European Firms not Confident of Outsourcing to India

Many European firms have found India’s offshore model inadequate for the kind of work they would like to outsource, a report by market research firm Forrester has said.

“Several European firms sent large teams to India during the past six months as a way to test the offshore waters, but we found that these initiatives lacked a solid vision and strategy for the type of work to be sent offshore, Senior Analyst with Forrester Sudin Apte said.

The report ‘Offshoring Strategies for Continental European Firms’ found that Indian providers struggle to build up meaningful local presence.

Their risk-averse approach means that they won’t make even smaller local staff acquisitions unless they see a direct and immediate increase in their European sales books, it said.

The report has also advised Indian offshore providers eyeing continental European business that they must change their risk-averse attitude and invest in building sizable local capability to win deals from European firms.

The report highlights that both Indian as well as European offshore providers have problems helping their European clients go offshore.

Source from: Economictimes.com

Vietnam – The Next Hub for Offshoring

An industry expert has predicted that Vietnam will overtake India and China for offshoring in the next four years.

Vietnam could potentially overtake India and China as a site for outsourcing by the year 2012, an industry expert has said.

At a forum on doing business in the region this week, Paul Smith, the managing director of recruitment and software firm Harvey Nash, said the country will become the most desirable place for outsourcing services – including IT – in the next few years.

“The duopoly India and China have long enjoyed within IT outsourcing is fast coming to an end – and rightly so. With deregulation, accession to the WTO and UN Security Council as well as significant overseas IT investment, Vietnam is becoming the outsourcing destination of choice for international business, not simply the poor relation,” Smith said at the forum.

“Vietnam has always offered a highly skilled labour force and low costs, but this coupled with economic expansion, political stability and diplomatic acceptance means the decision to choose it as an offshore destination has become a no-brainer,” he added.

His views were echoed by Andrew Cahn, the chief executive of the UK’s trade and investment. “UK companies such as BP, Prudential and Harvey Nash have led the way into Vietnam, but opportunities exist for all aspects of UK industry, from retail services to infrastructure development and financial services to IT outsourcing.”

This is because it has staff churn of just five per cent, a skilled, young IT workforce with strong language skills, and low operation costs, he said.

“India is becoming very expensive. There’s a skills shortage because there’s so much demand… and it’s pushing wages and prices up even more,” Smith told IT PRO. That demand has pushed annual staff turnover to 25 to 30 per cent, he said, compared with Vietnam’s five per cent. “It’s a major plus,” he said.

Smith said the country has a young workforce, with over 60 per cent below the age of 25, compared to the UK’s rate of 23 per cent below the age of 30. And, 83 per cent of graduates study science – compared with just 11 per cent in the UK.

“China has challenges with language and cultural skills,” he added. “It is expensive to get people with good language skills.” But in Vietnam, “written English is better than in most other countries,” he said.

Smith also stressed that the taxes are low and the country has strong growth. It has the second highest GDP growth, after only China, and has seen over seven per cent growth for the past twenty years.

That growth has helped Vietnam raise many of its people out of poverty, as well. In ten years, the country has gone from 80 per cent of the population below the poverty line to under 15 per cent. “That is lower than India,” stressed Smith.

But Smith warned companies looking to outsource in Vietnam – and anywhere else – to be cautious. “Like any new country you go into, make sure you understand the dynamics,” he said. “If it was really, really easy, everyone would be doing it already. This is for early adopters.”
Source: Itpro.co.uk

What Differentiates Knowledge Process Outsourcing from BPO

Financial services knowledge process outsourcing (KPO) industry is expected to be worth $5 billion by 2010, a study by KPMG said.

Sharing his views on the report, Pradeep Udhas, Global Partner-in-Charge, Sourcing Advisory, KPMG, has said that the success in offshoring business operations has encouraged many multinationals to start outsourcing key business processes and high-end knowledge work. The KPO phenomenon will have far reaching consequences for the global financial services industry over the next three years.

He feels that there is likely to be a significant shift in the boundaries between ‘outsourceable and ‘non-outsourceable activities; offshoring strategies are expected to embrace new locations and most global banks and insurers are expected to adopt KPO strategies, the study says.

Decisions about outsourcing may be accelerated to preserve and increase competitive advantage; boutique providers will leverage KPO to create new services and offerings and more rigorous regulatory and compliance control will likely be demanded as KPO providers deliver more complex services.

India is expected to remain a preferred location for KPO activity but organisations are expected to look for alternative locations for additional delivery centres, both from customer and service provider perspective.

The study also says that there are a few limitations on the potential growth of the KPO industry over the next three years like skill-set shortage, a declining U.S. dollar and compliance and regulatory pressures.

Some of the key challenges that can emerge in the industry are: maintaining high quality standards, investment in KPO infrastructure, lack of talent pool, requirement of higher level of control, confidentiality and enhanced risk management, it points out.

It says that the KPO industry has indeed come off age. Clients are recognising that process complexities, higher billing rates and skilled resources requirements differentiate KPO from BPO.

Source from: Hindu.com