If you ask me, one of the best deals in the land are the free Webinars hosted by legal firm Baker & McKenzie and featuring its attorneys from around the world and one of the analysts from neoIT, an offshoring advisory firm. Each month, this combination of experts discusses the outsourcing trends and legal and tax considerations for a specific geographic location.
Today’s event focused on Singapore. Next month, it’ll be Russia. And in March it’ll be Costa Rica.
When I tune into one of these broadcasts — Internet-delivered audio with slides — I feel like I’m sitting in on a master’s-level course at a major university.
Here’s what I learned about Singapore as a destination for services.
The country has become a regional headquarters for US and multi-national corporations. It has become especially popular among MNCs for placement of data centers and disaster recovery centers. Global suppliers — such as Accenture and IBM — have chosen Singapore because there’s quite a bit of in-country outsourcing going on, particularly among the government sector, and those service providers want to tap that demand. A tax treaty is pending between India and Singapore that will make it a draw for companies that want to set up captive operations. Also, a number of Asian companies have chosen Singapore for in-region offshoring, to leverage the capabilities that exist there.
What are the capabilities?
Not the kind of cost reductions you’ll see by taking business functions to India or China; but still respectable. According to neoIT VP Eugene Kublanov, labor is about half the cost of US or UK labor.
Beyond that, there’s a sizable skilled talent pool, strong language (read: English) capabilities, numerous flights between Singapore and the US or European countries, government support for the outsourcing industry, and a modern cable/network and data center infrastructure that matches anything you’d find in the US.
Firms such as AT&T, Motorola and MCI have set up captive centers there. Regional providers such as CSC, Frontline and SCS and global providers such as IBM, EDS, Ernst & Young, Unisys, and even Tata Consultancy have set up centers there as well.
According to Ken Chia, an attorney with Baker & McKenzie, Singapore’s strategy is to position itself as a “trusted, high-value added BPO hub” for financial services, human resources management, supply chain work, and legal and compliance functions.
But what really stands out for me is the fact that it’s being used as a regional location for storage, processing, and distribution of high end data and related IT services. The place is low risk in many ways — politically, economically, legally, socially, in terms of natural disasters, in terms of corruption.
In fact, Singapore enacted the first business continuity and disaster recovery standard for service providers, which specifies requirements for how those operations are monitored and kept up. Companies certified under the standard include HP, IBM, NCS and Singapore Computer Systems in the service provider category and Equinix, SingTel Expan and StarHub (the latter local telcos) in the facility category.
Along the same lines, the Monetary Authority of Singapore (MAS) has issued Guidelines on Outsourcing, which sets out the government’s expectations for financial institutions that have entered into outsourcing agreements or that are planning to outsourcing any of their business activities to a service provider in Singapore. (The guidelines focus on “material outsourcing” — where some disruption in the outsourcing arrangement might substantially affect the financial firm’s business operations, reputation or profitability.)
The guidelines comment on such matters as confidentiality and security, business continuity management, monitoring and control of outsourced activities and audits and inspections. Even if you’re not in a financial organization, the 23-page PDF document is a primer in the major issues you should concern yourself with when outsourcing.
What’s also worth reading is the list of concerns brought up by interested parties regarding the guidelines, including companies such as Accenture, EDS and Tata, as well as a number of client organizations that, presumably, do a great deal of work in Singapore. In general, according to the document, respondents “felt that full adherence to the proposals in the Guidelines would be costly and could outweigh the benefits of outsourcing.” In other words, this section from the Business Continuity Management coverage might be considered onerous:
6.6.1 An institution should require its service providers to develop and establish a framework that defines their roles and responsibilities for documenting, maintaining and testing business continuity management (BCM) plans and recovery procedures, that are at least as robust as its own. There should also be reviews and agreement with service providers on the adequacy of BCM plans as part of the service provider selection, and on an on-going basis.
This is wacky stuff! Heaven forbid the resources should be applied to documenting and testing whether the operations could weather an outbreak of avian influenza among IT staff or an earthquake at the regional headquarters.
What’s useful about the list of concerns document is how MAS responds. You might find their reasoning useful in your own negotiations with service providers — Singapore-based or not.
At any rate, these Baker & McKenzie talks are marvelous, cogent, educational examinations of the issues you need to concern yourself when offshoring. To listen to the archive of the Singapore talk — or the company’s other Webinars — go here:
To learn more about upcoming seminars, contact Julie LaEace, [email protected]. (Tell her I sent you!)
And if you’re looking for legal assistance for matters global services-related, these are the folks to call on. They have experts seemingly everywhere.