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October 2008 Vol. 03, Issue 33

Managing Disputes p. 40Service-oriented Architecture p. 36

They are not Bangalores or Makatisyet; but they could get there sooner.There are nine new entrants and six

dropouts from the 2007 list

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Building on Our Global Heritage

The Taj Mahal is acclaimed as a masterpiece of architecture and of the heart—an enduring testament to the power of love and a builder’s passion for creating beauty. At Genpact, we too, are passionate about our work and see beauty in managing and simplifying business processes for companies around the world.Our 31,700+ associates span 9 countries are united by a passion for excellence and commitment to work as a team. By combining our passion for excellence with teamwork, Genpact redefines what is possible, expanding from service to one company, GE,to more than 35 global enterprises in less than three years.

Cultivating Quality: Lean and Six Sigma

As companies wrestle with growing global complexity and competition, they look to Lean Six Sigma and Reengineering methods to ensure consistently high levels of performance and service delivery. As part of their efforts to sustain customer and shareholder value, global leaders search for partners whose dedication to process excellence is part of their DNA. Like other great builders, Genpact has the culture and tools to get it right the first time. Our building blocks are the deep industry domain knowledge, technology know-how and multi-shore delivery that we combine with Lean Six Sigma to ensure process excellence with every customer engagement.

Working Together: IT-Enabled BPO

Enterprises are searching for ways to continuously improve what they do. An emerging trend is the integration of Business Process Outsourcing (BPO) with Information Technology Outsourcing (ITO) to create even greater value. Genpact’s propriety technology tools, coupled with domain knowledge in major industry verticals, transforms client cost structures while reducing complexity and risk.

A Passion for Excellence.

At Genpact we’re passionate about our customers, our people and the communities we serve. Our passion is a special energy that defines us and constantly raises the bar on what we can achieve as we strive to exceed customer expectations and drive business impact. Our dedication to this principle drives us to be the Employer of Choice wherever we operate. We recruit top talent, train and reward them to be their best and create an environment of learning, openness and respect. This passion for excellence is part of Genpact’s DNA, rooted in our GE heritage and fervent belief that the customer comes first.

visit us at genpact.com and learn how we can work together to make the impossible possibleNew York +1 646 624 5900 • London +44 (0)20 7535 5400 • Gurgaon +91 124 402 2000 • Shanghai +86 21 6133 3555 • Tokyo +81 3 3543 1816

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FEATURES

By Avinash Vashistha, Tholons, andImrana Khan, Global Services

14

October 2008 Vo lume 03, I ssue 33

4 GlobalServices www.globalservicesmedia.com October 2008

MANAGING DISPUTESBy Namita GoelWho suffers the most in case of a dispute — customer or service provider? Whose fault is it anyway? Who’s holding theball at the time of deal termination or disagreements? Is it possible to carry on an outsourcing relationship after a nastyscrap? Here’s a reality check

40SERVICE-ORIENTED ARCHITECTUREBy Jayaprakash Nair, Delivery Manager, Aspire SystemsIs SOA still a buzzword? Why would a company spend money to spon-sor a so-called technical initiative by the IT team instead of financingsome other business feature development by the team? Is it true that alack of SOA in an enterprise with a complex IT ecosystem has a directimpact on the IT costs, and hence the bottom line, in the long run?

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SHYAMANUJA DASShyamanuja pioneeredoutsourcing journalism in India in1998 with bpOrbit, anewsletter for the domestic Indian BPOindustry. He is nowEditor, Dataquest magazine, Cybermedia.

ALLAN SCHWEYERAllan is the President and Executive Director of the Human CapitalInstitute and author ofTalent ManagementSystems.

PHIL FERSHTPhil is Research Director,Business ProcessOutsourcing, offshoringand IT sourcing, forleading industry analystfirm AMR Research, Inc.

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COLUMNISTS

46 50PLACING TALENT AT THECENTER OF INTEGRATEDTALENT MANAGEMENTBy Allan Schweyer, HCI and Tony Marzulli, Workscape

44CHINA’S CHALLENGES TODEVELOP A GLOBAL BPO CAPABILITYBy Phil Fersht, AMR Research


DEMANDDOWNTURN: TOPREASON FOR JOBSCUT IN AUG.By Namita Goel

13

THE FINANCIALCRISIS ANDOUTSOURCINGThe news about LehmanBrothers and Merrill Lynchshook the global financial-servicesindustry like never before. Willoutsourcing by the sector also seea drastic fall? What happens toprojects that are already under-way? Are there any new opportu-nities that the crisis throws up?

8

HP TO CUT 24,600EDS JOBSBy Imrana Khan

8

OUTSOURCING TOSENEGALBy Keerthi Nair

9

U.S NEWSPAPERINDUSTRY EMBARKSON OFFSHORINGBy Imrana Khan

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INFOSYS-AXON M&ADEAL KICKS OFF ANEW TRENDBy Tholons

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PUBLIC SECTORSIGNS SIX BIG ITODEALS IN AUG. ’08By Datamonitor

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LATIN AMERICA MSSMARKET SET TOGROW TO $332.7MILLION BY 2013By Imrana Khan

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SALES STRATEGIES INSERVICE PROVIDER COMPANIES TO SUCCEEDIN A TOUGH ECONOMYBy Matt Smith, 3forward

EXPERT VIEWS

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ED NAIREditor

EDITOR’S NOTE

[email protected]

The entire onus ofdeveloping the right

climate and conditionsdoes not rest on thegovernment alone. The private sector,

the universities, thecommercial institutions

and the industryassociations perhaps

have a bigger role to play

n this issue, we list out 50 emerging cities that are vying for a piece of actionin the outsourcing space. They are at a stage where they can be called “out-sourcing destinations” because they demonstrate a few qualifying attrib-

utes and level of activity such locations need to have.How does a city get there? Through sustained efforts directed at creating

an environment that helps attract investments, develop talent pools, and cre-ate a “pull” factor for the industry. The role played by the country govern-ment, in general, and the local government, in particular, is no less. But theentire onus of developing the right climate and conditions does not rest onthe government alone. The private sector, the universities, the commercialinstitutions and the industry associations perhaps have a bigger role to play.

The stellar role played by India’s tech industry association — Nasscom —in developing India’s software exports industry and catapulting it to globalprominence makes a good case study. Other examples like the Philippines’BPAP, the industry association for business process outsourcing, and devel-opment agencies like Singapore’s IDA have also demonstrated success.

The other key aspect in developing a destination is to have a few anchorcompanies, ideally globally leading ones, who can set the ball rolling. Thesecompanies then start acting as reference cases and when these companies scaleup, they are able to create an ecosystem of support services that the largerindustry would require. These companies also largely determine the area oftechnical competence that the place can choose to specialize. For instance,way back in the late eighties, Texas Instruments and Tektronix were amongstthe first ones to choose Bangalore for software development. Many other com-panies then followed suit and in about eight years, Bangalore became a hubof software development.

It takes time for a city to develop into a favorable destination for out-sourcing. As it is said, “Rome was not built in a day.” Credit is due to thecities that are featured in this issue for their sustained efforts at developingthe outsourcing industry. And they have many more peaks to scale. GS


I

Where Do You Want to Go Today?

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The news about Lehman Brothersand Merrill Lynch shook the

global financial-services industry likenever before.

It is almost clear that the financialindustry is going to cut more jobs inthe coming future. The industry hasalready shed nearly 103,000 workersin 2008, and it seems that it’s going tounleash another round of heavy layoffsin the sector. “A year-end spike infinancial cuts, ignited by these latestactions, could send 2008 job cuts inthe sector past the 2007 record total of153,105,” according to Challenger,Gray & Christmas, a global outplace-ment consultancy.

The financial sector is one of thebiggest buyers of IT and BusinessProcess Outsourcing (BPO) services.If companies in the sector start fallinglike ninepins, many of the current out-sourcing projects would get short-cir-cuited and the existing providerswould bear the brunt.

The industry experts believe thatthese announcements will impact theoutsourcing industry badly. “Therewill be a negative impact and this willshow up in lower/slow growth. Therewill also be an impact on the price. Asthe supply of talent in the U.S. willincrease, it will, thereby, depress thewage in the U.S. and place a subse-quent negative impact on arbitrage-driven value proposition. Also, con-

solidation in the industry will lowerthe overall demand and the companywill reap synergy. This will, subsequ-uently, show up in lower demand forservices in India,” says Vikas Sehgal,Principal and Executive Director, IndiaBusiness, Booz Allen Hamilton, aVirginia-headquartered strategy andtechnology-consulting firm.

The future of the BPO captivesand outsourcing setups of these banksis uncertain. The careers of employeesin these setups are also in doubt. Onone hand, they could be laid off at anypoint of time, but on the other, therewould be trained talent available toother BPO companies. For companiesthat are looking at adding scale, thecaptives would be an easy buy.

And, what will happen to the pro-jects that are already underway? “Somefor sure will go away as the companiesare gone; for those that are merged,you'll see elimination of redundantcontracts. Some projects that werefor growth will either be canceled orlowered in volume,” adds Sehgal.

However, every bad news precedessomething good. So there will besome opportunities as well. “Especiallyfor the providers going for value play.India can help in consolidation ofbanking in U.S. by offering services tointegrate the systems and financeprocesses across new and old entities,”states Sehgal. GS

4x7The Financial Crisisand OutsourcingBY IMRANA KHAN

2Jobscut pp.. 1133

HP to Cut24,600 EDS Jobs

The tech behemoth HPannounced plans to cut 7.5

percent (about 24,600 EDS jobs) ofthe combined entity’s manpowerunder the company’s restructuringprogram that is expected to save $1.8billion annually. The affected employ-ees will be provided with severancepackages, counseling and job-placement services.

HP said in a statement that thecompany plans to replace 50 percentof those jobs by 2011. The replace-ment intends to board the right talentwith services delivery capabilities inorder to cater to its global clientsfrom various industries.

Most of EDS’ employees are U.S.-based and expensive. Handling EDS’expensive manpower in order to savecost was one of the topmost chal-lenges for HP after the merger. Thus,it was expected that HP would axeEDS’ jobs after inking the HP-EDSmerger accord.

The HP-EDS merger announce-ment was made initially on May13th. However, the acquisition wasformalized and completed on Aug.26th, 2008. Under the terms of theacquisition, the company boughtEDS for $13.9 billion. EDS’ buyoutis HP’s largest acquisition in the IT-services space.

With this buyout, HP has one ofthe technology industry’s largest port-folios of products, services and end-to-end solutions. GS

8 GlobalServices www.globalservicesmedia.com October 200824x 7

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DakarThe capital region of

Senegal, Dakar, is a modernmetropolis where colonial-stylevillas, big modern buildings, andthe Medina — the old quarter— share an implausible mix.The Institut Fondementald'Afrique Noir (IFAN) andGalérie Nationale are some major attractions.

Ile de GoreeAlso known as

the Goree Island, Ile deGoree is a magnificent,lovely and captivatingplace with lovelypalaces, mansions andcolorful little alleys linedwith pastel colonial buildings and a mighty fortress.UNESCO declared this island a World Heritage Site.

Saint LouisSaint Louis or

Ndar retains a nostal-gic atmosphere in itsnarrow streets flankedby beautiful colonialhouses, balconies andverandas. Two spectacular national parksgrace the city — the Langue deBarbarie National Park and the DjoudjNational Park.

TambacoundaThe town is

known for its variedagricultural potentialand rail connectionswith Dakar to thenorthwest and Mali tothe northeast as wellas a paved road to Kédougou in the southwest.Niokolo Koba National Park, Senegal’s largestnational park, is located here.

The Petite CôteThe Petite Côte is

an excellent beach, agreat fishing center andshelters the beautifulforests of baobab-treesin Senegal — an excel-lent base to discoverthis country. Saly-Portudal or Saly andMbour are the popular tourist resorts of this region.

Five places to visit

A former French colony, Sene-gal, is fast luring outsourcing

opportunities from the Francophoneworld — its stability, similar timezone, low wages and stock of young,educated employees being the bonus.An extensive and modern telecom-munication infrastructure — in placewith a digital and fiber-optic networknationally and an optic marine andsatellite network internationally — ismaking the country’s telecommuni-cations as good as any in Europe.

The icing on the cake comes withFrench as one of Senegal’s nationallanguages. Dakar call-center staffhave an accent neutral enough to passfor native French, and this alluresFrench organizations toward Senegal.The major four call centers in Sene-gal — PCCI, Call Me, Access Value,Center Value — offer services main-ly for French companies.

With the minimum educationbeing a college degree, around 600operators aged between 20 and 25work up to 40 hours a week equippedwith a French-sounding pseudonym.Senegal, in addition, plans a com-petitive and trained workforce inorder to attract more foreign com-panies. For example, Senegal plans anetwork within the country linked bysatellite to the University of New York(Project SMKS) to enable students toobtain American diplomas.

“Since Senegal is the country in

the world, after Japan, to have devel-oped a very sophisticated governmentintranet system, the Senegalese havethe opportunity to gain a significantamount of training from their homecountry, thus avoiding the financialburden of going overseas,” says LanceT. Artis, President, Apyo Technolo-gies, a French-speaking technolo-gy/outbound telemarketing firm.

Though Senegal ranks among the20 least developed countries in theworld, and has an unemploymentrate of 48 percent, the center taps intoa pool of well-educated, young Sene-galese people who are respectful thanthe staff in Europe. Also the qualityof certain public services (electricity)hinder the country’s economic devel-opment and industrialization, beingfocused only in Dakar, makes the cityoverpopulated. To counter all this,Senegal has not only taken the ini-tiative to promote telecoms in ruralzones, but has also started imple-menting ambitious plans for the peri-od 2005 to 2015 such as improveroads and expand Dakar Port.

With high-levels of human skills,diversified service fabric and a deter-ministic approach, Senegal is boundto become a similar outsourcingmagnet for the French call-centerindustry as India has become forBritain and the U.S., putting it incompetition with Morocco, Tunisiaand Mauritius. GS

BY KEERTHI NAIR

Compiled by Keerthi Nair

OUTSOURCING TO

SENEGALSENEGAL

24x7

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SOURCES: © 2007 PEARSON EDUCATION, OXFORD BUSINESS GROUP, © 2008 CondéNet, INC.


10 GlobalServices www.globalservicesmedia.com October 200824x 7

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Public Sector Signs Six BigITO Deals in Aug. ’08BY DATAMONITOR

ITdeals

Demand from the public sectorcontinued to drive outsourcing

contract signing activity in Aug. ’08.Of the 10 biggest deals announcedduring the month, six involved public-sector customers.

The U.S. Army awarded the month’slargest deal to a defense-services con-tractor, ManTech International. Underthe two-year, $820 million agreement,ManTech will provide equipment andsystems to support mine detection andretrieval programs in Southwest Asia,including Iraq and Afghanistan. Thecontract win is one of the biggest inManTech’s history, and completes asuccessful few months for the company,which signed two deals worth over$100 million each in July ’08 andacquired security-services provider,Emerging Technologies Group.

One of ManTech’s rivals, SAIC, alsosecured a major defense-services awardlast month. It was selected by GeneralServices Administration to provide pro-ject management, helpdesk support andsystem-integration services to the U.S.Army’s HR command. SAIC has now

signed 10 deals worth over $100 millionsince the beginning of 2008, all withU.S. federal government agencies.

Lockheed Martin, a major player inthe U.S. public sector, secured a sig-nificant deal with a government agencyin the U.K. in August. The companywill head up a consortium, also includ-ing Logica, Oracle, Steria and Cable &Wireless, tasked with supporting the2011 census in England, Wales andNorthern Ireland. The team will design,install and support systems using char-acter recognition and color processingfor paper census forms, as well asensure that the census can be complet-ed via the internet.

In the private sector, the biggestdeal worth $431 million was signedbetween China Mobile and Motorola toprovide GSM network upgrades andexpansions. Some 16 network-servicesdeals have been signed in China thisyear, as the country looks to improve itstelecommunications infrastructure.Aside from Motorola, Alcatel-Lucent,Nokia Siemens Networks and Ericssonhave secured big deals. GS

THE 10 LARGEST IT SERVICES DEALS IN AUGUST 2008

*Application Development & Maintenance; SOURCE: DATAMONITOR IT SERVICES CONTRACTS DATABASE

Customer Provider Engagement(s) Value Duration($ mn) (yrs)

l U.S. Army ManTech International Maintenance, training 820 2

l China Mobile Motorola Network mgmt. 431 —

l General Services SAIC Helpdesk mgmt., systems 410 5Administration integration

l Boeing AT&T Network mgmt. 400 5

l Health Net IBM Infra mgmt. 300 5

l Office for National Statistics Lockheed Martin Processing services 276 —

l Health and Safety Executive Capita Group BPO 257 10

l U.S. Army Telecommunication Systems Application mgmt. 246 3 (est.)

l Absa Telkom Network mgmt. 237 5

l NOAA Diversified Global Partners ADM* 200 9

Metrics

The $11 billion Indian Business ProcessOutsourcing (BPO) industry — slat-

ed to reach $30 billion by 2012, andwhich employs over 700,000 people — hasbecome a monster to manage. Recent statson the sector’s employee turnover show anunprecedented rise; enough to keep busi-ness leaders awake at night.

Any offshoring announcement byU.S. newspaper publishers always makesheadlines. Especially when the publish-ers decide to offshore the services beyond

U.S NewspaperIndustry Embarkson OffshoringBY IMRANA KHAN

L atin America’s Managed Security Ser-vices (MSS) market is set to surge by

30 percent in the next five years — from$66 million in 2007 to $333.7 million in2013 — according to the latest findings ofa Calif.-headquartered business-researchand consulting firm, Frost & Sullivan.With the highest annual growth rate, theMSS market in the entire region is expect-ed to reach about $90 million in 2008.

In the current market scenario, theoutsourcing of network security in theregion is now being accepted at a largerpace. Thus, Latin American IT-servicesproviders are leveraging full outsourcingagreements. Most of the developed indus-tries such as telecom, IT and manufac-turing, to name a few, share the biggest pie(46 percent) of the region’s MSS market.However, the finance and banking indus-try still prefers to manage the networksecurity in-house.

Brazil and Mexico are the two domi-

BY IMRANA KHAN

Latin America’s


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their typical ad-production work. Manya times such announcements are metwith resistance due to jobs cutannouncements. Over 6,500 jobs cuthave been reported in the first six months of the year 2008. Even the blogspace gets flooded with senti-ments of angst against “the outsourcednewspapers.”

Quite a bit of muck was raisedwhen The Orange County Register, oneof the leading regional newspapers,recently announced its plan to off-shore copy-editing and page-layoutwork to India. In 2007, when Calif.-based news Website hired Indian jour-nalists to cover meetings of the Pasade-na City Council, the reaction of thelocals was quite uncomplimentary.

Plunging revenues is the biggest con-

cern for U.S. newspapers publishers. Thenewspaper industry in the region is goingthrough a major crisis. So the ultimatesolution for survival is to save costs byoutsourcing production and content ser-vices to low-cost offshoring destinationssuch as India.

Even though offshoring by U.S. news-papers primarily revolved around ad-production work, some copy-editing andpage design work is now also being sentto these locations. From India’s perspec-tive, the country has a huge untappedmarket. India shares a very small pie —$35 million — of the total offshoreopportunity from newspaper publishers,which is expected to be about $3,500 mil-

lion, estimated a business intelligence andresearch firm, ValueNotes.

Currently, there are a handful ofproviders such as Express KCS, Affini-ty Express, 2AdPro and MindworksGlobal that serves this market, butthere’s the opportunity for moreproviders to come in.

Going forward, according to Val-ueNotes’ study, the current Indian pen-etration into this market stands ataround one percent. The revenues ofIndian service provides could grow to$120 million by 2012. Also the numberof total workforce involved in thisindustry is set to cross 5,500 in the nextfour years. GS

nant markets in Latin America. In2007, these markets together account-ed for over 65 percent of the region’sMSS market.

According to the study, titled LatinAmerica Managed Security Services Mar-kets, the primary drivers behind thisgrowth are: Increasing threat levels, pres-sure from regulatory bodies to adoptsecurity measures, improving awarenessabout the growing necessity for fool-

proof network-security solutions, lack ofqualified IT professionals to manage in-house IT departments, and companies’desire to reduce the costs with IT-securi-ty expenditure to focus on core business.

However, many factors such as lack ofawareness of current threats and availablesolutions in the market and lack of quan-tifiable ROI hinder the growth of thismarket largely. GS

CURRENT MARKET CONDITIONS IN LATIN AMERICARegion Current status

l Andean countries — Colombia, With 14 percent participation, this region has shown Ecuador, Peru, Bolivia great growth potential, especially in Colombia and and Chile Venezuela, detaining Latin America’s highest CAGR for

the forecasted time period

l Brazil Is region’s largest and most established market, detaining 40.9 percent of MSS revenues

l Central America & Caribbean Very underdeveloped region, with growth potential for all MSS solutions. Costa Rica, Puerto Rico and Panama are the main markets in this region, fuelled by government investments and the presence of multinational companies

l Mexico Represents 24.1 percent of MSS revenues and has very similar market characteristics as the much larger Brazilian market

l Southern Cone Accounting for 16.2 percent of the region’s revenues, driven particularly by Argentina’s very high GDP growth over the past years and by Chile’s developed financial vertical.

SOURCE: FROST & SULLIVAN

SOURCE: FROST & SULLIVAN

300

200

100

0

40

30

20

10

0

Total revenues

2007 2008 2013

Rev

en

ues

($

mill

ion

s)

Gro

wth

rat

e (

% )

REVENUE FORECAST

MSS Market Set to Grow to $332.7 Million by 2013

Annual growth rate



Infosys-Axon M&A Deal Kicks Off a

A ugust ’08 witnessed the announce-ment of the largest Indian cross-bor-

der deal wherein Infosys, an India-based IT-services giant, acquired Axon Group, theU.K.-based SAP consulting-services firm,for a total transaction value of $753 million.This acquisition seems to be a trendsetter.Since the announcement, a spurt of simi-lar activities is being noticed.

Infosys has the largest exposure to West-ern customers. Of which, around 68 per-

cent of total revenue comes from the U.S.and around 30 percent comes from theEuropean regions, unlike other India-basedtier-1 firms such as Wipro (44 percent fromthe U.S. and 24 percent from Europe) andTCS (50 percent from the U.S. and 29 per-cent from Europe).

From a geographical expansion per-spective, the target is expected to providea strong local presence and a front-end forInfosys in Europe. The deal is further

marked by the synergetic benefits arisingfrom 2,000 employees offering SAP con-sulting services to customers from theaerospace, retail, manufacturing, utilities,financial and other commercial sectors,providing the global giant with strongcross-sell and up-sell opportunities. Theacquisition would also strengthen theposition of Infosys in the U.S., China andother Asian geographies. However, thisdeal would dilute the higher profit marginsof Infosys.

Due to the cultural barriers and non-off-shore benefits, Indian acquirers have alwaysstayed away from large transactions inEuropean regions. This could be furtherelaborated by the fact that Europe witnessedover 80 IT and business process outsourc-ing transactions in the past eight months,where around 50 percent are domestic, 40percent are U.S.-based acquirers and 10percent are from others.

Another large transaction of the monthwas the U.S.-based acquirer SunGard Cap-ital acquiring French financial softwaresolutions firm GL Trade for $443 million.

MEGA M&As OF AUGUST '08Acquirer Target Deal size

($ mn)

l Infosys Technologies Axon 753

l Serco Si International 525

l Sungard Capital Gl Trade 443

l Nuance Communications Snapin 180

l KKR Anite Public Sector 107

l Singapore Telecommunications Singapore Computer Systems 99

l Superinvest Superoffice 95

l Healthvision Solutions Medisolution's Healthcare 50Information Systems Division

l Spectris Ncode International 44

l Adaptec Aristos Logic 41

l Nuance Communications Zi 35

l Salesforce.com Instranet 32

l Sbi Holdings Sbi Net Systems 25

l ITC Pyxis Solutions 25

l Champion Technology Kantone 24

l Wind River Systems Mizi Research 16

l Q-Free Asa Dacolian 15

l Callwave Webmessenger 9

l Ucs Group Computer Software Consultant 9

l Creative Master Bermuda Tronic International 7

l Kn Wave Dawoori Entertainment 6

l Wiseman Heartland Data 6

l Info-Drive Software Technoprism 5

l Global Med Technologies Edonor 5

l Salary.Com Infobasis 5

SOURCE: THOLONS

BY NISHANT VERMA, PRINCIPAL, AND AVINASH VASHISTHA, CEO, THOLONS

DEAL COUNT BY TARGET COUNTRY (%)

SOURCE: THOLONS

U.S.: 4444

Canada: 77

Norway: 11

Singapore: 33

South Korea: 11

Belgium: 33

U.K.: 1133

Others: 1133

Germany: 77

Hong Kong: 44

Japan: 44To see the full table, please visit www.globalservicesmedia.com

24x 7

5



New Trend

The acquisition will expand the financialsoftware offerings of SunGard to Europeancustomers and would enable it to penetratethe small and mid-sized market segment.

Firms based in the U.S. have emerged asfavorite targets with 31 transactions, fol-lowed by the U.K. with nine deals, Canadaand Germany with five deals each. Othertarget geographies targeted were HongKong, Japan, Norway, Singapore, SouthKorea, Sweden, Australia, China, France,India, Israel, Netherlands, South Africa,UAE and Sweden. GS

DEAL VALUE BY TARGET COUNTRY (%)

SOURCE: THOLONS

Others: 1177

U.S. 38 U.K. 32

Canada: 22

Japan: 11

Norway: 33

Singapore: 44

Belgium: 00 ((eesstt..))

South Korea: 11Germany: 11

Hong Kong: 11

T he number of jobs cut in Aug.’08 was 14 percent less than the

number quoted in July. August wit-nessed slightly better market condi-tions compared to the last couple ofmonths, though the number is stillstubbornly high at 88,736, states thejobs cut report released by global out-placement consultancy, Challenger,Gray & Christmas. Demand down-turn has been stated as the top reasonby employers for the jobs cut, howev-er, the year-to-date category marketconditions is still topping the chart forthe reasons behind the cuts.

Till now, employers in various sec-tors have announced 667,996 jobscut, which is 29 percent higher than2007 eight-month total of 515,855.The months of May and July have jolt-ed the entire jobs market so badly thatthere are very less chances of recoverywithin this year. After the phase of2001 to 2005 that repeatedly sawover a million yearly positions cut byemployers, just three years later, 2008is set to join the “over a million” jobscut club.

Even though 2002 was a bad yearwith 1,466,823 jobs cut in total, thesummer of 2008 beats the summer of2002. Hopes of a late summer reprievein layoffs were dashed by heavy down-sizing in the automotive and govern-ment sectors, where employersannounced 17,233 and 12,328 jobcuts, respectively. This level of summerjob cutting has not been seen since2002, when the country was stillstruggling to recover in the wake of the2001 recession and September 11,according to the firm.

The number of CEOs exitstouched 144, the highest mark since

May 2007. The 144 exits are 16.1 per-cent higher than the previous monthwhen 124 exits were recorded. GS

Demand Downturn: TopReason for Jobs Cut in Aug.BY NAMITA GOEL

Jobscut

MONTH-BY-MONTH TOTALSMonth 2008 2007l May 103,522 71,115l June 81,755 55,726l July 103,312 42,897l August 88,736 79,459

Month 2008 2007l May 15,505 3,948 l June 18,936 3,713 l July 14,735 1,175 l August 1,337 30,892

AUGUST JOBS CUT REASONS

MORTGAGE / SUB-PRIME LAYOFFS

Reasons Number of layoffs

l Demand downturn 20,614

l Closing 16,779

l Cost-cutting 15,617

l Restructuring 11,821

l Market conditions 8,294

l Bankruptcy 3,871

l Merger/acquisition 3,646

l No clear reason 2,655

l Fluctuating sales 1,986

l Relocation 1,092

l Rising Costs 930

l Order cancellation/ 733 reduction

l Outsourcing 450

l Voluntary severance 115

l Reorganization/ 103consolidation

l Technological update 30

Total 88,736SOURCE: CHALLENGER, GRAY & CHRISTMAS

24x 7

6


coverstory_ik.qxp 9/22/2008 12:29 PM Page 14

They are not Bangalores or Makatisyet; but they could get there soon-er. There are nine new entrants and

six dropouts from the 2007 list

Premier Sponsor

5500TOP

OUTSOURCINGOUTSOURCING

CITIESCITIESGlobal Services-Tholons Study

EMERGINGGLOBAL

coverstory_ik.qxp 9/22/2008 5:24 PM Page 15

TIER-1 GLOBAL SERVICE PROVIDERSsuch as Accenture, ACS, Cognizant,Capgemini, CSC, EDS, Genpact, HP, IBM,Infosys, LogicaCMG, TCS, Satyam andWipro continue to increase their global pres-ence. The difference is that service providers

such as IBM and Accenture are looking to tier-2 and tier-3Indian cities for expansion, while the Indian providersInfosys, TCS and Wipro are heading toward cities in SouthAmerica and Eastern Europe.

In a way, the choice of the right city has become moreimportant than the choice of the country. It is rather the city(than the country), which represents a more accurate pack-age of attributes that service providers seek. Thus, Cebu Cityand Monterrey matter more than the Philippines andMexico from a decision-making standpoint.

This study identifies those locations that are globally rec-ognized for their “specific” outsourcing services offerings aswell as the ones that are establishing themselves as special-ized locations for particular outsourcing functions. To makethe study complete, like last year, we have also come up withthe names of top emerging outsourcing cities as that’s themain focus of this study. There are eight such cities insteadof five that we had reported last year. (See Table 2 —“Top 8Global Outsourcing Locations.”)

This year’s list of top 50 emerging global outsourcingcities, though, has quite a few surprises. We profiled nine“new entrants” — including Quezon City (ThePhilippines), Toronto (Canada), Rio de Janeiro (Brazil),Mexico City (Mexico), Jaipur (India), Singapore(Singapore), Chengdu (China), Guadalajara (Mexico) andMandaluyong City (The Philippines) — to the list. (SeeTable 3.) Last year we had profiled top 15 emerging out-sourcing locations.

The Perspective of the CityLocation assessment based on a city as opposed to a

country is reflective of the ongoing trend we are witnessingin the global outsourcing arena. Service providers are look-


THE LOCATIONTHE PARAMETERS OF EVALUATING THE CITIES

In order to provide location assessment, Tholonshas considered “six general categories” — “Scale &Quality of Workforce (including education),”“Business Catalyst,” “Cost”, “Infrastructure,” “RiskProfile” and “Quality of Life.” Within these six seg-ments are fifteen sub-categories, each possessing acorresponding weight.

The parameters above are the same components,which differentiate cities, and to a large extent deter-mine their individual capacities to fulfill particular ser-vices. Cities with large, English-proficient labor pools,for example, may be better equipped to provide voice-based customer support while a smaller city withrobust infrastructure and adequate supply of networkengineers may be better candidates to provide infra-structure managed services. Consequently, there is nodefinitive set or order of parameters, which will providea definitive advantage for each city across all servicelines. Each parameter must take into consideration anumber of determining factors: Type of service, desiredscale, and nature of delivery, to name a few aspects.

THE LOCATION-ASSESSMENT FRAMEWORK

Our “Location-assessment Framework” takes intoconsideration an expansive set of variables when eval-uating a city’s potential as a delivery center. Further, thequantitative data gathered is substantiated and ana-lyzed qualitatively.

In analyzing the capacity and potential of individualcity centers, Tholons identifies the inherent character-istics of a location — its key differentiator and at thesame time, its primary inhibitor. The recognition ofthese city-specific aspects is also essential in correlat-ing which specific service lines a city has the potentialor is most capable in delivering. City A for example, canhave a high percentage of its labor pool that is English-proficient, but may also have a smaller percentage of ITor technical-related university graduates as comparedto City B — having a low number of English-speakinggraduates, but a more favorable ratio of IT graduates. Inthis case, we can infer from a resource perspective, thatCity A may be more suitable for delivery of customer-support services, while City B may be better equippedto fulfill ITO-related services such as engineering orsoftware development.

From a service-delivery perspective, the more suc-cessful outsourcing cities have leveraged on their

The Global Services-Tholons Study

By Avinash Vashistha, Tholons, andImrana Khan, Global Services

cstory_Final.qxp 9/22/2008 3:25 PM Page 16

ing to identify and tap the inherent capabilities and capaci-ties of specific locations. This transition on how serviceproviders view locations illustrate both the maturity of theoutsourcing model and heightened focus on optimization of

service-delivery. Today, a single provider can have centers inmultiple countries and cities, with each city having the opti-mal conditions to fulfill specific service lines. Software devel-opment can be done in Bangalore, customer service can be


ASSESSMENTavailable resources to capture specificmarket segments. Cities in the Philippinesfor example, continue to avail of theirlarge English-proficient workforce incatering to the U.S. customer-service mar-ket. The same holds true for Central andSouth American cities that have beenquick to capitalize on the growingHispanic population in the U.S. Further,despite the U.S. currency’s recent slide,these destinations continue to be morecost efficient as compared to onshore(U.S.) delivery centers.

Due to the deteriorating political situ-ation in the state of WestBengal, we continue to putKolkata on the watch list.Political disturbances con-tributing to an unfavorableclimate for business wouldprove to be a big hindrancefor the city to attract invest-ments. However, we expectthe government to take steps to restorenormalcy and to continue on the growthpath as an outsourcing destination.

Cities are differentiated not only bytheir available resources (quality/type oflabor force, cost, available infrastructureand such), but also by their long-termpotential in fulfilling demand for specificservices. In many instances, these scale-related inhibitors can directly impactwhat type and size of outsourced ser-vices that location can fulfill. For head-count-dependent processes such asvoice-based customer support, lower

cost and large population bases areoften required.

There are also various regional andecosystem dynamics, which differentiatethe capacities of cities. A convergingEurope is a prime example. As Europecontinues to expand its unified market,cost-effective destinations in EasternEurope will continue to increase theirmarket share of outsourced servicesfrom customer nations in WesternEurope. In this regard, Eastern Europeancities such as Kraków and Prague willcontinue to leverage their nearshore and

cultural compatibility advan-tages. Alternatively, cities incountries with large popula-tion bases such as India andChina will maintain competi-tive advantage by offeringscale and labor costs, whichmost destinations will beunable to counter. Cities in

these two countries — with millions ofpeople — will also have the best potentialto offer a wider array of outsourced ser-vices. However, this does not necessarilyimply that the advantage is exclusive tosuch mega cities. Cities such as Ho ChiMinh City, Vietnam, and even smallerdestinations like Monterrey, Mexico havemade inroads in high-value ITO and engi-neering services. For similar sized citiesthat may have demographic constraints,identifying the available strengths withintheir ecosystem is essential in develop-ing their respective niche markets. GS


Budapest

Shanghai

Santiago

Singapore

BPO (Contact Center)

CostScale & Quality of WorkforceInfrastructureRisk ProfileBusiness CatalystQuality of Life

ITO (Infrastructure Managed Services)

Scale & Quality of WorkforceInfrastructureBusiness CatalystCostRisk ProfileQuality of Life

CITY CHARACTERISTICS WITH RESPECT TO SPECIFIC SERVICE

Low

Pri

ori

ty

H

igh



done out of Makati City, while engineering services aredelivered out of Kraków. The one-stop-shop country modelhas in fact given way to the more efficient, multicity, best-of-breed city model.

Further, this also reflects the increased responsibilities,which local government units now have in developing theirrespective cities. City officials, infrastructure providers andlocal stakeholders are often better able to promote, stimulateand market their city’s specific capabilities to potential out-sourcing service providers. Moreover, local stakeholders areable to address infrastructure and ecosystem concerns in atimelier manner. Many city mayors and local governmentunits, for example, can provide city-specific tax incentivesand telecom providers can deploy connectivity in a muchmore targeted scale. In contrast, nationwide agendas anddevelopmental rollouts, as otherwise mandated by nationalgovernments, are often prolonged and drawn out — a paceunfavorable to most service providers.

Though we highlight the increasingly vital role, whichindividual cities play in a country’s outsourcing industry, wedo not discount the significance that national governmentsand institutional bodies play in shaping the sector. Nationalgovernments and industry bodies are commonly tasked toprovide guidance, policies and set direction. Likewise, theseorganizations provide essential monitoring and regulatoryroles — ensuring that labor and business-related concernsare managed and implemented.

As such, the role of the city with regards to outsourc-ing should not be viewed as one, which has becomeentirely independent of the country. Rather, one shouldview the evolution of the city as a direct result of a coun-try’s inherent capabilities as an outsourcing provider.Referring to Prague as a “Center for Excellence” for soft-ware development, or Ho Chi Minh City for ITOutsourcing (ITO) processes, for example, highlights therespective country’s strengths.

The Locations & the Year Gone ByThe past eighteen months have been an incredibly

dynamic period for the global outsourcing industry. The ongoing slowdown in the U.S. economy, the contin-uing maturation of the outsourcing model, the rise oftier-2 and tier-3 cities as delivery centers, the heightenedlevel of competition and emergence of “global BusinessProcess Outsourcing (BPO) providers” are some of thekey ecosystem movements we continue to closely moni-tor. We have noticed that with each fundamental shift in the market, stakeholders in turn are requiring a deep-er understanding of delivery locations. This level ofknowledge has become essential not only to maintainfinancial objectives, but more so to ensure competitiveadvantages and longevity in an increasingly competitivemarket environment.

The region-wise analysis reveals something near to obvi-

ous. That is, Asian cities are the ones that rock the top 50cities chart. However, the interesting thing is that not onlythe tier-1 cities in the Asia-Pacific region are ruling the out-sourcing industry but also there are many tier-2 and tier-3Asia-Pacific cities that are fast emerging as outsourcing des-tinations. Of the top nine emerging cities, six — Cebu City(The Philippines), Shanghai (China), Beijing (China), HoChi Minh City (Vietnam), Kolkata (India) and Shenzhen(China) — are from the Asian continent. Thirty-eight per-cent of the top cities list have been occupied by such loca-tions followed by 26 percent by Central & EasternEuropean cities.


LOCATION FIRST

Ah! The debate is still alive. It is morethan a decade since Jack Welch madethe world believe in his 70-70-70 for-mula — 70 percent of the GE’s process-

es can be outsourced; 70 percent of what can beoutsourced can be offshored; and 70 percent ofwhat can be offshored can be executed in India.Many technology and pure services firms haveactually bettered on that formula. There arestart-up firms in the valley that are born global —just a few heads in the U.S. and rest in India.

Yet, the debate remains. I will but add onemore page to that. But as the Nobel Prize win-ning economist Amartya Sen, well, argues,sometimes the arguments are as important asthe final conclusion. At least majority of Indiansbelieve so and I am no exception either.

First let us examine the question a little care-fully: Should you choose a location first or apartner first? The question, then, inherentlyexcludes the captive option. It is for a companythat has decided to outsource to a third-partyservice provider (a partner). The reason I amspecifically pointing this out in the beginning isthat the importance of location selection is min-imized significantly, if not eliminated completelyin this case.

Now, let us build typical scenarios. Let’s say, to start with, a very large company

with global business presence is looking at amega outsourcing deal. In this case, it is safe toassume that it will need the work to be executedin different languages, for different time zoneswith some business continuity or at least disas-

By Shyamanuja Das


Losers & GainersWith each passing year, our location assessment continues

to be a target that’s moving and morphing like an amoeba,with a new set of market variables that need to be considered.Our location-assessment framework, thus, follows a deeperapproach to identify the emerging global outsourcing loca-tions. Thus, we see new entrants — even some among theones who topped the emerging cities list — spanning overthe list as well some going away from the listing. The citiesthat were recognized in our last year’s list and that could notmake to the list this time can be seen in the table belowwhich also shows the list of new entrants (See Table 1).

The Bangalores …The year’s list of top global Bangalores is bigger than the

last year’s. Our Top 5 Global Outsourcing Cities list has nowbecome Top 8 Global Outsourcing Cities with some newmembers — Chennai (India), Hyderabad (India), MakatiCity (The Philippines) and Pune (India). As expected,Indian cities dominate the top list once again. Makati City,as part of the Philippines NCR (National Capital Region)holds its ground, while Indian cities with the entrance ofChennai, Hyderabad and Pune continue to dominate thetop chart. (See Table 2.)


OR PARTNER FIRST?

ter-recovery capability built in. All these point to amultilocation strategy. Any large service providerthat can execute this contract should either havepresence in multiple locations or capabil-ity to quickly add some locations, or ide-ally both. Fortunately for the customersof outsourcing, most large global serviceproviders, irrespective of their country oforigin, are today building that capability.Whether it is IBM, Accenture or EDS orTCS, Infosys and Wipro, all of them todayhave a strong global delivery strategy.

Let us say a small or medium company wantsto outsource what could be of significant size forthat company but general IT or business process,like finance and accounting work or entire cus-tomer-service work, even though by sheer dollar

terms it may not be classified as a mega deal. Inthat case, it may not always be possible for thecompany to influence the service provider to goto a location of its choice. But in practical terms,it may not be a major roadblock, as most serviceproviders today are fairly mature in generic busi-ness-process delivery, and they will always find agood fit for the work. So, this one too goes topartner first.

But what about a large (or even) small compa-ny looking to outsource very specialized work?Say, design of some automotive components ordesign of algorithms? In that case, while a part-ner-first approach can be convenient, one wouldargue that a better approach is to select a locationfirst. And considering that most specialized workdoes not happen in hundreds of locations, thecompany will have to choose between two to threelocations; that is not that tough.

In many such cases, it is important to choosenot just the country but specific location. Take

engineering design services. WithinIndia, there are a few places like Pune(otherwise a tier-2 location), Bangalore,Hyderabad and Chennai that come ontop, rather than Mumbai or Delhi. The rational behind choosing/shortlist-ing locations first, in these cases, is notjust because of the capability of theworkforce, but there is the danger of

missing out good, small, specialized players, ifone does not have a first-hand evaluation ofthese locations.

Shyamanuja is Editor, Dataquest, CyberMedia.

GS


Continued on page 26


8The Global Services-Tholons Study


OUTSOURCINGTOP GLOBAL

OUTSOURCINGCITIES

l Bangalore Indial Chennai Indial Delhi NCR Indial Dublin Irelandl Hyderabad Indial Makati City The Philippinesl Mumbai Indial Pune India

With a rapidly maturing, expanding global outsourcingindustry, our last year’s “Top 5 Global Outsourcing Cities”chart has now become “Top 8 Global Outsourcing Cities.”Makati City, as part of the Philippines NCR (NationalCapital Region) holds its ground, while Indian cities withthe entrance of Chennai, Hyderabad and Pune continue todominate the top chart.

REGION-WISE BREAKUP (%)

n=50

Chart 1

38

26

20

642 4

Middle East

Western Europe

Africa

North America

South America

Central & Eastern Europe

Asia Pacific

The region-wise analysis reveals something near toobvious — Asian cities are the ones that rock the top 50cities chart. However, an interesting point is that notonly the tier-1 cities in the Asia-Pacific region are rulingthe outsourcing industry but also many tier-2 and tier-3Asia-Pacific cities are fast emerging as outsourcing des-tinations. Of the top nine emerging cities, six — CebuCity (The Philippines), Shanghai (China), Beijing (China),Ho Chi Minh City (Vietnam), Kolkata (India) andShenzhen (China) — are from the Asian continent.Thirty-eight percent of the top cities list has been occu-pied by such locations followed by 26 percent byCentral & Eastern European cities.

DROPOUTSRank (2008) City Country3311 Perth Australia3366 Baguio City The Philippines3377 Leeds U.K.

(Yorkshire & Humber)3388 Birmingham, Alabama U.S.4455 Oklahoma City, U.S.

Oklahoma 5500 Juarez Mexico

NEW ENTRANTS*Rank (2008) City Country2211 Quezon City The Philippines2222 Toronto Canada2266 Rio de Janeiro Brazil3300 Mexico City Mexico3311 Jaipur India3366 Singapore Singapore3377 Chengdu China4444 Guadalajara Mexico4455 Mandaluyong City The Philippines

Singapore

Dublin Docklands

Makati City

*THE NEW ENTRANTS HAVE BEEN PROFILED IN THE NEXT PAGES STARTING FROM PAGE NO. 30 TO PAGE NO. 34.

Table 1

Table 2




1 4 Cebu City Philippines +8 0.8 Philippine peso (PHP) PHP 46.59

2 8 Shanghai China +8 21.6 Chinese yuan (CNY) CNY 6.84

3 10 Beijing China +8 15.9 Chinese yuan (CNY) CNY 6.84

4 6 Ho Chi Minh City Vietnam +7 5.4 Vietnamese dong (VND) VND 16,527.50

5 16 Kraków Poland +1 0.8 Polish zlotych (PLN) PLN 2.46

6 5 Kolkata India +5:30 13.6 Indian rupee (INR) INR 44.80

7 11 Cairo Egypt +2 7.7 Egyptian pound (EGP) EGP 5.41

8 15 São Paulo Brazil -3 10.9 Brazilian reai (BRL) BRL 1.77

9 14 Buenos Aires Argentina -3 3.0 Argentine peso (ARS) ARS 3.06

10 13 Shenzhen China +8 26.3 Chinese yuan (CNY) CNY 6.84

11 12 Hanoi Vietnam +7 2.2 Vietnamese dong (VND) VND 16,527.50

12 9 Chandigarh India +5:30 2.3 Indian rupee (INR) INR 45.12

13 17 Curitiba Brazil -3 1.8 Brazilian reai (BRL) BRL 1.77

14 20 Prague Czech Republic +1 1.9 Czech koruna (CZK) CZK 17.59

15 23 Pasig City Philippines +8 0.6 Philippine peso (PHP) PHP 46.59

16 18 Dalian (Dairen) China +8 3.9 Chinese yuan (CNY) CNY 6.84

17 21 Coimbatore India +5:30 4.7 Indian rupee (INR) INR 45.12

18 19 Santiago Chile -4 5.4 Chilean peso (CLP) CLP 529

19 7 Colombo Sri Lanka +5:30 2.5 Sri Lankan rupee (LKR) LKR 107.88

20 25 Johannesburg South Africa +2 3.9 South African rand (ZAR) ZAR 8.06

21 NEW Quezon City Philippines +8 2.3 Philippine peso (PHP) PHP 46.59

22 NEW Toronto Canada -4 2.5 Canadian dollar (CAD) CAD 1.07

23 22 Guangzhou (Canton) China +8 14.2 Chinese yuan (CNY) CNY 6.84

24 24 Belfast Ireland Offset 0.6 Euro (EUR) EUR 0.71

25 28 Budapest Hungary +1 2.5 Hungarian forint (HUF) HUF 170.66

26 NEW Rio de Janeiro Brazil -3 6.1 Brazilian reai (BRL) BRL 1.77

27 29 San José Costa Rica -6 0.4 Costa Rican colon (CRC) CRC 548.79

28 26 Warsaw Poland +1 1.7 Polish zlotych (PLN) PLN 2.46

29 27 Brno Czech Republic +1 0.7 Czech koruna (CZK) CZK 17.59

30 NEW Mexico City Mexico -6 8.5 Mexican peso (MXN) MXN 10.55

31 NEW Jaipur India +5:30 6.5 Indian rupee (INR) INR 45.12

32 33 St. Petersburg Russia +3 4.8 Russian ruble (RUR) RUB 25.61

33 32 Kuala Lumpur Malaysia +8 1.9 Malaysian ringgit (MYR) MYR 3.46

34 34 Accra Ghana Offset 2.0 Ghanaian Cedi (GHS) GHS 1.16

35 40 Bratislava Slovakia +1 0.5 Slovak koruna (SKK) SKK 21.39

36 NEW Singapore City Singapore +8 4.6 Singapore Dollar (SGD) SGD 1.44

37 NEW Chengdu China +8 7.8 Chinese yuan (CNY) CNY 6.84

38 43 Bucharest Romania +2 1.9 Romanian leu (RON) RON 3.59

39 42 Moscow Russia +3 11.0 Russian ruble (RUR) RUB 25.61

40 41 Sofia Bulgaria +2 1.3 Bulgarian lev (BGN) BGN 1.39

41 46 Monterrey Mexico -6 1.1 Mexican peso (MXN) MXN 10.55

42 30 Glasgow City U.K. Offset 0.6 British pound (GBP) GBP 0.56

43 44 Brasília Brazil -3 2.5 Brazilian reai (BRL) BRL 1.73

44 NEW Guadalajara Mexico -6 1.6 Mexican peso (MXN) MXN 10.55

45 NEW Mandaluyong City Philippines +8 0.3 Philippine peso (PHP) PHP 46.59

46 47 Tallinn Estonia +2 0.4 Estonian kroon (EEK) EEk 11.08

47 39 San Antonio U.S. -6 1.3 U.S. dollar (USD) USD 1

48 35 Halifax Canada -4 0.4 Canadian dollar (CAD) CAD 1.07

49 48 Kiev Ukraine +2 2.7 Ukrainian hryvna (UAH) UAH 4.38

50 49 Ljubljana Slovenia +1 0.3 Slovenian tolars (SIT) SIT 169.70

Rank(2008)

Rank(2007)

Cities Country TimeZone(GMT)

Population (in mn)

est. in 2007

Currency Exchange Rate (as of Sept. 10th, '08)

USD 1 =

Top Emerging Global Outsourcing Cities50Table 3


ad.qxp 9/22/2008 6:56 PM Page 22

ad.qxp 9/22/2008 6:56 PM Page 23



1 Accenture, ACS, Convergys, eTelecare, People Support Univ. of the Philippines, Univ. of San Carlos

2 Accenture, Cognizant, EDS, Infosys, Neusoft, TCS, Wipro, Unisys East China Univ. of Science & Technology, Shanghai Jiao Tong Univ.

3 Accenture, Capgemini, EDS, IBM, Infosys, TCS, Wipro, Unisys Beijing Univ. of Tech., Peking Univ., Renmin Univ. of China

4 FPT Software, IBM, Luxoft, Vietnam Software Outsourcing Co. Ho Chi Minh City National Univ., Univ. of Technical Education

5 Capgemini, HCL, Hewitt, IBM, LogicaCMG, Philip Morris AGH Univ. of Science & Technology, Cracow Univ. of Technology

6 Capgemini, Cognizant, Genpact, HCL, IBM Daksh, TCS, Wipro Univ. of Calcutta, Bengal Engineering & Science Univ.

7 C3, Convergys, EDS, Raya Contact Center, Tamima, Xceed, Unisys Al-Azhar Univ., Ain Shams Univ., Cairo Univ., Call Center Academy

8 Accenture, Convergys, Cisco, Dell, EDS, Fidelity, Satyam, TCS Univ. of Sao Paulo, Federal Univ. of Sao Paulo

9 Accenture, Convergys, Cognizant, EDS, HP, Globant, TCS, TeleTech Universidad Catolica Argentina, Universidad de Buenos Aires

10 ACS, AT&T, HP, IBM, Siemens, Satyam Shenzhen Univ., Shenzhen Institute of Technology

11 Vietnam Offshore Services, Spi, Vietnam Software Outsourcing Co. Hanoi Univ. of Technology, Hanoio National Univ.

12 IBM Daksh, Infosys, Net Solutions, Netsoft Global Services, Quark Punjab Univ.

13 Accenture, Atos Origin, Wipro, Unisys The Federal Univ., Catholic Univ., The Federal Technical Univ.

14 Accenture, HP, Infosys, LogicaCMG, Unisys Charles Univ., Czech Technical Univ.

15 Sitel, Unisys Univ. of the City of Pasig

16 Accenture, Convergys, IBM Global Services Dalian Univ. of Technology, Dalian Maritime Univ.

17 Cognizant, TCS, Wipro Anna Univ., Bharathiar Univ.

18 Accenture, EDS, TCS, Unisys Pontificia Universidad CatÓlica de Chile, Univ. of Chile

19 Astron BPO, IBM, Lingua, LogicaCMG, Virtusa, WNS Univ. of Ceylon, Univ. of Colombo, Univ. of Peradeniya

20 Accenture, Satyam, TCS, Unisys Univ. of Johannesburg, Univ. of the Witwatersrand

21 IBM Daksh, C3, Sitel, One Touch Center, eTelecare, Sykes St. Paul Univ. Quezon City, Univ. of the Philippines

22 Accenture, Cognizant, EDS, Infosys, LogicaCMG, TCS, Unisys Univ. of Toronto, York Univ., Ryerson Univ.

23 Accenture, Atos Origin, Capgemini, EDS, Siemens, Unisys Sun Yat-sen Univ., South China Univ. of Technology, Guangzhou Univ.

24 Firstsource, HCL BPO Services, TeleTech Queen's Univ. Belfast, Univ. of Ulster

25 Accenture, Convergys, EDS, EPAM, Genpact, LogicaCMG, TCS Budapest Univ. of Tech. & Economics, Corvinus Univ. of Budapest

26 DBA, EDS, Politec, Satyam, Teleperformance, Unisys Federal Univ. of Rio de Janeiro, Federal Univ. of State of Rio de Janeiro

27 Accenture, CCC, IBM, Unisys, SlashSupport Univ. of Costa Rica

28 Accenture, EDS, TCS, Unisys Univ. of Warsaw, Warsaw Univ. of Technology

29 Accenture, CSC, IBM Global Services, Ness Technologies Masaryk Univ., Brno Univ. of Technology

30 Accenture, ACS, EDS, Hildebrando, Softtek, Stefanini, TCS, Unisys National Autonomous Univ. of Mexico, Metropolitan Autonomous Univ.

31 Infosys, Genpact, ST Microsystems, Spanco Rajasthan Univ., Rai Univ.

32 EPAM, Exigen Services Herzen State Pedagogical Univ. of Russia, Saint Petersburg State Univ.

33 Accenture, Convergys, HCL, LogicaCMG, TCS, Wipro Univ. of Malaya, Univ. of Kuala Lumpur, Tech. Univ. of Malaysia

34 ACS Methodist Univ. College Ghana, Wisconsin Intl. Univ. College

35 Ness Technologies, Unisys Comenius Univ., Univ. of Economics, Slovak Technical Univ.

36 Accenture, CSC, Cognizant, EDS, HCL, IBM, TCS, Unisys, Wipro National Univ. of Singapore, Nanyang Technological Univ., SIM Univ.

37 Augmentum, Dextrys, EDS, Genpact, Neusoft, Wipro Southwest Jiaotong Univ., Chengdu Univ. of Technology

38 Genpact, Ness Technologies, Perot Systems, Unisys, WNS Univ. of Bucharest, Univ. Politehnica of Bucharest

39 Accenture, Convergys, EDS, EPAM, IBM, LogicaCMG Moscow State Technical Univ., Bauman Moscow State Technical Univ.

40 HP, Sofica, SBND Tech., Sutherland Global Services, Unisys Saint Clement of Ohrid Univ. of Sofia, Technical Univ. of Sofia

41 Accenture, ACS, Sutherland Global Services Univ. of Monterrey

42 Unisys, LogicaCMG Univ. Of Glasgow, Univ. Of Strathclyde, Glasgow Caledonian Univ.

43 Accenture, Convergys, Politec, TCS, Unisys Univ. of Brasilia

44 TeleTech, Hispanic Teleservices, Perot Systems, TCS Universidad de Guadalajara, Universidad Panamericana

45 CPI Outsourcing, eTelecare, IBM Daksh, ICT Group Don Bosco Technical College, The Jose Rizal Univ., The Rizal Tech. Univ.

46 IBM, Hansapank, LogicaCMG, SAS (SSC*), SEM IT Partner, Solvus Tallinn Univ., Tallinn Univ. of Technology, Tallinn College of Engineering

47 Univ. of Texas, St. Mary's Univ., Trinity Univ.

48 ADP, EDS, Keane, TeleTech, CSC, Unisys, Fujitsu Dalhousie Univ., Saint Mary's Univ., Univ. of King's College

49 EPAM, Luxoft, GlobalLogic, LogicaCMG Kyiv National Technical Univ., Kiev National Taras Shevchenko Univ.

50 Unisys Univ. of Ljubljana

Rank(2008)

Key Service Providers Major Universities

Top Emerging Global Outsourcing Cities50




English

English, Japanese

English, Japanese, Korean

Chinese, English, French

English, Polish, Japanese

English

Arabic, English, French, German, Spanish

English, Portuguese, Spanish

English, French, Portuguese, Spanish

Chinese, English

Chinese, English, French

English


English, German

English

Chinese, English

English

English, Spanish

English

English

English

English, French

Chinese, English

English, Irish

English, German


English, Spanish

English, Polish

English

English, Spanish

English

English

English

English

English

English

Chinese, Japanese, English

English, Romanian

English, Russian

English, French

English, Spanish

English


English, Spanish

Filipino, English, Chinese

English, French, German, Finnish

English

English and French

English, Russian, Ukrainian

English, Slovene

Language Skills

CHINA, CHINA, EVERYWHERE

Whether it is the 2008Olympic Games, or the list ofemerging global outsourcinglocations, China dominatesboth. In the former, Chineseathletes bagged the maximumgold medals, and in the latterChinese cities claimed sixplaces. These cities are: l Shanghai (at the 2nd position)l Beijing (at the 3rd)l Shenzhen (at the 10th)l Dalian (at the 16th)l Guangzhou (at the 23rd)l Chengdu (at the 37th).

Of them, Shanghai is alreadyknown as one of the maturedestinations for providing ser-vices offerings such as F&A,product development, R&D andtesting, and Guangzhou isknown for engineering-servicesoffering. Outsourcing servicessuch as application develop-ment and maintenance andbusiness analytics are now alsobeing offered from Shenzhenand Shanghai, respectively.

Consequently, the countryhas become home to numerousIT and BPO services providers.While global providers such asAccenture, ACS, Atos Origin,AT&T, Capgemini, Cognizant,Convergys, EDS, Genpact, HP,Infosys, IBM, Satyam, TCS,Wirpo and Unisys have theirpresence across China, localproviders such as Augmentum,Bleum, Dextrys and Neusoft arealso known at a global scale.

Even though a lot is happen-

ing in the Chinese outsourcingspace, there are some otherareas — encouraging the usageof English language in schools —which the Chinese governmentis focussing on.

With supportive governmentand favorable outsourcing condi-tions, China’s outsourcing indus-try is set to flourish further.That means we might see somenew Chinese names in this listor some of the top emergingcities moving to the top out-sourcing cities’list in our nextstudy on out-sourcingcities. GS




Functions Established Emerging

ADM Bangalore, Chennai, Dublin, Hyderabad, Mumbai Ho Chi Minh, Pune, Shenzhen

Business Analytics Bangalore, Chennai, Delhi (NCR), Kraków, Mumbai, Bucharest, Cairo, Shanghai

Engineering Services Bangalore, Chennai, Guangzhou, Pune, St. Petersburg Coimbatore, Delhi (NCR), Moscow,

Prague

Finance and Accounting Bangalore, Kraków, Makati City, Mumbai, Shanghai Cebu City, Colombo, Pune

Human Resources Bangalore, Bucharest, Budapest, Makati City, Prague Cebu, Kraków, Tallinn

Legal Services Chennai, Makati City, Mumbai Cebu City, Johannesburg, Pune

Product Development Bangalore, Chennai, Ho Chi Minh, Moscow, Shanghai Bucharest, Pune, São Paulo

Research and Development Bangalore, Dublin, Moscow, Shanghai, St. Petersburg Beijing, Bucharest, Chennai, Prague

Testing Bangalore, Chennai, Ho Chi Minh, Hyderabad, Shanghai, Bucharest, Cairo, São Paulo

Toronto

Outsourcing Cities by Functions

NEW CATEGORIES

Functions Established Emerging

Contact Center Bucharest, Buenos Aires, Cairo, Dalian, Kraków, Casablanca, San José, São Paulo

(Multilingual) Mexico City

Contact Center (English) Bangalore, Delhi (NCR), Dublin, Makati City, Mumbai, Cebu City, Kolkata, Pune

Toronto

WWhhiittee:: Same as last year; RReedd:: Jumped from 2007 emerging list to 2008 list of established cities; BBllaacckk:: New entrants

Can You Name this One?In the 2008 Top 50 Emerging Global Outsourcing Cities

list, there is a city that springs the biggest surprise. Here’s aset of clues to find that out:

l In this city, the outsourcing industry continues toflourish tremendously. The outsourcing facilities of global companies such as Capgemini, HCL and PhilipMorris are already operational here.

l In this city, the obvious choices for customers are tooutsource their F&A, business analytics and multilingualcontact-center. The city has had skills in these areas in thepast too. The city is also an emerging location fornearshoring HR services.

l In this city, the labor costs are quite competitive. Anentry-level techie can mint $680 to $600 per month, whilea BPO exec with similar experience can expect his salary to

be between $380 and $100 per month.l In this city, many U.S. and Western European

companies enter much before than other Eastern Europeancities to source their F&A and business-analytical services from.

l In this city, many educational institutions are produc-ing thousands of students every year.

l In this city, the outsourcing industry is expected togrow further.

This city is Kraków, the capital of Poland. The compara-tive analysis reveals that this year Kraków has bagged thefifth place with an improvement of 11 positions from lastyear’s 15th rank.

City by FunctionsAs the global outsourcing market becomes increasingly

competitive, we expect the cities to be more focused in iden-tifying appropriate service lines and in developing their ser-vice-delivery capabilities. This means, as the industrymatures, cities will be compelled to recognize the servicesthey can deliver best. The concept of an individual locationbeing a “one-stop-shop” has given way to “smart/multi/selective sourcing” models, wherein selected processesare outsourced only to the most appropriate destination.

Therefore, we deviate from the notion of an “ideal loca-tion for all outsourcing services.” This study is more inclinedtoward the fact that there are locations which are more suit-able for specific outsourcing processes — services logicallygravitate to destinations where conditions are most optimalfor their delivery.

Table 4

Cathedral, Mexico City




THE RELATIONSHIP BETWEEN COST BENEFIT & COMPLEXITY OF THE PROCESS

Low HighCost benefit

Lo

wH

igh

Co

mp

lexi

ty

On-site

Toronto

Dublin

Glasgow

San Antonio

São Paulo

BucharestKraków

Shanghai

Bangalore

Delhi(NCR)

Dalian

BuenosAires

Cairo

MakatiHo Chi Minh

St. Petersburg

Onshore Nearshore Offshore

HH

HH

HHHH

HH

HH HH

HH

HHHH

HHHH HH

HH

HHHH

The lower cost equation does not always work. It’s alwaysa trade-off between cost benefit and complexity. In manyinstances, where the cost benefit is an advantage for distantoffshore locations, the complexity of services that can beprocessed is consequently lower. For instance, offshore citiessuch as St. Petersburg, Shanghai, Bangalore, Makati City,Ho Chi Minh City and Delhi (NCR), to name a few, pro-vide high-end, complex functions but not at a lower cost.Similarly, customers can easily get the less complex workdone from onshore locations such as San Antonio andGlasgow at a lower price.

Crystal Ball GazingAs the outsourcing industry matures and the quest for

cost-effective and resourceful services-delivery locations con-tinues, we would see some new tier-2 cities making head-lines. A few of them are:

l Nizhniy Novgorod, Russia: This tier-2 city in Russia isalready witnessing huge R&D activities. Intel’s R&D facili-ty is already operational in the city.

l Cork, Republic of Ireland: The city is not only sup-porting the small outsourcing operations but also encourag-ing them to expand further.

l Tianjin, China: Another tier-2 Chinese city is gettingready to serve the global outsourcing services’ buyers on alarger scale. Vast labor pool and low-cost of operations in thecity are sufficient enough to allure the outsourcers.

l Bacolod City, The Philippines: We tag this Fili-pino city as the promising next wave outsourcing city in the country.

l Amman, Jordan: The government is actively support-ing the capital region of Jordan, Amman, to count it amongthe most attractive outsourcing locations in the Middle Eastand African continent.

About the StudyFor the third consecutive year, Global Services and

Tholons have identified the top 50 emerging global out-sourcing cities. These locations are not Bangalores or

Chart 2

Continued on page 34


An IT Services Outsourcing Country Guide

States and Cities that Offer Unique IT Business OpportunitiesBy Daniel Tkach

Mexico City (population: 8,890,000; 19.3 million metro area in-cluded,) is the capital city of Mexico and the economic heart of the country. Greater Mexico City (the metropolitan area) has a population of 19.2 million. Mexico City has a per capita income of more than 23,000 USD (purchasing power parity adjusted 2006) and ranks as the eighth-richest urban agglomeration in the world. From 1999 to 2007, the city has received 106 billion USD in foreign direct investment– mainly in sectors such as fi-nancial services, retail, pharmaceutical, and tourism.

Higher Education and Professional Workforce: The National Autonomous University of Mexico (UNAM) is the largest (with 269,000 students) university in the Americas. Other major high-er-education institutions are the National Polytechnic Institute, the Metropolitan Autonomous University (UAM), the ITAM, the ITESM, the Universidad Panamericana (UP), and the Universi-dad La Salle. 13,000 IT professionals graduate every year.

Why Invest in Mexico City: Mexico City is a very attractive place for foreign investment due to its high infrastructure and human capital standards, as well as the robustness of its in-ternal market. The city welcomes investments and productive projects in the IT field and provides incentives and grants for relevant projects.

Mexico City

The State of Jalisco (population: 6,800,000) strongly supports the growth of IT Mexican companies. It has developed a robust infra-structure for global companies to conduct business in- and- from Jalisco and created advanced technology centers. Jalisco’s main cities are Guadalajara, Chapala and Puerto Vallarta.

Guadalajara is known as the Mexican Silicon Valley. Over 70 international companies, such as General Electric, IBM, Intel, Hitachi, Hewlett Packard, Siemens, Flextronics and Solectron have established facilities in Guadalajara. IT companies in Gua-dalajara offer advanced IT services including application design, development and testing, embedded software for the automotive and aerospace industries, wireless applications, printers, medical devices, and multimedia.

Higher Education and Professional Workforce: Guadalajara is a very important center of universities and educational centers with national and worldwide prestige that include the Universi-dad Panamericana, ITESO, Universidad de Guadalajara, Monter-rey Institute of Technology and the Universidad Autónoma de Guadalajara (U.A.G.). 3,200 IT professionals graduate every year.

Why Invest in Jalisco: Many leading IT and BPO companies conduct operations in the state because of its advantages such as a convenient geographic location, qualified IT human resources, excellent infrastructure and state investment incentives.

State of Jalisco

The State of Mexico (population: 14,000,000) surrounds Mexico City, with which it has practically merged. The main cities in the state are Toluca (the capital), Naucalpan and Tlalnepantla.

The IT companies of the State of Mexico offer a large variety of services including IT consulting, data centers, infrastructure management, and application development and testing. In-dustry solutions focus on the automotive, biotechnology and pharmaceutical sectors. BPO services include contact centers, data mining, help desk, market analysis, F&A services and loan application processing.

Higher Education and Professional Workforce: The State of Mexico is the home of three of the most prestigious universities in Mexico—the National Autonomous University, the State of Mexico University and a campus of the Monterrey Technology Institute. 5,200 IT professionals graduate every year.

Why Invest in the State of Mexico: The State of Mexico has a large number of already established multinational companies. The state population enjoys a high quality of life. There is signifi-cant availability of qualified human resources, and the state has an excellent infrastructure. The government of the state actively supports foreign investments in IT, and offers a rich set of incen-tives and tax exemptions for investors.

State of Mexico

The State of Nuevo Leon (population: 4,500,000) shares a 9 miles border with the U.S. state of Texas. It features a secure high-bandwidth communications network and research and tech-nology parks. The main cities in the state are Monterrey, (the capital), Guadalupe, and Apodaca.

Monterrey is well known in the global IT marketplace and many large Mexican and Indian IT service providers have estab-lished their delivery centers in the city.

Higher Education and Professional Workforce: Monterrey is home to two of the nation’s most prestigious universities, the National Autonomous University of Nuevo Leon and the Insti-tuto Tecnologico de Estudios Superiores de Monterrey (Monter-rey Institute of Technology and Higher Education). Other reput-ed universities include the University of Monterrey (UDEM) and the Universidad Regiomontana. The state has 44 higher educa-tion institutions from which 3,000 IT professionals graduate every year.

Why Invest in Nuevo Leon: Nuevo Leon borders the US, and investors are attracted by an American-style business culture, the availability of highly educated professionals, an excellent infrastructure and a high quality of life. The state government offers incentives and tax exemptions to investors.

State of Nuevo Leon

Sponsored Report

A Report

“Nearshore” outsourcing to Mexico for U.S. buyers offers the advantages of proximity, cultural affinity, time-zone alignment, relatively lower costs, fast and simple visa attainment, ease of software and hardware pro-curement, and the legal and IP protection provided by the NAFTA treaty. The decision of where to conduct business in Mexico, however, depends on your fi rm’s strategy. Some companies prefer the states with the largest population of IT professionals, such as Mexico City, Jalisco, and Nuevo Leon. Others prefer locations with a fast-growing IT industry, good universities and a friendly local environment such as Baja California, State of Mexico, Puebla, Sinaloa, Sonora and Veracruz.

Daniel Tkach is the CEO of PartnersMarket Consulting, Inc. Strategic Marketing advisors to MexicoIT. Contact: [email protected]

The State of Puebla (population: 5,600,000) is located in the cen-ter east of Mexico. Puebla is a strategic state for trade between Europe and the Americas. The main cities in the state are Puebla (the capital), Tehuacan and Cholula.

The most dynamic sectors in Puebla are the automotive, tex-tile and apparel, metalworking, furniture, and chemical indus-tries. The state is home to a competitive workforce specialized in industry and services.

Higher Education and Professional Workforce: Puebla is a national and international center for higher education that fea-tures many universities and technical schools such as the Uni-versidad de las Américas, Universidad Iberoamericana, Ben-emérita Universidad Autónoma de Puebla, Universidad Popular Autónoma del Estado de Puebla and the Monterrey Institute of Technology and Higher Education. 1500 IT professionals grad-uate in Puebla every year.

Why Invest in the State of Puebla: Puebla is rated as “an ex-cellent destination for foreign direct investment” by Standard & Poor’s and Fitch Ratings. The main foreign companies with operations in Puebla are of German, Brazilian, Canadian, Swiss, French and American origin. The Government of Puebla offers attractive incentives for IT investments.

State of Puebla

The State of Sonora (population: 3,100,000) shares an extensive border with the U.S. state of Arizona and a shorter one with New Mexico. The main cities in the state are Hermosillo (the capi-tal), Ciudad Obregón and Nogales.

The industry in Sonora has been oriented to automotive, aerospace and electronics and is now growing fast in Informa-tion Technology. Sonora has built a Technology Park designed specifically for the IT Industry, and two additional Technology Parks are in the planning stage.

Higher Education and Professional Workforce: Sonora fea-tures 48 Universities and multiple specialization schools. The main institution of higher education is the University of Sonora (UNISON), There are 17 universities in Sonora, including two campuses of the ITESM (Monterrey Institute of Technology). 1000 IT professionals graduate every year.

Why Invest in the State of Sonora: The state’s proximity to the U.S., the availability of talented professionals (usually edu-cated in the USA), the high use of English language and the sig-nificant lower operations costs make Sonora a very attractive lo-cation for IT investments, and a natural option to serve the U.S. West Coast. The government of Sonora actively supports foreign investments in IT through its “soft-landing” program.

State of Sonora

The State of Sinaloa (population: 2,700,000) is located in the north west of the Mexican Republic The main cities in the state are Culiacán (the Capital), Mazatlan and Los Mochis.

The technology sector of the state of Sinaloa is growing at a yearly rate of 300%. The main focus of the IT industry in Sinaloa is on Contact Centers and nearshoring of application develop-ment services. The state has one of the largest IT clusters in Mexico that gathers fifty-five companies of advanced IT matu-rity level.

Higher Education and Professional Workforce: Sinaloa fea-tures 48 Universities and multiple specialization schools. 3000IT professionals graduate every year, and a large percentage of them are English – Spanish bi-lingual.

Why Invest in the State of Sinaloa: Sinaloa is an excellent location for IT industry investments for global IT providers that want to establish a nearshore delivery center in Mexico with the low cost environment offered by a tier-2 location. The state is conveniently located very close to the U.S., and its time zone is CST. The state government offers generous incentives for inves-tors in technology.

State of Sinaloa

The State of Veracruz (population: 7,200,000) is located in the east-central part of the Gulf of Mexico The main cities in the state are Xalapa (the capital), and the port cities of Veracruz and Coatzacoalcos.

The state’s principal natural resource and dominant industry is oil; it is the main extraction, processing, and transport hub for much of the country’s oil reserves and is a leading producer of agricultural products. The ver@cluster is a regionally highly competitive IT cluster.

Higher Education and Professional Workforce: Veracruz has 49 universities that offer degrees in information technology. The main universities are Universidad Veracruzana, Universi-dad Autónoma de Veracruz and Universidad Mexicana, plantel Veracruz. 1100 IT professionals graduate every year.

Why Invest in the State of Veracruz: The government of Ve-racruz is strongly committed to the growth of the state and pro-vides incentives and tax breaks, creating excellent opportunities for investment. The environment is friendly and the cost of living, conducting business and building infrastructure is very low.

State of Veracruz

A Report

Learn more about the Mexican states and cities at www.mexico-it.com or call 1-866-639-4248.


Supportive government, world-class infrastructure, vast andaffordable talent pool help the city to bag 21st position in the list

Quezon City is the most populous city in the country with 2.3 millionpeople; a third of its residents under 15 years. These demographicspoint toward the city’s readiness to tackle new opportunities in the nextthree to five years.

With the help of 65 colleges and universities, the city produces an enormous num-ber of educated workerforce every year. To leverage the vast talent pool for the growthof the BPO industry, the city’s government is taking several innovative steps includ-ing the introduction of a 320-hour competency course for call-center agents for pooron Sept. 15th, 2008. Besides free meal, transportation allowance will also be provided.

As of now, the city has lured close to 57,000 business establishments, with BPOsfinding the city a cost-effective location. At present the city has over 60 BPOs andabout 35 call centers. A BPO agent in the city earns more than $250 per month. Alsothe labor costs in the city are comparable to other major global outsourcing cities.

Even though the monthly rental charges in Quezon City is $2 to $4 per squarefeet, registering property for any business purposes can take about 39 days in orderto complete the eight property registration procedures.

Quezon City has good infrastructure, and is well networked with the major high-ways, thoroughfares and mass transit systems of Metro Manila. Even the longest high-way in the metropolis and the country’s widest highway run through the City. Twoelevated light rail systems also make commuting, to and from Quezon City easy. GS

AAbboovvee:: Libis by night locatedat the Southeastern cornerof Quezon CityBBeellooww:: Katipunan Avenue, amajor road in Quezon City

Quezon City, The Philippines

One of the good options for the U.S.-based companies tonearshore their testing and contact-center functions

Toronto, the city with a population of 2.5 million, is known for theimmense R&D activities, skilled talent pool, renowned universities, sup-portive government initiatives and world-class infrastructure. Theinformation and communication technology sector is the region’s

largest private-sector employer in the technology hotbed of Canada, Toronto. Thecity is home to a mature and diverse IT-services industry. However, labor cost inToronto is higher than the wages in most of the other global outsourcing destina-tions. An IT professional in Toronto pockets no less than $2,200, which could goup to $3,000. Even a BPO executive earns between $2,000 and $2,400 per month.The per month rental charges for commercial real estate in the city are $2 to $3 per square feet. In addition, Toronto-based businesses typically can useinvestment tax credits to offset up to 75 percent of its federal tax for a year, withunused balances carried forward 10 years, according to Toronto’s Economic Development Body.

The city has a well-educated and skilled talent pool. University of Toronto, YorkUniversity and Ryerson University and several other colleges and IT training facil-ities churn out a large educated workforce suitable for knowledge-based industries.Toronto’s extensive road and rail connections further make it a flourishing desti-nation in addition to the great international connections. GS

AAbboovvee:: Toronto city BBeellooww:: Yonge-Dundas Square

Toronto, Canada 22




A tempting treat for global outsourcing service providers to setup their shop

Rio de Janeiro is the second largest city in Brazil with its vibrant popula-tion of some 6.1 million. Over years, the city has been a tempting treatto many providers such as DBA, Politec, Satyam and Teleperformanceto set up operations here. Apart from playing host to the third-party cen-

ters, some companies including Citigroup and Oracle have set up their captive cen-ters in the city.

The city’s universities churn out approximately 265,000 students and 20,000researchers every year. There are almost 110 universities and educational institutionsin Rio de Janeiro that offer 566 programs for technical education. Therefore, the cityprovides an alternative source of highly skilled and low-cost technical professionalsfor IT projects and staff augmentation. Techies can be hired at a lower cost of $420to $440 per month. Favorable time zone — depending on the season the city is justone or three hours later than New York — cultural proximity and large pool of Eng-lish- and Spanish-speaking people make it an ideal destination for setting up call-cen-ter facilities and BPOs. An entry-level BPO worker can make $360 to $330 per month.

With 15 procedures, starting a business in Rio de Janeiro takes 68 days, and thetotal start-up cost could go up to 10.9 percent of GDP per capita. The per monthrental charges in the city are between $4 and $5 per sqft. With 14 procedures, it takes75 days to register a property and set up a shop in the city. And it takes about threepercent of the property value to register a property in the region. GS

AAbboovvee:: Rio de Janeiro cityBBeellooww:: Leme Beach

Rio de Janeiro, Brazil

The NAFTA status boosts outsourcing in most of the tier-1 andtier-2 Mexican cities such as Mexico City and Monterrey

Mexico City, the capital region of Mexico, is the most vital industri-al, economic and cultural center in the country. In the top 50 cities’list, this new entrant has been positioned at the 30th place, and hasleft many global, well-known counterparts behind — St. Petersburg

(Russia) and Bucharest (Romania) to name a few. Even though Mexico City has beenknown as one of the top outsourcing destinations in Mexico, this is the first time thatthis city managed to get a place in our top 50 cities’ list.

Today many U.S. and European companies outsource their IT-services require-ments to Mexico City. Apart from being a delivery location for many of the globalIT-services providers — such as Accenture, EDS, Softtek and TCS to name a few —the city also supports large contact centers and BPO markets. Proficiency in Englishand Spanish languages helps the country to cater to the large Hispanic communityin the U.S. More than 70 percent of the Mexico City BPO market is concentratedin the Mexico City axis.

At $340 to $360 per month, the salary of entry-level BPO employees in MexicoCity is $20 to $40 higher than the BPO agents in Guadalajara and Monterrey whilethere is no variation in the salaries of entry-level techies in all the three cities — theyearn $360 to $380 per month. Unlike Indian outsourcing cities there is no major dif-ference between the salaries of techies and BPO agents in Mexico City. GS

AAbboovvee:: Mexico City CathedralBBeellooww:: Santa Fe business district

Mexico City, Mexico 30




Being geographically closer (5 to 6 hrs drive) to Delhi NCR,Jaipur’s infrastructure is able to attract and retain global providers

With the inauguration of the much-awaited IT Special EconomicZone (SEZ), Mahindra World City, in Aug. ’08, Jaipur has allurednumerous IT and BPO companies. Many such companiesincluding Infosys, Wipro and Connexions are already operating

or intending to operate out of the SEZ. Infosys’ BPO center at the SEZ is thecompany’s second facility in the city with a seating capacity of 3,200 employees.Infosys’ first such center in Jaipur was built in 2006 with a seating capacity of890 employees.

Beyond the SEZ, the city has other BPOs like Spanco, and captives like Erics-son to name a few. GECIS (now GE) and Genpact were one of the earliest entrantsinto the city with the employee base of 1,200 and 1,000 people, respectively. Anentry-level BPO agent earns from $140 to $160 per month, while an entry-leveltechie pockets no less than $200 per month.

The city with a population of 6.5 million people (estimated in 2007) offers bigcost-saving opportunities to the outsourcing industry. Jaipur’s 410 colleges and 15universities including 25 engineering colleges and 27 business-management insti-tutes churn out thousands of graduates per annum.

Even though the standard of living in the city is not as great as many other Indi-an cities, the per month rental charges in Jaipur is $1 to $3 per square feet. AlsoJaipur’s railway and airport are well connected with all major cities in India. GS

AAbboovvee:: Hawa MahalBBeellooww:: Carving at Amer Fort

Jaipur, India

Not only does the city have local and skilled talent to pitch onbut it also employs thousands of foreign white-collared workers

With tremendously increasing countrywide economic develop-ments, there is hardly any difference left between Singapore andits capital region Singapore City. No doubt, it is now referredas the “city-state.” In 2007, the per capita GDP of Singapore

was about $37,289, with a 7.7 percent annual growth rate and an annual infla-tion rate of 2.1 percent.

Fourteen bilateral and multilateral trade agreements including USSFTA (theU.S.-Singapore Free Trade Agreement), EFTA (European Free Trade Association:Iceland, Liechtenstein, Norway, Switzerland), mark the city-state as one of themost business-friendly countries in Asia. Singapore, therefore, houses thousandsof multinational corporations.

The labor costs in Singapore are relatively higher than other Asian countries. How-ever, they are lower than those in the U.S. A BPO agent in Singapore earns (from$1,400 to $2,000) seven times more than what an agent in India gets for the samejob. Interestingly, techies earn almost double than BPO employees in Singapore.

Even the real-estate costs are very high in the city. The per month rental chargesare $10 to $11 per square feet. However, the city-state enjoys the benefit of havingthe strongest intellectual property protection in the entire region of Asia, accordingto The World Economic Forum. GS

AAbboovvee:: Central BusinessDistrictBBeellooww:: C751B train at EunosMRT Station

Singapore City, Singapore 36




An important outsourcing hub in China and home to globalproviders such as EDS, Wipro and Genpact to name a few

Chengdu is the economic center of Southwestern China. The city is animportant global IT outsourcing destination. Several IT companies suchas EDS, IBM, HP, Neusoft, Dextrys (formerly known as DarwinSoft),Augmentum, Wipro, Genpact have their presence in the city.

The city with a population of 7.8 million people has a large pool of highly skilledIT professionals. A large number of universities and research institutions in Cheng-du churn out over 20,000 students per year.

In addition, Chengdu’s labor cost is quite competitive, which is about two thirdsthe wages in coastal cities, and the employee turnover rate is below 10 percent, accord-ing to Invest Chengdu’s statistics. On an average, a mechanical engineer earns about$4,488.65 per year, while a software engineer gets $9,299 per annum.

Also, Chengdu is an important R&D center in China. The city houses several SEZsincluding Chengdu Hign-tech Industrial Development Zone and Chengdu Economicand Technological Development Zone. Chengdu Information Association and Cheng-du New and High Technology Industry Area have established an “ImplementationPlan for Speeding up the Development of Chengdu Software Outsourcing.”

Chengdu has a world-class infrastructure, and is well connected with the othermetropolis such as Beijing and Shanghai. Chengdu Shuangliu International Airportis the sixth largest airport in mainland China. The city has one of China’s densest high-way networks with 10 expressways so far. GS

AAbboovvee:: Jin RIver & AnshunBridgeBBeellooww:: Temple in Chengdu

Chengdu, China

The city’s educational system makes it suitable for engineeringservices outsourcing

Guadalajara, Mexico’s Silicon Valley and the second largest city with a pop-ulation of 1.7 million people, has attracted significant levels of foreigninvestment. The multinational enterprises that Guadalajara hostshave helped to transform the city into an excellent place to do business.

The city’s IT industry in the city boomed after the inking of the North AmericaFree Trade Agreement. Since then the foreign direct investments has been growing.However, the industry noticed a shakeout in 2001 to 2003 when most of the MNCsstarted shifting their shops toward “far” East.

Guadalajara is the hotspot for the engineering-services industry because of its capa-bility to churn out engineers from universities such as Universidad de Guadalajaraand Universidad Panamericana, to name a few. Many educational institutions andthe government are working together to groom up world-class techies.

The engineering services in the city were earlier related to just the manufactur-ing segment but now it has grown to other areas such as design engineering. Guadala-jara houses several IT outsourcing firms such as Perot Systems and TCS. The BPOsector is already flourishing in the city with key BPO providers such as Hispanic Ser-vices and TeleTech. An entry-level BPO executive can make $320 to $340 per month.

In addition, Guadalajara is also a major national and international transportationand shipping hub. The city is also served by Guadalajara International Airport. GS

AAbboovvee:: Puerta de HierroBBeellooww:: Mormon Temple

Guadalajara, Mexico 44




Besides entering our list for the first time, Mandaluyong hasrecently bagged The World Bank’s business-friendly city status

In a small population of 295,733 people, the overall literacy rate in the Cityof Mandaluyong is pegged at 99 percent with exactly one percent belong-ing to the illiterate group, as per the Philippines’ National StatisticsOffice’s results. There are three major universities — Don Bosco Technical

College, The Jose Rizal University, The Rizal Technological University — and 47colleges in the city. Over 40,000 students graduate every year from these edu-cational institutions. Most of the colleges offer short-term courses on computerand technical education. A techie can earn $320 to $340 per month during hisinitial professional journey.

While Cebu city in the Philippines is the undisputable BPO hub, Mandaluy-ong City is gearing up to share the load. BPO players such as eTelecare are alsoexpanding in the city. Last year, eTelecare completed a facility in Mandaluyong City— accommodating up to 3,000 employees. An entry-level BPO executive pock-ets around $280 to $300 per month.

In 2007, new businesses in the city grew 21 percent from the year before. Inter-estingly, it takes only 21 days to register a property in the City of Mandaluyong.The per month rental charges in the city is between $2 and $4 per sqft.

Mandaluyong City is considered to be the heart of Metropolitan Manila as ithas three routes to link the two cities together. Mandaluyong City’s biggest assetis its easy road access – both within the city and to the adjacent cities. GS

Mandaluyong City skyline

Makatis. These are the ones that are not only capableenough, but are also gearing up fast to compete with suchglobal “Silicon Valleys” for providing IT and BPO services.

To make the location assessment further eas-ier for the global buyers of outsourcing services,we have also identified established and emergingcities by various functions such as applicationdevelopment and management, business analyt-ics, contact center (multilingual and English),engineering services, finance and accounting,HR, legal services, product development, R&Dand testing. In addition, we have also identifiedthe top eight global outsourcing locations.

MethodologyTo determine delivery and consumption trends for glob-

al outsourcing services in specific destinations, Tholons uti-lized similar surveys and interviews with tier-1 and tier-2providers and service buyers. The data gathering method-ologies were also applied to determine market and labor sizesas well as expansion strategies of tier-1 and tier-2 providers.

In addition, governments, industry bodies and relatedstakeholders were also interviewed to provide both primarydata and validation of analysis.

We obtained historical stats from governments, globalinstitutions and agencies, and economic-related datafrom monetary bodies. Publicly released data from gov-ernment sources were also considered when using coun-

try-specific market data. Publicly availablefinancial records such as quarterly and annu-al reports, industry bulletins and trade publi-cations were used to verify market assump-tions and analysis.

A combination of comprehensive quanti-tative and qualitative analysis was consideredin developing the rankings. The proprietaryweighting and ranking system was developed

and refined by senior Tholons consultants. Further, qualitative analysis was implemented to provide perspec-tive to the quantitative results of the report. Tholonscarefully considered numerous variables when providingfinal rankings, and considered the impact which non-numerical data plays in the assessment of global out-sourcing locations.

Avinash Vashistha is the CEO of Tholons, a global advisory, investmentand research firm. With additional inputs from the Tholons' team —Manuel Ravago, Skanda Jankiram, Paul Santos and Vinu Kartha —and Global Services' team — Keerthi Nair and Namita Goel

GS

45 Mandaluyong City, The Philippines The Global Services-Tholons Study

Continued from page 27


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Service-oriented

feature-SOA_Final.qxp 9/22/2008 11:08 AM Page 36


Tools & Technologies

By Jayaprakash Nair, Delivery Manager, Aspire Systems

LET US TAKE A quick look at a few thingscommonly observed in the industry today.OBSERVATION 1: Companies make investmentsin various “best of breed” products for theirLine-of-Business (LOB) functionalities. These

are typically monolithic systems tightly coupled togetherusing traditional Enterprise Application Integration (EAI)approaches (and proprietary technologies to glue themtogether), leading to a heterogeneous and brittle IT ecosys-tem. Any seasoned industry observer will identify this as anomnipresent scenario. OBSERVATION 2: The major software product companieshad hitherto left gaps in their offerings, which were filled bysmaller Independent Software Vendors (ISVs) with theirniche offerings. (See Diagram 1.)

The following problems are likely to occur with this arrangement.

Problem 1: In due course of time, the company maywant to get the ISV’s product extended to replace part of thefunctionality of P2 that belongs to another provider, and thefunctionality that needs to be changed could be anywhereamidst the existing workflow provided by P2. So, therewould be a need to build more interfaces between the prod-ucts to ensure that the flow is seamless. (See Diagram 2.)

This leads to an increasingly fragmented IT ecosystem.You can consider this akin to the continuous fragmentationthat happens on the hard disk because of deletion of somefiles/folders and addition of new files/folders which do notfit the size of an existing gap. This increased fragmentationleads to an increase in the cross-references between the dif-

Is Service-oriented Architecture (SOA) still a buzzword? Why would a companyspend money to sponsor a so-called technical initiative by the IT team instead offinancing some other business feature development by the team? Is it true that alack of SOA in an enterprise with a complex IT ecosystem has a direct impact onthe IT costs, and hence the bottom line, in the long run?

Diagram 1

P1

P1

P1 P1 P1 P1 P1

* * * * * * * *

P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2

P1 P1 P1 P1 P1 P1 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2

Gap in the eco-system:

Your product fills the gap:

Integration point 1 Integration point 2

Product 1 P2 Product 2* ISV’s Product

Architecture



ferent storage blocks on the hard disk, which is exactly whathappens in a typical enterprise IT setup, leading to aspaghetti type of integration.

Problem 2: The company may decide to replace productP1 with another product (say P3), by another provider.There’s a good likelihood that the company would need toapproach the ISV to customize its product, or at least repairthe integration point with the new product, in order tomaintain the workflow/dataflow within the enterprise.OBSERVATION 3: The company might introduce somechanges in its business processes/rules, which would lead tofurther breakages in the integration.OBSERVATION 4: In many cases, the trading partners of com-panies having business-to-business integration can changethe interface points, thus breaking the integration.

As you would be well aware, the above observations are,by no means, hypothetical, and such occurrences are expect-ed to increase, while moving forward. Let’s see what can bedone to alleviate some of the hurdles.

The Solution — SOAIn the instances mentioned above, the existing IT ecosys-

tem in an enterprise had potential breakage points. From asolution perspective, the firm will have two options:

l Either continue with the existing IT setup and keepon increasing the ever-so-brittle integration interfacesbetween the different products/applications, thus increas-ing the complexity of the integration/implementation ofthe IT ecosystem.

l Or, convert the enterprise architecture into a SOA.From the options, the first one is not really a “solution”

and just amounts to maintaining the status quo (or maybeworsening the situation), whereas the second option is asolution that the company can adopt. Service-orientationdescribes an architecture that uses loosely coupled services tosupport the requirements of business processes and users.

How SOA Can Reduce CostsINTEGRATION: A successfully implemented SOA will reducethe coupling between the different components in the sys-tem. This is possible because of the standards based (typical-ly XML) interfaces that SOA adopts. This manner of usingservices for integrating the disparate systems is called ServiceOriented Integration (SOI). This approach is totally differ-ent from the proprietary interfaces used by traditional EAI.

What happens in an SOA scenario is that the different

components/products use the same language to communi-cate with each other, and it becomes easy to continuouslyrealign or “re-integrate” them. This, in turn, leads to a very“amoebic” enterprise architecture, i.e. an architecture, whichcan continuously change shape, without any harm to itsfundamental constitution.CUSTOMIZATION/ENHANCEMENT: A typical software appli-cation solves one or more business problems, and businessproblems are manifested in business processes. An applica-tion can be effective only if it has a direct relevance to thebusiness processes followed by the company, and most ofthem are likely to change very frequently. There are twoproblems identified in traditional product implementations:

Problem 1: Atomicity. The atomic level of a traditionalapplication is normally a module, which is nothing but a setof closely knitted classes (here we assume that the applica-tion is developed in a disciplined object-oriented mannerwith the right composition of modules). Modules are typi-cally significant in size, highly cohesive and put into pro-duction after different levels of rigorous testing. Now ifthere’s a change in any of the business processes containedwithin a module, it would mean that the module needs tobe broken open, possibly gutted and reworked on. It wouldrequire multiple analyze-code-test loops for the module to

be put back in production. And then, there’s always the hugerisk of regression errors (and subsequent negative rippleeffects) creeping into the module.

Problem 2: Non-segregation of variable and fixed busi-ness processes. Every business has a set of core businessprocesses, which are relatively fixed in nature, i.e. they hard-ly change over a period of time. Then there are businessprocesses that change very frequently. Now in a typical tra-ditional application, modules are structured around features,and as such, contain a mix of business processes, which arefixed, and the ones that are not. Thus, every time a changeis required in a business process, a module needs to be dis-mantled and reworked on.

Both the above problems can be solved, if the applicationadapts to an SOA. SOA requires that the code implementa-tion of stable business processes be segregated from those,which change very frequently. Also, it requires that theatomic unit of cohesiveness be the “service” and not themodule. This makes the whole application easily customiz-able, thus reducing customization/enhancement costs.

To sum it up, as the complexity of the IT ecosystem in acompany increases, (primarily because of heterogeneity) the


Diagram 2

P1

* * * * * * * *P1 P1 P1 P1 P1 P1 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2

Integration point 1 Integration point 2 Integration point 3 Integration point 4

Product 1 P2 Product 2* ISV’s Product



revenue savings obtained from SOA also increases, providedSOA is implemented in a disciplined manner with propergovernance in place. Also it has been observed that the ITecosystems are indeed getting more and more complex.

Now let’s take a look at the first steps a company can taketo implement SOA.

Call for ActionAs a first step, you will need to talk to SOA consul-

tants/providers and identify those with the required capabil-ities. Here are some of the things that you could keep inmind for narrowing down your list of prospective providers:

l Check if the provider has any standing in the IT-ser-vices space, since that will be crucial for your provider tounderstand your stated as well as unstated challenges, andwork out solutions to alleviate those.

l Does the provider have consulting capabilities? Canthey identify the cross-section within your enterprise whereSOA can be implemented end-to-end with maximumimpact? Note that at this stage, yourprovider should be focusing mainly onbusiness process, and not too much onthe technology.

l Check if that provider has a solidimplementation team, because oncethe candidate cross-section for (con-verting to) SOA has been identified,and the architecture is in place, thenext step would be to actually imple-ment the solution using services.Here, you need to ensure that theprovider has a proven track record inthe requisite technologies.

l Does the provider have provencapabilities in the appropriate software-development methodologies (engineer-ing as well as project management),which are apt for SOA implementation?For instance, using a waterfall model forthis would be akin to fitting a round keg in a square hole.SOA and waterfall normally don’t work well together. Whatyou need is a provider who has sufficient expertise in Agile(or at least some other Iterative) methodologies.

l Any code that is developed needs to be tested. Now“SOA Testing” is a different beast. So check if your providerhas that expertise.

l Check if your provider has a quality-management sys-tem in place to ensure consistently good quality.

l Needless to say, check if your provider will do all theseat a low cost.

One option is to go for an amalgamation of differentproviders to meet the above goals, but you then need to beprepared to shell out the extra cost involved in project man-agement, communication management and risk manage-

ment. Also, you need to be aware which provider you willhold responsible in case of any issues.

In short, you need to find a provider who has the abili-ty to provide you with a “cost-effective” and “pragmaticturn-key” solution without disrupting any of your existingbusiness activities.

Different ApproachesThere are three approaches that companies typically con-

sider, for SOA adoption:TOP-DOWN APPROACH: Here, the company builds an SOAframework suitable for their requirements (in terms of gov-ernance), creates services which cater to specific businessprocesses, and then plugs these new services into the frame-work. The cons with this approach are the same as what hasbeen seen with the waterfall model of software development.

l By the time the framework is built, some of theassumptions/policies of the company’s business processeswould have changed, and the framework would need to

be reworked.l It takes a lot of time to actually

see any tangible result in the“SOAfication” of the enterprise.BOTTOM-UP APPROACH: In thisapproach, the company starts at theleaf level, i.e. builds services, and thentries to stitch them together and arriveat a framework. With this approach,the risk is that, being focused on thetrees, it is easy to lose sight of the for-est. So, instead of an SOA, one couldvery well end up with Just a Bunch OfWeb Services (JBOWS), without auniform governance framework,which is so critical for any SOA imple-mentation to be successful.“START IN THE MIDDLE AND SCALE

OUT” APPROACH: A complete over-hauling of your architecture may not

be feasible. But will the evergreen Pareto Rule be applica-ble to your product? That is, will converting 20 percent ofyour product into SOA reduce 80 percent of your inte-gration pains and, if yes, will the ROI justify the 20 per-cent investment?

Here, SOA is implemented in a cross-section of theenterprise, i.e. in a complete end-to-end LOB chain. A goodcross-section of business-workflow is identified as a candi-date, the required governance framework is built only forthat section, and the corresponding services are designed,built, tested and deployed. This approach overcomes mostof the cons of the above two approaches.

Normally, the last option is the best — start small, iden-tify your main bottlenecks, hit at those places with well-gov-erned services, see the results, and then extrapolate. GS


AS THE COMPLEXITY OF THE IT ECOSYSTEM

INCREASES, THE REVENUE SAVINGS

OBTAINED FROM SOAALSO INCREASES, PROVIDED SOA IS

IMPLEMENTED IN A DISCIPLINED MANNER

WITH PROPER GOVERNANCE IN PLACE



Managing

DISPUTESWho suffers the most in case of a dispute — customer or service provider? Whose

fault is it anyway? Who’s holding the ball at the time of deal termination or disagreements? Is it possible to carry on an outsourcing relationship after a nasty

scrap? Here’s a reality check

feature-mng disputes_final.qxp 9/22/2008 11:39 AM Page 40


Strategies

By Namita Goel

STARBUCKS TERMINATES HRO Contractwith Convergys; Liverpool Victoria Replaces EDSwith Atos Origin; Deutsche Post Kills Huge HPOutsourcing Deal. These are a few headlinesabout outsourcing deal terminations. The rea-

sons were the same as they were a decade ago — cost over-runs, governance failure and delivery failure.

In 2005, a research report released by DeloitteConsulting clearly stated that the year 2004 saw a signifi-cant rise in distrust in outsourcing relationships and morecustomers opted for deal terminations — 44 percentchose deal termination over litigation, re-negotiation andother remedies that involved mutual understanding. Thetrend has improved a bit as both customers and serviceproviders have matured. The recent report released byDeloitte, “Why Settle for Less,” reveals that 70 percent ofthe respondents — in all 300 global players — reportedbeing satisfied with the outsourcing setup, yet a disturb-ing 39 percent revealed to have terminated at least onecontract and moved to other service providers.

Europe too is getting matured in handling outsourcingrelationships. While evaluating the U.K. IT-services deals,Pierre Audoin Consultants, the U.K.-based consultancy,revealed that just 13 percent of the U.K.-based companiesthat updated their outsourcing deals during the first sevenmonths of 2008 terminated the initial deal to move on to anew provider.

There have been numerous articles that compare out-sourcing relationships with marriage, and to extend theanalogy, outsourcing contracts have started resemblingthe infamous pre-nups. The trend is that serviceproviders and customers now more strongly believe indeciding beforehand about the exit strategies and thepayouts, even before signing the deal. Definitely, the cyn-icism is infectious and what happens in a marriage ismaking way into business too.

Disputes to DisagreementsLegally, the term dispute has a strong connotation

attached to it. “They are never disputes, they are disagree-ments. I have had customers wanting to terminate the dealdue to change in the business needs and the contract did notprovide for any regulations in such a situation. Sometimesthe disagreements arise due to mismanagement of changemanagement,” said William Bierce, Partner, Bierce &Kenerson, a law firm.

Change management and governance failure are report-ed to be the top reasons for break up between the providerand customer. Problems relating to delivery failure or costoverruns can still be sorted out through discussions, whereas the case of governance and change management thatchallenges the very essence of the contract takes a hit. “Insome cases the initial contract is scrapped and a brand newcontract is drafted. While in the other the scope of thecontract, SLAs and cost changes are incorporated,” saidStephen Nordahl, Partner, Global Technology TransactionsGroup, Milbank, Tweed, Hadley & McCloy. “Here atMilbank, we have two sorts of disputes, small-d-disputesand capital-D-disputes. If it is the latter, then we know it’sbeen on for a while and the two parties failed to reach anagreement, so they seek the help of a third party; whereasin the former case they probably might need to incorporatesome changes in the contract due to the changing businessneeds,” added Nordahl.

The study by Deloitte also shows that contract termina-tion is not the first thought that crosses the mind of the cus-tomer and provider. “Sixty-one percent of the respondentsreported that in case of issues during the first year of thecontract, the matters were immediately escalated to seniormanagement, with 15 percent reporting five or more suchescalations. Fifty-three percent continued to have to escalatein the second year. Clearly, outsourcing is working finan-cially for most of the respondents, but their relationships



with their providers have not been without problems, withescalations being a common practice and terminations andcancellations viewed as real possibilities,” states the study.

Initiation of Disagreement and TerminationThe customer and the service provider could both initi-

ate a disagreement and seek legal recourse, but often it is thecustomer who usually does so. This trend could change. “Inthe past, customers had more powers, and were usually theones to find faults and raise arguments. However, the lastfew years have seen a change in the trend and a lot ofproviders have also come up with issues of non-cooperationor lack of sufficient information to deliver the services ade-quately,” said Bierce of Bierce & Kenerson.

It is a general belief that the power of contract termina-tion lies in the hands of the customer. The fact is to someextent true, but lately the trend is that even providers havevoiced out their disagreement with the customer. It is moreof a reputation issue for the service provider whenever a con-tract terminates. So the providers prefer re-negotiation totermination or litigation.

“I would say it is mutual. Whenever there is a situa-tion of discomfort in a contract, both of them — cus-tomer as well as service provider — feel it and sometimessay it together, while most of the times one of them haveto initiate it. So it is the matter of timing,” addedNordahl of Milbank.

“Being a provider, we have had also raised disagreementsat times. But termination is usually not our opted choice.And the situation for termination does not come in to dis-cussion until the matter of disagreement reaches out to thesenior management on both the sides. From the serviceproviders point of view, disagreements are normal as theysometimes help in improving the relationship but termina-tion just leaves a bad taste for both the provider and the cus-tomer,” said Kirill Degtiarenko, BDC Executive Director,IBA Group, a service provider.

Retardation of the DealOutsourcing deals on an average have a term of five to

seven years and usually the disagreements come during the

first two years of the contract due to work transition. “If thedeal can go along these initial years with probably minor dis-agreements that can be amended, then the deal goes on tillthe end,” explained Bierce.

Nordahl agreeed, “Nothing is certain in a contractualcycle. However, the chances of the deal termination increas-es with the increase in the degree of unpleasantness in theinitial years. Else, the deal rolls peacefully with minor trou-bled waters here and there.”

OPINIONS ON

“"Termination-assistance clausesare usually drafted to help thecustomer stay in control on ter-mination or expiration. The cus-tomer will want a choice ofreplacing the incumbent serviceprovider with another serviceprovider, or taking some or all ofthe outsourced services in-house. There could bea reconfiguration of the in-scope services, withpartial outsourcing and partial insourcing afterthe termination or expiration.

Termination-assistance clauses set forth howthe customer or its substitute provider will beable to receive something useful. Such clausesdefine how the service provider will transfer the‘platform’ on which the outsourced services areperformed. If the platform involves third-partytechnology, there are licensing issues that needto be resolved. In general, since each technologyplatform and the outsourced business process issomewhat unique, it's advisable to plan and occa-sionally review the plan for transferring the plat-form, not just the data.

Without such a clause, there could be anarchyin terms of a complex process that is essential to

THE FEW MAJOR DEALS TERMINATED FROM SEPT. ’07 TO SEPT. ’08

*IN YEARS; SOURCE: GLOBAL SERVICES

Deal Customer-Provider Actual deal term vs. Signed deal term* Reason for termination

l Triad-Perot 2 vs. 10 Lack of cost effectiveness and delivery failure

l AA-IBM 2 vs. 5 AA merged with Saga

l Starbucks-Convergys Not defined Change in Starbucks business needs

l Liverpool Victoria-EDS 4 vs. 13 Moves the process in-house

l State of Texas-Accenture 3 vs. 5 Service delivery failure

l Deutsche Post-HP Six months vs. 7 Lack of cost advantage.

Strategies



The painful time is when the deal gets messed up amidstall these disagreements. The staff and the service deliverybear the brunt of it. Usually it takes six to nine months forthe disagreements to settle down with the help of lawyers,but in the worst case scenario, it can also span over a year.

Life After Resolution or TerminationIt definitely leaves a bad taste in the

mouths of both the customer andprovider. If there is a resolution, then thecontinuing relationship between the twoparties is a bit strained, at least till bothare able to prove themselves that theywon’t repeat the actions that lead to dis-pleasure. The terms of the contractbecome more legally stringent and alter-nate compensatory options are created infavor of both the parties in case of any similar occurrencein the future. “It can be difficult, even under the best ofcircumstances where the dispute is settled in a mannerboth sides deem as fair, for the parties to resume the courseof the deal because major issues tend to ‘percolate up’ for a

while and this can generate frustration and ill-will betweenthe parties. Sometimes, it can be useful to replace thoseaffected by a particularly contentious re-negotiation bynew people so that the relationship can start fresh,” saidMichael S. Mensik, Partner, Baker & McKenzie.

If there is a termination, then the contract goes aheadwith the termination-assistance clauses. Life is more pre-

dictable in this case as the conditions arepre-decided. However, there is alwaysroom for negotiations for the reasonthat while designing the contract noneof the parties could predict the exact cir-cumstances of the termination. Butapart from the customary compensationclauses in the contract, the deal termi-nation carries a whole lot of intangibleeffects on both the parties that lower

morale and heighten mistrust. It is a sure hit on the rep-utation of both, however, the impact is more for the ser-vice provider. That’s why some of the deal terminationsare either not made public or are followed by explana-tions to each other’s case. GS

TERMINATION-ASSISTANCE CLAUSES

“

business continuity. Indeed, termination-assis-tance clauses are among the most important pro-visions since they give comfort for a relativelysmooth transition upon termination or expiration.The key to drafting such clauses is to give the cus-tomer reasonable control over the processes andassure the provider's cooperation and a plan forthe continuity of operations. Service providers willwant to negotiate economic issues, includingcosts, payment terms, scheduling and roles."

William Bierce,

Partner, Bierce and Kenerson

“These provisions typically covertopics such as, wind-down of ser-vices, provision of transition-outservices (i.e. termination-assis-tance services), transfer of IP,transfer of hardware, transfer ofthird-party agreements, right tohire project staff to name a few.As these exit provisions or termination-assis-tance provisions are highly negotiated, it is notclear that they "favor" one party versus theother. And also based on my experience, I wouldsay no to the fact that they are more in favor of

providers. The negotiations typically permit thecustomer to get what it needs to continue on withits business. However, providers usually aretougher on issues related to the disposition oftheir proprietary IP to the customer and hiring oftheir employees by the customer.”

Stephen Nordahl,

Partner, Milbank, Tweed, Hadley & McCloy

“Outsourcing contracts normallyinclude termination for causeand termination for convenienceprovisions. These clauses nor-mally favor the customer and areintended to protect the customerand its dependence on theprovider from the risk of earlytermination, while preserving termination as anoption for the customer, should the deal proveunfavorable. Ironically, even though customersmay have the option to terminate for conve-nience, exercising such option tends to be diffi-cult given the dependence that customers haveon service delivery.”

Michael S. Mensik

Partner, Baker & McKenzie

Strategies


Known as a global engineering-services outsourcing destination,China also has potential to develop a compelling Business ProcessOutsourcing (BPO) industry. However, there are many obstaclesthe country needs to combat in order to develop this beyond anindustry that is merely serving a sub-region

China’s Challenges to Develop aGlobal BPO Capability


By Phil Fersht

Experts

n our current economic climate,enterprises are vigorously looking atways to retain their core talent andprocesses while containing costs onroutine, tactical functions, for

example administrative finance, HR,customer management and procure-ment processes.

The industry for Business ProcessOutsourcing (BPO) — the transfer ofmanagement responsibility of these rou-tine business processes over to a third-party — has been enjoying steadygrowth over the last decade and we antic-ipate this to accelerate with current eco-nomic conditions. BPO is a logicaldirection for many enterprises to take,where enterprises can drive cost-effi-ciencies and improved process-rigorthrough service provider offerings thatappropriate low-cost offshore talent andstandardized processes underpinned bythe latest technology tools and platforms.

Is China, with its unprecedentedbase on cheap labor, low-cost productmanufacturing, de-regulated bankingsector, booming domestic economy anddeveloping infrastructure, poised tochallenge India, the Philippines, Centraland Eastern Europe and Latin America,

as a powerful delivery center for globalBPO services? We believe it will performwell in the medium term deliveringknowledge-based services to Chinesespeaking businesses — and some Japan-ese and Korean — but will struggle tobreak into the global market to deliverservices to Western enterprises for thefollowing reasons:

l China is in a time-crunch. Chinais already touting its tier-2 cities, such asXi’an and Chengdu, as its mainstays ofBeijing and Shanghai are already suffer-ing from chronic job attrition (30 per-cent) and wage inflation. India, andother offshore locales such as the Philip-pines and Eastern Europe, have enjoyeda stable period of several years to devel-op their BPO infrastructures beforethese issues crept in. China is movinginto BPO with little breathing space toestablish its infrastructure and buildcritical mass. It is easier for BPO firmsto combat attrition and wage inflationonce there is critical mass of staff andinfrastructure available.

l Wages and attrition for knowl-edge workers in China are alreadyhigh. Wages are not much lower thanin India, which has more experience in

BPO and much better English-lan-guage skills. Moreover, we are seeingattrition rates as high as 30 percent inthe major cities of Beijing, Guangzhouand Shanghai.

l Providers wary of the “India expe-rience” all over again. With all the initialteething problems firms ensured sendingout BPO services to India, why wouldthey want to go through all this againwith China? Some outsourcing giantssuch as Infosys and TCS have onlyestablished a token foothold in theregion — in the hundreds of employeesas opposed to the multiple thousands inIndia, this seems to indicate that thesefirms are still hedging their bets onChina. Only IBM has surpassed 1000employees in China for BPO services.

l Latin America is offering a com-pelling alternative for delivering BPOservices to U.S. businesses. We arealready seeing a strong competition forBPO services from the Latin Americancountries for the following reasons:

n Wage rates are comparable n Little need to relocate staff into

the U.S. n No need for bridge teams" which

spend their time overlapping develop-

I

experts lead-China’s challenges_Final.qxp 9/22/2008 11:41 AM Page 44

ment work with both onshore and off-shore teams

n Staff travel costs are far lower fornearshore

n English competency is strongn Staff attrition is lower in LatAm

countries than in India or China.The strong competency for Latin

American workers to deliver both Eng-lish and Hispanic voice-based servicesand their ability to administer routinebusiness services makes the region anattractive location for services providersto develop BPO service delivery centers.For example, enterprises can now sourceadministrative accounting tasks for com-parable rates in Mexico, than they can inChina or India.

l China’s core competency is engi-neering. China is more of a manufac-turing/industrial powerhouse, and we doview it being so adept at performingadministrative business services. R&Dservices are in the Chinese DNA, ratherthan BPO services, which is the direc-tion we see China taking, for exampleindustrial design work, contract manu-facturing, biotech services to name a few.

l Movement away from mere laborarbitrage. BPO services are increasinglymoving away from the “body shopping”game, and more towards the provision ofvalue-added business services and inno-vative offerings. Moreover, most of theoffshore BPO providers increasinglyprefer to price their services by transac-tions, for example, invoices produced perday, or reports per month, as opposed tocost savings per employee salary. Pricingservices by employees provided asopposed to services delivered expose

the service provider to increase its wageand currency appreciation, which isthreatening to erode the offshore servicemodels of today’s BPO providers. WithChina’s prime attraction for BPO ser-vices being low-cost workers, movingwork over here could be a regressive stepfor many enterprises, with the currentwage appreciation and employee attri-tion dynamics. Having said that, expe-rienced outsourcing providers deliveringChina-based BPO services can claim tohave learned from past mistakes and seekto rectify these.

l China’s English-competency is amajor minus for BPO. Whereby Singa-pore and Hong Kong adopted Englishas their mother tongue many years ago,China is still a good decade away frombeing able to boast good English-speak-ing competency. Beyond the Chinese-speaking languages, and some sur-rounding Asian languages such asJapanese and Taiwanese, it is difficult tosee China becoming more than a localhub for its domestic economy and someof the Asian-speaking countries. To runtruly pan Asia-Pacific services, not hav-ing a strong English-speaking compe-tency is a major issue with BPO. Whenrunning the vast majority of BPO ser-vices, there needs to be elements of closeinteraction between the outsourcer, oroffshore worker, and the mother com-pany outsourcing the services.

l China’s legal system’s policies andenforcement of data privacy and patentprotection is extremely poor. BPO ser-vices rely on sensitive employee, cus-tomer and financial data being sent toremote locations and adhering to a mul-

titude of industry regulations, data pri-vacy and compliance standards.

l China’s “Great Firewall” couldinhibit its knowledge services industry.Just last month, there were 868 arrestsmade of people providing unhealthycontent over the Internet. Googlereports that the most searched for wordsin China are related to “money” and“technology,” which indicates that thisunhealthy content probably wasn’t allpornography. People talk a lot abouthow “China will be changed more bythe Internet than the Internet willchange China,” but if the Chinese gov-ernment manages to keep most Westernsites from being accessed, and persistswith stepping up attempts to block thisunhealthy content, will there surely bea limit to the level with which Chinacan change? If the Chinese middle-class-es are continually blocked from inte-grating their online culture with the restof the world, won’t this impact theirability to assimilate, understand West-ern business culture and deliver knowl-edge services for customers outside ofthe Great Firewall? The constantattempts by the government to keepChina sectioned off from the rest of theworld over the Web could substantial-ly hold back the country from deliver-ing knowledge-based business servicesfor Western companies. GS


Phil is Research Director, Global Services and Outsourcing, for leading industry analyst AMR Research, Inc. He also authors the popular blog “Horses forSources” which can be accessed at http://www.fersht.typepad.com

experts lead-China’s challenges_Final.qxp 9/22/2008 11:42 AM Page 45

he U.S. Slowdown: Survive &Thrive reads one headline,while Grim Outlook for ITSpending reads the next.While Outsourcing Takes a

Hit says a Wall Street Journal blog, thesame day CIO News posts TPI’s reportof outsourcing’s best two quarters in 10years. Although the headlines clearly dis-agree on the impact a slower economyhas on outsourcing sales, there remainslittle argument that the U.S. economyand many others worldwide continueshowing weakness.

How is it that, with economic con-ditions the same for everyone, there aresuch varying results across the providerindustry? It is, at least, partly becausesuccessful firms are making better tacti-cal adjustments to their selling and mar-keting strategies to accommodate for theeconomic changes. So what did theychange and where did they start?

RREEVVIISSIITTIINNGG SSAALLEESS AANNDDMMAARRKKEETTIINNGG BBAASSIICCSS

Regardless of the level of businesseconomic conditions, outsourcing salessuccess begins with an external audit ofcustomer markets, including needs,trends, competition and product alter-natives. At the same time, an internalaudit examines organizational capabili-ties, available resources, financial require-ments, experience and offerings. Strate-gic marketing plans are thenconstructed, including differentiationapproaches and promotion, pricing,and channel decisions. Good times ortough, all these elements work togetherto determine sales success for the out-sourcing provider.

TTHHEE IIMMPPAACCTT OOFF SSLLOOWW EECCOONNOOMMIIEESSIt is a reality that slow economies

make it harder for IT Outsourcing(ITO) and Business Process Outsourc-

ing (BPO) firms to achieve the desiredsales results. A few of the familiar reasonsillustrate why:

● Many sectors spend less on IT ser-vices in uncertain times and some stopspending entirely.

● Competitors without plans foreconomic down-cycles often make des-perate pricing decisions or agree tounrealistic contract terms that onlymake matters worse.

● Outsourcing decisions take longerbecause more people share in the reviewprocess when cash is tight. At any hintof risk, the safe answer seems to be todelay the purchase.

Challenges like these require differ-ent sales tactics and the following are fiveof the best options to consider. Depend-ing on the outsourcer’s vertical expertisesome may apply more than others, butthe concepts can apply to most ITO andBPO markets.

T


The basics of selling and account management do not changein a tough economy. Regardless of the level of businesseconomic conditions, the selling teams in service providercompanies only need to make some tactical adjustments toreach their revenue goals

xpertsSales Strategies to Succeed in aTough Economy

By Matt Smith, VP and co-founder, 3forward

experts_Matt smith_Final.qxp 9/22/2008 3:03 PM Page 46

FFIIVVEE TTAACCTTIICCAALL AADDJJUUSSTTMMEENNTTSSFFOORR TTOOUUGGHH EECCOONNOOMMIICCCCOONNDDIITTIIOONNSS

Some sectors thrive in bad eco-nomic times — like outsourcing.Throughout 2008, study after studyfrom firms such as TPI, Everest, Gartnerand others have shown an acceleration ofoutsourcing activities as companiessearch for more cost-effective ways tocontinue delivering IT services and busi-ness processes. Segments under heavycost pressure like banking, manufactur-ing and retail are particularly receptive tooutsourcing solutions that can demon-strate savings. Other segments, whichexcel in downturns, are also great indus-tries to target — perhaps with a valueproposition emphasizing the greatercapabilities outsourcing can enable.Fox Business.com recently highlightedFive Sectors That Can Survive a Recessionand they include “green” providers,financial services, alternative medicine,on-line advertising and engineering.Companies in these industries shouldbe high on the target list of any out-sourcer with solutions that can helpthem maximize their success.

Intensify focus on existing accounts.Even in healthy economies, IT decisionmakers generally find their existing solu-tion providers less risky than unknownproviders. Two proven approaches toincreasing outsourcing sales in existingaccounts are portfolio expansion —selling solutions that are already in yourportfolio but not yet being utilized bythe target — and incorporating partner-delivered solutions for even broadercapabilities. The latter can also be a wor-thy defensive strategy to keep competi-tors from gaining access. In either case,the sales cycle will be shorter and lesscostly than trying to win a new customerand the revenue ramp up will also befaster. An excellent example of this strat-egy is highlighted in Cognizant’s 2007annual report titled Management’s Dis-cussion and Analysis where they identifyaccount expansion as a key driver to rev-enue growth in 2007:

“Expansion of our service offeringsenabled us to cross-sell new services to ourcustomers and meet the rapidly growingdemand for complex large-scale outsourc-ing solutions.”

“Increased penetration at existing cus-

tomers, including strategic customers.Specifically, 96.2% of our 2007 revenueswere derived from customers who had beenusing our services at the end of 2006.”

Consider indirect sales channels.For outsourcing companies trying topenetrate the U.S. mid-size and smallbusiness market, an indirect sales strat-egy through the ValueAdded Reseller(VAR) and System Integrators (SI) chan-nel is often the only viable approachbecause of the overwhelming number ofsmall and medium business prospects.Many VAR’s and SI’s focus on a partic-ular geographic market or vertical, andhave extremely high credibility withthose customers. Selling through Orig-inal Equipment Manufacturers (OEMs),other tech firms and even other out-sourcers is another very strong indirectsales market for many niche ITO andBPO outsourcers. These larger compa-nies are a great way to penetrate the topcorporations, the challenging U.S. mid-market and even small business.

Fine tune your value proposition.Spend time analyzing and refininghow you explain the benefits yourproducts and solutions provide cus-


Intensify focus on existing accounts.Even in healthy economies, IT deci-sion-makers generally find theirexisting solution providers less riskythan unknown providers.

experts_Matt smith_Final.qxp 9/22/2008 11:43 AM Page 47


tomers. Marketers are taught to ask thequestion, “So what?” Do you takesteps out of a process? Add features?Provide capabilities that did not existpreviously? Those are great, but “sowhat!” A strong value propositiontakes these statements at least onemore level and makes the outsourcingbenefit tangibly evident to the cus-tomer. In strong or weak economictimes, customers are looking for thesame benefits from outsourcing:Increased revenues, reduced costs,improved market share, gain in com-petitive advantages and delivery ofimproved service. Outsourcing candefinitely deliver these results, but it iseach company’s unique value propo-sition that determines their opportu-nity to make the sale.

Consider outsourcing certain salesactivities. Companies, which outsourcecertain sales or marketing activities do sofor the same reasons many other func-tions are outsourced — cost reduction,acceleration of results, and the benefitsof performance-based agreements. Cir-cumstances when sales outsourcing canmake sense include:

● Entering new markets, geogra-phies or customer segments

● Creating or exploring indirect sales channels

● Mentoring new sales leaders andbusiness development teams

● Supplementing existing sales, busi-ness development or solution teams.

Under the right circumstances,outsourcing sales or market develop-ment is a very efficient, productiveapproach to quickly develop new sales

opportunities and may be an optionfor some outsourcers to explore.

PPUUTTTTIINNGG IITT AALLLL TTOOGGEETTHHEERR WWIITTHHTTWWOO CCAASSEE SSTTUUDDIIEESS

A U.S.-based provider of technologysupport services has found great successwith their indirect sales strategy. Inaddition to selling directly to large cor-porate accounts they also market theirservices through three indirect channels— OEMs, end-to-end IT outsourcersand resellers. These indirect channelsallow the provider to reach customermarkets that would be too costly to sellto otherwise, including consumer, smallbusiness and mid-market. Indirect saleshave now grown to represent nearly halfof company’s total revenues.

In early 2008 a mid-sized ITOanticipated that the slowing U.S. econ-omy would create additional growthopportunities in outsourcing services.Their market research suggested they

focus on two particular segments,banking and financial services, andenergy and utilities. To keep the mar-keting message simple, they high-lighted just two solutions — remoteinfrastructure management and cus-tomer service desk. These two servicescould be sold as stand-alone solutionsand therefore had the potential toclose faster than a more complex end-to-end program. Lastly, to keep theirexisting sales organization focused onexpanding sales with their existingaccounts, they outsourced the marketdevelopment and qualification processto an outside sales specialist. The pro-gram is now generating several quali-fied prospects each month.

LLAASSTTLLYY,, DDOONN''TT PPAANNIICC —— FFOOLLLLOOWWAA PPLLAANN!!

If tough economic conditions areforcing your company to consider newselling models, first analyze your existingapproaches and reconfirm your under-lying strategies. Tactical course correc-tions as market or economic conditionschange are exactly what effective out-sourcing sales organizations are alwaysdoing. Don’t panic when adjustmentsare required. Instead, consider the manyoptions available and look to thosecompanies delivering the best results asmodels for success. It is a great time to“survive and thrive!” GS

Outsourcing can definitely improve rev-enues, service deliveryand market share, butit is each company’s

unique value proposi-tion that determinestheir opportunity to

make the sale.

Matt Smith is the Executive VP and Co-founder of 3forward, a Dallas, Texas-basedcompany specializing in sales, marketing andalliances for outsourcing companies in Indiaand the U.S.

experts_Matt smith_Final.qxp 9/22/2008 11:43 AM Page 48

Handshakes, EyeballsReaders & Viewers

Empowering the Knowledge Nation

ad_strip_1.qxp 7/15/2008 4:08 PM Page 20

For effective Talent Management (TM), integrated TM solution platform is required. An “employee-centric” mindset too is necessary; one that makestalent a partner in the lifecycle. But is that followedin organizations?

hen employees areat the center of thetalent-managementlifecycle, they arebetter able to under-

stand what it takes to be considered “toptalent” and to be a part of the leadershipsuccession pool.

TM is the end-to-end and integrat-ed process of planning, recruiting, devel-oping, managing and compensatingemployees throughout the organization.

An integrative and talent-centric“mindset” and initiatives led by a seniorexecutive with overall responsibility fortalent is critical. Much has been writtenabout the benefits of integrated TM.What has been less discussed andresearched is the employee’s role in inte-grated TM — what can and shouldemployees participate in for their bene-fit and the benefit of the organization?

In this regard, Human Capital Insti-tute, with Workscape, conducted a sur-vey of its membership to identify currentmarket perceptions and emerging needssurrounding the integration of benefitsand TM solutions into a single, “employ-ee-centric” solution offered on an inte-grated platform.

IINNTTEEGGRRAATTEEDD TTMMSkilled human capital is the most

important element in running a suc-cessful business. TM touches a widerange of Human-capital Management(HCM) disciplines such as perfor-

mance management, workforce plan-ning, skills management, successionplanning, recruiting, and resourcescheduling. In order to garner thegreatest competitive advantage fromthe organization’s resources, an orga-nization needs to bring these process-es into an integrated whole.

Six areas stand out as key elementswithin this framework:

l Competency and skills manage-ment: These pieces of the workforce-planning puzzle help organizations iden-tify the critical talents essential for eachrole within the company.

l Recruitment: The first step in hir-ing the right talent is being able to accu-rately evaluate candidates to match theirskills to the requirements of currentopenings and future business goals.

l Learning management: A learningmanagement system helps determineskills gaps in key positions and provides a way to bring workers up tonecessary levels.

l Performance management:For ongoing auditing and monitoring of talent productivity, this importantarea compares and connects emp-loyee performance results to organi-zational objectives.

l Compensation: Proper rewards,including base and incentive pay and equities, help HR staff and linemanagers recognize achievements andpush employees to strive for higher lev-els of effectiveness.

l Career and succession planning:This area provides a window into what'spossible — the new roles and responsi-bilities that represent growth andadvancement for each worker.

EEMMPPLLOOYYEEEE--CCEENNTTRRIICC TTMMEmployee involvement, through a

formal referral program is, inarguably,the best method of recruiting by everymeaningful measure (cost per hire,quality of hire, time to performanceand length of retention). Most orga-nizations know this and do it well.Two areas that are less developed inorganizations (in terms of employeeinvolvement) are development andsuccession planning.

Where employees are at the centerof the talent management lifecycle,they are better able to understandwhat it takes to be considered “top tal-ent” and to be a part of the leadershipsuccession pool.

Career pathing, whether leading toleadership or not, is too often non-existent in organizations. Our researchfound that where employees are givenmore involvement in charting theirown paths, including paths to leader-ship, the system runs more fluidly andless expensively; that way talent islikely to stay longer. GS

xperts

Placing Talent at the Center ofIntegrated Talent Management

W


Allen is President and Executive Director,Human Capital Institute. Tony is Chief Mar-keting Officer for Workscape.

By Allan Schweyer and Tony Marzulli

expert_Optimizers_Final.qxp 9/19/2008 11:50 AM Page 50

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