Business Process Outsourcing

What is BPO?
Business Process Outsourcing-
BPO is defined as the long-term contracting of a company's non-core business processes to an outside service provider to help increase shareholder value. Cost savings are naturally a major incentive but advocates claim that strategy is also an important consideration.


According to research carried out by CFO magazine and AMR Research:
68.3% of companies already engage in some from of business process outsourcing
63.6% foresee their firm's overall use of outsourcing increasing
45.1% periodically assess the ROI of BPO arrangements
"Outsourcing has moved up the food chain" according to Frank J Casale, CEO of The Outsourcing Institute, a New York based professional association of more than 26,000 outsourcing executives. "It is no longer seen solely as a cost-cutting measure, a last ditch attempt to save money and perform financial triage"


Why outsource IT?
*Cost effectiveness
*Improved customer service
*Focus on core business
*Reduce corporate overhead
*Capitalise on technological advances
*Insufficient resources
*All of the above?

Cheaper, better and faster technology has resulted in some of the key drivers of IT outsourcing costs dropping drastically in recent years. Some companies are paying as much as 80 percent less for mainframe usage than they were five years ago and 72 percent less for servers, according to data drawn from customers of Compass Group, a global benchmarking firm.

However, the people responsible for creating this progress have become more expensive every year, with the average cost per IT worker increasing nearly 12 percent over the past five years. For example, putting a real person on the other end of the help-desk phone line has become much more costly - almost 16% more between 2001 and 2002 alone.

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The Great Indian Dream

Yes, an interesting article.
It was originally published in the New York Times. Here is the unabridged version of the same.

The GREAT INDIA DREAM (Thomas. L. Friedman)
Note: Thomas Friedman is an influential and award-winning(that includes a Pulitzer too) American journalist.


From New York Times

Nine years ago, as Japan was beating America's brains out in the auto
industry, I wrote a column about playing a computer geography game with my
daughter, then nine years old. I was trying to help her with a clue that
clearly pointed to Detroit, so I asked her: ''Where are cars made?'' And
she answered, ''Japan''. Ouch.
Well, I was reminded of that story while visiting an Indian software design
firm in Bangalore, Global Edge. The company's marketing manager, Rajesh
Rao, told me he had just made a cold call to the vice-president for
engineering of a US company, trying to drum up business. As soon as Rao
introduced himself as calling from an Indian software firm, the US
executive said to him,

''Namaste'' - a common Hindi greeting.


Said Rao: ''A few years ago nobody in America wanted to talk to us. Now
they are eager.'' And a few even know how to say hi in proper Hindu
fashion. So now I wonder: If I have a granddaughter one day, and I tell her
I'm going to India, will she say, ''Grandpa, is that where software comes
from?''

Driving around Bangalore you might think so. The Pizza Hut billboard shows
a steaming pizza under the headline ''Gigabites of Taste!'' Some traffic
signs are sponsored by Texas Instruments. And when you tee off on the first
hole at Bangalore's KGA golf course, your playing partner points at two new
glass-and-steel buildings in the distance and says: ''Aim at either
Microsoft or IBM.''

How did India, in 15 years, go from being a synonym for massive poverty to
the brainy country that is going to take all our best jobs? Answer: good
timing, hard work, talent and luck.


The good timing starts with India's decision in 1991 to shuck off decades
of socialism and move toward a free-market economy with a focus on foreign
trade. This made it possible for Indians who wanted to succeed at
innovation to stay at home, not go to the West. This, in turn, enabled
India to harvest a lot of its natural assets for the age of globalisation.

One such asset was Indian culture's strong emphasis on education and the
widely held belief here that the greatest thing any son or daughter could
do was to become a doctor or an engineer, which created a huge pool of
potential software technicians. Second, by accident of history and the
British occupation of India, most of those engineers were educated in
English and could easily communicate with Silicon Valley.

India was also neatly on the other side of the world from America, so US
designers could work during the day and e-mail their output to their Indian
subcontractors in the evening. The Indians would then work on it for all of
their day and e-mail it back. Presto: the 24-hour workday.


Also, this was the age of globalisation, and the countries that succeed
best at globalisation are those that are best at ''glocalisation'' - taking
the best global innovations, styles and practices and melding them with
their own culture, so they don't feel overwhelmed. India has been naturally
glocalising for thousands of years.

Then add some luck. The dotcom bubble led to a huge overinvestment in
undersea fiber-optic cables, which made it dirt-cheap to transfer data,
projects or phone calls to far-flung places like India, where Indian
techies could work on them for much lower wages than US workers.

Finally, there was Y2K. So many companies feared that their computers would
melt down because of the Year 2000 glitch they needed software programmers
to go through and recode them. Who had large numbers of programmers to do
that cheaply? India. That was how a lot of Indian software firms got their
first outsourced jobs.


So if you are worried about outsourcing, I've got good news and bad news.
The good news is that a unique techno-cultural-economic perfect storm came
together in the early 1990s to make India a formidable competitor and
partner for certain US jobs - and there are not a lot of other Indias out
there. The bad news, from a competition point of view, is that there are
555 million Indians under the age of 25, and a lot of them want a piece of
''The Great Indian Dream,'' which is a lot like the American version.


As one Indian exec put it to me: The Americans' self-image that this tech
thing was their private preserve is over. This is a ''wake-up call'' for US
workers to redouble their efforts at education and research. If they do
that, he said, it will spur ''a whole new cycle of innovation, and we'll
both win. If we each pull down our shutters, we will both lose.''


New York Times