Issue link: https://www.e-digitaleditions.com/i/65226
The APAC Market A Flyover Amongst South East Asian locations, the success of the Philippines stands out. With costs and basic skill levels which are comparable to India's, the Philippines society's "softer" attributes—its cultural affinity with the United States, an accommodating customer service manner, and its workers' relative accent neutrality—all give it an edge over India in the provision of voice-based services. It is highly successful in servicing businesses outside Asia, but access to both English and Asian language skills also positions it to serve clients throughout APAC. In parallel, many commentators predict an increase in the importance of Vietnam, given its workers' language and IT skills, plus a rapidly improving infrastructure and business environment. Malaysia is also widely viewed as having good growth prospects, supported by government incentive programmes, along with other advantages, including its linguistic and cultural diversity. But some observers point out that ultimately neither country can rival the scale of resources available in India and China, and will need a clearly differentiated value proposition—such as that found in the Philippines—to enable solutions providers to pinpoint exactly which products and services they are best placed to deliver. For its part, Singapore plays a niche role, particularly in the financial sector. Although relatively high cost, it offers unusually strong data security. In Australia, service delivery primarily remains focussed onshore: "Processes such as benefits processing, payroll for complex union-driven pay schemes, and sourcing candidates for key roles can all be more cost effective overall by delivering all or part of the process from within Australia," explains Mary Sue Rogers, global managing director of HR managed services at Talent2, a leading HRO solutions provider in APAC. Although Southeast Asia locations are currently capturing a substantial share of growth, India and China's vast and skilled labour pools, the maturity of their HRO experience, and significant opportunities in lower cost cities will ensure their continued success, says Rajesh Ranjan, particularly in non0voice offshore services. In India Xerox Business Services has already started to expand from Tier 1 cities such as Delhi and Bangalore to Tier 2/3 cities including Kochi, Indore, and Vadodara, explains Khan: "Tier 3 cities in India and China are the new emerging locations." Mary Sue Rogers agrees: "The issue is less about new geographies and more about a shift to Tier 2 and Tier 3 cities. . . . established countries." It's about new cities and new locations within Ranjan also sees China strengthening its position in voice-based services to higher wage economies in East Asia, and Khan expects both India and China to shift towards higher value activities: "With the maturity of the services industry, organisations are shifting their focus to innovation. This is where we expect the established players like India and China to dominate, as they already have the subject matter expertise required to innovate and evolve this business." So will there be winners and losers, or can we expect new service models to emerge which play to the relative strengths of different locations? Khan offers one view of how this might play out: "We believe a hybrid model is in the making—Tier 1 (Call Centre) based in the Philippines, Tier 2 (Transactions) based in India/Malaysia, and Tier 3 (Application Development) located out of India, Vietnam and Malaysia." Emerging locations have to tick more than just the "low cost" box. Talent 2, which operates 10 HRO service hubs in APAC, is careful with selection criteria when evaluating the potential of a location: "We look at the quality of skilled labour which is available, access to language skills, local social and employment policies. . . . We want to create a high performance environment," says Rogers. Balancing onshore and offshore elements is also essential. "In the case of payroll, for example, when there are very complex pay agreements, having the right skill set onshore as part of delivery is very important," she adds. "Getting the mix right on what processes are delivered from where (remote or local) is critical to having high quality." In markets without mature HRO services provision, teething problems can be more acute: migrations require careful planning especially if continuity of services is at stake; and solutions providers need to pay close attention to training particularly for higher value HRO services which require stronger skills. Lee Slater, group head of talent acquisition at global banking group Standard Chartered, says the client-supplier relationship also needs to be on the right footing: "Close partnership in the early phases of the relationship to build a deep understanding of culture and the 'way we do things,' combined with service management and key management controls, are critical to ensuring a great candidate/applicant/employee experience and making sure expectations are met, regardless of whether it's an offshoring or HRO arrangement." Global and Regional Drivers A significant proportion of demand in APAC is driven by global deals signed with clients headquartered outside the region. Often, global clients want to scale up rapidly to accommodate growth in new territories in the region; leveraging the skills and capacity of solutions providers can be a cost effective way of doing this. "Our focus on priorities such as agility and scalability isn't impacting how we engage HRO solutions providers—most providers are capable of addressing these priorities," says Lee Slater, "Instead it's influencing which providers we engage. With operations in more than 70 countries spanning emerging markets in Asia, Africa, and the Middle East, we need to ensure we select the right partner who can help us scale in less traditional HRO markets." Fast growing regional businesses are also recognizing the potential of HRO. "Asia Pacific centres were initially set up to serve a global, U.S., and European customer base," explains Khan, "however we see a lot of activity with regional and local customers who want to leverage the mature delivery set up in place in Asia." Global economic uncertainty is encouraging them to focus on cost effective and flexible ways of scaling up: "They are taking a much closer look at their fixed and variable costs," says Rogers. This is creating further HRO opportunities, adds Khan: "As major economies in the region continue to develop, the need to focus on the core business is being felt more than ever before. Noncore businesses are being outsourced to best of breed service providers, and HR services are no exception." [10] HRO TODAY GLOBAL | WINTER 2012