In 2005, Santa Ana’s Ingram Micro Inc., the largest distributor of technology products, set out to cut costs by outsourcing call centers, accounting, data entry and payment processing to other countries.
In some respects, Ingram Micro was late to the game,companies in other industries had gone to India and other countries long before it.
“It is not a thought that was natural for distribution,” said Alain Moni & #233;, Ingram’s president and chief operating officer. “A lot of companies have done it in other areas, like manufacturing. In distribution, it was a novelty. Now our competitors are emulating that.”
Ingram, with yearly sales of about $34 billion, sent some 500 jobs abroad to India and the Philippines as part of a cost cutting effort at its sites in Santa Ana, Buffalo, N.Y., and Toronto.
Such moves were estimated to save the company about $25 million initially, according to Chris Osentowski, director of business process outsourcing for Ingram.
The savings aren’t huge given Ingram’s size. But they are critical for a company that earns just pennies on the dollar delivering computers and other gear to stores and technology service companies.
Like others, Ingram has found quirks in India. Early on, Indian workers confounded Ingram trainers with a difference in body language.
“The (trainers) would ask, ‘does everybody understand?’ And then everybody was shaking their heads,” Osentowski said. “Yet they had passed all of the training exams with flying colors.”
Turns out people in Bangalore, one of India’s top business hubs, shake their heads side to side to mean “yes.”
Ingram had to decide what to send to India and what not. Accounting, data entry and processing payments were sent to Bangalore.
A call center for phone sales, customer service and tech support was sent to the Philippines.
“Anything that didn’t require voice communications with our end customers stayed in India,” Osentowski said. “Anything voice related and customer facing went to the Philippines, because the skill sets there were much more conducive to the customer service and sales over the phone.”
In India, Ingram “wasn’t as comfortable with the voice experience our customers were getting,” he said. The Philippines was a better match because of its workers’ ability “to have a more natural, free-flowing conversation in English,” Osentowski said.
For some Ingram customers, which include big electronics retailers, outsourcing was a tough sell.
“We had a few negative reactions in the beginning from customers and vendors,” Osentowski said. “I don’t think anyone was surprised. For us, it has simply become a way we do business now.”
Language barriers are just the beginning, according to Osentowski.
“It’s small things,” he said. “There is so much of our communication that depends on context or reading between the lines. In an offshore environment, you have to be extremely specific and clear.”
Ingram hired Bangalore’s Infosys Technologies Ltd., a big outsourcing consultant that gets paid by other companies to recruit workers.
Infosys trains workers for two to four weeks before they start separate training with a company like Ingram.
“They get some basic finance and accounting training and take accent neutralization courses,” Osentowski said.
Still, Ingram had some difficult lessons to learn, such as “managing a team that doesn’t necessarily report to you,” he said.
“Our customer service managers are now managing (workers) that effectively report to Infosys,” Osentowski said. “It took us a while to adjust. We had to retrain and support our management staff.”
What helped Ingram was to meticulously document all of its business processes so that they could be replicated to the letter in India and the Philippines, he said.
“In my mind, that’s the most important thing a company can invest in,” Osentowski said. “We approached process documentation from a detailed perspective and prepared, down to the keystroke level, instructions for how to do a certain job so that somebody who has never done it before can sit down with this operations bible and figure it out.”
The pitfalls of companies outsourcing to India are part of the learning curve, according to Vijay Gurbaxani, senior associate dean of the Merage School of Business at the University of California, Irvine.
Gurbaxani is helping to put on an outsourcing conference at UC Irvine on Friday called “Strategic Initiatives in India: Partnering for Innovation.”
Ingram’s Moni & #233;, who earlier in his career worked in India for Allied Signal Inc., now part of Honeywell International Inc., is speaking on a panel at the conference. He said he wants to teach businesses looking to outsource the dos and don’ts of doing business in India.
“When you go to do business overseas, you need to have a mix of patience and humility,” Moni & #233; said. “Things don’t happen as quickly as in the territory that you are used to.”
A big pitfall for many: Companies “assume these countries work the way the U.S. works,” Gurbaxani said. “These are not easy countries to do business in. It takes a lot to do this right.”
In India, government regulation, which can vary by region, make the bureaucracy tough to navigate, he said. And though most Indians speak English, “there are nuances that are often missed.”
U.S. companies are often frustrated by different communication styles.
“Indians are very deferential to their bosses,” Gurbaxani said. “In call centers, workers are not likely to be direct about their problems or bring them up to their bosses. The style is much less direct. You need to understand how to probe very carefully as a manager.”
The biggest challenge for U.S. companies is an increasingly rapid rate of turnover among employees.
“The wage rates have increased significantly in India,” Gurbaxani said. “It’s not unlike Silicon Valley in the 1980s. People are confronted with huge demand for their talent so there will be a lot of jumping around.”
It’s something Ingram has struggled with.
“The labor market is completely saturated, especially in Bangalore, where people are job hopping and looking for more money,” Osentowski said.
This summer, Ingram put in place an incentive program to keep workers from leaving. It grants bonuses to Infosys managers who can keep their staffs in place.
Ingram also helps pay the tuition of workers looking to take business classes at the India Institute of Management in Bangalore.
There are similar programs set to be rolled out in Manila this year, according to Osentowski.
“We haven’t seen the same attrition levels in the Philippines, but we want to hedge our bets,” he said.
UCI’s Gurbaxani, who was raised in India, maintains that the difficulties of doing business there don’t outweigh the benefits to U.S. companies.
“There is phenomenal talent there,” he said. “As an American of Indian origin, the thing that surprises me is their energy and hunger. They are willing to work really, really hard. This is the first time in their lives that they have had economic opportunity to do so.” n
