Friday, February 25, 2005
New Avenues for Outsourcing
Contributed by-Rajat Agarwal, The Boston Consulting Group of India
A month back I asked Rajat, a close pal of me -whats the next ingridient for BPO? We heard enuf of Call center, transaction processing. His answer was spontaneous, lots and lots. My eye brows raised..really?
Of course like a good friend and a pure consultant he gathered his research and his thoughts, those i am mentioning here. Based on his template, with a few changes there in here i go:
PS: Rajat Agarwal is working with BCG since 2000. He is a BE from REC Durgapur and MBA (Finance) from IIM Ahmedabad.
New Areas in Outsourcing
Outsourcing is undergoing a radical transformation. Transparent geography is one Of the many emerging trends. Dramatic benefits such as cost savings and time to market reductions have been reported by its pioneers. New trends in outsourcing are defying speculators' predictions about a slowdown. Here are some of the new areas in outsourcing:
E-governance
E-governance or electronic governance may be defined as delivery of government services and information to the public using electronic means The private partner brings in specialized IT skills and other resources. Outsourcing helps the government, generally lacking in the knowledge of current and emerging IT technologies, to make the right choice of technology.
Project management skills in government are also quite poor and by outsourcing, services can be digitized with least penalty in time, cost and other resources. The private vendors would generally work more efficiently and effectively for faster development of projects at a lower cost. Day-to-day hassles of running, maintaining and managing the system can be left to the more specialized private partner. Outsourcing also allows mountains of inherent legacies of the government systems to be by-passed. Legacies reside in the organization, the hierarchy, the processes, decision-making and in the people involved. Dozens of approvals required in the sanction of projects result in huge delays in implementationof projects and, finally, poor quality of service delivery. The choice of outsourcing makes it possible to jump over these legacy systems in one go, bringing relief to the government IT-administrators, who need not then be
afraid of the auditors and their guillotines. The most important advantage of outsourcing lies in the fact that the government can concentrate on their core competencies. Productivity can thus
be enhanced.
Project management skills in government are also quite poor and by outsourcing, services can be digitized with least penalty in time, cost and other resources. The private vendors would generally work more efficiently and effectively for faster development of projects at a lower cost. Day-to-day hassles of running, maintaining and managing the system can be left to the more specialized private partner. Outsourcing also allows mountains of inherent legacies of the government systems to be by-passed. Legacies reside in the organization, the hierarchy, the processes, decision-making and in the people involved. Dozens of approvals required in the sanction of projects result in huge delays in implementationof projects and, finally, poor quality of service delivery. The choice of outsourcing makes it possible to jump over these legacy systems in one go, bringing relief to the government IT-administrators, who need not then be
afraid of the auditors and their guillotines. The most important advantage of outsourcing lies in the fact that the government can concentrate on their core competencies. Productivity can thus
be enhanced.
Retail Services Outsourcing
Geographic borders and time zones mean little for retail and manufacturing enterprises competing for mind share and market share in the global economy. With supply chains that span the globe, businesses are pushing to get their products to market and into the hands of their customers more quickly and more efficiently than ever before, little or no margin for error, they need experienced partners who can help them get the job done right, the first time. Major chains are expanding their presence across geographic regions and, in many cases, across national boundaries. Additionally, they are expanding into new markets that extend their brand to new product categories. Meanwhile, with the Internet has raised expectations for customer services.
Customers are expecting retailers to deliver a consistent experience, regardless of whether they are inside the store, phoning a call center, or at their computer. Outsourcing these services proves both cost effective and leads to increased productivity.
Customers are expecting retailers to deliver a consistent experience, regardless of whether they are inside the store, phoning a call center, or at their computer. Outsourcing these services proves both cost effective and leads to increased productivity.
Pharmaceutical research
From drug discovery to selling, the pharmaceutical industry needs new solutions. Utilizing information technology efficiently is a critical component for business success and gaining the competitive edge. Outsourcing provides the small pharmaceutical company the ability to take new drugs through clinical trials by avoid the investment in infrastructure which would normally be necessary. After InfoTech firms, it's the turn of biotech and pharma companies to look at
outsourcing from India. According to Proximare Inc, a consultant for pharma and related companies, over $200-million worth work is likely to be outsourced from India over the next 12 months in the field of biotechnology and pharmaceuticals. These companies are mostly looking at collaborative research outsourcing work to be done out of India. Collaborative research outsourcing (CRO) is likely to become the next big wave after contract research outsourcing
Financial Services
The role of outsourcing in financial services is undergoing fundamental, industry-wide changes. Financial services providers and vendors of IT products and services to the financial sector have long used outsourcing to meet their limited tactical goals. Enterprises are relying on outsourcing as part of their broader strategic sourcing plans. Their goal is to improve competitiveness while reducing costs. A recent study conducted by The Economist Intelligence Unit shows that
approximately 30 percent of the companies (in the study) outsource finance and accounting functions, with two-thirds of those (65 percent) characterizing the arrangement as successful (57 percent) or very successful (8 percent). While cost savings and increased productivity are key motivators for outsourcing, the study determined that finance and accounting outsourcing is increasingly being used as a catalyst for business transformation.
Healthcare
IT will provide healthcare organizations opportunities in 2004 to improve quality and reduce costs, while presenting challenges to the security and privacy of patient data. Healthcare's provider sector is opening its minds to the possibilities of business transformation through BPO. Rather than just focusing on the bottom line, they're realizing that savings from reduced operating costs can be redirected to investments in improving patient care quality, medical
facilities or equipment and salaries.
Along with these new areas in outsourcing there is also a shift in the reasons for outsourcing. Cost reduction is no longer the sole motivation as value addition with an improvement in productivity and quality is spurring people to explore India. The constantly growing BPO industry in the country is changing, incorporating new ideas and mindsets as well as opening up new possibilities for global companies.
