We are closing responses to our Australian BPO survey this Friday. If you are on the buy side of BPO and want to fill in the survey please go to
http://valuenotes.co.in/survey/index.php?sid=47518&lang=en

If you fill in the survey we will send you a free copy of the executive summary and put your name in the draw to win a free iPad 2.

Philippines BPO tour

We are excited to be organizing the BPO Tour of the Philippines with our principal partner UK Outsource magazine (www.outsourcemagazine.co.uk) for in late March/April and are delighted to invite you to join the tour.

This will be a high-profile delegation of business leaders led by Martin Conboy, President of the Australian BPO Association (ABPOA) and an acclaimed international expert on BPO. The tour has been created to allow decision-makers credible space in which to explore why the Philippines is the global number one in voice-based BPO and number two in non-voice BPO.

WHY YOU SHOULD GO

Meet the main players, government officials and more
Visit the best facilities in the Philippines
Discover what the Philippines can bring to your organisation
Explore Manila, Clark Aerotropolis/Subic and Cebu
Oh, and maybe squeeze in a couple of rounds of golf

No matter what area of outsourcing you are interested in, from front office call centres to back office processes, IT, data centres, manufacturing or animation, you will meet people you can partner with or service providers who do business in your area of specific interest.

Plus Outsource magazine will be covering the tour in a special section of the summer magazine – if you are on the tour, your opinions will be valuable to us and to your peers.

To find out more click here

Telstra to shed 200 jobs in latest cuts
Lucy Battersby

Telstra will shed 99 administrative jobs from its operations division, sending most of them offshore, while its Sensis unit will cull a similar number of positions. Of the total admin jobs lost, 60 of them will shift abroad and the remaining 39 positions made redundant, the telecoms company announced today.

–

Almost 200 workers will lose their jobs after the makers of Mortein and Dettol announced plans to shut down its only Australian manufacturing facility in Reckitt Benckiser (RB), a multinational household and healthcare manufacturer, today announced plans to restructure its operations. Their advertising featuring Louis the fly is an Australian institution. About 190 employees, mostly production and maintenance workers, will be left without a job when manufacturing stops at its factory in Sydney’s northwest by July. Production would move to other global manufacturing sites in Europe, Asia, South Africa, and North America. The company’s consumer contact centre will remain in Australia.

We spoke on many occasions last year about the rise and rise of the Australian dollar. It’s hard to believe that in the year 2000 one Australian dollar would buy a miserly 55 USA cents. Fast-forward to today and one Australian dollar will buy you a whopping US$1.06. Over the same period the A$ is worth twice as much in Indian rupees and 70% more in Philippines pesos. This started to accelerate in the last 2-3 years and partly explains the rapid uptake in BPO work being shipped off to Asia. From an economics point of view it’s to financially attractive not to consider it. In the last two years, the Philippines has grown to 17,000 seats that service Australia, there has been renewed focus since the GFC as operating costs have become extremely important to companies looking to tidy up their balance sheets.

The Australian mining boom started to become a factor in 2003 and since then, except for the GFC our dollar has steadily grown to be more expensive when measured against other currencies.

This year we’ll see more painful evidence of Australian businesses accepting the new reality: our dollar is likely to stay uncomfortably high for years, even decades. There are causalities as the high dollar is killing our tourism, retail and international education sectors – of that there is no doubt. As I said above, the A dollar is now worth US106¢, compared with its post-float average of about US75¢. But that’s not the full extent of its strength. Currently at about 81 euro cents and 67 British pence it’s the highest it’s been against those currencies for at least the past 20 years. Australians are taking advantage of this and going on overseas holidays in droves.

“We have to face it, Australia is now a high-cost destination,” the former Qantas chief executive Geoff Dixon told the Australian Financial Review a fortnight ago. “We can talk about it, we can wring our hands, but to spend too much time complaining about the currency is self-defeating.”

However by lowering the prices of imports i.e. BPO services purchased in the Philippines or India, it spreads the love to these countries. In effect, it transfers and distributes income to all those Asian businesses that supply BPO services. In terms of social justice that’s a good thing as it makes these countries less dependent on foreign aid as they learn to support Australian businesses and the multiplier effect, as the money ripples through their economies and reaches into all corners of their economy, means that everybody gets a taste. There is no doubt that it helps to float the economy boat in the countries that have BPO service providers.

Australia does not have a people shortage problem, what we have is a skills shortage problem. The mining and construction boom, mainly in Western Australia and Queensland has acted like a giant vacuum cleaner, sucking up all available labour resources to fuel the insatiable demand. Not only do we have a skills problem our young people also have an adversity to working in the service industry, somehow it’s beneath them. So even if their was no mining boom gobbling up all of our human resources we still can not get people to work in call centres and local outsourcing shops.

So what choice do Australian businesses have, they cannot get people and they cannot get people with the right skill sets and the right motivation. Yet their customers still expect first class customer service, telephone calls answered in less than 3 rings by a happy chirpy operator.

This creates pressure for resources – capital and labour – so when Australian companies look at places like the Philippines all they see is plenty of people who are ready, willing and able to work and at about half the price to employ them compared to Australia and with a university education. Once they take the first tentative steps and get going with their projects these companies realise that the quality of the knowledge workers is a on a par with local home grown agents if not superior to them and it all becomes far to easy.

This helps to change the structure of the Australian economy in response to Asia’s “comparative advantage” – the things we do best among ourselves compared with the things other countries do best, like BPO services.

As businesses recognise the rise in the dollar is more structural than temporary and start adjusting to it, painful changes occur, including laying off Australian workers. As I mentioned last week, we need to consider softening that blow. One place to start is to think about retaining our workforce and reskilling them for the new normal.

A range of countries are aggressively competing for a slice of the global BPO market, which is expected to grow at an annual rate of 5.4 percent to $93.4 billion in 2015, according to analyst Ovum. As India becomes more expensive, the Philippines, , Africa and Latin America are rolling out the welcome mat for outsourced business processes at the low to mid-point of the value chain.

Providers, industry groups and governments at all levels will ally to develop incentives to attract BPO jobs. Lures will include breaks on taxes and fees, as well as free or low-cost courses to improve residents’ business English skills and technological know-how. New locations in South America, Africa and Asia Pacific have emerged where providers have developed global delivery networks to address requirements centred on language skills, time zone proximity, and cultural sensitivity.

BPO is among key sectors the South African government has identified to grow the economy and create jobs. In 2009, South African BPO sector was estimated to be directly employing more than 60,000 people and accounting for a further 75,000 indirect ones. Time zone wise, South Africa is ideal for Europe.

Over the last couple of years a number of UK companies have repaticated projects out of India over quality of service issues. South Africa provides ideal positioning to Europe in terms of time zones and is being promoted as a destination that claims to offer quality had very affordable rates.

Yusuf Timolfrom the South African High Commissioner in London, said in a recent news article that there were huge opportunities for capturing India-based BPO work in 2012 and beyond. “South Africa is well positioned to fill this void as we are able to provide quality at an affordable price.” In 2009, the South African government launched an R1.1bn support programme to enhance the competitiveness of the BPO sector.

English-Spanish language skills, a young, highly skilled BPO workforce, cultural similarities and a good time-zone fit with north America is making Latin America a very attractive outsourcing destination for North American companies. Brazil, Mexico and Argentina have been showing signs of becoming serious contenders as key outsourcing destinations in recent years

Closer to home the Philippines has become a major destination for BPO operations.

The Philippines Government works extensively in offering investors incentives and opportunities. The Philippine government launched a range of fiscal and non-fiscal incentives to attract BPO investors as part of the 2007 Investment Priorities Plan. This plan has helped turn the Philippines into a growing BPO powerhouse.

Since 2007 the BPO industry in the Philippines, according to figures from McKinsey Quarterly, the BPO industry has experienced 46% annual growth and is now valued at over $US 6 billion. The BPO Association of the Philippines estimates that over 600,000 are employed in the BPO industry. 17,000 service the Australian market.

The Philippines is a convenient location for Australian organisations. It fits relatively well into Australia’s time zone and it is not that far to travel to. A highly skilled and motivated workforce that has very competent English skills is available. And it’s in expansive compared to Australia.

According to a recent study by CB Richard Ellis, the Philippines is one of the most cost-effective outsourcing destinations in Asia. Comparing 15 central business districts in Asia Manila was ranked second cheapest with lease rates of $US 19.1per square foot/annum, next to Jakarta’s $16.3. This compares to Sydney CBD, which ranges form $450 to $1,100 depending on building and location.

The Philippines government has developed special economic zones in various cities across the Philippines and are being put in place to serve as central hubs of activity, where the agricultural, industrial, commercial, and recreational aspects of everyday life can work together. Enterprises operating within these zones are offered substantial tax cuts to invest and grow their business.

It seems everyone wants a slice of the BPO pie. The competition between the new and emerging destinations shall fuel the future growth and evolution of the industry. As existing locations become overheated and the availability of sufficient talent dries up, the emergence and development of new destinations will be eagerly fostered by governments looking to give their citizens access to jobs.

Finance sector workers are under threat from the global drive towards outsourcing, write Matt Wade and Mark Hawthorne.

ANZ’s global website had 55 jobs advertised at its new Manila operation this week. They ranged from a new head of human resources to credit risk officers and business analysts. Almost all required a high level of university education, two years of similar experience and fluent written English. A further 10 jobs are available with the bank in Indonesia. But not a single job is being advertised in Australia.

It’s a similar story across the financial services sector.

Run the numbers and it’s easy to see why banks are transferring jobs overseas. An Australian-based credit risk officer with NAB told Weekend Business a “reasonable wage” was $60,000 a year, up to $80,000 for someone with more experience.

In Manila, jobs for overseas banks are advertised in local papers, to work out of one of the many brand spanking new offices near the capital.

Jobs for credit risk officers working for overseas banks – which one is never identified – are being advertised at between 20,000 and 30,000 pesos a month, equivalent to $5000 to $7800 a year. For that a university education and a minimum of four years of similar experience are needed. The jobs websites and newspapers in Manila are filled with ads for such jobs.

So far Australian companies have not pursued overseas outsourcing as aggressively as businesses in some advanced economies. One reason is the strong performance of the Australian economy, especially compared with US and Europe.

But as technological innovations expand the range of activities that can be outsourced, the number of service sector jobs that are vulnerable to offshoring has grown, at least in theory.

Modelling commissioned by unions, including the one representing financial sector workers, showed at least 250,000 jobs across Australia’s service sector could be susceptible to outsourcing, especially in finance, telecommunications and IT.

And as economic storm clouds threaten, there is growing scrutiny on business costs, especially in the financial services sector. A report this month by the UBS banking analyst Jonathan Mott predicted Australian banks were set to shed thousands of jobs and come under increasing pressure to move more operations to cheaper locations overseas.

“Opportunities to achieve cost savings by moving processing offshore to India and other areas are now likely to be re-investigated,” the report says.

In the boardrooms of Sydney’s Martin Place and Melbourne’s Collins Street, talk of a “white-collar recession” in banking and finance has been going on for months. It’s only in recent weeks that the extent of the losses has been becoming clear.

After slashing 3309 jobs last year, according to figures from the Financial Services Union, more pain is in store this year. The big four banks are expected to slash a further 2 per cent of their Australian workforces in both this year and next, in the face of rising borrowing costs caused by the euro zone crisis and amid fears of global recession. That’s about 7000 jobs.

“This will be bigger than the job cuts that followed the GFC [global financial crisis],” says an ANZ executive, off the record.

But, while the Australian workforces slide, the number of staff employed in Asia by Australian banks continues to grow.

“If you look at our operations site in Church Street [Richmond], there are now two empty floors,” says the ANZ executive. “All those jobs have been outsourced to Manila. There have been no announcements, just creeping cuts across the staff numbers.”

When discussing international wage discrepancies, the former Victorian premier Jeff Kennett raises an eyebrow. “I’ve long held the belief that in Australia we are pricing ourselves out of global markets,” he says.

“We are a very highly paid nation of people in some areas, and it’s making it hard for many industries to compete. In particular I look at the retail sector, and the penalty rates, the double time and triple time, paid on a Saturday or Sunday. These are the leisure days, when people are out spending money, but the retailers and restaurateurs of Sydney and Melbourne will tell you it’s impossible to make a buck. It’s an issue we have to address as a society.”

The global outsourcing industry has thrived on economic crisis. The dotcom bust of 2001 sparked a boom for IT service providers in India as US tech firms cut costs by sending operations offshore. India’s business process outsourcing firms – or BPOs as they are known – then prospered when the global financial crisis smashed the US finance sector and teetering financial institutions scrambled to slash costs. When the global economy was in the doldrums in 2009, India’s 20 biggest BPOs managed to grow their export earnings by 15 per cent. The industry’s second-biggest player, TCS BPO, grew by 73 per cent.

Now, with tougher times again forecast, the Financial Services Union fears foreign firms will soon be getting more work from Australia.

Leon Carter, the union’s national secretary, says 5000 jobs have been sent offshore by the financial services sector in almost four years.

“The bulk of those jobs have gone to Bangalore, some have gone to Manila and also New Zealand,” he says. The banks’ outsourcing slowed during the global financial crisis but is now gathering pace again.

The big four have adopted different approaches to offshoring. NAB and Westpac have outsourced operations to specialist business processing firms while ANZ has adopted a “captive” strategy where it directly employs staff in lower-cost Asian countries. ANZ has recently opened “operations hubs” in Manila and Chengdu, in China, to go with a long-established centre in Bangalore.

The ANZ’s chief, Mike Smith, has emphasised the importance of these hubs, which facilitate the bank’s operations across Asia, not just Australia. “Our investment in our operations hubs continues to support our productivity agenda and we’re also placing a stronger emphasis on generating ongoing efficiencies,” he said in November.

“This isn’t a matter of reacting to events, but of dynamically managing our costs to reflect our business strategy and the market conditions.”

Commonwealth Bank is the only one of the big four, which has not opted for much offshoring, Carter says. “I think they understand that keeping work here … can be a positive differentiation from the other three,” he says.

Despite the deteriorating outlook for banks, Commonwealth is holding firm. “We don’t offshore and we have no plans to offshore,” a Commonwealth spokeswoman told Weekend Business yesterday.

Like the Commonwealth, smaller “second-tier” banks have not opted for major offshoring.

Among the insurers, Suncorp says about 100 jobs have been “impacted by partnering activity” over the past six months. The union says it has plans to send off many more.

Telstra is another big employer that has reduced costs by outsourcing operations over the years.
Carter says that the profitability of Australian banks means there is no justification for sacking Australians and sending the work overseas. “These institutions, particularly the big four banks, are incredibly profitable and they can afford to protect Australian jobs,” he says.

“They have an obligation to the community, the country, and part of that obligation is protecting Australian jobs. Yet they continue to sacrifice Australian jobs on the altar of profit.”

Attention has recently been fixed on troubles in the manufacturing sector but the political heat could shift to the finance industry if job losses in the sector mount. Banks and insurers are likely to come under pressure not to send operations overseas.

A Westpac spokesman says it continues to “access specialist skills from its global sourcing providers” but has no specific targets.

“Our partners provide us global scale and capability that we could not achieve on our own.”
Westpac’s chief, Gail Kelly, has tried to shift the debate by talking about “best sourcing”. “It’s called best sourcing rather than outsourcing because in some cases we in-source as well,” she said in November.
A spokesman for National Australia Bank says with a workforce of 44,000 worldwide, numbers “will fluctuate in various parts of the business at times due to the completion of programs, outsourcing of some projects and continuing focus on efficiency”.

He says NAB always tries to redeploy people within the business.

The union says offshoring is being done to please big institutional shareholders at the expense of workers and customers.

“If we want our banks to be run to benefit the rich shareholders, then we will see an increase in job losses and in offshoring,” Carter says.

The union wants more regulations to make it harder for banks to send jobs offshore. It has successfully campaigned for a financial sector “right to know policy” to be included in the ALP’s policy platform which, if legislated by the federal government, would require financial institutions to get customers’ permission before sending personal financial data offshore.

If adopted, this rule could make it much more difficult for banks to efficiently deploy back office operations offshore. Surveys done by the union have found more than 80 percent of Australians believe their financial data should not be sent overseas.

“If we can expose the practice and make the banks and insurance companies say out loud that they’re sending Australian data – that is deeply personal financial information – overseas, as well as Australian jobs overseas, that is not an argument they will win with their customers and as a result offshoring will be substantially reduced,” Carter says.

“We are working very hard with the government to get that policy position converted into legislation.”

The government has so far resisted the union’s push but it is working with the independent senator Nick Xenophon to introduce a private member’s bill on the issue.

Carter says offshoring is “all about cost reduction” but advocates for the outsourcing industry, such as Sri Annaswamy, director of the Sydney outsourcing consultancy Swamy and Associates, say it now offers much more than just lower costs.

Cashed-up Indian outsourcing firms are moving “onshore” by buying back-office operations of financial institutions in the US and Europe.

They have developed expertise to “use capital in back offices more efficiently”, Annaswamy says. This includes selling the services of back-office operations, once only available to the financial institution, to third parties. “It’s no longer just a cost game,” he says. “That is a point people often miss.”

Annaswamy sees signs of this process in Australia. Last month, the Indian technology giant Infosys purchased the Australian consulting firm Copeland. “They have found that getting an onshore skill set, particularly for procurement consulting for their BPO, was a great benefit.”

He says it would be counterproductive and xenophobic to introduce regulations to contain or prohibit the latest innovations in outsourcing. Instead, Australia should welcome Indian BPOs and work to create an outsourcing industry here.

“These companies are willing to make massive investments and employ thousands of people.

“To speak of them as some sort of slave traders trying to take jobs away from Australia is an absolute nonsense. The best way is to proactively embrace them and show that our own back offices can be transformed.”

The global outsourcing industry has changed dramatically over the past decade but is still in its infancy.
It is bound to throw up challenges for companies and workers in high-wage economies such as Australia for some time yet.

Source: Sydney Morning Herald

“China, Canada, and Australia seemed well positioned for 2011,” says Bart Narter, senior vice-president of Celent’s Banking Group. “The United States has benefited from stabilizing of loan losses, but regulatory pressure on retail revenues loom large. Europe is mired in the crisis.”

The group sees two key business drivers:

1. Many economies are in low-to-no-growth mode: Banks must do more with existing customers in order to grow, and must reduce costs in order to improve profit.

2. Digital channels are taking on new importance in all geographies with smartphone penetration increasing everywhere.

The drive to reduce costs and the reality of the huge growth in mobile and smartphone usage is driving banks to think even more about digital channels. Digital channels can mean internet banking, personal financial management, mobile banking, mobile marketing, and tablets. All have been changing (and will continue to change) the shape of banking. Banks across the globe are building-out mobile capabilities and investing in improving the internet banking experience on both the retail and commercial sides.

Another consequence of huge cost pressures is the increased appetite for outsourcing, which manifests itself in many ways, including:

1. Replacing internally developed systems for off-the shelf systems.

2. Using SaaS through an external provider, perhaps in an external cloud, perhaps in an internal cloud, or perhaps in a bank-dedicated outsourcing facility.

Outsourcing means more than just business process outsourcing. It can mean shared systems in a service bureau, software as a service, internal clouds, or external clouds. It can also mean new business models in existing spaces, or using off-the-shelf software instead of internally developed systems. Banks are more willing to use other parties to solve their technology and operational challenges.

The continuing focus on risk and compliance is putting more emphasis on analytics. That means understanding the customer better through data the bank already has or can acquire. This insight can be used to better retain customers, better market to them, better understand their risk to the bank, and better predict when they will visit a branch.

In markets where economic growth is low, such as the United States and Western Europe, banks need to gain greater wallet share of existing customers. In both areas, banks are realizing that they have lots of data that can inform risk, pricing, cross-selling, and staffing. That realization has yet to turn into reality in most cases, however, but this is an area that is becoming strategic for banks across the globe.

Source:Celent

With the U.S. economy slowly recovering, the President laid out his agenda to sparking job creation and incentivizing businesses to hire in this State of the Union Address. One of the ideas the President has recently spoken about is encouraging companies to hire domestically rather than send jobs overseas.

One of those companies heading the call for such job expansion is Iowa-based business process outsourcing (BPO) service company Caleris. Founder Rick Grewell explained how his cornhusker company is growing and fielding calls from around the world.

LL: We have been hearing a lot about the insourcing of jobs. You started your company with just 25 employees. How many employees do you have now as more companies are scaling down their workforce but still need that customer support?

SO: We now have 300 employees. That’s organic growth. No acquisitions. We have a very small sales force and we are growing more out of word of mouth than a sales campaign.

We approximately serve 70 companies. We specialize in technology companies, broadband products and providers and high end consumer electronics. High-end software products, between 80 percent of our business?

LL: How do you stay competitive with India?

SO: That’s kind the meat of it. It’s mainly labor arbitrage. While India may offer 70% savings and we offer 50% savings, the quality of the call is what wins over the customer. For example, the length of our call is 50% shorter and that 50% negates the price the savings India. First call resolution is higher as well. Based on this, our customer satisfaction is in the low 90′s while in India, the satisfaction rate is in the 50% range. That’s based on public surveys we have reviewed.

LL: Given the global economic landscape, is that providing an opportunity for your company to entice other countries to outsource to us?

SO: We support several Japanese and European suppliers. Between 8-10 companies overseas.

LL: You provide services for call centers, social media monitoring and back office support. What is growing the fastest?

SO: We’re best known for the call centers for tech support. But an area that is growing is social media monitoring. Someone needs to look at the social media uploads, images, words that are going up online.
Software can only do so much. You need a human being to monitor as well. Software can eliminate some things when it comes to photo image uploads. Software flags the image but it can’t replace a real human being.

LL: Social Media is still new, what are the emerging trends and what advice can you offer businesses in protecting their online branding and presence?

SO: Don’t assume all the uploads are legitimate. You need to monitor user generated images. Photo sharing sites are a great example. Ad agencies that have contests have to keep a close eye on the data and imagines on their sites. User generated content needs to be monitored because you can’t assume everything posted on there is on the up and up. It may be a small percentage that’s not, but you don’t want to have images on your site that will upset visitors or advertisers.

By Matt Wade

FIFTEEN years ago Gurgaon was little more than a highway stop on the outskirts of the Indian capital, New Delhi. Now it has dozens of shopping malls, seven golf courses and a forest of office blocks.

Gurgaon has been built on India’s internet-age outsourcing sector. The city’s heady, unruly rise is symbolic of the rapid growth of the industry. The country’s biggest outsourcing firms are housed in Gurgaon, many in futuristic-looking buildings. They are easy to pick because of the huge satellite dishes on the roof.

The staff service clients around the world, doing things as diverse as collecting debts from credit-card defaulters, managing drug research data for pharmaceutical companies or analysing companies listed on Wall Street.

At the Gurgaon office of India’s biggest outsourcing company, Genpact, the cafeteria is filled with smartly dressed young people with iPhones and security tags who talk of working the “London” or “Sydney” shift. Their well-appointed work stations would not be out of place in Sydney or Melbourne. But one thing is very different: the cost of their labour. Salaries for an English-speaking, university-educated worker at Gurgaon’s outsourcing companies start at about 20,000 rupees a month – less than $5000 a year. And they have counterparts in many low-income countries across Asia, Africa and South America.

The offshore outsourcing industry started to take shape in the mid-1980s when several US multinationals including Citibank and GE Capital established operations in India to capitalise on the large number of well-educated engineers in that country that demanded relatively small salaries compared with their rich-world counterparts.

“Multinational companies started to see the potential a place like India had, especially in IT,” says Sydney-based Sri Annaswamy. “The idea was very simple: you could get top-quality engineering talent that could beat the world for a fraction of the price that you would get in mainstream American markets. That is basically the arbitrage.”

Advances in communications technology during the 1990s, especially the internet, made outsourcing much cheaper and easier, and the range of activities being outsourced expanded into areas such as financial accounting and customer services, especially call centres.

These new “business-process outsourcing” ventures – or BPOs as they are known – took off and a swag of Indian IT entrepreneurs got involved.

More recently, the range of services outsourced has moved up the value chain from business processing outsourcing to “knowledge-process outsourcing” – or KPO – including financial research, actuarial services, high-level accounting, and legal services.

“Many firms, especially investment banks, eventually discovered there was huge capacity for analytical work to be done in India,” says Annaswamy. “They could hire Indian MBAs who were a lot smarter and a lot cheaper than guys coming out of Ivy League schools.”

Most Australians are oblivious to the scale and sophistication of the global outsourcing business, estimated to be worth about $US3 trillion ($A2.82 trillion) a year. Some BPOs have developed into major international businesses with expertise in managing complex business processing.

Genpact has annual revenue of $US1.26 billion, employs 53,000 people in 17 countries and is listed on the New York Stock Exchange. National Australia Bank is among its more than 600 clients.

The outsourcing industry now holds an important place in the Indian business landscape. The proportion of India’s gross domestic product generated by the collection of businesses known in India as the ”IT-BPO” sector grew from 1.2 per cent in 1998 to 6.4 per cent last year, industry group Nasscom estimates.

BPOs and its sister IT sector have come to symbolise a new India marked by rapid growth and innovation.

Millions of young Indians aspire to the relatively high salaries paid by BPOs and the lifestyles of their workers. Outsourcing firms now feature regularly in Indian popular culture including Bollywood movies and television shows. Best-selling author Chetan Bhagat sold more than 1 millions copies of his novel One Night @ the Call Center about six colleagues who sell home appliances from Gurgaon to US customers.

India remains the biggest player in global outsourcing, but it faces stiff competition. The Philippines has attracted call centres, many of them set up by Indian BPOs seeking lower costs. Industry analyst Dataquest says call-centre agents deployed by several Indian BPO firms in the Philippines surpassed the corresponding headcount in India in 2009-10.

Other low-wage Asian countries including Indonesia, Bangladesh, Pakistan and Vietnam have fast-growing outsourcing industries. Improvements in high-speed broadband have also spawned industries in several African countries, including South Africa, Egypt and Kenya.

India’s long experience in internet-based outsourcing and its talent pool mean it has an advantage over smaller countries. But several Chinese centres, such as Shanghai and Chengdu, have the scale, expertise and talent to give the Indian outsourcers a run for their money, especially in the knowledge-processing market.

Competition between outsourcing destinations promises to put downward pressure on costs. That will only increase the inventive for Australian companies to send jobs overseas.

Source: Sydney Morning Herald

The final stages of the Australian summer holidays are here, and we are starting to notice that the traffic is getting heavier as Australia gets into first gear and gets ready for 2012. Here’s hoping that Europe can muddle its way through and not bring the whole show crashing down around us. At least the US is showing signs of gentle improvement.

With the US Presidential elections looming, we can expect to hear a lot more rhetoric about offshoring being un-American and saving jobs, etc. until such time as sanity prevails and the Presidential election is over.

The American government offering incentives for firms not to offshore completely misses the point. Somebody somewhere has to pay for the subsidy (usually the tax payers) and all it does is mask an inefficient labour market. How on earth is a government going to force private industry not to operate its own best interests. Having said that, it’s not possible to turn a bunch of skilled factory workers in too much needed nurses as an example. The problem is that America has millions of jobs, but the millions of unemployed American do not have the required skills to do them. So companies look to India and the Philippines for the people with the required skills.

The simple fact of the matter is that global labour markets have restructured and highly skilled and less expensive Asian knowledge workers can and will do the work required of them. Gone are the days when Asia was a place where low value business processes were sent as a labour arbitrage play. The intellectual horsepower in Asia is immense, and it’s understandable that in an age of cloud-based technologies coming into their own, companies would want to tap into these highly skilled workforces.

People in first world nations can complain about it all they want, but the drivers of BPO are very well-known and have been well-ventilated over the last couple of years. The world is governed by self-interest, and that is the nub of the issue.

It’s cold comfort for the man on the street for sure, but the world does not owe us a living, at the man on the street level social dislocation and society restructuring is hard to understand. Be that as it may, we are part of a global market. The world is changing whether we like it or not, and there will be local causalities. Yes, we must have safety nets for our fellow Australians who get caught out, but change is coming and of that there is no doubt.

A case in point is the Australian Car Manufacturing sector which is being propped up by government subsidies. For the foreseeable future we will still keep throwing money at it, and yes people will argue that there is the multiplier effect of all of the allied industries that making a living supplying the industry. But the reality is that people in other countries make better cars than we do and they cost less, so it does not make sense to make cars here because the market will buy the better-made cheaper cars anyway. So all we have done is thrown good money after bad, instead of retraining our workforces to get them ready for the future.

It is subsidies and government policies supporting economical unviable industries that got Europe into the mess that it’s currently in.

So it follows with BPO, if companies can access talented and less expensive labour in somewhere like the Philippines, why would a business pay more for the same thing in their own country?

The shareholders of businesses expect to pay the least amount that they can to operate their business and have a duty to employ the least amount of people necessary to make their business work.

2011 was the year of the cloud. Many organisations adopted a range of cloud solutions and we continued to see the emergence of new providers (new entrants as well as cloud services from established IT vendors). 2012 is the year where Cloud computing matures and grows up. According to Terry Walby from IPsoft, “Critical for 2012 is that cloud services can operate within a hybrid architectural environment, and deliver truly enterprise-class services. To realise this, the outsourcing industry will need to adopt a cloud orchestration approach”.

Cloud orchestration is the ability to manage cloud infrastructure in order to manage services consistently across multiple cloud and physical environments. According to Walby cloud orchestration involves three things:

1. The development of architecture, tools and processes to deliver a specific or defined range of services.
2. Knitting together different software and hardware environments to deliver those services.
3. Connecting and automating of work flows when necessary to deliver a defined service.

The cloud is all about scalability and flexibility, the ability to automate work flows across various technical and business domains is vital to the delivery of robust, scalable and on-demand services and computing resources. Orchestration is about aligning the business needs with the applications, data and infrastructure. It defines the policies and service levels through automated workflows and change management, creating an application-aligned infrastructure that can be scaled up or down based on the needs of each application. Orchestration also provides centralised management of the resource pool, including billing, metering, and chargeback for consumption.

Orchestration reduces the time and effort for deploying multiple instances of a single application. And as the requirement for more resources or a new application is triggered, automated tools perform tasks that before could only be done by multiple administrators operating on their individual pieces of the physical stack. Russell Ives Director of Business Process Outsourcing (BPO), Global Process Services (GPS), IBM, comments,” From a BPO perspective, orchestration is about coordinating all the processes, tasks and underlying IT components that are embedded within the outsourced processes to serve internal or external customers. This includes sub-processes, people, departmental approvals, interactions between companies and BPO providers, and the IT that supports those processes whether it is cloud-based or not”.

“Orchestration can, and must be, executed at multiple levels from servers, software, networks to applications, processes and workflow. As cloud-based BPO becomes more prevalent, the IT orchestration can become more complex, coordinating traditional IT environments with private and public cloud across the company and BPO provider”, adds Ives.

If we need orchestration, who is the orchestrator?

Russell Ives believes that initially the client organisation needs to be the orchestrator, he says, “Different aspects of orchestration; workflow, process, application, network, SW and servers may be devolved to providers but end to end responsibility must rest with the company. Over time, as BPO and cloud maturity progresses, different levels of devolution of orchestration can be adopted depending on the scope of both cloud infrastructure and BPO services employed by the company’.

Providers of cloud orchestration platforms such as GT Nexus and Enstratus have emerged to help organisations manage enterprise-class applications in public, private and hybrid cloud environments. For BPO organisations looking to leverage the emerging power of the cloud, they may decide to collaborate and create partnerships with various cloud providers to acquire the necessary competencies. According to Ives, the key capabilities that BPO organisations will require, in addition to core BPO competencies, include process transformation, IT enablement (the ability to support processes with IT capabilities), and expertise in cloud infrastructure and its’ integration. The ability to deliver outsourced processes is paramount.

In September last year, Gap Gemini and GT nexus announced a global partnership to enable the delivery of BPO supply chain orchestration for Cap Gemini’s global supply chain customers. The partnerships aims to deliver an orchestrated environment where different and complex supply chains interconnect with other complex networks so that processes can be automated across numerous enterprises and promote much greater visibility end to end.

Cloud-enabled BPO will become a critical capability and offering for any BPO provider. Ives believes, “As cloud becomes increasingly prevalent and progresses from being server focused to business outcome focused, clients will increasingly demand BPO providers to deliver a richer set of capabilities leveraging cloud-based platforms.”

“Currently, BPOs are predominantly utilising clients’ applications and IT infrastructure. Cloud-based infrastructure provides an opportunity for these BPOs to deliver bundled process and IT capabilities.

This will deliver greater savings and operational flexibility for clients as well as reducing overall reliance on traditional IT delivery”.

There is no shortage of reports and forecasts about the uptake of cloud computing. According to a recent IDC survey of the intentions of CIOs in Australia, 20.6% of respondents were using a cloud solution. The same survey says that by 2015 the use of cloud services by Australian companies – from SMBs to enterprise-size organisations – is set to quadruple.

If you needed any further convincing that cloud computing is no longer on a roll but becoming a bullet train, IDC forecasts that the revenue for cloud services in Australia will increase from its 2010 figure of $470 million to just over $2 billion in 2015 – a compound annual growth rate of 34%.

So what does this all mean for organisations such as Aegis and for our clients?

Before answering that, it is worth looking back at technology. Technology has been changing the way we have been doing business for some decades. And keeping on top of that change requires time (and usually a large IT department) to understand the technology and how it can impact a business.

Technology is going to continue to be an ever-increasing enabler of differentiating change. I think this is helped by the fact we no longer fear technology. We now understand what it can do for our business.

The real change that organisations are seeking to drive is differentiation. In today’s increasingly information rich and knowledge worker based environments that differentiation will largely come from an organisation’s ability to change business processes at a speed that is faster than the competition.

Technology as a process change enabler is critical.

I think in the past technology was seen as a necessary evil. We didn’t trust the many large promises that technology sales people made, in part as we can all share a story of a large, company-wide technology investment that turned out to be a dud. The problem was that the organisation became so fatigued by the “technology project” that they never turned their attention to the more important piece of process change (adoption) post the technology implementation, resulting in low, or in many cases, no ROI.

Technology projects used to be long (sometimes years), often blew out budgets and as a result ROI would frequently be at less than desired levels, but you had to do it to stay competitive.

Cloud offerings change all that. Technology can be turned on and off in an instant. The most exciting part is that resources can be invested and assigned in driving the required process change to deliver the ROI and the desired market differentiation.

Technology has long driven differentiation, revenue and cost competitiveness at Aegis. Cloud computing will enable us to continue to do this but in a more client centric customer outcome fashion. This will allow us to become far more proactive in driving genuine business process change.

At the moment we have about 50,000 people globally in call centres around the world, including 2,400 here in Australia.

Until now our own technology platform has required an almost continuous upgrade cycle of hardware to keep pace with changes in software – at significant cost. It can also be hard to move staff around because their login is dedicated to a particular hardware spec for the various client related activities.

At Aegis we are constantly striving to be at the cutting edge of technology. Thus we have recently undertaken a revolutionary technology upgrade with our Citrix Virtual Desktop Infrastructure Project.

Australia is among the first countries in the world to make the transition to the Citrix VDI (Virtual Desktop Infrastructure) along with Aegis offices in India, the Philippines and South Africa.
The investment will enable our employees to ‘hot desk’ meaning our staff can sit at any desk in any location and still have easy and instant access to all the information they need. This technological upgrade will further assist us in managing and enhancing the experience of our partners’ customers.

From our initial cost estimates we believe we will save 50% on our hardware costs. But while the cost improvements are impressive, it’s the speed with which we can drive the aforementioned process change that is really exciting. We believe we can undertake and execute process change in a third of the time we were able to previously, with greater flexibility from cloud-based technology.

Improved business agility, flexibility and efficiency, increased ability to exceed the business outcomes of clients and meet their ever changing needs, desktops being easier to manage, more secure and operated at a lower cost, increased productivity, choice and flexibility for any user, and a faster roll out of contracts are all expected outcomes of this significant technology upgrade.

Some companies have so far chosen to shy away from cloud because of the perceived security issues. My observation is that our technical people are very comfortable with the security of the cloud. They understand how security is managed, what risk mitigation strategies need to be implemented and how to ensure both our client’s data integrity and ours. Security remains one of the most important issues for our clients – we simply would not embark on cloud-based offerings without rock solid confidence.

For me I believe there is an invisible line. Those below the line are those that look at decisions and focus on the risk of change. Then there are those above the line – those who think, “What is the risk of not changing”.

For Aegis, we are above the line. We need innovative business processes and a workforce that can move around from office to office depending on demand. This is not only important for our growth globally, but also for the growth and differentiation of our clients and their businesses.