Outsourcing Times

Outsourcing Is Healthy & Good: Study

By Priya Jestin, Staff Writer

Those who felt that there was a chance the outsourcing industry would die out, may not be too happy with this recent survey by KPMG. According to the study Strategic Evolution, outsourcing is increasing and almost all the organizations that are involved in this practice want to maintain their sourcing level. And quite a few of them even want to increase the sourcing levels. This survey which collated responses from nearly 700 organizations from 32 countries proves that the only path open to this industry goes forward.

Contrary to the belief in certain quarters that outsourcing is creating new problems, most respondents believed that service providers made positive contributions to the success of their organizations. Oh, and it was not only services that had improved. The financial baseline of most firms was also showing an improvement and as they became more lean and mean, their competitiveness increased. Too much good news for a day. What do you say?

Let’s Shore It Up

By Priya Jestin, Staff Writer

There is a lot of technical lingo associated with the outsourcing industry. While most of us are familiar with these terms, I’ve noticed that there is no consistency in how these terms are interpreted. Here are a list of the most common terms in the industry, and their most widely accepted definitions.

• Offshoring: It is sometimes used interchangeably with outsourcing. While this may not be totally wrong, offshoring essentially involves relocating a business process including production/ manufacturing to another country – usually a low-cost alternative. Alternately, it could also mean an organization using the services of another firm that may be located in another country.
• Outsourcing: In outsourcing, a particular internal function of the company is assigned to an outside supplier. For instance call centers in the BPO industry are an outsoured function. Firms outsource to save money, improve quality, and also free their resources for other activities.
• Homeshoring: As the name suggests, if a company decides to transfer some of its work from offices to home-based employees, it is called homeshoring. Homeshoring, which is a good combination of outsourcing and telecommuting only requires that the employee have appropriate telephone and internet facilities to work from home.
• Inshoring: Sometimes, offshoring companies set up offices in the US or Europe. This is done to attract customers who may not have the resources or may not be amenable to offshoring
• Nearshoring: China, India and the Phillipines may still be the destinations of choice for many firms. But increasing number of firms want to get their work done in countries nearer home. For instance, they’d rather prefer getting work done in Canada, or East European countries like Poland, Russia and Rumania.

The Wheels Turn Finally

By Priya Jestin, Staff Writer

To increase profits, an organization has to increase its revenues, while keeping costs constant – no brainer right? There’s another method – reducing internal costs like overheads. One of the biggest drains on all cash flow for any organization is its contact center.

Over the past decade many firms outsourced their contact centers to a firm overseas or built facilities offshore that will still be part of the parent company. These alternative locations seemed quite attractive as they promised lower overall costs and a skilled and educated labor pool. And the best part? Salaries would be a fraction of what it was in America.

Welcome to present-day reality: degradation in services, backlash from customers, unfavorable cost structures, and an inability to effectively manage these offshore units. Despite significant investments in these offshore units, many firms are finally accepting the reality: it’s time to come home.

Why Outsourcing Fails

By Priya Jestin, Staff Writer

The main reason most organizations outsource their operations is to cut costs. Organizations that outsource operations to offshore environments consistently save money by taking advantage of lower labor costs. However, new evidence suggests that most offshore initiatives could do much better at improving cost efficiency.

One of the main reasons for high costs is that most outsourced projects are often poorly planned, shoddily implemented and ineffectively managed. As a result, cost savings from these initiatives fall far short of their potential. Most organizations are known to be unwilling to invest time at the outset to adequately plan and execute a project. They also wrongly assume they have the internal capabilities to govern an offshore operation.

Sin & Offshoring

Agreed that most organizations that outsource operations to offshore environments consistently save money by taking advantage of lower labor costs. However, what they don't realize is that most offshore initiatives could do much better at improving cost efficiency. Evidence suggests that poor planning, shoddy implementation and ineffective management are endemic to both captive and outsourced offshore projects.

These problems could result in lower profits or even losses. Usually, the failure is not due to lack of capabilities, experience or resources. The main reasons are simple human failings like laziness, greed, arrogance, etc. I know it seems a bit difficult to believe but to put it simply, good old-fashioned sin is to blame. Cio.com reports:

Don't be lazy. Don't "lift and shift" and settle for a short-term cost reduction without considering the long-term implications. Baseline performance before offshoring, and address performance issues before moving. At a minimum, develop a performance improvement plan for the offshored operation. Better still, re-engineer the operation before offshoring. Invest in building solid processes and an onshore management framework, and offshore, invest in training and orientation to make offshore staff part of the global organization and to create a sense of belonging.

Read more: A Sinner's Guide to Offshoring

My Two-Bit Prediction For The Industry

By Priya Jestin, Staff Writer

Predictions are what most people are good at. At the end of each year or financial year, we see this huge array of predictions from self-styled experts in the field. While some of them may have really done their bit of research to arrive at their conclusions, most others are just trying to get their moment in the sun.

Well, whatever be the case, let’s take a look at what the predictions for 2007 and the next few years are:

Firstly, India has become everyone’s favorite dartboard. So just about everyone is rushing to predict how India will cease to lead the outsourcing market in the next few years. Princes in waiting for the crown of outsourcing king include Israel, China, Russia and the Philippines. What most of these guys don’t realize is that India was never leader and the outsourcing industry cannot be clubbed as one single market. It has software, hardware, HRM, KPOs, BPOs, and well… many other Os. What my point here is how can we put it so simplistically?

Did anybody know that the outsourcing phenomenon would become so big? Did we realize ten years ago that many, many people will lose their jobs and that we might need to learn new trades in order to earn money? As the saying goes, there’s only one thing constant: change. So, probably, we may see a resurgence of jobs at home. But then here too predictions come in the way to play spoilsport. According to some ‘gurus’ in the field, tightening U.S. labor supply in technology, accounting and other processes, will force U.S.-based companies to accelerate their outsourcing strategies to stay competitive.

So, what happens if policies change? Recent news has it that the Democrats, alarmed with the rising student loan costs, are planning to reduce the rates. That might happen in the near future. So our doomsday fears of students being unable to bear the burden of debt may be misplaced after all. So what says, a policy change occurs, one that makes US companies realize that operating from home base is better? And yes, I’m being simplistic about it, but you never know. It could happen.

Financial Health As A Determinant For Outsourcing

How financially healthy is your company? The reason for this question is that all companies are driven by their return to shareholders or owners. If the results are not as strong as they should be, it is time to thoroughly examine the cost structure. This is more than a financial analysis; it is a strategic and organizational exercise as well. Manufacturing.net reports:

A merger or acquisition is a common outsourcing trigger for either the divested or newly formed organizations. When two companies become one, there is always extensive redundancy of infrastructure and staff. This duplication typically includes departments, equipment, machinery, and people. Facing the challenge of eliminating this duplication and its ensuing upheaval, a company may choose to look at to an outsourcing provider as an alternative to taking on this task themselves.

Read more: Determining When To Outsource: Indicators For Pharmaceutical Companies

‘Lack Of Skilled US Workers Is Main Cause For Outsourcing’

Azim Premji chairman of Wipro Technologies doesn’t agree with the general belief that outsourcing is stealing high-paying American tech jobs. According to Premji, the United States should be more worried about what is taught in its classrooms -- or, rather, what isn't. Crmbuyer.com reports:

In fact, there is a shortage of information technology engineers in the United States, said Premji, who in four decades has led Wipro from a US$2 million cooking-oil processing company to a $2.4 billion global technology player. In its most recent quarter, the Bangalore-based company reported $765 million in revenue, a 41 percent increase from a year earlier, with profits of $152 million, a 48 percent jump.

Read more: Wipro Chairman: Outsourcing Due to US Skilled Worker Shortage

India Still Preferred Outsourcing Destination

According to the Global City Competitiveness 2006 report released by offshore advisory firm NeoIT recently, the National Capital Region of Delhi is the best city in the world for offshoring or outsourcing business. Indian metros like Bangalore, Hyderabad, Mumbai and Pune occupied top seven positions followed by Ho Chi Minh City, Manila, Shanghai and Moscow. Financialexpress.com reports:

While Delhi with a score of 100 points topped the competitive index, Polish cities of Krakow and Warsaw ranked the lowest with scores of 70.6 and 71.1, respectively. Blasting myths of a Chinese threat to Indian BPO supremacy, the survey ranked only three Chinese cities of Dalian, Shanghai and Guangzhou as attractive for offshoring compared to seven Indian cities.

Read more: NCR, the best city for outsourcing in the world

Surprising trends in Outsourcing

-- By Priya Venkatesh, Staff Writer

Are you aware of the current trend in outsourcing? Do you know the current scenario with respect to the number subcontracting deals this year? IDC has come up with an interesting report on Outsourcing very recently.

The study by IDC proclaims that the core changes in the trend in outsourcing include the huge number of competitors who have entered into the outsourcing market this year! It also reports that the TCV (Total Contract Value) of the top 100 deals have drastically reduced to $67.9 billion from last year’s 70.1 billion.

Crmbuyer articulates that the number of business deals have plunged dramatically while desktop subcontracting have shown an enormous growth. With the lump sum deals weaning and With the clients’ demands on the rise, the service providers strive hard to cater to the rising demands of the customers!

Read one of my previous post on 'Indian IT stocks creep incredible heights amidst tight competition' to know the trends of Indian IT stocks this year!

Pros & Cons of confined facilities at offshore

-- By Priya Venkatesh, Staff Writer

Do you know the vantages of commencing confined facilities at offshore? How does that differ from subcontracting? Read on to know these interesting details.

The pros of such confined facilities at offshore are:

• Monetary transactions of the employer can be restricted to one bank account.
• Time zones can be taken advantage of by serving local clients during the daytime and western clients during the night.
• Keeping a handful of American managers at offshore, promoting local managers & aiming at quality products can circumvent Security/privacy issues.
• Work environment at the confined facilities are way better than work environment in subcontracting firms.

Looking into the cons of the confined facilities at offshore, one is able to see the tax liabilities, which has become a matter of deep concern. ]

• With the tax rates steeply rising, employers are forced to have second thoughts regarding the commencement of confined facilities at offshore particularly in India.

Click here to read one of our previous post on 'Is Outsourcing good or evil?'

Bristle side of Outsourcing

Do you happen to work with a co-worker who is a foreigner? Have you noticed the ethnic differences between yourself and your neighbor/co-worker who is a foreigner? Are you afraid of privacy/security issues that could come up as a result of outsourcing?

On a close observation of the current IT market trend towards outsourcing, you can very well understand the vast conflicts that are a part and parcel of the outsourcing wave of today's market.

When you are not comfortable with a co-worker who is a foreigner and a neighbor who does not match your wavelength in terms of ethnics, conversing medium and behavioral practices, its hard to digest the fact that Outsourcing, which is highly beneficial from several perspectives, is indeed the abode of working people with unimaginable ethnic differences and behavioral practices. Security is definitely one of the concerns in Outsourcing.

Cross-cultural training and proper selection of the company where the work is going to be given are some of the factors to be considered before outsourcing happens in any organization.

Click here to read my previous post on the measures taken by Indian firm to avoid security breaches, which are a part and parcel of the wave of outsourcing.

Incursion of ITeS into China

Are you into software development and debugging? Do you really know what is the latest trend in the IT industry? Read on to know the futuristic trail of IT enabled Services across the globe!

The Indian software giant, Infosys is setting up two new development centers in China. Crmbuyer articulates that ITeS growth could account to around $65 million involving around 6000 engineers in a span of 5 years from now.

Cheap labor is one of the main factors that drives this incursion of IT enabled Services into China. Driving IT work into China would help the employer to belt along the hectic software delivery docket accompanied by accurate deadlines and labor accountability.

Click here to read my previous blog on the penetration of outsourced work into Philippines.

Philippines join the Outsourcing race

As an onlooker of the current outsourcing scenario, you must be aware of the fact that India, China and Malaysia are the most popular subcontracting destinations. But of late, you are seldom surprised to hear that Philippine has also joined the race. Crmbuyer.com reports that the outsourcing initiative has become a $3 billion industry.

As a beholder, you are aware of the recent reports from newsmagazines describing the unimaginable technical expertise in web design, software development and graphics among the youth of Philippines. The clarity in communication, the fluency in English that Filipinos have added feathers to the cap.

The law enforcement in Philippines is on par with US. The ease with which software application development happens at a much lower labor add fuel to this fire of Outsourcing to Philippines.

Click here to read in detail about the growth of subcontracting work to Philippines.

Outsourcing your insurance

Do not be surprised if your insurer is looking to outsource services to a third party to improve operational efficiency and enhance growth opportunities. According to a report by Dublin-based consultants Research and Markets (R&M), outsourcing among insurance companies is a growing trend.

R&M based its conclusions on interviews conducted with insurers from the American continent, the Asia Pacific region, and EMEA. More than 50% of the interviews use BPO-based insurers.

The bulletin released by R&M, and quoted by Insurance Journal, goes on to say:

The horizontal processes such as HRO, F&A and CRM continue to grow significantly despite their dominance in terms of absolute usage. However, the fastest growth going forward will be in the industry specific processes such as claims processing and policy administration.

Swaziland government urged to outsource advertisement campaigns

The Swaziland International Trade Fair (SITF) is a mega event for the country. However, a meeting of exhibitors recently highlighted the need to advertise and market the event through outsourcing.

According to event coordinators, the business aspect of the fair needs to be emphasized, and this can be done by outsourcing the marketing of the event to subject matter experts.
According to the Swazi Observer, proper advertising can shift the focus of the trade fair from soccer and fun games to more serious business opportunities for the exhibitors.

Future of Outsourcing

Outsourcing is expanding its reach in terms if industry and geography. Companies that invest in outsourcing are growing in large numbers. Their individual needs are all similar. They just need to reduce overheads as much as possible. Outsourcing in automotive, energy, healthcare, technology and financial services markets is gaining momentum. Outsourcing brings multiple benefits to the firms. It enhances speed and efficiency. Outsourcing experience also enables the companies to gain expertise in new geographic areas into which they wish to expand. If the current trend will continue, outsourcing industry will have a great future.

Read my previous post titled "Offshoring Risks" to know more about risks associated with outsourcing.

Outsourcing of Professional Blogging

Recently, I have gone through an article by Wayne Hurlbert that highlighted the benefits of professional blogging. Professional blogging has a bright future. It is usually done by a paid writer. Most companies depend on blogs to increase their revenue and make their presence felt on the global arena. However, blog owners may not have the required knowledge, research skills or expertise to write blogs on a regular basis. Hence, they prefer to hire freelance writers or bloggers to do the work on a lesser pay.

Freelancers who stay at different locations do such work for a meager amount as compared to the revenue generated by the companies from these blogs. Business blogs have become more common on the blogging sphere. A business blog increases company revenue over time through marketing and relationship building. Even the task of blog writing is challenging for writers. In today's competitive market, only attractive and informative blogs can make the cut. Therefore, companies are outsourcing the entire blog writing operation to experienced freelance writers or bloggers.

Read our previous post titled "Growth in Contact Center Outsourcing Market" to know more about outsourcing market.

Outsourcing: Immature past, future perfect?

Outsourcing has almost become a compulsion in every industry. The premise on which outsourcing functions is that it reduces overhead costs and eases the pressure on in-house resources.

However, the experience of outsourcing business processes has not always been a positive one for enterprises. In an effort to reduce overhead costs, companies have been forced to sacrifice quality of service, and sometimes even lost out on customers in the process.

Market analysis firm Datamonitor reports that sales force outsourcing is most common in the pharmaceutical industry, while the concept of BestShoring—a strategy that tailors specific customer care needs to locations that are best suited for these functions—is picking up momentum.

Outsourcing is a constantly evolving process, and the lessons of the past guard against a repetition of the same mistakes in the future. As TMCnet reports:

Outsourcing can offer the company significant benefits in many areas, but the entire picture must be examined and understood before a move toward outsourcing can take place.

The US Gained From Outsourcing

There has been much hue and cry in the United States over the issue of outsourcing. Many people continue to oppose outsourcing saying that it would hurt the domestic workforce. However, according to the head of the US Chamber of Commerce, the United States has prospered by outsourcing its jobs to offshore destinations like India, China and Philippines.

Refer to my previous post titled "Is the Future of BPO Industry Secure in India?", which focuses on the future of BPO industry in India.

Economists in the country believe that the US cannot withdraw from the market and close operations just to protect its workers. The advantages of outsourcing should not be undermined at any cost. The statistics of the Federal Reserve Bank of San Fransisco revealed that out of every dollar of costs the US moves offshore, a net benefit of USD 1.12 to USD 1.14 are brought back.

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.

IRS Outsourcing Controversy

The public and intellectual opinion is divided in the United States over the permission granted to the Internal Revenue Service to hire more agents to collect pending taxes. President George W. Bush and his Republican allies are beginning a broad outsourcing of collection duties to private debt collectors. Some people believe that the president and congressional Republicans have a cultural hostility to government and have sympathy for vested business interests.

Evidences suggest that private debt collectors will generate a paltry return to the US government, while adding new IRS agents would produce huge collections. It is strange that despite having the data, the Bush administration is all set to outsource the service to third party companies.

Read my previous post titled "Data Security Tightened in India" to know about data security in India.

Law Firms to Benefit from Outsourcing

Outsourcing in legal sector is no longer a new word. Many companies worldwide are getting huge benefits from legal outsourcing. Indian law firms can earn up to $4.7 billion by 2011 by tapping into the massive $25 billion US legal off-shoring business. The Indian Legal Process Outsourcing industry targets at two big segments of the US legal sector. They are mid-sized private law firms and the US Corporations.

According to the estimates, the combined revenues from the private law firms and corporations could go up to around $4.7 billion by 2011-12. Read our previous post titled "Law Firms Contemplate Outsourcing" to know more about legal process outsourcing.

According to DNA Money -

Crisil Research suggested that Indian firms must tap US mid-sized or large law firms in the first phase and incorporate in the second stage. There could be a substantial increase in Indian LPOs targeting US corporations as the industry matures, the report said.

Politicisation of Outsourcing

There have been a series of controversies surrounding the outsourcing of jobs in the United States. While some argue that the US economy gains from the relocation of labor-intensive tasks to cheaper centers, they are still unable to prove that with conclusive evidences. Outsourcing is becoming an increasingly important element of the Indian economy. India has become one of the hot destinations for the US companies that are all set to outsource their jobs.

According to an estimate, offshore delivery of engineering services from India may become a US$40 billion-a-year business by 2020. Outsourcing to India is not just based on cheap labor and English speaking youth. The sophisticated opportunities opening up in the country are attracting the American companies to offshore their business. To know more about the outsourcing business in India, read our old post titled "India’s Outsourcing Revenue Is Growing".

Outsourcing Undermined Military Self-Sufficiency

Recently, the US Army decided to award military contracts to overseas manufacturers. It has been termed as a disturbing short-term policy that marked the country's growing dependence on foreign nations. The US Army announced that it would spend $3 billion to purchase up to 352 UH-145 helicopters from Eurocopter.

Eurocopter has been delivering its products and services to the US government and commercial operators for decades. Finally, it has broken into the US military market. The Pentagon sources argue that the outsourcing deal will help the US Army in getting good quality helicopters at a reduced price. However, it has definitely undermined the military self-sufficiency of the country. Now it's your turn to give your opinion on this issue. Do you think that outsourcing should be allowed in the US military?

Should Senate Eliminate Outsourcing Tax Credit?

Analysts believe that the United States is in the midst of the most serious economic transitions since the industrial age. The dual challenge of technology and globalization are taking their toll on middle and working-class Americans. Although economic changes cannot be revoked, some of the policies made by the government hurt the local workers. The high tax regime forced many companies to look for other destinations abroad in order to cut their costs to a great extent.

In the past five years, nearly 500,000 jobs have been outsourced to other countries. There is little doubt that outsourcing brings more revenue to the concerned companies. However, they badly affect the local people and results in widespread unemployment. There have been protest and dissenting voices in the United States over outsourcing. People, who are opposed to outsourcing, strongly advocate the elimination of outsourcing tax credit to discourage outsourcing. However, here the question arises of it is viable to do so. Only you can answer.

Outsourcing: The double-edge winner!

Outsourcing has led to sharp, and often hysterical, reactions from the West: Governments talk about it, the U.S. President talks about it, people talk about it, and we have even heard reports of people committing suicide against the outsourcing trend. But let's get away from such drastic reports, and turn to the main players in the business—the outsourcers and the vendors.

Obviously, the outsourcers have considerably gained from outsourcing, and the rising graph of outsourcing vouches for that. More and more companies are taking a ride along the outsourcing path, and several are renewing their outsourcing contracts, much like a child at a game show: "I want that ride again!"

The outsourcing vendors in India are also merrily tagging along the path, and busy in ramping up their resources and infrastructure. From one "tech-city" in Bangalore, we hear of outsource service providers diversifying to other metros and even smaller towns, contributing to the infrastructure in those cities. Chennai in southern India is the "happening place,” as I discovered during a recent visit.

Let’s take an example. British insurance major Aviva, the world's fifth largest insurer, has declared an operating profit of £1.699 billion for the first half of 2006. As DNA India reports:

Total Indian sales increased strongly to 173 million pounds from 50 million pounds (Rs 443.47 crore) in 2005, Aviva said in its interim result for six months ended June 30.

In India, Aviva Life Insurance is a 74:26 joint venture with India's Dabur Group. Early in 2006, Aviva went into a partnership with Centurion Bank of Punjab, and now the partners have 22 distribution agreements between them.

Outsourcing in India has many other such success stories, where both the outsourcer and the vendor emerge clear winners.    

UK Hospitals Outsourced Patient Notes!

For a long time, we have been advocating patient's rights and the protection of their privacy. However, it seems that some hospitals are aiming to reduce costs at the expense of violation of patients' privacy. Two Birmingham hospitals recently sent patients' notes to India, New Zealand and South Africa for transcription in order to cut costs. The Selly Oak Hospital and Queen Elizabeth NHS Hospital are the two hospitals that outsourced administrative work.

Their move has been severely criticized by health officials across the country. They believe that that besides patients' privacy, outsourcing may lead to errors such as typing errors that may risk patients' lives. What do you think on this? Should the patient noted be outsourced to different countries? What should be the main concern here - patients' well being or cost saving?

Aircraft MRO Outsourcing Is On Rise

The global aircraft maintenance, repair and overhaul (MRO) market is growing at a faster pace. According to reports, the total amount spent on MRO exceeds the value of new aircraft production. The entire MRO outsourcing market is estimated at $49 billion. The North American aircraft MRO market is outsourcing almost 55 percent of commercial aircraft MRO work.

Interestingly, the North American aircraft MRO market covers 41 percent of the global market. There are many investment and growth opportunities in the North American Aircraft MRO market and the companies are cashing on it. It has been predicted that the total revenue in North American MRO market will reach $26.08 billion by 2010. Currently, it stands at $20.09 billion.

Just how real are outsourcing fears?

I recently came across an article that cast a number of doubts over the outsourcing model. According to the article, outsourcers focus the entire offshoring business toward cutting costs, and neglect the quality aspects. If you take the article at face value, it is natural that you will think twice before outsourcing your business processes.

However, let us see just how real this fear is.

Think of an outsourced business. Yes, the basic objective is to cut costs, but with so many vendors vying for a place in the market, the outsourcer has plenty of options in selecting the outsourcing partner who is most suitable to the specific project and has the infrastructure and capability to execute it with finesse. So the onus is really with the outsourcer to find a capable partner. Every market has a few rotten apples, and this is true for outsourcing as much as for any other market.

The article cites the example of a call center that doesn’t handle client responses well enough. But hey, there are a number of checks and balances in an outsourcing deal which can ensure correct practices. There is talk of closing down a call center based in Bangalore (India). But what is the guarantee that the same situation will not arise even in-house?

The other fear raised about outsourcing is that an outsourcing vendor will not be able to adapt to changing practices and market requirements. But again, it is really upto the outsourcer to be foresighted enough and build such possible changes into the outsourcing arrangement from time to time.

Outsourcing ultimately boils down to a marriage of convenience between the outsourcer and the vendor. It is a sword that cuts both ways. A strong future-oriented relationship can trigger a long relationship. Believe me, outsourcing works—it is  not for nothing that a hoard of outsourcers are making a beeline toward countries like India and China. You don’t have to take my word for it; in an older post, I mentioned research findings that back up this fact, and more recent articles continue to point to a growth in the outsourcing business.

Official Certification for Outsourcing Experts

Quality and security issues have forced companies to hire skilled and experienced professionals who can make significant contribution to their outsourcing business. The International Association of Outsourcing Professionals says that companies will look to establish relationship with professionals who have earned official certification on outsourcing. This may look strange, but true. Ask yourself, won't you feel confident about your company's outsourcing relationship if they were overseen by some outsourcing experts with professional certification? Certainly, your answer would be 'YES'.

The International Association of Outsourcing Professionals (IAOP) has the mission of building outsourcing as a profession and an industry. It has recently graduated its first group of certified outsourcing professionals. The IAOP's move is seen as revolutionary for the outsourcing industry. More organizations are expected to follow suit. However, it is yet to be seen whether the certified outsourcing professionals really provide an added advantage to the outsourcing business or not.

Outsourcing in Gaming Industry

Gaming industry has been in the news for some time now. Although outsourcing has become a buzzword in the industry, the outsourcing of gaming industry grabbed special attention of the consumers worldwide. According to a report prepared by Amritt Venture, offshore outsourcing has witnessed a sharp increase in the gaming industry. However, inconsistency of the service providers forced the companies frequently change their vendors. Several companies have expressed disappointment over the results from outsourcing. It is difficult to say whether the gaming industry benefited from outsourcing or incurred losses. Only the concerned companies can reveal the truth.

Outsourcing of Newspaper Industry?

While the entire corporate world is into outsourcing, a debate has emerged whether the newspaper industry should join the fray or not. Recently, a new report published by the World Association of Newspapers examines the factors to be considered when deciding whether or not to outsource advertising, printing, human resources, editorial, accounting and other operations. The newspaper industry has now begun taking initiative to move into outsourcing their core operations such as editorial, advertising and circulation. The report also included case studies, performance measures and a benchmarking model. The debate still continues over this issue. Is it advisable to outsource the core functions of newspaper industry? The question remains unanswered.

The WAN Press reports that -

The case studies include examinations of the BBC, which outsourced human resources; the Vorarlberg Nachrichten, which outsourced editorial functions; Switzerland’s newspapers, which outsourced advertising sales; Italy’s Il Sole 24 ORE, which outsourced circulation and distribution management; The New York Times, which outsourced printing; Independent Newspapers, which outsourced finance, circulation services and telephone sales; and more.

Outsourcing marches on, but at a slower rate

Outsourcing continues to grow; make no mistake about that. The only change from previous years is that it is growing at a slower rate. This trend is revealed by DiamondCluster International Inc.'s annual Global IT Outsourcing Study.

But is this at all surprising? Not really, because any phenomenon starts with a dramatic upward graph, but sobers down after the pros and cons cancel each other out. This makes the market settle down to a more "real" level. This is exactly what's happening in the outsourcing market. After the initial frantic activity when outsourcers went at breakneck speed and signed contracts with vendors left, right, and center, the outsourcing community has now realized that thy need to tread more cautiously and avoid the mistakes of that initial phase.

So we are now looking at a more selective approach to outsourcing, usually preceded by a verification of the capabilities of the vendor. Besides, some outsourcing contracts have gone sour, leading to premature closures and projects being pulled back from the vendors.

Regardless of this development, however, outsourcing will not only survive, but also continue to attract additional business every year. According to Tom Weakland of DiamondCluster, the growth of outsourcing might no longer be the boom of 2004, but it is still big growth.

Computerworld has more.

Outsourcing Conservation of Monuments in India

India is well known for its historical monuments and sculptures. Millions of tourists throng to India in order to get a glimpse of these amazing structures. The Indian government is committed to protect these monuments from external damage or degradation. The Archaeological Survey of India (ASI) has been entrusted with this responsibility. The ASI is facing a shortage of labor to maintain these monuments. Hence, it has decided to outsource the conservation of monuments. According to ASI sources, it has limited labor, but the workload is increasing day by day. The ASI has no option but to outsource the maintenance to third parties.

According to The Times of India -

Some buildings in the Red Fort complex that are of relatively recent origin, belonging to the 1930s and portions of the Safdarjung Tomb have been outsourced to private parties, ASI Director General C Babu Rajeev told. Rajeev said the private parties to be entrusted with the renovation work will be selected through a thorough process keeping in mind their expertise and experience.

Outsourcing Work Saves Time

Small businesses often do not have a HR department to manage their resources. Hence, they hire professional in order to guide and manage their staff. That is not always a preferable option. Outsourcing is one of the few options that help companies enhance their capabilities such as web site maintenance and transactions. By outsourcing their work to a third party business, it saves enormous time and money for the companies. Cost is definitely the main factor. However, time also plays an important role in determining the output. The entire hiring process for any job can be turned over to a professional employer organization, which will also help train employees. The third party will also write performance review forms and create medical and other benefit plans.

Where is HR Outsourcing headed?

HR is probably one of the most lucrative market areas for outsourcing, outside of IT and telecomm. In recognition of this trend, The Conference Board published a report on HR Outsourcing Trends in 2002. The Board has now followed up with a fresh report on the benefits, challenges, and trends that mark HR outsourcing.

You need to see the two reports in conjunction as two parts of a study that investigates practices and outcome of HR outsourcing. The 2006 report is the result of a survey of 122 major companies in North America and Europe. According to an article published by IT 
Analysis:

In addition to an analysis of how human resource outsourcing practices may have changed in the interval since the previous study, this report evaluates the benefits and drawbacks of outsourcing, explores the considerations that lead to the decision to outsource, and examines the early experiences of a growing number of companies that are choosing to outsource the bulk of their HR activities.

Volvo to Hike Outsourcing From India By 40%

Swedish commercial vehicle maker Volvo is expected to increase its outsourcing businesses by 40% in 2006. According to the company sources, Volvo India has been considering several new components that the company could start outsourcing from India. Volvo has recently launched two new Volvo truck models FH and FM. The company is expected to grow at 30% on par with the Industry's growth. Currently, it operates only in the heavy-duty trucks segment, which has a market of about 150,000 units per annum in India.

According to Trading Markets -

The segment is likely to see more competition over the next few years with more local and international players entering this domain. Mr Leblanc however said that the company's products would continue to be priced at a premium as compared to local competition.

Wombs Outsourcing

Outsourcing business is no longer a new concept in the industry now. A large number of firms in the USA and Europe have outsourced their businesses to India and other favorite destinations for better productivity and quality at a low cost. Outsourcing business covers health, law, transactions, finance and other related operations. However, a new concept of outsourcing has come into picture with an increasing number of couples are coming to India in search of cheaper fertility treatment, donor eggs and surrogate mothers. It seems that the West is turning to Indians to carry babies.

India is an attractive destination for the couples looking for fertility treatment. They can avail the treatment at a relatively low cost. It is easier to find a surrogate mother in India and the cost of renting her womb to carry the fertilized egg is minimal as compared to the cost in Western countries. In the United States, a couple would have to pay US$15,000 to the surrogate mother and another $30,000 to the concerned agencies that arrange surrogate mothers. However, in India, the total cost will be something between $2,500 and $5,000. This wombs outsourcing is growing at a faster pace. According to reports, the number of cases of surrogacy has doubled over the past three years. Asia Times has published an article on the Same Topic.

As in the case of the outsourcing industry in general, the low cost of the service provided by an Indian surrogate mother is the reason for India's emergence at the forefront of the reproductive tourism business.

Outsourcing breeds on trust

Trust between outsourcing partners is an absolute essential for any successful outsourcing contract. However, there have been recent reports in the media that have led to certain nagging doubts and suspicion regarding outsourcing deals with countries like China. Clearly, it is not a healthy trend to single out countries on the basis of security issues for data; all countries have faced this problem in the recent past, including India.

The outsourcing markets in countries like India and China continue to rise phenomenally, and the outsourcing phenomenon is on a crest in spite of doubts in the Western media regarding the safety of outsourced data. Leading companies such as IBM, HP, Microsoft, Siemens, Unisys, and Electronic Data Systems continue to pump resources into China, contributing to the spiraling of the outsourcing boom.

All this is in contrast to the signal sent by the U.S. government recently that China's leading manufacturer Lenavo is not entirely trustworthy:

The U.S. Department of State said it won't use Lenovo computers on a classified network because of ongoing concerns about the company's Chinese government ties.
Whether this statement will temporarily slow down the outsourced work from the U.S. to China remains to be seen. However, considering the state of the outsourcing market, it seems unlikely.

Click here to read more.

RBI Employees in India to Oppose Outsourcing

Recently, the Reserve Bank of India (RBI) decided to outsource its core functions. It met with strong opposition from the bank's employees and economists. The All India Reserve Bank Employees Association has sought the help of economists, academicians, political parties and trade unions to start a national debate on this controversial issue. They say that such a decision could affect the country's economy. The RBI is responsible for the country's core economic functions such as monetary policy, exchange rate regulation and regulation of banking and non-banking financial institutions. Business Standard has published an article on the Same Topic.

The need of the hour, the economists felt, therefore, would be to commence a national debate on the matter to generate public awareness and opinion, instead of pushing for reforms, which are currently being introduced surreptitiously.

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.

More Information: Read Here

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.

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.

IBM leads the pack of top 100 outsourcing companies

The International Association of Outsourcing Professionals (IAOP) has released a list of the top 100 global outsourcing giants, and IBM leads the pack. The list of 100 highlights the role of the outsourcing industry in the economy; the 100 firms represent 68.9 billion in 2005 revenues and 1.03 million employees worldwide. The clients of these companies provide services in the banking, insurance, manufacturing, automotive, healthcare, pharmaceuticals, utilities, energy, telecommunications, retail, consumer packaged goods and the government and public sectors, and includes Fortune 500 companies such as GM, Ford, Citigroup, Bank of America, ExxonMobil and Verizon.

The top 100 service providers extend outsourcing support in the entire gamut of services--information technology and business process outsourcing, as well as areas such as facility services, real estate and capital asset management, manufacturing and logistics. From an Indian perspective, companies like Wipro Technologies and Genpact figure in the top 20.

For the full story, read IBM is ranked top global outsourcing company.

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.

UK and European companies to take the lead in the offshore outsourcing story

According to Gartner, UK and European companies will increase their outsourcing appetite by 50 percent per year over the next two years. Gartner also estimates the offshore outsourcing to increase from 13 percent to 20 percent over the same period at the global level. Silicon.com reports:

India remains the first choice of offshore destination for European countries and China also features as a potential top three choice, although it is still hampered by a lack of English language skills and a focus on the US.

Brazil: The newest outsourcing hub for the US?

Datamonitor, an independent analyst, predicts that Brazil will witness huge growth in terms of contact centers serving customers. This growth forecast is based on Brazil's existing contact centre management expertise, which will stand in good stead for the growth prediction to become a reality. CRM Today reports:

What is more, Datamonitor expects demand for Brazilian-based customer care services from companies domiciled in the USA to grow at a compound annual growth rate (CAGR) of 27% between 2005 and 2010 compared to 21% from other regions.

Convergys Corporation gets 2006 Service Leader Award

CRM magazine has recognized the role of Convergys Corporation in the industry and has given the 2006 Service Leader Award to the company for the second consecutive year. Convergys has made a mark for managing customer relationships with a difference and has played a significant role in enhancing the quality standards in the CRM sphere. TMCnet reports:

Convergys (News - Alert) provides billing, customer care and human resource services. Their outsourcing services focus on long term customer relationships and utilize their experience and best practices to the enhance customer experience.

Bill Gates expects Vietnam to raise its head as an outsourcing center

On his recent visit to Vietnam, Bill Gates has seen huge potential for Vietnam to make a mark similar to India in the outsourcing sphere. The country is drawing the attention of global technology companies despite its shortcomings.

Vietnam is growing and growing fast economically and its literacy rate is something for the nation to boast about. The 90% literacy rate is a major advantage for the country and will be a variable that other nations cannot afford to ignore. Gates further said that Vietnam should not restrict itself to manufacturing activities alone, but widen its horizons into the world of software development and outsourcing. The figure relating to the growth of Software and IT-related services industry reflects the optimism of Gates with a 40% annual growth rate. Bloomberg reports:

While the U.S. government says infringement of intellectual property rights is rampant in Vietnam, the nation of 84 million people is attracting the attention of global technology companies, lured by economic growth exceeding 8 percent and an estimated literacy rate of at least 90 percent.

IAOP places Equinox in World's top 100 outsourcing service providers

International Association of Outsourcing Professionals (IAOP) has placed Equinox, the BPO arm of i-flex in the Leadership Category of the global Top 100 outsourcing service providers, thereby proving its mettle in the outsourcing sphere. The selection process itself is very intense which makes this achievement all the more important as it reflects excellence in all respects when it comes to outsourcing. TMCnet reports:

Companies are ranked according to 18 criterion including revenue growth, number of employees, the skill and training of their workforce, the number of technical and business certifications, track record of management team and the quality of customer service.

Fewer megadeals happen due to more multisourcing contracts

Gartner expects the outsourcing market to continue it's upward march but there is a distinct possibility that there will be fewer megadeals. This will happen because companies are resorting to multi-sourcing which means that they do not rely on any one service provider for their requirements. There is also a shift happening as more and more companies are breaking up existing deals with a single vendor and opting for multi-sourcing their outsourcing needs.

The benchmark for a deal to be termed as a megadeal is a contract size of $1 billion and as Gartner expects megadeals to witness a lower figure, many deals will be signed in the $100 million to $999 million bracket. The longer term deals are also giving way to short term contracts as there is continual shift in market conditions. Companies are looking for outsourcing contracts which gives them the leeway to address the dynamic situations prevailing in the market place and it is obvious that if they tie themselves to longer term contracts, it will be difficult to meet these changing conditions. Government Technology CA reports:

Gartner says that although the contract value of individual outsourcing deals continues to decrease, there will be more of them and they will drive the outsourcing market to a growth rate of 7.3 percent from 2004 through 2009.

Contemplating Outsourcing?

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

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

Outsourced Work Outsourced

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

Nearshoring Takes Off

A study on call centers in Central America has found that there will be nearly 40,000 agents by the end of next year, an increase of 40 percent over the current figure of 21,012. The report, "Central America Call Center Report 2007: A Bilingual Niche", conducted by the Zagada Institute, has found that around 95 percent of the existing agents are bilingual and are thus well-suited to serve the customer care needs of U.S. companies that are looking to widen the Hispanic American market. The nearshoring market is booming because of stable parliamentary democracies, competitive telecommunication rates and coverage in key urban areas, low cost and adequate physical contact center office capacity in key markets, and business-friendly Economic Development Agencies. TMC Net reports:

Based on the levels of growth and service experience, the report categorizes the region into three growth niches: Maturing (Panama, Costa Rica), Contending (El Salvador, Guatemala) and Emerging  (Nicaragua, Honduras). Latin America has long been the land of promise for contact center nearshoring, given its proximity to the United States and cultural affinities, and recently it's been beginning to deliver on that promise.

Radiology Outsourced?

Forget business process outsourcing and information technology outsourcing. There are real concerns about the jobs of radiologists being transferred overseas. But Boston-based Frank Levy, an economist at the Massachusetts Institute of Technology, proved that these fears are totally unfounded. A study undertaken by him revealed that there is only one firm in India with a staff of three doctors who completed their residencies at Baylor, Yale, and the University of Massachusetts, that does the job of radiologists in the US. With doctors and medical practitioners requiring a medical degree earned in the US to practice any form of medicine, their jobs are protected for now. With the rising salaries of those in the medical profession, there is a chance that the status quo may not be preserved much longer.

Outsourcing in Q1 2006

The 2006 first quarter results of the Outsourcing Pulse Survey conducted by outsourcing and insourcing advisory firm EquaTerra revealed the following insights into the outsourcing industry:

• Human resource outsourcing (HRO) topped the market with 29 percent, followed by information technology (ITO) with 23 percent and finance and accounting (FAO) at 19 percent.
• Citations of increase in contract values were at their lowest levels.
• Sales cycles were increasing in length.
• There was a slight improvement in sales pursuit and delivery capacity.
• Scope levels remained flat.
• Demand was highest in the energy/utilities, CPG/retail, and pharmaceutical/biotech industries.

For a detailed analysis of the results of the survey, you can register for a webcast that will be held on April 20 at 1 p.m. Eastern Time by emailing Allison.Norman@equaterra.com. Alternatively, you can have reports detailing the survey findings sent to your email address by contacting research@equaterra.com.

Costs, Savings, and Outsourcing

You should probably rethink your outsourcing options if you are in it for the cost benefits. A survey by outsourcing advisory firm TPI has found that the outsourcing of information technology and business services results in an average savings of only 15 percent, a far cry from the 60 percent cost reduction claims. With salaries paid to professionals, severance pays, and governance costs making a huge dent in the company budget, organizations are left with only 10 to 39 percent as savings. There's some good news though for those who prefer quality to quantity though; around 21 percent of companies have now outsourced to enhance quality, a substantial increase over the 11 percent that did so in 2004.

Outsourcing Drives Service Industry

The service industry is being driven by outsourcing, according to a study by IDC, provider of custom consulting and research services for IT companies and markets. The survey rated the outsourcing of business and application management services as the top grosser for the year 2006, which will see worldwide organizations and governments spend more than $663 billion on external services. While the US will retain a major piece of the service pie, Central Europe, Africa, the Middle East, Latin America, and the Asia Pacific regions are close on its heels with mushrooming service opportunities. Globalization, standardization, and automation are paving the way for vendors to re-formulate their outsourcing strategies. IDC recommends that organizations should consider Brazil, Russia, India and China using innovative strategies that focus on hiring, managing, and retaining the best talent in the services industry.

Sapient occupies leadership status in IAOP's outsourcing ranking

International Association of Outsourcing Professionals (IAOP) has recognized the significant role Sapient has played in the outsourcing arena and has accorded the company a place in the top 100 providers. The rigorous process employed by IAOP in shortlisting the companies speaks volumes of Sapient's growing dominant status in the outsourcing sphere. IT News Online reports:

Companies were ranked according to 18 criteria, including revenue growth, number of employees, workforce skills and training, number of technical and business certifications, track record of the management team, and quality of customer service.

Egypt: A preferred outsourcing destination

Egypt is becoming an outsourcing hub as a cheaper alternative to competing locations. The country is churning out 80,000 technical graduates every year which provides the backbone for outsourcing business. IT Week UK reports:

Speaking at an event organised by Egyptian call centre specialist Xceed, Evan Kirchheimer of analyst firm Datamonitor said the country represented a more cost-effective location than Eastern Europe for UK companies wanting to outsource call centre and business process functions.

SEI makes it to the coveted Top 100 list of outsourcing companies

International Association of Outsourcing Professionals (IAOP) has recognized SEI as one of the 25 companies in the top 100 global outsourcing providers. SEI caters to the financial services sector and operates 22 offices spanning across 12 countries. Black Enterprise reports:

SEI is one of just three that focuses exclusively on financial services. According to IAOP, financial services firms are the heaviest users of outsourcing services. The list includes such outsourcing heavyweights as IBM, Accenture, Aramark, and Unisys.

LASON stamps its authority with a place in Top 100

LASON Inc. has grabbed a place in the top 20 in International Association of Outsourcing Professionals' (IAOP) 2006 Global Outsourcing 100 List. LASON is a leading BPO solutions provider and this recognition by IAOP has given the company a prominent place in the industry.

LASON concentrates on providing it's services to sectors which are data and document driven like Financial Services, Healthcare, Insurance and Publishing. The most important variables to be kept in mind in serving these sectors are accuracy, privacy and security. The company has made a name for itself with customized solutions targeted at these segments. Black Enterprise reports:

This achievement also highlights LASON's sol