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Skyline Business School |
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Skyline Business School |
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Issue:14
IT, BPO firms to curb salary hikes
Bad news for IT and BPO workers. Business is booming, there are jobs galore, but
already IT and BPO companies are looking for ways to curb salary increases. More and more
BPO companies are planning non-poaching pacts to prevent job-hopping by employees, keeping
salaries in check as well. The BPO industry in particular has been susceptible to a high
degree of staff attrition. It is not only fatigue, but also the urge to go in for higher
education or odd timings that have made BPO workers drop out. Very often the "short
gains" in salary have prompted employees to move from one company to another. The BPO
firms in a particular region, from time to time, have therefore got into huddles to
prevent excessive job hopping. With the BPO wave on, the Indian companies are finding that
hiring and retaining software engineers at reasonable salaries is virtually impossible.
Multinational companies are solving the problem of labour crunch by paying salaries, that
while being high by Indian standards are nevertheless still well below US and Western
European costs. A Hewitt Survey predicts the salaries of junior management and software
professionals in the IT services industry in India will go up 16.3 per cent this year,
compared to 15.3 per cent last year. Salaries of senior management will grow by around
11.8 per cent over last year. Of course, the high salaries and higher turnover rate will
not have much effect on the big Indian companies and the MNCs in hiring and retaining
staff, smaller companies will be hit as they would fail to keep up with the competition.
Source: www.idg.com.sg
April 19th 2004
Spectramind may lose MS business
Software giant Microsoft, which outsources a significant portion of voice-based
support work to Indian vendors, could discontinue its existing relationship with BPO firm
Wipro-Spectramind. One of the reasons why Wipro-Spectramind has given a subdued guidance
and announced a drop in net employee additions is because of the likelihood of Microsoft
pulling out. Wipro-Spectramind won a $10-million deal from Microsoft during the September
2003 quarter. The software company has been a Wipro customer for the past two years.
Wipro-Spectramind admitted to difficulties in attracting and retaining talent while
announcing its annual and quarterly numbers last week. "The net decrease of 156
employees in the BPO business in the last quarter has been because of a number of one-time
projects executed during the Christmas season and one-off product launches closing
down," the firm said. The firm lost CapitalOne, a customer account, which had 350
people working on it and another process involving nearly 400 people. A redeployment of
700 people as a result of this could have led to a drop in net additions, sources said.
However, analysts expect a near term slowdown in the firm's business due to this. Both the
firms are not ready to publicly confirm about the severance of business ties.
Source: The Economic Times, April 20th 2004
Gartner doubts viability of Indian BPOs
The recent acquisition of Daksh eServices by IBM raises serious questions about the
viability of Indian-owned business process outsourcing providers, according to analyst
firm Gartner. Daksh is one of the best-managed Indian BPO service providers and its
acquisition will reinforce the view that managing such rapid growth is proving to be a big
challenge for many "local" Indian entrepreneurs. Many MNCs are making major
moves into offshore outsourcing and this raises serious questions about how many
"pure-play" Indian providers can survive their pressure, Gartner said. The
explosive growth in the Indian offshore BPO industry in the past two years has begun to
expose some newer Indian outsourcers' fundamental weaknesses in managing this growth and
particularly the demands of a rapidly-expanding workforce, Gartner analyst Sujoy Chohan
said. Established information technology service providers like Infosys, Wipro, TCS and
HCL Technologies have been able to develop their skills in these areas over many years.
For the new players, human resources issues like attrition and security are emerging as
serious management challenges, he said. The result is that management resources are
strained and many entrepreneurs are tempted to cash out while the market will still pay
premium prices for their companies, he said. On the deal, he said it is a step further in
IBM's ongoing efforts to strengthen its India delivery capabilities. Daksh will certainly
increase IBM's capabilities in the offshore contact centre market.
Gartner has recommended that enterprises considering pure-play offshore BPO providers must
recognise that offshore outsourcing requires a long-term commitment from both parties
involved. As the offshore BPO market accelerates and consolidates, size and management
experience will become critical decision factors.
Source: www.us.rediff.com
April 19th 2004
Valtech to up Indian team by 700
French IT consulting company, Valtech, has launched its first offshore development
facility in Bangalore. The $100 million company specializing in advanced technology
solutions uses a unique software delivery process based on the agile & Unified Process
(UP) methodologies. Valtech utilizes open technologies based on the key building blocks of
J2EE, .NET, XML and UML. 'DuoShore' is a trademarked concept from Valtech. The DuoShore
approach makes it possible for its onshore (client location) consultants and offshore
(India) development teams to work together in close cooperation and to provide seamless
global IT development and operation (support & maintenance) to clients in other parts
of the world. High-speed and secure data communication is in place to allow engineers and
managers to communicate on a real-time basis. Clients on the other side of the globe can
monitor development and project milestones on an up-to-the-minute basis, ensuring both
quality and progress. Jean Yves Hardy, Chairman and CEO, says, "We have the advantage
of the existing client base from our global operations which would be supported by the
team in India. Valtech India, currently has about 100 people and we will be targeting 800
employees by the coming year to keep pace with our expansion plans."
Source: www.ciol.com
April 19th 2004
Exult and Circuit City Win 2004 HRO Award for 'HRO Relationship of
the Year: Retail and Manufacturing'
Exult, Inc. the innovator and leading provider of HR-led business process outsourcing
(BPO) for Global 500 companies and other large complex corporations, and Circuit City
Stores, Inc. a leading U.S. consumer electronics retailer, have won HRO Today's 2004 award
for "HRO Relationship of the Year: Retail and Manufacturing." Both companies
were honored with this inaugural award at the Human Resources Outsourcing World Conference
& Exposition in New York City. According to Jim Madden, Exult's founder, Chairman and
CEO, Exult is providing Circuit City with bottom line savings while improving HR processes
using the latest technological advances.
Source: www.prnewswire.com
April 20th 2004
Aviva BOTs three BPO units
Aviva Plc has become the first financial entity in the Indian BPO space to marry
not but 3 BPO outfits - the Mumbai-based WNS Global Services, the Delhi-based EXL and the
Bangalore-based 24X7. The UK-headquartered insurer, testing the waters the Indian market,
has decided to opt for the build, operate and transfer (BOT) model.
This follows Aviva's announcement last year to create 3700 jobs in India by the end of the
calendar year 2004. Aviva has opted for the BOT model, as it prefers to "work with
experienced suppliers who will set up the operation for us, using their local knowledge
and expertise to establish the operation and get it running efficiently," said Sue
Winston, head of group media relations, Aviva Plc. The operations will be transferred at a
later stage. The BPO centers will take care of recruitment of personnel, their training,
look after the facility and run the entire operations for a defined period before the
entire setup is transferred to Aviva. By not deciding upon a single BPO center, Aviva is
ensuring that should one center not perform to the mark, its outsourcing operations will
not be affected. The benefits of BOT being the MNC gets a headstart using the domain
expertise of the alliance partner and can at the same time retain full control of the
center without having to set up a captive unit. The jobs created in India will comprise
2350 jobs to service the UK general insurance business and life insurance businesses,
including approx 350 call center roles, 2000 back office, administration, processing as
well as IT roles, as well as 150 administration roles to support the general insurance
business in Canada.
Source: Business Standard, April 23rd 2004
BPO: Attrition, not language the big hassle
English is not the only language that Indian Business Process Outsourcing companies
are capable of doing business in. A survey commissioned by the Indo American Chamber of
Commerce and carried out by Ernst & Young, shows that 13 per
cent of third party BPO vendors surveyed are already supporting foreign languages.
"Indian call centers are offering services in languages like Spanish, French and
German. It is something that some call centers are building up as it will help them offer
their services to a larger set of clients and markets," said Ranjan Biswas, partner,
Ernst & Young. The survey interviewed 23 third party BPO vendors located at key cities
across India and was released during the Global Offshore Outsourcing Summit 2004 that
started in Mumbai on Tuesday. Its survey has revealed that 48 per
cent of the participants have more than three years of experience in the industry
and over 30 per cent of them service Fortune 500 clients. The large vendors in the sample
had an average of nine Fortune 500 clients. Not surprisingly, these vendors have been able
to post growth in excess of 50 per cent, in line with the
industry growth rate. Much of this growth has been possible because of the quick ramp up
that the companies have been able to achieve in hiring. On an average the survey
participants had employee strength of over 1700. Twenty-two per cent had over 3000
employees and 78 per cent had facilities in more than one city. Thirty-five per cent
operate from tier II cities as well. Yet extremely high attrition
and absenteeism plague the industry. Human resources is largely considered the most
critical input for the exploding BPO business. What sets the industry leaders apart is the
ability to ramp up quickly without compromising on quality or delivery schedule. However,
severe competition from within the industry has forced third party vendors to attract the
right kind of people.
Compounding the challenge are the following factors:
1. Most employees are fresh college graduates who are attracted by higher pay rather than
career building opportunities. There is a constant requirement to ramp up within extremely
short timeframes of 30-90 days.
2. There are also health related issues and lifestyle changes where employees work night
shifts.
3. Attrition averages 40 per cent for voice-based process and 25 per cent for non-voice
based processes.
4. There is also the problem of absenteeism. On a daily basis, 2-8 per cent of the
employees in the voice segment remain absent.
Source: www.rediff.com
April 21st 2004
Prepared by - Abhimanyu Puri,
BBA-MAHE-L1-S2
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