Thursday, October 28, 2004

10 Facts You Should Know About Outsourcing

News.com reports on the 10 facts you should know about outsourcing. This is a good summary about the issues related to offshore outsourcing and provides some interesting facts and figures. Some of the more compelling facts include...

2. The Department of Labor expects demand for software engineers to grow 50 percent by 2012.
4. In recent years, Finland and Japan invested more than the United States in technology research.
7. Miscommunication, mismanagement and other problems can cut into labor cost savings.
8. Some researchers estimate a return of $1.12 to $1.14 for every dollar spent on outsourcing.


Firms See Mixed Results in Outsourcing

News.com reports a survey of US and European companies has found that less than half consider outsourcing financial functions to be cost-effective.

About 44 percent of companies that have outsourced financial functions say they have saved a moderate amount, according to a new study from PricewaterhouseCoopers. Another 3 percent say they have saved a great deal.

Nearly 75 percent of American and European corporations that use outsourcing to support their financial functions will continue to do so over the next two years, according to the survey. About 29 percent of these companies expect to increase their use of outsourcing of financial functions, with spending likely to be 16 percent higher than present levels, the survey found.

A PwC representative said the disconnect between the outsourcing push and the financial results is mostly due to lack of planning on the companies' part.

India Uses Canada as Back-Door to US

Metro reports Indian companies are opening back doors into the United States by setting up shop in Canada.

The idea is to offer alternatives to U.S.-based Fortune 500 companies that are eager to get some benefit from the cost savings of outsourcing. By moving work to a "near-shore" destination such as Canada, U.S. companies can mitigate the domestic backlash that may come with the "off-shoring" of jobs.

He said people shouldn’t be surprised that Canada is an ideal near-shore destination for U.S. computer services jobs. It happened in the automotive sector in the 1960s, with the film and television industry and with call centres.

Raju compared the outsourcing trend to the advent of disruptive technologies such as the computer or cellphones. They are innovations that can’t be ignored, he said, because they represent such a dramatic change in how companies do business and remain competitive.

"The benefits of global outsourcing are not incremental," he said. "If they’re incremental, they can be ignored."

Ignoring these changes is what got many U.S. companies in trouble, which is why Satyam is planting seeds in China, a market expected to be the next global outsourcing opportunity after India has run its course.

Monday, October 25, 2004

Is Outsourcing Worth IT Job Loss?

CIO News asks what is happening in respect to technology jobs in the current environment. Is the global environment a drain on technology jobs here in the U.S.? A group of outsourcing experts gathered last month at the Emerging Technologies Conference at MIT to discuss the effect of globalization and offshore outsourcing on IT jobs in the U.S.

The reality is that offshore outsourcing is a growing trend. According to a recent study from Meta Group, the worldwide offshore outsourcing market is worth $10 billion today and will grow 20% annually through 2008. Meta also claims that offshoring growth will outpace outsourcing in general and predicts that the average enterprise will offshore 60% of application work by 2008 or 2009.

Regarding job loss, a study from the U.S.-China Economic and Security Review Commission, found that up to 406,000 U.S. jobs will be moved overseas this year. The offshore job tracker on TechsUnite.org reports that more than 259,000 jobs have been sent offshore from Jan. 1, 2000 through Oct. 12, 2004. The site also claims that 142,500 jobs have been lost as a result of offshore outsourcing during this same time frame.

"You have three choices: remain competitive, choose a new industry or go down a misguided path of tariffs and closed markets," he said. "We rightly chose to have a minimum wage in this country and not to allow sweatshops. By doing so, we accept that we may not be able to compete in some industries where cheaper labor and lower costs of living can produce the same products at a fraction of the cost."

Skills Shortage Threaten Indian Outsourcing

Gulf Daily News reports India's outsourcing industry faces a major 'talent challenge' as a lack of skilled employees threatens it's global success according to company officials and analysts.

While call centres are flourishing in India, they represent only a small portion of the global outsourcing market and nearly 97 per cent of future work will involve high-end analytical processes such as banking and marketing applications.

Avinash Vashistha, managing director of NeoIT, an outsourcing advisory and consulting firm, said India is not ready to meet new demands and the industry could be badly hurt if supply shortages are not overcome soon.

Gartner, a top global IT consultancy, last month said emerging nations in southeast Asia and central Europe could eat up nearly half India's 80pc share of the booming outsourcing market if the nation fails to draft a longterm strategy to stay ahead.

Friday, October 22, 2004

Outsourcing Medical Treatment

MSNBC reports a story of man who outsourced his heart surgery to India for a fraction of what it would have cost him in the US.

Taking his cue from cost-cutting U.S. businesses, Staab last month flew about 7,500 miles to the Indian capital, where doctors at the Escorts Heart Institute and Research Centre -- a sleek aluminum-colored building across the street from a bicycle-rickshaw stand -- replaced his balky heart valve with one harvested from a pig. Total bill: about $10,000, including roundtrip airfare and a planned side trip to the Taj Mahal.

Staab is one of a growing number of people known as "medical tourists" who are traveling to India in search of First World health care at Third World prices. Last year, an estimated 150,000 foreigners visited India for medical procedures, and the number is increasing at the rate of about 15 percent a year, according to Zakariah Ahmed, a health care specialist at the Confederation of Indian Industries.

Outsourcing Continues in US

Sify.com reports the practice of moving American jobs overseas continues and should pick up after the presidential election.

''Some customers were waiting for the elections to be over to place outsourcing orders,'' The Wall Street Journal quoted Wipro Chief Financial Officer Suresh Senapaty in yesterday's editions as saying. He acknowledged that outsourcing has become a political issue in the United States.

Some said American politicians were missing the point in saying more education as a solution for outsourcing, since the jobs moving overseas increasingly are affecting highly educated professionals, particularly in the technology sector.

Tuesday, October 19, 2004

Outsourcing Europe Gains Acceptance

CIOL reports the practice of outsourcing business, long popular in the United States and Britain, is gaining in acceptance in continental Europe and is diversifying rapidly from technology services to other business processes. In Europe, more outsourcing deals were signed last quarter than in any single quarter since 2000.

In Germany, Europe's biggest economy, banks are leading a trend of handing over entire business processes to third parties, with overall outsourcing revenues in the first nine months of 2004 tripling from the year-ago period, Technology Partners International said.

Driving the latest spurt of outsourcing growth is so-called business process outsourcing (BPO), in which companies contract out entire processes, for example human resources from hiring to pension administration.

Previously, firms tended to outsource only information technology functions such as server management, IT integration or customer relations to call centres.

Outsourcing Lawyers

Money reports attorneys are the latest to see their jobs being outsourced. A number of U.S. companies, including members of the Fortune 500 and some of the country's largest law firms, are now embracing the idea of outsourcing routine legal work to India, South Korea, Australia and other locales with far lower labor costs.

Smelling opportunity, a handful of companies have sprung up in recent years, both in the U.S. and abroad, that sell outsourced legal services.

One of them, a Chicago-based outfit called Mindcrest sells services like document management and research that feed at the bottom of the legal profession's food chain. With rates ranging from $20 an hour at the low end to $70 an hour at the top, the savings can run as high as 70 percent for work traditionally handled by junior U.S. lawyers who command close to $200 an hour.

Offshore IT Outsourcing Growing 20 Percent

InformationWeek reports the worldwide market for offshore IT services will grow to $17 billion in 2008 from $7 billion in 2003.

The worldwide market for offshore IT services will grow to $17 billion in 2008 from $7 billion in 2003, achieving a compound annual growth rate of 20%, according to a study released Monday by market researcher IDC. The study only tracks IT services sales won by offshore-based companies such as India's Wipro Technologies and Infosys Technologies. It does not include the value of work being placed offshore by American service providers such as IBM and EDS.

The growth is being driven in part by the fact that some IT-related work that has been relatively immune to offshoring is starting to move overseas, says Barry Mason, a senior analyst at IDC. "We're starting to see offshore firms move up the value chain," Mason says. IT consulting, Mason says, represents one new market that offshore firms are aggressively pursuing.

The good news for American IT workers: As offshore companies expand, they're opening offices in the United States and hiring locally. Says Mason: "There is still a lot of work that requires a presence close to the client."

Monday, October 18, 2004

Indian Outsourcing Sees Growth

EE Times reports semiannual results of India's top three software services exporting organizations released this week show that growth is back to pre-slump levels in 2000.

Tata Consultancy Services (TCS), Infosys Technologies and Wipro Technologies said they all have recorded strong growth, with more than one posting better-than-expected results. The results confirm that India's software exporting companies are back on track for growth.

"Offshoring has become a megatrend in the industry, as more customers leverage their partnership to increase global competitiveness," said Nandan Nilekani, CEO, president and managing director of Infosys Technologies Ltd. He said Infosys's focus is on scaling its opertions and on market differentiation.

Salaries Up. Outsourcing Overblown?

InformationWeek reports the lid on IT salaries is beginning to lift, and IT specialists should see gains of as much as 10 to 15 percent over the next three years, according to a new IT staff salaries study by the META Group.

Schafer was asked what impact the outsourcing phenomenon will have on IT specialists and their salaries.

While outsourcing has an impact, she believes talk of its impact has been overblown. Schafer cited a recent META Group outsourcing study, which found that 81 percent of some 600 polled IT enterprises don't engage in outsourcing at all.

She pointed to the value of IT specialists with "balanced capabilities"--having a strong technical expertise combined with managerial skills. She said: "These skills aren't going to be outsourced--ever."

Monday, October 11, 2004

UK Insurance Company Outsources

Independent News in the UK reports Royal and Sun Alliance, one of the biggest inurance firms in the country, will outsource more than 1,100 jobs to India over the next few years.

Royal and Sun Alliance said it will save over £10 million a year by switching call centre and customer service work to Bangalore.

The firm, the second biggest general insurer in the UK, already employs 100 workers in India, so the figure will rise to 1,200 by 2006.

Tuesday, October 05, 2004

Outsourcing to India Helps Prudential

The Times of India reports Prudential saved 60 million pounds by outsourcing call centers and back office operations to India 18 months ago.

"Because of the processing centre we have much higher quality of products and we have effected a cost saving of 60 million pounds, though it resulted in a loss of job of 900 in the UK," said Hugh Davies, Director, Prudential Corporation Asia. "Without moving, my company would have been in dire straits," Davies said, participating in a debate on 'India: Global Trade and Investment: Changing priorities?' organised by the Commonwealth Business Council of India.

Indian Diaspora Helped Outsourcing

ITworld.com reports India professionals, venture capitalists and entrepreneurs of Indian origin helped promote India as an outsourcing destination, according to a study conducted for the World Bank Institute in Washington, D.C., by Evalueserve Inc., a business intelligence and research firm.

"While other low-cost destinations are slowly catching up with India in outsourcing, the country will retain its edge because of the growing influence and expertise of the Indian diaspora, particularly in the U.S., Canada and the U.K., the study said. A key factor is the increase in organized networking and mentoring that the diaspora community can provide to businesses engaged in outsourcing, the study said."

"Some VCs in the U.S., particularly those of Indian origin, are actively funding companies that have back-end operations in India to save on research and development (R&D) costs, the study said. As of March this year, more than 150 U.S. startups had some back-end operations in India, and the number is likely to double by March 2006, according to the study."

Friday, October 01, 2004

Schwarzenegger Terminates Outsourcing Bill

The Mercury News reports California Governor Arnold Schwarzenegger vetoed legislation aimed at preventing the outsourcing of California jobs to foreign countries, claiming the measures would erect 'artificial barriers' to economic growth.

"There is a right way and a wrong way to expand economic opportunity in California," he said in a statement on one of the three vetoed bills Wednesday. "The wrong approach is to implement measures that restrict trade, invite retaliation or violate the United States Constitution or our foreign trade agreements."

Good Outsourcing Vietnam!

International Herald Tribune reports Vietnam is making a big push into becoming an outsourcing destination. Mathematics has been a strong suit of Vietnam's educational system and now the government is trying to train people in computer skills.

"Wages remain extremely low: World'Vest Base hires recent graduates with accounting or finance degrees, but no experience, for a starting salary of $100 a month, little more than an unskilled factory worker earns in neighboring China. Very low wages and strong math skills are a combination that has made believers of some experts."

"Atlas Industries has 100 people in Ho Chi Minh City, formerly Saigon, performing the technical tasks of turning architectural drawings from Britain into detailed blueprints that can be used by British construction companies. Joseph Woolf, the company's chief executive and founder, said that he preferred Vietnam to India because Vietnamese employees were more loyal and less inclined to change jobs repeatedly or seek work overseas, two problems some companies have encountered in India."