Outsourcing Times

Government Outsourcing Growth Slowed

Political debate and anti-offshoring legislation has slowed the growth of IT outsourcing by local and state governments. According to market-research firm Input, growth rates will remain at 3% through 2009, when government IT outsourcing will reach $17.7 billion.

From Information Week:

"Retiring government employees, as well as archaic government legacy systems, are undeniable factors in the state outsourcing market," James Krouse, Input manager of state and local market analysis, said in a statement accompanying the report. "The increasing demand for outsourcing in the coming years will be borne out of necessity, which politics will be unable to refute."

According to the report, outsourcing sectors such as IT platform operations, applications services, applications management, and desktop services will grow rapidly during the next five years, driving much of the total market growth.

Read more: Growth Slows In IT Outsourcing By Local And State Governments

Design Outsourcing to India

While the first wave of outsourcing to India included mostly labor-intensive tasks, the second wave, which is just beginning, includes skill-intensive manufacuring such as software design.

According to Express India:

US companies, which have development centres in India, are increasingly outsourcing industrial and engineering tasks to India. “The last few years have definitely seen increased activity in the Indian CAD/CAM/CAE space with MNC product vendors realising the importance of India as a cost-effective destination for outsourcing CAD/CAM/CAE work,” said Mr Narayan.

India has the expertise in 3D modeling and plant engineering in sectors like aerospace, automotive and industrial machinery. In the automotive sector, according to industry sources, 15 global car makers, including GM, Ford, Daimler Chrysler, Mercedes-Benz, Audi, Isuzu and Nissan, have set up outsourcing offices in the country, with a combined budget of approximately $1.5 billion.

Read more: Design outsourcing set to hit Indian shores

Human Resource Outsourcing

The Human Resource Outsourcing Association (HROA) has announced that it will offer to those companies considering outsourcing complimentary attendance to Certified Professional Outsourcing (CPO) workshops in January and February of next year.

According to the press release at eMediaWire:

“Using Outsourcing as an HR Strategy” and “Legal Aspects of HR Outsourcing” will respectively be offered in a one-day, workshop style format to maximize all participants’ learning experiences. The workshops will be offered on January 19 and 20, 2005 in Lincolnshire, IL; January 26 and 27, 2005 in Washington D.C., and February 3 and 4, 2005 in Morris Plains, NJ.

A key component of the overall mission of the HROA® is to support the HRO industry through education and the promotion of best practices, and elevating the HR profession by enabling individuals to attain the HRO industry’s first, and only, professional designation - the Certified Professional Outsourcing ("CPO") designation.

Read more: Human Resources Outsourcing Association Offers Organizations Considering Outsourcing and Advisory Firms Complimentary Attendance to Winter ’05 Learning Workshops

Lehman Brothers to Open Outsourcing Hub in Mumbai

Lehman Brothers has announced its plans to set up an outsourcing center in Mumbai which will be engaging staff in the hundreds. Business Standard reports:

The centre will be an enterprise wide operation handling both BPO and software development work. As far as BPO work is concerned, it is a sort of returning to India by Lehman as it had earlier ended its voice business engagement with Wipro Spectramind.

At that time Charlie Cortese, MD for information technology, Lehman Brothers Holdings, had said the company was not ending or pulling back on outsourcing and asserted that “overall numbers involved in outsourcing will go up next year.”

Read more: Lehman Plans Outsourcing Hub in Mumbai

Offshoring Versus Homeshoring

In 2004, many companies in the United States turned to the outsourcing of low value-added labor abroad to countries such as India. This continues to be an attempt to maximize profits while remaining competitive. The general public, however, has not looked favorably on outsourcing, as they claim it puts American jobs at risk and speaking with customer service agents who are in a different country can sometimes be unpleasant. Some companies have recently bucked this outsourcing trend by turning instead to homesourcing, or telecommuting, allowing their employees to work from home, thus saving on the the costs of having to rent office space and allowing their employees to have more free time because they no longer have to commute.

According to Rich Smith at the Motley Fool:

What's more, telecommuting is a highly prized "job benefit" that can increase employees' job satisfaction and reduce employee turnover (and related costs). Finally, it makes little difference whether an employee taking reservations for a JetBlue Airways (Nasdaq: JBLU) flight out of JFK lives in New York City or Kansas City. And hiring workers to do a job in a low-cost U.S. state allows JetBlue to save on salaries without shipping jobs to Bangalore.

Read more: Outsourcing Dons Pajamas

Sierra Atlantic VP Promotes Outsourcing

Former Oracle CIO Marc Herbert is now the executive vice president at Sierra Atlantic, an Indian outsourcing firm.

According to SearchTechTarget.com:

While CIO of Oracle, he was one of the early adopters in outsourcing Oracle jobs to India-based companies. More recently, Hebert has been helping guide Sierra Atlantic, an offshore outsourcer of software development, maintenance and support, with clients ranging from Oracle to Hempel Coatings, an international marine paints company.

Although its U.S. offices are in Fremont, Calif., nearly all its 800 contractors are based in India, Hebert said. The company has a development center in Hyderabad, India, and other offices in Indonesia, Malaysia, Singapore and the U.K.

Read his interview here: Former Oracle CIO promotes offshore outsourcing

Dell Won't Outsource

Dell is the only major computer maker that manufactures computers in the United States. After years of fine-tuning the manufacturing process, Dell sees no reason why they should outsource, despite witnessing HP and IBM outsource their assembly years ago.

According to the International Herald Tribune:

"It's been a long time since one of our competitors actually made a computer," said Michael Dell, the founder and chairman of Dell.

His company, by contrast, operates three giant assembly plants in the United States - two in Austin and the third near Nashville, Tennessee. Each is large enough to house six contiguous football fields.

Read more: Dell bucks the outsourcing trend

US to Regulate Indian BPO Firms

The United States Office of the Comptroller of the Currency will audit certain Indian BPO firms involved in financial transaction outsourcing for certain US companies, including American Express and Citibank.

According to CRM Buyer:

Though BPO units in India cannot pinpoint anything fundamentally wrong with the audits, they fear it could be used to discriminate against some vendors while outsourcing financial jobs.

News of the audit has shocked a section of the industry more because it comes hot on the heels of the backlash against outsourcing fading after the U.S. elections.

Read more: Indian Outsourcing Firms To Face US Financial Regulators

Outsourcing to Russia

On the eve of the fall of the Soviet Union in 1991, Alexis G. Sukharev founded Russia's first outsourcing firm. His original client was Hewlett-Packard and he is now doing business with IBM. Sukharev hopes that Russia will one day mirror India's outsourcing success and he has no fears that outsourcing will continue, despite some political outcry.

According to the New York Times:

"Republicans have never had a problem" with outsourcing, Mr. Sukharev said, and with the party still holding the majority in Congress, he does not foresee any legislation barring it.

"I had a meeting recently with the U.S. deputy secretary of commerce, and he said offshoring is good for the United States," he said. [...] "The world is too simply about globalization now. Outsourcing is unstoppable."

Read more: Modest Now, Russian Outsourcing Has Big Hopes

Domestic Outsourcing in India

With over 3.5 million small and medium businesses in India today, many are opting to domestically outsource their IT infrastructure.

According to Express India:

“Outsourcing has traditionally been the preserve of large enterprises and the government, but now SMB-level organisations are looking at outsourcing, simply because the cost differentiation between doing the work in-house and outsourcing can be huge,” says a senior official of Hyderabad-based Satyam Computer.

“This appears to be an extension of the domestic outsourcing trend. Competitive pressures and cost pressures are compelling SMBs to focus on their core competencies and look for external help in non-critical business areas, in this case IT operations,” says Nasscom. Outsourcing of non-production-related IT applications enables a company to not only focus on its main business activity but also achieve cost-savings on IT initiatives to the tune of 30%.

Read more: And now a domestic outsourcing boom