Thursday, December 02, 2004

Outsourcing Different Business Function

For the business manager, an article from SmartPros discusses when it is appropriate to outsource, keeping in mind the virtually endless amount of functional areas of a business that can be offshored.

Decisions to outsource projects, especially long-term, ongoing projects, such as the outsourcing of your entire information technology (IT) department, can affect -- and change -- employees' lives.

To maintain morale and the status quo, keep the lines of communication open throughout the duration of the project."If too many workers leave in the midst or aftermath of an outsourcing deal, the company and the outsourcer both suffer a damaging knowledge drain,"

Outsourcing Aim

Talking about outsourcing, as consumer point of view, its best to get quality product at least price and I think it makes sense to send work offshore, and see, that’s why we are sending….

We just can not do anything which is entirely bad for country/our selves. If Americans are sending work offshore, definitely there is/must some benefits, and that’s why its happening/getting success..

But I think there is one segment worst effected, and that is the IT/related Job seekers. And for compensating this segment, the company’s should take steps for creating good jobs. Under Balanced outsourcing, May be some industry/jobs would be lost in the process but this way, better job/industries would be created also. All required is to aim for the high quality productive work...

India Soaring

Yesterday, Indian Senses Touched the heights and its showing hints, that, irrespective of Govt. Internal Clashes, or, Reliance In House problems, India, is of course having hats up situation. And Re-election of George Bush also increased the Indian outsourcing optimism.
But Indians Outsourcing would require monitoring one thing, and that is to sustain/improve the quality work, Because, it seems the professionals in India move their jobs as in 6 months, just asking/demanding for hike in salary. This is the period when its reflecting bad. Now India would require proving about their quality and experiencing as compare to the cost.

Wednesday, December 01, 2004

India Vs China Outsourcing

China being more led to manufacturing, is/was not in comparison with Indian offshore outsourcing in field of IT. But with the latest developments things are changing….are they?

China got focus on local market (IT) only and do not have High profile Exporter in IT – outsourcing, where as India – well mannered, Service based country, is well established in this field

China currently is like what India was prior to 8-10 years, They were constraint to small projects only.

But China of course will not have to start from the scratch as India did, because of its vast local market availability….

Currently, may be China offers a low cost per man, but the quality question is more important as compare to the cost here….and does China has the capacity to meet the quality standards for IT Outsourcing…and when the Indian Outsourcing are having edge advantage as per their Services Industry back up, Neutral Communication/ accent ……..

Any idea…..!!!

Outsourcing, Effects on American Jobs

I have been reading lately about the effects of Outsourcing on American Jobs. And was surprised to see what been knitted (myths) and what actual/s are….

People generally have myths about job status, impact on US economy, unemployment, protection law in relation to Outsourcing etc. But the exact picture is some what different……

Most people think that “Outsourcing is One Way” but in fact its Two Way. The number of jobs “in sourced” ratio is high than the number of jobs “outsourced”…

And its not only the big corporations involved are making the profits, every one benefits from outsourcing. As costs decline, every consumer benefits, including those who lose their jobs to outsourcing.

In fact the belief is, that, impact of Outsourcing on American Economy is negatively exaggerated and the benefits of outsourcing are overlooked…….

Comments please!!!

Tuesday, November 30, 2004

Spotlight on India's manufacturing sector

According to some US-based investors, India can soon pose a threat to Chinese dominance over the manufacturing sector, especially in areas like automobiles.India?s manufacturing sector was in the spotlight at the ICICI Securities? Third Annual Investors' Conference in New York this week. Many American companies attended the debate on ?Investments in India?s

Manufacturing Sector? at the I-Sec investor conference. Industry captains spoke to CNBC-TV18 on their forthcoming corporate strategies in the light of India?s rising importance in the global economy.According to some US-based investors, India can soon pose a threat to China?s dominance of the manufacturing sector, especially in areas like automobiles where it doesn?t have as strong a track record as India.

Many companies, such as the Michigan-based auto component firm Magna Drivetrain, suggested investing in both markets as a way of cutting risks.In fact, India could be at the forefront of an industrial renaissance, if the right moves are made by both the government and corporates. As the director, marketing & planning of Magna Drivetrain, Sanjeev Verma, said, ?US companies in the next few years can expect to buy (goods) somewhere between $250 million to half a billion dollars a year from India, as opposed to $50 to $100 million right now.?

At the debate, the automobile industry dominated proceedings. Looking to expand and capture bigger market share in North America and Europe, they made their presence felt. Leading the charge was Hyundai India president B.V.R Subbu. Subbu said, ?It?s not just about being cost competitive, but also quality competitive. Our cars are now being sold in Germany, and as Germans are among the most discerning consumers in Western Europe, it shows we have good quality standards.?But there were detractors as well at the camp.

They feel that the Indian market may not be mature enough to cope - that India does not have the capability to produce the volumes required by US automakers at present. However, this is changing fast and outsourcing of manufacturing jobs could soon follow the IT and BPO way.President of India America Chamber of Commerce Rajeev Khanna, said, ?Till now, manufacturing (sectors) that has gone to India, has been catering to the Indian market. But, India as the manufacturing hub of the world is something which will come soon.?This was the rosy prognosis for India at the India Unlimited conference held in New York. A roomful of potential investors were present to affirm the great things in store for India.


Achieving Business Transformation Through Outsourcing

What is Business Transformation Outsourcing? On its simplest terms, it's about delivering improved revenue, market share and cost efficiency by contracting with a strategic business partner to handle the operation of a company's business processes, business applications and information technology infrastructure. BTO represents the convergence of business process, applications and information technology infrastructure.

Evaluating opportunities to move existing business processes and application development to geographies that offer improved economics can also help realize savings for immediate reinvestment into the next wave of transformation activities. India, for example, offers a well-trained labor force that can perform process and application functions at from one-sixth to one-eighth the cost of similar tasks in the United States.

But more and more organizations are utilizing the benefits of BTO to help shape their transformation into full-fledged, integrated company, moving from improvements in operational excellence to new business designs, and finally to the strategic flexibility, heightened customer loyalty and market responsiveness of e-business. In fact, business transformation outsourcing can be viewed as one of a series of levers a company can pull to move it along on its journey to becoming an on-demand enterprise.


Monday, November 29, 2004

Outsourcing SEO Work- some Facts

Competition and marketing profitability sounds a good idea for doing SEO for your business site. But Is it a good idea to outsource your SEO work? Many factors, many responses, take look on few factors:

1. They need access into your logs and all, and if you are in total secure zone kind of business you may not want other party to see it

2. There may be number of different companies working with Outsourcing Company for Content writing, Link Building etc and you may be interacting with that single Company. Quite interesting!! It’s making you on ease so to get all services from one Service provider

3. Variant pricing from $500 to $3000/ month, So need to see about your own marketing budget and level of efforts made by Outsourcing company

4. You can expect work with dedication out of Outsourcing SEO Company, as they gauge them selves on High Search Engine ranking, which your in-house professional may skip

5. The positive is, that you will be working with a professional experienced SEO company, but negative is – they also be having lots of other customers. So a time check, Efforts check etc required while outsourcing SEO work and do make it sure that you get SEO reports, regularly.

Choice is yours!! Every company is different, and every one has different set of work culture and approaches. But, it is surely a important work on part of marketing strategies, on deciding for “To” or “Not to” Outsource SEO work….

India's tech firms lukewarm on big U.S. deals

Indian companies like Infosys Technologies Ltd. and Tata Consultancy Services have made a couple of tentative jabs at the U.S. market. But most of the deals have been so small that a $100 million acquisition could be considered trailblazing.
"I'd be surprised if we saw a wave of big acquisitions coming one after another by Indian firms," said Robert Mann, a managing director at Boston's Revolution Partners who has worked with several India-based companies contemplating U.S. asset purchases.
U.S. companies have found it easy to buy or build back-end businesses in India, where the market's doors have been flung wide open to foreign investment and labor is inexpensive.
It's a different matter for Indian companies looking for acquisitions in the United States.
Many are unwilling to pay high multiples or take part in competitive auctions. And after enjoying internal growth of 25 percent to 30 percent a year, many of these companies are skeptical about the need for acquisitions.
But to compete more effectively against their more diversified U.S. rivals, some companies in India want client-facing, decision-making U.S. operations. And it's much easier to buy those businesses than to build them from scratch.
"They've got a bunch of cash, competitive threats, and a window in which to address those competitive threats," Mann said. "They've got to have people who can go in, roll up their sleeves and do the high-end intellectual work."
It's not for lack of trying that big deals by fledgling Indian companies have yet to materialize, experts said. It's more a lack of maturity and knowledge of the U.S. market.
Wipro Technologies acquired U.S. consulting firm NerveWire Inc. for nearly $19 million last year to gain access to blue-chip financial-sector clients. Tata Consultancy, which just raised $1.2 billion in its initial public offering, has said it will aggressively pursue acquisitions.
Most Indian companies realize they must compete on an international level and know that they'll get trounced by U.S. competitors if they try to grow internally instead of through acquisitions, said Mickey Commar of India's Commar & Associates, who advises American and European companies trying to establish a base in India.
"Today, (Indian) companies are far more aggressive in the due diligence stage, and they're just looking to see if they can pull the trigger," Commar said. He predicted an increase in the number of acquisitions by Indian information-technology services companies, but said it could be a few years before the total dollar sum of the deals rises markedly.
"Offshoring is not nice to have, it's a necessity," he said. "But I don't think we have the maturity levels yet to actually integrate such large acquisitions."
Meanwhile, U.S. industry leaders are making far more aggressive inroads into India.
International Business Machines Corp., the world's largest computer company, recently bought Daksh, India's third-largest back-office company, and e-Serve, another large player in that sector, sold a majority stake to financial services leader Citigroup.
About 4 percent of IBM's headcount is offshore, and 35 percent to 40 percent of that is in India, Janney Montgomery Scott analyst Mayank Tandon said in a recent research note.
Accenture, one of the world's largest consulting companies, offshores 4 percent to 5 percent of its headcount there.
Yet some Indian companies are stuck between their need to buy a U.S. presence and their limited ability to do so. This is particularly true for those in business process outsourcing, where many companies are still backed by venture investors, Commar said.
"They need local presence," Commar said. "Once they find how to integrate these operations and there's not too much culture clash, I definitely feel that the base will increase."
Many Indian companies' share prices have risen markedly as offshoring has become more accepted.
But whether those stocks will see further gains could depend on how much they're able to reach into the United States, said Revolution Partners' Mann. "I think they're at a critical inflection point to see whether they stumble or whether they can actually build out the model."
posted by NYBANKER at 2:18 PM

Role of Diaspora in Outsourcing

Growing Influence and Expertise of Indian Diaspora Gives India an Upper Edge in Outsourcing Arena – Evalueserve Reports ,Gurgaon, India – Oct. 1, 2004:

A study conducted by Evalueserve and World Bank Institute has stated that while other low-cost destinations are slowly catching up with India in the outsourcing arena, the country will retain its edge due to the growing influence and expertise of the Indian Diaspora, especially in the USA, Canada and the UK. This is primarily on account of the rise in organized networking and mentoring that the diaspora community can provide to businesses engaged in outsourcing.

According to the study, by the 1990s, many Indian engineers, who had started moving to the US in the 1960s, had either become entrepreneurs, venture capitalists, or senior executives in large and medium-size companies. Many of these professionals started their own companies in India (e.g., Techspan, Cognizant, Mphasis), while others convinced their companies to hire Indian IT professionals. This provided more visibility to the Indian talent pool and resulted in the strengthening of the Diaspora. For example, by late 1999, Indians constituted approximately 24% of the IT professional population of Silicon Valley. Riding the wave of this growing reputation in the IT sector, many well-placed senior executives in big corporations influenced outsourcing related decisions in India's favor. "These professionals had started to coalesce, especially because many had graduated from the same colleges and most of them knew their counterparts in India,” says Alok Aggarwal, the co-founder of Evalueserve, who graduated from IIT-Delhi and worked for IBM in the US. Some of these relationships quickly matured, leading to the formation of non-profit associations such as The Indus Entrepreneurs (TiE) and Silicon India Professional Association (SIPA), which further fuelled the networking within the Diaspora.

This led to a large movement of Indian American expats to India, who came back to monitor their company's investments and outsourcing contracts and to train and manage Indian professionals on US efficiency and standards. Aggarwal also moved to India to set-up IBM's India Research Lab, which hired over 50 experienced PhDs and masters in science and technology, in New Delhi. "The crucial role performed by the Indian expat community was to convince the large global corporations that India was a good place to get work done and provide required mentoring and troubleshooting assuring that the work had indeed been done," says Marc Vollenweider, a Swiss expatriate and former partner with McKinsey. He ran the McKinsey Knowledge Center in India for a couple of years. The Evalueserve - World Bank Institute study estimates that the combined annual personal earnings of more than 20 million Persons of Indian Origin (PIOs) is approximately USD 364 billion; the gross domestic product of India (with a population of over one billion) is USD 550 billion.

Also, the Indian Diaspora in the US owns approximately 17,000 hotels out of a total of 47,040 hotels; these hotels provide employment to more than 700,000 people in the US. Indians constitute approximately 20 percent of the 'International Medical Graduates' – or foreign-trained doctors - and about 6% of all the practicing physicians in the US . The Evalueserve study also points out that Indians are beginning to be actively involved in the social and political scene. In 2000, the Diaspora had four elected members of Parliament in the UK and 11 members in the House of Lords.Indian offshore vendors and various captive centers of global corporations are already moving up the value chain and performing more complex and value-added activities for their clients. Apart from providing the required capital (through investments), the Indian Diaspora is expected to increasingly play a crucial role in the gradual emergence of India's high-end knowledge services sector. First, it is expected that the Diaspora will provide more organized platforms for the sharing of knowledge and best practices. For example, one such initiative – The Indian School of Business (ISB) – is already acting as a platform for various professors teaching in the US, the UK, and Canada to come and teach in India. ISB also runs a world-class MBA program as well as various executive education programs for Indian companies.

Next, the Diaspora is expected to increase the brand equity of the Indian industry but without giving a semblance of bias for their home country over other low-wage destinations. In fact, "PIOs own brand equity as capable and successful professionals, indirectly lends increasing credibility to the might and ability of Indian firms, thus increasing the equity of Brand India" says Abhishek Pandey of Evalueserve, who graduated from IIT-Kanpur and is the co-author of the report. Additionally, some VCs in the US – particularly those of Indian origin – are actively funding Indian companies that have back-end operations in India, so that they can save on research and development costs. It is estimated that over 150 start-ups in the US already have some form of back-end in India (as of March 2004) and this number is likely to double by March 2006.Finally, several networking organizations like TiE (The Indus Entrepreneur), AAPI (American Association of Physicians from India), AAHOA (American Asian Hotel Owners Association), AACSA (American Asian Convenient Stores Association) are helping the Indian Diaspora and the entrepreneur community in India to bond stronger.

In addtion, many of these organizations are creating win-win situations with other Diaspora and IT communities, e.g., the Chinese Diaspora and the Chinese software and hardware manufacturing communities (in China, Taiwan and Hong Kong). Finally, some of these networking organizations have been extremely successful. For example, TiE and the Silicon Valley Bank has already taken three delegations of VCs to India for exploring potential investment opportunities. While all expatriates agree that the Diaspora has been a major catalyst, many downplay its role in the gradual transformation of India. According to this group, the sudden demand for skilled labor after the growth of Internet, and the Y2K problem, would have drawn India's engineers and technicians into the world IT industry regardless of the Diaspora’s assistance. "However, countries such as South Africa, Russia, and other Eastern European countries were not similarly drafted into the boom and we believe that the influence of the Diaspora has been crucial,” says Alok Aggarwal.

Further adds Yevgeny Kuznetsov, a senior economist at the World Bank, " Profound restructuring of global value chains we are witnessing now opens new windows of opportunities for India, particularly regarding outsourcing of corporate R&D. India Diaspora will again play a critical role in this incipient process. There are also important lessons for other Diasporas, in particular for highly skilled one such as Diaspora of Armenia or Argentina".

Friday, November 26, 2004

GE sells India outsourcing unit

US giant General Electric (GE) has sold a majority stake in its Indian outsourcing arm for $500m to two private equity firms.

The deal gives US-based General Atlantic Partners and Oak Hill Capital Partners a 60% stake in GE Capital International Services (GECIS).
GECIS is a pioneer in the lucrative global outsourcing industry.
GE was one of the first American companies to outsource back-office work to India in an effort to save costs.
India has a large pool of English-speaking skilled workers providing expertise in services such as accounting, insurance, claims processing and information technology.
Indian employees are also willing to work for comparatively low wages.

Source: BBC News

US outsourcing prayers to India

New York: Following the outsourcing of software and other technological work in recent years, Western nations have now begun "offshoring" of Christian prayers to India.

"With Roman Catholic clergy in short supply in the United States, Indian priests are picking up some of their work, saying Mass for special intentions, in a sacred if unusual version of outsourcing," The New York Times reported.

Joining Americans in sending Mass intentions, requests for services such as those to remember deceased relatives and thanksgiving prayers, to clergy in India, are Canadians and Europeans.
No other Indian state receives more intentions from overseas than Kerala, where the Masses are conducted in Malayalam. The intention, often a prayer for the repose of the soul of a deceased relative, or for a sick family member, thanksgiving for a favor received, or a prayer offering for a newborn, is announced at Mass.

Generally individuals don't receive overseas requests, which are mostly routed to churches in Kerala through the Vatican, the bishops or through religious bodies. Such requests are increasingly arriving via e-mail, though the regular mail and the word of mouth of traveling clergymen constitute a majority.

The Times, quoting priests, said memorial and thanksgiving prayers for locals are said for a donation of Rs 40, whereas a prayer request from America costs 5 dollars.
Sebastian Adayanthrath, auxialiary bishop of the Ernakulam-Angamaly diocese in Kochi, said his diocese received a monthly average of 350 Mass intentions, which are passed to the needy priests. He added that in Kerala, where priests earn about Rs 2,000, the overseas money is a welcome supplement.

In Bangalore's Dharmaram College, Rector James Narithookil said he often received requests for Mass intentions from abroad, which he disbursed among the 50 priests in his seminary. Most of the requests from the United States were for requiems, with donations of 5 to 10 dollars, he said.


High Quality in the Indian Outsourcing Industry

Outsourcing to India is now more about high quality rather than cost. Indian companies are fast scaling up to match or surpass international quality standards and are ensuring that they stay ahead through stable quality systems and continuous quality improvement.

The Indian BPO industry, which previously relied on its cost effectiveness to attract customers, is now under an entirely different dictatorship. Quality is the new buzzword and is dominating business processes and services like never before. Ninety percent of ITES-BPO companies now have specialized quality departments that are responsible for ensuring accurate, reliable services to their customers. The spotlight in Indian centers is now focused on ensuring standards of quality that are at par with, if not superior to their counterparts abroad.

Defining Quality
Quality departments have a straightforward approach to identifying the areas that require quality control. The first step is the identification of parameters that are 'critical to quality'. These parameters almost always include the client's requirements and expectations. Other key factors like accuracy, productivity and turnaround time are also outlined.
Most companies are now also following the process approach. The process approach is a description of the linkages between all the activities that work towards meeting the finest quality standards that have been identified by prevalent quality norms and the client's expectations.
The Indian Advantage
The Indian advantage lies primarily in the educational and technical qualifications of the personnel, who are often more qualified than the people working in the parent locations. A survey conducted in 2002 by NASSCOM (National Association of Software and Service Companies) showed that an India based ITES-BPO center in the banking and financial service sector, performs better than a UK or US based facility on significant factors such as the number of correct transactions/total umber of transactions, total satisfaction factor, number of transactions per hour and the average speed of answers.
The ITES-BPO industries are most sensitive to incorporating internationally accepted standards of quality assurance. The NASSCOM survey also found that 50 percent of Indian companies have implemented varied levels of ISO (The International Organisation for Standardization, which conceives sets of quality management standards) such as ISO 9002, ISO 9001, ISO 9001:2000, ISO 9001:2001.
The survey also says that 45 percent of Indian service providers have certifications like Six Sigma (a disciplined, statistical quality control method that measures the number of defects compared to the opportunities to make defects) and CMMI ( Capabilty Maturity Model Integration - which is a process improvement method that provides a set of best practices that address productivity, performance, costs, and customer satisfaction.). Moreover, a lot of organizations are upgrading their quality standards to from the ISE 9000 to the new ISO 9000:2000, and from the CMM framework to the new CMMI framework.
Quality Lapses - People and Industries
Despite superior performance levels and accreditation from international bodies, India still remains at a disadvantage when it comes to certifications for quality professionals. There are little or no certifications for quality professionals in India, and those that are available are either US or UK based. Although most companies make their employees undergo the processes for these certifications, the lack of an indigenous certification body is being felt, especially due to the scarcity of training centres for quality assurance and control. The only two popular certifications in the ITES industry are the 'Certified Software Quality Analyst (CSQA) and the Certified Software Test Engineer (CSTE). Both these certifications are offered by the Quality Assurance Institute, which is again, an international body. But these too are largely considered inadequate by most authorities.
Another major problem concerning industries like the customer contact center industry which relies on verbal one-on-one communication, is the use of incorrect accents and grammar. Quality lapses are felt strongly because of misunderstandings or the customer's inability to understand Indian accents. Efforts are being made to improve the quality standards in these areas by deploying specific bodies that evaluate prospective employees on English speaking abilities such as accent, grammar, fluency and overall communication skills. The international standard in contact center operations - the COPC certification is now in great demand among Indian contact centres. While six of the top 25 players already have COPC certifications, 12 more companies are in the process of being certified.
Efforts Towards Improving Quality
The frenetic pace, with which Indian players are moving towards achieving internationally recognized quality control standards, largely arises out of the awareness that the BPO industries cannot sustain themselves on the advantages of lower costs and English speaking abilities alone. The importance of consistency, low error rates and customer satisfaction has never been felt as strongly as right now.
Naturally, governing bodies like NASSCOM are holding no bars in its efforts to improve quality regulation. By the end of 2004, it plans to introduce a common certification programme across India for aspiring candidates, in terms of the skills and knowledge required by the BPO industry.
Another significant move towards ensuring quality is NASSCOM's initiative towards controlling issues like copyright infringement. It plans to formulate a comprehensive draft proposal to ensure information security and data privacy. The proposal will also emphasize the need for internal checks and continuous quality reviews, both by the internal senior management team as well as by the client team.

NASSCOM also plans to create a common yardstick for BPO organizations. Attempts to create such a yardstick are being made by Carnegie Mellon University which is involved in developing E-SCM or the E-Services Capability Model. This model is extremely useful for clients who are selecting a suitable service provider, as it allows them to compare the capabilities of different service providers, and also compare issues associated with the initiation and completion of the project.

The concept of benchmarking is also beginning to be used more regularly. Benchmarking is a continuous process of assessing and comparing an organization's performance with a recognized industry leader. This is especially useful in knowing where a particular company stands in relation to its competitors. It also makes it easier to identify which areas need more attention in terms of quality control.

The Quality Assurance Institute holds various training programmes in Six Sigma, COPC Implementation and Support and non-certified skills like maintaining customer satisfaction, people management, service levels and transaction monitoring.

For a company, ignoring quality now means certain extinction. Quality therefore, is no longer an option, it is the only choice.


Outsourcing: Likely Trends for the Next Decade

Outsourcing isn't going to disappear, and given the success that many companies have begun enjoying during the past few years, it's not likely to level off anytime soon. It's going to be more and more of a mainstream phenomenon, and it's going to affect more and more workers, in more and knowledge-based industries. Meanwhile, more and more politicians will utter more and more speeches, while Congress passes a few laws to help re-train those who have lost their jobs. But when it's all said and done, what you should expect to see, in terms of the economic impact of offshore outsourcing five to ten years from now is more of the same. End of story.

Of course, some of this more-of-the-same prediction is predicated on success with the current practice of offshore outsourcing. If companies find that offshore outsourcing reduces their costs, improves their productivity, and increases the quality of their products and services, they'll want to do more of the same. And if they discover, to their surprise, that they failed or achieved only minimal success, then perhaps outsourcing will fade away. From that perspective, it was interesting to see the assessment of approximately 240 respondents in a survey conducted by the Cutter Consortium in the spring of 2004. When asked "How successful do you think companies are likely to be in achieving their cost-reduction objectives through outsourcing?"


Added Challenges for Indian Outsourcing Industry

According to Gartner,

"Southeast Asia and Central Europe could acquire 45percent of India's share of the outsourcing market because of the country'sfailure to adopt a long-term strategy to stay ahead.

Offshore BPO earned India an estimated USD 2.3 billion in 2003, representingmore than 80 percent share of the global market. India may lose 45 percentof its 80 percent share by 2007. India has failed to see the potential challenge posed by its competingcountries.

Unlike other emerging nations, the Indian industry is toonarrowly focused on English-language outsourcing, and not trying todiversify into new markets by mastering other languages. No single countryis challenge to India, but competition from a number of countries togetherwill put pressure.


Thursday, November 25, 2004

US poll results won't hit outsourcing: Mulford

American election results are unlikely to stem the flow of jobs to India and other developing nations where labour is cheaper as outsourcing is a reality of globalisation, the US envoy said in New Delhi on Friday.

US Ambassador to India David Mulford told a meeting of the American Chamber of Commerce in New Delhi that there could be no turning back on the outsourcing of US manufacturing and call centre jobs to India and China.

Outsourcing from US to grow by 40%

Amidst the furore over outsourcing of jobs to countries like India, a study has said that the offshoring industry in the US is still in its nascent stage and is expected to grow 31 to 40 per cent annually in the next five years.

The McKinsey Global Institute said that business-process offshoring, which was valued between $32 to $35 billion in 2002, was just one per cent of the $3 trillion worth business functions that could be performed remotely.

Outsourcing Industry Pleased with Bush Victory

The New York Times published an interesting piece highlighting India’s outsourcing industry’s satisfaction with the re-election of George W. Bush. "Outsourcing" certainly had become a dirty word during the presidential campaign with Kerry accusing Bush of promoting "Benedict Arnold companies and CEO’s" to send jobs overseas. India’s software and back-office services industry posted $12.5 billion in export revenues from March 2003 to March 2004. Global demand for their services has continued to rise.


Growing outsourcing trend seen shifting to IT services

Outsourcing is a global "mega-trend" in the technology industry that will only increase in the future, with revenues linked to IT services likely to see the biggest gains by the end of the decade, according to market researcher Gartner Dataquest.

Still, it's uncertain if this will hurt the U.S. and European job market, as other factors may weigh more heavily on the volatile cycle of job loss and creation, according to Gartner analyst Craig Baty. Baty spoke here during the CommunicAsia 2004, Southeast Asia's largest telecom show.

During the next few years, the IT services market in the Asia Pacific and Japan markets is likely to outpace that of telecom services, which has been one of the hotter sector.

Last year, telecom services totaled $117 billion, while IT services rang up $104 billion in revenue, according to Gartner.

Although IT services is one of the highest profile areas for off-shoring, the markets for hardware and software development services have long been the basis of the off-shoring trend.

Taiwanese companies like Taiwan Semiconductor Manufacturing Co., Quanta Computer and Honhai have long provided Asia-based contract manufacturing services for the hardware industry, while a host of Indian and now Chinese companies are vying for the software development market. Chip design jobs are also starting to migrate overseas.

The emotion surrounding outsourcing will continue, Baty said, especially when the vendors are based in Asian countries.

Interestingly, countries like Australia have quietly been handling offshore services for years.

"If it's in Australia, then it's all right. We have kangaroos and helped the U.S. fight the Axis of Evil," Baty said. "But if it's in India, then it's something different. The race card is alive and well in the West."

That assertion is certainly debatable. On a micro-level, anecdotal evidence suggests that many out-of-work engineers, for instance, are more concerned about their next paycheck. On a macro-level, concerns seem to focus on the U.S. competitiveness in science and technology, and government sponsorship of related programs.

Nevertheless, the general backlash is clear, and Baty warned that it belies some key developments that may moderate trends in outsourcing. "

Fifty percent of CIOs globally have said their outsourcing experience was hell," Baty said. Within a few years, he added, as the outsourcing industry matures, it's possible that more than 60 percent of the vendors will fail.

Baty also noted that Washington believes less than 5 percent of jobs lost in the IT industry can be attributed to outsourcing.

"That's probably conservative," he said, citing figures from researcher Global Insight that found 2.8 percent of jobs were lost. "More jobs were probably lost through poor planning, bad [human resources] management or job mismatch," he said.


HR BPO the Next Big Thing

According to V Chandrasekaran of Secova eServices Ltd, human resources BPO amounts for one-third of all outsourcing. Gartner Research estimates that HR outsourcing will reach $51 billion and represent 39% of all BPO revenue by the end of 2004.

From Financial Express:

“HR opportunity is absolutely new. It is a sunrise opportunity with huge potential,” Mr Chandrasekaran, who formed Secova eServices to tap this potential, said. “Our initial focus will be only on HR administration, benefits and payroll, in the mid-market which accounts for $13.2 billion.”

In HR BPO, revenues depend on the number of employees the clients have. This is in sharp contrast to a typical customer care centre, where bills are charged on the workers servicing a client in the BPOs.

The Future of Outsourcing

Gartner Says Outsourcing Will Continue to Be the Main Driver for Growth in IT Services

Analysts Discuss The Future of Outsourcing During Gartner Outsourcing Summit 2004

Outsourcing continues to be the main source of growth in IT services, and has become a mainstream business practice for companies of all sizes. According to Gartner, Inc., in 2004, outsourcing will account for 53 percent of the total worldwide IT services market, and will make up 56 percent of the market by 2007.

Gartner presented these findings during the Gartner Outsourcing Summit 2004, which is taking place here, through May 19.

"Outsourcing is becoming the dominant way that enterprises buy IT services," said Allie Young, research vice president for Gartner's sourcing group. "The outsourcing industry continues to evolve, but the imperatives for enterprises that are considering outsourcing are constant - focus on core business, access to critical technical expertise and optimized IT operations."

There is heightened attention on business processes, as business process outsourcing (BPO) becomes the new growth area for adding greater value to outsourcing. Highly complex, multiyear IT projects are still found in megadeals, but for the average enterprise, the rise of shorter-term "selective" outsourcing will give way to a "best of breed" approach as business units influence outsourcing choices to a greater degree. The need for best in class IT outsourcing (ITO) and BPO for business impact is driving this shift.

The IT services market is also in the middle of unprecedented change as companies rush to employ a global delivery model (GDM), primarily in an attempt to reduce costs. Many enterprises consider "offshore" as synonymous with cost savings. The industry is transitioning to "global sourcing", which involves a broader, more varied value proposition, a more fundamental change in how enterprises buy and source IT services, and how outsourcers create and deliver IT-enabled business services. "A global delivery model means that enterprises can use IT resources from anywhere in the world to ensure that they have the right skills at the right price at the right time, with managed risk," Young said. "Only the largest global corporations will rely on captive centers to bring a global labor pool to their IS organizations; most enterprises will do so via outsourcing, tapping into the GDM of an outsourcer."


Wednesday, November 24, 2004

More corporate giants opening dedicated software development centers in places like India and Russia

While most companies tend to test the offshore waters with a small project or two, the big names tend to cement these relationships by setting up huge dedicated development centers in their countries of choice.
Microsoft and GE, for example, built campuses in India several years back. Over the past couple of years, though, Intel, Boeing and Motorola have preferred Russia as the best place for dedicated centers. Intel has 400 workers at one Russian center working on wireless LAN and modem projects. It plans to ramp this up to more than 1,000 staff over the next couple of years.
Dell, too, just established a dedicated software engineering center in Moscow. Unlike Intel's, this one is managed and staffed by Russian outsourcing vendor Luxoft. It is a scalable-upon-request team of software developers, with every member being selected by Dell based on relevant experience, domain knowledge and educational background. Dell views this center as a way to focus internal IT resources on specific core areas while scaling up the pace of IT deliverables, and at the same time reduce costs.
"Having delegated some projects to the Moscow Center, we intend to free up the time and energy of our IT departments to enable them to focus on value-added technology tasks, while keeping the scale of IT deliverables at the current and even higher pace," said J.R. Carter of Dell Computers.
Tom Sundsboe, a director of Luxoft, explained that such centers tend to evolve once companies gain confidence in the ability of their offshore partner.
"After you demonstrate first class ROI and rapid time to market with a Fortune 50 company during your early projects, they tend to want to consolidate the relationship by utilizing your skills and resources in the establishment of a dedicated center," he said. "That has been our experience with Boeing and Dell."


More and more IT jobs will move overseas in the coming years

Forrester Research estimates that the demand for offshore outsourcing will account for 28% of IT budgets in Europe and the U.S. within two years. Further, the number of offshore IT workers worldwide (software developers working overseas on projects for Western firms) will go from 360,000 today to more than 1 million by 2005.

"Clients are now banging on our doors demanding data on where they should go for offshore development," said Rita Terdiman, an analyst with Gartner Group. "We tell them to go where they can find the best resources and the highest quality for the lowest price."

India Outsourcing Advantage

India offshore outsourcing has the advantage of cheap, computer literate, English speaking manpower in more than enough numbers in comparison to other nations. Indian outsourcing destinations like Bangalore, Chennai, Pune, Mumbai, Delhi and Kolkota are developing with lots of money being invested in revamping the infrastructure in terms of power, road and communications.
India also has the expertise of quality certified software firms and outsourcing suppliers that not many countries can boast of.
So as of now, India seems to hold its position as the leader in outsourcing service market.