The Biggest Problems In Outsourcing Come From The Client/Supplier Mentality

BPO Voice had this great opportunity to interview one of the authority writer and speaker on globalisation, outsourcing, and corporate change – Mark Kobayashi-Hillary. Here are the excerpts:

BPO Voice: From Outsourcing to India (Your first book) till who moved my job (the latest one), how much have these factors changed – Market, Perception of the masses and the corporate Outlook?

Mark: The market has changed and obviously has grown. Outsourcing has moved from a strategy that needs to be explained to something that is accepted as a part of the management toolkit – the question now is just how to use it and where is it appropriate to use. The EU has become a larger market than the USA leading to a lot more interest in what European companies are planning. People on the street still don’t like outsourcing for a couple of reasons. Either it involves off shoring, so they see jobs being created far from home, or it leads to a decrease in customer service standards. And the people are generally right. If companies make their service to customers worse because they outsource tasks then they deserve to be criticized.

BPO Voice: Tell us more about your new book. What inspired you to write this book and whom are you trying to address?

Mark: I’ve written several books about outsourcing and globalization. In 2007 I wrote a book called ‘Global Services’ for the British Computer Society. Take a look at it – I know I am biased, but I think it’s the best exploration of how the entire IT industry is changing and moving to a new paradigm. I was writing about the cloud and globalization of services in that book, yet hardly anyone bought it. Maybe they were scared off by the British Computer Society label, but I can assure you that it’s a fairly easy read!

I wrote Who Moved My Job as a response to that experience. It’s a bit like entrepreneurs and their elevator pitch – if you can’t explain your business plan in a few seconds then it won’t work. I just applied this to a book about globalization, outsourcing, and jobs. I wanted to write something short, punchy, and as a story. So people could read it, understand, and then pass on the book to a friend.

BPO Voice: Your thoughts on Cost cutting vs. Cost Optimization.

Mark: When off shoring really came on the scene in a big way, companies were blinded by the potential for savings by shifting work around the world. Fundamentally though, you can optimize what you do in your supply chain and increase efficiency, but if you only ever go for management measures that cut costs then will you win the long game?

BPO Voice: In your view what are the foremost challenges for the companies, those who look to outsource and for those who offer their services?

Mark: The biggest challenge is to reach a state of true partnership. The biggest problems in outsourcing come from this client/supplier mentality. The client is all-powerful and can screw the supplier down for lower prices, more service, better free theatre tickets… yet we sometimes forget that all companies sit in their own supply chain. If a major international bank is commissioning IT from a supplier in India then don’t forget that the IT supplier is probably a multi-billion dollar outfit buying services all over the world in just the same way the bank has to keep their own customers happy. If more managers remembered this and made the outsourcing process less adversarial then it could be a lot more successful – and fun.

BPO Voice: What is your view on the present market scenario i.e. recession and its effect on outsourcing industry world wide. Do you think this recession would bring more outsourcing destinations and thus would affect the Indian outsourcing business significantly?

Mark: More destinations will happen anyway. I’ve been invited to Iran and North Korea and if those guys are exploring the possibilities then everyone knows the story!
The Indian companies will shoot themselves anyway if they continue to try selling the low cost story to foreign customers. India has built up a reputation for being an IT leader – now you need to deliver on that reputation, not sell on price alone. In general the recession should not hurt the big guys too much. Yes, they might halt recruitment for a time, but they have big ongoing contracts that should ride them through a rough patch. It’s the small and medium sized companies that will really suffer.

BPO Voice: In your opinion which country/region offer the best outsourcing destination for the future and why?

Mark: It’s hard to just pick a country as different places have different attractions in terms of the infrastructure or people, but in general I’m most excited about how east and south Africa is developing. Lots of great people there with excellent qualifications and the infrastructure is now improving. Nothing is going to stop them.

BPO Voice: How much would the “Obama” factor work against the outsourcing industry, if it will.

Mark: Obama needed to recapitalize a large chunk of American industry. It was natural that the bailout money would come with strings attached, particularly regarding sourcing from the USA only. However, I don’t see this as much of an issue going forward – unless you think that American industry is going to be perpetually bailed out by the government. Let’s assume that America is going to recover and reclaim much of its former economic glory – even if China and India are likely to surpass it this century.

BPO Voice: You are one of the most influential authorities on outsourcing, what are your views on the downfall of Satyam? What are the probable lessons to be learnt?

Mark: I don’t think it had anything to do with the outsourcing or IT industry in particular – it was a crooked boss cooking the books. If anything can be learned though then I’d suggest more professional company boards, particularly with more diverse non-exec directors who can kick up a fuss if they see any funny business taking place. So in short, don’t stuff your board full of family members and friends. Diversity is the key.

BPO Voice: Do you think there might be more Satyam(s) around in India or elsewhere?

Mark: Of course something like this will happen again at some point and in some country – maybe not India and maybe not in the IT business. But to assume that the regulatory authorities will be able to spot every crooked CEO is possibly hoping for too much. However, if a more professional board structure can be introduced then many issues can be averted. This doesn’t just apply to India though, just look at a country like France. Major companies have boards stuffed full of friends all sitting on the board of each other’s company – more like country clubs than executive management.

BPO Voice: On the lighter side, as you wrote in one of your blogs- Did you receive any call from Tech Mahindra about taking over the sponsorship of Satyam for the next FIFA world cup?

Mark: The England football team is performing well this year, just like our cricket team. I was looking forward to seeing some of my friends down in South Africa and hopefully getting there thanks to FIFA or Satyam offering to host me while I take a look at their technology, but alas, it looks like I’m going to have to start cycling from London soon if I want to be in South Africa in time for the first kickoff!

About Mark Kobayashi-Hillary: Mark Kobayashi-Hillary is a British writer with a long history of commenting on globalisation, outsourcing, and corporate change. He has written several books, the most recent being ‘Who Moved My Job?’ and he is a regular contributor to Computing magazine in the UK. His new book ‘Talking Outsourcing’ will be published in July 2009.