If you thought that the damage is over think again. Here’s some more collateral damage of the fraud at Satyam Computer Services: it may turn the tide against third-party Business Process Outsourcing (BPO) vendors. Post-Satyam, third-party vendors are being subject to closer scrutiny with higher level of disclosures being sought by customers.
Not surprisingly, the captive units (that is, a foreign company’s own backoffice) may find it more attractive to ramp up their services rather than offshore some of their work to third-party players. Analysts say that costs of due diligence of third party vendors are set to go up by 15% and captive BPO units might gain in the process.
“After the Satyam fiasco, clients may again look at setting up captive units even though they are 10-20% more expensive than outsourcing services to third-party companies. A captive unit offers a much more secure model of outsourcing and the increased cost of due diligence may even level the cost.
Clients will be wary of outsourcing critical processes like IT, mutual fund transactions and cash management to third party players,” says Rajnish Kohli, an independent consultant and former head of Fidelity Investments (India).Currently, out of $10.9 billion BPO business, captive units constitute 40%. “While the cost of due diligence on supplier side will increase by 15%, corporate governance will also be a very important criteria for third- party vendors to fulfill,’’ adds Bangalore-based offshore advisory firm Tholons’ CEO, Avinash Vashistha.
Offshoring analysts and captive BPO heads say that now corporate governance will become an integral parameter of judging a BPO vendor. Everest Research, an offshore consultant’s engagement director Kumar Subramaniam affirms: “Earlier that parameter (corporate governance) was less limited as qualifying for a third-party vendor.’’ Source
This entry was posted on Wednesday, January 28th, 2009 at 2:48 am and is filed under BPO News, BPO in India. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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