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Strategic managementApril 10 www.bus-ex.com 23The Middle East has been a huge economic success story over the past decade or so. Underpinned by its oil wealth, the region has developed into a real economic powerhouse. However, no country or region can be insulated from financial and economic shocks originating in another part of the world. Contrary to some views, the Middle Eastern countries are bound to be affected, albeit in different ways and degrees, by the financial crisis and the associated recessions. Sovereign wealth funds have invested abroad and the value of their holdings is being depreciated. Banks in the Gulf are not yet showing losses from exposure to sub-prime loans and mortgages, but it is likely that some may be affected. Historically-unlike their US and European counterparts-the majority of financial services companies and banks in the Middle East have not given much consideration to the concept of outsourcing in order to reduce costs. Now, we're seeing more interest in outsourcing from companies in the region.Until transaction volumes return, financial services companies, especially investment banks, are looking for innovative ways to reduce their cost bases in order to maintain their profit margins. Indeed, Middle Eastern clients are following much the same journey as search for ways to maintain profit asks if the Middle East could be next great outsourcing boomCore matter

24 www.bus-ex.com April 10high-value secondary research on organisations, company information and reviews of certain markets. This high-quality business intelligence can be at much lower cost than it could be done in-house.One client-a bank based in the Middle Eastern region-was seeking outsourcing services to enable it to concentrate on its core business functions and increase its focus on strategic portfolio development. The bank wanted reduced operating costs, enhanced quality of research available to it and improved productivity. It also wanted to produce and publish daily and weekly coverage reports providing an update of the day's stock markets and technical analysis with recommendations for key stocks in the GCC region, in order for its customers to benefit from this market intelligence.Furthermore, the bank wanted to produce its equity research reports in both English and Arabic. We were tasked with delivering an offshore team of highly-qualified equity research analysts and translators who could work together to deliver such reports. In this instance, approximately 50 to 60 per cent of the documents we were dealing with were originally produced in Arabic. Therefore a team was required to translate these into English, incorporate the data (where appropriate) into the equity research reports and finally provide two copies back to the customer-one in Arabic and one in English. We managed to strip out around 50 per cent of the cost of doing this work in-house.There are good outsourcing providers serving the Middle Eastern marketplace who can add real strategic and operational value to an organisation's ability to get products quickly to market and service them efficiently. Outsourcing also enables financial services providers in the region to ensure that their cost bases are broadly similar (within context) to those of their Western counterparts, enabling them to continue to be competitive on a regional and international scale.Many of the outsourcers see the region as strategically attractive and are prepared, in the light of the general market conditions, to be extremely competitive. Those who have never considered outsourcing as part of their strategies should revisit those perceptions to determine whether in the current market place they can afford to miss out on competitive advantage in product development lifecycles and operational efficiencies or lower capital investment.Kulvinder Reyatt is managing director Europe and Asia, RR Donnelley Global Business Process Outsourcing (GBPO). www.rrdonnelley.comtheir US and European counterparts did some five to seven years ago. They're looking at their business operations and asking themselves-what's core and what's non-core to us? What is essential to the running of our business, and what might be done effectively by a trusted partner? For instance, a boutique finance house might outsource all of its operations except investment research and portfolio construction, trade execution and client service, placing functions such as legal, compliance, technology and human resources in the hands of external providers. From an operational point of view, there can be a variety of drivers for exploring outsourcing. Outsourcing can be used to manage or reduce risk when organisations no longer feel they have the skills in-house to effectively manage the business as it stands, or it can even prove to be a catalyst for operational reengineering, or the desire to make a step change in the way an organisation operates. It may even be used to reduce product development lifecycles to enable organisations to roll out a new product or service administered by a third party, and bring that product to market in a much more cost effective and speedier fashion than could have been achieved in-house. Often, an outsourcer can satisfy the need for a previously unsupported function or be part of a new strategic direction as many companies look to move out of administration processes altogether, focusing on brand and service. This focus away from operations may also be attractive to those organisations struggling to keep pace with the regulatory agenda.Invariably, a strong degree of trust needs to be built up between the client and outsourcing partner. We're seeing pilot activities being carried out prior to actual delivery in order to establish the required degree of confidence in the skills and expertise being offered by the outsourcer. For example, we often invite potential clients to visit our centres in our offshore and nearshore locations in order to give clients a direct insight into the operation that they are seeking to partner with. In many ways, the Middle Eastern clients are asking some of the same questions that we experienced six to eight years ago in the European and US markets. However, the Middle Eastern companies have the advantage of being part of the 'secondary wave' of companies looking to outsource business processes to offshore locations, and as such, they can learn from the experiences of their predecessors in the US and Europe.As a result, Middle Eastern companies can 'leapfrog' straight to outsourcing slightly more complex functions than their Western counterparts were able to. We're seeing a great deal of demand for expertise in research and analytics, for instance, where the outsourcer is providing