IT firms need a new approach for surging growth: KPMG NASSCOM study

February 16, 2012: The Information Technology and Business Process Outsourcing sector in India has passed through many turning points over the years. During the initial phases, the main driver behind outsourcing was cost reduction and later organizations realized that outsourcing is not just a means to cut cost but is also of strategic importance.

In the present day business world, customers and service providers are searching for models that would help them to coordinate and manage centers spread across the globe, build strong long term relations and deliver high quality services. The Hub and Spoke model is one such model that is expected to lead the way for the IT/BPO sector in India and across the world.

This observation was made in the report published by KPMG in association with NASSCOM. Even though the service providers have taken initiatives, a complete transformation can happen only if other stake holders such as the government and other industry bodies provide support.

 The Hub and Spoke model is used in the background of multiple location sourcing, where the hub act as the single point of contact to the customers while the spokes are meant to provide services, which will be spread across different locations.

The hub is believed to take the responsibility of management of the business. The responsibilities will include developing capabilities, regulatory compliance and management of human resource. Other important responsibilities include customer management and uniform delivery standards. The spoke represents the delivery center which can be scaled up or down based on the requirements of the business. In the case of certain companies, they may make use of near shore spokes as base for the purpose of business development.

The Hub and Spoke model will offer fair cost proposition to organizations and enable the service providers to provide seamless services. A major advantage with the Hub and Spoke model is that it offers a great level of flexibility to the service providers in terms of operations. It places the service provider close to the clients which helps in obtaining meaningful insights. The model also reduces the risk associated with operating from single or very few locations, thus enabling the service provider to make use of labor pool from respective locations. A proper mix of locations from across the globe will help the service provider to offer better quality at reduced costs.

India is a favorite destination across the globe as far as outsourcing is concerned and this advantage can be utilized to the maximum by service providers from India with the Hub and Spoke model. 

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