Document is prime requirements in the process of Offshore Outsourcing. For example if the of native technical staff cannot read your mind about what you want in the product or project, how can geographically distant, non-native English speakers understand the requirements of client during the Offshore Outsourcing process.
Training of the Offshore Outsourcing team is important. The main thing is that outsourcing staff needs to know how the product works, both from the internals and from the perspective of knowing the problems the client wants to solve. Especially if you have Software Development occurring in multiple sites around the globe, you require a clear change process to make sure only the changes you want are allowed which makes by developing an appropriate change process.
Qualify provide by the vendor is equally important while Offshore Outsourcing process. Does the vendor have domain knowledge or not? Is it financially viable? Are there enough contractual safeguards in place to keep control over the intellectual property that you give it? These are some of the question to be asked before going for Offshore Outsourcing of the work.
The selection of Offshore Outsourcing projects with nonvolatile requirements is also important criteria. If the requirements changes frequently and it needs to check out the evolving product with the user, Offshore Software Development Outsourcing across the international makes it much harder. Planning of in-house staff by shifting their work hours is one another way for better process. If there is not enough people shifted to work earlier or later in the day, then someone across the overseas country who has a problem won't find someone to talk to.
Offshore Outsourcing
Make one of the best project managers as internal project manager by assigning him or her. Because there is a project manager at the client doesn't mean vendor don't need someone in their office to make sure all the appropriate handoffs are happening or not. Plan for each project to take longer and cost more, especially at the beginning of an Offshore Outsourcing relationship. The thumb rule is to increase the estimated time by 30% for the first Software project and then monitor the project to see if it needs to increase that estimate. Insist that the Offshore Outsourcing organizations keep the same team for client project's whole duration. Otherwise, the time spent on training by their people is wasted and vendor will have to start the training process again.
In placebo supported of the Offshore Outsourcing team make sure you have the tools, information systems and processes. They will need access to the source code, defect tracking system, database or other platform applications, builds, etc. which the same project tools that the internal IT-teams need. The verification that the people working on your Software project are the ones actually working on the same one. American organizations have been using the bait and switch approach to contracting for number of years. If client don't verify periodically who is working on their Software project, the project could be the learning ground for their newer staff to build their career. Well, the non American Offshore Outsourcing company has learned the same technique.
1/16/2007
Fight for outsourcing deals intensifies
Competition between IT outsourcing providers is continuing to intensify, spelling more complex procurement cycles but potentially lower prices for customers.
That was the finding of a new report from sourcing advisory firm TPI, which found that while the number of European outsourcing contracts climbed during 2006, the total value of these contracts fell by over a fifth as firms pursued a greater number of smaller, shorter outsourcing deals.
Duncan Aitchison, managing director of TPI in Europe, said that this so-called multi-sourcing strategy was forcing service providers to compete more to win the same quantity of business.
"In general terms, this increased competition is clearly good for buyers," he added. "However, greater diversity and specialisation among suppliers, combined with more frequent tendering, does mean more complexity in both the procurement process and the management of outsourcing contracts."
The reports also noted the growing influence of Indian outsourcing providers at the expense of established US and European firms. Indian companies now account for seven percent of the global outsourcing market, according to TPI, while the Big Six service providers - Accenture, ACS, CSC, EDS, HP, IBM – have seen their market share fall from 71 percent in 2002 to 46 percent in 2006.
"The figures clearly show a maturing of the India-based service providers, as they challenge the established players by taking an incremental approach and signing a large number of small, specialist contracts," said Aitchison. " India-based providers are clearly considered an attractive and credible alternative to traditional players and over the next few years we expect to see them competing directly with the Big Six for larger value contracts."
That was the finding of a new report from sourcing advisory firm TPI, which found that while the number of European outsourcing contracts climbed during 2006, the total value of these contracts fell by over a fifth as firms pursued a greater number of smaller, shorter outsourcing deals.
Duncan Aitchison, managing director of TPI in Europe, said that this so-called multi-sourcing strategy was forcing service providers to compete more to win the same quantity of business.
"In general terms, this increased competition is clearly good for buyers," he added. "However, greater diversity and specialisation among suppliers, combined with more frequent tendering, does mean more complexity in both the procurement process and the management of outsourcing contracts."
The reports also noted the growing influence of Indian outsourcing providers at the expense of established US and European firms. Indian companies now account for seven percent of the global outsourcing market, according to TPI, while the Big Six service providers - Accenture, ACS, CSC, EDS, HP, IBM – have seen their market share fall from 71 percent in 2002 to 46 percent in 2006.
"The figures clearly show a maturing of the India-based service providers, as they challenge the established players by taking an incremental approach and signing a large number of small, specialist contracts," said Aitchison. " India-based providers are clearly considered an attractive and credible alternative to traditional players and over the next few years we expect to see them competing directly with the Big Six for larger value contracts."
The Spin Cycle of Outsourcing
When Ross Perot spoke of the "giant sucking sound" during the 1992 elections, he spoke of U.S. jobs leaving the country because of cheap labor abroad. Outsourcing has since become a watchword of corporate America's continuous and heartless quest for cost cutting and downsizing. What was the threat of Japan in the '70s and '80s became Mexico for the '90s, and more recently it has been China and India conspiring with corporate America to take our jobs and send us all to the poor house.
And yet, here we are in 2007, and despite the Internet bubble burst, despite wave after wave of outsourcing, downsizing, rightsizing and just plain firing, the bay has yet to be sucked dry. Tumbleweeds do not blow down an empty Highway 101. In fact, according to the state Employment Development Department, California unemployment levels were at a 30-year low of 4.5 percent in October, with the San Francisco County level at a minuscule 3.8 percent. What happened?
I've spent these past 15 years in the technology industry, traveling the world, alternately getting sucked out of, and spat back into, the American workforce. My first job out of college was as cheap foreign outsourced labor, working at a computer help desk at IBM in Tokyo, an inexpensive American by yen standards at the time. I migrated my way to the Bay Area, where I worked for a computer hardware company at the height of the Internet boom. But as the bubble burst, and cheap Asian competitors took away market share, my whole department was laid off.
With the "if you can't beat 'em, join 'em" philosophy, I went to work for Solectron, an outsourcing company with operations in all the "low cost geographies" of the world. I helped transfer jobs abroad and shut down factories in the United States until something alarming happened. Our company was getting outsourced. Low-cost Asian outsourcers were beating up American-based outsourcers. Margins were falling. Our own layoffs loomed. So I hit the road again, going to an outsourcing consulting company, working with all the groups involved to try to design better solutions.
But what is the solution? How do you make outsourcing not ... suck so much?
What I've discovered isn't so much a one-way drain on U.S. business, but rather a spin cycle, a whirling of people, products and places coordinated to produce our daily goods and services. To understand this process, to check to see if we're missing a few socks, I've reviewed my past 15 years of experience in places from Europe, to Mexico, to Asia and back again to the Bay Area.
The basic concept of outsourcing is that companies want to specialize in what they do best, and find another source for all the other stuff. For example, Bay Area companies like Cisco and HP specialize in designing next generation technology, and are perfectly willing to have someone else assemble the final product someplace else. At home, I have a drawer filled with severed heads. They're novelty items from the 1940s, bottle stoppers with the corked heads of pop culture figures from the day: Winston Churchill, Cary Grant, Charlie Chaplin. They were made in West Germany, not because the Germans were on the forefront of cork-gluing technology, but because the starving refugees of WWII were willing to work for pennies an hour, and thus got stuck making cheap toys and trinkets.
Germany has long since grown from the head-making, cork-gluing phase, and ceased to be a destination for U.S. outsourcing. It has now moved to the next step in the cycle -- sending its stuff abroad. Last year, I visited a semiconductor equipment manufacturing factory in Germany where gray-haired engineers in white smock coats assured me that only highly trained (and highly paid) Germans were capable of building their products. Not surprisingly, costs had already sent many German-produced products southeast to the Czech Republic, where cheaper labor turned the final nuts and bolts to assemble the items.
But the past 15 years have changed the job situation in the Czech Republic as well. Almost none of the basic manufacturing was left there, either. The Czech workers have also become too expensive, their labor laws, unions and higher standard of living dictating higher salaries, which made bolt-turning better done elsewhere. I had a beer in Prague, toured a nearly empty factory and moved farther east to Budapest, Hungary.
Budapest seemed like a fine end-of-the road destination for outsourcing. Gray skies, gray buildings, the gray river splitting Buda from Pest. During the day, thick old women lined the paths of the parks, pleading for anyone to buy their handmade lace. At night, thin young women lined the same paths, dressed in lace, pleading for anyone to buy them.
A chain-smoking driver in a duct-taped Trabant took me to a suburban Budapest-based computer assembly factory one morning. We passed graffiti-covered block houses, scrub-filled lots and finally an advanced technology factory built to take work from Western Europe for brand-name electronics product companies. Like Germany and the Czech Republic before it, the factory was half empty. What happened? "The damn cheap Romanians are taking our jobs," one worker said.
But in Budapest, like Czech and Germany, some work did remain. The factory manager touted new custom build techniques, a lean supply chain, highly trained workers and their relative proximity to Germany. It was no longer cost, but value they were selling. "It's not like we're a bunch of stupid untrained Chinese workers or something," said one worker. It is the Chinese who have been held to be the ultimate threat to "our" jobs, be they here, in Germany, Hungary or even Romania. China's near limitless supply of labor and a government dedication to business has created a massive shift of manufacturing across the Pacific and into these mysterious factories. I had visions of Roman slave ships, a huge man in a fur vest beating a drum, while another cracked a whip over workers chained to benches assembling iPods, Nikes, or those huge inflatable crayons.
When I arrived at a factory outside of Shanghai, things were unsettlingly normal. I saw the same spotless assembly lines I witnessed in Germany, in Budapest and in San Jose. Uniformed workers quietly put together pieces of cell phones, printers, cameras and other items whose guts all seemed the same to me.
And then the buzzers went off. People started moving toward the doors. Was it ... an actual Chinese fire drill? It was! I waited for the chaos, the screaming. No, orderly groups lined up in sequence of their product assignments, their uniforms lending the operation the feel of a high school pep rally. The workers themselves seemed like junior high school girls, giggly, holding hands, toting Hello Kitty lunch boxes, even taking buses back home at the end of the day, or walking arm-in-arm to the nearby dormitories.
Yet these were no junior high schoolers. To get a job at a flagship factory of an international company was a tough process. Most were well educated, having to pass a battery of tests and background checks to get such a job. At least this factory had standards. The failed applicants would be working with battery acid at some shady sweatshop in the Gobi desert.
But it wasn't just the Chinese working in China. The plant manager was Chinese, but he worked for a boss in San Jose. The finance manager was from Romania, the project manager from Malaysia and the materials manager from "the Republic of Texas," as he called it. The parts for the products were sourced mostly in China, but with bits from Europe, the United States and elsewhere in Asia. A Taiwan shipping company sent finished product across the world to customers, who were happy that the product had become less expensive. And somehow, everyone ended up making money on the deal.
I felt like a character in "Catch-22," listening to Milo Minderbinder explain that he bought eggs for 7 cents in Malta and sold them for 5 cents in Italy for a profit.
It recalled a day in Bordeaux, France, the last place in the world you would think of as an outsourcing destination ("Farthest place from the German border," said the plant manager with a wink). At an American-owned electronic products factory, a Brazilian was presenting the "Sao Paolo" technique of factory management to a Japanese customer who wanted to produce computers there for the Belgian government. The spin cycle was whirring so fast I was losing track of who I was supposed to be angry at for taking my job.
Companies brag to Wall Street every quarter about how much money they are making on outsourcing jobs abroad. But they become silent when asked for a quote reflecting that reality. The companies fear the bad press, the perception that outsourcing is somehow unpatriotic, that American jobs are being given away to less worthy people overseas.
The reality is, America is not a nation of bolt-tighteners. If jobs hadn't been sent abroad, on a regular basis over the past 200 years, we'd still be hand-picking cotton on plantations, and weaving shirts on huge looms in sweatshops in New York City, while somewhere abroad the microchip engineers would be sipping wine and watching TVs that American workers were assembling in 24-hour-a-day factories. The question is, do you want to be the place that sends out the unskilled labor jobs, or the one that receives them? According to Lou Miscioscia, managing director and technology analyst at investment banking firm Cowen & Company, "The economics of outsourcing is simple.If you don't find a place to make your products cheaply, someone else will, and they'll put you out of business. U.S. technology firms that succeed are those that can balance outsourced manufacturing with in-house product development and product knowledge."
The moral issue is not so much the loss of these menial manufacturing jobs, but the question of what happens to those workers who had been doing those jobs. U.S. CEOs usually go for the quick fix -- send the jobs abroad and fire the workers. Wall Street has the instant gratification of costs cut, and rewards the companies with higher stock prices. If anything, the CEOs who initiate such strategies should be the first to be outsourced to low-cost countries -- the strategy is the managerial equivalent of bolt-tightening: repetitive action with no thought involved.
Just as companies continue to think of innovative ways to get rid of jobs -- of menial tasks -- they need to think of innovative ways to create new jobs for their existing workers. The easy answer is to fire the old, hire the new and wait for the spin cycle to bring in the next generation of worker for the next generation of product. Retraining programs are difficult, long-term solutions whose results don't show up on corporate balance sheets in time for Wall Street endorsement. But those companies that have survived the waves of outsourcing, the waves of industry upheaval, have been able to turn the subtraction of jobs through outsourcing into an addition of jobs. It's Milo Minderbinder math.
To understand the equation, I went south to Mexico, Perot's original source of the sucking sound. They had their own drain in the past 10 years, with jobs washing away from Mexico across the Pacific to China with tsunami-like speed. Mexico was cheap, but China was cheaper. Then a strange thing happened. Some jobs came back.
"There's some basic physics involved," said a technically trained plant manager in Guadalajara. "They're here," he pointed on a map to China, "And we're here," he pointed to central Mexico. "We're the same time zone, an hour's flight from California. We can work together with Silicon Valley engineers so much easier. And there's a big difference between a slow boat from China bringing product, and trucks rolling across the border from Mexico, offloading into a Best Buy. Start adding all those things together, and it's not so cheap in China, hey?"
As Mexicans began to lose their cheap outsourced jobs to someone who was cheaper, they had to innovate. They had to train their workers, modify their factories into sources of products and services which merited higher prices than those coming from China. I toured factories in Guadalajara ("The Silicon Valley of Mexico" reads the sign greeting visitors from the airport) which bragged they were the most efficient not only in Mexico, but in the world ("except for maybe the Japanese, but look how much they cost now!" said a tour guide). Guadalajara-area manufacturers have partnered with local universities, government agencies and international firms to create a new value proposition of highly trained engineers, ultra-efficient assembly lines and innovative transport plans. And because of this creative use of the same workers, in the same sites, business is coming back to an area that was forecast to be finished.
And what of the partners to the north, the Bay Area businesses who started this whole cycle of technology outsourcing? Our evening news is quick to publicize even the smallest layoff, but rarely does it announce the new hiring plans. It just wouldn't fit into the negative spin cycle. It got to the point that when I attended an Asian business conference at Berkeley's Haas Business School, an engineering grad student came up to me and quietly asked, "So, is there any point in my getting a degree here? Really, it sounds like I should just move to Beijing, learn Mandarin and drive a cab or something."
I told him not only are local firms hiring, they're desperate for engineering talent to help design the new generations of products. For example, my former employer Solectron is battling low-cost Asian competition by offering high-touch services locally in collaborative product design, repair, and analysis for area technology firms. A quick search on their Web site shows 75 open engineering-related jobs in the Bay Area. One local manufacturing company told me that their most profitable factory, worldwide, was here in Silicon Valley. Despite having the most expensive labor, land and supplies, they were "practically printing money" in comparison to their barely profitable plants in China and Eastern Europe.
And this is the latest setting on the spin cycle. Local venture-capital startups have a desperate need for quick new product prototypes, built and modified locally, with heavy engineering input. They're willing to pay a premium for these services. And companies are willing to pay a premium to find workers who can fulfill those jobs. The student is actually in the right place at the right time, despite all the media hype that says otherwise. The spin cycle of outsourcing has given local companies the opportunity to create even more jobs, even more business -- as long as they innovate. For example, to do the wash correctly (I'm told) you have to choose the right clothes, select the right settings, add the right detergents and only then will things turn out right at the end of the spin cycle. In the same way, local firms that are clever enough to select the right product to build, train or find the right workers to add to the mix and set the timer right to meet market demand, will find themselves immune to, or benefiting from, outsourcing.
To make the final reply to Ross Perot's dire prediction for outsourcing I'll leave it to a Socialist -- Michelle Bachelet, the current leftist president of Chile. She recently addressed the Socialist International Conference with these words: "Let's admit it, comrades, modernity and globalization are not an imperialist invention. They are realities and it is up to us to turn them into opportunities."
And yet, here we are in 2007, and despite the Internet bubble burst, despite wave after wave of outsourcing, downsizing, rightsizing and just plain firing, the bay has yet to be sucked dry. Tumbleweeds do not blow down an empty Highway 101. In fact, according to the state Employment Development Department, California unemployment levels were at a 30-year low of 4.5 percent in October, with the San Francisco County level at a minuscule 3.8 percent. What happened?
I've spent these past 15 years in the technology industry, traveling the world, alternately getting sucked out of, and spat back into, the American workforce. My first job out of college was as cheap foreign outsourced labor, working at a computer help desk at IBM in Tokyo, an inexpensive American by yen standards at the time. I migrated my way to the Bay Area, where I worked for a computer hardware company at the height of the Internet boom. But as the bubble burst, and cheap Asian competitors took away market share, my whole department was laid off.
With the "if you can't beat 'em, join 'em" philosophy, I went to work for Solectron, an outsourcing company with operations in all the "low cost geographies" of the world. I helped transfer jobs abroad and shut down factories in the United States until something alarming happened. Our company was getting outsourced. Low-cost Asian outsourcers were beating up American-based outsourcers. Margins were falling. Our own layoffs loomed. So I hit the road again, going to an outsourcing consulting company, working with all the groups involved to try to design better solutions.
But what is the solution? How do you make outsourcing not ... suck so much?
What I've discovered isn't so much a one-way drain on U.S. business, but rather a spin cycle, a whirling of people, products and places coordinated to produce our daily goods and services. To understand this process, to check to see if we're missing a few socks, I've reviewed my past 15 years of experience in places from Europe, to Mexico, to Asia and back again to the Bay Area.
The basic concept of outsourcing is that companies want to specialize in what they do best, and find another source for all the other stuff. For example, Bay Area companies like Cisco and HP specialize in designing next generation technology, and are perfectly willing to have someone else assemble the final product someplace else. At home, I have a drawer filled with severed heads. They're novelty items from the 1940s, bottle stoppers with the corked heads of pop culture figures from the day: Winston Churchill, Cary Grant, Charlie Chaplin. They were made in West Germany, not because the Germans were on the forefront of cork-gluing technology, but because the starving refugees of WWII were willing to work for pennies an hour, and thus got stuck making cheap toys and trinkets.
Germany has long since grown from the head-making, cork-gluing phase, and ceased to be a destination for U.S. outsourcing. It has now moved to the next step in the cycle -- sending its stuff abroad. Last year, I visited a semiconductor equipment manufacturing factory in Germany where gray-haired engineers in white smock coats assured me that only highly trained (and highly paid) Germans were capable of building their products. Not surprisingly, costs had already sent many German-produced products southeast to the Czech Republic, where cheaper labor turned the final nuts and bolts to assemble the items.
But the past 15 years have changed the job situation in the Czech Republic as well. Almost none of the basic manufacturing was left there, either. The Czech workers have also become too expensive, their labor laws, unions and higher standard of living dictating higher salaries, which made bolt-turning better done elsewhere. I had a beer in Prague, toured a nearly empty factory and moved farther east to Budapest, Hungary.
Budapest seemed like a fine end-of-the road destination for outsourcing. Gray skies, gray buildings, the gray river splitting Buda from Pest. During the day, thick old women lined the paths of the parks, pleading for anyone to buy their handmade lace. At night, thin young women lined the same paths, dressed in lace, pleading for anyone to buy them.
A chain-smoking driver in a duct-taped Trabant took me to a suburban Budapest-based computer assembly factory one morning. We passed graffiti-covered block houses, scrub-filled lots and finally an advanced technology factory built to take work from Western Europe for brand-name electronics product companies. Like Germany and the Czech Republic before it, the factory was half empty. What happened? "The damn cheap Romanians are taking our jobs," one worker said.
But in Budapest, like Czech and Germany, some work did remain. The factory manager touted new custom build techniques, a lean supply chain, highly trained workers and their relative proximity to Germany. It was no longer cost, but value they were selling. "It's not like we're a bunch of stupid untrained Chinese workers or something," said one worker. It is the Chinese who have been held to be the ultimate threat to "our" jobs, be they here, in Germany, Hungary or even Romania. China's near limitless supply of labor and a government dedication to business has created a massive shift of manufacturing across the Pacific and into these mysterious factories. I had visions of Roman slave ships, a huge man in a fur vest beating a drum, while another cracked a whip over workers chained to benches assembling iPods, Nikes, or those huge inflatable crayons.
When I arrived at a factory outside of Shanghai, things were unsettlingly normal. I saw the same spotless assembly lines I witnessed in Germany, in Budapest and in San Jose. Uniformed workers quietly put together pieces of cell phones, printers, cameras and other items whose guts all seemed the same to me.
And then the buzzers went off. People started moving toward the doors. Was it ... an actual Chinese fire drill? It was! I waited for the chaos, the screaming. No, orderly groups lined up in sequence of their product assignments, their uniforms lending the operation the feel of a high school pep rally. The workers themselves seemed like junior high school girls, giggly, holding hands, toting Hello Kitty lunch boxes, even taking buses back home at the end of the day, or walking arm-in-arm to the nearby dormitories.
Yet these were no junior high schoolers. To get a job at a flagship factory of an international company was a tough process. Most were well educated, having to pass a battery of tests and background checks to get such a job. At least this factory had standards. The failed applicants would be working with battery acid at some shady sweatshop in the Gobi desert.
But it wasn't just the Chinese working in China. The plant manager was Chinese, but he worked for a boss in San Jose. The finance manager was from Romania, the project manager from Malaysia and the materials manager from "the Republic of Texas," as he called it. The parts for the products were sourced mostly in China, but with bits from Europe, the United States and elsewhere in Asia. A Taiwan shipping company sent finished product across the world to customers, who were happy that the product had become less expensive. And somehow, everyone ended up making money on the deal.
I felt like a character in "Catch-22," listening to Milo Minderbinder explain that he bought eggs for 7 cents in Malta and sold them for 5 cents in Italy for a profit.
It recalled a day in Bordeaux, France, the last place in the world you would think of as an outsourcing destination ("Farthest place from the German border," said the plant manager with a wink). At an American-owned electronic products factory, a Brazilian was presenting the "Sao Paolo" technique of factory management to a Japanese customer who wanted to produce computers there for the Belgian government. The spin cycle was whirring so fast I was losing track of who I was supposed to be angry at for taking my job.
Companies brag to Wall Street every quarter about how much money they are making on outsourcing jobs abroad. But they become silent when asked for a quote reflecting that reality. The companies fear the bad press, the perception that outsourcing is somehow unpatriotic, that American jobs are being given away to less worthy people overseas.
The reality is, America is not a nation of bolt-tighteners. If jobs hadn't been sent abroad, on a regular basis over the past 200 years, we'd still be hand-picking cotton on plantations, and weaving shirts on huge looms in sweatshops in New York City, while somewhere abroad the microchip engineers would be sipping wine and watching TVs that American workers were assembling in 24-hour-a-day factories. The question is, do you want to be the place that sends out the unskilled labor jobs, or the one that receives them? According to Lou Miscioscia, managing director and technology analyst at investment banking firm Cowen & Company, "The economics of outsourcing is simple.If you don't find a place to make your products cheaply, someone else will, and they'll put you out of business. U.S. technology firms that succeed are those that can balance outsourced manufacturing with in-house product development and product knowledge."
The moral issue is not so much the loss of these menial manufacturing jobs, but the question of what happens to those workers who had been doing those jobs. U.S. CEOs usually go for the quick fix -- send the jobs abroad and fire the workers. Wall Street has the instant gratification of costs cut, and rewards the companies with higher stock prices. If anything, the CEOs who initiate such strategies should be the first to be outsourced to low-cost countries -- the strategy is the managerial equivalent of bolt-tightening: repetitive action with no thought involved.
Just as companies continue to think of innovative ways to get rid of jobs -- of menial tasks -- they need to think of innovative ways to create new jobs for their existing workers. The easy answer is to fire the old, hire the new and wait for the spin cycle to bring in the next generation of worker for the next generation of product. Retraining programs are difficult, long-term solutions whose results don't show up on corporate balance sheets in time for Wall Street endorsement. But those companies that have survived the waves of outsourcing, the waves of industry upheaval, have been able to turn the subtraction of jobs through outsourcing into an addition of jobs. It's Milo Minderbinder math.
To understand the equation, I went south to Mexico, Perot's original source of the sucking sound. They had their own drain in the past 10 years, with jobs washing away from Mexico across the Pacific to China with tsunami-like speed. Mexico was cheap, but China was cheaper. Then a strange thing happened. Some jobs came back.
"There's some basic physics involved," said a technically trained plant manager in Guadalajara. "They're here," he pointed on a map to China, "And we're here," he pointed to central Mexico. "We're the same time zone, an hour's flight from California. We can work together with Silicon Valley engineers so much easier. And there's a big difference between a slow boat from China bringing product, and trucks rolling across the border from Mexico, offloading into a Best Buy. Start adding all those things together, and it's not so cheap in China, hey?"
As Mexicans began to lose their cheap outsourced jobs to someone who was cheaper, they had to innovate. They had to train their workers, modify their factories into sources of products and services which merited higher prices than those coming from China. I toured factories in Guadalajara ("The Silicon Valley of Mexico" reads the sign greeting visitors from the airport) which bragged they were the most efficient not only in Mexico, but in the world ("except for maybe the Japanese, but look how much they cost now!" said a tour guide). Guadalajara-area manufacturers have partnered with local universities, government agencies and international firms to create a new value proposition of highly trained engineers, ultra-efficient assembly lines and innovative transport plans. And because of this creative use of the same workers, in the same sites, business is coming back to an area that was forecast to be finished.
And what of the partners to the north, the Bay Area businesses who started this whole cycle of technology outsourcing? Our evening news is quick to publicize even the smallest layoff, but rarely does it announce the new hiring plans. It just wouldn't fit into the negative spin cycle. It got to the point that when I attended an Asian business conference at Berkeley's Haas Business School, an engineering grad student came up to me and quietly asked, "So, is there any point in my getting a degree here? Really, it sounds like I should just move to Beijing, learn Mandarin and drive a cab or something."
I told him not only are local firms hiring, they're desperate for engineering talent to help design the new generations of products. For example, my former employer Solectron is battling low-cost Asian competition by offering high-touch services locally in collaborative product design, repair, and analysis for area technology firms. A quick search on their Web site shows 75 open engineering-related jobs in the Bay Area. One local manufacturing company told me that their most profitable factory, worldwide, was here in Silicon Valley. Despite having the most expensive labor, land and supplies, they were "practically printing money" in comparison to their barely profitable plants in China and Eastern Europe.
And this is the latest setting on the spin cycle. Local venture-capital startups have a desperate need for quick new product prototypes, built and modified locally, with heavy engineering input. They're willing to pay a premium for these services. And companies are willing to pay a premium to find workers who can fulfill those jobs. The student is actually in the right place at the right time, despite all the media hype that says otherwise. The spin cycle of outsourcing has given local companies the opportunity to create even more jobs, even more business -- as long as they innovate. For example, to do the wash correctly (I'm told) you have to choose the right clothes, select the right settings, add the right detergents and only then will things turn out right at the end of the spin cycle. In the same way, local firms that are clever enough to select the right product to build, train or find the right workers to add to the mix and set the timer right to meet market demand, will find themselves immune to, or benefiting from, outsourcing.
To make the final reply to Ross Perot's dire prediction for outsourcing I'll leave it to a Socialist -- Michelle Bachelet, the current leftist president of Chile. She recently addressed the Socialist International Conference with these words: "Let's admit it, comrades, modernity and globalization are not an imperialist invention. They are realities and it is up to us to turn them into opportunities."
Offshore Outsourcing looks fairly Good
Offshore Outsourcing really looks good in terms of many aspects, because it carries lots of advantages with it. This process with lots of flexibilities also reduces lots of work burdens from the side of the clients and opens many new scopes for them regarding his business searches. Well managed and fully furnished companies at present are available to serve for even the smallest business application with the best possible quality and at the lowest possible price rate. All these and many more points are there that makes the overall process of Offshore Outsourcing very interesting and frequent used ones.
Offshore Outsourcing has really changed the current working style of many of the companies. More and more companies are avoiding the old fashioned style and shifting the business process to this latest and modern way of the business process. Company’s priorities, policies and procedures to govern and manage the business operations have also been changed because of such Offshore Development help. Such decisions are more of the corporate objective based and they have also become more centralized. Previously the staffs were given lots of freedom regarding any business decisions and they were able to take decisions themselves. But by the adoption of such business process has really brought many changes in it. In present scenario in many companies now decision about audit comes first regarding the assessment of current and future business of the company from all the units. Such audit are conducted by some independent firms or by the own internal teams of the companies. This is considered to be one of the important stages of the Offshore Outsourcing.
Offshore Outsourcing
In Offshore Outsourcing the second most important stage is to build the perfect strategy for the business process. After clearing the focus about the limited resource, development of the overseas business strategy comes in to the picture. It starts with the specific priorities and funding decisions in accordance with the prepared audit details. It is also kept clear that what is to be sent overseas and what is to be kept inside. The roles of the overseas vendors are also than determined and the selection of the perfect vendors takes place. Still wholesale transfer of the deals of the companies should not be sent overseas as the chances of the failure increases. So it is better to first identify the needs of the companies for the purpose of Offshore Outsourcing.
In Offshore Outsourcing, well managed and mature services are also taken under consideration while taking any important business decision in some large companies to distribute the overall workload. Standardized platforms in terms of updating the hardware and software are also an important task in such overseas dealings. In short all these are some of the process that makes the overall process of Offshore Outsourcing very easy and smooth going.
Offshore Outsourcing has really changed the current working style of many of the companies. More and more companies are avoiding the old fashioned style and shifting the business process to this latest and modern way of the business process. Company’s priorities, policies and procedures to govern and manage the business operations have also been changed because of such Offshore Development help. Such decisions are more of the corporate objective based and they have also become more centralized. Previously the staffs were given lots of freedom regarding any business decisions and they were able to take decisions themselves. But by the adoption of such business process has really brought many changes in it. In present scenario in many companies now decision about audit comes first regarding the assessment of current and future business of the company from all the units. Such audit are conducted by some independent firms or by the own internal teams of the companies. This is considered to be one of the important stages of the Offshore Outsourcing.
Offshore Outsourcing
In Offshore Outsourcing the second most important stage is to build the perfect strategy for the business process. After clearing the focus about the limited resource, development of the overseas business strategy comes in to the picture. It starts with the specific priorities and funding decisions in accordance with the prepared audit details. It is also kept clear that what is to be sent overseas and what is to be kept inside. The roles of the overseas vendors are also than determined and the selection of the perfect vendors takes place. Still wholesale transfer of the deals of the companies should not be sent overseas as the chances of the failure increases. So it is better to first identify the needs of the companies for the purpose of Offshore Outsourcing.
In Offshore Outsourcing, well managed and mature services are also taken under consideration while taking any important business decision in some large companies to distribute the overall workload. Standardized platforms in terms of updating the hardware and software are also an important task in such overseas dealings. In short all these are some of the process that makes the overall process of Offshore Outsourcing very easy and smooth going.
Don’t Gamble with Success: Outsourcing, Customer Relationships and People are the Best Bets for 2007
By Nick Wakeman
Roseanne Gerin
Today’s market gives government contractors plenty to feel good about. The percentage of the IT budget available to them is growing. Agencies increasingly are asking contractors for services that are integral to their core missions. Investors, both on Wall Street and among private-equity groups, continue to find the government market attractive.
But there are worries, too. Budget pressures are growing, a factor further complicated by the drain of funds to fight the war in Iraq. The fallout from procurement scandals coupled with Democratic control of Congress means that the scrutiny of contracts and contractors will intensify. Add to that the constant pressure on companies to find the right people to fill job openings and keep the people they have now.
As executives look out over the next 12 months and beyond, many are making safe bets: concentrating on their core competencies, getting closer to their customers and looking at adjacent markets that can accelerate their growth.
Top on the minds of many executives is the budget. With only the Defense and Homeland Security appropriations approved, Congress is seriously considering a continuing resolution to cover the rest of fiscal 2007 for the remaining agencies.
“There is so much change going on right now,” said Deborah Alderson, president of Science Applications International Corp’s system and network solutions group. Leadership changes at key agencies such as the Defense Department, and constraints on money and people increase anxiety for government and contractors alike, she said.
“There’s a lot that needs to get done, and there are limited resources,” Alderson said.
UPSIDE TO BUDGET WOES
Budget pressures will force agencies to aggressively seek ways to drive out costs and become more efficient, said Todd Ramsey, IBM Corp.’s general manager for global government.
“Much like we have seen in private companies in the past 10 or 15 years, governments will be forced to do major transformations,” he said. Indiana, for example, in November awarded IBM a 10-year, $1 billion contract to revamp and operate the state’s welfare eligibility system.
“Outsourcing has really been a growth driver for us,” said Phil Nolan, chairman, president and CEO of Stanley Associates Inc., a $400 million-a-year systems integration and professional services company in Arlington, Va.
In October, Stanley won a 10-year, $164 million contract with the State Department to build and operate two passport processing centers. Those sites join 13 others the company runs for the State Department, Nolan said.
Outsourcing also will help Artel Inc. of Reston, Va., to grow from about $155 million in revenue in 2006 to $175 million in 2007, said Abbas Yazdani, founder and CEO of the company, which provides managed network services and systems integration to government clients.
“The reason for that growth is [that] clients come to us to put together a solution, deliver it, upgrade it and manage it,” he said. “That’s something I’d bet you the government is going to do more of.”
There’s an inherent efficiency in turning to contractors to run certain services, Nolan said. “You have a flexible workforce. You can use us or not use us. You can open the spigot up, or you can shut it down. That’s a harder thing to do when they are your own employees,” he said.
KNOW YOUR CUSTOMER
To keep pace with customer needs, companies need to concentrate on what the nation’s priorities are, executives said.
Defense, intelligence and homeland security top that list. Executives also see growing emphasis on health care, the environment and energy.
“What you have to do is look at how those priorities touch your customer sets,” said Jon Korin, director of strategic planning for Northrop Grumman Corp.’s $4 billion-a-year IT sector.
Over several years, BAE Systems Inc. had built up its IT capabilities through about 10 acquisitions. A year and a half ago, the company consolidated its IT work into a single division to take advantage of the IT capabilities it had acquired and meet growing customer needs, said Richard Schiefelin, the new president of BAE Systems IT. The consolidated unit has just under $1 billion in annual revenue. The company can now take on managed-services projects that number in the tens of thousands of seats, he said.
“We needed to be able to compete effectively, not just in size, but in market reach and with the right type of abilities, whether it’s application development, infrastructure work or mission support,” he said.
Work that is critical to a customer’s mission captures BAE’s attention, he said. “We’re driven by a close intimacy with our customers.”
For example, Schiefelin has a team that provides classroom training, training consultation and course development for the Global Command and Control System–Joint at Kessler Air Force Base in Biloxi, Miss. The military considers GCCS-J to be the bedrock of battlespace awareness.
One potential shift that would affect customer relationships in 2007 and that Korin will be following closely is the possibility of performance-based contracting gaining momentum. Now, there is a lot of talk about it around the federal market, but not a lot of concrete activity, he said.
The contractor that can deliver well under a performance-based contract will win more contracts and be more profitable, Korin said.
“You need to have the breadth and diversity of capabilities, domain expertise and customer relationships,” he said.
THE RIGHT SKILLS
Ask almost any IT contracting executives about the critical skills and technologies their customers are looking for, and they’ll quickly rattle off a list: command and control systems, wireless, geospatial, program management, logistics, enterprise resource planning, biometrics, information sharing, intelligence systems, to name a few.
But therein also lies one of the biggest challenges contractors are facing today, the hiring and retention of skilled employees.
The problem is so acute that SRA International Inc.’s President and CEO Renato DiPentima likens it to running out of iron ore in the middle of the Industrial Revolution.
“We’re in a computer-based, knowledge-based revolution, and finding and keeping good people is difficult,” he said.
In 2007, SRA hired Dan Ward as a vice president and human capital officer, and Eileen Raymond as director of recruitment. Both are new positions. The goal isn’t only to find and keep people, but to make it the right people with critical skills, he said.
“People are our most important resource. You have to treat them right,” DiPentima said.
Retention of employees is as much a priority as hiring new ones, executives said. “It is so expensive to replace good people,” said SAIC’s Alderson, who considers retention a higher priority than recruitment.
One tool SAIC deploys that benefits both employees and customers is its internal R&D accounts, which fund research projects.
“We are investing in our people’s skills,” Alderson said. “It is a tremendous motivator.”
Employees must feel that they have opportunities to grow and succeed, said BAE’s Schiefelin.
He and other senior managers meet weekly to review job openings and look at employees who have expressed a desire to take on a different job at the company.
BAE has goals and objectives, coaching sessions and mentoring for every staff member. Last year, the IT unit moved 590 of 4,600 employees into new jobs.
“We tell our program managers that the best thing they can do is take their best person and move them to another project,” he said. “That way people know you are going to be supportive of their careers.”
Roseanne Gerin
Today’s market gives government contractors plenty to feel good about. The percentage of the IT budget available to them is growing. Agencies increasingly are asking contractors for services that are integral to their core missions. Investors, both on Wall Street and among private-equity groups, continue to find the government market attractive.
But there are worries, too. Budget pressures are growing, a factor further complicated by the drain of funds to fight the war in Iraq. The fallout from procurement scandals coupled with Democratic control of Congress means that the scrutiny of contracts and contractors will intensify. Add to that the constant pressure on companies to find the right people to fill job openings and keep the people they have now.
As executives look out over the next 12 months and beyond, many are making safe bets: concentrating on their core competencies, getting closer to their customers and looking at adjacent markets that can accelerate their growth.
Top on the minds of many executives is the budget. With only the Defense and Homeland Security appropriations approved, Congress is seriously considering a continuing resolution to cover the rest of fiscal 2007 for the remaining agencies.
“There is so much change going on right now,” said Deborah Alderson, president of Science Applications International Corp’s system and network solutions group. Leadership changes at key agencies such as the Defense Department, and constraints on money and people increase anxiety for government and contractors alike, she said.
“There’s a lot that needs to get done, and there are limited resources,” Alderson said.
UPSIDE TO BUDGET WOES
Budget pressures will force agencies to aggressively seek ways to drive out costs and become more efficient, said Todd Ramsey, IBM Corp.’s general manager for global government.
“Much like we have seen in private companies in the past 10 or 15 years, governments will be forced to do major transformations,” he said. Indiana, for example, in November awarded IBM a 10-year, $1 billion contract to revamp and operate the state’s welfare eligibility system.
“Outsourcing has really been a growth driver for us,” said Phil Nolan, chairman, president and CEO of Stanley Associates Inc., a $400 million-a-year systems integration and professional services company in Arlington, Va.
In October, Stanley won a 10-year, $164 million contract with the State Department to build and operate two passport processing centers. Those sites join 13 others the company runs for the State Department, Nolan said.
Outsourcing also will help Artel Inc. of Reston, Va., to grow from about $155 million in revenue in 2006 to $175 million in 2007, said Abbas Yazdani, founder and CEO of the company, which provides managed network services and systems integration to government clients.
“The reason for that growth is [that] clients come to us to put together a solution, deliver it, upgrade it and manage it,” he said. “That’s something I’d bet you the government is going to do more of.”
There’s an inherent efficiency in turning to contractors to run certain services, Nolan said. “You have a flexible workforce. You can use us or not use us. You can open the spigot up, or you can shut it down. That’s a harder thing to do when they are your own employees,” he said.
KNOW YOUR CUSTOMER
To keep pace with customer needs, companies need to concentrate on what the nation’s priorities are, executives said.
Defense, intelligence and homeland security top that list. Executives also see growing emphasis on health care, the environment and energy.
“What you have to do is look at how those priorities touch your customer sets,” said Jon Korin, director of strategic planning for Northrop Grumman Corp.’s $4 billion-a-year IT sector.
Over several years, BAE Systems Inc. had built up its IT capabilities through about 10 acquisitions. A year and a half ago, the company consolidated its IT work into a single division to take advantage of the IT capabilities it had acquired and meet growing customer needs, said Richard Schiefelin, the new president of BAE Systems IT. The consolidated unit has just under $1 billion in annual revenue. The company can now take on managed-services projects that number in the tens of thousands of seats, he said.
“We needed to be able to compete effectively, not just in size, but in market reach and with the right type of abilities, whether it’s application development, infrastructure work or mission support,” he said.
Work that is critical to a customer’s mission captures BAE’s attention, he said. “We’re driven by a close intimacy with our customers.”
For example, Schiefelin has a team that provides classroom training, training consultation and course development for the Global Command and Control System–Joint at Kessler Air Force Base in Biloxi, Miss. The military considers GCCS-J to be the bedrock of battlespace awareness.
One potential shift that would affect customer relationships in 2007 and that Korin will be following closely is the possibility of performance-based contracting gaining momentum. Now, there is a lot of talk about it around the federal market, but not a lot of concrete activity, he said.
The contractor that can deliver well under a performance-based contract will win more contracts and be more profitable, Korin said.
“You need to have the breadth and diversity of capabilities, domain expertise and customer relationships,” he said.
THE RIGHT SKILLS
Ask almost any IT contracting executives about the critical skills and technologies their customers are looking for, and they’ll quickly rattle off a list: command and control systems, wireless, geospatial, program management, logistics, enterprise resource planning, biometrics, information sharing, intelligence systems, to name a few.
But therein also lies one of the biggest challenges contractors are facing today, the hiring and retention of skilled employees.
The problem is so acute that SRA International Inc.’s President and CEO Renato DiPentima likens it to running out of iron ore in the middle of the Industrial Revolution.
“We’re in a computer-based, knowledge-based revolution, and finding and keeping good people is difficult,” he said.
In 2007, SRA hired Dan Ward as a vice president and human capital officer, and Eileen Raymond as director of recruitment. Both are new positions. The goal isn’t only to find and keep people, but to make it the right people with critical skills, he said.
“People are our most important resource. You have to treat them right,” DiPentima said.
Retention of employees is as much a priority as hiring new ones, executives said. “It is so expensive to replace good people,” said SAIC’s Alderson, who considers retention a higher priority than recruitment.
One tool SAIC deploys that benefits both employees and customers is its internal R&D accounts, which fund research projects.
“We are investing in our people’s skills,” Alderson said. “It is a tremendous motivator.”
Employees must feel that they have opportunities to grow and succeed, said BAE’s Schiefelin.
He and other senior managers meet weekly to review job openings and look at employees who have expressed a desire to take on a different job at the company.
BAE has goals and objectives, coaching sessions and mentoring for every staff member. Last year, the IT unit moved 590 of 4,600 employees into new jobs.
“We tell our program managers that the best thing they can do is take their best person and move them to another project,” he said. “That way people know you are going to be supportive of their careers.”
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