Reasons to Outsource to India
For more than 20 years India has attracted international notoriety as an outsourcing hub, which started when UK technology and telecoms companies began...
For more than 20 years India has attracted international notoriety as an outsourcing hub, which started when UK technology and telecoms companies began outsourcing their call centers to the country, and still it is never far from the headlines.
Recently India found itself in the press after several American universities started outsourcing the marking of their exam papers to India, and in the same week it featured again when it emerged that a major Indian outsourcing specialist had set up a data-inputting unit in a local prison.
Indeed, India continues to attract business from all over the globe, including the United Kingdom, the United States, Australia, Spain, Netherlands, Denmark and Canada. Recent examples of such deals include: International chemical firm BASF Group outsourcing its IT provision; US aerospace group Rockwell Collins extending its design development relationship with India; international toy firm Mattel outsourcing some of its IT services to the country and fashion chain Diesel selecting India to become its outsourcing hub as it expands its operations into the country.
Explaining Microsoft's new outsourcing contract with Infosys, which has taken on a wide range of internal IT services for the software giant globally, a spokesperson said: “This deal is simply a consolidation of work [IT support services] that used to be provided by multiple providers to a single provider. Microsoft has had a concentrated effort to be more efficient and save money and this was a major area where we could do this. This new contract will not impact internal resources.”
Meanwhile, India has also remained successful in securing business from international governments, having recently won IT contracts with the UK’s National Health Service and Her Majesty’s Revenue and Customs.
“In the initial phase of outsourcing offshore, work was dominated by technology companies looking for cost savings,” explains Derek Kemp, Patni Computer Systems' President of Europe, the Middle East and Africa. “This rapidly matured into financial services organizations looking to combine these savings with process efficiencies and faster responses. This then drove the increase in skills available in offshore destinations such as India, creating a virtuous circle that has funded the development of many specialisms. As a result, now, a much wider spectrum of businesses look at India for outsourcing.”
Manoj Ayyappan, Managing Director of Excellone Technologies, says that most of the enquiries that his business receives are from small and medium sized companies. “We get enquiries from financial, manufacturing, software development and recruitment companies. Also from wholesalers, the education, real estate and tourism sectors,” he adds.
Atul Vashistha, Chairman of Neo Advisory and founding member of the International Association of Outsourcing Professionals, says that India is starting to see the life sciences, retail, manufacturing and healthcare sectors increasingly using the country.
India has been successful in attracting business from overseas because it offers companies a cost advantage, it has a large talent pool, excellent project management skills and bags of experience.
Kemp explains: “India has excellent and established process maturity – something other offshore destinations have yet to catch up on. India also offers highly skilled people at lower cost – and as the government continues to invest in infrastructure the availability of resources improves. Compared to China, the language barrier is far less of an issue in India as English is still widely spoken, and there is now a wealth of advisory services to help drive real results from outsourcing.”
And India’s popularity is seemingly continuing to grow. Many of the companies that we spoke to said that the number of companies outsourcing to India increased in 2009, and that they are expecting more of the same in the rest of this year.
“While the pace slowed down compared to past years, we expect existing companies to outsource more and also expect other companies to start outsourcing too,” says Vashistha. “The value proposition is too compelling.”
However, India is being put under increasing pressure from other countries wishing to vie for one of the top positions in the outsourcing industry. Competition is not just coming from one continent, but from across the globe, as Vashistha explains: “In Asia Pacific, China and the Philippines are key alternate destinations. In South America, we face competition from Mexico and Brazil. While in Europe, Poland, Russia, Hungary and the Czech Republic provide alternative outsourcing options.
“However, on a scale perspective, the others are far behind, but some such as the Philippines are catching up in call centers.”
Despite this, India remains confident that it can retain its place at the top of the outsourcing pile. “Nobody else can compete with India on process maturity – India is 20 years ahead of the game,” says Kemp.
“The stability that India offers is also critical. Certain companies will look to countries where their language is supported – for example, Spanish in South America – but only India can offer the volume and availability of language and IT skills and process maturity. There has been a lot of discussion as to the likely growth of China, but we have yet to really see that materialize beyond servicing the Japanese market.”
However, the future might not be quite as rosy for India, as companies hit by the credit crunch seek to make savings and are increasingly cancelling projects that would have been outsourced. An example of this is the new UK government cancelling its national identity card scheme. If this is replicated across the globe, India’s confidence may soon start to falter.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”