Outsourcing: Evalueserve Interview (Part 3)

By guest author Tony Scott

Global Delivery and Talent Acquisition

Tony: Obviously, to do that kind of knowledge-based outsourcing requires specialized talent. How do you build that capability?

Alok: We are hiring people in four centers: in India in New Delhi; in Shanghai; in Chile just north of Santiago to cover Latin America; and in a university town in Romania to cover Europe and in particular German, Italian, Russian, and Eastern European languages.

We chose those places very carefully to make sure that we could hire MBAs and accountants, CFAs, statisticians, and engineers, and it has been an interesting process. For example, I initially did not think that Chile would be a good place. What we found out was that Chile has a very good immigration policy, and after United States and Canada, probably one of the most open immigration policies in the world. This was very surprising, at least to me. Out of 180 people we have there in Chile, we have about thirty nationalities covered. That helps us in hiring people from Brazil and other countries very quickly.

Tony: Very interesting! Have you seen your labor rates increase over the years across all of your facilities?

Alok: They have been definitely been going up in India. Now that we are in our tenth year of operation, we can see that our labor rates have gone up an average of 5.75% annually. We can compare these labor rates even though the Indian rupee has fluctuated massively in relation to the dollar, but right now it is roughly the same as when we started. And when I say our labor rates have gone up at 5.75% annually, I mean labor plus infrastructure costs. Hence our prices have gone up on an average by 5.75% or so annually, which is fairly reasonable.

The bigger problem has been the fluctuations in currency for the Indian rupee compared to the Chilean peso and the Romanian lei, which tracks the euro more than the dollar.

Tony: Of course, the Chinese yuan is tied directly to the dollar.

Alok: Yes, so that is not a problem operationally, although that’s a problem in a different sense. It’s no problem tying it to the dollar, but [the yuan] should be worth at least 20% more, both for China’s sake and the United States’ sake.

It’s no longer only the United States that is hurting; China is going to hurt in the very short run as well. We do a fair bit of research on that country’s economics, and as much as we are worried about the United States going into a “double dip” recession – or at least the potential of not very strong growth – we are quite worried about China at this point also.

Tony: How so?

Alok: A bubble is being created unnecessarily where money has been put in at interest rates that we believe are not sustainable by the Chinese government, and there are already a lot of non-performing assets.

Tony: Certainly there are a lot of non-performing assets associated with state-owned enterprises, and a lot of highly speculative real estate in the major cities of China.

Alok: It’s definitely speculative in real estate, but also in terms of the investment in machinery and manufacturing plants. If they let their currency appreciate too quickly, there could be a lot of people who would be unemployed in the process. That’s why I think the Chinese government is worried, too.

Tony: Do you see that as a business risk? Looking at these four locations that you have, are you maintaining them solely to serve your clients, or is it also partly to provide a hedge against these kinds of risks?

Alok: It’s mainly for the clients; it’s not really a hedging issue. Out of India we can provide services in English, and India continues to be the lower lowest-cost location with respect to these knowledge services. China is about 15% more, but from China we cover primarily Chinese-speaking countries and Korea. Chile is about 33% more and so is Romania, and those offices are providing language capabilities and same time zone coverage in their regions.

This segment is part 3 in the series : Outsourcing: Evalueserve Interview
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