http://www.technewsworld.com/story/42781.html

India Maintains Outsourcing Advantage

By Anthony Mitchell
http://www.EcommerceTimes.com
Part of the ECT News Network
05/03/05 5:00 AM PT

The Indian IT outsourcing industry’s advantages as an outsourcing destination include overall quality, good value, increasing domain expertise and increasingly sophisticated performance metrics and program management skills. India stands ready to maintain its position as the top outsourcing destination for many years to come.

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New information technology outsourcing opportunities are largely going to India, thanks to India’s long-standing advantages. Despite negative press coverage that India has received for problems at a few outsourcing facilities, India is set to maintain its lead as the high-tech outsourcing destination of choice for U.S. clients.

India has the advantage of quality, price competitiveness, infrastructure, economic diversity and a vibrant corps of Western expatriates embedded as managers in Indian information technology (IT) firms. India’s quality and price advantages are detailed herein.

IT Cultural Revolution and the Rush to Quality
The drive for market share in the global IT outsourcing market has produced more CMM Level 5 software centers in India than anywhere else in the world. CMM is the highest level achievable under the Capability Maturity Model, a quality system standard developed by the Software Engineering Institute at Carnegie Mellon University. Indian managers realized that economic benefits would be gained by quality improvements and have energetically pursued those benefits.

The conception of quality is undergoing a sea change at Indian IT facilities. At non-Indian IT outsourcing facilities offshore, quality is often seen as part of a larger process, attended to and owned by the macro level of each organization. In those settings, as in government owned firms in India, the individual merely needs to follow procedures to comply with quality standards.

In a dramatic departure with old-style Indian management techniques, the IT industry has shifted the locus for quality down to individual people and individual actions. Ten years ago, Western clients would often complain that instead of merely having IT facility managers take ownership for the overall quality, Westerners simply wanted every individual in their offshore contractor’s organization to take ownership for each phone call, each e-mail and each trouble ticket that came their way.

Before the outsourcing cultural revolution broke out in India in the last half of the 1990s, when a problem or question came to an employee, it was considered proper for that employee to refer that problem to someone else for resolution. People would feel as if they had done their job properly if they made referrals rather than taking the initiative to fix a problem or answer a question themselves.

The IT workforces in India, particularly younger managers, are increasingly adopting U.S. approaches to quality and individual initiative. This makes the outsourcing process easier to launch and maintain. It has enabled Indian facilities to cross the trust threshold with many of their U.S. clients.

How Sub-Par Facilities Hold onto Clients
Even Indian outsourcing facilities operating at moderate levels of quality have been able to hold onto U.S. clients by establishing good long-term customer relationships. Once a call center or data processing firm has established a good track record with an American client, that client is likely to continue working with that firm unless their prices or quality takes a serious turn for the worse. This is true at both U.S. domestic and offshore call centers.

American clients of call centers will usually continue working with an outsourcing facility that is not always up to par with service quality — as long as such clients believe that the facility’s managers are quick to respond to client concerns.

Although it spent a few years floundering after a modest start in 1999, the Indian commercial call center industry has climbed out of its infancy. Clients with the patience to support their offshore contractor operations in India and to budget for adequate training and ramp up periods have often been rewarded by increases in quality and performance.

Increasing Domain Expertise
Call center and software firms in India are well positioned for continued quality and process improvements. This is due, in part, to continuing improvements in their domain expertise. Domain expertise refers to knowledge of the subject areas in which people work.

New software and call center firms starting up offshore often lack focus or domain expertise. Lack of domain expertise adds hidden costs to U.S. clients, who must spend time transferring domain expertise to their offshore contractors.

By specializing and not attempting to do everything, Indian software and call center firms have often been able to gain domain expertise, establish proven track records within those domains, and to provide both better quality outputs and better value for money for their clients.

Long-Term Price Competitiveness
Costs have been increasing in India and will continue to do so for ingredients such as labor, land and taxes. However, India will remain a cost-competitive destination because of high initial value propositions and because of unrealized opportunities for cost control.

Voice services and non-voice back office processing work (also called business process outsourcing or BPO) are more price sensitive than software development. Redirection of outsourcing work away from India would be understandable for cost reasons, yet the price per production (login) hour at many top-tier Indian centers has fallen from US$18 per hour four years ago to $15 an hour or less today. Prices charged to U.S. clients for training time at Indian facilities have also dropped.

There are opportunities for cost control beyond mere reductions in hourly charges. In 2001, when my firm began sending voice work to India, we could not find one call center there that owned an interactive voice response (IVR) system in the U.S. to enable the center to handle customer inquiries before routing a call overseas to a live agent. The industry at that time was not attuned to clients’ needs to reduce talk time and therefore clients’ costs.

Indian outsourcing firms have become increasingly sophisticated about using technology to achieve lower costs and better services for U.S. customers. Now completely automated inbound call handling solutions for domestic U.S. customers are cheaper and more seamless from Indian providers than U.S. ones.

The head start that India has over other outsourcing destinations has given its IT workforce a head start on building up a professionalism and competence that will enable that workforce to provide better value for money in the coming years, despite wage increases. Whereas the call center workforce in some areas of India has experienced annual turnover rates of 50 to 100 percent, the annual turnover rate at software firms such as Infosys has remained a staid 10 percent.

Sophisticated Performance Metrics
Indian outsourcing firms have become increasingly proficient at working with U.S. clients to reduce the average cost per call. Performance metrics such as average speed of answer, average length of call, first-call resolution rates, and customer satisfaction data are receiving increasing and well-deserved attention across wide sections of the customer service industry in India. The sophistication of metrics reporting now seen at Indian call centers often rivals or exceeds what is available from North American providers — many of whom are working with older and less sophisticated equipment than is in use at newer Indian facilities.

The quantitative focus on performance metrics is giving Indian call centers the ability to drive costs down for customers. It provides Indian call center professionals with skill sets that they are taking with them on international training and consulting assignments in Pakistan, Sri Lanka, and Dubai.

The proficiency and high-level capabilities that many Indian IT professionals are capable of demonstrating on a consistent basis is evidenced in the rise of Indian-based IT project management firms such as eBusiness India, who are my direct competitors. A few years ago I would not have paid much attention to them. Now their performance capabilities are equaling or exceeding what Americans can do.

Low Currency Risk
The declining value of the U.S. dollar has been a concern at offshore facilities in South Asia. Kurian James, who directs an InternationalStaff.net contract facility in South India, jokingly remarked that if the U.S. dollar loses any more of its value, then he will be able to afford an American chef. However, the U.S. dollar has not lost significant value against the Indian Rupee, particularly when compared to other currencies such as the Euro.

The U.S. dollar’s loss in value to the Euro has been fluctuating between 30 percent and 40 percent over the last three years. Both currencies have lost value compared to gold. Changes in the value of the Indian Rupee to the dollar have been comparatively mild, with exchange rate now at a little more than 43 Indian Rupees to the dollar. Two years ago the rate was a little more than 47 Rupees to the dollar.

All the outsourcing contracts from the U.S. to India that I have seen are in U.S. dollars. All the ones that I have written have provided no allowance for reductions in the value of the U.S. dollar. This reduces risks for U.S. firms from additional currency fluctuations and adds to India’s attractiveness as an outsourcing destination compared to destinations such as Canada.

In summary, the Indian IT outsourcing industry’s advantages as an outsourcing destination include overall quality, good value, increasing domain expertise and increasingly sophisticated performance metrics and program management skills. Other countries might challenge India’s IT outsourcing lead, but India stands ready to maintain its position as the top outsourcing destination for many years to come.

Free trade has benefited the world with more high quality jobs in both countries that are engaged in free trade, see East Asia, see the US high skilled jobs market etc for evidence, btw free trade is a British invention, Adam Smith.

Free trade does mean that your country has to be more competitive, that is not a bad thing, but if you cannot compete, it is your system that needs reform, those high skilled jobs are in the UK, problem is that many foreigners are working in them because graduate intake of natives in the UK is low for a whole basket of reasos and you should fix that problem and good luck to you on that front, I am sure that you will do fine. Everyone benefits when there are cheaper prices, but in everything there will always be some losers, the key is that there be many many more winners for every loser and free trade has done that. The fact that these low level jobs are leaving the UK is a good thing not a bad thing, it means that the UK had developed, eventually these jobs will leave India too (low level) and that will be a good thing too.

free trade makes sure that you produce the good in which you have a comparative advantage, meaning, the good that you can produce more efficiently than someone else at a cheaper price, people will now jump and generalize and say butoh gosh look Indian call centres are worse (do you even have statistical evidence), but INdian call centres are more efficient because they are cheaper and have decent performance times, the ratio is thus still higher than in the Uk, see Dr Sutton, LSE library, globalization.

India cannot take all UK jobs away, it is a mathematical fact, if i have a comparative advantage in basket of good x, you will have a comparative advantage in good y. So you will not loose everything, get over it. 🙂

Free trad makes goods cheaper and people have greater access to these goods, your phone bill etc would not be as cheap as it is if it was not for free trade, all goods would be more expensive and that would hurt the whole of the Uk not only the few low level workers who can’t seem to retrain properly.

To be fair there was a survery conducted by a British company Mitial I believe that talked about the existing problems of some indian call centres.

Remember, some are better than others

The problems were mainly concentrated at the lower end scale for the simplest things such as debit transfers, weather and train info etc, these jobs will no longer be in India anyway because automation is taking over these lower end customer support jobs, also internet etc…. This was the conclusion. Cost savings by the average UK customer was reported at 60%, pretty damn good. 🙂

Also its not like most of these jobs would have been held by Uk workers in the first place if outsourcing did not exist, there was already a trend of automation underway, people hated that so they said, ok well you can talk to someone then in India, companies cannot afford to maintain low rates and make customers happy while having UK workers doing lower level jobs for 10 pounds an hour!.

The UK still has one of the highest skilled labor force in the world, you need to fix that education system for the long term, there is no fear in competition, you will all be better off. I seem to have more faith in the British workforce than the Brits themselves. But the world is changing now, developed countries will not have jobs in customer support etc, they will have jobs in finance, biotech, robotics etc, retraining of the workforce is necessary. there are 100000 of jobs in London alone in such fields but the problem is that they cant find enough highly skilled British labor, look at the doctor situation and urse situation as an example, they are getting more foreigners to work because there is so much demand for a higher end field that pays more than those crummy customer support jobs.

I did not say that customer support in Asia was not upto scratch? I said that I am sure that some are not as good as others and that these are getting better and that THE OVERRIDING PREFERENCE OF CUSTOMERS REMAINS CHEAPER PRICES FOR MORE GOODS RATHER THAN PAYING HIGHER PRICES SO THAT A FEW LOW LEVEL UK workers can keep their jobs. Sorry but that si the truth. I am sure that some call centres are not performing that well and either they will change or they will switch back to another cal centre that is better or even back to the UK, FROM PAGE ONE I EXPLAINED THAT THERE ARE MANY EUROPEANS NOW BEING HIRED IN INDIA ITSELF TO COME AND PICK UP THE PHONE FOR THOSE MORE ETHNIC ACCENTS.

People often talk about a doomsday situation but if one were to take East Asia as an example, they embodied free trade, they took your manufacturing jobs in the 70s, the UK did not sink, the same thing is happening today, and btw those E Asian countries have high wages now and are still competitive and still keep their high end jobs.

But if i say the above i get accused of
(1) Mispelling generalization(s) by a ten year old kid.
2) Get called a troll
3) get my education questioned.

pathetic

Also when I mention art history all the time, its just mentioning the obvious, these arts degrees are dead now in the 21st century and do not get you jobs, people should not be studying such things anymore and if you do, don’t blame Indians for taking away your call centre jobs, these are low level jobs.

From the link I provided before

What are the benefits of free trade for the average person?

The historical record is very clear that free trade bestows many benefits to the average person. Those countries that lower trade barriers and open their markets enjoy higher economic standards of living. Consumers have access to a wider range of higher quality products at prices lower than they would otherwise pay. The average person also benefits in terms of wages and job opportunities. When labor and capital flow freely to the most productive areas of the economy, workers are employed in better, higher quality jobs with higher wages. While there are inevitable short-term transition costs in some sectors of the economy, the long-term benefits of free trade for all far outweigh such costs..

Related Works:

Protectionism Hurts Consumers
WTO Report Card: America’s Economic Stake in Open Trade
Trade, Jobs, and Manufacturing: Why (Almost All) US Workers Should Welcome Imports
The Blessings of Free Trade
Also see the CTPS issue page, “The Benefits of Globalization.”

bw this is only a forum, you are not supposed to not make spelling mistakes and it is pathetic for others to call you 1) troll and 2) get personal.

You cannot teach such people the truth about the world, they are bitter and prefer not to blame their system but rather free trade. Goodnews is, noone really cares about them, free trade is ere to stay and is growing faster but thanks kev for your english lessons, it was really on topic.

It is pretty obvious that having cheaper goods pleases the customer more than having a few low level jobs by art history grads staying in the west. It is not that companies are trying to destroy the western work force like the geniouses around here would think, its simply that the demand for goods is highly elastic in this competitive market and people wish to have cheaper goods, at least now more people can afford to buy computers, have cheap long distance calls etc

As far as paying for customer support, I suggest you contact your company, in the US, calls are free, how pathetic it is in the UK.

Also I am sorry kev but you again have generalized as all call centres not being as good as the ones in the UK based on your own experience and the ones of others, reality is that its not the case, they are as good, some are worse, some are getting better, a normal distribution. Only idiots generalize, I won’t bother debating with them. But if you really want these jobs back then try to convince the MAJORITY OF YOUR POPULATION to pay 3 times the amount for a product because now it is being manufactured in the UK, well done genious. It seems that as outsourcing is accelerating and since companies max profits based on customer demand, people seem to care more about prices and outsourcing will continue, the few bitter arts students around here will complain and make non sensicle generalizations and then get personal and talk about your degree, let them be, from the sarcastic biased moderator to the so called knowledgable students of economics who seem to have no clue as to what comparative advantage means to the ones who tend to generalize as usual, by that logic based on what Ihave seen in England, all English people are drunks because I wet to 4 pubs and all they did was get drunk and puke on others! but my level of education permits me to be a bit more advanced than the lads over here. Its just simple, the world is competitive now, if you can’t comete you loose but don’t be a sore and bitter lad about it.

oh and geniouses the fact that goods are cheaper benefits more people who can now afford to buy the good, start up that business and employ more people, free trade has created more high level jobs than it has taken away in the home country, GO VISIT a local library and if you do wish to argue, stop making a joke of yourselves and present some data and facts, try Dr Sutton, LSE libary or any library i am sure, i even provided you lads a link to answer your basic questions, at least try to have an argument backed up with facts.

kev
I do notknow what company you deal with because customer service calls tend to be FREE OF CHARGE. The call centre which I supervised had call times of 2 minutes, surely generalizations are for the…

As for my knowledge of economics, I invite you to test me on it if you dare, I was afterall educated at your LSE. 🙂

All companies tend to be demand driven, companies maximize profits subject to the demand which they forecast, meaning people always have a say, see your first year secondary school economics course for details. :rolleyes:

You would not imagine how much more expensive everything fro software, to laptops to long distance calls to even basic food would cost if it was not for free trade but then again I can go on and on about the obvious, some like Damian will still think that many many jobs will eventually go to India which is ridiculous.

and to the one liner
I did not say that you did not say that but never mind 🙂

Bud, I am really sorry that you cannot seem to understand, sucks to be you

UK universities cannot compete with US universities in terms of research which COSTS LOTS OF MONEY, you can find outa lot more about your own country’s education system by asking your Minister.

:rolleyes:

This is only partly true, British unis cannot compete with American unis and hence have had to look for higher paying students who tend to be internation since the price for a Brit is fixed. Universities are partly Govt funded and your great politicians should press unis to have a greater British intake, btw at the LSE in 2002 Finance Masters programme, most people who applied were not even British which is another problem in itself. These are political problems due to a bad education system at the lower level, I have been saying this all along but of course the ones who are supposed to be neutral mods are too busy engaging themselves in sarcastic one lines….. :rolleyes:

sleep time for real, sorry i ust could not help myself.

Sameer.

For me it is nothing to do with either high or low level employment, or about globalisation, politics or economics. It is not about education, it is not about race it is simply this….

When I wish to speak to any organisation I may be doing business with, whether it is a simple query or to complain, I expect to be able to communicate. In my personal experience with the personnel manning call centres in India, this inevitably becomes a problem. I do not wish to spell my surname five times, it is a five letter word and as such not particularly complicated. My address requires spelling on numerous occasions, okay, the name of the street may be difficult to spell for someone who is unfamiliar. But the word Street? I have to read account numbers or card numbers several times to be sure that the operative gets it right. They often object to my request to them to read it back to me. The operator rarely has any understanding of the nature of the complaint or query and even less idea how to rectify it. The standard answer when asked if I can speak to a supervisor is that one is not available. Should I ask if I can be transferred to someone in England that facility is not available either.

As I said to a supervisor the other day, it shows the level of trust that their employer has in their work when the only way to complain is by letter and that the call centre staff have no backup or support whatsoever. I have a moderately strong black country accent, but when I speak to Geordies, Scots, Irish, Liverpudlians, cockneys or Glaswegians, I have no trouble in communicating. The problem lies not in the language itself, but in the nuances and inflections which are a part of everyday speech. That and the fact that Indian call centre staff, in my personal experience, are wholly inadequately equipped, trained or otherwise suited to deal with telephone enquiries from people who are often angry or distressed because of a postal communication received.
Regards,

kev35

Before i make my leave

Kev
Sir

You are right in saying that the accent problem is there, I agree with what you say 100% but these problems are not as widespread as you would believe and also there are many Europeans working in India now as well to take care of that problem and also to train other Indians. Eventually these problems will be fixed, if they can’t be fixed then companies will relocate elsewhere, in the long term, say in 4-5 years, you will not have the problem, the problem is that you also have to understand that if you wish to keep your phone bill low then it is in your interest for these jobs to be in India, British people live in a developed economy and need to retrain to those many higher level jobs, whyare there so many more international students in British unis compared to native Brits? Don’t get me wrong, I think British people are highly intelligent, the problem is the education system and your POLITICIANS are to blame, not free trade. People complain about loosing jobs but then they complain even more when prices go up? Its weir, PRICES ARE CHEAP, INFLATION IS LOW PRECISELY BECAUSE OF FREE TRADE, IT KEEPS COSTS LOW WHICH IS GOOD FOR YOU WHEN YOU CAN CALL SOMEONE FOR A VERY VERY LOW RATE OR WHEN YOU CAN BUY THAT LAPTOP FOR 500 us DOLLARS.

I hope that people become more engaged nd learn more about free trade and how much is helps all of us, do not listen to people who do nothing but give you one liners, they call themselves mods too 😎