The Human Factor: India losing out on HR outsourcing

Human resource (HR) outsourcing has been the fastest growing BPO segment in the world in recent years. In fact its set to become a $ 51 billion market worldwide in 2004, representing 39 per cent of the total business process outsourcing (BPO) revenue. But India seems to be losing its way.

'India is barely skimming the surface of the HR outsourcing market potential', says Vashistha, Managing Partner of the California-based neoIT, the world's leading offshore advisory. Consider the following figures: The total market for HR outsourcing in the whole of Asia Pacific is estimated to go up to a mere $ 2.56 billion in 2004 (see table). That's just about 5 per cent of the world market. 'India's share even in this small pie is negligible', says Vashistha.

Which is a pity, considering that HR outsourcing has tremendous cost savings potential for companies. Typically, companies end up saving up to 30 to 40 per cent of their cost by outsourcing their HR processes.

The biggest problem --- and this is why the HR outsourcing industry in India is on the back foot --- is the government and the industry's failure to tackle issues like data security and data privacy. Most foreign companies insist that their outsourcing agreements contain detailed and precise contractual specifications regarding data privacy and protections.

Vast majority of the HR outsourcing giants keep away from India (only 2 per cent of the Indian HR outsourcing market is controlled by the organized sector), while the unorganized sector, which controls 98 per cent of the market, couldn't care less about these issues. This has directly contributed to the growing perception that Indian outsourcing companies lack domain expertise. For instance, Exult, the global HR outsourcing giant, wanted to outsource end-to-end HR-related work to a third party in India but was unable to find one with the requisite expertise. This prompted the company to set up its own captive outsourcing unit in India.

The biggest apprehension among the firms is the quality of the outsourcing vendors. So unless and until the quality is improved, lucrative HR outsourcing deals may not come India's way.

Reliance India looking to boost Outsourcing

A Reliance company official said that the group is all set to recruit 2,000 call center workers in expectation of bagging new outsourcing deals.

Reliance’s Mumbai call center already has 4500 employees who primarily work on domestic assignments of servicing the six million mobile facility subscribers.

Reliance Infocomm president V.S. Chandrasekar said, “ Of the 2000 employees which we will recruit will focus on outsourcing for international firms. We are going to get more people to meet our outsourcing job requirement, especially from U.S.A. where we’ve recently bagged one client.

He added that despite the full-blown backlash against outsourcing by some law-makers in western countries, surprisingly Indian companies have been constantly receiving outsourcing orders.

Multinationals have to outsource to India if they want to cut costs, want a large pool of English speaking, computer literate employees who work at a fraction of wages paid in the west.

Outsourcing: You win; I win deal for consumers, firms

A few years ago if you had talked about off shoring, people would've probably said that you are crazy. But now the term outsourcing or off shoring is so common, that even a child now will be able to tell you the meaning of it.

The debate is on fire ever since a study by Forrester, a research group, in 2002 claimed that 3.3 million white-collar US jobs (500,000 of them in IT) would be outsourced to countries like India by 2015.

The main competitors for India at the moment are China and Malaysia, but India looks to be the most attractive and favoured outsourcing destination for some time to come. The cost of back office operations in India is currently 37 per cent lower than in China and 17 per cent lower than in Malaysia. The Philippines is another country that is quickly gaining approval of many and is well equipped to provide competition in the future. It produces almost 300,000 college graduates a year, all of them English-speakers. But they are competing against India's annual crop of around 2 million college graduates, 80 per cent of who speak English.

The major advantage of outsourcing to low-cost countries like India is a combination of lower wages and the improvement in the quality and price of international telecommunications. The call rate of a one-minute call to America and U.K. from India has fallen by more than 80 per cent since January 2001.

Just to give you an idea as how much firms save by outsourcing to low-cost countries like India and others will become clear by the following example. An IT professional with three to five years' programming experience earns $96,000 in Britain, $75,000 in America and $26,000 in India. At the other end of the scale, low-grade call-centre jobs that in Britain earn a salary of $20,000 earn less than one-tenth of that in India. Now that is a huge sum of money the U.K. and U.S. firms want to save upon. With this being the case, no one can blame these companies for vying for outsourcing. Although the protests are on the rise by the workers, these firms believe in doing business using their heads and being ruled by their emotions.

Many companies have not yet taken anything like full advantage of off shoring. Harris Miller, president of the Information Technology Association of America (ITAA), a lobby group, says that offshore locations have so far only captured just 3-4 per cent of all US firms' outsourcing. The bulk remains onshore in the hands of big firms such as Accenture, CSC, EDS and IBM. Now just the imagine the bulk of business still remaining to be tapped by India and other destinations.
Outsourcing is already big and it is poised to get even bigger and better in the near future.

Offshore outsourcing: Little effect on U.S. jobs?

Overall U.S. job market has been little affected by IT and manufacturing companies outsourcing jobs to other countries. With most estimates saying 500,000 or fewer U.S. jobs have moved offshore to countries like India, offshore outsourcing has had little impact on the U.S. unemployment rate, which stood at 5.9 percent in November. The U.S. has a workforce of about 130 million people, and a few hundred thousand jobs being offshored overseas should have little impact on the number of jobs in the U.S.

While the representatives of the U.S. IT industry defended offshore outsourcing as potentially good for the U.S., others raised warning flags. The argument that offshore outsourcing, "frees up labor that can be redeployed" may not make sense to a U.S. worker who's just been laid off, said Ron Blackwell, chief economist for the AFL-CIO. "That's not exactly how I'd phrase it," he said of outsourcing freeing up labor.
When the offshore outsourcing of manufacturing started, proponents said U.S. residents shouldn't worry about those low-wage jobs, Blackwell said.

But political tensions in parts of the world may keep the offshore outsourcing numbers from growing as fast as some predict. "If Pakistan and India have a nuclear war, your call center could be in trouble," he said. "Things could change on a dime.,” said Martin Kenney, senior project director at the Berkeley Roundtable on International Economy and a professor at the University of California, Davis.
Supporters of offshore outsourcing argued the practice could save companies money, encourage other countries to buy U.S. products and allow U.S. workers to focus on a company's core products. Some companies have reported savings of 40 percent to 80 percent by moving some businesses processes out of the U.S., Kenney said.
The U.S. IT industry will continue to thrive even with offshore outsourcing, because its IT industry continues to be the most innovative, said Jeff Lande, vice president of the IT Services Division at the Information Technology Association of America. Offshore outsourcing does not mean a "zero sum game," with every job created overseas equaling a lost U.S. job, he said.
Efforts to stall offshore outsourcing could harm U.S. businesses, said Rolf Lundberg, senior vice president of congressional affairs for the United States Chamber of Commerce. Lundberg defended offshore outsourcing by saying the money & savings will pump up the bottom lines of U.S. companies. "Savings are passed on to consumers," he said. "Dividends are passed on to shareholders."
A study released by Forrester Research Inc. in November predicted 3.3 million U.S. jobs in the service industries would move overseas by 2015, but Lande noted that less than 1 million of those were predicted to be IT jobs.
So the call center industry in India is looking great guns, with looking forward to more in the near future. This call center boom is not going to end so soon.

Financial times sponsors Outsourcing to India

Outsourcing to India is the last thing the workers in the U.S. and Western Europe want to hear about. And what could be more hurting than to see a major financial newspaper sponsoring a conference, which encourages companies to relocate jobs to India. But Financial Times is doing exactly that.
"India has been on the frontline of global outsourcing for a decade and roughly half of the world's largest 500 companies and many government agencies now contract out IT and business process work to India. Offshore outsourcing of IT and business services is on course to become the fastest growing segment of the IT market in the next five years", the financial times website said.

Louise Hunter, the Director of Conferences for Financial Times, defended the conference on the basis that outsourcing to India is a subject of interest to many corporations, and that the Financial Times would never organize a conference that they were not "ethically comfortable" with.

Outsourcing the only way out for the U.S.

No matter what U.S. does they cannot take a step back now. Outsourcing is inevitable. Pressured by the necessities to cut costs and to stay competitive on a global basis, U.S. firms have to resort to offshore outsourcing, according to the latest issue of U.S. magazine Forbes.

Offshore outsourcing simply exploded into the mainstream in 2003. There is now no turning back, despite the usual concerns about jobs of the U.S. workers flowing into India or the concerns about the loss of innovation. "The pressure to cut as much cost and the need to compete globally is just too much", Forbes said.

It said in the US, the number of students graduating with computer and information science degrees has grown more than 70 percent since the mid-1990s but are still outpaced by business, social science and education degrees. But "India, with a population topping one billion, turns out 75,000 IT graduates annually, by far the most popular area of study," the magazine said. So that is the main advantage India has with it at the moment. So in fact we are doing US companies favor by letting them tap onto talent that is scarce in the US.

So let the strikes be on the rise, let the protests become common, or let the negative backlash continue, If the U.S. firms wish to cut costs, and stay competitive, it has to resort to outsourcing. There is no other choice, then be it outsourcing to India or China or any other country.

Re: Viewing 2003: Outsourcing and …India

Although the rest of the IT industry has not had a bright year, the continued need for businesses to look at ways of reducing or cutting IT costs has seen a relative boom in the demand for outsourcing services. India has overshadowed everybody else with gigantic low-cost offshore deals both for call centers and development work and, along with many of the big traditional IT outsourcing deals, coming its way.

Many multinationals have in fact fallen into trouble with workers because of transfer of jobs to India, which has resulted in strikes and protests. BT was the first to run into problems in February with the over plans to shift hundreds of directory enquiry jobs to India, which was not received well. Then In what turned out to be a much bigger dispute, Bank of Ireland IT staff faced off with bank bosses over a $600 mn outsourcing deal with Hewlett Packard that involved the transfer of 500 employees to the supplier. The bank announced the deal in April but then spent several months negotiating with the union, which warned that the firm faced "total war" with staff if they voted for a strike. Strike action was eventually averted and agreement reached in September. It wasn't just the private sector coming under union pressure. The Department for Environment, Food and Rural Affairs (Defra) started tendering for a 10-year £850m IT contract to overhaul the way the department works but the union is bitterly opposed to the deal and is warning of another potential government IT disaster. And many large organizations are also facing pressure for their worker unions for their plans on off shoring work to low cost destinations.
Possibly the greatest success story of the year was the blossoming of India as a mainstream low-cost, service providing base for blue-chip companies to outsource both customer facing and back-office IT. India in fact dominates the offshore sector with 90 per cent of the market, although 2003 saw the tentative emergence of several other countries. Although the picture seems rosy at the moment as umpteen numbers of multinationals have already come, and are still coming, the protests and strikes could be a cause for worry for India as a market.

U.S. not opposed to outsourcing to India: Arun Jaitley

Good news ceases to stop for the Indian BPO industry. The U.S. today assured that it would not approve of the opposition to business outsourcing bill brought in through legislations by New Jersey and some other states of the country, to stop the work flowing to low cost countries like India and China.

Commerce and Industries Minister Arun Jaitley said both U S government and the industry are in favor of continuing with outsourcing of jobs, of which India is a major beneficiary, replying to supplementaries during Question Hour.

After his talks with the U.S. Trade representative, he was told that Washington totally disapproved of the legislations to curb business process outsourcing.
The Minister said that the European countries and U.S. were not doing any favors to India by outsourcing here. They come here only because India is able to provide cost-effective and quality services for the business houses. And that the U.S. industry also knows that curtailing outsourcing could affect its profitability.

The Minister said India’s campaigning is on full-throttle to ensure that outsourcing jobs are not affected and the Indian missions abroad were assisting in these efforts.
He said it was being felt in some quarters in Europe and US that while the service jobs were being taken away by India, the manufacturing jobs were being cornered by China.

IBM escalates outsourcing to India and China

As many as 4,370 programming jobs are supposedly to be relocated outside U.S. by the software giant IBM.

A recent report by the Wall Street Journal has hinted that IBM has in fact told its managers to plan on shifting the work of thousands of programmers to foreign countries. IBM, which employed a total of nearly 316,000 workers at the end of 2002, said in a statement that it does not comment on "internal presentations or projections." But according to the statement, "the vast majority of the growth in application services that will occur in markets like India, China and Latin America will result from winning new contracts." By "markets," IBM is referring to where the services will be provided from, not the location of the customer, said company spokesman James Sciales.
This move is sure to add fuel to the already raging controversy of sending Information technology work to lower-cost fREnS

Outsourcing to India

British companies outsourcing to India, is not a surprise. But what is surprising is those who don’t. It is infact, “The Thing”, to do in Britain. Those who are not following this trend are the one’s who are making some news. Such companies are now being questioned on their decision to stick to Britain. Companies such as HBOS- owned telenet insurer, Esure, have just expanded to open a call center in Manchester, apart from already having a base in Glasgow.

On being asked as to why they did not choose low-cost economies like India, China or Philippines, they said that they always planned on having a strong U.K. presence. And also that they are happy with the pool of talent they have in Glasgow and Manchester.

This stance by Esure is in fact in stark contrast to the move taken by other financial companies that are looking for ways in which to cut overhead costs by off-shoring data processing and call center jobs. Even trade union leaders are bamboozled by this move by Esure to outsource more functions from within Britain rather than cheaper overseas providers. However Amicus trade union welcomed this move whole-heartedly.

Amicus national secretary David Fleming said, “This obviously is a way to show their confidence in the capability of the British workforce. This is a great gesture by them. We only wish that more companies took the same standpoint.

But Esure spokesperson told that, though at this point in time this is the best decision for the company, in future off- shoring is not ruled out”.

Technical flaws create mess in Call Centers:
Wipro Spectra mind loses its mega-project

US-based Lehman Brothers has decided to stop using Wipro Spectra mind as an outsourcing partner for technical help. Interestingly, while IT services outsourcing and off shoring is okay with MNCs, when it comes to BPOit is a different story.

In the fast growing BFSI segment, MNC companies like GE, American Express, Standard Chartered, Fidelity and the World Bank have all been outsourcing their IT requirements to companies like TCS, Wipro, Infosys, Cognizant and Satyam but importantly have chosen to do their BPO themselves. And there seems little exception to this rule.

When it comes to other verticals like transportation, manufacturing and airlines companies like P&O Ned Lloyd, Conesco, Dell, Convergys, WNS, Ford, McKinsey, HP, Bechtel Axa have also set up their own BPO centers. Another facet that needs to be noted is the fact that recent news on BPO troubles in India has all been voice related. Dell in Bangalore some weeks back and now Lehman with Wipro.

It is the accent that matters the most. Call Centers in India need to pay attention to the accent of their Customer Care Executive; this will enhance the quality of the service and thereby maintain the reputation of the BPO’s in India.

Outsourcing business now outsourcing itself!

The outsourcing business is now outsourcing itself. US-based Cedar says it's more economical than building more capacity.

The outsourcing business is now outsourcing itself!

US-based management and IT consulting firm, Cedar, which has a 250 seater call centre in Mumbai, wants to tie up with a bangalore based call centre.

That's because the group says the worldover, including India, call centres have under-utilised capacity of about 40%.

So instead of adding to its existing capacity, the group has decided on outsourcing its outsourcing business.

"We think outsourcing will continue to grow and rather than invest in putting up more infrastructure, we thought of teaming up with a firm with excess capacity in that business, grow the business together... and as we grow and develop that market, we will be able to move those companies into further outsourcing opportunities, most likely in India," said Tom Rump CEO Cedar Global Consulting.

Regional director in charge of Asia Pacific region at Cedar Global Consulting, Sanjiv Anand, puts under utilisation at 20-30%. People don't talk about it, it's hidden capacity, he said.

"If you are a UK call centre, you would get one-and-a-half shifts in India, given the time zone, so there are centres operating and even our own India centres doing 100% UK shifts. But, there is one dead shift, so if you get a US client, then you get full capacity (and there's no excess)," Anand said.

For Cedar, this is a first. But this business model allows it to use the under utilisation. Anand said that the company had built a centre in Mumbai two years ago and made that its reference site. "But, going forward, for flexibility, since there is capacity and we have our own client relationship in the US and UK, it might make sense to fill this excess capacity," he said.

And, the model makes good economic sense, as setting up a greenfield call centre would be more expensive. "Call centre is capital intensive with investments in technology... it involves expensing capital investment. This gives flexibility in the ongoing costs and we don't have to deal with upfront investment you need to make in building capacity," he said.

There is unutilised capacity in India - in Delhi, Mumbai, and Bangalore, Anand said.

"They are happy to have someone who is frontending in UK, USA to bring customers in....they are small, midrange companies. Often there is significant dependence on one customer group and when that customer walks away, then significant capacity opens up."

This could soon become a trend in India, where, typically, people put in capacity assuming customers will come in. But, the reality is selling and marketing overseas is more complicated than people understand, he said.

Insurance giant to outsource to India

British insurance giant Norwich Union is the latest to join the list of companies to outsource to India: it has told staff that it will cut 2,350 jobs and export them to India.

The move once again sparked protests from trade unions. The Amicus trade union termed the decision as "despicable" and vowed to fight it.

Parent firm Aviva said operating costs in India were typically 30-40 per cent lower than in Britain and the move would also help it provide 24-hour services.

Amicus officials said Tuesday there could be 500 compulsory redundancies, a figure that Aviva disputes.

Aviva already has offices in New Delhi and Bangalore, where about 1,200 staff process general insurance claims. It has defended its latest move as being about adding flexibility as well as cutting costs.

The time difference between Britain and India would allow the company to move to round-the-clock claims processing and administration, Aviva said.

Unions have warned that up to 200,000 jobs in the finance sector could leave Britain over the next five years as companies take advantage of cheaper labour costs abroad.

Aviva said it hoped the bulk of its job cuts will come through natural staff turnover or voluntary redundancies. The union warns that there will be hundreds of compulsory job losses.

However, according to Aviva, only 12 workers faced compulsory redundancies when the firm moved 1,250 jobs to India earlier this year.

"This deplorable announcement by Aviva is based purely on greed - it ignores Aviva's corporate social responsibility towards both its (British) employees and customers," David Fleming, Amicus national secretary, told the BBC.

Amicus also said the decision would undermine the British job market, especially for school leavers and graduates.

The union has warned that 12 locations across Britain will be affected by the cuts, a figure denied by the company.

In July, Norwich Union shed nearly 900 jobs in Norwich, Cheadle, Perth and Worthing, and during the past year, Aviva's overall British workforce has fallen by 3,000 staff to 36,000.

Worldwide, Aviva now employs about 59,000 people, and by the end of 2004 the firm expects to have at least 3,700 of them in India.

Of the new posts created in India, approximately 350 will be call centre roles servicing British customers, while another 2,000 staff will perform back office work including processing of British insurance claims.

About 150 jobs will be created to support Aviva's general insurance business in Canada, although Aviva promises that there will be no job losses in Canada.

Aviva is Britain's largest insurance group, and was formed in a merger of Norwich Union with CGU.

50,000 jobs moved to India

RESEARCH has revealed that 28 firms have outsourced more than 50,000 jobs serving UK customers to India over the past two years.

More and more firms are planning to 'remote source' call centre work to India, making savings of around 40%.

Recent announcements have included plans by the national rail enquiry service to move 600 jobs to India as part of cost cutting measures, while HSBC intends to outsource 4,000 jobs over two years.

Offshore outsourcing of call centre work is expected to grow by 25% over the next five years.

Financial services companies including Abbey, Barclays and HSBC have led the way in remote sourcing, closely followed by firms in other sectors including British Airways, BT and Tesco.

Unions have argued that turnover rates in some Indian call centres have reached 60%, twice as much as in the UK.

The Communication Workers Union said BT and other companies that outsourced call centre work should be reminded of the benefits of remaining in the UK.

'Outsourcing will destroy UK jobs, damaging both the UK economy and company reputations in the process,' said an official.

Bush Government encouraging outsourcing to India: Expert

The Government of US President George W Bush is encouraging rather than discouraging the process of job outsourcing to India, particularly in the software sector, feels an information systems expert.

In an online statement quoted by the Daily Times, Douglas Chick claimed that at all American Government levels, there is "every indication of helping more and more Americans become unemployed."

"The tech industry in the US is rapidly vanishing, and it's not just the telephone support positions. It is also the software programmers, hardware and engineering positions," Chick opined.

"Congress has even made way for overseas workers to come to this country and replace jobs. I have even seen ridiculous articles on the Internet falsely stating that overseas outsourcing will save American jobs. We are all in danger of losing our jobs and if we don't act now it may be too late," he warns.

Disagreeing with the view of Congressmen that they are supporting the "overseas outsourcing" because corporate taxes are too high and American corporations cannot compete with countries that do practice overseas outsourcing, Chick further goes on to say that, "If this is the case, how will US companies compete with child, prison, bonded or slave labour?"

"These pro-India US politicians will never take the blame," he says, adding that the only way to curtail these pro-India US companies is to stop buying their products, using their services and giving them money.

They should also be told why they were being boycotted, he says. If this doesn't work, he says, then the Americans would have to vote and unseat these pro-India US politicians who have "clandestinely assisted certain greedy business executives in moving millions of American jobs to India or hiring Indian citizens for jobs in the US.