The age of outsourcing to India for the cheaper labor costs is over, according to S. Premkumar, corporate officer and global head-financial services at Indian outsourcing firm HCL Technologies. Where once a function performed by 100 U.S. employees could be handed over to 100 Indian employees who could do it for significantly less, the diminishing value of the dollar combined with the strengthening of the rupee and increasing salary levels in India have wiped out the benefits of such labor arbitrage, he points out. Captives, too, have lost their luster, Premkumar says - they don't grow well because they're too focused on cutting costs and they're not good at sharing people and resources.So then, why outsource? Premkumar, who is in town for HCL's Investech road show, says outsourcing firms need to act more like partners and help companies with business transformations. With the right automation in place, work that today is done by 100 U.S. employees could be handled by 60 people anywhere.
HCL wants to evolve into a global systems integrator, a la EDS or IBM, with a focus on business, technology, application and data transformation. It has already built its financial services practice to $500 million over the course of the last seven years. Currently, the firm has around 10 Wall Street clients, and several are engaged in business process optimization projects using primarily Tibco, Fuego and EMC software. "Business process optimization is at the top of the agenda of every CIO we meet," Premkumar says. One financial client, for instance, wanted to shorten a credit decision process from 16 days to one minute. According to Premkumar, HCL created a new process, based on Filenet software, that now takes 37 seconds. HCL is also involved in projects for transforming data management, risk analytics, and research distribution.
Where five years ago, capital markets firms' parameters for outsourcing contracts were things like the ability to scale and CMM certification, today those are givens, and customers seek domain (industry) expertise, value beyond arbitrage, and a high level of integration among locations, people and systems, says Premkumar.