Abstract
Experts point out that continued high growth in an industry can be an issue because it strains systems and governance processes that need time to mature and to be institutionalized. Indian BPO industry is currently facing the challenges arising out of its stupendous growth. Can it successfully tackle these problems and emerge a winner?
The IT enabled services (ITES)[1] and Business Process Outsourcing (BPO)[2] constitute the fastest growing industry in India. BPO industry is considered to be a part of the ITES industry. The Indian ITES sector is expected to generate nearly 2 mn jobs in the country in the next few years. The revenues from this industry, which stood at $1.4 bn in 2002 are expected to rise sharply to $24 bn by 2008 according to a Nasscom-McKinsey report.
It's hot .....
Today, India is the hottest destination for any company which wants to outsource its business processes. But what can be the reason for India being so popular with the companies worldwide? The attractiveness of India can be contributed to three basic factors - Cost, People and Environment. India ranks first among a host of desirable nations in terms of cost (which includes employee cost, infrastructure cost, management cost and the tax structure). It beats all its competitors on the people front as well. The people factor is evaluated on the lines of size of the job market, workforce education level, language barriers, past outsourcing experience and employee retention. When it comes to environment (which includes country risk, infrastructure, cultural compatibility, proximity etc.) however, India lags behind countries like Canada, Australia and Ireland.
This is also being taken care of by government initiatives like the corporate tax exemption to all ITES companies till 2010. Apart from these, the fact that India has 53 of the 83 SEI CMM Level 5 companies[3] and that companies outsourcing to India have experienced cost savings in the range of 30% in the first year itself, have added to the attractiveness of India as 'the' destination for outsourcing. Given the strengths of India, it is no wonder that it is the first choice of nearly 82 % companies in the US for outsourcing.
The scenario however, is not as rosy as it looks, for this sector with enormous potential. Like any other industry during its growth phase, this industry is also going through its share of turbulence. The fact that the growth has been very sharp has added to its problems. However, all these ups and downs would help the industry in stabilizing and maturing. At least that's what experts and past experiences say.
The challenges of growth....
The major challenges being faced by the ITES or BPO industry in India can be classified into internal and external challenges. The internal challenges include shortage of competent managers for the middle and senior management and the high attrition rates. The external challenge is in the form of opposition from the US politicians and the UK labor unions against shifting of the BPO operations by local companies to India. The threat of real competition from other players like Philippines also exists, but doesn't seem to need our immediate attention. Let us look at some of these issues.
A speaker at the ITES-BPO Track at Nasscom 2003 commented that it is not ITES, but HRES. That succinctly explains the importance and value attached to the 'people' aspect in this service industry. The fact that this industry is still in its nascent stage in India has led to the dearth of experienced middle management level team leaders and senior managers. Nasscom President Kiran Karnik agrees that shortage of middle and senior level managers is in fact a critical issue. Entry-level recruitment and employment has not been a problem with so many fresh graduates with good language skills, available readily in the job market.
The problem is more intense for the third-party outsourcing companies which have just ventured into this business. They cannot even invest in training, given their financial and other constraints. Captive BPOs like GE and American Express, which are established players in the business, have no such problems. They in fact invest substantially in training their managers. However, they have been facing a problem of a different kind. Their middle and senior level managers are being poached by the new entrants to the industry. Reports say that large and established players face an attrition rate of 45% against the industry average of 35%. Everyone agrees that hiring from competition is a cyclical process and will not help the industry grow, but with very few options available, they resort to the easiest solution - poaching.
That brings us to the next issue - high attrition rates. Attrition means not only loss of talent, but also includes the cost of training the new recruits. The attrition rate in the industry has been hovering around 35%, which is quite high for any industry. An average Indian call center employee works with a company for 11 months, where as an average UK call center employee stays in a company for 3 years. It is expected that the attrition rates would come down once the growth stabilizes. Steep growth is one of the reasons for the high attrition rates, according to many in the industry.
According to a survey by People-One Consulting, an employee's leaving the organization happens typically in the first couple of weeks of joining. The reasons are many -- high stress levels, monotonous nature of the job, demand-supply disparity and lack of career growth potential on the professional front; loss of identity, mismatch with normal cycle, complete change of life style and lack of comfort on the personal front. Add to this, the 'poaching' strategy being adopted by the players in the industry. What else can we expect, but an attrition rate of 35%?
From India, Ahmadabad
7Experts point out that continued high growth in an industry can be an issue because it strains systems and governance processes that need time to mature and to be institutionalized. Indian BPO industry is currently facing the challenges arising out of its stupendous growth. Can it successfully tackle these problems and emerge a winner?
The IT enabled services (ITES)[1] and Business Process Outsourcing (BPO)[2] constitute the fastest growing industry in India. BPO industry is considered to be a part of the ITES industry. The Indian ITES sector is expected to generate nearly 2 mn jobs in the country in the next few years. The revenues from this industry, which stood at $1.4 bn in 2002 are expected to rise sharply to $24 bn by 2008 according to a Nasscom-McKinsey report.
It's hot .....
Today, India is the hottest destination for any company which wants to outsource its business processes. But what can be the reason for India being so popular with the companies worldwide? The attractiveness of India can be contributed to three basic factors - Cost, People and Environment. India ranks first among a host of desirable nations in terms of cost (which includes employee cost, infrastructure cost, management cost and the tax structure). It beats all its competitors on the people front as well. The people factor is evaluated on the lines of size of the job market, workforce education level, language barriers, past outsourcing experience and employee retention. When it comes to environment (which includes country risk, infrastructure, cultural compatibility, proximity etc.) however, India lags behind countries like Canada, Australia and Ireland.
This is also being taken care of by government initiatives like the corporate tax exemption to all ITES companies till 2010. Apart from these, the fact that India has 53 of the 83 SEI CMM Level 5 companies[3] and that companies outsourcing to India have experienced cost savings in the range of 30% in the first year itself, have added to the attractiveness of India as 'the' destination for outsourcing. Given the strengths of India, it is no wonder that it is the first choice of nearly 82 % companies in the US for outsourcing.
The scenario however, is not as rosy as it looks, for this sector with enormous potential. Like any other industry during its growth phase, this industry is also going through its share of turbulence. The fact that the growth has been very sharp has added to its problems. However, all these ups and downs would help the industry in stabilizing and maturing. At least that's what experts and past experiences say.
The challenges of growth....
The major challenges being faced by the ITES or BPO industry in India can be classified into internal and external challenges. The internal challenges include shortage of competent managers for the middle and senior management and the high attrition rates. The external challenge is in the form of opposition from the US politicians and the UK labor unions against shifting of the BPO operations by local companies to India. The threat of real competition from other players like Philippines also exists, but doesn't seem to need our immediate attention. Let us look at some of these issues.
A speaker at the ITES-BPO Track at Nasscom 2003 commented that it is not ITES, but HRES. That succinctly explains the importance and value attached to the 'people' aspect in this service industry. The fact that this industry is still in its nascent stage in India has led to the dearth of experienced middle management level team leaders and senior managers. Nasscom President Kiran Karnik agrees that shortage of middle and senior level managers is in fact a critical issue. Entry-level recruitment and employment has not been a problem with so many fresh graduates with good language skills, available readily in the job market.
The problem is more intense for the third-party outsourcing companies which have just ventured into this business. They cannot even invest in training, given their financial and other constraints. Captive BPOs like GE and American Express, which are established players in the business, have no such problems. They in fact invest substantially in training their managers. However, they have been facing a problem of a different kind. Their middle and senior level managers are being poached by the new entrants to the industry. Reports say that large and established players face an attrition rate of 45% against the industry average of 35%. Everyone agrees that hiring from competition is a cyclical process and will not help the industry grow, but with very few options available, they resort to the easiest solution - poaching.
That brings us to the next issue - high attrition rates. Attrition means not only loss of talent, but also includes the cost of training the new recruits. The attrition rate in the industry has been hovering around 35%, which is quite high for any industry. An average Indian call center employee works with a company for 11 months, where as an average UK call center employee stays in a company for 3 years. It is expected that the attrition rates would come down once the growth stabilizes. Steep growth is one of the reasons for the high attrition rates, according to many in the industry.
According to a survey by People-One Consulting, an employee's leaving the organization happens typically in the first couple of weeks of joining. The reasons are many -- high stress levels, monotonous nature of the job, demand-supply disparity and lack of career growth potential on the professional front; loss of identity, mismatch with normal cycle, complete change of life style and lack of comfort on the personal front. Add to this, the 'poaching' strategy being adopted by the players in the industry. What else can we expect, but an attrition rate of 35%?
From India, Ahmadabad
Tackling the attrition problem...
The industry players are trying out all the tricks in the book to tie down their employees and keep them locked in a safe.
They have been offering excellent infrastructure facilities in the form of ergonomically designed work stations and spacious, air-conditioned offices. They have been offering industry specific benefits like 24/7 cafeterias and home pick-up and drop facilities apart from regular benefits like retirals and loans at low interest rates. They have been arranging special weekend parties and offering incentives like tickets to exclusive music shows and dance parties. Some players are also sponsoring the higher education of their employees. This is one of the best ways of retaining a skilled employee for 2-3 years with a company. All this really goes well with a typical employee, who is in his early twenties, fresh out of college and unmarried.The industry has been quite benevolent on the compensation front as well. According to a Hewitt Associates survey conducted last year, the highest salary increase in the Asia Pacific region was in India.
Within the country, it was the ITES industry which recorded the highest growth of 14%. The variable pay component varied in the range of 15-70%, which is exhorbitant, to say the least.
All these measures are at the organizational level. At the industry level, companies have tried to get into informal agreements with competitors to avoid poaching. Though these agreements have no legal sanctity, they are based on mutual faith of the companies. For example, GE, HSBC, Nipuna, Microsoft, etc. informally agreed that they would not recruit someone who has worked for less than a year with his employer or someone who has switched 3 jobs in 2 years. Similarly, Tracmail, Infowavz, Transworks, Epicenter and Global Telesystems have all entered into an informal understanding to arrest poaching.
In spite of all these measures, the attrition rates have remained high. All these attempts by the employers have resulted in only partial success. What should companies do to curb this unhealthy trend? Experts feel that appropriate staffing strategies and managing employee morale are the key areas. Recruiting the right kind of people not only at the entry level but also for the middle management level can be a big contributing factor. Any fresh graduate in need of a job would say that working during odd hours and adapting to a new life style is not a problem, but when it actually comes to adapting to a completely different way of life, they find it difficult to reorient themselves. Adequate care should be taken in choosing and employing candidates in the entry level positions. Companies should also be willing to invest in training employees to take up higher responsibilities as team leads and managers. A strong middle and senior management helps in arresting attrition at the lower levels and consolidates the organizational culture and character.
Another important area of concern is the limited growth potential for an employee in this industry. Organizations should concentrate on individual career growth of employees and succession planning in the organization. Planning for growth both vertically and horizontally can bring a little reprieve to the employees. Horizontal growth can be in the form of promoting the employee from simple to more complex processes within the organization. This will enhance the learning of the employee and make him "feel-good".
The 'International' issue
The latest addition to the basket of woes of the BPO players is the hue & cry on outsourcing to India by the labor unions in the UK and the politicians in the USA. In the UK, the call center industry employs nearly 800,000 British workers and is a vital part of their economy. Labor unions are playing the card of 'patriotism' to stop UK based companies from outsourcing their back-office operations to India. The fact that it is election time in the USA and perhaps in the UK too, has added fuel to the fire. The media, the unions and the politicians in these countries have jumped on the 'backlash' bandwagon and have been making strong statements on outsourcing to India. However, there have been some rational-thinking bigwigs who have been opposing this backlash. The issue is expected to cool down slowly, with the elections getting over and better business sense prevailing over the outsourcing companies. The Indian BPO industry can also launch a friendly and soft campaign against the backlash, explaining the advantages of outsourcing, especially to India.
The threat of competition
Many competitors like Philippines, Ireland and even China are expected to catch up with India in the future, but they have their own constraints. China, which is being forecasted by some as the biggest threat to the Indian BPO industry, for example does not have English-speaking populace who can meet the requirements of a primarily English clientele. India outruns all its competitors when it comes to availability of quality services at the lowest possible rates. However, this does not mean that the Indian BPO industry can sit back and relax. It needs to gear up and prepare itself to face the competition. The strategy of the Indian industry should be to go up the value chain and offer more specialized services that can create a special position for it in the global outsourcing industry. It should not completely bank on the low-end services as they are cost-based and can be transferred to any country that offers the same services at a cheaper rate.
To conclude...
The Indian ITES industry should consolidate its position in the business of outsourcing by strengthening its domain knowledge and becoming more specialized in terms of the services offered. It should aim to go up the value chain without restricting itself to low-skilled jobs. It has to continuously strive to maintain its position of competitive advantage over other countries in the fray, in terms of low costs, quality people and conducive environment. It should also realize that unhealthy practices within the Indian industry can affect its competitiveness in the global BPO arena and therefore curb such practices. With the international business world eyeing India as a hot ITES destination and the Indian industry gearing up to bring in a new revolution, India is bound to become the BPO and ITES hub of the world.
From India, Ahmadabad
The industry players are trying out all the tricks in the book to tie down their employees and keep them locked in a safe.
They have been offering excellent infrastructure facilities in the form of ergonomically designed work stations and spacious, air-conditioned offices. They have been offering industry specific benefits like 24/7 cafeterias and home pick-up and drop facilities apart from regular benefits like retirals and loans at low interest rates. They have been arranging special weekend parties and offering incentives like tickets to exclusive music shows and dance parties. Some players are also sponsoring the higher education of their employees. This is one of the best ways of retaining a skilled employee for 2-3 years with a company. All this really goes well with a typical employee, who is in his early twenties, fresh out of college and unmarried.The industry has been quite benevolent on the compensation front as well. According to a Hewitt Associates survey conducted last year, the highest salary increase in the Asia Pacific region was in India.
Within the country, it was the ITES industry which recorded the highest growth of 14%. The variable pay component varied in the range of 15-70%, which is exhorbitant, to say the least.
All these measures are at the organizational level. At the industry level, companies have tried to get into informal agreements with competitors to avoid poaching. Though these agreements have no legal sanctity, they are based on mutual faith of the companies. For example, GE, HSBC, Nipuna, Microsoft, etc. informally agreed that they would not recruit someone who has worked for less than a year with his employer or someone who has switched 3 jobs in 2 years. Similarly, Tracmail, Infowavz, Transworks, Epicenter and Global Telesystems have all entered into an informal understanding to arrest poaching.
In spite of all these measures, the attrition rates have remained high. All these attempts by the employers have resulted in only partial success. What should companies do to curb this unhealthy trend? Experts feel that appropriate staffing strategies and managing employee morale are the key areas. Recruiting the right kind of people not only at the entry level but also for the middle management level can be a big contributing factor. Any fresh graduate in need of a job would say that working during odd hours and adapting to a new life style is not a problem, but when it actually comes to adapting to a completely different way of life, they find it difficult to reorient themselves. Adequate care should be taken in choosing and employing candidates in the entry level positions. Companies should also be willing to invest in training employees to take up higher responsibilities as team leads and managers. A strong middle and senior management helps in arresting attrition at the lower levels and consolidates the organizational culture and character.
Another important area of concern is the limited growth potential for an employee in this industry. Organizations should concentrate on individual career growth of employees and succession planning in the organization. Planning for growth both vertically and horizontally can bring a little reprieve to the employees. Horizontal growth can be in the form of promoting the employee from simple to more complex processes within the organization. This will enhance the learning of the employee and make him "feel-good".
The 'International' issue
The latest addition to the basket of woes of the BPO players is the hue & cry on outsourcing to India by the labor unions in the UK and the politicians in the USA. In the UK, the call center industry employs nearly 800,000 British workers and is a vital part of their economy. Labor unions are playing the card of 'patriotism' to stop UK based companies from outsourcing their back-office operations to India. The fact that it is election time in the USA and perhaps in the UK too, has added fuel to the fire. The media, the unions and the politicians in these countries have jumped on the 'backlash' bandwagon and have been making strong statements on outsourcing to India. However, there have been some rational-thinking bigwigs who have been opposing this backlash. The issue is expected to cool down slowly, with the elections getting over and better business sense prevailing over the outsourcing companies. The Indian BPO industry can also launch a friendly and soft campaign against the backlash, explaining the advantages of outsourcing, especially to India.
The threat of competition
Many competitors like Philippines, Ireland and even China are expected to catch up with India in the future, but they have their own constraints. China, which is being forecasted by some as the biggest threat to the Indian BPO industry, for example does not have English-speaking populace who can meet the requirements of a primarily English clientele. India outruns all its competitors when it comes to availability of quality services at the lowest possible rates. However, this does not mean that the Indian BPO industry can sit back and relax. It needs to gear up and prepare itself to face the competition. The strategy of the Indian industry should be to go up the value chain and offer more specialized services that can create a special position for it in the global outsourcing industry. It should not completely bank on the low-end services as they are cost-based and can be transferred to any country that offers the same services at a cheaper rate.
To conclude...
The Indian ITES industry should consolidate its position in the business of outsourcing by strengthening its domain knowledge and becoming more specialized in terms of the services offered. It should aim to go up the value chain without restricting itself to low-skilled jobs. It has to continuously strive to maintain its position of competitive advantage over other countries in the fray, in terms of low costs, quality people and conducive environment. It should also realize that unhealthy practices within the Indian industry can affect its competitiveness in the global BPO arena and therefore curb such practices. With the international business world eyeing India as a hot ITES destination and the Indian industry gearing up to bring in a new revolution, India is bound to become the BPO and ITES hub of the world.
From India, Ahmadabad
Amidst Other Challenges, Hewitt's HR BPO Head Resigns
Hewitt announced it will "review" its third-quarter guidance as it struggles for profits -- a common problem in the emerging industry. Pioneering in an emerging industry requires "some pain," says one expert.
By Andrew R. McIlvaine
Hewitt Associates is the 800-pound gorilla of the HR business-process outsourcing market.
The firm holds more than 37 percent of the HR BPO market and has more big-name clients (30 or so large companies, including Sun Microsystems and PepsiCo) than any other vendor in the industry.
However, the recent resignation of Bryan J. Doyle, president of Hewitt's HR outsourcing business -- along with the simultaneous retirement announcement of chairman and CEO Dale L. Gifford and Hewitt's statement that it plans to "review" its third quarter profit guidance -- has brought new attention to the company's operations.
It also has underlined the difficulties Hewitt is having as it struggles to earn a profit in what is still a controversial new industry, one in which most of the major vendors have yet to turn a profit.
"Their earnings calls have been dominated by their HR BPO business, which has been bleeding money," says Yankee Group analyst Jason Corsello.
"Hewitt has continued to win new business since it acquired [HR BPO vendor] Exult in 2004; it doesn't have a sales problem," Corsello says. "However, implementing and managing a BPO contract is very complex and Hewitt has really struggled with it. Many of the HR BPO contracts it inherited [from its 2004 acquisition of Exult] have not borne fruit in terms of scalability or operating efficiencies."
Though it's possible Gifford's retirement could be linked to problems with Hewitt's HR BPO unit, says Corsello, he says he's "not reading too much into it."
However, consultant Naomi Bloom, of Bloom & Wallace in Fort Myers, Fla., says she believes Gifford was "forced out" because of problems with Hewitt's BPO business. "He wasn't delivering," she says. "HR BPO is a business that could be successful, but Hewitt hasn't had the right leadership in place. They inherited an outstanding sales team when they acquired Exult, but those people have all left."
Hewitt expects its HR BPO business to lose $128 million this year, says Hewitt investor-relations spokeswoman Genny Pennise. The Lincolnshire, Ill.-based company, which also provides benefits consulting and administration services to clients, had total revenues of $2.8 billion for fiscal 2005 and net income of $135 million.
Phil Fersht of Everest Group says Hewitt's problems are the result of "trying to solve too many operational difficulties at the same time" and the outcome is that "many HR BPO vendors are shifting more of their resources from marketing to operations."
Julie Gordon, Hewitt's chief business excellence officer, will serve as temporary head of the company's HR BPO business while it searches for a permanent replacement. The company denies Gifford's retirement is linked in any way to the HR BPO unit's performance.
"Dale Gifford has been thinking about retirement for some time and he recently told the board of directors that now would be a good time to retire," says Hewitt spokeswoman Kelly Zitlow. "As for Bryan, he's resigned to pursue other opportunities, and I'm not going to speculate beyond that."
Hewitt is not alone in finding the road to profitability difficult.
Few if any HR BPO vendors are making money at this point, says Corsello, adding that Cincinnati-based Convergys is also losing money, while IBM, Accenture, EDS and other companies that provide HR BPO services have not released numbers around their services.
Hewitt's difficulties are compounded by the fact that the HR BPO industry (in which companies outsource four or more of their HR functions to a single vendor) is still relatively new and most of the large contracts have yet to mature, he says.
"I'd say profitability is pretty uncommon among the firms providing HR BPO services today," says Stan Lepeak, managing director of EquaTerra, an outsourcing advisory firm in New York. "There's a camp of equity analysts who wonder if HR BPO can ever be profitable. If Hewitt -- one of the most respected companies in the HR business -- can't make money at this, the thinking goes, then who can?"
Bloom says the answer to the question of whether HR BPO can ever be profitable is a "resounding yes," adding that she believes several vendors have (or soon will) achieved "fragile profitability."
"It's hard work, not to mention expensive, to be a pioneer in an emerging industry, and that's what HR BPO is," she says. "There've been a whole host of issues the industry has had to address, ranging from massive investments that had to be made to services that weren't priced correctly, software that had to be created and the question of what role customers should play. Look at Amazon.com -- it's an established player now but they had to suffer through years and years of losses. You don't get to an upside without some pain."
Lepeak says he anticipates Hewitt will most likely restate the number of HR BPO clients it expects to sign this year, adding that the company had initially predicted it would sign eight to 10 new clients in 2006. Hewitt has not publicly announced any new HR BPO clients so far this year.
Hewitt's challenges include the fact that it aggressively courts large clients, which, in turn, necessitates long and complex transitions from the clients' systems and processes to Hewitt's, says Lepeak.
"It's usually a couple of years into such a contract before the client and the vendor finally start to achieve the results they'd anticipated," he says. "This is complicated by the fact that customers tend to have higher expectations of Hewitt in terms of service delivery, which tends to lead to higher costs."
Hewitt still has plenty of opportunities to make its HR BPO business profitable, he says.
"Hewitt is putting processes into place to make sure new HR BPO deals are economically sound, although the results won't be obvious until two or three years down the line," says Lepeak. "Deals are being more carefully vetted by top managers, whereas before, like many other vendors, they had their field teams structuring deals, which was good for the clients but not so good for the providers."
Bloom is skeptical about Hewitt's prospects, however.
"One hopes that their board either has a big plan for either creating an A-plus leadership team or else selling off the BPO business before it loses even more value."
From India, Ahmadabad
Hewitt announced it will "review" its third-quarter guidance as it struggles for profits -- a common problem in the emerging industry. Pioneering in an emerging industry requires "some pain," says one expert.
By Andrew R. McIlvaine
Hewitt Associates is the 800-pound gorilla of the HR business-process outsourcing market.
The firm holds more than 37 percent of the HR BPO market and has more big-name clients (30 or so large companies, including Sun Microsystems and PepsiCo) than any other vendor in the industry.
However, the recent resignation of Bryan J. Doyle, president of Hewitt's HR outsourcing business -- along with the simultaneous retirement announcement of chairman and CEO Dale L. Gifford and Hewitt's statement that it plans to "review" its third quarter profit guidance -- has brought new attention to the company's operations.
It also has underlined the difficulties Hewitt is having as it struggles to earn a profit in what is still a controversial new industry, one in which most of the major vendors have yet to turn a profit.
"Their earnings calls have been dominated by their HR BPO business, which has been bleeding money," says Yankee Group analyst Jason Corsello.
"Hewitt has continued to win new business since it acquired [HR BPO vendor] Exult in 2004; it doesn't have a sales problem," Corsello says. "However, implementing and managing a BPO contract is very complex and Hewitt has really struggled with it. Many of the HR BPO contracts it inherited [from its 2004 acquisition of Exult] have not borne fruit in terms of scalability or operating efficiencies."
Though it's possible Gifford's retirement could be linked to problems with Hewitt's HR BPO unit, says Corsello, he says he's "not reading too much into it."
However, consultant Naomi Bloom, of Bloom & Wallace in Fort Myers, Fla., says she believes Gifford was "forced out" because of problems with Hewitt's BPO business. "He wasn't delivering," she says. "HR BPO is a business that could be successful, but Hewitt hasn't had the right leadership in place. They inherited an outstanding sales team when they acquired Exult, but those people have all left."
Hewitt expects its HR BPO business to lose $128 million this year, says Hewitt investor-relations spokeswoman Genny Pennise. The Lincolnshire, Ill.-based company, which also provides benefits consulting and administration services to clients, had total revenues of $2.8 billion for fiscal 2005 and net income of $135 million.
Phil Fersht of Everest Group says Hewitt's problems are the result of "trying to solve too many operational difficulties at the same time" and the outcome is that "many HR BPO vendors are shifting more of their resources from marketing to operations."
Julie Gordon, Hewitt's chief business excellence officer, will serve as temporary head of the company's HR BPO business while it searches for a permanent replacement. The company denies Gifford's retirement is linked in any way to the HR BPO unit's performance.
"Dale Gifford has been thinking about retirement for some time and he recently told the board of directors that now would be a good time to retire," says Hewitt spokeswoman Kelly Zitlow. "As for Bryan, he's resigned to pursue other opportunities, and I'm not going to speculate beyond that."
Hewitt is not alone in finding the road to profitability difficult.
Few if any HR BPO vendors are making money at this point, says Corsello, adding that Cincinnati-based Convergys is also losing money, while IBM, Accenture, EDS and other companies that provide HR BPO services have not released numbers around their services.
Hewitt's difficulties are compounded by the fact that the HR BPO industry (in which companies outsource four or more of their HR functions to a single vendor) is still relatively new and most of the large contracts have yet to mature, he says.
"I'd say profitability is pretty uncommon among the firms providing HR BPO services today," says Stan Lepeak, managing director of EquaTerra, an outsourcing advisory firm in New York. "There's a camp of equity analysts who wonder if HR BPO can ever be profitable. If Hewitt -- one of the most respected companies in the HR business -- can't make money at this, the thinking goes, then who can?"
Bloom says the answer to the question of whether HR BPO can ever be profitable is a "resounding yes," adding that she believes several vendors have (or soon will) achieved "fragile profitability."
"It's hard work, not to mention expensive, to be a pioneer in an emerging industry, and that's what HR BPO is," she says. "There've been a whole host of issues the industry has had to address, ranging from massive investments that had to be made to services that weren't priced correctly, software that had to be created and the question of what role customers should play. Look at Amazon.com -- it's an established player now but they had to suffer through years and years of losses. You don't get to an upside without some pain."
Lepeak says he anticipates Hewitt will most likely restate the number of HR BPO clients it expects to sign this year, adding that the company had initially predicted it would sign eight to 10 new clients in 2006. Hewitt has not publicly announced any new HR BPO clients so far this year.
Hewitt's challenges include the fact that it aggressively courts large clients, which, in turn, necessitates long and complex transitions from the clients' systems and processes to Hewitt's, says Lepeak.
"It's usually a couple of years into such a contract before the client and the vendor finally start to achieve the results they'd anticipated," he says. "This is complicated by the fact that customers tend to have higher expectations of Hewitt in terms of service delivery, which tends to lead to higher costs."
Hewitt still has plenty of opportunities to make its HR BPO business profitable, he says.
"Hewitt is putting processes into place to make sure new HR BPO deals are economically sound, although the results won't be obvious until two or three years down the line," says Lepeak. "Deals are being more carefully vetted by top managers, whereas before, like many other vendors, they had their field teams structuring deals, which was good for the clients but not so good for the providers."
Bloom is skeptical about Hewitt's prospects, however.
"One hopes that their board either has a big plan for either creating an A-plus leadership team or else selling off the BPO business before it loses even more value."
From India, Ahmadabad
What afflicts BPOs in India ?
Top 6 things which are greater challenges for the ITeS segment are :
1. US economy slowing down - particularly the Banking and Insurance segments
2. Lack of Incentives from the Government - sunset cluase for STPI units
3. Failure to attract and retain top talent at all levels - Executive, Middle and Senior Management
4. Bad media publicity - always showing the ill affects of working
5. Failure by the Companies to project 'careers' instead of 'jobs'
6. Poor perception by the job seekers.
With so many adverse conditions will the BPO industry in India can survive ? Only time will tell what the future holds for this segment.
Here is a good write up on the challenges that are affecting the Indian BPOs and what the Government must be doing to shore up the environment for doing business in ITeS. Share your valuable thoughts on this subject.
Happy Weekend
Raghav
Founder HRinIndia
From India, Ahmadabad
Top 6 things which are greater challenges for the ITeS segment are :
1. US economy slowing down - particularly the Banking and Insurance segments
2. Lack of Incentives from the Government - sunset cluase for STPI units
3. Failure to attract and retain top talent at all levels - Executive, Middle and Senior Management
4. Bad media publicity - always showing the ill affects of working
5. Failure by the Companies to project 'careers' instead of 'jobs'
6. Poor perception by the job seekers.
With so many adverse conditions will the BPO industry in India can survive ? Only time will tell what the future holds for this segment.
Here is a good write up on the challenges that are affecting the Indian BPOs and what the Government must be doing to shore up the environment for doing business in ITeS. Share your valuable thoughts on this subject.
Happy Weekend
Raghav
Founder HRinIndia
From India, Ahmadabad
BPO industry in India – new challenges
A+ A-
The fact that the Business Process Outsourcing industry in India is growing faster than ever was demonstrated by the “standing room only” sell out response to NASSCOM’s annual BPO summit in Bangalore in August. An industry which was created to a large extent by the early moves of GE under the leadership of Jack Welch now sees globally listed firms like GENPACT, WNS and EXL clocking a few billion dollars in value and leading a pack of small medium and large firms whose employment may well overtake that of the much older IT services industry in the not so distant future.
The views of the research industry leader, Gartner at the conference point the way to the future of this dynamic segment of the Indian knowledge industry. Single process outsourcing successes have morphed into for comprehensive end to end services with more and more process optimization resulting in higher value addition. Platform BPO solutions have also begun to substantially improve the quality and speed of new process migration offshore and multi-function BPO as well as comprehensive Human Resource Outsourcing have moved to the very apex of the “hype cycle”
There are quite a few challenges emerging as well. The abrupt rise of the rupee against the dollar and pound have left many young BPO firms gasping for breath and the inherently lower profitability of this segment compared to the industry majors in IT services puts most players at risk with the dollar likely to seek lower and lower levels against the rupee in the next eighteen months or so. Business transformation consulting which seemed to be the logical next wave as more and more KPO (Knowledge Process Outsourcing) wannabe firms emerged has dipped into the trough of disillusionment that follows the peak of inflated expectations in the Gartner hype cycle and if the industry has to continue to maintain a profitability level north of twenty percent, a study by Mckinsey suggests that many critical parameters of operational excellence – shift utilization, productivity, support costs , span of control and the ever present Damocles sword of attrition – have to be put under the microscope.
Another interesting nugget from Mckinsey was that industry leaders who are setting best practices in human resource management and retention actually pay less than the laggards and are leveraging effective people management practices rather than higher compensation to keep their teams intact. And finally, a reaffirmation of a feeling that most industry watchers have had – captive BPO units average a cost level which is thirty seven percent more than third party processors even though the best in class turn in cost data which is less than the figures of the best third parties.
There is an old Chinese curse “May you live in interesting times” and these are definitely that. The paradox is that a segment of the industry which benefited in its initial days through its umbilical cord connection with the IT sector is now concerned that the withdrawal of tax benefits may result in making the Indian BPO sector less competitive than competitors like China and Eastern Europe which are nipping at our heels. Maybe better sense will prevail and the sunrise industries will get continued support from the powers that be – let’s wait and see!
Dr. Ganesh Natarajan is Vice Chairman of NASSCOM and Deputy Chairman and MD of Zensar Technologies Ltd.
From India, Ahmadabad
A+ A-
The fact that the Business Process Outsourcing industry in India is growing faster than ever was demonstrated by the “standing room only” sell out response to NASSCOM’s annual BPO summit in Bangalore in August. An industry which was created to a large extent by the early moves of GE under the leadership of Jack Welch now sees globally listed firms like GENPACT, WNS and EXL clocking a few billion dollars in value and leading a pack of small medium and large firms whose employment may well overtake that of the much older IT services industry in the not so distant future.
The views of the research industry leader, Gartner at the conference point the way to the future of this dynamic segment of the Indian knowledge industry. Single process outsourcing successes have morphed into for comprehensive end to end services with more and more process optimization resulting in higher value addition. Platform BPO solutions have also begun to substantially improve the quality and speed of new process migration offshore and multi-function BPO as well as comprehensive Human Resource Outsourcing have moved to the very apex of the “hype cycle”
There are quite a few challenges emerging as well. The abrupt rise of the rupee against the dollar and pound have left many young BPO firms gasping for breath and the inherently lower profitability of this segment compared to the industry majors in IT services puts most players at risk with the dollar likely to seek lower and lower levels against the rupee in the next eighteen months or so. Business transformation consulting which seemed to be the logical next wave as more and more KPO (Knowledge Process Outsourcing) wannabe firms emerged has dipped into the trough of disillusionment that follows the peak of inflated expectations in the Gartner hype cycle and if the industry has to continue to maintain a profitability level north of twenty percent, a study by Mckinsey suggests that many critical parameters of operational excellence – shift utilization, productivity, support costs , span of control and the ever present Damocles sword of attrition – have to be put under the microscope.
Another interesting nugget from Mckinsey was that industry leaders who are setting best practices in human resource management and retention actually pay less than the laggards and are leveraging effective people management practices rather than higher compensation to keep their teams intact. And finally, a reaffirmation of a feeling that most industry watchers have had – captive BPO units average a cost level which is thirty seven percent more than third party processors even though the best in class turn in cost data which is less than the figures of the best third parties.
There is an old Chinese curse “May you live in interesting times” and these are definitely that. The paradox is that a segment of the industry which benefited in its initial days through its umbilical cord connection with the IT sector is now concerned that the withdrawal of tax benefits may result in making the Indian BPO sector less competitive than competitors like China and Eastern Europe which are nipping at our heels. Maybe better sense will prevail and the sunrise industries will get continued support from the powers that be – let’s wait and see!
Dr. Ganesh Natarajan is Vice Chairman of NASSCOM and Deputy Chairman and MD of Zensar Technologies Ltd.
From India, Ahmadabad
Source: DQ-IDC BPO E-Sat Survey 2007
Busting the common myth that BPO employees join/change jobs based primarily on salary hikes, the survey finds that a good work environment and high growth opportunity are better attractions. This is in contrast to salary and compensation for IT employees
Individually, within the parameters of employee satisfaction, large firms do comparatively better in work culture and image; expectedly, niche companies do better in salary and job content, and there is a mix when it comes to appraisal. When you go to the sub parameters, the large firms do better on corporate governance, and honesty and integrity, while small companies do better in the day-to-day working culture related parameters.
The Industry Fares Better
Rankings apart, what comes as good news for the entire industry, is that at the industry level, the overall employee satisfaction score has gone up to 8.0 (on a scale of ten) from last years 7.8. This is in contrast to 2006, when the score had actually gone down.
This is heartening, in the midst of controversies and criticism. In fact, the satisfaction levels have gone up in five broad parametersjob content (8.1 versus 7.8 in last year), work culture (8.4 versus 8.1 last year), training (8.4 versus 8.1 last year), appraisal (7.2 versus 6.9), and people (8.4 versus 8.2). It has gone down in twocompany image (7.7 versus 8.2) and salary (6.7 as compared to 6.8). Salary also happens to be the factor about which employees are least satisfied.
Attrition Blues
Ask any BPO companys CEO or HR manager about his or her biggest challenge, and attrition is what theyll say. The industrys biggest demon is rampant attrition, with scores of BPO companies looking for talent, BPO professionals are in hot demand; and often these fresh out of college graduates hop from one job to another, till they can hop no more. With each jump, the package goes up by as much as 20%.
From India, Ahmadabad
Busting the common myth that BPO employees join/change jobs based primarily on salary hikes, the survey finds that a good work environment and high growth opportunity are better attractions. This is in contrast to salary and compensation for IT employees
Individually, within the parameters of employee satisfaction, large firms do comparatively better in work culture and image; expectedly, niche companies do better in salary and job content, and there is a mix when it comes to appraisal. When you go to the sub parameters, the large firms do better on corporate governance, and honesty and integrity, while small companies do better in the day-to-day working culture related parameters.
The Industry Fares Better
Rankings apart, what comes as good news for the entire industry, is that at the industry level, the overall employee satisfaction score has gone up to 8.0 (on a scale of ten) from last years 7.8. This is in contrast to 2006, when the score had actually gone down.
This is heartening, in the midst of controversies and criticism. In fact, the satisfaction levels have gone up in five broad parametersjob content (8.1 versus 7.8 in last year), work culture (8.4 versus 8.1 last year), training (8.4 versus 8.1 last year), appraisal (7.2 versus 6.9), and people (8.4 versus 8.2). It has gone down in twocompany image (7.7 versus 8.2) and salary (6.7 as compared to 6.8). Salary also happens to be the factor about which employees are least satisfied.
Attrition Blues
Ask any BPO companys CEO or HR manager about his or her biggest challenge, and attrition is what theyll say. The industrys biggest demon is rampant attrition, with scores of BPO companies looking for talent, BPO professionals are in hot demand; and often these fresh out of college graduates hop from one job to another, till they can hop no more. With each jump, the package goes up by as much as 20%.
From India, Ahmadabad
Choosing the Right BPO Partner
In the age of outsourcing, it is critical to engage in business relationships that assure successful partnerships. The practice of outsourcing business processes is maturing and we are now able to better assess those factors that have led to successful or failed outsource relationships. High on the list of factors that result in successful BPO relationships is choosing the right partner to support an organization’s business needs.
Generally speaking, companies know their business needs and challenges. However, successful BPO relationships defined by the vendor’s positive impact on their customer’s ability to meet their goals, is somewhat allusive in today’s evolving BPO service industry. Given that a failed relationship can result in millions of lost revenue, market share, and eroded customer base, it is critical to have clear criteria on which to base the decisions.
In terms of meeting clients’ needs in such an arranged relationship, it is incumbent on vendors to understand those core corporate characteristics that businesses must consider when selecting a BPO partner, as well.
Towards this end, a BPO relationship should be viewed as a highly strategic business partnership requiring a deep union between businesses. As such, in deciding upon the appropriate partner, the corporate “personality” becomes a very real and tangible aspect of the relationship to consider. In essence, the right match is likely to result in a long term relationship characterized by contract renewals, increased revenue for all and positive corporate images within their respective industries. A poor match will likely end up with large sums of lost revenue, damaged corporate images and possibly litigation.
The purpose of this article is to describe those corporate personality traits that characterize the “Right Partner” for corporate clients. Again, these traits may sound like the list a marriage counselor would provide a newly wed couple, but, the fact is that corporations are organizations of people who need to be able to maintain a high-level of communication, teamwork and, be capable and willing to negotiated differences.
Let’s take a look at the list….
Integrity
A company should espouse Integrity as one of their core values. This is an indication to prospective clients that this vendor will do what they can to meet a company’s business needs in the most ethical and legal manner. When our times are characterized by corporate accounting and management scandals, vendor companies must set themselves above the others by clearly defining how they will maintain their integrity in providing services to clients.
Mission statements are a nice place to start, but, the crux of corporate relationships must be established between key corporate leaders. In establishing a partnership of trust, commitments must be made by those executives who can assure the delivery on promises. Having face to face communication and regular executive involvement helps to establish the tone of the relationship that is to be formed.
Open discussion of the issues and challenges on both sides of the relationship is required. Clients don’t want to be sold to, they want somebody who understands their situation and has a solution. Honest assessments of what is required to meet a client’s needs will drive customer confidence and establish a vendor as having integrity.
Commitment
The best vendors offering BPO service understand that outsourcing is not a market that can be entered into without full commitment to the BPO relationship. In cases where solution providers are uncommitted, performance slumps, revenue drops, frustration develops and the relationship suffers.
The vendors who are able to exemplify the core values of the company they support and deliver the services for which they have committed are able to generate customer satisfaction, increased productivity and revenue. Furthermore, this level of commitment enables BPO partners to build a degree of trust that serves as support when times are rough.
Willingness to Listen
When engaging clients in BPO activity, it is critical t to understand the business circumstances and drivers that has them seeking this relationship. To do this, vendors must allow clients to describe their perception of their issues and challenges in detail. It is tempting to jump in early with solutions that may meet a client’s needs. However, often, requirements change with the introduction of additional stakeholders input, changes in budgets, market fluctuations, organizational restructures, IT architecture redesigns, etc.
A good vendor partner will take the time to gather the inclusive data that will accurately represent the corporation’s business needs and requirements. Furthermore, much consideration should be given to issues not raised. The best of breed vendors use their industry experience to bring forward additional considerations that should be made by their customers. Successful BPO vendors provide reliable services by designing their solutions around client requirements and industry best practices while setting clear expectations.
Responsiveness
Corporations need vendor companies to be agile. The ability to respond to client requests and needs in expeditiously. Additionally, Vendor companies must demonstrate the ability to predict potential issues will prevent a lot of relationship conflicts, however, when issues do arise, good BPO vendors know the importance understanding the impact of an issue for their client and taking swift action by communicating this fact to their client. Again, having processes and contingency plans in place to resolve issues demonstrates a vendor’s ability to react to unforeseen problems in a controlled manner. This provides customers confidence in a vendor’s ability to maintain a reliable service.
A big differentiator between BPO vendors is those who identify potential opportunities and risks for client companies. As the business environment changes, so must rules, processes and models. Vendor companies must proactively help clients take advantage of changes in the business environment with an eye on long-term gains. Vendors who respond to contractual relationships by simply reacting to client needs, do to their clients a large disservice. Vendors who provide clients with regular industry insights, updates on changing technology, market insight, and business strategy drive client BPO relationships to more successful positions.
Innovation
Once of the main reasons that companies join into BPO relationships is that they understand the business function they are relinquishing is not a core competency for their organization. As such, it should be the vendor’s core competency and as a result should be able to produce increased efficiency through increased innovation and process improvement. Vendors who simply replace resources and maintain existing processes are not adding enough value to the customer’s organization to justify the increased complexity of BPO.
Innovative vendors must evaluate and challenge existing modes of work to establish the best possible work processes for the organization they service. Given the protective nature clients may have of these processes, it is important to clearly understand these processes and present service improvement recommendation in a manner sensitive to the corporate culture in which the vendor finds themselves.
Corporations expect and desire technology innovations from BPO vendors however; these innovations should be approached in a responsible manner. Vendors who recommend unproven technical solutions must recognize the risks that they bring to their client’s business. Therefore, it is absolutely critical that vendors invite clients to open evaluation when recommend technology solutions that address business needs, are financially responsible and have a well established performance/support records. It is not uncommon for clients to request solutions that do not meet a vendor’s standards, and in these cases, the best vendors will communicate this to their clients to help them understand the issues involved and appropriately set expectations for the solution implementation. In this way, good vendors illustrate their willingness to innovate in a manner that best supports their clients’ business goals.
Financial Responsibility
Good vendor partners are able to establish that they will be able to maintain the relationship being entered. Most long term BPO relationships are assumed to be maintained with the same vendor. Vendor facing financial instability bring an increase risk to the client in the case of being acquired, business downsizing, or worst case, going out of business. Vendors who are financially unstable are less likely to invest in innovation, resource training and client relationship building activities.
Financial responsibility also extends to business activities that vendors take on their clients’ behalf. Good vendor partners strive to keep costs of business low and demonstrate appropriate accounting procedures for the business they support. Financial responsibility shows respect for the client company and further illustrates the vendors desire to support clients’ business goals.
Proficiency
World class BPO vendors maintain resource pools who can address their customer business requirements on a daily basis. This requires vendors to continually acquire talent and train staff to meet the challenges of their clients’ businesses. Having workers who are certified or degreed in specific areas of expertise will provide a standard of knowledge that will benefit the client.
Good vendor partners will work with their clients to identify and train those skills that make workers competent for the roles they are to perform. Demonstrating interest in the client’s business further strengthens the client-vendor relationship.
As corporate organizations become more complex, providing more products and services, in diverse vertical markets, vendors are forced to provide resources in many areas of expertise. Good vendor partners may establish relationships with other quality BPO organizations to enable them to provide the services their clients require. In so doing, good vendor partners establish and maintain relationships that assure the highest level of quality for their customers. The same principles of integrity, commitment, responsiveness, good listening, innovation and financially responsibility discussed above apply and may be contractually agreed.
Proficiency drives performance and competitiveness in the marketplace. The result of proficiency is that corporations are more successful in their marketplace and more profitable. Typical among the highest performing companies is that they have enterprise learning strategies designed to support their corporate goals. Similarly, the best of breed vendors recognize this and have proven strategies for helping clients build alignment and measure the impact on client’s goals.
In Summary, vendors need to be able to demonstrate that they are the “Right Partner” by demonstrating certain corporate traits consistent with your own. BPO relationships are strategic partnerships, it is critical to understand corporate cultures and establish relationships that are founded on principles that support business goals. With a foundation built on these traits, BPO relationships have a greater chance in establishing long term business relationships provide measurable value in terms of increase competitiveness, efficiency, and profit, in today’s challenging and diverse marketplace.
From India, Ahmadabad
In the age of outsourcing, it is critical to engage in business relationships that assure successful partnerships. The practice of outsourcing business processes is maturing and we are now able to better assess those factors that have led to successful or failed outsource relationships. High on the list of factors that result in successful BPO relationships is choosing the right partner to support an organization’s business needs.
Generally speaking, companies know their business needs and challenges. However, successful BPO relationships defined by the vendor’s positive impact on their customer’s ability to meet their goals, is somewhat allusive in today’s evolving BPO service industry. Given that a failed relationship can result in millions of lost revenue, market share, and eroded customer base, it is critical to have clear criteria on which to base the decisions.
In terms of meeting clients’ needs in such an arranged relationship, it is incumbent on vendors to understand those core corporate characteristics that businesses must consider when selecting a BPO partner, as well.
Towards this end, a BPO relationship should be viewed as a highly strategic business partnership requiring a deep union between businesses. As such, in deciding upon the appropriate partner, the corporate “personality” becomes a very real and tangible aspect of the relationship to consider. In essence, the right match is likely to result in a long term relationship characterized by contract renewals, increased revenue for all and positive corporate images within their respective industries. A poor match will likely end up with large sums of lost revenue, damaged corporate images and possibly litigation.
The purpose of this article is to describe those corporate personality traits that characterize the “Right Partner” for corporate clients. Again, these traits may sound like the list a marriage counselor would provide a newly wed couple, but, the fact is that corporations are organizations of people who need to be able to maintain a high-level of communication, teamwork and, be capable and willing to negotiated differences.
Let’s take a look at the list….
Integrity
A company should espouse Integrity as one of their core values. This is an indication to prospective clients that this vendor will do what they can to meet a company’s business needs in the most ethical and legal manner. When our times are characterized by corporate accounting and management scandals, vendor companies must set themselves above the others by clearly defining how they will maintain their integrity in providing services to clients.
Mission statements are a nice place to start, but, the crux of corporate relationships must be established between key corporate leaders. In establishing a partnership of trust, commitments must be made by those executives who can assure the delivery on promises. Having face to face communication and regular executive involvement helps to establish the tone of the relationship that is to be formed.
Open discussion of the issues and challenges on both sides of the relationship is required. Clients don’t want to be sold to, they want somebody who understands their situation and has a solution. Honest assessments of what is required to meet a client’s needs will drive customer confidence and establish a vendor as having integrity.
Commitment
The best vendors offering BPO service understand that outsourcing is not a market that can be entered into without full commitment to the BPO relationship. In cases where solution providers are uncommitted, performance slumps, revenue drops, frustration develops and the relationship suffers.
The vendors who are able to exemplify the core values of the company they support and deliver the services for which they have committed are able to generate customer satisfaction, increased productivity and revenue. Furthermore, this level of commitment enables BPO partners to build a degree of trust that serves as support when times are rough.
Willingness to Listen
When engaging clients in BPO activity, it is critical t to understand the business circumstances and drivers that has them seeking this relationship. To do this, vendors must allow clients to describe their perception of their issues and challenges in detail. It is tempting to jump in early with solutions that may meet a client’s needs. However, often, requirements change with the introduction of additional stakeholders input, changes in budgets, market fluctuations, organizational restructures, IT architecture redesigns, etc.
A good vendor partner will take the time to gather the inclusive data that will accurately represent the corporation’s business needs and requirements. Furthermore, much consideration should be given to issues not raised. The best of breed vendors use their industry experience to bring forward additional considerations that should be made by their customers. Successful BPO vendors provide reliable services by designing their solutions around client requirements and industry best practices while setting clear expectations.
Responsiveness
Corporations need vendor companies to be agile. The ability to respond to client requests and needs in expeditiously. Additionally, Vendor companies must demonstrate the ability to predict potential issues will prevent a lot of relationship conflicts, however, when issues do arise, good BPO vendors know the importance understanding the impact of an issue for their client and taking swift action by communicating this fact to their client. Again, having processes and contingency plans in place to resolve issues demonstrates a vendor’s ability to react to unforeseen problems in a controlled manner. This provides customers confidence in a vendor’s ability to maintain a reliable service.
A big differentiator between BPO vendors is those who identify potential opportunities and risks for client companies. As the business environment changes, so must rules, processes and models. Vendor companies must proactively help clients take advantage of changes in the business environment with an eye on long-term gains. Vendors who respond to contractual relationships by simply reacting to client needs, do to their clients a large disservice. Vendors who provide clients with regular industry insights, updates on changing technology, market insight, and business strategy drive client BPO relationships to more successful positions.
Innovation
Once of the main reasons that companies join into BPO relationships is that they understand the business function they are relinquishing is not a core competency for their organization. As such, it should be the vendor’s core competency and as a result should be able to produce increased efficiency through increased innovation and process improvement. Vendors who simply replace resources and maintain existing processes are not adding enough value to the customer’s organization to justify the increased complexity of BPO.
Innovative vendors must evaluate and challenge existing modes of work to establish the best possible work processes for the organization they service. Given the protective nature clients may have of these processes, it is important to clearly understand these processes and present service improvement recommendation in a manner sensitive to the corporate culture in which the vendor finds themselves.
Corporations expect and desire technology innovations from BPO vendors however; these innovations should be approached in a responsible manner. Vendors who recommend unproven technical solutions must recognize the risks that they bring to their client’s business. Therefore, it is absolutely critical that vendors invite clients to open evaluation when recommend technology solutions that address business needs, are financially responsible and have a well established performance/support records. It is not uncommon for clients to request solutions that do not meet a vendor’s standards, and in these cases, the best vendors will communicate this to their clients to help them understand the issues involved and appropriately set expectations for the solution implementation. In this way, good vendors illustrate their willingness to innovate in a manner that best supports their clients’ business goals.
Financial Responsibility
Good vendor partners are able to establish that they will be able to maintain the relationship being entered. Most long term BPO relationships are assumed to be maintained with the same vendor. Vendor facing financial instability bring an increase risk to the client in the case of being acquired, business downsizing, or worst case, going out of business. Vendors who are financially unstable are less likely to invest in innovation, resource training and client relationship building activities.
Financial responsibility also extends to business activities that vendors take on their clients’ behalf. Good vendor partners strive to keep costs of business low and demonstrate appropriate accounting procedures for the business they support. Financial responsibility shows respect for the client company and further illustrates the vendors desire to support clients’ business goals.
Proficiency
World class BPO vendors maintain resource pools who can address their customer business requirements on a daily basis. This requires vendors to continually acquire talent and train staff to meet the challenges of their clients’ businesses. Having workers who are certified or degreed in specific areas of expertise will provide a standard of knowledge that will benefit the client.
Good vendor partners will work with their clients to identify and train those skills that make workers competent for the roles they are to perform. Demonstrating interest in the client’s business further strengthens the client-vendor relationship.
As corporate organizations become more complex, providing more products and services, in diverse vertical markets, vendors are forced to provide resources in many areas of expertise. Good vendor partners may establish relationships with other quality BPO organizations to enable them to provide the services their clients require. In so doing, good vendor partners establish and maintain relationships that assure the highest level of quality for their customers. The same principles of integrity, commitment, responsiveness, good listening, innovation and financially responsibility discussed above apply and may be contractually agreed.
Proficiency drives performance and competitiveness in the marketplace. The result of proficiency is that corporations are more successful in their marketplace and more profitable. Typical among the highest performing companies is that they have enterprise learning strategies designed to support their corporate goals. Similarly, the best of breed vendors recognize this and have proven strategies for helping clients build alignment and measure the impact on client’s goals.
In Summary, vendors need to be able to demonstrate that they are the “Right Partner” by demonstrating certain corporate traits consistent with your own. BPO relationships are strategic partnerships, it is critical to understand corporate cultures and establish relationships that are founded on principles that support business goals. With a foundation built on these traits, BPO relationships have a greater chance in establishing long term business relationships provide measurable value in terms of increase competitiveness, efficiency, and profit, in today’s challenging and diverse marketplace.
From India, Ahmadabad
Dear Jay, was following the mail thread and found very elaborate and content rich. Regards, Senthil
From India
From India
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