Business & Policy

Offshoring is viewed with increasing ambivalence in the IT industry, according to the exclusive 2007 Skills Survey from CNET News.com sister site Silicon.com

The decline in the number of outsourcing agreements, and relatively-soft outlook for 2007 "is driven by the fact that offshore tasking is considered a preferred alternative to outsourcing among corporates," according to a new TPI report.

Vietnam is tipped to become a more popular outsourcing destination than both China and India within the next five years.

Trade and investment liberalisation, long viewed with ambivalence in much of the developing world, is facing growing scepticism in rich countries. The heightened concern has been prompted in part by fears of job losses, wage stagnation, and growing inequality. However, a recent analysis by the Organisation for Economic Cooperation and Development (OECD) suggests that, while the dangers of economic globalisation are real, they have been greatly exaggerated.

As industrial growth in China suffers increasingly from constraints on its resources and environment, the country has been paying more attention to its services industry in order to make its economic growth sustainable. Software development is one of its targets. In 2006, China's software industry had combined sales of 480 billion yuan (S$94 billion), 23 per cent higher than 2005. But, more importantly, with the rapid development of telecom infrastructure, software development is no longer centralised.

Smaller BPOs vouch by cost effectiveness and strategise to stake their claim on larger profits. Small and medium business process outsourcing (BPO) enterprises are gearing up to give names like Progeon, Convergys, IBM-Daksh, Accenture and WNS a run for their money.

It may be the loneliest — and toughest — job on the planet. Abused by providers, repudiated by the business lines, asked by management to scale mountains in nanoseconds equipped with very few resources. Only the bravest and thickest-skinned need apply. How can these agents of change thrive, and survive, the almost impossible job of changing global services delivery?

Offshoring - love it or hate it, if you have anything to do with decisions about technology in a large organisation you won't be able to avoid having an opinion about it. Outsourcing continues to grow and along with it the option of outsourcing to offshore locations, in particular India. Last year saw the largest number of outsourcing contracts signed ever, according to sourcing advisors TPI, and Indian companies are steadily growing their market share.

There is a strong perception in the market that the captive business model is under threat. The story goes that third-party suppliers, especially in the Indian context, are maturing and are taking significant steps to expand the scale and the scope of processes delivered, thereby posing a threat to the captive model.

Offshore development has been embraced by the vast majority of commercial software vendors and enterprise application development groups. Why? Because a world flattened by globalization makes it possible to improve competitiveness by taking advantage of the easy exchange of low-cost, high-quality technical skills. But despite the obvious cost and skill advantages, sending software projects offshore introduces new risks to your software development projects.

When Mike Tulloch took over as senior project manager for global plastics manufacturer Nypro’s outsourcer in China in 2005, he proudly proclaimed that he spoke not a syllable of Mandarin.  At the time, IT leaders at the $1 billion company were more concerned that Tulloch be able to coordinate the rigid project documentation that would have to take place at their headquarters in Clinton, Mass., before sending their Web development work to Beijing-based IT services provider Objectiva. And Tulloch, working part-time, was able to accomplish that for Nypro.

Concern about the alleged threat of "offshore outsourcing" -- that manufacturing would increasingly move to China, and services to India -- has inevitably declined from the hysterical levels of three years ago. The issue was big news in the run-up to the 2004 U.S. presidential election. Remember Democratic candidate John Kerry indicting "Benedict Arnold CEOs" who sent "American" jobs overseas?

For decades, Alan S. Blinder -- Princeton University economist, former Federal Reserve Board vice chairman and perennial adviser to Democratic presidential candidates -- argued, along with most economists, that free trade enriches the U.S. and its trading partners, despite the harm it does to some workers. "Like 99% of economists since the days of Adam Smith, I am a free trader down to my toes," he wrote back in 2001.

Vendor management ranks right up there among your most critical capabilities. New monthly columnist Amir Hartman explains why CIOs need to take charge, how to go about doing it, and why trust is so key to this relationship.

Offshoring, especially to India, has become an important issue in Australia, There is no significant public backlash, but the players are treading warily while the critics circle. We examine the latest developments.

Santiago, also known as Santiago de Chile, has a low cost of living compared to other large Latin American cities. With a population of 200,792 (according to 2002 census), the urban population of the capital of Chile is 43% of the total urban population of the country.

If you are an executive of a multinational looking for geographies in which to expand your markets, operations, and investments, is China more attractive than India? South Africa better than Mexico? Does Russia have more promise than the United States? The answer you devise can be crucial to your company's future.

Working in India could not have been better at any other time considering the salaries that the market is offering. Employees across industries in India saw their salaries increase between 11.9% and 16% (average 14.4% increase) in 2006 over the previous year, according to Hewitt Associate’s 11th annual Salary Increase Survey released a few days ago. This makes 2006 the fourth consecutive year in which salaries grew by double digits.

India and China continue to dominate the Index. India maintains a wide, albeit slightly shrinking, lead over China, confirming what industry surveys and visiting executives repeatedly find – for all the concern about overheating, wage inflation and service levels, India still offers an unbeatable mix of low costs, deep technical and language skills, mature vendors and supportive government policies.

Despite the hype over globalization and suggestions that the top managers of large corporations should come from/be based in emerging economies like India and China, we have only a handful of instances where corporations have done something tangible in this direction.

Striking the right balance between reward maximization and risk minimization is definitely the most daunting aspect of an offshoring decision. The cardinal rule in such a case would be to include a range of investment vehicles in the portfolio, which could leverage the portfolio to maximize strengths and minimize weaknesses

The word offshoring still causes some IT professionals to break out in a cold sweat and others to reach a low boil. Debates continue to rage on the merits and morality of getting technology work done by non-Americans for wages lower than those of their U.S. counterparts. But meanwhile, the practice of offshoring has not only become more prevalent, it has also begun to mature.

The cab driver leans hard on the horn as we race past a motorbike upon which mum, dad and two small children are precariously balanced. None wearing helmets, of course.

The Rise of India, a new book written by Niranjan Rajadhyaksha, offers insightful perspectives on how India reached its current level of economic prosperity, warts and all. An editorial-page editor with Mint, a new financial daily in India, Rajadhyaksha uses wide-ranging interviews and hard data to back his arguments.

In 2006, two pure-play offshore BPO firms, WNS and EXLService, listed in the U.S. Mumbai-based WNS and New York and Noida, India-based EXLService have done well on the markets so far. The third offshore BPO firm — the largest such firm globally — that is getting ready to be listed on the U.S. bourses is Gurgaon, India-based Genpact.  

At the start of 2007, we have once again surveyed the lawyers in Morrison & Foerster's Global Sourcing Group in key markets in the United States, Europe and Asia. This update collates their views on the state of the global outsourcing market and makes predictions about what to expect in 2007. Our views are based not only on what we have seen in the many sourcing projects with which we have been involved over the past 12 months, but also on the views of many of our clients, service providers and outsourcing consultant colleagues.

Godfrey Pinto has great credentials. He has three master’s degrees, including an MBA, and a bachelor’s in economics. He has a solid position, too, as director of offshore outsourcing, a role he has held for six of the nine years he has worked in IT at a large East Coast technology company.

As sourcing is now regarded as a global game, its use as a key strategic tool is creating numerous opportunities and advantages for those who manage and deploy it well. But just how many organisations actually know the strategic value of their outsourcing activities?

In December 2006, Mumbai-based Tech Mahindra won India's biggest outsourcing deal to date -- a five-year, $1 billion contract from British Telecom to provide technical support. Tech Mahindra, in which BT has a 35% stake, bettered a September 2005 deal in which three Indian IT services firms were among five international providers picked by Amsterdam-based financial services company ABN Amro for one of the biggest outsourcing contracts ever handed out.

He is one of the most prominent matchmakers in the outsourcing arena. Outsourcing advisory TPI co-founder, Dennis McGuire has seen his firm help global majors source transactions with a contract value running into several billion dollars in US, Western Europe, Canada, Korea, Mexico, Australia and Japan. Even as he warns of deals getting smaller, the outsourcing advisor seems sold on the fast-emerging Asia Pacific market. It has seen a five-year high last year in outsourcing activity.

A lot of big contracts were inked in December last year. IBM Global Services and Siemens bagged the biggest of all.

IT is indicative of the graduation of the Indian IT-enabled services industry. They feel it is time they stopped referring to themselves as the call centre business, if they have to move up the chain in customer mindshare. The Call Centre Association of India has rechristened itself as Business Process Industry Association of India (BPIAI).

Even as Infosys and other Indian companies have prospered, they have contributed to rising inequality levels in India -- in part by helping to bid up salaries for those who get top jobs. "Democratic societies," said Laura D'Andrea Tyson, an economics professor, "need to have a population that feels the benefits from this process are shared by them."

Quotes from CEOs and CFOs on recent earnings conference calls, discussing their companies and markets:

Organizations that outsource operations to offshore environments consistently save money by taking advantage of lower labor costs. While that's not surprising, evidence increasingly suggests that most offshore initiatives could do much better at improving cost efficiency.

When 13-year old Taylor, who lives in Modesto, California, wants help with her homework, she no longer goes and asks her mother for help. Instead she goes to her computer and gets on the internet, where she dials up an e-tutoring service, TutorVista, based in Bangalore, India, for help with her maths and English.

Last week I was in Beijing for yet another conference on the rise of Asia (especially China and India) and its implications for the global economy. Before turning to substance, let me share a few casual impressions about China’s capital city, which I was revisiting after fifteen years.

The village of Ethakota in India's Andhra Pradesh state hardly looks like a place that has been transformed by the Information Revolution. To get there, you take a 10-hour train ride from Hyderabad, the nearest big city, then drive an hour on narrow roads past rice paddies, coconut groves, and ponds teeming with prawns and crabs.

BPO and ITO outsourcing demand is generally growing, but the first half of 2007 will see a slower rate of growth than in previous years, according to EquaTerra's 4Q06 Outsourcing Pulse Surveys. EquaTerra believes this is the beginning of a "multipronged readjustment" in the overall BPO/ITO outsourcing market.

GLOBALISATION is a big word but an old idea, most economists will say, with a jaded air. The phenomenon has kept the profession's number-crunchers busy, counting the spoils and how they are divided. But it has left the blackboard theorists with relatively little to do.

The village of Ethakota in India's Andhra Pradesh state hardly looks like a place that has been transformed by the Information Revolution. To get there, you take a 10-hour train ride from Hyderabad, the nearest big city, then drive an hour on narrow roads past rice paddies, coconut groves, and ponds teeming with prawns and crabs.

2006 was a profitable year for Indian outsourcing giants TCS, Infosys, and Wipro (all three of which reported high-profile deals and double-digit profit growth). As usual, the outsourcing industry continues to thrive despite controversy and consumer resistance; however 2006 also saw some changes in the industry, many of which indicate that the industry is coming into its maturity. Following are some of the major trends in the outsourcing industry in 2006.

Mention globalisation and a curious mist descends that prevents straight thinking. It is now a given on left and right that billions of low-paid workers are going to take away western jobs and make European welfare and taxation levels unaffordable luxuries. The only options are trade protection or a Darwinian low-tax, low-welfare fight to the finish - equipped with whatever education and training we can get. We must all accept our fate.

2006 in the outsourcing world was once again about India but increasingly also China, as the geographical boundaries became ever more blurred. Fewer high-profile outsourcing deals also suggests companies are finally getting the hang of the new 'multi-sourcing' approach of divvying up work between a few key suppliers. Despite this progress, reports Andy McCue, outsourcing remains a contentious and divisive issue.

The skies are anything but friendly for airlines these days, with high fuel costs, the constant threat of terrorism, and accelerating competition from low-cost carriers. Last year was especially rough for Continental as fuel costs skyrocketed in the wake of Hurricanes Katrina and Rita.

BANGALORE, India - First came orientation at the Hyatt Regency in Burlingame -- name tags for all, a buffet of pasta, sushi and apple pie, the quick rundown on company goals and ethics. Then the recruits prepared to climb aboard three jet airliners for the 30-hour journey to Bangalore, headquarters of their new employer, Infosys Technologies.

Alsbridge CEO and Collaborative Outsourcing pioneer, Ben Trowbridge, says, as the outsourcing industry moves into 2007, higher priority must be placed on staying cost competitive and staying ahead of global trends in the sourcing market.

If you want to find out what’s going to be the next trend in outsourcing, it pays to visit Bangalore. I dropped in on a 2-year-old startup that’s delivering analytics as a service. It’s Mu Sigma, with offices in Schaumberg, Illinois, and downtown Bangalore.

With offshoring to developing Asian nations becoming more and more prevalent, many believe the UK is set for fall. But the NOA's Mark Kobayashi-Hillary argues the outcome of global business is not nearly so clear-cut.

While HP’s acquisition of Compaq was significant in size, it was Lenovo’s acquisition of IBM’s laptop division that created a landmark event in the global technology industry. It signified the emergence of a new era of globalization where leading corporations in developing nations have started acquiring a dominating presence in the West.

Explore the two sides of the ongoing offshoring debate.

Note: "The Offshoring Research Network is a project of the Center for International Business Education and Research (CIBER) at Duke University's Fuqua School of Business. The ORN project was launched in 2004 and 2005 in partnership with Archstone Consulting LLC and has continued in 2006 with the Booz Allen Hamilton Inc as the lead corporate sponsor."

On a recent trip to Silicon Valley, silicon.com analysis and reports editor Sylvia Carr spoke to IT leaders at Stanford University about their greatest concerns - including outsourcing and management. Here is the first in a two-part series.

Explore the two sides of the ongoing offshoring debate.

Note: "The Offshoring Research Network is a project of the Center for International Business Education and Research (CIBER) at Duke University's Fuqua School of Business. The ORN project was launched in 2004 and 2005 in partnership with Archstone Consulting LLC and has continued in 2006 with the Booz Allen Hamilton Inc as the lead corporate sponsor."

Harvey Nash group development director Paul Smith reports that his company is seeing boom conditions in its outsourcing business, with annual growth rates of about 40%.

Many times, business organizations encounter the dilemma of ethical decision making. “If a CIO says ‘I’ve never faced an ethical issue’, they’re not living in the real world,” says Larry Ponemon, chairman and founder of the Ponemon Institute, a security and privacy research think tank based in Arizona.

Earlier this decade, one of the biggest fads in global management was to set up offshore business processing outsourcing (or "BPO" in industry jargon) in India to handle a myriad of tasks, from payroll and in-house technical support to sourcing procurement, in the name of saving cash.

When Apple said in March it would build a 3,000-employee customer support center in Bangalore, India, to cut operating costs, it was a major step. Apple has always based its industry-leading support centers in the U.S. and Canada. A move offshore would risk a nick in its polished reputation.

One of the more frustrating aspects of offshoring is communicating effectively with customer service agents whose English language skills are suspect.

IBM Global Technology Services recently announced a change of focus to its Infrastructure Access Services in response to the perennially changing business environment. Following what it terms “Years of Value Acceleration” between 2003 and 2006, IBM sees a need to innovate across products/services/markets, operational processes and business models.

While there may be very sound reasons against outsourcing certain functions for your organization, it makes all the sense in the world to examine your operations, run the numbers and determine for yourself whether BPO has a role to play in your organization.

The Fortune 500 could potentially save $58 billion annually or over $116 million on an average per company, by offshoring many of their back-office activities, according to research by The Hackett Group, a strategic advisory firm.

What's one to make of two recent, and diverging, Duke University studies of outsourcing's impact on the U.S. engineering workforce?

Companies are mostly driven by the cost arbitrage in outsourcing arrangements, blissfully unaware of the future pricing factors that could impact the arrangements in a dramatic way. Here are a few guidelines to help companies avoid financial drain in the long term.

India has successfully claimed a significant share of the offshore business process outsourcing (BPO) market, but recently, there have been allegations that call center employees there have stolen data entrusted to their employers. As a result, concerns have risen about the security of data held by Indian service providers, and companies that outsource to India are seeking out the remedies that are available to them to deal with and prevent the misuse of data in India.

The offshore exodus of software programming over the past half-decade has slashed costs, eliminated tens of thousands of American jobs, and given rise to a huge industry in India. Now a debate has begun about whether the globalization of software is a serious threat to national security.

Companies are increasingly moving sophisticated, mission-critical functions such as product design and research and development to China, India and other offshore locations primarily because these countries can provide highly skilled scientific and engineering workers who are in short supply in the U.S. and Europe, according to a new study by Duke University and management consulting firm Booz Allen Hamilton.

You can outsource a project, but you can never outsource management of a project. As outsourcing has grown to be a major tool in business projects, that maxim has been touted widely. But the devil's in the details. How, exactly, do you manage an outsourced project?

Earlier this year, a newly appointed CIO examined a software application developed for his financial-services firm by an Indian outsourcing firm. He was aghast at what he saw. It was so bad, he told software industry consultant, Josh Greenbaum that he feared someone had launched the project not to create software, but to create some sort of a bizarre tax write-off.

While outsourcing service providers cited slowing to flat quarter-over-quarter deal pipelines growth and slower demand level growth for the next quarter, EquaTerra advisors saw modestly improved quarter-over-quarter demand growth in its 3Q06 Outsourcing Pulse Surveys.

AS MANY as 50,000 Australian jobs could be sent offshore, mostly to India, as banks look to slash costs, the Financial Sector Union of Australia estimates.

As organisations increasingly opt to outsource back-office functions, Cameron Timmis looks at whether any will take the next radical step of outsourcing legal work.

The U.S. tech industry began offshoring assembly and testing in the 1970s, followed by chip fabrication and much system design work in the 1980s and ‘90s. Next went software development, which was outsourced to offshore service providers, followed by business process outsourcing (BPO). Now experts believe another offshoring wave looms: engineering design.

There is growing concern among some commentators at the impending growth of regulatory scrutiny of outsourcing in the securities industry in the USA and Europe through introduction of additional regulation governing outsourcing. It is important to put these impending regulatory changes in context.

The forum objective is to promote development of Ukrainian market of software development and IT Outsourcing Services. Ukraine has rather good potential for development of the most high tech area of world economy.

Across much of the world, India is still known as a land of elephants and maharajahs. But one day, it might be known for Tata.

It's the relationship, stupid. That was the message at the Outsource World conference in New York City Oct. 17-18, where the subject of how to get around outsourcing relationship pitfalls was front and center during various presentations.

Outsourcing is increasing its reach in terms of vertical industry reach as well as geographic scope. While the firms investing in it are wide-ranging, their individual needs are all similar in that they need to reduce overheads as much as possible. Yet the outsourcing phenomenon is rarely understood.

This short executive report format on the Argentine call center BPO market is the first of four concise reports in the authors South American series that will also cover Brazil, Mexico and Chile in short order.

The growth and success of the Indian ITES-BPO sector is due to a combination of strengths India possesses, of which high security standards and world class practices are a key part.

Outsourcing services are offered through various delivery models. Of these, the Build, Operate, Transfer model is growing in popularity...

Companies want an edge through new business models, but in innovative strategic thinking for clients, Indian IT firms lag the global giants, says Forrester's Navi Radjou

A large talent pool and requisite infrastructure are the key reasons why India has the potential to control 25 to 30 per cent of the offshore engineering design services market by 2020

India's outsourcing industry, flourishing with business from an expanding base of American and European customers, is facing greater criticism after a series of security breaches.

Data show the euro zone's failure to keep up with tech change, and its poor innovation rate, pose greater problems than cheap foreign labor

Outsourcing is still more of an art than a science. But it's now part of the corporate toolkit, and it's important to use this tool right.

Asset Management Outsourcing, Inc. (AMO) is a mid-sized collection firm that provides services to credit grantors throughout the entire life cycle of an account...

Maximizing value from BPO engagements is high on a customer’s agenda. But risk aversion usually takes precedence over trying a different pricing model that would effectively measure that value

A few years back, top of mind outsourcing destinations began seeing a shift from the U.S.A., Canada and Ireland to China and India. Now customers are increasingly finding themselves being serviced out of countries such as Brazil, Malaysia, Poland and the Czech Republic.

Recent commentary about the state of American workershas emphasised income in-equality - declining prospects of low-skilled workers relative to their more highly skilled counterparts. Part of the discussion has centred on the role played by globalisation.

As we have reported in previous installments on this ongoing series of articles on Finance and Accounting Outsourcing (FAO), the primary driver of FAO is cost reduction through labor arbitrage. So, if cost reduction from labor arbitrage is a common factor in almost all FAO transactions, should we expect a similar business case across companies who employ FAO?

As companies rush abroad to cut back-office costs, one fact gets forgotten in the fray. Costs of small increases in error rates are enormous and can easily wipe out cost reductions from cheaper labor. A data-entry error in a document such as a loan application may make it impossible to process the document automatically, incorrect loan documents may be created, the end customer may call with complaints, and there might be soft costs as well.

Despite China's enormous pool of university graduates (3.1 million in 2005 alone), MGI research suggests that fewer than 10 percent of Chinese job candidates, on average, would be suitable for work in a foreign company, and the fast-growing domestic economy absorbs most of those who could.

Indeed, far from presaging a thriving offshore services sector, MGI points to a looming shortage of home-grown talent, with serious implications for the multinationals now in China and for the growing number of Chinese companies with global ambitions.

To avoid this talent crunch and to sustain the economic ascent of the past 20 years, China must produce not just more graduates but more suitable ones.

Reforms in the educational system—including greater emphasis on practical and language skills—will help the country fill its skilled-labor gap.