The role of industry associations in supporting the IT and business process outsourcing industries in low cost countries

IT Outsourcing Roadmap Index

The present wave of outsourcing, and offshore outsourcing in particular, was made possible by the fast development and global spread of high quality information and communication technologies, globalization, Internet and the availability of high speed, high quality and affordable communication facilities.

Competing effectively in the offshore outsourcing market place requires that governments in low cost countries create and introduce business friendly legal systems, policies and industry support mechanisms. Infrastructure development must also be high priority. However, governments not always focus on the right things, introduce the right policies and legislation, set the priorities right or use the limited resources the most effective way. This is often due to the lack of knowledge and experience, competing interests at many levels and scattered interest groups.

India, the industry leader, started to develop its offshore outsourcing capabilities about 20 years ago. One of its key to success is the strong industry association – NASSCOM.

Building and managing an industry association successfully requires that it focuses on the issues and functions that the members of the association consider important.

The association must produce a number of documents which govern operation, services, development and management:

Charter – defines the purpose, objectives, target group, rights and responsibilities, management/governing bodies, structure and legal status of the association.

Business plan: defines the general framework and strategies of operation.

Operational plan: defines the detailed plan of operation in accordance with the business plan.

Bylaw: Law or rules governing the internal affairs the association.

To be successful in formulating plans, strategies, objectives and delivering services to members require to be as S.M.A.R.T as possible. That means;

Specific – activities, services, targets and objectives must be clearly defined

Measurable – how to measure the results of the activities compared to targets (money, members, services, etc.) with the use of administrative aids which are easily accessible in you organization. Regular reports about the progress should be produced and they should be accessible by members.

Achievable – who can be involved (participants) and what is in it that will stimulate the participants to achieve the objectives.

Realistic – where do the objectives come from and are they able to be realized.

Time related – when must objectives be realized – with a timeframe of planned activities

Basic functions of branch associations

A branch association usually has one, several or all of the following basic functions:

lobbying and representation;

negotiating;

consultancy and training;

guild function;

club function;

Lobbying and representation

The lobbying function of an association is to influence decision makers in the interest of its members. Through the association, members can join forces or hire a specialist (lobbyist). The association can represent its members and the industry (as well as the country) at international forums. Advantage is that as a group they can be represented by one or a few people. In some cases associations face the difficulty of not being able to publish results for political reasons. Silent diplomacy may often be very successful. A disadvantage is that so-called ‘free riders’, or nonmembers, benefit from the association’s efforts without contributing.

Negotiations

When it comes to negotiations, an association can make profitable agreements on behalf of its members, due to its scale. Also, an association offers the negotiator on the other side of the table the economic advantage of only having to make one agreement rather than dealing with each company individually. One of the difficulties is that individual members can have trouble keeping joint agreements.

Consultancy and training

Consultancy and training is one of the services an association can offer its members. The advantage is that they can hire a specialist for a low price, while the specialist himself enjoys the advantage of access to a whole group of companies, although differences between members can make this complicated.

Some of the possible areas of consultancy and training:

Legal consultancy (contracts, arbitration, general terms & conditions of delivery, payments, IP, privacy, security);

Technological consultancy and training

Knowledge and company support (outsourcing promotion, business processes, management, marketing, client behavior, economic issues, individual consultancy, benchmarking, research). The association is a single point of entry to an entire industry for third parties (such as investors). The advantage is that interested parties have access to information and assistance in one single place.

Guild

Functioning as a guild, an association can make internal agreements between members, for instance on behavior, quality standards or image. The main advantage for members is image; the advantage for third parties is that they can do business with the best companies in the branch.

Club

The club function of an association is to provide a meeting point for people with the same interests. Members can benefit from exchanging views and belonging to a group of likeminded entrepreneurs as well as from social aspects. This function can be difficult to manage, as meetings will often only take place if there is a special – and usually sudden – reason.

A few examples

1. BITKOM (www.bitkom.org) - German Association for Information Technology, Telecommunications and New Media.

It represents a total of 1,300 companies. Its roughly 700 regular members employ some 700,000 people and generate revenues of 120 billion euros.

BITKOM is also member of EICTA (www.eicta.org) - The European Information, Communications and Consumer Electronics Technology Industry Associations.

EICTA combines 32 national ICT/CE associations from 24 European countries with 48 direct company members. EICTA altogether represents more than 10.000 enterprises in Europe with more than 2 million employees and revenues of over € 200 billion.

2. INT@J (www.intaj.net) - The Information Technology Association of Jordan, a voluntary non-profit, private organization. The mission of INT@J is to effectively represent, promote, and advance the Jordanian software and IT services industry in the global market.

INT@J is also member of WITSA (www.witsa.org) - The World Information Technology and Services Alliance (WITSA) is a consortium of 65 information technology (IT) industry associations from economies around the world. WITSA members represent over 90 percent of the world IT market.

Other regional associations include:

Southeast Europe Information Technology Associations (SEEITA). Members are five country associations; BAIT (Bulgaria), SEPVE (Greece), TBD (Turkey), YURIT (FR Yugoslavia) and MASIT (Macedonia). Unfortunately the association does not have a home page yet.

Asia-Oceania Computing Industry Organization (www.asocio.org) At present, ASOCIO represents 24 economies encompassing members from Japan, Australia, Bangladesh, Hong Kong, India, Indonesia, Korea, Malaysia, Mongolia, Myanmar, Nepal, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam, including 5 guest members; USA, UK, Canada, Spain and France. Today, ASOCIO account for over 10,000 companies in the region.

European Multimedia Associations Convention (www.emmac.org) is the Europe-wide network of associations representing more than 5000 digital media companies.

Download a comprehensive list of IT industry associations around the globe here.