Offshore BPO firms building domestic presence ?
Date: June 11th, 2009
Corrystone Global Partners
A recent article in WSJ and in DNA (Link) talks about how a number of the BPO firms are looking to come closer to their client locations. Be it client needs, politics or need to go higher up the value chain outsourcing firms constantly look at ways to get closer to their client. Some like Genpact, Wipro have build centers around the world globally to offer services to their clients. Genpact recently announced that the loan modification service they are going to offer their US based clients will be delivered from domestic locations ( Genpact to offer loan modification services). Firms like Infosys, Wipro , TCS have all opened centers in South America to be closer to their clients.
Some specialized BPO firms like Transworks-Minacs has a large Canadian presence for their BPO services plus domestic presence close to their specialized verticals e.g. Michigan for auto industry.
That being the case , the shift of offering domestic services locally is starting to happen but slowly and we see a gradual ramp up in this. Indian vendors have been reluctant to shift base of their operations outside India where they have economies of scale, domestic expertise in execution , access to talent and labor arbitrage advantages.
A number of firms which have established centers outside of India have done this for specific client needs where the clients have paid for the facility vs building facility and then attracting clients. In today’s economic environment that is a tougher proposition too. Infact a number of the firms have scaled down or completely shutdown their plans to establish centers outside of India. Some have announced with much fanfare creation of these local facilities but they have been primarily PR exercises and the scale is miniscule.
The recent push to move closer to clients may be driven more by politics then anything else. Companies which are looking at asset sales or selling their existing operations domestically to raise cash is another way some of the firms are looking to establish local presence with committed business.
The challenge we see companies facing when dealing with offshore vendors running domestic centers or establishing local presence is that how well equipped are the offshore firms to offer value running domestic services ?
The only way this will happen is if the Indian firms are willing to truely become global firms and build expertise to manage global operations and not just build global locations. Currently it may be driven by politics but if it is merely politics this will not be a growth engine for outsourcing vendors and for corporations there is little incentive to offer domestic operations to offshore vendors. Where the companies can see some value is if there is a hybrid model ( operations domestic and globally working together) and the outsourcing vendor managing the operations.
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