Globalization and offshoring are two words that basically mean the same thing but have very different perceptions, depending on what part of the world you are in.
Having worked in the United States for over 20 years and in India for the last three, I have seen firsthand the changes taking place in both nations. And I think "globalization" is the appropriate term to describe the offshoring phenomena occurring around the world today.
Rapid developments in telecommunications and the adoption of Internet technology have enabled fast-moving companies to leverage globalization to their strategic advantage.
Many of the largest U.S. banking companies have worked with an Infosys or a Wipro on software. The bankers can discuss their business requirements and software specifications in the United States, the development takes place in India, and the delivery and execution occur across the globe.
This model affords two significant advantages: It's a 24/7 working model, allowing for development to occur seamlessly around the clock; and there are significant cost advantages in using a competent, low-cost talent pool that is well versed in engineering and technology.
Companies that do not take advantage of this phenomenon will slowly but surely find it difficult to survive in an increasingly competitive global economy.
Consider the amazing growth of Infosys Technologies, a Bangalore, India, company that provides consulting and information technology services to clients around the world. Established in 1981, it needed almost 25 years to reach $2 billion of annual revenue, a level it reached in 2005. It then took just one year to cross the $3 billion threshold. This growth is being generated from a global set of clients, 60% of which are based in the United States.
As the globalization of software-related services grows and matures, companies will look for the next area where they can improve their productivity. I predict that will mean adopting the globalization model in analytics operations. From a consumer banking perspective, analytics encompasses any functional area that requires leveraging available data and information, along with talent well versed in statistical and econometric skills, to make better business decisions. These functions are usually called risk management, decision management, customer relationship marketing, database marketing, etc.
A few U.S. financial services companies have ventured down this path. General Electric Co. was one of the first movers, setting up its back-office company, GE Capital International Services, in India 10 years ago with operations that initially focused on "business processes." A few other large firms have since followed, including American Express Co. in 2001 and Citigroup Inc. three years later. Gecis also started working on many analytic functions, including risk and decision management for GE's consumer and commercial lending operations.
Globalizing analytics will be possible essentially for the same reason Infosys has done so well in technology: the global availability of affordable analytical talent well versed in statistics and econometrics, leadership talent with deep domain knowledge, and a business model that provides round-the-clock delivery.
But working on information-related processes requires a set of controls: selective access to sensitive customer-level information as well as tight data security. In addition, a significant part of analytics involves understanding the local economy and its consumer mindset.
Although this issue is more challenging than data security ones, companies in India are tackling this by sending employees to host countries for two or three months for "immersion" assignments. Moreover, the ready availability of global news across television and the Internet, as well as the significant number of expatriates, are helping bridge the gap between the data analyst working in Bangalore and the U.S. consumers shopping their local malls.
We are in the initial stages of a renewed wave of globalization. The success and rapid adoption of technology, combined with the globalization of software and business process-related services, will help companies move up the value chain of information-based services.
