Outsourcing and cultural challenges


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“Outsourcing and cultural challenges”, Per Reinboth, Special Advisor Fairs and Delegations, Innovation Norway.

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Outsourcing and cultural challenges

  1. 1. Cultural challenges in outsourcing Presentation 6.May 2010 Per Reinboth- Innovasjon Norge
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  5. 5. 21 ST CENTURY HEAD 5
  6. 6. 19 TH CENTURY BODY 6
  8. 8. Talent Pool for Knowledge Based Economy India has one of the largest education systems in the world • 311 Universities with over 15,600 colleges • 3 million graduates every year • 200,000 engineers every year • 300,000 other technicians every year • 150,000 R&D professionals every year • 2,000 Graduates from Indian Institutes of Management and other top 10 Business Schools every year • 84,000 Graduates from other Business Schools every year 8
  9. 9. Indian IT Industry • ITES exports grew from 17.7 bn US$ (2004-05) to US$ 23.4 bn(2005-06) – 32% growth • As per NASSCOM review for 2005-06 revenues from US totalled 67%, Europe 25% and rest of the world 7.7%. • Share of IT Software and Services Industry in GDP – • Raised from 1.2% (1999-00) to 4.8% (2005-06) • Majority companies adopted international standards: ISO, CMM,, etc. 9
  10. 10. Global Comparison 10
  11. 11. Major Players India's Top Software companies India's Top BPO firms 1 TCS 1 Genpact 2 Infosys 2 WNS 3 Satyam 3 Wipo BPO 4 Wipro 4 HCL BPO Services 5 IBM 5 ICICI One Source 6 IBM Daksh 7 Progeon Top 4 companies have 8 Aegis BPO Services 80% market share 9 EXL Service Holdings 10 24/7 Customer 11
  12. 12. India Based Service Provider Landscape Category No. of Share of India’s total Performance players IT/BPO export revenues Tier I Players 3-4 45% of IT Services Revenues greater than USD 1 billion 4-5% of BPO Tier II IT Players 7-10 25% of IT Services Revenues USD 100 million-USD 1 billion 4-5% of BPO Offshore 20-30 10-15% of IT Services Revenues USD 10 million-USD 500 operations of 10-15% of BPO million Global IT majors Pure play BPO 40-50 20% of BPO Revenues USD 10 million-USD 200 providers million Captive BPO 150 50% of BPO Revenues USD 25 million-USD 150 units million (top 10 units) Emerging >3000 10-15% of IT Services Revenues less than USD 100 million (IT) players 5% of BPO Revenues less than USD 10 million (BPO) 12
  13. 13. Future Trends • Increasing Labor costs • Moving up the value chain • Consolidation • Manpower Shortage • Outsourcing Backlash • Engineering Services Outsourcing (ESO), Avionics and other opportunities 13
  14. 14. Risk factors when you outsource to India Time is not always an important element Indians seldom express diagreement. Only done in an indirect manner. Avoid expressing direct disagreement. Your priority can be changed according to the total business picture Even if English is understood and spoken , the meaning can deviate 14
  15. 15. Risk factors in outsourcing to India Loyalty can be with the best paying party. •Often solutions are 90% - good enough but not perfect. •Your contact persom may change often •Competence in your special field may be insufficient •Direct communication difficult if you want to solve a problem 15
  16. 16. Risk factors in outsourcing to India ctd. • Secrecy agreements • IPR could possibly be a problem • Work processes different . India often has a hierachical system but ICT companies tend to change this to a flat or project oriented system. • Communication. The remote working model 16
  17. 17. Reduce risk and cost Define the deliveries. (Terms of Reference) Prepare yourself thorughly. Learn about the business culture and make quality control of your potential partners. You might be more dependant on your partner more than he will depend on you. Use Innovation Norway, delhi or other local adviser in the process. Treat your potential partners with respect. This also goes for the potential key personell you will cooperate with. . 17
  18. 18. Reduce risk and costs ctd. • Think long term and see the process in this perspective. You might have to offer some training to get the people on the right level of undrstanding.. Be prepared and plan for good people changing position and companies • Travel extensively to get a first hand impression on both the the company and the environment it is working in. Invite personell to your company to give them a impression of your company how you work 18
  19. 19. How can Norwegian companies use this advantage? Work with the specialists! Get in touch with: •Indian partner with a daughter/ company in Norway •Norwegian partner with a daughter /majority ownership in India •Go on your own and find a possible Indian partner directly. 19
  20. 20. In general Use common sense and show respect. Accept that the culture is different and try to adopt. Take your time to experience and understand the market and the culture before expecting big results. This investment will pay back later. Be patient 20