BPOVoice.com - Outsourcing Survey Report 2009

Survey Report : Outsourcing Challenges 2009

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Table of Contents

Content Page #

Foreword 3

Executive Summary 4

Research Overview 5

Survey Cases 6

Conclusion 29

About us 30



Foreword

Looking into present business scenario around us , eyes across the globe are on this year’s trends and developments in the outsourcing industry especially in India. There is a silent fear on what would happen to this industry? Will we have the same level of confidence back in the industry?

Outsourcing challenges 2009: Opportunities & Threats ,BPOVoice.com outsourcing report is a just released global survey report that addresses similar questions. The survey team got response from 600 people across the globe who are directly or indirectly related to the outsourcing industry expressing their views on some of the critical questions asked to them during the survey.

The main finding of the survey was that large number of people were confident and believed that India will be able to survive the ongoing slump in the market. As many as 62% respondents believed that India would still do well because it is still a low cost high quality outsourcing destination.

It appears as if people who are in the higher management and few consultants, support India more in terms of its better future in coming years while those who are entry level executives or with little exposure to outsourcing sector are bit negative.

The report documents the views of the respondents and analyzes their sentiments & expectations giving hint of the possible Opportunities & Threats in 2009 for the outsourcing industry prevailing globally.

We hope that you find the findings presented in this report directly relevant to your organization and welcome your feedback and comments.

Sincerely,

Team BPO Voice



Executive Summary

With global recession and sensitive market sentiments, there is a state of confusion and sense of suspicion regarding outsourcing business in the months to come. BPOVoice.com has attempted to understand market sentiments in order to realize the possible behavior of outsourcing business especially the one related to India. 52 % of these respondents have felt the impact of recession to some extent but expecting more to come. Besides this there is a mixed bag of feelings with varying degree of confidence as well as fear in the market and there seems to be some kind of business logic shift in this dynamic atmosphere of business chaos.

The key findings

The majority of the respondents showed confidence in the Indian BPO sector , 68 % stated that the present scenario of global recession would drive in more business to India, either as first choice or otherwise.

82% said India still has the global trust and Satyam fiasco was just a one off incident

62% said that India is very much capable of surviving the current slump in the market and would stay as an industry leader in the light of emerging competition

However , there were also some surprisingly negative findings as well. Strikingly 52 % of 600 respondents reported that they have already felt the affect of recession and are expecting more to face. 31 % reported to have been affected by it to large extent and were highly insecure about the their jobs. In addition, 49 % said that recent

Obama's statement to reduce tax incentives for outsourcing companies in USA would affect India, as major chunk of outsourcing business in India is from USA.

We were struck by this seeming paradox. Consequently, we dug deeper into survey results to identify underlying causes for these findings and their implications.

From further analysis we found -

• That all those who are at the higher management level ( 27%) or company owners ( 44%) were confident about sustained BPO business globally and in India.

• Not so confident ( 36%) respondents felt that market would bounce back not earlier than 18-24 months but a thin margin above i.e. 37 % were confident to see the market coming back to normal in 12-18 months.



47 % of respondents had given their personal views when asked for comments & suggestions out of which 25 % felt that we should be prepared for further market slump and its consequences while 43 % stated that India has good domestic consumption to sustain its economy and outperform when economy bounces back in the coming months.

To add to this, 23 % felt that recession would lead to reduction in salary of mid-high level executive which would be beneficial in the long term, resulting in mild impact at entry level jobs in times to come. This could strengthen India's competitive edge.



Research Overview

BPOVoice.com undertook a comprehensive research effort to analyze Threats and Opportunities to come in year 2009 by identifying the present mood in the market and observe the possible business practices for FY 2009. In addition to online survey and telephonic interviews , the research was supplemented by BPOVoice.com's own experience in analyzing market in different regions and their trickle down affect in the outsourcing sector in India and other markets

The research analyzed outsourcing from multiple perspective, including:

A survey of 150 senior executives in different geographic regions who are directly or indirectly connected to outsourcing business. Respondents were senior leaders, CEOs, Managing Directors, Vice Presidents, and Senior Managers.

Combination of online Survey and Telephonic interviews were considered and respondents (330) were either from academic background or working in mid-level management positions in various organization having direct or indirect impact of recession. 120 respondents were entry level executives, most of them were from India.

Respondent’s Geographical breakup -

85 % of respondents ( 510 ) were from India from entry level executives ( 20%) to mid (60 %) and Senior level management ( 20%)

7 % respondents ( 42) were from North America out of which 50 % were from Senior level management & decision makers and 50% were from mid level management.

2 % respondents (12) were from South America and all were from Senior management

Europe and Asia (Excluding India) had balance 6 % of respondents.



Case 1

Present Scenario of global recession will drive in more business to India.

Most of the respondents were positive, but with tag attached.

Photograph by: R.P. Piper



Most of the respondents were positive with tag attached.

Most of the respondents were positive and felt that India would get more business during the period of recession. As many as 68% of the respondents agreed to this. However majority ( 38 %) of the respondents were skeptical and felt that India would find it difficult to remain as a first choice as compared to other outsourcing destinations. 30 % of the respondents were confident and said that India would still be the first choice as outsourcing destination amongst lot of vendors and this would help India in gaining more business.

A Fairly large number (28%) of surveyed said that present scenario of global recession won't drive in more business to India. This indirectly could mean that whatever business we will get would even- out when many other companies would resize and reduce their outsourcing business projects because of their business resizing which eventually would reduce the overall outsourcing business in India.

Looking into more broader prospective the actual inflow of the outsourcing business in India would be vertical specific and largely dependent on skill set availability.



Case 2

Satyam Fiasco is a one off incident, which won't affect any further.

Majority of the respondents supported this statement with a bit of suspicion.

Photograph by Rivo/Andrea



Majority of the respondents supported this statement with a bit of suspicion

82 % of surveyed showed confidence in Indian Inc. but had some sort of suspicion, probably because Satyam fiasco was referred to as Enron of India which is a major setback.

As figure of respondents having suspicion is as large as 55 %, there seems to be a spot in the expected glory for Indian outsourcing business.

16 % of respondents clearly expressed that India has already lost global trust which signifies that India will have to restore its sheen and glory before it is too late.

One of the suggested ways is to outperform in this scenario of recession in terms of quality and productivity keeping the billing rates competitive. Ultimately we need to give more reasons to clients to come back to India with the same level of confidence



Case 3

With recession, the problem of attrition and high payouts has got solved on its own.

Majority of the respondents disagreed to this statement

Photograph by S.C. Axman



Majority of the respondents disagreed to this statement

62 % of respondents either did not agree to this or were not sure about it. 36 % of surveyed straight away said no which means there is an ample scope for debate regarding this issue.

Attrition has always been a problem in the outsourcing business and during the time of recession there are two sides to this story-

• Leaving a job on your own before your employer asks you to leave ,in case you find reduced business in the company and instability in the organization or if you are aware of your non performance and likelihood of being asked to leave.

• Sticking with the same organization because of fear and rather work more number of hours without expecting increment in the salary. This fear would arise because of negative sentiments in the market.

38 % of respondents agreed that problem of attrition and high payouts has got solved on its own because of recession.

75% of these respondents were from higher management i.e. Senior Manager and above which implies that they have experienced this themselves in their businesses and are expecting the same trend in such times.



Case 4

Indian BPO sector is capable of surviving the current slump in the market.

Majority of respondents agreed to this statement having varied reasons.

Photograph by Ricardo Liberato



Majority of the respondents agreed to this statement with varied reasons

Although overall reply expected was positive but surprisingly we found a positive reply from whooping 74 % of surveyed which shows quite a good confidence level in the market in favor of Indian outsourcing business.

But there was a catch when we saw the reasons our respondents have given in favor of the topic under discussion.

Only 12% of surveyed believed that India would be able to survive the present slump in the market because of its unique skill set and 62 % of surveyed believed that India would still survive in such conditions because of its low cost high quality image worldwide.

There were still 26% of the respondents who were either not sure or felt that there are other countries having alternative skill set at low cost as far as outsourcing destination is concerned looking into present global recession.

There are unarguably other destinations where outsourcing business is moving i.e. Philippines, China, Middle East, South America etc, but India has its unique combination of low cost, high skill set,high quality of delivery model and above all maturity of handling outsourcing business.



Case 5

Internal security and corporate governance are the new threats.

Majority of respondents did not agree or were not sure.

Photograph by Fimb

.



Majority of the respondents did not agree or were not sure

58 % of respondents were either not sure or did not agree to the statement that Internal security and corporate governance are the new threats. This shows that largely, respondents were already convinced that such threats are part of India Inc.

42 % were of the opinion that such threats are new probably because primarily, such threats have not been observed directly from Outsourcing sector in India.

Collectively such issues will have to be addressed as soon as possible to plug in the lower confidence level that has already been disturbing many corporates. There need to be a better corporate governance system and we need tighter auditing methodologies to avoid any possible future setbacks.



Case 6

Salary Cuts and raised performance bars are better options to layoffs in the time of recession.

A good lot of respondents were in favor of this, but at the same time respondents against it were no less in number

Photograph by Epierre



A good lot of respondents were in favor of this, but at the same time respondents against this were no less in number.

53 % of the respondents were sure that salary cuts and raised performance bars were better options to layoffs in the time of recession. This could be out of their own experience or because of what they would have observed in their workplace.

47 % of surveyed were either not sure or didn't support the above statement. They believed that an employee's performance and efficiency would reduce as the salary cuts are done and performance bars are raised suddenly.

Salary is one of the most important motivation factor for the employees to give their best performance without looking for any options. But then to remain safe in your job is attaining more importance in these times.

Its has been observed that those employees having huge family responsibilities in terms of providing financial support to them, these are the ones who would prefer lower salary and raised performance bars instead of loosing that job. But in case an employee has no such responsibilities, he won't prefer to have a salary cut in his job.



Case 7

Clients will increase geographical diversity to de-risk the delivery model

70 % of surveyed agreed to this because in times to come this would be inevitable for various reasons.

Photograph by Rdesai



70 % of surveyed agreed to this because in times to come this would be inevitable for various reasons.

As many as 70 % surveyed felt that clients would increase geographic diversity to de-risk the delivery model.

Interestingly 40% of the respondents also felt (even though clients would do so), that it would happen with limited footprint. This is probably because to choose a right outsourcing destination there are lot of factors that have to be kept in mind and there are only few countries which can fulfill all the required parameters for lot of outsourcing projects.

30 % of the respondents supported the above statement because they believed that cost of operations would average out with time and thus clients would definitely increase their geographic diversity. As the cost of operation varies from place to place this could be a valid reason.

Moreover the risk of business also varies from place to place which has to be kept in mind while looking for various outsourcing destinations.

30 % of surveyed were either not sure or felt that clients would not increase their geographic diversity to de-risk the delivery model as skill set would vary with geography. Well this surely applies to certain outsourcing projects where knowledge base is required as part of the requisites to get the project. KPO projects would come under this umbrella.



Case 8

Pricing pressures will result in reduced rates and high accountability.

Majority of our respondents agree to this statement looking into present market scenario.

Photograph by Erik Charlton



Majority of our respondents agreed to this statement looking into present market scenario

62 % of surveyed were a worried lot because of the competition from other outsourcing destinations and emerging centers. They were of opinion that this might put more pressure on Indian companies and thus they would follow this practice to stay competitive.

38 % of surveyed were either not sure or didn't believe in this practice to be followed by Indian companies. According to them different skill sets have different premium. This implies that all the companies might not follow this strategy as India has certain skill set to fulfill certain project requirements which can outshine other countries in many aspects.

Though there could not be a major business shift to competitive countries, but this is a chance for them to open their doors for prospective clients for business shift as and when situation demands



Case 9

Obama's proposal to cut tax incentives will impact the Indian outsourcing industry.

49 % of the respondents supported this view

Photograph by Flickrolf



49% of the respondents supported that Obama's proposed cut on tax incentives will impact Indian outsourcing industry

49 % of the respondents believed it to be true and feel that this surely will impact Indian outsourcing industry.

As many as 32 % of surveyed were confident that Indian outsourcing industry will have no or less impact post, “Obama's new policy” even after their tax benefits are taken off as American work force would still be an expensive proposition for lot of companies in the present scenario

19 % of the respondents chose , not to comment probably because they were not sure about the nature of the policy that will come into place and how much it might impact the present India BPO scenario. They preferred a wait and watch approach.



Case 10

When do you expect the market to bounce back?

60 % of the respondents felt that market would be back on track within 18 months

Photograph by Linda Kenney



60% of the respondents felt that market would be back on track within 18 months

There was a proportionate response from the our respondents.

23 % of the respondents believed that market would bounce back in 6-12 months.

37% of surveyed had fairly balanced expectation of the scenario and expected the market to bounce back in 12-18 months

While 36% had conservative expectations and expected the market to be back on track in 18-24 months.

4% of surveyed were not sure probably because market at present is too dynamic and unpredictable to reach any conclusion

Also the impact of recession would be felt in different parts of the world at different times and thus it would depend on many factors.



Case 11

How much have you been affected in the current scenario?

83 % of surveyed have been affected either marginally or significantly

Photograph by Allie Caulfield



83 % of surveyed were affected either marginally or significantly

Significantly large number (83%) of respondents were affected by the present downturn of the economy

52 % of surveyed felt marginal affect and according to them they were yet to experience the whole impact.

A good lot of 31 % of the respondents felt insecure about their jobs and according to them they have been affected by the present scenario to a large extent. Significant number of such respondents were from Europe and USA.

12 % of the respondents were confident about their prospects even in the in the current scenario and expressed themselves to remain shielded from the recession and did not see being affected at all.

These were the people who were concentrating either on academics or pure domestic business.



Conclusion

Even though the majority of the respondents either were affected by the downturn or expecting it anytime sooner, the overall mood is upbeat. Most of the professionals are confident and feel that the Indian outsourcing industry would sail through this tough period.

There are challenges to address like rebuilding the faith of the clients , emerging competition and temporary setbacks like policy changes in US etc however all this would make the industry more mature , stable and stronger than before.

2009 would be a crucial year for the outsourcing industry as one can expect many unexpected twists and turns due to the economic downturn and expected policy changes from the government across the globe.

As new destinations are emerging and are trying to be competitive in terms of cost advantage the focus would now be back to quality and higher customer satisfaction.

Training would achieve more significance as those countries who would acquire new skill set and adjust as per the new demands of the industry would be in a better position to negotiate the business opportunities.

Indeed, 2009 would be an year to watch out for. Photograph by Olga Pavlovsky



About us

BPOVoice.Com is an ever growing network of BPO professionals. Its focus is to endow its members with the news and up-to-date information from around the globe with its internal research as well as through knowledge of experts across the globe. This makes the resource more robust and gives a third dimension to conventional views on outsourcing business.

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BPOVoice.com - Outsourcing Survey Report 2009

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