Niyamath Parveez

Not too many people are going to have sympathy for those in the baking industry but there are definitely hard times in that industry. Many observers believe that the reckless behavior of banks for the past few years has been the major factor in the current economic downturn and that their happiness to dish out loans to all and sundry has left many people in a bad way financially. This has led to many consumers to believe that whatever happens to bank staff is fair game but it should be remembered that they are people too with families to look after. This means that any consumer which finds it funny to gloat at anyone who loses their job, even if they are in the banking industry is probably a bad person. That said, there are definitely job losses taking place in this industry and there will be a lot more to come too.

Many banks now have to look at their structure and determine where they can make savings to give themselves a better opportunity of staying solvent. In recent years, outsourcing has proved to be a tremendous way for companies to save money and lower their labor costs and this is something that is definitely happening within the banking industry at the moment. There are many areas in which a bank or building society can look to place their work with an external agent without causing any great detriment to the work or service they provide customers.

This is very important because although there is a great need to lower costs and be far more streamlined and efficient, there always needs to be the focus on customer service. With so many banks operating at the moment, there is a lot of competition and if one bank starts to under-perform the rest of the banks operating in the area would be keen to swoop on their customers. Today’s modern consumer has changed and brand loyalty to entities like banks no longer exists. Your parents may have been happy signing with a bank and staying with them for their entire life but that no longer needs to be the case. If a bank provides poor service or lower savings rates or charges higher rates for an overdraft, they are likely to miss out on a great deal of customers. This is where outsourcing is a great opportunity as it can solve both of these problems. Yes, it will help lower the labor cost involved with operating a bank but it should also maintain the high standards that customers demand.

This is because some of the firms who are supplying the outsourcing capabilities are market experts in their respective fields. If they are providing support to a number of banks around the world, they will develop an opportunity to gain experience and become better equipped at dealing with problems and issues that may arise. This is why so many banking firms are looking to a third party agent to assist them with all their banking needs.

With the credit crunch causing a greater number of people to be unemployed, it is only natural that many people will be considering the idea of starting up their own business. It is true to say that now is a difficult time and some people will be shying away from taking on such a venture but it may be the best option. If you have an idea that you think can make you money, now may be the best time to devote your time to it, particularly if you have been made unemployed in recent times. There is a lot of help and assistance available to people who are looking to start up their own businesses and it is very important for people to consider outsourcing when kicking off a new company.

When people are looking to start up their own business, they will likely have a talent or skill in one particular field or area and this is going to be the core strength of the business. If this is not, then there is no chance of the venture being a success but as people have probably quickly realized, it takes more than a core strength to make a business venture worthwhile. You could have the greatest product of all time but if you are unable to promote the product or get it into the shops and to the consumers, it is never going to be a success. This is where many people are turning towards outsourcing as a means of making their product well known and raising the interest in it. This may seem like a costly venture but outsourcing some of the responsibility can make the chances of success much greater and this is something that people will have to consider when they are planning their budget and expenditure. This money could be spent on other areas but are these areas likely to bring back as much of a return?

The marketing aspect is something that is strange to many people and this is where outside assistance can really make a huge difference. People may be thinking that if their product is good enough it will sell but think about how many products and services there are available to choose from. It is probably fair to say that everyone behind a company completely believes in their own product or service and it is not possible for everyone to be right. Outsourcing the marketing element of a product or service launch to an external provider should allow any new firm to focus on where their strengths lie but also ensure they are giving their product every chance of being found and loved by consumers.

The same can be said for the distribution channels as it can be very hard to get your product on the shelves if you are new to the industry and have no contacts. Even great marketing may create a demand and buzz about your product but if you are unable to reach the stores, people will be unable to buy your good and consumers will turn to alternatives. Outsourcing in this field can make all the difference and it is little wonder that people are looking to do what they can to give themselves a better chance of glory.

There is no doubt that when used well, outsourcing is a tremendous way for a firm to make cost savings and to gain valuable experience and expertise in certain key business areas. It would be perfect for a firm to have experts and market leaders in every department but in the ideal world this is not a likely situation and certainly not one that would be cost effective to obtain and maintain. Focusing on key strengths and then gaining the support and assistance of external partners is a key reason why outsourcing is such a strong tool for a great number of organizations. The financial benefit can never be overlooked when it comes to business, particularly in the current climate but sometimes there needs to be a greater awareness of the overall benefits to a business.

This means that when a firm is looking to outsource some of their workload or departments, there needs to be focus given to what experience and expertise the new partner will bring to the agreement as opposed to can they help slash costs. Criticism of the trend towards outsourcing focuses on the lack of personal touch that some business are able to apply to their customer base and a growing displacement from the everyday running of the industry. This is not the case for every firm but if payroll and inventory systems are completely outsourced and the replies and responses are limited, how can a firm react to any problems that arise with their customer base?

This is leading to a number of firms of placing a middle-man or conduit role or department in place to liaise with the outsourcing firm to obtain a better understanding of their work and how they progress the work. Many firms look to utilize the benefits of outsourcing as a way to completely remove workload from their main office and to reduce staffing levels but there may well be a trade off in quality and ability to fully respond to customer questions.

This extra layer of management and control may go against the principle of outsourcing to many people but to make an overall saving, this tighter control of systems is deemed to be vital for some industry experts. With modern technology updating at a rapid rate, the costs of maintaining software systems and computer hardware may inflate expenditure to such a level that savings on wages may be nullified and the company no better off. Being able to have someone in control at the outsourcing side and determining where and when the purchases of technological advances are required may be crucial to maintaining the high level of benefit that people expect from outsourcing.

The moral of the story is that, outsourcing remains a fantastic way to cut costs and get experience on board but it has to be done correctly and not just outsourcing for the sake of outsourcing. Like in all business deals, proper care and attention has to be done to ensure that any potential partner will provide benefit to both parties and that cost and quality benefits can be obtained.

Asian and European countries are not the only players in the BPO field any longer. South American countries are fast catching up, Guatemala being the latest name in the roster. Coca-Cola Enterprises have already outsourced the processing of their financial and accounting work to Guatemala-based outsourcing vendors, and more big names are expected to follow suit pretty soon.

Guatemala has always been a prime location for outsourcing jobs, and its delay in grabbing its slice of pie from the field can only be attributed to less enthusiastic advertisement of the capabilities of its population. Compared to many other South American countries, Guatemala has some significant advantages in the field of business process outsourcing, especially when it comes to handling tasks outsourced by big names in US. The principal advantages that give Guatemala a significant edge over many other countries in the outsourcing field include:

High literacy rate with impressive knowledge of English – 80% of the population learn English from the age of 5. Thus processing business operations for companies that have English as the official language is not a problem to outsourcing vendors located in Guatemala. Besides, the impressive literacy rate of 86% is good enough to provide a sizable advantage to the country in the fields of both technical and non-technical jobs.

Low average age of its working population – About 80% of the population of the country is under 30 years of age. Thus, the workforce of Guatemala is young, energetic, and prepared to work hard. Also, around 200,000 of its population are still studying in Universities, so the inclusion of thousands of freshly out-of-college, technically proficient graduates to the workforce is not far off. This is quite a lucrative prospect for outsourcers indeed.

Already a popular outsourcing destination – Several big names worldwide have already outsourced sizable fractions of their business processing to Guatemala, thereby forming a strong base and proving the potential of the country’s workforce. Some of the key names include Capgemini, Walmart, P&G, Scotiabank, etc.

Peaceful Government – 20 years of undisputed, peaceful democracy have given Guatemala the political stability required for attracting investors and outsourcers.

Well-developed telecom infrastructure – Guatemala is well known for its well-developed and stable telecommunication services. The commerce minister was spotted carrying three Blackberries to a recent conference; which bears further evidence of how tech savvy the general population can be – quite a welcoming sight for outsourcers.

Short distance from US, and same time zone – Guatemala is located very close to the US; a simple 3-hour flight could take the representative of a US-based outsourcing company to a call center in Guatemala. Those located in Asia, in contrast, will take more than half a day to reach.

Good economical condition – Guatemala has quite a flourishing economy, even in these recession-plagued times. The export of green tomatoes, coffee and bananas has picked up, while manufacturing industries continue to provide a strong backbone to the economy of the country, as always.

For these reasons, Guatemala is fast turning into quite a major player in the outsourcing field. The advantage of having a favorable location and a compatible workforce have provided the country with almost all the resources it needs to build a strong and effective outsourcing network.

There has been a rapid growth in the number of US-based companies that are outsourcing their financial processes to BPO-s located in Asian countries, especially India. The process is quite logical from the financial point of view, but some security concerns simply cannot be ignored. A recent incident in which three employees from an Indian BPO made off with a staggering 350,000 USD from Citibank account holders by hacking their accounts has brought some amount of uneasiness among the big giants in US who regularly depend on the Indian BPO-s to get their confidential financial data processed.

Protection of financial data is one of the first and foremost concerns of a company. If information about business deals, tender calls and budget plans are compromised, the very future of the company can be in danger. This is one of the reasons that more and more companies are getting concerned about the way security breaches are occurring in Indian BPO-s. The situation does not bode well for the Indian BPO industry.

However, this situation can be avoided without much hassle, if some standard security procedures are implemented and maintained. True, no system can be absolutely safe from unauthorized people waiting to get a crack at it. But, their plans can be thwarted by finding the loopholes in the system and plugging those as soon as those are found. Some safety procedures can be put to use for doing that. These are as follows:

1. Dynamic data masking – In this procedure, the employee is never allowed access the complete data of the client. Thus sensitive data is protected by hiding (or masking) it, using symbols like asterisk in place of the actual data. This is the process with the most stringent restrictions, but is undoubtedly the most secure as well.
2. Paperless office – This is a relatively new concept that is rapidly gaining popularity. In this process, employees are not allowed to carry or use any sort of paper stationery in office. Reminders are set using software tools, and electronic notepads are used to keep notes. This process ensures that no data can be taken out of the office. The process is not full-proof though, an employee with a photographic memory could sure walk out with a list of client info in his head. But this process, combined with dynamic data masking, can secure the sensitive data being handled to quite a good extent.
3. Automatic call monitoring – Special types of voice recognition software are available now, which can monitor calls made by employees while in office. These software packages can also trigger an alarm when the employee or the person at the other end utters some specific words, such as, “client”, “password”, “account”, etc. By forcing the employee to submit his cell phone to the authorities when entering office and making him/ her use the monitored office phones while working will make this process quite effective.

These processes can make the data of the clients secured at least to some extent from employees with malicious attitude. Data security is of paramount importance when managing financial data of a company and BPO-s have to implement stringent security measures to make sure that their clients’ data does not get compromised.

LPO, or Legal Process Outsourcing, is a relatively new name. After BPO and KPO, LPO seems to be another flourishing industry in the making. Several high-profile law firms in the US are outsourcing their legal processes to offshore providers. They, however, are still charging the same fees to their clients as they did before, hence making a good profit in the process. Clients are not far behind either. Several intelligent clients have seen through this money making and have started outsourcing their legal processes to offshore agencies on their own. They are getting the high volumes of low-priority legal work done by offshore providers, while assigning the more important issues to local, experienced lawyers.

LPO-s in India are among the first and foremost service providers being targeted by the larger corporate clients, and with good reason. Law professionals from India are often hailed as some of the best in India. They are known to have a keen understanding of world politics and are also known to be well-versed about the laws of many countries. Moreover, the difference in the value of dollar and Indian rupee makes dealing with India-based Legal Process Outsourcing firms all the more profitable for US-based corporations. Some of the larger US-based corporations have even made long-term contracts with some of the leading LPO-s in India, getting their clients’ cases handled with the help of these firms. This is not only helping them in cutting costs, but they also manage to charge lower fees from their clients. Consequently, they get many more clients than before, thereby multiplying their incomes multifold. Lastly, in these times where economic recession has pushed everyone’s panic button, this sort of move is absolutely logical anyway. This has resulted in major Indian players in the BPO market, such as, Wipro, Infosys, etc. have switched to legal process outsourcing, setting an example that smaller LPO firms can emulate. According to predictions from finance gurus, this trend should become more prevalent in the coming years, starting with 2009.

The switch is not without its share of drawbacks, though. In order to make sure that their clients receive superior service, the corporate organizations have to optimize and organize their legal services, just the way they organize other shared business processes. One way they can achieve this is to employ some attorneys in every jurisdiction where they operate, and keep the bulk of the work to be handled by Indian legal service providers in order to save up on capital. The resources from India will cost at least 50%-80% less than that in other countries anyway, bringing down the total capital to be invested anyway.

Some of the leading companies in the US, such as DuPont, Oracle, and GE have already transferred the bulk of their legal processes to India, in a planned manner to make sure that their clients continue to receive cost-effective, yet high-quality services. The legal process outsourcing firms in India are rising at a rapid rate, and in the coming years, starting from 2009, their popularity is expected to rise even further.

The future of Indian doctors planning to practice abroad may not look all rosy, but that of medical professionals in India sure is. Many US-based multinational companies are looking to get their employee healthcare taken care of by offshore hospitals and medical facilities, starting with those in India. A study has revealed that US-based multinationals could literally save billions every year by outsourcing employee healthcare to Indian hospitals. Dr Arnold Milstein of Mercer Health & Benefits has been quoted as saying, “that they estimate that the price advantage for the most efficient Indian hospitals would be around 85 per cent to 90 per cent." Wal-Mart can be cited as one example, which would be looking forward to saving as much as 90% of its 80 billion annual healthcare cost, if it outsourced its employee healthcare processes to India.

The cost of healthcare in US is rising steeply with each year, forcing many companies to look forward to adapting new cost-cutting policies. The rising healthcare costs are starting to reduce the profits made by these companies at a rapid rate. Off shoring healthcare process management seems to be the perfect way to start countering it. A study has shown that by off shoring employee healthcare, General Motors could slash as much as $1000 from the price tag of every car that rolls out of their showrooms, and yet maintain a good profit. In these times of economic recession, that would sure prove to be a boon to their customers.

Healthcare benefits were never well organized in the US. Medical insurance premiums often reach ridiculous amounts, and many employees have discovered that their acquired diseases are not covered by the medical insurance plan that they are availing. This would not be a problem if the employees were treated in Indian hospitals, most of which are now considered to be world-class in quality of service. Not just that, the employees will be able to combine a short pleasure trip with their treatment package and still end up paying only about 10% - 15% of the cost that they would have to pay to US-based healthcare professionals. The good news does not end there. Since the cost of healthcare would be a fraction of that in the US, the cost of premiums to be paid by the patients would also be much lower to begin with. This would automatically mean that more employees would get the chance to receive world-class healthcare at costs that they can afford. A process like this should certainly be welcomed by employers and employees alike.

The process, however, could suffer from one small drawback. Many US-based medical insurance providers would probably be unwilling to support this migration of patients, evidently because their profits would go down quite a bit. However, the way in which US citizens are visiting Indian hospitals to get treated even without insurance, the insurance providers would have little choice but to alter their stance in the long run. This would certainly be a welcome change to the entire healthcare process in the US.

Many top-ranking US-based companies outsource their business support services to offshore call centers and BPO-s. While this is certainly a good move that helps in cutting costs, the risk of having a negative impact on the reputation of the company in the long run cannot be ignored. These days, US-based customers and clients are pretty choosy about who they are getting the support from. The thought of having someone from outside the country to help them from their own problems is not a welcome feeling for a large fraction of them. This brings us to the topic of discussion – the caveats of outsourcing. A couple points are of particular concern here, which are:

Differences in accent – Many a times, US-based customers are agitated when they hear a foreign accent from the other side of the phone. This is often countered by call centers by teaching their employees how to speak with a neutral accent. This is certainly a good measure, but can be carried out effectively only in countries like India, where knowledge of English is widespread. But in countries like China, where the level of proficiency in English language is usually lacking among the general population, this can pose to be a serious problem for call centers. So, the American companies who outsource their support services to call centers of these latter countries risk losing a good portion of their reputation in the market in the long run. They may be able to save a chunk of their everyday costs, but the tradeoff is usually not worth it.

Difference in time-zones – This is another serious problem, often encountered by US-based companies when outsourcing their support jobs to offshore companies located on the other half of the globe. The time difference, often around 12 hours or more, means that most of the call center employees would have to work in night shifts. This can wreak havoc on the sleep-wake cycle of an employee, affecting his/ her health in the long run. Moreover, a call center employee, feeling sleepy during the night, can accidentally make mistakes when answering a customer’s queries. To add to the woe, the “flexible” shifts in which employees are forced to work in most call centers are often too demanding for even some of the healthier employees. The flexible shifts require an employee to work in night shifts in one week, and then in the day shift for the next. This type of erratic work pattern often results in a strong attrition rate among the employees. In order to retain high performers within the organization, call centers often end up paying unusually high wages to them. This results in an automatic increase in the cost of service of the call center, adversely impacting those companies that outsourced the business or support process to them in the first place.

These two are among the matters of grave concern for US-based companies and call centers alike. Sadly, no solution has been found till date that can effectively circumvent these two problems. The BPO industry in Asian countries will survive for now, but unless these major problems are taken care of effectively, the future does not look good for these sections.

Written by Seema Sapra

This Economic Times story reflects Indian industry and policymakers sensitivity on the issue of any protectionist clamp-down on outsourcing. Though I think the Economic Times jumped the gun here a bit. Its too early to be talking about WTO contests especially since the whole story seems to be based upon this sentence in President Obama’s speech to Congress:

We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.

The news report captioned “India may contest Obama’s move against outsourcing in WTO” seems to be based upon Minister Kamal Nath’s response on being asked whether India would respond to the suggestion in Obama’s speech. This is what Nath is reported to have answered:

We have to ensure what they (US) are doing is WTO compatible when we are talking about trade, movement of goods, movement of people and movement of services," Commerce and Industry Minister Kamal Nath said here.
"Yes, of course," he said when asked if India will take up the issue of outsourcing with the US administration.
…

Nath said, "One has to see how the US companies using India as a base for technological development respond to their own government." Outsourcing of technology development by large companies cannot be switched on and off, he added.

It should be interesting to see what shape the US measure on discouraging outsourcing takes. A PTI story has more:

Nearly 1,000 US firms, which have shipped their jobs overseas are anticipated to be affected with the proposed elimination of tax incentives. The plan mainly refers to one of the provisions in the tax code that allows companies to pay lesser taxes for profits earned from foreign shores.

Here’s another interesting aspect linking the outsourcing issue with H-1B visas. A Computerworld story discusses this:

The U.S. government’s H-1B visa usage data for fiscal 2008 shows that offshore outsourcing firms based in India are employing a growing number of H-1B workers — a hiring trend that is affecting the IT workforces in communities such as Oldsmar, Fla.

Oldsmar is the home of a technology center operated by The Nielsen Co., which measures TV audiences, consumer trends and other metrics for its clients. Nielsen last year began laying off workers at the facility after announcing in October 2007 a 10-year global outsourcing agreement valued at $1.2 billion with Tata Consultancy Services Ltd.

And while Nielsen cut employees, Mumbai, India-based Tata was increasing its hiring of H-1B workers. Tata received approval for a total of 1,539 H-1B visas during the federal fiscal year that ended last September, according to government data released this week. That was nearly double the 797 visas that the outsourcing and IT services vendor received in fiscal 2007