Corporate Governance Key Factor In APEJ BPO Effectiveness

In its latest study of business process outsourcing trends in the Asia/Pacific excluding Japan (APEJ) market, IDC predicts moderate growth in Business Process Outsourcing (BPO) services for the region. While much of APEJ is still at its nascent stages of development for BPO, IDC observed several important developments in the region which will drive growth in this market.

Under IDC’s definition, Business Process Outsourcing is distinct from Processing Services. IDC regards BPO as more strategic and involves transformational activities that align a company's outsourcing engagements to corporate objectives. For example, an ongoing engagement by a bank to hire a vendor to look at benchmarking and advisory on how to increase customer response time would be considered a BPO engagement. However, if it is just outsourcing check processing to a vendor to do it more cheaply at bulk, that would not be considered BPO but rather processing services.

'In 2003/2004, cost was the core BPO criterion. However, enterprises are now beginning to look at issues of corporate governance and security, and not just going with the cheapest BPO provider anymore,' said Conrad Chang, IDC's Senior Market Analyst for Asia/Pacific BPO Services Research. 'Cost effective solutions are still important but cost is no longer used as the only major decision making factor in awarding BPO contracts'.

IDC's unique ongoing relationship with both buyers of BPO services and vendors has been instrumental in the development of IDC's comprehensive overview of the BPO landscape for APEJ. The following summarize IDC's predictions for BPO in APEJ for 2006:

-Corporate governance will be a key consideration - IDC has found that over the past 12 months, both enterprises and vendors are quicker to recognize the importance of establishing corporate governance structures before proceeding with BPO implementation. Companies that have their internal processes mapped out are able to benchmark and measure performance more effectively than companies that were disorganized.

-Enterprises raise concerns of BPO security - Enterprises are increasingly demanding stricter security and data privacy measures to ensure that sensitive information, such as personal data, bank account details and other confidential information do not leak out once transferred into the hands of third party vendors. Prominent BPO vendors have also gone to great lengths to ensure that adequate security, back up and safety systems are in place to minimize the breach of highly sensitive information.

-BPO mega deals are few and far between - The market should not expect to see many mega BPO deals (in excess of US) in APEJ, the likes of which occur more often in the US and Western Europe. Instead, expect to see more piece-meal, ad hoc and customized BPO deals that are smaller in contract size (less than US). The complex, diverse and non-homogenous market dynamics of APEJ mean that more targeted, specialized and local BPO deals will become more common instead of mega deals that span large functions and operations across the entire enterprise.

-Rise of the Indian BPO players - Long regarded as being cost effective in IT implementation, Indian players have successfully leveraged IT outsourcing and forayed into BPO services with a strong concentration on the finance and banking sectors.

-China still needs time to develop - Cost will not be a major advantage for BPO given the existing low cost of doing business in China. BPO will be seen more as a driver for best practices benchmarking that will allow Chinese companies to expand more rapidly and tap into markets beyond the local frontiers.

IDC's Asia/Pacific BPO program covers qualitative and quantitative research for BPO across horizontal functions ranging from Human Resources to Finance and Accounting to Customer Care. IDC tracks BPO that is consumed locally and not exported. Thus, if a U.S. company engages a BPO vendor in India for services delivered to the U.S., that is considered a BPO export and not counted as part of IDC's study.

 Top Stories

Information security is a predominant concern in companies looking for outsourcing vendors
According to a recent survey by Booz Allen Hamilton, information security has become a top concern among companies evaluating current and potential outsourcing relationships. Around 87 percent of the respondents are currently outsourcing or actively considering outsourcing a portion of their work. In fact, concern for data and intellectual property scored higher than all the other potential differentiators of the vendors, including financial strength, business stability, and the reputation. Furthermore, 85 percent of the respondents were found willing to pay 10-15 percent more in order to ensure superior security for the outsourcing services. Nearly 70 percent of the respondents are reconsidering their outsourcing strategy. Furthermore, 30 percent of the respondents found security capability claims impossible to verify, and 20 percent found provider security claims not credible.

Motorola builds 17th R&D centre
US communications giant Motorola Inc launched a research and development (R&D) centre on Friday in Hangzhou, the capital of East China's Zhejiang Province.  The new site, the 17th R&D facility established by Motorola in China, will focus on providing support to Chinese operators with Motorola's network technology.

British Hospital Outsourcing Medical Typing to India
The Harshill complex of the University Hospital of North Staffordshire, facing debts of nearly £15.5 million, took the step to cut its operating costs. has hired a team of typists in India to type out routine letters from doctors to patients - the process takes less than a day and returned to the trust within 24 hours. This promises to make large savings for the hospital trust.

Solectron Signs Multi-Year Contract With IBM for Procurement Business Transformation Services
IBM will manage more than $1.2 billion per year of indirect spend in areas such as temporary contract services, office equipment, utilities, and telecommunications. Core to the project is the implementation of IBM's complete Procure-To-Pay procurement solution that will be integrated with Solectron's internal systems and controls.

CountryLinks NSW Rail signs outsourcing deal
CountryLink, a subsidiary of the New South Wales government-owned Rail Corporation, has selected Mincom, an Australian software and services firm, to manage its IT infrastructure. The contract is valid for a period of three years. Mincom will enable CountryLink to integrate its desktop and network support for online booking and reservations services.

Boots to renegotiate £710m IBM outsourcing deal
Boots initially signed the deal back in 2002, aiming to save £130m over 10 years with IBM managing an overhaul of Boots' IT infrastructure - data centre, in-store systems, networks and telecoms - and handling the retailer's chip and PIN rollout. Boots said today it has entered into discussions with IBM about making amendments to the contract because much of its IT infrastructure renewal programme, including chip and PIN, new pharmacy systems and an SAP rollout, is now complete.

 Service Provider News

Chinese Software industry pockets US$48.75b in 2005
According to the latest figures released by Chinese Ministry of Information Industry (MII), China's software industry earned USD 48.75 billion in 2005, growing 40.3 percent over the previous year. The exports surged 28.2 percent to USD 3.59 billion. MII also projected that outsourcing of software development and IT services from Europe and the US to China is expected to increase 50 percent in the next few years.

Indian IT mart booming says NASSCOM IDC
According to a report by NASSCOM and IDC India, only 45 percent of the India's corporate IT expenditure is utilized in procuring outsourcing services. In-house spending on IT services still accounts for more than half of the corporate IT spend. However, the domestic IT-Enabled Services (ITES) and BPO market is expected to exceed INR 6.6 billion in 2006. The banking and financial services (BFS), manufacturing, and telecom segments accounted for 77 percent of the overall spending on IT services in 2004.

Dell, IBM, and Capgemini To Double Indian Workforce
According to Information Week, Dell Computer and consulting firm Capgemini have become the latest tech powerhouses to publicly acknowledge plans to significantly increase headcount in India in order to tap the country's highly skilled, but relatively lowly paid, IT and business services workforce.

LogicaCMG plans to add 1,000 jobs
Software services firm LogicaCMG plans to add 1,000 people in India by this year end to service its global business divisions. This will increase LogicaCMG’s workforce in India to over 3,000.LogicaCMG is doing many works from India.

Unisys Steps Up China Operations
Unisys announced expansion of China operations with launch of new global sourcing services and technology centre in Shanghai. The centre is expected to provide software development, information technology...

Patni Wins Multi-Services Telecom Deal from UK's Carphone Warehouse
Patni will support The Carphone Warehouse's delivery platform encompassing fixed line, wireless and Mobile Virtual Network Operator (MVNO) capabilities for the pan-European market. This will be a fixed price engagement with program management and end-to-end systems implementation responsibility across multiple vendors.

Satyam clinches Nissan's software application deal
Satyam Computer Services has won a five-year offshoring contract from Nissan North America to maintain, support and enhance software applications of the automotive major.

EDS Signs Business Transformation Agreement with Delta Dental of California
Delta Dental of California, one of the US largest dental health plans, to implement EDS’ MetaVance Administration and Finance System and support the company’s enterprise transformation. Financial details were not disclosed.

HCL Awarded Contract by MSC Software Corporation to Participate in Global Rollout of Oracle 11i Applications
For MSC, HCL will participate in the following Oracle activities: -- Oracle 11i Upgrade to 11.5.10, Migrate 11.0.3 to Global 11.5.10 -- Site level new modules implementation by region -- Design and Develop new RICE components -- Port existing RICE components with minor modifications -- Implement best practices -- Address Financial reporting requirements

Symphony teams-up with Mimosa Systems
Symphony Services today announced details of its partnership with Mimosa Systems, including specific achievements resulting from the company's decision to team with Symphony on the development of its unified information management solutions.

R.R. Donnelley acquire BPO unit of OfficeTiger by 250 million dollar
This is Second acquisition by a leading BPO service provider within shore span of one year. In year 2005, month of June, and the firm has acquired UK based Business Process Outsourcing supplier, Astron with the facilities in India, Europe, and Sri Lanka. The transaction processing services of OfficeTiger are nearly related for complementary to existing document based Outsourcing services of R.R. Donnell