Outsourcing and offshoring: implementation and risk reduction, by Anthony Mitchell and Tara Bradford

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Learn about risk reduction and implementation in going offshore. Covers taxes, telecommunications, NDAs, workplace and cultural issues in India, Pakistan, and the Philippines.

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Outsourcing and offshoring: implementation and risk reduction, by Anthony Mitchell and Tara Bradford

  1. 1. Offshoring & Outsourcing: Implementation and Risk Reduction Tara Bradford and Anthony Mitchell Strategic sourcing Results oriented Retains core competencies: Strategic planning Brand management Project management Market driven Process oriented Driven by capabilities and prices of available service providers Greater project mgt efforts needed May require institution building InternationalStaff.net
  2. 2. Captive Facilities Can be commercialized Can use SLAs, metrics and reporting systems on par with commercial facilities Traditional equation: after three years a captive facility is cheaper than outsourcing Locally owned outsourcing facilities in South Asia are capable of running cheaper than U.S. captive operations indefinitely Resistance from within a parent company can impede captive operations and market driven outsourcing InternationalStaff.net
  3. 3. Advantages of captive facilities • Easier to monitor and control • Investments in training and quality can achieve better returns • Can be easier to recruit and retain good personnel • Easier to impart corporate culture • Quicker and easier to change procedures • Access to local markets • Can be cheaper
  4. 4. The Govt. of India taxes IT and ITeS companies at 36%-46% if they receive all their contracts through a single source outside of India. The Govt. of India (GOI) is considering a presumptive tax rate of 10% for IT and ITeS firms. The GOI has authority to tax retroactively. GOI Circular 2004/5 governs IT and ITeS firms.
  5. 5. In India, non-payment of the final or most recent invoice is common, even among large profitable Indian companies. To minimize risks, Indian companies may look for opportunities to bill for work before it is conducted. To convert Indian Rupees into dollars and transfer them to the U.S. requires approval of the Reserve Bank of India, which can add more than six weeks to an initial transfer process.
  6. 6. Outsourcing Outsourcing 1.0 2.0 Large indefinite More market quantity contracts driven and price sensitive. Large project management fees Can require high to handle project levels of effort to management manage projects tasks on behalf of and strengthen client staff. capabilities of service Low-risk approach providers. that resists efforts to derail Lower run costs outsourcing and higher projects. levels of control. Emphasizes Emphasizes results. processes used to achieve results.
  7. 7. Voice vs. non-voice • Recruiting is easier for non- voice work • Non-voice employees easier to manage • Retention of women easier for non-voice
  8. 8. Knowledge process outsourcing (KPO) • Small program sizes are typical, e.g., 5 FTEs. • The more complex or unfamiliar KPO projects are for offshore staff, the more ramp-up times may need to be extended.
  9. 9. An offshore facility can be used to support domestic operations in the same country or region. This provides economies of scale and encourages world-class support in overseas markets. Broaden the labor pool: Hire and train ‘near hires’ without the risk or costs of attempting to upgrade near hires to immediately begin handling U.S. customers. Retention of top talent: Agents may not be willing to stay on the night shift forever, especially women when they marry and start a family. Retention can be aided by having domestic programs running during the day.
  10. 10. The best tasks to be shifted: Easiest to perform Measurable Open to the client to monitor quality InternationalStaff.net
  11. 11. For market-driven outsourcing: • Update table of organization (especially for staff levels). • Forecast the number of positions in different skill sets under consideration for outsourcing/offshoring. • Forecast fully-loaded personnel costs in the different skill areas under consideration, if operations were to remain in-house in the U.S. • Designate potential offshore locations to be considered for outsourcing/offshoring. • In offshore areas under consideration, assess the cost and availability of labor with desired skill sets. • Subtract internal costs for project management.
  12. 12. Then: 1. Assess labor markets for key skills in destinations under consideration. 2. Forecast competition for 3. Determine whether key skills in destinations there is a good match under consideration and between skill areas the rates at which that can be shifted educational institutions, and an offshore labor labor shifts from other fields market’s long term and in-migration could ability to supply those influence labor supplies skills at predictable and labor costs. labor costs.
  13. 13. Calculate costs per action In calculating ROI for outsourcing or offshoring, define indicators to be compared, preferably based in part on the total cost of handling a particular type of task. This normalizes for variations in performance between U.S. and overseas facilities, such as number of calls to close, length of calls, and variations in management costs. InternationalStaff.net
  14. 14. Biggest saving opportunities The largest cost reductions are achieved in shifting high-paying positions. Sophisticated inbound support positions that cost $72-$84 per production hour in the U.S. can be run for $18 or less per production hour in India and Pakistan.
  15. 15. Telecom costs Telecom costs between the U.S. and South Asia are about $1 per hour and have a delay of 350 milliseconds or less end to end. Satellite backup costs extra (except in Pakistan, where it is 100% government subsidized) and has a 450-550 millisecond delay. 500 milliseconds is considered the maximum tolerable delay for consumer applications.
  16. 16. How to plan for shifting work The service provider will seek to map out everything that needs to be accomplished in order to make a program function. Scripts, answers to frequently asked questions (FAQs) and decision trees are developed and made accessible to agents.
  17. 17. Call Center Program Implementation Process InternationalStaff.net
  18. 18. How to run an outsourcing project Develop: A scope of work Level of effort projections Time frames, and Performance indicators that will be used to monitor the project and procedures for QA InternationalStaff.net
  19. 19. How to make NDAs work Executives who sign NDAs may not understand them and may not take them seriously. Risks of NDAs being ignored increase when there is no onsite presence to reinforce their importance.
  20. 20. NDAs written by Indian firms for each other and their employees are largely ineffectual. They declare anything and everything to be protected information, which discourages NDAs from being taken seriously. To make NDAs work, having someone onsite representing the client is essential. This person needs to provide training to support the NDA. Whereas NDA issues can be addressed with top managers in a one-on-one context, middle managers need to be included in training. Training needs to include an understanding of how confidential information is defined.
  21. 21. Equipment and procedural protections • The concept of segregating and protecting confidential data is not always widely understood. However, some facilities offshore are excellent at data protection. • Clients or their representatives need to get inside facilities and ensure that equipment and procedural protections are in place and adequately monitored. • Separate QA departments are needed, geographically and socially isolated from the people they are monitoring. • Indian call centers were predominantly paper-based operations from the years 2000-2003. The shift to paperless environments helps secure data. • U.S. pharmaceutical manufacturers have experience with loss prevention that translates well into offshore call center environments.
  22. 22. Comparing India and the Philippines India Philippines Accent Intensive training Minimal training Culture Intensive training Minimal training Infrastructure Dependent on Stable location Facilities Low to High End Moderate to High End Political Usually no Usually no impact- often tax impact incentives InternationalStaff.net
  23. 23. Contact: Tara Bradford Anthony Mitchell tara.bradford@gmail.com info@InternationalStaff.net (206) 709-8547
  24. 24. InternationalStaff.net
  25. 25. InternationalStaff.net

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