Online Business Review of SCIBC

by Pawan Varma, CEO & Founder, IntraWorld Outsourcing Management Center

The key is proficiency.
Since the 1980s, both clients and providers have been building proficiency in various disciplines.  This growth has not been entirely organic.  Rather, mergers, acquisitions and old-fashioned poaching of experienced specialists have been used extensively.

For example, Tata Consultancy Services (TCS), one of the largest Indian IT companies, employs more than 160,000 people in India.  From 2001 through 2008, it executed 12 key acquisitions that added nearly 19,000 people to its payroll and gave direct access to customers in 6 different countries.  At the same time, it strengthened its own delivery capabilities in India and other countries.  You see a similar pattern if you look at Wipro (100,000 employees) and Infosys (145,000 employees), two of the other outsourcing giants in India.

As you can imagine, the growth of these companies is based on much more than simple cost reduction for foreign clients.  In fact, as the cost of doing business has dropped, companies like these have redefined how their clients can benefit from the changes.

For example, in the 1980s and early 1990s, the world was gripped in fear of the coming millennium.  Computer programs were not built to handle the change and fears were that programs would interpret the year 2000 as 1900.  Calculations would go wrong, computers would shut down, and the world would be plunged into the dark ages.  The media called it the “Y2K [Year 2000] bug”.

At this time, the need was for thousands of computer programmers to pore over millions of computer programs with billions of lines of computer code.  Indian companies offered a large pool of programmers at cut-rate cost.  Clients around the world jumped at the offer.

Outside the big Indian IT companies, word hit the streets and suddenly computer training centers sprouted up everywhere.  People left lucrative careers in other fields to get into the computer industry.  Entrepreneurs created companies and started marketing computer programming services everywhere.

From within this raw money-grab, people began to see that offering a commodity service, computer programming, was becoming difficult.  They started to specialize.  In cooperation with their clients, they built centers of excellence and internationally-certified facilities.

India was quickly transformed from being a low-level provider of cheap labor to being a provider of reliable, high quality software services.  This offering then broadened into other fields outside computing.  Companies offering remote medical diagnosis, financial analysis, and legal opinions started to develop.  Business process outsourcing (BPO) was born.  In this service, instead of just handing a simple piece of work to a service provider, an entire business process (such as income tax preparation) was given over to an offshore company.

Soon, we had KPO (Knowledge process outsourcing), LPO (legal process outsourcing), and others.  Recently, big name universities from the US have started opening up branches in India and offering American degrees to students who may never set foot on US soil.  As a result, research and development projects are coming to India as well.  And recently, it was reported that state governments in the US are inviting Indian outsourcing companies to come to their state to set up processing centers.

All of these add up to increasingly sophisticated, tightly integrated people, technologies, and processes.  These global collaborations are becoming the new norm.  A global workforce is now within reach of practically any company in any country around the world.

Now, if you take a step back and look at the “global economy”, you will see the same type of pattern happening in different countries.
China, for example, focused on becoming the world’s manufacturing hub.  It is now turning its attention to outsourcing.  But rather than starting from scratch as India did, it is using India’s experience to accelerate its own foray into this area.  Chile is doing the same thing in its own way.  As is Vietnam, and Romania, and Northern Ireland.  And practically every other developing region of the world.

The result, naturally, will be pockets of specialization.
You may find, for example, that the Philippines is great for English language call center operations while the Dominican Republic is the place to go for Spanish language operations.  You might want to consider western China for accounting work or eastern China for engineering services.

Your key, however, will be your own proficiency in terms of your ability to manage work that is done outside the walls of your office.  Master the science and the art of managing outsourced work and the world is open to you.  Choose from the best of the best or the cheapest of the cheapest.

The “global economy” will not be a level playing field where everyone has equal access or opportunity.  Rather, it will be an environment where the spoils go to those who are most proficient at bringing value to, and extracting profit from, different pockets of influence.  You must develop proficiency in terms of managing your people, technologies, and processes in a global environment.

In the next article, we will look at one very successful way of developing this proficiency.  You will see how to rate your current level of proficiency and identify specific areas of improvement for maximum short-term profit and long-term capabilities enhancement.

Article submitted on 5th May, 2010; All Rights Reserved ©, SCIBC Business Review

About the Author Pawan Varma's background is centered around delivering results to clients in difficult circumstances. Since 1987, Pawan has directly worked in more than 45 different industries, rescued 5 projects (over $116 million in value) from failure, created 2 centers of excellence, and had 4 clients send him to India to set up or improve their offshore capabilities. Having spent the last 14 months intensely studying the outsourcing industry, Pawan has embarked on a mission to help companies become better at operating globally. This means mastering: a) outsourcing; b) offshore branches; and c) global collaborations.