Is Disaster About to Strike India Outsourcers?

Forrester Research came out with a research piece this week, titled “Will your Offshore Provider Survive The Recession? that asks BPO clients to take a cold, hard look at the health of India-based providers.

The Forrester researcher, Sudin Apte, paints a pretty grim picture of the India BPO sector citing that major providers are ill-equipped to handle a perfect storm of diminished demand, picky clients wanting better deals and anti-outsourcing rhetoric from President Barack Obama.

The researcher says: “Indian providers’ limited preparedness to fight the recession poses a risk for clients. While in the short term sourcing professionals will find it attractive to obtain lower rates, vendor viability is challenged in the  long run — putting project delivery and overall client work at risk.”

These are pretty strong words and have major implications for Nearshore providers and US customers. What can providers learn?

Lesson 1: Differentiate yourself and your brand. Part of the problem for many India providers is they are doing too much and have lost sight of their core specializations.

Lesson 2: Build credibility through service excellence. The outsourcing business is very much a long-term gain proposition. It remains essential that providers consider their delivery value through continuous engagement and committing to invest in competency areas.

Lesson 3: Be honest. Say No. Part of the advantage of working in the Nearshore region, is the sharing of similar cultures. For that reason, the Western Hemisphere is probably better known for its ability to be “professionally blunt” when necessary to get the point across. This is an advantage for providers who are working with clients who are used to receiving “push back.” Being tactfully frank when necessary is something that customers will respect you for.

Lesson 4: Offer new methods of engagement. This point – courtesy of Forrester – is important since providers need to demonstrate that they are innovating in the right areas and looking at ways to improve the delivery of service, through human capital efficiencies, technology improvements or other creative models.

Is the India outsource industry about to collapse? Absolutely not.

But when major research firms like Forrester talk about anticipating bankruptcies – it’s a wake up call I would pay attention to.

Forrester advice to US clients working in India: “Rather than wait for a provider to go bankrupt or be acquired and face work disruption, identifying early symptoms of risk can save a lot of pain.”

IAOP: As India Wanes, Does Central America Become a New BPO Hub?

I kept hearing it throughout the IAOP Central America chapter meeting this week in Guatemala City:

India is reaching a BPO and KPO saturation point. Companies want more options but they want the same kind of process discipline that originally put India on the map. Is Central America ready to fill those big shoes?

qqqqqqqqqqqqqqqqqqqqqqqqqqqLori Blackman, president of DNL Global and a key behind the scenes organizer of the event, made a great point when she insisted the greater Latin America region has to take a close look at itself and decide what it can do better than anyone else. As a result, I kept asking my new provider friends: What makes you different? Beyond building call center operations, what’s the long term value play for your operation? Lori says it’s the natural ability to sell and smoothly engage with people which makes for promising opportunities.

I agree – but to be honest – industry leaders are definitely not there yet in terms of saying “our most precious resource are agents who have a natural proclivity to sell, or upsell.” Mario Lopez, a director with Transactel, pointed out that the region has to walk before it runs.

As far as filling the shoes of India, it’s safe to say that Central America has some room to grow. Standards of organizational process (a theme hit hard by former BP global CIO Don Althoff of British Petroleum which I will blog separately about), where companies and nations get on the Six Sigma and ITIL bandwagon, is not exactly a competency most regional providers are touting.

The “good news” as Stephan Manning, an Offshoring Research Associate from Duke University, pointed out during his presentation: Latin America is rising to become a top destination for call center business, in part because of Spanish language strengths. Demand for administrative support and BPO work, as well as product development (a theme we heard about repeatedly) are all up.

The flipside: There is a nasty race to the bottom in the price-is-everything world of call center sourcing. Commoditization is a very real concern and Manning – as well as others – stressed that providers need to take serious steps toward building a roadmap to higher value, and higher margin services, like KPO. My belief is KPO capabilities will begin to show up more and more and it will be introduced by the major, global players already beginning to build a beachhead in the region. The upside is huge – as long as providers commit to playing for the long haul.

Do Cultural Barriers Hamper US-Latin America Outsourcing?

One of the things I have heard repeatedly in my conversations with near shore sourcing partners in Latin America and the Caribbean is there has been a noticeable shift in the last two years away from India, in favor of near 5555555555555555555555551shore providers. Take Delta Airlines, for example, which transitioned much of its contact center operations from India to Jamaica. Why did Delta make this move?

Part of the reason, I’m told, is Jamaica is culturally more aligned with the core of Delta’s customer base – US citizens. Other factors include the familiar issues that make near-shoring so popular: similar time zones, closer physical proximity and English-as-a-first language capabilities.

Cultural familiarity is a real issue with real impacts. When I lived in Japan during the 90s, I frequently observed the “mum effect”, where a colleague or partner who possessed negative or “bad news” was very hesistant to reveal this information partly out of embarassment and partly because this behavior is embedded in Japanese culture.  In the business world the “mum effect” is a death sentence.  Failure to communicate problems or challenges  only causes those issues to manifest – just look at the origins of the US credit crisis. There is real data  behind the mum effect and its implications for the global outsourcing market, much of it done by Richard Nisbett, a social psychologist and outlined in this recent ComputerWorld report.
Unlike the US and UK, Latin America is classified by Nisbett as a group oriented culture, which is more aligned with Asia than the West. Will this present challenges in the continued emergence of Latin America – US commercial cooperative ventures?

We thing not. Latin America is  well positioned to become an extremely important nearshore ally for American industry. Key factors include:

  • The higher level of commitment the Obama administration is showing in building stronger Latin America-US relations
  • Economic realities. US companies of all sizes are viewing Latin America and Caribbean locations in a much more positive light because of fundamentally attractive operational cost advantages.  This favorable sentiment is showing up in an assortment of cross-border trade deals, BPO alliances and the establishment of offshore sourcing centers.
  • The growing professional class of trained workers in the region.
  • Finally – and perhaps most importantly – Latin America by and large loves President Obama and this will likely contribute to a favorable attitude toward all things American.

Despite immigration, drug cartels and other issues that media outlets like CNN want to exploit for their own commercial advantage, we see meaningful trends that demonstrate a tightening bond in this hemisphere.