Talking outsourcing - comment and opinion on the latest in outsourcing and offshoring by Mark Kobayashi-Hillary Talking outsourcing - comment and opinion on the latest in outsourcing and offshoring by Mark Kobayashi-Hillary Talking outsourcing - comment and opinion on the latest in outsourcing and offshoring by Mark Kobayashi-Hillary

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Thursday, 28 February 2008

Protecting employees should be a priority

In 1961, the Indian state of Karnataka (where Bangalore is located) created a new law banning women from working at night. In 2002, this law was amended to give special dispensation to the IT and IT-enabled service sector, provided the employer offers adequate protection to any women working at night, including safe transport to and from home.

On December 13, 2005, a female employee of Hewlett Packard Globalsoft in Bangalore was raped and murdered by her cab driver when she was on her way in to work a nightshift. The police filed a complaint to the labour commissioner who then filed the complaint before magistrates, claiming that the managing director of HP Globalsoft had been negligent in not providing secure transport. At that time, the MD of HP Globalsoft was Som Mittal, the new President of Nasscom and now the figurehead of the Indian IT industry.

Mittal has fought to quash the complaint, but the Indian Supreme Court has just quashed his final chance of appeal, so it looks like the police are going to get their way and will be able to convict him of not providing adequate security for female employees. The maximum penalty is a fine of 1,000 rupees. That’s approximately £12 or $25.

The whole affair is quite pointless and rather demeaning to the memory of Pratibha Murthy, the murdered employee. If HP was negligent in not screening the background of cab drivers employed to collect their female employees late at night, then a proper penalty should be applied. If they could not have prevented the situation then there is a no case to answer. However, the outcome that the Indian legal authorities appear to have reached after much legal wrangling between the Karnataka High Court and Supreme Court is that the former managing director may have to pony up an amount that is equivalent to lunch in a London sandwich bar.

It’s really a waste of time, tax rupees, and legal effort and appears to be driven by over-zealous bureaucrats more concerned with the application of the law to the letter, rather than in any pragmatic fashion. Let’s hope Som Mittal can put it behind him and get on with the job of leading Nasscom.

The Indian regulatory authorities pursuing this type of case ought to be asking the question why it is unsafe for women after dark in India. Surely this is the underlying question? Why should private sector companies be responsible for running their own fleet of taxis because the cities and states can’t provide good enough local infrastructure for employees to safely travel to and from work, whatever the time?

Tuesday, 26 February 2008

The damaging aspects of offshore outsourcing

I went to the London School of Economics last night to listen to a lecture by Professor Joseph Stiglitz, a Nobel laureate and one of the most-cited economists in the world today. He is well known as a critic of many aspects of globalisation, though the lecture last night was actually about the immense cost of the war in Iraq – as Stiglitz has just published a new book on the topic.

I’ve been thinking a lot over the past few days about some of the more damaging aspects of offshore outsourcing. First, a student emailed me asking for some help with a dissertation that explores the pros and cons of outsourcing, then I had to think about it once more as I am putting together a TV documentary and it will include some analysis of both sides of the coin.

Of course, going to see Stiglitz speak just galvanised some of my thoughts and I’ve got a lunch planned this week with fellow blogger Peter Skyte, at the union Unite. An interesting thing regarding Stiglitz’s new book though – and considering that he is usually viewed as pretty much left-of-centre and critical of everything – is that the military veterans of the Iraq war are very supportive of his analysis. That fact alone does make it sound like a lot more than just left wing tub-thumping.

For all the arguments that developed nations can enrich developing nations by purchasing goods or services, there are many counter-arguments from the detractors. I was in India recently and I was sitting on a bus next a guy from Belgium who worked in the IT sector in Europe, but had never been to India before.

He was completely shocked at the absolute poverty in the streets of Mumbai. It brought me back to my own reaction the first time I took a taxi from Mumbai airport to my hotel – I couldn’t get into the hotel fast enough after seeing the slums. My Belgian friend had internalised a vision of India as the technology companies present it; gleaming offices, smart well-paid staff all with phone-book length CVs, opulent hotels.

The reality is far from what we see on the corporate web sites, like the old holiday brochures that failed to mention your holiday resort is still under construction. And in a sense that is a good analogy, because a place like India is still under construction, and things are still a mess around the edges of the more developed industries.

When I was in the Philippines a couple of weeks ago, they were talking about IT outsourcing being worth 11 per cent of GDP within the next 2 years. It’s clear that our industry is of phenomenal importance to developing regions. All you need is a broadband link, some reliable electricity, some smart people and you are in business. This means that the opportunities for enriching the lives of billions of people is a genuine reality – because every industry now relies on IT – so demand for IT services can only increase.

But in our rush to advance economic enrichment and the redistribution of wealth from the north to the south, it’s worth also considering some of the genuine social issues. We know about the fears on our side of the equation, people fear their jobs will all vanish offshore, junior roles will all be offshored leading to a problem with the career path as people can’t gain experience on a real career ladder, constant uncertainty about the future.

What about on the other side of the offshoring story too? Taking India just as an example, the newspapers are full of stories of sordid scenes at nightclubs, rape, murder, drugs, drinking, and the arrogance of very young people earning far more than their parents. It’s not directly the fault of the outsourcing industry, but by default we have created immense clusters of young well-paid people with markedly different values to the generation that preceded them.

If we can export values such as gender equality then that’s great, but a problem of exporting cultural values is that you don’t have much control over which ones are exported and adopted. India has such a rich and diverse national cuisine, yet the kids at most call centres seem to be wolfing down curried pizza from Pizza Hut, or lamb burgers from McDonald’s…

I was asked to write a a book about this a couple of years ago and I just never had the time to put it together, but no one else seems to have written a book that looks at both the way our jobs are changing and the way work and society is changing in the places we work with. Maybe I need to think again about the offer from that publisher.

On the whole, I’d suggest that it is of extreme value to work with those regions that are less wealthy and less developed. It’s almost a moral imperative these days, and the moment some serious technology-related work starts getting outsourced to African nations then we will really start being aware of what is possible. However, we need to keep our eyes open to the social as well as the economic changes, in our own countries along with those we choose to work with.

Thursday, 21 February 2008

Is there anything you cannot outsource?

I was chatting to Egidio (Edge) Zarrella, global head of IT advisory for KPMG, at the Nasscom conference in Mumbai last week and he mentioned something to me that was a bit off the beaten track. We had been talking about the development of the international knowledge process outsourcing (KPO) market because he just published a new research report with some useful insights on the growth in this sector, but then he said that we were now going to start seeing the ‘core’ being outsourced.

The ‘core’ in this context is what we have spent years defining as the part of a company that can’t be outsourced. Everyone who has been to business school has spent ages trying to define what is the core of a company, and what are the services that can be purchased in from someone who can perform the service better.

Every academic with an interest in this area, from Charles Handy to Gary Hamel, has written reams on defining that boundary between the organisation and the hired help. Entire university courses look at defining the retained organisation, yet here is Edge saying that the structure of the company itself is about to be radically overhauled.

Edge gave me some examples, such as several companies he advises that have outsourced their own chief executive. They just buy in the best gunslinger that is available on the market. It was an off-the-cuff conversation, but based on some of the comments he had presented to the conference and I thought it was fascinating. Where does the core sit if you can even hire in the head of the company through an outsourcing deal?

Edge sponsored the Bollywood Dreams dinner at the Nasscom conference and he ended up getting hauled up on stage in front of a couple of thousand people for some Bollywood dance lessons. Given that performance though, he might have wanted to outsource the dancing to someone else in KPMG.

Wednesday, 20 February 2008

Indian acquisition rumours could be more than speculation

I was recently chatting on the sidelines of the Nasscom conference in India to Alex Blues, a partner at PA Consulting. Alex is known to just about everyone in this business, as he is one of the leading global advisors with a long track record on some major deals.

Alex was on his honeymoon, with his new wife enjoying the pleasures of Mumbai as he went from meeting to meeting at the conference. That’s real dedication to your work… well, in fact he was actually on holiday nearby and timed his return home so he could spend time at the conference, but he was still technically on his honeymoon.

Alex said something really interesting to me while we were chatting that could reignite the debate over potential mergers and acquisitions in the outsourcing supplier marketplace. I had asked Alex when he thought that we could drop the prefix “Indian” from the names of the Indian technology suppliers – in the same way as we never prefix a country in front of IBM, Capgemini, EDS, or Atos Origin. Basically, I wanted to know when will they grow up and be considered global players?

He said: “I think that there will soon be a Indian supplier making a significant purchase in the UK. There have been a lot of market rumours and some of those were pure rumours, but some were serious bids. I think that in the next 12 months there will be a huge surprise in the market and somebody with very deep pockets will make a major purchase. That company will be the one that moves from being considered a major player in India to being a true global player. It will be really interesting to watch this over the next 12 months.”

No matter how much they deny it, industry insiders know that the Indian slide rule has been run over several European service companies. If Alex Blues says we should be watching for something to happen in 2008 then I think it’s a serious insight and not just the further propagation of market rumours.

Tuesday, 19 February 2008

The world is going to India

I travelled home from the Nasscom conference in Mumbai at the weekend, suffering a taxi with a puncture on the way to the airport. Still, I did manage to get there on time and thanks to the great online check-in system on ba.com I was all set to go when I arrived at the airport, though the Mumbai international airport version of a fast bag drop is rather more pedestrian than that on offer at Heathrow.

The BA chief information officer Paul Coby was speaking at Nasscom so I guess any BA complaints could be directed to him personally, but after taking too many flights over the past week I really liked my BA homecoming experience. Not least the fact that 26-year-old episodes of Only Fools and Horses are on the entertainment system, welcoming the weary British traveller back to Peckham.

I’m going to write up some comments from people I spoke to at Nasscom over the next few days, but I wanted to immediately comment on something that struck me while I was there. It’s something that I spoke to a few people about and everyone seemed to agree with me – that the Nasscom annual conference is becoming less about India and more about the business of global outsourcing and IT services in general. India is just where Nasscom is based, but the conference itself is starting to become a focal point for regions across the world promoting their outsourcing services.

For example, consider this: The pre-conference discussions were dominated by International Business Wales, the government body that promotes investment into Wales. Similar pre-conference discussions featured representatives of the hi-tech sector in Pakistan, Malaysia, and China. The evening reception on the first day of the conference was sponsored by Nova Scotia, Canada. Canadian delegates were handing out newspapers extolling the virtues of investing in their country. Lunch on day two was sponsored by Costa Rica, and dinner that evening was thanks to the Egyptians. The keynote sessions on day three featured representatives of Egypt, China, and Australia and then the lunch was funded by our very own Think London. The final session of the conference examined software innovation in India, China, and Israel.

This international involvement in what used to be an India-focused technology conference underlines a couple of points. India has become the centre of the international IT service industry – this really is where a lot of the thinking is taking place. Also, it does demonstrate that the industry in India is far more mature than even just a few years ago. Many of these international trade bodies are partnering with India because they want to capture a little piece of the magic dust for their own IT services industry.

Nasscom is becoming the central reference point for the global IT services industry and it would not surprise me if they even dropped ‘India’ from the title of the conference in 2009.

Friday, 15 February 2008

India gets the jitters over Western economic problems

So here we are at the Nasscom conference once again. I’ve been going to this conference for the past six years, watching each year as the entire Indian technology industry rails against some injustice, or just enjoys the moment. My earlier visits to this conference were against a backdrop of violent anti-offshoring protests in the UK and US. How times change.

Something I noticed last year was that there seems to be less of a unifying theme at the conference, possibly as the industry matures. This is even more obvious to me this year, although some people have insisted to me that innovation is the theme for 2008, but I’m afraid that’s a bit too nebulous. I don’t mean the theme on the programme, I mean what everyone is talking about in the coffee shops and bars around the conference venue.

I walked into this event thinking that the general theme might be quite negative this year. Stock prices in the sector have been struggling as margins have been eroded by the unfavourable dollar to rupee exchange rate. Add that to a general fear of economic slowdown in the West and you might expect a cloud or two to be hanging over some of the participants, but in general the mood has been upbeat. Companies either see a downturn in the US as an opportunity to get out there and use the low-cost-India calling card once more (something they had just about managed to discard in a quest for acceptance as strategic partners), or they just see new opportunities on the horizon.

I had a cup of tea with one of my mates from London, Paul Morrison from the consulting and research firm Alsbridge. He acknowledged some of the difficulties, but he felt that some of the industry voices fearing the future are protesting too much.

Paul said: “I would challenge a lot of these general concerns running across the Indian technology industry because I don’t think those problems are really so deep. I think that in fact, the real discussion here is more about the next set of growth opportunities. Knowledge process outsourcing (KPO) for example. KPO is not new, but we are now seeing real case studies coming through, rather than just talk. I think there is a lot of discussion about where captives [foreign companies with their back office or delivery centres in India; HSBC for example] are going to go. Some of the captives in India are bigger than some service providers. The domestic Indian market is also rising up the agenda and so the main question is really, where is the balance going to be struck between any potential slowdown and all of these different opportunities for growth?”

Paul is absolutely right. What’s the point in talking vaguely about a wave of innovation on the horizon, when there is a list of very real and tangible industry opportunities right there and ready to be grasped by whoever wants to go for it? In fact, it makes the concern over recent share price performance seem incredibly short-sighted. Yes, we all know that public companies need to justify their performance to external shareholders – who start getting jittery as margins are eroded, but the only company I can think of in this sector that has really taken leadership and stuck a flag (rather than their head) in the sand is Cognizant. It has talked up the market opportunities and told the market analysts that results are going to be higher than market predictions. Brave words. So let’s hope Francisco D’Souza, Cognizant’s chief executive, achieves his numbers and proves the industry doubters wrong.

Toilet trouble

Last night Nasscom made various awards to the great and good around the world, for their contribution to the Indian technology and service industry over the past year. Various international business leaders such as Willie Walsh of British Airways, and John Chambers of Cisco received awards, along with local heroes such as Ratan Tata.

These awards are well respected and the recipients are certainly worthy. These are people generating thousands of jobs in India, and investing hundreds of millions of dollars (or even billions in some cases) in the country.

When Willie Walsh appeared on screen to accept his award - he couldn’t make it in person, but the BA chief information officer Paul Coby did come and accept it on his behalf - the chatter in the crowd turned to the amazing efforts of the BA flight crew who recently managed to avert disaster by crash-landing their Boeing 777 on a Heathrow runway, even though the engines had failed several miles from the airport. Hundreds of tons of steel should not glide – in my personal view those pilots are incredible.

The Indian people around me at the awards thought that the crew were absolute heroes. When I mentioned that it looks like some of the passengers might be trying to sue BA for compensation, they could not comprehend it – they felt the passengers should be grateful to be alive. Certainly an interesting cultural difference and perhaps a sorry example of Britain coasting down the US path to ambulance-chasing litigation.

On a lighter note though, I noticed a couple of differences about the awards this year, and you could say they are connected. The bar stayed open during the award ceremony itself. In past years, the moment people start accepting their awards the bar has closed and opened again once the awards are all handed out. Presumably, this is to ensure everyone takes a seat and watches the show, rather than hanging around at the back with the barflies and reprobates.

I was hanging around chatting to the Xansa team, now owned by Steria and being rebranded to Steria soon. Hilary Robertson and I made several runs to the bar prior to the awards starting, scooping up enough wine and beer to last the table through the awards, only to find that the bar did not actually close this year so we had to work our way through an entire table full of drinks. It’s a hard life, but we managed it.

Now for the connected item, usually there are more than enough toilets available at this event. This is a dinner for about two thousand people and with the bar being open for longer, one might assume an increased need for toilets this year, but it seemed that they reduced them. I only found six, in total, for boys and girls. Perhaps I just missed the others, but the lines of men with crossed legs made me think that the organisers should have exercised some joined-up thinking. More beer is always welcome, but make sure the number of cubicles also increases in future please!

Thursday, 14 February 2008

A buzz about the Philippines

I just flew into Mumbai in India, after a journey involving four countries in one day. I had breakfast in the Philippines, lunch in Hong Kong then my plane to India stopped to pick up more people at Bangkok in Thailand. That’s pretty good going even for me and I’ve done a fair few air miles in my time. I’m going to be really pleased to get back home and to have a pint at the Castle Inn in Ealing without having to remember what flight I am on the next morning and where I put the ticket. In fact, I could not even find my air ticket this morning, but given that everything is electronic these days I could at least show the security guard at Manila airport an Apple Macbook screen image showing my ticket. Luckily she believed me.

The annual Nasscom show launched this evening in Mumbai. I missed the opening party because I was travelling today, but the meat of the conference is across the next two days anyway. I’m getting ready to record a lot of interviews and to capture some thoughts on what is really going on in India at present. I’ve already had some text messages from people at the opening ceremony though so I know the Indian tech firm NIIT has 6ft high posters of my image on their stand! That’s because they were mentioned a few times in the book I wrote last year with Dr Richard Sykes. It will be nice to get my photo taken by these posters, I guess!

I want to mention a few words on the Philippines before I switch entirely to what is going on at Nasscom. I have some interviews and notes that I’m going to refer back to at the weekend so I’ll blog a bit more once I review my notes, but as a quick and initial observation I am leaving the place very impressed by what they are doing there. The government is incredibly supportive of the technology and hi-tech services industry. They see it going from a standing start at the millennium to being worth 11 per cent of GDP by the end of this decade so it’s no wonder they are rolling out the red carpet for anyone ready to invest there.

The physical infrastructure in the Philippines is a lot better than India; the city streets are covered with smooth asphalt rather than the craters you bounce across on the way to an Indian hotel. It’s also quite a bit more inviting to the western visitor. Starbucks branches can be found on most city corners and other little cultural connections crop up making the place feel very inviting. Over the past few days I’ve found loads of people just coming to chat to me about England – quite often about things like the Premier League, or the girl on the Sofitel hotel reception desk telling me about her holiday in London last year. To be honest I think the only place I have ever felt the people being similarly friendly to foreign visitors and investors was Thailand.

And it’s not just about the people being friendly - the companies are getting serious too. Captive centres – multinationals opening their own local facilities – dominate the Philippines at present, so there are no well-known home-grown companies yet, but they are trying. I spoke to several companies working on both software and services and some were doing really interesting work, often for well-known clients in Europe and the US. What they really need to do is just boost their own brand and the brand of the region itself – something India has been phenomenally successful at doing over the past decade.

I think they will get there. There is a buzz in the air about what they are doing in the Philippines and the government really has a strong plan in place to help support the industry, from working with universities to improving infrastructure in dozens of smaller cities so the work can be spread throughout the county – about 80 per cent of this business is in Manila right now. I’m looking forward to returning soon if I can find some projects out there that are interesting for me to work on.

A big thank you

As you might recall from an earlier blog, I left the UK without a visa to enter India and still I have managed to get into Mumbai so I can report from the Nasscom conference here. I just wanted to ensure that the team at Tholons in the Philippines got a big thank you on the blog for making sure that this was possible.

They took my passport away and with the help of the commercial team at the embassy of India in Manila, they managed to get my visa turned around within 24 hours. This is a process that usually takes six days and requires a personal visit to the embassy, yet I managed to carry on working at the conference in Manila while the Tholons team did all the running around for me.

Maybe I should forget to renew my visa more often, as it ended up to be a far easier process than usual!

Monday, 11 February 2008

Good morning Madam President

I’m sitting in the Sofitel hotel in Manila right now enjoying some fresh mango at 4am – because I’m jet-lagged. I only got in last night and within minutes of arriving at the hotel I was already whisked off to a welcome reception for speakers at the e-Services conference, taking place here in Manila for the next two days.

The cold drinks were certainly welcome and it was good to meet everyone who will be sharing the speaker platform, but I was feeling incredibly tired – travelling from Saturday morning in London to Sunday evening in Manila. Then, just as I was going to slope off to my room to get some sleep, one of the hosts came over to me: “We have seated you with the Philippines president in the morning. So you can talk to her about how to make the region more attractive for outsourcing.”

That’s nice. Although, my name badge actually highlights that I am from the UK National Outsourcing Association, reminding me that I really should write a book called the Outsourcer’s Apprentice at some point.

It will be a pleasure to meet the president in the morning, but given my present frame of mind, I might be half asleep by 10am.


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