BPO GLOBAL SERVICE DELIVERY: Key To Success

It
is well documented that Global Service Delivery (GSD), or “offshoring,” is
gaining momentum in terms of the types of services being offered, and the
geographic locations in which the model is being deployed. According to recent
reports, most organizations are incorporating GSD to reduce costs, expedite
growth and gain access to qualified personnel. There are many reasons for this
growth: operating and capital expenditures are often less expensive with GSD
than “onshore,” skill levels and language proficiencies overseas are
increasing, IT infrastructure is becoming more robust and cultural compatibility
issues are dissipating, to name a few. But what types of companies will be
expanding their GSD initiatives? What is their level of satisfaction with GSD?
Are productivity expectations being met? And as global service delivery expands,
what type of service providers will be selected?

In an effort to answer these questions and to explore the quantifiable
trends and key findings that directly impact global strategy, operational
excellence and attainment of real financial benefits, TPI, a global-sourcing
advisory firm, conducted a comprehensive survey during 2005, and published its
results in the State of Global Service Delivery (SGSD). The SGSD report is based
on research compiled in mid-2005 from companies of all sizes, with strong
representation in organizations with annual revenues of over $10 bn. TPI polled
more than 200 executives around the world with experience using global-sourcing
delivery models of all kinds and produced a study exploring the current state of
the global IT offshore service delivery market. 

As the report was being created, and as the responses were being analyzed,
clear and identifiable groupings began to emerge. Respondents, depending on
their organizational experience with GSD, featured different and distinctive
traits that directly affected their level of GSD success. Thus, TPI identified
and established the Global Service Delivery Maturity Curve (GSDMC). In the
study, the GSDMC serves two purposes: it acts as a yard-stick to assist
organizations in defining where their organization fits into the continuum, and
helps identify potential actions that can be taken to increase GSD
effectiveness.
Â

State of GSD

According to the study, GSD will experience a period of accelerated growth
during the coming 18 months, particularly among companies with three to five
years of global service delivery already underway - Stage 4 or higher along
the curve. This growth is largely driven by an overall broadening of the work
activity being executed at global service delivery location(s). For example, in
addition to Applications Development and Maintenance (ADM) activities - a
typical first step in offshoring - GSD operations often expand significantly
to include infrastructure and R&D, while simultaneously adding additional
global resources in ADM. This expansion of work activities increases the size of
the organizations' global sourcing operation, the number of offshore locations
and the number of operational models used.

Based on the survey response, GSD satisfaction levels have room for
improvement; however, they do not differ significantly from “onshore”
satisfaction levels. GSD-satisfaction levels tend to be equal to satisfaction
with their firms' onshore consultants and their internal staff, making the
comparison statistically insignificant. And this general opinion is consistent
across organizations at all stages of the GSD Maturity Curve with only slight
differences. Stage 1 respondents tend to have slightly higher satisfaction
levels with offshore resources. Organizations at Stage 5 indicated a higher
overall-satisfaction level with offshore resources onsite than for their own
internal staff.

The initial findings show that the promise of global service delivery
productivity appears to remain somewhat elusive, as measuring the productivity
gained or lost in offshoring endeavors continues to be a challenge for many
organizations despite the rising adoption of GSD overall. Expectations for
productivity seem to run the course from groundless optimism in the earliest
years, to a modified, rationalized expectancy in later years. Among respondents
with less than a year of offshore experience (Stage 2), only 17% reported their
global productivity is “reaching expectations.” At the other extreme, among
those with five or more years experience (Stage 4 & 5), 40% say they are
reaching expectations, albeit at a lower, revised scale. This indicates that
maturing organizations are adjusting their expectations accordingly, and
productivity targets are being eased rather than tightened.

Respondents clearly articulated that as they move up the GSD Maturity
Curve, their dynamics change significantly. And it appears that multinational
company (MNC) service providers such as ACS, Accenture, CSC, EDS, HP or IBM are
benefiting most from this GSD maturation. Increasing headcount, expanding across
multiple global destinations, and a strengthening tendency to evaluate, and
select an MNC service provider over a local or national pure-play provider were
some of the activities cited by the more mature respondents.

A market that was once dominated by the offshore service providers such as
TCS, Wipro and Infosys has now become a hotly contested battle with MNCs that in
many cases are delivering scaled offshore operations at very competitive prices.
TPI believes the surge toward multiple global locations and the broadening of
activities such as infrastructure will bolster the MNCs' competitive position.

Maturity

“If I knew then what I know now, I would have done things differently?”
People have said it millions of times. Once someone has time, experience and
maturity under their belt, they do things differently. They learn from their
mistakes, and the same applies with businesses.

As companies progressed up the GSD Maturity Curve, they experienced the
benefits of GSD and expanded their initiatives, increased their satisfaction
levels in their GSD program, and had more “realistic” expectations of what
GSD could do for their company. They also learned from their mistakes with
unproven providers, and are moving towards MNCs with a truly global scope. The
first 36 of months of the global service delivery operation creates a foundation
that builds significant traction, so a very important “take-away” is to stay
committed to the initiative. Those who stick with offshoring do reap significant
returns once they reach Stage 3, at which point they are likely to expand their
efforts.

Paul Schmidt, Partner, Global Service Delivery, TPI and Jim Hussey, Senior
Advisor, Global Service Delivery, TPI

Republished with permission from Global Services