The word “Outsourcing”

One of my industry contacts on the outsourcer side once revealed over lunch that his American born ( probably 3rd Generation) parents were chiding him for being the outsourcing manager of a financial sector major. My friend’s Dad lamented that he was overseeing the "export of American jobs" and was generally unwilling to share the exact content of his son's job with friends and relatives. In fact, when I offered my MBA class on "Global Outsourcing of Knowledge based services" in Fall 2005; my University colleagues truncated the advertising for the class to just "Global Knowledge Based Services" and quietly dropped the "outsourcing" word. A colleague explained this to me and since there were enough students enrolled anyway – I let it go.

I find this approach quite inexplicable. Yes, if you or your loved one's job is outsourced, it is horrendous. The solution is not in being " anti-global outsourcing” but instead becoming pro-active   to see how it can benefit your career and business in or from the US.

Therefore I sympathize with Economics Professor N. Gregory Mankiw who got into controversy as the then Chairman of the the White House Council of Economic Advisors. He basically said in February 2004 that outsourcing was the new way of doing international trade and that this was something he'd say in one of his introductory economics classes.

According to this article in the NY Times, while McKinsey sees only 2% US jobs getting shipped overseas Professor Alan S. Blinder thinks this number could be much higher.

While it looks like the public outcry against outsourcing has subsided somewhat since the last elections in 2004; there is continuing reluctance to see outsourcing as a fact and a possible opportunity. It is only after both individuals and businesses start understanding and accepting this that folks would start managing outsourcing to career advantage and business advantage.

Customer Service across Countries

It is great to be back in the US. British Airways turned out to be quite nice with a very large bunch of customer support people at the Indira Gandhi International Airport, Delhi. They had a separate gate and from 4 am there were young customer service folks at every step: getting your baggage screened; helping you through immigration; moving folks through security including such friendly tips that coffee is available after security but if you need to eat- buy and carry food, before security. Naturally, I found this new but just wonderful customer service one more instance of the "diffusion" of the customer service ethos that is spreading in India. British Airways at Heathrow was good but had simply fewer people and when one of our bag handles  were torn at Newark we had a hard time finding the BA office and the person was tired ( almost mid night) and pointed at the notice which says that torn handles are not covered as loss. Surprising because I remember at least one airline ( probably Japan Airlines) which did replace a busted bag in the past. My experience at three airports with the same airline, this time, was different. Quite simply while in low cost countries airlines  can put more people on the customer service job it is probably not cost feasible to do so in higher cost countries. I predict that in the future business processes will make up the service gap – thus you might call a 1800 number or go to a website for damaged/lost luggage issues. Once "globalized" via a telephone or Internet service can be provided more rapidly…

It was therefore with some amusement that I read the book review of THE BACKROOM BRIGADE: Seetha; Penguin Portfolio; 11, Community Centre, Panchsheel Park, New Delhi. In my own interview with Raman Roy about three years ago I had come abreast of the role of American Express and John Macdonald. Apparently, John made a comment in the 1993 India meeting that the revenues from India were less than the stationery expenses in the New York office. He was amazed at the very low ratio of operations costs to revenues. They decided to shift all SE Asian work to India. This was before the Internet …after which things changed totally.

As I observed during a midnight visit to a call center operation at Delhi – the workers were actually happy. Happy making outbound calls to UK phone customers. These kids saw their jobs as careers and Indian HR managers are in a tizzy trying to work out career paths that will help retain the best employees. The jobs that Indian workers do happily are derided as "cyber coolie" jobs according to Seetha. But happy service workers and many of them working will keep customer service up to speed  and customers happy. Seetha mentions that eLoan offers India processing of loan applications in one day and US processing in two days. 85% customers prefer the one day processing.

Aircraft Maintenance,Repair and Overhaul (MRO)

The Indian domestic airline scene is seeing frenetic growth. Privatization of airlines  and a surging middle class keep multiple airlines busy. Consider that an airlines was offering seats to Patna (Eastern India) from Delhi at half the second class air-conditioned rail fare. Unimaginable even blasphemous just twelve months ago!

Boldly, airlines are offering booking services both online and through unconventional distribution channels like gas stations. Even more boldly, in an attempt to attract first time air travelers with low prices Deccan Airlines offers no food or beverage. This way turn around time is improved and the aircraft are  in the air rather rather than taking time to load food and remove dishes. All this means that hundreds of aircrafts ( the largest recent civilian plane buyers are Indian aviation companies) need to be maintained,repaired and overhauled in the next few years.

Going by the Indian auto industry every Ram,Shyam and Hari ( equivalent of Tom, Dick and Harry) will get into the MRO act because Indian Aviation companies would like to squeeze out every safe mile from every aircraft being bought now.

This article highlights the enormous growth in the MRO industry in Asia. This growth represents huge opportunity for Tier 1 US -MRO companies to open joint ventures and tie up with capable Indian partners. Engine suppliers like Pratt and Whitney and GE would perhaps feel more comfortable seeing a reliable US Tier 1 MRO party operating with good local partners in India. The question is will the US-MRO industry particularly at the quality but Tier 1 or Tier 2 level be able to capitalize on this upcoming opportunity?

Indian Social System, 711 and 8% growth

I had planned to update my blog more frequently during my India trip but things have been so busy and fascinating that I have been slow. This despite excellent connectivity but I do wish I had gone in for the Reliance wireless Internet than the faster, but less mobile DSL line.

In any event my India trip has been just great. Apart from numerous outsourcing related meetings etc. I took the time to observe the "new" India. Finding myself at the pharmacist’s with a proper doctor’s prescription for a cold I noticed that a member of the "bottom of the pyramid" had walked in. This guy was a young fellow working in one of the numerous frenzied construction projects in Delhi. He asked the pharmacist, another young fellow for cough medicine for his two kids. The pharmacist asked precise questions like what ages (1 and 3 years) what kind of cough ( wet/dry) and suffering for how long ( 2 days). The pharmacist came back with what I guessed was pediatric cough syrup and gave precise dosage instructions with the caveat that the kids should see a doctor if they were not better in 2 days.  The cost – Rs. 25 ( 50 cents) for the syrup and the "knowledge" of the pharmacist about the current kid’s coughs and treatment was just part of the social support system. Neither the patient nor the system at this point is able to afford lawyers or insurance… and probably things are better off.

711 or the Mumbai train blasts had me stunned for a week not only with the ghastly event that made Bombay the most terrorist attacked city in the world but I was more stunned at the speed with which everything became normal. The stock market worked the very next day, people just caught the same trains,ordinary Mumbai folks helped the injured and the families of the dead and yelled loudly at the police who managed to look appropriately sheepish for not doing enough and not doing stuff quickly at least immediately after the blasts. To the credit of the Indian political system there was no communal backlash and people in general remained calm and Indian Muslims roundly condemned the terrorist perpetrators.

The US Congress approved the India US nuclear power technology transfer deal with wide  bipartisan support. The Indian press reported every killer amendment that was thankfully defeated in the US congress. Nuclear power will certainly go a long way in helping fuel the spectacular 8% growth that India is experiencing.  What does  8% growth feel like ? It feels about 3 times faster than the much ridiculed 3% Hindu rate of growth; every business is so busy with the booming local market that US outsourcing business is merely a "status" symbol or novelty. Very much like Indian kids preferring KFC to tandoori chicken more than occasionally for "style".

Customer Satisfaction and Outsourced Prayers

Having arrived in New Delhi last week, I am still wondering at the massive changes I am seeing here. Notably the roads situation is much better with frenetic construction going on- on all fronts. Everyone seems to be realizing that that infrastructure needs to improve and  is indeed improving rapidly. Also customer service whether it is your car provider or phone/Internet provider or restaurant seems to have vastly improved. Every one seems to be much more customer focused. My guess is that the customer service culture has percolated from the very large young force working in the global customer service business who have been spreading the word that the old Indian style of being occasionally curt with particularly weaker consumers will not work in the new global market. You can be curt  occasionally but must be always responsive and resolve issues – and create satisfaction for the customer- stuff that the Mahatma always encouraged.

I was therefore smiling and am confident that outsourced prayers to India will work fine. According to this report catholic churches in the west are outsourcing mass to Kerala, India. However, in the impeccably structured organization that is the catholic church, the local bishop is given the task who finds an appropriate priest. Since God is the only witness the writer of this piece suggests that the delivery of this particular outsourced service is entirely based on trust. Knowing the Indian "God-fearing" culture and the new service credo I guess no priest will fudge or risk shortcuts with prayers. Here too new "business" models are emerging. Kerala has more catholics but is expensive so North Indian churches are looking for assignments and are being offered some. In addition priests from India are being called in on short term assignments overseas. Although just 2.5 percent of the population is catholic in India they are four times in number than catholics in Britain. If I were to get time off from my more mundane "commercial" studies in outsourcing this should be  a really fascinating topic to research !

Bill Gates leaves Microsoft while Apple leaves Bangalore…

The news on Thursday that Bill Gates will leave operational command of Microsoft and be full time with the Bill and Melinda Gates Foundation from July 1, 2008 did not shock the stock market. Succession at Microsoft is likely to be a smooth affair. Observing how aggressively Microsoft expanded development work in India we can expect Bill Gates to bring the same energy and "mass global" effect to philanthropy that he brought to the computer industry with Microsoft. Bill Gates will aggressively promote health and other basic issues for the poorest in Africa and Asia. According to this article from Forbes, Bill Gates is unlikely to meddle with Microsoft and I tend to agree. 

Steve Jobs and Apple are great on the market side but Apple really don’t want to be a "mass brand". Check out Apple Stores if you are not an Apple user and you’ll know what I mean. It is probably because of the backlash from their rather select niche Apple customers that Apple have decided to go slow with customer support from Bangalore. This will be really interesting to check out when I am in Bangalore next month….

Technology, Jobs and Home-Depot

This MSN report from the Bureau of Labor Statistics offers one angle of jobs outlook for the US. It suggests that many jobs that can be simplified and done by technology will be done by technology. Simplification includes consolidation of farms to larger ones which will find the smaller farmer out of work. Stock clerks and order fillers in manufacturing and retail will also have their  work done by machines as will meter readers that will compete with optical scanning and voice recognition technologies.

The one common thread with most of these occupations is the ability to completely articulate the process or work into defined processes that can be then done by machines. Do jobs change after machines do much of the rote work ? Yes – if you go to Home Depot you see much of the check out is "self checkout" and the many former cashiers are in the aisles helping customers. Are they adding more value in the aisles than in the check-out? .. I think so.

Cross-Sourcing between Pune and Nebraska

The popular press calls it a "culture" and "logistical" problem. The solution is "cross sourcing" according to this article in the Economic Times of India. Xpanxion an Atlanta based software outsourcing company is moving back it’s quality testing and deployment activities to Nebraska. The company wants to take the best of the world! They want to avail of low cost programming in India but want to retain the high contact and highly contextual end of things in the US. Makes sense both for cost and for quality. For doing the integration and quality control work at Nebraska will certainly be less expensive than California or New York.

What the press calls "culture" and "logistics" in services  is correctly called "situated learning" and "contextual" in academe.The difference is clear if you consider moving a bunch of US born programmers to India or China and after a year or two still expect them to exactly understand the US customer requirements by "osmosis"!

In an inter-connected global world the ability to do this co-ordination and integration well will be key to success….

Medical Outsourcing

Had been hearing about this since last year and now the Time magazine article has done an excellent piece on medical outsourcing. Consider this  from the article that at current rates US would be spending $1 out of every $5 of GDP on health care by 2015. Yet, 1 out of 4 Americans would be under-insured or uninsured.

Clearly medical outsourcing is a solution for non-urgent care. A quad bye pass surgery in India can cost less than 20% of what it costs in the US. The quality of care is excellent and now accreditation agencies like the Joint Commission will certify quality. Many Indian doctors are trained in the US and have an MD from the US or UK and that gives additional comfort. Insurance companies can extend their markets  and service providers like some companies have done in the Mexico border for inexpensive dentistry. More people can be insured and treated at low cost and insurance companies are exploring about giving an incentive – take your family member for the tour and take $5000 ! Even those who have insurance in the US are apparently finding this attractive…

Outsourcing Diversity

Outsourcing is not simply to reduce cost and potentially improve efficiency and increase innovation. It clearly is a way of getting a contractor or business partner to do "non-core" things which you cannot do, unable to do and perhaps think that you don’t need to do.

One interesting recent story is  about big organizations who want their big legal firms to have more minority lawyers- particularly at the partner level. But minority lawyers are difficult to hire and retain by the bigger law firms simply because these firms are predominantly white and minority lawyers feel "out of place." Several big law firms have come up with an interesting alternative. For example, in this story from the "Minority Law Journal"  of May 12, Dimitra Kessenides mentions that the law firm Sonnenschein, Womble and Venable has tied up with minority firm  Brown & Sheehan. Together they are pitching for business and this is opening up new opportunities for Minority Law firms. However, the concern in the article is whether the bigger law firms are simply "outsourcing" the diversity "problem." On the other hand Minority Owned Law firms will have an opportunity to shape diversity inside the big firm. Interesting….