Zinnov, which does a bit of blogging here, and SVB India Advisors, recently came out with a 600-page report on "compensation and benefits" specifically for tech companies in India. In an executive brief (which runs 32 pages), that Sandhill.com is running, you'll learn such interesting tidbits as these:

• The engineering function saw an average salary increase for 2006 of 16%.
• For tech support and operations support functions, the increase was 14%.
• The average turnover rate was 13%.
• Raises typically happen in March and April.
• Signing bonuses are gaining popularity, to offset options or a bonus a given candidate was expecting to receive before he or she jumped ship.

Interestingly, the total industry average salaries in 2006 for product engineering companies actually dipped 6%. Why? The talent pool is too small. That's driving companies to bring in "freshers" (Americans know them as newbies), people coming in with zero to two years of experience, who get lower salaries, thereby depressing the overall salary level.

If you're in a position to care about compensation for this type of company in India, this might be worth ordering. Funny thing, though. I can't figure out how you're supposed to order it, other than contacting info@zinnov.com or Roma David at rdavid (at) svb.com and asking.

Last weekend's (June 16- 17) issue of the Wall Street Journal has a very interesting article entitled "Seven Myths About Outsourcing" (Subscription may be required - not sure) by Phaneesh Puranam and Kannan Srikanth. Phaneesh teaches at the London School of Economics and Kannan is his student there.

Very interesting article and conveys a lot of wisdom in a short article. To paraphrase, the Seven Myths that they talk about are:

1. We can have it all - Companies set Efficiency Goals AND Effectiveness Goals all at the same time and think they can achieve them all in an outsourcing effort. Efficiency and Effectiveness have inverse relationships. If you want more of one, you need to give up more of the other.

2. Outsourcing srvices is like buying commodities - with no transaction costs. The authors say that this is not true. Transitions and making sure that the process is executed like how you would like, take resources, effort and money. These need to be figured into the cost savings properly to see the true savings.

3. We need an Ironclad contract - Contracts can go only so far. It is more about the long term relationship and making things work!

4. Contracts don't matter - This is the other extreme. Operating without a proper contract and very informally. Leads to a lot of trouble.

5. Vendors are insurance companies - Risks cannot be transferred to the vendor. You may still be subject to risks even when you have outsourced.

6. It's not our headache anymore - On-going involvement and considering the outsourcing vendor part of the team is the only way to long term success.

7. Our first failure should be our last attempt - Companies that are eventually successful at outsourcing are those that do not give up but both client and vendor learn lessons and fine tune their own approaches.

Good article!

A number of global and regional companies have set up captive centers in remote locations to cater to their back office, product development functions. Does this mean,“There is no opportunity for firms to work with 3rd Party Service Providers and capitalize strengths of such providers for internal operations benefit”? Not really!!

Even a 100% captive operation has a fair and compelling need to work along a 3rd Party Service provider and reap benefits. The areas where this could be considered are

1) Rolling out pilot processes in newer areas for parent company that captive operation is not familiar with

2) Expanding service into newer geographies, where in size of operations makes a captive venture unviable and imbalances the effort and reward

3) Providing peak volume coverage through another operation / facility where in peaks are consistent but magnitude of such peaks is inconsistent and unpredictable

4) Requirement of a robust disaster recovery / business continuity sites for which green field investments are too expensive

5) Need for an internal performance challenger or requirement for external performance benchmarks to evaluate internal performance against

6) Infusion of new thoughts and incubation of new ideas

P&G is one such organization that balances captive operations with outsourced operations. They have termed this strategy as “Leveraging our best, with Their best”. This has helped them to grow stronger and faster by tapping into the strengths of external partners. Also helped in smoother integration of newer processes that came into organization on account of new business acquisitions.

In a seminar I attended, a good number of strategic planners, decision makers, global shared service operations heads were looking for solutions in terms of how they can benchmark internal performance and infuse newer ideas apart from the ones that are generated internally. May be its time to identify an external, experienced BPO partner for a collaborative effort to accomplish internal objectives!

Just when many organizations have standardized their business processes, particularly those that are pure voice or voice/data hybrid processes into a streamlined set of distinct process steps, with carefully orchestrated handoffs, best practices seem to be going exactly the opposite way!

Many organizations streamlined their disorganized and ad-hoc processes into a disciplined ways of handling them as suggested by frameworks like ITIL (Information Technoilogy Infrastructure Library). Incoming calls for support or queries are taken first by someone who just verifies whether you can be supported, takes down a description of the problem and passes it on to the next level of support. If they cannot handle it they pass it on to the next level and so on. This increased the efficiency and utilization of people in the call center and made sure that calls did not fall through the cracks somewhere. A disciplined, systematic way of doing things.

Except it annoyed the heck out of customers!

Along comes First Call Resolution and the pressure to address the consumer's problem by the first person that takes the call. Customers prefer this the best, understandably. Who wants to be passed on from person to person after being on hold a hundred times, only to start with a description of the problem over and over again? That's what reality seemed like to the customer!

Now companies are rushing to empower their agents to do the right thing on the phone or on other media like chat, when they interact with the customers. And do what it takes to satisfy the customer and get their loyalty in return.

The parallels between Assembly line manufacturing as practiced by automakers for decades and the new Lean manufacturing as practiced by Toyota and other Japanese automakers and what is happening in services is amazing. In the olden days Industrial Engineers were the Gods of Manufacturing and the lowly workers just tightened the nuts on the bolts all day long and went home! Just like the streamlined assembly line approach to providing services.

New manufacturing did away with "experts" in manufacturing. People who did the work were the experts. Any improvement ideas came from them since they were the most qualified people to come up with the right ideas and implement them also. They stopped the assembly line if something is not going smoothly and you did not start the line back till the root cause is identified and fixed.

Services delivered the same way cannot go wrong! Over the longer term, calls are eliminated rather than optimized!

Amazing, the kinds of lessons services can learn from new manufacturing, particularly Lean methods as practiced these days!

To deal with future we have to deal with possibilities. Analysis will only tell us what is. - Edward de Bono

A recent report says that

"In the late 1990s, India’s software industry started booming. The threat of the so-called Y2K bug and an abundance of well trained, technically skilled and relatively cheap labour opened the country’s eyes to the potential of business outsourcing. The government soon realised that if it did not facilitate massive investments in telecommunications infrastructure, it would lose out on an enormous economic boost. Now, more than 300 000 fixed lines and more than 2 million cellphones are being added a month.

"The National Association of Software and Service Companies (Nasscom) is saying that income from business process outsourcing (BPO) has increased tenfold over the past decade. The industry has set a revenue target of $60 billion (R435.5 billion) by 2010, up from an estimated $47.8 billion this year. Back in 1998, industry revenues were $4.8 billion.
"Nasscom estimates that as a proportion of national gross domestic product (GDP), the revenue aggregate of the Indian technology sector has grown from 1.2 percent in 1998 to an estimated 5.4 percent this year. Direct employment is more than 1.6 million people.

"The US and the UK are the dominant markets, contributing to 67 percent and 15 percent of total exports respectively, but Indian firms are also exploring new markets. Banking, financial services and insurance are the main sectors, accounting for nearly 60 percent of the total, but manufacturing, retail, media, utilities, healthcare and transportation are growing rapidly.

"India remains a choice destination for BPO and is key to any global BPO strategy, but Indian firms have started outsourcing to even cheaper destinations as they move higher up the value chain."

The reference to Indian firms outsourcing to even cheaper destinations is an interesting one. This is more to do with the BPO firms that are increasingly looking for "Smart Shore" options in countries such as China, Sri Lanka and others where in BPO is in early stages of adoption. Such an industry landscape allows the service providers to transfer work primarily at low end of the value chain and realize two fold gains -

1) Increase the process profitability by leveraging low cost resources in the Smart Shore locations who do not attrite faster &

2) Free up the existing trained resources in India to take on work at the higher end.

This seems to work well in case of non voice processes that are predominantly rules and decision based.