Outsourcing Times

Baer Investments Limited and Northern Trust expand Outsourcing Agreement

A PRNewswire press release of August 24 reports that Julius Baer Investments Limited (JBIL) and Northern Trust, a provider of global custody, asset administration, and investment management services, have now expanded their partnership. Under the new agreement, which is likely to be fructified by the end of 2005, Northern Trust will provide a whole gamut of services to JBIL including trade matching, confirmation and settlement, investment record keeping, entitlement processing, pricing, asset set-up, reconciliation, client reporting, valuations and performance analysis.

The senior management of both JBIL and Northern Trust expressed confidence in the relationship. Michael Allen, Senior Manager (Operations) at JBIL, expects Northern Trust to deliver the same quality of service as before. Camie West, Vice President and Relationship Manager at Northern Trust, is also confident that his company will be able to meet the requirements of their client. PRNewswire quotes Camie West:

We'll be working with JBIL to transfer its operations onto our market leading, single, global technology platform—which also supports Julius Baer's investment operations in New York—at the earliest opportunity. 

Read More: Julius Baer Investments Limited London to Outsource UK-based Fixed Income Investment Management Operations to Northern Trust

Chartered Accountant Positions Shift to India

Despite the fact that accountancy deals heavily with numbers, the industry has been hesitant to make the transition to outsourcing.  That all seems set to change, however, as huge numbers of Chartered Accountant or CA positions are springing up throughout India.  Chosen for its abundance of skilled labor and proficiency in English, increasingly western accounting firms are shifting basic accountancy work over to Indian Accountancy Firms. 

The change has caused an increasing number of business students in the Indian world to consider entereing the field of accountancy.  With just 8,000 available positions just a few years ago, it hardly seemed worthwhile to study accountancy with the hope of landing what amounts to very few jobs.  In recent years, however, the number of CA positions available has shot up.  This indicates not only a willingness for western firms to shift work abroad, but gives yet another indicator that traditional outsourcing destination countries are rapidly moving up the value-added food chain. The Times of India reports:

According to Akshaya Bhargava, CEO of Progeon, "Considering the rate at which the need for such people is increasing, demand might outstrip supply.  These people come with accounts knowledge and this is where training comes in to make them aware of managing processes."

Read More: CAs surf outsourcing wave

India Shifts Away from Pro-Outsourcing Stance

The Indian Banks Association are considering implementing norms that will regulate the outsourcing of banks activities.  The banks are expressing concern over the security concerns of outsourcing, a move that is particularly ironic in light of the country's encouragement of western banks to transition their work to India.  The Indian Banks Association is arguing that because of security and risk management concerns, banks should not be allowed to outsourcing core financial services whereas they would remain able to outsource less important call centre and data processing work. 

As India as a whole climbs the value-added ladder and begins to transition from solely an outsourcing destination country to a country with assets and labor costs that become worthwhile to outsource, the attitude towards outsourcing is beginning to shift.  A few years ago only pro-outsourcing commentary was heard, whereas now industry heads are beginning to make the transition into a more balanced if not protectionist mentality.  This may have long-term ramifications on the future of the outsourcing practice as currently Indian Government lobbyist are playing a key role in ensuring further opening of western economies. The Hindu reports:

Though the central bank is not against outsourcing per se, it is concerned over the third party risk involved in it.

Read More: IBA panel to discuss outsourcing norms next week

Outsourcing: Homework

Doing homework before getting started with outsourcing is as important as managing the outsourcing relationship once established. Like any organizational decision, outsourcing requires effective management from the outset of the outsourcing evaluation through the life of the outsourcing relationship. The most critical part of getting started right is to first determine the reasons for outsourcing.

Even before sending the first RFP or meeting with a potential vendor, the company should have all the stakeholders fill out a questionnaire, that should contain at a minimum questions such as the following:

    1. What are our core competencies?
    2. What areas of the corporation take a large share of management
       time and other resources but are not critical to the survival
       of the enterprise?
    3. What has been our approach to fixing the issues enumerated in
       question (3)?
    4. For areas identified in Question (2), are there many
       organizations that rely on those areas?
    5. What kind of relationship with a vendor is most appropriate?
    6. What objectives will be used to measure performance of the
       outsourcer?
    7. What are the major issues that we want outsourcing to resolve?
    8. What time frame of a business relationship are we looking at
       for outsourcing?

Lets consider the 8 questions mentioned above in more detail.

The first question is to get the management to clearly define the core competencies for the enterprise. Even though this is a simple question the amount of internal debate this question can generate will come as a surprise to most involved in this exercise.

The second question is more of second part of the first question. Once the core areas have been identified, this question leads to a discussion on the non core activities that are considered a "burden" on the enterprises resources. This question helps bring to foreground areas that are possible candidates for outsourcing.

The third question is for more organizational perspective completeness reasons than for any other. This also allows the organizational heads of non core activities identified in question 2 to be able to offer any plans to fix the problems or issues. Because sometimes it does turn out that an enterprise may prematurely outsource a non core activity without first ensuring that all has been done to resolve the problem organically.

The fourth question is to better focus on the areas identified by answer to the earlier question. Any non core activity that many parts of the enterprise rely on to perform their function will be harder to outsource than a non core function that has few internal clients. And this is very useful information while prioritizing.

Questions five through eight are meant to clarify organizations game plan while walking into an outsourcing identification and engagement process. These questions should be answered in much detail. The more detailed the response the easier it will be later in the process to go back and recalibrate.

The above eight questions are only meant as a guideline and every enterprise should refine the set of questions to be answered on a case-by-case basis before taking on the daunting task of outsourcing. The importance of talking to executives in other corporations who have successfully implemented outsourcing should also not be under-
estimated.

----The above article was written by Guest Author Shankar Sahai----

Knowledge Process Outsouring (KPO) to dwarf Business Process Outsourcing (BPO) in the Future

If you ask most outsourcing experts, the hottest trend in outsourcing today is Business Process Outsourcing. Surprisingly however, a recent survey by NASSCOM indicates that India's BPO industry will in coming years be dwarfed by the fast growing Knowledge Processing Outsourcing (KPO).  The survey indicated that an increasing number of large western countries will look to places like India to keep down Research and Development costs.  Currently much of this work remains in western nations.  With the cost of such work increasing quickly, however, an increasing number of companies are ready to cut their overhead by moving the work abroad.  They will look to countries with cheap labor who have the basic infrastructure necessary to support the work.  Namely, China, India, and Eastern European nations.  G2G.net reports:

Although he did not quantify the potential of the KPO industry, Karnik said that a lot of foreign companies are looking to India for setting up research and development services.

Read More: 'Knowledge Process Outsourcing to surpass BPO industry growth'

Business Process Outsourcing becomes increasingly vertical in end-to-end solutions

In an effort to avoid compliance difficulties and cut their bottom line, increasingly financial services firms are looking to enter into end-to-end outsourcing solutions.  While financial services companies have in recent years made an effort to outsource more and more horizontal business processes, such as human resources, finance, accounting, and procurement, they have not yet embraced vertical outsourcing.  The shift towards more vertical outsourcing ventures comes in response to increasingly complex accounting and procurement regulations.  In part, some of these new laws and regulations are due to Sarbanes-Oxley.  Because new laws and regulations require constant vigilence and investment, some companies are choosing to simply move all the work out of house.  This is creating a need for specialized outsourcing companies which are able to provide increasingly vertical services. Silicon.com reports:

In addition, increased cost pressure in retail banking and the need to stem costs in financial markets makes BPO particularly attractive, according to Datamonitor.

Read More: BPO: Financial firms eye up end-to-end outsourcing

Nuclear War Avoided Due to Outsourcing?!?

In what seems a rather interesting and incredulous take on the Indian Pakistani conflict, a writer for IndiaDaily speculates that nuclear conflict was avoided between India and Pakistan because of...outsourcing.  In the scenario, India and Pakistan were at the point of escalation when American corporations began to express a real financial interest in offshore outsourcing.  American corporations indicated that they wanted to invest heavily in India, but only insofar as the country remained stable militarily. 

This need caused Indian destination firms, who controlled much of the Indian corporate economy, to lobby the government for a peaceful resolution to the conflict.  Their efforts were successful and instead of beating the war drums, the Indian government made a genuine effort at peace negotation and war was avoided.  The answer seems a touch simplistic, but from a free market perspective it makes some sense.  It is generally agreed that a stable government brings greater foreign investment and that such investment improves the infrastructure and ultimately the standard of living for a particular country.  Whether corporate India would have been able to control the direction of the government in the midst of a run up to nuclear conflict seems a bit difficult to accept, but the underlying logic here works well. IndiaDaily.com reports:

Indian outsourcing oligarchs made enormous amount of money exploiting the youth of India to work for American projects at substandard salaries.  The world was saved from a nuke war that could have devastated South Asia.

Read More: It was American corporate leaders and Indian outsourcing oligarchs who convinced BJP not to attack Pakistan after Indian Parliament attack and avoid nuke exchanges

NWA Mechanics Threated Strike; Execs Threated Outsourcing

US Airline providers have had nothing but bad news since 2001.  It is quite apparent that the industry is saturated and that the only reasonable solution will be to allow some airliners to fall.  Having said that, Northwest Airlines announced that a planned strike by company mechanics may lead to further outsourcing of mechanic work.  The airline is attempting to cut wages and the mechanics have staged a union strike in protest. In response, the airline is attempting to scare the union from striking by stating that it will eliminate the jobs of those who strike. 

It is a difficult period for organized labor.  Unlike previous threats, the threat to entirely eliminate all heavy maintenance is a very real possibility today.  It is simply unfeasible to for many airliners to maintain heavy maintenance in-house when they are under constant price pressure from competitors.  Such work also introduces further legacy costs which are swallowing US providers.  This report by NWA seems a direct attack on unions, but there is little public sympathy today for organized labor as there was a few decades ago.  Miami.com reports:

Further, executives say the airline will use its overseas bases to do more maintenance work on planes used for international flights.  The airline will also shift some work now done by union mechanics to other classes of employees.  For example, pushing airplanes back from the gates.

Read More: NWA chief: Strike will mean more outsourcing of mechanic jobs

Educomp Datamatics and Career Launcher Set to Provide Math Tutoring to UK Students

After the success of ventures into business process outsourcing and other high value added outsourcing services, Indian firms are set to provide private tutoring services to British students in the subjects of math and science.  The two Indian companies leading the charge are Educomp Datamatics and Career Launcher.  They will offer one-on-one tutoring services with students beginning early next year.  The company is already offering services to students in the United States.  This move towards expanding their services to other countries is an indication that the western world is becoming increasingly comfortable with outsourcing education solutions as well as providing yet another indicator that western nations are increasingly falling behind in the maths and sciences.  The Times of India reports:

"Our area is maths and we have found that universally across the world we have seen that maths is a huge proble.  The UK doesn't have many math teachers.  On the other hand in India we have intellectual talent and capital available for tutoring," he said.

Read More: http://timesofindia.indiatimes.com/articleshow/1200476.cms

Developing Software version 1.0 through Outsourcing

While software development outsourcing is nothing new, software developers have always been reticent about outsourcing work on the first version of a particular piece of software.  It has not historically concerned developers that Indian engineers had the capability to find and eliminate bugs and create new features.  But when it came to the business of working through problems for the first time, developers usually insisted on keeping the work domestic.

That, however, is changing quickly.  Accelerance is one Indian company developing software from stratch for outside companies looking for outsourcing.  To eliminate many of the communication problems that have limited outsourcing in the past, Indian firms are now creating a demo version of the software to pass along to potential customers before fully developing the software.  This allows developers to work out the kinks before they have invested too much in the product.  It is also allowing more and more software developers to consider using outsourcing developers for their version 1.0s. webpronews reports:

Is there a way to shorten these iteration cycles? The Accelerance answer is, don't code up your product or prototype at the start.  Use and HTML editor to create screen mock-ups.

Read More: Five Steps To Create Your Software Product With Outsourcing