30 Minute Interview

“There will be some slowing down in outsourcing to India”

Richard Harris VP Research Gartner

How is outsourcing shaping up across segments?

In outsourcing different views are emerging across sub-segments. It is increasingly getting associated with business processes. The focus would be on sub-verticals. For instance, in banks it is about particular processes like cheque processing.

The other value proposition in outsourcing is of sharing. There is a trend wherein organisations are thinking that they can have a much bigger outsourcing centre that can be shared among the same verticals. Increasingly, organisations such as insurance companies and banks are getting comfortable with the idea of a shared sourcing arrangement with other banks or similar organisations where they can have ownership of the entity. Recently, top Australian insurance companies did something similar. Competitors came together and are sharing a common infrastructure for customer-related queries.

Banking is also looking for such options. One area where they can come together is cheque processing. They do not want to invest much for this, but at the same time cheque volumes are increasing considerably.

Which other verticals are looking at outsourcing?

The verticals that are the biggest contributors to outsourcing are financial services, and IT/ITES. Telcos and governments are the upcoming verticals. However, for 2003-08, the largest growth in percentage terms would be the government vertical. The drivers for this vertical would be based more on cost and not infrastructure, unlike others like banks and telcos. For the government, security is a big issue because there is the fear of information moving out of the country.

Where’s the Indian outsourcing market headed?

Concern about security is going to be an issue. There is growing resistance especially from the customer. Financial institutions are rediscovering customer satisfaction and customer service as key factors in retaining them for the future. This will make a difference in tomorrow’s world. The issue is not outsourcing to India but what makes business sense, particularly when it is customer-related.

Is outsourcing to India going to grow?

We feel there will be some slowing down in outsourcing to India. But this will happen in the traditional areas like BFSI and ITES. Even in verticals like telecom manufacturing, the trend will be to manage operations locally, and outsourcing will be more focussed.

What are the issues that Indian organisations should look out for?

There will be a vertically segmented market with more niche segments. Organisations will be selective in choosing business models. Companies would rather outsource functions that are business-critical rather than generic in nature. Hence, organisations would like to work with companies which have best practices in place. Indian outsourcing companies will have to plug into business strategies with better innovation and entrepreneurship. This could well be a deciding factor between an Indian outsourcing company and any other global company.

—Shivani Shinde