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Latest buzz on BPO block: dual shoring

Parvathy Ullatil in Mumbai | March 19, 2004 09:03 IST

Near shoring is becoming passe. The latest buzz on the business process outsourcing block is "dual shoring" -- operating out of two global delivery centres, one in the United States and the other in India.

Indian BPO companies seem to have devised an ingenious method to work their way around the US-led backlash against offshoring. The technique is simple: operate an office in the US that employs a few American workers and let them handle 10-15 per cent of the project work. The rest can safely be offshored to India.

"We call it dual shoring. We run a legitimate delivery centre in the US where 10-20 per cent of the work on many of our US projects gets done. This gives us a front office in the US to interact with the customer and also gives the customer a choice of geographies. It also works as a global disaster recovery centre to ensure business continuity," said Ganesh Natrajan, deputy chairman and managing director, Zensar Technologies.

Traditionally, most BPO companies run a sales and marketing front office in the US, but the trend is now changing. Companies seem to be getting a part of their process work done in the US too.

"Typically, there are layers of services. So, while the tier one, rule-based work gets done in India, work that requires more intricate knowledge of the local legal technicalities can be done in the US. This way, service can also be rendered differently on a customer-to-customer basis, depending on their preferences," said Ravindra Datar of Gartner India.

The "dual shore" operation will not dilute the cost arbitrage or erode the margins of BPO companies. "Most companies get their US front either through collaborations with US partners or through the acquisition route. In both cases, there is no question of margins getting impacted as the dollar salaries paid in the US are factored into the business proposal," pointed out an industry observer.

The acquisition route definitely seems to be the more popular method with companies like ICICI OneSource, Datamatics, Godrej, Intelenet and the Essar group picking up small BPO companies in the US.

"We have acquired two US-based companies in the US which has given us 300 employees in the country," said Manish Modi, managing director and CEO of Datamatics Technologies.

This gives us a good front to interact with clients in the US and also a team of experts who can handle the higher-end processes," he added.

Buttered, both sides

  • BPO firms operate offices in the US that handle 10-15% of the project work; rest is done in India.
  • Front office in the US interacts with the customer and handles local issues.
  • Traditionally, most BPO firms run a sales and marketing front office in the US.
  • Dual shore operation will not dilute cost arbitrage or erode margins.

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