More BPO Investors
profit margins are squeezing out the options of major outsourcing firms to
maintain operations in India, according to a keynote speaker of a recent
outsourcing conference in Singapore.
Richard Mills, chairman of Chalre’ Associates, noted in his presentation
the observation of business process outsourcing (BPO) leaders that India is
becoming a more difficult proposition.
He cited numerous instances when top outsourcing firms such as Sykes, GXS,
Safeway, Dell, HP, IBM, and ClientLogic have either reduced or completely
closed down operations in India, and placed their bets on the Philippines.
Although India remains the world’s top outsourcing hub, Mills said that
BPO companies are well aware of the limits to past achievements.
Among the difficulties encountered by firms in India are the constraints in
infrastructure, fat salaries of BPO executives and workers, and the
retention problem. The last one refers to the quick turnover of workers in
BPOP companies, owing to, among others, the health problems of night-shift
work and the tendency of the predominantly young work force to easily get
“bored” from the work or miss the night life.
Other countries, however, are not just passively monitoring the regional
movements of companies. According to Mills, among these contenders for a
significant portion of the global outsourcing clientele are Malaysia, South
Africa, Costa Rica, eastern Europe, Russia, Brazil, and Mexico.
Despite the list of competitors, Mills said the people in Singapore “were
very impressed by the work being done here (Philippines).”
“I was surprised how much interest there is for offshore back-office
services in Singapore all of a sudden and I was deluged with people asking
for more information,” Mills said in a subsequent email to BusinessMirror.
“And today, the most important destination for offshore outsourcing in the
world is the Philippines (in my opinion).”
While India might be an increasingly expensive investment, its employment in
the outsourcing sector is projected to more than double to 2.4 million in
2010 from the current one million. The Philippines, with 180,000, might
achieve the one-million mark in the same year.
Mills added that with the maturity of the voice services and IT, companies
are moving a broad range of functions offshore. He pointed to Sykes, which
decided to transfer operations in India to the Philippines. “We moved
calls to other facilities in Asia to get a higher rate of return,” Mills
quoted the company’s vice-president for global strategies Dan Hernandez as
The US-based contact center and information technology (IT) group has 7,000
employees in the Philippines.
“But knowledgeable observers in the region say that the rate of return
differential must be large for a company of Sykes’ size and prominence to
forgo India after already putting capacity in place,” Mills said in his
“Better results and economics” also convinced GXS to expand in the
Philippines from its facilities in India. This followed the company decision
to centralize all functions with a customer interfacing component. “GXS
reported an increase in roughly all of its quality metrics within just a few
months of moving the work to the Philippines from its various worldwide
locations,” Mills said.
the article above
PDF format by clicking below.
& Management Consulting:
Associates provides its Executive Search & Management
Consulting services throughout the Asia Pacific region. We are
proactive and well known in our sectors of focus. Regional
Managers use us to help bridge the gap between local environments and
the world-class requirements of multinational corporations.