Source:www.arcweb.com

Satyam Computer Services Ltd., a leading global consulting and IT services company headquartered in Hyderabad, India, had their first “Analyst Day” in Boston this week. Satyam was one of the pioneers of the Global Delivery Model (GDM) almost 20 years ago. Satyam, like other offshore companies, has been growing very fast over the years. In fiscal 2007, Satyam had revenues of just under $1.5 billion and those revenues increased by 33.3 percent on a year over year basis. They ended 2007 with close to 40,000 employees.

Satyam employs the Global Delivery Model for services such as software development, consulting/Enterprise solutions (application consulting and implementation of solutions from companies like Oracle and SAP), Engineering Services, Infrastructure Management, and Business Process Outsourcing (BPO). Satyam is one of the largest suppliers of Enterprise Application services. Unlike their peers, manufacturing is the primary focus for Satyam. 27 percent of their revenues come from the manufacturing sector.

There is a down side to the rapid growth for the outsourcing services industry. Because of their growth, Satyam hired close to 10,000 new employees last year. Further, labor turnover has been a big problem for the industry over the past few years. Unsatisfied workers find it easy to jump to a different company, usually at a significantly higher salary. At some of the top offshore companies, attrition runs as high as 20 percent per year.

Satyam is doing quite well when it comes to employee attrition. They have managed to lower their attrition rate to 14 percent, which would be very high in most industries, but is among the best in class for offshore IT and BPO firms. They have done it partly by bringing their salary and compensation packages in line with other firms in the industry. But, top executives at Satyam believe compensation is a less important factor than other factors, like being challenged in your work and having a career path that looks interesting and rewarding.

One thing related to job satisfaction is the nature of the contracts the company signs. In time and material contracts, the customer exerts a high degree of control on the process and the people. The result is that a fairly skilled employee may be spending 80 percent of their time doing work they consider mundane, and only 20 percent of the time is the employee’s experience being fully utilized. Satyam is putting more emphasis on trying to build much more structured platforms for specific processes, such that the same kind of work can be done for multiple customers on a fixed price basis. In these situations, there is much less customer oversight. The result is that a more skilled worker can spend closer to 100 percent of their time doing things where their experience counts, but for five clients rather than one.

Further, they, perhaps more than any of their peers, have grown their middle management talent pool. Among the 3,000 middle managers they consider most important, attrition is under 10 percent. Among those middle managers who are ranked as their highest performers, it is under 5 percent.

Satyam believes they are doing well retaining and growing their middle management talent pool because of the distributed management model they employ.

“Distributed” management does not refer to the fact that they have a workforce and managers are distributed around the world, it refers to the “distribution” of entrepreneurial responsibility to their middle managers. While Satyam’s major business lines include Enterprise solutions, BPO, Engineering Services, etc., those broad business lines have been broken into about 2,000 distinct businesses where middle managers have profit and loss responsibility. In these businesses, the managers are coached and mentored, but they make the operational decisions and put together business plans in order to get capital to grow their offerings. Leadership training is a good thing, but it becomes much more relevant to a middle manager when they have a high level of responsibility.

To lower their attrition rate, Satyam is also starting to open facilities in smaller cities where the competition for labor with other companies in their industry is low. Also, as the range of services Satyam is providing increases, they are concluding they don’t always need an engineering degree as a prerequisite. College graduates from other areas, when combined with the technology platforms they build to support particular services, and their process discipline, will be capable of providing high quality work.

Source:www.livemint.com

Americans have largely accepted outsourcing, but have legitimate concerns over inefficiency and poor quality

In 2005, I was at a wedding in Ohio and someone seated at my table—a software tester—had nothing nice to say about offshoring. She hated the lack of control over team members in India, their hesitance to ask questions and a time difference that didn’t allow for instant communication. She quit her job in frustration.

Earlier this month, I was at a wedding again, this time in Maryland, and happened upon even more Americans who deal with India on a regular basis. After initial pleasantries about “all the changes in India” and an eventual shedding of inhibition, they largely had the same complaints.
The last few years have been filled with news of Indians moving up the value chain in contracts awarded, creating an assumption that initial “back-office” tasks were performed to relative US profit and satisfaction.

While surveys gauging productivity and client opinion might show such, the ground reality, shore to shore, team to team, worker to worker, actually yields a fair amount of discontent. My admittedly anecdotal discovery comes as Indian services providers fear a strong rupee and skyrocketing salaries will mean work lost to competitors in China and Mexico, Russia and Eastern Europe, Vietnam and the Philippines. And this is precisely why teams in India and the US separated by thousands of miles—and the more immeasurable rift of misunderstanding—need to begin a blunt dialogue.

I figured I’d get the ball rolling this week with some thoughts from The Americans, all of whom I promised anonymity in exchange for raw, no-holds-barred honesty.

“There is no entitlement with US businesses. We’ll drop India for China the same way we dropped the US for India in the first place,” one manager told me from his perch at a technology company that is a household name across the world. “Heck, it’ll be easier as there will be no internal backlash.”

He’s had mixed experiences with offshore teams, specifically praising the cost savings and access to a large labour pool. Often, though, he finds a lack of accountability. “The crappy companies come in after a horrendous project, blame my team when it was clearly their fault… and then ask to take over our entire operations,” he says. “They want the end-to-end business, but they do nothing to gain my trust that they can handle it.”

Turnover, many American managers agree, remains a significant problem. One told me that just as she learned to pronounce someone’s name, it was time for a replacement.

“It’s great for their careers and I totally understand why they do that. But it puts an added pressure on us onshore folks,” said a manager in North Carolina.

“We’ve just spent time and money on technical training, only to have to start over now. I don’t know how that’s supposed to make our business more efficient.”

This particular manager said she was training three Indians offshore and one American onshore at the same time in the same task. “The person in the US was able to complete more work, which was of a better quality. I don’t think she was smarter than the others—the India team was far more educated and had more technical experience. The US person was not afraid to ask questions and used her time more wisely.”

For too long, critiques of offshoring from the US have raised the defence mechanisms and insecurities of Indian workers, who decry the westerners as bigoted and closed-minded. In these 13-odd months before US presidential election, services companies have been devising strategies to fight anticipated anti-outsourcing rhetoric from politicians. Yet most of the people I talked to in recent weeks have accepted the model and rarely begrudge Indians taking jobs. Rather, they had legitimate concerns over the quality of work and an overall lack of efficiency.

To be sure, workplaces that rest on the offshore model have been aware of and obsessed with fixing these problems for years. But the changes have not kept pace with, say, the rupee, which continued its sprint yesterday.

One strategy consultant outside Washington, DC, epitomizes why Indians should urgently address their shortcomings. His business process outsourcing unit operates in the US, India and Ukraine. “They are younger in Ukraine, a lot sharper, more dedicated, work less hours but produce the same or more, take pride in their work, no attrition problem, no 20%-every-year demands,” he said, conceding that scaling up was a problem, but would not be elsewhere.
As for that wedding guest who first raised the red flag, I tracked her down this week through Facebook. Thankfully, she told me, she no longer deals with offshore teams. But she stays in touch with the people from the old organization and had bad news: “Quality has gone down and they lost too many customers for the particular project. …They are sunsetting the product.”