By Shaun Polovin

Outsourcing Vs. Offshoring

Some people would call what we do ‘outsourcing’, but that couldn’t be further from the truth. Outsourcing refers to the process of allocating a portion of your business operations to an external entity or person. Most outsourcing organisations – for the sake of good business sense known to them – have their own agenda and probably a range of clients of which you are just one.

When an organisation decides to outsource a portion of their business, they understand that they are placing their business reputation in the hands of their outsource partner and rely on that external entity to have the correct processes, team and ability to deliver what you have promised to your client.

For the right organisations it’s a sure shortcut path to reducing operational costs but depending on the business’s transformation goals and its industry, it may not provide the long-term solution for growth. Relying on an independent company to supply you with core services is always a risk.

In our line of work, the questions clients ask about outsourcing their development work is what if they go under tomorrow? there goes the development arm of your business. I’ll admit, we tried it a few times ourselves before we went down the permanent route. We found an “ISO accredited” company in India and tried to have a small test project developed. What came back was worthy only of our big green garbage bin, but that’s not to say all outsourcing development companies are rubbish.  Decision makers just need to take the care and due-diligence in selecting a reputable partner to hand over a critical piece of their business, and this can take a lot of work.

When you offshore, you are setting up a brand business operation, however it’s in another country where a dollar generally goes a lot further. Our team in Sri Lanka has been hand picked and interviewed by both our local management team and our Sydney management team. Every team member has gone through both internal and most have also been offered external training and certification. They are all valued employees and members of the team and are greatly appreciated for their contribution at both a team and company level.

Why Offshoring your web development company makes sense for you and your clients

When we explain to clients the reason we have built our company in the above manner, our clients often nod their heads in agreement. It makes complete business sense if executed correctly and I’ll tell you why.

In Australia, the high living costs come with equally high salary prices. In our industry you are also faced with demand for quality digital staff considerably outstripping supply. Therefore, when you consider the cost of not only employing your team but also recruitment fees, training, taxes (e.g. Payroll) it comes as no surprise that the cost of delivering a large ecommerce website for clients, when all resources are locally based, would be astronomical. Achieving efficiencies in a service based, labour intensive business is never easy.  It’s almost impossible to apply Henry Ford style production efficiencies, however it is possible to reduce your operating costs through effective offshoring.

The other major benefit from running an offshore office is also the retention of IP. Consider the following scenario: After months of searching and paying a hefty sum to a recruitment agency you find a great web developer to work on a range of new client wins.

Nine months later, after investing heavily in this new staff member’s training so they have a deep understanding of a number of key projects, another firm swoops in and poaches your star developer. The poaching firm is prepared to pay well above market rates out of desperation and have made an offer that can’t be refused. There goes your investment and you’re back to square one – hunting for a replacement in a very competitive market. Compare that to our Sri Lankan office where we have achieved well over a 90% retention rate over the course of 5 years. Now that won’t be the case in every offshore office (as we have managed to achieve this through our continuous efforts to build the best culture for our team) but you’re far less likely to face the same dilemma.

Offshoring Tips

Having gone through the trials and tribulations, I have put together a few key points that I think would serve any business looking to offshore a portion of their business operations well. If done correctly you will reap the reward of delivering a product or service at the same level or even better than your local competitors but at a considerably lower cost – a win for you and a win for your clients. In our situation we’ve offshored our development team, but most of the same principle apply to any other business model – be it technical support, customer service or manufacturing.

1. Invest in your infrastructure

It may be far cheaper to set up an overseas operations in the Philippines, India or Sri Lanka but that’s no excuse to stint on the infrastructure. Ensure you have the best quality dedicated Internet lines (which are considerably more than what you pay locally), comms equipment and PC’s.

2. Invest in your team and training

There is an amazing talent pool of staff ready to commit to your cause. Ensure you hire correctly and offer both internal and external training programs. You will be repaid in spades. Provide them with a good orientation program to the ensure a successful on-boarding journey and retention.  Socialise them into your brand with your corporate values, events calendar, reward and recognition schemes, company policies and processes, career progression maps and other employee engagement programs

3. Run an Agile development methodology

Running your project in Agile ensures that there is far more frequent reviews of the project progress. I won’t go into the details of how Agile works but for those who are not familiar with it there are plently of articles on the topic and I recommend you have a read of it if you’re in the technology or software development space.

4. Transparency across the organisation

It’s very easy to forget to relay company news and messages with your team overseas. It’s important that they get to see where the company is heading and what opportunities you’re working on. Don’t forget to do this. Yammer is a great social networking tool for companies to use that can help bring any newsworthy items to broadcast across multiple offices.


5. Build a Trustworthy leadership and Management team

Here lies one of the real factors to your success in setting up an offshore office. Unless you or one of your partners is prepared to move overseas to run it, you will need to find a trustworthy team to be your representitive over there. Make sure you spend the time finding the right people as this could make or break you. We have been very lucky in  this area as our management team comprises of our longest serving employees and a referal from one of our Sydney team members who had originated from Sri Lanka.

The Fruits of Our Labour

What we set out to achieve those years ago was better cost efficiency with hopefully the same quality of output. What we got in the end was so much more:

• An engaged, dedicated, hard working and highly intelligent team.
• A family oriented team comprising of the friendliest people you are likely to meet.
• A scalable business model capable of catering to our growing clients needs.
• Retention rates that most Australian businesses could only dream of.
• A deep talent pool of well educated and experienced candidates for further expansion
• and last but not least – a great excuse to frequent an amazing country in a beautiful part of the world!

So the next time you think about jumping on Odesk or Freelancer to find that silver bullet, stop, reconsider and think about your long-term strategy.

About the author

Shaun Polovin is one of four founding directors at Sydney’s award winning ecommerce and digital marketing agency Netstarter.   Shaun has worked with B2B and B2C brands such as (Shaun to  fill in the blanks).  He’s passionate about and specialises in digital marketing strategies, creative web design and digital innovation that engages audiences; business and digital commercial strategies that lead to profitable conversion outcomes.  Shaun lives in Sydney, enjoys travelling, the odd spot of surfing and triathlon training.

By Martin Conboy

I recently visited Sri Lanka who are three years on from the end of a separatist civil war and the country is mending itself and it is gearing up to get a piece of the BPO pie. Sitting in the shadow of the monster that is the Indian BPO industry with its nearly 900,000 employees and $USD 16 Billion of exports I wondered what lessons they could learn from their Indian and indeed Philippine counterparts.

The 2008-09 global financial crisis and recession exposed Sri Lanka’s economic vulnerabilities and nearly caused a balance of payments crisis. Growth slowed to 3.5% in 2009. Economic activity rebounded strongly with the end of the war and an IMF agreement, resulting in two straight years of high growth in 2010 and 2011. Per capita income of $5,600 on a purchasing power parity basis is among the highest in the region. There are some issues that they will need to be checked, like inflation, which rose to 9.3 percent in the month of June 2012 (5.8 percent on an annual average basis). Given what is currently going on in Europe, that is not a bad position to be in.

Sri Lanka continues to experience strong economic growth, driven by large-scale reconstruction and development projects. The government still struggles with high debt interest payments, a bloated civil service, and historically high budget deficits. However recent reforms to the tax code have resulted in higher revenue and lower budget deficits in recent years. There is a plan on the table on economic cooperation between China and Sri Lanka, which will only help to create more awareness of what the ‘New’ Sri Lanka has to offer. This is a relationship that goes back some 1,600 years.

To put ‘New’ Sri Lanka in perspective we need to look at what’s happening in India, the Philippines and also China. Needless to say Sri Lanka can never compete against the sheer size and scale of India and the Philippines, but it can carve out a BPO niche where it has skills and expertise.

I asked Arun Jethamalani, Managing Director, Value Notes one of the leading BPO analysts in India if India is headed at the right direction? “Although the Philippines has emerged as the preferred destination in voice-based BPO due to the accent advantage, the sheer size and weight of domain knowledge required for IT applications, infrastructure management, technology help desk, and other hot new areas like mobility, cloud, etc. will make it hard for the Philippines to catch up to India in these areas. The number of trained programmers and “techies”, both entering the market and who already have experience, is much larger in India, and it provides India a sustainable advantage. This same advantage holds true in many non-voice and high-end knowledge process outsourcing activities like analytics, legal, or market research.”

The rise of BPO in the Philippines has been nothing short of amazing. The very first calls were taken in 1997, and by the year 2000 they had about 25,000 people earning a living from BPO. That’s when I first heard about their BPO sector. We were doing call centre research and we had to double-check the statistics to confirm the sudden surge in the size of their call centres. Today, the Philippines’ BPO sector employs about 640,000 people and enjoys revenues of $11 billion, about 5% of the country’s GDP.

Mr. Jethamalani went on to say, “The Philippines BPO sector will grow and might gain market share in some areas. Some of the companies in the Philippines will compete with their Indian and global counterparts. But overall, in the outsourcing arena, they will not find it as easy to catch up as they have in voice-based BPO. China, in fact, is a much bigger competitor, especially in technology driven segments.”

The main reason for the success of the Philippine call centres is that workers speak English with a relatively neutral (US) accent and are familiar with American idioms – which is exactly what their American customers want. Of these, many have taken to complaining bitterly about Indian accents (which no amount of “voice neutralisation” coaching seems to have overcome).

Companies looking to crack the Australian market in particular and to be successful in handling voice related work at least, will need a ‘Culture Training’, program which goes beyond simple voice and accent assimilation. FooBoo is in the process of developing a program that addresses this gap. If you want to know more or have some ideas about what should be involved in such a program, then drop me a line. (mconboy@FooBooOnLine.com)

Phil Fersht the CEO of US analyst Horses for Sources in a recent blog said, “The industry known as “outsourcing” is currently under its greatest-ever attack. Worryingly, for the business and IT services industry, we are all now caught in the crossfire. This is quickly developing into an attack on “outsourcing” that is going mainstream, where many pundits and voters, not familiar with the complexities of global business, are jumping on the bandwagon.“

He went on to say, “The President (Obama) should be bemoaning the fact that US labor costs are far too high and the country is not currently blessed with millions of people in urban or rural concentrations who are prepared to take on lower level white collar jobs at $25-40K per annum. He should be bemoaning the fact that the US education system isn’t producing hordes of graduates qualified in ABAP programming that can compete with the Indian factory model. He should be bemoaning the fact that the 8% of the US workforce currently unemployed aren’t filling the jobs that are being “shipped overseas”. Our data already shows that most US business would love to move work to onshore locations, and would be prepared to make much less significant cost savings, if it was available.”

In this context India is planning to rebrand BPO and the question is, will that effort work for India? “The objective of re-branding by Indian BPO firms is to attract specialised talent and to alter global perception of the term “BPO”.  Said Mr. Jethamalani. “This initiative will help them in their current move to “higher value” service offerings that require domain expertise and the ability to provide analytics and insights to their clients.”

The challenge for the Philippines’ BPO industry is that it is overly committed to the USA and then over-represented in voice. As I like to call it, flying around on one wing. Having empty facilities during the day that are crying out to be utilized is a big issue for the operators in the Philippines.

The big question is whether the Philippine BPO industry, having conquered the contact centre market, can now move up the value chain. To keep growing rapidly—and profitably—it needs to capture some of the more sophisticated higher value back-office jobs.

There is a trend in India that all integrated BPOs are doing pretty well, compared to standalone BPOs. TCS has reported 33% incremental revenue from BPO, Infosys reported 24% incremental revenue from BPO while WNS posted topline and bottom line losses and also fired its CFO in India. The question is what are the reasons behind this?

Value Notes’ Jethamalani again “Some of the leading IT companies have decades-long relationships with Fortune 500 companies. They have big budgets and the ability to have conversations with the senior management of their larger clients gives them an advantage in securing integrated IT & BPO projects.”

India has a nicely balanced spread of service lines, with 42% in Customer Care, 22% in F&A, 18 % in knowledge service and 14% in Vertical Specific BPO services. In contrast the Philippines has 69% of its service lines in Voice BPO, 20% in Non Voice BPO and 11% in IT / ESO.

“Technology is increasingly emerging as a crucial differentiator in how business processes are outsourced,” said Jethamalani, “For instance, e-discovery in Legal Process Outsourcing (LPO) is not possible without technology, customer service is moving to the cloud, and Big Data and Analytics requires IT expertise coupled with ability to manage massive volumes of data. This gives integrated IT-BPOs an edge over pure-play BPOs.

It’s always important to think ahead and think about emerging trends in BPO.

Mr. Jethamalani, “A couple of emerging trends in BPO over the next few years are – a greater integration of business analytics with main stream BPO, e.g. a boost in outsourcing of claims processing by healthcare insurers due to the recent ruling from the US Supreme Court, and expansion of delivery centers in tier-2, tier-3 cities and onshore locations.

This is supported by The Sauce’s recent BPO research in Australia: ‘The Australian BPO Report 2012” which examined the outsourcing motives of major Australian organizations and government departments. IBM and Fuji Xerox supported the report. It found that the fastest growing segment of outsourcing was printing and Document management, which under pins the move to ‘Big Data’. This was closely following by HR outsourcing and then Marketing and Online Marketing. The driver behind the online growth is the rise and rise of social media and major corporates are really struggling to get their heads around the phenomena and are crying out for support.

Which brings us neatly back to Sri Lanka. I believe that there is a place for Sri Lanka if they can learn from the big guys and not rush in. They can only ever be a small player, however once they find their niche, I think we will find them establishing   themselves as an important BPO ‘business colony’.

• Join the LinkedIn group’ The Australian BPO Research Report 2012’
• SAP offers mobile device management on Amazon’s cloud
  SAP’s Afaria mobile device management tool is now available on Amazon Web Services’ cloud, offered as a way to make it easier to start using the platform. The availability of Afaria 7.0 server on AWS gives enterprises a fast and simple way to buy and implement an enterprise-ready mobile management platform, according to SAP.
• Queensland water-services and waste water-services company Unitywater has outsourced its IT services to CSG for the next three years. The two organisations signed the contract earlier this year in January, sealing Unitywater’s choice to move more of its IT services to the cloud.
• Sri Lanka ranked 21 in A T Kearney global outsourcing report. Sri Lanka’s fledgling outsourcing business sector, has scored well in a recent A T Kearney study, which gave high marks for the island’s skilled talent pool and a strong business environment at competitive costs.

Hayleys Business Solutions International (Pvt) Limited (HBSI) recently reinforced its commitment to sustainability and service differentiation by being the first and only BPO Company in the country to obtain Carbon Neutral certification.

Photo on right: Mohan Pandithage – Chairman and Chief Executive of Hayleys Group (third from left) receives the carbon neutral certificate from Subramaniam Easwaran- Co Founder, Carbon Consulting Company. Sutheash Balasubramaniam – Director/CEO (extreme left), Dr. Arul Sivagananathan – Managing Director (second left) and Asiri Silva Manager – IT and Infrastructure (extreme right) of Hayleys Business Solutions International and Sanith de Silva Wijeyeratne – Chief Operating Officer – Carbon Consulting Company, were present.

This pioneering achievement, unique in Sri Lanka’s business process outsourcing services industry, was earned after a focused effort by HBSI to adopt practices that reduce or eliminate greenhouse gas emissions. The certificate was awarded by The CarbonNeutral Company, a world-leading provider of carbon reduction solutions.
In accordance with The CarbonNeutral Protocol, a global standard for carbon neutral certification, an independent assessment of the CO2 emissions produced was undertaken. The company has already implemented several energy management initiatives in accordance with its offset-inclusive emissions reduction programme.
“HBSI has reduced and offset its CO2 emissions to net zero in accordance with The CarbonNeutral Protocol. As a result, we are Sri Lanka’s first and only CarbonNeutral certified BPO Company, as verified by an independent organisation,” Managing Director- Hayleys Business Solutions Limited, Dr. Arul Sivagananathan stated.
The certification makes a clear and credible statement about the action HBSI has taken on climate change and is expected to meet growing demand for climate friendly solutions. “We are confident that this move will go a long way in enhancing the competitiveness of our service offering in local and international markets.
Clients of Hayleys Business Solutions International stand to benefit immensely from the work they outsource being carbon n eutral. This certification plays a decisive role towards branding Sri Lanka as a sustainable outsourcing destination,” Hayleys Group Chairman Mohan Pandithage said.

Sri Lanka’s information technology and business process outsourcing firms have started to expand out of Columbo, to lower costs and also be closer to the residents of potential workers, officials said.

Dinesh Saparamadu, head of HSenid, a software developer said his firm had set up a research and development unit and gone to Kandy in central Sri Lanka where Peradeniya, a national university was located. “We had a lot of students boarding here (in Colombo) who go home for the weekend,” Saparamadu told an economic forum organized by the Ceylon Chamber of Commerce, Sri Lanka’s largest business association.

“We need to go and set up satellite operations. ” Saparamadu who is also chairman of Sri Lanka Association of Software and Service Companies (SLASSCOM ), an industry body, said IFS, another software developer had set up offices in Kandy.

Niranjan Tavarayen, senior vice president, WNS Global Services said his firm was planning to set up an outsourcing unit about 30 kilometres away from the capital.

One of the problems of setting up offices outside Colombo was that senior officials did not want to reside in the regions due to lack of facilities and infrastructure such as schools for their children.

Tavarayen says international clients want to locate their outsourcing centres in cities that look modern and have up to date facilities. But there were clients who were willing to outsource work to ‘tier two’ cities, he said.

Rohan Samarajiva, head of Lirne Asia, a regional policy research unit says the government in particular has an opportunity to locate call centres outside the capital.

Reshan Dewapura, head of Sri Lanka’s ICT Agency says the government’s ’1919′ call centre could move parts out when it expand. The government was also planning to set up an IT park outside the capital.

Source: Lanka Business Online

by Brett Winterford 

Aussie companies get up to 12 years tax free.

The Sri Lankan Government has offered Australian companies and Government departments a tax holiday of up to twelve years if they choose the war-torn country for IT and business process outsourcing.

Recovering from a 25-year civil war between the dominant Sinhalese and separatist Tamil movement that ended dramatically in 2009, the Sri Lankan Government has pulled out all the stops to boost employment and the country’s economy.

Foreign ownership laws have been relaxed across several key verticals in a bid to attract Western investment that might otherwise flow to India or China.

The Information and Communication Technology Agency of Sri Lanka has offered Australian companies setting up IT or BPO outsourcing  “no restrictions on repatriation earnings” – a principle the agency says is enshrined in Sri Lanka’s constitution.

It has also lowered corporate tax rates from 35 to 28 percent, comparable to Australia’s company tax rate of 30 percent.

Under a new scheme proposed for the IT and BPO industries, businesses can be exempted from tax for up to twelve years when they commit to employing a large number of Sri Lankan workers.

Source: Information and Communication Technology Agency of Sri Lanka.

The Information and Communication Technology Agency of Sri Lanka has funded a delegation representing 15 Sri Lankan ICT companies to visit Sydney and Melbourne for a series of events, including the CeBIT conference next week in Sydney.

Agency chief executive Reshan Dewapura said the small nation expects its IT industry to be a billion dollar export powerhouse employing 100,000 within five years.

“We are excited to extend a warm invitation to Australian companies to realise the significant opportunities that exist here, including generous tax holidays,” he said.

Read on to hear how one South Australian company took up the opportunity…

Adelaide-based CAM Management Solutions (CAMMS), a provider of Business Intelligence software and consulting, set up a Global Service Provisioning Centre in Sri Lanka three years ago, just prior to the end of the civil war.

The company employs over 100 staff in the facility to fulfill contracts for the likes of the South Australian and Northern Territory governments.

According to Joe Collins, managing director at CAMMS, it wasn’t tax sweeteners that piqued his interest in the region.
The company struggled to find the skills at home required keeping up with its plans for growth.

Investing in the facility amid the closing stages of the civil war, Collins saw “a country with huge potential, using resources in a non-productive way.

“It’s a much more relaxed place now,” he said. “Now that the Government no longer needs to focus [on] war, it’s naturally more amenable to business. It has better priorities than buying bullets.

“We saw Sri Lanka as the next big opportunity to support our growth – and it was exactly half way between our offices in Australia and the UK. Our company was growing very rapidly, and we were struggling to find the right people to keep up our R&D needs in Australia while supporting the needs of our customers.”

Collins developed a business relationship with a Sri Lankan investment agent to facilitate recruitment and the establishment of the centre.

“We considered the outsourcing or joint venture approach,” he said, “but in the end we decided to establish a company there.”
Rather than “outsource the hack work”, Collins wanted the service centre to work hand-in-hand with employees in Australia and the UK.

“We are very open and proud of our service centre,” he said. “We wanted the Global Service Delivery Centre to be an extension of us, to work jointly on projects. The company policy is to up-skill staff at the centre, to disseminate our corporate knowledge.”

During the past three years, CAMMS’ Sri Lankan scope has grown from R&D to 24-hour helpdesk, eTraining, marketing and product development around such complex areas as business intelligence and knowledge management.

“If you keep at it, the same rules apply as at home – you just need good staff and you need strong leaders,” Collins said.
Collins said the Sri Lankan office has shortened CAMMS’ cycle of product development, improved its responsiveness and ability to scale and raised the standard of its customer service.

“It allows our Australian staff to focus on the core business of selling products and providing high level support to our Australian clients.”

The only challenge, Collins said, is that Sri Lankan Government initiatives are getting noticed by some very large multinationals. Already, sweeteners have attracted investment from the likes of Microsoft, Motorola, SAS and Nokia.

“When big American companies come in and set-up 1000-man offices, there will be more demand for staff,” he said.
But he has no regrets.

“We were lucky, in some respects, that we got in early. I’d say I still would have done it without any tax agreements. It’s cost-effective, and it solved a problem we had around the availability of skilled people, and how to keep them.”

Source: IT News

Sri Lanka BPO industry offers global exposure and fast paced career progression