Outsourcing Times

Kerry Admits Outsourcing Will Remain

With the U.S. presidential election less than three weeks away, Senator John Kerry has acknowledged that he cannot rid the United States of outsourcing should he become President.

According to Reuters:

Democratic Presidential candidate John Kerry, who had earlier denounced as ‘traitors’ CEOs of US companies outsourcing to countries like India and China, acknowledged that the practice is here to stay but promised a level-playing field for the American worker.

"Outsourcing is going to happen. I have acknowledged that [...]" Kerry said during the third and last Presidential debate with George W Bush on Wednesday night.

Read more: Kerry acknowledges outsourcing is here to stay

India May Lose Outsourcing Edge

While Indian outsourcing firms are growing rapidly, their clients are going to begin demanding more value added over time, which some say will lead India to lose it's competitive advantage in the outsourcing market. Vikash Daga, consultant for McKinsey and Co. agrees.

According to Business Report:

Daga said India's advantage of cheap labour, where call centre employees work for one-sixth of the salaries of their Western counterparts, has come under pressure.

"Billing rates have declined during the last two years in call centres. From 20 dollars an hour it has gone down to eight an hour now so companies surviving on (cheap) labour will not be able to maintain their margins," he said.

Read more: Indian firms may lose outsourcing advantage

Infosys Profits Spike on Outsourcing Boom

The rise in outsourcing has seen India's second-largest software provider Infosys experience a 49% jump in quarterly profits.

According to the Financial Times:

Better demand in its prime U.S. market helped Infosys as it set the mood for the technology earnings season. Industry leader Tata Consultancy Services was scheduled to report its first quarterly results since listing on Tuesday while third-ranked Wipro Ltd. is expected to report on Friday.

Read more: Infosys profits jump 49% on outsourcing

IMF: Outsourcing Does Not Equate to Lost American Jobs

A paper written for the U.S. National Bureau of Economic Research by the International Monetary Fund shows that outsourcing does not lead to lost American jobs.

According to the Hindustan Times:

They also find no link between job losses and outsourcing in the United States because outsourcing, by boosting firms' efficiency, creates enough new jobs to offset the initial losses.

"The risk of service outsourcing dramatically reducing job growth in the advanced economies has been greatly exaggerated," IMF researchers Mary Amiti and Shang-Jin Wei write.

Read more: 'Job fears from outsourcing in West not backed by data'

Indian BPO Companies Need U.S. Facilities

BPO companies in India are discovering that they need some American facilities and staff to run operations for their U.S. clients. ICICI OneSource Ltd. is an Indian BPO company that recently acquired New York-based Account Solutions Group LLC.

From InfoWorld:

Going forward, outsourcers must provide a blend of onshore and offshore delivery of BPO services to their customers, according to [ICICI's CEO Ananda] Mukerji.

"Users are looking at blended delivery from both ends," he said. "U.S. companies that were outsourcing in the U.S. now want to take advantage of the lower cost of offshore services, while companies that have outsourced offshore may want to keep some processes onshore in the U.S."

Read more: 'Pure' outsourcing model falls from favor

Is India Losing BPO to the Philippines?

India may be losing its grip on BPO to eastern Europe and the Philippines, a new study by Gartner says.

According to Business Standard Online:

Like India (a former British colony), English is widely spoken in the Philippines.

It also has a large and youthful population of 84 million, with many studying in the higher education system. The downside is that the Philippines faces an annual typhoon season and its recent history is marked by sporadic political upheavals and coup attempts, the paper said.

Read more: India may lose BPO edge to new rivals

Can Kerry Prevent Outsourcing?

According to a recent Zogby International poll, 71% of Americans feel that outsourcing is bad for the nation's economy. But most economists feel that Democrat presidential candidate Senator John Kerry can do little to stop the phenomenon, and that it will inevitably remain a part of global trade.

From the Michigan Daily:

“When you think of all the other problems the economy is facing, (outsourcing) has gotten attention out of all proportion to its significance,” said Gary Saxonhouse, a University economics professor.

Saxonhouse cited recent reports by the General Accounting Office and Department of Labor, which found in a survey of 2003 mass layoffs that only 13,000 job losses — less than 1 percent of the 1.5 million lost in layoffs of more than 50 workers — were due to offshore relocation.

“While it’s extremely painful for the 15,000 people who, in a year, might lose their jobs to a company moving its operations overseas, it’s not an important economic issue for the economy as a whole,” Saxonhouse said.

Read more: Economists say Kerry can't stop outsourcing

How to Outsource Successfully

John Kasper at CIO.com has posted four rules to keep in mind when undergoing an outsourcing project. They are 1) keep the value close to the customer, 2) a global economy requires investments in global markets, 3) relationships rule, and 4) projects may vary but service quality can't.

More from CIO.com:

Outsourcing—whether across the street or across the sea—is most successful when the focus is on delivering significant business value over the long haul, not on cutting costs in the short term. This focus on value is a guiding principle for my outsourcing company. At SEI Information Technology, we have done it with domestic and off-shore service centers, and here are the four keys that yielded success for us.

Read more: Four Keys to Successful Outsourcing

Infosys the Second-Largest Indian IT Outsourcing Provider

Nandan Nilekani's Infosys is the second-largest Indian IT outsourcing provider. Infosys is launching a new division that will employ over 500 consultants by March 2005.

According to Forbes:

Nilekani most wanted to talk about a new subsidiary Infosys has formed in the U.S. called Infosys Consulting Inc. Its aim: helping customers develop "technology for business transformation." To get the new business started, Nilekani has hired five of the country's top consultants on the use of IT in business—two from Deloitte, one from IBM, one from EDS, and one from Cap Gemini Ernst & Young.

Read more: An Outsourcing Provider Sets His Sights on Global Giants