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To ask you a question: What is common between designing an airplane wing and an automobilet's high-tech diagnostic system? Probably, nothing! But, what you didn't know either is, that there is an India Inc. component in both. What some of you might not know either is that global majors, from Boeing to Airbus are getting the former done in , while DaimlerChrysler, Ford and BMW are outsourcing the latter to Indian vendors.
Together, the two outsourced services have elevated the kind of work being wired to . Part of the engineering outsourcing services business estimated at $7-12-billion globally, currently, India-based vendors like HCL Technologies, Satyam Computer Systems, Infosys Technologies, Wipro, TCS, GE India are undertaking work worth an estimated $400-500-million annually, and which is set to boom, further. According to Kiran Karnik,President - NASSCOM: "In both automobile and aerospace there is a lot of interest among global majors. This is from the point of selling, manufacturing and designing. We see engineering services such as design work, stress tests, flight management systems for aircraft as one of the next big off-shored opportunities for .
Already, Infosys Technologies has worked on designing a part of the Airbus A 380-wing, currently under-going test flights. Also, working with Spirit Aerospace, which earlier was a part of Boeing, Aerospace comes under its 5,000-people strong product Engineering and Life Cycle practice and comprises 10% of Infosys revenues. In addition, HCL Technologies, another Indian vendor also has a 1,000-engineers working in the aerospace arena.
Dushyant Naagar, Senior Manager, Aerospace Technologies - HCL Technologies: "We are working on various systems for the Boeing 787 scheduled for take-off in 2008. The systems include flight management and landing gear. We have also worked on Airbus A 380, with their Tier 1 suppliers." And, apart from working with airplane manufacturers, HCL works with aerospace suppliers, as well, like Hamilton Sundstrand.
ncreasingly, western majors are coming to , not only because of cost effectiveness, but for the fact that and other emerging markets are fast becoming important manufacturers. In fact, the Indian Civil Aviation Industry is reputedly working on chalking out a policy that insists a certain percentage of work must be sent to , whenever the latter buys aircraft from Boeing or Airbus.
As for automobile outsourcing, the industry gets a boost as makers can reduce IT costs per car by as much as 60%. Another Indian IT major, Wipro Technologies has a team of 1,000-people working on developing applications for global car majors. And, Genpact's 1,000-in number staff executes finance, accounts payable, analytics and procurement tasks for global auto makers and auto-related BPO tasks.
All this leaves Kris Gopalakrishnan, COO - Infosys Technologies quite gung-ho about the future of aerospace engineering outsourcing, despite the fact that though outsourced projects in this industry may bring good billing rates, the margins maybe better but risks are also higher due to the cyclical nature of this area.
The above is a fair indication of which way the off-shoring / outsourcing game is going. Starting out with lower end outsourced projects, has steadily shown itself to be an accomplished game player in every field from IT to aeronautics to the automobile industry, and the list is endless. Today, it is taking on high-end outsourcing projects, tomorrow it will have taken on the world!
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Best Practices in Outsourcing
When your company is planning to have a long-term offshore outsourcing relationships with th eprovider, the foundation of the success of this venture should be laid during the negotiation period itself.
When your company is planning to have a long-term offshore outsourcing relationships with th eprovider, the foundation of the success of this venture should be laid during the negotiation period itself. The cornerstone of this negotiation period will be the SLA or the Service Level Agreement. The aim of outsourcing is to gain value for the host organization. There are several contrasting views however regarding how to maximize value and minimize risk by outsourcing. The following best practices can serve as a guide when structuring your SLA, and then implementing and maintaining a relationship with the chosen provider. Five Golden Rules For Offshore Outsourcing Defined:
1. Develop enduring relationships between key management personnel. The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them. Studies on outsourcing success stories have demonstrated that working chemistry in management and peer friendships among employees have proved to be important determinants in forming long-term relationships that yield real value.
2. Present a Quantifiable Objective. A useful performance criterion includes quantifiable objectives and clarifies expectations of the quality of service. If you can get ahold of SLAs for comparable projects, they will serve as reasonable starting points—but remember, these are negotiable. In any event, ensure that exact objectives and expectations are included in the SLA and are understood by both organizations prior to implementation.
3. Pre-determine the Incentives and Penalties Schemes. The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria. If performance of the service provider exceeds expectations, then incentives should be given; conversely, appropriate penalties should be imposed if objectives are consistently missed.
4. Review Periodically to Maintain Successful Relationships. Organize formal review meetings often. During the meetings, both sides can discuss the performance of both teams and determine the future objectives or goals of the company accordingly. They can also discuss product reviews and deliverables during these meetings. Keep in mind that performance objectives may need to be continually revised according to changing market conditions and the opportunity costs of both firms.
5. Communicate Well & Often to Bridge Cultural Differences. The parties involved in an outsourcing relationship belong to distinct cultures, these differences have to be accepted and bridged. The cultural understanding between the two organizations can be enhanced by organizing social events, educating about company background, participating in each others' quality programs, etc. Communication really is the key to a healthy relationship. It may be helpful to send a loyal employee to the BPO site for a few months to facilitate understanding in the implementation phase.
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Kundali