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24 May 2003

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Too late to form a cartel?

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Dear Friends,

About 15 years back, the Indian software industry's outlook was not
too rosy. Glorified body-shopping outfits - they were fighting on
just one variable: billing. Indian companies would start bidding at
rates of $30-40 an hour and then settling for $15 or less.

The situation was clearly not sustainable and Nasscom was brought
into the act. Then a single-room operation, the association's
leaders sat together with a single-point agenda: to ensure that
Indian companies do not undercut themselves to the point of
committing hara-kiri. It was decided they would not go below a
pre-determined level - set at $18 an hour - come what may. Today's
giants will perhaps resent acknowledging that they formed a price
cartel then, but this approach was probably instrumental in
nurturing the industry.

Today, BPO company CEOs urgently feel the need to agree on pricing
benchmarks. Raman Roy, co-founder of Spectramind recently said that
he fears that the BPO business will go crashing like the medical
transcription industry. "Quotes coming from some players are just
not sustainable. Those prices are not commercially viable."

When the issue of a price cartel came up last year at the MTIndia
meet, there were few takers. Reasons given were:

(i) How do you enforce this?

(ii) Let market forces decide!

(iii) MTSOs were at different stages of maturity - a cartel could
work only amongst equals.

(iv) The industry is too young!

Given the level of competition in the marketplace, MTSOs are
tempted - and even forced - to undercut one another to ensure
bagging a contract and then end up making losses trying to deliver
at those rates.

CEOs and boards need to protect their companies and the Industry in
such a scenario. They may want to leaf through the Nasscom book
circa early-1990s to be profitable and benefit the industry in the
long run.

Hope you all had a Happy MT Week!

Enjoy!

Maj (Dr.) Amit Chatterjee, SM
Strategist / Founder ~ mailto:amit@...
MT India ~ www.mtindia.org
"The Community of MT Professionals"

"It takes years to become an overnight success! Inch by inch, it's
a cinch."

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NEWS AND VIEWS :
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1) World Medical Transcription Week launched

Recognition and respect for the back-end people in the medical
industry, who largely remain ignored, was one objective of the
World Medical Transcription Week inaugurated on Saturday.

Organised by Max Healthscribe, the World Medical Transcription Week
celebrated the over 6,000 people strong, Rs 160-crore medical
transcription industry in India. The theme is: 'Medical
Transcriptionists - out of this world'.

The week began with a march by 300 medical transcriptionists in
Koramangala.

http://timesofindia.indiatimes.com/cms.dll/xml/uncomp/articleshow?m
sid=46702453

2) Software firm chief arrested for duping customers

The Central Crime Station investigators on Thursday arrested Vinsri
Infotech managing director C Suresh for duping 1,500 clients to the
tune of Rs 20 crore.

The company provided the data entry of novels, medical
transcription, management and e-Books and paid Rs 30 crore of the
Rs 40 crore deposits to the clients towards the bill for the data
entry work.

The company, which appeared to have been sailing smoothly, ran into
rough weather in February this year when cheques issued by Suresh
were dishonoured by bankers due to non-availability of funds.

http://timesofindia.indiatimes.com/cms.dll/xml/uncomp/articleshow?m
sid=45811107

3) What takes a Citiflier to Progeon

Tell Bhargava about commoditisation and customers dumping you
overnight for a few cents less, and he argues that it depends on
what work you do for them. He categorises BPO work into four kinds.
At the very basic level, outstanding skills aren't required and
success is dependent on tight cost management, as in a commodity
(medical transcription, for instance). At the next level there's
some business risk - for example, the call centre sort of work,
where the key is capacity utilisation.

The third category is the market for knowledge services like equity
services, medical or legal summary, where you need specialists,
lawyers, economists. Here capacity utilisation is irrelevant. It is
really the quality of the output levels that matters. The fourth is
what Bhargava calls 'transaction processing', which calls for
unique product knowledge and where you have to ensure business
continuity and have good output processes.

http://economictimes.indiatimes.com/cms.dll/xml/uncomp/articleshow?
msid=47188770

4) Philippine leader aims to lure more outsourcing

Philippine President Gloria Macapagal Arroyo visited with President
Bush and was feted at a White House state dinner, came to the
nation's financial capital yesterday to pitch US companies on the
benefits of moving some of their key business and technology tasks
to her island nation.

But they don't expect the Philippines to rival India's strength in
high-tech areas such as software engineering. ''To take on India in
software development is ludicrous,'' said Roberto Romulo, senior
adviser to Arroyo and former president of IBM Corp.'s Philippine
operations. ''No way we can catch up.'' Romulo's great hope is that
his nation can become a power in the larger field of ''business
process outsourcing,'' such as medical transcription, accounting,
tax preparation, and customer service call centers.

http://www.boston.com/dailyglobe2/142/business/Philippine_leader_ai
ms_to_lure_more_outsourcing+.shtml

5) Bangladesh Opens IT Center in Silicon Valley

Bangladesh threw its hat into the worldwide race to benefit from
the huge global IT market by coming to the center of the action: It
opened a 2,000-sq. ft. office May 11 in the heart of Silicon Valley
headed by an expatriate semiconductor engineer. The project, with
an annual budget of $400,000, is supported by the World Bank and
the country's commerce ministry.

There are about 200 software companies in Bangladesh, and at least
30-40 export abroad to the U.S., Europe, Japan, and Australia.
Exports include software, medical transcription, contact centers,
pre-press graphics for Europe, cartoon animation for Canada and
Australia. Over 20 companies have ISO 9002 certification.

http://news.ncmonline.com/news/view_article.html?article_id=a658e6f
21612e82c5b731de3408c6fc6

6) The BPO juggernaut starts rolling

How technology compresses change! It is no longer the age of
software, which has matured, is facing pricing pressure and has
lost its stock market shine. It is now the age of business process
outsourcing (BPO).

Till a few years ago it used to be called IT-enabled services,
denoting the manner in which individual services like data entry,
responding to calls, medical transcription and simple data
processing were delivered. But somewhere along the line, entire
business processes began to get outsourced, giving rise to BPO.

http://www.business-standard.com/today/story.asp?Menu=26&story=1475
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The MTIndia Team
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