A case for Growth of select sectors in India- (2011-15) (Opportunities for Youth in India)
The financial turmoil has upset growth prospects of many businesses. The corporate and even countries are constrained to look for new alternatives for growth of the economy while making efforts to protect existing businesses and jobs. Several Financial Institutions have been jolted and are in serious need of repairs & restructuring. Those that have managed to stay afloat either due to largesse of the Monetary policy or due to Government’s effort have been chastised enough and a cautious about where they put their ‘Money,’ henceforth. Large Business Conglomerates across the globe are busy reassessing their plans, reorient to the emerging situation, renew emerging demand-supply scenarios & busy defining new & more robust supply chains to effectively cater to emerging situation. Effects are being seen everywhere as several people being rendered jobless even as quite a few others are transferred and witness role changes with redefined wages. The same are results of corporate adaptation towards emerging demand scenarios, restructuring of the length, breadth & depth of their product-lines and assessment of required production capacity. Governments across the world are adapting their monetary & fiscal policies to help population & organizations adjust to the “emerging realities”. This is even while quest for reassessment to make changes to the Regulatory Regimes and Business Policy & procedures, Institutional Support Architecture and Infrastructure Support development continues across the Globe.
While the Corporate quest for stability continues; it can be said with some conviction that with such volatility in commodity prices, interest rates and currencies shall continue for the next few years. This shall have huge impact of Storage costs (due to interest rates); Haulage/Transportation/Logistics Cost (due to Bunker/Fuel oil/Gas); Processing/Production costs (due to Currency fluctuations, Interest rates, commodity prices). There is also a sea change in our understanding and perception of Risk and plans for mitigation of those Risks are quite different from what they used to be previously. Senior Managements at Corporate are now constrained to plan for various scenarios that may play out and hedge their Risks accordingly so as not to be caught unaware. They are trying to assemble an integrated/holistic view of the entire organization’s activities, the various regulatory constraints each of their units operate under and the multitudes of possibilities that each of those units may possess. They are seized to identify potential opportunities there under including ways to cut costs, reduce risks or improve client servicing by adding new products or new customers. This is resulting is a lot of opportunities in Finance and Administration space of the corporate and some of this work is increasingly being outsourced and being moved to low cost locations such as India. While presently engaged with relatively low value added work, these centers shall be required to metamorphose into high value added ‘insight’ provider in the future; failing on this count will lead to atrophy of such centers to other lower cost destinations in the increasingly demanding environment.
The trend is being egged by the Labour Cost Arbitrage which is one area of stability (sans the currency fluctuation scenario, of course) and making decision on this count is seen as relatively lower Risk. Added to these trends are the scores of changes that are being spearheaded/facilitated by Government in the spheres of regulatory policy, Tax regimen, infrastructure changes & environmental concerns. These changes are reshaping the way in which business shall be conducted, ability to source/provide services to the Global corporations and engage effectively with global economic environment. Then the corporate also need to figure out the threat to security of the systems, personnel, assets and the possible impact they pose of business continuity and to carry forward Business as usual. These concerns are weighing upon their concerns to move their business processes overseas and shall continue to effect business decisions.
The Global corporations had already initiated sourcing of services in areas of Human Resource process outsourcing, Client Relationship Management process outsourcing, Vendor and Dealer Management process outsourcing, Payments process outsourcing, Logistics and inventory management process outsourcing, Global Sourcing processes outsourcing, Legal process outsourcing, Medical transcription process outsourcing etc. However most of these processes were on discrete legacy systems and of relatively low complexity though requiring a large human effort. Now back-office activity of highly integrated & sophisticated systems is also being moved to lower cost destinations. Result is a clutch of high end processes are increasingly being considered to be moved to lower cost destinations. However, support for transitioning and migration of the processes shall be forthcoming only if professionals display a lot of ‘Sensibility’ and ‘Sensitivity’.
Sensibility is required to understand the context in which changes are being made and associated conditions & consequences. What is required is full appreciation of concerns of the host country (from where process is being outsourced), their service requirements, perception of Risk and Risk control/management framework. Added to this is the need for appreciation of process standardization and integration requirements of the Global corporate/headquarters which are at the core of driving these changes. Also, appreciation of impact of global changes in accounting regulations such as advent of IFRS or the impact of Sarbanes-Oxley act etc. is required in order to make process improvements and to make them more user friendly. Thus professional demand is to be able to decipher a more complete picture of the system and chaos across the corporate basis limited discussions and information disclosures, solutioning and service delivery to the satisfaction of stakeholders.
Sensitivity is required to understand how various processes are stacked together to meet end customer’s requirement and also on which processes/activities are being moved. How such a transition shall be carried out to be effective. What can be go/no go areas while a make-over/transformation of the process is carried out so that residual risk remains under control and how hand-off of information shall be carried out from both sides, performance requirements etc. There is need to convince outsourcers regarding ability to perform services as per requirements with Reliability; and display Responsiveness towards any concerns/issues that the client may have including ability to understand the concerns/issues fully (& thus maintain information levels equal to the levels at the host/global levels). Thus he understanding to adequately man onsite and offshore processes with proper information/knowledge transfer procedures and balancing of understanding level at all levels is required.
Quite a few processes being considered for outsourcing are from Financial organizations itself like Banks, FIs and Insurance companies. Some of the Credit rating companies may also be considering moving processes overseas to the extent these processes are standardized, stable and low risk allow considerable savings in manpower costs without any deviation in results. The processes being considered for moving overseas include processes like client on-boarding including maintenance of static data and associated processes like credit/insurance application processing (i.e. those processes that may be carried out effectively from low cost destination such as preparation of financial spreadsheets and financial risk ratings, collateral and margin maintenance/evaluation etc. and miscellaneous processes related to client acquisition and underwriting). Then there is always the manpower intensive transaction processes some which like Trade Finance and Services, Payment processes, Custody operations, Treasury operations etc. where deal entry, authorizations, validations may be required to be carried out at back office and outsourcing may offer considerable scope of cutting costs. The same may also be true for supply chain financing, e-invoicing processes, e-commerce arrangements etc. Claims Settlement/ Management processes, Credit rating information processing and management for Rating companies, Utilities, Card companies and retailers may be some of the other areas where outsourcing may have scope for standardization, cost-reduction and process improvement.
Adequate display of maturity to handle concerns with adequate degree of Sensibility and Sensitivity; delivery of services with Reliability and Responsiveness to issues/concerns (of course taking integrity, commitment and professionalism for granted) will lead to further gains in areas which require high touch i.e. ability to grasp complex and often unstructured needs and retrieve useful information and presenting the same is a structured manner to facilitate decision making :
1. Organization Data/Information/ Knowledge Management arenas. This shall include planning and maintenance of Data structures and maintenance of information/knowledge repositories. Storage, retrieval and dissemination of information/data and associated services.
2. Research for Information from public sources including collation and presentation of such information to solve problems or to meet internal information requirements of executives. Also, carrying out experiments to validate reject hypothesis (scientific, engineering or management etc.), research new processes and technologies for their potential to improve performance or reduce cost etc.
3. Information services such as Information/New gathering from around the World for Online, print news A/V media, magazines, business news organizations etc. including dissemination of customized information/news basis relevance criteria as well as on-demand retrieval etc. Of course this will require much greater cultural understanding appreciation for aesthetic sense of the customers i.e. the manner in which the gather, collate and interpret information including the manner in which they prefer the required information to be presented.
4. Entertainment services such as Short and Full length movies, Documentaries and professional training related stuff, Animations, educational films and audios, Gaming software etc. which shall also require high degree of appreciation for Culture and Aesthetic sense of the people of host countries.
The above assessment is basis understanding that the labour cost arbitrage is likely to be sustained with average Labour cost plus overhead for a developed country worker at USD 80,000 approx. while that of India/developing country worker ruling at USD 25,000. Varying estimate suggest that there is potential for migration/transitioning of anywhere between 10,000,000 to 25,000,000 (10-25 mio.) jobs in next 4-8 years. India shall require an investment of close to 75-225 Billion USD to support such transitioning of jobs for which it needs to create the right infrastructure and climate. There is also need to develop orientation, awareness, knowledge and skills to deliver performance for such jobs and sustain interest of customers to carry out such transitioning/migrations as well as attracting investors, domestic and foreign to support the process. There is also need to reach out to potential outsourcers to help them improve understanding of economics, technology, control processes including any associated issues that they may have while addressing their concerns. Also, there is need to constantly highlight the success stories in relevant forums, a process which has now taken back seat due to fear of political retribution in the developed countries.