Syntel Poll Measures Perceived Threat to Global Outsourcing
May 07, 2007
For those in the contact center industry, the outsourcing of certain positions, processes or the entire operation is common. Outsourcing each of these to a company overseas is often done to streamline processes and potentially cut costs. However, such practices don’t always bode well for the organization, whether it is in the outcome of the outsourcing contract or as a result of external circumstances. To combat these threats, the first step is to effectively identify the biggest obstacle to outsourcing success.
Syntel, Inc., a global information technology services and Business Process Outsourcing (BPO) firm, surveyed 325 Fortune 1000 IT executives of global companies to gain a better understand of their views of the leading threats to global outsourcing. The survey was conducted between March 1, 2007 and April 27, 2007.
This online survey asked participants to select one of five responses to the following question: “What is the single greatest threat to the global outsourcing trend in 2007?” The results included 33 percent of respondents citing wage inflation; 27 percent noted quality concerns; 21 percent felt that possible outsourcing legislation would be the greatest threat; 10 percent reported perceived security risks; and 9 percent indicated middle-management resistance.
Syntel had its own view on the results of this survey. When considering wage inflation, the company noted that as the IT industry continues to grow and larger North American technology firms are establishing operations in India, wage inflation in the country is growing approximately 15 percent annually. IT services firms are also reporting wage inflation in the U.S. of roughly 5 percent.
According to Syntel, these inflationary rates are still at very manageable levels. Client corporations understand that to attract and retain top talent for their projects through outsourced vendor partners, they need to share some of the burden of wage inflation through pricing increases.
When considering quality, 27 percent of respondents indicated it as the biggest, compared to 30 percent in a Syntel poll in October of 2006. The firm takes the view that as more and more complex projects are outsourced to IT partners, in addition to Back Office processes, a focus on quality delivery will continue to be at the forefront of the vendor’s focus. Smart IT firms are continuing to enhance their educational training skills and development practices to keep driving quality higher.
While the SEC and Sarbanes-Oxley have increased the legislative oversight of U.S. companies. Syntel doesn’t expect significant initiatives on outsourcing. Through globalization, outsourcing has become a viable option for competitive advantage in the U.S. Recently, Syntel has witnessed more awareness that when certain functions are outsourced, companies are more capable of focusing on their core business at home and using the savings to drive more R&D investments.
Security is always an issue when considering outsourcing, whether domestically or abroad. Syntel takes the stance that security risks are at a very low-level of concern as outsourcing companies have since the beginning taken measures to protect data in multiple locations and have evolved on par with U.S. companies.
The 9 percent response to middle-management resistance is significant in that such an obstacle to outsourcing is no longer viewed as a serious issue. In the early days of globalization, this issue was a dominant factor in the success or failure of a global engagement. As services globalization has matured, corporations have directly realized the value and benefits of global sourcing.
"We believe that no single overriding threat to global sourcing emerged from the Syntel poll because of the continued maturation of the industry," said Bharat Desai, Syntel Chairman and Chief Executive Officer, in a Monday statement. "Global sourcing has gained acceptance in the business community and will continue to increase in momentum as smart corporations worldwide focus on enhancing customer satisfaction, driving innovation, and gaining competitive advantage."
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