By Martin Conboy

According to the study T2 market Pulse Survey that while businesses in APAC are optimistic about business growth in 2013, 55 percent of APAC Businesses don’t anticipate increasing their workforce

The majority of APAC businesses predict growth in the next 12 months, however interestingly many do not plan to increase their workforce numbers to support intended growth according to The Talent2 APAC Market Pulse 3 Study.

In the last few years there has been a mandate within Australian corporations to reduce internal operating costs and refocus on core business activities. Many companies are responding to this by outsourcing non-core business processes to third party providers.

The report finds a strong sense of optimism amongst the majority of APAC businesses, with 61% predicting growth for the next 12 months, and only 5 percent predicting decline. In Australia, the research shows that whilst more than half of businesses are forecasting economic growth in the next 12 months, only 40 percent expect to increase employee numbers.

This discrepancy could threaten to place great pressure on some companies and their employees and it is expected that as growth occurs without an increase in human resources, APAC businesses will turn to contractors. Businesses in APAC are however already using some growth strategies such as reducing headcount and investment in mature markets (36 percent) and increasing back-office services through shared service delivery (33 percent).

It is worth noting that 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 of this sector. Not only do we have a skills shortage problem but our young people also have an adversity to working in the service industry. So even if there was no mining boom gobbling up available workers, we still cannot get people to work in call centres and local outsourcing shops.

Expansion is both a key driver and a significant benefit. In the Australian BPO study 2012 conducted by the Sauce and supported by IBM and Fuji Xerox, one factor emerged as the clear front-runner and that was global expansion. 40 percent of organisations considered access to skilled manpower as important

One possible explanation for companies looking for growth and reducing headcount is that they may not necessarily be able to identify the particular skills that they need in a fast changing market, and made thus turn to other methods to attract the required skills. These days growth does not always equate with increased FTE headcount.

The T2 research reveals that 66 percent of organisations across APAC currently employ contractors, a figure that is potentially set to grow as unemployment figures rise and job seekers accept contract positions.

Currently in Australia, with an unemployment rate of 5.1 percentage, it’s very hard for companies to find suitable staff to man their customer facing divisions. Consequently, if they want their phones answered, they may move to an outsourced solution, to access skills. This will be a major driver going forward. On the flip side, we have a community that demands that companies meet the highest standards of customer service.

Whilst awareness of the skills and benefits contractors can offer organisations is high, the research finds there are also challenges. 65 per cent of Australian businesses believe contracted workers increase workforce flexibility and scalability to support economic conditions and 37 percent feel contractors offer improved business performance by better matching specialist resources to company projects.

“It may become increasingly necessary for businesses across APAC to consider the flexibility of a contracted workforce in an oscillating economic climate, rather than resorting to cuts to full- time employees as a reactive profitability measure,” said Caleb Baker, Managing Director, RPO & Managed Services Asia Pacific, and Talent2.

“When unemployment rates rise, the demand for contractors also rises as people who were traditionally used to full time roles begin considering part time or contractor roles. It’s clear that whilst businesses are aware of the benefits a contractor workforce can offer, there are perceived barriers to adoption for businesses to overcome in order to consider employing contractors. These barriers can be easily addressed by working with expert providers who can offer ease of management and better visibility of contracted employees,” concluded Baker.

China is currently working to rebalance its economy, as it attempts to shift from a reliance on net exports to boosting domestic consumption.



Fund managers tell Channel NewsAsia that ASEAN economies and businesses are far more likely to benefit from this trend than its North Asian counterparts.



China is set for an economic slowdown this year.



Experts said this could mean demand for imports from the rest of the region will also moderate, translating to slower growth in the rest of Asia. 



But at least one analyst is confident that Southeast Asia will fare better than other markets.

Senior vice president, head of strategy & currency at the Fullerton Fund Management Gerard Teo said: “If you look at the composition of exports from ASEAN, they tend to be consumer related, food related, manufacturing related items that would benefit from stronger consumption.



“In contrast, if you look at Northeast Asia, such as Korea and Japan, they tend to be more geared towards investment demand in China – which is precisely what it is trying to reduce its dependence on.


”So on balance, our assessment would be within the region, it looks like ASEAN will more likely benefit compared to Northeast Asia.” 



Teo predicts that companies geared towards Chinese consumption should start seeing the benefits over the next six to 12 months.

Other hot sector picks include a recommendation to invest in the Philippines, with a focus on banks and consumer stocks.



With one of the youngest populations in Asia, and a business process outsourcing industry forecasted to grow at a rate of 25 per cent per annum, the Philippines economy represents an alternative to other popular emerging markets.



Mark Matthews, managing director, senior advisor head of Research Asia, Julius Baer, said: “It is really one of the bright spots out there. I think more and more people are understanding its potential. It used to be considered a peripheral frontier, really uninvestible place. Increasingly, more people are becoming more interested.” 



As for currencies, the Australian dollar which is expected to be worst hit by a rapid slowdown in China. 

Instead, investors are switching to the Singapore dollar, given its safe haven status.

Source: Channel News Asia

By Michael Gerrity

Photo on right side: Jeremy Sheldon, JLL

Last week Jones Lang LaSalle’s Asia Pacific market experts told World Property Channel that strong corporate tenant demand in emerging South East Asian economies are now driving rental growth in that region.

Jones Lang LaSalle is now forecasting 6 to 8 percent growth in grade A office rents in Jakarta this quarter and 3 to 5 percent in Manila. At the same time the bigger, more established markets which are dominated by financial services, Hong Kong and Singapore, are experiencing a decline in grade A rental values as the banking and finance sector remains focused on managing costs.

Jeremy Sheldon, Managing Director, Markets Asia Pacific Jones Lang LaSalle says, “We are witnessing a polarisation in the region. Whilst we are seeing a slowing of leasing activity levels in the established markets, there is increasing activity in South East Asia, where we are experiencing higher enquiry levels than we have seen before. Companies are taking advantage of the major labour cost arbitrage within these markets and we expect this to continue this year. Overall our forecast for grade A rents is for limited growth this year in certain markets. The market generally looks to be much slower than 2011, although last year was a record in terms of take up, surpassing even 2007 which was the last peak of the market.”

Sheldon further commented, “Our outlook is positive in that the Asia Pacific region continues to experience economic growth at a faster pace than the rest of the world and this is forecast to continue this year. Current conditions may be a good opportunity for companies to find space that represents good value for money and to secure opportunities to expand and consolidate in a region that will continue to grow in economic importance globally. Much will of course be dependent on events in the Eurozone and the United States; we have already seen positive news from the latter in recent weeks and like everyone else we are keeping a close eye on the Eurozone debt crisis.”

As well as the growth in Jakarta and Manila, Jones Lang LaSalle expect to see growth in Beijing in Q1 of between three and five percent. Grade A office rents in most other markets are expected to remain relatively stable, whilst the firm anticipates falls of circa five percent in Singapore, and between six and seven percent in Hong Kong this quarter.

Regional Market Overviews by Jones Lang LaSalle in Q1, 2012:

CHINA
• Beijing: demand remains strong on the back of on-going expansion, albeit with smaller spatial requirements in general, but quality space is still difficult to find, especially for large blocks of contiguous space. Landlords continue to set high rental expectations, but rental levels achieved in actual deals have been generally stable.

INDIA
Delhi: we see sluggish new demand and vacancy levels remain high. We expect rents to remain stable or increase marginally in the near term.

Mumbai: there is limited expansion by non-IT occupiers, vacancy levels remain high and we expect rents to remain stable in the near term.

PHILIPPINES
• Manila: we expect to see 10-15 percent growth in grade A office rents over the next 12-18 months. We saw 360,000 sq. m transacted last year, which we are confident to use as the demand projection for the next five years. In 2013 and 2014 we expect to see higher demand from traditional non Business Process Outsourcing (BPO) offices that will add another 50,000 sq. m of demand on top of the BPO demand of 360,000 sq. m.

AUSTRALIA
• Melbourne: the downsizing of major Australian banks is creating sublease opportunities. Some large occupiers are exploring the suitability of using alternative workplace strategies to reduce their occupied footprint. We are seeing healthy levels of pre-leasing activity (up to 80% of net lettable area in upcoming projects). Tenants electing to stay put and renew leases are being charged a premium compared to new leasing transactions, which need to support fit-out and relocation expenses.

• Sydney: most global firms are putting real estate decisions temporarily on hold, despite the relative health of their Australian operations. We are seeing more relocations and increased activity from smaller tenants, particularly in the premium sector. Deal activity by major occupiers is seeing the number of large tranches of contiguous space reduce. The limited new supply in 2012 should support rental growth, albeit at a slower pace than in 2011.

Source: World Property Channel

By Kathleen A. Martin

GLOBAL CONSULTANCY firm Tholons, Inc. has cited talent pools as a major challenge to the Southeast Asian countries’ business process outsourcing (BPO) industry but said it foresees niche specializations of the sector to continue to grow.

This, as 12 cities from the Southeast Asian region, including five from the Philippines, made it to Tholons’ Top 100 outsourcing destinations.

The five Philippine cities are Manila (4th), Cebu (9th), Davao (69th), Sta. Rosa (86th), and Iloilo (92nd).

“Addressing talent pool shortages will be the most critical issue in the Southeast Asian region’s IT (information and technology)-BPO industry as a whole. These should be immediately addressed to further drive the growth of the services outsourcing industry,” the firm said in its 2012 Tholons Top 100 Outsourcing Destinations: Southeast Asia executive summary released yesterday.

“This is especially significant as widespread cost-cutting measures brought upon by the recession in the US and UK markets are being pursued, which in turn, are driving up the demand for outsourcing,” the document read.

Tholons said BPO firms are experiencing difficulty in hiring and retaining “capable employees,” thus, resulting in higher attrition rates and an increase in hiring and retention costs.

“[Such] has resulted in greater initiatives by service providers to train fresh graduates or reskill lateral hires themselves, an exercise becoming increasingly common albeit more costly,” Tholons said.

Already, Tholons noted an initiative for skills development currently being undertaken in Manila is needed to increase the country’s talent supply.

“The Technical Education and Skills Development Authority (TESDA) of the Philippines, for example, has been continuously providing Finishing Courses for Call Center Agents targeted to near-hires in the Contact Support space,” the document read.

Despite the region’s foreseen supply problems, Tholons said niche specializations offered are expected to grow.

“Tholons sees that the region’s current niche specializations will continue to grow and pave the way for the development of higher-value services in Southeast Asia,” the document read.

Tholons said that in 2011, Southeast Asian countries have been steadily building their own outsourcing identities.

The Philippines has continued to be the premier contact support services destination, while Singapore and Malaysia have become financial and accounting outsourcing and back-office process outsourcing pillars, Tholons said.

Vietnam and Indonesia, meanwhile, have established themselves as strong providers of IT services, Tholons said.

“As confidence and maturity builds, process and delivery innovation will thrive as well. Tholons sees this as necessitating Southeast Asia’s smooth transition up the services value chain,” the document read.

The local BPO sector is expected to have booked $11 billion in revenues in 2011, then to grow by at least 20% from this number by yearend, the Business Processing Association of the Philippines previously said.

By 2016, the sector is expected to deliver $25 billion in revenues, after recording $9 billion in revenues in 2010. —

Source: BWorld Online

A précis of an article that appeared in the Straits Times in Singapore.

The year 2020 may have once sounded more like the stuff of science fiction novels. But it is only eight and bit years away now. In a new report “Imagining Asia 2020” a team of researchers and analysts from DBS Bank look into their crystal balls to see what 2020 might hold for Asia

1. GDP growth: Asia will surpass the US in economic size.

Asia has long been the fastest growing region in the world. And last year it overtook the United States as the main driver of global growth.

Mr. David Carbon, managing director of economic and currency research at DBS said “This is the biggest structural change going on in the global economy today. Asia has been getting a little bigger and bigger, and is now at the point where it is big enough where it matters. 5 years ago, 10 years ago, 15 years ago, it was not big enough to matter, not big enough to drive its own recovery, but today it is.”

By 2016, Asia will catch up in size with the US. By 2020, it will be 17% larger than the US economy.

The speed of growth has been simply breathtaking. In 2000, Asia was only 40% of the size of the US. By 2010 it was 80%.

China will contribute 64% of this growth over the next eight years, and India 17%, making them the two most important drivers of growth by far.

2. People power: Asia will add another US to its population.

We have just had the 7 billionth person born and by 2020 Asia will have added another 220 million people, almost the entire population of the US. “That is 10 times more than the US population is going to grow by. For every single new person we have in the US by 2020 we are going to have 10 new people in Asia,” said Carbon

Mr. Bhaskaran Manu the chief executive of Centennial Asia advisors and vice president of economic Society of Singapore, said: “if the population growth occurs in countries with endemic political and economic problems, these problems could perhaps get even worse. But if the growth is in rapidly growing economies, which can provide good jobs for the additions to the workforce, then the impact is likely to be positive.”

3. Urbanized nation: China will have over 100 cities with more than 1 million people each.

China will have seven megacities by 2020. There will be more than ½ a dozen mega cities with a population of over 8 million each. However China will also have a whopping 130 other cities with populations of more than 1 million people each.

It’s not just all about China and India, in Southeast Asia, over 20 secondary cities across Indonesia, the Philippines, Thailand, Vietnam and Malaysia also behind the growth of people by 2020, said the DBS report

The demand for infrastructure development and urban makeovers is therefore immense. “Urban centers offer economies of scale and make it more efficient to provide services such as education, healthcare, clean water and safe sanitation,” said the DBS report

“A skilled labor force attracts investments that generate more employment and prosperity, setting off a virtuous circle of economic gain.”

4. Hey big spenders: Asia will be the next big consumer.

Americans are not the only big spenders. Asia is expected to at least double its current level of consumption and will consume 80% as much food as the US.

It will more than triple the growth rate of private consumption of the US over the next 10 years said the DBS report.

Food will be a large part of that spending. One out of every four dollars spent by each household will be on food.

5. Wealth creation: Asian incomes have lots of room to rise

Between the mid-1960s and today, income levels in most Asian nations have grown by 5 to 8 times. But most of Asia is still far behind developed Western nations such as the US and Europe in terms of household income levels.

So while income levels have grown rapidly in Asia, there is still a lot of catching up to be done and it means “fast growth in Asia should be able to continue for a long time”, noted the DBS reports.

By Vivian Yeo

Businesses operating in Asia are becoming more open to outsourcing core capabilities such as research and development (R&D) in a bid to derive greater operational efficiencies. But, industry watchers warn that these companies should take care when doing so.

The Economist Corporate Network (ECN) revealed last month that product development and product design were the least likely to be outsourced or considered for business process outsourcing (BPO) among companies with Asian operations. The study was based on a survey of over 130 companies in various verticals, of which 2.4 percent were from the IT sector.

However, the ECN report noted that the number of enterprises evaluating the potential of outsourcing product development and design, exceeded or was comparable with those that indicated likewise for human resource administration or finance and accounting. Part of The Economist Group, the ECN is a membership-based service that provides analysis on economic and business trends.

Ross O’Brien, director of the ECN in Hong Kong and author of the report, revealed that the company’s tech industry clients were indeed stepping up engagement with third-party providers for R&D processes.

ECN clients, typically large multinationals, “deploy in-region R&D to help them create a virtuous cycle”, he told ZDNet Asia in an e-mail interview.

“[A] locally-developed product, which responds to application needs, form factors and price-points of Asian markets, is increasingly needed as tech companies depend on sales in Asia to shore up their global growth objectives,” explained O’Brien.

Jens Butler, Ovum’s principal analyst for IT services in the Asia-Pacific region, concurred. He noted in an e-mail that there is “certainly an increase in BPO interest” among tech organisations of core capabilities such as R&D.

However, Butler added that companies tend to be selective about the R&D aspects to outsource, where the focus is usually on functions such as testing rather than the actual design and architecting of products and services.

R&D outsourcing not for all – Rolf Jester, Gartner’s Distinguished Analyst and Asia-Pacific vice president for IT services, noted in a phone interview that there is a “decent amount of external R&D” being carried out in the industry today.

According to Jester, it is common for major software vendors to have outsourcing partners involved in product engineering. Mobile manufacturers also look to companies in China and Vietnam, for example, to develop embedded software, he said.
Sydney-based Jester added that one factor that could encourage businesses to outsource R&D is that a product has reached “commodity-stage” or is a common product with a large pool of providers.

In contrast, companies that deal with an “early-stage technology”, such as a security company with leading-edge development, would want to keep a proprietary hold over its R&D-related processes, he noted. This category of businesses may still outsource some aspects, particularly if they deem outsourcing as the best option to obtain a specific expertise, the analyst said.

“Ultimately, any organisation that is considering R&D-related BPO needs to discern whether that function is a competitive differentiator,” said Jester.

“Each company competes on different characteristics. R&D and the ability to truly design innovative things may or may not be one of those characteristics, and each company needs to make that decision,” he explained.

For instance, he noted that Dell during its early days competed on the basis of having a supply chain that was heavily customised and ensuring that products were brought to market and delivered to the end-customer uniquely and quickly.

Butler added that while there may be proper structures in place for companies to govern the outsourcing of core capabilities, there may be reasons holding them back.

“As greater control associated with advanced architectures and more rigours are built into development functions, there will be ‘stages’ that will fit into an outsourcing function reasonably straightforwardly,” the Ovum analyst said. “However, a lot also depends on the organisational culture, risk profile and strategic direction. More often than not, it requires a specific incident to drive organisations down this path rather than a gradual shift.”

Singapore-based Data Security Systems Solutions (DSSS) is one organisation that currently does not outsource any of its R&D work, and has no intention of doing so.

In an e-mail, CEO Tan Teik Guan told ZDNet Asia that the “quality of the product is key to the success” of software companies such as DSSS.

“We choose not to outsource our product development and instead hire all our developers within the Singapore office to ensure security remains the highest emphasis during the product development cycle, and that the necessary security procedures and mechanisms remain in place while building the product,” Tan said.

He added that another reason DSSS retains development work in-house is to play its part as a “responsible corporate citizen” by exposing the current and future generation of engineers in Singapore to “high-tech entrepreneurship”.

Outsourcing core functions necessary for competitiveness – The ECN’s O’Brien, however, cautioned that companies may increasingly have no choice but to look to a third-party, including BPO service providers, for product development.

“Whole-scale outsourcing of all core development requirements to a single partner is rarely considered a good thing. But, with cycle time and cost expectations being as intense as they are in the region, IT firms can hardly afford not to leverage partners increasingly higher up their own ‘value stacks’ to reduce cycle time,” he pointed out.

“A portfolio management approach is how I am seeing firms mitigate this challenge,” he said. He related that one ECN member, who plays in the mobile applications space, distributes its code development among several geographically-dispersed partners, ensuring that no critical mass of IP (intellectual property) is in a single service provider’s hands.

According to O’Brien, in five years’ time, the majority of organisations will have no choice but to seek efficiencies from R&D outsourcing, especially since they are increasingly unable to squeeze cost efficiencies out of low-value production coupled with higher wages in Asia.

The option, he observed, is not one to dread.

“We tend to think of R&D as being only rarified moments of white lab-coated ‘Eureka!’ innovation, while in reality much of it is debugging, simulating and other labor-intensive processes materially indistinguishable from good old-fashioned manual labor.
“I believe this failure to recognise a lot of R&D for what it truly is in the IT value chain, is causing decision makers to make bad calls with regard to the extent they have to outsource, to stay competitive,” O’Brien said.
 
Source: ZDNetAsia.com

The inaugural Asia Pacific HR Outsourcing Summit, which will be attended by leaders from both global enterprises and local businesses, is particularly important given the challenges that lie ahead as the world attempts to put itself on the road to economic recovery.

Industry analysts affirm that HR outsourcing (HRO) is the fastest-growing area of BPO (business process outsourcing) today. Furthermore, they state that integrated multi-tower HRO is the fastest-growing segment within HR outsourcing. So while it is now common for companies to outsource single process transactional work, such as payroll administration, recruitment or benefits, the market is beginning to see more interest from companies interested in comprehensively outsourcing their HR processes. This multi-process or multi-tower outsourcing is where a service provider handles multiple HR processes for a client in an integrated fashion, instead of being engaged to handle stand-alone HR processes on a piece-meal basis.

The conference will incorporate advice on managing Asia-Pacific HR projects, networking opportunities enabling attendees to discuss concerns with peers from across the continent and strategic insights into the critical issues with relation to the growing propensity for businesses to outsource elements of their HR strategy to benefit from expertise, cost savings and process efficiencies.

Rosaleen Blair, founder and CEO, Alexander Mann Solutions (AMS), a keynote speaker and panel discussion participant at the event said, “Asia is set for a golden age of growth and development led by the world’s most populous nations, China and India. The next generation leaders and managers are coming from Asia and they will transform how Asia does business globally. This is an exciting phase for the region but it will be challenging managing, developing and nurturing the talent in the region.”

The inaugural Asia-Pacific HR Outsourcing Summit 2010 at Shangri-La Hotel, Singapore on 5th May.

Regus, a global provider of outsourced serviced offices, virtual offices, conference rooms, and business lounges claim that Singapore’s current work model is ‘flawed.’

Regus and Unwired, a specialist on the future of work, released a study that sets the spotlight on “placing agility at the heart of how, where and when we work will enable us to improve our lives, business and the environment.” The study shows that 55 percent of desks in an office are unoccupied at any given time during work hours, wasting electricity and other resources. While office desks are empty, meeting rooms are usually fully booked because work has become increasingly collaborative over time.  For the average worker, the lifestyle is fast-paced and stressful, with time wasted on commuting.

These findings signify reducing wasted resources such as unused real estate so that carbon emissions rate is also lowered. The suggestion is that by outsourcing your space requirements to a company like Regus you will achieve a better utilisation of your working resources.

According to Regus, “The agile working explosion, driven by ever-more sophisticated mobile technology and telephony, is radically reshaping the way we work. Workers travelling to a fixed place of work to be tied to a desk by the telephone and PC are slowly but surely becoming a dying breed. Instead, we may see an increase in the amount of mobile workers and workers who work from home.

“To cut down on commuting and the strain on staff and transport systems, companies must combine the traditional office with a new mix of space, including serviced offices and community hubs. Alongside this, to make staff more effective in the field in front of customers, they must introduce solutions such as ABW, on-demand workspace and distributed working – supported by new technology.”

Tiger Airways Singapore has taken its first step towards improving its call centre and customer services by partnering with Symphony BPO Solutions.

The plan launched on 15 April 2010, but the improvements to customer service experience will be implemented phase by phase. At this time, agents are being recruited and trained, and this process is expected to take a few months. Once this process is complete, there will be twice the number of agents to handle customer calls. Not only is the number of agents increased, but operation hours are also extended.  Tiger Airways and Symphony BPO Solutions also added local hotlines handled by bilingual agents (English and the local language) for customers calling from Hong Kong, Indonesia and Malaysia.

Tiger Airways Singapore Managing Director, Rosalynn Tay, said, “We are pleased to partner with Symphony BPO Solutions as they have established efficiencies and a strong track record in providing call centre services. Once the transition has been completed and the new call centre improvements are in place, we look forward to improving our customers’ experience, particularly in terms of call waiting time.”

Symphony BPO Solutions is part of The Symphony Group, a business process outsourcing company located in Asia. Symphony provides BPO solutions to over 3,000 clients from more than 29 countries.

ICON Plc, a well-known outsourcing services vendor to the pharmaceutical, biotechnology and medical device industries is expanding its presence in the Asia Pacific region. Its most recent expansions include Seoul, Korea, and Singapore. The latest development is their new office in Manila, Philippines.

ICON’s CEO Peter Gray said, “With over 800 employees in 14 Asia-Pac countries and 13 years of successful operations in the region, Asia-Pacific is a key market for ICON. Philippines’ large population, coupled with the country’s well-established network of hospitals, physicians and investigators has made it an attractive location for our clients, and one which we have supported for a number of years through home-based employees. Investing in local support and infrastructure through the office in Manila will ensure that we can support future client demand as they increasingly look to include Asia in their drug development programs.”