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Follow UsOutsourcing, offshoring or strategic transfer of business processes to third
world countries. Whatever, be the method used by MNCs, the goal remains the
same-reducing operational costs. Let's not debate on the smartness of this
concept or the 'promised' savings on costs; as such discussion has been done to
death through various forums. Instead, in this discussion, let's peek into the
backyard of all the action, ie ITES companies, and uncover the numerous
challenges they face. Challenges that not only undermine their progress but also
the quality of service they offer to clients.
There's a wide range of services being offered from Indian shores. A few
examples are processing of intellectual information (done by KPOs), software
development, completion of parts of a large business chain (done by BPOs), and
resolving client queries. Being tech savvy, the ITES companies are supposed to
serve as a role model for others, for eg, the companies comprising the
traditional economy. The Indian ITES-BPO industry started about a decade back
with promises of customer satisfaction, quality, and people satisfaction. And it
hasn't fared badly till date. It's only that people expect it to sustain higher
levels of double digit growth. However, to carry on a bullish run, the industry
needs to continue the focus on process improvement and people development.
A case for regulatory compliance
Amongst all offshoring destinations, India has till now retained its edge.
But within the Indian industry one can see huge variations in quality of
services offered. While companies at the top of the chain have been steadily
increasing their competency, others have either stagnated or just failed to pick
up. Even within an organization, you can easily identify islands of excellence
that are surrounded by laggards. The reasons for this vary from decentralized
management to lack of standardization of processes.
These days ITES companies comprising of BPOs, LPOs, call centers and offshore
software development centers face a lot of pressure related to privacy laws and
data confidentiality regulations imposed by EU and the US. Regulations such as
SOX, CA SB1386, HIPAA and EU Directive 95/46/EC threaten companies with severe
penalties, including imprisonment, for any kind of breach. Surveys show that 81%
percent of violations happen from unscrupulous internal employees, and the ratio
of the damage caused by such threats is five times more than the damage caused
by external sources. The reason for this is not hard to fathom. Most ITES
companies follow a process-based approach to safeguard client data within their
departments. Standard network security solutions such as firewalls and IDS
solutions are not adept in checking the mischief mongers who steal data from
within an organization. Although, most privacy laws condone security breach
where data was already stored in an encrypted format, organizations should focus
on increasing the internal security by additional areas of protection, ie by
deploying more stringent access control solutions, apart from standard data
encryption solutions. These days it's fairly common to hear of cases about
breach of confidential information, aided by increasing intruder knowledge and
sophistication of attack techniques. Compounding the misery is a shared
infrastructure and the high attrition rate that leads to a change in trained
manpower. The more recent and much publicized cases of security failure,
infringement in privacy and employee scandals in the BPO companies, have put
tremendous pressure on the government and NASSCOM to frame appropriate laws and
to come up with viable policies to improve customer confidence in the Indian BPO
industry.
A lot of companies have already taken meaningful steps in this direction
through the use of Privacy of Information encryption solutions, which enforce
selective access to confidential data, depending on the profile of the user.
There are hard-disk encryption software available, that are designed to keep
data on mobile devices such as notebooks, confidential and inaccessible to
hackers or thieves, in the event of loss or theft. Some other encryption and
compression solutions can be used to send files/folders securely as email
attachments, or share them through portable media.
How to curb the high attrition rate
To serve as a role model, you need stability. Surprisingly, this sunrise
industry is the worst sufferer amongst all in terms of attrition. Let alone
innovation or process improvement, their first challenge is recruiting,
retaining and training their manpower. For an industry still in nascent stages,
the dearth of quality manpower is imminent. A predictably high rate of attrition
has spared nobody in this vertical, be it a 'David' or a 'Goliath.' So, what are
the reasons for this volatility? Salary is definitely a factor but not the only
reason, 'cause most organizations, in spite of paying employees according to
current industry standards, are still facing the crunch. A couple of months back
we carried a survey for our Strategy story on 'IT Team Management' where we
detailed the concerns on attrition by CIOs across all verticals. Predictably, it
was the ITES segment which topped the attrition rate list amongst all verticals.
A suggestion that came out strongly across was that apart from good salaries,
you need to explore innovative schemes to keep employees on board. Moreover,
work pressure and late night work hours are palpable reasons for employees
quitting en masse.
With rising operating costs and shrinking profit margins, most organizations
prefer recruiting inexperienced and raw people and mold them in their own way.
This was backed by our survey results that showed that as many as 34% of all
positions in BPOs are taken up by freshers. To reduce stress, companies resort
to measures such as flexible timings for employees, taking them for outings and
offering recreational activities such as indoor games, gyms, coffee houses, etc.
They also imbibe innovative ideas such as removing monotony from work,
nominating employees for conferences, keeping them motivated through trainings
and encouraging employees to use recreational and sports facilities available on
campus. Another concept that is likely to gain a lot of ground in future is that
of working from home. This is already popular in the West and a few
organizations have already made a start albeit in some exceptional cases, such
as for persons with physical deformity or female employees on maternity leave.
Having said that, nothing is more important than employers keeping backups ready
to cope with a high attrition rate. Given the high volume of work in this
vertical and the pressure from competition, employees leaving in hordes is a
common sight.
NASSCOM recently conducted a survey to check how the management in BPOs keeps
a tab on employee attrition. Interestingly, 50% of the respondents felt that a
rigorous root cause analysis was the most effective practice for improving
quality and accuracy, followed by rigorous skill verification (24%).
As far as training of employees is concerned, the Team Leaders were rated as
the best source to impart training. A small group of managers felt the need for
linking rewards to the quality of training, while 15% of the middle management
rated it to be the most effective practice for cost effective training. Middle
management leadership competencies and hiring appropriate persons for this role
were also rated as the two most cost-effective means to improve worker retention
by the senior management. This is also clearly the focus area for employee
retention, for all kinds of BPOs operating out of India, be it Captive or Third
Party.
Strategies to increase business
One of the ways for increasing business competence would be to develop
vertical-specific teams within an organization. This would create pools of
excellence within the same company and also allow a proper marketing of the good
work done by a company toward a specific vertical. It also helps in selling a
company's strengths in the international market on a case-to-case basis rather
than harping on the generic themes of outsourcing or offshoring. The development
of long-term strategic partnerships with niche clients has also been rated
highly by senior management of BPOs.
Let's control the burgeoning data center
With IT industry growing at a steady 25% and space in metros available at a
premium, there is tremendous strain on enterprises to manage the ever-growing
hardware resources within the limited space available. To combat this, companies
need to look at innovative solutions to consolidate their IT infrastructure.
Such a consolidation not only effects savings on cost of procurement, deployment
and maintenance, but also on the physical space required to house all the
equipment. To ensure business continuity, companies need to do away with
inefficient backup/data recovery procedures. Also, there's tremendous stress on
the bandwidth available to support user needs. Procurement of new hardware such
as servers and storage devices costs a huge amount of money thereby impacting
the profitability. Therefore, companies need to look at innovative solutions
that are future-proof, low-cost, robust, and scalable. The core areas while
conceptualizing data center infrastructure management are: server consolidation;
storage consolidation; backup consolidation; and space consolidation. Multiple
small servers should be replaced with high-capacity servers to improve
efficiencies in hardware utilization and better management of bandwidth. One
must go for products that support the latest, mature technologies such as FC/CIFS/NFS,
as well as emerging Next-Gen technologies such as iSCSI. Apart from improving
efficiency, such a strategy also leads to direct cost savings by reducing AMC
costs. Snapshot technology can be leveraged and configured for disk-based
backup, while advanced backup concepts such as block-based incremental backup
reduce backup windows from several hours to a few minutes.
Anytime, anywhere access to information
With growing business needs, IT companies require increased bandwidth over
their WAN links, a far greater amount of scalability; and with scattered IT
skills and a mobile workforce, they should ensure anytime, anywhere access to
information for their workforce. These concerns can only addressed by moving on
from legacy TDM-based networks to Multiprotocol Label Switching (MPLS)-based
networks. The drawbacks of point-to-point lease line connectivity across all
locations include fixed bandwidth, lack of scalability, network complexity, and
high running costs with low bandwidth. MPLS technology provides benefits such as
bandwidth scalability, cost savings, any-to-any communication, QoS and traffic
isolation amongst multiple clients. The technology enables secure virtual
private networks (VPN) and allows scalability that would make it possible to
offer assured growth to customers without having to make significant
investments. Rather than setting up and managing individual point-to-point
circuits between each office using a pair of leased lines, MPLS-VPN customers
need to provide only one connection from their office router to a service
provider's edge router. This also proves crucial in saving costs especially when
profitability is taking a hit in the face of stiff competition. An MPLS network
in addition to improving traffic speed, makes it easy to manage a network for
quality of service (QoS). Other benefits include: increased bandwidth that
translates into a reduction in the yearly costs on bandwidth procurement; a
reduction in provisioning time for new customers; improved productivity &
product quality assurance.
The road ahead
The days of India being a major attraction for outsourcing due to the cheap
labor and its geo-economic benefits, are over. After crossing over the initial
honeymoon period, foreign companies are looking at value for money in terms of
the impact outsourcing has had on their long term relationship with clients. So,
they demand customer satisfaction through efficient response and service
quality. This is the most crucial reason for their sustenance in business. After
having shown the potential, the Indian ITES industry is now moving toward the
phase where they need to show performance, ie they need to go beyond their
contractual obligations to look at ways to enhance customer satisfaction. This
could be done by identifying new opportunities to service customers and
improving value-adds to their services.
How would you rank the challenges before the Indian ITES industry? What measures are you taking to curb attrition across your company? How do you manage a huge and distributed infrastructure across |
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