vcustomer[1] - [Draft, April 2006] vCUSTOMER: SHAPING THE...

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_______ This case was written by Research Associate Sandip Basu under the guidance of Professor Suresh Kotha from the University of Washington Business School, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The case is based on publicly available information at the time of writing. Copyright © Kotha & Basu 2005. All rights reserved. [ Draft, April 2006 ] vCUSTOMER: SHAPING THE OUTSOURCING INDUSTRY Sanjay Kumar sat in the conference room at his office in Kirkland, a rapidly expanding suburb of Seattle, Washington. He was getting ready for a meeting that could decide the future strategic direction of vCustomer, the company he founded in October 1999. The room had two clocks, one displaying U.S. Pacific Time and the other, Indian Standard Time. It was a warm Seattle morning in the spring of 2005. As he glanced to see what time it was in India, he reflected on the disparities between the two countries, which extended well beyond the twelve-and-a-half hour time difference. Indeed leveraging these differences had been the primary value proposition of his foray into the IT Enabled Services (ITES) and Business Process Outsourcing (BPO) space with the formation of vCustomer. Since it’s founding, vCustomer had a track record of coupling aggressive growth with 100% customer retention. Inc. magazine ranked it as the fastest growing private company in business services in 2004. Currently, vCustomer was one of the largest private companies involved in “consumer based technical support” in the world. Its 18 clients were some of the largest diversified global leaders in the computer/networking/ peripherals manufacturing space. With a total capacity of around 3,300 workstations, the company handled 3 million calls a month. 1 THE OFFSHORE OUTSOURCING PHENOMENON From Manufacturing to Services Outsourcing is a generic business practice in which firms decide to buy inputs or services from external sources rather than make them in-house. While over 85% of outsourcing activity is domestic, the term has come to be associated with “offshore outsourcing” or simply “off-shoring”, which involves sourcing from business organizations in foreign countries. The adoption of offshore outsourcing in manufacturing activity started taking off in the late 1980s and early 1990s. As transport and communications costs fell and logistics technology improved, American manufacturers of automobiles and consumer electronics began moving production to cheaper nearby countries like Mexico. By the late 1990s, China had emerged as a major destination for outsourcing of manufacturing. 2 When telecommunications costs fell similarly, U.S. firms started moving their business services abroad too. Countries like India, where skilled labor could be accessed at relatively lower costs, became attractive destinations for this type of work. IT services were one of the primary activities to become outsourced. Indian IT companies got their first big boost with the “Y2K crisis” at the turn of the
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vcustomer[1] - [Draft, April 2006] vCUSTOMER: SHAPING THE...

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