Body shopping
Body shops is a slanderous term that refers to modern day information technology (IT) manpower supplier companies with their ability to respond, deploy and cater requirements for skilled IT labourers.
History & origin
Body shopping in IT originated during the Y2K period 1996-1999 where there was huge demand and clamour for people with Mainframe, COBOL and related technology skills to solve the bug of the century, called Y2K.
Most specialist Y2K consulting companies operated in US, Europe, Middle East, Japan & Australia outsourced their manpower requirements to Indian technology companies.
During 1996-97, these companies responded to the demand by heavily recruiting and training local graduates in India specifically for Y2K. Their consultants either worked onshore or offshore at 95% utilization rate generating very high margins. The high profit margin during this period resulted in excellent growth and a huge cash assets to expand operations to other IT business segments post-Y2K season. These companies growth strategy still continue to focus on similar lines, which is, developing IT skills for a changing market place and catering skills demand of the customer.
Operational model
'Body shops' operate either offshore, onshore or nearshore and respond dynamically to their clients IT skills demands with less turn around time by supplying people to work directly for their client's project management team.
Some Body shops operate through intermediary companies due to their inability to get direct business contracts for supplying people to the end-clients. In such cases, intermediary companies will take a percentage cut from the negotiated daily billing rates.
Personnel who are body shopped are vital for a bringing a longstanding relationship with the client. For this reason, Body shopping companies prefer to recruit and operate with experienced people.
Revenue model
Most body shops maintain a very good relationship with their client and they continue to work on building further revenue streams by analysing client's immediate or future IT skills requirements for supplying resources.
Body shopping companies mainly recruit offshore and provide training to their employees using their offshore facilities.
Employment costs (both Fixed Term and Permanent) are generally offseted by the highly profitable billing ratio, especially for onsite assignments abroad. Most companies boast a utilization rate of 80% which also takes into account of the potential long 'bench period', where an employee is not billable or when his skills are not in demand.
Indian body shopping networks
In India, traditional body shopping has evolved in its due course post-Y2K era to create strong networking and collaboration between competing Indian body shops working abroad. For instance in Hyderabad, all body shops claim to have the ability to place Indian workers in almost any country using the resources and services of other Indian bodyshops operating in the target country.[1]
In one documented case study deemed as a typical example, a body shop in Hyderabad was able to win a 360 man-month deal with a U.S. company that urgently needed 40 IT workers with a very "specific" skill on a 9-month project. Although the Indian body shop company could easily find lower paid workers in India for the job, the H-1B visa process would take too long to bring them into the United States to work. Thus, the Indian firm forwarded a request to its associate network to locate 40 Indian temporary workers in the United States. A search was undertaken by the network for available Indian H-1b workers, resulting in a list of recently laid-off Indian H-1B workers in the USA. Sponsorship for the laid-off Indian H-1B workers was reassigned to the needing bodyshop and a portion of the newly empolyed workers salary was given as commission to the peer body shop that help locate the laid off H-1B workers in their associated peer network of Indian body shops. This process of quickly recruiting available H-1B holders is referred to as "body shopping".[1]
Criticisms
In the west, the companies that are directly or indirectly involved in body shopping are heavily criticised for slaughtering the local overpriced IT labour market by using competitively priced resources, especially from India. There is general consensus amongst various local peer groups that companies operate from Indian subcontinent abuse the visa system of developed nations to quickly supply IT labour, thereby thrashing the local demand.
There is also media reports on some companies and the way they treat migrant workers after they arrive by giving them lower pay scale and substandard accommodation facilities in their attempt to maximize profit.
See also
References
- Xiang Biao, 'An Indian Labor System in the Information Technology Industry', Global "Body Shopping"