3/25/2007

Offshore Outsourcing Cost Advantages To Disappear By 2027, Study Says

Despite increasing wages, for now India is still an offshore hot spot for U.S. technology companies.


By Paul McDougall
InformationWeek

March 15, 2007 02:00 PM

Rising salaries and other cost increases in emerging markets such as India and China mean the financial advantages of outsourcing to such destinations will dry up in the next 20 years, according to a study released Thursday.

The study, by consulting firm A.T. Kearney, says wage and price inflation in offshore locations is already eating into the savings enjoyed by American companies that outsource technology and back-office work and will continue to do so in the coming years.

Average wages for programmers in India, China, and Eastern Europe rose between 20% and 40% on average in 2006, compared with U.S. increases of between 5% and 10%, according to the study.

The findings show that "corporations making global location decisions should focus less on short-term cost considerations and more on long-term projections of talent supply and operating conditions," says A.T. Kearney chairman Paul Laudicina.

That message may be lost on a number of CEOs as they rush to build out operations in thriving offshore markets such as in India, where tech salaries are still anywhere from 40% to 60% less than in the United States, despite the study's findings. IBM recently surpassed the 50,000-employee mark in the country, while Accenture earlier this year revealed that it will soon have more employees in India than it has in the United States.

Significant offshore cost increases could also impact the fortunes of indigenous Indian services providers such as Wipro Technologies, Infosys, and Tata Consultancy Services, all of which have enjoyed robust double-digit growth in recent years on the strength of selling low-rate contracting services to Western companies.

For the time being, however, A.T. Kearney still ranks India as the top offshore outsourcing destination in terms of value and quality of service. It's followed by China, Malaysia, Thailand, and Brazil.

Ireland, once an offshore hot spot until it suffered considerable inflation of its own, ranked last on the list at 50th place, trailing barely developed countries such as Senegal and Sri Lanka.

Incentives to take call centre growth off hold

By: Neal Goldwyer
Published: 23 Mar 07 - 0:00

This month the Department of Trade and Industry (DTI) will launch a number of incentives to encourage foreign corporates to offshore and outsource their business process operations to South Africa. These incentives will also benefit local operators who service international business and are looking to grow their inter- national client base.



National government is committed to market South Africa as an internationally preferred business process outsourcing and offshoring (BPO&O) destination. Customised incentive options are already in place by the City of Johannesburg’s economic development unit (EDU) for companies to establish call centre operations in the new BPO precinct of the city’s central business district. These benefits include reduced prices on property, telecommunications, power, security and transport.



BPO&O is a growing sector in the global economy and emerging markets are becoming increasingly attractive destinations for companies opting to outsource their business support activities to external service providers to administer and manage. The move towards outsourcing globally has been motivated by labour and operational cost savings for the principal company, reducing overheads internally.



The local industry is set to continue this growth trajectory as government and the private sector, supported by the provincial industry associations, play an increasingly active role in securing foreign direct investment (FDI) and implementing programmes to develop and increase local capacity and capability.



“Over the past two years, the industry has shown significant growth with some call centres having grown by more than 50%,” says ContactinGauteng CEO Keryn House.

This is largely a result of investment by Virgin Mobile, Carphone Warehouse, Sykes International, IBM and Call Centre Nucleus. In addition to the 2 000 jobs created in 2006, House estimates that at least 500 more seats will have been created by the end of this month. Research into exact figures is still under way but ContactinGauteng’s general goal is to facilitate hundreds of millions of rands of investment into this industry and secure for the province 60% of an expected 100 000 new jobs for the province. Of these, House explains, 25% will be direct operating positions and the remainder indirect or support jobs for supervisors, trainers, quality controllers, transport, canteen, infrastructure and information technology d�cor providers.



ContactinGauteng is the industry representative organisation and member association in Gauteng responsible for promoting the province as an attractive BPO and contact centre destination. It hosts investors on a weekly basis, showcases opportunities at international conferences and is involved in promoting call centre operation and management as attractive careers.

“For the first time, South Africans are seeing call centres as a good place to work with a reasonable salary. But like any other career, call centre personnel need to be trained and developed,” adds House.



Business processes making up the sector include credit card and cheque processing, accounting, financial, actuarial, property and human resources management services, risk underwriting, asset management administration and technical support, Web design, data management and customer service contact centres.

The call centre industry is a well-established dynamic subindustry of the BPO sector in South Africa’s urban centres of Johannesburg, Cape Town and Durban.

Gauteng, in particular, the city of Johannesburg, has the highest number of call centres in the country employing some 35 000 call centre agents in outsourced and captive (in-house) call centres in information and communication technology (ICT), financial services, banking, tourism, hospitality and business-to-business.



A number of factors highlight South Africa’s attractiveness as a BPO destination. It can provide educated labour at competitive rates. About 15% of agents have a tertiary qualification. Overseas clients consider the South African English accent more neutral and the overall diction and dialect proficiency of staff to be better than some other destinations. Budget Insurance, of the UK, reports savings of 40% on its South Africa-based call centres as operators are competent at handling complex, nonscripted calls. Strategy consulting firm McKinsey indicates local first-call resolution rates of 85% to 95% compared to India’s 66%.

The country also has time zones similar to Europe, some of the cheapest electricity costs in the world, an almost entirely digitalised telecommunications infrastructure, a favourable exchange rate and property rentals 40% to 70% cheaper than most G7 capital cities.



A sector development strategy sponsored by the DTI in conjunction with the Business Trust, which will contribute funding, hopes that the local call centre subsector will benefit from an expected growth from $10-billion to $60-billion by 2009 in the US and the UK BPO&O markets. The DTI sector support strategy estimates that the global outsourcing boom could create 100 000 jobs in South Africa by 2009, provided that appropriate focus, institutional support and targeted government and industry interventions are in place.

Other targets are to create an industry worth $800-million that will attract cumulative FDI of up to $175-million. Research commissioned from McKinsey by the EDU concluded that 50% of these indicators represent accruals to the city of Johannesburg. Gauteng province as a whole generates 34% of the country’s gross domestic product and, despite being the smallest province, it already controls 60% of the country’s call centre operations. “In 2005, there were 360 call centres in Gauteng. In total, there are about 35 000 call centre agents at last count,” explains House.



City of Johannesburg’s David van Niekerk has indicated that development of the inner city as Africa’s future call centre hub is a priority for the EDU. The BPO skills hub is a joint venture between industry stakeholders and Cida City campus aimed at skills development of agents and managers for local call centres.

“The BPO skills hub is the best in the country from the point of view that it is the most generous in terms of skills development incentives. It provides a 50% cost reduction to employers to accredit their agents with an internationally recognised call centre qualification,” comments House.



The introduction of internationally benchmarked standards of best practice for the sector later this year will provide minimum acceptable levels of operation within call centres and other BPO centres. When adopted, they will give South Africa further credibility as being able to deliver a quality offering to international companies needing to ensure that both their service and their customer satisfaction levels can be met.



ContactinGauteng hosted twelve international missions in 2006 and will join DTI Minister Mandisi Mpahlwa in launching the new BPO incentives in four different US cities this month.



“We will also take a variety of steps to improve competition in the economy, besides others, to lower the cost of doing business and promote investment, including practical introduction of the Regu-latory Impact Assessment system, developing high-speed national and international broadband capa-city, finalising the plan to improve the capacity of the rail and port operators, and strengthening the effectiveness of our competition authorities,” said President Thabo Mbeki at the opening of Parliament on February 12, 2007. He added that the Department of Communications (DoC) and Telkom, together with mobile phone companies are finalising plans to tackle call term-ination rates this year.



This goes some way towards tackling the challenges posed by the slow roll-out of broadband up until now in the country, as well as the comparatively high costs thereof. Fixed-line density has also declined somewhat in spite of expectations that dereg- ulation of Telkom’s fixed-line mono-polisation would improve roll-out. The issue of telecommunications costs bears on South Africa’s competitiveness in the global arena of BPO&O, which government, in its Accelerated and Shared Growth Initiative for South Africa, acknowledged as one of three high-priority sectors with economic development and job creation potential.



The DoC hopes that deregulating industry protectionism will improve competitiveness and enable stakeholders to harness ICTs to attain broader economic and social development for South Africa within the context of the global knowledge economy.

U.S. State, Local Outsourcing Market to Exceed $20 Billion

The total state and local outsourcing market in the U.S. will go beyond $20 billion in 2011 with a CAGR of 10.6%, says a recent report by INPUT, the Virginia-based authority on government business (See Chart 1).

Factors that will drive outsourcing will be the need for governments to outsource technical applications and engagements to ensure continuity of operations. The political factor will be overridden in cases where governments find it necessary to outsource technical applications due to smaller workforce and the non replacement of legacy systems.

The study predicts that areas such as data-center and application management, desktop services

and hosting would bag a big chunk of the burgeoning market.

The study also says that, in the near future, BPO will not play a large role as formerly projected. It also suggested avoiding the usage of terminologies like “Comprehensive Departmental Outsourcing” or “Business Process Outsourcing,” because of political pressure on such deals.

The study points out that public indignation at outsourcing was based on misunderstanding that outsourcing automatically meant offshoring. The reality is that the U.S. Government Accountability Report is much under-reported which explicitly states that only a meager three percent of state outsourcing is being performed outside the U.S.

Over the past year many outsourcing initiatives have been taken in states like Virginia, Texas, Indiana and San Diego. These outsourcing initiatives are expected to re-invigorate the state outsourcing marketplace, albeit a few disruptions along the way.

KPMG urges businesses to measure benefits of outsourcing properly

Posted by Maggie Holland at 8:37AM, Wednesday 28th February 2007

Recent research suggests that, while many companies are happy to outsource much of their operational activity, many businesses are still unsure exactly what benefits handing over the reigns is bringing them.

Despite the fact that many businesses are engaged in outsourcing activity, whether onshore of offshore, some 42 per cent of deals aren't supported by a formal way of measuring the benefits, research published today reveals.

Businesses around the globe are unable to properly quantify exactly what they're getting out of an outsourcing arrangement, according to the study conducted by KPMG.

But the overall consensus of many outsourcing contracts is that companies are happy with their lot, suggesting that they don't fully understand or are glossing over potential grey or problem areas, warns Shamus Rae, a KPMG IT advisory partner.

"Personally, I'm glad to hear that businesses feel that their sourcing arrangements are working as it was all too easy in outsourcing's formative years to dismiss it as something which never properly delivered. However, businesses have to be able to substantiate the benefits which outsourcing delivers. Simply going on a gut feel or anecdotal evidence is not enough."

"Significant opportunities do exist for organisations to capitalise on the strategic value of outsourcing. This potential can be unlocked by more consistent measurements of contract provisions and other metrics about the relationship with the service provider. Sadly, our survey shows that far too many businesses do not appear to have these processes in place, leaving them floundering in the dark somewhat when trying to establish the real value of outsourcing arrangements to their bottom line."

In addition to not being able to measure the benefits of outsourcing, some 79 per cent of businesses surveyed weren't completely sure of the cost involved in selecting a partner to work with.

Half of companies took longer than six months to complete the request for proposal (RFP) aspect of the deal, while six out of 10 respondents admitted that any problems they encounter are nearly always related to people, highlighting that cultural fit is often a secondary consideration when choosing who to work with.

While it is clear the outsourcing outlook isn't completely rosy, many businesses remain upbeat, with just 13 per cent agreeing with the doomsayers that up to half of all outsourcing deals are destined for failure.

"Upon analysing the survey responses, it became quite clear that businesses were struggling to determine exactly what constituted success within their outsourcing arrangements. Many respondents say they believe sourcing improves their financial performance; shareholder value and competitiveness yet a large percentage of sourcing relationships are not strategically monitored," added Rae.

"There is an obvious paradox at play here...In the long term, this sort of intuitive response - where they just 'feel' that sourcing is working - may not be good enough. Sourcing is increasingly regarded as a key component of an effective business strategy but companies need to insist on seeing the tangible benefits to continue to justify what is often a large-scale investment. Outsourcing is working but these survey results suggest a pressing need for a continuing evolution of current practices if outsourcing is to be universally accepted as an effective strategic business tool."

Issues of Software Outsourcing

IT community constantly debates regarding the fact that software outsourcing being cheaper in terms of cost-reduction involved, grants access to blue-chip, real-time and specialized knowledge that are especially inviting demands from corporate management and boards.

February 28, 2007 (XTVWorld.Com) -- Now administrative bosses of multinational enterprises are considering the security practice for global network services.

The risks encompassed by the software outsourcing are higher in terms of outsourcing, whether the questions involving outsourcers can be trusted? Just the idea of delegating control of thickheaded but purely professional procedure to a third party group – is a guaranteed recipe for trouble. How to make sure that the customer is rendered the optimum set of services? The Meta tendency of this structure will certainly continue in a larger number of infrastructures with value services, meeting client's demand. Entrepreneurs must not worry if they hold thorough analysis before approaching things in a sensible manner. These security precautions are obligatory to be taken not to fall into trouble.

It is of primary importance for an entrepreneur to undertake a site-check to ensure that company's management is not just a couple of losers with in a rented office, testimonials, references and feedback will also be good. A company dedicated to software outsourcing must constantly get updated with the latest industry publications, magazines and a bulk of sites so that the Information Technology Outsourcing research to have sound knowledge base of the grounds of software outsourcing. An IT analyst must be proficient and in the know about the market and the trends commonly practiced by large corporations to increase their output index.

Talking over and discussion of various IT related issues will also give better notion about the general state of the business.Organization's entrepreneur should make sure that the security provider is to a high degree honest; the enterprise must make certain that it's getting both the service it wants and needs. The service-level agreement must be picked to pieces to sustain. Before the commencement or agreement execution one should carry a complete security check. Analyst used to cultivating the idea that "the threat to internal security conditioned by social aspects is possibly migrated with an outsourcer and is caused by the lack of social interaction with employees". It is essential and in some cases vital to consider the following security factors before opting for outsourcing: insurance and third party suppliers, software licenses, ownership information, contract commencement, term and termination.

The outsourcer you choose should have adequate public liability insurance against risks and loss or material liability through injury or damage. There is a barest need for an agreement which party will mediate and administer between the purchaser and other third party suppliers. A third party developer or vendor should have software licenses to render outsourced services. Contracts concluded should be maximum flexible so that licenses currently held by the purchaser and related to services provided may require extension or prolongation.In order to minimize transition difficulties, the contract commencement date should be stipulated before hand.

The contract term will wholly depend upon the nature of the offshore outsource services and the buyer's business requirements. The historical roots concerning the security procedures should encompass plenty of financial businesses outsource both its security and transportation security to companies dedicated to these services. System specification, Access and Service level agreements. One must certainly define the specification regarding the functionality, performance and availability of the system. The service level reliability much depends upon the system specification.Examination and analysis of performance data will aid in determining and managing service levels, namely a system response and job turn around times.

However these documents may be ineffective unless buyer provided practical and realistic remedies in the event of non-performance. The contract should envisage a review period to cover possible change requests and integration of new technology provided by the software outsourcer.The degree of security about the disclosed information is required to be to the extent of security used within the outsourcer organization or sufficient to protect confidential information. Illegal access to sensitive data will require severe planning, implementation and management. The last on the list but not least in value for software outsourcing service is to make sure that the documents and data will be protected and kept confidential and agree upon parties responsibilities and obligations.

Source: Software Outsourcing Library

Firms fail to monitor outsourcing benefits

Three-quarters of firms lack the ability to measure the success of contracts
Lisa Kelly , Computing, 28 Feb 2007
Picture of moving light

Many businesses do not understand the value of their outsourcing arrangements and are unable to quantify benefits, according to research released yesterday (Wednesday).

An international survey by consultancy KPMG has found that 42 per cent of companies with outsourcing arrangements are not supported by a formal measurement framework.

Some 59 per cent of respondents only track benefits of IT projects at an elementary level, or not at all. And 72 per cent said they do not have the criteria to measure the success or failure of sourcing arrangements.

But the appetite for outsourcing remains high, with 89 per cent of respondents expecting to maintain or increase sourcing levels. Just 14 per cent admit to a significant misalignment of financial expectations with their provider.

Alan Dion, KPMG IT sourcing practice director, says while firms have wider goals when it comes to outsourcing, cost reduction can overshadow them.

‘It is rare for cost reduction to be the only objective of an outsourcing contract,’ said Dion.

‘Other business objectives such as becoming more agile, speed of IT development for new products and end-user experience are also important.

‘But often these broader business goals are forgotten and cost and technical service level agreements become important.’

Paul Morrison, a director at the National Outsourcing Association, shares this view.

‘Organisations are getting better at making outsourcing work as they learn how to manage contracts properly, but they should make sure they are getting as much benefit as possible by adequate tracking.’

Morrison says benefits can be tracked by finance teams if the contracts are relatively small. But firms embarking on seven- to 10-year deals are increasingly setting up a programme management office or sourcing team to monitor progress.

‘If the agreement is not delivering, it is a basis for rectifying the issue or, at worst, for exiting the deal,’ said Morrison.

Outsourcing: Give it away now

As India Inc grows at a rampant pace, outsourcing can ease a company's overheads by letting it focus on its core competencies. By Varun Aggarwal

India is already the preferred choice for outsourcing business processes like customer services, telemarketing and even collections. The emerging market which is showing stratospheric growth is that of IT infrastructure outsourcing. We are not just talking about global outsourcing here; even domestic outsourcing has reached a peak. A number of reasons are attributed to the popularity of IT infrastructure outsourcing in India, one of the fastest growing markets in the region. One of them is the country’s economic growth.

For people who find the 9.2 percent GDP growth rate to be impressive, they should take a look at the growth rates of leading Indian companies which are in double digits and that too, quarter by quarter. Indian companies are out to conquer the world with major acquisitions. The deals surely boost their stock prices; however, withstanding the market’s expectations isn’t that easy. To meet that kind of expectations, it is important that IT not only play the role of a supporter of business growth, it should also act as a catalyst.

The end result of all this is that CIOs have to bring in a lot of new technologies, expand the IT infrastructure which, in turn, brings about a lot of obligations to accelerate business growth. To achieve this, CIOs have two options—either build an infrastructure on their own or outsource it. If they do it themselves, they will need to invest in building the infrastructure, hiring staff and training them which takes time if nothing else. Or the other hand, the easier option would be to leverage existing service providers and save time to focus on the company’s areas of specialisation.

Some key trends in 2006 included high attrition rates in IT departments, in-house availability of expertise on new technologies, and vendors enjoying a cost advantage. Networks are becoming far more integrated into the enterprise computing architecture, but most IT organisations lack the depth of knowledge to deal with this area.

Outsourcing can provide access to new and increasingly complex IT capacity and functionality without requiring capital expenditure. Infrastructure and application outsourcing continue to be high-growth areas.

In India, many corporate executives are trying to understand the benefits that IT outsourcing can deliver and the impact that it can have on their companies. A recent IBM CEO study identified that companies engaging in IT outsourcing realised significant long-term improvements in business performance, compared to their sector peers. The decision as to what extent a company will outsource is primarily driven by the underlying objective behind outsourcing.

According to Balakrishna Adiga, Vice President - Strategic Outsourcing - IBM India/SA, “Enterprises that go for full scope outsourcing are driven more by the core competency theory. Such CEOs want to focus on their own business and let experts manage the rest with a strong governance mechanism. Whereas partial outsourcing is driven by other objectives such as cost issues, resource constraints, comfort with adopting an incremental approach or a focus on initially addressing tactical problems. Many large and mid-sized companies have outsourced their entire IT setup to IBM. At the same time some companies are content with outsourcing only part of their IT infrastructure such as just the applications or helpdesk.”

The most common IT component that tends to be outsourced is IT infrastructure. Even in IT infrastructure, some companies only outsource the desktop management or helpdesk or data centre management portion. Application management outsourcing is another common area. Today, outsourcing is subtle and organic, and it will continue to be so. The shift that we saw towards full-scope or strategic outsourcing from selective outsourcing is likely to continue this year.

"Although staff augmentation was the most popular form of IT outsourcing in the past, the trend is changing towards service providers who can take up a particular service area and deliver an end-to-end SLA for the same"

- Anil Raibagi
General Manager
Sales & Operations at TOS
Wipro Infotech

Anil Raibagi, General Manager - Sales & Operations at TOS, Wipro Infotech says, “Wipro’s TOS model aligns IT to business and realises a tangible business value from IT. In the Total Outsourcing model, Wipro is responsible for complete IT operations management (including assets provisioning, business process transformation and IT Strategy) and delivers on a pre-agreed set of SLAs which can include business SLAs. Thus, the client is free to focus on his core business and can clearly measure the “business value” he is realising from IT—something that is not easy to define and measure in any other outsourcing scenario or in an in-house IT setup.”

According to Adiga, some of the prevalent outsourcing models are full scope outsourcing, application management outsourcing, IT infrastructure outsourcing, multi-vendor outsourcing, business process outsourcing and out-tasking. The newer models that are emerging are hybrid combinations of earlier models where more risks are transferred to the service provider. Also, among newer ventures the tendency is to go for output based outsourcing.

Changing business models

Historically outsourcing models have been ad-hoc. Companies would outsource entire IT departments or a part of the same to large outsourcers. This involved asset transfer of existing IT employees to the outsourcer with a tiny team being retained by the company doing the outsourcing.

In determining how to best source services to support business dynamics, organisations use different sourcing strategies and business models. Outsourcing business models can be domestic or non-domestic. In the external outsourcing model, companies engage external providers providing the required services at a specified service level and of a specified quality. Depending on the location of the resources, outsourcing business models could be Onsite or Onshore for resources based on the client’s premises or in the same country but at a different location respectively. A much talked about outsourcing business model is the Global Delivery Methodology (GDM) which could be either nearshore or offshore. In a nearshore outsourcing business model, services are delivered from an adjacent country and in an offshore one services are delivered from a far off geography, generally from India or China.

As companies become more mature in their outsourcing engagements and as organisations start developing formal sourcing strategies which in many ways remains ad-hoc in nature, in 2007 and beyond the industry will start seeing a combination of all these outsourcing business models in a completely integrated manner in order to optimise services delivery in their sourcing strategies which would include a systematic and methodical evaluation of the source and location of resources.

We are yet to witness Indian domestic companies using offshore or nearshore outsourcing business models in their sourcing strategies in a full-fledged manner. So far the domestic landscape has seen end-to-end outsourcing deals with a vendor who may be an Indian transnational or an MNC. Although some aspects of the entire services delivery are sourced from different geographies and with mounting pressure of skilled resources, we might also see Indian companies participating in the offshore global sourcing market in the near future. Utility type services delivery models are also gaining ground in India (as in other parts of the globe) and in 2007 we would see more outsourcing business models wherein companies will be paying for only what they use and will have the flexibility to rapidly scale up or down in accordance with their business requirements.

Raibagi observes that staff augmentation was the most popular and well known form of IT outsourcing in the past. He however feels that the trend is swiftly changing towards service providers who take up a particular service area and deliver an end-to-end SLA for the same. “Wipro itself follows the Total Outsourcing Service (TOS) model. This can be defined as a long term contractual arrangement in which the Service Provider takes ownership and responsibility for managing all or part of a client’s IT Operations or department, based on an SLA that typically covers asset takeover and refresh, people takeover, infrastructure services and application services.”

Besides expanding beyond traditional discrete, tactical ‘out-tasking’ projects or facilities management into strategic outsourcing projects, another trend is catching on with regard to the timeframe of outsourcing projects. From a two or three year term contract, the relationship is extending to over a decade. Flexible contracts are what end-customers seem to prefer and that’s exactly what vendors are offering.

Choosing what to outsource

"The areas which the customers are outsourcing vary in terms of the
maturity of the company, their IT environment, in terms of how much IT is aligned with business, and also how they are growing"

- Heera John
Regional Marketing Manager
Outsourcing Services
HP Asia Pacific & Japan

The decision to outsource has been taken, but the question still remains, ‘what part of IT do I outsource?’ The answer to this question varies from enterprise to enterprise based on factors such as the maturity of the company and its growth rate. A company needs to thoroughly evaluate the risks behind outsourcing its infrastructure to a third party. It should look at its businesses and determine the core capability that it wants to retain and what tasks it wants to outsource. That said, it is easier to wrap stringent SLA (service level agreements) around these arrangements.

According to Arup Roy, Senior Research Analyst, Gartner, “Indian companies are mostly in their first generation outsourcing deals and generally outsource a part of their IT setup however some user companies in India are trying to leapfrog to an advanced stage and are also going in for total IT outsourcing deals.”

Talking about the areas which the customers are outsourcing, Heera John, Regional Marketing Manager - Outsourcing Services, HP Asia Pacific & Japan feels, “It varies in terms of the maturity of the company, its IT environment, in terms of how much IT is aligned with business, and also how they’re growing. For example, large enterprises which are on a high growth path would prefer to go for outsourcing the entire IT setup, which could cover the end-user environment, the network, the data centre, and the applications.”

In India, large enterprises are going in for strategic outsourcing because they are in expansion mode, and are facing fierce competition from global players, and they have to get to the market fast. They need to bring in new technologies, best practices in terms of compliances or practices such as ITSM (IT Service Management) and ITIL (IT infrastructure Library). These companies go for strategic outsourcing as they can’t wait. Attrition is so high in the IT industry that it’s difficult for IT managers to keep their staff motivated within the company. Even getting people is a big challenge.

John insists, “SMBs on the other hand, prefer to outsource in phases. The first part is usually the end user work environment and then the network, after which they might also move towards data centre outsourcing. These are the enterprises which are not really mature and not looking at very high growth, who are at a steady state where they do not want to take a risk and want to control their IT infrastructure. Thus, these companies look for outsourcing areas with the least risk that are more problematic such as the end user environment. They sometimes would even go for outsourcing the network rather than the entire data centre where the risk is high.”
Points to remember before outsourcing

* Before deciding what areas to outsource, one should evaluate the criticality of that particular application or process, the benefits that can be derived after outsourcing and the budget required.
* Outsourcing your IT applications enables you to focus on core business activities while at the same time ensuring that you have skilled and qualified professionals to manage your IT infrastructure.
* Before deciding on a third-party, one should consider factors such as cost, service support, technical competence and the reputation of the vendor.
* Keep in mind that whatever application or process is outsourced, you must have strategic control; everything should not be left to the vendor or partner.
* The decision-making power should be given as per the need of the organisation.
But the business heads as well as top management should be involved when taking the decision to outsource.

Security concerns over outsourcing

"Some well known challenges are in the area of data security. There are several operating models through which clients can mitigate
their security related challenges"

- Mohan Sekhar
Member of the Board & Chief Delivery Officer
iGATE

Security metrics almost invariably forms a necessary part of outsourcing contracts in the present day. Strong IP, security and privacy requirements as well as extensive regulatory constraints drive companies to setup captive service centres in an offshore and onshore delivery model.

The security challenges in outsourcing are not very different from the day-to-day challenges an IT department encounters as it manages a public and private facing IT infrastructure. SlashSupport’s approach has been to develop an extensible framework of technologies and processes that allow the company to incorporate its client’s security policies within their environment. Ahmar Abbas, Senior VP SlashSupport says, “We routinely undergo audits by our client’s security department to make sure we are in compliance. In addition, we believe that it is also important to measure ourselves against industry benchmarks. Hence we routinely work with third party firms that conduct a security analysis of our environment.”

Apart from technology, security breaches in networks and applications with viruses, hacking, data theft; security threats from people and employees and terrorist strikes are also causes for concern. Apart from implementing stringent security standards such as BS 7799, vendors are also coming up with stringent employee background check to minimise security breaches.

According to Mohan Sekhar Member of the Board & Chief Delivery Officer, iGATE, “Some well known challenges are in the areas of data security. There are several operating models through which clients can mitigate their security related challenges. These include dedicated facilities, isolated networks, state of the art monitoring devices and metrics processes and tighter contracts with penalties.”

A tangled web of SLAs

SLAs are dependent on a customer’s business objectives. For some customers a high availability environment (24x7, remote and onsite) is a pre-requisite and hence an SLA that mandates end-user application availability is a must. For other customers, specific SLAs for various components of the IT infrastructure are required. These SLAs can be based on response or resolution times (Incident resolution time, change management) and adherence to the same.

Abbas feels that outsourcing a defined set of activities that are wrapped in solid SLAs delivers the best results. A simple governance framework can be put in place to manage these activities and hence the output or deliverables are generally in sync between the client and the vendor.

An additional service that Wipro TOS (Total Outsourcing Service) offers to customers is Business Aligned SLAs. Based on a particular customer’s business and requirements, business SLAs are developed so that the customer can see Wipro being a “strategic partner” that delivers on business parameters rather than just IT.

The SLAs established with the client are typically extensive and vary with each of the service offering. For example, in case of helpdesk or support services the SLAs would include targets on First Call Resolution (FCR), Average Handling Time (AHT) etc. When monitoring and managing IT infrastructure the SLAs include Response Time to Alerts, Mean Time to Resolution (MTTR), percentage of escalations, average downtime etc.

It’s here to stay

Outsourcing looks set to grow as most organisations that have tried it are satisfied with the value that they have received. Analysts believe that, having experimented with piecemeal outsourcing deals, more Indian organisations will start outsourcing their entire IT infrastructure. Clearly, Indian companies are realising that IT outsourcing is not just a cost saver but also a business growth enabler. Keeping in mind the risks involved and careful evaluation of the service provider can help India Inc to breathe easy and let IT boost its already rampant growth. While there is no way to completely eliminate risk, there is a need to be pragmatic. So the only way to go ahead is to deal with acceptable risks.

More than half of top firms renegotiate outsourcing terms

Almost two-thirds (60%) of FTSE 350 companies have had to exit or re-negotiate an outsourcing contract before the end of its term, typically due to poor service from the supplier.

The finding is the result of a survey conducted by law firm Addleshaw Goddard , which questioned sourcing and legal experts at 68 of the FTSE 350 companies.

The survey also showed that one in three UK organisations have taken or intend to take a business function that has been outsourced back in-house.

Over half of those companies have cited service quality problems as the main driver and two fifths said that the failure to deliver cost savings was the reason behind their decision.

The firms questioned in the survey were mainly operating in the financial and retail sectors, markets that have seen widespread outsourcing. The survey explored organisations’ approaches to managing the outsourcing contractual process and the key issues that companies face at each stage.

The study found that the main risk associated with exiting was inadequate exit planning – 24% of respondents said that their company had been significantly impacted by inadequate exit planning.
Exiting was the area where companies felt the least confident in their abilities as part of the whole outsourcing process.

The survey also found that high profile outsourcing disasters do not appear to have increased concerns about outsourcing risks.

Only one fifth (21%) of respondents said that problems, such as the recent Gate Gourmet and BA dispute, have prompted their boards to take a closer look at outsourcing risks.

Board involvement in outsourcing is directly correlated to the size of the deal – although 91% of respondents said some contracts were signed off by the board.

Regarding the perception of outsourcing risks, 21% thought that the deterioration in the quality of the outsourced service process was the factor most likely to cause the failure of outsourcing.

Lack of control was cited as the second largest risk, by 18%. Hidden costs associated with outsourcing contracts were deemed less risky, with 13% citing this risk.

With regard to the outsourcing lifecycle, transition is seen as the riskiest phase. Lack of internal resource to affect transition (cited by 69%) and lack of supplier skills (41%) were seen as the main risks in transition.

Margaret Harvey, head of the technology and outsourcing team at Addleshaw Goddard, said, “The research has uncovered a number of hidden outsourcing truths. Companies often embark on outsourcing with rose-tinted spectacles – they don’t adequately anticipate what could happen when outsourcing goes wrong.”

Outsourcing, media joins the boom

New Delhi, March 21. (PTI): Are you good in English grammar, spelling and editing? Well there may be a job waiting for you from a newspaper thousands of miles away in the U.S.

After IT companies, Banking and finance companies, call centres, education, medical transcription and legal sectors, it is now the U.S. that is looking for outsourcing editing jobs to India and some other developing countries.

"Sure, there have been some basic business reporting and data-entry jobs moving to India, says Sreenath Srinivasan, a professor of Mass Communication in Columbia University in an e-mail interview.

Media watchers say Bangalore has already attracted the attention of the world media. Reuters opened a data and news gathering operation in Bangalore in 2004 as part of a trial run. The agency's Bangalore operation today has more than 1,000 employees, including about 100 reporters and editors, who churn out news briefs, analyst ratings changes, earnings tables, economic polling data and other data products for the company's subscribers. The trend is only gaining momentum.

Global outsourcing of content and other services in the publishing industry is pegged at $2.5 billion. In India outsourced publishing service business is doing a turnover of Rs.1000 crores annually. Recent industry analysis show that the newspaper industry in the developed world is ready to outsource its non-core and core functions to destinations such as India to achieve cost cutting.

A recent decision by the Boston Globe, owned by the New York Times, to outsource editorial jobs to India has already triggered agitation by the unions there, who are up in arms.

Although newspapers have started outsourcing of editorial work to Indian journalists, the change is not going to be smooth for the American readers, says Sunil Saxena, an online journalist and author of book Headline Writing.

Indian English is not snappy and sharp as the Americans are used to reading, he says.

Vijay Darda, Rajya Sabha M.P. and Chairman of the Lokmat group of newspapers, differs. Darda says, his Lokmat group was approached by a well-known British newspaper for editing work.

"We worked for them for six months and found so many grammatical errors. The newspaper editors were happy and were keen to move their classified advertisement handling too to India," he says.

Saxena says that outsourcing of writing jobs, however, is already a huge industry. A website that sprung up a couple of years ago has a substantial databank of 'ghost writers' who do copy editing, book editing, website proof reading and writing your resumes.

The website accepts projects and auctions the work- the job is awarded to professionals with lowest bids. Sitting at home, quite a few writers are making good money, he says.

American English is far more vibrant than Indian English. It will therefore be difficult for Indian journalists to rewrite copy. However, they will be able to handle outsourcing that is limited to simple editing and page making. Also, it will be easier to handle work for a magazine than a newspaper.

The main hurdle will be rewriting. Indians write long, convoluted sentences that may put off Americans. Another important factor is time. When will this work be done? In the night or during daytime? It will be hard to retain good staff if all the work is done at night, as currently happens with other BPOs, Saxena says.

Darda, a former President of the Indian Newspaper Society (INS) said the trend is good for the Indian newspaper industry. "I feel good and proud. This kind of job paves way for further improving our performance besides generating additional revenue,", he says. Darda said, he was happy to see that his editorial team started spending more time in libraries reading and polishing their English.

Quite a few Indian companies already handling overseas work have now added editing and proof reading as also ghost writing to their portfolios.

A company, Hi-Tech Export in Ahmedabad offers 40 hours of proof reading and copy editing for $295. Started in 1992, the company did data processing for other Indian companies and later expanded its offerings developing markets in the United States, Canada, Europe and Australia.

Now it also has an office in the U.S. in Omaha. Another company, Cicada Media in Bangalore, India, focuses on corporate and marketing communications. It offered to correct errors in grammar, spelling, usage and style, and to proofread. U.S. companies are advertising for copy editors now on Monster India, the overseas cousin of the http://Monster.com Monster.com job site we know here.

A newsroom, bedeviled by missed deadlines, a short-handed copy desk and a lack of editing candidates, gets creative, says Joe Grimm, Recruiting and Development officer in Detroit Free Press on a website.

The newsroom then finds a company that offers editing services. The company is overseas, perhaps in India or Singapore. Powered by fiber-optic connections that carry data all the way around the world in less than a second, the off-shore company offers a guarantee on deadline performance.

The quality is good. Hundreds of thousands of people in India grow up in English-speaking schools, and they're working hard to build careers. The work is cheap by U.S. standards. The rate is a third less than what the American newspaper is paying. There are no health benefits, vacations or sick days, and no utility or equipment costs to the newspaper, he says.

Currently the newspaper industry is outsourcing to Indian service providers, editorial work, designing, advertising and sales including classifieds and human resources. With almost 70 per cent of all media work having become digital, it can be easily outsourced, media experts say.

Thus, digitising archives, metatagging are also some of the services being handled by Indian companies. NDTV, the country's largest private broadcaster recently announced a Joint Venture with a BPO company to offer content creation and other media services to world-wide customers.

Indian BPO sector: Call diverts to China, Sri Lanka ahead?

The Indian outsourcing industry might soon get a taste of its own medicine. The industry is now afraid of losing jobs to countries like China, Sri Lanka, the Philippines and South Africa where governments are handing out tax breaks, while Indian companies reel under the newly announced MAT, reports CNBC-TV18.



As of now, the Indian outsourcing industry is losing only sleep, but the time might not be far when it loses jobs as well. The BPO sector says the new tax announcements of Fringe Benefit Tax on ESOPs, 12% on rental space and 11% MAT in this year's Budget has made the Indian industry less competitive globally.



Raman Roy, Chairman and Managing Director, Quatrro, said, “We face the risk of losing our first-mover advantage. These policies are making us less productive in comparison to other countries.”



On the other hand, China, Sri Lanka, the Philippines and South Africa want a slice of the outsourcing pie. Sri Lanka offers a 15-year tax holiday, while Philippines and China offer a 10-yr tax holiday each. Most of their governments offer 10 to 15 year tax breaks and China even offers BPO employees an income-tax holiday.



Promod Bhasin, President & CEO, Genpact, says, “Countries like China, Romania, South Africa and the Philippines offer better incentives. I have told my people, if China becomes more cost-effective, I will be the first one to move.”



Industry sources say Nasscom has made representations to the Prime Minister and Finance Minister on behalf of the USD 9-billion Indian BPO industry, but has little hope of a rollback. It might now lose expertise to newcomers.

CCID Report Shows China's IT Services Market to Escalate in 2007

BEIJING, March, 21 /Xinhua-PRNewswire/ -- CCID Consulting Co., Ltd
(hereinafter known as CCID Consulting), China's leading research,
consulting and IT outsourcing service provider, the first Chinese
consulting firm listed in Hong Kong, reviews the current status of China's
IT Services Market in 2006-2007, and outlines the main market development
trends: China's IT services market began to enter a stage of structural
adjustment from 2006.
CCID Consulting's data show that the growth rate of China's IT services
market slowed down compared to that of 2005, even though it has increased
17.8% over 2005 and has reached a size of 59.5 billion Yuan in 2006.
According to statistics, lower growth in system integration services was
the key factor that pulled down the growth of the whole IT services market,
as system integration at present accounts for nearly 30 percent of China's
overall IT services market. Slowing down of integration growth signaled a
major change in China's IT services market, indicating that the information
society had gradually leapt from the procurement and use of basic systems
to software and service applications, as China's IT services market began
to enter a stage of structural adjustment since 2006. Jian Cang, an analyst
of CCID Consulting, indicates the structural adjustment trends as follows:
1. System Integration Growth Slowed down with Gradual Increase in
Outsourcing Activities
In terms of specific sectors, the IT consulting market benefited from
various IT consulting projects of the telecommunication industry and the
government and marked an increase of more than 20% over last year. For
system integration services, some companies saw a negative growth over last
year. However, under the effect of the Beijing 2008 Olympics project, the
system integration market managed to maintain a momentum of high-speed
growth and snapped the biggest share of the IT services market. With the
growing popularity of human resources outsourcing, the operational
procedure outsourcing market became the sector that grew fastest. The IT
system outsourcing market also grew rapidly. At the same time, the fast
growing sectors led to an over-20% growth rate of the IT technical services
market, while the support and maintenance market continued to grow
steadily.
2. Government Services Skyrocketed, Small Enterprise Market to be
Nurtured and Market Structure Remained Stable
With the implementation of government projects, in some provinces and
cities, IT services market for the government grew at the highest rate in
the vertical markets. IT services market for large enterprises maintained a
relatively high growth rate over last year and will remain the biggest
sector of the vertical markets. By comparison, the services market for
small enterprises grew relatively slowly and remained in the nurturing
stage. In the parallel markets, projects such as 3G construction, customer
support system, network management and security management in the
telecommunication industry contributed to relatively rapid growth of IT
services and the scope of this sector remained in the second place of
industry markets. The IT services market in the finance industry kept a
steady growth momentum over last year and was expected to continue to hold
the largest share of the industry. IT services in the manufacturing
industry grew most quickly thanks to the high demands of multinational
manufacturing enterprises. Although services in the energy and circulation
industries grew relatively slowly compared with other key industries, they
marked a growth rate of around 15%, which indicated the robust growing
demands for IT services in key industries.
3. Big International Companies Enjoyed Distinctive Advantages in
Comprehensive Services, Domestic Companies Such as Digital China and
Neusoft Kept their own Sphere of Industries
Among IT services providers, while IBM held the largest market share
with its capacity of comprehensive IT services, other major providers like
HP, Digital China, and Accenture continued their leadership position in
their strongest areas. AsiaInfo achieved a larger market share, due to the
fact that it purchased part of the telecommunication services of two
companies and received a large number of orders from the telecommunication
industry in 2006. Neusoft also had bigger market shares because of the
rapid growth of its outsourcing services.
The structural adjustment in 2006 will continue in 2007 and the next
few years. The trends in different sectors are as follows:
4. Ever-Greater Reliance of System Integration Projects on Consultation
Promoted High Growth of IT Consultation
As customers' interests diversified and demands rapidly shifting, and
as more attention is paid to their self-services and IT systems, system
integration will tend to reply more and more on IT consultation. Meanwhile,
greater awareness of the strategic importance of IT outsourcing enhances
the position of IT consultation as more and more enterprises value these
services. Consequently, IT consulting will continue to grow relatively
rapidly in 2007.
5. Training and Education Market Tend to Involve Less Fields, but
Demands Remain High and the Market Will Continue to Grow Steadily
The IT training and education market development has neither heated nor
slowed in the last two years, but this was not a problem of demands. As a
matter of fact, the rise of the IT training and education in China was
subsequent to the fact that post-secondary IT education was not in line
with the market. With the relative lagging behind of post-secondary IT
education some years ago, there will not be a great many new employees and
even students still in school enrolled in off-campus training. While
vocational schools, software schools and other post-secondary educational
institutions that even more highly target IT education were heavily
launched in the past two years, and IT companies also directly collaborated
with institutions of higher learning in IT education. Both were blows to
the off-campus training market. However, due to immense demands and the
inherent feature of information technologies to keep learning, IT education
and training still shows growing potential in vocational training. It is
forecast that the IT education and training market will maintain a growth
of around 20% in 2007 and demand will increase in training game and
software outsourcing experts.
6. Multiple Factors Promoted Outsourcing, Offshore Services Grew Fast,
Domestic Demand will Take More Time Before Explosion and Expert Supply Will
Also Restrict Market Development
Outsourcing was a highlight of China's IT services market in 2006. The
government-sponsored BPO basis was launched, and as a result, the market
responded positively and services providers were gathering. It seems that
everything was ready. However, the biggest difference between the resources
needed by manufacturing bases and plants and IT outsourcing is that the
latter require much more highly qualified personnel than the previous. How
to locate qualified personnel in a relatively short time is the most
essential bottleneck of IT outsourcing development in China right now. This
problem is expected to become even more pronounced in 2007, therefore the
growth of outsourcing is not very likely to explode, but steady and rapid
growth of over 25% is foreseen.
7. Customer Support and Maintenance Will Continue to Lean Towards
Software
The focus of customer support and maintenance leaned more and more
towards software since 2006. Hardware services declined by 2.4 percentage
point in the overall support and maintenance services in 2006 over 2005,
and the trend that will proceed and may even further in 2007. Software
intellectual property rights protection procedure will also considerably
affect the development of maintenance services. As a result, the growth of
this sector will be fast but restricted.
8. Small and Medium-Sized Businesses (SMB) Will Become the Main Clients
of Future IT Services
SMBs demand just as many IT services as large enterprises, but their
structure and features of demands resulted in a relatively low level for IT
services in the past ten-odd years. This situation will greatly change in
the next few years. First, IT services providers will have to transfer the
focus of growth to SMBs and actively explore the opportunities of serving
them, because large enterprises become more cautious of spending, the
competitive pattern among large companies already tend to become stable,
and revenue growth with them slows down. Second, the diverse service modes,
open-source software development, and the promotion of standard services
and service products will expand the profit potential of serving SMBs and
services providers will consequently invest more in services targeted at
SMBs. Last but not least, lower costs and better understanding of SMBs of
the relation between their competitiveness and the IT system will make them
more willing than before to invest in IT and increase demands for IT
services. So for a number of years in the future SMBs will demand rapidly
increasing IT services, and fighting to win over SMBs will gradually become
the focus of competition among IT services providers.
About CCID Consulting
CCID Consulting Co., Ltd (also known as CCID Consulting), the first
Chinese consulting firm listed in the Growth Enterprise Market of the Stock
Exchange (GEM) of Hong Kong (stock code: HK08235), is directly affiliate to
China Center for Information Industry Development (hereinafter known as
CCID Group). Headquartered in Beijing, CCID Consulting has so far set up
branch offices in Shanghai, Guangzhou, Shenzhen, Harbin, with over 300
professional consultants and industry experts. The company's business scope
has covered over 200 large and medium-sized cities in China. Apart from
home market development, CCID Consulting establishes international
cooperation links across the United States, Asia-pacific area and Europe,
by setting up agents in the U.S, Japan, South Korea, Australia, Singapore,
Italy and Russia, along with the aim to be global.
Based on four major competitiveness of the powerful data channels,
industrial resources, intensive knowledge and deep understandings of
information technology, CCID Consulting provides customers with consulting,
research and IT outsourcing services covering strategy planning, IT
application, marketing strategy, human resources and information technology
outsourcing. Our customers range from industrial users in IT,
telecommunications, energy, finance, automobile to government departments
at all levels and diversified industrial parks. CCID Consulting commits
ourselves to become the No.1 brand for strategy consulting, the No.1
consultant for enterprise management and the No.1 expert for market
research.

SEO Outsourcing India will efficiently cut costs

Outsourcing simply means handing over the work that you do to a third party. Every business these days is being dominated by this and search engine optimization or SEO is no exception. Among the many destinations for outsourcing, SEO outsourcing in India has emerged as the most illustrious destinations in the world. True there are several countries in the world, that provide SEO outsourcing, but due to certain advantages India has emerged as the hottest destination for SEO outsourcing.

There are several advantages of SEO outsourcing from India. Among the countries that are in the outsourcing work, India has the highest number of English speaking professionals. Proper knowledge of the language is a huge bonus as this helps in proper interaction with clients. After all if professionals working for SEO outsourcing are just not able to understand what their client wants, there will be chaos all around and needless to say that the work will not at all be done in a proper manner.

SEO is all about undertaking various strategies that will help an online site to rank at the top of search engine find results. One of the strategies for SEO is writing lots of articles and content and distributing them on the web. So to write good articles one needs proper knowledge of English and also knowledge about the subject on which they are writing. This along with several other advantages has enabled Indian professionals to do excellent work for SEO for businesses that are operating outside.

India also has a huge number of professionals who are very highly qualified in the technical field. Technical qualification of professionals is one of the benchmark for successfully doing SEO for any online business site. Another great advantage of doing SEO outsourcing from India is that you will end up saving huge amounts of money. This is the one aspect that is driving more and more companies towards undertaking outsourcing SEO for their business.

Imagine if you can hire someone who can do the work for you in less then half the rate that you used to pay, then it surely is a huge advantage to you. Suppose you used to pay eight dollars to get certain SEO work done, you will now have to pay less then half say about three dollars if you outsource the same work. That is not all; the SEO work for you will be done by highly qualified professionals, so you will also get top quality work done from them.

Many companies have earned huge profit by undertaking SEO outsourcing from India. Well, when there are so many advantages, and one can earn only profit from this. There is absolutely no chance of incurring losses of any kind if you work with the right people. So just make sure that you are working with the right kind of people to get your SEO outsourcing in India done in just the perfect way. After all you are undertaking this task for the progress of your business and you will undoubtedly want the best for your business.