Outsourcing Times

Offshore Spending to Increase

Research firm Gartner has predicted that offshore spending will increase by 50 percent in 2006 and 2007, with firms in the UK being the biggest contributors. Spending in the US market will increase by 30 percent, while Germany and the Nordic region are expected to increase their offshoring demands. The number of firms that use overseas service providers is expected to climb to 20 percent over the next two years, from the present 13 percent. India still remains the favored destination, followed by China and Brazil, though the Czech Republic, Hungary and Slovakia are emerging contenders to be reckoned with.

Contemplating Outsourcing?

With even small and medium businesses outsourcing their processes today in order to cut back on costs, there are a few precautions they should take before they jump into the fray.

• Consider that the decision may involve transfer of employees
• Realize that software and hardware licenses may have to be transferred to the service provider
• Set standards to measure if delivery measures up to promised levels
• Set rules for handling personal information according to the Data Protection Act
• Anticipate intellectual property issues that may come up
• Decide on the time frame for the contract, and any clauses that deal with disaster recovery and termination of rights
• Agree on a procedure to resolve disputes
• Remember that flexibility is the key to success in outsourcing

Data Liability Rests With Outsourcer

Companies that outsource their data processing functions to organizations overseas are often not too bothered with the data protection rules that need to be adhered to. To help such firms, the Information Commissioner’s Office (ICO) in the United Kingdom has published advice such as requesting and procuring clarification from both organizations that handle personal information and from the people whose interests have to be protected. The booklet makes it clear that the company that outsources the work is responsible for any misuse of secure and personal data, even though the misdemeanor occurs abroad. 

Outsourced Work Outsourced

The outsourcing market is looking at a new scenario now – one in which outsourced processes are being outsourced again. Indian IT giants like Tata Consultancy Services (TCS), Wipro, and Infosys Technologies are among those who have opened offices in Hungary, China, Chile, and the Czech Republic. With this emerging trend, India seems to have lost its status as the golden-haired child of the offshoring industry. If India can find labor and skill in other countries, why can’t we? This seems to be the question the USA is asking. It has found suitable answers too, in the form of operations being outsourced to Dubai, Budapest (Convergys), China, the Czech Republic, Hungary (IBM Global Services), and Philippines, Slovakia (Accenture). But India is not out of the running; in fact, it has moved on to performing more sophisticated processes like design and research and development (R&D) for companies in the U.S, rather than just data entry and back office processes.

Wipro On the Rise

Indian IT giant Wipro announced a 17 percent growth in revenues from its business processing outsourcing (BPO) unit for the year 2005-2006. With the revenue per employee increasing from $1,600 in June 2005 to $1,850 currently, the revenues have risen to Rs.762.70 crore from Rs.652.30 crore in 2004-2005. TMC Net reports:

Wipro BPO expects to move to transaction processing, which includes the combination of both voice and non-voice, and will be looking to add customers in the new segment.

Textiles Outsourced from India

Orient Craft will be responsible for supplying textile products worth between $1 and 1.5 million in its role as exclusive supplier for the Japanese buying house Sumukin Bussan Corporation (SBC). The exporter from India has signed an outsourcing agreement with SBC, which is a buying subsidiary of Kashiama, Japan, which licenses famous brands like Calvin Klein, DKNY, and Ralph Lauren.

Metavante Ties Up With ICICI

U.S. banking and payment technology provider Metavante has tied up with ICICI OneSource, the business processing outsourcing (BPO) unit of India’s largest private bank, ICICI. According to the agreement reached, Metavante will take over 11.5 percent of the Indian company, while OneSource will be able to access the United States market by acting as the sole distributor of its services in the North American banking, financial services, and payment market. TMC Net reports:

OneSource will be Metavante's exclusive offshore delivery partner and preferred onshore partner for BPO services to financial institutions. The deal is being financed through a combination of primary infusion and secondary purchase.

Germany Keen On India

Germany is looking to expand its business presence in India, according to a study conducted by the India Brand Equity Foundation. With the profusion of high-skilled technical labor available at low cost in the country, it is no wonder that 85 percent of companies perceive India as an exciting growth market, 65 have already set up manufacturing facilities there, with another 30 percent planning to do so in the near future. The business processes most likely to be outsourced will be those related to research and development (R&D).

Auto Manufacturers Outsource Too

Your car may have rolled off the assembly lines in Denver or Germany, but its safety systems, Bluetooth applications, headlamp infrared vision, and remote diagnostics services are just a few applications that are being developed in India. Yes, automobile manufacturers are among the latest to have jumped into the outsourcing fray. Indian organizations such as Wipro Technologies, Satyam Computer Systems, and Genpact are a few of those who take care of finance, accounts, payable analytics, supply chain management, and procurement tasks for auto manufacturers all over the world.

Lay-Offs to Cut Costs

In an attempt to cut costs and improve productivity, Office Depot Inc., the second-largest office supply retailer in the United States, has either laid off or relocated nearly 900 of its call center employees, as an aftermath of shutting down eight of ten such centers. Their work has been outsourced to third party call centers or to virtual ones where home-based agents take care of customer needs. The company hopes to save $15 million annually through this consolidation process. TMC Net reports:

Employees there say they were never notified about Office Depot's long-range plans to eliminate traditional call centers. They only began to worry that the company was considering layoffs when workers from West Corp., a leading outsourcing company, came to the call center a couple of weeks ago and job-shadowed them.