By Stephanie Overby – CIO (US)

One of the biggest drivers for sending IT work overseas remains cost savings, but the ability to contribute to revenue generation has a far higher value to offshore outsourcing customers today. Yet for all their talk about contributing to customer innovation, many offshore providers still fail to deliver on that increasingly important front, says Jan Erik Aase, a sourcing and vendor management analyst with Forrester Research.

According to a 2011 Forrester survey, 41 percent of outsourcing clients cited lack of innovation as the biggest challenge with their existing IT services relationships. Aase decided to dig deeper into the issue, interviewing 11 offshore outsourcing customers in depth about their innovation expectations and experience. Aase says he wanted to “determine if there were unique expectations clients have of their offshore vendors. [But] in the end, I believe my findings apply to any vendor relationship.”

The first problem is that outsourcing vendors and customers lack a common definition of IT or IT-enabled innovation.

Clients interviewed by Aase identified three types of activities offshore vendors may try to pass off as innovation that failed to meet their expectations: innovation-for-pay (vendors creates a solution for one client and then licenses it back as a product to that client and the larger market), innovation for innovation’s sake (emerging tech from vendor R&D labs that don’t solve a customer problem), and administrative innovation (IT services buyers don’t view process improvements, project management tools, relationship dashboards, and the like as real innovation).

For customers, the bar for innovation is much higher, says Aase. They want innovation relevant to their specific needs–something that helps them solve a clear business problem or introduce a new way of doing business. They want commercially viable solutions–ideas that create competitive differentiation, improve market share, or have “an ROI with a multiplier of at least two,” Aase says. Finally, they demand that innovation be something altogether new; a generic cloud offering or new release of existing technology won’t suffice.

Could offshore outsourcing clients be expecting too much from their providers? “No, their expectations of getting advanced innovations from their offshore vendors is not unrealistic,” says Aase. “These vendors know their clients’ companies inside and out in many relationships.”

Rather, customers may be expecting too little from themselves. For innovation to happen in an offshore outsourcing relationship today, clients have to step up to the plate, investing more time and money than in the past. “It is unrealistic to assume that innovation can come without the client involvement and eventual investment,” Aase says. “The innovation that is now considered table stakes was happening in the back rooms and behind the scenes, so that created an expectation with clients. The issue is that the next generation of innovation, that is now needed and expected, can’t happen in those types of closed ecosystems.”

Customers seeking innovation from offshore providers have to make greater investments on several fronts, according to Aase’s research. First, they need to foster vendor relationship not just with IT, but also with the rest of the business so they understand the bigger business strategy and challenges. Secondly, they need to evolve from outsourcing managers focused on cost and contractual terms to strategic partners with their offshore vendors.

Some offshore providers have created new engagement models to foster that kind of relationships that customers can participate in (Aase points to TCS’s Co-Innovation Network (COIN), Wipro’s Applied Innovation, ACS’s Dream Sessions, Luxoft’s LEAP, and HCL Technologies’ Mad Jam), but they do require a different level of investment, from a time and money perspective, than a traditional labor arbitrage deal.

Thirdly, smart clients will take advantage of the network of innovation that their offshore deals give them access to–from academic institutions to emerging tech vendors to venture capital funds. “Accessing this information helps the client become engaged in an entire ecosystem of innovation that takes innovation well beyond rate card contract language and more in the direction of partnerships, joint ventures, and joint intellectual property,” Aase says.

Of course, there’s the question of whether customers ought to depend on outsourcers–offshore or otherwise–to generate innovation. And not every client does. Some customers are solely seeking cost savings or operational improvements from providers. “[But] in many cases, clients don’t have the right mix of people in-house to generate innovative ideas,” says Aase. “They are also very limited as they have very narrow vision and preconceived notions that often constrain their creativity.” Additionally, most clients don’t have anywhere near the amount of money to invest in research and development that the big offshore providers do, Aase says.

For those IT services customers looking for innovation from offshore providers, Aase advises that clients seek out vendors with:

• Access to innovation resources, such as outside relationships with key industry providers and deep talent pools.
• Solid client experience, as evidenced in contract renewals, increased investment, and customer satisfaction scores.
• A culture of innovation, that includes reward and recognition programs tied to idea generation and corporate level goals tied to innovation.
• IP development programs, supporting the exploration and execution of new ideas, such a customer experience centers, dedicated concept labs, and idea management processes.
• Support for strategic customer partnerships, which might take the form of thought leadership events or innovation summits, fairs, or days.

Source: CIO Australia

By Rob Gray

Outsourcing has attracted plenty of controversy over the years. To some, BPO (business process outsourcing) may as well read OMG, as it summons up negative connotations such as service cuts, budget savings, redundancies, offshoring and the like.

The furore surrounding some unwise moves has undoubtedly caused perception issues that impinge on all significant BPO decisions, no matter how prudent or painstakingly thought through they may be.

But while cost cutting is an important dimension to numerous outsourcing initiatives, it is not always a vital factor and sometimes does not figure in the thinking at all. For some organisations, the core question is not how BPO can be implemented to save money, but rather how it can help in making money for the business.

Where companies are pursuing a clearly defined expansion strategy, HR Directors may well explore how BPO can help deliver that desired growth. This is particularly true when building a business abroad. Faced with an often daunting array of foreign legislation and regulations, employers may feel, rather than investing in the nuts and bolts of creating the necessary infrastructure in-house, money would be better spent on outsourcing, thereby giving HRDs and other directors more time to focus on the important decisions that will drive business growth.

There is a compelling argument that not only can outsource providers support clients in new markets, where they lack infrastructure, but also that they can help companies ‘up-skill’ specific segments that may drive growth, by recruiting the right new staff and developing the skills of existing personnel.

“Moving to a global delivery model and implementing proven, effective processes can deliver business benefits beyond cost reduction,” says Jill Goldstein, senior manager of HR outsourcing at management consultancy Accenture. “HR business process outsourcing can help organisations improve workforce performance, measured by revenue increases of from 1% to 2%.

“It can also help clients create competitive advantage by forecasting and fulfilling talent needs and aligning talent plans, workforce capabilities and employee performance with business strategy.”

Expanding globally brings great challenges and can be a drain on management resources. While any final decision will always lie with the business itself, outsourcing can provide infrastructure and services to support the process while freeing up capacity, and ultimately allowing directors to focus on the operational side of expansion.

Jason Gregory, global HRO service line lead for Capgemini, says working with a company such as his gives clients access to a global capability that would otherwise be difficult to replicate on a country-by-country basis. “Not only can this reduce setup timeframes and costs, but it can also ensure consistent service experience, regardless of geography,” Gregory elaborates. “Indeed, Capgemini’s global process model was developed with this in mind, as it provides a process blueprint for HR services, which can then be used across all geographies by incorporating any country-specific regulatory needs or tax differences. This enables new geographies to be added seamlessly, as and when required.”

Certainly among large multinationals the trend is clear. KPMG research identifies a distinct move to globally integrated shared services. In fact, KPMG believes that more than 80% of large companies have adopted shared services – and of these, almost two-thirds have done so with a model that is multi-functional and globally integrated.

What KPMG means by ‘globally integrated’ is the skillful management by HRDs of a portfolio of internal and best-in-class providers able to bring benefits through service excellence. Naturally, technology is playing an increasingly significant role in delivering these services.

“Taking into account all areas of outsourcing demand, HR accounts for around 8%,” says KPMG principal advisor Karene House. “Shared services is shown to be a proven model for support services and is actually influencing what is outsourced in the first instance.”

But how exactly are companies using HRO to drive growth? And how successful are they in this respect?

HR outsourcing provider Ceridian says it works with a number of companies that have used outsourcing to grow. For example, UK leisure and hotels operator Whitbread has used it to deliver an HR transformation project successfully, dealing with the way it interacts with its people. This has reduced the administrative burden on line managers, allowing them a better focus on running the business.

The outsourcing arrangement has also allowed the company to reorganise its management structure completely. Ceridian also works with Canadian multinational IT firm, Research in Motion (RIM), which manufactures the BlackBerry. It has used outsourcing as a simple and easy way to grow quickly, by not having to worry too much about the ins and outs of setting up businesses in new countries.

But would it not be a better option to work with individual consultants when expanding abroad, rather than larger outsourcing providers? While this is of course entirely possible, and can work well in some cases, often the local legal, cultural and language barriers conspire to make it a much longer and more expensive process.

The way of doing things in other countries may be very simple to those used to it, yet opaque to the buyer of services. This may lead to organisations believing they have secured a great deal on something, bought comparatively cheaply, only to find out subsequently that things they thought were included are not.

Also, it can be hard to ascertain in advance the number of consultants required to help achieve goals in many geographies. This problem is magnified the larger the number of countries and size of contracts involved.

It is unusual, not to say foolhardy, for a company to outsource something that is core to its business, particularly HR strategy. Less clear-cut, having outsourced something, is if and when it should be brought back in-house.

Ceridian UK chief commercial officer Nick Laird says recruitment outsourcing is often “time-bounded”. When starting up, he explains, organisations need close control; while during a huge growth spurt, outsourcing can help with capacity that businesses could not deliver themselves.

Once in a more mature phase, companies often wish to retain better control over elements in the process themselves, so bring some of these back in-house. But, Laird adds, even at this stage, the sophisticated ones can blend the best of outsourced activity with some element of internal control.

Among the interesting market trends Laird pinpoints is a move towards outsourcing for corporate mergers and acquisitions. “In our experience, the business case for an acquisition based on quick integration and cost reductions means there is an imperative for pace, and this can only really be delivered by an outsourcer, which has a much larger bench of subject matter skills,” says Laird. “A corollary of this is that, during periods of rapid organic growth, we have sometimes seen companies lose control of non-core activity, as local subsidiaries or affiliates ‘do their own thing’. Almost always when this happens, the solutions that evolve are of the ‘quick and dirty’ variety, and not the sort of conclusion that the head office might like.

“We find in our smaller – but rapidly growing – international clients, this danger of loss of control is a key reason to outsource. In these circumstances, the burden of maintaining consistency, reporting and control is down to the supplier to drive, rather than the local management. We have one financial services client that is growing at 20% a year, in a ‘land grab’ strategy. It has outsourced payroll internationally for this reason of maintaining control.”

Consistency and control may also be viewed in the context of company culture. Ensuring company culture is not diluted while the business grows overseas is an important consideration.

Does outsourcing risk undermining the company culture? Accenture says not, arguing that outsourcing HR processes can reinforce company culture in three ways.

First, capturing, ‘scrubbing’ and giving access to workforce information regarding risks and opportunities providing credible and actionable data for decision-making.

Second, empowering employees and line managers with access to information and the ability to initiate transactions in an easy and intuitive way – reducing time spent on back office administrative activities.

And third, allowing the HR team to focus on strategic initiatives and empowering the workforce, moving less strategic, admin-heavy processes to the outsource provider.

“Ultimately, communication is key,” says NorthgateArinso HR solutions director, Sue Rippin. “Transition should begin with an intense internal communication strategy and be accompanied by increased staff understanding of what the changes are and how these will benefit them going forward. The supplier needs to understand the company culture before beginning its operation. Not only is every company different, but how that company operates in other countries differs too.”

For company ISS Facility Services, outsourcing some areas of HR to Ceridian has given flexibility, enabling it to concentrate on its core business and helped in delivering growth in a business where margins are tight.

“ISS’ decision to outsource was all about risk management,” says ISS HR operations director, Richard Bishop-Laggett. “Before Ceridian, we had responsibility for the building, for the people, for keeping the systems statutorily compliant; for the hardware and the software. Risk is not eliminated with outsourcing, but it is substantially reduced and mitigated. Ceridian’s offshore capability spreads the risk even further.”

So, while outsourcing may still be seen as controversial in some quarters, in others it is viewed as a means of reducing risk and enhancing growth.

Case study: Quickstart Global

Quickstart Global practises what it preaches with outsourcing. When considering expansion into eastern Europe, it turned to consultancy firm MBA & Co to analyse and report on the cost of labour, the potential drop in productivity, the potential recruitment costs, rent and government support in each of the six countries on its shortlist and recommend the most suitable country.

The Quickstart model is to provide organisations with quick and easy ways to establish their own operations around the world. Clients choose their own staff, then direct and control their day-to-day work in one of the Quickstart client centres in Argentina, Bulgaria, India and China. Each centre provides clients with office space, recruitment, HR, facilities and IT support.

Training, recruitment, profiling and pre-employment checking and payroll are all functions that can be successfully outsourced, believes Quickstart, but eventually be brought back in-house if the company reaches critical mass in a location.

“Management focus should be on establishing business momentum and market traction,” says Quickstart CEO, Neal Gandhi. “Too often, the important strategic task of setting up an offshore office is given to senior management – often with a business development background – who then struggle to deal with property leases, telecoms and HR in an unfamiliar territory. As going into a new geographical location is an important strategic business decision, the more that can be taken off their shoulders and outsourced, the more likely the venture is to succeed. The biggest cost is failing to deliver on a strategic decision to establish in a new market. Outsourcing to a local HR organisation will protect you from potential costs and litigation.”

Facts and figures

Outsourcing generates revenue of £207 billion a year for the British economy (roughly 8% of UK GDP), putting it just behind financial services, according to Oxford Economics research in May.

More than 80% of HR executives across Asia Pacific are considering HRO as a solution to “key challenges”, finds a Talent2/Galaxy Research Market Pulse study released in July.

KPMG’s report, HR Shared Services and Outsourcing, identified the following areas as “hot” in HRO: Software as a Service; platform BPO; hybrid delivery models; single process deals; global sourcing; customer service orientation; renewal with extensive restructuring.

Case study: Liberty Wines

Liberty Wines is an import business that supplies a wide range of premium wines to regional wine merchants, restaurants, multiple grocers and specialist retailers. By 2009, the company had grown to 65 people and HR and payroll tasks were becoming increasingly complicated and time-consuming.

After reviewing several options, the company decided to take up an HR outsourcing package for SMEs provided by plusHR. An assigned HR professional handles Liberty Wines’ day-to-day HR tasks, including issuing employment contracts, checking right to work, administering the pension scheme and maintaining the HR database.

Employees are able to book holidays and submit timesheets online via self-service, and managers can view employee information and live absence reports for their teams. Payroll is entirely outsourced.

Outsourcing has freed up management time – previously the company had devoted a “disproportionate” amount of time to HR, as there was concern about not making a mistake with salaries or personal information. Additionally, the HR information required by managers is now securely available online, easy to access and up-to-date, again reducing management time spent on non-value-add activities.

“We also have access to more senior HR expertise as needed, which means we can handle more difficult HR issues in a very cost-effective manner,” says Liberty Wines chief operating officer Gary Wyatt. “The rigour of having to deal with the deadlines of a third party and the ownership of data from managers and staff have professionalised our HR function and I feel it was an important step in the growth of our company.”

That growth has resulted in Liberty Wines expanding in two years from 65 to 80 staff.

Source: HR Magazine UK

By Mark Atterby, Senior Staff Writer

Despite the ever-increasing use of smart technology, the development of innovative business management and leadership, and the increased focus on recruitment, training and staff development, meeting and exceeding customer service targets is a never-ending challenge for contact centres.

The essential problems stems from the fact that what customers need and expect today can change dramatically over time. If you’re a service provider, customer expectations can pose a major challenge. They grow, they shrink, they change shape, and they change direction. They shift constantly, and they shift easily. And how satisfied (or dissatisfied) your customers are is determined by these expectations and your performance in meeting them.

Shane O’Donnell Senior Consultant Contact Centres, Curran and Associates, who has some 30 years experience in contact centre management, comments, “The main reason that meeting customer expectations is so challenging is that the needs and wants of customers evolve as quickly as their lives and businesses change”.

Though what customers expect may change rapidly the internal processes and structures of an organisation may not be able to evolve quick enough to meet the new challenges. “Unfortunately while market change is rapid, organisational internal decision-making processes are often too slow to be effective so only those with quicker, more empowered authority to initiate change, tend to prosper in a competitive environment”, says O’Donnell.

One of the key benefits of outsourcing is that organisations can immediately tap in to “best practice” skills, expertise and processes, offering a significant time-to market capability. For example, in launching an IVR solution, an outsourcer is equipped with the consultative skills and programming ‘know how’ to help corporations rapidly ramp up a new application .In running a short-term marketing promotion, or in anticipation of overflow calls, perhaps due to seasonal fluctuations, an outsourcing firm can quickly assemble the staff and systems needed.

Dislocation between the contact centre and other parts of the organisation can also have a dramatic impact on customer expectations. O’Donnell advises, “This dislocation is most often caused by timing and poor communication. If a sales and marketing campaign takes months to plan and the contact centre is still waiting on a script to be approved 4 hours after go live (a very frequent occurrence), there is a serious disconnection and it is usually symptomatic of other problems”.

Last minute information leaves no time to ask questions, test processes or properly train staff, leading to customer dissatisfaction, employee dissatisfaction, misunderstandings causing errors and the blame game. The contact centre (regardless if it’s in-house or outsourced) and the rest of the organisation, need to work together, early in the process, to understand the differing perspectives and prevent problems, to get it right, first time.

A supplier of any product or service relies on the quality of its offering and the speed to delivery to provide basic customer service. “However”, advises O’Donnell, “it is the relationships its employees can create and maintain over time that overrides concerns of cost and other objections and sets the customer perception of the service received. The “like” factor should not be underestimated. Don’t let the metrics overshadow it”.

Multi-skilling has many benefits to customers, the organisation and frontline troops. It allows; more efficient use of technology to help customers have their needs met in a single call, minimisation of costs by reducing waste and it provides Agents with variety in their tasks, opportunities for career development and potential to increase their income.

Source: Dialogic.com

By Brad Lillis

• Change is difficult. Transformational change, such as the change associated with Business Process Outsourcing, is exponentially more intricate. In fact, the complexity of managing that change is a major reason that enterprises decide not to outsource business functions. According to a 2011 survey by HfS Research and the London School of Economics Outsourcing Unit, 78 percent of enterprises cited the disruption to business as an important factor when making the decision not to outsource.

• The pitfalls of a poorly planned and executed transition are many, and the operational, financial, and relationship implications are significant. Standing in the way of solid execution of an outsourcing transition are a number of common challenges, including limited process documentation, the lack of transition metrics, insufficient monitoring of vendor resources, and failure to plan for unexpected events. Understanding how to identify and address these challenges increases the likelihood of outsourcing success.

Document Processes

In an ideal situation, enterprises operate with global standardized processes and systems, with local variations only existing to accommodate legal, regulatory, or statutory requirements. However, it is much more common for enterprises to have a complex, heterogeneous set of processes and systems. Enterprises often do not have the luxury of standardizing processes prior to outsourcing, as there are change management and system configuration obstacles to overcome, cost savings delays, and resource shortages.

To enable a successful transition in a non-standard environment, process documentation becomes essential.

The effort to create Standard Operating Procedures, capture process exceptions, and document “tribal knowledge” should begin well before a transition, when knowledge is often lost through attrition. This process documentation will serve as the foundation for both knowledge transfer (as training materials) and operational performance (as reference materials), and can be captured effectively with commonly available tools.

Develop Transition Metrics

Enterprises often believe that the performance metrics committed to in the contract will be sufficient to manage provider performance through the life of the relationship. However, these metrics are typically established to measure stable operations, as opposed to performance during the transition period. Transition metrics typically require daily, or even hourly, reporting and should provide visibility to the health of the operations, specifically during the period prior to stabilization.

Identifying “leading indicator” measurements throughout a business process will allow enterprises to recognize the risks before they affect performance and disrupt business continuity. Enterprises should also define a limited number of key transition metrics to provide insight into implementation success. Additionally, transition management should identify any down-stream impact of a transition metric “miss,” so that affected stakeholders can be informed and any required adjustments can be made.

Monitor Service Provider Staffing and Turnover

One of the key benefits of outsourcers is their ability to manage large-scale recruiting, hiring, training, and retention efforts in offshore locations, where an enterprise does not have the staff or infrastructure to accomplish such a resource ramp-up. They often insist that the enterprise doesn’t need to be concerned with these efforts, as they rely heavily on outsourcer proximity to the labor market and proven human resources practices. However, experience shows that carefully monitoring service provider staffing and turnover is critically important to the initial and ongoing success of any BPO initiative.

Ideally, the contract will define the education, skills, language capabilities and levels of experience required for each outsourced position. However, it is also essential to ensure staffing requirements are actually being met by the service provider during transition. For example, enterprises should seek to interview and approve candidates for positions that require specific skill sets and validate that service provider team members hired possess the experience and skills outlined in the contract. Additionally, to help prevent service provider employee turnover from disrupting a BPO transition, enterprises should consider a careful and gradual reduction in the number of enterprise resources during the transition phase.

Prepare for the Unexpected

Preparing for potential transition challenges in advance will position an enterprise to proactively and collaboratively address common issues and increase the speed to stabilization. However, while outsourcing transitions follow a script, some ad-libbing is required as it is impossible to anticipate every possible situation and issue. In such situations, an enterprise’s most effective tool is a team of dedicated, experienced resources tasked with, and capable of, identifying root-causes and engaging stakeholders to effectively resolve the issues.

Issue resolution requires a comprehensive approach, extending beyond assigning an action item. It often includes activities such as refining process documentation, re-administering training and making required system changes. For fast-track issues, the transition team will need to escalate issues as necessary to the applicable stakeholder groups to ensure proper attention and resolution.

An outsourcing transition is a complex, challenging event that places a tremendous demand on people, processes, and technology. Dealing with the common transition pitfalls identified above will help to ensure the outsourcing implementation is short in duration, causes as little disruption as possible, and sets the stage for a successful outsourcing relationship.

Brad Lillis is a senior associate with Pace Harmon, an outsourcing advisory firm providing guidance on complex outsourcing and strategic sourcing transactions, process optimization, and supplier program management.

Source: Business Finance Magazine

In March 2011 China released its 12th Five-Year Economic Plan, the underpinning philosophy of which is to create more socially inclusive and environmentally sustainable growth. The intent of the plan is to ensure that the benefits of China’s economic growth are shared amongst a greater proportion of Chinese citizens. The plan focuses on re-establishing a balanced economy, improving residual social inequality and adopting further environmental protection initiatives.

The “Twelfth-five Year Plan” will speed up the transformation of economic development whilst expanding the domestic market and develop the services sector to international standards.

The service outsourcing industry is an important opportunity for economic globalization.

China’s offshore outsourcing sector was impacted by the recent earthquake and tsunami in Japan as Japan is an important market of China’s outsourcing industry. The weakness of demand from Japan has had a negative impact on the development of China’s service outsourcing industry.

China’s service outsourcing industry is valued at about US$40 billion in 2010, which is up 35%, however the domestic market is responsibility for 87% of that, In the long run, there is still a very large potential market for outsourcing within China. The main sectors are finance, telecommunication, and government, other less mature sectors include pharmaceutical and e-commerce outsourcing

For Full Version, Please visit: http://www.chnsourcing.com.cn/research-insights/article/9266.html


It’s no secret that the economic powerhouses of Europe and the USA are starting to lose their gloss, as we witness the rise and rise of Asia and in particular China and India. On average, Asia’s economic growth has been outpacing other regions for many years. It is now widely accepted that global economic, strategic and political influence is inexorably shifting to the Asia-Pacific, to our part of the world, and that, in this century, the Asia-Pacific region will fast become the world’s centre of gravity.

A global power shift towards Asia is happening, and engagement with Asia as a way for Australia to insert itself in the power shift that will likely affect global affairs over the next century is of paramount importance.

APEC (Asia-Pacific Economic Cooperation) economies now account for nearly 70 per cent of Australia’s total trade in goods and services. Our economic links with APEC economies and India have helped Australia weather the storm of the global recession. Trade and investment ties with Asia have underpinned Australia’s prosperity.

Asia is home to the world’s two most populous countries, the world’s largest holders of foreign exchange reserves, and two of the world’s top three economies.

The impact of Asia’s rise is being felt in many industries and communities across the country. Chinese demand for Australian minerals and iron ore appeared at just the right time — the result of many years’ investment in marketing and promotions — to compensate for the global downturn.

The rise of China is a defining element of Asia’s increasing influence, but it is not the only or the whole story. However for a growing number of firms, the importance of China has crossed the tipping point that turns the Chinese market into a corporate priority.

In 2008 Australian education institutions recorded over 290,000 enrolments by Asian students, creating new job opportunities and supporting Australian growth.

While the impact across the region has been mixed, overall the region has proven remarkably resilient.

The rise of India, the weight of the ASEAN economies combined, the great individual potential of Indonesia and the enduring economic strengths of Japan and South Korea, must also be acknowledged.

The need to pay attention to Asia, therefore, is becoming an essential part of Australian mainstream business strategy as a market destination for products ranging from consumer goods to financial services.

The growth of the middle class over the past decade has been quite noticeable in some Asian countries. The middle class can contribute to higher and more sustainable economic growth as it goes together with lower inequality and is supportive of larger domestic demand. Once unattainable western products are ever more attainable. In terms of durable goods typically associated with the middle class, 6% of urban households in China own a car, 54% own a computer, 97% own a washing machine, and every household has more than one mobile phone and colour TV set.

Asia’s middle class is one of the fastest growing population groups in the world. According to the World Bank, the middle class of South and East Asia accounted for 1.4% of the global population and 2.1% of global income in 2000. By 2030, the World Bank forecasts that this same group will account for 8.9% of the population and 7.7% of global income – much higher than the middle class growth in other developing regions.

The emergence of a large and dynamic middle class raises Asia’s profile as an attractive market destination.

The disposable income of tens of millions of people in non-western countries will continue to explode. Consulting firm McKinsey predicts that some 2 billion people in a dozen emerging economies will spend $20 trillion annually in a decade, up from $7 billion today.

Global middle class spending today in trillions of dollars is worth $21.3 trillion with North America representing 26% and Europe at 38% and the Asia Pacific at 23% according to OECD estimates. It is estimated that the size of the pie will grow to $55.7 trillion by 2030 with the Asia Pacific representing a whopping 59%. Europe and North America will account for 30% between them.

Australian BPO players by and large have never really turned their sights on Asia as a place to do business. They are amongst the best run and best managed operators in a very mature market. An emerging middle class means that they buy all of the things that are supported by customer service.

Isn’t it about time that Australian BPO companies started to seriously engage with Asia?

Members of ABPOA are afforded courtesies and on ground support in the following Asia Pacific countries through our affiliations in Bangladesh, India, Malaysia, the Philippines, China and New Zealand.

This Latin American country is becoming a great outsourcing destination. Here’s why…

Colombia: “The only risk is the risk of staying”

If you’ve recently seen CNN news in English or “Español”, or you’ve flown to Colombia, that`s probably a TV advertising tagline that you’ve already seen. It’s part of an effective strategy the Colombian government is promoting the nation worldwide, to help people realize how the country has changed. And it has.

Colombia is a hot dynamic economy, so hot that back in 2007 the cover of BusinessWeek magazine labeled this South American nation as one of the “Most Extreme” markets on Earth1.

Last year Michael Geoghegan, former CEO of HSBC, in his speech to the American Chamber of Commerce in Hong Kong, said: “The new BRICs are Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS). They are countries with major populations, dynamic, diverse economies, political stability and each of them has a brilliant future. Any company with global ambitions will have to take immediate action in these markets.”

Colombia is the only Latin America country in that CIVETS new club — a club with great economic potential (see graph below).

Last September, the cover of The Economist magazine depicted a map of the Latin America region “down-up” with this provocative title: “Nobody’s backyard, The rise of Latin America”. According to the article “marketing people are beginning to talk about a “Latin American decade”.

If the region can keep up the growth of the past few years, it will double its income per person by 2025, to an average of $22,000 a year at purchasing – power parity, Half a dozen Latin American countries may have achieved developed-country status, with an income equivalent to Spain´s today.

By the end of the first 10 years of the new millennium, Colombia´s GDP per capita head has doubled, actually almost tripled, annual Foreign Direct Investment net inflows have multiplied by four and Colombian exports have tripled. This great economic progress has made a social impact as well. Colombia poverty rate was reduced from 53 percent to 30.4 percent and Affiliates to health services grew from almost 24 million to more than 41 million.

During the same period, international visitors to Colombia doubled. While tourism in the world fell 4 percent, in Colombia it increased 10.2 percent in 2009, of which 23 percent are U.S. citizens (see table below).

COLOMBIA: MAIN INDICATORS

When it comes to outsourcing, Colombia also is enhancing its role in the Latin America Region and the outsourcing world. The country offers business opportunities and the chance to share success stories to the global business community.

Key multinational companies have chosen Colombia as their country of choice to set up BPO and IT services operations. IBM, Citi, SAP, Unisys, Sutherland, Teleperformance, Siemens, Sitel, Microsoft, General Electric, Avanza, Terremark, Convergys, and Indra are but a few. Genpact is going to open operations on the second semester of 2011.And even with its existing presence in Colombia, HP chose the country to develop one of its New Global Service Centers, designed to operate as the hub of multi-functional operations such as technology, business office and sales support in Medellin.

Colombia is now part of 2011 Gartner`s “30 Leading Locations for Offshore Services”. This indicates the progress the country is making, as well as the challenges ahead to stay on the list.

Different factors help Colombia serve as an attractive destination for outsourcing. A Public – Private Partnership to strengthen and build the BPO&IT “world class sectors”. For instance, the Chamber of BPO&IT at ANDI ( National Business Association of Colombia) leads the creation of the Colombia IAOP Chapter. The Chamber is co-organizing with IAOP and the support of the Proexport the Latin America Outsourcing Summit in Cartagena, May 26&27.

Geographic location with multiple direct daily flights to major cities in the U.S. and other parts of Latin America, including a time zone shared with the U.S. east coast, are drivers.

Human talent and scalability are important, too. According to the IMD World Competitiveness report, Colombia has the second most qualified labor available in the region and offers the best quality education in science and mathematics. It also has the best Labor Market Flexibility Index in Latin America and, according to the World Bank, it is the third most “Business Friendly” country in Latin America and top reformer in the region. It also ranked among the top countries for investor protection.

Moreover, Colombia’s credit rating recently was boosted to investment grade by Standard & Poor’s. The increase puts Colombia’s rating in line with that of Brazil and Peru. S&P’s decision will attract a new class of investors to Colombia, lowering government borrowing costs, spurring investment and supporting economic growth in Latin America’s fourth-largest petroleum producer.

In addition to this, the country offers an export platform: 11 free trade agreements (FTA) with 48 countries allowing preferential access to over 1,500 million consumers. In 2011, Colombia will negotiate 18 international investment agreements (IIA) and 16 double taxation agreements (DTA).

The country now offers great incentives to promote industry, such as a 125 percent income tax deduction for investments in scientific and technological developments and a 200 percent income tax deduction for salaries and social benefits paid to handicapped employees. It also offers one of the most competitive Free Trade Zones (FTZ) in Latin America, with a 15 percent income tax and a VAT exemption for goods sold from Colombia to the FTZ, among other benefits. Colombia currently has 91 Free Trade Zones.

Colombia offers scale and alternatives. With major cities such as Bogota, Medellin, Cali, Barranquilla, Ibague, Bucaramanga, Manizales and Pereira, multiple options are available for buyers and suppliers. Thirty cities have a population of 100,000 or more and Bogota produces 67,000 graduates every year, of which, 17,000 are technical graduates. Some of these cities are part of the 600 cities a recent report made by The McKinsey Institute identified that will contribute half of the world’s economic growth by 2025. At present, the combined workforce of IT and BPO industry in Bogota exceeds 50,000.

So, it’s not just an advertising slogan. Colombia truly is a great outsourcing destination and the only risk is the risk of staying.