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Re: (latest references) India BPO offshore failure rates...

de Marcus Aurelius 06/13/2006 07:30



Dog, there is a very LOW failure rate in Indian BPOs.
Apple BPO never got started in any significant way, so how is it a
"failure" if it closes down a 30 employee office?

Clutching at straws is not a good strategy, dog. Improve your skills
and offer value to those who can give you a job. Otherwise, no amount
of baying at the Indian BPOs will get you out of your miserable hole.


Adi Anant

Straydog wrote:
> Offshore outsourcing (i.e. BPO, especially to India)
> has a high failure rate and is leading to a new pheonmenon:
> backsourcing/backshoring, and the "H-1B swindle."
>
> June 12, 2005 revision: Adds BW article reference on Apple pulling out of
> India (see item #14)
>
> June 6, 2006 revision: Adds one question (#4) about economic conditions in
> India and references (in item #13, below).
>
> May 5, 2006 revision: Companies hiring foreigners on H1b visas are
> less interested in quality work and more interested in cheap labor (see
> item #12 below).
>
>
> FAQ:
> QUESTION #1: How well is offshore outsourcing & BPO (especially to India)
> really working?
> ANSWER: Below are twelve different sources (1-11, 14) and many comments,
> summaries, and quotes that report that the failure rates are very high
> and satisfaction is not very high, either. Especially in reference # 10,
> it is clear that you don't get increased "productivity." Instead, when
> the cost goes down, so does the quality of what comes out.
>
> QUESTION #2: Instead of offshoring jobs to, for example, India, US
> companies import foreign labor to the USA through a visa such as the
> H-1B which requires that the employee work only for the company that
> sponsors that visa and they justify this on a shortage of IT expertise
> in the USA. How true is this picture?
> ANSWER: Reference #12, below, is a source of information that H-1B
> employers are more interested in cheap labor than quality service or
> products.
>
> QUESTION #3: Are there any anti-offshoring internet resources?
> ANSWER: See at the very end of this file, one website. If you know of any
> more, please send email to me or post to the newsgroups.
>
> QUESTION #4: What BPO economic changes are currently being reported for
> India?
> ANSWER: See item #13, below.
>
> ---------------------
> 14. Subject: More India BPO failure
> (in Business Week, June 19, 2006 issue, page 48):
>
> title: "India: Why Apple Walked Away"
> subtitle: "Plans for an Indian tech support center have been scrapped. A
> cautionary tale"
> by Manjeet Kripalani and Peter Burrows.
>
> Quotes:
> "Just three months back, Apple ...[was talking about] hiring 3,000 workers
> by 2007 [in Bangalore]...."
>
> These plans are now cancelled and most of the 30 existing employees in
> Bangalore have been dismissed. The factors mentioned as working against
> the original plan include "Entry level pay at tech and outsourcing
> companies climbed by as much as 13% annually from 2000 to 2004, while
> salaries for midlevel managers jumped 30% a year during the same
> period...." Also cited as a problem was high turnover. Thus the financial
> advantage of sending work to India has just about vanished.
> --------------
> 13. Quote from CFO magazine, June 2006, page 17 (may be on their website,
> cfo.com, I did not check): "Passing on India? Rising wages in India are
> eating into some of the cost advantages of sending work to the popular
> outsourcing destination. Wages have increased roughly 11 percent in each
> of the last three years with little sign of abating, says Michael
> Spellacy, vice president at The Boston Consulting Group. In major cities
> like Bombay and Bangalore, inflation has climbed as high as 14 percent,
> with worker attrition rates now averaging 25%. A full time worker in
> outsourced financial services in India earns between $22,000 and $27,000,
> Spellacy says."
>
> Also, in The Economist, June 3rd, 2006 issue is a special report on India
> "A Survey of Business in India" with the title "Now for the hard part" and
> on page 6 of the special report (center section of the issue) is a large
> article ("If in doubt, farm it out") on the difficulty India is having
> finding workers for this great expansion in BPO service to the outside world.
>
> ---------------------
> 12. The article "The H-1B Swindle" by Ephraim Schwartz, appearing in
> Infoworld, October 31, 2005, page 12, has the subtitle "A new study
> suggests that companies hire foreign workers for cheap labor, not skill."
> The article goes on to say: "It appears there is hard evidence to prove
> that employers are using the H-1B visa program to hire cheap labor; that
> is, to pay substantially lower wages than the national average for
> programming jobs (infoworld.com/3449)" The article goes into additional
> detail and cites data sources such as BLS (infoworld.com/3450) and DOL's
> H-1B website (infoworld.com/3451). Across the board, foreigners were being
> paid less. As a general fact, companies have a financial incentive to
> preferentially recruit foreigners because they know foreigners will accept
> a job offer at a lower wage.
> ---------------------
> 11. A study show that outsourcing really does not save as claimed.
> http://www.boston.com/business/technology/articles/2006/04/13/
> outsourcing_saves_less_than_claimed/
>
> (this reference was posted on a newsgroup in early 2006, and was not
> checked)
> --------------
> 10. Three more recent articles. First: the article "Don't Offload Big IT
> Problems On Outsourcers" by Rob Preston (VP.Ed-in-cheif) as appeared in
> Informationweek, April 10, 2006, page 88 (may be online at
> informationweek.com). Second: the large article "How Do You Spell Relief?
> O-U-T-S-O-U-R-C-I-N-G" by Bruce Boardman, appearing in Network Computing,
> April 1, 2006, pages 30-36, and a third article in the same issue on pages
> 39-48.
>
> So what do these three articles say? The first is a one page qualitative
> review of several outsourcing failures and cites "Outsourcing Backlash"
> (presumably at informationweek.com/650/50iuout.htm [I have not checked
> it]) and explained that any problems people have at home become magnified
> when they offshore/outsource (many references to India).
>
> The second walks people through the "process" of outsourcing/offshoring
> work, including a discussion of how to do this, but also has a sidebar on
> page 36 which includes a summary of a Deloitte Consulting survey of 25
> organizations (worth $1 trillion in market cap, and with 1 mil employees,
> and spent $50 bil on operations outsourced) and the sidebar says things
> like: one in four brought functions back in house after realizing they
> could do the work better, cheaper themselves, 33% of outsourcing
> relationships failed in one year while 50% didn't last five years, and 57%
> paid extra for services they though were included in the original
> contract.
>
> The third article also helps the IT specialist by evaluating four data
> center packages (from Savvis, EDS, Globix, and Infosys). There were a
> number of tables with data. Bottom line results: Infosys was the cheapest,
> EDS about three times more expensive, others midway; quality of results-
> Savvis and EDS got A-, Globix got B+, and Infosys got a C. You get what
> you pay for.
> ----------------
> 9. Courtesy of "indiabpoking" are the following reported negatives,
> failures and shortcomings of BPO, quoting his quote from the source given:
>
> >From indiabpoking@yahoo.com Mon Apr 10 18:36:37 2006
> Date: 10 Apr 2006 15:36:37 -0700
> From: indiaBPOking <indiabpoking@yahoo.com>
> Newsgroups: alt.computer.consultants, alt.politics.economics,
> alt.politics.bush, sci.research.careers, soc.culture.british
> Subject: Outsourcing seen as source of innovation
>
> http://news.zdnet.com/2100-9595_22-6059512.html
>
> "An IDC and Capgemini survey of almost 300 executives attending IDC's
> Outsourcing Forum East last week found that top reasons for deciding to
> use Business Process Outsourcing in a corporate strategy include
> reducing costs, driving innovation, and the ability to focus on core
> competencies."
>
> [but see below]
>
> "Additional [negatives, failures, drawbacks] survey highlights include:"
>
> "* More than one third (38.2 percent) of participants felt the biggest
> downside to outsourcing is not getting the expected results, followed
> by public/customer backlash (23.5 percent), and anxiety over loosing
> control (20.6 percent)."
>
> [note that 38.2 percent is much lower than other figures cited from
> other sources farther down]
>
> "* The three most important legal issues concerning BPO today according
> to those surveyed were: governance procedures (33.8%), business
> continuity (27.7 percent) and intellectual property rights (26.2
> percent)."
>
> --------------------------------
> 8. More complaints about India:
>
> from the article "View from Asia-India won't fully benefit from the amazing
> productivity of its companies unless it builds a better infrastructure for
> business" by Tom Leander (Editor-in-Chief, CFO Asia). Appearing in "CFO"
> magazine for April 2006, page 27 (may be at their website:
> www.cfo.com/backissues).
>
> Some quotes:
>
> "... GE's CFO, Keith Sherin, told CFO Asia late last year that he finds India
> frustrating. 'You get excited and nothing happens,' he says. Three years ago,
> GE did about the same volume of business in both India and China. Today,
> China is a $3 billion market for GE, triple that of India. So, it's no surprise
> when Sherin sums up GE's Asian strategy by saying that 'China is number
> one, two, and three for us'."
>
> "His primary complaint is the lack of government support for infrastructure
> improvements. Turn off any highway in India and you'll know what Sherin is
> talking about."
>
> "It may be unseemly to criticise a government that has to take care of so
> many poor citizens for not building better roads to facilitate commerce, but
> India's CFOs point out that infrastructure is a social-welfare issue. Sumant
> Sinha, CFO of leading conglomerate Aditya Birla Group, says that he spends
> more on capital expenditure every year than peer companies in other nations
> might. How many of them, after all, must build their own power stations?"
>
> "But its wishful thinking [despite all the positives of India] to conclude that
> India's remarkable productivity will translate into a thriving internal market
> any time soon. In the eyes of most U.S. finance chiefs, China remains
> number one, two, and three."
> ---------------------------------------
> 7. Backshoring...the new buzzword
>
> Feb 13, 2006 issue of Infoworld, pages 8 (Efraim Schwartz's column) and
> page 4, (editor's);
>
> Developer poaching and rapidly rising prices are causing US based
> companies to start pulling jobs back to the USA. Read about it in the
> periodical.
> ------------------------------------------------
> 6. Subject: Deloitte Report: outsource failure rates
>
> From June, 2005, CFO magazine, page 19.
> (it may be on their website, www.cfo.com/BackIssues)
>
> Deloitte Consulting was said (by the CFO article) to have said "'In the
> real world, outsourcing frequently fails to deliver its promise.' wrote
> researchers who surveyed 25 companies with average revenues of $50
> billion. The study reveals that 70 percent of its respondents have had
> significantly negative experiences and are outsourcing business processes
> and IT with increasing caution."
>
> "...there is growning evidence that large comapnies are rethinking massive
> outsourcing contracts. Big name defectors that have unwound at least part
> of their arrangements include Conseco, Dell, Capital One, and Lehman
> Brothers."
>
> "A sure sign that outsourcing isn't working is the amount of renegotiation
> surrounding the vendor agreements, sayd Deloitte senior strategy principal
> Ken Landis. 'There wasn't a single participant in the study wohe contract
> went to term,' he says. 'All of them had renegotiated prior to the
> contract expiration date'"
>
> "Companies are souring on outsourcing, the survey asserts, for the same
> reason it has been criticised for years: failure to live up to
> cost-reduction promises, risks to intellectual property, and
> confidentiatlity, and lack of transparency."
>
> The article states that, so far, 25% of the companies have brought
> services back (now called backsourcing).
> ------------------------------------------------------
> 5. From Information Week, page 8, in the Nov 21, 2005 issue.
>
> Sidebar: "48% of all companies will spend more money on BPO this year than
> in 2004"
>
> "55% of current BPO service delivery is conductend inside the USA"
>
> "41% of companies are satisfied with their BPO services"
>
> So, that sounds like 100 - 41= 59% are dissatisified with their BPO
> services. And, there's going to be more BPO?
>
> Says the source is IW, Managing Offshore, and Equa Terra study of 200 BPO
> customers.
> -------------------------------------------------
> 4. "Offshoring isn't such a sure thing"
> by Lora Kolodny,
> Inc. magazine, September, 2005, pages 22-24
>
> Quotes:
>
> "Companies are finding that sending IT work overseas can
> be more trouble than it's worth, according to a new survey
> from DiamondCluster International, a Chicago-based
> management consultancy. The number of executives
> surveyed who said they were pleased with their outsourced
> IT vendors fell by 17 pecentage points versus the previous
> year, marking the first decline since 2002. Moreover, early
> termination of relationships between buyers and offshore
> service providers spiked to 51%, which is double the rate of
> 2004."
>
> In other words, half of all relationships are terminated
> before their first contract period is up.
>
> In view of this, a spokesman for the consulting firm says
> that "...tech buyers will think twice about sending critical
> services abroad--at least for now."
> --------------------------------------------------
> 3. From "CFO" magazine, FALL 2005, special issue, pages
> 40-44. (may be on www.cfo.com/Backissues)
>
> article: "Customer Disservice: Critics say the promised
> savings from offshoring come at too steep a price, while
> companies say very little at all"
>
> by Norm Alster
>
> some content and some quotes:
>
> This article starts by saying that on a recent talk show
> where people could call in with comments and questions, it
> was discovered that virtually everyone in the USA does not
> like foreign call center representatives.
>
> "But the practice of outsourcing customer service to
> offshore call centers is beginning to look like a classical
> idea carried too far. Critics of the pracctice point to a
> growing body of evidence that suggests faulty economics
> and customer dissatisfaction are forcing a rethink of what
> once seemed a no-brainer."
>
> "'The economic benefits of outsourcing customer service
> are grossly overstated' according to Niels Kjellerup, a senior
> partner with Australian consulting firm Resource
> International and editor of a Website devoted to call centers
> (www.callcenters.com.au). Customer resistance, along with
> data-security concerns and the unexpectedly high costs of
> managing offshore call centers, offset and dilute their
> promised economic benefits, says Kjellerup."
>
> "There is already evidence that these factors have
> combined to slow the offshore migration. Several large
> firms, including Dell, credit-card giant Capital One, and
> insurer Conseco, have shifted at least some customer-
> support operations back to the United States."
>
> Gartner's analyst, Robert Brown, says that the initial large
> growth in offshoring is expected to be, in the future, much
> much smaller.
>
> "Companies with monopolistic or overwhelmingly dominant
> market positions are more apt to risk customer alienation
> where near-term savings can be realized."
>
> "Alexa Bona, a Gartner analyst based in London, predicts
> that during the next three years, up to 60 percent of
> companies outsourcing customer-facing service will
> encounter customer defections and hidden costs that will
> either cancel or outweigh any perceived savings in such
> arrangements."
>
> "He [Chris Selland, at Covington Associates in Boston]says
> executives at firms that have employed offshore call centers
> keep telling him that 'it's harder, it takes more management
> attention, and you have to be meticulous about the way you
> structure the agreement.' As a result of all this unexpected
> overhead, the projected savings from offshoring can swiftly
> evaporate."
>
> The article says there is huge turnover at Indian call
> centers; it can be up to 70% per year. And, with the big
> expansion, there have been recruiting wars in India and
> escalating pay scales.
>
> "Martha Rogers, a consultant and author of several books
> on customer relationships, contends that the metrics
> generally used to measure call-center performance are
> flawed."
>
> "Many companies that outsource customer service, in fact,
> don't like talking about it, and more than a dozen turned
> down requests for interviews. 'Companies are looking to do
> everything they can to hide the fact that they are using off
> shore call centers' says Selland. 'From a political standpoint
> and a customer-acceptance standpoint, it is something they
> are trying to downplay.' At some Asian centers, agents are
> actually trained to conceal their real names and adopt
> phoney American monikers, a practice that fools few and
> can further inflame an already angry caller."
>
> "One in three respondents in a British survey said they
> would stop doing business with a bank that relocates its call
> centers offshore. Another study, conducted in 2004,
> reported that just 5 pecent of the British are satisfied with
> offshore call centers. The Irish arm of Sweden's Tele2AG, a
> telecommunications firm, recently switched its call center
> operation out of India and back to Ireland, citing consumer
> preference."
>
> "In an unpublished data-theft case now under investigation,
> a large U.S.-based technology multinational contracted with
> a call center in India without knowing that that company in
> turn subcontracted a portion of the work to firms outside
> India, where employees of the subcontractor apparently
> managed to penetrate the American company's information
> database."
>
> "...growing outsourcing industries in Eastern Europe and
> Latin America have been targeted by criminals seeking
> access to customer data. "
>
> "'For companies that regard customer service as a key part
> of future revenue growth, bringing such operations back to
> domestic shores is the way to go,' says Kjellerup."
> ---------------------------------------------------
> 2. From _Information Week_, page 60, Dec 19/26 issue, 2005
>
> A short article by Paul McDougall reporting that: "...companies
> operating in India, including local ones such as Infosys
> Technologies, Tata Consultancy Services, and Wipro Technologies,
> spend a lot of time and energy time stealing each other's
> employees--and that's quickly driving up salaries" and "'There's a
> lot of employee turnover [in India], and we weren't interested in that,'
> says Martin Mellon, director of development at applications vendor ASG
> Software Solutions. The company chose Northern Ireland over India
> for its offshore development work."
> --------------------------------------------------
> 1. Subject: "Satisfaction Wanes for Offshoring"
>
> On page 2 of the print issue of Processor.com for June 17, 2005, volume
> 27, number 24:
>
> "According to consulting firm DiamondCluster International, the number of
> buyers satisfied with the providers of their offshore outsourcing has
> fallen from 79% to 62%. The firm's annual survey of IT outsourcing also
> revealed that 51% of buyers are terminating their outsourcing
> relationships earlier than scheduled."
> =============================
>
> An anti-offshoring website (excerpted from a 2006 newsgroup posting):
>
> Subject: US IT Out Web Site (Anti-Offshore-Outsourcing) (fwd)
> From: Vladimir Veytsel <VladV@verizon.net>
> Newsgroups: alt.computer.consultants, alt.computer.consultants.ads
>
> Link : http://it.davar.net or http://davar.net/IT
> Name : US IT Out - USA Information Technology Outsourcing
> Descr: Selection of anti-offshore-outsourcing quotes,
> opinions, cartoons and links.
> (On most part changes are uploaded at month end;
> updated sections are marked by colored dates.)
>
> About Short introduction that explains the purpose,
> the origins, and the structure of the web site.
>
> Advice Quotes that offer advice on what one can do
> to oppose the offshore outsourcing.
>
> Quotes Quotations selected mainly by the following criteria:
> 1. Random historic quotes (mostly by the US presidents).
> 2. All USA historic quotes (mostly by the US presidents).
> 3. Condensed viewpoints that are well taken.
> 4. Representative statements showing "who is who"
> relative to the offshore outsourcing issue.
>
> Opinions Opinions selected on most part from the
> "alt.computer.consultants" news group. Just linking
> to them would be clumsy and not quite reliable, and
> could result in losing them if they were deleted from
> the news group archives. A few opinions were selected
> from the media, again for the sake of keeping them in
> case they were deleted from the media site archives.
>
> Books Short reviews of books that describe and analyze the
> offshore outsourcing phenomenon, and related subjects.
>
> Cartoons "One picture is worth thousand words" - especially if
> it's a good cartoon. Treating a topic that is anything
> but a fun with a smile (though a sad one) serves as a
> healthy add-on to the mostly depressing content of this
> web site.
>
> IT Links Classified links to information about the offshore
> outsourcing of information technology jobs by
> USA-based companies.
>
> USA Links Classified links to information about USA events
> (some links here are related to offshore outsourcing).
>
> World links Classified links to information about world events
> (some links here are related to offshore outsourcing).
>
>
> --
> Best regards,
> Vladimir Veytsel
> http://davar.net
> http://it.davar.net

Australian bank considering offshoring of jobs to India	Dr.Sahib.Pandit.Shri.Shri.Rainam Ji Maharaj Ji Ustad
Re: Australian bank considering offshoring of jobs to India	usenet
Re: Australian bank considering offshoring of jobs to India	Dr. Homilete
Re: Australian bank considering offshoring of jobs to India	are we on same page?
Re: Australian bank considering offshoring of jobs to India	usenet
Re: Australian bank considering offshoring of jobs to India	Al Klein
Re: (latest references) India BPO offshore failure rates...	Straydog
|  Re: (latest references) India BPO offshore failure rates...	Marcus Aurelius
(latest references) India BPO offshore failure rates...	Straydog
Re: (latest references) India BPO offshore failure rates...	harmony
Re: (latest references) India BPO offshore failure rates...	usenet

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