess exis�ng methods to priori�es in the light accomplish goals. of change.

Competency
Adaptability Analy cal Thinking & Decision Making Communica on Skills (Verbal & Wri en) Communica on & Presenta on Skills Con nuous Improvement Customer Service Orienta on Enthusias c / Self Mo vated Leadership Abili es & Skills People Management Result-Oriented Strategic Thinking Teamwork/ Interpersonal Skills Time Management & Schedule Adherence Visionary Leadership Grand Total

Training

Finance

Quality

Posi on
E0 E1, E2, E3 E0, E1 E2, E3 E0 E1, E2 & Above E0 E2, E3 E2 & Above E4 & Above E4 & Above E0, E1 E1 E4 & Above

Demonstrates willingness to change ideas or percep�ons based on new informa�on or contary evidence. Is open to new ideas and listens to other people’s points of view and adjusts his/her own approach and behavoir accordingly.

Iden�fies a pragma�c approach in order to get the job done quickly and effec�vely. Maintains effec�veness when experiencing major changes in work tasks or the workds environment and adjusts effec�vely to work within new structures, processes, requirements or cultures.

Uses an awareness of the bigger picture along with common sense to interpret and implement change. Exhibits necessary a�ributes of confidence, tolerance, empathy, op�mism and respect for others in �mes of change.

Learning Map Team Building Skills Basic Team Building Skills Advance

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11

14

14

8

14

14

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framework in their people management practices. Such a competency framework also lays down the platform for effective staffing, workforce planning, performance management for facilitating business growth and sustainability.

Case study

One of the key annual objectives of company ITMarks (name changed) was to implement a process improvement framework across the board. Sustainable process improvement demands a workforce that is adequately skilled to meet up to the task in the short term and the

long term. Management adopted a V-model (refer Figure 2) that integrates Process improvement with People Management practices. The salient people management practices from a skill development perspective are listed below. > Competency analysis of existing workforce responsible for process definition and process implementation. > Creating the Competency Dictionary for core competencies (refer Figure 3,4). > Crafting learning maps for each competency using the appropriate educational psychology approach discussed earlier. > Competency Development Plan indicating the type and mode of education and training methodology to be used at each level.

Conclusion

Individual learning does not guarantee organisational learning, but without it, no organisational learning occurs. Learning organisations have set up People Management Practices to integrate the growth objectives of an individual’s learning programme with sustainable growth objectives of the organisation. Aditya Bhalla is Practice Manager with QAI Innovation Practice consulting clients on product and process design. Sandeep Banerjee is Senior Consultant with QAI SPI and Human Capital Management Practice consulting clients on implementation of best practices based on CMMi, and PCMM frameworks. They can be contacted at adityabhalla@yahoo.com and sandeepcrpark@ hotmail.com

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study

‘LPO leads field for cost savings’

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ffshore legal services outsourcing, including intellectual property (IP) work, has produced the highest cost savings for its client base than any other outsourced function, according to a report. Buoyed by a growing recognition in the US legal system of the document work required in IP cases, legal services outsourcing has tied with innovation outsourcing as the most profitable offshore solution. The report, “Is the Global Outsourcing Industry in for a No-holds Barred Competition?” was produced from survey results compiled by PricewaterhouseCoopers (PwC) in partnership with the Offshoring Research Network (ORN) of North Carolina’s Duke University. Examining developments from 2007 to 2009, the report puts the average client cost savings achieved by Legal Process Outsourcing (LPO) providers at 44%, with software development coming in at 41% and knowledge/analytical services in third place with 39%. Below the top three, call centres, human resources, marketing and innovation are the next highest achievers. Meanwhile, LPO’s average profit margin ties with that of innovation services for first place, with both classes hitting 29%. “The attractive economic benefit of LPO,” says the report, “may

explain the high number of service providers entering the market and of companies exploring opportunities to outsource their most routine legal activities over the past few years.” PwC and the ORN trace back the success of legal outsourcing to a US legislative watershed, stating that the 2006 Federal Rules of Civil Procedure concerning Electronic Discovery “has changed the relationship between law firms and their corporate clients”. They also cite an American Bar Association (ABA) ethical opinion of 2008, which backed the outsourcing of

Ageing population boosts medical outsourcing
Medical equipment outsourcing is on the rise because of the ageing population. Advancements in technology, the desire to lead an active lifestyle, the rise in chronic conditions and increased public and private spending, are also contributing to a sharp rise, according to a new Bharatbook report. The report, “Outsourcing in the Global Medical Equipment Industry - The Market Expected to Register High Growth in the Future”, forecasts that the medical equipment outsourcing market will reach US$40.1 billion by 2016. It analyses the key drivers behind outsourcing of manufacturing, clinical research and other support services to low-cost service providers based in Asian countries and elsewhere.

legal services. “Any favourable opinion towards outsourcing from the legal industry bodies is going to be influential,” Director of legal services outsourcing at CPA Global Paul McGolpin said. “Also the effects of views among clients are equally important. Over the past six months, legal services outsourcing has gathered pace. People are saying that it makes sense and that it’s not going to go away, and in this period we have seen the highest activity since we went into business in this area – particularly in services such as e-discovery and document management.” While the report says that, in India alone, the LPO industry is growing faster than 40% per annum. It also points out that Sri Lanka and the Philippines are growing in popularity – crediting the Philippines in particular for its natural compatibility with the US legal system.

Economic recession raises worker loyalty
The economic recession in Malaysia has generated a powerful sense of engagement between workers and bosses, with more than a third of employees surveyed saying they are more loyal to their employer, according to the latest survey from global workforce solutions leader Kelly Services. The survey, conducted between early October 2009 and the end of January 2010, found that 37% of the respondents said the economic downturn made them more loyal, while 11% said it made them less loyal, and 52 percent said that it made no difference. The global economic recession has had a profound impact on the way workers view their jobs and their employment situation. With millions of workers laid off, the prospect of being out of work or losing a job has meant that many workers have had to re-evaluate their careers and their job choices. Those workers who are more loyal to their employers attribute the shift to positive management, salary/pay levels that have improved or remained steady, and non-cash benefits that have improved or remained steady. Those who are less loyal say it’s due to poor management and falling pay. The findings are part of the Kelly Global Workforce Index, which obtained the views of approximately 134,000 people, including almost 2,000 in Malaysia. The impact of the economic slowdown on work attitudes has been greatest among Gen Y (aged 18-29) where 40% said the downturn had made them more loyal, compared with 37% of baby boomers (aged 48-65) and 33% of Gen X (aged 30-47). Results of the survey in malaysia reveal: > 48% of respondents say they felt ‘totally committed’ to their current employer, ranging from 50% among Gen X, 49 percent for baby boomers and 47% for Gen Y. > When asked to name the one thing that would make an employee more committed to their job, 31 percent cited ‘higher salary or benefits’, followed by ‘more interesting or challenging work’ (29%). > Company reputation was considered ‘very important’ in job selection and retention by 49% of both baby boomers and Gen X, and 48% of Gen Y. > 37% of Gen Y were “very confident” in their employers’ ability to be good corporate citizens, higher than for both Gen X (35%) and baby boomers (29%).

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Decline in apps development projects
Though application development is the single largest category in outsourcing, data centre operations, help desk, disaster recovery, website and e-commerce systems and desktop support have gained significant ground. According to a study by California-based research firm Computer Economics, it is and has been application development for the past three years, but it is fast declining. In 2009, 33% of 200 companies surveyed by Computer Economics outsourced application development. Those numbers are down roughly 20% points from the previous two years (53% in 2008; 52% in 2007). “Such a precipitous drop indicates the overriding factor driving the downturn was the deepening recession, which caused many organisations to curtail spending on new initiatives and delay ongoing projects where possible,” Computer Economics reported on its Website. The data is based on its report – “IT Outsourcing Statistics 2009/2010: Outsourcing Trends and Cost Experiences for 11 Key IT Functions”. “As application development is project-based, application development outsourcing activity is far more subject to swings in the economic cycle than outsourcing of data centre, help desk or other IT functions. Outsourcing activity declined across the board last year, but no single function declined more than application development.” Though application development is the single largest category in outsourcing, data centre operations, help desk, disaster recovery, Website and e-commerce systems and desktop support have gained significant ground (between 21 and 28% of companies surveyed), according to the study. The least popular area of IT outsourcing is, understandably, security, with only 19 percent of organizations allowing an external service provider to handle this important data management and customer record protection function. Regardless of company size, outsourcing generally accounts for 5-6% of a total IT budget. Large organisations are much more inclined to use outsourcing companies for help desk support.

disaster recovery more important than data security, says study

D

espite the ever increasing threat of cyber attacks and hackers, business leaders who recently took part in a Honeywell-sponsored survey said disaster recovery planning and preparedness are a bigger priority than securing their networks. Of the more than 400 corporate executives who took part in the survey entitled, “2009-2010 Preparedness, Security and Crisis Communications”, 55% said a pandemic was the biggest threat to their organisation. Natural disaster was ranked second by executives with 52%, followed by data security and telecom failure/ power outages, which received 35% and 45% respectively. Both data security and telecom failure/power outages were ranked as top threats in 2008. A majority of respondents also reported having plans in place to deal with pandemics (73%) and natural disasters (82%). Business prepared to deal with cyber issues was much lower with only 60% saying that they were prepared to deal with data centre disruptions and only 53% prepared for data breaches. Only 46% said they were prepared for a cyber attack. “Traditionally, disaster recovery has focused on IT, data and infrastructure threats, but there’s now broader recognition that other threats — such as pandemic or natural disaster — are just as serious and have a wider impact,” said Vern Cole, chief security officer for Varolii

South Asia nation dominates in publishing outsourcing market
india is the most popular outsourcing location in the world for all pre-press publishing work according to a survey by research firm Valuenotes Database, which found that 66% of publishers in the US and UK placed India at the top of their list for pre-press work. The US is placed second with 30% of the vote, and the Philippines third with 18%. Other notables include the UK and China with 16%, Vietnam with 8% and Australia, which took 5% of the vote. The remaining 18% is made up of a bracket of countries deemed to be up-and-coming. Rakhi Vig, manager of product sales at Valuenotes Database, said that outsourcing has become slightly more complicated of late as publishing houses looked to address the effects of the recession and changing market conditions. She said: “Over the past few months, we have seen publishers trying a variety of approaches - going digital, reducing print publishing, and cutting costs. “In spite of these measures, one thing comes across very strongly – the industry is yet to find that one formula that addresses all its problems.”

Fifty-five percent of the respondents said a pandemic was the biggest threat to their organisation

Corporation, which conducted the survey. “Organisations are now planning for those threats with more sophisticated notifications systems, broader communication of information and increased attention from top corporate executives. While we don’t want to lose sight of the consequences of cyber attacks or a data centre failure, the increased attention to the human side of emergency preparedness is a very positive trend.”

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management

Be wise … What do you do if you are in a country where heavy drinking is expected of you, but you don’t drink?

to drink or not to drink
The social convention of alcohol drinking in other countries

I

’ve only been drunk twice in my life. Both times when I was in my teens and with my cousin Joey. The first time was on a Christmas Eve when a group of us had gone to the movies and decided to stop in the local bar for “a drink” to celebrate. My friend Sonia and I were with my cousin Joey and a few other friends. Joey was trying to get Sonia tipsy. I didn’t trust his ulterior motives and so, when he wasn’t looking, I’d gulp her drink down, and then continue to sip my own. Friends of my parents thought it was cute that I was in the bar, since I was well under sixteen at the time and so they kept sending drinks over to our table. I was doing two for everyone else’s one. I managed to maintain my decorum until I got home that night and then boy, was I sick. The second time was when I was visiting my cousin Joey in Boston. We were in the hotel bar on a Satur-

day night. Boston had (maybe still has) “blue laws” – which means no drinking on Sunday. So there was a last call and Joey ordered us each three drinks. I kept pace with him. I’m not – nor have I ever been – a heavy drinker. Boy, did I get sick. The message: Don’t pace other people. That brings me to the present. I recently was on a panel for continuing education for Attorneys that appeared in San Jose and again in San Francisco. The topic we had was how to deal with alcohol while doing business in other countries. Since I teach Multi-culturalism, Diversity and International Business they asked me to talk about how people should handle the invitation to drink, and to get drunk when visiting other countries. One of the things I mentioned was the importance of getting to know you and relationship building

By Dr arLyne Diamond

for business people in much of the world. In the US, people tend to get to the business point, thinking that they are wasting time if socialising is done first. Not so in most other countries of the world. People in Europe, Asia, and elsewhere want to know you first. They want to get to understand you and learn to trust you before making the deal. Drinking serves that purpose in many countries. In some of the more socially proper cultures, like Japan for example, during the day people are always neutral, polite, appropriate and stoic. It’s only after hours in the bar when that formality is washed away and the real person emerges. Getting drunk is acceptable. Indeed, in South Korea I’m told they have “vomitoriums” much like those in ancient Greece. In Europe, particularly in the “Romance” cultures like Italy, France and Spain, social drinking of wine

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management | Outsourcing

“Above all, please remember you are there to win the deal, not to win the drunken bout. This does not have to be a macho challenge.”
with meals is the convention. It’s not about getting drunk, but about relaxing and having a long and leisurely meal during which your host gets to know you and you get to know him/her. Germany also encourages social drinking – but not to the point of getting drunk, except at October fest. In countries with large Muslim populations, drinking is rare. Indeed, forbidden to citizens in some countries and even to guests in others. Thus, it is critically important when visiting these countries to NOT drink. Do not drink even if there are private rooms in which visitors may drink. Accept the convention and religious preference of people in those countries. My advice: Do not drink if your hosts don’t drink. Drink moderately even if your hosts are drinking heavily. If you are drinking, you need to recall that your tolerance is lower than usual. Why? Because: > You are suffering from jet lag. > You are not sleeping as comfortably as you do in your own bed at home. > You are eating unusual foods and thus your stomach is slightly upset. > You are not accustomed to their alcohol and don’t know how you will tolerate it. > You are under stress – because you are there to do the deal, and > You are being scrutinised. So, what do you do if one of your teammates is drinking heavily – especially if – or even if – the person is the CEO? You protect that person. The entire team must take responsibility for protecting that person from drinking too much. If she or he loses respect, your deal is lost. What do you do if you are in a country where heavy drinking is expected of you, but you don’t drink? Whatever you do, don’t moralise. Don’t lecture. Don’t in any way suggest that they are wrong. Don’t tell them you don’t drink. It is OK to tell them you can’t drink for medical reasons. You might quietly and privately ask your host to help you out here. Explain that you are not

Do not drink if your hosts don’t drink. Drink moderately even if your hosts are drinking heavily.

able to drink and ask that they help you avoid insulting anyone else or embarrassing yourself. Above all, please remember you are there to win the deal, not to win the drunken bout. This does not have to be a macho challenge. When you play the other man’s game you always lose. Don’t play

his game. Find a way to play your own graciously. Dr ArLyne Diamond is an Organisational Development and Human Resource Consultant with over 30 years experience. She can be contacted at arlyne@diamondassociates.net

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Capability Development

CDp hits the road
MSC Malaysia’s Capability Development Department to go on road shows to create more awareness on its offerings and incentives
ultimedia Development Corporation’s Capability Development Department will embark on a series of road shows coming April in its efforts to boost competencies among MSC Malaysia companies. The Capability Development Programmes (CDP) road shows will cover three locations, namely Cyberjaya, Penang and Kuala Lumpur. Head of Capability Development Department Ir Dr Karl Ng said the event would prove to be a fruitful occasion for the participants, as the organisers have ensured the presence of high-profile speakers coupled up with a series of informative, specialised and up-to-date content. Besides, the event will also provide a great platform for networking. Ng said: “This is our first level of engagement with the companies to fuel awareness and interests. Subsequently we will push them to pre-adoption phase and then finally to the adoption phase when they are ready.”

FaSt FaCtS
> 93% in growth of export sales from participants of CDP (extracted and analysed from Impact Survey 2008) > Since achieving CMMI Level 5 Rated under CDP CMMI in 2006, Pentasoft Malaysia won eight out of 20 of its international tenders amounting to moret han RM14 million – competing with software giants from US, UK and India. >  Significant achievement under CDP  Six Sigma: 12 companies participated and collectively drew projected savings of RM3.13 million. muCh to gain Build Industry Capability through Strategic Partnership with key industry bodies through Capability Development Department: > Software Engineering Institute – Carnegie Mellon: Malaysia’s current rankings (in terms of number of appraisals) are 14th worldwide and 1st in SEA region. > Project Management Institute (PMI): To-date Malaysia has 2000 project management professionals in the country and more are expected to be churned out in near future. > IT Service Management Forum (itSMF) Malaysia: CDP and key industry players helped to establish this forum in 2007. Today it has grown from seven initial members to 80 members and recently, Malaysia’s effort has been recognised with the selection of itSMF Malaysia’s president as one of itSMF International’s directors – the only Asian representative. > International Association of Software Architects (IASA) Malaysian Chapter has been instrumental in the development of CITA (Certified IT Architect), a newly  introduced international professional certification in 2009. CDP supports  and promotes CITA via joint-venture promotional and awareness activities. > Information Systems Audit and Control Association (ISACA) Malaysia Chapter – CDP supports and promotes ISACA’s Certified Information Systems Auditor  (CISA) and Certified Information Security  Manager (CISM) via CDP Professional Development.

M

ng … ‘We will also be announcing a few new interesting and important initiatives during the event.’ global standards and best practices. The department also promotes continuous improvement of capability and skills especially on emerging technologies and new best practices for Malaysian ICT professionals. “The short term objective of the road shows is to build awareness on available global best practices that will benefit Malaysian companies. By sharing the benefits and testimonials from companies that are already seeing the results of their investments, we hope that we can encourage more companies to partake capability development initiatives in their companies,” he said. “Long term is, of course, to get them to adopt these capability development programmes, regardless if they utilise MSC Malaysia’s assistance or otherwise.” Also, participants now may choose the relevant ones and commit their time to attend and benefit from the programmes, Ng said. He added: “So be sure to join us at these road shows to know about these latest and related trends pertaining to our programmes. We will also be announcing a few new interesting and important initiatives during the event.” The inaugural road show will be held in Cyberview Lodge, Cyberjaya from April 7-8. The keynote speaker will be Howard Kendall – Founder and Chairman of Service Desk Institute of UK – who will delve into the subject of IT Service Management (ITSM). It will be followed by Awareness Dialogues focusing on selected areas such as the Leadership, Project Management, Software Development and Strategy. Four workshops are also in the pipeline in the area of Information Security Management Service (ISMS), IT Service Management (ITSM), Service Desk and Capability Maturity Model Integration (CMMI). For more information on these initiatives please visit www.mscmalaysia.my/cdp

objectives

Consolidation

While past CDP events, such as talks and workshops, were conducted as small and stand alone occasions – leading to many events scattered throughout the year, this year the department has decided to consolidate the workshops and conduct three main events in as many locations targeting both ICT professionals and MSC Malaysia organisations. Ng said: “We will organise the road shows in three locations. Cyberjaya was selected due to its premier position as the nerve centre of ICT businesses in Malaysia. We also extended the road shows to Kuala Lumpur and Penang in order make it convenient for companies located in these areas to join in the occasion.” He said Capability Development Department is continuously making more efforts to get closer to MSC Malaysia companies to understand their needs, adding that the road shows will provide a good opportunity for the department to share with the participants on CDP and assistance provided to them through its incentive schemes, online knowledge centre, besides workshops and awareness dialogues. CDP holistically tackles the area of People, Process, Product, Technology and Business Management. “Through our programmes, participants would be able to continuously improve and upgrade themselves and the company,” Ng added. CDP’s ultimate goal is to make the Malaysian companies more competitive in the global ICT markets by raising the awareness and assisting these companies in adopting

mSC malaysia R&D and ip Conference
MDeC will be launching and conducting the MSC Malaysia IP Connect (IP Connect) programme on March 31 in Hilton Hotel, Petaling Jaya, Selangor. IP Connect is a platform to connect MSC Malaysia status companies, Research Institutions and Institutions of Higher Learning in order to foster IP licensing and/or IP commercialisation opportunities. Some of the benefits for the participants: > Practical guidance to companies on issues involving Intellectual Property (IP) rights, IP valuation, Human-Computer Interaction (HCI) and the Management of Information / Online Communities and Social Computing. > Valuable insights from an industry player about its journey in IP protection and exploitation and HCI related issues. For enquiries and registration, please contact CliC at clic@mdec.com.my

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happenings | Outsourcing

Keynote speech by arroyo.

The exhibitors at the event.

panel discussion on the CiO Challenge with harvey Koeppel executive Director of Centre for CiO Leadership (right) as moderator. speakers: (from left) Barry Marshall, Vp and Operations Manager, Jp Morgan Chase; James Dantow, VpWorldwide services and philippine gM, netsuite; Frank sirianni, Vp and CiO, Fordham University; and Dr. philip hadcroft, gM- strategy, salmat (australia).

arroyo takes a tour of the exhibition hall.

10th e-servicesglobal sourcing ourcing Conference and exhibition xhibition

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ith its theme – Bright Skies Ahead: Collaborating for Smarter Business Solutions – 10th e-Services Global Sourcing Conference and Exhibition 2010 brought together a huge number of global movers and thought leaders with a diverse group of companies who buy or sell outsourcing services. Held from Feb 8-9 at the SMX Convention Centre in Pasay City, e-Services was led by the Philippines’ Centre for International Trade Expositions and Missions (CITEM), an attached agency of the Department of Trade and Industry (DTI). The event is geared towards the promotion of the country as the preferred global outsourcing destination. “From scratch, with only 2,000 workers and US$24 million in revenues in year 2000, (the Philippine BPO industry) is now a global powerhouse,” said a beaming President Gloria Macapagal-

Arroyo during her keynote address. “From almost half a million workers last year, it is expected to be 600,000 this year. And from more than US$7 billion revenues last year, it is expected to exceed at US$9 billion this year.” Philippines’ BPO industry is the single biggest employment growth sector in the country to date, despite the lingering shocks triggered by the recent global economic downturn. In fact, analyst group Gartner predicts that with the high-profile tech sector leading the way, the industry expects to be back on solid footing in 2010. “It’s been a great period for Phillippines’ outsourcing industry – especially in the second half of 2009, when the economic recovery started to kick in,” said Gillian Virata, Business Processing Association of the Philippines (BPAP) executive director for information and research. “The Philippines has a unique proposition to bring in more BPO-IT business because of our language skills, our customer-service orientation, our trainability, our cost, our infrastructure, telco competition – all of these advantages still keep us competitive in the industry.” Virata said voice-based services remained as top earner in 2009, bringing in for the

Virata … ‘it’s been a great period for philippines’ outsourcing industry, especially in the second half of 2009.’

country US$5 billion in revenues. Following it were back office services at US$1.12 billion, software and other IT services at US$568 million, engineering services and design process delivery at US$228 million, transcription (non-voice) at US$186.8 million, animation at US$120 million and games development at US$4.5 million. Experts foresee a possibility of attracting newer markets in animation, Engineering Services Outsourcing (ESO) and transcription this year. Virata added: “We are now providing more diversity and scale in other fields of service and levels of complexity. We want to be known not just for voice-based services, but also other segments which demand more knowledge and expertise.” Monchito Ibrahim, commissioner of the Commission on Information and Communications Technology, said the government is exerting all efforts to sustain the growth of the BPO industry. “The outsourcing sector can expect more support from the government especially in developing new markets,” said Ibrahim. He cited the importance of the creation of the Department of Information and Communications Technology and the passage of a data privacy law in ensuring that the BPO sector in the Philippines will remain robust. “We definitely need a privacy law to make us on a par with other countries in the world,” said Ibrahim.

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happenings

Brocade, McAfee ink deal
Brocade and McAfee announced that they have entered a strategic partnership to deliver a broad set of fully interoperable end-to-end network security solutions. As part of the partnership, Brocade will work in conjunction with McAfee to integrate critical security capabilities into the Brocade family of networking products. The pairing of leading-edge Brocade networking products with McAfee’s extensive security capabilities enables customers to deploy and maintain highly reliable and secure network environments – from endpoint to the edge and the core – that are protected against a wide range of security threats, including malicious activities, data breaches, network intrusions and policy violations. As a part of an open technology architecture approach, Brocade and McAfee are collaborating on a set of jointly designed, interoperable solutions developed specifically to address the network security needs of enterprise customers.

set sights on end product: Minister
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alaysian Deputy Minister of Science, Technology and Innovation Fadillah Yusof said the ministry was very focused on carrying out the mandate to increase the critical mass of researchers, scientists and engineers in the country. “There is certainly a deficiency in the country’s commercialisation process due to institutions of higher learning conducting research and development that are not focused on the end product,” he said at the presentation of the MSC Malaysia Business Plan Competition 2009/2010 awards to 10 institutions on March 18. The Deputy Minister said in this respect, the ministry fully supports competitions, such as the MSC Business Plan Competition, because we see tremendous value in the innovative and technological entrepreneurship exploration. The annual competition is jointly-organised by Multimedia Development Corporation (MDeC) in collaboration with several institutions of higher learning in Malaysia under the National Unipreneur Programme (NUDP), which is anchored by MDeC’s Technoprenuer Development Division. He said today’s award winners would be channeled through MDeC’s technopreneur programmes that would mould both participants and business plans into feasible ventures. Kolej Damansara Utama won the grand prize of RM7,000 for inventing an “SMS controlled multi-socket plan” which allows home owners to control home appliances when away from home. International Islamic University Malaysia received RM5,000 cash for their “Foot Mouse” idea which is specially designed for the physically disabled who are unable to use a computer mouse with their hands.

WNS appoints Murugesh as CEO
Business Process Outsourcing (BPO) giant WNS (Holdings) recently announced the appointment of Keshav Murugesh as CEO and elected him to the board. Murugesh, who was the President and CEO of Nasdaq-listed Syntel – a global IT services and Knowledge Process Outsourcing (KPO) firm – takes over the company as Neeraj Bhargava, co-founder and CEO, stepped down from the post on Jan 31. “This is a great opportunity. It was great to work with Bharat Desai and the team at Syntel. WNS is a great brand, the talent in the company and the market potential is huge. I clearly see a positive recovery for the industry going ahead. I will be fully focused on top line growth, customer centricity, operational and financial metrics, and driving innovation across the enterprise,” said Murugesh.

Event on credit card security
A conference on “Payment Card Industry Data Security Standard- PCI DSS” will be held in Kuala Lumpur from 27-28 May. The conference is targeted at reducing credit card fraud by implementing PCI DSS/ PA DSS standard for all merchant banks, ICT service providers servicing banks and credit transaction companies, payment gateway companies and all on-line payment transaction service providers. There is a one-day seminar followed by two sessions of practical workshops on security controls which carries a certificate of completion issued by TUV Rheinland. Those interested may contact Capt. Rajkumar, capt.raj@macrofirmtechnology. com or call +012 7201304.

Fujitsu’s new president for Malaysian operations
Fujitsu, a provider of IT-based business solutions, announced the appointment of Mr Charles Lew as President of Fujitsu Malaysia. In his new role, Lew will assume overall responsibility for driving business growth and profitability of the company’s operations and is responsible for the overall direction and market strategy for sales, marketing, services and support operations. In particular, he will focus on growing Fujitsu Malaysia’s IT services business by leveraging on the company’s longstanding reputation for technology excellence and service reliability. The Malaysian reports to Lawrence Wee, Regional CEO of Fujitsu Asia, and replaces Masaya Motegi who has assumed a new leadership position within the Fujitsu group.

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happenings | Outsourcing

yMantec Corp recently announced Backup Exec 2010 to help mid-sized businesses save time and money by protecting more data and utilising less storage. Backup Exec 2010 offers fully integrated data deduplication and archiving technologies and is the first backup and recovery solution to offer granular recovery of Microsoft Exchange, SQL and Active Directory in VMware and Hyper-V environments from a single pass backup. Backup Exec also adds new support for Microsoft Windows 2008 R2, Hyper-V R2, Exchange 2010, Windows 7 and VMware vSphere 4.0. “Organisations of all sizes are struggling to effectively manage information growth, particularly as they leverage virtualisation technologies, creating new backup and recovery complexities,” said Andre Xavier, regional product manager, information management group for Symantec Asia Pacific and Japan. “Deduplication and archiving have primarily been enterpriseclass technologies, but Backup Exec 2010

s

symantec serves up Backup exec 2010
brings them to the masses to solve difficult IT challenges in an extremely simple and easy to use solution.” According to industry analyst firm IDC, storage capacity is growing between 48 and 50% each year, placing more data at risk and making the disaster recovery process much slower. In fact, approximately 70% of data is duplicated and has not been accessed in more than 90 days. Organisations that implement an integrated deduplication and archiving solution can realise up to 20-40% savings in storage costs and easily find and recover their critical information when they need it. Delivering on Symantec’s deduplication strategy, Backup Exec 2010 offers a flexible approach to eliminating duplicate data without adding complexity. Backup Exec offers integrated deduplication technology at the client/source and media server, in addition to integrating with third-party deduplication appliances through the Symantec OpenStorage Technology (OST) program. Deduplication allows organisations to dramatically reduce backup storage costs by consolidating and re-using existing storage resources, and client-side deduplication minimises backup windows and reduces network utilisation by up to 90%. Deploying Backup Exec deduplication technology is a simple three-step process that does not require an additional point product: install the deduplication option, define the deduplication storage location and then target the backups to that location. Backup Exec 2010 will also allow organisations to easily automate deduplicating backup sets from one media server to another over a WAN to reduce data across larger distributed environments, such as remote offices for disaster recovery purposes. With integrated deduplication, smaller remote offices will be able to replace local tape-based backup with an off-site backup plan that targets a central Backup Exec media server or central NetBackup PureDisk environment, minimally impacting the network.

Kelly services Malaysia makes two key appointments
Kelly services Malaysia announced the appointment of Melissa Norman to the post of Managing Director, while Anthony Raja Devadoss assumes the position of Regional Senior Director – APAC, Kelly Outsourcing and Consulting Group. Both appointments are effective March 2010. Melissa brings with her a wealth of experience and a deep understanding of the workforce solutions industry. Having managed Kelly India and Kelly Singapore in interim roles as Country General Manager and Vice President respectively, Melissa anthony currently also serves as Raja Devadoss Regional Service Director, Kelly APAC and is responsible for conceptualising, designing and implementing effective business processes, training and workflows to promote a competitive organisational environment for Kelly businesses in the region. In his role as Regional Senior Director – APAC with the Outsourcing and Consulting Group of Kelly Services, Devadoss is responsible for bringing the range of Kelly Outsourcing and Consulting Group’s (KellyOCG) customer solutions into Malaysia, India, China, Philippines, Indonesia and Singapore. Heading all six specialised divisions in KellyOCG, he also leads teams in the conceptualisation, design and implementation of Human Resource Outsourcing and Consulting programmes in Recruitment Process, Contingent Workforce, Business Process, HR Consulting, Global Executive Search, Career Transition and Organisational Effectiveness Consulting.

Unisys appoints new chief for APAC outsourcing
Unisys has appointed a Sydneybased new head of its global outsourcing and infrastructure services for the Asia Pacific region. Scott Whyman has been elevated to the position of vice president and general manager, Global Outsourcing and Infrastructure Services (GOIS), Asia Pacific reporting to Tony Doye, who is the senior vice president and president, GOIS. In the role, Whyman has full accountability for the Unisys outsourcing business in Asia Pacific. Whyman takes on the job with 25 years of IT and outsourcing experience including 15 years with Unisys. Most recently he was based in Singapore as vice president and general manager for Unisys Asia covering China, Hong Kong, Taiwan, India, Malaysia, The Philippines, and Singapore. Previously Whyman held sales and general management roles within Unisys Australia and New Zealand, and prior to joining Unisys he was managing director of the PCS Group, a private Australian technology and services firm, and divisional chief marketing officer for Australian Consolidated Press (ACP).

Melissa norman

March-April 2010 | Outsourcing |

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Outsourcing |

light takes

age of innocence
“The things which the child loves remain in the domain of the heart until old age. The most beautiful thing in life is that our souls remaining over the places where we once enjoyed ourselves.” • Kahlil Gibran (Lebanese Poet) “Every child is an artist. The problem is how to remain an artist once we grow up.” • Pablo Picasso (pix) “There is no absurdity so obvious that it cannot be firmly planted in the human head if you only begin to impose it before the age of five, by constantly repeating it with an air of great solemnity.” • Arthur Schopenhauer (German Philosopher) “The few wonders of the world only exist while there are those with the sight to see them.” • Charles de Lint quotes (Celtic folk musician) “The innocent and the beautiful have no enemy but time.” • William Butler Yeats (Irish poet) “Innocence is always unsuspicious.” • Thomas C. Haliburton (Canadian Writer) “Innocence can be redefined and called stupidity. Honesty can be called gullibility. Candor becomes lack of common sense. Interest in your work can be called cowardice. Generosity can be called soft-headedness, and observe: the former is disturbing.” • Abraham Maslow (American Psychologist) “Innocence of heart and violence of feeling are necessary in any kind of superior achievement: The arts cannot exist without them.” • Louise Bogan (American Poet) “Innocence is like a dumb leper who has lost his bell, wandering the world, meaning no harm.” • Graham Greene (English novelist) “To become truly immortal, a work of art must escape all human limits: logic and common sense will only interfere. But once these barriers are broken, it will enter the realms of childhood visions and dreams.” • Giorgio de Chirico (Greek-Italian painter)

Outsourcing
uNs producing communion wafers in France were shocked to learn that authorities contemplated buying cheaper ones from Poland. It is one of the most potent symbols of the Christian church: the thin, round unleavened wafer used in the celebration of holy communion. Traditionally this “sacramental bread”, representing the body of Christ, has been made by nuns as a source of income for their communities. But the good sisters of France have found that even the body of Christ is subject to free market forces, reported UK’s Guardian.

threat to french nuns’ holy industry
In a temporal battle that threatened to take the bread from their mouths, nuns producing communion wafers for French churches were shocked to learn that the religious authorities at Lourdes – one of France’s holiest shrines – were contemplating buying cheaper hosts from Poland. To add insult the Polish “hosts” are made by a secular workforce. Sister Marcelline, from the Carmelite convent at Carmel de Saint Germainen-Laye just outside Paris, said: “Foreign producers, namely those from Poland, have undercut the market.”

N

Women more satisfied working in public sector than BPos
WomeN working in public sector undertakings (PSUs) are more satisfied than those working in private outsourcing companies, says a study by the Associated Chamber of Commerce and Industry of India (Assocham). “Majority of working women gave priority to PSU sectors because the sector provided them job satisfaction, including reasonably good annual income, with job security and convenient working hours besides a healthy work environment,” the study, “Empowering the Women”, said. Releasing the findings of the study, Assocham president Swati Piramal said women engaged in BPO sectors are least satisfied with their jobs. “It is found that women employed in this particular sector feel lack of personal growth and development since they perceive less room in the decision-making process and less flexibility in working hours, besides pressures to perform and deliver targets,” she said in a statement. The study was done on women working in areas like banking, finance, power, petroleum and consultancy. It is based on a sample size of 773 working women across 11 Indian states, mostly in metros.

smaller and leaner Playboy
scott FlaNders, CEO of Playboy Enterprises, said outsourcing could trim the Chicago company’s staff of 573 by 50% this year. The company is aiming to be “smaller and leaner,” The Chicago Tribune quoted Flanders as saying. Since Flanders took over in June, Playboy has outsourced production of its monthly magazine and struck a deal to outsource its Asia operations to IMG Licensing Worldwide. Playboy may expand that option with IMG to include Europe, Flanders said. The aim is to be smaller, but diversify. The company plans to continue to work with partnerships to open a casino in Mexico and a Miami nightclub, the newspaper said. Business analyst Steve Marascia at Capital Securities management Inc. said outsourcing made sense for Playboy. Lacking the funds necessary to expand its brand, “the next best thing is to farm it out”, he said. “This is probably the only viable option.”

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| Outsourcing | March-April 2010

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