Wednesday, September 29, 2004

India Ready for Windows XP Lite

vnunet.com reports a cut-down version of Windows XP is being released in India and other developing technology markets like Thailand, Malaysia, Indonesia and Russia. This version includes a Hindi interface and will be available early next year.

"This low-cost, customised and localised technology will spur PC usage, creating a new breed of technology-aware citizens to contribute to India's growth as an IT superpower," said Ravi Venkatesan, chairman at Microsoft India, in a statement.

"Technology is a catalyst for economic and social change [but India has] a long way to go in providing access to technology and the related skill."

Tuesday, September 28, 2004

Outsourcing: Transitional Service Agreements

NEWS.com.au reports companies that centralise IT services with an outsourcer or a shared services group need to design deals that can be broken up if part of the company is sold.

Minter Ellison partner Keith Robinson says the increasingly popular shared services model could make it difficult and expensive to break off elements of a company in a merger or acquisition, unless the services deal is structured so it can be separated.

Robinson says corporates need to "think ahead" when negotiating services agreements, and structure such agreements so temporary sub-licences can be developed to deal with sales of parts of the business. Lawyers call these deals "transitional service agreements".

Monday, September 27, 2004

Outsourcing Creates Jobs in Singapore

The Straight Times reports the Singapore unemployment rate is expected to drop as firms restructure and outsource work, according to labour leader Lim Boon Heng.

"On the recent moves by companies such as Singapore Airlines and Singapore Airport Terminal Services (Sats) to outsource jobs, Mr Lim said that it is one outcome of a more competitive environment. The national carrier announced last week that it was outsourcing 130 information technology jobs."

Said Mr Lim: 'It's happened in other countries first, now it's catching up with us... We've seen Singapore come under more intense pressure, because many of our neighbours are doing the same things as we do, and they do so on a lower cost base, including wage cost.'

Asked whether outsourcing would worsen the umemployment rate, he said: 'No, I think the unemployment rate will actually improve in my view, because new opportunities come up for those who're looking for jobs.

Singapore Identifies 12 Outsourcing Services

The Straight Times reports the Singapore government has identified 12 services which can be outsourced to private companies as part of an ongoing economic drive.

"The functions submitted by government ministries and statutory boards are: library and legal services; human resource; training; carpark services; call centres; IT; facilities, document and project management; security; and finance and accounting."

"They will be 'market-tested' - that is, comparing the cost of delivering the functions in-house with what is charged by the private sector. If a private company can deliver a service more cheaply and effectively, it will be hired to do the job."

"The Government calls this process best-sourcing. The idea is for public agencies to get the best value for their money. They will complete their market-testing by next March, said the Finance Ministry."

Wednesday, September 22, 2004

Is Offshoring Slowing Down?

BusinessWeek Online reports the wage gap between the US and Asia is quickly narrowing which could diminish the cost savings of sending work overseas.

"The demand for English-speaking service workers in Bangalore is so high that GE as well as Infosys Technologies (INFY ) and Tata Consultancy Services are now looking outside major Indian cities to set up new call centers and other operations because they can't recruit enough college-educated people. The same is true in China."

"What does that tell you? Most of the best and brightest Indians and Chinese are already fully employed and are negotiating higher wages and benefits for their work."

"This is a significant development offshoring. Honest corporate managers will tell you that to make offshoring work, you need at least a 300% to 400% wage spread between American software writers, engineers, accountants, and call-center employees and their Indian and Chinese counterparts."

Don't Forget Security When Outsourcing

Computerworld reports many companies fail to take into account cultural differences that may affect their security when outsourcing, according to experts attending the Gartner IT Security Summit in London today.

At issue is not so much the security that outsourcing service providers use to protect companies' systems -- such as firewalls and data backup -- as it is the cultural differences, Iyengar said. For instance, standards of privacy are often looser in India because it's a close-knit society where, say, reading someone else's e-mail wouldn't be considered much of an intrusion.

"Fifty percent of companies understand that there are security issues with offshoring, but the real issues are cultural and in compliance and regulation," said Lawrence Lerner, senior technical architect of the Advanced Solutions Group at Cognizant Technology Solutions Corp.

One way of ensuring that security and regulatory compliance concerns are met is by putting the onus on the outsourcing provider and writing it into the contract, he said. "It pays dividends to have the provider responsible for these issues," Balchin said. "For us, it's a distraction from our core business."

Monday, September 20, 2004

India's Outsourcing Faces Skills Shortage

CRM News reporst India's outsourcing industry is expected to face a shortage of 262,000 professionals by 2012. Kiran Karnik, president of the National Association of Software and Service Companies (NASSCOM), said the body had begun talks with IT firms, universities and governments about improving study courses to equip students for outsourcing and IT research jobs.

"There are two-and-a-half million graduates every year in India," Karnik told reporters. "[But] the employable pool in this is very, very small. We are working with the universities to train people better."

"The aim is to have courses meant towards producing graduates with quality. This has to start right from the primary school level," Karnik said.

Lower Telecom Costs Boost Outsourcing to South America

allAfrica.com reports policy changes announced this month by the communications ministry of South Africa will lead to globally competitive telecommunications prices and ultimately more outsourcing business to South Africa.

One of the country's less attractive features is its high telecommunications costs. But this is set to change following the news that the licensing of the second network operator will take place this month. Also, as of next year it will be legal for more players to carry both voice and data traffic over a single line.

Call Centre Nucleus marketing director Jonathan Hackner says South Africa competes with about 20 countries for call-centre business and ranks about fifteenth, with India and the Philippines leading the pack. "However, we can rank in the top five once our telecommunications prices come down," says Hackner. He reports that the Department of Trade and Industry is offering R200-million worth of incentives for companies which set up local call centres, a move which can create an additional 100 000 jobs by 2007.

Friday, September 17, 2004

Outsourcing R and D to India

EE Times reports India is attracting research and development outsourcing projects according to a strudy by Research and Markets of Ireland. R&D outsourcing to India is expected to grow from $1.3 billion in 2003 to $8 billion by 2010.

"Growth in R&D outsourcing has been boosted by the outsourcing of services. Now, overseas companies that used India as a low-cost base are beginning to exploit Indian technical expertise."

"The success of Indian R&D centers was attributed to factors such as good management, an emphasis on quality, strong ties to universities and clear roadmaps. The growing number of R&D centers also built on the successes of pioneering companies, the study found."

Offshoring Goes Mainstream

vnunet.com reports Unisys chief and others foresee easier outsourcing ahead and indicators suggest offshore outsourcing has entered the mainstream as global organisations gain confidence offshoring new and complex services.

Brian Hadfield, managing director at the IT services firm in the UK, said the future of outsourcing would see a move to packaged offerings and away from one-off, specialist deals. "We believe the ability to take an outsourcing venture and grow it into a utility is important," he said. "You get economies of scale, which can be passed on to the customer."

Hadfield predicted that demand for outsourcing would grow in a number of areas, including supply chain management, logistics and customer relationship management. "You'll see a transition from outsourcing the back office to the middle and front-end. People will start taking a look at outsourcing these activities."

Hadfield also anticipated growth in offshore IT outsourcing. "We do some offshore work and have made investments in this area," he added. "The ability to lower costs by doing work offshore will be attractive to customers and suppliers." However, firms are likely to be selective about the projects and activities sent abroad, he predicted.

Friday, September 10, 2004

Big Growth for India Outsourcing Company

Reuters.com reports WNS Global Services, India's largest independent back-office provider, is growing revenue by 50 to 60 percent.

"Revenue grew 84 percent to $103 million in the year to March 2004, helping it unseat Wipro Ltd.'s Spectramind arm from the top of the list of independent Indian providers. The Indian business process outsourcing (BPO) sector has grown to $3.6 billion from nowhere a few years ago, but captive arms of multinationals account for 60 percent of the revenue"

"WNS employs 5,000 people in BPO centers in Bombay, Pune and Nashik in India, Ipswich in the UK, and it is opening one in Sri Lanka soon. Bhargava said it aimed to double headcount to 10,000 by March 2006."

Kerry on Outsourcing

Kansas City Star reports Sen. John Kerry pledged to eliminate a tax break that U.S. companies get for foreign operations. Most likely this would only have a small effect on a limited number of companies and is unlikely to bring jobs back onshore.

"Most experts say that outsourcing isn't to blame for many of the 1.1 million private-sector jobs that have been lost over the past three years. And those jobs that are outsourced aren't driven abroad, as a rule, by the small tax break that Kerry decries, they say. Economists say that most companies that relocate jobs abroad do so to take advantage of lower wages and production costs."

Wednesday, September 08, 2004

Outsourcing's Impact

Fool.com reports on the impact of outsourcing in America and it's effect on jobs.

"What we need is a way of determining whether the gain is worth the pain. Suppose the net benefit to America is the degree to which the average employee's purchasing power increases. The benefit really depends on four factors: the proportion of consumer expenses spent on potentially outsourced goods, the decrease in prices due to outsourcing, the proportion of American jobs that can be outsourced economically, and the wages of jobs that can be outsourced relative to the jobs that cannot"

"In the long term, American workers will be competing with labor elsewhere, pressuring American wages. Though prices should fall, it's unclear whether these benefits will compensate Americans for lower wages. On the other hand, India and China will benefit from both higher wages and falling prices. Consequently, outsourcing will likely narrow America's standard of living lead over other countries."

Tuesday, September 07, 2004

Philippines Joins OutsourceWorld

Philippines newspaper ABS-CBNNEWS.COM reports the Philippines is set to join OutsourceWorld, which will be held in New York City next month, in an effort to find new outsourcing markets.

"OutsourceWorld NY, which will be co-located with Technology Exchange Week New York, attracted some 43,000 international visitors last year. Over 200 exhibitors are expected to join this year’s event, which organizers said will draw 45,000 visitors. Purisima said the participation of the Philippines in the exhibit is part of the DTI’s efforts to position the Philippines as the preferred outsourcing destination in Asia."

"The Philippines serves as a source of outsourcing services from the US and Europe. US-based companies such as AIG and Procter & Gamble rely on the Philippines for its management, finance and accounting services, while Alitalia and International Red Cross already have established their presence in the country’s outsourcing industry."

Monday, September 06, 2004

Outsourcing Countered by Foreign Firms In US

SeattlePi.com reports foreign companies have created millions of jobs in the United States, far outpacing the amount of work that American businesses have sent abroad, Labor Secretary Elaine Chao said last week.

"In the past year, employers have eliminated about 300,000 jobs in the United States in favor of cheaper labor elsewhere, Chao said. Yet about 9 million Americans currently work for U.S. subsidiaries of foreign-owned companies, she said."

"'We understand the concern and the anxiety on this issue,' Chao said. 'My point also is we live and work in a worldwide economy. ... If we isolate ourselves from this worldwide economy, we will put in jeopardy the 9 million jobs that Americans currently hold' in foreign-owned companies.

Friday, September 03, 2004

Malaysia Emerging as a Top Outsourcing Destination

Space Wire reports Malaysia is competing to become one of Asia's top outsourcing destinations according to Malaysian Prime Minister Abdullah Ahmad Badawi.

"A global survey by US consultancy firm AT Kearney listed Malaysia as the third most attractive offshore location in terms of cost and skills behind India and China."

"Abdullah said the Multimedia Super Corridor (MSC), launched in 1996 as Asia's answer to California's Silicon Valley, has expanded rapidly with new 'cyber-cities' being established in several states."

Thursday, September 02, 2004

More Outsourcing After Elections

Indian published Business Standard reports American firms and independent IT vendors are for the most part marking time, waiting for the US elections to be over. The jobs traveling to India are mainly resulting from the need to take care of growth and attrition and little because of layoffs.

"Avinash Vashistha, CEO of the offshoring consultancy neoIT, predicts that next year IT services offered out of India are likely to grow at 40 per cent. The potential for Indian companies in particular is underlined by the small part of global IT services delivered by them. If this is the optimistic scenario for IT services, for ITES or BPO the potential for growth of offshoring is even greater. So far only a small part of BPO services has migrated to India, dominated mainly by call centre work."

Wednesday, September 01, 2004

Outsourcing is Pruning America

Market Week blog offers a unique view on outsourcing as the pruning of American jobs. In other words, America moves low return business to lower cost labor sources to focus more on higher return businesses.

"In America we 'prune' low return businesses and invest in high return businesses. The textile industry in the USA is another case in point. Over time textile manufacturing moved from Great Britain to the Northeast of the USA, then to the Southeast of the USA in order to keep labor costs down. Now the textile industry is moving overseas to low cost producers. Textiles are a business with a very low return on invested capital and cost advantages quickly turn into price advantages. Price advantages turn into sales as consumers seek to get the most for their dollar."

"As painful as this process can be for individuals and communities the likely outcome is not that all of our jobs move overseas. Who aspires for their children to work in a broom factory, or to make clothespins? The USA will continue to retain high value added jobs and prune low value added jobs."

"We all benefit from pruning from lower cost of goods, a broad array of products in our stores. The Chinese make lamps, toys, consumer appliances and sell them to us, and they buy Boeing Jets, Cisco Routers, Intel Microprocessors, Disney Movies, and Coca-Cola."

"Off shoring or outsourcing of low valued added jobs is how we prune the dangerous dead wood here in the USA. It is why we enjoy one of the highest standards of living in the world. It is necessary. Without it our productivity will falter and our standard of living will fall."