IQcatalyst

MNC's consider China as quick fix

China's push to become an alternate BPO hub for MNCs tackling soaring wages and high attrition rate in India remains a distant dream as its offshore market is developing slower than expected, a study says.

Despite significant government support and huge level of visibility on the global arena, China's offshore market has not taken off as expected and still has a long way to become a potential alternative to India, the technology research firm said in the report.

Multinational firms, considering China as a 'quick-fix' solution to deal with rising costs and high attrition of employees in other offshore locations like India, would be sorely disappointed by the country's slowing offshore momentum, the report said.

When first looked at nearly two years ago, China's offshore and global delivery model was widely viewed as the key challenger to India for offshore supremacy. However, the latest research shows that to date, the market has not taken off as expected.

The report authors, who had predicted in 2002 that over three million BPO jobs in the US would go offshore, added that firms with large bases in India should consider other geographies when addressing the risk mitigation issue. Even countries like the Philippines, Mexico and Brazil could prove to be better alternatives than China for diversifying offshore exposure. The Philippines, Mexico and Brazil may provide better alternatives than China in terms of skills, language and convenience.

Noting that China's percentage of overall offshore resources has dropped and other countries were growing at a faster pace, with the country needing to refocus its offshore efforts. Instead of trying to compete in areas like application development and management, where India clearly dominates, China should encourage its local firms to focus on other areas like testing, data management and product development services. Chinese firms also need to implement strict intellectual property controls and undertake training programs.

For other countries vying for the lucrative offshoring pie, the authors suggest economic development agencies in Thailand, Malaysia, Egypt and Morocco need to do more than just re-labelling the pool of engineering graduates as being ready to export their services. Education programs ought to focus on advanced skills like project management and advanced architecture skills, while at the same time, respective governments should invest significant funds to market the country as an alternative to the offshore incumbent  India.

Source(s): Rediff, Forrester

First National Bank awards BPO contract to Accenture

First National Bank of Arizona has awarded Accenture one of the mortgage industry’s first-ever end-to-end post-closing business process outsourcing (BPO) assignment. Financial terms of the two-year contract were not disclosed.

Accenture will provide the bank with file-room services including imaging to convert paper documents into electronic form, indexing to capture relevant information in digital form, workflow services to speed processing, performance metrics spanning the process, and data and document review to confirm that loans have met underwriting, servicing and secondary-market salability requirements.

Accenture will deliver the service both onsite and through its Global Delivery Network, which includes more than 40 centers in 30 cities around the world. Accenture will also utilize on-demand technology for mortgage-industry imaging, application integration and business process management from Epitome Systems, Inc.

Post-closing mortgage processing is a black hole for originators today because of the huge volumes of paper and the need for many people to shuffle and review that paper. Digitizing this material opens significant opportunities in other parts of the processing value chain. Additionally, when originators are looking to better match lower mortgage volumes and expense, outsourcing can provide a variable and more predictable cost.

Source(s): Phoenix dBusiness News

HR metrics to create competitive advantage

In light of the looming labor shortage, organizations must maximize the contributions of their human capital. Ultimate Performance: Measuring Human Resources at Work, a new book from Wiley, explains how.

America is on the cusp of a serious labor shortage. Between now and the year 2012 the U.S. Bureau of Labor Statistics estimates that nearly 35 million Baby Boomers will retire, leaving businesses with one of the tightest labor markets in American history. Faced with this huge lack of talented and skilled workers, organizations must find better ways to maximize the contributions of their human capital in order to remain competitive. If you're a human resource executive, the heat is on you-and job one is properly measuring workforce performance.

Ultimate Performance: Measuring Human Resources at Work (Wiley, 2007, ISBN-13: 978-0-4717412-1-3, ISBN-10: 0471741213)-a new handbook by Nicholas C. Burkholder, Scott Golas, and Jeremy Shapiro-offers corporate human resource managers a new blueprint for expanding the contributions of their workforce to the bottom line. By employing new ways of measuring employee potential and performance, CEOs and other C-level executives can finally gauge accurately how to manage people for maximum productivity, performance, and results.

Most organizations have traditionally viewed their workforce as a "cost of doing business," rather than as a strategic resource. Too often employees have been considered more of a burden than a corporate asset. Ultimate Performance proposes to change that mindset.

Conventional human resource management strategies have generally advocated processes like goal setting and individual performance review to motivate employees to work harder and contribute more. But standard performance appraisal criteria are often difficult to measure and may have little actual affect on the company's profitability. It's no wonder that human resource management is seen as a "soft" science in many management schools and boardrooms.

At the same time, other organizational units such as marketing, strategic planning, production, and finance routinely use proven tools and metrics to track their progress and improve their operations. The authors suggest a more structured approach to human resource management that relies on forging closer links between operations and staff executives.

"What is needed," the authors explain, "is an approach that integrates the measurement of human capital assets (and not just the cost of their acquisition) into the decision support models used by finance and operational executives."

Rather than seeing the traditional "personnel department" as a cost center, they view the human resources function as a full partner in managing the strategic direction and performance of the organization as a whole. In Ultimate Performance: Measuring Human Resources at Work the authors provide the framework, tools, and techniques for implementing a new system of human metrics within any organization.

As the authors point out, "The new economic paradigm continues to recognize people as a company's key competitive advantage; human resources managers are required to deliver services that are more than efficient and effective, but also support their organization's strategy and objectives."

In addition to chapters on how to develop meaningful measurements of workforce costs and contributions, along with selecting more typical metrics for job performance, the authors include case studies from organizations such as Intel Corporation and PacifiCare Health Systems. Also included are lively discussions about the value and need for metrics in such diverse arenas as Major League Baseball, government bureaucracy, crime reports, and the "No Child Left Behind" Act.

The book also provides a framework for selecting and implementing performance metrics that can enable managers to make strategic decisions that will hit the bottom line with impact.

Experienced human resources professionals will also likely find Ultimate Performance to be a tool they can use to solidify their position within the organization. As the authors point out, the human resources department is ... "the only function within a company that is reasonably positioned to improve the way people work. HR owns and manages all of the data about workers and work: their jobs, expertise, organizations, backgrounds, skills, requirements, and compensation structure. HR as a discipline-not the department-has a matchless understanding of the factors that govern worker productivity: competencies, management processes, relationships, rewards, collaboration, learning, job structures, partnership models, and more."

In today's demanding, fast-paced, rapidly evolving global economy, an organization's workforce is the most important competitive advantage it possesses. Armed with the measurement systems outlined in this important book, C-level executives, including chief human resource officers, will finally be empowered to pinpoint and build upon the strengths, weaknesses, and opportunities of their human capital.

"The ability to maximize the performance of your human assets relies on the ability to measure their attributes, exploit the strengths, and examine the weaknesses," the authors conclude. "In the perilous sea of business, is your organization navigating with longitude or is it merely drifting? Without the proper measurement tools, your organization is risking its own existence, competing with organizations that measure, correctly and on time. Measurement arms organizations with a competitive advantage and it is imperative to take it."

Source(s): News Blaze

Silos of spreadsheets in HR

A benchmark study based on an analysis of 298 validated respondents, finds that most large organizations have not derived full value from their human capital due to lack of business intelligence (BI) technology and the low priority placed on improving workforce performance management. The study also shows that with rampant use of spreadsheets, emails and custom applications, the gap between the requirement for workforce metrics and the capability to deliver them is only widening.

Managing the effectiveness of an organization’s workforce to full value is one of the most critical performance management objectives for this decade. However, this research report shows that over two thirds of organizations lack information technology to measure and improve workforce performance, and surprisingly, many are not making it a priority.

Among the key findings:

• HR Needs Tools and Skills: HR organizations are not satisfied with their workforce metrics, and only half of HR organizations have sufficient skills. Over half admit lack of BI is the largest barrier
• ERP and HRMS Fall Short: Of respondents with HRMS with their ERP suites, half lack accessibility and capability to generate workforce metrics
• Silos of Spreadsheets and Email Stunt Organizations: More than half of organizations do not have access to workforce metrics for which they are responsible and 28% lack any access to important workforce metrics. Those organizations most often use reports (74%), spreadsheets (69%) and e-mail (49%) and many will custom build
• Workforce Metrics Becoming More Sophisticated: Metrics in widest use are compensation (chosen by 62% of respondents), budgeting (56%) and goals and objectives (52%). New implementations in 2007/2008 will be goals and objectives (77%), learning and training (71%), compensation (69%) and competency (66%).

Source(s): Ventana Research, Cognos

Captive outsourcers finding rough waters

The captive outsourcing story is turning sour or so it seems after the latest market buzz that Citigroup is planning to pull out of its local business process outsourcing (BPO) unit, Citigroup Global Services (formerly eServe).

While Citigroup continues to maintain that “the bank’s policy is not to respond to market speculation”, industry sources say “it makes sense for Citigroup to exit the business since it’s not core to its operations”. Its BPO currently has close to 8,000 people spread out over its two centers in Mumbai and Chennai.

Some of the names floating for the buyout of eServe include IBM, Automatic DataProcessing (ADP), Infosys, EDS, Genpact, Capgemini and private equity players like Blackstone and General Atlantic.

Genpact denied comment saying that it is in its silent period. While IBM and Capgemini too maintained the no-comment stance, a senior Capgemini official, on condition of anonymity, said: “We have studied Citi Global Services, it seems to be a decent company and has a good set up.” However, the official was concerned about the valuation of the Citi’s BPO arm, which market rumours pegged at $1-1.2 billion.

Some analysts feel that with Citigroup Inc announcing that it would slash 17,000 jobs and move 9,500 jobs to low-cost destinations (a major chunk is expected to be moved to India), its BPO arm which has been operating as a Citi captive from its Mumbai and Chennai centers would be a major beneficiary.

A Citigroup spokesperson, when contacted, said: “This is a global decision and we do have any details as yet. We would not like to comment at this stage.”

Besides, it was just last November that e-Serve International changed its name to Citigroup Global Services. The company officials said they were planning to set up an international site in Delhi by June.

An analyst, on conditions of anonymity, said the company would prefer to grow organically and hence increase the headcount of its Indian BPO arm. He added that Citigroup might also look at an acquisition rather than outsourcing the work to other Indian BPOs.

Whichever way the dice rolls, the fact remains that global companies have generally backed out for two reasons. Either the operations have become too big to manage and hence a third-party involvement makes sense, say analysts. Or the organization is not interested in managing the day-to-day activity of another business.

A recent analyst report on captive units stated: “Over the next three years, at least 40-60% of the current captives would have embarked on some exit strategies, and for the next year, it expects the number of new centers to gradually taper off as the news about struggling existing centers gets around.”

As a result of these issues, firms quickly realise that setting up a captive center is not an endpoint itself but just a stage in their offshore and outsourcing evolution.

Taking the cue, a number of early entrants have sold their captives and opted to outsource, and some others now leverage partners more than in the past, in their revised initiative to build the offshore ecosystem, the report noted.

The going is getting tough for the captive units due to increasing wages, skyrocketing attrition and lack of integration and management support. Most of the captives serve the parent company’s global operations and thus over a period of time these captive units do not get the cost arbitrage factor even if they are in the low-cost countries.

And if the firm does pull out, it won’t be the first instance. In 2001, HCL Technologies acquired a majority stake (51%) in Deutsche Bank’s BPO arm and in 2005 acquired the remaining 49 percent.

In 2002, it was the turn of Mumbai-based WNS Holdings and in 2004, GE Capital International Services divested 60% of its stake in its BPO arm (now renamed as Genpact) to General Atlantic and Oak Hill Capital Partners at an estimated price of $500m.

Source(s): Business Standard

Resolve announces Q1-07 results

Resolve Staffing, Inc, reported revenues for the quarter ended March 31, 2007. Revenue for the first quarter of 2007 totaled $61.8m, an increase of over $49m, or 390% over the first quarter of 2006. Revenue of approximately $62m represents record first quarter sales for Resolve, a quarter which is typically the slowest for the staffing industry. Non-GAAP revenues for the quarter ended March 31, 2007 were $121,939,370.

Due to the nature of the merger with ELS, it is difficult to analyze profitability for the first quarter of 2007. Resolve’s first quarter net loss was $270,769. Resolve still had some carry over expenses associated with the merger, as well as two additional acquisitions. For example, legal and accounting fees, which include additional work pertaining to the merger, totaled $250,000 for the first quarter of 2007. Non-cash items, such as depreciation, amortization of non-competes, and changes in allowance for doubtful account totaled $571,694 in 2007. Interest expense of $600,240 was also recorded, bringing Resolve's EBITDA to $665,701 for the first quarter of 2007.

Company executrives had previously stated that we were on a run rate of $240m in sales for 2007 and first quarter results reflect that figure.

Source(s): Resolve

Wyatt to acquire Germany's Heissmann

Watson Wyatt announced the intention to acquire Heissmann, a German actuarial, benefits and human resources consultantcy.

According to the letter of intent, Watson Wyatt plans to acquire 100% of the operations of Dr. Dr. Heissmann GmbH in Germany, including its subsidiaries in Ireland, the Netherlands, France and Austria. The companies are aiming to sign a definitive agreement by the beginning of July, subject to obtaining the necessary regulatory consents.

Headquartered in Wiesbaden and established in 1955, Heissmann employs a staff of 360, including 300 people in Germany. The firm has total annual revenues of more than $67 million.

Watson Wyatt currently has offices across 12 European countries -- Belgium, France, Germany, Hungary, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The purchase of Heissmann will be Watson Wyatt's second acquisition in Europe this year; the company acquired Watson Wyatt Brans & Co., its long-time partner in the Netherlands, in February.

Source(s): Watson Wyatt Worldwide

Indian firms a force to reckon with

Xchanging, a U.K-based BPO service provider, which started off pretty much at the same time that many offshore services firms in India did, and has maintained a growth rate, if not margin rate, that is comparable to many large Indian BPO firms, has decided to list on the London Stock Exchange, and probably would have completed the process by the time this magazine reaches you. Xchanging, a firm that manages HR, procurement, insurance back office and financial-services back-offices functions for its clients, recorded revenues close to $800m last year — and all of that from BPO or products supporting BPO.

Back in India, Genpact, the GE captive, which has graduated to be a thriving third-party service provider with revenues in excess of $600m, has already hired financial advisers for a U.S. listing. It is likely to happen in the first half of this year. WNS, the British Airways subsidiary, and EXL Service, the Conseco subsidiary, listed at NYSE and NASDAQ respectively, in the second half of 2006.

What is common to all these companies? Xchanging, Genpact, WNS, and EXL Service are all examples of what the industry calls pure-play BPO service providers. They make all their money selling business services, in contrast to many others who also provide IT services.

The fact that so may of them have decided to list in a span of less than twelve months says something about the validity of the model. Not long back, many openly questioned whether a strategy to offer business services without offering IT services is sustainable. In the U.S., many IT services firms were entering this lucrative opportunity, whereas in India, where the industry was nascent — it started practically in 1999-2000 — the best of the pure-play BPO firms were being taken over by the large IT services firms.

And not because they thought it was the next big thing. On the contrary, many of them (IT services firms) thought that this high-growth, "low-value" business was a short-term remedy to counter the slowdown in IT services market. That attitude gave some good euphemisms to BPO, the most prevalent being Indian IT industry's description — IT Enabled Services (ITES). Thankfully, the phrase is dying a natural death. The four companies cited above are just the new set of companies that have established themselves to well-established multiservices new generations BPO companies.

A few of the older single-services firms are also transforming fast. Convergys, which started as a telecom billing software maker and transformed to a call-center service provider, is today becoming a multiservice BPO firm with strong clientele in F&A and HR services. Hewitt, though largely into HR, has also transformed itself from an HR consultant and recruitment firm to a full services HRO provider. A few other forms like collection services firm NCO and call-center services firm, Sitel, are now consolidating before transforming to be new-generation BPO service providers.

Source(s): GlobalServicesMedia

Is Citigroup looking to unload its Indian captive?

Sources within CGS, said rising costs had driven Citigroup's decision to dispose of the captive operation. The financial services giant announced last month it was cutting 17,000 jobs from its global operations as part of a program aimed at reducing costs by $10b over the next three years.

CSG which was known as E-Serve International until last November, provides transaction processing, contact center, and data imaging services and applications. For the 12 months to the end of March 2006, the operation reported net profit of $17.7m on revenue of $151.6m.

The news that CGS could be up for sale comes in the same week that Genpact, India's largest BPO vendor and former captive operation of General Electric, filed for an IPO on the New York stock exchange. General Electric has retained a 40% stake in Genpact, with the remainder of the company owned by private equity firms Oak Hill Capital and General Atlantic.

If Citigroup does decide to put its BPO captive operation on the block, there should be no shortage of suitors. One name that immediately springs to mind is EDS, which has made no secret of its desire to make major acquisitions over the next few years.

In February, EDS chief executive Mike Jordan said the company would spend between $1.5 and $2 billion annually on acquisitions for the foreseeable future, adding that the takeovers would be focused on key vertical markets such as financial services. Add in a strong presence in India and CGS would appear to be a good fit for the US services giant.

Another major vendor that could be interested in CGS is Capgemini. The company recently boosted its offshore presence with the acquisition of Kanbay, another financial services specialist. Capgemini is also looking to build up its BPO operation, which currently boasts a headcount of about 5,500, and has not ruled out making an acquisition in the space before the end of the year.

Fiserv and Metavante expand operations in India

Only 18 months after launching a unit in India, Fiserv Inc. said it has 1,000 employees there and hopes to hire another 4,000 by the end of 2009.

India has a well educated work force with costs lower than typically seen in the U.S. on a 2- or 3-to-1 basis. Fiserv, whose main business is selling software and data processing services to banks and credit unions, has more than 23,000 employees worldwide, most of them in the United States. Altogether, Fiserv has about 230 offices around the globe. The company was looking at other new sites for business-process outsourcing and technology besides its New Dehli and Pune sites in India, including "lower-cost locations in the U.S."

Among the job positions in Fiserv's India operation are computer software design, programming and quality assurance testing and back-office functions such as data entry and forms processing. Many financial services companies still handle data processing in-house, but through the lower-cost option available in India.

Using Indian resources can save 20 to 30% or so in personnel costs by the second or third year in production. It is part of the reason why margins have expanded pretty nicely and should continue to expand nicely in the future for the total business.

Brown Deer-based Metavante Corp., which competes with Fiserv and others in the financial technology industry, hasn't added its own employees in India. However, Metavante last year acquired a 20% stake in an Indian company called Firstsource, a major provider of automated back-office functions for banks and credit unions.

Source(s): Fiserv, Metavante