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Later Part Of 2010 Will Be Critical For IT Outsourcing - Dr. Pradeep Mukherjee, President, Avasant - Asia
Avasant was named as “World’s Best Outsourcing Advisor” in IAOP's 2009 List. Dr. Pradeep Mukherjee is the President and Managing Partner of Avasant’s Asian operations. Prior to joining Avasant, Pradeep was heading the Offshore Advisory practice of neoIT. He has over 20 years of experience and expertise in Consultancy and Management of Technology Business. BPOVoice talked to him to get the first hand analysis of the upcoming trends for 2010. Below are the excerpts :What could be the top three trends for the outsourcing industry in 2010?
Global economies have begun to see some northward movement. This will boost firms to accelerate their outsourcing and offshoring initiatives:
Commoditized processes such as F&A, HR will be best candidates for firm’s transformational initiatives. Service provider maturity and capabilities will provide client community (particularly mid sized firms) more confidence to offshore. IT budgets are expected to see slow cautious movement till mid 2010. Later part of 2010 will be critical for IT outsourcing
Supplier Rationalization: We expect greater rationalization in client portfolios as clients seek to work with fewer trusted suppliers. This would be a win-win for both clients and suppliers providing both parties with greater confidence in each other, and attain economies of scale.
Newer geographies will emerge and provide investors with compelling value propositions to expand delivery networks as well as provide regional services. Offshore and domestic service providers will also scout for attractive targets in the client markets to attain proximity to their clients.
How close is the "cloud computing factor" from making a serious impact on the outsourcing business?
A number of our clients are closely observing the progress in Cloud Computing area. Clients are increasingly interested in exploring and evaluating all potential solutions in their sourcing strategy. We believe cloud computing is here to stay and will offer significant benefits to companies on a case-to-case basis. There are obviously huge benefits for small and medium enterprises, and we anticipate greater adoption from clients in the coming year.
Could there be more pressure on the CEO etc. to deliver more in the post recession scenario?
CEO’s role post recession would be more oriented towards regaining growth levels, increasing investor confidence and continue rationalizing costs. Outsourcing could be critical in implementing all of the above.
What can Indian companies do to stay competitive in view of increased competition from emerging locations?
From a business retention and client relationship perspective, further investments in key markets of US and UK would be imperative. These would be in terms on acquiring new client facing personnel, setting local near-shore delivery presence, and acquiring new skills such as business transformation capabilities.
In terms of new growth opportunities, penetration of Indian companies in client markets such as Europe, Japan and Africa will be critical. Few of these markets are still nascent to outsourcing with locations such as Japan constituting less than two per cent of the IT services exports from India. Markets such as China, India, Africa, and South America would provide significant growth options in local markets. Establishment of presence in such markets for domestic outsourcing and nearshoring will facilitate Indian companies to remain competitive and compete with the global and regional majors such as IBM, Accenture etc. It will also be imperative for these firms to show critical mass and also be culturally aligned in these markets. This would require firms to adopt a partnership approach to enter and service these markets.
How much time could China take before it starts posing a serious threat to the Indian BPO industry?
We have seen very few contracts (<5% of total contracts) in the market requesting for offshore BPO services from China. Excepting for services catering to the Japanese market, China has not posted a threat to Indian BPO industry. As Japanese and Korean markets open up, China will have a bigger role to play with language capabilities and support.
China continues to make significant investments in improving the talent pool and providing the right infrastructure along with government support. A number of regional provinces are stepping up to increase competitiveness and attract global players. The English language capabilities continue to be a challenge with our findings showing that only about 2 out of 10 can speak some English, although not of quality to cater to the US/UK markets.
Now that Obama has been here for a year, do you still see the possibility of "reverse sourcing" in the coming years?
Domestic sourcing by clients in US would be done on a selective basis. This would primarily be driven by local employment generation, by leveraging lower cost locations locally and using government incentives. We however anticipate this to be minimal and restricted to certain low-end processes and functions.
Majority of large corporations are heavily committed to their globalization strategies and have leveraged their global delivery and transformation partners to remain cost competitive and stay relevant in these tough times. In the long term, as the growth trajectory improves, these firms will further increase their commitment to global markets and talent.
You have recently opened a new office in Ghana, is there any strategic reason for this sudden focus on Africa?
Avasant has been working on its Africa strategy for over last 12 months, and we are highly confident of Africa’s prospects and emerging role in the global outsourcing area. Africa
Avasant has made rapid strides in Africa over last few months and we are already executing engagements in multiple countries in Africa. We are committed to Africa would it would continue to play an integral role in our strategy.
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