Outsourcing Times

The south shines in outsourcing armour

First, it was the turn of the southern Indian city of Bangalore to be promoted as the tech-city in India, housing numerous outsourcing "merchants,” as it were. Now, it is Chennai, just a few hundred kilometers to the east of Bangalore that is being catapulted into the status of an outsourcing hub. Throw in the third southern city of Hyderabad, and you have a city-trio that has the potential to outshine north and west India as the business epicenter in India.

I can try counting the number of multinational outsourcing companies based in these three southern cities, but I know it will be a hopeless task. Any attempt to draw a list of the who's-who in the outsourcing industry is doomed to become obsolete in a few days time, so rapidly are the outsourcing vendors spreading their roots in this region.

However, let's talk about Chennai. Global software solutions and integration services provider Mastek has recently bought a 17-acre plot in the city, and this could turn out to be the most well managed outsourcing delivery center in India. The stakes are high, but so are the credentials of Mastek, as My Iris reports:

Mastek is a USD 156 million, publicly held company, with more than 2,800 employees and 7,200 man-years of experience. The company has implemented more than 1,000 projects worldwide.   

In a couple of years at the most, we'll know if the Mastek dream comes true in Chennai.

Crunch in tech-savvy resource pool leads to aviation outsourcing

You might be surprised to hear this, but India, China, and Mexico produce more engineering graduates than the US. So you have a limited resource pool in the US to absorb all aspects in the aviation industry. In this scenario, aviation companies in the US cannot be blamed if they look toward other countries for subassembly help.

It is the age of partnerships, and the aviation industry is not lagging behind in this respect. A major criterion for this trend is the quintessential benefit of outsourcing—it reduces the cost of production and cuts out unnecessary chains in the production cycle

At the General Aviation Technology Conference and Exhibition at Century II sponsored by the Society of Automotive Engineers, a panel of leading executives in the industry confirmed to engineers that the time is ideal for more partnerships and outsourcing contracts. However, the panel is well aware of the downside of outsourcing:

The devil is always in the details.... Companies must have the digital technology needed to transfer large files. And there must be good communication among engineers in U.S. companies working with those in other places.

The worrying factor for educationalists and aviation industrialists in the US is that there is a perceptible drop in interest in the engineering disciple. The aviation industry can hope to keep engineering jobs within the US only if students get rid of this apathy toward the subject. If this doesn't happen, the specter of outsourcing is bound to cast its spell even darker and deeper in the future.

GrandForks Herald has more.

Privatization in schools: It pays to outsource

In July last year, I mentioned about the outsourcing storm brewing in schools. More than a year down the line, the controversy seems to have taken epic proportions, but paradoxically, the concept of privatization in schools is also gaining credence.

The pressure of working with smaller budgets has led to widespread privatization in non-instructional areas such as janitorial, food, and busing services. This has also stirred superintending authorities to investigate privatization in schools.

The statistical figures are there for all to see:

Officials at Muskegon Reeths-Puffer expect to save about $480,000 a year with private custodians over the life of the contract. That works out to about $114 per student. In Auburn Hills, a new contract may save the Avondale School District up to $490,000 — $128 per student — in fiscal 2007. In Jackson, a new custodial contract is expected to annually save $1.3 million, or about $193 per student.

Outsourcing or contractual agreements with third-party service providers are here to stay in school management. Private vendors increasingly provide services like transport and food. The school authorities are happy because it gives them an efficient management  technique, and then there is the "small matter" of budgetary savings.

Make no mistake, the benefits of privatization in schools are real and touches lives across different districts in the US.

Mackinac Center, which contacted all 552 schools listed in the Michigan Education Directory, has more details on the growing trend of privatization in schools.

Loyalty counts: National Australia Bank widens outsourcing deal with Accenture

Perform well, and you will be rewarded with a bigger piece of the cake—that's what NAB seems to be telling Accenture. To begin with, NAB's agreement with Accenture was limited to a finance and accounting arrangement; by April 2007, Accenture will be awarded 81 back-office finance-processing roles, where Accenture will validate and convert data into reports, and look after procurement administration.

However, NAB has not taken this step out of the blue. A pilot project was completed some months back with encouraging results, and this helped in sealing the final deal for Accenture. As Global Services reports, the NAB outsourcing venture will not lead to job layoffs:

It is expected that many of the affected employees will be re-deployed to other roles within the bank.... The plans do not involve customer-contact roles, and all customer data will remain stored in Australia. 

HR outsourcing: Building blocks

As I mentioned in an older post titled Where is HR Outsourcing headed? HR outsourcing comes third in the list of potentially high paybacks, after IT and the telecomm industry. However, many companies wrap up their HR functionalities as something that happens in the back office, and do not give enough attention to the infrastructure that essentially props up its employees. Over the years, this has bred neglect, leading to antiquated HR management systems. If you're interested in earning an HR management degree, consider California Coast University's MBA in HR management degree program.

Now, it is time for this mindset to change, because companies are suddenly waking up to the fact that their HR policies are not in step with the times, and a major overhaul is called for to keep pace with company acquisitions and mergers. A few companies have tried mending their HR management system on their own, but they soon discovered that it is like opening Pandora's Box; more you inquire into the state of HR policies, you keep unearthing more anomalies.

That's where outsourcing can step in. If you have a problem managing your HR and bringing the existing system up to scratch, why not let a third party worry about it? What comes with HR outsourcing is better management at a lower cost

An article in Morning Star names some big performers in HR outsourcing: Paychex, which provides payroll processing; AMN Healthcare, which looks after health-care staffing; Administaff, which provides all HR functions and caters to the small businesses; and Hewitt, a consultant firm for companies that need employee benefit programs. 

You need a “versatilist” to ride the outsourcing storm

IT professionals in America are constantly living in fear of losing their jobs; at least, that's the feeling one gets after reading articles about jobs migrating offshore because of outsourcing. This might be just going over-the-board a bit, but the concern is certainly there, and the fraternity of IT professionals has accepted the fact that outsourcing is here to stay, and is devising ways of getting around the outsourcing storm and keeping IT jobs afloat.

The consensus is that the specialized IT professional will find it difficult to survive, because his or her specialization can lend itself to only a limited number of jobs. A more practical solution is to specialize in a particular area of IT expertise, and then diversify to other related areas of business processes, thus widening the job profile. In other words, if you are a versatilist, you can find favor with company CEOs.

To effectively surf the outsourcing wave, companies are looking for greater maneuverability and agility in their workforce; if one employee can fit into different job portfolios, that employee is much more valuable than the specialist who has a fairly narrow job path to traverse. Datamation quotes Morello of research firm Gartner:

The versatilist can look like many things. While a combination of business and tech is one excellent choice, there are other versatile skill sets a tech professional can acquire to be more marketable.

India marches on with its offshore cost advantage

If you have been following the outsourcing trend in India, you would have definitely felt the gathering storms over India's potency as the leading outsourcing destination. These storm clouds mainly stemmed from the fact that the mushrooming of outsourcing vendors in India directly contributed to major wage inflation in the country, and there was also a perception emerging that the pool of skilled resources in India was drying up.

However, US-based research firm Everest has conclusively dispelled all these storm clouds. In its "2006 Global Sourcing Market Update", Everest clarifies that the concerns related to wage inflation and skill shortages were grossly exaggerated, and India continues to enjoy its offshore advantages.

Maneuvering firmly on its tracks, the Indian BPO industry accounts for half of the global business in this arena, and Nasscom has predicted that the industry will chart a growth rate of 40% over the next fiscal year:

The Indian BPO sector is expected to maintain the current export momentum and grow by 35-40 per cent in this fiscal (FY 07) to achieve $8-8.5 billion as against $6.3 billion in the previous fiscal (2005-06).

Industry analysts feel that India will hold its offshore advantages and continue to rake in the outsourcing bucks for the next thirty years. It's certainly "Advantage India"!

Investor Ideas has more information on the current scenario and the future directions that the market could take.

The outsourcing controversy rears its head in Malaysia

In almost every country, human rights are a major concern, and the guardians of civil rights are ever ready to take to task any violation of individual rights. Look at the outsourcing scenario in Malaysia, for instance. No sooner had the Malaysian government announced its policy of using outsourcing companies to recruit Bangladeshi workers, two human rights organizations—Malaysia-based Tenaganita and the Philippines-based Migrant Forum Asia—were up in arms against the statement.

Both these organizations believe that the Malaysian policy will institutionalize and legalize human trafficking and bonded labor, charges that could prove too hot for the Malaysian government to handle.

But it is not only the policy that is under attack. Both Tenaganita and Migrant Forum Asia have also made scathing remarks against the outsourcing companies, labeling them as arrogant and exploitative enterprises that hold the workers to unjust contracts and treat them as bonded labor. It remains to be seen if the Malaysian government can work its way through this opposition and arrive at a consensus—an unlikely result in the present scenario where both parties are at loggerheads.

For more information on the impasse, click here.

Maryland State Highway Administration goes the outsourcing way

You or I may not realize it, but quite a few arms of the government machinery are also attracted to outsourcing. Outsourcing is attractive because it enables you to "manage more with fewer headaches." This premise has worked well in the corporate environment, and now numerous government departments are queuing up in that belief.

The Maryland State Highway Administration has entered into a five-year $44 million agreement with CSC to enhance the Coordinated Highways Action Response Team (CHART) system.

CSC's part of the deal is to standardize a system where the administration is able to meet current and future IT requirements as stipulated by the Federal Intelligent Transportation System committee. Global Services gives more specifics:

Under the new agreement, CSC will provide systems integration, development testing and deployment of the enhanced CHART system throughout the state. Initially, CSC will assist the Administration in a review of its business area architecture to certify all CHART system requirements.

Legal Process Outsourcing: A $25 billion business waiting to happen

In an older post, I had mentioned a Forrester report, which prophesied that India would absorb 79,000 legal jobs by 2015. This theory is now gaining potency because, by all accounts, legal outsourcing is catching up in a big way and becoming a sizeable part of the total outsourcing business in India.

According to CRISIL Research, Legal process outsourcing is a high-potential value-added service area, and India's vantage position is particularly suited to this business module. There is no dearth of law graduates in the country, and infrastructure facilities also lend positively to legal process outsourcing. India is capable of providing the required legal expertise and infrastructure at a cost far lower than would be required in the US scenario. This has attracted several large to medium-sized law firms and corporates in the US to shift business processes to India.

According to Sudhir Nair who heads CRISIL:

The combined revenues from the private law firms and the corporations are estimated at around $4.7 billion. As the industry matures, we expect a substantial increase in the Indian LPOs targeting US corporations.

The Indian LPOs must now realize that it is possible to capture anything up to $2 billion of the global LPO market, provided the industry is able to ramp up its total lawyer strength.

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