There was a time when experts were really worth their salt. For instance, if someone has to do consulting for oil and gas (O&S), Information Communication Technology (ICT), or Automotive, he had to develop an expertise in that field. More like a lawyer or a doctor. The expertise came from a blend of education and of course experience. The highest ranked experts stayed in academics went on to create path breaking theories and changed the course of human lives. Another category practiced the subject.
Now suddenly there was this Knowledge Process Outsourcing (KPO). Let me ask two simple questions?
- What constitutes knowledge?
- Why should/shouldn’t it be outsourced?
Lets throw some light. The works of Gary Hamel, Clayton Christensen states that core competence should be where organizations must invest continuously. This competency would not only safeguard against discontinuous environmental changes but also will strengthen the foundations. Now some of the examples are Honda in designing engines, Intel in designing and manufacturing chips. So believe me these innovative tasks will NEVER BE OUTSOURCED. So that Knowledge Part of the KPO can easily be taken off.
So what kind of expertise do KPOs are leveraging on? Well Lets assume a law firm. Final year students intern under lawyers and learn among many things writing legal briefs. Believe me its not easy. But with increased pressure some of the content gets outsourced.(Remember they will not outsource the core activities). Now in
And so we are putting up a face where we try to fake that we are intelligent. Its like some Indian Actors scratching their heads in the same manner as Tom Hanks does. The story does not end here. The KPO model is also adopted by some consulting firms. Instead of taking people with astute knowledge on industry they take people with Google searching skills coupled with the ones required to make cold calls (credit card salesperson). And then starts saga of writing thousands of research reports without a morsel of innovative idea.
The day may not be far when Medical representatives will be analyzing Vaccine Markets and car mechanics will be comparing engine designs. And not to mention they will also devise a got to market strategies. In order to analyze two modes or heart or eye operations, consulting firms will not ask expert physicians. Instead they will recruit anyone from any background, but the necessary skill set= Google Search! Talent and expertise has transformed to skill set!
23 comments:
Great thinking man!
Bit of heresy, I must admit.
But I do agree.
I woould now expect another blog from you showing the larger impact of such shoddy practice on the Indian KPO boom, in the long run.
WOW! this is really well written! i shudder to think abt the fate of "resurgent" india with its "booming" economy, when these MNCs will decide to withdraw outsourced jobs! just imagine the sudden hike in unemployment then...! so many undeserving ppl have BPO jobs nowadays... but imagine the scenario 5-6 yrs hence when the concept of offshoring wont exist.
I will take three aspects of the story..
First what can be outsourced
who are the people who outsource and why its outsourced.
And third the consultancy side of the story.
First 2 parts i would like to draw an analogy from my days in the Auto Industry..
No Indian company was ready to source out a safety critical or performance based core component from China.
Like the Sona Koyos of India were sure that they wont lose their Electronic steerings and steering gear orders from Santro or Maruti to some chinese firm. And why ?? as they were not only safety critical but product specific as well. Dr Surinder Kapur once told me, while i was doing a study and I quote " Iwe have jointly developed the product with hyundai, its santro specific steering gear, if they want to out source it from china, they have to start afresh from the drawing board"
it was the tier II and tier III who were at risk.. the people who make fastners , helical springs , wheel.. as they can be produced in bulk and are not products specific or core in nature.
Why is that so , Tata Motors once said when the company representatives wer asked abt their out sourcing of wheels from China:
The wheels are of Acceptable quality.. and we need to answer to our share holders.
The word acceptable quality here means they are not the best in the business and not even good but will last the guarantee period.
The same is What you said for KPOs.. it is actually all over not just service sector..
But the third part ill just say a single line..
I have had experience in the Auto sector for 2 years, But joined the consultancy industry in the electronics sector.
I help u rest your case
Abhigyan, you are the exceptional one. Look around you and me. Some of our colleagues don't know basics of the industry they are tracking. In fact one of my colleagues does not know that Norton is a product from Symentec corporation. And ended up putting them as separate products. Just imagine Norton = X % and Symentec = Y % comprising an Universe of security sofware. Some even dont know the difference between a router and a firewall.
You don't have to look far my friend.
In the world, over the years, quality of writings / teaching /
learning in any form on any subject follow classical PARETO curve. 80%
of knowledge that had been made visible in print / in voice / in
paints and sketches lack basic element of wisdom. Also valued
knowledge at certain point of time had been either ignored or
misinterpreted. Content of GOOGLE in my view is no exception. However
it has great advantage of providing information both right and wrong
at a faster rate at suitable time at minimum expense. When work of
GOOGLE'S digitization of contents of biggest libraries of the world
would be over, one can expect significant improvement in quality of
content also.
Experts have become expert by learning from different available
related and unrelated sources. KPO, if comes out of the legacy and
luxury of retaining so called secret knowledge, in my view, would
throw challenge on longevity of success of such successful experts.
I am looking at it from a different angle. Taking on the example of the law firm - lets say we have a huge law firm in India; lets even consider your office, for example. Will the HR recruit the cleaners, canteen operators, security personnel or errand runners for the office? No! they wouldnt want to expend their resources over something someone else can easily do. they divert their resources to develop stronger core competence. in other words, they 'source' the non-core operations to companies like group 4, RKHS, Falcon etc. Question is, what makes them non-core? are they not critical business components? they are, but you wouldnt know until the security guard sleeps off and the office gets burgled, or the cleaners go on strike and toilets become unhygienic and start spreading germs. so we know these non-core parts can be critical. but then what makes them non-core? surely, its the business/product knowledge involved with the industry practice. which, accordingly, is not sourced. here comes the basic difference in a BPO and a KPO. while cleaning and catering are business processes, writing legal documents and medical transcriptions would be what one may call knowledge process. knowledge process, to me, is not distributing knowledge, but gathering, collating and storing knowledge across an industry. if all big hospitals were to use a single company to document all its medical history of operations they perform, then this company would become what i may call the 'google in operations'. a new hospital can then just 'browse' to this firm, pay a fee and gather information about a critical medical procedure. now, can that procedure be performed by non-doctors? no! when the procedure talks about hysterectomy, an english grad will have no idea what is being talked about! the english grad can at most document, organise, collate and distribute such knowledge, but not put it to practice. the world will thus need both kinds of people - those who gather knowledge and those who use it. we are just streamlining the process with introduction of KPO.
as to employment in india - it is true a lot of semi skilled people are doing a lot of semi skilled jobs; we have always been doing that, we just climbed a technology rung, thats it. it is upto us whether we want to use knowledge or collect it, and our education and intelectual interest will guide us towards the appropriate goals. the english or commerce grad need not be a teacher or a stock broker if they do not want to use the knowledge they gained - for that is harder work.
we are getting pathetically lethargic
Thanks Tito for insights. But there is smthn I want to emphasize. Knowlede can exist in two forms, consumption and creation. The former is there in KPOs, the later however is absent.
true....thats what separated KPO from mainstream industries. KPO's cant create knowledge, they arent meant to. thats by design. what they can do at best is, they can optimise the knowlege storage, access and quality processes - much like google. google, if you know, gives access to varied quality of knowledge - some are good, some low standard, while some are incorrect. likewise for wikipedia. that leaves room for improvement for KPO's.
look at it this way - you have a nice burma teak table at home. you employ a maid to clean it everyday. you do not expect the maid to repair it if it is broken, what you can expect is the maid to understand when it is about to break so she informs you (reactive) or take measures so that it doesnt break (proactive). now replace the table with the core competence and the maid with the KPO and you have an answer.
@priya
MNC's will never withdraw outsourced jobs - i repeat - never.
consider it this way; all your life you made your own bed, cooked your own food and did your own dishes. then you went to office, travelled on different assignments, worked from home and socialised. one day you got a maid who cooked and cleaned and made the bed for you. you liked it, you enjoyed it, you got more time to spend on other important things. then one day the maid got absent and you went furious - you were starting to get dependent on her. soon the maid became an integral part of your daily life and you just couldnt do without her. the maid realised this and started charging you more than what she worked for. what would you do? fire her and go back to old ways? no way! you fire her and get a new maid who'd be charging lesser! the industry will remain, my dear - we are all slaves to dependency. if X doesnt work, Y will. but the work created will never seize.
as regards the work remaining in india, it will - for we have a few advantages - our average intellect and learning curve are more, we speak english fluently, we are driven by money, and we are a huge lot of people! china could compete - if only they spoke as good english as we do - coz dont forget, our main market is in the UK and USA. france italy and germany will only source their non-core business to france italy and germany respectively.
@Tito and @Priya
Well, in case of cheaper automated options job outsourcing to humans will stop. The photocopying machines replaced the human copier, the vaccumn cleaners replaced the servents (in many countries, in India it dint happen coz of moist dust and cheap labor) and washing machines replaced the DHOBIS.
MARK MY WORDS. With automated response system with neural network in the back, followed of economies of scale production jobs will stop being outsourced. Now that is possible. Having a machine in the backend is cheaper than employing thousands of people, renting spaces, providing benefits, salary. And the machines wont complain.
in this scenarion what will the BPO employees do. With almost 100% Disposable income and marginally higher than 0% savings?
Human minds should be capable of doing more than Bhaskar becoming Beck. In the process of natural selection these will automatically be exterminated. The BPO/KPO will stop. It will reach the pinnacle of its decedance in the next 5 years. Economics and scientific innovation will stop it.
Have any of have heard of Factor Price Equillibrium??
In lay mans term the dooms day for Global Out sourcing..Avi da . dada .. tomra shabai bhule jaccho.. the guy who would have joined a call center for mere 7000 Rs 5-6 years back but today i fresh guy might turn down even a 15000 offer
Whats does that mean labour is slowly getting expensive.. at the same time.. un employment in the US ... the bangalored factor will make ppl work there at a cheaper rates( because it is US not India or china)
making labour cost their cheaper.. it has already started..
i cant make u understand this in the comments page .. the whole issue was huge..was the debate of the Economic world when it came as a criticism of Hecksher-Ohlin theory( the basic International trade theory based on endowments stating a capital intensive nation will produce capital intensive goods, and trade it to labour intensive and vice versa)
The dooms day has started .. and sooner or letter the BPO bubble will burst
I agree. Sooner or later the firms in USA will see that establishing contact centers are expensive. The postulate of technoligcal alternative that I assumed if reached through economies of scale... will be a cheaper options. Besides Tito, we don't provide servants with health benefits, PF, insurance. So having servents at home may not be a great comparison.
With the increase in cost of everything in India, salary and benefits are bound to increase, and that wil burn holes in the pockets of US corps. Then they will say, " hey aint this supposed to be a cost saver?".
That day....is not far.
INDIA HAS TO CREATE JOBS. ELSE THIS 10% ECONOMIC GROWTH WILL NOT SUSTAIN.
Hey Guys! I am loving every bit of it. This is turning out to be be damn good debate. I wish, there was a way of sharing a transcript of this with the policy makers of our nation.
I couldn't agree more when Avi commented "INDIA HAS TO CREATE JOBS. ELSE THIS 10% ECONOMIC GROWTH WILL NOT SUSTAIN."
True Indians have to create jobs. Entrepreneurship has to be given a big boost. And, because, innovation and creativity usually paves way for entrepreneurship, we as a society (or even at a micro level, our families)have create an environment where innovation and creativity can thrive.
Its high time, we tried identifying what all could be our core competencies. KPO/BPO sectors, certainly blossomed onour soil for we were better equipped than many nations, but then, these aren't the only ones where we all should be rushing off too. There surely are many other areas, where we have potential to be world beaters. The challenge si only to unleas this potential. I guess, we as a nation need to debate on this.
There si another issue that worries me immesely, and that is the ever increasing divide between the "haves" and the "have nots". I have a eerie feeling, if we as nation don't address this, this could have serious ramifications, that I dare not imagine.
avi, zico, tito! - u guys shud compile ur thoughts on this blog and make it in2 a book. and dont forget to thank me 4d idea in the ACKOWLEDGEMENTS.
i agree to what avi says "create jobs" and also zicos ideas about the doomsday.
Avi, when you mention dhobis were replaced by washing machine - you might also mention - and washing machine mechanics, dealers, repair centers, AMC's and a change in making detergents. every replacement has always created newer jobs. like bank tellers replaced by ATM's gave NCR the chance to produce these machines, Cisco to connect them over the network, VSNL to provide bandwidth and group 4 securicor an additional job of protecting the machines, falcon to transfer the money in strong vans and so on. what i am hinting at is, changes do happen, and with the changes the jobs change. india has historically adapted to these changes. remember the first form of outsourcing - medical transcription. there were graduates doing that and now the same graduates are handling credit card transactions. when they will be replaced by machines these graduates will take up the AMC of those machines and will be taught the skill.
see the thing is pretty simple - what kind of work creation are you talking about? can india afford to make cars at a competitive price that matches european quality standards? heck we dont even have srs bags on our cars! not that we cant, but it will take time, and a lot of money. we are now making the money. in ten years we will be making the cars.
Hey Tito, I agree with you onm most part. The first job outsourcing is however a little older that Medical transcription. Its Cotton and Wool. If you remember the suits, the cotton that the British wore were from Indian Fabric and Indian labor but then sold to European and India Market at a premium price.
Then we condemned the idea and started producing our own clothes. So a signifin=cant market as taken away. Now we are embracing the same idea.
Its time we actually develop the software. Imagine if we can develop the autiomated response system. Tragically even if its developed by an Indian, the place will be Caltech or MIT.
No Avida i cant agree about the cotton part.. thats just trading, outsourcing can only be in services, and not on materials. As materials need natural endowments. What the heck English climate does not support cotton fields, so they need to import the same to keep Manchester running.
Its different we were exploited then, even now we are being exploited by the way, but we have huge producers surplus in Indian circumstances they have a huge consumer surplus .. hence its pareto optimal for both of us
Still its sort of an exploitation coz labort is cheap. in the 19th century British Labors were expensive and now its the same story, the labors form west are expensive so let India to the "Janitorial Work".
But then we were not proud. NOW WE ARE!!! Amazing transformation.
According to a recent study by AT Kearney, the US firms will not be benefited (in terms of cost savings) by offshoring their IT and back-office work to destinations, including India and China, in the next 20 years due to rising wages and price inflation in such countries. Among the key findings, the average wages for the programmers in India, China, and Eastern Europe grew by up to 40 percent in 2006 as compared to up to 10 percent for their US counterparts. Despite this fact, majority of US-based companies, such as Accenture and IBM, are establishing/expanding their offshore units in countries such as India and China, in order to leverage the low-cost labor market in such countries. It is evident that Indian professionals' wages are 40-60 percent less as compared to their US counterparts.
The question is "How reliable is the outsourcing job in the long run for our country"
The other question is "Does India has the sustainable competitive edge to survive in the outsourcing game in the long run?"
And importantly, "How much of India has been benefited by the outsourcing of jobs, and how much in next 10 years?"
Software Export in India to Plunge in The Long Run: Karnik
Indian IT trade body National Association of Software and Services Companies (NASSCOM) has said that the software industry will reach the export target of USD 60 billion by 2010 but the long-term growth rate and profitability will fall on account of less government support and imposition of taxes.
"The present momentum should enable us to reach the target of USD 60 billion of exports in 2010. The software export industry will be able to meet the indicated export revenue of USD 31.6 billion this fiscal. But in the long run, with such discouraging policies, we expect a fall in growth rates and bottom lines, since the small and medium players in particular will be seriously impacted by these changes," Nasscom president Kiran Karnik said.
"Higher costs for leased space will adversely affect SMEs and companies which do not own office space, and this will reduce the competitiveness of India. Besides, with Employee Stock Options (ESOPs) s being taxed under Fringe Benefit Tax (FBT), companies will face immense pressure to retain skilled manpower. This may force some companies to look at other alternate destinations such as Eastern Europe, China and South East Asia to set up offshore development centres”, he said.
One of the first thoughts that come to my mind is what has prompted this deluge of KPO/ BPOs in the developing world? Why, all of a sudden, within a span of a decade, have these sprouted like mushrooms? And would these disappear just as suddenly as they had burgeoned.... without a trace or a ripple?
There is a school of thought that proclaims that this is the effect of colonial rule of the last 3 centuries. Great Britain, the ruling imperial power of the 18th & 19th centuries, had practised merchantilism in India from 1770 to 1813, industrial capitalism upto 1856 & finance capitalism upto 1911. What they took from India bettered their citizens' lives while impoverishing our own, thus driving down living standards & costs in the sub-continent. However, this got ultimately transformed into an Icarus Paradox for Britain & the Western World due to the arbitrage resulting from different standards of living & correspondingly costs. And then, the age-old instinct of NEED stepped into the picture. Surely, it made a lot of sense to save money by outscoucing away from the land of the stars n stripes & the union jack. Today, almost nothing in the world is global or local, but simply glocal (i.e, globally local). As long as the the central nervous system of any organization rests in San Jose, L.A or Dallas, it is simply a question of deriving the maximum economic arbitrage or nothing but exercising common business sense.
The question to which I am still seeking the answer is how long can this industry be sustained & when will it start fading? Would it require a crash like the one that happened in the USA in the late 1920's to send it reeling to its demise? Or would it start sinking by so much as the FIIs pulling out at any point of time? What is it that's going to trigger the collapse & when ?????
Very interesting article Dude..Great work!!
Priyanka (KPO Professional)
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