The India sourcing toolkit
You’ve received board approval, and like many corporations your board decided the outsourcing destination to be India (the Mecca of outsourcing). As project lead you’ve worked very hard to select the right vendor as partner or decided to go captive. Whatever the case may be, before you jump on the plane, here is a decision tool kit for India-bound outsourcers. This kit will help make your project a success and avoid common pitfalls! These are purely based on personal experiences working in the Indian outsourcing sector – along with feedback from several of my expat colleagues.
1. Location, Location, Location
This should be your number-one concern. Lots of firms don’t think too much but city location is key. All cities in India aren’t the same. Staying away from B-class cities (like Pune/Jaipur/ Bhubneshwar etc) is sensible; as there are severe infrastructures issues. Although in a recent Tholons survey of top destinations these cities appear prominently, issues do exist (like no international airport). Other factors to consider: avoid locating in business districts/downtown areas (steep rents) instead stay in close proximity (50-100km radius); ensure access to a reputed university/college to attract young talent; consider cities that offer functional talent pool, e.g. for IT Bangalore or Hyderabad is ideal; Mumbai for F&A.
2. Get in the Zone
There are locations created by the government in various parts of India called “special economic zones” (SEZ), to attract new outsourcing work. SEZs offer lot of advantages like tax breaks (income tax, VAT), duty waivers (customs/import), subsidies on power etc. These SEZs help the business case further to keep overhead costs low and reduce tax liability for your outsourcing operation. Make sure you research this option and make it part of your decision kit.
The success of your project is all about hiring the right people either directly (for captive) or working closely with the vendor. First thing to understand: it is bulk hiring so partnering with a strong local recruitment firm makes sense. Don’t look for 90 per cent or 100 per cent skill match (for routine jobs in AP or IT) as keeping the bar too high will make positions harder to fill. Instead, hire smart people with good potential and offer good training. Also make sure your plan includes the quick scaling-up of hiring and training as typical outsourcing grows rapidly.
4. Talent Management
Talent management is by far one of the biggest challenges in India. Due to booming economy staff turnovers are very very high (20 per cent to 30 per cent). Staff attrition will be even higher if deployment is for the Americas, as it is night shift (the ‘graveyard shift’) in India. It is hard enough to find the right people, but even harder to retain them. Consider developing a tailor-made staff retention and engagement program to retain key people. Remember, the plan should be India-specific: global policies do not work due to high growth and attrition rates.
5. Inflation & Yearly Increases
Inflation in India is high at eight to ten per cent; expectations of staff for annual increments are even higher. Salary increases of two or three per cent annually – a norm in the western world – don’t work here. Be sure to budget for higher salary increases for your India centre, else risk losing key people to the competition.
6. Reward & Recognition
To keep your Indian staff (contract and employees) motivated, nothing works better than a good reward/ recognition program. You need to customise a local plan, like Employee of the Month, monthly team awards etc. Cash, reward points card, or a simple “thank you” letter signed by senior management, work well. A motivated team will ensure all your goals/KPIs are met, and even exceeded.
Conventional outsourcing KPIs will merely focus on measuring success through cost savings (FTE/staff cost). This is critical as that’s why we outsource in the first place. But also plan to include qualitative KPIs to ensure outsourcing project showcase success on all fronts – so management can see outsourcing’s benefits beyond just cost saving. Examples will be accuracy and timeliness of AP/invoice process; number breaks outstanding over 30/60 days in a recon process; number of bugs during IT testing etc.
8. Manage Anxiety
As more and more functions get outsourced, it leads to anxiety among senior management. They often wonder if work that is outsourced will happen at all, or if someday BAU will break down there! It is important that you understand and manage this properly. Keep an honest and constant communication process going with frequent updates on progress made, track monthly KPIs and share all this with management and other stakeholders.
9. Corporate Culture
There are big challenges running your “new” centre and trying to model it to run like your well-established offices in, say, New York or London. Senior management will like to see a common enterprise culture established quickly. Setting up corporate culture consistent with the rest of the world is tough and takes years to happen. These centres are far from principle offices with little or no physical interaction with senior management, so you will have to work even harder. Make sure your management is aware and their expectations are established appropriately.
10. Business Continuity Plan
An India-specific BCP is needed as part of your outsourcing planning kit. If it is captive you’ll have to create your own, or request a vendor to create one for you that is consistent with global requirements. Due to infrastructure issues in India it is important that your BCP addresses circumstances like power failure (quite common there), system outage, terror attacks, building security, business disruption due to curfew, demonstrations, religious ceremonies, and transport strikes. Some of these are unique to India and may not be part of your global BCP plan as yet.
About the Author
Ash Bisaria is VP at Credit Suisse. To read Ash’s entry into our buy-side Q&A series ‘The Professionals’, click here.