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Has the BPO Industry in the Philippines Grown Too Big to Fail?

By Jason Thurwanger

There are an increasing number of people that point to the meteoric rise of the BPO industry in the Philippines and suggest that the footprint here will only continue to grow larger.  In short, they are of the opinion that the industry has already grown too big to fail.  They point to large and continuous investments from abroad, a high English literacy rate, and a bountiful supply of warm bodies to staff the growing industry as evidence that they are set for the future.

The industry is projected to be on pace for $16 billion of revenue this year, with projected growth rates estimating annual revenues of $25 billion by the year 2016.  Many people share the view that the Philippines is the BPO/contact centre capital of the world and will continue to be so moving forward.

Someone asked me very recently if I thought that the industry had grown too big to fail in the Philippines.  I smiled and stated, “Of course”.  It’s not too often that some entity can be deemed too big to fail.  Consider the following entities that were also too big to fail:

  • The Titanic – This modern marvel of shipbuilding was never formally advertised as being. However, in one interview, an executive from the company that built the Titanic stated that he thought the Titanic was unsinkable.  Ironically, when he made this statement, the Titanic was almost completely sunk already.
  • Persian Empire – In the Battle of Marathon, the Greek people sent 10,000 troops to try and slow down the advance of the Persians into Greece, so that the rest of Greece could have more time to mobilize a more robust defense.  Their task was a suicide mission as there were hundreds of thousands of Persians on the way.  Interestingly, the 10,000 Greeks sent to slow the Persians down actually destroyed the much larger attacking force.  Some years later in the Battle of the Issus (modern day Turkey), Alexander the Great led his force of 40,000 troops into battle against hundreds of thousands of Persians…..and won decisively, precipitating the final demise of Darius III.
  • GM & Chrysler – These two automotive giants were deemed too big to fail.  However, through practicing an approach of listening to board members and unions much more attentively than listening to their customers, both organizations needed billions of dollars in bailout money from the US government to survive.  Furthermore, Chrysler needed to be purchased by an Italian automaker to stay afloat.

We could go through many more examples of how entities that were “too big to fail” ended up failing (i.e. financial services, banking, etc.), but it’s not really necessary.  If history has taught us anything, it has taught us that any entity can be too big to fail…..until it ultimately fails.

One must take a more critical look at the true operational health of the BPO industry in the Philippines when considering the long-term viability of this industry in this country.

Upon closer inspection, one will see that while the headcount of Filipinos in the industry has risen dramatically over the last 10 years, actual performance (most notably NPS/CSAT) has not seen a corresponding rise.  This is due to many factors, including an underdeveloped workforce, weak Operations leadership, and a lack of understanding and appreciation in the realm of what the customer experience really is and how to optimize it consistently.

I am a fan of the Philippines.  However, rather than trying to be “too big to fail”, the industry, and all employed therein, would be better advised to make their operations “too effective to pass up.”  Otherwise, the outlook for the BPO industry in the Philippines is not quite nearly as bright as many assume.

After all, what is the going market rate and future demand for an industry that routinely underperforms, creates customer friction, produces inconsistently quality in the customer experience, and that lacks a vibrant understanding of how to effectively engage customers in the US, Canada, Australia, and the UK?

Yes, the industry has grown a great deal in spite of these weaknesses.  However, the leadership in the Philippines need look no further than the history of the BPO/contact centre industry in India to better understand the cost of assuming that a continuance of mediocrity will be acceptable.

Jason Thurwanger is a freelance Operations Consultant with 20 years of experience in the contact centre/BPO workspace, including extensive experience in customer care/CRM, customer intelligence/market research, and sales (both inbound & outbound).  Driving the customer experience and improving operational efficiency make up the centrepiece of Jason’s consulting engagements.

Posted in Business, Destinations, ForecastsComments (5)

A multi-channel BBQ – without the snags

By Scott McMillan & Tom Dickerson, Salmat

Today when we organise an event, such as a barbeque with friends, we may phone to invite them, send the address via a text message, invite others via Facebook and then upload posts, pictures and tweets of the event. We use multiple channels to ensure everyone has a great experience.
Imagine a similar scenario in business. A customer is considering attending an event you are hosting having received an email from your marketing department but they would like more detail first. The customer then decides to place a call to your contact centre to fill the gaps. Having reached a customer service rep they probe for more detail only to be met with a response of “what event?”

Frustrated by this, the customer posts comments on the company’s Facebook page. Others visit the web site which has details of last month’s event so they assume they’ve missed it and don’t turn up.

salmatThe difference? We communicate with our friends and family using multiple channels (SMS, phone, Facebook…) in an integrated way.  Integration is achieved because our friends and family remember previous conversations and pick up the thread no matter what channel is used. So why are most organisations communicating in a fragmented way – one channel at a time?

The problem usually stems from size. The only way many large organisations can be cost efficient (and price competitive) is to have contacts handled by different employees, (say a contact centre rather than an account manager).  In the early 90s this problem was overcome using CRM systems capturing case notes about previous calls, but this solution is no longer effective due to the rise of multiple channels. Put simply, if you tweet first and then follow up with two phone calls (heaven forbid), the agent can see your previous call, but chances are they can’t see your tweet.

These interactions, each paid for by the company, reduce the likelihood of this customer being a loyal, high-value advocate for your business.

This siloed set up can often result in the customer bouncing from one channel to another out of frustration because they cannot get hold of an answer. The result is customer frustration and rising operational costs because of responding to multiple incoming enquiries about the same topic.

Here are some statistics that you should be aware of:

  • 88% of callers rate not having to repeat their query as important
  • Only 15% of businesses claim to have an effective single customer view in place
  • 42% of Australian consumers say they will pay more for excellent customer service
  • In 2015, $30 billion in global purchases are expected to occur on social networking sites
  • 34% of Australian consumers are likely to use a smartphone app for a customer service query in the next 12 months

So if that is the problem, what is the solution?

Understanding how your customers want to communicate is a great start. Do they prefer SMS reminders to emails? Would they like to update their own account status online? As an organisation it is your responsibility to know your customers, understand who they are, understand what they need and then provide the right channels for them.

You need to know when a channel is working, as well as when to tweak your communications approach, your message or your product. Knowing what’s broken and why is as important as knowing what’s working.

Using multiple channels, an organisation should mirror the habits of its consumer’s interpersonal communication in a manner best suited to the channel. This may be short, sharp and frequent posts on Facebook or highly individual and timely SMS messages to their mobile. Making sure your customer service experience is simple, easy and convenient for your customers will actually give them a pleasant surprise. At the forefront of this is an integrated single customer view, the ability for agents to see previous customer interactions, no matter what the channel.

Listen to your customers. Avoid expecting your customers to fit into the departments and silos of your organisation. If old ways of doing things are getting in the way of achieving your objectives, change them!

Scott McMillan is Salmat’s General Manager of Business Consulting

Tom Dickerson is a Salmat Business Consultant

Posted in Communications, CRM, Social MediaComments (32)

Best practices for managing your remote team

By Darren Sprod.

John, Mary, Olaf, Nasir, Tasmina, Rolf and Jorge are all working on an ERP software implementation team. Jorge and John work for the vendor; Mary and Rolf are company employees located on two different continents; Tasmina is an independent contractor who works from her home office; and Nasir works for a BPO provider.

They meet virtually using web-conferencing software, and exchange information fluidly using email, instant messaging, a corporate document repository and the occasional phone call.
They won’t all work on the project for its entire duration, but instead join for as long as their expertise is needed.

They never meet face-to-face, but manage to form effective working relationships and even a few lasting friendships.

The project is completed with the usual challenges and glitches, but overall is considered a significant success.

Is this the workforce of the future? Actually, it’s today’s reality for many organisations and workers.

Dealing with the management challenges presented by the new workforce

While this kind of dispersed and diverse team can allow you to access the skills and experience you need, as and when you need them, it can present some management challenges. How do you keep this mix of workers aligned, engaged and high performing?

While you need to respect labour laws and the different nature of your working relationships, you can still use talent management best practices to ensure smooth operations.

Align everyone to high level goals

When managing any kind of team, it’s important to clearly communicate expectations and align everyone’s efforts. One of the easiest and best ways to do this is to clearly communicate high level goals – be they organisational, divisional/departmental, or project – then ask everyone to create individual goals that in some way support the higher level goal. To do this effectively, everyone’s goals, at every level, need to be specific, measurable, achievable, realistic and time-bound (SMART).

Then, you, or key managers from each source, need visibility into the full set of supporting goals so you can identify and address any gaps that might hinder goal attainment. You also need to regularly monitor progress on goals, ensure everyone is still aligned, and identify any challenges or roadblocks so they can be addressed early on. If you can share the information with the entire work team, your various labour sources can assess and identify any impact to their work and the overall project, and readjust.

This form of goal alignment/management is one of the best ways to communicate expectations and ensure your entire workforce is working in concert with the same focus.

Maintain the dialogue

If it’s important to maintain an ongoing dialogue about expectations and performance with collocated employees, it’s even more vital with a workforce that’s made up of different classes of workers in disparate locations.

While it may not be appropriate to maintain this dialogue with individual workers from BPO providers, you should at least maintain it with the managers who are your key contacts.

Everyone needs feedback on their performance and the opportunity to discuss goals, priorities, expectations and how work gets done. So engage in a two-way dialogue with all parties, in a mutually acceptable manner.

Encourage development

When you’re managing employees, it’s clear that you have a responsibility to support their development through work assignments, feedback and coaching, and formal development activities.

With outsourced or contract staff, that responsibility may not be as clear. Here again, you may need to work through external management rather than directly with the worker in question. But you certainly can identify knowledge/skill/performance gaps, suggest learning or development activities, and track improvements in performance.

When your organisation is adopting a new tool or approach to work, it can be beneficial to try to sync up training and development activities with your vendors, contractors and BPO providers. While you may not be in a position to “mandate” training for these workers, encouraging their development can still be beneficial to your working relationship and results.

Evaluate performance

Irrespective of the nature of your formal relationship (employer, customer, partner, etc.) with your workers, it’s always valuable to periodically stop and formally evaluate each individual’s performance.

While you can conduct formal performance evaluations for your employees, you can’t do that with other classes of workers.

But you can still engage in a formal review, outlining your expectations, evaluating work done to date, identifying areas for improvement, and establishing goals for the coming period. You may need to alter who you do the evaluation with – for example, with a BPO worker you may need to conduct the evaluation with their manager – but the evaluation is still important to conduct, both to support the performance of the worker and your relationship with your BPO providers.

Work with your various labour providers to determine the best and most appropriate way to conduct these reviews, as well as their timing.

And don’t forget to solicit feedback from them on your performance so you can improve it.

Recognise and reward performance

Here again, while the way you recognise and reward performance will differ for your employees and your other classes of workers, it’s vitally important that you do. You’ll likely need to negotiate appropriate means with your BPO providers. But nothing ever prevents you from sending a sincere thank you email (copying all appropriate management) or verbally acknowledging contributions to your organisation’s success.

Remembering the fundamentals of talent management

Talent management is fundamentally about creating a high performing workforce. While you need to employ different tactics and techniques with different classes of workers, clearly communicating expectations, providing ongoing feedback, supporting development, evaluating performance, and recognising and rewarding contributions are the key ways you achieve this.

Darren Sprod is a Regional Manager at Halogen Software.

Posted in Human Resources, Labour, Productivity & Environment, TeleworkingComments (1)

The Philippines BPO Industry’s resilience in the face of disaster

By Martin Conboy

If you can help financially please visit there is no doubt that the lovely people of the Philippines need all of our support.

The extent of the recent disaster in the Philippines and its impact on so many people is too difficult to put into words. It was heart breaking to see what these poor unfortunate people have had to go through especially as this was the same area that recently was affected by a major earthquake. Typhoon Haiyan, with wind speeds of over 195 miles per hour (310 + kms), left a path of devastation across the Philippines archipelago, it was the strongest storm ever to make landfall. According to German-based CEDIM Forensic Disaster Analysis, the destruction is estimated to be between $US 8 – 19 billion, though the full extent of the damage is unlikely to be known for weeks or even months. Even now some survivors are only just seeing the first signs of aid that is pouring in from all over the world.

There is an interesting part of the character of the Filipino people and that is their eternal optimism and they will pull through this and be stronger as a result. The country has been preparing to protect the industries it relies on for its economy for a long time and disaster recovery planning is a well-established management practice, as Typhoons are an inevitable fact of life in the Philippines. On average the Philippines is hit by over 20 heavy to severe storms per year. The most recent disaster has certainly affected some parts of the BPO industry, but the level of impact it has had on the industry has been kept to a minimum due to a range of effective forward thinking disaster recovery procedures.

Global buyers and service providers have built a strong presence in the Philippines, and typhoon threat is a geographical risk trade-off that companies have made in return for a high-grade good-quality English-speaking talent pool. The industry is well organised in terms of disaster recovery, although this storm was on a scale not seen before. The main BPO markets of Manila was not really affected as it was well to the north of the storm and emerging centres like Davao City were well to the south of the epicentre. Cebu and Iloilo in the central Philippines were not as fortunate.

In a statement given about Typhoon Haiyan’s effect on its Philippines operations in Manila and Cebu, US-based, Sykes Enterprises commented that “the impact from the typhoon has been immaterial, given the company’s disaster recovery planning and built-in redundant support infrastructure.” The company has been “operating in the Philippines since 1997 and the number of typhoons and storms the archipelago experiences on average is roughly 20 on an annual basis.”

Work was suspended in the cities of Cebu, Iloilo and Dumaguete, in preparation for the typhoon. Temporary power outages and disruption to telecommunications led to higher absenteeism. Many BPO organisations shifted their operations and call flows to other centres in the country in preparation of the storm.

emily-brocoyEmily Brocoy, Senior Business Development Manager, Taking You Forward Inc. (TYF) a major BPO enterprise in Cebu, “ Every time there is a forecast of a strong typhoon to hit the country we always prioritize the safety and welfare of our employees first. On this occasion given the severity of the warnings we suspended our operations for one day, as we did not want our staff moving about getting to and from work.”

She went on to say, ”Of course we cannot just stop working, as that would disadvantage our customers, so in terms of business continuity planning and allowing for outages beyond our control, we have a partner in another geographical location that we can seamlessly divert telephony traffic to. Because of our prudence we were lucky that most of our employees were safe and got back to work the day after the storm had blown through and now our call centre operation is back to normal.”

The Philippine BPO industry will be playing a major role in helping to rebuild the infrastructure, prosperity, and lives for the people of the Philippines. With a growth of 6.6 percent last year, the Philippines is only second to China in the region. The impact of the storm to the national GDP is estimated to have shaved around one percent according to the IMF and economist in the country, with little impact to inflation, which the central bank has targeted between 3 and 5 percent for 2014.

Posted in Business, featuredComments (0) shares soar by more than 400 per cent

There is no question that there has been a sharp increase in the ‘Micro sourcing’ end of the Outsourcing spectrum and as a result shares in the outsourcing website have surged by as much as 400 per cent during the company’s first hours of trade on the Australian share market.

After listing at 50 cents last week, its shares soared to as high as $2.60 in their first day of trading. At 2:50pm (AEDT), they were trading 252 per cent higher at $1.76, giving the company a market value of about $771 million. Freelancer founder Marr Barrie says he opted to raise capital through an initial public offering in order to maintain control over the how the business is operated.

“This space is in its infancy,” he said. “We have 9 million users globally. There’s a long way to go. We thought this is probably the best path, and we maintained being masters of our own destiny.”

Freelancer raised has $15 million through the offering of 30 million shares. Fund manager Roger Montgomery says there has been strong interest in the float, reportedly including from US tech investor Joel Sng. “There are some very high profile early investors in companies like Twitter and Facebook have taken a stake in Freelancer, and so everybody is riding on their coat tails,” he said.

To read more

Posted in Business, GrowthComments (0)

Compliance, Risk and Contractor Management Organisations

By Matthew Franceschini.

Using a specialist outsourced provider such as a Contractor Management Organisation (CMO) to engage and manage your contract workforce can be the most cost-effective, risk free and simple solution. A good CMO brings a depth of industry knowledge and expertise in areas such as legal, industrial relations, workplace health and safety, insurance and taxation.

In recent years, however, growth in demand for contract labour has led to a commensurate increase in the number of companies offering contractor management services.  With so many new companies entering the industry, choosing a suitable CMO for your business requirements has become much more difficult. How do you choose who to entrust with the responsibility of engaging and managing your contract workforce resources?

It’s not a question to take lightly as the consequences of selecting a poor CMO can have a serious negative impact on your organisation.  A CMO’s obligation is to provide a compliant framework for an organisation’s contract workers. However, if the CMO does not conduct itself compliantly, such as not paying contractors correctly or not adhering to statutory obligations, the organisation engaging the contract worker’s services could be left with arduous liabilities.

To avoid the risk of forming a bad CMO relationship, it’s important to ensure that your prospective partner is responsible, compliant, follows best practice and has the interests of clients and contract workers at heart.  Following is a series of suggestions to guide you in your search for a CMO you can trust to meet your needs.

Does the CMO offer contractor management as its core service?

Why buy supermarket bread when there is a bakery right next door? Some recruitment agencies may offer contractor management as a side arm to the business, but few provide a true specialist compliance framework for engagement. Your organisation deserves the best service there is. You deserve a service that is provided by specialists, who have the resources and experience necessary to provide what you need.

Companies looking to engage contract workers are best served when they use recruitment agencies for the ‘pre-engagement’ phase of sourcing and selecting the talent and then seek the advice of specialist CMOs for the ‘engagement and management’ phase to ensure that the workers are correctly and seamlessly administered. Best practice processes, systems and expert knowledge are non-negotiable when it comes to the ongoing management of your contract workforce.

Before you appoint a CMO make sure theirs is a business you are happy to be associated with.

Consider the company’s length of trading, their ownership structure, balance sheet health, ability to fund large-scale payrolls and their statutory compliance. Check their references by talking to other clients and conduct some due diligence on statutory compliance. You need to ensure rock-solid reliability, stability and a match with your requirements.

Does the CMO comply with all current employment law?

With the ever changing legal landscape, being a 100 per cent compliant CMO is not an easy feat, particularly given the background of uncertainty caused by federal and state government movement in recent months.  It takes time and energy to remain up to date with employment law and to understand how it applies to the industry. 

A good example of this was the introduction of Workchoices and Australian Workplace Agreements (AWAs) some years ago, when CMOs needed legal, HR and federal government input to ensure all employer obligations and contractor entitlements were met. The same degree of effort then had to be applied with the introduction of the Fair Work Act, and it is bound to change again in the future.

Does the CMO assess the contractor’s rate and duties and if applicable, ensure they meet the conditions of the relevant award?

Despite being a non-traditional employer, all CMOs are obliged to comply with Modern Awards.  Therefore, as part of the engagement process, CMOs should always review all contractor rates in relation to their job function. Any concerns must be discussed with the customer and action taken where required to ensure all conditions are met.

Does the CMO use tax minimisation sales tools that go outside the rulings and suggested practices of the Australian Taxation Office (ATO)?

To gain a competitive edge, some CMOs entice contractors by projecting likely incomes based on assumed levels of work, business expenses and salary packaging for the year.

Unfortunately, what some CMOs fail to state is that when tax time comes, the contractor will need to substantiate all of their projected expenses and allowances. While the practice may help make the CMO look more attractive in the eyes of the contractor, it’s not a sustainable practice.

Contractor management requires a long term view, trustworthiness and compliance, whether dealing with contractors or the organisations that engage them. Therefore it is critically important for an organisation and contractors to assess the best outcomes by having visibility and access to the CMO’s taxation and legal team. This will validate the practices applied and provide both parties with an insight into the makeup of the CMO. These taxation and legal teams should be part of the CMO’s core capability, not outsourced, so as to ensure continuity and cohesion in service delivery.

Are you sure the CMO collects and remits the appropriate Workers’ Compensation Insurance and Payroll Tax amounts? 

Payroll Tax and Workers’ Compensation Insurance are complex areas due to the fact that they are state based tax and each state has its own legislative framework. Where an organisation has contractors working throughout Australia, it must be prepared to constantly review law changes, consult experts and ensure any changes are reflected in organisational process and procedure.

Does the CMO have a comprehensive customer management or support structure in place?

A CMO must be capable of doing much more than administering payroll for contractors. They must be responsive to customer and contractor queries, provide billing and payroll information promptly and at any time be equipped to deal with enquiries ranging from human resources issues to industrial relations, motor vehicle leasing and superannuation. This means ensuring a variety of subject matter experts are always on hand.

And finally, does the CMO have adequate privacy, security and disaster recovery systems and processes in place?

Privacy and security are of utmost importance in this industry.  Every CMO should have rigorous security policies in place to ensure the safety of personal and client data. To ensure reliability and accessibility, every CMO should also have a disaster recovery plan that will enable it to resurrect systems and maintain services in the event of a disaster.

With contract workers accounting for an increasing presence in the Australian workforce, organisations need to be clear on their engagement strategies and practices.  Sourcing good contractors, establishing consistent and compliant engagement practices, and monitoring the use of contractors in order to better manage budgets are important challenges for any organisation today.


Ultimately, you want to partner with a company that has a solid reputation in their respective market. It is important that your business’ image is not compromised and the service you receive is of the standard you require. Furthermore, your contract workforce should be engaged and managed by a company that shares the beliefs and values of your business. After all, success breeds more success.


Matthew Franceschini is CEO of Entity Solutions


Posted in HRO, Labour, LeadershipComments (0)

Leveraging Opportunities in Tier II and Tier III cities in India

A number of tier II and III cities like Jaipur, Nagpur, Bhopal, Chandigarh, Coimbatore, Ludhiana, Mangalore, Indore and Kochi, have come into reckoning as the growth drivers of the future. They are attracting large investments as they possess a significant cost advantage – in terms of land prices and manpower. Further, the government is also upgrading the infrastructure by introducing policies on SEZs, National Investment Manufacturing Zone (NIMZs) and improving public transport, airports, etc.

This year, thanks to good monsoons, the agricultural incomes are expected to increase. The agri-GDP for the Agricultural Year 2013-14 is expected to be 2.5 – 3 times higher than the previous year. Since many tier II / III cities are largely agrarian driven, it translates to higher disposable incomes in these cities.

As tier I markets have reached saturation, companies across sectors from hotels to automobiles to luxury goods, are now looking at these markets for future growth.

Customised Sales and Marketing strategy for Tier II and III cities

Companies moving to markets in smaller cities in India need to develop new strategies and formulas for these markets as they have some inherently different characteristics. One cannot treat the Tier II and Tier III markets, simply as an extension of their tier I markets. A sales and marketing strategy devised for metro cities may not necessarily work for other cities.

With low penetration, internet in India still remains a tool accessible largely by metro and tier I city consumers. Therefore, these consumers come well researched prior to the purchase of any product, technology or service. Compare this to consumers in tier II / III cities who are largely accessing the internet through their mobile phones, and rely on personal opinion rather than an ‘internet opinion’. A company’s sales force should be ready to handle such ‘unprepared’ customers and educate them about their product portfolio. A successful implementation of this small virtue would ultimately get them life-long customers.

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Posted in Business, Destinations, GrowthComments (0)

IT Outsourcing in Eastern Europe

By Elena Kozlovskya

The Global outsourcing industry is switching its focus from simple labor arbitrage to sophisticated models of expertise based solutions. Eastern Europe is at the forefront of this change.

In a normal IT outsourcing scenario the customer brings the vision for a particular project, hiring programmers for several months to execute this vision. When the project is complete, the outsourcing company receives its payment and the customer receives full IP for the innovation. After the innovation is in place, it becomes the customer’s responsibility on how to commercialise it, sell it, and capitalize on it.

There are many regions in the world with good IT capabilities. Historically, the countries in Scandinavia, the USA, UK, Israel were the owners of innovations, while the actual development was outsourced to places with cheaper labor like India, South East Asia, Eastern Europe.

Eastern Europe has quickly gained its popularity as an outsourcing player for its high quality, mathematically intensive programming skills, rich engineering heritage accumulated during the times of USSR at this strategic technology zone covering current countries like Belarus, Lithuania, Ukraine, Latvia, Estonia.

Though if we look at the size of the Eastern European market, it can all squeeze in the size of Google alone. To compare, the biggest IT company in Eastern Europe employs around 10,000 people, while in Asia you can find a company employing over 1 million people. To date, the average outsourcing rate in Eastern Europe is $35 per hour, or around US $5,600 per developer per month. The market of Eastern Europe is already experiencing the lack of resources, which creates the constant increase in payrolls. Contrary to Asian vendors, Eastern European vendors cannot make money if they staff big teams, while Asian vendors have a comparatively “unlimited” resource pool. This puts Eastern Europe in unique position to be able to offer both cheaper services compared to local providers, and also cost effective complex solution with minimum labor involved. Thus, while competing on global arena, the Eastern European focus is to seek for labor effectiveness, accumulated knowledge base and solution delivery, rather then just selling IT heads.

Is it something new?
In fact no, the pioneers in corporate solution based approach are the companies Microsoft and SAP. These companies were getting in competition with outsourcing vendors by focusing on creating unique “solutions catalogue” to cater to corporate clients. By executing their strategy they not only created the competition to Asian Outsourcing Giants, but even made them absorb their framework and won the admission to Big 4 Outsourcing consultancy circle.

Microsoft is known to be the most effective Partners Networks strategists. It has successfully acquired Navision and Axapta companies (currently MS Dynamics Nav and AX) turning them into own modules under the Microsoft brand. Or look at Facebook, which buys out small innovative teams for incredible amount of money, which demonstrates how high they value the expertise in specific fields.

IT business owners in Eastern Europe feel the pressure of high expenses and have to react with offering additional value. There are more and more companies evolving with the expertise based offerings, product components tailored to particular business challenges in different domains and technologies. This also fostered the creation of a startup movement in Eastern Europe around 3 years ago for brand new businesses. So, companies became mature enough to face the competition at global level while delivering solutions.

Customers are becoming more experienced and demanding, and are not ready to pay by the hour for the solutions that they can get even for free. So, while cost advantage is not our best card, local IT companies have to evolve to that change, or die, being swallowed by more effective business partners.

While working at a big outsourcing company, I was in charge of handling customers’ requests. There were around 30 qualified requests coming in on a daily basis with the requests for quotes for different innovative products and services…and all of them were repetitive. All of them were trying to address similar challenges in slightly different ways.

There will be the time when outsourcing companies will have to stop writing the majority of code from scratch, because it has already been written, re-written and re-rewritten before. There will be no other way but commercialization of the expertise.

Big outsourcing companies have huge accumulated experience to address business challenges and consult customers on the best way to resolve their problem. So, outsourcing buyers which are developing specifications in house are often robbing themselves by cutting the possibility of listening to the view of an outsourcing vendor.

The biggest Eastern European vendor, EPAM Systems (NYSE:EPAM) verifies the described trend by offering a solution based approach and by investing in its own knowledge based systems.
It is BDP’s primary goal to continue building its smart semantic data base of different solutions produced in Eastern Europe. We strive to promote specialization among local IT companies and encourage them to avoid “can-do-it-all” business model. There are just a few examples broken down by verticals, which are listed at BDP’s website. By being able to overview the market, we can not only identify the best vendor from Eastern Europe for each outsourcing case, but also commit to the delivery. In addition, we can place our independent consultant to overview project development at vendor’s premises.

Local Eastern European vendors are coming up with ready modules to automate different kinds of manufacturing processes, to fish out information from big data volumes, to streamline processes at your web sites, to enable systems’ security and much more. By collecting this in-house innovation, our companies go beyond rate-per-hour competition and are becoming able to introduce their innovations at global level. This market situation features great opportunities for outsourcing buyers and IT companies to base their innovation and R&D centers and subsidiaries in Eastern Europe, makes the region more attractive for outsourcing and so allows undertaking wider range of business and IT activities.

Posted in Business, E-Collaboration, IT Outsourcing, TechnologyComments (1)

Malaysia: the Captive Outsourcing Hotspot

By Martin Conboy. Malaysia has been identified by Everest Research as a key country to watch in Asia as the global sourcing market continues to evolve and grow rapidly in coming years.  As buyers implement and utilise differing sourcing models in line with their strategic direction and objectives, the in-house model continues to be a significant component of this evolution.

Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Under current Prime Minister Najib, Malaysia is attempting to grow its economy by attracting investments in Islamic finance, high technology industries, biotechnology, and ICT-BPO services. The population is 28 million of which 12 million make up the countries workforce.

As a former British colony it’s hard not to see the British colonial influence, which is mixed with a fusion of Islamic modernism. The mix is spectacular and impressive and a credit to the vision of the country’s leadership. Moreover, with its multicultural mix of Indian, Chinese and native Malays, the country is able to boast a peaceful and harmonious existence.

During the 22-year term of Prime Minister Mahathir, Malaysia was successful in diversifying its economy from dependence on exports of raw materials to the development of manufacturing, services, and tourism. The current government has continued these pro-business policies.

Malaysia is a nation of multilinguists due to their central geographical location; with the Straits of Melaka channeling trading ships between East and West. This resulted in traders from Arabia, India and China opting to make Malaysia their home throughout early history; not to mention a legal system based on English Common Law as well as a heavily influenced English education system having being previously a Crown Colony. Admirably, Malaysia is one of few nations that gained their independence from British rule in 1957 through a series of civilized negotiations versus massive upheavals and uprising. Malaysians are thus formally educated in the Malay language and English and may also be educated in Mandarin, Tamil and even Arabic should they began their early education with specific language or Islamist schools. With the rise of China and India as global economic hubs and existence of economic centers in the Middle East; Malaysia is well positioned to be the strategic staging point to export services to those regions.

Looking specifically at the BPO sector according to ValueNotes an Indian based BPO analyst firm about 15 percent are captives in the Shared Services space and of the balance only about 20% are servicing the international market. The sector is skewed towards the ITO sector with about half of the businesses represented in that area and 35 per cent in pure BPO.

The success of the captive outsourcing model, Everest refers to a captive as a Global In-House Centre (GIC), in India and Philippines has led buyers to explore other locations. While both these countries are the major focus for GIC activity, companies are establishing GICs in other parts of Asia, Central and Eastern Europe, South America and Africa.

Malaysia is one of the strongest contenders in the Asian region with significant GIC presence in the country. Due to its unique value proposition in terms of multi-lingual, multi-cultural capabilities, significant expertise, and supportive government bodies, the country is well established to support voice-based and non-voice work (mainly finance & accounting and application services). The market is also gradually expanding to offer high-end work such as analytics.

According to McKinsey Global Institute’s Emerging Global Market Survey Study in 2005, Malaysia ranked high as an “enabling business environment”, and its economy is mostly driven by services that run ahead of other markets, particularly in India, China, Poland, and the Philippines.

Malaysia has a booming service sector, shifting from its production-based economy to a rapidly expanding economy dependent on education and service. Malaysia benefits from its strategic location, its global integration, and its well-educated workforce. Although India is the leading nation for supplying outsourcing services, Malaysia is on the second tier of outsourcing nations with countries like China and The Philippines.

Malaysia’s economic competitiveness is above average, scoring a 4.88 on the GCI index.  Macro economic stability is also high with a 5.0 index, scoring higher than India (4.5), the Philippines (4.6) and Thailand (4.9). A nation’s infrastructure is a major component in deciding where to set up sourcing projects. Malaysia’s infrastructure scores are among the highest in the world, with both road quality and electric supply achieving a 5.7 index – tying the US for roads and Thailand for electric supply.

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BT plans to shift outsourcing work to India and Malaysia

British Telecommunications Company BT GROUP is looking at shifting some outsourced processes to its own captive centres in India and Malaysia, in keeping with the trend of multinationals pulling back on technology outsourcing. BT’s plan is part of a new wave, where large US corporations are rethinking on what parts of technology they should outsource and what they must retain in house.

Last year, automobile major General Motors revealed plans to bring back about 90% of work it outsourced to HP. Other companies taking back outsourced work include consumer products company P&G and financial services company Citi.

Analysts said that London based BT, which has been among the early outsourcers, is now worried that it may have gone too far and is looking at bringing some control back. If the plan fructifies, vendors like Tech Mahindra, Tata Consultancy Services and Accenture could end up with less work from BT.

“BT is moving work selectively to the captive,” said a senior industry executive close to the developments on condition of anonymity. “Over a period of time, it has outsourced so much that they don’t have the skills within the company. So nobody knows the system within BT because TechM has built and run it for more than a decade.”

The executive said initially the number of processes taken back would be small. He pointed out that the telecom major had been “insourcing” from all top vendors for the past five-six quarters.

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