Creating a global-services strategy that blends a company’s core competencies with multiple service providers will increasingly top the agenda for management, executives and industry experts said Vivek Paul, Managing Partner, Texas Pacific Group, at the 2006 Global Services Conference in New York on Feb. 2nd.
Labor arbitrage – the cost differential between labor rates in the U.S.A. and overseas – is driving companies from all industries to seek out services partners with substantial presence in India and China. Leading India-based service providers such as Infosys, Satyam, Tata Consultancy Services and Wipro Technologies have an edge over U.S. companies in terms of being low-cost providers, said the conference keynote speaker, Paul.
Paul’s commnets were the first public statements by Texas Pacific since the private-equity firm went public with potential investments in ACS and CSC – two industry leading service providers. Both deals reportedly have fallen through.
The availability of knowledge workers worldwide has flattened the barriers to distributing people and processes to the most cost-effective regions. Knowledge, according to Paul, is the connective tissue that binds corporations with their offshore captive operations, and with outsourcers. “How do you create a uniform culture on a global scale?” asked Paul, rhetorically. Those companies that can master the rules of engagement will flourish; those that can’t will fall by the wayside.
Knowledge management is a tricky thing, one that even large companies have a tough time with. Fewer than five percent of engagements by service providers lead to creation of a “process map” that flow-charts the outsourced business process, Paul said. Another challenge is the capturing of “tribal knowledge,” the knowledge that accumulates from decades of close collaboration among employees. Replicating that knowledge in a foreign environment may be difficult.
A host of issues concerning governance complicate the global-services equation. The question of what constitutes a service-level agreement, and who actually reviews goals against objectives is largely unanswered, said Paul. Other burning issues include protection of intellectual property, confidentiality and lending professionalism to the outsourcing industry by creating a position on the likes of a global-sourcing executive.
