Outsourcing Times

Offshoring Manufacturing

Offshoring manufacturing for cost, like outsourcing in general, does not result in a net cost savings. This is mainly because of hidden overhead costs and because it inhibits, compromises, or thwarts 6 out of the 8 cost reduction strategies. Halfcostproducts.com reports:

When measured on a total cost basis, manufacturing offshore for sale in the U.S. rarely results in a net cost savings, considering differences in labor efficiency and all the costs of shipping, quality, inventory, communications, travel, training, transferring products, support, and complete sets of equipment needed for any manufacture.

Read more: OFFSHORE MANUFACTURING A TO SAVE COST@

Offshoring Manufacturing

Offshoring manufacturing for cost, like outsourcing in general, does not result in a net cost savings. This is mainly because of hidden overhead costs and because it inhibits, compromises, or thwarts 6 out of the 8 cost reduction strategies. Halfcostproducts.com reports:

When measured on a total cost basis, manufacturing offshore for sale in the U.S. rarely results in a net cost savings, considering differences in labor efficiency and all the costs of shipping, quality, inventory, communications, travel, training, transferring products, support, and complete sets of equipment needed for any manufacture.

Read more: OFFSHORE MANUFACTURING A TO SAVE COST@

The Great American Outsourcing Deceit

By Priya Jestin, Staff Writer

When we talk about learning the fine art of outsourcing, there’s probably no one better than our very own US President Bush to begin with. His presidency is marked by great outsourcing ideas. A recent article in the New York Times describes how the Coast Guard has run a $17 billion modernization program. The huge bill was thanks to the expertise that the Coast Guard outsourced to two of the nation’s largest military contractors. They were supposed to plan, supervise and deliver the new vessels and helicopters. And the result? Expensive ships that aren’t seaworthy.

Now that we’ve checked out the home front, let’s take a look at the international scene. They first bomb the place down and promise a good regime. Then when it comes time to help the Afghan government train a new police force, our great administrators outsourced the work to DynCorp International, a private contractor. Today, after throwing $1.1 billion into this police-training project, Afghanistan still doesn’t have an effective police-training program.

Israel’s Native English Speakers Has US Excited

While India and China may still be outsourcing hotspots, there are other countries trying to woo US firms. Israel, which differentiates itself from India and the Far East by offering a vast pool of highly educated workers who are native English speakers and share a cultural affinity with the West, is one that has attracted a lot of attention. Boston.com reports:

The heightened interest comes as the government is offering firms a $200-per-month subsidy for each worker employed by foreign companies. While Israel's workforce still doesn't come as cheap as its rivals, salaries are far less than in America. And perhaps surprisingly, all the figures for economic growth, credit ratings, and investment this year indicate the instability in Israel has not affected business at all.

Read more: US firms turn to Israel as outsourcing alternative

Rebuilding In-House Capacity Is Not Feasible, Say Australian Majors

This one’s for those who thought that this outsourcing problem was a passing phase: It is NOT. The problem does not lie with the great capabilities of the people in the country to which work is outsourced. The problem lies with the company that outsources its capability. Once a company outsources, it is next to impossible to rebuild in-house capability.

According to a Gartner study that was conducted last year, only 23 per cent of the Australian companies that outsourced managed to bring services back in-house. And the outsourcing deals today are nothing like they were in the past. This is the age of selective sourcing which focuses on getting assistance in areas where the company either faces an IT skills shortage or wants to free up staff and resources. Computerworld.com reports:

One high profile recent example is Qantas, which has outsourced internal IT applications support and maintenance. The transition will take over 15 months and Qantas will shed some 340 Australian IT staff. Qantas chief executive officer Geoff Dixon said it would require an investment of up to $100 million to develop an in-house capability, an investment it could not support.

Read more: Outsourcing a done deal with very few able to rebuild in-house capability

Deutsche Post To Move Operations To Eastern Europe

Deutsche Post AG plans to reorganize its financial operations and may outsource some of its operations to the Czech Republic and Poland. This move is expected to save 500 million Euro a year, according to Deutsche Post management. Forbes.com reports:

'We will make a decision in the next 12 to 18 months, where our accounting services in Europe are to be located,' Frank Appel, Deutsche Post manager for Global Business Services told the newspaper.

Read more: Deutsche Post to move accounting ops to Eastern Europe; save 500 mln eur a year

Privacy Concerns on Legal Outsourcing

In a recent post titled "Law Firms to Benefit from Outsourcing", I had mentioned about the benefits of legal outsourcing. Now there are some concerns over the legal process outsourcing. Outsourcing certain types of legal work to offshore destinations has become a common practice in the United States. However, there are already concerns about how it would affect issues such as privacy. By outsourcing legal work, law firms are dealing with people in another country who are not subject to the US or Canadian law. That might create many problems in future.

The overseas lawyers are not very close to the work produced. However, they remain responsible for it. Outsourcing has serious limitations, as there are several limits imposed by privacy legislation and solicitors. Another concern is regarding the authority of the client company over the offshore workers. Since they are contractual workers, the company may not be able to dictate its terms and finally end up with heavy losses.

Are You Looking to Outsource?

According to industry figures, the global business process outsourcing industry is set to be worth €140bn by 2009. Therefore, many companies are planning to take a share of that market. If your company is planning to outsource, there may be some challenges before it. The key challenges are managing growth while maintaining the high standards of customer service.

You must recruit professionals who will help you in making a right decision on outsourcing. Choosing a right vendor in the offshore destinations is not an easy task. A thorough research is required before you take the plunge.

This is an interesting post titled "Did Outsourcing Raise Level of Wages?", which was written by me a few days ago. You can read the post and give your valuable opinion.

Tax Outsourcing

Recently, I have gone through a report that tax collection services in the United States have been outsourced to third party destinations. It is said that the IRS has decided to outsource its tax collections services to private vendors.

More than 12,000 people across the country who owe taxes to the government will be contacted by private collection agencies to pay up. IRS sources believe that the plan will help the agency in recovering a huge amount of unpaid money in the coming years.

Read my previous post titled "Did Outsourcing Raise Level of Wages?" to know about the impact of outsourcing.

China into Service Outsourcing

Recently, I had written a post titled "India: Hot Destination for Outsourcing?". We have discussed a lot about India's rising fortunes in the outsourcing sector. Now, China is all set to challenge India in this field. China has unveiled a plan to enter an area that has been the exclusive domain of India for years. That is service outsourcing.

China is prioritizing it service outsourcing in a bid to boost the services industry. Experts believe that the global service outsourcing market will reach US$1 trillion by 2008. Hence, China wants to grab a substantial amount of share in that market.

Reducing Cost Adjustments in Outsourcing Contracts

Many buyers of outsourced services are approaching the contract negotiation process without a full understanding of the issues that negatively affect their businesses. Companies that fail to implement appropriate price inflation mechanisms in outsourcing contract negotiations face risk of losing millions of dollars during the lifetime of a typical contract.

Buyers of outsourcing services often pay more than the standard price because they do not negotiate the impact of economic factors such as inflation. It is necessary for the corporate buyers to understand how future pricing factors will affect the duration of their outsourcing arrangement. Due to the diverse elements in outsourcing service providers' cost structures, the role of labor costs versus non-labor costs should be based on economic cost adjustment formulas. An accurate price inflator will reflect realistic inflation rates for labor, hardware, facilities and other factors.

Read my previous post titled “Offshore Outsourcing is Set for a Huge Growth” for more information on offshore outsourcing.

UAE: Hot Destination for Outsourcing

After India, Ireland, Malaysia and Philippines, now it is the turn of UAE to join the outsourcing brigade. The Dubai Outsource Zone (DOZ) development was first announced in 2004. The project was the brainchild of Dubai Holding. During the launch of the project, it was not expected that it would be huge success. However, it happened. Demand for space within the zone from both regional and international companies has already exceeded expectations.

The entire DOZ project is spread over 3,000,000 square feet. DOZ is an ideal outsourcing destination for companies because of its strategic location. It is just 15 minutes drive from Dubai Airport and five minutes from Dubai International City. Read our previous post titled "Official Certification for Outsourcing Experts" for more information on outsourcing.

Outsourcing of Fire Services Put Off

For a long time, the decision over the future of local fire services outsourcing in Half Moon Bay has been pending. It was expected that finally the voting would take place at the meeting of the Half Moon Bay Fire Protection District board of directors this week. However, it was put off until August 17.

The controversy cropped up after the July release of a San Mateo County Civil Grand Jury report that recommended that the district's administrative, training and fire prevention services to be contracted to another fire department by December 31. There have serious differences over this issue among the board members. In addition, employees of the fire service department are also opposed to such a move. Now, everyone is keeping the fingers crossed until August 17, when the final voting will take place.

$88 billion in outsourcing contracts up for grabs: new suppliers, line up!

All outsourcing contracts are time bound. As an outsourcing deal meanders toward its logical conclusion, it is a jittery time for the outsource vendor: will the outsourcer renew the contract, or simply dump the vendor in favor of another? It is certainly a time to retrospect and redefine outsourcing relationships.

The time is also one of opportunities for new suppliers. A show of one-upmanship can help them snatch a juicy outsourcing deal. According to a report by Everest Research Institute, outsourcing contracts worth $118 billion are due to expire between 2006 and 2008. While some existing relationships have firmed up and a quarter of this amount has been pushed back to status-quo relationships, contracts worth $88 billion are yet to be decided.

Some of the large existing IT contracts are likely to give way to multiple smaller contracts, and this leaves the door open for new players to flaunt their wares. In this situation, the big global suppliers such as CSC, EDS, and IBM are entirely justified in feeling the pinch of competition.

BBC's Goof-up in the Outsourcing Deal

According to the National Audit Office (NAO) has revealed that the BBC miscalculated the savings it would make through its outsourcing deal with Siemens Business Services (SBS). The BBC had originally projected that the deal would generate savings of £35.2 million. It has now admitted its mistake in the projection. It was found that the BBC overestimated the cost of running its IT in-house by £7.7 million, which resulted in the error.

The BBC Management acknowledged that the saving figure should have been updated. It also regrets that the mistake could not be identified earlier. Otherwise, it would have been reported to the executive and the governors. The management has assured that appropriate processes are in place to ensure that it does not occur again.

Silicon.com reports that -

The Broadcasting Entertainment Cinematograph and Theatre Union (Bectu), which represented approximately 370 of the IT staff the BBC sold to Siemens, fiercely criticised the BBC for its miscalculation of cost savings.

Outsourcing catches on among large aircraft carriers

As different air carriers fight for airspace, they are also engaged in a different battle—the battle to cut costs and make them financially attractive to customers. While the smaller carriers have started outsourcing work to maintenance vendors from the outset, the large network carriers in the US are also beginning to see outsourcing as a viable option to stay afloat in their cash-strapped situation.

According to Eclat Consulting, network carriers outsource 40% of their maintenance work, but the figure touches 50% in the case of the low-cost carriers. A Mercer Consulting study emphasizes this growing trend. The study reveals that 56% of airlines are likely to go in for an increase in maintenance, repair, and overhaul (MRO) outflow, and consequently the outside service providers in this sector are likely to benefit.

If we are to look at individual policies of different aircraft carriers, an even clearer picture emerges. Northwest Airlines outsources all heavy maintenance work and most of its line maintenance, while US Airways Group has outsourced nearly 60% of its airframe maintenance since early 2005. Not to be outdone, Delta Air Lines and AMR Corp. have also jumped on the outsourcing bandwagon.

All this is not a shot in the dark; according to Mercer, outsourcing cuts costs by about 75% as compared to in-house work. However, quality concerns are already brewing, particularly in the Aircraft Mechanics Fraternal Association. This can lead to a rethink in the near future in case these clouds of concern gather into a storm.

Read more

Virtuos expands gaming plan with new funds

We have all heard of outsourcing firms paying phenomenal salaries to its employees to acquire the best skills available in the industry. Apart from the salary, outsourcing vendors also need to invest heavily in developing infrastructure capabilities to present a happy picture for potential outsourcers. Together, this calls for a strong financial backup, without which vendors cannot hope to survive and expand production in the competitive market of today. Thus, with the conclusion of a new financial deal with Legend Holdings, it is a happy situation for game industry outsourcing firm Virtuos.

Barely eighteen months into production, Virtuos can now give an impetus to its next-gen game development plans. There is a big outsourcing opportunity in the gaming sector globally, and Virtuos aims to figure prominently in that market by increasing its team three-fold over the next two years and investing heavily into training, processes, security, and IT. Where will the money come from? You guessed it, its from new financial partner Legend Holdings. Gamasutra cites market research firm Screen Digest:

[The outsourcing opportunity within the game industry] will reach $1.1 billion by the end of 2006 and is set to grow to $2.5 billion by 2010, representing around 40 percent of total game development spend.

Emission Trading and Outsourcing Boom

Surprisingly, emission trading has generated curiosity in the outsourcing circuits in the recent months. Emission trading allows countries to buy or sell emissions that come from a manufacturing plant or a refinery. As poisonous gases emitted by these units can cause health and environmental hazards, most countries have emphasized on controlling emissions. Gas emission is measured with the help of analysis instruments from leading companies. The data from these analyzers helps in calculating the total emission and it is passed to government authorities.

Most countries do not have either the technology or the infrastructure to deal with these issues. Hence, outsourcing is preferable to them. There are several firms in financial and energy trading that offer consulting and services in emission trading sector. The complete automating and outsourcing of emission trading is taking a new shape these days. Recently, Enzen Global has bagged two outsourcing contracts from European Union to provide outsourcing services to those who are trading emissions. IT Wire has published an article on the Same Topic.

If a manufacturer (or a country) has high emissions, which exceed the prescribed norms, the manufacturer has two options - either pay a penalty or buy equivalent credits from a non-pollution source. It can also choose to set up a non-polluting source itself and do an internal offsetting like setting up a bio fuel plant or wind power plant.

Most U.S. Consumer Products Companies use Outsourcing

According to reports, more than two-thirds of US consumer products companies are outsourcing some portion of their workforce to third parties. Consumer products companies are concerned about rising energy costs and tight margins. They anticipate lower growth rates in the coming months. As the domestic economy is all set to surge further, consumer products executives are expecting revenue growth of 6.2 percent over the next 12 months.

Large consumer products companies are tightening their expenses because of energy costs. There is concern among companies on the rising energy price level. The impact of escalating energy prices can be seen in the hiring plans, gross margins and investment plans of the companies. Higher costs and limited price increases have led to a margin squeeze for consumer products companies. As energy costs have escalated further, leaders of consumer products companies are having a tough time to handle the pressure. Reliable Plant has published an article on the Same Topic.

Overall, consumer products companies expect the size of their workforce will decrease by an average of 3.4 percent over the next 12 months, attributable to deep cutbacks by several large companies and caution stemming from rising energy prices.

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.

More Information: Read Here

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.

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.

Dispute between Sprint and IBM on Outsourcing

When Sprint started business with IBM, it was confident that outsourcing IT jobs to IBM would improve the company's software, increase productivity and ensure cost saving for the company. However, situation has taken an interesting turn with Sprint suing IBM over the loss incurred by the company because of outsourcing to IBM. According to Sprint sources, IBM failed to meet contractual promises for productivity improvements. Kansas City reports:

In its simplest form, Sprint executives contend that IBM owes them for about 119,000 hours of uncompleted work. That is the equivalent of 57 years’ work for a single employee.

Medical Tourism: A byproduct of the outsourcing logic

Outsourcing has become a global phenomenon because of a fundamental assumption: outsourcing helps cut costs dramatically, adding up to a higher return on investments. Countries such as India and China have become the centers of outsourcing deals because of the cost factor that works well for companies extending an outsourcing deal to vendors in these countries.

The same logic is now being extended to new frontiers. According to the Time magazine, the high-quality health facilities and cut-rate surgery in countries such as India, Thailand, Singapore, and Malaysia is encouraging Americans to travel to distant countries for resolving complicated health problems.

This trend has been aptly described in a recent article as the "outsourcing of hearts, eyes, and teeth to India.” Skepticism still rides high about the health facilities in India, but the fact is that there are many real-world instances of people traveling to India for eye surgeries and orthopedic and neurological ailments. 

Video games: Child's play no more

It's a common enough sight to see a child busy with the controls of a video game. However, it's time to ponder about the economics of manufacturing a video console. A recent study has shown that the cost of developing a game for a home console outside India can be anything between US$10-13 million, while the same can be accomplished at one-fourth the price in India.

Thus, this market sector has high potential for success and gains in India. Leading players such as Mumbai-based Paradox Studios, Indiagames, and Hurix Systems have already started calculating the pros of developing the market in India with a possible partner in the global market.

US Companies Benefit from Outsourcing

According to a recent study conducted by Capgemini, the US companies have greatly benefited from outsourcing. They are not only pleased with the benefits delivered by current outsourcing efforts, but also they plan do more outsourcing in future. The US companies believe that focusing attention on matters that are core to business will augur well for further growth. Improving process speeds and providing near-term cost savings are also part of outsourcing initiatives.

The US executives understand that the benefits of outsourcing go well beyond cost saving. Outsourcing is a shortcut to business success as companies use it to fuel growth and innovation. In today's competitive environment, executives are looking for ways to drive benefits and improve corporate performance. The US companies have realized that outsourcing is an efficient way to increase competitiveness, improve speed to market, and transform their businesses.

Legal firm benefits from outsourcing

Lumen Legal, a firm that changed its name from Royal Oak to its current name to be more representative of its national presence is deriving the benefits of outsourcing. Its growth story is largely dependent on outsourcing document review services. DetNews reports:

The company, with 30 employees and 2005 revenues of $6.7 million, used to be best known for providing temporary lawyers and legal support personnel in the Midwest.

Aronson & Co. steps onto the outsourcing bandwagon

Aronson & Co. has initiated the Deltek Outsourcing group to meet the requirements of Metro Washington's large government contracting community. This outsourcing group will cater to the accounting operations management among federal contractors as well as companies which lack the skills necessary to perform accounting tasks. WebCPA reports:

According to the firm, internal accounting departments cost most government contractors between $100,000 and $500,000 a year. The accounting firm will offer its outsourcing services in tandem with Deltek software for government contractors. The services available from Aronson include accounts payable processing, time sheets, payroll preparation, financial reporting, job summary reports and labor utilization.

The outsourcing business has taken wings

The first three months of 2006 has been a golden quarter for global outsourcing as the total contract value (TCV) saw a staggering figure of $22.7 bn for contracts over $50m. This is a 173 percent year-on-year growth with a record 83 transactions happening during this period.

These figures have been released by TPI Inc., an advisory firm in it's quarterly report catering to the state of the global outsourcing industry.

BPO transactions saw the same trend as they grew by 63 per cent year-on-year. Research reveals that cost reduction remains the primary motivating factor for outsourcing for the companies and at the same time there is an increasing trend which shows quality improvement and innovation to be other driving forces to hop into the outsourcing bandwagon. TMCnet reports:

"Restructuring of the first-generation agreements have yielded an increased impact on both the volume and the value of contracts in the broader market this quarter, with restructuring representing 33 percent of the TCV signed as against 24 percent of TCV during all of 2005, " said Siddharth A Pai, partner & managing director, TPI India.

European Healthcare Outsourcing Market to witness significant growth

The increasing costs of healthcare and the complexity of healthcare IT systems is forcing European hospitals to look at outsourcing as a solution to these problems. The vendors catering to the Healthcare segment are gearing up to take advantage of the opportunities from this sector.

A Frost & Sullivan Study reveals significant growth estimates in the European Healthcare IT Outsourcing market. The revenue figure is expected to touch $697.7 million in 2010 from $396.4 million in 2005. This growth path will be fuelled by IT initiatives from governments of countries in Europe which will require a greater role from the Application Service Providers. Market vendors will see increased competition and have to opt for appropriate pricing strategies to meet the offerings from rivals in the sector. Black Enterprise reports:

"Globally, the healthcare IT sector is set to witness organic growth due to the interest generated by clinical systems such as electronic medical record (EMR) and administrative ones such as patient administrative systems (PAS)," notes Frost & Sullivan Research Analyst Sumanth Kambhammettu.

MAN AG considers outsourcing as a cost reduction measure

MAN AG is considering outsourcing some of it's truck production to derive the benefits of cost reduction. The Krakow unit in Poland is most likely to ride the outsourcing bandwagon. Forbes reports:

The outsourcing partners being considered include not just external firms but also a unit belong to MAN Ferrostaal.

US must focus on STEM to stem erosion of competitiveness

Global sourcing has brought the focus back on attracting more American students to study STEM, if the country wants to stem the erosion of its global competitiveness! Well, STEM stands for science, technology. engineering and math. According to experts America must at a minimum double the number of STEM graduates, from approximately 430,000 to 860,000 over the next 10 years, or risk losing ground to global competitors.

The lead in technology that America has enjoyed over the years is gradually giving way to a level playing field thanks to the huge number of STEM graduates that are being produced by countries such as China and India. As national barriers disappear and more and more companies adopt a global hiring policy, the need for America to have its own large pool of skilled workers becomes more and more important.

Read more: Globalization's Gloomy Guses must adapt

Drug Discovery Outsourcing estimated to surpass $7 billion by 2009

Drug Discovery outsourcing is the place to be in when it comes to thriving business and pharma companies, both big and small, are getting ready to share the fruits of profits. A study by Kalorama Information, a division of MarketResearch.com on Outsourcing in Drug Discovery reveals significant gains in the growth of the market.

The study takes a re-look at the market with a bottom up approach and includes profiles of major players in the Drug Discovery Outsourcing market. It also takes into variables affecting the market which will play a significant role in determining the future trends of this market.
PR Leap reports:

The new study, Outsourcing in Drug Discovery, 2nd Edition, predicts that the swiftly growing market for outsourcing services, fueled in part by impressive advances in the Asian market, will increase at a rate of 15% from the current 2005 figure of $4.1 billion. In fact, upon discovering the benefits of outsourcing in Asia, many of the top pharma and U.S.-based contract research organizations (CROs) have opened their own operations there.

Outsourcing: its growth and challenges in the open market

Outsourcing is a global phenomenon, and it is beginning to shape the economies of several countries. However, as FPIF reports, there is a disparity between nations in dealing with outsourcing: each nation has its own regulations, and this hinders the formulation of a unified policy toward outsourcing. If we were to look at outsourcing as a form of competition and understand the economics of outsourcing, we stand a better chance of coming up with clear policy decisions to meet this global pattern.

This pattern perhaps began with the formation of multinational corporation (MNC) production in the 1960s, and was emphasized in the 1980s and 1990s when the MNCs produced for export to the United States. Together with the growth of MNCs was the growth of the retail market. Producers now offered their products at a discount in different parts of the world, and this led to the germination of the concept of international competition.

The idea was to locate the cheapest supplier and distributor (the China factor), and then push the producers in the US to match the low prices. In an effort to match prices, the competition has spread to several parts of the world. Good case studies of this global sourcing for the cheapest labor are the motor giants Visteon and Delphi. Both these companies moved to a global sourcing model in 2005, and announced that low prices offered by China have to be matched to stay in business. In the process, both companies moved a substantial part of their production offshore to China. However, the going has been tough, and Delphi filed for bankruptcy in late 2005.

The emerging free market in countries like India, China, and the former Soviet bloc countries has contributed to the maturity of outsourcing. In this scenario, a set of clear policies are needed to regulate competition in the outsourcing market.

Outsourcing leads to global economic growth

The worldwide phenomenon of growth in economic strength is largely a product of outsourcing. The "Strategic Review 2006 — The IT industry in India" has shown that outsourcing contributes the most to the growth engine worldwide, and the growth in India itself is expected to cross $36 billion in annual revenue in 2005-2006. Rediff reports:

Export earnings accounted for 64 per cent of the total IT-ITES aggregate in 2004-05. Strong fundamentals, including a large base of skilled talent, demonstrated quality and service delivery expertise at a significant cost advantage and an enabling environment have ensured that India attracts a larger share of the global IT-ITES demand for off-shored services.

African cos waking up to call center business

African countries such as Nigeria are fast realising the games that can be played in BPO space if you have plenty of  cheap labour. Call and contact centers are fast coming up in that country. Admittedly BPO operators there are still operating very much at the low end. The good thing is if more and more players begin to crowd the low end of the market, competition will force those with more experience - such as players in India - to graduate into higher levels in the value chain. There are benefits for the buyers too. Competition from new destinations such as Nigeria and other African countries will further push down costs of outsourcing call/contact center activity. This once again shows how competition somehow creates a win-win situation for all. For an insight into the Nigerian market:

Read more:  Setting the benchmark for outsourcing contact centers

India unbeatable - Reasons why sceptics are wrong!

Doubting Thomases have raised two issues in recent times even as the latest strategic review of India's IT and ITeS sector by Nasscom, the country's largest IT and ITeS industry association has predicted that India is well on track to achieve IT and ITeS exports of $60 billion by 2010, and that it will continue to maintain its leadership in the global BPO market.

Rising wages, new challengers

The first issue is: with the demand for BPO/KPO out of India rising, the labour cost arbitrage that is now driving BPO/KPO business to India will narrow down, perhaps even disappear and India will begin to lose its dominance in the global BPO market. Incidentally, India now enjoys a whopping 44% share of this market. To prove their point people are citing the recent move by SAP AG to look outside India for its offshoring needs as it has claimed that labour costs have become too high in India. The second issue is the claim that China and other destinations are fast emerging as major challengers to India in the BPO market.

Mismatch is temporary

Both are really non-issues! Yes, in the very short term there is likely to be some mismatch between demand and supply for labour in India's BPO/KPO industry and that at the moment labour costs in India are moving northwards. But let me assure you that this is just a temporary phenomenon and will be overcome in the very near future. The reason for this is that the Indian government - both at the federal as well as the state levels - is very much aware of this problem and is, therefore, making concerted and conscious efforts to overcome this. Most states have already introduced and made compulsory some kind of IT education even at the primary school level. Most school going Indian kids can now operate a PC, can surf the Internet, play online and offline games and know the basics of standard and widely-used applications such as MS Word or Power Point or Excel. By the time these kids come out of school, all will be armed with basic IT skills.

Training, training, trained!

Second, government, industry and academia are working hand-in-hand to set up new IT training institutes, introducing new courses that will train people in skills required by industry or are fine-tuning existing training courses so that those trained have the skills needed by industry. Third, India being a poor country with a high level of unemployment, both students and their parents are very much aware of which sectors have the highest employment potential with the result that students inevitably rush to get trained in those skills that they think will help them get jobs easily once they pass out of school or college. So, any perceived shortage of skilled workers now is purely a temporary phenomenon. In the very near future, supply will outstrip demand and that is a certainty rather than the other way around!

The Chinese demographic dragon

Coming now to the second issue about other destinations posing a challenge to India. The only destination that can provide any real threat is China with its huge population. At present India leads all other destinations in terms of talent pool by a factor of 2.5 and that figure is surely going to go up in the days to come because of what I have said in the previous paragraph plus the fact that India's population growth rate is around 2% a year and it is going to remain that way for quite some time to come. Secondly, India's demographics are excellent with more than 50% of the population being aged below 25 years. China's demographics, on the other hand, are very much skewed in favour of the aged and despite its larger population, China is all set to see a shortage of people in the working age group in the years to come. You can't really afford to fool around with natural rates of growth and dictatorially impose a one-child per couple norm without having to face some kind of backlash somewhere down the line. If in the short run they have managed to push back the population growth rate, in the long run they are going to suffer for it!

The English edge!

Finally, India will continue to maintain its lead due to the English language factor. No other country can hope to catch up with India in terms of an English-speaking talent pool, not even China despite its larger population and despite its efforts to train people in English language skills. Some time back there were reports out of China that parents there were resorting to surgical interventions on the tongues of their children with a view to make these children better able to pronounce English words. I have no doubt that such moves will only cripple many innocent children but will not really solve the problem. India has too much of an historical edge to beat here. And as long as the United States and the UK continue to be leading global economies with most BPO/KPO jobs emanating from there, nobody can stop India's dominance. If the Chinese have any edge anywhere it is only with regard to the Japanese market. Japan so far has not taken to offshoring as much as the US or western Europe but things are changing. But trust me, India will be there too! So, all those envious of India's leadership position in offshoring will have to remain just that - envious - for a very long time to come. Good news for them will be hard to come by!

Read more: Business Process Outsourcing - Advantage India   

Is back-sourcing the new trend?

That more and more American and European companies will resort to outsourcing and offshoring is something that we have heard ad nauseum. A recent 'survey of surveys' - very much necessary to make sense of the huge variation between reports of the size of the outsourcing market from different organisations such as Gartner, IDC and ComputerWire -- has again come up with the same conclusion. Offshoring is now deeply rooted and the rush to climb the offshoring bandwagon will continue unabated. Yet, amidst the boredom of knowing the already known, there are interesting  aspects to take note of.

The first is the phenomenon of back-sourcing. Hey! What is that, you may ask? Its a fallout of the evolution of outsourcing. One trend that has firmly established itself in the last few years is that of multi-sourcing. No more are companies willing to strike offshoring deals with just one or two vendors awarding them mega deals. The trend now is to break up the offshoring pie into a number of service and application providers. Take the recent General Motors award. The more than $15billion contract was split up and awarded to several vendors - at least one of them from India. In the past the award would have gone to just one or two players. But not anymore. This is the trend with other such awards. ABN Amro, for example. signed 5 year deals with 5 vendors last September.

In fact, this has been going on for some time. In 2003, companies signed 29 deals worth more than $1billion, in 2004 the number of such deals came down to 25 and in 2005 the figure had dropped to a meagre 15. This year, one can expect even fewer mega deals and many more multi-sourcing deals.

With multi-sourcing comes the problems of managing vendors and investing more on governance and relationship management. Companies are typically spending anything between 8% and 20% of total contract value on governance of outsourced operations with higher spending being reported by those having complicated multi-sourcing  arrangements. Consequently, some organisations are looking at what functions they can do better than their vendors and retaining them. This is back-sourcing. JP Morgan Chase has done it with IBM, Banco Santander has said that it is back-sourcing some of Abbey's IT operations and UK retailer Sainsbury's has announced that it is bringing back in-house its multi-billion outsourcing with Accenture. So, surely this is a significant trend? Or, is it a counter-trend within a trend or just an exception which proves the rule?

Read more: Global Sourcing trends in 2006

Labour has nothing to lose but its myopic spectacles!

When personal computers first began to trickle into India in the middle eighties, labour unions across the country were up in arms against what they called 'the black hand' of computerisation and automation. Even today, every now and then one comes across companies and organisations in India hit by labour trouble on the grounds of computerisation and automation, the main grievance being a perceived loss of jobs. Why should we let machines take over our livelihoods, is the refrain.

Today, twenty years down the line, it is ironic that most new jobs in India are being created in the IT and ITeS sectors. According to the Nasscom, the apex body of Indian IT and ITeS firms, the manpower requirement will be over 3.7 million in these sectors by 2012. This is over and above the manpower required for domestic IT and ITeS firms which the Nasscom estimates at about 1.5 million. In fact, the demand for human resources will shoot up so much that unless there is effective intervention now, there would be a shortfall of about half a million people in these sectors by 2009. So much for how computers would eat into jobs!

A similar thing is now happening in the West. With more and more Western companies looking east to outsource their operations, back office or otherwise, trade unions and politicians of various hues have begun to shout from the rooftops regading how jobs are going to be lost if outsourcing to India and other countries continues unabated. But again the facts tell an entirely different story. The US banking, financial services and insurance (BFSI) sector alone has saved over $6 billion so far from outsourcing to India and other countries and these savings have been utilised to provide new employment to as many as 125,000 thus preventing layoffs. Add to this the 60,000 new jobs created for Indians in the US doing onshore work and how their spending in the US is adding to final consumption demand with its concomitant employment effects and you end up with a situation which is contradictory to say the least -- by outsourcing jobs, that is by shifting jobs from the US to low cost destinations, more jobs have been created in the US. It is somewhat like the Water of India trick that magicians out of India are wont to flaunt on global stages - the more water you throw out of the pitcher, the more full it becomes!

Perhaps labour everywhere is short-sighted and slow on the uptake. In this age of outsourcing they have nothing to lose but their myopic spectacles!

Read more: BPO India          

Outsourcing industry faces "Paradox of Excellence"

According to a study by leading growth strategies consultancy firm Techtel Corporation, outsourcing contracts up to $100 billion might turn over by 2008. Another important conclusion of the study, which took into account over 600 enterprise IT buyers and 18 different IT outsourcing brands, is that the outsourcing sector might encounter financial stumbling blocks because of the principle of "Paradox of Excellence".

David Mosby and Michael Weissman have elaborated this concept in a new book that has appeared in Fast Company, Harvard Business Review, Entrepreneur, and other media. Weisman, President of Fresh Perspectives, expresses concerns over the client turnover and satisfaction level, and the consequent loyalty factor.

The study also revealed that the most sought after IT outsourcing brands include IBM, Dellwww.dell.com, and HP, with IBM Global Services at the top of the rung with 28 percent of customers voting for it.

Outsourcing helps airlines provide more customer value at lower cost

Outsourcing has already caught up with some of the major airlines around the world, and has helped them provide the most value to customers at the lowest cost. Steve Reynolds, Vice President of business process and IT outsourcing provider Affiliated Computer Services, Inc., has called on Legacy airlines to outsource even more to compete with such low-cost model airlines. The Edge Daily reports:

Meanwhile, on the local front, MAS officials agreed that outsourcing would only be efficient when the services were promising. “If there’s outsource, there are questions of control. This control is different from (the) kind of control over your own company. If there’s no such control the airline’s interest could be compromised when the outsource service is not of a certain standard.” said MAS’ chairman Datuk Mohamad Munir Abdul Majid.

Edelweiss Securities report on Rico Auto

According to an article published by Business Standard, the report submitted by Edelweiss Securities shows that the results for first half of 2005 are below expectations for Rico Auto, mainly because of the slow growth of its clients Hero Honda and HMSI, coupled with rising costs of power and capacity expansion.

However, the second half is likely to show improved results, with the stabilization of clients, better power situation, and growth in exports. It is also likely that Rico Auto is going to be the major beneficiary of the auto-outsourcing phenomenon that is growing rapidly in India and is expected to take off in a big way in the next 3-5 years.

Capgemini SA envisages new strategy to augment profit

The outsourcing arm of Capgemini SA ended the first half of 2005 with a loss. However, it is expected that the company will record an upward swing in fortunes in the second of the year, leading up to a 4 percent margin in 2006. This was stated by Paul Hermelin, CEO of Capgemini SA.

Hermelin also mentioned that the company will initiate the Margin Acceleration Plan, a development project that is designed to augment profit up to 5 percent in the later half of 2006, and then set the company on a steady growth path in the following years. Forbes.com reports:

This morning, Capgemini raised its full year sales guidance to growth of 'close to 14 pct' from 12 pct previously, and reaffirmed its operating margin forecast at 2.9 pct, as it posted third quarter sales growth of 10 pct to 1.674 bln eur.

US economy benefits from global outsourcing: ITAA study

In recent times, there is a growing opinion in the US regarding the detrimental effect that outsourcing has on the US economy and job situation. A recent trade report has indicated to the contrary.

According to the study by the Information Technology Association of America, conducted by Global Insight, an economic analysis, forecasting, and financial information company, global sourcing is good for the US because it resulted in a net growth in US jobs in 2005. According to the report, the number of new jobs in the US because of outsourcing might touch 337,625 by the year 2010. InformationWeek.com reports:

[Global Insight chief economist Nariman] Behravesh added that the U.S. economy benefits from global outsourcing because they help increase the U.S. Gross Domestic Product by $68.7 million in 2005. By 2010, he expects outsourcing to increase GDP by $147.4 million. For corporations, Behravesh said outsourcing helps them lower costs and improves profits, which he added are often reinvested in new products and services. Consumers benefit because outsourcing helps lower software and service costs, encouraging them to spend more.   

Bombardier Aerospace eyes India, Mexico and China as Outsource destinations

The need to cut costs is hitting almost every industry, and the aerospace industry is no different. Bombardier Aerospace is considering outsourcing of business processes to India, China, and Mexico. India is the beneficiary of Bombardier's technical publications functions, but this has resulted in the loss of 79 jobs, including 12 in Wichita.

Mexico could possibly get the electrical harness assignment from Bombardier. This again could result in loss of existing jobs in Bombardier's home territory. The Mexico preference is prompted by similar moves from Raytheon Aircraft Co. and Cessna Aircraft Co. Kansas.com reports:

According to Latin America News Digest, Bombardier also is considering opening a jet assembly plant in the Mexican central state of Queretaro. That could create about 5,000 jobs, the governor of the state, Francisco Garrido Patron, told the paper recently.

TechTeam Global to declare 3rd quarter financial results in Webcast

On October 27, the financial results for the 3rd quarter will be announce by TechTeam  Global, a global service provider of information technology and BPO services. The results will be declared through PR Newswire and webcast on the website of the company. This webcasts will be followed by a teleconference meant for investors to follow up on the results of the third quarter.

A PRNewswire provides details of accessing the website and the webcasts. It is expected that TechTeam will declare its fourth quarter results on February 9, 2006. The company is based in Southfield, Michigan, and has a presence in Dearborn, Michigan; Davenport, Iowa; Chantilly and Herndon, Virginia; Portsmouth, Rhode Island; Bethesda and Germantown, Maryland; Brussels and Gent, Belgium; Uxbridge, United Kingdom; Cologne, Germany; Gothenburg, Sweden; and Bucharest, Romania. PRNewswire reports:

A taped replay of the call will be available beginning at approximately 6:30 p.m. EDT, on Thursday, October 27, 2005. This toll-free replay will be available until 11:59 p.m. EST, on Thursday, November 10, 2005.

US demand for consulting and outsourcing services pushes quarterly growth rate for Accenture Ltd.

With a high demand from the US for its consulting and outsourcing capabilities, New York-based Accenture Ltd. has seen a 25 percent increase in its profits for the quarter ending August 31. According to a company source, the increase is going to continue through in fiscal 2006, with the expected rise between 13 to 17 percent.

The company has reported a net income of $229 million  in the quarter, which is well above the last quarter's figure of $183 million. The quarterly revenue earnings of the company now stands at $3.92 million. In 2006, The company has declared a dividend for shareholders, with Class A holders getting a cash dividend of 30 cents a share. Next year, Accenture plans to expense stock options, and this is going to adversely impact the company's earnings. Smartmoney.com reports:

Fiscal 2005 results also included a benefit of 12 cents a share from a reorganization of the company's liabilities. Next year, Accenture said it won't get that boost. Excluding those two items, 2006 earnings per share will rise 13% to 17%, according to Accenture.

New tax imposition may dampen insurance services outsourcing from the UK

The UK government is considering the levy of a tax on outsourced insurance services. This is likely to increase the tax payable by insurers to the tune of about 200 million pounds. If passed, the additional tax is bound to act as a dampener to the idea of outsourcing insurance services, as it would neutralize the cost-effectiveness of outsourcing work. The Association of British Insurers (ABI) have appealed to the government to reconsider the tax imposition. ABI is seeking a delay at least until 2007 for the imposition.

The government is considering the appeal, and waiting for feedback from the industry. In the existing situation of VAT exemption, several companies have outsourced administrative jobs, including call centers, claims handling, loss adjustment, and back-office processing. India is the chief beneficiary of such outsourced jobs. The Indian Express reports:

Prudential Insurance said it would urge Customs and Excise to agree to the delay "to allow more time to iron out the uncertainty about the implementation." A spokeswoman said, however, it was too early to say whether its outsourcing policy would alter due to the tax change.

Read More: Tax issues: UK insurers may end outsourcing to India

LSI Logic Corp. to close down its Gresham chip-manufacturing plant, turn to outsourcing

LSI Logic Corp., which manufactures chips for telecommunication, computer, and electronic products, has announced that it will go ahead with outsourcing its chip production to producers in Asia, and eventually may close down its manufacturing plant in Gresham. This decision has been brought about by the inability of the management to upgrade and modernize its plant to bring it at par with today's technology.

This move has already resulted in 90 job lay-offs at the Gresham plant, and put the remaining jobs in jeopardy. The company plans to continue manufacturing at Gresham until early next year, and is hopeful of getting a buyer for the plant. However, it will be difficult to get a buyer easily, considering that the plant uses an out-of-date technology. OregonLive.com reports:

LSI spokesman Kevin Brett said the company can't afford the billions it would cost to upgrade the Gresham site to keep up with the latest manufacturing technology. Instead, he said, LSI will outsource its chip production to contract manufacturers in Asia and put its Gresham factory on the market.

Read More: LSI to outsource production, sell factory

Boeing's quest to build the 787 tail rudder in China

The USA and China are presently engaged in a tense economic relationship. The US administration is divided in its reaction to this relationship; some view China as a challenge to the US economy, while others believe that there is tremendous potential in the Chinese market. In this background, Boeing's quest to get an export license deal from a supplier based in Chengdu (China) to build the 787 tail rudder assumes particular significance.

The Seattle Times reports that Boeing is awaiting clearance from the US federal government, but the government is extra-cautious in its approach to this request.The Commerce Department is also exploring the possibility of Boeing having provided restricted technology to Chengdu without an export license. The Seattle Times elaborates:

Commerce officials visited Boeing's composite-manufacturing center in Frederickson near Tacoma in July to assess the 787 rudder manufacturing plan and had plans to travel to Chengdu and other Chinese facilities last month. A spokesman at Commerce said the agency is "statutorily prohibited" from commenting about its review process.

Read More: U.S. holds up Boeing's plan to outsource work in China

Software Companies outsource for Cutting Costs, not for Specialist Expertise: Evans Data Report

After conducting a survey of 400 software developers at leading companies, analyst firm Evans Data concludes that the primary motif for outsourcing work is more for reducing costs rather than seeking skill expertise. The survey indicated that the number of developers outsourcing work for expertise alone is on a downward trend, and only one-fifth of the respondents to the survey believe that outsourcing is aimed at improving skill support. On the other hand, nearly one-third of the respondents maintain that the reason for outsourcing work is to cut costs. There are also indications that outsourcing is more for lower-level programming work.

In an article published on September 1, IT Week reports that the findings of Evans Data is in line with the report published earlier by Compass, a management consultancy firm, that 58% of projects outsourced to IT and BPO  service providers did not meet the expections of their clients. IT Week summarizes the finding of Evans Data:

Evans Data surveyed 400 software developers at large enterprises and found just 19 percent of respondents outsourced development work to utilise specialist expertise, down from 44 percent five years ago. In contrast, 28 percent cited cost savings as the main reason for outsourcing, compared with 15 percent in 2000.

Read More: Cost-cutting drives outsourcing

Dovenmuehle Mortgage, Inc. to cater to the subservicing of Astoria Federal's Loan Portfolio

RISMedia reports that Dovenmuehle Mortgage, Inc. (DMI), a mortgage loan servicing company based in Schaumberg, Illinois, has entered into an outsourcing agreement with Astoria Financial Corporation (AFC). AFC is the holding company for Astoria Federal Savings & Loan Association. Under the terms of the new contract, which comes into effect from December 2005, DMI will cater to the sub-servicing of Astoria Federal's loan portfolio.

Expressing confidence in the service profile of DMI, George L. Engelke, Jr., Astoria's Chairman, President & CEO, hopes that the drop in the number of loans being serviced by Astoria in the last few years will be countered by the new contract. While Astoria continues aggressively in its core business areas of banking and mortgage lending, the agreement with DMI is expected to increase Astoria's operating capabilities. RISMedia elaborates on the expected financial results of the agreement:

The transaction will result in the recording of a charge of approximately $1 million, pre-tax, in the 2005 third quarter and should result in annual savings of approximately $2 million, pre-tax, beginning in 2006.

Read More: Astoria Financial Corporation to Outsource its Mortgage Loan Servicing

MiFID (Markets in Financial Instruments Directive) will Lead to Finacial Mergers

An anticipated wave of European banking regulation is anticipated to force many smaller financial services companies to shift compliance regulations to outsourcing firms.  MiFID (Markets in Financial Instruments Directive) will create, in theory, a single European capital market that will apply to all 25 EU states by April of 2007. 

Initial estimates indicate, however, that the regulation requirements to make the shift will cost financial services organizations an estimated 1 billion euros.  This will place increasing pressure on the margins of financial services companies, and force many to reinvent themselves.  The high costs and universality of the move will also likely cause a sharp increase in consolidations and mergers between small and mid-sized investment banks.  This will allow many such banks to achieve economies of scale and help them remain competitive in the changing financial market.  Silicon.com reports:

It predicts increased demand for outsourcing and application service provider (ASP services to enable smaller participants to cope with the new regulatory requirements and the complex market structures that follow.

Read More: IT Outsourcing: Wave of Euro-regulation to spark outsourcing

Northwest Airlines Outsources More Maintenance Work

To date more than half of all airline maintenance is outsourced to contract mechanics.  Northwest is among those aiming to shift more of their maintenance work to outside shops as the currently do with more than one-third of their total work.  Not surprisingly, this has caused quite a commotion among unionized mechanics currently working for Northwest.  One of the primary benefits, from the point of view of companies, is that hiring contract maintenance personnel means not having to fund pensions, give travel discouts, or provide medical coverage to employees.  This has allowed airlines to slash overhead costs in an effort to achieve profitability after drastic increases in the price of oil which have been sustained by the United States' conflict in Iraq.  Many new mechanics are now heading to certified repair stations rather than in-house maintenance because it seems even to mechanics, the writing is on the wall. Minnesota Public Radio Reports:

"The new start ups have outsourced almost all their maintenance, they do their minimal checks in house, because it's more cost effective, but once you get up to the c's and d's done once a year, they're fully outsourced," she said.

Read More: Outsourcing looms large in NWA-mechanics dispute

UK Professor Says Outsourcing Provides Net Benefit for UK

A recent report by Mari Sako, a professor of management studies at Oxford Univerity's Said Business School, indicates that outsourcing is creating more UK jobs than it is sending abroad.  While this has historically been the argument of free laborers this report takes a new twist on the claim arguing that UK is uniquely suited to reap the benefits of outsourcing.  Sako argues that the UK's tightly knit business community creates a unique resource for companies considering outsourcing to draw upon.  This allows companies and the country at large to create contracts which provide the most benefit to the company while simultaneously providing an overall labor creation for the local economy.  This take on the question of whether outsourcing provides a net surplus or drain from the home economy is unique because it approaches the question of whether outsourcing is good for the UK and rather ignores its consequences on the rest of the world.  The positive conclusions drawn by the pro-business professor are no surprise considering the recent debate on the subject raised by the pro-labor interests over some recent high-profile announcements of outsourcing moves. VNUnet.com reports:

'A lot of the UK outsouricng job creation is within data services, labour placement agencies and other areas, such as professional services, accounting, consulting, architectural design and so on,' she said.

Read More: Outsourcing 'creating more jobs for the UK'

Tech-Student Enrollment Down In US

A report by the Computer Research Association indicates that new enrollments in computer and engineering programs throughout the United States are continuing to deline, marking this the fourth straight year.  The study indicates that more than 20,000 bachelor's degrees were awarded to North American students in these fields forthe 2003-2004 school year.  According to David Utter of webpronews.com, this is because entry-level professional opportunities do not exist for these individuals.  He points out that despite claims that upper-level technology jobs are going unfilled, inexperienced graduates are unable to gain the experience necessary to fill such jobs after college and as a consequence decide not to enter the field at all.  Mr. Utter argues that by outsourcing the most basic and menial of tech jobs, western nations are in the long run cutting themselves off from the more advanced jobs in the future.  Webpronews.com Reports:

Oddly enough, the article doesn't state how a new college engineering graduate will have access to these high-level jobs. Since they are "high-level," it seems likely firms will want experienced candidates for the positions.

How does one get experience in a field? Starting in a low-level job and gaining it. Who's hiring graduates for low-level tech jobs with the prospects of becoming qualified for high-level jobs? That's difficult to tell.

Read More: Outsourcing, Layoffs, And No Stock Options?

Scottish Clothier Peter Scott Embraces Chinese Outsourcing

While textile firms across the western world are crying out for protectionism to alleviate the pressure imposed by undercutting foreign firms, Peter Scott clotheir is embracing foreign cost differentials.  Peter Scott, known principally for their golf attire, has set up a liscencing agreement with a Shanghai firm to produce and sell its line of clothing in hundreds of Chinese stores. Interestingly, the move has been more preventative than reactive, as sales of the product line have remained relatively stable.  This signals a transition in the mentality of many manufacturing firms who previously have fought tooth and nail against foreign competition rather than attempting to incorporate it.  Managing Director David Breckenridge discusses the company's rationale for the move.  CNN Money Reports:

"No amount of complaining or moaning about it is going to make the slightest bit of difference," he said. "We are not going to change the macro-economic policies of major trading blocs, the EU, the U.S. or China."

Read More: Now, China is outsourcing textiles