Outsourcing A Globally Competitive Marketplace

Updated: Jan 22 2003, 05:30am hrs
Outsourcing as a global concept is at an evolutionary stage. Michael F Corbett, president and CEO of Michael F Corbett & Associates Ltd, is an internationally recognized consultant known for his work on outsourcing. Mr Corbett, who was in Mumbai at Nasscom Outsource India 2003, spoke to Kavita Nair on the headstart that India has in this field and on the issues that revolve around it. Excerpts:

With outsourcing being the buzzword today, what is Indias position in the outsourcing scenario
Outsourcing is becoming a global concept and India actually ranks very high when it comes to IT and business processes. India has a first-mover advantage because of its 10-15 year history in these areas: business process, animation and engineering. It is clearly in the leadership position right now. But it is also one that can slip very quickly. Other countries are going to look at the positive effect that outsourcing has had on Indian economy. The key point is that outsourcing is becoming a globally competitive market place for these competencies. For outsourcing, companies will look not only at India but also China, Dublin, Eastern Europe.

Despite India emerging as a favoured destination for outsourcing, Indian companies have been unable to get work in the US government outsourcing sector. Why is it so
The US government outsourcing market is 10 years behind the private sector. Government decision by definition is political and does involve a lot of other issues like layoffs. This is a political challenge. I do not see that changing in the near future. In the US, we are pleased to see the government embracing the concept of outsourcing. The government is saving 30-40 per cent of costs just by outsourcing. There is no need to outsource offshore as yet. If the government can get the kind of returns it is getting with outsourcing, the next step would be to look at increasing the cost savings which could be offshore. What we are likely to see is governments outsourcing to US-based companies which, in turn, would go offshore. That is what I think is going to happen.

NJ Bill Not Much Of An Issue

Chennai: The recent Bill of the New Jersey government which prohibits contracting government jobs to outside agencies is not an important issue for Indian business process outsourcing (BPO), said an outsourcing expert. The Bill is yet to become a law.
Bill or no Bill, it is unlikely that the government work will get offshored to India. The cost differential between outsourcing of work in the US and offshoring it to India is not a significant driver (for the work to be offshored), said president and chief executive officer, Michael F Corbett & Associates, Michael F Corbett at a Nasscom summit held here on Tuesday.
I did not know about it until a law firm representing Indian firms asked for my opinion on the issue. Very few people in the US know about it. It is the Indian companies that are talking about it, he said.
The outsourcing of government jobs is a politically sensitive issue. The Florida state government has recently outsourced its human resources related activities, due to the political leadership displayed by the state administration. Also, firms must understand that the government is not a single entity and there is the federal government, state governments etc, he explained.

Outsourcing has highlighted issues like layoffs. How is this being dealt with
The personnel impact of outsourcing is nothing new.

In the short term, there will be issues like job losses. But in the long term, confidence in the companies to whom work is getting outsourced will be an important factor. That is where the attention ought to be.

Is the government considering any changes in its existing policies so that the advantage of outsourcing can be leveraged
Outsourcing and outsourcing offshore is an evolutionary concept. The governement sector is 10 years behind the private sector in outsourcing. So they are certainly not going to be aggressive over work getting outsourced offshore. There is nothing that can be expected in the short term. Over time, they will look at how they can improve their processes and begin migrating certain pieces of their work offshore when issues are not so sensitive.

How is India placed when it comes to other countries, specifically Philippines
Since outsourcing is a global market, no country in the world can be ignored.

The Indian companies have to get clearer in their own mind. As they are articulate to their customers, they have a unique advantage. This cannot be based on talent and low-cost alone; it has to be based on developing unique expertise, focused on particular industries, successful results and current relationships. This is what I suggest every Indian company should do.

In the short term, I agree that there is a lot of work coming and an opportunity to pick up on it with a more general positioning. Certainly, you take the work that comes. But you cannot build a long term strategy on that. So take this opportunity and figure out how exactly to be positioned because when executives outsource they want to go to a company that they know has produced high quality results.