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Asia/South Asia
Full steam ahead in Singapore's outsourcing race
Sumathi Bala

          When Credit Suisse, the Swiss bank, announced in May that it was to expand its back room operations in Singapore by taking on 900 staff, it gave a significant boost to the country's aspirations as a centre for high-end operations.
The bank's decision to move jobs to Singapore rather another popular outsourcing destination such as India or eastern Europe was a coup for the Singapore authorities.
It proved that the direction policymakers had been taking to transform the city-state into a regional hub for high-end business process outsourcing (BPO) was paying off.
Credit Suisse has more than 2,000 employees in Singapore, which has become a popular outsourcing centre for international financial institutions eager to avoid the high rental costs of Tokyo or Hong Kong.
Speaking at a media briefing at the time of the announcement Paul Calello, Credit Suisse's Asia CEO, said the city-state was the best location for its expansion: "Singapore is a vital centre for the entire region, both in terms of our regional business strategy and our regional support operations."
The move follows Merrill Lynch's decision in April to add 800 back office jobs in Singapore over the next two years. Other financial institutions, including Citigroup and Barclays, have set up significant outsourcing operations in the city-state.
According to the Infocomm Development Authority of Singapore (IDA), leading IT players Hewlett-Packard, IBM and Microsoft, have also located their business process outsourcing activities to Singapore to improve their operational efficiency.
The last few years have seen a surge in outsourcing activities in Singapore as the authorities offer financial incentives to multinationals looking at locations for their back office functions.
The move was imperative for Singapore, which was losing ground to China in the battle to retain low cost manufacturing and IT jobs. Moreover, in recent years outsourcing has become the cash cow for a number of Asian countries - especially India and Malaysia - leading to fierce competition.
Increasing recognition of BPO as a viable strategy for businesses trying to gain a competitive advantage has spurred its adoption and market growth. According to research company Gartner Dataquest, the global BPO market is estimated to reach US$173bn by 2008.
IDA expects Singapore's BPO market - worth S$440m in 2005 to almost double to S$817m by 2009, which could enhance Singapore's reputation as a vibrant BPO hub.
To enable local companies to plug into the growing outsourcing market, IDA has set aside S$12m to help local infocomm companies in the development and provision of high value-added BPO services.
To strengthen BPO service delivery, Singapore has established the world's first Business Continuity/Disaster Recovery (BC/DR) standards, adding to its reputation as a trusted and reliable business hub.
Chan Yeng Kit, chief executive officer of IDA, sums up the city-state's advantages thus: "Singapore's strengths lie in its strong intellectual property protection, pro-business attitude, talent pool, and a worry-free stable environment. We are free from natural disasters, politically stable, and equipped with a robust infocomm infrastructure and excellent connectivity."
Singapore's geographical proximity to the larger Asian markets of China and India - and its position between US and European time zones - are also seen as advantages.
Evidence has been emerging that shows the multi-pronged approach taken by policymakers to grow the business is certainly bearing fruit. According to a recent survey of the call centre industry in the region, conducted by the global recruitment consultancy Kelly Services, Singapore's contact centre business continues to grow despite increasing competition from Thailand, Malaysia and the Philippines.
"In the current dynamic market environment, the conventional wisdom is that Singapore may be losing ground in the contact centre business, compared to bigger call centre markets such as India and Malaysia," said Dhirendra Shantilal, Kelly Services' vice-president and managing director for Asia Pacific. "However, the study shows that Singapore is still sought after for its higher-end skill sets in selected industries."
The findings confirm past studies that have also given Singapore top marks. In a 2004 report the US Department of Commerce ranked the city-state as the second fastest growing hub for outsourcing among US businesses, while reports by AT Kearney, PwC and the Economist Intelligence Unit have all found Singapore to be among the top destinations for offshoring.
Industry experts say that although Singaporean employees are on average 20 per cent more expensive than their regional counterparts, this does not act as deterrent because they provide different skills. In fact the latest survey by Kelly Services showed call centre operators in Singapore are recruiting at a faster pace than the Asian average.
Singapore's ability to provide a talented pool of professionals proficient in multilingual and verbal communication skills has given it an edge over its regional rivals.
In spite of the favourable factors, there are critics who remain sceptical and believe Singapore's cost structure is simply too high for it to become, a significant player in outsourcing. But supporters argue that the country will most likely remain a high-end niche player in the long term. Experts believe that as long as Singapore is not seen as a competitor, but a country which can complement China and India by offering higher value-added services, then its position is ensured.
Under syndication arrangement with FE


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