News Release-- February 26, 2004

Offshore deals keep raising the bar

A commitment to continuous process improvement, not price, clinches offshore deals for SA firms, says Peter Drube, Business Process Outsourcing (BPO) director for Computer Sciences Corporation in South Africa


Offshore IT outsourcing deals will only be secured if service providers can guarantee global clients that they can deliver continuous service improvements.

While South Africa’s economic, telecommunication and legal infrastructure are key factors in attracting offshore outsourcing business, deals will be clinched only if service providers can deliver continuous improvements to global clients,

The country’s economic stability, First World telecommunications infrastructure, affinity with Western business culture, English language skills and well-educated workforce, were a firm foundation on which to build an outsourcing service to attract global clients.

But, while the fundamentals of a stable economy and a sound legal and telecommunications systems are key in attracting offshore business, they are not enough. CSC has learnt that, when it comes to evaluating the business risks of offshore outsourcing, clients prefer providers with sufficient infrastructure and world-class processes and expertise through which to offer continuing cost benefits, innovation, and technological innovation to.

The volatility of South Africa’s rand has been an incentive for a number of service providers to seek offshore business but this only ever offer short-term profits. There must be sufficient volumes of transactions for offshore BPO to be profitable on a sustainable basis, irrespective of the exchange rate.

While it is no secret that South Africa’s infrastructure and resource costs are a competitive advantage compared with those paid in the northern hemisphere, global corporations have moved beyond cost cutting as the sole motivation for outsourcing.

Cost reduction in isolation rarely works in the long term so BPO must be about continuous innovation and optimisation if it is to achieve its aim of using technology to drive down transaction and interaction costs.

To win international business South African outsourcing providers must demonstrate that they are more than technology partners in the BPO solution. They must show that they have expertise in business process management which is the key enabler in BPO because it is a method for intelligently aggregating and managing business process for continuous improvement.

It is true that South Africa has many advantages over its competitors seeking offshore outsourcing work. These include political and economic stability, legal, judicial and financial compatibility with the target markets, robust and reliable electricity and telecommunications infrastructures, a well-educated workforce proficient in English, and government commitment to marketing the country’s offshore outsourcing potential to overseas markets.

Combining these benefits with a commitment to continually improve expertise and innovation to add value to clients’ operations is a winning solution for South African-based companies.

Crucial to establishing an open and trusting relationship with clients is the ability to draw on the relevant experience to advise them about the risks as well as the opportunities of offshore outsourcing.

Working with offshore organisations is a specialty, requiring a unique body of knowledge that grows with time and experience. Most client companies don't have this body of knowledge nor are they willing or able to make the sustained investment to build and maintain it.

Often it is important for the outsourcing vendor to have a physical presence in the client’s home country, because it gives them the assurance that someone close to home can help deal with any problems that arise. These issues may involve complex legal and tax issues, so they rely on a vendor’s knowledge of how to resolve home-based issues.

Managing an offshore relationship requires extra attention to be paid to the implementation of best practices for business processes and the refinement, over time, to ensure ongoing improvements and profitability for the client.

The importance of effective project management in an offshore relationship should not be underestimated. Besides the complications introduced by vast distances and time zones, clients have little or no experience in dealing with cultures in the offshore locale, so they need to learn to trust the judgements and practises introduced to the process by the vendor. This again emphasises the importance of vendors investing much time upfront establishing their credentials with the client and building an open and trusting relationship.

In any business relationship, it takes time to fully understand the business drivers, culture, operating model and key objectives of the other party. The better the two parties understand each other, the more appropriate will be the solutions they jointly develop.

CSC in South Africa has been particularly successful in attracting international BPO work to the country. Offshore deals in various outsourcing disciplines placed about R1-billion of new business with the company during the past year.

This was achieved both through CSC’s global strategy of ensuring the best possible outsourcing solution for its clients by placing portions of contracted work in the country best able to provide the desired solution, and through CSC’s operation in South Africa’s own efforts to attract business to the country.

CSC in South Africa was recently rated top Applications Service Provider in the country by BMI-Technology. The same survey ranked the company as one of South Africa’s top three Information Technology outsourcing vendors.


ABOUT CSC IN SOUTH AFRICA

CSC offers the South African market a wide range of services, including systems integration, application and infrastructure outsourcing, and business process outsourcing, as well as customer relationship management (CRM) and healthcare and financial services solutions.

In South Africa CSC also provides offshore Business Process Outsourcing (BPO) services to manage the policy processing and administration for its US and UK financial services customers which include life and pensions providers, short-term insurance and banking. By combining international best practices with local expertise and knowledge, CSC is one of the fastest growing IT companies in South Africa.

A leading IT services provider, CSC adds value through its collaborative approach to delivering fast, reliable and flexible solutions. CSC opened its doors in South Africa in November 1999 and today has offices in Johannesburg, Cape Town and Richards Bay. It is continuing to expand rapidly in South Africa and is extending its services to the rest of Africa. For more information, contact 021 529 6500 or 011 686 5400.

CSC
Founded in 1959, Computer Sciences Corporation is a leading global information technology (IT) services company. CSC’s mission is to provide customers in industry and government with solutions crafted to meet their specific challenges and enable them to profit from the advanced use of technology.

With approximately 90,000 employees, CSC provides innovative solutions for customers around the world by applying leading technologies and CSC’s own advanced capabilities. These include systems design and integration; IT and business process outsourcing; applications software development; Web and application hosting; and management consulting. Headquartered in El Segundo, Calif., CSC reported revenue of $13.8 billion for the 12 months ended Jan. 2, 2004. For more information, visit the company’s Web site at www.csc.com.