Guest Blog

Who moved my job?
Tuesday, September 23, 2008

Those of us in the sourcing ‘business’ know that outsourcing is all about companies making decisions about where to source, or procure, services. When we talk about the subject, we tend to think of it in isolation. It’s a business strategy and there are well-established guidelines for deciding when to outsource, when to offshore, when to call in consultants – and when not to. But, in my new book I’ve strayed off the typical path worn down by outsourcing commentators and into a world inhabited by sheepdogs and terriers.

Just take a step back from the typical outsourcing debate for a moment and consider how companies are functioning today. Companies can source services, and even entire departments or functions, from the best of breed operators anywhere in the world. The Internet has created a robust pipeline that allows almost free data and voice transmission without boundaries. Yet, there is an opposite phenomena too – increased migration.

People are increasingly willing and able to travel for work. The EU already allows a free movement of labour, but most developed countries are on the prowl for new talent to plug skills gaps and are using points-based methods of securing that talent, wherever it may come from.

So, people are more capable of moving to the work and work is more capable of moving to the people. It’s a more fluid work of work out there and companies are increasingly structured in a way that reflects this. There is less of an ‘HQ’ culture and more of a loose global collective or federation, all interconnected and moving in the same direction, but not necessarily with all those actors being employees of the same company – or being employed by anyone at all!

Academics have written about this extensively. Business guru Charles Handy predicted all this in the 1980s and sociologist Manuel Castells wrote three volumes on what he called the ‘Network Society’ – so what’s new?

Well, the difference now is the sheer presence of this phenomenon in all our lives. It is now a reality for all of us. None of us in any walk of life can avoid globalisation any longer. The recent troubles in banks all over the world demonstrates how closely linked they have become and how a butterfly flapping its wings in one country can destroy a bank in another.

So how could I write something new on the subject that would add to the debate? Well, I decided that there was plenty of theoretical material already out there. I wanted to write something short, punchy, and different – so it would in fact serve to spark off more debate about how jobs, education, taxes, migration, and outsourcing are all interlinked.

So I came up with ‘Who Moved My Job?’ It was just published this month. The book is about three English sheepdogs: Winston, Charlie, and Blair, who find their idyllic life on Manor farm disrupted by the arrival of lower-cost foreign herding dogs. They embark on an adventure that changes their lives forever. Mozi, Pandit, and Lech (from China, India, and Poland) are trained in local herding methods by the English dogs and soon establish their dominance on the farm – even working longer hours without complaint. The three Border Collies embark on an adventure where they are forced to discover a new career, enduring life in Battersea Dogs Home, living rough in a London cemetery, and the nagging doubt that perhaps they can’t adjust to the fast-moving world outside the jobs they know and love.

The book has been fun to produce, but is clearly an experiment for me because it is so different to most of the books commenting on outsourcing. A new detailed academic study of the issues might get more recognition within ivy-clad university walls, but what is going to stimulate more debate and understanding in the media and with the general public – the people really affected by these changes?

Bring on the dogs!

Mark Kobayashi-Hillary is the author of ‘Who Moved My Job?’ and is Offshoring Director of the National Outsourcing Association.

www.whomovedmyjob.com

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Egypt: Why it should be on your outsourcing map
Wednesday, July 09, 2008

The outsourcing market offers a vast opportunity for regions that are able to capitalise on it. Business process outsourcing (BPO) is estimated to become a $90 billion market worldwide over the next six to eight years, and Egypt is well positioned to take a good share of that. India continues to lead the outsourcing market, both in IT outsourcing and BPO.  Our aim is to position Egypt as the India of the Middle East. Indian IT outsourcing firms, including Wipro and Satyam Computer Services, and global IT companies such as Teleperformance, Cisco, Google, IBM, Microsoft, Valeo and Oracle have already recognised Egypt’s potential and invested here, but why should other companies follow suit?

Egypt has some unique advantages as an outsourcing destination, such as a broad talent base, lower labour costs than in surrounding low-cost regions, time zone proximity with Europe and relative familiarity with Western culture over traditional outsourcing destinations like India and China.

An abundant talent supply

Our large annual graduate talent pool of over 300,000 graduates, including a 20,000 strong specialist workforce with engineering and computing degrees, has excellent multilingual capabilities in English, French, German, Italian and Spanish, in addition to Arabic. This positions us favourably amongst other emerging outsourcing destinations thanks to the diverse regions we are able to support with local language outsourcing services. In fact, a global study carried out by Global Services-Tholons ranks Cairo 11th in its list of the top 50 emerging outsourcing cities, citing our multilingual skill set and government-led initiatives amongst our strengths1.

This talent pool is something that the government is keen to cultivate, and has set up a number of initiatives to support it. These cover training and best practice sharing, for example through our Information Technology Institute (ITI, http://www.iti.gov.eg) in Cairo, which trains up to 1,000 people every year. Also, these initiatives include curriculum reform in five universities with the aim of producing more than 5,000 people annually, thus preparing our workforce of the future. Almost half of Egypt’s 74 million inhabitants are aged between 15 and 39, meaning we have a talent surplus for the next five years, and government-led initiatives such as the Egyptian Education Initiative (EEI, http://www.eei.gov.eg), E-Learning Competence Centre (ELCC, http://www.elcc.gov.eg) and Mobile IT Club (http://mitc.ictfund.org.eg)will enable us to support the outsourcing industry in the long term. This is in stark contrast to many other outsourcing destinations that suffer from high levels of attrition within their talent base.

Investing in a world class infrastructure

The Egyptian government has invested heavily in achieving world class infrastructure facilities to support the booming outsourcing market. We realised the need to establish a specialised and modern business park to be the flagship hub for ICT. The Smart Village in Cairo stretches over 600 acres and accommodates multinational and local telecommunications and IT companies, financial institutions and banks, together with related government authorities. Currently, over 13,000 professionals run the operations of more than 100 local and international companies and institutions at the Smart Village, and the number is expected to exceed 40,000 by the end of 2014. A second park is under construction in Cairo – the Maadi Contact Centre Park – which will house a further 45,000 employees specialising in serving the call centre industry.

Egypt also has the potential to become a multi-city outsourcing location. In addition to the excellent infrastructure, services and talent pool provided by our capital city Cairo, other cities will ultimately support our outsourcing market. These include: Alexandria, the country’s second largest city, which benefits from excellent connectivity thanks to its two airports and two ports; El-Mansura, an important commercial and industrial city; and Asyut, the home of the University of Asyut, one of the largest universities in Egypt.

Providing cost-effective outsourcing services

Despite our world class infrastructure and talent pool, Egypt remains a cost-effective destination for outsourcing services. Our structurally low cost of operations is at least 20 percent lower than other leading locations in Eastern Europe, North Africa and Asia, and we also have the world’s lowest telecom costs. In addition, our low wage inflation of just 5 per cent annually, compared to 10-15 percent in other locations, and low currency fluctuation of the Egyptian pound with respect to the US dollar, means that the costs of operating in the region will remain stable.

Because the Egyptian government understands the importance of the IT industry to the health of its growing economy, we offer tax breaks and other financial incentives to attract international companies to set up call/service centre and BPO operations in the country. Our commitment to economic reform makes Egypt an increasingly attractive prospect financially. The recent economic reform programme has seen corporate tax rates cut from 42 percent to 20 percent, and thanks to our tax, customs and financial sector reforms, Egypt was named as the leading global economic reformer by the World Bank in its ‘Doing Business 2007’ report.

A leading outsourcing destination

The national ICT sector is emerging as a role model of deregulation and privatisation as well as a catalyst for reform in other sectors. The sector has managed to maintain growth rates of up to 20 per cent, and attract local and foreign investments of more than $8 billion over the past three years. In a study by AT Kearney, Egypt is ranked 13th in providing IT offshore services worldwide, above Eastern European locations such as the Czech Republic, Hungary and Poland, as well as other Middle Eastern and African locations such as South Africa and Tunisia.

Local, regional and international companies, including Unilever, Orange, Vodafone, Proctor & Gamble and Sun Microsystems are already investing in outsourcing services in Egypt. These provide valid evidence on the capabilities of the Egyptian outsourcing sector. With Egypt’s IT sector forecast to grow from $889 million in 2006 to $1.3 billion in 2013, we are confident that we will be able to cement the country’s position as a leading emerging outsourcing destination.

The Information Technology Industry Development Agency (ITIDA) is a government body affiliated to Egypt’s Ministry of Communications and Information Technology. It was established to encourage the development of Egypt’s IT industry, with a particular focus on outsourcing services. It is tasked with attracting foreign direct investments to the IT industry and maximising the exports of IT services and applications.

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Turn the tables on suppliers

The tables are turning on the suppliers of goods and services.

The web and penetration of broadband allows tools, previously only available to large public and private organisations to publish RFIs and RFQs to their preferred supplier list, to be developed to provide SMEs and individual Consumers to ‘pull’ relevant marketing information and quotations from potential suppliers.

Until now CRM, in its many forms, has been used to capture data about customers and prospects with the commendable intention of understanding their ‘needs’ and pushing appropriate marketing messages. This data may originally have been provided voluntarily and in good faith in exchange for a specific purpose (convenience) or reward (loyalty card). Unfortunately this has got so out of hand that today data about an individual, including personal and sensitive information, is being harvested, collected and stored on 1,000 data silos around the globe.

Some of this data is 10 minutes old - some of it 10 years old, much of it is out of date and inaccurate and organisations are making decisions which could, for example, affect the credit rating of an individual or SME based upon this erroneous data.  It certainly wasn’t provided to be shared, sold or stolen without the individuals’ knowledge or permission resulting in an increasing avalanche of spam and junk mail. It also wasn’t provided for organisations, public and private, to treat identifying information in such a cavalier manner as to expose a company or individual to the risk of identity theft and fraud.

Never forget that the ‘R’ in CRM stands for ‘Relationship’ and, to make that worthwhile, the supply chain needs to participate in a two-way conversation between buyer and seller. There is no need to ‘guess’ what a customer or prospect may want when we now have the ability to let them tell a supplier precisely what they want – RFIs and RFQs for everyone right down to the all important consumer.

The reciprocal to CRM is VRM (vendor relationship management) which allows the individual to enter, store and maintain their information in their own data silo. From this they can anonymously ‘publish’ their wants and needs (RFIs) for suppliers to respond and correspond (RFQs) only revealing their relevant identity details at the appropriate time in the conversation/transaction.

The benefits for both parties in this scenario include:

• Both seller and buyer can be authenticated by a trusted third party;

•Only relevant information provided by buyer, with their permissio;

• data, if relevant, can be verified and certified by the trusted third party;

• the ability to ‘write once, use many’ reduces repetitive effort by the buyer and ensures consistency of information when comparing responses from suppliers;

• The communication channel, email address/phone number, can be unique to a supplier (unrelated spam to that address will immediately identify the source of the information breach);

• There is an audit trail for buyer of what data provided to whom, when and why;

• The data feed can be one-time or persistent so that suppliers are always up-to-date;

• The data feed can use machine-readable code to synchronise (two ways) with the seller’s CRM;

• The data feed can be turned off at the end of the relationship;

• Unsuccessful potential suppliers are not able to ‘spam’ a prospect or to share, lose or sell data;

• The seller reinforces the relationship with the buyer by demonstrating respect for sensitive data;

• The seller demonstrates compliance with Data Protection Act.

The key issue here is that the buyer is now able to ‘pull’ relevant information rather than surfing, searching or filtering.

A buyer’s ‘invitation’ could be specific and temporary (e.g. replacement double glazing) or more general and persistent (promotional gifts). The more ‘granular’ the invitation (let’s say, the supplier has to be within 50 miles of your location, the maximum price is £5,000, and after-sales service capability is essential, and so on) then the more relevant the responses will be.

This ability to ‘invite’ relevant email marketing messages will result in spam becoming a sales inhibitor rather than a cheap, albeit increasingly ineffective, sales enabler. Spam used to be merey irritating (and you don’t want to irritate your customers and prospects) but it is now out of control. Reputable suppliers will want to distance themselves from such intrusive tactics – after all, customer relationships are at stake.

Numerous applications based upon consumer-driven VRM principals will be launched starting in 2008. Many of these will be simple, light widgets in the social networking space expressing an interest in, say, Chardonnay and requesting marketing information. Others will be heavier, providing highly secure personal digital safe deposit boxes from which an individual can confidently manage their health, wealth and happiness.

I often recall the classic marketing poster, spotted in a New York print shop window some years ago, which all buyers would do well to keep in mind. It read “Quality, Speed, Price – Choose any two”.

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Will the tax man end the Indian party?
Wednesday, April 16, 2008

Indian IT services vendors have had several reasons to be nervous of late – well, as nervous as one can get when your company’s revenue growth is north of 25% and your operating margin exceeds 20%.

Rupee appreciation, domestic salary inflation, pressure in the US banking market and mounting anti-offshoring rhetoric from the US Presidential candidates have sent jitters through the stock prices of the top Indian suppliers, and prompted some to write rather premature obituaries on the Indian IT export market: http://www.forbes.com/technology/enterprisetech/2008/02/29/mitra-india-outsourcing-tech-enter-cx_sm_0229outsource.html

And another issue that is keeping some awake at night is whether the Indian Government will extend the IT sector’s tax breaks that are due to end in 2009. One of the major factors behind the Indian IT sourcing phenomenon was the development of Software Technology Parks of India (STPI) in 1991, in which companies operating in designated areas qualified for a ten-year income tax exemption.

Debate has raged in India as to whether a country with such a huge need for public infrastructure investment, can afford not to tax some of the most successful multi-billion dollar enterprises doing business in its cities.

There was no mention of an STPI extension in the Government’s latest budget, announced earlier this month. But the vast majority of the vendors I have spoken with in the last couple of months are cautiously optimistic that the Indian Government will extend the tax breaks within the zones beyond the current deadline.

Industry association NASSCOM continues to push hard for an extension, and representatives from the Ministry of Communications and IT has been making positive noises about it in the Indian press and at recent conferences

This is partly because the Indian Government has become anxious that the country’s national champions may up sticks, and take their business out of India to alternative sourcing locations.

It will be a long time before China’s IT services export industry achieves the same scale and maturity as that of India. But already, Indian and Western services vendors have set their sights beyond the over-heating labour markets in Bangalore and Mumbai, and are setting up in cities such as Chennai and Gurgaon: http://www.reuters.com/article/rbssTechMediaTelecomNews/idUSDEL5984620080325

And of greater concern to the Indian Government is that all of the country’s tier-one vendors are setting up secondary sourcing centres in Latin America, Eastern Europe and Eastern Asia. Countries such as the Philippines and Vietnam have learned from India’s success and are offering tax holidays of their own.

NASSCOM believes that the non-extension of the tax break would land a crippling blow to the Indian IT industry, resulting in the loss of some 400,000 jobs in the medium term.

This is a tough call for the Indian Government to make, and one that echoes the recent crackdown by the UK Government on non-domicile taxation. With less than two years to go before deadline day, it doesn’t have much time to make up its mind.

Offshore gains a foothold in UK public sector
Government has long been seen as the last sector that would open its arms to global sourcing.

Offshoring is a sensitive issue for any business, but stir in public data protection laws, strong unionization and the close scrutiny of the national media, and it is easy to see why the government space does not account for a significant chunk of the Indian suppliers’ revenue – less than 2% for the top five players in the UK.

But while we are very unlikely to see any public sector bodies enter into deals that would cut UK public sector jobs and replace them with offshore labour, there are increasing opportunities for both offshore specialists and Western companies to use their global sourcing capabilities on government projects.

This was highlighted when Indian vendor HCL Technologies recently won a $4m deal with Wiltshire Police Force to build a remote working system to enable officers to access vital information while in the field. HCL is implementing the system and will provide ongoing support over the next five years, but will not handle any sensitive data as part of the contract.

Cash-strapped government organizations are becoming more open to utilizing global delivery, particularly on the ‘build’ part of IT projects. In public healthcare, TCS and Infosys have both worked for the NHS for several years, and TCS has just been named as one of the health service’s approved ASCC suppliers.

Don’t be surprised to see offshore services vendors in the hunt for future government sector business. They aren’t going to oust the likes of EDS, Fujitsu from IBM on public sector outsourcing engagements, but there is enough project work out there for it to represent a pretty big growth opportunity.

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