EDS to set up global service center in central China

Source: Xinhuanet

04-11-2007 10:34

WUHAN, April 10 (Xinhua) -- Electronic Data Systems (EDS), the world's leading IT service outsourcing company, is to locate a service center in Wuhan, central China's Hubei Province, a company official said Tuesday.

The service center, first of its kind in China following the ones in India, South America, Eastern Europe, is an important part of EDS' global strategy, said Kevin Bonfied, vice president of Business Workforce and Capacity Management of EDS, at a software outsourcing service forum in Wuhan.

The service center, located in a software development park in Wuhan, will hire 700 employees this year, and the number is planned to increase to 3,000 within three years, said Derek Sharp, vice president of EDS Asia.

The service center will provide outsourcing services for EDS' global customers, as well as its local Chinese customers, said Sharp.

Presently, EDS owns two representative offices in China, with another based in Beijing. But these two offices now functions mainly as a receiver of orders for EDS, so its latest investment in Wuhan will be the company's largest-ever investment in China, according to Bonfied.

China's software outsourcing industry has been developing rapidly these years.

Its software outsourcing market generated value of 1.43 billion U.S. dollars in 2006, a jump of 55.4 percent from the previous year, and the figure is predicted to top 7 billion U.S. dollars by2010, or 8.4 percent of the world market, according to a report by the China Market Information Center, a leading Chinese information service provider.

Based in Texas, the United States, EDS is a leading global technology services company with 130,000 staff, mainly providing outsourcing services on information technology infrastructure, software system and business process for organizations and companies from 64 countries.

Offshore Software Outsourcing Trend in 2007

According to IT Industry experts, Offshore Software Outsourcing Trend will have better market place in the year 2007. We all know that IT Outsourcing is on the boom since last five to seven years and rapidly the demand of overseas services is also increasing. Sending the development work to the overseas location, especially in the software industry, has become pretty common and routine procedure for many of the companies. Most of the companies now a day prefer outsourcing to reduce the in-house development burden. It is also fact that outsourcing the non-core activities helps the companies to concentrate more on their key functionalities.

If we consider the scenario before almost a decade, sending the work to the overseas location was avoided. Most of the companies preferred to perform all the work in-house only in spite of higher cost. But with the development of advance technology, outsourcing has become the ideal business process. Again in the time period of last five years, the process of offshoring is highly booming. Countries like India & China are the most preferable destinations for overseas IT services. In the financial year of 2006 both the countries have faced tremendous growth and higher financial growth is also expected in the year 2007.

The market of Offshore Software Outsourcing is expanding rapidly and the main reason is the customers are now looking for the services and products with lower cost and higher quality. Today’s market is customer’s market and customer is the king. To sustain the place in the market and to meet the demand of the current market for lower cost and higher quality services, companies have only one option and that is IT Outsourcing. According to the experts, in the financial year 2007 Outsourcing industry is expected to have overseas income almost two times compared to the previous year. More and more development work is sent to India and China from the countries like US, UK & Australia. It is also marked that India has much higher market share compared to China for IT Offshoring services.

Increased Offshore Software Outsourcing Services

Financial growth of India was also very high in the year 2006 due to increased Offshore Software Outsourcing services. IT has played a major role in the growth of the country India in the recent years as more and more foreign economy is coming into the country as a part of IT Outsourcing. India has highly talented men power with it. Another main reason for the success of the country in the filed of outsourcing is the fluency over the English language. Indians are very fluent in English and this is the most important advantage that India has edge over China.

Overall market survey also suggests that in the coming financial year of 2007, IT Outsourcing will have brighter future. From the current market scenario we can firmly say that Offshore Software Outsourcing is the best solution to meet today’s market demand for the combination of Lower Development Cost and Higher Product Quality.

NewMarket China Aims To Build Game Development Outsourcing Business

April 5, 2007

NewMarket China has signed a two-year contract with Shanghai ArtCoding Company to cooperatively provide outsourcing services to game development customers.

NewMarket China will initially target customers in North America, but will eventually seek customers in other global markets as well.

ArtCoding has provided offshore development services to a variety of customers, including international game publishers and independent studios. Their capabilities extend not only to the PC platform, but also to Sony's PlayStation, Microsoft's Xbox, and Nintendo's GameCube.

Last year, NewMarket Technology, the holding company for NewMarket China, completed the independent public listing of its Chinese operations which expect to report over US$20 million in revenue for 2006. NewMarket China has forecasted a 100% increase in revenue in 2007 to US$40 million.

Outsourcing's Future Holds Major Surprises for Global Providers

CHICAGO, April 4 /PRNewswire/ -- The ways in which companies evaluate outsourcing performance, the global strategies of outsourcing providers, and even presidential politics will be affected by emerging trends in the outsourcing industry, according to Diamond Management & Technology Consultants, Inc. .

In advance of its annual Global Outsourcing Study, experts in Diamond's Strategic Sourcing Advisory practice offered a forecast of trends that are altering the way corporate clients approach their sourcing decisions and how providers of outsourcing services must adapt to a changing market. Buyers and providers of outsourcing services are invited to participate in Diamond's 2007 Global Outsourcing Study and share their confidential opinions about the current and future state of IT and Business Process outsourcing. The survey is available online at http://www.diamondconsultants.com/.

Buyers trying new ways of improving outsourcing effectiveness

Diamond's 2006 IT Outsourcing Study found that forty-seven percent of buyers had experienced an abnormal contract termination in the past year while only two percent stated that their outsourcing expectations were exceeded.

"Optimizing outsourcing effectiveness is becoming a high priority for C- level executives," said Tom Weakland, who leads Diamond's Strategic Sourcing Advisory practice. "We are going to see companies scramble to find advisors who not only have the skills to review contractual agreements, but who also are willing to provide hands-on management of offshore resources at remote locations, and who can design and track meaningful measures of provider performance."

Weakland points to Cisco's December 2006 appointment of a new executive position, the Chief Globalization Officer, as a sign of things to come as companies dedicate more staff on a full-time basis to lead and manage sourcing and global expansion initiatives.

Charlie Gavin, a Partner in Diamond's Sourcing practice, adds, "Clients are placing more emphasis on improving their day-to-day vendor management capabilities along several dimensions -- knowledge management and market understanding, contract/performance management, and relationship management. Some buyers are even sending employees to their providers' offshore training centers for extended periods of time to establish tighter partnerships and better working relationships."

Buyers will quietly re-insource work

As buyers continue to be disappointed in some of their outsourcing results and re-assess their activities, more companies will quietly bring some outsourced work back in-house even as they continue to invest in other areas on an outsourced basis.

"In some cases, internal IT employees will be asked to shift gears and retake ownership of functions that they previously helped transition to an outsourcer," said Brian Tumpowsky, a senior member of Diamond's Sourcing practice. "We think the trend we've seen in past studies, where companies are outsourcing commodity activities to redirect IT staff toward more strategic work, will continue. But internal IT departments will also be re-tasked with functions that had previously been outsourced. It's a balancing act; companies are trying to calibrate their sourcing portfolios to achieve the optimal mix of resources."

This is by no means the death knell for outsourcing as Diamond sees continued growth for both IT and Business Process outsourcing. Buyers of the future, however, will be more prone to re-insource when their expectations are not consistently met.

Negative publicity about outsourcing will re-emerge with the run up to the 2008 U.S. Presidential election

With Democrats taking majority control in Congress and presidential campaigning well underway, the topic of outsourcing and its impact on U.S. jobs will once again become a significant campaign issue. Offshore outsourcing providers experienced a slow down of growth amongst a wave of backlash in conjunction with the 2004 presidential election, and the potential is there for a similar occurrence in 2007 and 2008. Even though outsourcing has become a mainstream activity and organizations are better prepared to handle employee backlash and public outcry, Diamond believes that many organizations may begin to delay major outsourcing decisions as the election nears.

More buyers will look to outsourcing as a growth play.

The announcement by Wipro and Motorola last summer of a joint venture to host a global network operation center is representative of a movement in the market for buyers and providers to establish what Weakland calls "cooperative captives."

"Look for companies trying to enter India or China to form joint ventures with outsourcing companies. It's a way to leverage established relationships with the government and associate with an established local brand," Weakland said. "These joint ventures can jump-start business efforts and bring tax advantages, and can also accelerate market presence by reducing the navigational hurdles of setting up a business overseas.

They can accelerate a company's efforts on the revenue side in local markets as well. More U.S. and European-based companies recognize the potential of changing consumer demographics among the 1.1 billion citizens in India and 1.3 billion in China. India already hosts a middle-class population of 300-400 million while China's middle class is expected to grow from 130 million to approximately 600 million (twice the size of today's U.S. population) in the next 15 years. And so accordingly U.S. and European firms will craft outsourcing strategies not only to leverage additional capabilities and cost savings, but also to become exposed to these growing markets in terms of knowledge, brand, suppliers, and eventually customers.

Rates will rise as second-tier providers invest in additional global operations to balance their onshore and offshore presence

As large multinational offshore players battle for global outsourcing supremacy, balancing the need for low-cost operations with customer demands for more high-touch service will alter provider global delivery models and cause them to readjust their rate structures. Second-tier providers will be forced to follow the lead of the larger firms and increase investments to expand their global reach and get closer to their customers. As a result, providers will seek to increase their prices to offset their expansion costs.

"As costs rise, sourcing implementation and management become even more critical, particularly if the goal is cost-savings," said Weakland. "More companies will try to bring structured management discipline to their outsourcing relationships. The risk is they will end up negotiating adversarial relationships and we'll see even more abnormal contract terminations."

China will leverage the 2008 Beijing Olympics to increase its status among outsourcing destinations

Expecting more than 20,000 journalists, China will take advantage of the 2008 Summer Olympics to promote its position as an outsourcing super-power, highlighting its increased focus on English education, a booming economy, and a growing pool of highly qualified software engineers.

"According to Diamond's annual global IT outsourcing studies, the number of buyers that expect to outsource IT functions to China has soared 48 percent between 2004 and 2006," Weakland said. "The Olympics are the perfect platform for Chinese outsourcers to begin to convert those expectations into real market share, and establish their reputations as capable, high-quality providers."

While China is poised to capture significant mindshare, Diamond believes it will still be several years before the Chinese outsourcing industry captures significant market share.

Greater demands for outsourcing employee security checks

After a multinational bank discovered in 2005 that call center employees at an Indian outsourcing firm had stolen more than $300,000 from its customers' accounts NASSCOM established a National Skills Registry of employees working at Indian outsourcing firms. However, the latest estimates are that only 30 percent of the industry's employees have undergone independent background checks and been added to the database.

"Customers are anxious to verify the qualifications and backgrounds of specific employees," said Gavin. "Outsourcers have done a good job in the areas of physical and information security but this is the year they need to focus on their employee base. We'll see outsourcers carefully screening employees, verifying work histories and backgrounds, and using the issue of employee screening as a competitive edge."

About Diamond

Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond's small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results. To learn more visit http://www.diamondconsultants.com/.

Contacts: David Moon Media Relations +1.312.255.4560 david.moon@diamondconsultants.com Margaret Boyce Investor Relations +1.312.255.5784 margaret.boyce@diamondconsultants.com

Diamond Management & Technology Consultants

CONTACT: Media Relations, David Moon, +1-312-255-4560, or
david.moon@diamondconsultants.com, or Investor Relations, Margaret Boyce,
+1-312-255-5784, or margaret.boyce@diamondconsultants.com, both of Diamond
Management & Technology Consultants

Web site: http://www.diamondconsultants.com/

New game outsourcing deal in China

10:15, Apr 5th 2007 by Michael French

NewMarket China has teamed up with Shanghai-based development studio ArtCoding to form a new outsourcing offer in Asia for North American companies.

The two companies have inked a two year contract to cooperatively provide outsourcing to game development companies, with capabilities for PC and Sony, Microsoft and Nintendo platforms.

ArtCoding has previously worked for the likes of EA, Activision and Vivendi.

While the two are initially targetting American companies they plan in time to offer their services to global customers as well.

Lack of good governance is the weakest link in most global outsourcing deals. Managing relationships to mutual benefit is notoriously difficult in all

Lack of good governance is the weakest link in most global outsourcing deals. Managing relationships to mutual benefit is notoriously difficult in all cases. And managing them from many time zones away just compounds the problems. Governance is strictly defined as authoritative direction or control, but in this context, we mean how global-service initiatives are run—the people, processes, systems, and controls.

With scale and rapid growth come numerous challenges, including service failures, privacy violations, data theft, and inadequate savings. While such issues are often attributed to lack of capabilities and inconsistent quality on the part of the service provider, I find that inadequate governance on the part of the client is the single biggest reason that global service initiatives fail.

An effective governance structure keeps global initiatives aligned with overall corporate strategy. It also lets the organization manage expectations and communications between its internal constituents and the service provider or its own global operations. The organization benefits because services are delivered effectively, internal constituents make the right decisions at the right time, and key stakeholders' expectations for service delivery are managed appropriately.

Governance isn't a short-term measure. To build successful relationships with global vendors and distributed global operations, an organization must put as much effort into designing and implementing the governance structure as it does in writing the RFP, selecting the supplier, setting up an operation, or negotiating the deal. Of course, the service provider shares a role in governance, too, as it participates in this ongoing process. The supplier should be well-integrated into the governance process and structure.

To reap the promised benefit, avoid value leakage, and manage complexity and risk, organizations must develop governance structures that span strategic and tactical elements of the company's objectives. A best-in-class structure starts with establishing a governance body across three layers: organizational, functional, and operational. The CIO or functional head is involved at the organizational level, while process owners are involved at the functional layer. At the operational level, the key participants are project managers and team leads.

Success requires an internal life-cycle commitment, timely decision-making, appropriate staffing and role definitions, investment of time and effort by senior management, and appropriate budgets. The key components of successful governance also include six operational aspects: management of performance, finance, contracts, resources, relationships, and risks.

As an example, HSBC established IT and back-office operations in 10 Asian countries just six years after opening its first offshore office in Guangzhou, China, thanks to a continued governance commitment from top management and from employees from a wide berth of expertise and experience. Today, more than 18,000 people across Asia cater to its banking divisions in North America, Europe, Asia-Pacific, and the Middle East. A focused and dedicated corporate-governance body, called the Global Processing Team, continually works to meet strategic and tactical objectives. Originally a small group reporting to HSBC United Kingdom's senior manager for personal financial services, the team evolved into a strategic division reporting directly to the group CEO.

Good governance will ensure that your globalization initiatives provide an early-warning system of problems and an excellent ROI.

Atul Vashistha is co-founder and CEO of neoIT, a management-consulting firm. Previously, he served as senior VP, international, at Cardinal Health.

Premier's Visit Strengthens China's Software Outsourcing Ties With Japan

China's growing software outsourcing trade with Japan is expected to rise even faster after Premier Wen Jiabao's "ice-melting" visit to Japan.

"China accounted for more than 60 percent of Japan's outsourced software trade in 2006 and has become the country's biggest software outsourcing base," said Mine Shentaro of the Japan External Trade Organization, based in Dalian, northeast China's Liaoning Province.

Dalian Hi-Think Computer Technologies (DHC) is one of China's leading software outsourcing firms. Manager Liu Jun is proud of its big-name customers, including technology giants Hitachi (NYSE: HIT) , Sony (NYSE: SNE) , Mitsubishi and NEC (Nasdaq: NIPNY) .

Continued Growth

"DHC started outsourcing computer software from Japan in 1996, a time when Sino-Japanese relations were at low ebb. Political hindrances have not impeded our business," said Liu.

DHC's business with Japan has grown 30 percent annually since 1996 and now employs 2,000 people. Last year, the company exported software worth US$50 million to Japan.

"More than 60 percent of China's software trade is Japan-oriented," said Jin Guowei, deputy director of the Dalian Information Technology Bureau.

Skilled Labor

Dalian, a Japanese colony for 40 years before the end of World War II, became the outsourcing center of information technology to Japan due to its geographical proximity and its skilled labor force.

The city's software industry sales last year set a new record at 10 billion yuan ($1.23 billion), maintaining a 60 percent annual rise in the past six years.

Of the sales, processing outsourced software contributed 3.7 billion yuan ($456 million), of which at least 80 percent was for Japanese companies.

The city has 20,000 people working in the software outsourcing sector and 70 percent of them speak Japanese.

According to a government plan for the development of software and information services, China aims to generate $168 billion from the software sector and export $12.5 billion worth of software services in 2010.

'An Irreversible Trend'

Jin is confident in the future. "With the improvement of bilateral ties, I believe the industry will become more prosperous.

"The friendship between China and Japan is an irreversible trend. Premier Wen Jiabao's visit to Japan is good for the two countries. I hope after the visit more Japanese can put away misgivings and start cooperating with Chinese firms in the software industry. It will be a win-win solution," said Jin.

"While European and American companies are choosing India as an outsourcing base, Japanese firms prefer China because we are close neighbors and have similar cultural backgrounds." said Noshiro Yasuo, president of Fujitsu System Engineering in northwest China's city of Xi'an.

"Premier Wen's visit to Japan will give us more confidence to expand our business in China," he added.

Outsourcing trends among small and mid-sized OEMs

By Bruce Rayner, VP Consulting and Research, Technology Forecasters Inc.

Apr 19, 2007

At the recent Technology Forecasters' Quarterly Forum in Monterrey, Mexico, TFI consultants presented a number of new research studies covering a wide range of topics relevant to the supply chain and outsourcing needs of the electronics industry.

This article covers Part 2. as shown below. The third part will be published next week.
Part 1 (published last week). The state of Lean adoption in the electronics supply chain
Part 2. Outsourcing trends among small and mid-sized OEMs
Part 3. Supply Chain software trends among OEMs and EMS providers

Reports on manufacturing and design outsourcing typically focus on the top-tier electronics companies such as Apple, Cisco Systems, Hewlett Packard, and others. But they are not alone in tapping contract manufacturers. Small and mid-tier companies, especially entrepreneurial, high-growth companies utilize contract manufacturers - and not just for production - and the pace of outsourcing is increasing.

The level of outsourcing is significant among these companies. Collectively, the thousands of electronics OEMs with annual sales below $1 billion produce about $140 billion worth of products and represent about 13 percent of the total global electronics market. About half are in the computer and consumer sectors of the market with the remainder split between communications, medical, automotive, industrial and aerospace/defense equipment.

Many of these companies are relatively young and started life with no intention of building factories. Instead, out of the gate, they focused on design and development and turned to contract manufacturers for prototyping and production.

TFI's survey findings included a number of interesting trends among this group of companies:
-- Printed circuit board assembly (PCBA) outsourcing is the norm among these smaller, fast growing electronics OEM; however, many also outsource parts of their product design.
-- Cost, quality, and protection of intellectual property are the major challenges faced by the smaller OEMs outsourcing.
-- Cost reduction, flexibility, and reduced cycle time are the three main reasons they outsource.
-- China and Southeast Asia are the primary areas cited by these small companies for production expansion.

Based on the interviews TFI conducted, the outsourcing of PCB assemblies among these small, high-growth OEMs may have reached saturation point. Currently the firms surveyed outsource PCB assemblies over 90 percent of the time. That's because internal production of PC boards is not justified in their business model.

While PCBA dominates the outsourcing trend, opportunities exist for other contract services. Sub-assembly and final assembly are now outsourced about 35 percent of the time, according to the survey sample. And small OEMs are using logistics services 21 percent of the time to ship final products to customers or distribution centers.

TFI asked these OEMs what they considered to be the most significant challenges they faced in outsourcing electronics. The issue of cost management appeared at the forefront with quality close behind. (See Chart 1). As might be expected among smaller, fast-growing companies, the risks associated with protecting intellectual property is a major concern as they look to outsource manufacturing.

An unexpected finding was the willingness among this group of companies to outsource design. Approximately 15 percent of their design activity is outsourced. In some cases, the outsourcing of design was seen as a short-term strategy; the in-house design teams simply didn't have the bandwidth to handle the volume of design work. Outsourcing design allowed them greater flexibility as they grow the business. However, a number of the OEMs TFI interviewed indicated that they plan to decrease the outsourcing of design as they add internal resources.

"We see product design as one of our core competencies and we want to move more of that in house," said one consumer OEM executive.

A trend among large OEMs for the past decade has been the shift of manufacturing to low-cost regions, with a focus on China. Now because of cost pressure and the growth of new markets, smaller OEMs are increasingly seeking out low-cost manufacturing centers for their production as well.

The tremendous economic growth in India and China, for example, creates a boom in consumer spending in these areas. To serve these untapped markets, smaller companies will, by necessity, need to develop strategies for serving these growing markets, which typically include locating production and distribution operations close to these markets.

When we asked the survey respondents where they were considering outsourcing in the future, China and Southeast Asia were the predominant responses. Although all the companies interviewed were headquartered in either the United States or Western Europe, they showed a distinct preference for outsourcing to Asia. Even those companies that currently serve the US market and use only a domestic supply base said they could not ignore today's global marketplace.

Outsourcing Your Back Office Functions - 12 Reasons for Change

Outsourcing your back office functions will pay off substantially in relatively short order. How do you know when it's time to make the change to business process outsourcing (BPO)? Here are 12 reasons for change.

From: GO Global (Global Outsourcing, Inc.) Media contact: Arlene Hauben, 305-206-4488 Email: arlene@goglobalbpo.com Outsourcing Your Back Office Functions 12 Reasons for Change /24-7PressRelease/ - MIAMI, FL, April 24, 2007 - Outsourcing your back office functions will pay off substantially in relatively short order. The potential to reduce overhead costs is great as the business eliminates salaries and employee benefits, as well as other ancillary costs, such as leasing of space, utilities, and computer and telecommunication related expenses. Beyond the significant cost savings of outsourcing, the CEO is relieved from the sweat and pain of operating the business, which often means concentrating on administering and managing employees. With newly available capital from the cost savings and freed up time, the CEO can focus on expanding the core business. According to Cheryl Frank, CEO of GO Global, a business process outsourcing (BPO) provider, "Companies that outsource their back office process will not only reduce expenses, but also create a more streamlined environment positioned for growth, adding millions in value and making them attractive to a third party for purchase." The question is how do you know when it's time to make the change to business process outsourcing (BPO)? According to Frank, companies should consider outsourcing their back office functions when these circumstances exist: 1. When a company employs three to 50 back office workers. 2. When your bottom line profit to gross revenues is less than you projected. 3. When a significant amount of a CEO or CFO's time is spent managing and administrating back office employees. 4. When your back office costs exceed 10% of revenues. 5. When the turnover rate of back office staff is more than 5% annually. Training costs can drain your bottom line! 6. When every time an employee leaves you spend too much time searching for qualified replacements. 7. When computer systems become obsolete and software outdated, it may be the right time for an upgrade and shift to an experienced outsourcing provider. 8. When the company is not growing, indicated by earnings of less than 10% annually. 9. When the company is lagging behind its peers, evidenced by a decrease in customers. 10. When you do not get timely month profit/loss statements and you are unable to manage your business effectively. 11. When the data you are getting just is not correct! 12. When the CEO and other top officers take frequent fishing trips and have contacted headhunters. As a case in point, GO Global was asked to provide accounting services for United Management Company et al in Washington, DC. The CEO was no longer able to profitably manage the properties and was on the verge of putting them on the market. He decided to outsource the accounting and property management to GO Global. Within three months, one of the company's largest buildings was no longer in the red. The transition period to outsource the accounting and administrative functions is usually about three to six months, but the savings after two years can exceed 60%. "GO Global transforms businesses by reducing costs and streamlining operations to such an extent that the company becomes very well positioned for long term growth," notes Frank. "In the case of United Management, the CEO was spread thin both financially and time wise, managing the company's several properties. Since outsourcing, the business is now acquiring additional properties and entering into affiliated industries," says Frank. "In fact, banks have lined up to offer lines of credit to assist in the company's expansion plans. A good profit/loss statement is worth more than its weight in gold." GO Global has offices in Miami, FL and Bethesda, MD. At its nearshore data processing center in Guatemala, data is securely processed within a 24-hour period. Founded in 2006, GO Global is dedicated to providing all manner of back office services, from call centers to accounting, claims processing, and even highly complex financial services. Contact GO Global at 1-877-462-7680, or visit www.goglobalbpo.com.

About GO Global GO Global is dedicated to providing all manner of back office services, from call centers to accounting, claims processing, and even highly complex financial services. Please contact us at 877-462-7680.