Saturday, June 30, 2007

Outsourcing held 43.5 percent share of 2006 chip packaging market


In research results that will likely be of little surprise to semiconductor industry watchers, analysts from market research firm Gartner Inc. have reported that outsourcing is on the rise as specialization becomes more prevalent within the chip industry's operations.

The worldwide semiconductor contract assembly and test services (SATS) market experienced double-digit growth in 2006 as revenue totaled $19.2 billion, a 26.5 percent increase from 2005, according to Gartner. Outsourcing's share rose to 43.5 percent of the total semiconductor packaging market.

"SATS market growth was greater than overall semiconductor growth again in 2006, reflecting the ongoing increased used of outsourcing services resulting from the dynamic expansion in chip scale packages (CSP), flip-chip packages, system-in-package (SiP) and 3-D assembly," Jim Walker, research VP for Gartner's semiconductor manufacturing and design research group, said in a statement.

On a company-by-company basis, Advanced Semiconductor Engineering (ASE) Group remained the number one provider of assembly and test services and became the first SATS provider to exceed $3 billion in a calendar year, Gartner said. ASE held 15.8 percent of the market's share with $3.02 in revenues for 2006.

Second-ranked Amkor Technology grew the fastest among the top three companies, growing more than 30 percent and grabbing $2.72 billion sales and 14.2 percent market share in 2006, while third-ranked Siliconware Precision Industries Co. Ltd. (SPIL) saw $1.7 billion in 2006 revenues, controlling 8.9 percent of the market.

Fourth-ranked STATS ChipPAC Ltd. had $1.6 billion in sales and 8.4 percent market share. Rounding out the top-five SATS providers was United Test and Assembly Center Ltd. (UTAC), which made $638 in revenues and controlled 3.3 percent of the market.

Financial Services Outsourcing: Not If, But When


Doing more with less is the mantra for all financial services executives today. Continually improving operational excellence may seem like an impossible goal in a world where the volume of transactions increases exponentially, customer expectations rise daily, regulatory requirements abound, and the margin for error is zero.

Outsourcing has increasingly become a mandatory and highly successful strategy within market-leading banks around the globe. A recent survey of industry executives conducted by Deloitte Research revealed that the majority believe more than 20 percent of the industry's global cost base will have shifted offshore by 2010. The Outsourcing Journal predicts that between 20 to 30 percent of a bank's staff will either be an offshore captive or employed by a third party outsourcer.

Banks have already realized substantial savings from offshoring, from $8 to 12 billion in the last four years, up to 37 percent savings per process outsourced. The ability to reduce costs, increase market agility and improve business focus, response time and speed time to market will be significantly impaired by keeping functions in-house that can be efficiently provided by a third party.

BPO companies now offer a way to bridge the gap between the reality of today and the vision of tomorrow for financial services: a way to achieve the cost and quality advantages of strategic global outsourcing without the risks of losing control of the operation and without the investment costs of setting up their own offshore centers.

Achieving cost savings from wage differentials and tax incentives of 45-55 percent is just the beginning of a successful outsourcing relationship. Productivity and consolidation gains from a less expensive but very skilled workforce increase the value derived from the outsourced services. Finally, re-engineering processes can further increase the savings to a total of 60-70 percent less than the initial costs.

Perhaps the most significant benefit from global outsourcing is an intangible: once the headaches of routine, high volume transactions are moved out of the bank's offices, management and staff can devote their energies and resources to the tasks of realizing business goals and building competitive advantage.

However, outsourcing and offshoring can be a daunting prospect to many managers, especially those in mid-size banks which lack the resources to follow in the larger banks' footsteps and set up their own captive operations offshore. Potential drawbacks include increased concerns of risk around security and privacy; losing control over their businesses during the outsourcing process given that this could have a serious impact on their reputation and competitive position; and accountability for that outsourced function, even if a contractor fails to comply.

Banks should create an enterprise strategy for outsourcing rather than the more traditional functional approach run by functional or business unit leads. The resulting master plan will help the bank evaluate which processes could be outsourced and which ones could or should go offshore in logical groups sequenced to maximize value as well as prepare for the challenges of managing a bank in 2010 and beyond.

Processes that are easiest to outsource are those that are labor intensive, well defined, have few possible outcomes, are standardized with clear rules, and stand alone with minimal linkages to other processes. The mapping process is an integral part of successful outsourcing. Analyzing each step of the process and determining the most efficient way to execute it on the front end will ensure that the outsource map will be most effective. The BPO partner should clearly define the steps, which involves identifying the selected services migration phases and ranking them in order.

To ensure that outsourcing remains a source of competitive advantage, not a risk to business, banks must be proactive in creating a risk-aware culture and implementing a risk-management architecture that integrates risks of all types across the enterprise. A successful risk management program must have a long-term planning horizon, yet be structured carefully to yield concrete value in the near term.

Friday, June 29, 2007

The next ‘next big thing’

Source: Hindustantimes

About 400 Indians are at work off the expressway that connects Noida with Greater Noida near Delhi, to make next generation Boeing aircraft get faster on to runways.

That might seem like an exaggeration, when you learn that all they are doing is to reduce the cost and assure the timely delivery of the nuts and bolts that would go into the new Boeing jets. There hangs the tale of procurement outsourcing. This is one of the newer stories in the larger theme of business process outsourcing (BPO). The simple fact is that virtually anything that can be done by using a combination of skilled workers, telecommunication links and involves high costs can now be offshored to India. Companies like Corbus LLC, based in Dayton, Ohio and founded by former Delhi College of Engineering student Raj Soin, are trying to unlock value for Fortune 500 giants by trying to manage complex tasks involving dealing with a global network of suppliers.

Corbus has a $100 million 10-year contract from General Electric Co (GE) to manage supplies for customers like Boeing for which GE makes aircraft engines. Increasingly, giants source as much supplies as possible from the best and the cheapest wherever they are on the earth—and procurement is a complex puzzle in the game. An offshore-based procurement outsourcing company promises to cut costs by as much as 20 per cent a year.

Business-to-business (B2B) was a favourite theme in the late 1990s but often, the headaches to be resolved lie in coordination and delivery, with an eye for detail on specifications, schedule and efficiency. In the twenty-first century version, procurement outsourcing involves a nitty-gritty management service done from a corner of the globe, very much resembling the supply of components it coordinates.

Players in the procurement service game include giants like Accenture and IBM, and have been joined by Gurgaon-based Genpact, which was spun off from GE’s own international services arm that ran call centres, and also Scandent Solutions in Bangalore. Unlike call centres, procurement outsourcing involves management and often, engineering skills.

Engineering companies like GE spends 60 per cent of direct spending on parts like nuts, bolts and other small items that cost under $1,500 per unit, supplied by various manufacturers dotted across the globe.

For an outsourcing partner to make sense, it must achieve what is called the “QCDC” formula—covering quality, cost, delivery and compliance. Indirect spending can be as much as $100 million per year in a company with annual revenues of $1 billion, says Mittal. Earlier this year, the National Association of Software and Service Companies (Nasscom) said that offshore services were expected to boom, driven by offshoring of “large white spaces in major industries.” Procurement is one of them. Telecommunication and automobile sectors are among those that offer strong promise in procurement outsourcing.

Nasscom says the current size of the global BPO industry is about $14 billion (India accounts for nearly half of it) but the addressable offshore market that could slowly be ripped off from its origins in advanced markets to low-cost countries like India estimated to be as high as $120-150 billion a year.

If the business grows, demand would grow for engineers, certified purchase managers and other agents whose skills are qualitatively different from the smooth-talking, fake-accented post-teen women who started the BPO revolution about a decade ago.

MPs condemn BBC outsourcing costs

Source: Zdnet

The BBC's £1.5bn IT outsourcing deal with Siemens Business Services has come under fire from MPs for over-estimating cost savings and for key projects running late and over budget.

The BBC signed the 10-year deal with Siemens Business Services (SBS) in 2004 to replace the services previously supplied by BBC Technology, which include desktop computers, specialist technology projects and support for programme production and broadcast functions. SBS acquired BBC Technology for an undisclosed sum as part of the deal.

When BBC managers sought approval for the SBS deal they told BBC governors that cost savings were guaranteed at £35.2m a year. In a report by parliamentary spending watchdog the Public Accounts Committee (PAC), it has now emerged the savings for the first year fell 38 percent short of that figure at just £22m.

The deal does not allow the BBC a share of SBS's profits on the contract if they exceed a specified level — a clause that is now standard in many outsourcing contracts today. SBS's forecast profit margins for the contract are 12.25 percent for commodity work and 23 percent for special projects.

The BBC has also been criticised for not exercising its rights of open-book access to check how profitable the contract is for SBS. The BBC argues that benchmarking provisions keep the contract competitive, but these do not apply to one-third of the services provided by SBS. The BBC is now due to examine the SBS profits on the deal this year.

Performance management by the BBC also comes under fire from MPs in the PAC report. In the first year of the contract, SBS reported 95 percent of key service targets were met, but the BBC has now acknowledged that the validation of performance data provided by SBS was not sufficiently robust.

Despite the £1.5bn framework agreement, substantial amounts of money are still being spent on other IT suppliers for services. In the financial year 2005/06, £190m was spent by the BBC through the SBS contract, but a further £260m was spent on technology services from other suppliers. Around £50m of this was spent by BBC units procuring their own technology services that could have been bought through the SBS contract.

The BBC claims the contract will still hit the projected cost savings target over 10 years and is now forecasting average savings of £40m a year for the rest of the contract.

The PAC report, however, expresses doubt over whether this will be achieved and recommends a BBC internal audit to confirm the accuracy of the latest savings estimate and regular updates to the BBC Trust on progress against that target.

Thursday, June 28, 2007

After BPO & KPO, now comes PPO


Person-to-person outsourcing gains currency with small offices and individuals. You have heard about BPO & KPO, but it’s time now to add a new word to your vocabulary: PPO.

Coined by Alok Aggarwal, chairman of Evalueserve Inc, PPO means person-to-person outsourcing. The US-based Aggarwal, who is the co-founder of the global research and analytics services firm, says offshoring is now beginning to go mainstream and is touching the upper class and working class alike. “This is very reminiscent of 1991-92 when manufacturing in China and other low-wage countries began to impact the lives of the rich and the not-so-rich in developed countries,” he says.

Here’s how: small offices, home businesses and even individuals are utilizing PPO services everyday through various means such as online tutoring and home & landscape design services. Even invitation cards for weddings and other parties, personal assistant secretarial services like scheduling appointments and maintaining calendars are now being outsourced.

Many of these professionals work from their homes with a broadband connection and given the low overhead, vendors and freelancers can charge fairly low rates.

A few companies, such as Future Net (a subsidiary of the Alaphuza, India-based Future Groups) are also experimenting with providing ancillary and concierge services from low-wage countries. In their model, the end-client registers on their website and agrees on a price. Future Net then provides property deals for customers or for their family members and friends. Other services would include payments made to utility service agencies, educational or other institutions; and purchase of simple items such as movie tickets, personal computers, and electronics equipment.

Apart from online tutoring, for instance, companies such as Transtutors, Career Launcher, Educomp Datamatics, and Tutor Vista also offer one-on-one “live” homework assistance over the web and provide essay-writing guidance and help with educational content. Most Indian tutors charge between $8 and $40 per hour — a pittance by US standards.

Individual contracts are often of low value – between $100 and $5,000 – but since the number of end consumers and small businesses is enormous, the total addressable market in the US alone easily exceeds $20 billion. Evalueserve’s research and analysis shows that between April 2006 and March 2007, the revenue from this sector was more than $250 million and it is likely to grow to over $2 billion by 2015 — a cumulative annual growth rate of around 26 per cent. The growth rate, is likely to be much more in the future as many of these PPO offshoring trends are at the beginning of their lifecycles.

According to Evalueserve, PPO services follow two business models: the direct interaction model where the individual client signs a contract directly with a vendor in a low-wage country, whose employees (tutors, admin etc) work on a full-time or a part-time basis, or as sub-contractors. Since these contracts are of low monetary value, the individual client cannot usually travel to the offshore location or perform a costly due-diligence process, and is therefore exposed to some risk.

The second is the online marketplace model where the vendors providing PPO services enrol in an online marketplace by paying a monthly subscription fee plus a fixed percentage of the revenue if they win the project through this marketplace. So, when an individual client posts requirements for a new project to be conducted on the online marketplace, the marketplace communicates these opportunities to the selected vendors and freelancers and requests proposals to be delivered to the client. The client then awards the work to the appropriate vendor depending on price (which may be on a per hour or a fixed cost basis), delivery time and a quality score provided by other clients who have been served by this vendor.

Some of the prominent online marketplaces are (the largest marketplace with more than 625,000 registered vendors and freelance professionals), California-based, Florida-based and, owned by Sweden-based Innovateit.

PPO is indeed a silent revolution and one that goes beyond just a few big companies. It’s difficult therefore to doubt Aggarwal when he says PPO signifies how outsourcing is slowly, but steadily, becoming a people’s project by reaching small businesses and homes directly.

US norms won't hit legal outsourcing

Source: Rediff

The ethical guidelines proposed by three US bar associations for their attorneys will not have any adverse impact on the legal outsourcing services industry in India.

In fact, the opinions delivered by the associations legitimise the outsourcing of legal services to other countries and will lead to the market in India getting larger, according to Ram Vasudevan, president of SQ Global Solutions.

New York-based SQ Global Solutions is a joint venture between Strategic Legal Solutions, a 12-year-old US domestic legal staffing company and Quislex, a provider of offshore legal services in India. The company employs around 300 professionals, of which about 150 work out of India.

It may be recalled that three US bar associations -- New York, California and Los Angeles -- had in 2006 and early 2007 delivered opinions stating that offshoring of legal support work by lawyers in the US to other countries was ethical provided certain conditions are met.

"The guidelines state that US lawyers who are contemplating outsourcing legal services to other countries should inform their client that the work is being outsourced, besides protecting the client's confidences. The US law firm should also be closely involved in the supervision of the outsourced work. In addition, the entity performing the work must perform conflict checks to avoid any unpleasant surprises," said Vasudevan.

"Companies in India directly deal with the legal departments of US corporations and law firms for outsourcing work to avoid any issues of unauthorised practice and usually have several quality control metrics in place," he said. For instance, SQ follows the Six Sigma process.

At present, there are around 15 companies in India that provide legal outsourcing services, with the prominent among them being SQ Global Solutions, Pangea and Mindcrest.

Though not mandatory, many US law firms and attorneys have been adopting the ethical guidelines and client demand too has been picking up.

This is expected to accelerate the growth of the legal outsourcing services industry in India in the years to come. The Indian legal outsourcing industry is currently pegged at $130 million, and is expected to touch the $4-billion mark by 2015, according to Forrester Research, he added.

Currently, there are around 1,000 such professionals, both lawyers and non-lawyers, delivering high-end legal outsourcing services in India.

Wednesday, June 27, 2007

Offshore Product Design Services to Grow by 28 Percent Annually


The worldwide market for Offshore Product Design Services (PDS) is expected to grow at a compounded annual growth rate (CAGR) of 28.0% over the next five years. According to a new ARC Advisory Group study, “Offshore Product Design Services Worldwide Outlook”, the market was $1.2 billion in 2006 and is forecasted to be over $4.1 billion in 2011.

According to ARC Advisory Group Service Director Steve Banker, Ph.D., “When you have forecasted growth of over 25% for a market that is already larger than a billion dollars, you are looking at an extraordinary market. One explanation for this is the power of the Global Service Delivery business model.”

Global Service Delivery Model

Global Service Delivery (GSD) is the practice of outsourcing work to low cost regions. Labor for a particular client task is divided between service people located in the client’s office or a nearby office (nearshore), and a low cost offshore facility. A typical ratio in PDS is 80% offshore to 20% onshore.

The GSD model has proven itself across areas such as custom software development, IT infrastructure support, call center services (and other similar business process outsourcing [BPO] services), application implementations, and now PDS. The value proposition is simple; knowledge workers from low cost regions are paid about 25% of the level of their counterparts in the West. The Internet infrastructure and mature business models among leading offshore IT companies support the GSD model.

The Flat World Comes to Engineering Services

The top five suppliers of offshore PDS are large Indian IT companies that provide a broad range of BPO and IT services. Each has revenues of over $100 million in the offshore PDS market, and cumulatively these four suppliers account for more than 60% of the market.

Each of the market leaders has strong market recognition as a company that has perfected the offshore model. Each has developed strong processes and systems to manage offshore projects across their diverse service areas and each has extremely robust processes for hiring new personnel and training them.

All of these companies are challenged by their extremely high growth rates, which for some of them means hiring and training tens of thousands of new employees per year, high attrition (though it is typically much lower in PDS than in other service areas), and growing wage pressures which lead to a gradually decreasing labor arbitrage value proposition.

There is considerable work surrounding 3D to 2D conversions, using Product Data Management systems to create documentation, and design of simpler components. To the extent that service providers can engage in more complex forms of engineering, they improve their ability to help clients speed their products to market.

IT Department Outsourcing


Outsourcing a part or complete IT department frees up a company's valued IT personnel so they can support their mission critical business processes. In addition many companies today are finding that they cannot take the risk or endure the financial burden of running their whole IT department in-house.

Outsourcing a part or complete IT department can make financial and business sense to companies of all sizes. In many organisations, users demand the highest level of service - both from a technical and a customer care perspective. This can be challenging for smaller in-house teams to achieve as they are often so busy tackling the day-to-day issues, making it difficult to implement any IT improvements.

Outsourcing IT department – What are the drivers?

Growing pains: - Is your company growing so rapidly or making acquisitions? What impact is this growth on your IT staff and resources? Outsourcing either a part or the whole of your IT department is now an accepted mainstream solution.

Downsizing: Is your organisation downsizing? What are the impacts of this on your IT service delivery? IT department outsourcing is an option worth evaluating to save costs and improve efficiencies.

Infrastructure refresh: Are you coming to the end of your IT systems lifecycle? (Servers, laptops, PCs). This is usually a 3 year cycle. This event is the right time to consider the options of IT department outsourcing.

Outsourcing a part or complete IT department may provide the following benefits:

# Quick deployment
# Flexibility in the choice of technology and modules
# Improvement of cash flow management
# Reduce the burden on internal IT staff
# Efficient use of internal resources
# Strong skills sets at lower costs - access to a mix of technicians with unique skills
# Better risk management, especially those risks associated with unscheduled downtime due to major disruptions.
# Avoids expensive recruitment

Risks & Costs of IT Department Outsourcing

IT department outsourcing can expose the company with associated risks that potentially have a higher costs than benefits for the company. Some of those associated risks could be:

# Loss of control over service quality
# Possibility of service disruption due to instability of vendors

Outsourcing IT services to a third party potentially puts a company’s reputation at risk - if suppliers or partners let it down. Organisations in both public and private sectors need a process of regular assurance from their external partners.

With a rigorous system in place, businesses can manage their external relationships and reputation more effectively, while allowing legal and working arrangements to be adjusted as the partnership evolves.

Tuesday, June 26, 2007

Beware of outsourcing myths, warns survey

Source: Outsourcing-pharma

A number of outsourcing misconceptions are luring companies into viewing offshoring as an easy process, new research reveals.

The outsourcing market is booming and more and more companies are relying on external firms to save on costs and improve efficiency.

Indeed, outsourced pharmaceutical R&D spending is set to increase at twice the expected rate of general R&D expenditure for the next five years, according to recent data, and in particular outsourcing clinical trials is seen by many pharma companies as a means to make the process cheaper, quicker and more efficient.

However, companies that think transferring an operation to an overseas provider is a trouble-free, straightforward task can get a rude awakening, warns new research , and companies often find that their high hopes about cost savings and greater efficiency don't pan out.

The study based on an industry survey found seven common myths that outsourcing vendors and clients cling to about offshore outsourcing - false assumptions about how the process should work - and gave some advice on how to overcome them.

The first common myth is the idea that the three main objectives of outsourcing a development stage - cost reductions, improvement in service, and flexibility - can be achieved at the same time.

"The kind of skills you need to achieve cost reductions, production flexibility or enhancement, are usually different. Even when you offshore, where in principle you can get low cost and quality, it is better to begin with just one objective." , Phanish Puranam, one of the researchers, told the WSJ.

The second most common myth was to see outsourcing services as simple as buying commodities, such as stationery.

In reality, the process does involve significant transaction costs, starting with finding a vendor and negotiating a contract, and followed by the costs of moving operations from one location to another while maintaining the connection with the rest of the company.

A third false assumption, according to the survey, was relating to negotiation of the contract. The outsourcing process should not be seen as a one-off deal, but instead as a relationship that keeps evolving and needs constant updating. The researchers found that writing a highly complex contract, trying to include clauses covering all possible situations, usually proves to be a waste of time.

On the other hand, there is another mistaken belief that a company does not need a contract because the deal with the vendor is seen as a partnership rather than a simple procurement relationship.

Furthermore, the number five on the list of common misconceptions that clients and services providers accept as true is to view the vendor as an insurance company who should bear greater liability in case of problem.

"The sharing of risk between client and vendor is one of the most contentious issues in outsourcing, leading to acrimonious negotiations and poor relationships," said the research.

Moreover, the survey found that sometimes companies think once they have outsourced an operation, they can just forget about it and rely completely on the service provider. The researchers explained that it was crucial for the client firm to retain the knowledge of the process outsourced to avoid difficulties down the road.

Finally, the seventh most common myth in outsourcing is to think that the first attempt will automatically be a success and relinquish at the first failure.

"Very few companies report great success with their very first outsourcing project but that doesn't mean they should give up," the researchers said.

Offshore Manufacturing: A Risky Proposition?


At a recent government event in Washington, D.C., the president of Panasonic Computer Solutions made a big statement: "All our competitors moved engineering and manufacturing to third-party partners." More specifically, he mentioned locations like Taiwan and other countries in Asia.

Why is that a big statement? Beyond the fact that he made a sweeping generalization that some of those competitors might take exception to, the significance of that statement by Panasonic's Rance Poehler lies in the fact that, in a considerable number of cases at least, it's exactly true. And for government customers and the solution providers that sell to them, that's something to seriously consider when making purchasing and partnering decisions.

Two reasons exist for why this trend is happening. The first is simple cost-cutting. Manufacturers can save a lot of money by relying on original design manufacturers, or ODMs, that can make their products for much less, thanks to cheap skilled labor. This is nothing new, of course. The second reason for the trend that's more specific to the federal market is the need to comply with the Trade Agreement Act (TAA). Vendors based in countries that aren't authorized to sell to the U.S. government have to find an alternative, which often leads them to the very same ODMs that others rely on to cut costs.

But with manufacturers removed from the process, issues can arise. Beyond quality concerns, duplicate products are made and sold to the gray market or, worse yet, originals are reverse-engineered for the purpose of counterfeiting them across Asia. The experience of American Data & Computer Products is a perfect example.

Original equipment manufacturers (OEMs) aren't intentionally turning around counterfeit goods when they filter manufacturing to Asia. They don't want to see fakes any more than the government does. But the strategy opens the door for that to happen, which introduces the very risk many of these OEMs were trying to avoid in the first place: violation of the TAA.

Plenty of people lump this issue together with the politics of offshoring, arguing that vendors cause the problems when they decide to manufacture outside U.S. borders. Outsourcing serves a very real purpose, and, frankly, it's inevitable in a global economy.

Obviously, in a market that depends more on the channel than most any other, partnering is an essential way to keep everyone in business and meet customer demands. But the decision to partner for the actual engineering and manufacturing of products that could land in the hands of federal customers carries with it a degree of irresponsibility. Offshore to save costs and enable TAA compliance, yes, but not at the risk of sacrificing control over processes, intellectual property and, subsequently, security. Simply put, those that deal in government contracting have to be more responsible.

So what exactly are the alternatives? Vendors have to hold offshore locations to the same standards as the government headquarters, which is difficult to do if they're not in complete control of how things are run.

Or maybe they should handle the manufacturing of products for federal customers differently than they handle it for the commercial sector. That's perhaps an expensive option, but it's one that would alleviate some of the risk. Another alternative for vendors is to follow Panasonic's lead, avoiding these issues altogether by keeping product design, engineering and manufacturing in-house.

Monday, June 25, 2007

Productivity and not Outsourcing Responsible for Job loss in the US

Offshore Outsourcing is so often stated responsible for the gloomy job market in the United States. Is outsourcing the sole reason for the job losses? Here is an objective look at the matter.

Every time a new, more advanced technology is introduced into any industry; there is always some form of retraining, reduction in scope, or redundancy. Why then has offshore outsourcing created so much uproar? Probably because of the scale and speed of change!

Comparative advantage! Yes, that what fuels offshore outsourcing. A benefit in cost, skill or speed provided by a country in comparison to other countries draws business from the United States and other western nations. In the 1980’s this transition began with the manufacturing industry, who in order to save labor costs continued to do their design, development and marketing work on their own while outsourcing their manufacturing operations. The same trend is being mirrored by the service industry. To stay in the competition and to stay afloat, downsizing/ laying off, cost cutting, investment in new technologies, process reengineering and outsourcing become necessary. In fact, these are the factors that drive outsourcing. Why then is outsourcing considered the prime culprit for the job losses?

More than outsourcing, it is productivity that is responsible for the current situation. The rising productivity in the US means a growing number of jobs which are to be accomplished by a fewer number of men. Labor costs are falling but capital costs are falling faster, and that makes it more advantageous to invest rather than to hire. The cost savings are invested in innovations or building a competitive edge. And, the fact that is not so often cited is that the United States imports far more jobs than it exports and has the best re-employment rate in the world.

Also, what is lacking today to cause this furor over outsourcing is probably the fact that in the current productivity boom there are no new and innovative industries that create jobs to replace those that are lost, like the car manufacturing industry in the 1920s, commercial aviation in the 1950s and 1960s and information technology in the 1990s. Currently, we are all waiting for the next big thing to happen, be it healthcare, pharma, biotech, energy — all of which can make a big impact.

Hence, the negative connotations of outsourcing will not really help in increasing the number of jobs in the US but they will definitely limit and restrict productivity. Moreover, there’s very little to show that outsourcing does in fact cause job loss in the US. On the contrary, a Boston University Professor examined the effect of outsourcing on large financial firms, and found that less than 20 per cent of workers affected by outsourcing lose their jobs; the rest are repositioned within the firms.

In the present scenario, sectors such as construction and health care are positioned to exploit the benefits of outsourcing to the fullest. The result will be a decrease in their cost of production, and improvement in quality and output.

Outsourcing targets core jobs


Offshore firms aiming to offer work that isn't just cheaper, but better

Businessmen's collective memory doesn't go that far back. When chief executives decide to move jobs to India, they draw intellectual sustenance from something more recent. When you apply the model of core competence to business processes, outsourcing is all about companies parceling out activities that they aren't best equipped to undertake.

If you sell computers, you shouldn't run your own help desk. If you are an airline, you mustn't waste your time juggling cash collected in different currencies. No company needs to tie up resources in managing accounts receivable, or preparing payroll, in-house.

You can buy all these services from third parties, which will either automate them or manage them with cheaper staff in India, Latin America or eastern Europe.

This offloading of noncore work to specialists has been the main driver for the business-process outsourcing industry, projected to grow 10 percent a year to $618 billion by 2010.

As these services add depth to their own organizations by hiring engineers, doctors and statisticians, they are now able to do things that a client company has always considered to be integral to its main business.

Nipuna Services Ltd., a Hyderabad, India, business-process outsourcing company, manages the shop-floor inventory for an automaker in Detroit, creates graphics for an animation studio in the United Kingdom and handles artwork changes on labels and cartons of GlaxoSmithKline Plc medicines to satisfy regulators in various countries.

Most economists believe that outsourcing is only about getting things done ``cheaper.'' They think it is transient and self-adjusting: A rise in the inflation-adjusted exchange rate of the exporting nation will make its cost advantage disappear; the same relative-price mechanism will also increase developed-country exports to places such as India and China. New jobs will be created to replace the ones that are being lost.

What this argument misses is that the third-party services that are winning ownership of business processes will move them from one developing country to another. Profits will be repatriated to developed-nation companies by the truckload. But the jobs won't go back. Not for a long time.

If outsourcing becomes as widespread in services as it already is in manufacturing, Western economies may still grow strongly, thanks to surging corporate profits. However, the falling share of wages in economies across the developed world will keep offshoring a hot issue for decades to come.

Outsourcing is out - it's a political cold potato


The issue of poor service does seem a real deal-breaker

The preliminaries to the US presidential election took a bizarre turn last week when a leaked document from the Barack Obama camp referred to Hillary Clinton as the "Democratic Senator for the Punjab". This clumsy jibe at a rival Democrat candidate, immediately retracted, was a reference to Mrs Clinton's supposed close connections to US corporations which have outsourced jobs. This subject, in particular offshore call centres, is in danger of becoming a hot potato in the election. But the politicians need not worry, for there is every sign that what was once believed to be an unstoppable trend is losing momentum.

The conceptual thinking behind BPO (business process outsourcing) is simple: companies stick to what they do best and spend their dollars on human capital in the most efficient way. Back-office outsourcing began in the US in the 1960s (payroll processing etc) and gathered pace along with the rapid advances in IT. The last decade's revolution in telesales and customer support propelled BPO into a new dimension.

A casual glance at any selection of Dow Jones annual reports will tell you that at least some outsourcing is virtually universal. In India, it is thought that call centres alone now employ in excess of a million people (compared to just 300,000 at the start of this decade) and pro- viders have sprung up in all elements of the BPO spectrum - from the lowest level of data processing, to functions that require customer interaction, to the transfer of intellectual capital.

Prices range from an estimated $10-$12 (£5-£6) per hour outsourced at the bottom, to around $14 for call services and much more at the top end. Workers in call centres see a much-reduced portion of this - albeit general opinion is that working conditions far exceed the local manufacturing equivalent.

At the sophisticated end, there have been many reports of New York investment banks outsourcing research functions to the highly educated and relatively poorly paid labour force of southern Asia. Similarly, in a recent report, McKinsey estimated that large US pharmaceutical groups were reducing the cost of new drug development (estimated at between $600m and $900m) by as much as $200m through outsourcing. Even at the bottom end, data-processing outsourcing at US retail banks is thought to save at least $18m in costs per 1,000 jobs transferred.

It is this angle, US job losses, that makes BPO such a political issue. The Communication Workers of America union has been particularly active and sought to influence the policies of individual states. At the start of this year, politicians in Minnesota pushed for legislation to give customers an automatic right to request an alternative, American, call centre, if they were dealing with personal or financial information.

The CWA's campaign has cleverly focused as much on the customer as the displaced worker. Three issues are cited: a generally poor level of customer service, data fraud and, this being modern America, terrorist risks.

Saturday, June 23, 2007

Is there anything they can't outsource?

Source: Asiamedia

Is there anything out there that can't be outsourced to a cheaper part of the world? Probably, but reporting on city council meetings for the local news "paper" is not one of them. Online community news site Pasadena Now (, in California, found this out last month when it hired two reporters in India to cover the weekly council meeting.

The only problem is, the response to the decision was so heated that the editor has been too busy fielding media enquiries to train the new staff. There was a mixed reaction to the story, with the predictable backlash but also comments that it's something people better get used to.

The thinking behind the move was that the time difference allowed for the Indian reporters to sit through the evening council meeting and write up a report in time for Pasadena Now's readers first thing in the morning. As these meetings could drag on well into the night, it made sense. And needless to say the Indian writers would be a lot cheaper than having a US journalist sit through the meeting and then stay up another hour or so to write it up.

Many people questioned whether the quality of reporting would suffer if the writer was not physically present, suggesting they would not get reactions or comments from other sources. Perhaps, but it's still valuable to get a record of the proceedings for an early morning news piece, which can then be updated throughout the day by the local reporters who can "add value" to the story.

It's also not such a novel idea, either -- Reuters has been using Indian reporters to do some of the "grunt" reporting for a few years now, while headlines and copy editing for the South China Morning Post gets done by cheaper editors right here in the same building that produces the Bangkok Post.

The press pack, the security risk that we are, was shunted off into a special media room where they had a couple of large screens set up to relay what was happening in the main hall. The strange thing was that it was more convenient to sit and take notes this way -- coffee supply on tap, fellow journalists to chat with without annoying the delegates and easy access to the exit once you had the story.

Increasingly these days there are a lot of major events, particularly technology pow-wows, that are streamed live over the web. So if you were a budding reporter, blogger or Indian looking for overseas work, you could start to tune in and make a name for yourself by churning out reports quicker and better than everyone else. A young guy by the name of Charles Dickens made his name by being able to attend court hearings and churning out a story quickly and accurately, and who knows, if he was around today he might do the same from webcasts to get his start.

HSBC Malta to start outsourcing jobs to India


HSBC Bank Malta might be relocating a number of jobs, which had always been carried by Maltese workers since the time when the bank was state-owned, to cheaper markets such as India – where workers are paid less, is informed.

Investigations by this e-newspaper found that HSBC UK started outsourcing particular jobs to countries where the workers are paid less to maximise the banks profits. This practice might now shift to Malta’s HSBC arm.

The HSBC jobs touted to start being carried out in India are related to accounting and payments, while security at the bank will be outsourced to a Maltese company.

The outsourcing of certain jobs within HSBC Malta will not affect the present workforce at HSBC no staff will be made redundant by virtue of an agreement which the international bank had signed as part of the deal to take over Mid-Med Bank, sources confirmed.

But at the same time, the redeployment exercise in the bank will freeze the intake of new staff for a period of time since the openings will be taken over by the workers who will have their present job outsourced.

The idea behind outsourcing certain jobs to cheaper markets is to maximise profits, particularly when the work is done by workers who are paid less than in our country for every hour of work. At the same time, work outsourced to local companies contributes to an increase in precarious jobs and exploitation of local staff.

HSBC deployed at least one staff member solely for the purpose of identifying the jobs that HSBC Malta can outsource to foreign companies in the coming weeks and months.

Maltese banks have always offered services of high quality and assured a large contribution towards Malta’s economy. But excessive competition and globalisation seem to be taking their toll also in the banking sector.

Friday, June 22, 2007

Global outsourcing arena heats up


Research released last week from sector skills body e-Skills UK echoes the common observation that UK IT graduates need more business skills, because lower-level technology jobs that do not require such expertise are being offshored, mostly to India.

But as the global market matures, the Indian IT industry is starting to face some of the same issues as its UK counterpart.

There are already warnings that the subcontinent will face a talent shortfall in its technology workforce by 2010, although Indian IT trade association Nasscom says there is still time to avert a crisis.

Unlike in the UK, where technology degree numbers halved between 2001 and 2005, recruitment is not a problem in India. The country produces more than three million IT graduates a year, and the current workforce stands at 1.6 million.

But as market requirements change, the industry is starting to question whether degree courses are producing the right skills, says Nasscom spokesman Ameet Nivsarkar.

‘The cause for concern is that the three million graduates are not all ready and competent to enter the workforce,’ said Nivsarkar.

Like e-Skills UK, Nasscom is working on initiatives to bring graduate training in line with private sector requirements. One current scheme, for example, aims to create finishing schools that offer three short courses to bridge the gap for graduates between academic learning and the kind of business skills required in the real world.

"The training shortfall is largely in communication and the ability to present oneself before a customer," said Nivsarkar.

Skills issues are part of wider changes in the offshore market. Until now India has been the undisputed leader, generating about $48bn (£24.2bn) in annual IT services exports last year.

One of the biggest threats to India’s dominance is China. Its vast pool of cheap labour is increasingly attractive to suppliers catering for growing demand, including Indian firms such as Wipro and Infosys.

Ironically, the sub-continent’s economic success is also presenting new problems. Indian supplier TCS announced earlier this month that it is moving 5,000 jobs to Mexico because of wage inflation at home.

Global currency fluctuations can have a major impact on the economics of offshoring deals, according to Mark Kobayashi-Hillary, director of the National Outsourcing Association.

"Margins are being eroded as the Indian rupee becomes stronger against the dollar, so hiring elsewhere has become a more attractive proposition," he said.

But there are also changes in the shape of the global outsourcing market that may play out to India’s benefit.

As offshoring becomes a more established practice, the supply market is fragmenting and specialising. Ukraine and Russia, for example, are making major in-roads into the high-end scientific software niche.

Growing specialisation could help India offset the business it has lost to cheaper rivals.

The country is still the dominant player in the business process outsourcing (BPO) sector, which is expected to grow by another 32 per cent to £4.2bn this year. And while better educated staff may be pushing up Indian prices, customers’ selection criteria are also likely to change, says Kobayashi-Hillary.

For Indian firms, the decision to hire staff from abroad reflects their emergence as truly global companies.

"They are no longer just Indian firms. They are deliverers of IT services and need skills from all over the world," said Ovum analyst Phil Codling.

The difficulty for suppliers, regardless of their country of origin, is that requirements can change so quickly.

Pharma Outsourcing R&D To Free Up Marketing Dollars


Pharma Companies are outsourcing more R&D to free up cash for marketing, according to a new study from Cutting Edge Information.

"Uniting R&D and Marketing for Integrated Early-Stage Market Preparation" is Cutting Edge Information's latest study. The report reveals that pharmaceutical companies are looking to the biotech sector to outsource development of new drugs. In doing so, the company can free up resources to market drugs currently in their pipelines.

"I think there are two things driving this," says Elio Evangelista, research team leader at the North Carolina-based business intelligence firm. "The first is more spending and more overall focus on marketing. With fewer blockbuster products available in companies' portfolios, those brand teams are finding newer and more innovative ways to market their products."

One of those methods is to work more closely with R&D to develop more competitive labels, Evangelista says. The more a company can accomplish in clinical testing during launch, the more competitive it can be on the market. So R&D begins to play a much larger role in product lifecycle management.

"The second factor driving this increased communication is, in part, the external pressure for companies to reinvest their profits in more R&D," Evangelista tells Marketing Daily. "In doing so, R&D teams need to work with marketing teams more closely to begin developing products that the market will accept. It's no use spending hundreds of millions of dollars developing a drug that will never reach the market. Therefore, working more closely with marketing teams to develop viable products will go a long way to reducing the costs of health care."

The report includes strategies and tactics from 15 top pharma companies including Pfizer, Novartis, Merck, and Sanofi-Aventis.

One profiled company is in favor of shrinking business unit departments and creating small internal teams to handle deals with small biotechs to outsource most of the early-stage pre-clinical work. The idea is based on the biotech industry's capability to develop innovative products more quickly than slow-moving, large pharmaceutical companies.

The company invests almost as much in early-stage research as it would for an in-house compound, but it outsources the work to smaller, faster-moving biotechs, which assume some of the risk that the company would otherwise retain.

Thursday, June 21, 2007

Less Cost, More Ease: That’s Online Tutorial Outsourcing for You


This is the actual picture of success of online tutorials from which many American families are reaping the benefits. Outsourcing to India has gained much popularity in the education business.

Nick Adams is just another high school student from Austin who always has had problem scoring good grades in exams. Nick used to get upset every time he saw his repeated failures of doing very poor in all his exams. His parents were quite worried about the repeated failure of their son and his inability to perform well in exams. After a lot of thought and consultations with Nick’s teachers they decided to try out providing nick the help and guidance of a private tutor. Like any other high scholar in America the main subjects that Nick lagged in were Maths, Science and English. However the Adams soon realized the exorbitantly high rates a private tutor charges in the US. The charges range from about $80-100. This is one of the main problems being faced by most American families like the Adams family that they cannot afford the luxury of providing their children private tuitions.

Not any more. The problem of cost has again been solved by a phenomenon that has helped America in reducing its costs for some time now. It’s called outsourcing. In this case it is called online tutorial outsourcing. To start of with online tutorial it involves a teacher and students who chat and interact with each other over a high speed internet connection and the teacher helps the student in grasping the basics of the subject being taught. So then what is online tutorial outsourcing? It means the online tutorials are outsourced to a company which may be locate miles away in India, which employs teachers, trains them according to American curriculum and accents and provides a platform for the teachers and students to associate with each other.

So what’s the use of online tutoring outsourcing? The foremost reason for its evolution is simply cost reduction. Another very important reason for its development has been flexibility. Take for example the case of Judy Duke. Judy had not been doing well in her exams. Her parents want her to get extra tuitions in the evening to cope up with the studies she doesn’t want to leave her passion for her studies. So what to do? She is helped by a teacher from India who teaches her in the night time. Moreover it costs her about ¼ of what she would have spent on private tuitions from her area. Makes sense, doesn't it?

"I had almost lost all hope of finding my son a good tutor until one day I came across a friend of mine who apprised me about online tutoring” says an elated Mr. Smith who’s ninth grade son has been taking online tuitions for about 6 months now. “At first I did not know that it was some person teaching him sitting in India but when I did I was a little worried. But no more worries as my son has improved a lot and it has not created a hole in my pocket. As long the person is giving good results and my son is happy I am least bothered about whether he is sitting at India or china or Bermuda.” exclaims Mr. Smith.

This is the actual picture of success of online tutorials from which many American families are reaping the benefits. Outsourcing to India has gained much popularity in the education business.

The No Child Left Behind act has acted as gasoline in the fire for the outsourcing of educational services to countries like India. The act was formulated to advise parents to provide private tuitions to many students in America who were underperforming in their school. Many companies like Trans tutors (, growing stars, etc. are based at India and are doing well in this business of educational services outsourcing. These companies like Trans tutors have established offices in India and operate online tutorial sites catering to students of America and Britain. They have well trained tutors and offer tremendous cost advantage to the companies which are already into online tutorials and are based at America. Many companies in the business and based at America have outsourced their business to companies like Trans tutors and are reaping the benefits.

It’s like profits minus the costs. Online tutoring outsourcing is working wonders for American students not just for school students but students in college, pre college and exam preparation levels. It is the destiny of tomorrows’ education industry.

Aptara Launches Advanced Legal Process Outsourcing Solution


Comprehensive Offerings Help US Corporations and Law Firms Reduce Costs and Increase Efficiency

Aptara, Inc., a global leader in integrated content transformation solutions, today announced the addition of an advanced Legal Process Outsourcing (LPO) solution to its expanding stable of content services. The new LPO solution enables law firms and General Counsels within corporations to effectively manage their costs and resources. Aptara will provide pre-established service level agreement (SLA) offerings to ensure delivery of the highest performance and quality.

As part of this advanced solution, Aptara has expanded its offerings to include coding, indexing, tagging and advanced Collection, Forensic and Electronic Discovery (eDiscovery) services. Leveraging state-of-the-art software and certified ISO:9000 facilities, Aptara offers the outsourced advantage of bringing together a worldwide network of high quality professionals and resources resulting in reduced costs and administrative time for legal customers so they can focus on the intricacies of each case. In the U.S. alone, the demand for content related legal services is projected to rise from $1.2B in 2005 to $5.0B in 2010.

Aptara's LPO solution includes both discovery and non-discovery services. Discovery services will provide corporate and law firm customers with access to both paper and electronic document processing capabilities. Services include scanning and optical character recognition to provide customers with the ability to transform paper documents into electronic images.

Non-discovery services include consulting and analysis support such as, case management, coding and indexing services, and subpoena services. These services provide litigators with a dedicated, certified offshore paralegal so that they are able to refocus their in-house resources. Additionally, legal research staff can be provided for document analysis, e-filing capabilities and other case support activities. Finally, Aptara will provide support for attorney re-certification by leveraging its renowned eLearning capabilities.

Building on its legacy of success in the pre-print publishing industry developing the most sophisticated academic and corporate print materials, Aptara is well positioned to provide its litigation customers with the most advanced software and project management expertise.

Aptara will be exhibiting its full LPO services at booth 117 during LegalTech West Coast, being held at the Los Angeles Convention Center.

Wednesday, June 20, 2007

7 Indian cities emerge as best offshoring locations

Source: Hindustantimes

Seven Indian cities have emerged as the most favoured outsourcing destinations globally, beating out rivals such as Manila, Shanghai and Moscow, according to a report by a US-based consultancy.

And India looks set to remain the outsourcing leader in the long term, according to the consultancy neoIT, which advises global companies on offshore operations.

New Delhi headed the seven Indian cities that topped the list of 24 from around the world vying for the tag of favourite offshore sites, said neoIT in a report entitled: "Offshore Insights: Global City Competitiveness."

"A lot has been said about India's eroding cost advantage and supply constraints," senior neoIT consultant Sabyasachi Satyaprasad said on Saturday.

"But the fact remains that in terms of talent supply and cost arbitrage, India is still the leader," said Satyaprasad, whose company is headquartered in San Ramon, California, with offices in India and the Philippines.

New Delhi, Bangalore, Hyderabad, Mumbai, Pune, Chennai and Kolkata were the seven most favoured sites worldwide to locate offshore, said the report assembled from feedback from over 60 clients. The Indian cities rated higher than Ho Chi Minh City, Manila, Shanghai and Moscow.

India, which already holds at least 50 per cent of the global outsourcing market, appeared set to maintain its dominance, said Satyaprasad.

"India will dominate the global outsourcing scenario for the long-term," said Satyaprasad.

"That's because of its skilled and broad labour pool, overall maturity of delivery services in term of breadth and quality and the easiness of scaling up manpower numbers because of India's big population advantage," he said.

To assess the cities, neoIT used such criteria as human capital — the existence of a large, qualified pool of workers; costs — salaries, real estate; infrastructure – good telecommunications, transport; and living environment factors such as quality of life.

Manila, which ranked ninth, is popular with BPO companies serving US clients.

"The people are well versed with the American accent and culture and a large talent supply thanks to universities in the region, but costwise it's slightly more expensive than Indian cities," Satyaprasad said.

Shanghai, which is 10th on the list, has excellent infrastructure and a good talent supply but is held back by the lack of English-language fluency, the report said.

"China has similar advantages (to India) in terms of labour skills. But its major disadvantage is lack of English skills although it's making big efforts to change this," Satyaprasad said.

An Ounce of Prevention: Guarding Against IT Outsourcing Failure


A three-part approach to maximizing the value of an IT outsourcing deal.

How often do IT outsourcing deals fail? The numbers vary depending on which study is cited and what definition of failure is used. But executives initiating or tending to an IT outsourcing relationship must be constantly sobered by the fact that, from a purely statistical viewpoint, their deal stands about as much chance of failing as of succeeding.

Millions of dollars are often in play in an IT outsourcing deal, along with the hopes of management and investors in the business transformation that outsourcing can deliver. So it is to everyone’s benefit to have the means in place to deal with the problems which, perhaps inevitably, will occur.

However, what IT decision makers really need is not just better triage but better preventive medicine along the entire lifecycle of their outsourcing deals. Issues and challenges can appear quite different depending on where they occur in the course of a relationship. What might be a catastrophic problem in year two or three of a deal might have been only a small issue when the seeds of the problem were sown at the contract or transition stage.

A three-part approach to maximizing the value of IT outsourcing deal:

* Prevention. Focus on the risk mitigation capabilities and governance structures that anticipate problems before they occur and that keep an outsourcing relationship on track.
* Quick response. Develop the diagnostics and "early warning systems" that identify problems quickly and then address them before they mushroom into deal-killing catastrophes.
* Retooling. If things go badly wrong, have the mechanisms at the ready to bring the parties together, reexamine the original deal intent and retool or refresh the relationship where possible.

Contracting Phase Issues

When we conduct our realignment and remediation services for IT outsourcing relationships, our diagnostics frequently find that the root cause of the problem goes back to the deal itself. Outsourcing selection processes tend to focus both the company and the service provider primarily on financial terms, obscuring the fact that the real work comes only after the signatures on the contract are dry.

And the contract itself may be the root cause of the problem. If getting to the signature stage is a battle, forcing a provider to negotiate away its margin and reasonable operational assumptions, outsourcing buyers may win the pricing battle only to lose the delivery war. Performance, quality and flexibility inevitably suffer. More intangibly, the outsourcing buyer loses out on important opportunities for innovation and continuous improvement, as the provider pulls back from any activities beyond the bare essentials. When we evaluate the situation of companies that are either vaguely or overtly dissatisfied with the collegiality and quality of their outsourcing relationship, we often find that the buyer engaged in aggressive deal-making behavior that created the problem.

Tuesday, June 19, 2007

Document Outsourcing

Source: Offshoringtimes

Rising printing costs and short of technology understanding are forcing firms to look for alternative solutions to cut costs in document production.

It has been viewed that most companies spend around 10 percent of their revenues on document production. Analysts believe the typical return by outsourcing document management to vendors is in the range of 30 percent across sectors.

Major printing vendors like HP, Canon and Xerox are offering services that allow firms to outsource their printing requirements. For example Xerox India, has already initiated Document Outsourcing service targeting companies Finance, insurance, banking, advertising and retail business. On the other hand Xerox Global Services, provides consulting and managed services to minimize costs.

Xerox introduced Intranet DOCS, software to provide access and distribution for engineering and enterprise documents via corporate intranets or the Internet. This enables enterprises to manage costs and increase returns by about 20 percent, and Xerox is expecting to raise the productivity levels by 40 per cent,"Ravi Venkatraman, director, Xerox Global Services, said.

Looking at the nature of the printing materials, Xerox offers a service called Document Advisory Office, wherein a customer can get the printed documents delivered by Xerox Global Service on a real-time basis.

While printing devices are often owned by customers, HP (Hewlett-Packard) has gone a step ahead with a contract-based model for its multi-function printers. Under this, the printers will be actually owned by HP.

HP says they targets high-volume users who need not have to pay for the printer. Its a pay-per-use-system, where the devices,and consumables like ink and print head will be taken care of by HP. The company offers managed print services so customer can outsource their document management works, including copying, printing and faxing to HP.

Document outsourcing also makes sense to customers. Most of the companies feel that if their printing work is outsourced they can very well concentrate on their core areas. Apart from that, companies will be able to utilize their manpower more effectively in productive activities.

Xerox Global Services claims to have 10,000 contracts under their belt. Their customer lists some of the leading institution and company like Karnataka High court and Airtel.

UTI Bank in Mumbai started outsourcing its printing operations to Xerox almost three years ago. They say with over 30 lakh printing work, with centralised printing, the bank reduced printing and mailing of cheques from front office thus saving time.

Most printing solution providers are introducing consulting services. HP claims to have over 15,000 of consultants worldwide and that one-third of their revenue comes from this service.

Next to follow the footstep is Canon India, who till now were providing document management contract services. Now they have geared up to provide a whole lot of services including software, hardware, training, consumables and manpower.

Canon, as part of this drive has a colour specialist in place under their business imaging solutions channel. The role of colour specialist is to provide expert advice and guidance to customers.

Capgemini Ushers in New Era of Business Process Outsourcing by Delivering Business Insight


Capgemini, one of the world's foremost providers of Consulting, Technology and Outsourcing services, today announced significant enhancements and new services as part of its expanded Business Process Outsourcing (BPO) solution portfolio. Capgemini is leading the development of 3rd Generation BPO services delivering value to the top–line – by combining unique Business Insight processes with the innovative use of business intelligence tools and deep industry knowledge, Capgemini unlocks the hidden value–add in basic BPO workflow. Capgemini is first–to–market delivering BPO with Business Insight, which enables clients to make better, more informed decisions that drive measurable business outcomes that contribute to the top line.

Delivering BPO with Business Insight

By combining its unique processes with sector–specific skills and ensuring that these innovations are embedded into day–to–day operations through Delivery Excellence Teams, Capgemini makes innovation part of the service. Clients can benefit from Business Insight processes such as: customer analysis; spend intelligence; audit forensics; revenue recovery and leakage prevention; ethical fraud testing and contract compliance.

3rd Generation BPO – The New Wave in Business Process Outsourcing

Capgemini has been innovating in BPO since the ‘90s. This 1st wave was largely driven by labor arbitrage and economies of scale. Through the end of the ‘90s and into the ‘00s, 2nd Generation BPO has added continuous improvement and the ability to deliver in increasingly complex project environments involving multiple processes, multiple ERPs and multi–language services. These two generations delivered strong benefit to the bottom line. Capgemini is first–to–market delivering BPO with Business Insight, which enables clients to make better, more informed decisions that drive measurable business outcomes that contribute to the top line.

“Capgemini leveraged innovative processes and economies of scale to deliver more efficient and standardized processes. Outsourcing our F&A services to Capgemini has resulted in improved quality, business agility, and risk management,” said Phil Cox, Director Shared Services, Unilever Asia & Africa, based in Singapore.

Capgemini is broadening its scope of service offerings to target additional opportunities in the growing North American BPO market. This builds on a strong foundation of BPO horizontal services for F&A and Customer Care & Intelligence and BPO–vertical services such as SmartTrack™ and Revenue Management for Utilities, and Technical Content Management for complex manufacturing clients. Capgemini is bringing to the market two new services:

1. BPO Procurement Services to include: Outsourced Operational Procurement Centre (OPC) Services and Outsourced Spend and Category Management. and

2. Assurance Services for SOX Compliance.

Investing in North American Leadership

Capgemini's enhanced solution set supports the Corporation’s strategy of increasing its presence in and share of the North American BPO market. Capgemini’s North American initiative is a part of its long–term growth strategy fueled by the lucrative market potential for BPO in the U.S. and Canada, which represents 64 percent of the global US$152 billion BPO market.¹ The company is leveraging its success as a leader in BPO in Europe, combined with a solid foundation in North America, to grow in North America’s manufacturing, utilities and financial sectors.

To support this initiative, Capgemini has created a new BPO business unit and has put in place a new, highly experienced executive management team. Deputy Global BPO Leader, David Poole, has also assumed the role of North American BPO leader and has relocated to North America.

Monday, June 18, 2007

India will be $30 bn hub for engineering outsourcing

Source: Hindustantimes

India's engineering process outsourcing (EPO) business would grow 10-fold over the next seven years to touch $30 billion and make the country a major hub in this area.

"The estimated demand for engineering process outsourcing to India has grown at 30-35 per cent since 2004-06," said the study released in New Delhi by Commerce Minister Kamal Nath, adding the momentum would be sustained in the ensuing years.

The global EPO market, on the other hand, will grow to around $110-$140 billion by 2015, taking India's share to 20-27 per cent, said the study conducted by the state-run Engineering Export Promotion Council (EEPC).

According to EEPC Chairman Rakesh Shah, engineering exports from India touched $26 billion in 2006-07 but expressed concern over the decision to do away with the duty entitlement passbook scheme, an export incentive programme, next year.

But Kamal Nath assured that the government was working to develop an alternative duty neutralisation scheme that would replace the current scheme to be in tune with the norms set by the World Trade Organisation.

The minister asked the engineering exporters to use the focus market scheme to their advantage in promoting exports to the identified markets, especially to the Commonwealth of Independent States (CIS).

As many as 16 new destinations, including CIS, had been included this year in the focus market list and exporters will find it useful to concentrate on developing the markets in these countries, Kamal Nath added.

"Indian exports including engineering exports are likely to face increased non-tariff barriers, considering that average tariffs for industrial products in all countries is headed southwards," he warned.

"This process has already begun for engineering products and is likely to gain greater momentum as India's share in the world exports increases in the coming years."

In outsourcing, solutions matter over destinations


Whether in the Philippines or India, global companies don’t really care where their business processes are being done. As long as it improves their business performance and reduces their cost, the jobs could be outsourced anywhere in the world.

This favorable trend is not enough, however. Outsourcing power Accenture said establishing a global footprint that can deliver relevant solutions is a crucial step that outsourcing firms are doing now to take advantage of the boom.

In a recent visit to the Philippines, Accenture’s group chief executive for outsourcing Kevin Campbell said one of the advantages of maintaining global locations is the ability to conduct "load balancing."

This is done, according to Campbell, to distribute tasks among its various sites to attain productivity and efficiency. "Offshoring is already a given. But global companies want consistent global solutions," said the official.

Accenture, one of the earliest outsourcing firms to set up shop in the Philippines, maintains some 10,000 employees in the country. It is ramping up this figure to about 15,000 this year with the opening of its call center in Cebu.

Contrary to popular perception, Campbell said companies are being pushed to outsource not because they simply want to cut cost. "Outsourcing engagements need to be designed and measured to achieve business outcomes."

He repeated: "Outsourcers must help clients drive value into their businesses while simultaneously pushing cost out. [But] outsourcers need to have an established global delivery capability and footprint now."

Also, one good trait of an effective outsourcer, Campbell said, is its ability to attract and maintain the best talent. For Accenture, achieving this means "accelerating its people agenda by growing the number of existing people, surgically adding talent, and rewarding performance."

Recently, it partnered with the Massachusetts Institute of Technology (MIT) to develop the Accenture Solutions delivery Academy, a new training and certification program based on the company’s application delivery curriculum.

Accenture’s two-year collaboration with MIT includes ongoing review of the academy’s educational content, student assessments, and overall program design by several MIT School of Engineering faculty who are experts in related subject areas, including Java, SAP, C++, and Microsoft technologies and the software development lifecycle.

Friday, June 15, 2007

Global Hospitality Outsourcing - Winning in a Flat World!


In the last few years the hospitality space has seen a rapid transformation. Much has been said and written about how emerging markets such as India and China are becoming the new centre of gravity for the hospitality world.

The global hospitality playing field has been levelled and the resulting impact on growth and profitability continues to push leading hotel companies to explore more efficient business models and raises the following key questions for the industry:-


* Are the cost structures better than industry averages?
* Is there a clear view on core vs. non-core functions?
* Is there scope for converting a large portion of the business support cost to variable cost?

Focus & Stakeholder Alignment

* Are processes within each strategic business unit and within geographical regions structured appropriately?
* Have shared service centers given the expected returns?

Growth Alignment

* Is the company ‘acquisition ready’ operationally?
* Is the company operationally ready to expand into growing markets and geographies?


* Does the executive level have a consistent and standard view of information across businesses and geographies?

It will be safe to assume that in today’s world no corporate strategy is complete unless it addresses the impact of global off-shoring on the organization’s bottom line. Derivation of enhanced value through cost optimisation, efficiency and transformation of processes, functions, products and various businesses is imperative.

Traditionally organizations have aligned their back offices to a functional productivity model that is constituted around the existing structure within the company. While these models have worked for some, there are common themes of inefficiencies that run across captive back-office operations of organizations and these inefficiencies impede the ability to optimize business performance.

The initial business case for outsourcing emerges by way of significant opportunities in labor cost arbitrage. Organizations have realized this potential and are beginning to move their non-critical, people intensive segments to third party vendors or establishing captive units and shared service centres. Typical services that can be off-shored would include functions such as 24/7 global reservation centres, customer helpdesk, outbound sales support, frequent guest program management, RFP response centre and other similar services.

People, Processes and Technology Alignment

Through technology enablement and operational effectiveness of the service provider, a greater degree of integration can be achieved. Having analysed a prototype organisation we understand that often high end resources are involved in low value activities and processes are not aligned to the right stakeholders.

Operational Effectiveness and Productivity Improvements

Service providers are capable of providing customised real-time asset, brand and enterprise level information through automated reporting and statistical consolidation. Assessment of development and investment risk to validate entry strategy in key global markets through economic research and functions such as development and tracking of performance indicators, trend based forecasting, budget reviews, compliance audits and statutory reporting can be also be outsourced, thereby resulting in committed operational efficiencies, enhanced productivity and better knowledge management.

At HVS, global hospitality outsourcing was an opportunity we spotted early and have formed a global strategic alliance with Infosys BPO Ltd. The alliance seeks to combine the outsourcing capabilities of Infosys and the hospitality consulting expertise of HVS to design specific solutions for the hospitality industry. Our outsourcing solutions will be tailor made to enable your operations work more efficiently and, at the same time optimize costs.

Outsourcing the eBay way

Source: Computerworld

SMBs are increasingly turning to eBay-like IT services brokers

Increasingly, small and midsize businesses are turning to eBay-like IT services brokers to hire technical talent for projects -- both within the U.S. and offshore.

Such users are seeking the same advantages that large companies hope to get through IT services deals: flexible workforces, lower-cost labor and access to the right skill sets for particular projects.

Using an online job marketplace was the direction that Giancarlo Fiorarancio took Betsey Johnson, a New York-based chain of women's designer clothing stores with nearly 50 outlets, after he was hired as its IT director about nine months ago.

The kinds of services offered by vendors such as OnForce "have a disruptive potential" for U.S.-based temporary employment agencies and IT services providers that charge higher labor fees, said Gard Little, an analyst at market research firm IDC.

But the job marketplaces may have their largest impact because of their ability to connect IT managers with offshore help. While Congress debates whether it should raise the annual cap on H-1B visas, global job-matching services such as one offered by oDesk are showing that companies of any size can hire offshore IT talent to work on projects.

The shift of technology work to offshore locations, free of any H-1B constraints, is an economic reality that the Committee on Science and Technology in the U.S. House of Representatives began examining this week.

Many of the firms offering to do work via oDesk are small software development outfits that are spread among about 60 countries, Swart said. The largest concentrations are in India and eastern Europe, which both account for about 30% of the total. But oDesk said it also lists many services providers that are based in North America.

Pay rates vary by skill as well as geographic location, the type of project involved and recommendations from earlier customers. For instance, on a worldwide basis, AJAX developers currently are being paid hourly rates of between US$15 and US$83, according to oDesk.

Development work and the number of hours spent on it can be monitored and evaluated on an ongoing basis through a central project management repository and the use of tools for tracking technical issues and different versions of software programs. In addition, oDesk provides screenshots of a programmer's work so IT managers can do spot checks of code.

As with eBay's online auction site, recommendations from customers give service providers on both the oDesk and OnForce sites evidence of a successful track record, which can help them earn higher fees. As a result, developers have to deliver more than good technical services, said Shane Bell, whose Midland, Texas-based company, ITechWest Solutions, runs on orders he gets via OnForce.

"Ninety percent of it is relationship, and that willingness to go the extra mile," said Bell, who had a full-time job at a telecommunications company when he started doing some extra work through OnForce about two years ago. Now ITechWest is a full-time occupation for him. The firm employs five other people as well, and Bell projects that it will gross about US$1 million in revenue next year.

A dependable technician with good people skills can earn between US$35,000 and US$50,000 per year through sites like OnForce and oDesk, said Crisantos Hajibrahim, who started doing IT work after being discharged from the Marines several years ago.

TopCoder uses another approach to connect employers to overseas tech workers. Users of TopCoder's Web site submit development projects that are used as the basis of coding competitions between developers. The top developers are paid by the customers, while TopCoder officials assess the work of other programmers and give them feedback on it.

Tiffani Bova, an analyst at Gartner, said demand for services such as OnForce, oDesk and TopCoder is increasing -- especially as smaller companies become more reliant on technology. "It absolutely fills a need for a specific type of customer," Bova said. "And with the number of small businesses in North America under 100 employees, I expect it to continue to gain momentum."

Thursday, June 14, 2007

Medical Transcription Services Outsourced to India

You can now turn to India to meet all your transcription requirements. Several leading medical transcription service providers with genuine expertise have come up throughout India, to cater to the medical and legal transcription needs of offshore clients. The result of course is achievement of highest possible quality at very reasonable costs.

Skilled transcriptionists in India, who are knowledgeable in all areas of medicine, use latest technology to service the ever-increasing customer base of single doctors, clinics, practices and hospitals of all sizes. Additionally, support teams work with clients to provide quick and best solutions. Medical transcription service providers in India are equipped to act as capacity-rich partners, who can handle huge lines of transcription with speed and accuracy. These outsourcing service providers are ideally suited to customers with large, high volume transcription needs as well as those with lesser volume of transcription needs.

Following is the kind of medical transcription work that can be outsourced to India :

• Operative Note
• Discharge Summary
• Medical Billing
• Progress Note
• SOAP Note
• Letters
• Initial Evaluation and Management
• Independent Medical Evaluation
• Telephone Consult
• Consultation
• History and Physical Notes, and more!

Indian medical transcription companies use secure streaming over the internet for handling of dictations or voice files and for the delivery of completed work. One thing to look out for is the security standards employed by these companies. It is desirable to meet the guidelines established in the four HIPAA categories specific to Transcription related organizations, including Administrative Procedures, Physical Safeguards, Security Services, and Security Mechanisms.

Transcription companies in India serving offshore companies boast of experienced production and quality Assurance professionals. All are HIPAA compliant, quality controlled, confidential, efficient, inexpensive, and secure. Proof reading teams ensure that there are no English or formatting errors. The world of opportunity also lies in the fact that these service providers minimize costs without compromising on quality and timely delivery.

To sum up, a vast pool of English speaking resources, Cost-savings, and quicker turn around time, are the advantages of outsourcing medical transcription to India.

Medical transcription outsourcing is one of the fastest growing outsourcing products. Most prestigious hospitals in US and other parts of the world are outsourcing their medical transcription work to India. Also, it is a very important part of the health care industry. Hence, physician’s groups, individual doctors, as well as hospitals and clinics, all turn to India to receive superior, completely accurate and legal quality transcription work, done with utmost care and quality.

Outsourcing Is Now Targeting Core Jobs in West


Outsourcing, when you apply the model of core competence to business processes, is all about companies parceling out activities that they aren't best equipped to undertake.

If you sell computers, you shouldn't run your own helpdesk. If you are an airline, you mustn't waste your time juggling cash collected in different countries and currencies.

No company needs to tie up resources in managing accounts receivable, or preparing payroll, in-house.

You can buy all these services from third parties, which will either automate them or manage them with cheaper manpower in India, Latin America or eastern Europe.

This offloading of non-core work to specialists has been the main driver for the business-process outsourcing industry, projected to grow 10 percent a year to $618 billion by 2010.

Now outsourcing companies are pushing the frontier, forcing global CEOs to define their core competence more sharply. It's difficult to predict how it will all pan out, though it looks like Western companies may finally be left with processes with minimal labor content. And that will be one of the biggest political challenges developed-country governments will face.

Nipuna Services Ltd., a Hyderabad, India-based business- process outsourcing company, manages the shop-floor inventory for an automaker in Detroit, creates graphics for an animation studio in the U.K., and handles artwork changes on labels and cartons of GlaxoSmithKline Plc medicines so as to satisfy regulators in various countries.

Most economists believe that services outsourcing is only about getting things done ``cheaper.'' They think it is transient and self-adjusting: A rise in the inflation-adjusted exchange rate of the exporting nation will make its cost advantage disappear; the same relative-price mechanism will also increase developed-country exports to places such as India and China. New jobs will be created to replace the ones that are now being lost.

Nascent Industry

From contacting a potential customer to making him sign the outsourcing agreement takes 18 months to two years. The rarity value of the companies that provide such services is evident in their valuations.

Answering questions such as these for Fortune 100 companies recently fetched investors in Marketics Technologies, a Bangalore-based analytics company started by former Procter & Gamble Co. employees, about $65 million in payouts from acquirer WNS (Holdings) Ltd. That translates into $325,000 per employee, more than double the going rate, according to a report by J.P. Morgan Securities Inc. analyst Christine Pezino.

Wages Versus Profits

The manufacturing economy may serve as an example. Apple Inc. had fewer than 18,000 employees as of Sept. 30, 2006. Revenue per worker was in excess of $1 million. That's 10 times the value an average worker produced last year at Taiwan's Hon Hai Precision Industry Co., a contract manufacturer -- among other things -- of Apple iPod music players.

If outsourcing becomes as widespread in services as it already is in manufacturing, Western economies may still grow strongly, thanks to surging corporate profits. However, the falling share of wages in economies across the developed world will keep offshoring a hot political issue for decades to come.

AMP offshore Siebel skills search


A SHORTAGE of Siebel skills has led AMP Financial Services to look offshore to complete an upgrade of a customer relationship management system used by more than 1500 financial planners and call-centre staff.

The move comes as organisations around the country, including the Australian Taxation Office and Department of Immigration and Citizenship, struggle to find sufficient numbers of technology workers with Siebel expertise. The shortage has contributed to spiralling contractor prices in Canberra and forced federal agencies to send work interstate.

It is also adding to the momentum towards offshore outsourcing in the private sector.

The company has now awarded Infosys a contract to carry out the upgrade after it decided last October to proceed with the project.

An AMP spokeswoman said plans for the project, including the decision to appoint Infosys to provide software services, were signed off by April this year and that the upgrade had commenced.

The spokeswoman said the project was being led by AMP's IT@AMP technology division and that Infosys was providing services both onshore and in India. The upgrade is expected to be completed by the middle of next year.

"Most of the work is being done in Australia. Infosys is doing some work in India, mainly software development and testing," the spokeswoman said. The decision to appoint Infosys to the project and send some development and testing work offshore follows a visit to India by Ms Barnett early last year.

Infosys now boasts a number of blue-chip Australian customers, including AMP, miner Rio Tinto and Telstra. Confidentiality agreements, however, prevent Infosys and compatriots such as Wipro, Tata Consultancy Services and Satyam, from talking about most of their customers.

Infosys notes in statutory accounts for its last financial year, filed with the Australian Securities and Investments Commission in May, that it had won a Siebel contract with "a leading Australian insurance company".

Many private sector firms are reluctant to disclose their involvement in offshore IT and business process outsourcing despite growing investment in offshore services.

Research firm Frost and Sullivan reported last month that more than a third of Australian financial services firms were on the way to embracing offshore IT and business processing outsourcing by mid-2008.

Financial services firms that have openly admitted to offshoring include the National Australia Bank, Westpac and AMP.

The growing move towards offshore outsourcing was reflected in Infosys Australia's financial accounts for the year to March 31.

Mr Ebeyan said about half of Infosys's Australian work was carried out offshore with the revenue booked through its international operations.

He said the company generated more than $200 million all up in revenue from Australian contracts during its most recent financial year.

Wednesday, June 13, 2007

Second Life - outsourcing's next frontier?


When PA Consulting wanted to build an extra wing for its offices, it hired the best man for the job.

Unusually, perhaps, it turned out that the best man for the job was an enormous rabbit, and one which wanted to be paid in an electronic currency that didn't exist a few years ago.

But then again, the office extension PA wanted was a virtual one, built in the rapidly growing Second Life online world.

As well as finding a rabbit to build the extra wing for its Second Life HQ, PA Consulting also found in-world 'residents' willing to work as greeters in its office in exchange for the in-world currency, Linden dollars.

"We've outsourced first-level support to the global labour pool," explained Claus Nehmzow, member of PA Consulting's management team.

But far from being a kooky one-off, a number of companies are looking at how virtual worlds can help them improve the way they create and manage teams in their own businesses - as well as providing a new market.

Depo Consulting is using its Second Life office not just as a showcase but as a means of improving the management of its team - some members of which it has never met in the real world or even spoken to on the telephone.

Peter Dunkley, director of Depo, which develops Second Life buildings for its clients, said: "The most compelling differences between this and existing remote working is the ability to work as a team - and to manage that team."

Virtual worlds offer the ability to provide development capability in new ways, using more flexible and advanced methodologies - and at lower cost than traditional offshore development can deliver, he said.

But this doesn't mean the end of traditional outsourcing, of course - in fact, there's no reason why established outsourcers can't use the same benefits to manage their dispersed teams.

Setting up an office is a good first project to work on, so long as it isn't left to gather virtual dust but has a purpose - such as being a venue for team meetings or recruitment and interviews (particularly effective when looking for IT staff, according to Dunkley). Building the office can be a huge learning experience in terms of how projects work within a virtual environment, he suggests.

But don't leap in with anything too sensitive, such as projects involving personal data of customers.

As Dunkley points out, it's wise to not get too enthusiastic too quickly: "Your compliance department are likely to start spinning like tops if you start having critical meetings with your corporate finance advisors about a hot new deal in your new virtual office located between a beach club and a casino."