Outsourcing Times

How Long Will Indian/Chinese Outsourcing Last?

An informal study conducted by India Daily, makes the case that the rates of growth in India and China will in only 5 years lead them to a level where western outsourcing to these nations is no longer a profitable option.  With current rates of growth and per capita GDP progressing at much higher rates than that of western outsourcers, the costs of labor in India and China will approach that of western nations and limit the benefits of offshoring.  India Daily Reports:

The oil price and cost of energy as a whole will be the most critical factor. Eighty percent of the dynamic non-deflationary part of World Economy will get distributed between India, China, Brazil and South Africa (with possible inclusion of Russia). The cost of getting services performed in India will almost equal that of doing the same in the West because of the cost of energy and much higher standard of living of the Indians and the Chinese in 2010.

Read More: Look into the crystal ball – Outsourcing from India in 2010

Fidelity's human resources and payroll outsourcing drives growth

Fidelity Investments has reported that its payroll and human resources outsourcing businesses reached record levels for the second straight year, and now makes up about one-third of the company's revenue.  CNN Money reports:

Fidelity also expanded its human resources and payroll outsourcing business at a time many corporations are trying to save money, leaving the sending of pay stubs and keeping track of workers' benefit records to outsiders like Fidelity.

"HR and payroll administration is the fastest growing part of our business as we've nearly tripled the number of employees and retirees services in the past 18 months," Peter Smail, president of Fidelity Employer Services Co. said about the outsourcing business.

Read more: Fidelity's outsourcing biz hits record

Vertical IT Outsourcing Opens New Possibilities

With the offshoring of general IT services becoming an ever more mature market in places like India, a number of outsourcing companies are trying to take the next step in service providing, Verical IT Outsourcing.  IT service companies which formerly had the capacity to offer only general IT services, are becoming specialized, and thus more attractive, by teaming up with other firms which also provide services in the same industry.  India Daily Reports:

Indian software giant Tata Consultancy Services (TCS) said on Saturday it had signed a pact with state-owned National Aerospace Laboratories to bid jointly for national and international aerospace programs. They will jointly offer "solutions and services" in the aerospace domain including design, testing, manufacturing and use of advanced computer-aided techniques, said senior TCS official Reghu Ayyaswamy.

Read More: Vertical IT markets – the new trend in outsourcing

NY Lawmaker Proposes Legislation to Limit Funding for Outsourcers

State Assemblyman Richard Brodsky of Weschester New York is raising quite a stir by introducing a bill that would prevent companies who recieve New York state tax subsidies from moving jobs out of the state.  While the legislation is clearly an attempt to curb offshoring internationally, the wording of the bill may prevent large companies from even transferring work to other states.  Assemblyman Brodsky has made the case that this bill is not intended as a block against outsourcing altogether, but that it simply stops outsourcing from being subsidized by the state. Many critics argue, however, that the bill will hurt corporate profits in the region and ultimately cost the state more jobs than it saves.  Newsday.com Reports:

The legislation proposed by state Assemblyman Richard Brodsky of Westchester would prohibit companies from sending jobs out of New York if they received tax breaks or other financial incentives from the state. A violation of the legislation would require a company to repay whatever benefits it was awarded, and ban it from receiving further state financial assistance for five years.

Read More: Bill aims to stop companies that get tax incentives from sending jobs out of state

Scottish Law Firms Expand Outsourcing

Taking a page from the most successful law firms in New York, some Scottish-based firms, rather than cutting their number of partners, are seeking to increase profits by outsourcing some of their more mundane tasks.  A national slowdown in the amount of work available is causing most firms to become more strategic in one way or another.  Many firms, however, see this slowdown as the impetus they needed to make some very rational and cost effective changes.  Scotsman.com Reports:

"What’s the point in a lawyer spending valuable time on basic administrative tasks when a specialist can do it more effectively and efficiently?" asks Docuserve’s Chief Executive Margaret Lang, who imported the idea from New York.

Read More: Outsourcing is in for Scottish legal firms

Pakistan's IT-Outsourcing Business to Double by June 2005

The 9/11 attacks marked a quick decline in outsourcing work from Pakistan, a negative trend that has continued until quite recently.  New figures indicate, however, that in the past 6 months not only has Pakistani outsourcing rebounded, but it has more than doubled. Still tiny compared to its neighbor India's outsourcing industry, Pakistan has nonetheless recently crossed the $10 million figure, and analysts predict that figure will exceed $20 million by the fiscal year's end.  Skeptics warn however, that a diminishing labor pool and an insufficient infrastructure will hinder future growth of the industry.  Daily Times Reports:

The local infant industry experiences [a] lack of skilled manpower amid speedy growth. Major players say the insufficient availability of required workforce halts the due growth of the industry. “We can do much better,” said Nasir Lone, country manager The Resource Group (TRG) - a US-based private investment firm with a focus on the business of call centres and outsourcing.

Read More: IT-outsourcing business grows 100 percent in half year

Africa Enters Outsourcing Market

Capitalizing on increasing wages in principal call-center outsourcing areas such as India, Ireland, and China, a number of African countries are expanding their efforts to attract outsourcing work.  While South Africa is leading the continent with an estimated 500 call centers employing approximately 31,000 people, a number of other countries including Ghana, Kenya, Morocco, Senegal, Tunisia and Madagascar are taking advantage of their educated english and french speakers by establishing their own call-centers.  While a number of African nations are seeing some early success, the lack of infrastructure in many areas is creating a number of unanticipated obstacles.  RockyMountainNews.com Reports:

Kenya's regular phone lines are so abysmal that the founders of KenCall had to go through the cumbersome process of getting government approval to use a costly satellite hookup. Even more dollars were burned on an elaborate generator system aimed at keeping KenCall's computer screens running during Nairobi's frequent power failures.

Read More: Africa gets in on outsourcing bonanza

Offshoring Domestically?

Silicon Valley offshoring has typically gone the way of countries like India and China, but Kathy White of Rural Sourcing Inc. is betting that at least some may stay domestic by going rural.  Taking advantage of lower costs of living, and higher unemployment rates, RSI is creating IT centers in places like Greenville, North Carolina.  While the company is still quite small, it plans to establish 50 centers nationwide, offering potential offshorers an alternative.  While some are seeing this company as an indicator of the proverbial pendulem swinging and IT jobs moving back towards the United States, other analysts argue that the domestic wage differentials are simply too small to achieve widespread success.  CRMBuyer Reports:

"It's very viable because it simulates low cost and, most importantly, you don't have any of the privacy  or data-protection issues you have when you cross the borders," said Atul Vashistha, a former colleague of White's and co-founder of neoIT, California outsourcing consultants.

Read More: Firm Fights Offshoring by Finding Rural Homes for IT Jobs

Outsourcing Financials Equals Increased Compliance

One of the primary deterrents for many large companies in their decision on whether to outsource financial functions, is the fear that their compliance with increasingly complex tax codes and accounting rules will suffer.  A new survey by the Consulting firm Accenture, however, indicates that many executives are experiences improvements in governance and compliance.  WebCPA reports:

73 percent of respondents who outsourced a financial process said that outsourcing increases "the rigor of business processes because they're better defined and documented."

Read More: Study: Outsourcing Boosts Compliance, Internal Controls

Maine Considers Anti-Offshoring Bill

In what some are touting as a plug against all offshoring, Maine legislators are beginning deliberations on whether to create a law which would limit, if not eliminate, job offshoring from the state.  While some legislators are claiming that the bill is little more than a symbolic act indicating the state's solidarity with displaced workers, others are pointing out that this bill may harm profit margins in the region.  As of yet, there are a number of proposals on the board ranging from a strict limitation of all offshoring, to limitations on those businesses whose offshoring practices are deemed to produce net negative economic effects on the state.  Maine Today.com Reports:

Maine is one of several states reacting to the attention American companies have gotten in recent years for the practice of offshore outsourcing - the shifting of service and high-tech jobs overseas. The country saw a flurry of legislation in 2004, when 36 states had proposals aimed at keeping state work from going abroad, according to the National Conference of State Legislatures.

Read More: Policymakers struggle with outsourcing issue