Publication: Chimo Canada
Next Phase Has Begun
Richard Mills CFA, Chairman
in India has reached a near term peak and meaningful expansion from this
point forward will result in higher costs and lower quality delivery.”
Leaders in Asia have been saying this to each other for months now. Today,
we are seeing deliberate action to move capacity from India to next step
destinations like Philippines, China and Vietnam.
major business publications have picked up on the evolving situation. Both
Forbes (India: Good Help is Hard to Find) and BusinessWeek (India’s IT
Challenge) recently published feature articles that directly address the
growing problems in India and the viability of the next step destination
Looking at current events in Philippines, we can get a better idea what is
going on. Sykes, a large US-based contact center and IT support
organization, has operations in both India and Philippines. The company said
it would shift much of its Indian capacity to Philippines where it already
has 7000 employees. “We moved calls to other facilities in Asia to get a
higher rate of return,” was the official statement from Dan Hernandez,
Sykes’s vice-president for global strategies. 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.
Ambergris Solutions is another large contact center organization with
operations in Philippines. The company just received a $43.5M investment
through Telus International, a Canadian-based global IT Solutions provider.
Jim Evans, who played the key local role in coordinating the deal, says his
company wanted a “strategic investment” in the outsourcing industry in
Asia and Philippines offered the best long-term opportunity given all the
options including India.
As Asia Pacific VP for global B2B services provider GXS, Victor Lee oversees
the professional & customer services operations in the region. His
company made the decision to direct functions with a strong customer
component to Philippines because of better economics and results there. His
company’s analysis also indicated that costs were increasing
disproportionately in India unlike Philippines. As well, Victor feels that
“having product development in India and professional & customer
services in Philippines reduces risks.”
More outspoken than most, Rick McGonegal is clear that India will not be
part of his company’s plans for the foreseeable future. He is the Managing
Director of RCG Information Technology, another good-sized IT solutions
provider. The company already has a strong offshore presence in Philippines
and has assessed the Asia Pacific region for future expansion. India, he
feels, is already too crowded with numerous companies all scrambling to hire
from each other. The result is destructively high staff turnover rates,
mounting salary costs and poorer English communications skills compared to
that which is available in Philippines. He also cited overstretched
infrastructure in India as a further reason RCG would not consider this
destination at present. According to Rick, his company has its “radar set
on Vietnam and China” should their current best option of Philippines give
Others that appear to be moving work to Philippines include: Hewitt, which
has just started hiring staff for its newly commissioned BPO facility, and
HSBC, the global banking organization, which got their BPO underway a few
months ago. I am currently meeting with numerous early stage entrants to
Philippines – more than at anytime during the past 3 years.
another anecdote, I spoke recently to the Texas-based Global Recruitment
Manager of a multinational technology company who needed help attracting
Indians living in the US and Canada to jobs back in India. This is no
surprise since there is strong demand for returnee management talent. Except
that this fellow was not looking for managers, he was looking for individual
contributors with 3 years of Java/C++ experience – a core skill that was
once available in seemingly infinite quantities. He described, with great
exasperation, the challenges his company faced hiring such people within
India these days.
LONG LIVE THE KING!
No one is saying that the King of Outsourcing will lose its dominance or its
long-term attractiveness as an outsourcing destination. India created the
offshore outsourcing model and it will continue driving the industry forward
because of its huge size and the remarkable competence of its managers.
India does experience slower growth because of constrained resources in the
near term, it is only because of its tremendous success over the past few
years. India’s recent hiring growth has been roughly double that of the
crazy dotcom boom times in North America. So, current alleged constraints
are not indicative of weakness but of great success.
besides, rising costs may be a big deal to business leaders who have to
somehow budget for them. But for individual workers, who see their paychecks
rise by 30% from a well timed job change, “rising costs” probably
don’t warrant the same degree of concern.
countries like Philippines and Vietnam are better options today, it is only
because they have been less successful at developing and attracting quality
outsourcing employers in the past. The pioneering accomplishments made by
India have now opened the door for these countries to receive their share of
the blessings. And as for India, we can be sure they will soon be back
stronger than ever.
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