Global Service Delivery: Get the Best of the World

Global service delivery is evolving as a mature business model,
where an individual company leveraging on a few resources offshore to countries,
and is now preparing to emerge as the next destination for technology and
business process outsourcing. This is a business model on which both leading
companies and service providers are leveraging on. It is now a key strategic
requirement for successful enterprises and is now shaping the way services are
developed and delivered across the globe.

The GSD approach gives the service provider the opportunity to
tap into the best global resources, which are talent, infrastructure, technology
solutions and political and economic environments. It signifies the emergence of
a type 3 model as distinct from a type 1 model where delivery is focused on
domain or industry skills resident in the country of delivery and a type 2 where
delivery is focused on high quality, technology skills resident in an offshore
location. Besides, the cost arbitrage of offshore operations adds economic
advantage to the entire process. With these benefits the customer is able to get
the optimum mix of resources and ensure business value. It is the unique balance
of on shore and off shore delivery. Companies that provide this effectively are
those that are equally invested in the demand and supply side of the execution
model. It has given the service providers more degrees to freedom-freedom from
10-hour days; labor shortages, economic constraints and single point
dependencies. Selected and designed correctly, the GSD model benefits both the
customer and the service provider.

The Drivers

The drivers of the global service delivery include the sophistication of
today's technology. With the available communication networks and technology
platforms, business can be conducted across the world without having a direct
physical presence. It is not the same as having branches in the world as global
sourcing allows transfer of skill and processes, while maintaining standard
quality and reducing cost at all times.

Availability of highly educated, technically skilled and
low-cost talent in emerging economies, the GSD has achieved broad acceptance
through its ability to deliver lower costs, higher quality, and productivity.
Favorable government regulations also drive the GSD and ensures centralized
delivery of service. On the other hand having branches world over will lead to
ineffective integration of services. Moreover, competitive pressures in all
industries force customers to look at new business models to stay ahead of the
competition.

Cost is one of the drivers and other main aspect is the
availability of talent pool. For example, Philippines has good talent pool in
voice arena because of similarity in accent with the US. The biggest advantage
of India is the 24/7-delivery capability because of 12 hours time lag. In
addition to cost, clients are gaining added value from strategic innovations
that are being executed from inception to finish by the global delivery
operations. Quality assurance cuts down maintenance costs while continuous
improvements aid in improving all the key parameters. Value is a function of
price, quality, risk, scope or skill, and time. Price is only one factor in the
GSD model. Quality, risk and skill are equally important. The cost factor has
evolved and we are looking at a location not only for cost but also for the
value that location can deliver and this in the earlier offshore game was marked
by cost alone but now the market is at a 3.0 stage it has evolved from cost to
performance/process improvement to value creation.

India and GSD

The opportunity to combine global resources with a local presence is the key
driver to adoption of GSD. It is a proven model for delivering the best solution
at the best price offering a range of global sourcing options designed to align
with a client's core business needs. India is replete with type 2 firms. These
firms have realized that to keep up with the changing nature of the industry,
they need to invest more heavily in the demand chain too. This is why several
India companies are now acquiring or organically growing their presence in the
US and Europe. World over companies are looking at India as a favorable
destination for outsourcing because of its low cost talent pool and time
difference advantage. The best practices gained by handling global offshore work
are helping India centric companies to leverage these benefits to provide value
proposition. Global mergers and acquisitions by Indian companies are further
driving the adoption of GSD model.

Competitive pressures, demographics imbalances, technology
innovations and global market opportunities are driving the adoption of GSD in
India. The signs are clear for the BPO companies either adopt or perish.

Best Sourcing

The leading BPO companies all over the world are definitely practicing
best sourcing aggressively in one-way or the other. Some companies look at it as
mix of cost quality and competency from a particular country and some look at it
as having multiple processes and choosing different vendors in different
countries. It can be safely said almost all large projects are best sourced. The
key thing is to source the right mix of vertical/domain skills and
technology/application talent so that the client gets rich content with solid
execution.

Dream Destinations

Geographical locations, which can offer a cost and knowledge advantage
and provide pools of accessible talent is the ones that are gaining share in the
market. Prerequisites like infrastructure, technology and favorable government
regulations are other factors that will determine preference to a particular
destination. As per recent market studies, the leaders are India, Canada, China
and Czech republic and Philippines to name a few. A few of the emerging
destinations are Australia, Belarus, Brazil, Bulgaria, Ireland and South Africa
while some of the early entrants are Argentina, Cuba, Fiji, Ghana etc.

India is growing as a very important service delivery hub in the
global services supply chain. Indian service providers are becoming increasingly
sophisticated, and have proven this in recent times. There is considerable depth
of talent and unexplored/untapped locations in India from which a variety of
services can be delivered.

The destinations that are emerging are those that are
positioning themselves as the next India. Any destinations, which provide value
the kind of value that the customer is looking at along with cost quality to
value and language is expected to be the next destination.

China vs India

Though China lost out in the initial run in the global service industry
(they are behind by seven years), it is now fast catching up to compete with
India. It will continue to grow as more and more companies decide to outsource
their processes. But the Chinese workforce is more qualified to target the Far
East Asian markets due to higher availability of workforce skilled in the
languages of those regions. In terms of English language skills, there is a gap,
but China is making remarkable improvement in increasing English-speaking
software engineers to sustain IT offshoring projects. The Chinese IT industry is
divided into several smaller software companies. In order to draw an
international clientele, the main challenge for them is to merge as a single,
solid, reliable partner. On the positive side, the Chinese economy is aware of
the drawback and 12% of the IT service providers are planning major mergers and
acquisitions. In the meantime, the Indian companies are planning to takeover
some of the smaller software companies in China and expand their service. India
has a clear edge when in comes to application implementations such SAP, Oracle
etc and application development. Many projects need offshore staff to come on
on-site for periods of time. Indian vendors have more efficient H1 and L1 visa
engines than their Chinese counterparts.

Challenges

Indian BPO vendors have demonstrated the ability to lift a process off an
American entity and do it in India with admirable results but adopting global
services delivery is still a challenge. Finding the right partner and facility
that complements the service providers operations poses a great hindrance in GSD
adoption. Factors such as cultural and language differences need to be
considered while planning global projects. In GSD data protection and security
concerns of potential customers is also an issue along with the concerns of the
customers on service delays or quality of service.

The challenge lies in going forward and moving up more complex
tasks such as true transaction processing as opposed to data entry and call
center work. Moreover, to ensure that your delivery is happening as per the
standards and maintain level of predictable and repeatable performance from
different geographic locations is also a major challenged faced by the BPO
companies.

The Future

India will continue to lead the global BPO market but based on benefits of
cost reduction, manpower availability, and quality that it brings to global
organizations, destinations like the Philippines will evolve as the preferred
destination GSD will continue to gain momentum as companies focus on getting the
best at economical costs. It will become more robust over time as we have seen
in the past with the manufacturing sector. Over time, customers are bound get
very used to delivery of a wide variety of services from different global
locations. The introduction of new technologies, maturing processes and
practices will increase confidence in the GSD model with respect to customer
data protection, reliability of service.

Sonia Sharma


sonias@cybermedia.co.in