Consider the Source

Selecting a Sound Sourcing Location Amid a World of Change

By Dinesh Goel, Partner, TPI India

As service delivery destinations have become increasingly globalized over the years, selecting the optimal location for a sourcing engagement has become a more and more complex process. While the number of possible locations has grown dramatically, each destination is also busy self-promoting, creating a competitive atmosphere that further magnifies the difficulty of your decision.

What might appear to be a relatively straightforward choice based on general awareness of popular countries and cities, selection is — in reality — a much more nuanced process that requires ever-more-careful consideration.

Here are the TPI Top 5 considerations for selecting your next sourcing location: 

1. Risk. Amid ever-increasing economic and geopolitical uncertainty, risk assessment is critical in selecting an outsourcing location that ensures business continuity. Thorough risk assessment requires an objective, detailed review of the economic, political, civic, and natural calamity-related characteristics of each location.
   
   
2. Human capital. The availability of the talent pool in a specific location will determine the scalability of your sourcing operation over time. Deep insight into the suitability of offshore service delivery potential, the level of training required, and the demand-supply balance in terms of density of offshore employment will help you make the best decision.
   
   
3. Infrastructure. Infrastructure can play spoilsport when ensuring a robust, secure, scalable and dependable operation. Determining the state of the current physical and technology/telecom infrastructure, the historic level of investment in infrastructure and a realistic sense of projected investments are all vital to your final destination decision.
   
   
4. Maturity. Understanding a specific location in the context of the entire offshore service delivery industry will help you assess and define its current maturity level. It’s important to gauge the industry as it has developed over time: how it has progressed over the past five years, its relative current state, and its likely future state. In some countries, such as India, domestic sourcing is growing rapidly in some delivery locations that were traditionally considered “offshore,” further adding to the maturity and complexity consideration of your location decision.
   
   
5. Cost. Last, but not least, in establishing the business case for your location selection, take into account the delivery cost per full time equivalent (FTE) or per transaction. Given the rapidly changing dynamics of various locations around the world, it is essential to understand the “go forward” view of your overall cost. Wherever you ultimately elect to go, you don’t want to revisit that decision in the near future.

The global service delivery experts at TPI are experienced in helping clients assess their global sourcing needs and select the optimal location(s) to pursue. For more information on selecting your outsourcing location or any other global service delivery question, contact Dinesh Goel, Partner, TPI, at dinesh.goel@tpi.net or +91 98458 93787.

New Mecca of Outsourcing – Middle Eastern Region

By Dinesh Goel, Partner, TPI

As the outsourcing industry globalizes, new regions and countries are joining the bandwagon both as markets of demand for outsourced services as well as to supply talent for servicing the demand.

With the onset of 2009, TPI has targeted a few countries/regions as new geographies for offering sourcing advisory services. The selection criteria, apart from other factors, obviously included the current volume of outsourcing activity and the medium term potential of these markets. The mid-east region is one example.

In discussions with prospects, service providers and market influencers, we find that this is an interesting and encouraging market for multiple reasons.

• Firstly, we find that in places such as Dubai, businesses are going through a severe downturn due to current economic pressures – a phenomenon that is fueling interest and potential demand for outsourced, or even off shored, services.
• Secondly, in general the consulting industry is well established for important initiatives which are complex, transformational, unprecedented or potentially risky. That seems to be the trend with both the public and private sectors.
• Thirdly, there is considerable demand for implementing contemporary IT solutions and infrastructure with large spends as organizations want to become more competitive and prepare for growth in countries such as Saudi Arabia.

An important indicator of the growing interest in outsourcing: Arab Outsourcing Conference is being held for the first time ever this year in Dubai. The organizers are bullish about senior level participation in this conference.

However, outsourcing of services – other than AMC or break fix support contracts – is not an established and mature model for the most part across the region. Hence all interested market participants should expect, as in any other such market, to spend cycles educating the buyers of these services on the benefits and risks involved.

I am very interested in learning from your experiences and thoughts on this region.

 

Indian Providers: Those Things in the Forest are Called Trees

We recently hosted a roundtable with senior sourcing executives from some major companies. The discussion was far-reaching  and quite provocative. One topic really brought out the passion: These executives just don't see eye to eye with Indian providers.

I’ve written previously about the conversations I’ve had with most of the leading executives of the major India-based providers. To a person, and to a company, they cite their firm commitments to quality-based relationships geared around productivity.

The earful I got at the roundtable suggested that is lip service. The senior sourcing executives voiced an escalating level of impatience with the offshore providers on the essential question of the business model. They said they saw no evidence that Indian providers are willing to be measured by objectives such as service levels and output.

I’ve long held the view that the deeper entrenched the India-based providers become in a model that is focused almost exclusively on lower labor costs, the harder it will be for them to “mature” to what clients really seek. Indeed, several of the senior executives at our roundtable said the deadline had already passed, so they are moving on to do business with providers that are willing to commit to true outsourcing, with true service measures.

Sounds like the race for bodies is giving way to a race for services.

Cultural Lessons: Another Take on China vs. India

At a recent meeting in Dalian, China, I was chatting with a site manager for a leading India-based service provider. Naturally enough, the topic of workforce management challenges came up, so I took the opportunity to ask about the relative difficulties in attracting, training, and retaining employees for business process outsourcing operations.

The site manager started off by confirming what I already knew – then he threw me a curve ball. First he told me that China, like India, has an abundance of trained young professionals. Check. Then he said that attrition on his team was roughly equal to that seen at his company’s India-based operations. Again, no surprise. But then he explained why professionals often quit their jobs in this industrial city in northeastern China.

First, a few reminders: In India, employees start to leave as they acquire additional skills and  experience and the forces of supply and demand make it possible for them to get a better wage by jumping to another job. Young professionals are feverous for opportunities to grow, so managers have to develop employees and keep offering challenges and potential for advancement.

The cultural forces take a different form in China, I learned. Many employees grew up as only children – with all the focused nurturing that entails – with the result that managers often find it difficult to supervise them. As the Dalian site manager told me, you can't be harsh with employees, else you risk them quitting. They are not accustomed to anything less than positive feedback, he explained. (We've read about this same sense of entitlement among the young professionals now entering offices in the U.S.)

Figuring that this manager's experience might be an aberration, I did some more asking around. Sure enough, I heard the same from several other managers of China-based companies and even from managers at multinational firms with operations in the country. 

No one is saying that one country's professional workforce is better than the other. Rather, the lesson is: Cultures matter, and in outsourcing and offshoring, it’s all about getting the best people to do the best work. Techniques for attracting and retaining that talent are unique to each country.

The Great Divide?

When the topic of offshoring comes up in most settings, the conversation invariably turns to culture. The frequency of mention reminds me of my days working at a Wall Street investment bank: Culture was mentioned so often that one felt that the bank was in the yogurt business!

Recently, however, I’ve begun to detect some bristling among client executives who deploy and manage offshore operations when they are presented with the roster of “cultural challenges” related to offshore operations.

Many would like to see the industry solve the culture problem once and for all, but it isn't going away anytime soon.

In the words of one senior IT executive, “The industry needs to move beyond the excuses of cultural differences if it wants to add maximum value to my business.”  Implicit here is a bit of impatience with the challenges related to blending the business models of Western-based clients and emerging economies. The executive was referring to India in this case, but it could have been Brazil,  China, Poland...

I recently came a cross a great article, Five Challenges India Offshore Teams Face in Working with Americans, authored by Dr. Karine Schomer that explores these cultural differences. It includes a nice summation of the bridges that need to be built.

Although most of the concerns about offshoring have been directed to the developed countries in which jobs and wages appear threatened, I’m sensing a growing anxiety with the cultural complexities being experienced.  Western executives are asking, “As the client, shouldn’t MY culture matter as much as that of the offshore destination?”

With an industry that is trying to demonstrate its maturity across a range of technical, political, economic, and managerial spectrums, many clients are expecting that the cultural gaps will abate.

Personally, I find this to be a critical measure of maturity for the offshore business model and proposition. It’s only when the services are seen to be seamless that will we move beyond the first-generation of offshore solutions. To be clear, this isn’t about accents on the telephone. Diversity is a great thing, but inefficiencies driven by lingering cultural differences are a drag on the industry.