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Vision Asia Interviews Sunil K Jha – Managing Director – Akiko Group of Companies for their March 2013 Issue

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TCO (Total Cost of Ownership) – Promises and Pitfalls of Outsourcing

When talking about TCO (Total Cost of Ownership) with regards to businesses; it usually refers to financial costs that a business may incur from the upkeep of a system within the company. The key areas that usually require substantial finances are wages, training, benefits, and infrastructure.

The other factors that exacerbate business expenditure are taxation, licensing, maintenance and office rent to name a few. In some businesses, profits are consumed to cover expenses as the business struggles to maintain operating costs.

In the modern marketplace many businesses opt to outsource key departments in the hope of reducing costs and stay competitive. This has triggered a huge boom in the BPO (Business Process Outsourcing) industry as more and more companies pack up and shift operations elsewhere.

Before deciding whether outsourcing would bring the promised benefits, it is imperative to weigh in the pros and cons. Failing to access the reality of outsourcing may have undesired consequences for a business.

There are numerous advantages to outsourcing with the main goal of reducing operating costs; key examples are:

  • Reduction of Labour Cost – The obvious advantage would be a reduction in labour cost from hiring employees in countries where wages are low.
  • Reduction of Infrastructure Costs – Because BPO infrastructure is already in place or much cheaper to set up overseas; huge savings can be made compared to setting it up domestically.
  • Increased Efficiency and Flexibility – Outsourced contractors have the experience and know-how to complete business transactions swiftly and efficiently. This is due to being highly specialized in the trade and may increase profits while reducing overall cost.
  • Tax Incentives – Governments of countries with a strong BPO sector offer tax incentives in the hope of luring investors to set-up offices within their borders. The savings in taxation greatly boost a business’ bottom line.

Even with the promised cost savings, it would be wise to calculate the true cost of migrating an office overseas and what implications it may have in the long run.

Of course along with the benefits, there are also pitfalls to outsourcing that one must carefully consider. If not assessed and addressed properly; they could have a negative impact on a business’ performance which will ultimately lead to reduced profits.

Knowing the risk is half the battle and some of  the associated risk with Business Process Outsourcing are:

  • Security Risks – When dealing with sensitive information it would be wise to minimize external access but the risk is ever-present especially with overseas contractors. Losing confidential information can jeopardize a business and its relationship with clients. Luckily even with huge amounts of sensitive data being sent globally, unauthorized access incidents are limited. There are working systems in place to minimize this. 
  • Quality Issues – The quality of foreign workers has often been subject to scrutiny as they may fail to deliver good service compared to their domestic counterparts. An example would be a call centre agent with a thick foreign accent, which will definitely make correspondence a teeth gnashing affair. This may cause a business to lose the patronage it has earned, as customers leave in frustration.
  • Downtime Caused by Natural Disasters– An event on the other side of the world may disrupt a business’ outsourced operations because of damage to infrastructure and lack of power. There is a real threat of downtime because countries with large BPO operations are located in the pacific typhoon belt. Measures are being undertaken by governments to improve infrastructure to withstand such events.
  • Political Events – Political instability may also cause a shift in policy that may be disadvantageous to business.  This is one of the realities of setting up office overseas; though statistically speaking the chances of this happening are quite remote.

Although there are effective systems to counter the disadvantages of outsourcing, one must carefully consider whether Business Process Outsourcing will be suitable for a particular business.

With careful planning and wise decision making; a business could reap the benefits that outsourcing brings while minimizing cost and potential problems.

 

The Evolution of Outsourcing (BPO)

Ever since the beginning of Industrial Revolution, humans have been looking for a way to cut operational costs. The emergence of new technology has enabled new forms of cost management to take place and one of the outcomes is B.P.O. known as “Business Process Outsourcing”.

BPO is a practice that companies adopt to outsource some aspects of their in-house business operations to third parties. This is done with the goal of increasing efficiency and reducing costs. This practice used to encompass manufacturing but in the contemporary sense; this only involves office work. Examples of commonly outsourced labour are bespoke application development, Data Center management, Customer Care, Tech Support, Data Processing and Animation.

Outsourcing has its roots from the time when large organisations decided to concentrate on their core skills, like banking or insurance etc. and outsource their IT Infrastructure or development to IT Systems Integrators (SI) however in the same country, reducing their IT costs marginally.

Today most companies use BPO by soliciting the services of third parties which may get the job done cheaper, faster and more efficiently. The companies that offer outsourcing service are usually located in countries with cheaper labour. In recent times this practice has seen ubiquity due to improvements in technology.

The main reason companies opt for BPO is because of the huge difference between incomes in other countries. For example the average income in the United States or Australia is around $40,000 per annum compared to that of India, China or the Philippines which have per capita incomes of around $2000 – $4000 USD per annum. This makes it ideal to send various business operations to parts of the world where labour is cheap. A large amount of hard-working, educated and skilled workers makes them further enticing to prospective employers.

Historically various companies have been using Business Process Outsourcing on a smaller scale as early as the Victorian era but this was all limited to manufacturing. The huge distances to be travelled, lack of communication infrastructure made BPO impractical at the time.

The history of modern BPO Began in the 1950’s following World War 2. American companies began to send manufacturing and animation operations to Mexico and to a lesser extent Europe. Although there were quality issues they were soon rectified once the lessons were learned. At that time Asia was largely under-developed and devastated due World War 2. This made it unappealing to outsource there.

Only with the digital age has outsourcing in Asia really taken off. Improved telecommunications and Internet has allowed massive chunks of data to be transferred with ease.

Since most Asian countries are not proficient with English; this has only left two key players in the BPO industry namely India and The Philippines.

At first the obvious choice was India because of technical savvy and English as their second language. Linguistically, India has close ties with the west as it was a British Colony prior to 1946. Recently India’s dominance in the BPO industry has been challenged by a relative newcomer. Its monopoly-hold in the BPO industry has been undermined by another English speaking Asian country; namely the Philippines.

A relative late comer in the BPO sector but in the span of a Decade the Philippines has taken a big chunk of the pie. This little country situated in the Pacific Ocean has been the recent ideal destination for BPO operations around the globe. More and more companies are becoming aware of the skill and proficiency of its workers.

Although it may not seem apparent at first; The Philippines shares many similarities to western countries in terms of culture and language because of its close historical ties with Europe and the United States.  The Philippines’ government, and education system is based on the U.S. model as the Philippines was a former colony.  Its population in excess of 90 million possesses a highly educated workforce hungry for opportunity. A culture more in-tune with the west and a better fluency in American English has led this recent shift towards the Philippines.  The outlook is good and extra room is being created to accommodate future growth in the BPO industry.

The Digital Revolution has caused a huge leap in communications and has enabled the workplace to span entire continents while increasing cost effectiveness and efficiency.

Online Asset Management and Tracking

A Unique World First Portal – to manage your Product Warranties and Content insurance

For the first time, there is something useful for individuals and small business owners to use and take advantage of. A world first concept that allows YOU to be in total control of your Valuable Assets, Personal effects, office equipment, Jewelery and much, much more. 

www.myassetsonline.com is a new concept that allows you to store, retrieve and analyse your product warranties and home/ business contents insurance.

In every day life, when you purchase any item, be it White goods, Electronics, Jewelery or furniture – you are presented with the item and a receipt. In the modern world if you want to retain the warranty of your newly purchased assets, you need to retain the proof of purchase i.e. RECEIPT/ INVOICE. In most cases, we either lose the receipt or the information, in turn losing the right to claim warrranty on the asset.

So, we developed a secure online webportal, http://www.myassetsonline.com where you can store and track the purchase information of all your assets, be it at home or at work. Once you have all your products online on a secure environment, you can also add up the values to get a better handle at your home contents – for insurance purposes.

Want more?? This web portal is absolutely FREE your use. So get in there, register and start posting your products online.

Hello world!

Hello!!

Looks like I am here and I guess I need to write something.  I guess I will begin with writing about myself.

My Personal Life:

50 years on this beautiful Earth, 39, of the 50 spent in the cultural and spiritual hub of the world – India and 11 years in this gorgeous country-Australia. I have two beautiful children 13 and 11, and a gorgeous wife – what else can I ask for!!  In a nutshell a happy, content and satisfied family. I enjoy friends, love watching people interact with each other, play chess and am passionate about photography – once again, capturing emotions. I have been experimenting with Spirituality and believe have managed a fairly good balance between my materialistic life and my spiritual life.  It has been a great journey and along the path I have learned a lot – I guess there is a lot more to learn and I am open armed to accept and receive all I can.

I would not call myself a Connoisseur, however, will still contend by saying I love a good drop of wine and have started enjoying wines from different regions of the world.  I definitely love food and enjoy cooking for friends and family.  I believe it is my way of relaxing. Very much a family man, I love to go out with friends as well and enjoy some one-on-one with me mates (as they would say in Australia).  I have traveled around the globe and have visited many countries and enjoyed interacting with different people and cultures.

My Professional Life:

I am a Serial Entrepreneur who has worked his way up from the grass-root level up to owning and operating successful business ventures both in India as well as in Australia.  I began my professional career in 1982 in India. By 1985 I had set up my first business venture “Professional Business Software”. Professional Business Software under my leadership assisted Public listed companies in India convert shareholder information from tape drives to hard disk drives and then developed an application “SHAREASSIST” to manage all share transactions internally. In 1987 I established “Akiko Systems, a privately owned Software Consulting and Developing company. I headed it as its Managing Director. Akiko Systems in India was the first company to have started the concept of ERP style software development starting 1988. I conceptualize new ideas and pride myself in my expertise at Concept Design and Development.

I migrated to Australia in 1999, and joined the workforce in senior management positions within large IT Systems Integrators including Praxa Limited and Aspect Computing Pty Ltd. In 2002 I established Akiko Business Consultants and have successfully grown it to a million dollar business; assisting fortune 500 Australian companies reduce cost of their business operations and increase their efficiencies through Business Process Improvement.

My strengths lie in Concept Design and Development, Process Improvement, Sales and business development, Mentoring and creating successful businesses.

Akiko Business Consultants Pty Ltd

Akiko Business Consultants is a premier business process consulting and services company. We help our customers use our Business Solutions to reduce costs and improve business efficiency through re-engineering/ refining their business processes. To extend the value we bring to our customers, we’ve invested our skills in methodologies that help speed deployment, decrease risk, and control costs.  Skills we use are certified SIX SIGMA consultants.

As a part of Business Process Consulting, we also offer Business Process Off Shoring/ Outsourcing.  We have facilities in India where we process Accounts Payable, Marketing Surveys, Driver Manifests, Cab Charge, Loyalty Program forms, Mortgage Processing and essentially anything that could be free flowing text.

Recently, we have developed a “WORLD FIRST” web portal designed and developed with you as an individual and a small business owner in mind.  We all have faced this dilemma at some or the other stage on our lives, when we fear losing all we own to a theft or fire or flood, or any other natural calamity and not being able to claim insurance – simply because we did not have any record of what we own and the value of what we owned.  with MyAssetsOnline.com we have created a secure and robust portal where you can store information about all your personal assets and sleep peacefully.