The next day we had a corporate visit at Deloitte, which was a nice complement to our Mumbai sightseeing. We were given three presentations, and the chance to ask lots of questions regarding factors of Business Process Outsourcing in India.
IT Outsourcing Growth & Trends
The first presenter talked about outsourcing growth. When the BPO trend began, there was a centralized hub of activity in Bangalore. This is not to say that the Indian education and talent was the best in Bangalore; rather, companies did not realize the opportunities to be had in other cities. Eventually two things prompted the expansion of BPO into other cities: (1) the government started taking infrastructure initiatives, such as expressways in Pune, and (2) Bangalore reached a saturation point. Generation Y and the popularity of social networking and online communities has been a growth driver, as well as targeted HR initiatives to advocate cultural diversity.
What about the growth of IT in India? In a country that does so much technology development work for United States clients, it was surprising for me to find out that the IT wave is lagging a lot in India. Indian clients and US clients have different maturities, and therefore different types and levels of demand. The Indian IT landscape mirrors that of the US 30-40 years ago (for example, e-commerce is not yet prevalent in India), most of the work being done for Indian clients is geared more toward defining a roadmap, or a strategy. Also, in India, employing human resources to do tasks is still much cheaper than paying for an entire IT system to do the same work.
The growth off-shoring in Europe is very slow. This is in part due to heightened linguistic and cultural difference, but the majority of European clients still believe that things are best done "in-house".
Wired for Winning--the IT Off-shoring Model
The off-shoring model can be broken up into three categories: home-shoring, off-shoring, and near-shoring.
- Home-shoring: Keeping operations/systems on your own turf. This gives an allusion of security, but does not give projects or companies cost competitiveness.
- Off-shoring: By sending things overseas, you not only gain more cost competitiveness, but also you will have access to a larger talent pool, improve the scalability of a project, are more able to standardize processes, and can develop global delivery/service centers around the world.
- Near-shoring: For the U.S., this would mean sending work to places like Canada and Latin America. This model stresses geographical proximity and smaller time differences.
Although the above list shows that off-shoring can yield some important benefits, it is not without its challenges. Some of the most prevalent issues faced by off-shoring projects are: maintaining the strong economic relationships with potential partner countries, developing a cultural sensitivity, finding places with language similarities. A particular challenge of an off-shored project, however, is gaining credibility, which can only be done through the standardization of processes and the implementation of a strong monitoring/governance mechanism.
When it comes to off-shoring, especially in the technology domain, not everything is off-shored. Systems implementation and maintenance work are the most likely to be off-shored. On the other hand, pure business transformation (for example, a complete re-branding, or re-positioning of a business in order to attract customers from a different market) is most often taken over by a home team. As a result of most business transformation efforts being undertaken by a home team, there has been a trend to bring the Indian resources on-shore. This allows for more the growth of trust through monitoring and transparency, and still renders cost benefits to the client.
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