The Value Of Outsourcing

Companies large and small, public and private, and across a wide variety of industries have embraced the practice of outsourcing within virtually all disciplines, including information technology - the sector which leads the trend.In fact, within the past five to eight years, outsourcing has evolved from a purely tactical option - often of last resort - to an ongoing, standard business practice and strategic management tool. But what explains this dramatic evolution in such a relatively short period of time?

Weighing the Pros and Cons

For many, the decision to outsource begins with exercise of weighing the time and expense of doing it yourself against your desired outcome. For example, if you decide to add a patio to your home, you have two basic options. You can either take on the entire job yourself - designing the space, securing the permits, purchasing the materials, and building it yourself. Or you could hire an experienced contractor to handle everything for you.Your investment for the first option is largely in materials and a significant amount of your time, particularly if you are squeezing the patio project into a busy schedule that already includes work and family responsibilities. But how long will it take you to complete the job? What quality assurances will you have, especially if you've never tackled anything like this before? What might the short- and long-term consequences of the do-it-yourself approach be?On the other hand, what could a professional contractor bring to the table? While the financial investment might be slightly higher to cover labor costs with an experienced builder, the completion time is likely to be much shorter and you can hold the project to agreed-upon quality guarantees

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TEN KEY FACTORS FOR SUCCESSFUL SOFTWARE AND OUTSOURCING AGREEMENTS

From: corporate findlaw

In addition to the updating the contractual provisions discussed above, the following core factors are necessary for successful information technology agreements in today's business environments.


Clear Description of Software's Functionality. A customer needs the scope and description of the functionality of the software and services to be clear, complete, and unambiguous.


Meaningful Acceptance Criteria. Acceptance criteria should be objective, rigorous, and tailored to the needs of the customer. It should be possible to fail the test, quantify the failure, and determine what changes are required to pass the retest.


Meaningful Service Levels. A service level is the level of service that the software will provide. Service levels are often expressed in percentage terms. For example, a contract may require a service level of 100 transactions per second 95 percent of the time. A common mistake is to ignore the other 5 percent of the time. The contract should impose a service level on that remaining percentage; otherwise, the exception could provide a large whole for in performance obligations.


Accurate Metrics. Metrics are the standards and other criteria used to measure the performance of the software and related services. Continuing with the example in number three, the metric would be the criteria used to determine whether the software processes 100 transactions 95 percent of the time.


Meaningful Service-Level Credits. These credits are payments, offsets, or other forms of compensation that a vendor is obligated to pay the customer when it the software fails to meet service levels. These payments are what put teeth in service-level obligations.


Maintenance and Support Levels and Response Times. The safest assumption for the customer to make is that software or outsource services will not work completely. To compensate, the customer must receive complete and timely maintenance and support services with proper escalation provisions to be sure that the appropriately skilled vendor employees resolve the problems.


Avoid Too Much Shared Responsibility. To the extent possible, functions should be the responsibility of either one party or the other. If functions must be shared (for example, first-level support provided by the customer and higher levels of support provided by the vendor), then the demarcation lines should be drawn cleanly. When no one party is responsible, the task often will not get done properly.


Avoid Uncoordinated Amendments. A danger in complex information technology licensing transactions is that, over time, the collection of statements of work, work orders, amendments, and the like introduce inconsistent provisions with the result in extreme cases that it is not clear what the contract requires.


Avoid Paying Too Much Money Upfront. Paying most of the fees at the beginning of the contract reduces the customer's leverage, and in some cases, the key vendor employees will be assigned to other customers.


Termination Rights and Transition Services. A customer will want the right to terminate the agreement both for cause and for convenience. Termination for convenience is an important remedy when the customer downsizes or reduces the scope of the project. A customer will want the right to transition the software or services in house or to another vendor. The vendor will want to be paid for these services. The customer may consider paying a premium for transition services in order to obtain the benefit of an orderly transition.

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Offshore Outsourcing practices

As offshore outsourcing evolves beyond all the hue and cry about organizations adapting outsourcing seeking short-term benefits, there has been a steep learning curve associated with it's evolution. Some organization's have badly burnt their fingers by opting for short-term advantages at the cost of long-term benefits where as some have successfully managed to balance between the short and long-term benefits. Here are some of the best practices that have helped many of our customers build a robust outsourcing model over the years and practised by some of the world's leading companies who've successfully integrated outsourcing in their core business strategy.

a. Communicate openly about your outsourcing plans
Top management has to take the responsibility to explain the rationale behind it's decision to outsource. Apart from the obvious reasons to outsource like globalization, access to talent, reducing risks, reducing turnaround time, cost cutting etc., many companies have their raison d'être behind the outsourcing intiative that has to be clearly communicated to all the team members at appropriate time. It has been repeatedly seen that companies that encourage open communication within the organization about it's outsourcing plans are in a much better position to handle potential employee backlashing that could arise from the jobs moving offshore than it's less proactive counterparts. Today, many companies that intend to outsource are concerned about employee backlashing and the domino effect it produces. One of the most effective ways a company's top management can address this is by presenting a clear picture of the opportunities and challenges thrown open by globalization and technological advancements. Evolutionary forces act on businesses as they do on living beings and ultimately the fittest survive.

b. Involve the core front-line teams in the discussions
It is a good idea to involve the key front-line managers/ staff in the outsourcing discussions to give them a platform to express their feelings openly. Such discussions could bring out some of the previously unaddressed employee concerns and also helps management eliminate false rumours that could have evolved or possibly evolve during the initial stages of the outsourcing process. Further, core members of the organization want to be assured that outsourcing decisions will not have a negative impact on their goals.

c. Build a performance-driven culture
Performance driven companies usually have a policy of encouraging performance by eliminating non-performers on a periodic basis. Many companies that do not have a performance-driven culture can seize opportunity to build one by weeding out the non-performers and filling the void thus created by outsourcing those roles to an outsourcing service provider. There could be few more effective ways to emphasize the importance of performance within the organization and at the same time not taking any drastic measures that would destabilize the organization.

d. Maintain your brand equity in the talent/ business community. Do not underestimate the importance of sending the right message.
To avoid negative word of mouth within the talent/ business community, many companies have resorted to providing a well-balanced severance package for the key members whom they plan let go as a result of their outsourcing plans. This is very important for a company today as in this internet age, it takes only hours or minutes for a negative word-of-mouth to enter into the talent community, on which many organizations rely to build their core competence. This is especially critical for companies operating in niche areas where the talent pool is very limited and where most of the members are well connected.

e. Invest in intellectual capital
Today's smartest companies, inspite of all their outsourcing initiatives, continually invest in training and equipping their MIS/ IT staff. The core members of the MIS/ IT staff carry very valuable proprietary knowledge about the company's practices, personnel, and systems. These smart companies realize that success of their outsourcing initiative relies to a great extent on the intellectual capital of their existing employees. These companies liberally invest in building this intellectual capital through varied training programs ranging from core technical trainings to executive education programs.

f. Derisk
A well thought-out sourcing strategy is the best possible derisking model. A careful examination of the tangible and intangible benefits/ potential risks associated with outsourcing with respect to that organization's vision and business objectives cannot be overemphasized.
A long-term outlook is a prime requisite for the success of an organization's outsourcing initiative.

Outsourcing in India In crisis over scam

NEW DELHI, June 24 -- India's booming Offshore outsourcing industry struggled with new political and security worries Friday after a British tabloid reported that one of its reporters purchased private financial data on British citizens from an Indian outsourcing worker as part of a sting operation.
The Sun newspaper reported Thursday that a reporter posing as a businessman purchased the bank account details of 1,000 Britons -- including customers of some of Britain's best-known banks -- for about $5.50 each.

The worker who allegedly sold the information bragged to the undercover reporter that he could "sell as many as 200,000 account details a month" and declared that "technology is made by man and it can be broken by man," according to the newspaper. The Sun said the worker received the information from "a web of contacts who work in call centers."
The newspaper's report, which was widely covered in the Indian news media, has renewed criticism that outsourcing firms have failed to erect adequate protections against fraud in their zeal to take advantage of the booming demand from foreign companies seeking to lower costs by shifting some office operations abroad.
The incident also has played into the hands of workers and politicians in Britain, the United States and other developed countries who see the outsourcing phenomenon as a threat to employment and prosperity at home and are eager to find ways to discredit it.
The report comes on the heels of another scandal in which several Indian outsourcing workers in the western city of Pune are alleged to have used their positions to steal $426,000 from New York-based customers of Citibank.
"This is California" during the Gold Rush, said Shankkar Aiyar, a business journalist and senior editor at India Today magazine who has written widely on outsourcing. "Everybody who sees an opportunity sets up shop. They want to start fast, they've got a contract in hand, and some of them are taking shortcuts."
India has no monopoly on such fraud. This month, MasterCard International Inc. announced that more than 40 million credit card numbers belonging to U.S. consumers were accessed by a computer hacker who breached security at a processing center operated by another company in Tuscon.
India's National Association of Software and Service Companies, known as NASSCOM, has said the industry was already taking a number of steps to promote better security, including the development of a national registry of outsourcing workers that will help screen out potential criminals. Outsourcing companies in India typically bar workers from downloading or printing information, and often from carrying cell phones or even pens into their work areas.
"The problem is not unique to any single nation," the group said in a statement Thursday. "It is one that can affect any country, and each of us has a responsibility to take on the criminals."
The Sun identified the outsourcing worker at the center of its sting as Kkaran Bahree, 24, a computer expert and college graduate who lives with his parents in New Delhi. It said he provided the newspaper's reporter, Oliver Harvey, with "account holders' secret passwords, addresses, phone numbers and details of their credit cards, passports and driving licenses." The newspaper said that some of the information was contained on a CD and that Harvey's three meetings with Bahree had been secretly recorded and filmed.
The Sun said that Bahree "gathers supposedly secret information from corrupt call center workers in Delhi" and that it had verified the authenticity of the information with "a security expert." The newspaper said it had given investigation details to the City of London police.
Bahree could not be reached for comment Friday. But in an interview with the BBC on Thursday, he denied any wrongdoing, saying he had been asked by an associate to give a CD to the Sun's reporter, did not know what it contained and had not received any payment.
The newspaper said Bahree had worked for several years at Daksh eServices, now a subsidiary of IBM, and currently works for an outsourcing company called Infinity eSearch in the fast-growing New Delhi suburb of Gurgaon.
At a news conference Friday, Infinity's managing director, Rahul Dutt, said the firm had no banking clients in Britain and did not handle financial information for clients, according to the Press Trust of India news service. Dutt said Bahree has worked at the company for about three months and had been given until 5:30 p.m. Friday to give an explanation "about his alleged role in the scam." Calls to the company's Gurgaon office went unanswered late Friday afternoon.
India's outsourcing industry performs a range of customer-service and other back-office functions for Western and multinational firms in areas such as banking, insurance and health care. The industry is creating jobs at the rate of nearly 100,000 a year, and its revenue is growing at more than 40 percent annually, according to NASSCOM. But analysts warn that the industry's rapid growth has stretched the supply of educated English speakers, prompting some companies to lower their hiring standards.

Source:http://www.washingtonpost.com

Offshore Outsourcing trends

The offshore outsourcing working should be checked, since everyone’s excited about how well – or poorly – offshore outsourcing works, let’s take a look at what’s happening now, and what’s likely to happen over the next few years.
Let us say first that much of the fate around offshore outsourcing has already been sealed. How could this be? There are new reports that near- and off-shore outsourcing does not save as much money as many people assumed. Some reports suggest that quality is a continuing problem, and others complain about language barriers, competing processes and the management challenges that especially plague many off-shore outsourcing projects.
The fate may already be sealed for several reasons. First, the number of management information systems (MIS), information systems (IS), computer science (CS) and computer engineering (CE) majors has fallen so dramatically over the past few years that we’re likely to lose an entire generation of replacement technologists if present trends continue – and they show every sign of doing so. So as the previous generation continues to gray, there will be precious few new ones to keep the skills pipeline full. The obvious outcome is increased demand for the skills – wherever they happen to be.
A second trend that will fuel the demand for more offshore outsourcing is standardization and its cousin, commoditization. The industry is making increasingly less variant stuff work together. While Web Services and service-oriented architectures (SOAs) represent impressive technology they also represent freedom to those who deploy and support technology.
Vendor consolidation is also fueling standardization and commoditization, and if you believe the impact that SOAs will have on software development, support and licensing, the stage is set for the massive de-centralization of cooperative software components. If this playing field truly levels itself out, the door will open even further for outsourcers who will master the new architectures (as a natural extension from where they are now in applications development and integration).
The third trend to watch is “the end of corporate computing,” or the desire to buy services and rent applications rather than deploy and support them in-house. Nick Carr is at it again. In the Spring 2005 issue of the Sloan Management Review, he predicts the end of corporate data centers and the rise of “utility computing.”

Managing Software Project

There is a significant difference in outsourced software development methodology vs in-house software development.
The outsourced software development involves a key decision – primarily a management decision – Should you manage the project in-house or Should you outsource the complete product development? Both of these approaches to outsourced software development have benefits if you have the right outsourcing partner.
Typically, if the project management and solution architecture is managed in house using internal resources, it involves a very close resource management. Project manager takes the responsibility of managing the software development direction and ensuring efficient use of development resources.
The software development is divided into definable tasks by the internal team, and performance is measured against the individual tasks.
The second approach, where the offshore vendor provides complete software development including software architecture and project management services, involves interaction at the functional level. It some times involves a detailed product specification phase – where a project manager spends significant time with the business and interface with the offshore team.
The vendor as well as the client, in such cases, shares the responsibility and risks of product development. It involves an interaction at the functional level as opposed to technical level.

Outsourcing - a New Surge

From:seguejobs

Recent trends clearly indicate that companies are generally avoiding traditional outsourcing risks and forming a deeper relationship with their offshore partners by setting up dedicated centers. A dedicated center is an extension of an organization abroad.

The dedicated center devotes all its efforts to the host organization and, to maintain consistence with the organization's standards, it follows their culture and methodologies to produce immediate results. The center enhances overall productivity, and more importantly, it results in considerable long-term cost savings.

Countries like China, India, Israel, and Russia, which possess highly skilled labor forces as well as outsourcing capabilities, have been the major gainers. Despite the fact that each of these countries has its own advantages or drawbacks, there has been a sudden upsurge of dedicated centers in these countries

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Outsourcing + Insourcing Key to Smartsourcing

From:seguejobs

In today's high-speed global business environment, every organization is out to maximize its profits, enlarge its market share, and above all, put a check on ever-increasing costs. Management gurus are undertaking every effort and every possible mantra is being applied to re-think and re-adopt new processes, especially the buzzwords "outsourcing" and "insourcing."

Outsourcing is the process of procuring services or products from an external service provider with a view to curb costs, replace in-house capabilities, and thereby reduce the time period of projects. Outsourcing is thus a full transfer or delegation of an organization's facility management functions to an external firm. Outsourcing has emerged as an effective tool to revamp the strategies and benefits of business in a financially viable and pro-active manner.

Fundamentally speaking, outsourcing may be classified into two types: traditional outsourcing and Greenfield outsourcing.

a. Traditional outsourcing means that the staff of the organization does not perform the same jobs or tasks. Here, tasks to be performed are identified and the service provider usually hires the staff. For instance, IT outsourcing may include a transfer of responsibility for management of data centers and networks. In the field of facility management, the people working as property managers might become the staff of a facility management company.

b. Greenfield outsourcing, on the other hand, means that the organization can change its business processes without any hiring of staff by the service provider. The organization, for instance, may hire an up-and-coming company to provide a new service such as wireless remote computing, which was not previously handled internally.

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Offshore Outsourcing

In an ongoing drive to reduce capital expenditures, corporate executives continue to consider offshore outsourcing as a way to reduce IT costs and focus on projects that are most directly linked to business goals.
Experienced executives agree that offshore outsourcing almost always sows uncertainty in internal personnel. It can result in layoffs and budget reductions among IT middle managers. The silver lining for IT managers is that there are opportunities for those who are prepared to embrace change and help their companies face the challenges of dealing with outsourcers - whether those external providers are in Bangalore or Boston.
Other technology and business leaders agree that when it comes to offshore outsourcing, companies need all the talent they can muster to do it right.
You need a team to manage the outsourcers, a program management office or an offshore development management center. offshore outsourcing program management involves a variety of tasks and skills, which include the writing of service-level agreements; analysis of contracts; documentation for how processes should be managed; and creation of liaison roles to ensure effective communication among IT, the business side of the company and outsourcers.
Of course, not all IT managers have access to mentoring programs. However, IT middle managers in any company can develop their project management chops.
Be process-oriented, focusing on managing resources. Analyze what you do, apply metrics to what you do, break out costs and inventory skills. See how you can do things faster, better.
People involved with help desks and network management are in a good position to hone their communications and negotiating skills since they need to contract, for example, for services for bandwidth and deal with a complex network of relationships to have systems installed.
Ultimately, outsourcing consultants and top executives advise IT managers to prepare to embrace change, and take the initiative to develop the skills required to deal with offshore outsourcing.

Software Testing: The next outsourcing boom sector

From: blogtaragana

Indian Outsourcing industry is increasingly turning towards software testing. In fact India has started providing software testing services to customers from 2005.

Reuters reports on companies like Wipro, Infosys and Aztech who are experiencing boom in this sector.Wipro has jumped four-fold to 2,400 in two years. In the nine months to December, revenue grew 90 percent to $64 million, three times the industry average.

Software glitches are estimated to cost nearly $60 billion a year in the United States alone, according to the National Institute of Standards and Technology. Companies such as online share brokers and handset makers are willing to spend a lot to avoid them. Testing could make up 25-50 percent of software budgets. Independent testing is growing at 50-65 percent while the part of work done offshore is growing at 35-40 percent.

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Indian Outsourcing Firms Make Global Push In China, America

From: outsource360

While U.S. workers and corporations continue to digest the idea that college grads on the other side of the planet can do the same jobs for one-third the price, the very firms that have made these shifts possible are heading to new countries — and, in some cases, circling back to the U.S.

Cognizant Technology, (CTSH) Infosys, (INFY) Tata Consultancy Services and Wipro, (WIT) companies whose heavily India-based staff develop and maintain big IT systems for their North American and European clients, have started to set up operations in other cheap-labor locales such as China and the Czech Republic.

At the same time, they are recruiting more experienced U.S.-based workers to offer the business consulting typically provided by firms like Accenture (ACN) and McKinsey.

Stoking these ambitions are growth rates that outshine those of their U.S. tech service rivals. The Indian firms have increased annual sales by at least 40% for each of the past two years, and investors have taken note.

Take Bangalore-based Wipro. With $1.9 billion in annual sales, it's just one-tenth the size of EDS. (EDS) But Wipro's market capitalization tops that of its Texas competitor's by more than $5 billion.

Strong sales and stock prices have given the Indian firms momentum to expand in countries like China.

Indian firms have invested close to $50 million in China and employ nearly 2,000 people there, says Indian trade group NASSCOM.

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Eye on offshoring: Accessing the suppliers

From: computerworld

Recognizing the current state of flux of offshoring, key characteristics that must be understood in detail for each supplier under consideration include:

• Multinational capability. Are services located in one country or even one city, or are they diverse on a global scale?
• Partnerships/use of third parties. What are the key partnerships the supplier has formed? Does it have offshore partners it will outsource work to?
• Turnover rate. Many call centers in India are experiencing a turnover rate of 50%, and application development centers are experiencing 15% to 25% turnover. Obviously, the lower the turnover rate, the more stable the environment.
• Technical infrastructure. What is the composition of the supplier's technical infrastructure and support structure? Is its support plan standards-based
• Business continuity and disaster recovery. What is the plan, and has it been evaluated lately?
• Security. What is the security plan, and has the supplier recently conducted a risk assessment? If so, how often does it assess its security posture?
• Service-level agreements. Does the supplier tie all of its SLAs to the delivery of the product, or is the SLA modularized?

Different companies will have different comfort levels with the answers to these key characteristics. To reinforce the point; the key to successful offshoring is a well-defined, executable strategy and governance plan. Using a supplier-independent consultancy to select the most responsive and responsible supplier of offshore service will help guarantee success.

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Outsourcing in India: Advantage

From: outsourcing2india

Indian companies are seen as preferred partners all over the world. The natural resource of India lies in its abundant technically skilled manpower, easily transforming India into an outsourcing paradise. It has a large pool of computer literate and English speaking professionals and, above all use of state-of-the-art technologies especially in software development. The solutions are cost-effective, high quality, highly reliable, and delivered on time.

The Indian advantage lies primarily in the educational and technical qualifications of the personnel, who are often more qualified than the people working in the parent locations. A survey conducted in 2002 by NASSCOM (National Association of Software and Service Companies) showed that an India based ITES-BPO center in the banking and financial service sector, performs better than a UK or US based facility on significant factors such as the number of correct transactions/total umber of transactions, total satisfaction factor, number of transactions per hour and the average speed of answers.

The survey also says that 45 percent of Indian service providers have certifications like Six Sigma (a disciplined, statistical quality control method that measures the number of defects compared to the opportunities to make defects) and CMMI ( Capabilty Maturity Model Integration - which is a process improvement method that provides a set of best practices that address productivity, performance, costs, and customer satisfaction.). Moreover, a lot of organizations are upgrading their quality standards to from the ISE 9000 to the new ISO 9000:2000, and from the CMM framework to the new CMMI framework.

Pune is a fast emerging outsourcing destination. This fast emerging info hub fast has a large number of quality educational institutions and universities. Today its resources and statistics back its claim for the numero uno destination for IT investments. The setting up of IT Parks with good connectivity, phone lines and electricity and a robust telecom infrastructure is another reason for why Pune is the new IT destination. The availability of huge land in prime locations coupled with the abundant trained manpower has prompted many companies to open office in Pune.

The Indian model ensures that it works in systematic manner. IT systems - production servers, mainframes, and application systems - rarely reside in India. Rather, outsourced systems reside at the client site, or in some cases, at a hosted site in the US or Europe. Remote workers in India develop code or maintain systems from a facility in India over a variety of communications links.

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Offshore outsourcing strategy

From: cnet news

The reality is that offshoring is another form of trade, and trade brings both opportunities and challenges. Benefits have always exceeded costs, however, and our great imperative is to maximize the former while minimizing the latter. Specifically, we must do the following:

• Enforce current and future trade agreements.
• Enable global flows of goods, services, capital and people.
• Promote lifelong learning environments, efforts and skills.
• Identify ways to encourage saving and to maintain health coverage during work force transitions, but ways that don't restrain future hiring.
• Ensure our business climate encourages entrepreneurship (access to capital, employer flexibility, and more rational regulations and torts).
• Improve our infrastructure to maximize companies' and workers' productivity.
• Ensure adequate resources for educational innovations that work.

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Procurement outsourcing

From: information week

Nearly 75% of buyers expect to increase IT outsourcing this year, up from 64% last year. Just 7% say they'll decrease use of onshore outsourcers, and 5% plan to reduce use of offshore outsourcers. Most buyers like what they get: 78% are satisfied with their outsourcing deals, up from 74% last year.

Over the past year, ICG Commerce has seen an unprecedented level of interest in procurement process outsourcing. Many industry thought-leaders have launched comprehensive studies on the topic, reporting that performance has exceeded early adopter's expectations and are projecting 15 to 50% growth over the next three years. Trade media and educational organizations that have historically avoided the topic are now approaching it proactively. But perhaps the most direct evidence of a growing trend toward procurement outsourcing from ICG Commerce's vantage point is the 10X increase in the number of inquiries and RFPs received for outsourcing services.

While this increased interest in procurement outsourcing is clear and the value proposition can be compelling, many companies still seem to struggle to understand procurement outsourcing and determine the appropriate path forward for their own organization.

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Software outsourcing industry: trends

From: oocenter

Order books of software exporters are full and the guidance for the remaining period of the year looks positive. CEOs talk of India becoming the de-facto destination for software offshoring. The list of companies waiting to jump onto the offshore bandwagon is increasing. Signs, which on the surface, looks rosy for the Indian software service exporters. The 2005 IT outsourcing study includes the insights of 210 buyers and 242 providers of outsourcing services. All participants were directly involved or highly aware of their company’s outsourcing-related decisions, states the study. IT budgets of participating companies ranged from less than $5 million to more than $500 million. The survey points to a continuing growth in the outsourcing market, with 74% of buyers anticipating an increase in IT outsourcing.

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Business continues to see strategic benefits of outsourcing

From: personnel today

The majority of companies still believe there are significant strategic benefits and competitive advantage to outsourcing. Almost two-thirds of companies believe that outsourcing can bring real competitive and strategic advantage, according to a research.

India and Russia are singled out for their expertise in services provision. India is hi-tech and well educated resources, so it's a good place to base centres of excellence. Russia same way is using a fantastic research institute [with] a lot of well trained scientists and engineers that has surprising technology.

China is seen as a manufacturing hotbed. However, direct investment in the country remains difficult. However, the research also highlighted environmental inhibitors to moving into these markets. These inhibitors included corruption and political and economic volatility, which were mentioned in relation to Russia and Brazil. Human rights were of greater concern in India and China.

A survey 2,100 UK companies and organizations, conducted by pollsters NOP, shows that business attitudes to outsourcing are becoming more positive. More than half (51%) of the companies surveyed said that outsourcing has become an established way of working – a figure 14% higher than it was in 2003.The survey reveals that more and more organizations are realizing the benefits that outsourcing can bring.

But it is important that businesses don't solely focus on the benefits - to achieve outsourcing success, companies must adhere to best practice policies and practices.

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Offshore outsourcing:Facts

From: e-isn

For most software companies across the globe, offshore outsourcing is an interesting option. Whether it is a service or a product to sustain an organization's competitiveness, one has to pursue cost reduction goals without compromising the quality of the solutions. The biggest boon outsourcing has given to the global business community is the strength to upgrade their core business while being at the cutting edge of technology.

There are a few logical and important guidelines that any organization has to follow to be successful in outsourcing software to offshore businesses. India has established itself as one of the most competitive destinations for software outsourcing development services.

Unlike in house development or on site development, the offshore software development has certain peculiarities associated with its process. Most of the steps that are involved in onsite development are present in offshore development. Critical steps have been included in the process to ensure successful completion of the project.

Software outsourcing though in huge demand & profitable proposition, if not handled properly can become a pain also. But professional organizations outsourcing software are very cautious these days & do they due diligence before selecting the right software outsourcing partner.

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Domain expertise important for software outsourcing

From:e-isn

Consulting software companies focus on defining, optimizing and aligning client's business strategy with IT initiatives. Business and technology work hand-in-hand. A proper understanding of this synthesis motivates every engagement, enabling us to deliver technology solutions that give you a decisive competitive advantage.

Customers are tilted or harp on choosing software outsourcing companies who understand business strategies and is good at generating ideas & also has the technical expertise to turn those ideas into reality. It is better than making the mistake of choosing technology companies having good technical expertise but little domain knowledge. It is important to strike a balance between the two & opt for business oriented technology solution provider. Only they spend time to understand customer requirements, and then tailor complete solutions that deliver tangible value to the enterprise

For the best Offshore Software Development, i.e., software Development outsourcing and Offshore outsourcing services, contact A-1 technology, Inc, an offshore outsourcing company.

Software outsourcing jumps target

From:open outsource

India's export revenues from software outsourcing have exceeded targets and will reach $17.3 billion in the fiscal year ending March 2005. For the first time, the total number of people employed in India's outsourcing industry has also touched 1 million hands, said the National Association of Software and Service Companies.
The exports gained momentum this year with more companies realizing the value of global sourcing, In the year to March 2004, India's software exports stood at $12.8 billion and the industry employed 770,000 people.
India's domestic market for the current fiscal year has been valued at $$4.9 billion, up from $$3.9 billion a year earlier.
Thus, the total annual value of India's software industry, including exports and local sales, is nearly $22.2 billion.

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Outsourcing: Getting Off on the Right Foot

From:Computerworld

An effective governance and relationship management process, implemented early, can help both buyer and provider make healthy offshore outsourcing. But effective governance doesn't just happen spontaneously, at least not very quickly. Here are five tips for achieving real "speed to governance."

1) Contract issues are at the root of many problems that arise early in outsourcing arrangements. Many buyers lament that their contracts are hundreds of pages long and are confusing. Given the length and complexity of outsourcing contracts, it is hardly surprising that buyer and provider enter the agreement holding different assumptions about a number of critical issues.

To improve the transition from negotiation to implementation, buyer and provider should conduct joint contract briefing sessions. In such sessions, key members of the provider and buyer negotiation team brief transition leaders, delivery managers and functional managers from both sides. Topics should include the terms of the deal and the underlying intentions behind them, highlighting any issues that were deferred or not fully resolved, as well as critical scope boundaries.

2) Not all outsourcing relationships are created equally. At one end of the spectrum, some are primarily about lowering price by leveraging economies of scale, while others are about transformation, innovation and shared risk/reward. As might be expected, many buyers aspire to keep their providers closer toward the "lower price/less integration" end of the spectrum, while providers often aim to integrate further (and thereby enhance their margins).

3) Ensuring end-user buy-in, both at the employee and executive level, is critical. Many outsourcing arrangements require that buyers make significant process changes to reap cost savings. End users, accustomed to specific ways of doing things and a particular level and type of service, can turn a business case upside down when they don't comply with new processes.

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Offshoring improves business competitiveness

From: personneltoday

Eight in 10 organisations believe that offshoring has improved their competitive position, according to a research by the National Outsourcing Association (NOA).

The study also shows that a quarter of organisations now use offshore business process service delivery.

According to the study, the main ways that offshoring affects the competitiveness of organisations were identified as a combination of improved customer services, reduced costs, improved scalability and ability to manage fluctuations in workload. On the whole, respondents reported an average return on investment of around 29 per cent through the use of offshore services.

According to the research, 84 per cent of respondents believe that the use of offshore services makes a net contribution to the UK economy, which supports the findings released at this month's CBI conference. This means organisations tend to regard the use of offshore services as a means to improve their competitiveness through cost effective access to higher quality services and personnel.

The NOA study also found that organisations were 100 per cent satisfied with the calibre of personnel and data security in offshore locations. The lowest satisfaction ratings were related to cultural compatibility (67 per cent) and language capability (67 per cent), indicating that organisations need to carefully assess these factors before opting for an offshore service.

Offshoring seems to be gradually shaking off the negativity that has surrounded it. Organisations are beginning to realise the real benefits that offshoring can bring, if managed effectively.

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Five Golden Rules For Offshore Outsourcing

From:blogsource

1. Develop enduring relationships between key management personnel.
The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them. Studies on outsourcing success stories have demonstrated that working chemistry in management and peer friendships among employees have proved to be important determinants in forming long-term relationships that yield real value.

2. Present a Quantifiable Objective.
A useful performance criterion includes quantifiable objectives and clarifies expectations of the quality of service. If you can get ahold of SLAs for comparable projects, they will serve as reasonable starting points—but remember, these are negotiable. In any event, ensure that exact objectives and expectations are included in the SLA and are understood by both organizations prior to implementation.

3. Pre-determine the Incentives and Penalties Schemes.
The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria. If performance of the service provider exceeds expectations, then incentives should be given; conversely, appropriate penalties should be imposed if objectives are consistently missed.

4. Review Periodically to Maintain Successful Relationships.
Organize formal review meetings often. During the meetings, both sides can discuss the performance of both teams and determine the future objectives or goals of the company accordingly. They can also discuss product reviews and deliverables during these meetings. Keep in mind that performance objectives may need to be continually revised according to changing market conditions and the opportunity costs of both firms.

5. Communicate Well & Often to Bridge Cultural Differences.
The parties involved in an outsourcing relationship belong to distinct cultures, these differences have to be accepted and bridged. The cultural understanding between the two organizations can be enhanced by organizing social events, educating about company background, participating in each others’ quality programs, etc. Communication really is the key to a healthy relationship. It may be helpful to send a loyal employee to the BPO site for a few months to facilitate understanding in the implementation phase.

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offshore outsourcing benefits

Every business has a host of resources at its disposal. Each employee offers a unique combination of skills, plus companies have hardware, software, phone lines, fax lines, Internet connections, email, and more. All of these resources contribute toward getting the job done. But sometimes all of the resources a company has at its fingertips may not be enough. That's when outsourcing can be a lifesaver--or at the very least, a project saver.

When you outsource a project or part of a project, you are enlisting the services of an independent contractor (IC). The services available from ICs are numerous and varied. You might need someone to do some writing, some web design, a bit of software programming, research, develop a layout concept for your new brochure, or just about any other task imaginable. Instead of heaping another responsibility on the shoulders of your already-stressed-out staff or hiring another person that you will have to find work for during the next slow down, you can look for help from the outside.

Outsourced product development expanded in India

From: financialexpress

The Indian outsourcing industry has matured substantially and is seeing some interesting trends. With the rupee appreciating and costs rising, India loses the edge of a cost advantage that can affect our profits and the clients’ decision to outsource.
To combat this, India is moving away from offering just a cost advantage to redefining business plans that bring in value-adds and enhanced delivery capabilities. There is a continuous effort to move up the value chain towards high end product development, innovation and design.
Outsourced Product Development (OPD) is the rapidly emerging niche with many product companies looking towards India to outsource their product engineering work. Software product outsourcing seems to be gaining significant traction not just in established companies but also in startups with many venture capitalists (VCs) specifically asking for an ‘India plan’.
In fact, the last two years has seen a sizable movement from VCs towards an interesting business model. VCs are increasingly funding entrepreneurs with hard-core business domain knowledge who partner with an Indian technology major specializing in end to end product engineering.
Product start-ups are now coming to India with just a vision document based on market needs. There has been an increase in business from the European countries, where product talent is still not widely found. The European markets have opened up towards outsourcing product work to India.
According to Frost & Sullivan, R&D outsourcing market for information technology in India is estimated to grow to $9.1 billion by 2010 from $1.3 billion in 2003, at a compounded annual growth rate of 32.05%.
India’s talent pool is its other competitive edge. Over the past decade this has received sufficient international exposure. A combination of high-end product services and abundant IT talent makes us the ‘leader’ to deliver world-class expectation. Along with being scale players, Indian companies also need to show focus and depth of knowledge in the vertical they identify for themselves and go to market with success stories.
So OPD is an evident trend that is likely to gain momentum in 2005 - While Product companies are already looking at entering India with an OPD partner, small and medium level captives might go the third-party way, as they might find it easier to ‘rent’ already existing high talent teams instead of creating one themselves.

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Customer Care Offshore Outsourcing Trends in the Utility Industry

Offshore Outsourcing customer care is powerful way for utilities to provide best in class customer service and manage costs. Outsourcing reduces or eliminates the need for capital expenditure. What was once a capital expenditure and ongoing fixed expense becomes a variable expense when outsourcing. A utility company can easily adjust their expenses as their business needs fluctuate. Offshore Outsourcing reduces or eliminates the need for the capital expenditure associated with constructing and managing an in-house customer service center.

Ongoing fixed expenses become a variable expense and you can easily adjust these expenses as business needs fluctuate. Offshore Outsourcing also provides a company with the latest and greatest customer service technology, at a fraction of what it would cost to purchase. Additionally, by partnering with an outsource provider, a company can leverage the best practices of an expert, who has designed, developed and fine-tuned the management practices to provide the most effect and efficient service to customers.

Indian outsourcing: skills shortage looms

India's rapidly growing software and offshore outsourcing industry says the nation's university graduates lack the skills needed for an estimated one million jobs in the next four years.
The issue is so crucial that the industry will develop its own system to test the skills of the country's three million university graduates each year, Kiran Karnik, president of the National Association of Software and Service Companies, said on Wednesday at a two-day summit in Bangalore on outsourcing trends.
"The test is designed for entry-level candidates. It will gauge the skills necessary for call center and transaction processing jobs," Karnik said. "Most of the graduates ... currently are not employable."
India's software and services industry earned $US22 billion ($A28.73 billion) in the fiscal year ended March and is expected to grow 32 per cent this year, the software association said earlier this month.
The industry, which covers offshore outsourcing services such as software programs, billing, customer management and accounting for companies abroad and in India, crossed one million employees last fiscal year, which is set to double by 2009.
The association represents 900 members including India's largest software and service companies.
Executives from Infosys and Wipro have complained that the government is not providing the tools needed for the industry to grow such as electricity and an updated education system.
"This will enable the industry to come out with a certain amount of standards. The pilot project is expected to begin in a couple of weeks," Mr Karnik said.
Even with skills testing and classes, the industry may not be able to fill 262,000 jobs of the one million estimate because of a lack of qualified people, particularly middle-level management, he said.
"The whole purpose is to create an employable talent pool and to enhance the size and quality of the" workforce," Mr Karnik said.
source:http://www.smh.com

Offshore outsourcing: Key facts

From: Hewitt resource library

In light of uncertainty in the software marketplace, many companies are concerned about their investments in enterprise resource planning (ERP) systems and are not only wondering what software providers will be around for the long-term but are also evaluating their options. Through outsourcing, companies can get rid of the expense, headache, uncertainty, and risk of managing their own ERP system and relying on software providers. They can also transfer the risks and responsibilities to an outsourcing provider.
Over the last 20 years, the HR outsourcing marketplace has evolved beyond benefits administration. Companies are outsourcing more HR activities to achieve a fundamental shift from an administrative, tactical, and compliance-driven function to a focus on the strategic acquisition, motivation, and retention of talent. The transactional functions must be done right and can be handled with greater quality and efficiency by a provider who has the process and technology expertise.
Outsourcing has become a mainstream business practice. A growing number of executives understand the benefits it can bring in terms of not only cost savings, but also heightened strategic focus. Many recognize outsourcing relationships as long-term partnerships created to further the strategic goals of the organization. Today, companies want to build an internal competency around outsourcing so that they can work with partners to build the kind of responsive business ecosystem they need to compete.

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India faces outsourcing labor shortage

India is beginning to see a shortage of properly skilled labor in its back-office outsourcing industry, and could fall short by a quarter million workers in four years, officials have said.
"The problem is not with the quantity, but with the quality," Rajeeva Ratna Shah, a top official of the federal Planning Commission, which directs India's economic strategy, said during an outsourcing conference in the southern city of Bangalore, the center of India's high-tech industry.
Only a fraction of the three million graduates produced by India each year are ready to be employed in the outsourcing industry, with others needing several months of training, Shah said.
Scores of Western firms farm out office functions such as telemarketing, handling customer calls, payroll accounting and credit card processing to countries such as India, where wages are low and skilled professionals are abundant.
India employs 348,000 people in such back-office outsourcing functions alone and adds 150,000 jobs each year. The industry earned US$5.2 billion in the fiscal year that ended in March.
Most people who apply for back-office jobs lack communication skills, knowledge of international practices and advanced computing skills, said Kiran Karnik, president of the National Association of Software and Services Companies, India's technology trade body.
"Companies are able to select only eight or nine people out of 100 who apply and that's pretty low selection ratio," Karnik said.
India has long touted the abundance of its work force as the main attraction for companies looking to shift work to cheaper locations.
"In my estimate, only a third of the pool has the right skills to be absorbed into the industry right away," he said.
Nasscom has begun a plan to work with Indian universities to improve skills needed for the outsourcing industry, he said.

source:www.cnn.com

How Outsourcing Facilitated a Sale

From: outsourcing-journal
Company X designs and manufactures devices installed in the ceilings of casinos that allow computers to track the movement of people.
A major manufacturer wanted to purchase the company, but it had a problem with its manufacturing process. Company X's sales force was known for selling whatever its clients wanted; customization became standard. They also promised these customized systems in record time frames, which had its engineers scrambling to make the requested changes. In addition, Company X had a product plant in Ohio that only experienced a 33 percent utilization rate. Together, these gave the company two headaches its new owner did not want.
The solution was to find a contract manufacturer who could engineer, then produce these customized systems for Company X. Outsourcing transformed its traditional supply chain into a build-to-order model.
Now Company X has no inventory or waste. There are now no more fire sales for surveillance gear that's suddenly out-of-date. The outsourcer is only manufacturing what its customers order.
Today Company X's sales force can concentrate on selling systems its customers want instead of the systems they have to sell. This produces a profitable product line for its new owner.
Trend: Engineering Going Offshore to India
While most manufacturers are outsourcing the typical general administration processes like human resources, finance and accounting, purchasing, and IT, the new leap in outsourcing is in electronic manufacturing services (EMS). EMS outsourcers are bundling their engineering functions with the manufacturing of electronic components; this is exactly what Company X needed. Engineering is becoming the new outsourcing frontier.
One of the big trends in EMS is sending more of the engineering work to India, where several new research and development centers have opened. Companies like Company X are seeing the value of sending lower-value engineering jobs to India.
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Saving grace in offshore outsourcing

Bangalore, June 7 (PTI): Outsourcing IT, IT-enabled services (ITeS) and business process (BPO) work to India has helped firms achieve cost savings anywhere between 40 per cent and 50 per cent, according to the National Association of Software and Service Companies (Nasscom).
In an analysis on ITeS-BPO industry released at a summit here, Nasscom noted that companies were also able to generate higher free cash flows due to reduced investments in physical infrastructure, telecom and equipment.
Wage arbitrage has also led to higher cost savings for companies which have opted for offshore outsourcing, the industry body said in the report.
It pointed out that the need to focus on core competencies to remain competitive has been driving more companies to offshore outsourcing.
“offshore outsourcing helps free up resources and help higher management focus on core business requirements. offshore outsourcing also allows for access to new technologies and talent to help strengthen business offerings,” Nasscom said.

source:http://www.telegraphindia.com

India is the outsourcing benchmark

From:computing news

Once a year, the Indian IT industry hosts a London conference to persuade UK organisations to outsource their technology or business operations to the sub-continent.
The event last week, organised by India's National Association of Software and Service Companies (Nasscom), presented a story that is by now pretty familiar to most IT directors.
Indian outsourcing can save companies as much as 50 per cent of their operational costs, says Nasscom.
Companies such as Standard Chartered, HSBC and Channel 4 rely heavily on Indian service providers. All of British Airways' back-office ticketing is in India.
Analyst Richard Holway predicts that an Indian IT company will soon be among the top five technology vendors in the world.
The business facts are impressive. But it's only when you look into some of the statistics behind the remarkable rise of the country's IT providers that you start to appreciate just what a powerhouse is being created.
It was difficult not to be impressed by the way IT has been identified as an area where India can have an enormous global influence as well as boosting its own economy.
IT exports are currently $10bn (£6bn) (more than $2bn of which is from Europe), and growing by 30 per cent a year. Compare that to the depressed sector worldwide.
By 2008, Karnik predicts that export earnings will be $50bn (£30bn), with total revenues of $87bn (£53bn). IT will account for 25 per cent of all exports and eight per cent of India's GDP, but will be generated from just 0.25 per cent of the population.
Every year, there are 500,000 new IT and engineering graduates in India. The country's five Institutes of Technology take just 1,000 students a year for their elite courses - and receive nearly one million applicants.

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India booms on back of offshore outsourcing

India's software and service export industry is booming, according to data released on Thursday by the National Association of Software and Services Companies.
Revenue from the export of software and from services sold to companies from outside India (what's known as offshore outsourcing), reached US$17.2bn during fiscal 2004 to 2005, according to the group, which is also known as Nasscom. The jump represents growth of 34.5 per cent over the previous year's revenue of US$12.8bn.
Of the US$17.2bn, US$5.2bn was revenue from call centres and business process outsourcing services, it said. The remaining US$12bn was generated by software and other services.
The trade organisation attributed the growth to both high-margin segments of the market, as well as traditional service lines in the business process outsourcing sector. It said revenue from product development and R&D services was US$3bn, up from US$2.3bn the previous year.
Indian companies are gaining ground in services such as packaged software implementation, systems integration, network infrastructure management and IT consulting, Nasscom said.
While the UK and the US remain dominant markets, Indian companies are making gains in newer geographies such as Germany, Japan and Singapore, Nasscom said.
Nasscom Chairman, S Ramadorai, said in a statement: "The Indian software and services industry has been able to maintain its growth momentum and consolidate its partnership with overseas customers, adding to their competitiveness. To sustain our competitive advantage, the industry must engage closely with academia to create the right talent pool, collaborate with the hardware industry in microelectronics and embedded software, maximize employment opportunities and elevate service excellence through R&D and quality-benchmarked delivery."
Ramadorai heads Tata Consultancy services, which earned $2bn in software and service exports during the fiscal year that ended 31 March.
Nasscom, which is based in New Delhi, projected growth of more than 30 per cent in exports during fiscal 2005 to 2006.
The organisation also said the number of workers employed in the industry has exceeded one million.
Nasscom has projected a revenue target of US$50bn by 2009.

source:http://uk.news.yahoo.com

Outsourcing's Benefits--More than money

Offshore Outsourcing has emerged as a cost-cutting measure, but it's increasingly viewed as a strategic planning and business tool. According to a survey of more than 800 executives in the United States and Europe, cost savings are still a key outsourcing benefit, but the additional business controls generated by outsourcing are driving the trend to external providers. Over half had recorded perceptible improvements in the first six months of outsourcing. The most frequently cited improvements included better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives.
The trend toward deriving broader business benefits from outsourcing stems from both increased maturity and experience with the process and, the spread of outsourcing beyond IT departments.
While IT services continue to be the focus of the leading outsourced function, more companies are turning to outside sources for supply-chain operations, learning and training, human resources, accounting and financial services as well as customer relationship management. Supply-chain management was seen as the most rapidly rising area for outsourcing.
The effect of moving outsourcing into multiple business process has brought a wider range of business experience and insight to bear.
The broader view of offshore outsourcing benefits should be matched by broader, more flexible and more constantly monitored arrangements with outsourcers.

Indian outsourcing revenues skyrocket

From: theregisters

Exports of software and IT services from India will rise 30 to 32 per cent in the year to March 2006, according to predictions from India's leading association of technology companies. The National Association of Software and Services Companies (Nasscom) said that exports will hit $22.5bn in 2006, up from $17.2bn in the FY ending March 2005 and $16.7bn in 2003-04. Domestic market revenues grow by 24 per cent in FY 04-05 to reach $4.8bn.
One million people work in India's growing IT market, according to Nasscom, which is targeting export growth of $50bn in FY 09. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world. To sustain the competitive advantage, the industry must engage closely with academia to create the right talent pool, collaborate with the hardware industry in microelectronics and embedded software, maximize employment opportunities and elevate service excellence through R&D and quality-benchmarked delivery, according to Nasscom.

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Lifecycle of offshore outsourcing

Offshore outsourcing, especially in software application development and maintenance and manufacturing is nothing new. Companies have been outsourcing offsite or offshore for at least two decades. What is new is the rapid growth in business process offshore outsourcing in areas such as customer care, transaction processing, finance and accounting, human resources, desktop support, and software development.
Companies in the U.S. economy have resorted to a strategy of widespread cost-cutting as a way to make their earnings look more attractive. However, like all over hyped management innovations, offshore outsourcing is bound to reach a short-term peak, especially in information technology.
Typically, every management-driven innovation goes through three phases: hype, despair, consolidation, and assimilation
The Hype Period. Offshore outsourcing is currently in a period of hype, many companies initiate projects to gain experience with the current innovation. They also are often spurred into action simply because a competitor in the industry is doing it. A similar trend was noticed in 190’s.
The period of despair. Usually the hype ends abruptly, and the market enters a period of disillusionment. In this phase, the offshore projects that were initiated in haste will fail to deliver on their promises. We are beginning to see some evidence of a pullback with recent decisions by Dell and Lehman Brothers to pull their offshore help desks back in-house. The companies that aren't serious about offshore outsourcing at this point will begin to retreat and either reevaluate their strategies or cancel their offshore plans altogether.
Consolidation and assimilation period. Following the period of despair is a period of consolidation, during which the weaker vendors and weaker companies exit the market. We saw similar behavior in the e-commerce market: The market went through a period of consolidation and, in the last year or so, finally appears to be on the Slope of Profit.
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effect of outsourcing technology jobs

For years, technology jobs such as computer programming and technical support have been outsourced to overseas companies. More recently, less technical functions such as call centers for healthcare and insurance claims have been moved to overseas countries. As recently as last year, college students in India business schools, outsourced through U.S. accounting firms, were completing tax returns for U.S. Citizens. This paper will review what has happened with outsourcing and analyze the effects of outsourcing these technology jobs overseas.
Until recently, technology outsourcing typically meant hiring an outside firm to handle very specific or very technical tasks that were not considered a “core competency” by the business looking to outsource. For example, an insurance company might outsource technology functions in order to focus on their core business: selling insurance. The power of the Internet and the ability to have workers “on-line” halfway across the world has changed the look of outsourcing.
Today, in an effort to reduce costs, U.S. companies import qualified foreign information technology (IT) workers by obtaining temporary visas for the new employees. Once they learn the host company's specific needs, the foreign workers often return home to establish an IT department for the firm. Once the overseas IT department is operational, the workers who trained them are often replaced.
India is one of several countries with relatively low-wage, highly educated, English-speaking populations. Smaller countries such as Ireland and the Philippines are also benefiting from U.S. cost-cutting efforts. Workers in such countries provide a broad range of business services, such as answering customer-service calls, accounting, reviewing insurance claims and processing bills. The export of American jobs has touched so many sectors of the economy that it has generated a new term to describe the trend “offshoring,” which is short for offshore outsourcing
“A lot of these off shored phiositions replace very high-wage jobs,” says Lester Thurow, dean of the Sloan School of Business at Massachusetts Institute of Technology (MIT). “Here in Boston, for example, Massachusetts General Hospital is even outsourcing radiologists. Instead of having a $450,000 radiologist read an X-ray or an MRI here, they send it to India and have it read by a $50,000 radiologist.” Meanwhile, General Electric, Microsoft and other big firms are expanding their operations in India to include everything from basic customer service to high-end research and development.
Business advocates say offshore outsourcing is nothing more than the latest cost-saving technique and that it will benefit Americans in the long run by allowing companies to be more efficient and to invest the savings in more valuable, cutting-edge U.S. jobs of the future. Labor advocates counter that offshoring threatens U.S. living standards by forcing Americans whose jobs have gone overseas to take lower-wage positions. In addition, the debate over whether offshoring helps or hurts the economy is emerging as a key issue in the coming presidential campaign.
“The Web makes it much easier for a skilled job to move to India, where you have plenty of people trained not just at MIT but at various high-tech Indian academic institutions,” says Susan Aaronson, director of globalization studies at the University of North Carolina's Kenan Institute of Private Enterprise, in Washington, D.C. “The only thing that's new about this is that middle-class jobs are now being affected” .
Estimates of the number of American jobs lost to the trend vary widely, largely because U.S. companies are not required to report their offshoring practices. One report blames offshoring for 300,000 of the 2.4 million total jobs lost since 2001. One expert recently went on record to say outsourcing is the big reason why — even though we've got an economic recovery in terms of rate of growth — we do not have an economic recovery in terms of jobs”.
Proponents of offshoring say it simply reflects the way the U.S. economy is evolving and that bumps in the road must be expected. “This trend of moving jobs to other locations, both onshore and offshore, started when we moved from an agrarian-based society to where we are today, and it's been a continuous evolution,” says Robert Daigle, co-founder of Evalueserve, an offshoring company in Chappaqua, N.Y. Evalueserve's far-flung staff includes 270 people in India who conduct market research and write patent applications for corporate clients worldwide. “Companies are outsourcing and offshoring to remain competitive”.
Business representatives say that attempts to block the hiring of foreign workers would hurt the economy, and eventually American workers. In addition to cutting labor costs, they say, globalizing work forces lets companies offer round-the-clock customer service, with workers in the Philippines and other overseas call centers answering customers when American employees are sleeping. Nevertheless, offshoring is a $35-billion-a-year business and reportedly is growing 30-40 percent annually, gobbling up 1 percent of the world's service sector, according to the Financial Times .