Bangladesh can become the next BPO destination
Al Mamun | Sunday, 22 June 2008
DURING garment boom, Bangladesh's economy improved significantly in the last decade. The country earns nearly three-quarters of its foreign exchange from garment exports. Because of abolition of the quota system from January 2005, the growth slowed down somewhat. Retailers are now free to buy from whatever country they chose for low price. It could mean cheaper clothes for consumers but the pain will be felt in slums in the developing world.
As the garment industries is not doing that well, in this case all the investors and Bangladesh government itself should concentrate on BPO (Business Process Outsourcing) which will provide Bangladesh an economical advantage. This market is booming now. The 2005 NASSCOM-McKinsey report suggests that the global offshore market is estimated to be 300 billion dollar of which 110 billion dollar will be offshored by 2010. There are significant opportunities for Bangladesh to increase its presence in this sector.
According to Global Infotech Analyst International Data Corporation, the Indian software and BPO segment will grow at a rate of more than 16 per cent to become a 132 billion-dollar industry by 2012. China, Vietnam and Sri Lanka are emerging as preferred outsourcing destinations too.
India is slowly losing its IT outsourcing and BPO advantage because wages are rising there. And some of the researcher believes that the wage difference enjoyed by India will be completely gone by 2020. Some of the company representatives are already commenting that India is over saturating.
Bangladesh ICT (Information Communication Technology) Business Center (BIBC) has been constantly trying to promote ICT business of Bangladesh in the USA. It is a non-profit organisation that, overseen by American Association of Bangladeshi Engineers and Architects (AABEA) and funded by the Ministry of Commerce, Bangladesh. Bangladeshi companies and investors need to understand how to win the game where our next door neighbour is a great competitor.
Companies are looking for outsourcing partners from dozens of geographies and sites. It makes for a difficult selection process. They basically see the vendors' geographical location that match their customer base and cultural needs. They always try to make sure the vendors on their short list have expertise in the services they require for their vertical industry. One very important is political stability of the location and business comfort.
Bangladeshi vendors need to prove that the company will maximum support from government and leading political groups. Also they have to make sure that they have quality service programmes open to monitoring transactions. They also have to show that they can meet their needs, large or small.
The big companies see outsourcing from corporate perspective. For this it's important to have a clear and thorough understanding of IT functions and how the outsourcing arrangement works. Besides, the problems or reasons for the developed countries to go for outsourcing must be understood as well. The developed countries extensively research vendor availability and capabilities. Most of the time the corporations and the clients want to make sure that the vendors or IT service providers are willing and capable of providing the desired services. They want to know, do they have previous experience? Have they been successful? Can they provide value?
Usually, the corporations establish outsourcing goals and objectives through evaluation to make sure that a vendor can measure and define success. What capabilities and capacity does it have? Does the vendor fit the organisational culture? Is it willing or capable of offering a trial run? And how the vendor resolves unsatisfactory performance? The outsourcing vendor should assume responsibility and bear some risk for not meeting the service levels specified in the contract. The action for unsatisfactory performance is clear and could entail automatic breach of contract or a financial penalty.
India is popular because of proven quality, competitive cost and proven knowledge management capability. Worldwide 30 per cent of the companies, who have reached Level 5 of CMMi (Capability Maturity Model Integration), are Indian IT/ITES firms. The IT/ITES companies can cater to and compete with global players because they adopted the highest quality standards. This high quality of services and products has been the driver and sustainer of growth which has helped move India out of the "mediocrity" and low quality image. It also raised the bar for other industries as well. Indian exports had traditionally been restricted to low end, low-technology oriented products like gems and jewelries and garments/apparels. The advent of IT/ITES industry led the world to recognise that Indian products and services could compete and win against global competitors on quality parameters. India is now emerging as a research and development center for some of the large IT/ITES companies of the world. India is demonstrating that it stands for quality.
Now it's our turn. Bangladesh needs to do the same. The outsourcing contract is an important part of establishing an effective outsourcing partnership. The contract should be comprehensive enough to cover the breadth of services being contracted for. Since most outsourcing relationships are multi-year in duration, it should address how the contract will be reviewed and amended to reflect changing business requirements.
Having a contract that comprehensively addresses all these issues doesn't guarantee success. Beyond the contract, it's important to have solid executive sponsorship both from the vendor and the client. The executive sponsors should have a regular forum for discussing performance with a continual focus on quality improvement. It's inevitable that business requirements will change over time, therefore, executive sponsors should anticipate this and be open and willing to adapt the outsourcing relationship as needed to meet the ever changing business needs.
If an organisation has little experience or familiarity with outsourcing, managing expectations may be a difficult challenge. Senior management may view outsourcing as an easy way to address the backlog of projects that have escalated as a result of the industry's shortage of resources.
Outsourcing may also be viewed as an opportunity to reduce cost and improve service. While these may be appropriate considerations, non-IT senior management may not understand the complexity and risk associated with IT outsourcing. The following suggestions will help to manage expectations with senior management.
Most and common key issues arise to Senior Management when outsourcing to offshore discussion come for the decision making process!
Many companies today are outsourcing offshore. However, there are ramifications and bigger impacts that come with the decision making process. This list highlights factual data gathered from real-world experiences. So a participating vendor should take good care of the followings areas and should have better contingency and mitigation plan in place to satisfy senior management.
The offshore countries should address the lack the network bandwidth for fast communication and intermittent electrical outages.
Security issues, such privacy needs to be addressed to protect the company's assets.
The offshore country needs to address poor or unacceptable quality of work in IT development/services, regardless of the CMMi level publicize.
The objectivity issue needs to be addressed. It means the offshore partner has to ensure development and testing. It has to keep companies the best interests of the corporation at heart (and provide adherence to functional, performance, reliability and usability testing standards) when it conflicts with meeting their deliverable date.
Due to its recent experience the US is interested in geopolitical climate.
................................................
The writer is working for an investment bank in NY as a Senior Vice President. He can be reached at [email protected]
As the garment industries is not doing that well, in this case all the investors and Bangladesh government itself should concentrate on BPO (Business Process Outsourcing) which will provide Bangladesh an economical advantage. This market is booming now. The 2005 NASSCOM-McKinsey report suggests that the global offshore market is estimated to be 300 billion dollar of which 110 billion dollar will be offshored by 2010. There are significant opportunities for Bangladesh to increase its presence in this sector.
According to Global Infotech Analyst International Data Corporation, the Indian software and BPO segment will grow at a rate of more than 16 per cent to become a 132 billion-dollar industry by 2012. China, Vietnam and Sri Lanka are emerging as preferred outsourcing destinations too.
India is slowly losing its IT outsourcing and BPO advantage because wages are rising there. And some of the researcher believes that the wage difference enjoyed by India will be completely gone by 2020. Some of the company representatives are already commenting that India is over saturating.
Bangladesh ICT (Information Communication Technology) Business Center (BIBC) has been constantly trying to promote ICT business of Bangladesh in the USA. It is a non-profit organisation that, overseen by American Association of Bangladeshi Engineers and Architects (AABEA) and funded by the Ministry of Commerce, Bangladesh. Bangladeshi companies and investors need to understand how to win the game where our next door neighbour is a great competitor.
Companies are looking for outsourcing partners from dozens of geographies and sites. It makes for a difficult selection process. They basically see the vendors' geographical location that match their customer base and cultural needs. They always try to make sure the vendors on their short list have expertise in the services they require for their vertical industry. One very important is political stability of the location and business comfort.
Bangladeshi vendors need to prove that the company will maximum support from government and leading political groups. Also they have to make sure that they have quality service programmes open to monitoring transactions. They also have to show that they can meet their needs, large or small.
The big companies see outsourcing from corporate perspective. For this it's important to have a clear and thorough understanding of IT functions and how the outsourcing arrangement works. Besides, the problems or reasons for the developed countries to go for outsourcing must be understood as well. The developed countries extensively research vendor availability and capabilities. Most of the time the corporations and the clients want to make sure that the vendors or IT service providers are willing and capable of providing the desired services. They want to know, do they have previous experience? Have they been successful? Can they provide value?
Usually, the corporations establish outsourcing goals and objectives through evaluation to make sure that a vendor can measure and define success. What capabilities and capacity does it have? Does the vendor fit the organisational culture? Is it willing or capable of offering a trial run? And how the vendor resolves unsatisfactory performance? The outsourcing vendor should assume responsibility and bear some risk for not meeting the service levels specified in the contract. The action for unsatisfactory performance is clear and could entail automatic breach of contract or a financial penalty.
India is popular because of proven quality, competitive cost and proven knowledge management capability. Worldwide 30 per cent of the companies, who have reached Level 5 of CMMi (Capability Maturity Model Integration), are Indian IT/ITES firms. The IT/ITES companies can cater to and compete with global players because they adopted the highest quality standards. This high quality of services and products has been the driver and sustainer of growth which has helped move India out of the "mediocrity" and low quality image. It also raised the bar for other industries as well. Indian exports had traditionally been restricted to low end, low-technology oriented products like gems and jewelries and garments/apparels. The advent of IT/ITES industry led the world to recognise that Indian products and services could compete and win against global competitors on quality parameters. India is now emerging as a research and development center for some of the large IT/ITES companies of the world. India is demonstrating that it stands for quality.
Now it's our turn. Bangladesh needs to do the same. The outsourcing contract is an important part of establishing an effective outsourcing partnership. The contract should be comprehensive enough to cover the breadth of services being contracted for. Since most outsourcing relationships are multi-year in duration, it should address how the contract will be reviewed and amended to reflect changing business requirements.
Having a contract that comprehensively addresses all these issues doesn't guarantee success. Beyond the contract, it's important to have solid executive sponsorship both from the vendor and the client. The executive sponsors should have a regular forum for discussing performance with a continual focus on quality improvement. It's inevitable that business requirements will change over time, therefore, executive sponsors should anticipate this and be open and willing to adapt the outsourcing relationship as needed to meet the ever changing business needs.
If an organisation has little experience or familiarity with outsourcing, managing expectations may be a difficult challenge. Senior management may view outsourcing as an easy way to address the backlog of projects that have escalated as a result of the industry's shortage of resources.
Outsourcing may also be viewed as an opportunity to reduce cost and improve service. While these may be appropriate considerations, non-IT senior management may not understand the complexity and risk associated with IT outsourcing. The following suggestions will help to manage expectations with senior management.
Most and common key issues arise to Senior Management when outsourcing to offshore discussion come for the decision making process!
Many companies today are outsourcing offshore. However, there are ramifications and bigger impacts that come with the decision making process. This list highlights factual data gathered from real-world experiences. So a participating vendor should take good care of the followings areas and should have better contingency and mitigation plan in place to satisfy senior management.
The offshore countries should address the lack the network bandwidth for fast communication and intermittent electrical outages.
Security issues, such privacy needs to be addressed to protect the company's assets.
The offshore country needs to address poor or unacceptable quality of work in IT development/services, regardless of the CMMi level publicize.
The objectivity issue needs to be addressed. It means the offshore partner has to ensure development and testing. It has to keep companies the best interests of the corporation at heart (and provide adherence to functional, performance, reliability and usability testing standards) when it conflicts with meeting their deliverable date.
Due to its recent experience the US is interested in geopolitical climate.
................................................
The writer is working for an investment bank in NY as a Senior Vice President. He can be reached at [email protected]