Outsourcing Times

Outsourcing to SMBs

Outsourcing has been the exclusive domain of large comanies for a long time. However, the situation has changed now. Small and mid-sized businesses are getting outsourcing businesses in order to get the benefits of cost saving. Outsourcing helps companies to focus on their unique business strategy. It also reduces costs and brings in excellent support staff and expertise on demand. It has been estimated that business-processing outsourcing to small and middle market companies will grow to more than $25 billion by 2009.

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Wealthy investors, venture capitalists and private equity firms who are aware are demanding that executives in small and medium sized companies use outsourcing as a strategic tool to put invested dollars to their highest and best use.

Nasscom BPO Meet in India

There is an apprehension that all is not well within the Indian BPO industry and it might face some sort of crisis if the present issues are left unresolved. The Nasscom is holding a two-day ITES-BPO Strategy summit in Bangalore (India) on June 7 - 8. Issues such as managing growth and combating competition will be debated in the summit. The ninth annual Nasscom (National Association of Software and Service Companies) event will focus on the challenges faced by the industry and on the next phase of growth. Business Line reports:

The summit will focus on how India can emerge as the benchmark in global outsourcing and continue to offer an unmatched package of benefits to overseas investors. The aim is also to draw attention to the challenges and pitfalls that lie in the path of the Indian ITES-BPO sector and how they can be overcome to maintain the country's edge in this space.

Medical Outsourcing

Medical tourism is booming in the US, India and elsewhere in the world. Now US companies are trying to contain health-care costs. Medical expenses are high in the US as compared to other countries in the world. High-quality care and low-cost surgery is readily available in India, Thailand, Singapore and Malaysia. According to estimates, millions of surgeries are performed each year in the $2 trillion US health care system. As a result, companies are now planning to go for medical outsourcing to curb the rising health-care costs.

Most companies in the US may soon offer employees outsourcing as a health-care option. Major employers in the US are self-insured. They bear much of their employees' medical care. When they assess costs and benefits, they find the above countries as viable options for outsourcing the health-care services. Private payers are now ready to send patients abroad for uncomplicated elective surgeries in order to reduce costs.

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Mini-med plans are increasingly popular with contract and hourly workers, who are more likely than most other workers to be uninsured. But these plans are controversial because the buyers often think they cover more than they actually do.

India: Hot Destination for Outsourcing?

Although India always has been preferred as the major destination for outsourcing, some UK firms were hesitant to outsource their businesses because of infrastructure problems. However, in the recent months, Indian companies have resolved the issues attached with infrastructure problems to a considerable extent. Experts believe that India is in a better position to tackle the infrastructure problems that have discouraged some UK firms from outsourcing IT work to the country.

The bureaucratic tangles in India always had a negative impact on the outsourcing industry. However, increased foreign investment and efforts by the Indian government to streamline bureaucracy have opened the way for completion of infrastructure projects at a faster pace. Infrastructure facilities in the Southern Indian cities including Bangalore and Hyderabad have improved significantly. Companies such as Satyam, TCS, Infosys, Microsoft and Oracle have expanded their operations in these cities and are attracting outsourcing firms.

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However, some critics argue that despite these promised improvements, the ever-increasing demand for electricity, roads and other basic infrastructure means the Indian government will struggle to keep pace. As evidence, they point to the rolling blackouts that have occurred in some cities.

Need of Outsourcing to India

It is well known that outsourcing to India is growing day by day. Although the US companies are leading the list in outsourcing their businesses to India, the UK companies are not lagging behind. According to Deloitte, a leading consulting firm, British companies will need to outsource work to India in order to receive benefits of efficient labor at a low cost. The firm has predicted a huge shake-up in the area of processing in view of the globalization.

The Deloitte analysis said that an increasing number of products would become commoditized. As customers are reluctant to pay more than a minimum amount for such services, margins will become low, which will be important for companies to cut costs in specific areas. Experts believe that savings generated from offshoring work could be reinvested in developing services for high-value market segments.

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Deloitte specialists expect 700 European banks to disappear over the next three years, and believe a number of deals resulting in firms in the eastern and western hemisphere combining are likely.

Medical outsourcing catches on

Just days after the story of an American couple traveling to India for surgery hit the news, there is another case of an individual traveling from the U.S. to the Bumrungrad Hospital in Bangkok for a herniated disk repair in his neck.

This trend is on the rise not only because of the substantial savings in medical costs as compared to a similar surgery in the U.S., but also because the quality of service in countries like India, Thailand, Singapore, and Malaysia is as good as anywhere in the world. No wonder, individuals--and even some corporates-- are making a beeline for outsourcing medical requirements. Bumrungrad Hospital alone has seen a quantum jump in the number of American patients to 55,000, a 30 percent rise. Indian medical facilities are also witnessing a similar jump in "medical tourism.”

The net effect is one of globalization of the U.S. hospitals, leading to competition and, one hopes, to better service. For companies in the U.S. that offer medical insurance to employees, the trend to move outside the U.S. for treatment is acting as a catalyst. Such companies are offering added incentives to employees who are willing to travel to Asian countries for their medical needs.

Once the stigma of India being a "developing country" is removed in the American mind, the number of people coming in to places like New Delhi will surely see a further leap. As Time magazine reports:

...As the medical-cost crisis deepens, the corporations who pay insurers are likely to find the lure of outsourcing as irresistible in health care as it is in software.

Worksoft in China on way to emulating Infosys in India

SiliconBeat reports that Silicon Valley venture capital firm Sequoia Capital has pumped in $30 million to fund the China-based IT outsourcing firm Worksoft Creative Software Technology. With this additional overseas investment by Sequoia, coupled with the earlier investment made by DCM, Worksoft is definitely aligning itself to be China's best outsourcing company.

The major competition for Worksoft comes from China-based service providers who have their focus on clients from Japan. In contrast, Worksoft has a U.S. focus, and this will probably lead to the company moving up in the near future to number one in the Chinese outsourcing market.

Outsourcing opposed by RBI employees in India

Opposition to outsourcing: the scene is a familiar one in the U.S. However, roles are changing, and India also has its share of opposition to outsourcing services. Employees of the Reserve Bank of India are opposing a move by the authorities to form a National Payment's Corporation of India that will take over the check clearing functions from RBI.

The Economic Times quotes K. K. Sharma, Secretary, All India Reserve Bank Employees Association:

We have two main demands -- implementation of the revised pension scheme and no outsourcing of jobs from RBI.

Outsourcing: A universal trend

When outsourcing started out as a business model for companies in the U.S., it became the alternative to high costs of operation in the U.S. and found economically viable partners in countries like India. Some years down the line, the practice of outsourcing work to save time and money is no longer a one-way-traffic, but has developed a cyclic pattern. U.S. countries outsource to India, India outsources to other countries, and so does China to other outsourcing service providers situated in other countries.

In the present scenario, the pros and cons of outsourcing are shared by several countries, and it is no longer a U.S.-centric model. When you turn to the news coming in from various countries, you will find that the work force in each of those countries faces the same worries and enjoys the same advantages that come with outsourcing work. Like it or not, outsourcing is a business model that is being adopted globally, and it is here to stay.

Event: Russian Outsourcing & Software Summit 2006

If you happen to be in Moscow on May 31, you can be a part of the 6th Russian Outsourcing & Software Summit, the premier event in the arena of IT outsourcing and software development. The event will facilitate the easy flow of updated information about the software export market in Russia and the CIS countries. Click here for more information on the event and how to participate.