By Janet Silvera

Minister of Industry, Investment and Commerce, Anthony Hylton, says Jamaica must capitalise on the gains it has made in growing the Jamaican business process outsourcing industry, to become the leading contact centre location in the English-speaking Caribbean.

The island currently boasts over 10,000 full time agents in the offshore business process outsourcing sector.

Addressing international investors and local business operators at the opening ceremony of the Jamaican Investment Forum now on at the Montego Bay Convention Centre, Minister Hylton said, Jamaica has been recognised by Gartner as a destination to watch and by A.T Kearney as a favourable business process outsourcing destination.

He said that with near shore access to the US, low attrition rates and high labour force availability among secondary and university graduates, Jamaica provides great value to businesses looking for a business process outsourcing destination.

These advantages, he argues as well as the fact that the government has demonstrated its support for this priority sector, have kept industry heavyweights such as ACS (Xerox), Teleperformance and West Corporation operating in the island for almost a decade.

Janet.silvera@gleanerjm.com

As the media keep reminding us, the many pressures for change in the structure of our economy are causing some workers to be thrown out of their jobs. But this is unlikely to cause a decline in overall employment. Huh?

The structure of the economy – as represented by the relative sizes of the various industry sectors – is always changing. Normally the rate of change is so slow we don’t notice it. At present, however, the pace of change is much quicker than usual.

These pressures are coming from outside Australia. Many are the consequence of the rapid transition of various populous economies from developing to developed. Some of these “emerging” economies are in South America; most are in Asia.

One big consequence of this development is that much of the manufacturing undertaken in the world is moving from the developed to the emerging economies, where labour is more abundant and thus cheaper. This is hitting manufacturing in all the developed economies, not just us. (They’re not enjoying it, either.)
Because the emerging economies’ immaturity means they’re growing a lot faster than the rich economies, another consequence is that most of the growth in the global economy comes from them. That’s been true for years; it will be even truer in the coming decade because the North Atlantic economies damaged their prospects so badly with their financial crisis.

A further consequence is that the cycle in the world prices of primary commodities – food and fibre, minerals and energy – is now driven more by the emerging economies than the rich economies.

And the different needs of the emerging economies – for energy, steel and high-protein foodstuffs – have produced a long-lasting change in the structure of world trade, where the demand for primary commodities is growing faster than the demand for manufactures, meaning the prices and volumes of commodities are growing faster than those for manufacturing.

Because the emerging economies have much more economic development to do, and because there’s a pipeline of countries coming behind China and India, the increased global demand for commodities relative manufactures is likely to last for many moons.

This is bad news for the real incomes of most of the developed countries (which tend to import most of the primary commodities they use, while gaining most of their export income from manufactures), but great news for us, since our imports are mainly manufactures and our exports mainly commodities.

Of course, both the big advanced economies and we face painful structural change as a consequence of this shift in the structure of the global economy, but I know whose shoes I’d prefer to be in.

In Australia we have to shift resources of labour and capital to the expanding mining (and agricultural) sectors from the declining manufacturing sector and elsewhere in the economy.

The improvement in our trading fortunes relative to the rest of the world is reflected in our higher exchange rate – which is thus likely to stay high for the foreseeable future. To many people, this sounds like terribly bad luck (when they’re not thinking about their next overseas holiday, that is).

To economists, however, it’s all part of the same deal. Our trading position has improved, so our exchange rate has appreciated to help us bring about the change in the structure of our industries needed to fully exploit that improved position.

In other words, by making it harder for our manufacturers (and tourist operators and education providers) to compete on international markets, the higher dollar is helping shift resources out of manufacturing and into mining and elsewhere.

Of course, the era of the emerging economies isn’t the only factor forcing change on our industries. The other big one is the continuing information technology revolution, which is presenting considerable challenges to our established media companies, the book industry, retailers and shopping-centre owners.

I started by asserting that the job losses being caused by structural change were unlikely to lead to a fall in employment overall. Why not? Because what creates jobs is the spending of income.

Starting with the mining boom, it’s bringing a lot of additional income to Australia (first from higher prices per tonne, then from a lot more tonnes). But, people object, mining is highly capital intensive so it doesn’t employ many people. It may account for 10 per cent of the value of all we produce (gross domestic product), but it accounts for only 2 per cent of total employment.

True, but what happens to all the income the miners earn that isn’t paid to their employees? Some of it goes to foreign owners and is spent abroad, but the rest goes to local shareholders and local suppliers to the industry, with Australian governments also getting a big chunk (as they should).

When the local shareholders, suppliers and governments spend that income, jobs are created. Where? At present, a lot are in the construction industry but, more generally, all round the services sector.

How can I be so sure? Because the services sector (including construction) accounts for about 85 per cent of all employment and because it has accounted for all the net jobs growth for the past 40 years.

Next, the advent of new technology often prompts employers to retrench staff as machines replace workers. People imagine these jobs have been “lost”, but economists know they’ve merely been “displaced” (moved).

Why? Because when companies make changes that improve their productivity (output per worker), they raise the economy’s real income. The company shares the benefit from its higher productivity among its remaining workers, its shareholders and the taxman, but often competition forces the benefit through to its customers in the form of prices that are lower than they otherwise would be. And lower prices mean higher real incomes.

The point is that as this income is spent around the economy it creates jobs around the economy. Where? Somewhere in the services sector.

Ah, you say, but are all the workers “displaced” from manufacturing able to take up the new jobs in mining or the services sector? A lot more are than you imagine will be able to, but some will have a struggle and some individuals won’t make it.

That’s why the smart response from governments to pressures for structural change is not to help companies carry on as if nothing in the world had changed, but to help individual workers adjust to that change with help to retrain and relocate.

Ross Gittins is the economics editor of the SMH.

Read more: http://www.smh.com.au/business/most-jobs-are-not-lost-they-merely-end-up-elsewhere-20120224-1ttdx.html#ixzz1nRdRuu00

Over the past 20 years the New Zealand government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally.

This dynamic growth has boosted real incomes and broadened and deepened the technological capabilities of the industrial sector. The economy fell into recession before the start of the global financial crisis and contracted for five consecutive quarters in 2008-09. In line with global peers, the central bank cut interest rates aggressively and the government developed fiscal stimulus measures.

The economy posted a 1.4% decline in 2009, but pulled out of recession late in the year. Nevertheless, key trade sectors remain vulnerable to weak external demand. The government plans to raise productivity growth and develop infrastructure, while reining in government spending.

When one thinks of outsourcing and offshoring, one automatically thinks of India and the Philippines as the primary and most logical destinations. They certainly hog all of the headlines.

However, over the last few years, many new localities have opened up, and New Zealand is putting its hand up for consideration. After all its geographical proximity to Australia is attractive, it is just over the ditch (Tasman Sea) and is only three hours away by jet. In many ways it exactly like Australian Society, with an Anglo Celtic, indigenous, Asian demographic.

If necessity is the mother of invention then New Zealand has developed a solid reputation as a can do, innovative and very resourceful nation located in the South Pacific. Leading up to new years Rugby World Cup the country is busy improving infrastructure.

Not many people know that NZ was actually part of New South Wales from 1841 -1849 .The Treaty of Waitangi, signed in 1840, guaranteed that individual Maori tribes should have undisturbed possession of their lands, forests, fisheries and other treasures in return for becoming British subjects. However the new British settlers did not appreciate that the Maori owned their land communally and that permission to settle on land did not always imply sale of that land. This led to the so-called Maori Wars. Australia (then known as New South Wales) and New Zealand were both British colonies and the British army that was fighting in New Zealand were garrisoned in Sydney and New Zealand was administered from NSW.

So, from a historical perspective, both countries are culturally the same. In terms of language availability English is the main language plus as a function of the trading nations that make up the Pacific rim and the ebb and flow of different nationalities NZ has good availability of Asian language speakers. The British heritage means that there is a similar business and legal environment to Australia. It’s no secret that Australia and NZ’s multicultural societies have produced very stable economic and political environments that are the envy of many.

Many locations in NZ have impressive high quality educational facilities and infrastructure, giving outsourcers access to labour resources that are highly educated and skilled. When BPO is considered from a high-level consultants talk about BPO 1.0, which is the initial ‘Lift & Shift’ strategy that chases a least cost environment. Initially, the principal driver for BPO is to reduce costs. There is no doubt that NZ ticks that box with one Australian dollar currently buying NZ$1.30. This combined with lower salaries; on costs and rents on a parity-pricing basis makes NZ a 30% plus less expensive proposition for Australian companies considering a ‘Near Shore’ option.

Availability of a ready willing and able workforce is a major consideration and with an unemployment rate two points higher than Australia, NZ can offer an educated, articulate, culturally similar and prepared workforce. The capital city of Auckland is home to 5 universities and polytechnic colleges; these in turn produce over 17,000 graduates per annum with a bachelor’s degree or higher. An amazing 30 percent of NZ adults in Auckland have a bachelors degree or higher.

Fujitsu Australia set up an IT helpdesk facility in Auckland last year to service a large contract with Qantas that covers Australia. One of the most important factors when determining a location is the ability to attract skilled, quality people.

Karyn Jeffery, GM Service Support, Fujitsu Australia Limited said “In advance to opening our Auckland facility, we conducted market research to determine the tangible opportunity to meet our recruitment needs.  We are pleased that we have had a great result in attracting quality technical staff for our first and second line support service.  We now have upwards of 60 staff based in Auckland and have been really pleased with the calibre of the individuals.”

In recent years NZ has experienced a negative net migration as their workforce has looked to countries like Australia for work opportunities, and its vital to find work to keep people in New Zealand. Needless to say that people want to stay in their own country and be close to family. An important consideration of a failure to keep the population in NZ is that they are a source of support for domestic demand and the housing market.

More recently BPO (BPO 2.0 & BPO 3.0) is increasingly viewed as an instrument to add value and quality. Driven by an inability to find people in Australia and rather than off shoring to The Philippines or other Asian destinations, companies from Australia are starting to examine NZ more closely.

In the same way that companies in the USA look to Canada as a ‘Near Shore’ destination so to will Australian companies look to New Zealand as a realistic option. It means organisations in Australia can outsource to a location that is cheaper, yet has all the advantages of being part of an advanced and similar economy with a stable political system.

People interested in New Zealand should visit http://www.investauckland.com/ They are the gateway into NZ.

When one thinks of outsourcing and offshoring, one automatically thinks of India and the Philippines as the primary and most logical destinations. However over the last few years, many new localities have opened up, with outsourcing operations setting up across a diverse range of geographical locations, including Central and South America, Africa, Eastern Europe and even regional Australia.

Initially, the principal driver for BPO was as a business practice to reduce costs. More recently it is increasingly viewed as an instrument to add value and quality. Rather than off shoring, companies from Australia, US and Western Europe are looking to ‘right shore’ which translates into near shore or on-shoring their outsourcing relationships. For the US, near shoring options include Canada, Central and South America.

To meet these new demands and to compete against competition from areas like the Philippines and South America, Indian outsourcers are looking to invest in delivery centres across the world thus becoming Pan Global. The India BPO market has bred some extremely large players who are cashed up and scouring the planet looking for acquisitions as they look to offer an end-to-end BPO supply chain. According to Deepak Patel CEO, Aditya Birla Minacs, if you are going to be a significant global player, one will have to have a near shore option as well as offshore solutions to offer.

Indian outsourcer, Wipro BPO now has centres in Philippines, Eastern Europe and Australia among others, and plans to tap newer geographies like Japan. During 2010, Aditya Birla Minacs and other Indian outsourcers have been establishing and strengthening their delivery centres in North America.

In a recent interview Wipro BPO’s senior vice-president Ashutosh Vaidya said,  “We have set up 15 overseas delivery centres and parked 3,000 people there to neutralise near shoring by global outsourcing firms like Accenture and CapGemini.”

Australia

Though labour costs are similar to the US and Europe, real estate costs, particularly in regional areas, are significantly less expensive considering the skill level of the workforce and level of infrastructure. Geoff Hill, Manager Economic Development for Latrobe City (Eastern Victoria – Australia) believes that regional areas like Latrobe City can offer great commercial opportunities for Greenfield sites, with existing floor plates ready for fit out and very competitive and workable costs.

Many Australian rural areas have impressive high quality educational facilities and infrastructure, giving outsourcers access to labour resources that are highly educated and skilled. It means organisations in Europe and North America can outsource to a location that is cheaper, yet has all the advantages of being part of an advanced economy with a stable political system. Hill comments, “Regional areas like Latrobe City do not have highly saturated markets, and therefore can offer prospective outsourcers access to a labour force with a low attrition rate.” Needless to say that people in rural and regional areas want to stay in those areas and be close to family and tend to stay as employees for longer. In a full employment economy like Australia, it’s hard to get staff in metropolitan areas and it brings the rural areas into play.

Recently, UK outsourcer Vertex, who employs 10,000 people across 70 locations in the UK, North America, Australia and India, announced the building a new facility in Ballarat (Western Victoria) representing millions of dollars of investment in regional Australia, the new facility will employ 600 people in the next two years. The Victorian Office of Housing Maintenance established a customer care call centre in La Trobe, generating 60 new jobs in the region. “The successful attraction of these organisations will enhance and diversify the local economy and have an enormous positive impact on existing businesses,” said a delighted Hill.

Brazil and South America

Since 2008, Brazil and other South American countries have been getting in on the BPO and outsourcing market. Their proximity to North America make them very desirable as near shoring options. Companies such as IBM, Unisys, HP, EDS, Accenture, Deloitte, Motorola, Intel and Nokia all have offshore centers in Brazil, Guatemala, Chile and Argentina.  Indian outsourcers such as Tata and TCS have also setup delivery centres in South America.

Labour costs in South America are cheaper than in the US or Europe, where on average there is a 30% salary advantage cost over the US. However, labour costs are not as cheap as they are in India or China.

Eastern Europe

According to consulting firm McKinsey, between 2005 and 2007, the BPO industry in Eastern Europe nearly tripled, becoming a favorite location for offshore outsourcing. The region offers low wage levels, is a relatively low risk location for investing, and has a reasonable and reliable level of infrastructure in place.
The other benefit is the region’s geographical and cultural proximity to Western Europe, making the process of setting up offices much easier. There is also fewer language barriers compared with elsewhere, with German and French both being widely spoken.

The industry is becoming a truly global industry, where there is a diverse range of suitable locations offering different benefits and advantages.  And now it’s more a question of finding the right ‘shore’ rather than the cheapest ‘shore.’

Written by Rob O’Malley

The manner in which businesses in The UK and elsewhere in Europe outsource activity offshore, has changed dramatically over the past 10 years.  Back in 2003, I was in on a meeting where the objective was to determine how quickly that company could outsource 1000’s of call centre positions to India.  I recently revisited that company and was involved in a similar meeting.  They have a new CEO and management team.  The objectives of the meeting couldn’t be more different.  There was now much greater consideration as to what should be off shored and what shouldn’t.  Teams of people had been formed whose roles were to ensure that their new strategy of “offshore outsourcing” couldn’t possibly fail and if it did, there were contingency plans and procedures on what to do.  The due diligence in vendor selection had been completely overhauled and it was difficult to appreciate that this was the same company that I had visited 7 years previous.

Of course, in hindsight it is very easy to see the changes.  I, like many, who have been involved in any form of offshore outsourcing over the past 10 years, have learnt by mistakes (ideally someone else’s but sometimes our own).  The company I was visiting had learnt from those mistakes and they had brought in external skills from other companies who had also gone through that painful learning process.  When at University in England studying Business, I was always taught that British business was risk-averse and conservative in its nature.  If this is the case, then both our banks and our companies engaged in off shoring have been typically un-British over the past 10 years and now they’re all reverting back.

If I were to sum up the differences in offshore outsourcing now compared with a few years ago, it comes down to two key areas; de-risking the whole project and increasing the control that the company has.

Larger businesses now have teams of people dedicated to managing the vendors and many of these are located in the country of delivery.  These trends have also led to a rapid rise in near shoring.  For Western European businesses, near shoring now means Central & Eastern Europe and predominantly to those countries which were once Communist but are now part of the European Union.  In countries such as Poland, Romania, The Czech Republic and Hungary, there are now fast growing outsourced vendors covering a range of services.   Near shoring is therefore not so much a trend but a symptom of these trends towards greater control and reducing risk.

What is meant by near shoring?

Near shoring is essentially about trading risk for price.  A near shore option is considered lower risk but generally higher priced than the typical offshore locations such as India and The Philippines but without the perceived risk and negative associations around quality.  There are still significant cost savings when outsourcing to Eastern Europe but they tend to be less significant than Asia.

What are the advantages?

One key advantage with near shore is the pure geography. It is much simpler for a client to have positive input into an outsourcing project when it is only a 2-hour flight away to address any problems quickly.  This makes it far more expedient to manage the vendor.  It’s also easier to incorporate the near shore delivery team into the company’s operations as a whole.

Another issue is language availability. Companies are increasingly looking to centralise operations on a regional basis. Countries in Asia simply don’t have the breadth of European language skills as they do in Eastern Europe. In Romania, it is not unusual to have BPO agents with bi lingual skills, this is of course crucial for contact centre activity but it is also important for all types of outsourcing. A Frenchman is likely to be able to have some form of conversation with an Indian ITO supplier in English, but it can and often does pose problems.

The biggest difference is the way in which people are educated.  We all know that the Indian education system has been fantastic in producing some of the world’s greatest IT minds.  However, the education systems across Eastern Europe are very similar to those found in Western Europe, The USA and Australia in that it encourages creativity over the need to learn facts.  I worked for some time with a company who outsourced technical support to The Philippines, India and Romania.  The Asian agents were technically very competent, but the Romanian agents understood the nuances and intonations and what was required from the call and answered appropriately.  The Eastern Europeans achieved shorter call durations and higher customer satisfaction scores.

Conclusion

Eastern Europe will never compete head to head with large-scale outsourcing against the likes of Asian BPOs. It does however work very well for niche projects and is a very good proposition for European based firms or the increasing number of risk-averse companies.  It’s also the perfect location for companies looking to centralise European operations or for non-European firms to be able to service major economies such as Germany, Italy and France.  Even though many countries in Eastern Europe and now part of the European Union, they are still not part of the Euro Currency so costs are considerably lower than Western Europe.  There are differences across the various countries of Central and Eastern Europe.  Those outside the UK including Russia, Moldova, Serbia and The Ukraine are still considered riskier locations.  The countries closer to Germany including the Czech Republic, Slovakia and to a lesser extent Poland have seen costs and labour availability reduce over recent years.  The countries further to the South including Romania, Hungary and Bulgaria are now the more popular choices.  The Former Yugoslav Republics of Croatia, Bosnia and Macedonia are also hungry to find industries to employ their well-educated and young populations.  As we see their infrastructures and political systems mature, we are likely to see an outsourcing industry flourish especially if they are inside the European Union.

Rob O’Malley has worked in the outsourcing industry for the past 17 years. He can be contacted at rob.omalley@call-centres.com

Advans, an IT consultancy and solutions provider, has released an outsourcing survey showing 75% of managers prefer nearshoring, to offshoring to popular outsourcing vendors, such as Indian BPO companies. Furthermore, 37% of these managers expressed interest in increasing their outsourced IT projects in the following year, with database administration and QA processes as the leading types of projects.

Paul Angelo, VP of Service Delivery at Advans said, “We were interested in learning more about executives’ opinions regarding outsourcing.  The results showed that the majority of executives are considering outsourcing strategies that are closer to home. These results will help us refine our services so we can continue to deliver cost-effective solutions that meet the needs of IT executives.”

Aside from expressing an interest in outsourcing more IT projects, the managers surveyed by Advans were also keen on outsourcing Business Intelligence, Help Desk, Human Resources, Operations and Monitoring.

For businesses looking at cutting their costs and focusing on their core business through outsourcing work, it is wise to consider nearshoring as a potential alternative.

Savings from nearshoring are not as significant as offshoring, however it is still less expensive compared to operating in places such as Australian mainland capital cities. According to Access Economics’ industry report, the cost difference between near shoring in Tasmania and off shoring to India or the Philippines in certain circumstances may be comparable.

Although the global perception is that outsourcing work to Asia is economically advantageous because of lower labour costs, there may be operating expenses and risk factors to be considered in the total cost and these may impact the price difference between nearshoring and offshoring.

At first glance, offshoring is inexpensive, but it may have hidden costs.

According to Access Economics’ findings, there are indirect costs in the advertised price of Indian and Philippine offshore contact centres. These indirect costs comprise higher staff training requirements, management fees, charges for overseas calls, increased rates for call escalation, spending for international travel, and risks caused by changes in the socio-political environment of the offshore location. There are also added costs because of lower quality where, from a customer’s viewpoint, service from an offshore contact centre is less satisfying compared to service from a local or nearshore contact centre. Considering all these costs and risks may make offshoring more expensive than it initially seems, and this lessens its cost advantage substantially.