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Library of Congress Cataloging-in-Publication Data

Kennedy, Robert E. (Robert Emmett), 1962-

The services shift : seizing the ultimate offshore opportunity / Robert E. Kennedy, AjaySharma.

p. cm.

ISBN 0-13-713350-2 (hardback : alk. paper) 1. Contracting out. 2. Offshore outsourcing. 3.Globalization. I. Sharma, Ajay, 1971- II. Title.

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2008040505

Introduction

If you’re an active manager in the first decade of the twenty-firstcentury, you already know about the phenomenon of globalization inthe manufacturing sector—although perhaps you don’t know the fullscope of that phenomenon. But by any measure, it’s enormous. In2006, the U.S. trade-to-GDP ratio was 28.0 percent, compared with11.1 percent in 1970 and 20.4 percent in 1990.1 In 2006, U.S. compa-nies committed $60 billion to new manufacturing foreign directinvestment (FDI): a jump of 66 percent over the previous year.2

The reasons behind this phenomenon are well documented, andthey are widely—often hotly—discussed. They include the low costof labor overseas, fewer regulatory restrictions, proximity to emergingmarkets (facilitating sales in those markets), the ability to focus homecountry resources on product development and marketing, the com-moditization of manufacturing technology, the rise of supplier clus-ters in different countries, and so on.

But there’s a parallel phenomenon occurring today—anotherkind of offshoring—that may soon overtake its manufacturing-basedcousin in scale and scope: the globalization of services.

We call it “the services shift.”

This is a new and different phenomenon, and it’s one whoseimplications are poorly understood by most corporate managers.True, most of us have heard stories about large corporations movingcall centers and basic business processes (for example, softwaredevelopment, payroll, billing) offshore. And on a basic level, most ofus understand the compelling logic that lies behind these develop-ments. To the customer phoning in to argue about an entry on his orher monthly credit card statement, it doesn’t matter much whetherthe contact center agent is sitting in Omaha, Nebraska, or Bangalore,

1

2 THE SERVICES SHIFT

India. If it’s cheaper to hire that agent in Bangalore than in Omaha,and if that offshore person is able to resolve the dispute successfully,then that service job is very likely to move offshore.

In fact, to a large extent, it already has.

But so far, it has been hard to get a clear picture of what’s goingon—and where and why. Where are the jobs going? Who’s getting thebenefits of the globalization of services? How big are those benefits?What companies benefit (or could benefit) from the offshoring ofservices? How, exactly, does it work? Who makes for a good partnerin this realm? What are the public policy implications of this trend—and how can companies make long-term investments if the ground isshifting beneath their feet?

These are the questions we ask and answer in The Services Shift.

Outsourcing and Offshoring

First, some definitions, which we’ll return to and flesh out in sub-sequent chapters. Outsourcing means moving a particular task out-side an organization’s boundaries. When a company decides toeliminate its in-house food service department and hire an outsidecontractor to run its cafeteria, it is “outsourcing” that function. Forlots of “non-core” practical activities—such as staffing the cafeteriaand cleaning the headquarters building—outsourcing means buyingthe service fairly close to home.

But many other activities aren’t necessarily rooted in geography.In theory, at least, you could outsource these tasks to a contractoranywhere in the world. When a task moves across a geographicboundary, we call this “offshoring.”

For example, recent years have seen the emergence of a phe-nomenon called the “electronic ICU (intensive care unit)”—a vir-tual ICU that uses video conferencing, remote bedside terminals,

INTRODUCTION 3

and image-acquisition technology to monitor critically ill patientsremotely. With eICU, a team of critical-care specialists sits at aremote location and continuously tracks patients’ vital signs, and ifsomething is amiss, the team contacts the onsite staff and recom-mends action.

One electronic ICU provider, VISICU, pitches its product as away to cost-effectively improve medical care in hospitals that don’thave enough critical-care physicians:

ICU patients require around-the-clock specialized care, how-ever most ICUs don’t have the specially trained physiciansavailable to provide this. With an eICU facility linked viatelemedicine and computer monitors to their hospital ICUrooms, they now can.3

VISICU likens its eICU solution to the air traffic control func-tion, in which a team of technical specialists relies on software andtracking technology to assist in airplane navigation without actuallybeing in the cockpit. The company claims to have implemented someform of the eICU solution in 34 U.S. hospitals, and has recently inkeda $25 million deal with Sutter Health, Northern California’s leadingnon-profit provider of health-care services.

Currently, eICU is only outsourced—that is, turned over todomestic contractors—rather than offshored. But in this activity,distance is irrelevant. In fact, other than some truly formidable regu-latory barriers, nothing stands in the way of moving the eICUs off-shore, and thereby substituting foreign health-care technicians fordomestic ones.

The white-coated doctor in your local hospital might seem for-ever immune to offshoring, but as the eICU example illustrates, that’snot necessarily the case.

Offshoring, as the name implies, means moving a function andits associated jobs to another part of the world. Offshoring com-prises a wide range of relationships between the “parent” company

4 THE SERVICES SHIFT

and remote service providers. Sometimes those providers staywithin the corporate boundary, but operate at a geographic dis-tance. Sometimes they are outside the corporate boundaries (theyare “outsourced offshorers”). In this book, we focus mainly on theoffshoring phenomenon, although certainly domestic outsourcing isanother important kind of “services shift.”

The word “offshoring,” useful as it is, is something of a red her-ring. The globalization of services is not simply a story about jobsbeing moved offshore. It’s about a fundamental reorganization ofwork, in which different tasks are being carried out by different indi-viduals in different locations. As new global sourcing options becomeavailable, forward-looking managers are actively evaluating tasks,processes, and functions inside their firms—from back-office supportto leading-edge research—to determine the most cost-effective andhighest quality location to carry out these activities. In other words,it’s not just about finding a low-cost location. It’s about gaining accessto the best combination of talent, resources, and local markets.

Why is it happening now? Again, we’ll look into this question ingreater depth in later chapters. But for now, we’ll simply point to fivecompelling forces:

• Technological innovations—These innovations include thespread of computer literacy, broadband Internet access, inex-pensive international telephony, widespread digital records,and so on.

• Emerging market growth—Today, developing countries areworking to “grow” their service sectors at least as aggressivelyas their manufacturing sectors. Countries around the worldhave witnessed India’s experience—with exports of softwareand IT-enabled services growing at a compounded annualgrowth rate of more than 43 percent, rising from $128 millionin 1991 to $40.8 billion in 2007.4 These exports can be achievedwith relatively low capital investment and environmentalimpact. Finally, the sector is attractive because it involves usinga country’s brains, not its brawn.

INTRODUCTION 5

• Global macroeconomic liberalization —Based on the stan-dard measures of economic “openness,” more countries areable to engage in international trade and investment than everbefore.

• The corporate imperative to both reduce costs andimprove quality—Most business practitioners understand theconcept of lower cost through offshoring; fewer understandthat offshoring can lead to major productivity and qualityimprovements.

• A convergence of global business culture—This includesthe global dissemination of Western management principles,the emergence of English as the global language of business,and so on.

Even this brief review of the factors pushing for the globalizationof services should suggest, strongly, that this powerful trend is not afad, but a huge, fundamental, and irreversible shift. According toMcKinsey/NASSCOM, offshore IT and business process outsourcing(BPO) have only reached one-ninth and one-twelfth of their respec-tive market potentials!5

What does this mean for your company? Business models andorganizational structures will become more dynamic, more fluid, andmore opportunistic. In fact, this transformation is already wellunderway.

What does this mean for you? Tomorrow’s managers also willhave to become more flexible, more versatile, and more broad-gauge.The old ways of providing services—both in the traditional “servicesector” and in the services-oriented activities of manufacturingfirms—just won’t cut it in the face of the global services shift. Youneed to understand the offshoring options that are available to you,because—without a doubt!—your strongest competitors will cer-tainly understand them, and exploit them.

6 THE SERVICES SHIFT

Introducing the Authors

Who, exactly, is taking you on this global tour of offshoring? Asmuch as possible in this book, we’ll adopt the first-person pluralvoice: we. For the purposes of this part of the introduction, however,we’ll switch briefly to the third person.

Author Robert (Bob) Kennedy is the Tom Lantos Professor ofBusiness Administration and Director of the Global Initiative at theUniversity of Michigan’s Ross School of Business. He is also Execu-tive Director of the William Davidson Institute (WDI): an independ-ent, nonprofit research and educational institute located at theUniversity of Michigan. Founded in 1992, the Institute focuses onbusiness and policy issues in developing countries and operates in fivebroad areas: research, executive education, development consultingservices, development and distribution of teaching materials, andsupporting international activities at the University of Michigan.

Kennedy has been involved in research and advisory workdirectly related to offshoring for the better part of a decade. In 1999,he began working with Tata Consultancy Services, which is India’slargest software firm, and one of the leading global drivers of servicesoffshoring. Since then, Kennedy has published more than a dozenteaching cases on offshoring issues. Between 2002 and 2008, hisinternational business and offshoring cases were assigned at everyone of BusinessWeek’s top 25 business schools.

In addition to his academic credentials, Kennedy has extensive“real-world” experience. He has worked as a consultant in more than20 countries, performing advisory work for many of the firmsengaged in cutting-edge offshoring practices. Prior to his academiccareer, he worked as a venture-capital investor in central Europe andhas maintained this real-world orientation ever since.

Coauthor Ajay Sharma is Research Manager for the “Globaliza-tion of Services” initiative at the William Davidson Institute, and isan expert in IT and process consulting. After earning his bachelor’s

INTRODUCTION 7

degree in electrical engineering at the Institute of Technology,Banaras Hindu University (Varanasi) in 1992, he joined Infosys,which was then embarking on a dramatic growth curve based on off-shoring software development. After six years as a project managerwith Infosys, Sharma joined PriceWaterhouseCoopers (USA), wherehe provided technology consulting to Fortune 500 companies. Hethen earned his MBA at the University of Michigan, and—afterreceiving his degree in 2004—joined the William Davidson Institute.

Returning to our shared authorial voice, together we have deeptheoretical grounding, extensive practical experience, and strongongoing relationships with many of the most innovative offshoringcompanies in the world. It’s this knowledge base and experience thatwe bring together in The Services Shift.

What You’ll Find in This Book

We’ve already introduced the important distinction between out-sourcing and offshoring, mainly talking at the industry level. InChapter 1, “Globalization of Services: What, Why, and When,” we’lldig deeper into these phenomena, giving examples at two levels:industries and companies. We’ll provide several tools for you to use asyou think about your own company’s place in the global services com-munity. We’ll explain that the current (and exploding!) wave of serv-ices globalization is simply the next logical step in the evolution ofinternational trade, which began with the extraction and exploitationof natural resources, continued through the rationalization of manu-facturing around the world—a process that continues today—andnow is expanding rapidly into the services sector.

We economists sometimes take for granted certain theories andprinciples that business practitioners, pundits, and laypeople eitherdon’t understand or simply don’t buy into. With that potential gulf inmind, we provide some basic economic rationales for why interna-

8 THE SERVICES SHIFT

tional trade and investment are “good,” in the sense of creating com-parative advantages for nations, and better returns on capital for indi-vidual investors.

Yes, change inevitably causes pain and dislocation for workers inparticular industries or sectors. One of the paradoxical aspects ofglobalization is that the gains it creates tend to be spread across largenumbers of individuals, whereas the pain it generates tends to belocalized in smaller groups of workers, companies, or communities.When millions of Wal-Mart shoppers save $10 each on their runningshoes, that’s a huge collective benefit to those shoppers. Meanwhile, arunning-shoe factory closes somewhere in the United States, creatingdislocations and pain for the people who worked in that factory, andfor the surrounding community. When viewed systematically, inalmost all cases, the total gains from trade outweigh the losses. It’sjust that the losses are more easily identified and observed.

The domestic U.S. press has taken notice, often casting this phe-nomenon in terms of “American jobs lost.” But this is the wrong lensthrough which to observe trade. The right question is, where can andshould specific tasks be located to achieve the best combination of costand performance? Yes, the jobs that are associated with these tasksmight move. But locating the right tasks in the right place also leadsto faster product development, stronger companies in the “off-shoring” nations, better returns for investors in those companies, andrising demand in those nations.

In other words, offshoring—done right—leads to an enhancedstandard of living in both developed and developing countries. To besure, change is uncomfortable, and this provides a ready hook for polemicists. But change is also necessary for growth and improvement.

As we make clear in Chapter 1, managers don’t have the luxury ofputting their strategies on hold to await the outcome of a national pol-icy debate. They have to improve their firms today, along lines that

INTRODUCTION 9

have already been proven to work, or they will fall behind to thosewho do make those compelling changes.

Chapter 2, “The Economics and Drivers of Offshoring,” pro-vides a framework for analyzing and understanding offshoringopportunities and discusses why the globalization of services isoccurring now.

In the first part of Chapter 2, we look briefly at two economicframeworks that are helpful in understanding and assessing off-shoring opportunities. The first is the value chain, introduced byMichael Porter in 1985. The value chain framework allows the analystto look inside the “black box” of a firm—breaking it into a sequenceof functions or tasks. Porter’s insight was that competitive advantagearises from capabilities at the function/task level, not at the firm level.

The second framework is “transaction costs economics,” or TCE,which explains why and where firm boundaries exist. This, in turn,helps shed light on why firms perform some tasks themselves locally,“outsource” some tasks to other firms, and source some from remotelocations. As businesses, suppliers, customers, and technologiesevolve, the transactions costs involved in moving tasks across firm orgeographic boundaries also change, thus affecting the sourcingoptions and payoffs facing firms.

The chapter then revisits the outsourcing/offshoring decisionand, using TCE, discusses the factors that make a task more or lesslikely to be a candidate for being transferred across a firm or geo-graphic boundary.

In Chapter 1, we explain why trade in services has become morelike trade in manufactured goods in recent years (production andconsumption have become separable by geography). In Chapter 2,we show how trade in services differs in important ways from trade inmanufactured goods.

10 THE SERVICES SHIFT

Why? First, services tend to be much more labor intensive thanmanufacturing. This means that low-wage countries have an evengreater advantage in services than they traditionally have had in man-ufacturing. Second, new (and vocal) categories of workers havebecome vulnerable to offshoring. Third, trade in services tends to besynchronous—that is, happening in real time—which makes this newkind of trade highly visible. And fourth, within the firm, offshoringtends to happen at the task level, and activities sourced remotelyremain closely connected to activities retained at home. This meansthat a service activity that has been offshored—for example, account-ing, collections, or product design—still interacts with the company’sremaining employees every day.

Still, not all services lend themselves to offshoring. There are stillwhole categories of jobs that will remain off limits to offshoring, atleast for the time being—and in some cases, forever. (Your local bar-ber, your police officer, and your elementary school teacher are prob-ably immune to offshoring.) Certain kinds of jobs near the beatingheart of the company—the core competencies—are probably “safe.”But changing technologies call for a continual reexamination of whatis possible. Radiologists once assumed that they were safe, and it’snow clear that they are not.

The chapter concludes with a discussion of what we call the “FiveDrivers of Globalization” in the services sector, and explains whythose drivers are likely to intensify in the future:

• The economic liberalization in developing countries, which hasresulted in 1) lower barriers to economic engagement, 2)higher growth rates in those countries, and 3) increased atten-tion from global firms that are under pressure to generatehigher growth rates of their own

• The digitization of business processes, which makes manymore business activities “moveable”

• Rapid improvements in quality and reductions in cost across arange of computing and telecom services, which again permitand encourage “task mobility”

INTRODUCTION 11

• Growing capabilities around the globe• The emergence of a global business culture, based largely on

the practices of leading U.S. and European companies, whichmakes an ever-larger number of geographic contexts congenialto those companies

In Chapter 3, “Making It Real,” we present a frameworkintended to help you establish realistic sourcing goals for your organ-ization and to implement these goals. Firms pursue offshoring for avariety of reasons, including efficiency, enhancement, and transfor-mation. The first part of the chapter discusses how these approachesdiffer and why it is imperative that you be clear and realistic aboutestablishing your offshoring goals. These goals influence the entireoffshoring journey—which tasks/processes to start with, the type ofsourcing partner to work with, the risks encountered, and theexpected benefits.

The chapter then discusses the differences between offshoringtasks (for example, operating a call center and managing accountspayable) and offshoring entire processes (for example, hire-to-retireHR management or purchase-to-pay sourcing operations). Task off-shoring tends to be cost and best-practice focused, whereas processoffshoring is closely linked with reengineering. In some situations,successful process transformation leads to business performance ben-efits of 10 to 20 times those from labor cost savings.

The chapter then describes in detail how companies go aboutidentifying, documenting, and migrating activities offshore. We walkyou through an eight-step process that takes companies from activityidentification to implementation, calling on tools such as detailedprocess mapping, IT systems implementation, risk mitigation, moni-toring, process migration, and post-switchover integration.

Let’s assume you’re interested in offshoring, but you’re not sureof your range of choices in the global marketplace. Chapter 4, “TheSupply Side,” explores outsourcing options today. It begins with anoverview of the offshoring universe—size, growth rates, types of

12 THE SERVICES SHIFT

activities, and so on. The chapter then discusses how we got here—starting with the Tata Group’s initial software exports in 1973 andcontinuing (in a milestone format) up to the present.

We then present a typology of offshoring business models:

• The captives of global firms such as Motorola, AmericanExpress, and Microsoft

• Organizations affiliated with global outsourcing firms, such asAccenture, IBM, and Convergys

• Firms affiliated with offshore software firms, such as TCS,Infosys, and Wipro

• Independent firms, such as ITTIAM, EvalueServe, and Telera-diology Solutions, Inc.

Obviously, offshoring involves all different kinds of firms. Yes,you have the huge software firms that have gotten into the back-office business. And you have the U.S. Fortune 100 firms that arerushing over in large numbers, as well. (IBM now has 53,000 people,or 17.6 percent of its global workforce,6 in India, and has describedIndia as a linchpin in its strategy to serve the “globally integratedenterprise.”) But you also have a host of very small firms in nicheroles—market research, medical transcription, and so on. You alsohave reconfigurations within this cast of characters—for example,GE’s spin-out of Genpact (from captive to independent), and R.R.Donnelley’s recent acquisition of Office Tiger (from independent tocaptive).

Today, much of this activity is centered in India. But more andmore countries are playing, or trying to play, in the offshoring game.China and the Philippines are already important offshore destina-tions, and countries such as Hungary, Russia, Morocco, Brazil, SouthAfrica, and Mauritius are gaining ground.

What do these different kinds of firms, in their different geogra-phies, mean for you, as a contemporary manager? How do you

INTRODUCTION 13

choose a partner, and what signals should you look for in a successfuloffshoring relationship?

Chapter 5, “Shifting Skill Sets,” explores what this all means forhow you manage and organize your firm. We start with the fact thatoffshoring is a hands-on activity. Moving tasks from one geography toanother creates both enormous challenges and impressive opportuni-ties for companies. Managers need very specific skill sets to make off-shoring work—and those skills often differ from those required in thenon-outsourced, non-offshored world.

For example, international skills (language skills, cultural aware-ness, an understanding of how the global business community func-tions) were once a “nice to have.” Today, for offshoring companies,they are indispensable resources. Where such skills were once con-fined to the executive suite or in the “international division,” they arenow required deep down in many different parts of the offshoringorganization. At almost every level, people need to understand how tocommunicate and manage across cultures. They need to be skilled atanticipating and managing risk, and they need to be effective commu-nicators—enabling them to head off the backlash that is often inherentin offshoring, or to contain and offset that backlash when it does arise.

At the same time, strong IT and industrial engineering skills areneeded—not only to reengineer, migrate, and manage far-flung oper-ations, but also to develop and maintain the IT systems that arerequired to manage a geographically dispersed operation.

The chapter presents a framework with which to consider thetypes of management responsibilities that lead to success. We thendraw on detailed interviews with dozens of offshoring firms to illus-trate how the key success factors for managers change when anorganization embraces global sourcing.

From the opening chapters of The Services Shift, we underscoreour political agnosticism about offshoring. Because there’s no point inarguing with the tide—we assert—managers should focus on

14 THE SERVICES SHIFT

understanding and exploiting this growing trend. In Chapter 6, “TheServices Shift: Policy Implications,” we adopt a broader policy per-spective. Offshoring has led to a flurry of policy initiatives, in bothdeveloping and developed countries. What are the generalapproaches, and what do these mean for managers?

In developing countries, policies have focused on investment ineducation (sometimes primary, and sometimes advanced technical),telecom deregulation, export-processing zones, general incentives forforeign investment, and—in some cases—a broad-based reform ofthe commercial code. Obviously, these policies are intended to be“offshoring friendly,” and many have proven very successful.

In the developed world, most policy initiatives are aimed at slow-ing or regulating the offshoring choice. In the United States, forexample, at least 33 state legislatures have debated anti-offshoringlegislation, and the U.S. Senate has actually passed laws setting limitson offshoring. We argue that for at least three reasons, these policiesare generally misguided, in both the short and long term. First, asnoted earlier, the savings associated with offshoring tend to be sohuge, and companies are under such extraordinary pressure toimprove their margins, that managers have little choice but to seekout these opportunities, even when they are frowned upon in thepolitical arena.

Second, the offshore migration of activities is simply too hard tospot to allow for effective regulation. Even when governments try toregulate offshoring, they have almost no ability to monitor, much lessenforce, such regulations. Moving a 250-person factory is one thing;moving four customer-care positions or hiring an engineer in China(even though one was available in Michigan) is quite another.

Third, as explained in Chapter 1, all the evidence suggests thatfor the developed world, inhibiting offshoring only reduces long-termincomes. Countries that open up their economies tend to grow faster;countries that throw up protectionist walls tend to grow more slowly.Anti-offshoring policies may be politically appealing in the short

INTRODUCTION 15

term, but they are a bad economic prescription for long-term growthor high standards of living.

The only feasible policy responses to the pain and dislocationscaused by offshoring—we argue—are to focus on 1) minimizing coststo affected workers, and 2) hastening their transition to new sectors.Much has been made in the U.S. media about transition and adjust-ment programs that haven’t worked. We point to examples of adjust-ment processes that are effective and do add value.

And finally, in Chapter 7, “Looking Ahead,” we look to the future.What is the next big thing in the globalization of services? And whatdoes that mean for managers today?

First, we reiterate some of the points made in earlier chapters.Offshoring will become a much more truly global activity. Othercountries will “gain on” India as they figure out their own uniqueniches and competitive advantages.

Second, globalization will come to many more services—bothhigh value added (R&D, product design, legal and advisory work) andmore personalized services (tutoring for your child, life coaching,personal scheduling).

Third, globalization of services will grow strongly in the non-ITrealm. Instead of servicing clients from a distance, new firms willbring clients to the developing world. We are already seeing thebeginnings of this trend with so-called “medical tourism” and retire-ment communities in low-cost countries.

Fourth, business-process multinationals will play an ever moreimportant role. Companies such as Tata Consultancy Services,Infosys, Wipro, and Genpact are growing at astounding rates; all arelikely to have more than 100,000 employees within a few years.They will be well positioned to offer the equivalent of “standard-ized parts” for knowledge work.7 As this happens, ever-greaternumbers of firms in the developed world will be compelled to

16 THE SERVICES SHIFT

conceive of their traditional back-office processes as standardizedutilities.

Introductions have their perils. Boiling down the contents of ourbook into a few short pages—as we’ve tried to do here, to give you asense of what’s coming—leads to a pretty dense result. Don’t bedaunted; in subsequent chapters, we will do our best to make some-times-complicated ideas accessible, and useful. The services shift iscreating an enormously fertile ground of opportunity; our goal is tomake you feel at home on that ground.

Endnotes1 The trade-to-GDP ratio is calculated as (exports + imports) / GDP. It provides a

rough measure of the role trade flows play in an economy. Source: EconomicReport of the President: 2008, Table B-1.

2 Peter Koudal, “Growing the Global Corporation: Global Investment Trends of U.S.Manufacturers,” Deloitte Research, 2005.

3 Company Facts, VISICU, http://visicu.com/index_flash.asp (accessed on February21, 2008).

4 Data from “NASSCOM Strategic Review” (2008) and from “Tata Consultancy Ser-vices: High Technology in a Low-Income Country” (2000), by Robert E. Kennedy,Harvard Business School Case # 700-092.

5 “Nasscom-McKinsey Report 2005: Extending India’s Leadership of the Global ITand BPO Industries,” NASSCOM, December 2005, p. 30, 33.

6 Paul McDougall, “IBM Head Count In India Tops 50,000,” InformationWeek (Feb2007), www.informationweek.com/story/showArticle.jhtml?articleID=197002525.

7 I first heard this phrase from John Sviokla, a former colleague at Harvard BusinessSchool and currently Vice-Chairman and Director of Innovation and Research forDiamond Management, a leading technology strategy consulting firm.

INDEXAAAMT (American Association for

Medical Transcription), 25accent neutralization, 207accounting processes, 91accumulation of resources, 235acquisition, history of offshoring,

155-156advisory firms, 259alignment, vendor evaluation, 126allocation of resources, as managerial

role, 177alternate trade adjustment assistance

(ATAA), 232American Association for Medical

Transcription (AAMT), 25American Express, 152, 160analysis and strategy formulation

process (value chain approach), 52analysis, as managerial role, 176-177analytical skills, 183-184Apollo Hospitals Group, 32Apple, differentiation strategy, 53Argentina, 271AskSunday, 253asset specificity (TCE transaction

variable), 58ATAA (alternate trade adjustment

assistance), 232

Bback office operations, 94, 179-180backsourcing, 66bargaining costs, transaction cost

economics, 55benefits

globalized services, 202-204policy initiatives in developed

economies, 220-221Bharti Enterprises, transformational

outsourcing, 95billing processes, 92Biopolis, 21

317

biotech research, 20Biotechnology Ireland, 21body-shopping, 149Booz & Company, joint study with

Duke University, 259bounded rationality, 56BPO (business process outsourcing)

services, 5, 22BPO-specific firms, 165-166Indian BPO industry, 205-206potential market, 144

Brainard, Lael, 234Brazil, 265, 298-301British Airways, 152, 160Broadcom, 157Brookings Institution paper, 234Brown, Gordon, 82BTO (business transformation

outsourcing) projects, 95Bulgaria, 269Burrough Corporation, agreement with

TCS, 148-150business

culture, 5, 81-83models for offshoring, 12-13operations risks, 118-119processes, 99, 152-153tasks, 96

business process outsourcing services.See BPO services

business transformation outsourcing(BTO) projects, 95

CCall Center Outsourcing (EDS), 96call centers, 165

accent neutralization, 207capital requirements, 202contracts, 91

Canada, 266capability risks, 119-120Capgemini, 165, 297

318 INDEX

capital, 202captive operations, 19

American Express, 152growth, 161multinationals, 159, 162predictions for the future, 248-249

CBay, 27challenges

cultural challenges, 257-258globalization of services in developed

economies, 225-229offshore fatigue, 258

improving competitive position,260-261

managing sourcing complexity,259-260

policy initiatives for developingeconomies, 200-201

human capital, 207infrastructure, 206regulatory environment,

207-209social repercussions, 209-210

Chile, 301-303China, 264, 284-287Chrysalis Capital, 153clinical trials, 20-22Coase, Ronald, 54Cocuzza, Frank, 184Cogent Road, 117Cohen, Linda, 90collaborative partnering, 124Committee on Prospering in the Global

Economy of the 21st Century(National Academies), 238

commodity-type processes, 90communication

goals/objectives, 176skills, 186

competitive advantage, 52Competitive Advantage, 50computing, as driver of services

globalization, 76-77concierge services, 259Conseco, geographical risks due to

cultural differences, 116context-specific knowledge,

back-office operations, 179continuous improvement provision

(SLAs), 141contract research organizations

(CROs), 20

contractsnegotiation, 126service, 91

convergence of business culture, 5Convergys, 153coordination of tasks, 100corporate imperatives, 5cost

as component of a process, 108differentials, medical tourism, 31minimization (TCE), 58-59

Costa Rica, 256, 271“country attractiveness”

(Kearney), 171country profiles

Brazil, 298-301Chile, 301-303China, 284-287consistent criteria, 171Egypt, 277-280India, 307-310, 314Philippines, 272-276Poland, 294-298Romania, 280-283Russia, 288-291South Africa, 291-293Vietnam, 304-306

Croatia, policy measures, 212CROs (contract research organizations),

20cross-border trade and investment

flows, 33-37cross-cultural challenges, 257-258cultural challenges, 116, 257-258customer risks, 119-120Cyber Appellate Tribunals, 219“Cyber-City” project (Mauritius), 214Czech Republic, 267

Ddata analysis services, 259Data Protection Directive

of 1995, 217data security, developing

economies, 217database management, 19Days Sales Outstanding (DSO), 92decision variables, 37declining scale of projects, 250-252decoding technology and infrastructure,

111-114

INDEX 319

decomposition framework (EquaTerra),105

Dell, 61, 161Deloitte, 93-94Delphi Corporation, 184Delta Airlines, 65demographic deficit, developed

economies, 223-224dental tourism, 255desktop computing support, 92developed economies, policy initiatives,

219benefits, 220-221challenges, 225-229emerging demographic deficit,

223-224increased productivity, 221-223policy measures, 230-239

developing economies, policyinitiatives, 201benefits of globalized services,

202-204human capital challenge, 207infrastructure challenge, 206policy measures, 210-217regulatory environment challenge,

207-209social repercussions challenge,

209-210Diageo, 93-94Diamond Consulting, 259differentiation strategy, 53Digital Signal Processing (DSP)

Systems, 166digitization of business processes,

74-76Dobbs, Lou, 225domestic offshoring, 252domestic organic growth, 203Dreaming the BRICs, “The Path to

2050” study (Goldman Sachs), 42drivers of services globalization,

10-11, 73-85digitization of business processes, 74-

76global market liberalization, 74growing capabilities around the globe,

78-80low-cost, high-speed computing and

telecom, 76-77rise of global business culture, 81-83

drug development, 20-22

DSO (Days Sales Outstanding), 92DSP (Digital Signal Processing)

Systems, 166Dubai, Internet City, 214due diligence, 19Duke University, joint study with Booz

& Company, 259dynamic nature of offshore

market, 171

EE-Loan, 119earn-back windows (SLAs), 141Eastman Kodak, 63economic frameworks, 9

transaction cost economics, 54bargaining costs, 55cost minimization, 58-59policing and enforcement

costs, 56search and information

costs, 55transaction variables, 57-58

value chain approach, 50analysis and strategy formulation

process, 52insights, 52-53primary activities, 51support activities, 51

The Economic Institutions ofCapitalism: Firms, Markets, RelationalContracting, 55

economic liberalization, 40economic policy initiatives

developed economies, 219benefits, 220-221challenges, 225-229emerging demographic deficit,

223-224increased productivity, 221-223policy measures, 230-239

developing economiesbenefits of globalized services,

202-204human capital challenge, 207infrastructure challenge, 206policy measures, 210-217regulatory environment

challenge, 207-209social repercussions challenge,

209-210

320 INDEX

economic strategiesglobal outsourcing, 195trade and investment flows, 33-37transformation of global economy, 38-

43EDS (end-to-end Call Center

Outsourcing), 96education

capital and education level, 207management, 79

effectiveness-focused processes, 135efficiency-focused processes,

90-92, 135Egypt, 271, 277-280eight-step process

(outsourcing/offshoring), 104decoding technology and

infrastructure, 111-114geography selection, 127-128integration of operations, 131-133migration of operations, 128-129process mapping, 108-111risk identification, 114

business operations risks, 118-119

customer, employee, andcapability risks, 119-120

geographical/location risks, 115-117

holdup/strategic risks, 120-121migration risks, 117-118

task identification, 105-108vendor selection, 122-127

Elance, 251elective reporting, teleradiology, 29electronic documentation, IDC survey,

75electronic ICUs, 2electronic medical records

(EMRs), 25Eli Lilly, 21emerging demographic deficit,

developed economies, 223-224emerging market growth, 4employee risks, 119-120employment

growth in IT and BPO services, 147India exports, 23

EMRs (electronic medical records), 25

end-to-end Call Center Outsourcing(EDS), 96

Enterprise Resource Planning systems,111

Enzor, Jim, 184EPZs (export-processing zones),

213-214EquaTerra, 105, 185, 259equity research, 19Ertel, Danny, 184European-based captives, 161evaluation of vendors, 125Evalueserve, 157, 166Everest Group, 259executives, 178expectations (sourcing goals), 89-90

efficiency-focused sourcing, 90-92enhancement sourcing efforts, 92-94transformational sourcing, 94-96

export employment, India, 23Export Industry Encouragement

Act, 215export sectors, India, 23export-processing zones (EPZs),

213-214Exporting America: Why Corporate

Greed Is Shipping American JobsOverseas, 225

FFDI (foreign direct investment), 37,

208, 218-219finance processes, 91financial incentives, 211-212firms (vendor landscape), 158

BPO-specific firms, 165-166captives of multinationals, 159-162initiation of offshoring by size, 145multinationals, 164-165offshore-based IT service providers,

162-164forces (globalization of services), 4foreign direct investment (FDI), 37,

208, 218-219foreign investment in services,

210-211data security/intellectual property

rights, 217export-processing zones (EPZs), 213-

214financial incentives, 211-212human capital/skills development,

216-217

INDEX 321

quality infrastructure and skills, 214-216

Forrester Research, 202002 report, 2252004 study, 246

free trade zone incentives, 213freeloading outsiders, 209frequency (TCE transaction

variable), 57functional level (process

mapping), 109future of services shift, 15-16, 245

captive operations, 248-249declining scale of projects, 250-252increased globalization, 246-248increased personal services, 252-254rapid growth, 245-246specialized talent overrides cost

savings, 249-250two-way travel increases, 254-256

GGambia, 212-213Gartner Group

approaches to sourcing, 90offshore help desks study, 257

GE (General Electric), 61, 152captive operations, 160John F. Welch Technology

Centre, 156GECIS, 152General Motors, 250generalized managerial roles, 176-178generic skills, 181generic sources of competitive

advantage, 52generic transformation services, 96Genome Valley, 21Genpact, 165, 186, 250

outsourcing relationship with PenskeTruck, 190-195

transformational outsourcing withWachovia, 95

transition toolkit, 129geographic expansion, 153-155,

170-172geographical risks, 115-117Ghana, 212, 270global business culture, 81-83Global Crossing, 76“Global Economic Prospects and the

Developing Countries” study, 40

global economy, transformation, 38-43

Global Initiative (University ofMichigan), 6

global market liberalization, 74Global Radiology Centre (GRC), 29Global Services Location Index

(Kearney), 127global survey of corporate executives

(McKinsey), 44globalization of services,

drivers of, 10-11, 73digitization of business processes,

74-76global market liberalization, 74growing capabilities around the

globe, 78-80low-cost, high-speed computing

and telecom, 76-77rise of global business culture, 81-

83forces, 4future of, 15-16, 246-248market GDP shares, 38safe offshore industries, 18

clinical trials, 20-22drug development, 20-22equity research, 19legal research, 19-20

skill sets, 181-182“Globalization of Services” initiative

(WDI), 6go live subphase (Six Sigma project,

transition phase), 130goals (sourcing), 11, 89-90

efficiency-focused sourcing, 90-92enhancement sourcing efforts, 92-94setting, 176transformational sourcing, 94-96

Goldman Sachsequity research, 19Dreaming the BRICs, “The Path to

2050” study, 42graduate engineering programs, 80GRC (Global Radiology Centre), Wipro

Technologies, 29growth

captive operations, 161predictions for the future, 245-246rate, potential offshore market, 145

Gupta, Rajat, 78Gupta, Vinay, 183

322 INDEX

Hhandoffs, as component of a

process, 108health tourism, 31help desks, Gartner study, 257high-speed computing and telecom, 76-

77history of offshoring, 147

early experiments in U.S. and Ireland,150-151

geographic expansion and acquisition,153-156

global talent search, 156-158growth of business process offshoring,

152-153India-based software exports,

151-152TCS agreement with Burroughs

Corporation, 148-150Hodges, Mark, 185holdup risks, 120-121human capital, 207, 216-217Human Resource (HR) processes, 93Hungary, 269

IIBM

company profile, 297multinational outsourcing firms, 164transformational outsourcing, 95

IDC surveys, 75identification of risks, as step in

offshoring process, 114business operations risks, 118-119customer, employee, and capability

risks, 119-120geographical/location risks, 115-117holdup/strategic risks, 120-121migration risks, 117-118

identification of tasks, as step inoffshoring process, 105-108

IGIC (Institutional Group andInformation Company), 149

IIM (Indian Institute of Management),79

image-acquisition technology, 3imperatives (eight-step offshoring

process), 104decoding technology and

infrastructure, 111-114geography selection, 127-128

integration of operations, 131-133migration of operations, 128-129process mapping, 108-111risk identification, 114

business operations risks, 118-119

customer, employee, andcapability risks, 119-120

geographical/location risks, 115-117

holdup/strategic risks, 120-121migration risks, 117-118

task identification, 105-108vendor selection, 122-127

in-person contact, as factor againstoffshoring, 72

India, 264export employment, 23export sectors, 23offshore industries, 22

IT/ITES sector, 23-24medical tourism, 31-33medical transcription, 25-27teleradiology, 27-30

profile, 307-314software exports, 151-152

Indian BPO industry, 205-206Indian Institute of Management (IIM),

79Indian School of Business (ISB), 79indirect employment, 202individual transformations, 196induced employment, 202Industrial Vocational Training Board

(Mauritius), 216industries safe for offshoring, 18

clinical trials, 20-22drug development, 20-22equity research, 19legal research, 19-20

industry profilesBrazil, 299-300Chile, 302China, 285Egypt, 278India, 308-309Philippines, 274Poland, 295-296Romania, 282Russia, 289-290South Africa, 292Vietnam, 305

INDEX 323

information exchange, as factor againstoffshoring, 73

Information Technology Act of 2000, 219

Information Technology Action Plan, 218

Information Technology Association ofAmerica study, 36

information technology task force, 218

Information Technology/InformationTechnology Enabled Services(IT/ITES), 23

Infosys Technologies Ltd., 7, 24, 150,163, 250

infrastructurechallenges of developing

economies, 206decoding, 111-114policy measures for developing

economies, 214-216innovation, higher standards of

living, 236input, business processes, 100insights, value chain economic

framework, 52-53Institutional Group and Information

Company (IGIC), 149integration of operations, as step in

offshoring process, 131-133intellectual property rights, 208, 217InterContinental Hotels Group, 254internalization/externalization decision,

55international connectivity, policy

measures, 214International Labor Organization, EPZ

database, 213international trade and investment, 5,

33-37international trade theory, 200Internet, as driver of services

globalization, 76-77Internet City (Dubai), 214investment promotion agencies (IPAs),

210IPAs (investment promotion agencies),

210Ireland, 266, 150ISB (Indian School of Business), 79Israel, 270

IT services, 162-164Gambia, 213Jamaica, 215potential market, 144

IT/ITES (InformationTechnology/Information TechnologyEnabled Services) sector, 23-24

ITTIAM Systems, 166, 248

J–KJamaica, IT services, 215Janeeva, 259Janeeva Assurance, 133John F. Welch Technology

Centre, 156JPMorgan Chase, 19

Kanbay, 165Kearney, A. T.

“country attractiveness” survey, 171Global Services Location Index, 127

key playersBrazil, 300-301Chile, 303China, 287Egypt, 279-280India, 314Philippines, 276Poland, 296-297Romania, 283Russia, 291South Africa, 293Vietnam, 306

Kleiner Perkins Caufield & Byers, 251knowledge process outsourcing (KPO),

166knowledge transfer and infrastructure

preparation subphase (Six Sigmaproject, transition phase), 130

knowledge-services industry, Jamaica, 215

KPO (knowledge process outsourcing),166

Llanguage, global business culture,

81-82Larsen, Chris, 119legal research, 19-20Lehman Brothers, 118Litan, Robert E., 234

324 INDEX

local resources, 34location risks, 115-117logic, as component of a process, 108low-cost, high-speed computing and

telecom, 76-77Lucent, 76Lund, Morten, 83

Mmacro level (process mapping), 109macroeconomic gains, offshore

industries, 36macroeconomic liberalization, 5mainframe operations, 92make or buy decision

(outsourcing), 61Malaysia, 268Malhotra, Romi, 61management responsibilities, 13, 175

analytical skills, 183-184education, 79generic process of management, 176-

179global sourcing operations, 181-182negotiation skills, 185-186organizational challenges, 186

availability issues, 189-190Penske Truck Leasing example,

190-195soft skills, 185-186traditional back office operations, 179-

180Mankiw, N. Gregory, 221Mann, Catherine, 36mapping processes, as step in offshoring

process, 108-111Market and Hierarchies: Analysis and

Antitrust Implications, 55market capabilities, as outsourcing

factor, 68market growth, 4market liberalization, as driver of

services globalization, 74Mauritius

“Cyber-City” project, 214Industrial Vocational Training Board,

216policy measures, 211

McKinsey & Company estimates(potential offshore market), 144

McKinsey Global Institute (MGI), 219

global survey of corporate executives,44

medical tourism study, 33measurement reporting frequency

(SLAs), 140medical tourism

economics of, 255India, 31-33MGI study, 33

Medical Tourism, 254medical transcription

India, 25-27Philippines, 27

Medical Transcription ServiceOrganizations (MTSOs), 25

Mexico, 265MGI (McKinsey Global Institute), 219

global survey of corporate executives,44

medical tourism study, 33micro-multinationals, 253Microsoft, 248, 259middle managers, 178, 196migration of operations, as step in

offshoring process, 128-129migration risks, 117-118milestones, as component of a process,

108monitoring

performance, 177vendors, 259

motivation of team members, 177Motorola, 298Mphasis, 116MTSOs (Medical Transcription Service

Organizations), 25Multimedia Super Corridor (Malaysia),

212multinationals, 159, 162-165multisourcing, 124

NNASSCOM, 23National Academies, Committee on

Prospering in the Global Economy ofthe 21st Century, 238

National Telecom Policy, 214“The Nature of the Firm” (Coase), 54near-shoring options, 248negotiation skills, 185-186neoIT, 259

INDEX 325

network operations, 92New Telecom Policy of 1999,

153, 219Nilekani, Nandan, 239Novartis, 21

OOCR (optical character

recognition), 99Office Tiger, 166offshore fatigue, 258

improving competitive position, 260-261

managing sourcing complexity, 259-260

offshore industries, 18case for the services shift, 43-44clinical trials, 20-22drug development, 20-22equity research, 19India, 22

IT/ITES sector, 23-24medical tourism, 31-33medical transcription, 25-27teleradiology, 27-30

IT service providers, 162-164legal research, 19-20macroeconomic gains, 36offshoring options, 69-73

approaches to, 71factors that work against

offshoring, 72-73sourcing options, 60

business importance, 63-64make or buy decision, 61process characteristics, 64-69

transformation of global economy, 38-43

offshoring, 69approaches to, 71business models, 12-13defined, 3economic frameworks, 9eight-step process, 104

decoding technology andinfrastructure, 111-114

geography selection, 127-128integration of operations,

131-133migration of operations,

128-129

process mapping, 108-111risk identification, 114-121task identification, 105-108vendor selection, 122-127

factors that work against offshoring,72-73

geographic spread, 170-172history of, 147

early experiments in U.S. andIreland, 150-151

geographic expansion andacquisition, 153-156

global talent search, 156-158growth of business process

offshoring, 152-153India-based software exports,

151-152TCS agreement with Burroughs

Corporation, 148-150individual transformations, 196influence of location, tasks, and

organization type, 166-169middle managers, 196patriotism factor, 195policy initiatives, 14-15, 199

challenges to, 200-201developed economies, 219-239developing economies, 201-217

predictions for the future, 245captive operations, 248-249declining scale of projects,

250-252increased globalization,

246-248increased personal services, 252-

254rapid growth, 245-246specialized talent overrides cost

savings, 249-250two-way travel increases,

254-256senior managers, 196skill sets, 13, 175

analytical skills, 183-184generic process of management,

176-179global sourcing operations,

181-182negotiation skills, 185-186organizational challenges,

186-195

326 INDEX

soft skills, 185-186traditional back office operations,

179-180standard of living enhancements, 8tasks versus processes, 96, 99-104

one-off projects, 253operational risks, 118-119operational systems, business processes,

99operations integration, as step in

offshoring process, 131-133opportunism, 56optical character recognition

(OCR), 99Oracle, 259organizational challenges, skill set

requirements, 186availability issues, 189-190Penske Truck Leasing example,

190-195organizational/soft issues, as

outsourcing factor, 68output, business processes, 100output-oriented schools, 237outsourcing, 60

business importance, 63-64defined, 2Delta Airlines, 65eight-step process, 104

decoding technology andinfrastructure, 111-114

geography selection, 127-128integration of operations,

131-133migration of operations,

128-129process mapping, 108-111risk identification, 114-121task identification, 105-108vendor selection, 122-127

make or buy decision, 61predictions for the future, 245

captive operations, 248-249declining scale of projects,

250-252increased globalization,

246-248increased personal services, 252-

254rapid growth, 245-246

specialized talent overrides costsavings, 249-250

two-way travel increases, 254-256

process characteristics, 64-69

PParry, Cyril, 33patent applications, 19patriotism factor, 195Paul, Steven, 21payment processing centers, 165penalizing underperformance, as

managerial role, 177Penske Truck Leasing, as outsourcing

relationship with Genpact, 190-195people-dependent processes, 193performance monitoring, as managerial

role, 177performance review periods

(SLAs), 141personal services

concierge services, 259predictions for the future, 252-254

PESTLE (Political, Economic, Social,Technological, Legal, andEnvironmental) components, 128

Pfizer, 248pharmaceutical clinical trials, 20phases, offshoring history

early experiments in U.S. and Ireland,150-151

geographic expansion and acquisition,153-156

global talent search, 156-158growth of business process offshoring,

152-153India-based software exports,

151-152TCS agreement with Burroughs

Corporation, 148-150Philippines, 264

medical transcriptions services, 27profile, 272-276

physical proximity, as factor againstoffshoring, 72

Poland, 267, 294-298policing and enforcement costs,

transaction cost economics, 56policy initiatives, 14-15, 199

challenges to, 200-201

INDEX 327

developed economies, 219benefits, 220-221challenges, 225-229emerging demographic deficit,

223-224globalization of services,

230-239increased productivity, 221-223policy measures, 230-239

developing economies, 201benefits of globalized services,

202-204human capital challenge, 207infrastructure challenge, 206policy measures, 210-217regulatory environment,

207-209social repercussions, 209-210

policy openness index, 38political repercussions, 227Political, Economic, Social,

Technological, Legal, andEnvironmental (PESTLE)components, 128

Porter, Michael, value chain approach,50

power of processes, 101predictions for the future, 245

captive operations, 248-249declining scale of projects, 250-252increased globalization, 246-248increased personal services, 252-254rapid growth, 245-246specialized talent overrides cost

savings, 249-250two-way travel increases, 254-256

President’s Council of EconomicAdvisors, 36

PriceWaterhouseCoopers, 7pricing, vendor evaluation, 126primary activities, value chain

approach, 51process benchmarking and solution

design subphase (Six Sigma project,transition phase), 130

process(es)accounting, 91back office, 94billing, 92business, 99, 152-153commodity-type, 90

customized, 135-136effectiveness-focused, 135efficiency-focused, 135finance, 91Human Resource (HR), 93management, 181mapping, 98, 108-111, 194outsourcing/offshoring, 104

characteristics, 64-69decoding technology and

infrastructure, 111-114geography selection, 127-128integration of operations,

131-133migration of operations,

128-129process mapping, 108-111risk identification, 114-121task identification, 105-108vendor selection, 122-127

power of, 101skills, 181standardized, 135-136tasks versus, 96, 99-104

procure-to-pay process, 102-104procurement services, 165producer-focused schools, 237productivity

developed economies, 221, 223growth, 34

Progeon (Infosys), 163protectionism, 231

Q–Rquality infrastructure, developing

economies, 214-216Quintiles, 21

rapid growth, predictions for the future,245-246

reallocation of resources, higherstandards of living, 235

regulations, developing economiesenvironment challenge, 207-209foreign investment in services,

210-217regulatory requirements, as factor

against offshoring, 72relationships

as component of a process, 108vendor evaluation, 125

remote bedside terminals, 2

328 INDEX

remote concierge services, 253, 259“rent-a-programmer” business, 149reporting performance, as managerial

role, 178research services, 259resources

allocation, 177country profiles, 171

restrictive regulatory requirements, asfactor against offshoring, 72

retirement communities, 256review periods (SLAs), 141rewarding performance, as managerial

role, 177reworked processes, 194rise of global business culture, 81-83risk identification, as step in offshoring

process, 114business operations risks, 118-119customer, employee, and capability

risks, 119-120geographical/location risks, 115-117holdup/strategic risks, 120-121migration risks, 117-118

Rodrik, Dani, 229Romania, 267, 280-283Roy, Raman, 17, 153, 203Rubin, Brad, 188Russia, 266, 288-291

Ssafe offshoring industries, 18

clinical trials, 20-22drug development, 20-22equity research, 19legal research, 19-20

Samuelson, Paul, 226scale (vendors), 158scale of projects, predictions for the

future, 250-252Scott, Tony, 250screen process subphase (Six Sigma

project, transition phase), 130search and information costs

(TCE), 55sectors

country profiles, 171India exports, 23

security breaches, 116senior executives, 178senior managers, 179, 196

separability, as outsourcing factor, 65Serebra Connect, 251service contracts, 91service level agreements (SLAs), 56, 91,

140-141service providers, vendor

selection, 124services globalization, drivers of,

10-11, 73digitization of business processes, 74-

76global market liberalization, 74growing capabilities around the globe,

78-80low-cost, high-speed computing and

telecom, 76-77rise of global business culture, 81-83

services shift argument, 43-44setting goals, as managerial role, 176Singapore, 268Singapore Airlines, joint ventures with

TCS, 163Sitel, 153Six Sigma project phases, 129skill sets for offshoring, 13, 175

analytical skills, 183-184generic process of management, 176-

179global sourcing operations, 181-182negotiation skills, 185-186organizational challenges, 186

availability issues, 189-190Penske Truck Leasing example,

190-195soft skills, 185-186traditional back office operations, 179-

180skills development, policy measures for

developing economies, 216-217SLAs (service level agreements), 56, 91,

140-141social repercussions challenge,

developing economies, 209-210soft skills, 185-186software development task force, 218software exports, India, 151-152software technology parks (STPs), 214software-specific investments, 152sourcing

goals, 11, 89-90efficiency-focused sourcing,

90-92

INDEX 329

enhancement sourcing efforts, 92-94

transformational sourcing, 94-96

landscape, 158BPO-specific firms, 165-166captives of multinationals,

159-162multinationals, 164-165offshore-based IT service

providers, 162-164options, 60

business importance, 63-64make or buy decision, 61process characteristics, 64-69

South Africa, 265, 291-293specialties

Brazil, 300Chile, 302China, 287Egypt, 279India, 310-311Philippines, 275Poland, 296Romania, 283Russia, 290South Africa, 293Vietnam, 306

Spectramind, 17, 153, 165speech recognition (SR) field, 25spillovers, 203SR (speech recognition) field, 25Sri Lanka, retirement

communities, 256standardized processes, 135-136standards of living

accumulation of resources, 235innovation, 236reallocation of resources, 235

STPs (software technology parks), 214strategic risks, 120-121strategists (managers), 176strengths, weaknesses, opportunities,

and threats (SWOT) analysis, 51, 171

subprocesses, 100super-processes, 100supply, 143-147support activities, value chain approach,

51Sutter Health, 3Sutton, Willie, 202

SWOT (strengths, weaknesses,opportunities, and threats) analysis,51, 171

TTAA (trade adjustment assistance), 232talent overriding cost savings,

predictions for the future, 249-250talents, global talent search, 156-158targets (SLAs), 140task maps (process mapping), 109tasks, offshore process

identification of, 105-108influence on offshoring options, 166-

169integration of, 131-133migration of, 128processes versus, 96, 99-104reorganization, 36

Tata Consultancy Services (TCS), 6,148-150, 250

tax policy, regulatory environment and,209

TCE (transaction cost economics), 9, 54bargaining costs, 55-56cost minimization, 58-59search and information costs, 55transaction variables, 57-58

TCS (Tata Consultancy Services), 250agreement with Burrough

Corporation, 148-150joint ventures with Singapore Airlines,

163teams, vendor selection, 123technological innovations, 4technology

decoding, 111-114services, 215

telecom infrastructureas driver of services globalization, 76-

77policy measures, 214

teleradiology, India, 27-30Teleradiology Solutions, 29Thailand, 270third-party vendors, captive operations,

19toolkits

Genpact, 129process mapping, 109

330 INDEX

trade adjustment assistance (TAA), 232trade and investment flows, 33-37trade zone incentives, 213trade-to-GDP ratio, 1traditional economic models, 56traditional office operations, 179-180training and control design subphase

(Six Sigma project, transition phase),130

transaction cost economics (TCE), 9, 54bargaining costs, 55-56cost minimization, 58-59search and information costs, 55transaction variables, 57-58

transferability, as outsourcing factor, 67

transformation of the global economy,38-43

transformational outsourcing, 94-96, 195

transition phase (Six Sigma projects), 129

transition toolkit (Genpact), 129TransUnion Interactive, 188travel anxiety, 193true processes, 193TutorVista, 252two-way travel increases, predictions for

the future, 254-256

UU.N. Center on Trade and

Development (UNCTAD) survey, 210

U.S.-based captives, 161Ukraine, 269uncertainty (TCE transaction variable),

57UNCTAD (U.N. Center on Trade and

Development) survey, 210user-focused schools, 237

Vvalue, as component of a process, 108value chain approach (economic

framework), 9, 50analysis and strategy formulation

process, 52insights, 52-53

primary activities, 51support activities, 51

Vantage Partners, 184variables (TCE and transactions),

57-58vendors, 158

BPO-specific firms, 165-166captives of multinationals, 159-162multinationals, 164-165offshore-based IT service providers,

162-164selection, 122-127tools for monitoring, 259

venture capital, 82video conferencing, 2Vietnam, 268, 304-306virtual private networks (VPNs), 28VISICU, 3VoIP (Voice over Internet

Protocol), 77VPNs (virtual private networks), 28

W–ZWachovia, transformational outsourcing

with Genpact, 95Wal-Mart, low-cost strategy, 53WANs (wide area networks), 28Warren, Nicholas, 234WDI (William Davidson Institute), 6Welch, Jack, 151White House Council of Economic

Advisers, 221wide area networks (WANs), 28William Davidson Institute (WDI), 6Williamson, Oliver, 54Wipro Technologies, 17, 29, 150, 250WNS, 165

Young, Allie, 90