Outsourcing Times

Forrester Research: Outsourcing Not a Priority for Mid-size Firms

While many small businesses continue to outsource many of their IT operations, only about one-third of medium-size companies will consider outsourcing in 2005, says Forrester Research.

According to BPM Today:

Development, maintenance, and support for custom applications are their main concerns.

In addition, mid-sized companies are not rushing to move their systems to Web-services-based architectures. They share this characteristic with large enterprises, which have not taken up the Web-services rallying cry as enthusiastically as software vendors thought they might.

Read more: Security Trumps Outsourcing for Mid-Size Businesses

Outsourcing to Canada

While India, the Philippines, and Singapore often come to mind when the term outsourcing is used, one must not forget that Canada has significant outsourcing advantages for U.S. firms. Canada is much closer and there are far fewer cultural differences, making Canada a top spot for outsourcing.

According to the International Herald Tribune:

Canada lags India in the number of people working in outsourcing businesses. But its stability, proximity and cultural similarity to the United States tend to attract higher-value, more sophisticated work.

At the same time, outsourcing companies, including Keane, have started dividing jobs between operations in Canada and India.

Read more: Outsourcing up north rather than overseas

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.

Read more: HR outsourcing is next big opportunity: experts

CTG Named TechX Best Outsourcing Solution Winner

CTG, an international IT solutions company was named the "Best Outsourcing Solution" winner at TechX New York 2004.

According to the press release at Yahoo! Finance:

CTG was one of 17 competitors who submitted case studies of outsourcing solutions to a panel of judges that included editors and journalists from leading information technology and business publications. The CTG entry showcased its longstanding engagement with Texas-based Lone Star Steel Company, a world-leading manufacturer and distributor of quality tubular products for energy, industrial, and automotive applications. The case study described major projects CTG has completed for Lone Star, including implementation of specialized manufacturing software and installation of an innovative wireless communication network.

Read more: CTG Wins TechX NY 2004 Outsourcing Award

U.S. Outsourcing Accelerates

Outsourcing of jobs from the U.S. is accelerating. Last year, many groups including the U.S. Chamber of Commerce estimated that approximately 200,000 U.S. jobs per year are sent offshore. A new report by a bipartisan congressional commission reveals that 406,000 U.S. jobs would be outsourced in 2004. And this acceleration is expected to continue for years to come.

According to the International Herald Tribune:

Some economists cite growing numbers of U.S. jobs transplanted overseas as the main reason for slow employment growth during the current economy recovery. Another 400,000 jobs added to the total 1.8 million jobs created in the United States in 2004 would be "a big deal," Stephen Roach, chief economist at Morgan Stanley, said. But Shang-Jin Wei of the International Monetary Fund said that when a company employs people overseas, lower costs and high profits enable it to hire elsewhere in the organization.

Read more: Outsourcing of jobs is accelerating in U.S.

Health Care Providers Can Save by Outsourcing

A new study by Gartner concludes that health care providers who are not offshoring are missing out on a chance to save some serious cash.

According to InfoWorld:

Offshore outsourcing of some functions not directly related to patient care can deliver savings of 20 percent or more, said John Lovelock, a health care analyst with Gartner Inc. Gartner estimates health care organizations save an average of about 23 percent on outsourcing contracts, including IT and non-IT outsourcing, with some organizations seeing savings up to 45 percent on some outsourcing contracts, said Lovelock, who spoke at the Gartner Healthcare IT Summit in Baltimore.

Gartner estimates that healthcare organizations will spend 16 percent of their external services budgets on business process outsourcing during 2004, and the IT-focused research firm expects that number to grow in coming years, Lovelock said in an interview.

Read more: Analyst: Outsourcing can save costs in health care

Outsourcing Benefits Everyone

While the United States stongly advocates free trade policy, 35 states have already passed legislation preventing their governments from outsourcing work offshore. If outsourcing continues to be stifled in the U.S., American corporations will need to depend on a highly paid workforce even for low-tech jobs, thus creating costlier U.S. goods which would not be as competitive in the world market. Banning outsourcing could therefore eliminate more jobs in the U.S.

According to the Hindu Business Line:

A report prepared by McKinsey Global Institute for the US Chamber of Commerce has pointed out that: "A US company earns on an average a net profit of $1.12 to $1.14 by outsourcing work for which it pays $1.0 abroad." It has further stated that by outsourcing low paid jobs to foreign soil, US capital, intellectual or otherwise, can be utilised to create more profitable and higher income generating jobs.

Read more: Outsourcing: Win-win for all

India APIs May Lure US Drug Manufacturers

With the cost of drugs in the US rising, many Indian drug companies, especially the manufacturers of active pharmaceutical ingredients (APIs) expect that US drug companies will outsource.

According to the Financial Express:

Besides APIs, offshoring is set to increase due to the medical billing pattern prevalent in the US. While most companies invest heavily in innovative research and development (R&D), the cost of manufacturing in the US is also on the higher side, thus pushing up prices. In this regard, Indian companies see a bright future in offshoring for contract R&D and manufacturing generics, says Export-Import (Exim) Bank of India executive director S Sridhar.

Read more: Indian firms see outsourcing potential in US drug price hike

White Collar Outsourcing

Jobs of middle class workers in the United States and England are being threatened as much as those of unskilled workers.

According to the Telegraph:

Rick Simmonds, a director of outsourcing advisers ALS Consulting, said: "Middle England is under threat. Mr Jones's suggestion that if you've got the skills, you've nothing to fear is rubbish. China's middle class has only been in existence for 10 years. In 10 years' time, they'll be producing some pretty skilled and educated people."

Read more: Outsourcing 'going to hit professionals'

S&P Sets up Hyderabad BPO Unit

Standard & Poor's will relocate its information technology enabled services (ITES) arm to Hyderabad, India.

According to Sify:

This move is a follow-up of the NYSE-listed company's recent acquisition of Capital IQ in September, which has a global support centre in Hyderabad. A team of senior officials from McGraw Hill, Standard &Poor's and Capital IQ visited Hyderabad and met with the State Chief Minister.

They met with the Chief Minister and conveyed plans for Indian operations.

Read more: S&P to set up BPO unit in Hyderabad