pop avata

BPO Journal

Saturday, June 25, 2005

Bye! I am on Vacation!

I will be gone from June 25 - July 4. I am off to London, then Keswick and Edinburgh. Intend to relax to the bext of my ability - so not much blogging and email. Have a fun week!

Tuesday, June 21, 2005

Its a flattening world?

Cnooc Ltd., China's third largest oil company, has made an unsolicited $18.5 billion cash bid for U.S. oil company Unocal Corp. in an effort to break up its pending acquisition by Chevron Corp. This is the largest foreign acquisition ever attempted by a Chinese company, and marks the first time Chinese and U.S. companies have engaged in a takeover battle. It is anticipated that this latest sign of China's hunger to gain direct control over more energy assets to feed its booming economy could set off political fireworks in Washington, feeding larger concerns about China's growing global economic ambitions.

However, its not the first. Much has been said of the Chinese century in recent times. About how its breathing down our neck in the "flat world". Rik Kirkland, on a recent visit to China, said, "China is what the U.S. economy might look like if it were run by a consortium of folks from McKinsey, Goldman Sachs, and the CIA. Sure, they'd get plenty wrong, but more often than not they'd get it right. The proof was all around us: in the capital's skyscrapers and software parks; in our discussions ("China needs to make enterprises, not universities, the center of innovation because they'll respond better to the market," said Minister of Science and Technology Xu Guanhua); and, of course, in the numbers. Of all the dazzling stats China has posted, the most impressive is this: In 20 years it has lifted some 400 million of its 1.3 billion people out of grinding $1-a-day poverty."

The growing economic buoyancy in China is also the subject of Friedman's flat and increasingly flattening world. However, I am surprised that for all the focus on China, little is said about our fiscal rules and competitiveness in "China's century". All the politicians seem to do is engage in China bashing including curse them for following the same currency policy that they have pursued for the past decade and recommend reimposing quotas and import controls. Geoffrey Colvin, in this insightful article "Our Leading Export?Nonsense about China" talks about how all these frantic efforts to cut back Chinese imports is nothing but political theater and disingenuousness. Also, none of these debates mention the interest of the American consumer. The simple truth is that we do not stand to benefit from curbing Chinese imports or on a broader scale, imposing a protectionist policy. For example, consider the textiles industry. The industry itself employs less than 0.5% of working Americans. But, more than 32 million households (comprising more than 80 million people) get by on an annual income of less than $25,000 each. For them, isn't savings on basic necessities—clothing—precious? This itself is a case for the end of textile quotas.

Do we need protection because we cannot cut it in a global, free economy? Manufacturing businesses like textiles are the most talked about so far, but as we increasingly lose our lead in sectors such as tech services and information, we need some answers that reflect a change in attitudes and policies. We cannot afford to curb China's or Taiwan's or India's hunger in an icreasingly interconnected world. We must look at increasing ours. This goes beyond what Friedman suggests - making pensions and health insurance portable, to some form of wage insurance, to new subsidies for tertiary education, to more good old-fashioned parenting (as in, Hey, kid, switch that video controller off and crack a book!) but its a start. As Colvin says, "In a global market, how can American workers be worth as much as they cost? We don't hear many public officials proposing answers. If we did, perhaps our towering nonsense surplus would start to come down."

NASSCOM Top 10 - Revisions

This Economic Times article reports that Nasscom's recent rankings of third party call centre and BPO vendors in the country for FY 05 have been revised. ICICI OneSource is now ranked No. 5, up from the No. 8 slot it occupied in the previous list. The earlier release, in error, had not accounted revenue of the 100% owned US subsidiary of ICICI OneSource. ICICI in the last one year made three acquisitions, which include a 51% stake in Pipal Research, ASG and RevIT systems.The top five call centres and BPO firms now are WNS, WiproBPO, HCL’s BPO arm, IBM Daksh and ICICI OneSource.

Thursday, June 16, 2005


WNS Global Services once again stands India's leading third party BPO service provider. The BPO arms of leading service providers Wipro and HCL are in the second and third slot, according to the Nasscom ranking of third party ITES (call centres and BPO) companies for 2004-05. The rankings, which are based on the revenues earned by the companies in FY 2005, did not consider captive units. Nasscom officials also stated that some companies did not provide their India revenues as reported to STPI. Had they done so, they would have found a place in the top 10. Examples being e-funds and Sutherland Technologies.

Sunday, June 12, 2005

Do as the Chinese do

In this post, Nicholas Carr draws attention to Microsoft's new Chinese internet portal that has banned the words "democracy" and "freedom" from parts of its website in an apparent effort to avoid offending Beijing's political censors. Carr reminds us of Bill Gates' vehement advocacy of the Bill of Rights in an article, titled "Support Freedom of Speech on the Internet," that Gates wrote in 1996. Excerpts follow:

"The free exchange of ideas on a global basis is something that is important for the U.S. politically and economically. Let's not undermine the world-wide trend toward free expression by setting a bad example when it comes to free speech on a computer network."

"The Bill of Rights is the foundation on which our nation is built. The Internet is an enormously valuable place in which those rights must continue to thrive. Both the Bill of Rights and the Internet are potentially fragile. Mess with either of them too much, and we might ruin them."

"We can't let this happen."

The stark contrast is offered by an excerpt from an article in the Financial Times, "Don't mention democracy, Microsoft tells China web users":

"Attempts to input words in Chinese such as 'democracy' prompted an error message from the site: 'This item contains forbidden speech. Please delete the forbidden speech from this item.' Other phrases banned included the Chinese for 'demonstration,' 'democratic movement' and 'Taiwan independence."

Thursday, June 09, 2005

More on SOX costs

More on the costs of the misbegotten SOX - I did not mention this study by Zhang in my earlier post. The abstract reads:

"This paper investigates the economic consequences of the Sarbanes-Oxley Act through a study of market reactions to legislative events related to the Act. I find that the cumulative abnormal return around all legislative events leading to the passage of the Act is significantly negative. The loss in total market value around the most significant rulemaking events amounts to $1.4 trillion. I then examine the private benefits and costs of major provisions of the Act by investigating the cross-sectional variation in market reactions to the rulemaking events. Regression results are consistent with the hypothesis that shareholders consider both the restriction of nonaudit services and the provisions to enhance corporate governance costly to business. The results also show that Section 404 of SOX, which mandates an internal control test, imposes significant costs on firms."

It is likely that other contemporaneous news announcements may have impacted stock prices during the study, though the author shows that other news around the most significant SOX-related events is unlikely the key driver of the documented abnormal returns. Second, as investors’ expectations are unobservable, the author states that he cannot completely rule out an alternative hypothesis for the observed negative cumulative abnormal return, viz., that investors had expected really tough regulations but were disappointed by SOX. However, additional analyses in the paper do not provide support for this hypothesis.

Well, SOX doesn't seem to be hurting everyone. Didn't Greenspan recently tell Wharton graduates he "likes" it?

Monday, June 06, 2005

From Appblue to Apptel

Had a fun weekend in hot n humid Houston - wished my folks a safe trip back home and relaxed to the best of my ability. Hence, the reduced number of blogs this week.

A singular observation of note over the weekend - Apple's proposed announcement at the Worldwide Developers Conference in San Francisco of its plan to transition from IBM PowerPC processors to Intel's Pentium chips . Given Jobbs' mercurial reputation, I thought I'd wait until the formal announcement today. Yes, its official. In fact, Apple has been working on the move for the past five years, creating two versions of its Mac OS X operating system. To quote Jobbs, "Mac OS X has been leading a secret double life".

The transition marks a change in Apple's traditional niche strategy. The Wall Street Journal reports that the move, which could help Apple ensure that its Mac systems remain competitive in the mainstream market, may have been driven by business needs to: reduce prices, create powerful new Mac products that are even smaller and thinner than the the one-piece iMac and Mac mini (IBM's chips, partly because of the heat they give off, have held back Apple designs for some compact products), and meet public commitments for increasing the speed of its desktop and laptop lines (Macs lag behind PCs in clock speed). The journal also reports that the decision may be driven largely by the increasing significance of laptops, which have become an increasingly critical source of growth for Apple and the industry as a whole - "Apple has been repeatedly stymied in its attempts to create a laptop based on the G5 microprocessor by IBM, because of the excessive heat of the chip. Intel, on the other hand, has made chips for mobile devices one of its key focuses".

In addition to the architectural problems - Apple will have to recompile and redesign all Mac OS X applications, and support and maintain two code bases for its operating system, as well as entirely different families of hardware - the decision is likely to cause an outcry amongst vitriolic Mac users who believe the switch is equivalent to joining forces with the enemy. It would also be interesting to see if the move makes the Macs more vulnerable to viruses, reduced incidence of which was a point in their favor thus far.

The transition also highlights that no sourcing relationship is unshakable. Even partners in long-term, long-standing alliances are forced to evaluate partnership objectives as they evolve to adapt to turbulent market and user needs.

Wednesday, June 01, 2005

Problems with Multiple Choice

There's an interesting article in CIO Magazine about the cost and complexity of managing multiple outsourcing vendors that's aligned with my discussions with several outsourcing managers in large firms. There is a general consensus on the advantages of use of multiple service providers: reduced costs and improved quality of service that stem from increased competition between providers, access to specialized skills or technical expertise of multiple providers, and reduced hold-up risk (associated with depending on a single service provider).

However, outsourcing managers attest to the time-consuming, complex and expensive management of these service providers. For example, the article states that P&G has spent the past two years shaping a new governance structure to oversee the outsourcing vendors, an area in which the company had little previous experience. Commonly cited dimensions of a governance structure in multisourcing include regular reviews of vendor performance with measurement applications such as dashboards or vendor scorecards, efficient contracts that spell out the need for cooperation and conflict resolution measures, and well trained staff and organization structures that facilitate coordination between and management of multiple outsourcing agreements.

The Deloitte study, "Calling a Change in the Outsourcing Market" that I discussed in an earlier post, highlights the dissatisfaction with outsourcing services among large firms. The findings are aligned with a 2004 CIO survey that cited "a poorly developed, underbudgeted, underresourced governance model" as the primary reason for dissatisfaction with outsourcing among user firms. It would be interesting to find out what percentage of the respondents in these studies were managing multiple outsourcing relationships. My guess is that multisourcing was the dominant strategy among a significant number of these respondents. I think this issue promises to get more problematic than its current form. As more companies leverage outsourcing to reduce costs and increase operational efficiency, more research will be required to understand the dynamics of multisourcing and the effective governance of multiple outsourcing relationships.

Outsourcing news
Blogcritics: news and reviews Blogarama - The Blog Directory Blogwise - blog directory Listed on BlogShares

     Take this Offshoring Survey