Facebook has a cool change !!

After a rather big series on outsourcing, we are back reporting on technolgy.

Facebook now has chat available between contacts.

Yes it is quite light and fast.

No you might not voice chat as of now.

Yes the design is much better than Gtalk, Yahoo, Skype,Hotmail combined.


I uploaded my entire Linked In list (2500 contacts ) (using export CSV function in Linkedin and upload contact file in Facebook) and sent them a facebook invite.

With a 10 % response rate and luckily 0 % no complaint rate  , I aim to chat with some of the top 250 professionals I know of, besides some fast aging batch mates.

Web 2.0 is cool ,huh !

Outsourcing Analytics to India: 1

Outsourcing -Some Facts


A study found that out of every 1 dollar outsourced, only 31 cents comes to the outsourced country. The rest is captured by the Western Company in terms of savings and dividends. Most of India’s outsourcing sector is directly and indirectly owned by Western private equity players, who also use their influence within client companies in the West to outsource work. In addition in some sectors outsourcing helps to bridge resources shortage gaps to make those domains sustainable. The excesses of outsourcing happens when middle management start outsourcing for a short term quarterly benefit, without retraining it’s workers and in order to get the tab of “successfully managed an outsourcing/transition process” on their resumes. To some part American tax policies are responsible for those excesses. Also countries that benefit from outsourcing become more stable allies and in turn provide emerging markets for Western Manufacturers. At best it can be termed as a transfer of value between Western workers to Western investors via outsourcing staff.


Outsourcing – What Works , What doesn’t


A healthy outsourcing project outsources only required number of projects, has proper time for transitioning, has an on site co coordinator, and is adequately priced. If the contract squeezes the vendor, the vendor may cut corners and drop quality (he has American investors to answer to!). If the price is too lavish, the outsourcer will be disappointed in lesser cost savings and the hidden costs especially traveling and training.


The worst type of outsourcing transition is some people will transition in three weeks what they have learnt in three years to a bunch of consultants flying in, and will then be fired. This leaves everyone confused on the vendor side especially as most transition projects end up doing most of the documentation themselves . The resentful employees (and rightly so) share the bare professional minimum information and there is no team work here.


The best outsourcing projects that I have seen work are ones in which the vendor team is treated as a member of the company that happens to sit in India, thus can provide round the clock coverage due to time zone differences. The vendors are usually eager to learn, and if the outsourcing team is secure in transferring knowledge they generally pass along the soft informal tricks and trades of the process as well (for e.g. do not use table A from DW X, use table B, as it is more accurate). These contracts are generally adequately priced as ell. Remember your vendor team gets approx 20 to 33 % of billings only (for 100 dollar invoice only 30 dollars will go the team salary), the rest goes in overheads, investor returns etc. So an adequate billing rate ensures that your of shore team has more food with some jam on the table, thus will stick with you longer. An important check is to ask from your vendor before the contract starts to give the exact ratio of billing to salaries, and also to give the promotion schedule for the team. Also ask for the names of the analysts and qualifications and actual time spent in vendor company to avoid window dressing by vendors.



Choosing the right vendor without burning your fingers


You may get confused or plain irritated at the vendor selection stage where every vendor claims to build the Taj Mahal on the moon for 20 $ a hour for you. One of the best techniques is to give some sample data/task to be done to multiple vendors, and then evaluate the top 3. Then go for a free two month pilot to see synergies and team capabilities. Always ask for names of analytics working on the project. Then award the project but with adequate penalties in an elaborate service level agreement and liability clauses, just to keep operational risk down.


What to outsource and what not: A stepwise approach


Don’t give your vendor more to chew than he can swallow. Ask the vendor for examples and not just slides on similar work. Give an old actual project done by your team as a test in the pilot above. A stepwise approach to outsourcing will help save you much more money in the long term.


Outsourcing in Data Mining and Analytics:Transitions


India , China and Eastern Europe have vast pools of statisticians and MBA s that can be utilized for data mining analytics. But outsourcing everything in your analytics project is , well ,its like throwing the baby out with the bath water.


Time intensive tasks like Data crunching, Data querying, Data pulling and cleaning , and running repetitive jobs should definitely be outsourced. An additional aspect is to get these tasks documented during the transition process for your own operational stability.


The next stage is to transition reporting, but only after you feel your vendor team has documented and is comfortable with the data universe. Since most vendor teams use Master’s degrees and advanced programmers you can also give incentives to them for creating an automation process rather than do the same task again and again which enables them to enhance billing.



Lastly you can outsource high value tasks like market basket analysis ,scoring models as well as credit models, but only after regular compliance training has been given. You can also ask your offshore team to do research on newer techniques that you never had the time to.




Data Security

For data security insist on an on site inspection or a suitable standard like ISO 27001 certification to keep sensitive data safe, with proper encryption (like PGP) for data exchanges. Also insist on certain legal training for your offshore team (and not just on the job training) and this could be in the form of certifications as well.


Insist on sharing all codes and logs from your vendor as your own intellectual property as this will ensure operational stability and quality assurance at all stages of the project and the contract.


Outsourcing in this manner enables systematic freeing up of valuable on site resources to business context and strategic tasks rather than low level tasks, thus enhancing their skill sets as well. Having adequate penalties (in terms of free credits) for service level agreement breaches will ensure high quality steady output.

Cutting software costs in outsourcing of analytics and data mining –

Some costs like software costs remain the same through the globe.

You can use the outsourcing transition to force some innovation, like insist 50 % of offshore team uses Open Office and Google Applications for first six months, and nearly half the team uses open source statistical tools like R.


Using newer softwares like WPS ( a base SAS clone ) for cutting down SAS and SPSS costs, open source tools like Linux for say 25 % of the offshore team’s systems can actually help you do a test and control on costs on your own team.


Having personally worked with all these softwares, an optimized approach can save you much more costs than you can imagine.


Cultural Differences, Communication and Tracking– Most Indians see Western culture from Hollywood movies so be prepared for some fun here. Try and speak slowly, and ask if you have been understood after you say a paragraph. Ask your offshore team to send you a meeting summary after each call, and ask them to send a schedule of work for the upcoming week to ensure adequate resource allocation.


You can insist on time sheets (log in –log out), since most outsourcing companies record this information anyways for their own purposes so it’s not a big deal. Eastern cultures tend to be hierarchical with emphasis on deferring to superior’s opinions so try and ask your offshore team to speak up their thoughts in time. Use of instant messengers like skype greatly helps streamline communication.


Remember, for better or for worse, outsourcing is here to stay in some form or the other. If you cannot beat it, then join it , and if you do it correctly you, and your company will gain and you will enjoy the process as well.


Finding Outsourcing Vendors through Consultants

Consulting companies are limited to biases as most outsourcing companies (in India ) atleast have a big degree of ex consultants.

So each consulting company seems to have a prid quo quo arrangement or a favourite partner.

Outsourcing companies themselves have a lot of churn/attrition in senior management. So nearly everyone knows what the other rates /details are.

The industry average attrition is 40% and thats the annual growth as well.

The best way to choose a consulting/outsourcing company is to

a) ask for previous case studies as for your EXACT process

b) ask them about billing/salaries ratio for their staff for the outsourcer.

c) Ask about risk manaagement or change control processes in place for terminating or transitioning ownership, or even scenarios for changing vendors .

Why Do Indian BPO companies struggle more than Indian IT companies ?

1)different sales cycle and methods of evaluation- cost is the reason to outsource in BPO, capability AND cost is the reason to seek technology outsourcing. Sales cycle are longer and much bigger in IT companies, while BPO companies have a shorter sales invetment hence push for faster sales than a long sales cycle with mega deals

2)consultants are very good at generic processes, outsourcing requires a detail orientation and dealing with lower middle management to get the transitions requirements done correctly….

3) Most BPO’s hire the bottom half of top consulting firms or star salesmen who used to be stars. Sad but true .Ex consultants join PE funds if they are good, start ups if they are ok, BPO’s get the worst in that lot as they pay the least. Same for technology salesmen .

4) BPO is yet to mature in sales, pre sales processes and have a longer term view. It is a younger industry and I am sure IT outsourcing struggled in its initial days too.

5) Internal BPO HR practises-

Much higher levels of attrition in BPO lead to lower quality of delivery than in technology. Also experienced BPO delivery people,with zero sales experience, who stick around sometimes get to partner the new sales people onsite not because its good for the firm but only way to retain these people

6)Competition in BPO is quite ridiculous with rates touching 14-15 $ per hour for large deals, and quite many salesmen end up making discounts just to make that quarter or undercut the competition for strategic reasons.”

Margins are higher in IT companies in India .

Genpact and WNS are exceptions to this rule  due to sheer size and parental pedigree (GE and BA respectively), but most Indian BPOs/BTOs/KPOs less than 4000 people will suffer the above issues

Outsourcing Analytics:Attrition Silver Bullets

Use an analytical tool called common sense and think like the little guys.

1) Have a minimum core team of employees rather than over hire is your enthusiasm

2) pay them well…about 10 % above market rates.

3) give them appropriate designations 🙂 not the ones they manage to haggle for
4) for fluctuating demand/work use sub contractors rather than hire employees /build huge empires of people…..(e.g A VP once told me proudly “I lead 500 people”…as if he was going to fight for Sparta)

5) employees who have periods of very less and sometimes hectic over activity..leave.

attrition is easier controlled in smaller teams, and a lot more work can be sub contracted at economic terms….

6) be flexible and nice  to your people..

as long as they get the work done ,any time they want to come in should be fine as long as they meet deadlines…

7) use tele commuting,work from home , internet conferences etc ,it is safer and the IT industry uses it more than ITES. It also saves costs….

this will act as a substantial barrier to exit……

8) and find work,training ((skill enhancement etc),new developments  to keep young people from getting bored..rather than quarterly off sites. Give them a quarterly cash amount than the offsite .

9) Use predictive attrition control, based on survey based attributes and rate employees in red,yellow,green. Focus on the reds, high attrition threats. Some companies are even coming up with a response model to predict attrition.

Boredom makes people quit faster than anything at least in Indian analytics that I have seen.

Keep em happy and they will return the favour

Outsourcing Analytics:Some Trends

1) Eastern Europe has definitely come up and so is China in basic outsourcing processes. For more complex processes India remains the primary destination and sometimes act as managers to East European and China new outsourcers.EU countries delivery centers enjoy less stringent data norms. The Chinese speak much worse English and are better mathematicians. So are the East Europeans.

Some of this out sourcing 2.0 is driven by Indian companies who want to mitigate risks of rupee and have global delivery 24 * 7 and also enjoy EU norms of data protection.

2) Cutting costs through open source software like R, better solutions like WPS could also get big.

You can also see fragmentation to consultants as technology like remote desktop and skype allows low risk  remote working.

Consolidation of KPO and BPO has been problematic and disappointing in expectations at least in India.

Next big big trend depends on how 2008 US Recession and politics plays out as USA remains the biggest source of outsourcing business and trends in this field

Indian Outsourcing :Opinions on–Why Bad Experiences

some of the recent reasons are-

1) Inadequate transition times – Transition is done faster and faster due to keeping less bench strength , while prices and competitions seem quite competitive.

2) Cost vs Quality tradeoff – Cost tradeoffs will lead to quality tradeoffs. The expectation on client side is we negotiated a hard mean deal , but we still should get the quality had we been prepared to pay more. Not true.

3) Scale and Type of process- India will offer huge scale for time to come as rural Indians get call center opportunities. This is a recent trend to cut costs and yes rural Indians will have worse accents. Complex processes will still come India’s way but here the Chinese will be more formidable competitors as they can’t master the english accent but do just fine on the spreadsheets and maths.

4) Global delivery — Most big Indian BPOs now deliver from India AND Europe, AND Asia (including Indian BPOs with Philippines and China centers, and South American. Like Baskin Robbins , you will choose among the 31 flavors of delivery centers and expect to pay accordingly from same  company.

5) Pragmatic expectations – After millions of hours of interaction, people of different cultures have realized the difference in communication, and assertive behaviour .eg Please do this immediately is different In India and US.

6) I am more worried about the outsourcing (value creation actual vs expected, political sensitivities, long term exchange rate and inflation mechanisms ) and voice industry (with better automated voice recognizability ) than about India in particular.

7) And yes attrition is a concern , but actual reality is attrition helps keep costs low by churning out experienced voice agents with newer boys who stretch more than the shift (Indian outsourcing remains unregulated and labor is non organized ).

I wont take the name but as a Manager I was told to encourage attrition in the name of performance just to keep the Operating margin up.

8) A case study is attached for Indian BPO IPOS (which are mostly owned by Western Investors) and another article written by me on Indian call centres.This should give you more insights than you expected to happen https://decisionstats.com/2007/indian-outsourcing-company-plans-to-take-american-investors-for-a-ride/

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