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A Panel Discussion on

The Global Outsourcing Club invited a number of distinguished speakers to participate on a panel on current trends in international outsourcing. Led by Professor John Wells, the panelists spoke about their past experiences and future expectations for the industry.

The first speaker was Ashok Dutt, the EVP of Marketing for Discover Financial Services, who shared the challenges he faced in establishing the first credit card system in India. His colleagues in the U.S. were initially very dubious that credit cards would be viable in a country with no credit-bureau infrastructure. However, by going to a small software provider, Dutt and his team were able to create and launch an entire platform in six months that supported one to two million cards. They also established a door-to-door sales force – an idea that his colleagues initially dismissed as “crazy”, but that yielded Discover 70% of new card sign-ups.

Mr. Dutt emphasized that the ability to localize is key to successful outsourcing. For example, he once set up a call center in Mexico, which was meant to service all of Latin America. However, his team hadn’t anticipated that some words in Mexican Spanish are quite different from those in Puerto Rican Spanish. Also, Puerto Rican customers would occasionally speak to customer service representatives with an aggressive tone – a practice which was acceptable in Puerto Rico, but which flustered call center workers in Mexico.

Other similar cultural nuances made the call center a failure, and they had to re-open call centers in Puerto Rico and other countries around the region that appealed to local accents and cultures. This was an example of a market that was too highly fragmented to benefit from a consolidated call center proving that, in some cases, customer service functions may benefit from being localized.

Dutt’s final words of advice were that companies pursue a partnership with the organizations they outsource to and for everything to work, companies should be “joined at the hip” with their outsourcers, instead of the more common “black box” approach. Dutt warned that results may not be optimal if you “just send off a set of specifications” and hope for the best.

The next speaker was Jeff Robison, VP Customer Care for Upromise Inc. “You can’t outsource what you don’t understand. The road is littered with spectacular failures, and those failures were usually in cases where companies were outsourcing things they didn’t fully understand,” said Robison.

His second suggestion was that companies considering outsourcing should know their goals and metrics of success in advance, and that they should establish methods for obtaining real-time feedback to gauge the efficacy of their project. His final point was that most outsourcing companies on the market today are “pretty much all the same. The question is, what management process do you bring to the table in order to, for example, make a close on a sales call?”

Robison also discussed the ramifications of recent telemarketing legislation in the U.S. “One million or more jobs were wiped out over-night with the implementation of the ‘do-not-call list’ legislation. Aggressive telemarketers gave telemarketing a bad name in the U.S… We didn’t listen to the market soon enough…[and] we took a hit.”

In terms of the future of the industry, Robison observed that “the ability to move large amounts of data cheaply” is the single most important factor in the development of international outsourcing, and predicted that as the cost to transfer data falls, international outsourcing will become even more prevalent.

He also noted that a country does not necessarily need a large work-force of English speakers to be competitive in the industry. He pointed out that analytical work, such as analyzing x-rays or MRIs, can be done by anyone with the proper training, regardless of which language they speak. He noted that Romania is currently the newest entrant in attracting outsourcing work.

Rich Tinervin, the Chairman of Gail Weiss and Associates, pointed out that the concept of outsourcing is not new in the field of financial services.

Tinervin previously worked with CitiGroup, when “[they] wanted to be larger in the asset management business to compete with powerhouses like Fidelity.” CitiGroup outsourced its code development to India, and its accounting and administration work to Europe. The number of asset management clients has grown from 3.5 million to 9 million today, a success that Tinervin credits to the improved customer service provided by outsourcing. The outsourcing project itself was a success because they had “excellent metrics, a quality business plan, and the right strategic partners”

“Services will one day be engineered or ‘manufactured’ across the globe, much like traditional manufacturing jobs today are,” predicted Raja Gopalakrishnan, the President of I-Onesource America.

What needs to be done for an outsourcing project to flourish? Gopalakrishnan listed a number of factors: commitment from the upper echelons of senior management that “cascade through the organization”; documentation of all processes and sub-processes in place, as “30-40% of the collective knowledge in an organization exists in peoples’ heads”; emphasis on cultural relevance and understanding, for both clients and co-workers; sensitivity on the part of outsourcers to the fact that they are probably taking someone else’s job.

Gopalakrishnan agreed with Robison’s point that many service providers are only distinguishable by “the number of slides in their PowerPoint presentations.”

The final speaker in the panel was Ashish Nanda, Associate Professor in the Negotiations, Organizations, and Markets unit at the Harvard Business School. In response to Professor Well’s question, “How far is it going to go?”, Professor Nanda spoke about a much broader role for outsourcing in the future, stating that “[it will go] beyond IT outsourcing, but also to things like drug testing/pharma, film/TV productions, legal services, accounting….anyplace you can transfer human-capital-intensive work.”

Nanda continued, “This is as dramatic a change as the liquefaction of financial capital in previous centuries across geographical boundaries…Due to virtue of high-bandwidth output, boundaries of a firm’s work and location will be redefined.”

Another trend that Professor Nanda noted was the creation of new firms that offer to help companies find the best outsourcing – essentially, even the task of outsourcing is itself being outsourced. Through it all, quality should still outweigh cost savings. Professor Nanda stated that he “can not overstate the benefit of….sufficiently high quality.”

Gopalakrishnan may have summed it up best in one of his final remarks: “It takes 15 years to be an overnight success.”

April 5, 2004
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