Knowing that tactical issues can and do impact global global-sourcing decisions, we also asked the providers to respond to questions about their U.S. presence. The results show that many of these checklist items, while common, are not uniformly available:

• 67% of the Offshore 100 have a U.S. “legal” presence

• 91% of the Offshore 100 have a U.S. sales & and marketing presence
• 70% of the Offshore 100 have U.S.-based delivery locations
• 92% of firms have customers in the U.S.
• 30% of the Offshore 100 have gone public; the remainder are privately held. In response to customer and market requirements, many of the Offshore 100 have established a U.S. legal presence. And in some cases, companies have listed American Depository Receipts (ADRs) on U.S. stock exchanges to gain access to expansion capital.

BPO is shifting from augmenting captive shared-services operations and call center/customer service to outsourced HR, F&A and claims processing. Companies such as iGate and Infosys want to take over entire business processes, not just transaction-processing applications.

Some offshore vendors such as Wipro, TCS, and Infosys are entering the consulting space once exclusively the domain of an EDS/AT Kearney, Deloitte Consulting, IBM, Accenture, and Cap Gemini, among others.

The once sleepy call-center business is gaining in complexity with the advent of new call-routing technology, inexpensive voice over IP telephony, and the creation of contact-center applications that provide sophisticated E-commerce service and support.

Once Sarbanes-Oxley compliance work is finished, says Clarence T. Schmitz, CEO of Outsource Partners International, “CFOs will again be in a position to direct their attention to productivity, cost savings, and process improvement.”

David Marries Goliath?

When you compare a $60 million outsourcer versus a colossus such as IBM Global Services, there’s always a bit of a mismatch. Bigger companies tend to offer a wider range of services and have more resources to meet the needs of large, multi-national corporate customers. And while specialty-service providers may not offer the one-stop depth or breadth of a major service provider, they can and do win a healthy share of RFPs. Not surprisingly, some customers prefer to be a bigger fish in a smaller and deeper pond.

While some U.S. analyst firms have been predicting that the number of offshore providers must eventually shrink due to failures or consolidations, this probably will have no impact upon customer bargaining power. Yet the IBM-Daksh and Hewitt-Exult deals are among the first of what may become an onslaught of consolidations in the BPO and ITO markets- deals that will take the form of mergers & and acquisitions primarily between rival Indian firms and among U.S. firms acquiring providers located across Asia, South America, and Eastern Europe. While still maturing, expect big moves out of China as well. If the Lenovo-IBM deal is any indication, Chinese service providers will enter the M&A fray with an eye on both U.S. and Indian ITO firms. Of course, not all the “David’s” will be willing to hook up with “Goliath” firms in the near future. And that’s good news for U.S. managers willing to shop around for specialty providers rather than mega-outsourcing firms.

Next Steps

How do you go about preparing to source a provider located in an unfamiliar region? It may be a cliche, but yes seeing is believing: You’re better off packing your bags to evaluate the regional providers even if you have to drag a reluctant business stakeholder with you to Russia, India, or China. You don’t necessarily have to wait until you have an RFP or a purchase order for services in hand.

• Research the region. Clearly there is much you can do before you go includingstart learning about the culture and business environment, reviewing the local tax and labor laws, and begin reading periodicals from the region itself. Generally you need to get up to speed before you go. Here is something offbeat to consider: Do a healthy percentage of the top graduates from the region’s leading colleges join the service providers you’re considering?

• Build or buy short lists. Obtain or create a short- list of leading providers from sources such as this issue, from advisory firms, or analyst firms. Outside of the U.S. or India, five to ten companies per region is manageable, beyond that you’re probably stretching. Make sure you identify the largest company in a specific region: This will give you a sense of the size of the industry and the availability of resources should you decide to scale up in the future.
• Prepare questions for sales visits. These can be quite detailed, of course, but we suggest that beyond the usual corporate firmagraphics about size and profitability, that you also request information about cost structure, training and pricing models, and disaster recovery. In fact, try to obtain a presentation from the service provider ahead of time that details the basics, so that you can spend more time onsite drilling down on the specifics that will impact your decision. Don’t forget to ask about the provider’s employee retention strategy.
• References. You will need them, ask early and often, and not just for American firms. Make sure the references aren’t just the provider’s favorite clients, but are living case studies that are relevant to your business.
• Site visits. It is critical to the success of the relationship with your chosen suppliers to visit the delivery operation and talk face-to-face with project managers. Do they practice what they preach? Make sure you set the right expectations about the purpose of your visit and the information you want to discuss. If you don’t, you might spend hours in a presentation that you can readily review on the flight over. When you go, visit multiple companies to get a better sense of the region’s capabilities and assets.