Saturday, September 29, 2007

IT cos moving towards Russia for skilled talent

Indian information technology, or IT, companies are following their global customers to different corners of the world and some are moving towards Russia, reports CNBC-TV18.

Indian IT companies are saying hello to Russia. That is because Russia has what Indian IT companies desperately want- highly skilled talent. An IDC survey of 20 West- European and US companies outsourcing to Russia, found Russians excelled at high-end software.

An attrition rate of just 4% sweetens the deal. IDC adds that developing new products in Russia costs at least 30% less than in Western Europe or the US.

The question is whether India should be worried and the answer is an emphatic no. That is because IT companies, like TCS, want to use Russian talent to advance their outsourcing capabilities.

“We will definitely look at Russia, sometime in the future. I cannot give you a timeline now. That is a market we will look actively to create a resource base,” said N Chandrasekaran, COO, TCS.

Already companies like Hewlett Packard, Intel, Google and Capgemini have set up development or offshore centres in Russia. Besides, Russia itself offers a market.

“In terms of the domestic market opportunity, according to the Russian Ministry, they expect it to be a USD 40 billion industry by 2010. It is almost three-fold from 2006 levels. Oil and gas, banking and financial services are some of the areas where there are opportunities,” said Ashwin Mehta, Senior Research Analyst, Ambit Capital.

Analysts also say the moolah in offshoring is in high-end work, a sector in which the Russians excel. Also, an offshore development centre there will help Indian IT companies get outsourcing business for the East European markets, of companies based in the US and Western Europe. So, we might soon see Diwali celebrated in Russia!

IT Survival Guide: Outsourcing's Advantages

Offshoring can cut costs dramatically, extend support and capabilities, and provide hard-to-find expertise, but careful management is the only way to ensure success.

Outsourcing offers businesses the opportunity to cut costs and boost productivity -- if it's done right.

Offshore locations feature low-cost workers who can cut your labor costs by 50% or more. Tapping workers in India or China also affords the possibility of round-the-clock technical or customer support -- when domestic staffers sign off in the evening, their Asian counterparts are just waking up. Companies can also transform labor costs from fixed to variable by working with an outsourcer. Need extra manpower during the holidays? A service provider can put more bodies on your account during crunch times. Finally, outsourcers can provide quick access to domain and technology experts who may be in short supply locally.

Despite these advantages, reports abound about outsourcing gone bad. Dell infamously had to repatriate some customer service operations after customers complained they couldn't understand foreign phone reps. The bottom line: Outsourcing isn't about blindly throwing work over the wall; it needs to be thought out and aggressively managed. Here are some pitfalls to watch for, and how to cope.
Many outsourcing projects fail because of lack of internal oversight. Forrester analyst Christine Ferussi Ross says businesses should establish formal vendor management offices staffed with professionals experienced in IT operations, contract negotiations, and procurement. Also needed is an individual with the diplomatic skills necessary to maintain vendor relationships over time. "Outsourcing implies some give and take," says Ross.

Only 47% of 615 companies recently surveyed by Forrester reported having a centralized vendor management office.

Costs also need to be managed, or potential savings can evaporate quickly. Of concern lately for those outsourcing to India is the rising rupee, which has gained about 14% against the U.S. dollar over the past year. Businesses need to negotiate up front the extent to which their vendor is willing to insulate them from currency fluctuations. Labor costs in India are also rising -- by as much as 15% per year -- so companies interested in outsourcing for the first time might do well to scout out locations that haven't been oversold, such as South America and China, and even second-tier cities in India. Not everything needs to be in Bangalore.

Deciding what to outsource is almost as critical as the decision to outsource itself. Not all IT projects or customer groups are created equally. Outsourcing the development of non-critical applications or customer service for low-revenue customers are good places to start. Dell's mistake was offshoring service and support for its high-end business customers.

Regardless of what you outsource, the security of your company's and your customers' personal and business data must be a top consideration. When weighing vendors, it's worth a trip to their facilities to inspect first-hand their security technologies and policies, even if that means a long flight. Most major offshore outsourcers, including India's big four of Wipro, TCS, Infosys, and Satyam, have sophisticated security processes in place. Even so, it must be negotiated up front who is responsible for what if a breach occurs.

Outsourcing needn't be fraught with peril, but it does need to be well managed.

Friday, September 28, 2007

Outsourcing takes a toll on U.S. highway projects

Shipping services for Americans overseas is reaching all the way to U.S. highways.

Across the nation, foreign management of toll roads and other infrastructure is raising money for projects that otherwise would not be built.

In Virginia, Australian companies would operate four toll roads in the state when construction is completed on tollways planned for the Washington area.

The foreign companies compete for public-private partnership contracts that state governments increasingly give out to avoid draining their tax revenue on highways.

"In real dollars, there's a lot less dollars available for publicly funded infrastructure than there used to be," said Michael Kulper, vice president of the transportation consortium Fluor-Transurban Inc. and an Australian citizen. "More and more of the state budgets are being consumed by maintenance."

Fluor-Transurban is finishing a deal with Virginia that would build 70 miles of "HOT lanes" along the Capital Beltway's normal traffic lanes and south to Fredericksburg.

For motorists, the HOT — high-occupancy toll — lanes mean they would pay between 10 cents and $1 a mile to bypass Beltway traffic. The rates would vary throughout the day, depending on the density of traffic on the Beltway. Buses and high-occupancy vehicles could use the toll road for free.

Transurban Group is the Australian consortium that would collect the tolls and maintain the roads. Fluor Corp. is an Irving, Texas, engineering and construction company that would build the HOT lanes.

The Ethics of Outsourcing Customer Service

It's a familiar scenario: A product you purchased recently has developed a problem, so you call the company's toll-free number and are connected to a "customer service associate" in India or the Philippines. You describe your problem but have a hard time understanding what the company representative is saying. You try several more times to communicate why you are calling but cannot get information that you can comprehend. You ask to be transferred to someone in the U.S. and are then put on hold for what seems like an eternity. You hang up in frustration and vow never again to purchase anything from this company.

More and more businesses are outsourcing not just manufacturing jobs but services ones too. On the face of it, this seems like a smart financial move: By slashing labor costs 25%, 50%, or more, companies that have had slim profit margins are now able to enrich the bottom line and keep shareholders happy.

Outsourcing customer service, however, is not only unethical. It's bad for business.

Here's why.
Good Word of Mouth and How Not to Get It

The most valuable commodity a business has, and the most difficult one to come by, is positive word of mouth. There are lots of ways to engender this. You can build a superior product. You can create a memorable marketing campaign. You can get publicity by doing good works in the community. All of these will inevitably get people talking about your company, which is harder and harder to make happen in our increasingly crowded marketplace.

The problem with outsourcing customer service is that this practice creates nothing but negative word of mouth. Time is precious, and what customer wants to spend an inordinate amount of time in an often vain attempt to communicate with a company employee who is halfway around the world and cannot speak English effectively? It is easy to measure the savings a business gets by farming out customer-service jobs to countries whose median income is an eighth of what it is in the U.S. What too many businesses either fail to see or refuse to take seriously, however, is that companies that value short-term profit at the expense of meaningful customer service risk sacrificing long-term profits and the company's own reputation. Beware: It's harder to repair a poor image than it is to maintain a good one in the first place.

Smart businesses recognize that the surest way to hold onto their current customers and create new ones is to place customer satisfaction front and center, not only in their mission statements but in their day-to-day operations. This means that customer-service representatives must be able to communicate clearly. This also means that these employees should be fluent not only in the primary language of the customer base but in their culture, customs, and idiosyncrasies as well. The root of "customer" is "custom," and customs are largely a mystery to those who live and work outside of the culture.

Thursday, September 27, 2007

Virtusa Ranked #1 IT Systems Outsourcing Vendor in Wealth Management Industry by the 2007 Black Book of Outsourcing

Virtusa Corporation (NASDAQ: VRTU), a global IT services company that provides IT consulting, technology implementation and application outsourcing services, has been named the top IT Systems Outsourcing Vendor in the Brown-Wilson Group's annual “Black Book” survey of Top Outsourcing Vendors in the Wealth Management Industry.

The Wealth Management IT Systems Outsourcing rankings are based upon eighteen criteria of operational excellence, including technology innovation, client relationships and trust, breadth of offering and customization.

“Outsourcing is becoming more popular as wealth management industry executives become more comfortable with the robustness of the outsourcers’ systems and capabilities, especially in times of regulatory change,” noted Doug Brown, co-author of “The Black Book of Outsourcing” and a principal of Brown-Wilson Group. “Virtusa is at the top of a very exclusive group of high-quality IT systems outsourcers in this evolving, fast-growing industry.”

“We are extremely pleased to be recognized by Brown-Wilson Group in The Black Book of Outsourcing for our innovative work in the wealth management arena,” said Kris Canekeratne, Virtusa Chairman and CEO. “For financial institutions that offer wealth management services, the focus must be on how IT can deliver more agile solutions to increase operational efficiency and improve customer experience. Virtusa’s software platforming approach has enabled our wealth management clients to enhance their customer-facing applications–opening accounts faster, offering new products and services seamlessly, and providing superior customer service to their high-net worth clientele.”

Black Book’s Top Outsourcing Vendor Rankings in the Wealth Management Industry Report will be released at tomorrow’s FS Outsourcing Wealth Management Industry Summit in New York, where Virtusa executives will present on “Emerging Trends in Building Agile IT Solutions in Wealth Management.”

About the Black Book Top Outsourcing Vendors & Top Advisors Rankings

The Black Book initiative sponsors the only annual, independent, non-biased ranking of 300 outsourcing advisors and 4,500 vendors as completely scored from over 20,000 outsourcing users' and clients' ballots. The Top 50 Best Managed Global Outsourcing Vendors ranking is based on twenty-six measures of leadership excellence, including client satisfaction with senior management direction, leadership impact on outsourcing results, business transformation practices, client relations management, and indicators of C-level officer commitment. Sublists in twelve categories of outsourcing cover over 500 outsourcing functions, in 40 industries, from multiple organization sizes and locations. Sublists are rankings based on eighteen criteria of operational excellence and client satisfaction with outcomes. Surveys are conducted each year, currently in the fourth update, beginning in March with results announced in June.

About Virtusa Corporation

Virtusa is a global information technology (IT) services company providing IT consulting, technology implementation and application outsourcing services. Using its enhanced global delivery model, innovative platforming approach and industry expertise, Virtusa provides cost-effective services that enable its clients to use IT to enhance business performance, accelerate time-to-market, increase productivity and improve customer service. Founded in 1996 and headquartered in Massachusetts, Virtusa has offices in the United States and the United Kingdom, and global delivery centers in India and Sri Lanka.

Analysis: Outsourcing war is good business

The private armies employed by the United States as auxiliary forces in the war in Iraq have come under criticism following an incident that drew the ire of Iraq’s prime minister, who demanded their immediate withdrawal.

However, Prime Minister Nouri al-Maliki’s wishes are far removed from the economic realities of the war, at least as far as the Bush administration is concerned, and the prime minister’s edicts will carry little impact, if any.

If the deployment of tens of thousands of armed contract workers in Iraq may seem somewhat unethical given that they are held accountable to neither Iraqi nor U.S. laws, their involvement in the war is nevertheless a wise business decision that will save the U.S. taxpayer billions of dollars.

The most prominent of these private security firms is an outfit called Blackwater USA, which retains some 20,000 or so armed employees. Blackwater’s employees, most often former Special Forces personnel recruited from dozens of different countries, provide security to many U.S. agencies operating in Iraq, including the U.S. Embassy and U.S. diplomats stationed in Baghdad.

On Sept. 16 a Blackwater unit providing security for a convoy of U.S. diplomats traveling in Baghdad is alleged to have indiscriminately opened fire after coming under attack. The result left 11 Iraqis dead and 13 wounded, among them women and children. The incident prompted Maliki to demand that Blackwater curtail its operations in Iraq, a request that was ignored. Given the scope of Blackwater’s operations in Iraq, asking it to leave would affect most U.S. operations in the country. Not to mention the setbacks it would have on the war effort.

But why is the United States turning over part of the war effort to a civilian mercenary force? Given its size, Blackwater, one of several such companies operating in Iraq since the U.S. invasion in March 2003, constitutes the second-largest foreign force in Iraq after the U.S. military. It has its own military base and operates about 20 aircrafts, including armed helicopters.

Why? It’s a question of logistics and economy.

First, the tens of thousands of contractors who are assigned to guard buildings, installations, military bases and provide protection for U.S. officials allows the Pentagon to maintain a smaller force in the country, avoiding further taxing an overstretched military fighting two wars.

Financially, the Pentagon contracts with security firms, which in turn pay their employees. So where are the savings? Well, consider the healthcare costs alone attached to a returning veteran in need of medical attention over a lifetime. In that regard alone, privatizing part of the war carries a huge advantage as far as keeping costs down. Contract workers who are wounded in action are not the responsibility of the U.S. government.

In a March 2007 article in The New Statesman titled “Iraq: the Hidden Cost of the War,” Andrew Stephen quotes two economists who predict that several decades of care for the wounded veterans of the Iraq war will amount to $2.5 trillion, a figure the author says the Pentagon is trying to suppress.

Linda Bilmes, a Harvard professor and an economist who served in the Clinton administration, and Professor Joseph Stiglitz, a Nobel laureate economist from Columbia University, say Stephen has "established not only that the number of wounded in Iraq and Afghanistan is far higher than the Pentagon has been saying, but that looking after them alone could cost present and future U.S. taxpayers a sum they estimate to be $536 billion.”

Providing long-term care for just one soldier suffering from severe brain injury could end up costing a minimum of $4.3 million, according to the report. Since the start of the conflict, more than 1.4 million U.S. troops have been deployed in Iraq. According to The New Statesman, more than 200,000 veterans from the current Iraq or Afghanistan wars have been treated at VA centers since the start of the conflicts.

“Every person injured on active duty is going to be a long-term cost of the war,” Bilmes told The New Statesman. This of course does not apply to the private army contracted by the Pentagon.

With the cost of the war to the U.S. taxpayer draining approximately $200,000 every minute, according to the National Priorities Project, Washington will not find it difficult explaining to the Iraqi prime minister the need to go on with business as usual.

Wednesday, September 26, 2007

Why Hr Outsourcing Gaining Weight?

Human resource outsourcing is extremely popular and well accepted area in any established organization. One of the most simple reason why HR outsourcing is gaining important these days is it act as a cost-saving mechanism. Today companies know that HR outsourcing is a necessary business device not only to cut shot cost, but also bring value to their enterprises. Further HR outsourcing arrangement is a huge commitment over a comprehensive time period. HR outsourcing services concentrates on the distinctive ability. You can earn value to your best-in-class skills and capabilities to lower your operating costs and enhance your bottom line.

The Advantages of HR Outsourcing

Organizations of every form and dimension are pursuing HR outsourcing plans today. Most are looking for ways to boost up their business act, productivity and competitiveness. Key reasons to tap HR outsourcing benefits include:

• Enhance abilities in key aggressive areas
• Partner with specialists to augment innovation
• Increase the aptitude to concentrate on core competencies
• Lessen costs
• Speed time to market place
• Improve business act

However it involves a variety of issues. For example: Will the supplier begin to use space in the obtainable facilities, or the unit would be transferred to their facilities? Would existing guarantees transfer to the present supplier? How would the edifying interface among the two organizations be managed? How would company huge processes, procedures, and so be addressed? Etc. All these and many others would require to be warily considered.

When thinking the outsourcing of human resource services, organization should be very apparent with respect to its company’s expectations. It should clearly explain the services themselves - in other words, precisely what it wishes to be delivered. It is for eternity a good plan to calculate these against the present services, approximately go for a benchmarking exercise. At the very least, this would offer helpful statistics for use downstream, when reflection of suppliers is undertaken. It is essentially been noticed lot of positive result where the management stands before and after outsourcing Human resources. Path of human resource outsourcing is very helpful for any upcoming and established organization.

Ireland considered a European leader in offshore aquaculture, workshop told

IRELAND'S role as a major player in the aquaculture sector has been underlined at an international workshop and "foresight" exercise held yesterday to coincide with the World Seafood Congress. The event was opened by MEP Sean O’Neachtain and attended by around 70 delegates from across the world.

“Ireland has a reputation in Europe as one of the world leaders in open aquaculture production,” Mr. O’Neachtain said. “As we experience both dwindling stocks and an ever increasing demand for seafood products, aquaculture appears to be the most realistic and sustainable way to provide quality fish products to consumers.”

The Workshop, which was funded under the EU 6th Framework Programme, was designed to provide anyone with an interest in offshore fish farming the opportunity to submit their thoughts on the next steps for future development. This information will now be included in a comprehensive report outlining the way forward for the European aquaculture industry and submitted to the European Commission in February 2008.

“The Irish fish farming industry is now producing more than 60,000 tonnes of fish per annum at a value of over €100 million,” said Mr. O’Neachtain. “In fact, production value doubled over the last 15 years. In real terms, the industry has created over 1,600 jobs.”

Speakers at the Workshop described experiences in the USA, Spain and Ireland in farming a variety of fish and shellfish in offshore conditions. Future trends in offshore aquaculture were discussed by Donal Maguire of BIM.

The objective of the EU project funding the Workshop is to investigate the opportunity and usefulness for the aquaculture industry of promoting offshore fish farming through a “technological platform” – a consortium of international experts and stakeholders. Achieving this objective requires the collection, validation and collation of data from a diverse range of sources on the opportunities and requirements of European offshore aquaculture and it’s evaluation to assess the appropriateness of a technological platform as a suitable promotional vehicle.

The Dublin Workshop, it is said, is a key part of this process.

Tuesday, September 25, 2007

AA cancels £50m IBM outsourcing contract

The AA has replaced its IT management team and cancelled its £50 million outsourcing contract with IBM, two weeks after the EC approved the sale of the AA to Saga's private equity owners, Charterhouse.

"We will be ending our relationship with IBM over the next 12 months," an AA spokesman confirmed.

AA and Saga will continue to trade as separate companies, although a group management team will oversee areas such as finance and IT, a Saga spokeswoman said.

Andrew Gisby, former IT manager at Saga, replaces Trevor Didcock as the AA's IT director. Didcock joined the AA in 2004, six months before private equity group CVC Capital Partners and Permira purchased the AA for £1.7bn from Centrica.

Didcock left the AA as a result of the merger and following a review of management, an AA spokesman confirmed. Jim Cameron, former IT director at Saga, will be group IT director over both the AA and Saga. Gisby will report to Cameron.

A study commissioned by the GMB union in August accused the AA of under-investing in new laptops for patrols. The AA categorically denied the claims made by the GMB's report and said it had invested £37m in its IT infrastructure over the past three years.

"As would be expected in any market-leading business, plans and the necessary investment - around £9m - are already in place for replacing the Vixen unit, which may not be a laptop-based unit. Technology moves on and we will implement a replacement at the appropriate time," an AA spokeswoman told Computer Weekly in August.

Offshore activity curtailed in Gulf

Oil and gas companies with offshore installations in the Gulf of Mexico whisked workers onshore and shut down some production Thursday while monitoring a disorganized weather system that could gain strength as it moves into the basin.

"It's not really a storm yet, but if it does form, it'll already be on top of everybody," Devon Energy spokesman Chip Minty said.

Many oil and gas platforms dot the central and east-central parts of the Gulf directly south of Louisiana and Mississippi, near the coast as well as more than 100 miles offshore in thousands of feet of water.

They include Royal Dutch Shell's Mars platform, the Gulf's most prolific producer at 160,000 barrels of oil and 121 million cubic feet of natural gas per day. It's 130 miles southeast of New Orleans.

And 185 miles southeast of New Orleans is Anadarko Petroleum Corp.'s Independence Hub, the world's deepest offshore production platform, which began production in July. It had been producing about 250 million cubic feet of gas per day and can ramp that up to 1 billion cubic feet per day, or about 2 percent of all natural gas production in the United States.

Both are among platforms that have been fully evacuated with production shut in as the system approaches.

"In order to ensure the safety of our workers, we are removing all personnel from our operated facilities in the eastern and east-central Gulf of Mexico," said Anadarko spokesman John Christiansen.

The Gulf has about 4,000 offshore platforms — 834 of those manned — which provide nearly 30 percent of the nation's crude oil production and about 20 percent of the its natural gas production.

Companies are watching the weather system off western Florida, remembering havoc wrought by hurricanes Katrina and Rita in 2005. Those storms destroyed more than 100 platforms and shut in 92 percent of oil output and 83 percent of natural gas production.

The Interior Department's Minerals Management Service, which oversees Gulf oil and gas activity, said operators reported Thursday that they have shut in 27.7 percent of the Gulf's 1.3 million barrels of oil per day and 16.7 percent of its 7.7 billion cubic feet of gas per day.

A shut-in involves closing safety valves below the water's surface to prevent oil and gas releases.

Approaching Louisiana
The National Hurricane Center said the low-pressure system was moving northwest and was expected to reach the central Gulf early today. The center anticipated that it would come ashore in southeast Louisiana.

AccuWeather said the system could become Tropical Storm Jerry today before moving inland.

In addition to the Independence Hub, Anadarko evacuated and shut in production at its Constitution, Neptune and Marco Polo oil and gas platforms, which collectively produce 145,000 barrels a day.

Shell said all of its Gulf platforms were being evacuated and production shut in on Thursday. Shell's net operated production in the Gulf is about 370,000 barrels of oil equivalent per day.

The threat to production, along with a falling dollar and lower U.S. interest rates, contributed to upward pressure on oil prices, which closed up $1.39 to a record $83.32 a barrel in trading Thursday on the New York Mercantile Exchange. Brent crude closed up 62 cents to settle at $79.09 a barrel on London's ICE Futures exchange.

Monday, September 24, 2007

Legal Process Outsourcing: Creating job opportunities

Legal Process Outsourcing is the latest trend. Big corporations are reaping the benefits. New job opportunities are being created. LPOs seem to have a bright future in India in the coming years. A report.

OUTSOURCING TO India and other lower-cost developing nations is the hottest topic in today’s global marketplace. Major corporations benefit from having work done at a quarter of the price, while the developing countries benefit from the huge influx of income and job creation. The latest industry to join the outsourcing rat race is the legal sector. Legal outsourcing has already created 12,000 job opportunities in India alone and this figure is expected to rise to as many as 79,000 by 2015.

Less than positive opinions expressed by some young Indian Law school students have left me baffled. Why would any young lawyer not want to be part of this exciting and growing sector? Young attorneys can earn a relatively high salary in comparison to domestic Indian firms. There are questions that are being raised regarding the quality and level of work being done by Indian attorneys working in LPOs.

Ramneek Sidhu, from Delhi Law School says, “After investing three years in law school, I don’t want to be caught dead working as a clerk in an LPO.”

Nishita too agrees with this view and further adds, “A lawyer in an LPO is definitely earning good money but at the same time is not justifying his/her profession. There is no direct litigation involved which is the essence of being a lawyer.”

Is it true to say that attorneys within Legal Process Outsourcing companies are nothing more than glorified law clerks, or are they really starting to become more heavily involved with the practice of international law?

Brij, a young attorney working with an LPO feels quite differently to both Ramneek and Nishita. He believes that he is making a sound progress in his career graph by working with an LPO. He says, “Many lawyers nowadays, whether in India, the US or the UK rarely see the inside of a court room. Working within an LPO and not a law firm allows me to keep in sync with the latest developments in US law. The legal thought process that any young attorney must develop over time comes from studying, reading and writing legal briefs and memoranda. I hope that I demonstrate my passion and emotion for law in the arguments I raise in the legal motions and documents I prepare. I know that the work I do is being utilized in the US by firms practicing US law for the benefit of real clients. Although, I don’t physically get to meet the clients who ultimately benefit from my endeavors, in today’s legal world this is by no means abnormal and just a fact of life. Our country is on the verge of becoming a major economic player on the world stage, I believe that I am contributing significantly to this and putting myself in a much stronger position to develop as an international attorney, as and when India opens its doors to foreign law firms.”

Palak, an attorney, opines, “The kind of exposure and opportunities provided by the LPO industry to lawyers is something which I could not have imagined when I graduated. Since my association with LPOs, my skills and knowledge have been under constant development. We aren’t just paralegals. We’re involved in hard core legal work and play an important role in the fate of cases and client matters being handled overseas”.

Vishal Aggarwal, Country Manager of a leading LPO in India says, “In the past, the work in legal services consisted mainly of support work including basic paralegal, secretarial, and litigation support. However, we are continuing to see increasingly higher value work being outsourced from the US and UK to Indian LPOs. Offshore legal process companies such as LawScribe have moved beyond traditional back office legal support services to increasingly more complex core legal work including legal research, patent and trademark searching and drafting, document drafting and due diligence.”

Mark Ross, UK attorney, LawScribe Director, and Legal Offshoring guru passionately believes that we are only in the nascent stages of this exciting and emerging industry. He says, “In the course of the next two to three years, a vast number of qualified Indian attorneys will be working within the industry. I believe the Indian government and the Bar Association will be left with no alternative other than to formally open up the market to foreign law firms and allow Indian attorneys to practice US and UK law from within India’s borders. Once this happens the substantive nature of the work being performed in LPOs, captive arrangements and US and UK Law Firms’ Indian offices will continue to increase. Many Indian attorneys will wish to remain within domestic Indian firms, however the lure of practicing International Law will prove extremely difficult to resist for others.”

LPOs are not just a fad or a passing phase. The trend has shifted from domestic law firms to an increasingly competitive global marketplace with massive scope and job opportunities. The clock is ticking fast and with time LPOs in India will be a much sought after industry to work with.

Outsourcing: source it out

Not very many years ago the idea of any organisation that had no foreign connections or markets arranging for large sections of its non-core activities to be handled by outsiders was virtually unheard of. Today, outsourcing certain business sectors to specialist providers is a fact of business life.

Driven by market and other pressures, smaller businesses need to invest all their time and resources into core areas of their business. What they do not want to do are the back office functions, including non-core activities such as accounting, payroll, VAT, employment and human resources, and health and safety.

With some of these tasks, such as payroll and VAT, it is simply a matter of efficiency and cost effectiveness.

With others, there are additional problems in keeping abreast with complex and ever-changing legislation to contend with. No matter whether the business is large or small there are opportunities for an outsourcer to take the strain.

Commercial organisations now look to their accountants to help them compete effectively by providing them with a range of added value services. In many respects, the accountancy profession has become the commercial world's first port of call when looking for help with outsourcing.

Unfortunately, the accountancy profession has not got to grips with the opportunities that outsourcing provides. Firms should be looking to generate business for themselves, both in an advisory capacity and as the recipients of outsourced work from clients. Practitioners should be well aware of the benefits to their clients of outsourcing non-core functions and should know them well enough to be able to identify those who should be taking this route. Of course, only the largest firms have the expertise to offer a wide range of outsourced services, but whether it is HR or IT, they should be able to recommend the right specialist.

As for the services that firms themselves can offer: management accounts, VAT preparation and payroll are prime examples. All these service are easy to provide, but can be extremely lucrative if the firm is well organised and geared up with a processing system to handle the work in the UK, or whether they outsource the work overseas.

When it comes to generating new business, there are also opportunities to acquire new clients who only require outsourced services. Where large practices face conflicts of interest they may be happy for their client to outsource work to a smaller firm that is not seen as a competitor. Some of the more progressive independent practices have housed their payroll facilities under a separate identity which they can then market to companies that do not use any of the firm's other services.

Saturday, September 22, 2007

Tips For Recruiting And Retaining IT Talent

Worldwide competition for IT professionals is becoming a pervasive problem, making hiring and retaining qualified--let alone top--IT talent a major concern for most organizations.

The IT job market hasn't been this good since the late 1990s, but it's a demanding market, too. As technology and business environments continue to change rapidly, IT professionals are required to learn and apply new skills to compete in a global economy. Today's IT jobs require more than just strong technical abilities; they also demand industry and business knowledge, as well as effective communication and interpersonal skills. My most recent research conducted in association with the Society for Information Management, to be revealed Oct. 9 at SIMposium in Memphis, Tenn., shows that retaining IT pros has surpassed IT-business alignment as the No. 1 concern for IT executives.

The market for IT professionals is still the fastest-growing sector in the U.S. economy, with more than 1 million new jobs projected to be added between 2004 and 2014. Six of the 30 occupations projected by the Bureau of Labor Statistics to grow the fastest in this time period are IT related. IT job prospects are expected to be good as demand increases because of rapid advancement in technologies, new business opportunities for leveraging applications, and the number of baby boomers expected to retire.

But there may not be sufficient IT talent to meet this growing demand. The IT hiring downturn during the early part of this decade and the fear of offshore outsourcing have caused a drop in enrollment for computer science and information systems courses at many universities. In the past decade, the number of students majoring in computer science has dropped 40%. A report from UCLA's higher-education research institute shows an even steeper decline of 70% between 2000 and 2005 of freshmen who planned to major in computer science. The loss of IT skills and IT professionals will only accelerate the shift of IT jobs overseas. If nothing is done to turn this trend around to meet the anticipated strong demand for IT workers in the United States, organizations will be forced to source their IT resources overseas, reinforcing a self-fulfilling prophecy that everything is moving offshore.

Harris Interactive reports that, in the second quarter, organizations moderately increased IT head count and salaries to attract and retain skilled and talented IT professionals. In the current employee-driven market, it's difficult to retain talented IT professionals, who have historically displayed high turn-over rates.

The turnover of skilled IT people is expensive and disruptive to organizations. Whenever a talented professional leaves, costs are incurred for hiring and training, as well as the cost of losing the professional's knowledge about his or her company. Recruiting and hiring IT professionals isn't cheap. The cost of hiring skilled IT people varies depending on the type of job and the specific skills required, along with other intangibles. Gartner estimates that IT employee replacement costs are 2.5 times the annual salary of an IT professional leaving the organization. Recruiting includes the cost of advertising, recruiters, traveling, interviewing, and training, as well as the productivity lost as the new IT professional comes up to speed.

Retaining IT professionals has taken on a new sense of urgency. Important considerations such as how to retain skilled IT professionals in the improving IT job market, how to prepare for offshore outsourcing, and how to ensure that IT professionals have the required business, technical, and interpersonal skills to succeed in the era of globalization are all important.

Greater outsourcing in Logistics

It's now the turn of the logistics industry to promote outsourcing as the only way for manufacturers to reduce the escalating supply chain management cost. And the fast growing organised sector of third party logistics solution providers - 3PL companies - are proving to be good at it. Growing at 25 per cent, per annum, India's 3PL industry is poised to expand its market manifold.

Leading 3PL players, who are participating at Logistics 2007, a three-day exhibition being organised by Confederation of Indian Industry (CII) in Chennai, said the logistics industry is getting restructured, focusing more on enhancing its knowledge offerings which promise huge cost savings in supply chain operations, reduced lead time and safe transportation of high value goods.

"Logistics is not a new name of transportation business. It is about offering total supply chain solutions, from ensuring delivery of components 'just in time' to manufacturers, to door deliver finished products 'on demand' to end customers, it encompasses the entire movement of goods, within and without an organisation," said G Ragunath, deputy general manager - Marketing, TVS Logistics Services Limited.

He said 3PL companies help original equipment manufacturers (OEMs) and their tier-I, tier-II suppliers effectively implement manufacturing best practices such as lean management and vendor managed inventory. Logistics takes off the anxiety from manufacturers on the timely availability of components and drastically reduce the inventory cost.

"With the entry of 3PL companies, there's a lot of clarity on what constitutes core business of stakeholders across the supply chain - in a typical production scenario, manufacturers manufacture and suppliers supply, while logistics companies take over everything that take place in-between - from handling of materials to packaging to documentation to transportation," he said.

He said OEMs can achieve a direct cost saving of over 15 per cent by partnering with 3PL companies. "As 3PL companies have dedicated fleets that do not depend on daily orders, adopt scientific practices for route optimisation and employ trained manpower, they can effect a reduction of transit time by over 30 per cent. Realising the benefits, practically all automobile manufacturers have made 3PL operations integral to business. The size of the organised 3PL market in automobile could be conservatively estimated at about 5 per cent of the turnover of the automobile industry in India," he said.

TVS Logistics has registered a turnover of Rs 250 crore in the last financial year.

A spokesperson of AFL Pvt Ltd, one of the leading 3PL companies which currently caters to the needs of electronics and IT hardware industry, said 3PL operators essentially consolidate warehousing operations and transportation, based on a resource sharing model.

"Many 3PL companies partnering with electronics players focus on door-to-door distribution - delivering laptops and desktops directly to the end customers, following 'hub and spoke' model of distribution. They provide reverse logistics solutions - carrying old products received from customers on exchange offers back to manufacturers; defective management solutions - replacing un-repairable products with fresh electronic goods. Earlier, it used to take 10-15 days before a customer got his defective mobile instrument replaced. However, after the advent of 3PL solutions, a mobile company can assure replacement within a maximum of three days anywhere in the country," he said.

On the changing business dynamics in the logistics industry, Sanil Kumar, sales manager, GATI, Chennai, said logistics services are increasingly sold based on pallet locations, rather than on floor space. GATI operates 'mechantronic warehouses' - fully automated warehouses - of about a million square feet across the country.

"We offer customised logistics solutions for customers of different sectors as billing, documentation, and statutory requirements differ from sector to sector. Once we acquire an account, we spend a couple of months to understand our customer's business and hire, train human resource and streamline our operations and establish physical infrastructure, such as warehousing, to suit the particular needs," he said.

Friday, September 21, 2007

Security outsourcing on the rise

As companies get more comfortable with outsiders managing security, the amount of security services being outsourced is growing steadily

As one of the world's largest outsourcing providers, Wipro Technologies is ramping up its security services business in a big way.

While the massive Indian company has had a security practice in place since 1998, Wipro officials say that the group has seen dramatic expansion over the last several years as customers gradually warm to the idea of offloading IT systems protection to external specialists.

With five individual areas of business, nearly 1500 workers, 170 customers, and a claimed internal growth rate of 100 percent per year, the Bangalore-based outsourcer contends that the time for security outsourcing take off has already arrived.

Faced with an ever-changing IT threat landscape and increasing pressure in the form of compliance mandates, businesses worldwide are getting over their fear of leaving security in someone else's hands and choosing outsourcing as a means to solve their problems, Wipro executives said.

"Attacks are getting more sophisticated, data leakage has become a huge concern, and customers understand that constantly implementing new policies and technologies has become a challenging task," said Prasenjit Saha, global head for security services at Wipro.

"We're working with customers to build the comfort factor, and most often, the projects start small, but as customers see what we can deliver and we build confidence under the co-managed model, we're slowly taking over more work," he said.

Since security budgets began rising in 2003, Saha claims that Wipro's services unit has flourished. Among the areas of rapid growth for the firm are such projects as access management, security event management, data monitoring, and compliance automation.

And while pricing has admittedly driven much of the growth of Wipro's business thus far, the executive said that his company is now winning deals based on its level of expertise.

"I have feeling that going forward, if we are focused and can provide good solutions that meet requirements, customers will increasingly look at outsourcing," Saha said. "It will be a cycle, but these deals won't always be driven by cost-savings, they will also be driven by our ability to outperform internal security."

By expanding its footprint slowly within customers over time, the executive contends that any negative perceptions of security outsourcing are being rapidly conquered.

"If you look at the positioning we're taking with customers, our objective is to work as strategic security partner and provide integrated solutions and services; some people feel it is a risk to outsource security, but those who have made the leap see the efficiency, and they're expanding their projects," Saha said.

IBM, Scotiabank expand relationship in $480-million IT outsourcing renewal

Scotiabank (TSX:BNS) is expanding its relationship with IBM Corp. in a new IT outsourcing deal that's expected to cost $480 million over the next six years.

Under the arrangement announced Thursday, IBM will manage the big Canadian bank's information-technology operations, including its data centres, branches and automatic banking machines.

The deal extends a contract signed in 2001, when IBM began to manage Scotiabank's IT operations and will provide a new "international" framework that will adapt to the bank's needs as it expands abroad.

"A lot of the agreement covers the very same scope that the original agreement covered," J.P. Savage, Scotiabank's chief technology officer, said in an interview.

"I covers our data centre operations, which includes both our mainframes and our midrange services, as well as our distributed desktops and our branch environment," Savage said.

He leads a number of teams within Scotiabank that determine what is needed from the IBM-managed IT infrastructure. In the original outsourcing deal in 2001, about 450 Scotiabank employees and 100 remained with the bank to oversee the relationship with IBM.

In addition, the bank kept software development in-house, with about 600 Scotiabank employees plus outside contractors.

Those parameters remain unchanged under the new deal but "what's somewhat different going forward is there's a bit of an offshore component here, with respect to what I would call more traditional operational jobs - monitoring, and those kinds of things," Savage said.

Bank of Nova Scotia is one of Canada's largest financial institutions and the most international of the country's Big Six banks.

The Scotiabank group and its affiliates operate in about 50 countries.

Because of IBM's expertise and global reach, the bank will be able to quickly gear up its IT capacity in the event of large-scale acquisitions or introduction of new computer programming, Savage said.

"As you can imagine, if you go out with a program that's going to have an impact on market share, that drives capacity requirements throughout the organization and we have to be responsive to that. So this allows us to be more nimble," Savage said.

The agreement calls for Scotiabank to pay IBM on a monthly basis on a per-service basis. The bank can also increase or decrease the services it gets from IBM.

"So this creates quite a lot of flexibility from the organization for growth," Savage said.

IBM Canada's Mark Wilson, who led the computer company's negotiations with Scotiabank, said a lot of work went into creating a "whole new global framework" for the relationship to the bank's growth.

In addition, IBM is bringing to the bank a new range of capabilities, including a centre in Brazil that will deliver select services to Scotiabank over time.

"It's one of our global centres for server operations, so they'll be doing monitoring and operations of computer servers over time in Brazil," Wilson said.

Scotiabank's servers are in Canada and will remain there, he added.

"We're not moving any servers or any customer information to another country. We're just taking advantage of skill pools in different countries and making sure that they (will) provide services to Scotiabank."

IBM Corp. is one of the world's biggest information-technology companies, with global revenues of US$91.4 billion in 2006 from the sale of computer hardware, software and services.

Thursday, September 20, 2007

SBM sees first sale of offshore LNG facilty in 18 months; enters JV with Linde

SBM Offshore said it expects the first sale of its Liquified Natural Gas offshore production facility, called LNG FPSO, within 18 months, and also announced a development partnership with Germany's Linde AG.

SBM said it now considers the LNG FPSO ready for marketing and added that it can now establish the cost and delivery time of each unit.

Spokesman Sebastiaan de Ronde Bresser told Thomson Financial News that SBM is already in talks with potential customers and that 'every major oil company and anyone who wants LNG is a potential client'.

The LNG FPSO is an offshore liquified natural gas production facility that allows the development of stranded offshore gas fields as it produces, liquifies and stores gas.

SBM said capital expenditures on each unit is 2 bln usd.

To shorten the design and delivery cycle time of the LNG FPSO, SBM said it decided to form a partnership with Linde.

'Linde and SBM have complementary skills and relevant experience to produce a reliable LNG FPSO solution in the shortest possible time,' SBM said.

SBM also said it has entered into a deal with the IHI shipyard of Japan for the engineering and construction of LNG hulls.

IHI has been commissioned to design a 230,000 cubic metre multifunctional LNG ship hill.

Global marketing efforts for the LNG FPSO start today and the first unit is expected to commence production of gas in 2012.

Linde and SBM said they are both confident that there is a strong upcoming demand for this type of facility.

US cos could save $9.9 b thru outsourcing: Study

“The few dozen TPI clients analysed, have unlocked at least $3.3 billion of total commercial value.”

Estimating that US businesses could be sitting on $9.9 billion in potential infrastructure savings through outsourcing, a latest Forrester study has found that companies that have outsourced, in the past, ended up with 12-17 per cent cost savings.

“The few dozen TPI clients analysed, have unlocked at least $3.3 billion of total commercial value. Firms at the high and low ends of the deal sizes saved closer to 12 per cent, while firms in the middle of the bell curve saved more than 17 per cent,” Dr Paul Roehrig, Principal Analyst, Forrester Research, said in the latest report, for which Forrester partnered with outsourcing advisory firm TPI.

While price remained a key driver, mature clients were seeking additional benefits such as access to skills, better service delivery, predictable delivery cost and sharper focus on the core business.

“Outsourcing is about jettisoning non-core business processes, to enable value accrual by focusing on business-critical work rather than enabling work that can be done better and cheaper by other firms. Outsourcing can be the force multiplier that helps firms focus on the core business rather than ancillary support functions,” it said.
Transactions data

To get outsourcing savings information for clients, Forrester asked TPI to provide data from recent transactions. Data from 53 separate IT outsourcing transactions from 2003 to 2006 were analysed – all of the deals included infrastructure management services, and 22 of the deals also included applications services.

The report concluded that from a pure cost-savings perspective, against the base spend (what it would cost without outsourcing), the few dozen TPI clients had unlocked at least $3.3 billion of total commercial value. The 37 clients who signed deals with a total contract value of $500 million or less saved about $1.3 billion.

“We know the global infrastructure outsourcing market is about $77 billion per year (EMEA is about $33 billion; the US is about $44 billion). And we know only about 30 per cent of businesses outsource infrastructure components now. That means that the potential US infrastructure outsourcing market can conservatively be sized at about $110 billion per year. If we assume our rough rule-of-thumb savings of about 15 per cent, it means that we can conclude that the potential latent asset US businesses are sitting on by not outsourcing more infrastructure services is about $9.9 billion per year,” Forrester said.

Wednesday, September 19, 2007

Indian embassy to outsource visa services

The Indian Embassy in the US has contracted an American firm to outsource its visa collection and delivery processes at its five diplomatic missions from October 1.

Indian Ambassador Ronen Sen said the new system will offer "speedy and efficient" service against the backdrop of a growing number of Americans travelling to India.

Travisa Outsourcing Inc will handle the outsourcing service for the embassy in the capital and the Consuls General in Chicago, Houston, New York and San Fransisco.

Sen said the outsourcing was necessary due to rapid transformation of India-US relations in recent years which has "manifested in an unprecedented growth of business travellers, tourists and other US residents to India and the introduction of several non-stop and additional travel services between the two countries".

The burgeoning cooperation in the economic, commercial, technological, educational and cultural fields and the "increasing close bonds" of the Indian American community with their country of origin has led to increasing demands for visa and other consular services, Sen said in a statement, adding "severe constraints" posed by space and shortage of trained personnel had made it difficult to provide efficient service.

Travisa Outsourcing will charge a service fee of $13 per visa application and offer same day collection at its visa application centres and next day service for applications received by post. It will also have a 24/7 call centre manned by bilingual staff.

The Indian envoy also said the consular wings of the missions will continue to offer services after office hours or on holidays for emergency travel on extreme compassionate grounds 365 days a year.

BR Pharma To Moderate Panel On Comparator Drug Outsourcing At ISPE 2007 Berlin Conference

BR Pharma Ltd., a leader in the procurement of pharmaceutical products for comparator trials and named patient programs, recently announced that Angus Cameron, the company’s head of business development, will moderate a roundtable discussion, titled “Sourcing Comparators for Global Trials,” at this week’s ISPE (International Society for Pharmaceutical Engineering) 2007 Berlin Conference in Berlin, Germany.

The September 19 roundtable will focus on guiding pharmaceutical and biotechnology companies through the process of efficiently and cost-effectively procuring comparator drugs for use in clinical studies. Among the topics to be discussed: advantages and disadvantages of various methods of sourcing; the importance of managing the supply chain and maintaining a documentation trail; and pitfalls to avoid in the sourcing process. Participants in the roundtable will include Aptuit, Inc., which provides a comprehensive suite of drug development services and competencies to more than 600 biotechnology and large, fully integrated pharmaceutical innovators worldwide.

"With the costs for delays in many pivotal clinical trials exceeding USD 1 million a day, locating a specific comparator drug and managing the logistics of providing that drug for a clinical trial is a complex, time consuming process outside the expertise of many pharmaceutical companies," Cameron said. "Outsourcing to a specialist firm, which takes on and manages the entire process, can often be the timeliest and most cost-effective approach for pharmaceutical companies."

“Every day lost in a clinical trial has consequences in time and money, thereby compromising the trial program,” Cameron said. “The business of the drug company is to innovate, develop and market pharmaceuticals. This is most successfully done by leveraging the contact network and experience of a dedicated specialist firm, which already will have in place an immediate sourcing network that includes original manufacturers as well as a network of validated manufacturer approved wholesalers. Outsourcing the procurement of comparators to a qualified third party will provide a single point of contact for all sourcing, regulatory, logistical and administrative issues that surround obtaining the drug. It also will assure validity of the supplied comparator throughout the supply chain.”

Tuesday, September 18, 2007

First Data outsourcing will target tech jobs

First Data hopes to save $150 million annually in an outsourcing plan that targets nearly 6,000 of its technology employees.

The company says it's adopting the plan "to more efficiently compete on a global scale, better utilize our global talent and footprint, and leverage the labor pool in lower-cost locations," according to a securities filing from the company Monday. First Data estimates it has 6,600 technology workers, 90 percent of whom are in-house employees.

First Data spokesman Colin Wheeler declined to specify a number of employees who could be affected by the outsourcing.

The company has 2,000 Denver-area employees, many of whom work at the corporate office.

The filing presents information given to potential investors in new debt from the Greenwood Village-based transaction processor. First Data is trying this week to sell $22.4 billion in loans and bonds that will allow buyout firm Kohlberg Kravis Roberts to buy First Data for $29.8 billion.

The credit markets have significantly deteriorated since the deal was announced in April. KKR, as the buyout firm is known, is trying hard to get the debt sold. Part of the effort is convincing Wall Street that First Data will have the cash flow to make the payments.

The global outsourcing plan is the largest of several cost-cutting initiatives. First Data also is consolidating 12 data centers and seven "command centers" in the U.S. into three and two over the next several years. The company announced that plan soon after Ric Duques became CEO in the fall of 2005.

First Data said it will incur charges of about $125 million to $150 million to implement the initiatives.

As First Data prepped to sell its debt, it modified several terms to make the loans more palatable for investors. Still, the sale continues to be rough going.

"We just think that that's too leveraged of a deal for the current credit market," Wesley Sparks, portfolio manager and head of U.S. credit strategies at Schroder Investment Management in New York, told Bloomberg News.

Growing pains dim India's outsourcing edge

Indian outsourcing companies are shifting some of their operations to China, the Philippines, Vietnam and Kenya in a bid to stay competitive as higher wages, expensive property prices and a rising rupee eat into profits.

Back-office services companies thrive on doing jobs such as taking customer calls, payroll management and accounting at a fraction of the cost for big multinational firms or governments.

But costs in India are climbing on the back of a robust economy that has lured skilled workers to other sectors, forcing companies to look elsewhere to stay in business.

"If I was only in India, probably I would have been worried to death," said Partha Sarkar, chief executive of HTMT Global Solutions Ltd.

The Bangalore-based back-office services provider used to generate all its revenue from India by providing services to its clients in the United States. But India now accounts for little over half the total, and rapid expansion in the Philippines and Mauritius has helped it offset the impact of a stronger rupee. It plans to enter China and Vietnam soon.

The company sees its 2008 revenue jumping to $150 million from $97 million in the last fiscal year.

"Three years back, I was completely exposed to rupee-dollar," Sarkar said. "Now it doesn't worry me. I have diversified my currency and country risk."

In July, Infosys Technologies, India's second-largest software services exporter, said it would buy three of Royal Philips Electronics' back-office services units in Thailand, Poland and India to expand market presence.

The back-office services unit of the third-largest software exporter Wipro Ltd plans to set up two facilities in China to tap growing business opportunities there, its chief executive T.K. Kurien said.

India's English-speaking workforce, a big factor in winning call-centre jobs, faces competition from countries like Kenya.

"When compared to India, we are better off in terms of salary and cost per seat, and we have a large pool of Kenyans with clear accents," said Bitange Ndemo, permanent secretary in Kenya's Information Ministry.

Monday, September 17, 2007

Outsourcing businesses acquiring up-close and personal flavours

In the past three months, GetFriday, has seen more than 300% increase in its business in terms of customers

Finding a new job for an out-of-work software engineer in the US or having a repairman fix a broken window pane in Geneva is all part of the day’s work at GetFriday, a Bangalore-based company that offers such services, termed virtual assistance, to individuals and small businesses across the world.

This is outsourcing up-close-and-personal. Companies offering such services remotely support faulty home computers, file individual tax returns, tutor schoolchildren online and run personal chores. The business could be worth $2 billion (Rs8,100 crore) by 2015, up from $250 million in 2006, according to an April 2007 study on person -to-person offshoring by Evalueserve, a global knowledge services firm.

In the past three months, GetFriday, a division of TTK Services Pvt. Ltd, part of the TTK Group, has seen more than 300% increase in its business in terms of customers: from 200 customers in June, it now services 700. To cope with the demand for more work, it has, over the past six weeks, hired 80 employees to take its staff strength to 120. “There is still a three-week backlog of requests to deal with,” said Sunder Prakasham, chief executive of TTK Services, who conceptualized and launched the service in August 2005.

Mphasis Ltd, a Bangalore company that is part of Electronic Data Systems and is better known for the back-office and software applications work it does for large companies, files up to 10,000 tax returns for individual customers in the US. “We deal with various levels of complexity; for instance, if the client has used returns from the sale of a ranch in Texas to fund a round of gaming at a Vegas casino, we go back with annotations to the chartered accountant firm in the US which outsourced the task to us,” said Sachdev Ramakrishna, vice-president, strategic marketing, Mphasis.

“Cost arbitrage is not the only reason personal tasks are being outsourced to India. For instance, we get the bulk of our business from accountancy firms that prefer to focus on high net worth clients and pass on routine tax filings to offshore firms,” said Ramakrishna, who added that the Mphasis’ billing rate of $75-80 for filing a return is comparable with what an accountancy firm in the US would charge.

There is a similar trend in support services for individual users of computers. More than 40% of the $100 billion IT customer-support market in the US is outsourced. In India, this has spawned businesses such as iYogi, a start-up company based in Gurgaon, offering remote support for computer users primarily in the US and the UK.

“Ninety per cent of computer malfunctions are software-related, which are problems a user can fix himself if he is guided by an expert on the phone,” said Vishal Dhar, president, iYogi. Launched in early 2007, iYogi aims to have one million customers by 2011, up from the current 55,000.

“Remote technical support, education services and health care are the three segments where we expect the highest growth in offshoring of personal services,” said Alok Mittal, executive director at Canaan Partners, an early stage venture capital (VC) firm, which, along with SVB Financial group, invested $3.1 million in iYogi in April.

Tutor Vista, an online tutoring service based in Bangalore, has also raised a total of $15 million in VC funding from investors such as Sequoia Capital and Lightspeed Venture Partners to fund a growing business that now has more than 100,000 registered users primarily in the US and the UK. Tutor Vista has a network of 600 tutors, spread across 28 Indian cities, who receive 60 hours of training before they actually start to tutor a student online. “Personal offshoring is finally a consumer marketing business where service providers have to spend on marketing and brand building if they are to attract and retain customers,” said K. Ganesh, founder and chief executive officer of Tutor Vista.

IT outsourcing boom has come and gone, study says

LARGE firms that have fueled the global information technology outsourcing boom and have put developing countries such as India and the Philippines on investors' radar screens are getting to be picky, according to a recent study.

"We do believe that the boom years for IT outsourcing growth have come and gone," said Brian Tumpowsky in a statement. "Buyers are learning to be more selective and strategic in the way they approach outsourcing and, as such, the pace of growth is slowing."

Tumpowsky is co-author of the 2006 Global IT Outsourcing Study conducted by Diamond Management and Technology Consultants (DMTC), a Chicago-based IT management consulting firm.

DMTC's study reveals that buyers are still prematurely terminating contracts, and questioning the value of onshore outsourcing. They are also struggling with the basics of determining what to outsource, measuring effectiveness and managing a global pool of resources.

Buyers are concerned about contract renegotiations, extensions and terminations to seek additional outsourcing opportunities.

In 2006, 8 percent of offshore buyers said they plan to decrease their levels of outsourcing over the next 12 months. This is compared to DMTC's previous study in 2004 in which none of the buyers said they would decrease the amount of outsourcing they were doing.

Firms are reining in outsourcing for three reasons: either they mistakenly outsourced a process or function that is core to their business and are now bringing those back in; their provider over-promised and under-delivered; or, the complexity of managing and measuring outsourcing projects and relationships overshadowed the benefits.

This however does not signal the death knell for IT outsourcing.

DMTC said the industry is alive and will continue to grow well into the future, although at a slower pace.

The pace of growth has declined significantly over the past several years. In 2004, 86 percent of all buyers told DMTC that they were going to increase their level of offshore outsourcing--albeit at a slower pace than in years past. By 2005, that number had slipped to 70 percent and currently sits at an all-time low of 64 percent.

The good news is, overall, the percentage of buyers satisfied with their IT outsourcing decisions remains quite high, with 71 percent of buyers saying they were happy with their offshore providers. In 2005, the offshore satisfaction rate was only 62 percent.

The study polled hundreds of senior executives mainly based in the United States and Europe and studied industry trends over the past 12 months in the areas of spending, buyer satisfaction, outsourcing impact and leadership of the changing outsourcing market.

Saturday, September 15, 2007

Accenture wins multi-year outsourcing contract from BT

Accenture is providing BT with finance and accounting (F&A) services under a five-and-a-half-year business process outsourcing (BPO) contract. Financial details of the agreement were not disclosed.

Under the terms of the contract, Accenture is providing services related to management reporting, financial planning and analysis, month-end close activities and budgeting/forecasting to BT's operations, initially focused in the UK. The services are being delivered through Accenture's Global Delivery Network using delivery centres in India.

This contract complements three current BPO agreements between the two companies, which include a contract to provide a full range of finance processes to BT Global Services in the United States, Europe and Asia, and contracts to provide BT with a range of human resources and learning services on a global basis.

Outsourcing savings lost to poor processes

Survey finds majority of manufacturing companies outsourcing operations losing hard dollars due to outdated processes

Companies that outsource parts of their operations without appropriate processes in place could ultimately lose the potential cost savings outsourcing promises.

Survey results released Wednesday show that 85 percent of 800 manufacturers polled outsource part or all of their manufacturing operations, but two-thirds of those reported they use manual, time-consuming processes such as phone calls, faxes and e-mails with spreadsheets. The US-based survey, conducted by manufacturing product life-cycle management (PLM) vendor Arena Solutions and consulting firm Symphony Consulting, also revealed that 52 percent of manufacturers who outsourced and depended on manual methods lost money due to communication and documentation errors.

"While outsourcing offers significant financial merits and enables companies to focus on their core strengths, it is not free of challenges," said Bijan Dastmalchi, co-founder and senior consultant at Symphony Consulting, in a press release. "Outsourcing manufacturing without the proper infrastructure and control is a recipe for failure."

Specifically, costly errors led to rework, scrapped inventory, excess materials and product recalls, according to Arena Solutions. Areas that posed challenges for companies outsourcing manufacturing include coordinating new product introductions, managing changes, and communicating information across organizational and geographical boundaries.

"Shepherding a product from design through manufacturing is difficult, but introducing outsourcing into the process pushes it to a significantly higher level of complexity. Despite the cost savings associated with outsourcing, the management task becomes even more difficult and carries greater risk," Dastmalchi said.

Fewer than one-third of survey respondents reported they use PLM systems, but those that did reported having fewer outsourcing issues compared with peers depending upon manual processes. For instance, those using PLM reported they have 32 percent fewer problems with new product introduction, 29 percent fewer problems with environmental regulatory compliance and 26 percent fewer problems with product change management.

Friday, September 14, 2007

Outsourcing driving warehousing market

In September 2006, when Indo Arya Logistics director Yogesh Arya was poring over his plan to build India’s largest warehouse, he was not sure whether this was a step his company was ready for.

In a tightly held private company like his, almost all investments are funded entirely out of internal accruals. A Rs 50-crore warehouse, which would be huge enough to accommodate two Melbourne Cricket Club grounds, seemed more of an ego trip than a business decision.

The risk of not getting enough customers to fill the space was there. Nevertheless, Mr Arya pursued the project, thinking that if the warehouse didn’t bring in sufficient revenues, the premium on the land he bought certainly will.

Today, only three months after the warehouse was made available, Indo Arya has rented every sq ft of space the company possibly can. In fact, enticed by this huge demand, Mr Arya has commissioned work on adding another 2,00,000 sq ft to the existing 5,14,000 sq feet facility.

The fact that the warehousing segment is seeing significant investments is not limited to Indo Arya. By 2008, Third party logistics service providers (3PL), with the likes of TNT, Transport Corporation of India (TCI), Blue Dart, Gati and Safexpress, are looking at creating more than 25 million sq ft of warehousing space in India.

Analysts suggest that the segment alone will see investments of almost Rs 2,000 crore in the next three years. There is a reason for this. “On the demand side, the need for warehousing is entirely outsourcing driven,” says Krishnakant Thakur, analyst at Edelweiss Securities.

Outsourcing wasn’t an option till 2006. “With the phasing out of Central Sales Tax (CST), manufacturers need not manage their own warehouses and can comfortably outsource it to a third party,” Mr Thakur adds.

Earlier, in order to prevent being taxed under CST, manufacturers had to maintain multiple warehouses to show movement of goods from one company warehouse to another. Today, they are more than willing to outsource it to a warehouse management company and concentrate on their core business.

Indo Arya, for instance, is undertaking warehouse management for a clientele base which includes companies such as ITC Foods, Pantaloon, Reliance, Nestle, Coca-Cola and P&G among others.

“It makes sense for the companies to outsource. They save on costs, time and also enjoy the benefits of a lean supply chain,” says Mr Arya. Bolstered by the growth prospects, Indo Arya is also contemplating a 20% equity stake dilution to fund investments. The company has an ambitious plan to set up warehousing capacity of two million sq ft in the next two years.

On the supply front too, 3PL service providers are more than willing to invest in warehouses because of substantially higher margins than any other segment of supply chain management.

The outsourcing gambit


A closer look at the $4.2 billion homegrown telecom giant’s big outsourcing gambit suggests several similarities with that of the global fast food icon McDonald’s . The Big Mac does not run restaurants anywhere in the world and outsources everything right from procurement to supply chain management to even making its chicken patties and milkshakes. Instead, Mcdonald’s ’ focus is only to be a slick marketing machine , enticing more and more people to step inside the golden arches. Similarly , at Bharti, it’s IT and network management is outsourced, so is the running of its 6.5 lakh retail outlets across the country, and more than 80 per cent of its customer care call centres.

“Bharti’s strength is brand management , people management and customer management. We went through a list of activities where others were better than Bharti, and decided to let them do it for us. We went to the very best companies in the world. No way in the world would we know telecom equipment better than Ericsson who actually makes them,” Kohli says.

In hindsight, Bharti’s pioneering move would seem like a no brainer given the market conditions in 2002-03 .

Bharti was the dominant private sector player in mobile communications but was up against state run behemoths such as MTNL and BSNL and nearly half a dozen ambitious private sector rivals. Bharti had to scale up massively and yet remain twinkle toed. “In 2004, there was enormous competitive pressure on Bharti and it had to constantly keep an eye on regulatory changes. That can really stretch the management’s bandwidth . The Bharti-IBM deal freed up the management to focus squarely on customer acquisition and delighting them,” says Ashish Kumar, relationship director, at IBM for Bharti.

What differentiates Bharti’s outsourcing deal with vendors such as IBM, Ericsson and Nokia Siemens is the revenue share model instead of the conventional fee-based service. “We follow a tiered revenue approach whereby our rewards are directly linked to the growth in Bharti’s topline,” explains IBM’s Kumar. All the quality parameters are customer oriented and there are penalty and bonus clauses built in.

IBM has a dedicated army of 1200-1300 employees servicing Bharti, and almost 80 percent of the people resources at Ericsson and NSN service Bharti’s infrastructure. Today Bharti does not have on its rolls too many people with high operational skill sets in the areas of IT and infrastructure management . “Earlier we had a team of 100 people running the networks. Today it has been pared down to the bones. There are just a handful of people at Bharti who look after the governance and review of our partners,” says Kohli.

“As Bharti focusses on brand management , Ericsson on the other side is rolling out Bharti’s internet protocol (IP) based core network, so that they are ready to fire on all cylinders wherever the new 3G telecom policy is announced ,” explains Ericcson’s Granryd.

The Bharti outsourcing deal with Bharti has been so successful for both Ericsson and NSN that between themselves they’ve added close to 150 similar clients across the world. Mittal and the top brass at NSN, Ericsson and IBM say, they that they are inundated with queries from several Fortune 500 companies on their successful outsourcing partnership. Last year, even the venerable Harvard Business School came out with a case study on Bharti’s strategy.
Bharti’s road to outsourced success was not easy. When the decision to farm out IT to IBM was taken, there were more than 250 anxious employees in Bharti’s in-house IT team who worried about their future. All of them absorbed by IBM with a personal assurance from Mittal that they could come back to Bharti within two years if they didn’t like the new set-up at IBM. “Not one has wished to come back,” gushes Kohli.

For IBM too, its relationship with Bharti became a trophy and an example of its new ‘On Demand’ model of customer relationship. Sunil Mittal was invited as the key note speaker at two successive IBM CEO forums in Shanghai and Rome, and at its annual analyst meet in India as well. Earlier this year, in an interview to CD, Virginia Rometty, senior VP, Global Business Services, IBM cited the Bharti deal as a perfect example of business transformation outsourcing.

Thursday, September 13, 2007

Reverse outsourcing takes off as rising costs hit Indian IT firms

Indian IT firms that thrived on the outsourcing boom in the West are themselves headed offshore, from Malaysia to Mexico, to escape the double sting of surging salaries and a rising rupee.

Tata Consultancy, Infosys, Wipro, Satyam and smaller companies are stepping up acquisitions and opening more facilities closer to US and European clients to cut costs -- the reason why work was farmed out to India in the first place.

Salaries of software professionals rose 18.7 percent in 2007, a survey showed Tuesday, while the rupee has gained almost 10 percent this year to near 10-year highs against the dollar.

That's eroding the cost advantage once enjoyed by the 50 billion dollar information technology industry, which bills two-thirds of sales in dollars but whose expenses are almost all incurred in rupees.

IT firms are "off-shoring" work to time zones and locations nearer their clients in a reversal of the trend that made Bangalore, India's Silicon Valley, the favourite back-office of the world's biggest companies.

Bangalore also gave the English language a new slang verb: being "bangalored" in the US meant a person had lost his job because it had been handed to an IT company in India that would do it for a fraction of the cost.

The term looks set to lose its pejorative punch as the same IT industry, which employs 1.63 million people at home, creates and sustains thousands of jobs abroad.

This week Wipro opened a facility in the Mexican city of Monterrey to service American and European clients and Satyam launched a software centre in MSC Malaysia, a government-designated high-tech zone.

"In the past, we viewed off-shoring as India-centric, but we do not do it any more," said Satyam founder B. Ramalinga Raju, who on Monday opened the centre to support business in the US, Southeast Asia and the Middle East.

"We look at off-shoring as delivering through high-quality workforce in lower-cost countries," he said.

Hyderabad-based Satyam has hired 300 mostly-Malaysian IT engineers to man the facility, whose workforce will rise to 2,000 in four years to cater to clients such as GlaxoSmithKline, one of its top 10 customers.

Malaysia was chosen because of its "competitive cost environment," said Raju, whose company is distributing work to locations where "it makes the most business sense."


Companies that outsource IT functions save between 12% and 17% of the cost of doing the work in-house, a new report from Forrester Research Inc. finds.

The savings take into account the expense of moving the work to an outside provider, advisor and legal fees, severance for any employees let go, taxes and ongoing management of the deal. Moreover, the discount is conservative, said Forrester analyst Paul Roehrig, because it does not factor in harder-to-quantify benefits that can be accrued in a good outsourcing deal.

"There's additional skills that you would get, technology expertise, predictable delivery costs, none of which is included in these savings figures," said Roehrig, who covers sourcing and vendor management at the Cambridge, Mass.-based firm.

The Forrester study was done in conjunction with TPI, a global advisory firm in The Woodlands, Texas, that specializes in structuring large outsourcing deals. The firm publishes the TPI Index, a quarterly report on outsourcing trends based on data from its clients, primarily global 1,000 corporations. TPI reported that in 2006 it handled outsourcing contracts worth $21 billion.

The Forrester report analyzed data from 53 separate outsourcing transactions handled by TPI from 2003 to 2006. All of the deals include infrastructure management services; 22 also included application services. The savings rate was calculated by comparing the projected internal costs without outsourcing with the total planned cost with outsourcing. The average savings across all deals was about 15%, or about $3.3 billion in total commercial value.

"That's a big number. Even if you're 10% or 15% off, it's still a big number of commercial value that is locked up," Roehrig said. "The other side of the coin is that these outsourcing plays, at this level, shouldn't just be about savings. There are other benefits of outsourcing that have a multiplier effect on the dollars saved. Such as flexibility, such as a market presence in another part of the world, additional skills, technology expertise, all of which is not even included in these technology savings."

Wednesday, September 12, 2007

Opportunities in Outsourcing

As Ben Franklin famously said, "In this world nothing is certain but death and taxes." We all have to buy the farm one day, but we don't all have to do our taxes -- many of us can and do pay others, like H&R Block, to do them for us. In that regard, companies are no different from individuals.

In addition to taxes, corporations often have regulatory hurdles to clear. These seemingly mundane tasks aren't exactly what top brass at a hot, cutting-edge tech upstart wants to focus on.

Thankfully, there are companies to handle these back- and front-office functions for them. These outsourcing (not to be confused with offshoring) providers serve thousands of companies, providing added expertise, shifting burdens away from key management, and helping firms manage their cost structures. While companies might pay a premium for such services, the firms providing them free their clients to concentrate on more vital matters. And for investors, these helpful companies can yield impressive returns.

Companies helping companies

If you work in a major metropolitan area, chances are you've seen an Iron Mountain (NYSE: IRM) truck. Iron Mountain, which plies its trade in document management and data protection services, has the lion's share of U.S. document compliance contracts, and a strong presence abroad. The company owes some of its success to Enron and its mass-shredding ways. Since Sarbanes-Oxley was signed into law in 2002, Iron Mountain's stock has more than doubled.

If you aren't sold yet, know that the company passes the "Oracle" test; it's one of Warren Buffett's top 30 holdings. While Iron Mountain is pricey at more than 40 times earnings, you can't help but like its growth prospects, given its greedy domestic market share and its proven ability to gain overseas footholds.

The business-services space offers a plethora of strong outsourcing companies. Names like Automatic Data Processing (NYSE: ADP), Paychex (Nasdaq: PAYX), and First Data (NYSE: FDC) have posted solid gains over the last few years. Typically, management service companies help businesses both small and large handle such exciting tasks as payroll, benefits administration, job applicant screening, and complying with local labor regulations. While this sector is a bit overcrowded, and mostly fully valued, its occupants have been proven winners.

Think outside the cube
Don't just think cubicles and mailrooms when looking for outsourcing names. Companies that service regulatory and back- and front-office tasks also come from several other areas including the medical arena.

Parexel (Nasdaq: PRXL) performs regulatory and medical consulting, health policy and reimbursement services, and clinical trial management, helping pharmaceutical companies can focus on their drug pipelines. In a little more than 10 years, the company has gone from $10 to north of $40, rewarding those wise enough to recognize its helpful ways. At more than 30 times earnings, much of its value is baked in; however, competitor Pharmaceutical Product Development (Nasdaq: PPDI) might have a little more room to run, at a more reasonable 25 times earnings.

Yet another name that helps companies in the medical field with compliance issues is Waste Management (NYSE: WMI). Like Iron Mountain, chances are you've seen the company's trucks bustling about town. Medical waste isn't the only segment from which the company stands to profit, especially if states and municipalities enact mandatory eWaste programs. Environmentally conscious places like California and Maine have already done so, and more are likely to follow suit. Along with Allied Waste (NYSE: AW) and Republic Services (NYSE: RSG) the company controls more than half of the U.S. waste disposal market.

The advantages of being helpful
Companies that provide outsourcing services often enjoy strong, defensible moats around their businesses. Many of these companies enjoy steady work, because larger corporations are less likely to tinker with contracts that aren't part of their core business, and small businesses often have nowhere else to turn. In addition, outsourcing outfits aren't likely to attract a great deal of competition, thanks to the sheer scale required to get such operations up and running profitably.

The downsides here are obvious and few, the biggest being that regulations can change. In the event of an economic downturn, outsourcing names that handle functions like HR could face cuts, or prompt smaller business to pare back their reliance on pricey external help. Still, these same companies are often best poised to handle changes in the regulatory environment, since they typically have more resources dedicated to tracking these changes, and more experience in understanding how to roll with them.

Potential in high-level finance outsourcing services

High-level finance outsourcing services can be a potential avenue for Malaysia to differentiate itself from other business process outsourcing (BPO) markets.

Chartered Institute of Management Accountants (CIMA) director of strategic development Rick Sturge said China and India were currently catering to low-level finance outsourcing activities, which provided Malaysia an opportunity to venture into high-level services.

“There is a market (for Malaysia) to provide higher-value services, such as investment research analysis,” he told a briefing on BPO opportunities in Malaysia.

Sturge said traditional finance outsourcing focused on low-level transactional activities, such as general accounting services like sales accounting.

Higher-value offerings, he said, included financial-reporting services such as investment-research analysis and knowledge-process outsourcing.

Sturge said the “war for talent” globally was creating difficulty for companies to achieve continuity and consistency in providing services.

“BPO and shared-services operators are being pushed to deliver higher-value services to clients and this is putting a strain on their resources and talents.

“They have to address this by bringing in more skilled people in an effective and efficient manner,” he said, adding that BPO operators saw value in having CIMA-trained professionals due to their skills.

CIMA is a leading membership body that offers an internationally recognised professional qualification in management accountancy.

Sturge said CIMA professionals were equipped with strategic management skills and expertise in accounting, business and financial management.

“It’s about effective analytical work to make the right decisions, manage performance and risks and drive business success. That’s what we are training people to be,” he said.

Sturge, meanwhile, said the global finance-outsourcing market, which is estimated to be worth US$70bil annually at present, was expected to grow to US$100bil within three years.

Tuesday, September 11, 2007

Customs deal blows out by $40m

AN Australian Customs Service outsourcing contract with IBM has blown out by more than $40 million since it was signed three months ago, as the agency added GST and a contingency for rising processing costs to the estimated bill.

IBM was awarded the mainframe and mid-range computing services contract on June 5 when the deal was announced as a five-year, $160 million agreement that replaced Electronic Data Systems' long-standing mainframe deal with Customs.

But contract values published by the agency under a Senate standing order showed that Customs now estimates the cost of the agreement at $203.15million over the same five-year period.

The jump in costs is similar to a $14 million rise in the value of a $140million Department of Immigration and Citizenship contract that was recorded earlier this year, when Immigration added GST to its outsourcing bill.

A Customs spokeswoman denied the additional $43million on its IBM contract represented an increase in the value of the agreement.

"The value of the contract has not changed," the spokeswoman said. "The $160million figure is the tendered price over the five-year period of the contract in today's dollars, excluding GST for the volume of services sought by Customs.

It was awarded as Customs broke up its nine-year-old outsourcing contract with Texas-based EDS.

EDS first picked up the Customs deal in December 1997 when all of the agency's IT functions were outsourced under the federal Government's failed $5 billion mandatory outsourcing contract.

The EDS deal was worth $200million over five years and gave Customs the option for two two-year extensions.

Customs exercised both of those extensions and the documents published under the Senate order showed that EDS will pocket $693.98million from the deal by the time the final components of the agreement expire in the middle of next year.