Taking on the subject of leadership for today and tomorrow, the Nasscom India Leadership Forum 2010, held a session on 'Global Sourcing at Crossroads: Strategies to Drive Demand'. The discussion was moderated by Eric Simonson, Managing Principal, Everest Group. The speakers of this session were R Chandrashekharan, President and MD, Cognizant, Mark Power, Chief Procurement Officer at Hewitt Associates, and P G Raghuraman, Executive Director (Asia Pacific), Accenture.
Eric Simonson began by highlighting the events that occurred through the financial crisis experienced largely by the US last year. According to Simonson, even events like the Mumbai terrorist attacks and the Satyam scandal had made their effects felt in the sourcing industry. Simonson went on to say that the effects of last year's downturn has resulted in some companies being pressurized to increase offshoring while some felt it necessary to reduce their offshore dependence. In spite this seeming uncertainty, he said that over the next two years users can still expect to increase their offshore volume of FTEs. There is increased activity in this respect in India, Philippines, China and Brazil.
Simonson is also of the opinion that the sourcing industry is going through a maturation phase. This is a result of buyer-driven consolidation, wherein the companies have to do extract more work with less suppliers. In addition to the more-with-less scenario is the slowing growth rate, which brings the company to the 'next stage of maturity'. These forces or behaviors will lead to consolidation, platform adoption, cloud computing, and opting for simplicity.
Chandrashekharan agreed with Simonson over the structural changes, particularly in the way businesses have operated. These changes, he said, are made with mid- or long-term implications in mind. He further pointed out that various industry verticals were going through a phase where they were either looking to reduce cost in research and development (pharma) so as to market cheaper drugs, or interested in multi-channel integration (retail industry). Chandrashekharan stressed that there is a need for structural and cyclical change.
Chandrashekharan also said that as customers are increasingly going global, they will need support in multiple locations, which will lead to greater sourcing needs. He highlighted the fact that need to be alternative service delivery models, wherein pricing should not be based on effort but on the business outcome. Chandrashekhar ended with a key point that now the cost driving force in the sourcing chain will change to one that is based on value.
Speakers Mark Power and P G Raghuraman shared contrasting views on the procurement of sourcing models. Power expressed a realistic concern that IT budgets are still strained and Fortune 200 companies are still not warming up to the idea of putting their data in the cloud. Power said that CIOs are increasingly taking the aid of third-party advisers who question the value of a proposition. Raghuraman was of the view that since cloud computing is an exciting option, even if the Fortune 200 companies are not showing the interest, there are many who do see the benefit in this service model. This is because there is a direct 5-25 percent saving on governance, management of multiple service providers. However, he did agree that the role of the procurement officer has significantly increased as the time. He said there is a need for greater flexibility in contracts. Emerging markets look for solution providers with a goal to provide more value and cost is less of a factor. This is because they have not been adversely affected by the financial crisis.
In response to a question raised by Simonson on what value proposition to look for, Raghuraman answered that suppliers need to build a 'relational partnership' rather than a contractual one. This will help suppliers gain more trust while trying to experiment and improve services.
Questions from the audience ranged from the Obama-led US government's tough views on offshoring and the need to provide greater value as opposed to the much-hyped 'total cost of ownership' concept. Power agreed that in-spite of the US government's stand on offshoring, companies are still interested in leveraging the best talent around the world to be able to market their products and services better. Chandrashekharan explained that the cost is not going to be a defining factor now. It is going to be the 'extra services' that a supplier can offer and the value that can be derived from a particular solution provider.
With regard to the way in which the industry will deal with the projected growth 12 percent in the BPO space, Chandrashekharan said that India needs talent development and improved education in order to be able to meet that sort of growth. In addition to that best practices and moving away from the cost-centric approach will also help. These best practices, he said, can be derived from local markets -- ones that suppliers can then take to the global market.
