Skyline Business School
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Skyline Business School |
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BPO
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Issue 41
Offshoring to lose cost edge: Gartner
Around 80% of companies that outsource customer service projects to cut costs
will fail to do so by 2007 because of high staff attrition rates in offshore
call centers, research firm Gartner has predicted. Worse still, many companies
that go for outsourcing neglect to manage their outsourced operations.
“Companies are not looking at processes from a customer point of view and this
is risky,” said Gartner research director Alexa Bona.
Gartner predicted that through 2008, some 60% of companies that outsource
customer-facing functions, will face client defections and hidden costs that
outweigh any potential cost savings. The Gartner survey, however, predicted that
the customer service outsourcing market would continue to grow, from $8.4
billion in 2004 to $12.2 billion in 2007, although the
offshore element will still only account for 5% of that market by 2007
(up from 2% at present).
It said it is possible to save between 25% and 30% if outsourcing is carried out
carefully. But badly managed projects can “reduce the quality of the customer
experience, dilute the brand values of the company and fail to deliver cost
savings.”
In-house call centers typically lose 19-25% of staff each
year while offshore centers can see 70-80% turnover.
It predicted that 70% of the top 15 Indian-owned firms offering call centre
services will be bought, merged or marginalized by the end of 2005.
“Many of those smaller companies are owned by VCs. They have grown really
dramatically, and when you are growing at that rate, processes break down and it
becomes harder to retain staff,” Bona said.
Source: Agencies, www.sdcexec.com, March 11th
Gecis
bags $24-m order from int'l auto major
Pramod Bhasin, president and CEO of Gecis Global, the biggest outsourcing firm
in the country, announced that the company had bagged a $24m order from a global
auto manufacturer. The company wants non-GE revenue to contribute 25-30% of the
total revenues in ‘06, up from 1% in ‘04. According to Mr. Bhasin, the
non-GE business should deliver close to 50% of the company’s total revenues in
the next three years.
Gecis registered revenues of $426 m in ‘04. It plans to clock about 25% growth
to $525m in ‘05. The company currently employs 17,000 people out of which
13,500 are in India, 2,300 in Mexico and 1,100 in China. It also has 575 people
in Hungary. The company plans to raise its total headcount to 23,500.
Mr Bhasin said that the company is focusing on creating vertical expertise and
domain knowledge in industries like insurance and healthcare and tap revenue in
Europe and China.
Mr Bhasin didn’t name his non-GE clients. However, he said the company serves
a host of non-GE clients, which include companies in the pharma sector, computer
manufacturers, automobile, financial services, consumer products manufacturer,
airline, consumer electronics and media.
Source: Times
News Network, March 13th
Mphasis
to acquire Eldorado Computing
The $16.5 million acquisition of the healthcare benefits
management solutions firm, is aimed at increasing its footprint in the US market
The MphasiS BFL Group, provider of IT and BPO solutions, has entered into a
definitive agreement to acquire US based Eldorado Computing, a healthcare
benefits management solutions firm, for $16.5 million in an all cash deal. The
transaction is expected to be completed by March 31, 2005.
Commenting on the acquisition, MphasiS BFL chairman and CEO Jerry Rao said,
"This acquisition is part of MphasiS' overall business strategy to
strengthen its footprint in the US and to enter the healthcare insurance and
payment market. The deal is a perfect strategic fit for the company as it
provides a well-established software platform and marquis healthcare customer
base. This is the foundation on which the combined entity will offer a complete
portfolio of services to automate and outsource the processes related to
healthcare benefits, management."
"This is a high growth area and with Eldorado's platform we will be able to
become a business service provider in addition to being an application service
provider. The acquisition will position MphasiS as a first mover in integrating
a global sourcing back-end to a platform-based software offering", he
added.
Source: www.ciol.com, March 14th
Growth
of Multi-Process Human Resources Outsourcing Grew by 37 Percent in 2004,
According to Everest Research Institute Report
Among Key Findings: Cost Savings Increase, Smaller Buyers
Become an Important Segment, Global Transactions on the Rise, Technology Choice
a Key Differentiator
The outsourcing of three or more HR functions, commonly referred to as Human
Resources Outsourcing (HRO), grew by 37 percent in 2004, according to an
in-depth study issued today by the Everest Research Institute. The report, Human
Resources Outsourcing (HRO) Annual Report 2005, also found cost savings
accelerating for buyers, both large and small, and the scale of HRO engagements
increasing, as global deals become increasingly common.
Among the reports key findings:
-- Buyers - Prices across all segments have fallen over the last 4 to 5 years by
more than 20 percent as the market has matured, with prices for larger buyers
(in excess of 25,000 active employees) falling faster than those for small
buyers (with fewer than 25,000 active employees). However, the number of small
buyer transactions has recently crossed that of large buyers, and this segment
will see further price reductions as the market continues to scale and the
delivery model matures. While the offshore component has not been much of a
driver in HR outsourcing, its impact could accelerate in the future.
-- Suppliers - Major revenue opportunities for suppliers still abound. These
include the small buyer segment, less mature markets such as Europe and Asia,
and larger global transactions. Effectively penetrating each of these markets,
however, will require a different set of skills and technologies. Meeting the
needs of the small buyer segment, for example, will require that suppliers
effectively leverage a single technology platform to work for a number of
smaller customers.
-- Investors - Increased merger and acquisition activity is likely as suppliers
seek partners with complementary capabilities and large suppliers without
capabilities buy into the market. The European and Asian HR outsourcing markets
are far less developed than North America, and new VC-funded initiatives could
arise in these locations if established suppliers do not make investments. At
the same time, the window for organic new supplier entry is rapidly closing, and
established suppliers will have an advantage going forward.
Source: www.businesswire.com, March 15th
Now,
BPO pros get an agony aunt
Centre for BPO Professionals (CBPOP), a non-profit organization, is to
facilitate a platform for BPO and call centre professionals to discuss their
issues and find out solutions and to help them maintain their employability and
adaptability in the volatile market requirements. It has so far enrolled about
1,000 members in Hyderabad and Bangalore and soon it will have a full-fledged
office in Chennai. "CBPOP has been created with an objective to act as a
common voice for problems of BPO and call centre professionals and to help them
in times of emergency and distress," director, CBPOP, J S R Prasad
said.
Besides addressing psychological ailments and other health problems, CBPOP will
focus on helping the professionals maintain their employability and
adaptability, to cope with volatile market requirements and update their skills
to meet the future requirements," he added. CBPOP, a couple of days back,
organized a meeting with BPO professionals in Chennai and announced launch of
its operations in the city. BPO professionals from Ajuba, Office Tiger, Allsec,
and Sutherland and a few HR consultants participated and said "CBPOP is the
need of the hour."
Though the organization is intended for employees of BPO industry, CBPOP is
planning to involve top management of various BPO organizations to create a
platform for interaction and to design training programmes. In Andhra Pradesh
and Karnataka, it has tied up with universities and ITeS organizations for
skill-orientation programmes and knowledge transfer.
Source: Press Trust of India, March 16th
HSBC
to double BPO staff in Asia
Global bank HSBC Holdings Plc expects to double its Asian back-office workforce
in three years and axe more clerical jobs in the West to help it save more than
$1 billion. The world's second-largest bank by market value has 13,000 workers
in 10 global back-office service centers around Asia, providing mainly clerical
and phone support and replacing jobs in higher-cost centers in the United States
and Europe.
HSBC has four global service centers in India, three in China and one each in
Malaysia, the Philippines and Sri Lanka. HSBC is to formally open a fifth Indian
centre in Calcutta in November. It is also considering setting up a new centre
in Vietnam, where low costs and populations of English and French speakers could
make it suitable. A new centre usually costs the bank $20 million to $30 million
to set up.
Source: Reuters, March 16th
Nasscom
cheers bandwidth tariff cuts
TRAI has given a positive signal to the potential
investors and MNCs, and will help in further enhancing India's competitive
advantage in the IT and ITES-BPO industries: Kiran Karnik
Nasscom welcomes the decision of Telecom Regulatory Authority of India (TRAI) to
reduce ceiling tariffs for higher and lower capacities of international
bandwidth by about 70 percent and 35 percent respectively. In response to the
move, Nasscom president Kiran Karnik said, "this move by TRAI has given a
positive signal to the potential investors and MNCs, and will help in further
enhancing India's competitive advantage in the ITES-BPO and IT industry in the
global market."
Bandwidth is a critical component of the IT/ITES-BPO industry and Nasscom said
it had made a series of representations to TRAI and DoT earlier, highlighting
the criticality of the pricing issue, particularly at higher levels of bandwidth
capacity. Due to higher tariff and capacity issue, Indian IT companies and MNCs
were facing constraints in scaling up their operations, noted Nasscom.
Nasscom said it is hopeful that TRAI will take note of its other recommendations
with respect to reduction in domestic tariff rates to make them comparable to
international standards and resolving the interconnectivity issues between NLD
and ILD providers.
Source: www.ciol.com, March 17th
Customer
First bags Apollo contract
Will handle its call center operations across India,
through a specific toll free number
Customer First Services, one of India's largest domestic call centers and
headquartered in Bangalore, said it has bagged a prestigious contract from the
Apollo Group of Hospitals to handle their call center operations across India,
through a specific toll free number, proposed to be termed as "Apollo
Doctors”.
The Call Center would cater to Information dissemination, Resolution of Customer
Queries on various plans launched, coordinating customer requirements with
Apollo Hospitals, E- Marketing/Email Management, Scheduling of Appointments,
etc. The Call Center would also cater to the emergency services as well, in
certain locations.
Source: www.ciol.com, March 17th
2,50,000
more BPO jobs by 2009
Call centre markets of India and the Philippines are set to see further boom
through 2009, a study says. The report, "The Future of Contact Centre
Outsourcing in India and the Philippines", published by Datamonitor, an
American analyst firm, predicts that over 2,50,000 new call centre agent
positions will be created in two countries by 2009. And Philippines will be
poaching the market increasingly, which India currently dominates.
USA and UK are the biggest clients in the call centre industry. According to
Datamonitor, both India and the Philippines will see substantial growth in call
centers.
With the US presidential elections are out of the way, US businesses will now be
able to ramp up their offshore operations, via call centers, the report also
said.
More firms are set to follow the likes of British Airways, Citibank, General
Electric and HSBC, all of which have spun off a part or all of their operations
to India.
"Outsourcing providers are competing to run entire customer processes for
their clients, rather than merely the voice-based call centre part," said
Ryan Powell, call centre analyst at Datamonitor and author of the study.
"The fact that they are able to win this kind of work is testament to the
efforts that have been placed on assuring quality control over the past year or
so," Powell said.
Source: Press Trust of India, March 18th
Indian
BPO goes to Pakistan
The company has signed an MoU with Karachi based
Millennium Software to set up a call center in Karachi for its international and
domestic requirements
Spanco Telesystems and Solutions Ltd has informed BSE that it has signed a
Memorandum of Understanding (MoU) with Millennium Software Pvt Ltd (MSL) based
in Karachi, Pakistan, to set up a call center in Karachi for its international
and domestic requirements. This effort is in continuation to the initiatives
taken by NASSCOM during the visit of Indian IT/ITES delegates to Pakistan last
year on the invitation of PASHA (Pakistan Association of Software House) and IT
ministry of Pakistan. The company was part of the delegation.
Spanco will provide complete know how for setting up the call center and would
also advise MSL for operations, HR practices and training, the execution of
complete CRM for Pizza-Hut in Pakistan will also be done by the company as a
first project, as stated in the MOU.
Source: www.ciol.com, March 23rd
FOR
AUSTRALIA: The Asian experience
Outsourcing work overseas is becoming acceptable for more
Australian firms as it becomes harder to find accountants in Australia
The skills shortage in accounting is prompting more small and medium-size firms
to outsource work to Asia, but many are hesitant because of concerns about the
quality of accountants and confidentiality standards.
Peter Vickers, a sole practitioner in Lindfield, Sydney, is happy with his
outsourcing arrangement, which he had to set up after finding it impossible to
hire staff locally. To help achieve his goal, Vickers began outsourcing
bookkeeping work nine months ago to accountants in Bangalore, India, through a
Sydney outsourcing company, Back Office Shared Services. Since January, Vickers
has sent higher-level work (such as the preparation of financial statements, tax
returns and self-managed superannuation fund accounts) to two accountants in
Bangalore who work exclusively for his firm. He expects to have five accountants
in India working for him in about five years.
Dario Gamba, a director of the self-managed superannuation fund administrator
Super Advantage, says it has been sending work to India for processing for the
past 18 months and he has been happy with the results. "The quality is good
... it has been better than what I have seen from people in
Australia."
Australian firms are cautious about outsourcing work overseas because they are
concerned about whether overseas staff have sufficient training on Australian
tax rules and accounting software.
Source: www.brm.com.au, March 24th
Unisys
to up headcount to 4,500 by '08
American IT services and product firm Unisys Corporation plans to ramp up its
India workforce, including with its partners, to 4,500 by 2008, up from the
existing 1,150 professionals. "Unisys has sourced globally for more than 25
years. Our current expansion in India is an extension of this strategy and is
integral to growing our global capabilities," Unisys Chairman Lawrence A
Weinbach said at the launch of its 1,000 seat new building in Bangalore.
Unisys outsources software work with four Indian partners - Hexaware, Caritor,
NIIT and Tata Infotech - who jointly employ about 1,000 people. "The
partners will add 1,000 more people while we will hire 1,000 more people in
2005," Unisys India Managing Director Mukul Agrawal said. He said Unisys
has a roadmap to reach a strength of 4,500 people by 2008, which includes 2,500
people at its captive centre.
"India offers lower cost of operations and there is a demand from our
clients to move work to offshore locations," Unisys global sourcing Vice
President, Cal Killen said. Unisys last April said it would invest USD 180
million (Rs 810 crore) in India till 2008 and it has spent $10 million on the
new facility, officials said. Unisys India will provide end-to-end IT services
for its global customers, besides technical help desk support, BPO and IT
sourcing.
Source: Press Trust of India, March 28th
Why
Indian BPO guys are losing out to Filipinos
A recent survey by Singapore-based ACA Research and Michigan-based Fortune 500
staffing firm Kelly Services has said that the Filipinos are steadily
progressing in the BPO business and may outsmart the Indians soon.
While an Indian BPO agent spends less than a year (11 months) at a BPO, his
Filipino counterpart spends 19 months on an average in a company. When it comes
to conversion of calls into actual sales, Indian BPO agents are clear winners.
35 per cent of calls routed to India get converted into actual business as
compared to the Filipino rate of 25 per cent. While an Indian BPO guy takes 24
days to get trained, his Filipino counterpart spends only 19 days as a
trainee.
The Philippines is an emerging BPO hub because of cultural compatibility with
the west, especially the US. The Philippines was under the US rule for almost 50
years. The Philippines is the third largest English-speaking country in the
world. About 72 per cent of the population is fluent in English.
In the Philippines, similarity in legal and tax framework with the US has eased
the administrative bottlenecks for the American firms setting captive BPOs
there. Chevron Texaco, AOL, P&G, Accenture and Dell have set up centers
there. Major BPO hubs in the Philippines are Manila and Cebu City.
However:
Scaling up of operations is a major challenge that call centers in Philippines
face. The country has a small population. Universities churn out only 70,000 IT
graduates each year as compared to India where the figure runs into lakhs. India
churns out more than 4.5 lakh IT graduates every year.
Attrition rates in Filipino call centers are lower at 20 per cent as compared to
India’s – 31 per cent.
The hourly cost per seat in India is $3.18 as compared to Philippines'
$3.82.
Do Filipinos make better BPO agents than our Indian BPO
workers? The answer that emerges from the facts and figures from the survey by
ACA Research and Kelly Services is yes.
But these findings are only for the call centre domain. When it comes to
high-end BPOs work such as tele-radiology, engineering design or software
development, India leads the way.
Source: www.indiatimes.com, March 10th
Prepared by
Abhimanyu Puri, BBA (MAHE) 2nd year
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2652 4399
www.SkylineCollege.com