| The economic downturn is affecting the majority of | | | | - Philippines competes for customers requiring |
| global markets around the world. However, studies, | | | | language skill sets (e.g. Customer Service). Philippines' |
| interviews and surveys conducted in the sector, point | | | | attractiveness for BPO services tends to continue to |
| to an optimistic outcome for outsourcing and offshoring | | | | grow, with a focus mainly on voice based BPO |
| services in the coming years. This article reviews the | | | | services. Philippines still does not have the education |
| key financial, public and commercial sectors and | | | | levels and access to university degree skills as easily |
| explores the best options available to them. | | | | as India and the time zone different can represent a |
| Today, approximately 30% of revenuesof offshore | | | | drawback for UK based operations. |
| outsourcing companies are tied to the financial | | | | - China competes for general back office, lower skilled |
| services industry. We are all aware that banks and | | | | BPO and those not needing significant English language |
| other financial services firms are under significant | | | | interactions. The market sees China as the favourite |
| pressure to reduce cost. Despite the recent | | | | location in terms of low labour costs but it's important |
| near-nationalisation of several well known high street | | | | to consider it in terms of likely future Inflation wages |
| banks, it is believed that these organisations will most | | | | and currency fluctuation. Wages and salary inflation |
| likely only achieve the required cost savings through a | | | | tends to continue to rise due to lack of English |
| reduction in headcount and transferring jobs offshore in | | | | speakers with high level skills and experience in IT and |
| 12-18 months. The political pressure to save jobs will be | | | | BPO services in the local market. In addition to this, the |
| overlooked in favour of reducing costs. This view is | | | | strengthened tendency of the Yuan continues to grow |
| reinforced by a recent study conducted by The | | | | and has increased over 50% against the pound in |
| Everest Research Institute, which predicts Business | | | | 2008. |
| Process Outsourcing (BPO) from the financial services | | | | Where next? |
| industry will increase 40 to 45 times the current market | | | | Despite the growth predicted for 2009 in this sector, |
| size over the next five years, with key drivers of | | | | these well known outsourcing locations are not |
| growth coming from cost reductions. We believe that | | | | necessarily going to win business easily. They should |
| the financial crisis will in fact accelerate global | | | | expect to face greater competition from other |
| outsourcing. | | | | emerging countries that are highly ranked in the sector, |
| Public services in 2009 is facing a tough time as | | | | such as Egypt, Ukraine and other nearshoring locations. |
| unemployment increases, more people will claim | | | | - Egypt It is early days for this new location and there |
| benefits. Council tax rates have been frozen for the | | | | is not yet a significant trend of companies here, |
| first time in many London boroughs. In addition to more | | | | however it's a location that is still developing and has |
| money going out and less money coming in, the public | | | | lots of potential. It can offer a variety of language skills |
| sector is likely to face huge political pressure to keep | | | | (such as Spanish, French, English and Arabic) and all |
| jobs in the UK. So where does that leave | | | | the recent investments in infrastructure, in labour pool, |
| Outsourcing? Outsourcing in public services has | | | | innovation incentives and tax benefits the government |
| become more widely acceptable but will not generate | | | | is supporting, it looks like a promising location for the |
| the savings that offshoring provides and that some | | | | near future. |
| would agree the public sector needs. With regards to | | | | - Ukraine is becoming one of the best outsourcing |
| offshoring there has been little progress beyond the | | | | hubs in Eastern Europe due to its combination of large |
| NHS agreement with Steria. We do however foresee | | | | talent pool and various value-added factors. Also with |
| a need for this to change. In the future the public | | | | acquisition of local companies by BPO providers, like |
| sector will retain some jobs in the UK (to ease political | | | | acquisition of Alvion by SoftServe in 2008, and the |
| views) however back office transactional roles will | | | | huge support the government is providing, Ukraine is |
| move to offshore locations to achieve the required | | | | most likely to have huge growth in the coming years. |
| costs savings | | | | Ukraine's currency has depreciated against the Pound, |
| Commerce and Industry is an area that has always | | | | US Dollar and Euro, making it even more attractive to |
| been more progressive and forward thinking as cost is | | | | many suppliers around the globe. However, Ukraine |
| the bottom line and shareholders welcome the financial | | | | faced big wage inflation in 2008 (23%) and it is |
| benefits. Most FTSE 100 companies have already | | | | predicted to have a 17% in 2009. |
| some operations overseas. We predict 2009 will see | | | | - Poland a well known popular location that should not |
| offshoring in this market grow as companies use this | | | | be overlooked. The recent high devaluation of the |
| strategy to cut costs and position them selves in a | | | | Zloty against the Pound, even greater than its wage |
| better position within their sector. | | | | inflation, has made it an even cheaper location for UK |
| What are the best options? | | | | companies compared to 2008. However, even with |
| So where are these deals going to take place? | | | | the depreciation of the Zloty, service providers are |
| Currently, offshoring is the best option for an | | | | seeing the turnover has decreased significantly and |
| outsourcing strategy, rather than near-shoring. Service | | | | this is mainly because the market is not growing as it |
| Providers are locating and even re-locating their | | | | was in the past years. Also, the joining of additional |
| operations to the cheapest possible location where | | | | countries, like Poland, to the European Union is raising |
| their operations can be carried out and where the | | | | challenges for near-shoring locations, since its labour |
| service agreements can be met. India, Philippines and | | | | force are now able to move freely through Europe |
| China remain the best rated locations and all offer | | | | causing college graduates to leave the country to find |
| quite different value propositions and in many ways | | | | better paid jobs in other EU countries. This will not only |
| compete for different aspects within the outsourcing | | | | impacts on the availability of skilled labour but also on |
| services: | | | | the future wages. |
| - India established in back office transactional work and | | | | In conclusion, 2009 is going to be for many companies |
| increasingly competing for specialised skills, It's the most | | | | an economical challenge due to the Global crisis, but |
| developed and experienced outsourcing community. | | | | there is a possible solution by looking to Offshoring |
| Even with the wage inflation India is suffering, survey | | | | options as a way to reduce cost, improve their |
| conducted by OPI2 on the current state of the | | | | operational model and to get a better position on their |
| outsourcing market, not only places India as the first | | | | local sector. This clearly will open new opportunities for |
| choice for Offshoring location but shows that 20% of | | | | Offshoring providers and locations to increase their |
| the respondents still prefer this location because of | | | | services for worldwide clients around the globe. |
| their labour cost. | | | | |