Smart Strategies for Successful Offshore Outsourcing

First of all, you have to understand what offshore outsourcing services really imply. Offshore outsourcing means that a company will be hiring another company to work on their business processes. The company that offers offshore outsourcing services will be doing the business process or part of the business process.

Companies in developed countries, such as the United States, Canada, and European nations are now outsourcing their business process or part of their business process in order to save money. This is the primary reason why companies today are now outsourcing their business processes.

Companies that offer outsourcing services are usually offshore or are located in other countries. Usually, countries from developing nations do this because of the high demand for outsourcing services from western countries.

If you have a company, then outsourcing can be one of the best things that can happen to your business, in case you choose to outsource your business process in offshore companies. Besides, because you can save your company from spending a lot of money and at the same time fully function as a whole company, who wouldn't want to get outsourcing services from offshore companies?

By outsourcing, your company will be able to save significant amounts of money. This is because offshore companies, particularly in developing nations, charges only a fraction of the amount to get the job done compared to your own country.

Developing nations that usually offers outsourcing services are China, the Philippines, Mexico, and India. These countries are considered to have such a low labor cost that companies from developed countries are considering hiring their services to get their business process work done.

Another benefit of outsourcing for your company is that it can take heavy workloads off and divide it to offshore companies to do part of your company's workload. Because of this, your company will be able to focus on more important matters to make your company more competitive in the world of business.

If you are in the software developing business, it is better that you should outsource part of your software development department in order to cut operational costs and at the same time, let your in-house software development department breathe.

This is because IT professionals in developed countries, such as in the United States charge a high amount of fee for every software developed. If you outsource it to offshore companies, particularly in developing countries, such as India, and the Philippines, that has a large pool of qualified and equally talented IT professionals, they will charge you for only a fraction of the amount that IT professionals will charge you in your own country.

For example, if a programming job costs about 100 dollars in your country and the same programming job in offshore countries cost only 20 dollars to develop, you would want to hire the cheaper alternative. Obviously, if you need 100 or 200 of these programming jobs, you can see the difference in cost. Your company will be able to save thousands of dollars if you offshore your business process or part of your business process.

Always remember that you only have to offshore certain jobs. You should never offshore any projects regarding strategies of your business. You should also consider the quality of the product the offshore company can provide. If the offshore company's product is not at par with your company's standards, you should not hire the company at all. You better look for an offshore company that provides better quality.

India and China, the two emerging giants

The fact is incontrovertible that India would land in the company of developed nations by 2020. She would infact take over some of European economies like Italy, Germany and Spain and would further move to become the world’s third largest economy by 2040.
A NEW SEASON of M&A has arrived and India is looking to pile up the numbers of maximum mergers and acquisitions. Myriad companies have become MNCs in the past few years, whether it’s the Genpect, the biggest BPO in India ready to be floated in the US stock market; Starbucks, Seattle based world’s largest coffee chain collaborating with Planet Retail; Videocon envisaging the take over of South Korea’s debt burdened Daewoo electronics for $700 million, and the biggest of them all- the Tata-Corus deal. But what really lies in the future? The fact is incontrovertible that India would land in the company of developed nations by 2020. She would infact take over some of European economies like Italy, Germany and Spain and would further move to become the world’s third largest economy by 2040. US is too far ahead. So where does the real competition lie? Infact, it’s in our very own backyard. The robust Chinese economy is taking giant leaps and romping towards the utopia of prosperity of development. The per capita income in the United States is $30,000 whereas it has just reached $1600 in China. So our moving target should be China not US. China opened its market nearly a decade and a half before India followed the path. The world is considering the 21st century, the century of 2 Asian giants – China and India. Quite paradoxically, both have some challenges in front of them. Let us introspect first. India received an estimated investment of $40 billion foreign investment in the last financial year as compared to $72.4 billion, what China enjoyed in the same period. How much China has excelled is quite evident from the fact that the per capita income of a Chinese national has risen from $275 in 1982 to $1040 in 2002 whereas India lagged much behind as the figure peregrinated from $260 to $540 in the same period. The World Bank report on environment for starting and conducting business puts India on dismal 80th rank. License Raj, time consuming and tedious process, bureaucratic hassles, red tapeism and political unwillingness are the index reasons which present India as an insalubrious destination for investment. Eyebrows are also raised about the substantial growth or inclusive growth. Dr. Manmohan Singh has been addressing the issue as per the priority. Sensex reached the magical figure of 13,000 for the very first time in the history of its lifetime on 30th October 2006 , but what is the relevance to a small debt burdened farmer of a small village of Vidarbha. Every now and then news reports come in about the suicide committed by a farmer. Eleventh plan says a root cause for farmers’ suicides is the failure of the banking system in extending credit that has led them into poignant plight. The approach paper of the Eleventh plan acknowledges the regaining of agricultural dynamism, reversing deceleration in agricultural growth and thereby addressing the problem of rural distress as the top priorities. While the achievement of 9% growth is not infeasible, what is not comprehensible in the absence of clear engagement is how this growth will ensure inclusiveness. Private sector has been called upon by the PM and the Planning Commission to rope in some capital and establish a sense of rapport with the farmers of the country. Interestingly, companies like Reliance and Bharti Ventures has pledged cooperation in Haryana and Punjab respectively. This highlights the fact that the agriculture has taken a backseat. The proportion of the agriculture in the 2005-06 is 20% of the total GDP of $690 billion and its further bound to decrease to ticklish 15.3% out of total GDP of $1 trillion in 2010-11. Critics claim that there is a sense of irrational exuberance about India’s growth story and we should not delude that the growth and reward what India has achieved are here to stay forever. Without higher level of investment and productivity from that investment, sustaining things is difficult. Without reforms, it is impossible to increase inclusiveness. It’s a matter of fact that India would need at least whooping Rs.14,00,000 crores of investment in infrastructure development by 2012. The airport facilities are in shambles, roads are looking to be the permanent residence of potholes and you never know that the electricity cut in your part of city is going to be of 5 or 10 hours. Some believe that it is just not about the GDP or any other intrigue terms, it is about the variation or inequalities. The other important thing is non income indicators. The illiteracy, poverty, absenteeism in primary govt. schools and malnourishment are still common. The number of malnourished under the age of 5 in India is almost about 50% which is even worse than countries like Bangladesh or even Sub – Saharan Africa. The Asian “China and India” juggernaut has thrust the world into mystique. By 2020, 1 out of every 3 people using cell phones will be either from India or China. India’s software and BPO exports are set to reach $60 billion by 2010, up from $24 billion in 2005. FDI norms have been relaxed in India and the gambit has attracted investment in SEZs. Schemes like Bharat Nirman with Rs.1,74,000 crore investment in the next five years, will give a fillip to rural infrastructure. Market capital has outscored GDP. As of August 2006, the market capitalization of NSE stood at Rs.27,77,401 crores which are approximately 98% of GDP calculated at market at market cost. The aforesaid figure is plausible indicator of what looks like that India is shifting gears – transitioning from “developing economy” to “rapid developing economy”. Nearly 140 Indian companies including heavyweights like Reliance, Tata, TCS, Infosys, Ranbaxy, and Jindal steel have already started their operations in China. The indigenous companies are also moving west towards LAC (Latin America and Caribbean) with great verve. Jindal steel won the bid for the Bolivian mine El Mutin, one of the largest iron ore deposits in May, 06. Committing an investment of $2.3 billion, Essar group is building a $1.2 billion steel plant in T&T; Bajaj Autos have announced the inception of operations in Argentina. Few Indian banks have entered the Chinese scenario including State Bank of India and Bank of India. India has embraced China with IT skills. IT exports have touched new skies with the commensurate total of nearly $2 billion and has become the 3rd largest IT developer. In juxtaposition with China, the energy security is styming India’s march. China enjoys a secure and strong foothold in gas and coal energy. India is on the verge of a civilian nuclear cooperation with The States and the officials are hoping that the deal gets a nod in the Lame Duck session of US Congress in December. New foreign secretary Mr. S.S. Menon too has acknowledged the matter as of imperative importance. Chinese economy too suffers from anomalies. The ridge between haves and have-nots has been widening. Majority of the population cannot speak English which leads China into the shortage of labour, manpower and technical and non – technical expertise (The Chinese Authorities are teaching English to 4 million people before 2008 Beijing Olympics). The talented, eager, avid, cognizant and bright youth of India scores over their counterparts from China. India is supposed to attract millions of jobs as the country would be the hub for expert and skillful labour and managers by 2020. Media, Judiciary and Democracy are perhaps the three pillars where India enjoys an upper hand over China. But as it is said to be, that money has no colour, India actually could make efforts to avoid the competition from China. “If you can’t beat them, you ought to join them.” Thus a stronger rapport would be beneficial for both the countries as one is considered to be “the factory of the world” and the other is considered to be the “world’s service centre”. Measures should be adopted to overcome petty skirmish and frivolous ambiguities and the avoidance of feint moves. Both, India and China should not look into the mouth of the gifted horse and both should move forward to be the strategic partners as both supplement the needs of each other, which would certainly promulgate a symbiotic relationship – ‘can’t do with it, can’t live without it’. After all, we share an interesting past starting from the origination of “silk route” to the acrimonious battles, but not withstanding the preposterous past we should revert to the following saying, just because both the nations have become mature enough and the interests too have undergone a metamorphosis; from political to economic, which seems to be a reason more than just good enough; “Hindi Chini Bhai Bhai”

Offshore Outsourcing enabled Transformation

As per a recent McKinsey Article “we continue to find that companies make suboptimal design choices when crafting offshoring programs. Some lack awareness of the vendors’ capabilities or feel pressure to capture near-term cost benefits without thinking through a two- or three-year plan strategically. Others have preconceived notions about what they must keep close at hand.”

As an offshore outsourcing consultant, I couldn’t agree more with the findings of the McKinsey article. I have mentioned in one of my previous articles that offshore outsourcing needs to be looked at a strategic initiative rather just a cost saving exercise.

I have a classic example where a leading Financial Services company outsourced one of their core processes of document conversion to EDGAR II format for SEC filing. The workload in this process was seasonal and was usually very high during the quarter end period. As a result the company had challenges to arrive at a successful formula that could help them service their clients’ at most competitive price. The company looked at offshore outsourcing this core process to a low cost country and spent over a year and substantial money to train the offshore resources who could execute the process seamlessly. Had this company just looked at short term benefits, they would have not been where they are today – a market leader in their business!

Like this organization, company executives should look at innovation in offshore outsourcing. Executives should move away from piecemeal, task-level offshore outsourcing and use offshore outsourcing as a tool for a fundamental redesign of their existing operating model.

For all these years, we have been hearing about business transformation using ERP, CRM, etc. In my personal opinion “Offshore Outsourcing enabled Transformation” should be the new business model for organizations.

How to Brand IT Outsourcing Services

The most common and least understood marketing barrier facing outsourcing service providers is the absence of a strong brand. Most brands associated with IT and IT-enabled services (ITeS) companies are chosen on the basis of criteria relevant to where outsourcing firms are based, rather than where they intend to do business.

In the outsourcing industry, branding challenges are most acute for companies based outside of their target market -- that is, based in locations with competitive cost advantages. Companies in these locations commonly face branding challenges due to incumbent brand selection and deployment practices.

Most offshore call centers, BPO (business process outsourcing) firms and software service companies are located in economies where major purchasing decisions have traditionally been made on the basis of longstanding personal connections -- rather than on the qualifications of a seller -- and where buyers face fewer competitive choices than in the U.S.

In other words, most offshore outsourcing companies choose brands as if they were in a sellers' market. It was a sellers' market during the first five years (2000-2004) of the Indian call center boom and from 1995-2000 in the market for software services from India.

Now outsourcing is a buyer's market, thanks to increased competition from emerging destinations and the commodification of numerous types of outsourcing services.

In a buyer's market poor brand choices become marketing handicaps. A good, persuasive brand can provide competitive advantages, especially in a buyer's market. A brand can and should encourage buyers to make positive associations with a vendor.

In its broadest sense, the definition of "brand" can extend beyond the name of a company or service or product line to include brands expressed as graphic logos, slogans and color schemes. Here we focus on brands as names of companies and product or service lines.
The Ten Commandments of Branding

Failure to follow any one of the following 10 rules makes it difficult to market a company successfully. Any company that violates one of these rules needs to spend more money on sales and marketing to compensate for poor branding choices.

1. Focus on Target Markets

The first commandment of branding is that a brand has to work well in a company's target markets. This rule is often ignored in favor of brands that confer status in locations where a company is based.

2. Don't Covet Another's Brand

A brand should not borrow or approximate a brand name from a firm already known in a target market, regardless of whether service offerings are dissimilar.

3. Match Brands Exactly With Domain Names

A brand should be identical to its corresponding domain name. For example, a brand for news and services to protect against software vulnerabilities could be expressed as SoftwareVulnerabilities.com, not Software-Vulnerabilities.com or iSoftwareVulnerabilities.com. The dash can help in mirror sites put up for search engine optimization, but not for the primary brand. Unless streaming video is involved, only dot-com and dot-net names should be used for international and North American markets.

4. Don't Use Silly Prefixes

Unless a company has been in business for more than five years, its name should not contain the prefix 'i' or 'e.' eBay has built up immense brand equity. Other companies with other lower-case prefixes in their brands have not.

5. Escape the Background Noise

Avoid overused words such as "global," "tech," "soft," "serve" or "solutions."

6. Obey Rules of Grammar

Do not violate rules of grammar, including the use of capital letters. When your company becomes bigger than eBay, then it can break this rule.

7. Avoid Negative Connotations

Brands should not carry confusing or negative connotations for people in target markets. This extends to sexual and religious connotations.

8. Make Brands Memorable and Easy to Spell

9. Obtain Internal Understanding and Acceptance

The exact name of a company and its brands need to be accepted within and communicated throughout the company's organization. At an Indian call center company and a software services firm in Pakistan that I'm working with now, there are disagreements and uncertainties among top managers at each firm about what their companies are called. This is not uncommon, especially at small Indian call centers that operate locally on a largely cash basis.

10. Test Prior to Deployment