Monthly Archives: February 2014

Can Indian outsourcing hit $300 Billion by 2020?

Indian IT’s ambition to hit $300 billion in revenues by 2020 could be a tad over-ambitious, analysts and industry consultants believe, as for one it entails an average growth rate that is higher than the upper end of the range Nasscom’s forecast.

As global firms undergo rapid changes, with accelerated adoption of emerging technologies and business models, the Indian companies’ preponderance on IT outsourcing means they need to ramp up offerings in the new areas while continuing to keep their bread-and-butter work. Vendor executives, industry analysts and customers indicate a better spending environment in CY14 as reflected in Nasscom’s higher IT services and BPO exports growth estimate of 13-15 %. Most of this growth acceleration is likely to come from application modernization and emerging technologies (also called digital technologies). While 13-15 % growth in FY15 appears realistic, the sustainable growth rate over FY14-20 is likely to be somewhere closer to the lower end of the range. In other words, the industry is unlikely to hit the $300-billion mark in that time frame, unless it accelerates significantly.

IT has potential to reach $221 billion

The core of the business, services , is unlikely to look the same in the next seven years, and a focus on intellectual property, especially in digital technologies, could be the key to success. Indian companies in general are widely believed to invest a lot less in their R&D in comparison with those in the West, even within the services business. KPMG estimated that the industry could potentially reach $221 billion in revenue by 2020, a gap of $79 billion to the Nasscom target.

Not everyone agrees that the target is unachievable, Nasscom has been getting it predictions right for the last many years. So given their track record, the IT industry should be able to achieve $300 billion revenues by 2020. In the near term, buffeted by two years of very slow growth, the Indian IT industry is concentrating on winning re-bid contracts, as global corporations continue to look for cost-cutting options and offshore more work. The Indian companies are also adding business in managing computer systems and storage networks, called infrastructure management in the industry.

They run the risk of not investing enough in digital technologies and high-end consulting, an area where companies such as Accenture are more self-assured. The Indian services industry being still ill-equipped for the digital transformation wave that is about to be unleashed on organizations as they try to fulfill the customer engagement lifecycle. The rise of Big data, social media, and other emerging digital initiatives need a good look to capitalize.

Most Indian centric service providers are still focused on back-end services around F&A and HR and ERP services. There is huge need to make changes to their business model and invest in things like building consulting, there is such an opportunity open, but it is not easy for India pure play firms, some have failed in this endeavor earlier. If they can compete with the Big 3 in US and in Europe crossing 300B by 2020 is not a huge milestone.

The are some headwinds like political instability, threat of taxation, inflation, rising wages, Visa issues, upgrading education system to get more employable variety of IT pros which pose bottlenecks as well to achieve this ambitious growth.

Outsourcing analytics

Outsourcing analytics can offer huge benefits for client — but requires a carefully constructed relationship. The last decade has seen large amounts of data gathering in various forms be it loyalty programs or otherwise and companies are looking to monetize this huge data store via various means. Data is money and in most cases has a shelf life. The companies that have data are looking for various means to run analytics, help disseminate data either for themselves or for their clients. Selling insights instead of just selling data is another big emerging business with top dollars. Companies have invested hiring resources just to run their analytics 24/7 and in order to reduce costs are looking for outsourcing partners. There are lots of good examples of front-runners that have been doing this for a while but the big surge seems to be around the corner.

The surge of interest in big data has led to growing demand for analytics teams. Having big data capabilities can help companies become more efficient and improve overall competitiveness. Companies with superior data analytics capabilities have found ways to build long-term advantages. FedEx Corp., for example, has for years used its team of analytics professionals to create and maintain a competitive advantage through enhanced revenues and lower costs. One of the factors that has helped Wal-Mart Stores Inc. become one of the world’s largest and most successful retailers is the strength of its analytics. The ability to cross sell or up-sell is ably aided by analytics.

Assembling analytics teams, however, is difficult. For one thing, many companies lack the in-house knowledge and experience needed to put together an analytics team. Technologies are still emerging. What’s more, the labor market for analytics professionals has grown increasingly tight. The shortage of analysts — particularly those capable of developing and leading world-class teams that can enable a company to create a competitive advantage from its data and analytics — is driving organizations to consider outsourcing their analytics activities. However, choosing analytics providers and structuring effective working relationships that deliver value require managers to have a clear understanding of what they’re looking for and the potential risks involved.

Analytics is the latest in a string of activities companies are outsourcing to business process organizations (BPOs). As the telecommunications boom that began in the late 1990s led to improving communications with emerging markets, Fortune 500 companies began shifting call centers offshore to locations such as India and the Philippines to take advantage of less expensive labor. India, Philippines and some more Latin American countries are especially attractive because of its large English-speaking population and highly educated labor force. Once call centers were established to handle customer service and telesales, companies began identifying other activities that might be suitable for outsourcing or offshoring: IT services, computer programming, legal research, application processing and accounting.

Analytics was a late arrival to the business-process-outsourcing menu of services; companies that tasted success with other areas of outsourcing have been more successful in moving analytics offshore slowly and steadily.

This isn’t to say outsourcing analytics isn’t done at all today. “A number of well-known Fortune 500 companies outsource and offshore at least some of their analytics. It’s safe to say that outsourcing analytics will grow in the future. The shortage of analytics talent — “particularly those capable of developing and leading world-class teams that can enable a company to create a competitive advantage from its data and analytics” — is putting outsourcing on the agenda. The enormous cost advantage will eventually accelerate

Outsourcing analytics can be a wise strategy, too, as long as managers “have a clear understanding of what they’re looking for and the potential risks involved. For the MIT SMR report, Bell and Fogarty studied four multinational companies that used one or more offshore analytics outsourcers, as well as four analytics outsourcers operating in India. Through their research, they discovered differences in how analytically challenged and analytically sophisticated companies approach outsourcing. Regardless, care and management of the relationship with the selected analytics outsourcer will determine success or failure. “Outsourcing analytics requires a carefully constructed relationship, and the negotiation and evolution of this relationship needs to clarify who does what, who owns what and how each party can use the information it has,” they said.

In conclusion, future looks bright for outsourcing companies to tap into this market. From today’s smaller margins mainly due to early adopters playing carefully and outsourcers trying to grab market and entrench they, this market is poised to change. With heavy investments into Big data there is a market share for everyone that is ready to dive in with his or her credentials. Outsourcing companies investing in people, process and technology stand to gain the biggest in this sphere.

Understanding Indian culture – Quick tips

You perhaps cannot escape being tied to outsourced environment in some form or fashion, and for those that are fully engaged with outsourcing partners dealing with resources with multiple vendors in various countries it makes it pertinent to learn and understand the culture of the country where your resources are.

I will provide some insights and collateral on some of the outsourcing hubs in my next series of blog. lets start with Indian sub continent which happens to be one of the largest outsourcing hubs today.

handshake

To be inter-culturally competent doesn’t mean you are an authority in the values and beliefs of every culture. What it means is that you hold a deep respect for cultural differences and are eager to learn, and willing to accept that there are many ways of viewing the world.

Consider these tips while working in a Multi-Cultural Team:

Be Flexible (“blessed are the flexible for they cannot be bent out of shape!”)
Understand & Respect Different Cultures
Build Working Relationships Based on Different Work Values.
Beware of Generalizations – Cultures are Changing/Globalizing
Equal/Fair Treatment for all Team Members
Convey Your Desire to Be Sensitive to Another’s Culture – Early in the Relationship
Do Not Impose Your Own Values/Expectations on Others
Culture Cannot Be An Excuse for Poor Communication/Misunderstanding

Here are some good guides to learn more on this subject.

Internet: Centre for Intercultural Learning, An excellent site providing a local perspective on most issues.

http://www.intercultures.ca/cil-cai/country_insights-en.asp

An interesting publication produced by the United States Peace Corps that is a mix of personal experiences, cross-cultural training, and a host of ideas to help in establishing and expanding a global mindset. You may download this 256 page book (3.7Mb) for free, or download just the chapters you want.
Culture Shock Guides A well written book series (each on a different region or country).

Culture Matters http://www.peacecorps.gov/wws/publications/culture

Read: The World is Flat Thomas L. Friedman – provides in depth understanding of globalization in the 21st century.

Read a Local Newspaper or Magazine Many of these are available at no cost on the internet.

Dealing with Conflicts in outsourced environs

Working with virtual teams is very common in an outsourced environment. A virtual team is one where the team members are based in a number of different locations spread across multiple geographies and they communicate through communication tools and over the phone. It can be harder to manage conflict in virtual teams because you can’t see people when they are speaking and therefore you can’t pick up on their body language. As a result, conflicts can be quite far advanced before you even realize that there is a problem.

When your team all works in the same building it is easy to bring them together for meetings and discussions to help resolve conflict. But when they are scattered all over the country and beyond, it can be much harder to spot issues and deal with them.

Here are 5 tips to help you manage conflict on your virtual team.

1. Respect diversity

Everyone is different – you know that already! It really helps to have in mind the basic principle of respecting diversity. Don’t expect everyone to have the same approach, dealing with risk or even reporting status as you do. The more you learn about the culture of the people on your team, the easier you will find it to recognize that how they do things is down to their individual traits and working styles, and not a desire to create conflict in the team.

2. Learn a few words in their language

When you work with international teams, it can be a good icebreaker to learn a few words in their language. How about Ciao, ‘Hello’, ‘Goodbye’ and ‘Thank you?’ You can include these in emails or instant messages too.

This shows that you are willing to learn about their country and language, and that you are trying to make an effort. If you show that you are prepared to learn and try to understand their culture, they will hopefully be more willing to understand yours. This can also help stop conflicts before they start because it builds a better team environment and a more friendly, trusting team.

3. Deal with conflict early

As soon as you spot a conflict situation, deal with it. Because virtual teams don’t have the opportunity to chat informally over lunch or in the elevator, they miss out on many of the small social interactions that help build strong, trusting teams.

This can mean that by the time you hear about a potential conflict, it is already much further advanced than it would be if your team members were all working in the same building. So you need to act quickly to stop the situation getting worse. Call up the people involved or ask for clarification of the issue. Convene a meeting or send out a bulletin stating what is being done about the problem. You can use the same conflict management techniques that you would use on a team where the team members all work in the same office, but the key is to get in there as soon as you can and get the conflict sorted out before it escalates into something more serious. Look for conflict that could potentially be swept under the carpet. This happens more so on the remote locations.

4. Know when to stop using online tools

Online collaboration tools are great. They allow you to communicate in real-time, and they help team members who don’t have English as their first language understand the issues more effectively, because they rely on written communication (which is often easier for non-native speakers to understand) instead of verbal communication (as non-native speakers can get lost in a fast-moving conversation with a number of different accents).

They let you use instant messaging, wikis, discussion groups and other features that promote collaboration within the team. In fact, they can minimize the risk of conflict because everyone has access to the same data and a single version of everything. But there is a time to stop using online tools and start talking to people over the phone or in person – and that time is when there is a severe conflict situation.

However good you are at getting your message across in writing, nothing beats a face-to-face meeting, and sometimes you need one to sort out the problem once and for all. So if you can, get the relevant parties together to discuss what the issue is, how to resolve it and the next steps for moving forward. Although this may seem expensive, sometimes it is the only way.

Consider using web video conferencing if you can’t stretch to bringing people together in person, as that is a suitable alternative. The important thing is that you are speaking to each other and that you can see each other.

5. Try different communication styles

Online tools give you the chance to use a variety of communication techniques. You can produce formal reports, send emails and instant messages, or start discussion threads. You can share presentations, videos and documents, like minutes from team meetings. Try each of these and see which ones work best with different team members. You may find that one team member prefers instant messaging and another prefers emails – try to tailor the way you communicate with them to their preferences.

Good communication is one of the ways to prevent conflict arising in the first place and to deal with it when it does arise, so knowing how your team members communicate and how best to get your message across is an important skill in building a successful team.

Conflict on virtual teams, like conflict on any team, is inevitable. You can do what you can to minimize the risk, for example by using good communication skills and being respectful of language and cultural differences in the team, but it isn’t something that you can avoid completely. You can guarantee that it is going to happen at some point, but the skill is in identifying the situation as soon as possible and dealing with it using appropriate techniques. If you are professional, respectful and courteous, and recognize and deal with conflict early, you’ll be well on your way to managing disagreements in the team effectively.

6. Have an ambassador : Sometimes it helps to send someone either as decoy or on purpose to deal with the conflict. Someone who has dealt with conflicts before and has a knack of dealing with all parties. Listening skills are important. Knowing the old age adage of praising in public and criticizing in private is a clue as well.