Why It's Time To Tap Into Japan

[Sunbelt Asia]

Bangkokpost

Why it's time to tap into Japan

Gartner report points to Japan as the best market for Thai outsourcing services

DON SAMBANDARAKSA

The result of a study into the potential of Thailand's business process outsourcing industry by Gartner Research has identified the Japanese outsourcing market as the most promising for Thai businesses to tap into.

The reasons cited were the close ties between the two countries, lack of animosity during the Second World War and the fact that at any one time, there are around 200,000 Japanese executives living in Bangkok and Chiang Mai who can provide guidance and training.

Presenting the findings here recently were Gartner researchers Bob Hayward, Sujay Chohan and Charles Chun.

"It is still the second largest economy in the world, the costs of doing business there are the highest in the world and their population is declining at half a million people a year," Hayward said of Japan.

He said that while the Japanese seemed to think they could solve their labour shortage through the use of robots, the reality was that they would have to outsource and to offshore. So far, they have outsourced to China, in spite of the tense relationships between the two countries.

Hayward said that the only reason they are not outsourcing to Thailand was that no Thai company had gone there offering BPO services. He said that Thailand and Japan were the only major Asian countries not to have been colonised, shared a respect for the Buddhist religion and for a monarchy, and most importantly had not fought each other during the war.

"Japan is Thailand's largest investor by far and at any one time there are up to 200,000 Japanese executives here, many of whom refuse to go back to Japan after their assignment. That is why parts of Chiang Mai and Bangkok look a little bit like Tokyo," he said.

Chohan spoke of his own experience with the Indian IT explosion - the media hype through to the backlash in the US on how it was taking jobs away. He noted that today India was suddenly facing a severe shortage of skilled IT workers and said it would take them a further three to four years for new universities and vocational institutions to balance out demand and supply.

This means that today India can no longer take on low-end work and businesses are looking for partners in countries such as Thailand to meet the shortfall.

However, business process outsourcing was a different story, Chohan said. Unlike IT outsourcing, BPO only needed vocational training.

Typical business processes are transcribing application forms for credit cards through to basic processing, such as for insurance claims.

BPO is no longer a matter of the US sending forms to India or the Philippines. It is as much about Japanese companies outsourcing business processes to the Japanese-speaking community in Dalian, China or the Spanish speaking community in the US outsourcing to Ireland and Spain.

Chun noted that Ireland and Spain had reaped enormous benefits from relaxing their immigration policies, allowing for a multinational, multi-lingual workforce to come and settle very easily. For example, it has led HP and Dell to set up massive, multi-lingual call centres there.

Chohan noted that education and sustainability were the most important things that investors looked at, especially given the skill shortage India was now facing.

"Infrastructure is also important, with 99.999% connectivity uptime crucial," Chohan said. "Government support becomes critical. They are keen to know what are the incentives and will these incentives survive political upheaval."

Another issue that the study looked at was cultural compatibility, not so much of cultures themselves, but of how well Thai people would fit in with foreign business practices. Any BPO partner would also have to comply with the data and IP security laws of the outsourcing country and, in the case of US-based companies, must now be subject to audit by US regulators.

Chohan said that the proofs of concept that BPO worked in Thailand already existed, with 10 major multinationals having BPO centres in Bangkok supporting their corporate needs worldwide, each with 200 to 500 people.

In order to move forward, the analysts from Gartner said that a top-level policy must be put in place. Commitment here must also come from the very top and the government must invest in Thailand's image as a destination for BPO investment, not just as a tourism destination.

The other major issue is Thailand's limited international connectivity. Gartner said that the NTC's approval of a new Internet gateway licence to True was a good step but much more had to be done to overcome the image of Thailand being an expensive and unreliable destination.

The analysts recommended that Thailand focus on repeatable, rule-based tasks that are standardised across many companies. For instance, data entry, data transcription and basic rule checking for insurance claims. Later, the companies could move up the value chain.

Thailand should also continue to focus on English. Chun noted that all of the Lenovo meetings in China were now conducted entirely in English and that by 2008, it was expected that China would be the world's largest English-speaking nation.

Hayward noted that while Thailand had many good government policies, many fell apart on a practical level. He cited his personal experience, having moved to Bangkok four months ago, with immigration. The policy was to simplify procedures and have a single form to fill it, but the result was one of the longest and most complicated forms he had ever seen.

The most important thing was that experience in India had shown that it had to be a public-private partnership, with the government helping to invest in the Thailand brand and ensure adequate supply of vocationally trained workers, he said. "When we did the study and talked to people, it was suprising how few people knew what BPO was or how it was a viable career choice," Hayward said.

Chohan said that it would not be too far-fetched to think of converting the old Don Muang airport into a BPO city, as the Philippines had done the same with the former US Clark Air Force Base. He also noted that having the right people in leadership roles was also important.

Hayward said that there was little point in continuing to promote the Thai IT industry the same way that it has been promoted due to labour shortages. "People who today complain that it is hard to find Java programmers will find it even harder tomorrow," he said.

Sipa president Arvuth Ploysongsaeng gave a closing speech promising that he would immediately set up a task force to tap into this 1.7 trillion baht industry. The taskforce would comprise members from Sipa, the ICT Ministry, the Board of Investment and the Finance, Commerce, Industry, Interior, Education and Foreign Affairs ministries to look into the Gartner recommendations and fix the weaknesses while building on the country's strengths.

"We need to remember that this message [from Gartner] may have pointed out some embarrassing points but the important thing is that we need to listen to this constructive criticism and change, rather than feel resentful of it," he said.

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www.sunbeltasiagroup.com

[~G~]

Thailand should also continue to focus on English.

Exactly. All of the above is quite meaningless without the language skills. But... didn't Thailand lately revised its policy to make it harder on foreign english teachers?

[LaoPo]

Bangkokpost

Thailand should also continue to focus on English. Chun noted that all of the Lenovo meetings in China were now conducted entirely in English and that by 2008, it was expected that China would be the world's largest English-speaking nation.

www.sunbeltasiagroup.com

Whoever said or wrote this must be dreaming...

2008 is just 2 years away and although China is putting a lot of effort to teach youngsters English it is far away yet of becoming the worlds' largest English-speaking nation.

Wherever you go in China, and I'm not even talking about 'small' cities (less than 1 million) virtually NOBODY speaks English.

I should know...my wife is Chinese and I travel a lot overthere; it's a real pain to have yourself understand in China.

But, I admit, Thailand should DO a lot more, teaching the youngsters English and make it more easy to 'welcome' English teachers in order to help the country 'forward' instead of making it more difficult.

Shame on the Government; short-sighted they are!

LaoPo