BPOVoice talked to Partha De Sarkar – CEO Hinduja Global Solutions limited (HGSL) on various important issues that the industry is facing in the midst of turbulent times.Below is the second part of the two part series.
What do you have to say on the much talked about protectionist approach against outsourcing?Protectionism as a policy is closely aligned with anti-globalization, and contrasts with free trade. It violates the principle of comparative advantage. Outsourcing creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.
Generally, as businesses reduce the costs of their products, they reduce prices to consumers. The “consumer surplus” that results from lower prices far outweighs the cost of lost jobs or lower wages. That’s because outsourcing lowers costs for consumers and businesses, raises productivity, increases business investment in new products and industries, and thereby boosts economic growth that creates new jobs. The viability of companies depends on their ability to remain cost-competitive in an increasingly dynamic and unforgiving global economy. Far more jobs depend on the companies remaining competitive than can ever be affected by outsourcing.
In my opinion, protectionism doesn’t make economic sense, nor does it help create jobs. It is based on the myth that outsourcing is only about global labor arbitrage. Moreover, with the current trend of setting up global delivery centers, outsourcing is already creating local jobs. We have always maintained that there is a greater scope for market penetration by being ‘local’. All our 24 global delivery centres hire locally. With the acquisition of Affina in 2007, we added 6 centres across US and Canada. A local presence mitigates country specific risks in outsourcing and increases our visibility.
According to you, what could be the upcoming challenges for the Indian BPO Industry?
In the near future, the key global out-sourcing drivers would continue to be cost, access to talent, business improvements, speed-to-market and access to diverse markets. In the post recessionary scenario, the focus on cost control/reduction will increase more and it is in this context that we envisage more integrated delivery models in tier 2/3 locations. Cost effective services, high quality processes, experience in global best practices and deep pockets to invest in setting up infrastructure and new centres are some of the pre-requisites. There is also the new move to get into sub-urban India, where the cost structures are lower.
One concern is our industry’s heavy dependence on US, which constitutes 60% of our global exports. But with a large number of markets and verticals that are under penetrated, the opportunity and scope is still large. The constant volatility of the US-Rupee exchange rate is also a cause for concern. There is still a good scope for reduction in costs, if the central and state governments take significant steps to address the inefficiencies in public transport, power and education. As of now, the industry continues to take the burden of generating its own power, providing public services like transport and security as also huge training interventions for freshmen to make them employable.
Why is it that the average success ratio of the contact centers is low? Could you please share the common mistakes that centers usually do?
The low success rate is due to the misplaced belief that a contact center is a commodity-like business. Most new entrants are so bent upon reducing the costs that they sacrifice the quality. They tend to over-promise (low cost and high quality) and under-deliver (low cost and low quality). Hence in-spite of getting a good start, their businesses fail in the long run. If your USP is lowest cost then sooner or later there will be another player in your vicinity with still lower costs! Cost arbitrage is not a sustainable competitive advantage. It is just one factor which brings business to you. Beyond that, it’s the sheer quality of your services which retains that business for you. One should deliver consistent value and have precise vertical focus.
Many contact centers start operations even before they have a proper infrastructure in place. The important requirements are carpet area, equipment, communication and manpower. Then there are training issues. This business operates in real time and there is no time getting back after a call is messed up. Hence good quality training and running pilot projects are critical to success.
Tell us something about HGSL’s new initiatives or future plans.
In this economic crisis our clients are trying to consolidate work that has been farmed out to multiple vendors. Vendors who are at the top of the pile in performance and price are therefore able to garner additional volumes from existing clients. We at HGSL have consistently been amongst the top 2 or 3 vendors for most of our clients and therefore have benefited from vendor consolidation. We are also making plans to attract more business from our existing clients and a few LOIs have already been signed. The new centre at Manila has come up to meet these incremental demands. We are interested in the flourishing Middle East market and you might see increased activity in this region.
We have a simple three pronged strategy – get incremental business from existing customers, get more business from new customers and get more business by penetrating new markets/sectors. We are particularly interested in expanding our already large share of the domestic market pie. Domestic BPO has emerged as a hedging option against the uncertain scenario in North America and it’s hardly surprising that most BPOs these days are talking vernacular! We at HGSL were one of the very few BPOs to explore the domestic markets in 2005. This strategy has worked for us and today 15% of our revenues come from the domestic markets.
Our outsourcing projects in the future will be operative as well as consultative in nature. We will be working jointly with the clients to determine outsourcing opportunities, models, knowledge transfer plans and critical-to-quality measures.
Click below to read the first part of this interview
“We didn’t miss the (Satyam’s buyout) bus. We let it go ! ” Partha …
About Partha De Sarkar
Partha De Sarkar is the Chief Executive Officer of HGSL and leads the organization across all its geographies.
Partha is responsible for having built HGSL into a global organization by focusing on being the preferred business process transformation partner for our clients and creating value in all our customer relationships through innovative outsourcing solutions.
Partha has 20 years of experience in customer service and operations across industries like Banking, Financial Services, Healthcare and Insurance. Prior to joining HGSL, Partha has set up complex outsourcing projects in organizations like Deloitte Consulting, GE Capital International Services and Bank of America. With a deep industry domain knowledge in each market sector, he has successfully led teams which set up operations for large remote processing centers in India to service international clients in US, UK, Australia and the Asia-Pacific region.
Partha holds a postgraduate degree in Management from the Indian Institute of Management (IIM), Bangalore and a Masters degree in Technology from the Indian Institute of Technology (IIT), Chennai. He is a PhD in Strategic Management from IIT Delhi.