Not long after I arrived in Vietnam, I was grateful that I had not developed a taste for fine food. I learned quickly that, with rare exceptions, C-rations were an agreeable alternative to meals prepared by Army field cooks.
Even so, Uncle Sam made sure none of us went hungry. New replacements, however, soon saw the long-termers frequently resorting to the canned cuisine, which was abundant, rather than eating at the "mess hall."
That's not to say the meals weren't nutritious, at times even more than palatable, especially those Thanksgiving and Christmas spreads that helped to lift morale. Much of the time, though, the GIs in my outfit looked elsewhere to satisfy their appetites, perhaps skeptical of the cooks' motivations but also aware that lowered expectations were better than no expectations.
Besides, adequate rations of dime-a-can beer took care of the morale part, at least to the extent life in the remote central highlands of Vietnam provided morale-lifting opportunities.
In other words, the Army provided whatever the Army considered essential, and that was that. Either Army cooks fed us, or Army supply clerks distributed cases of C-rations.
No one apparently had yet conceived the modern management tool of contracting those services to private vendors, as has become the norm for the U.S. armed forces in Iraq, Afghanistan and elsewhere across the globe.
Outsourcing has become a given in applied management strategies, designed to maximize efficiency in achieving the designated goals and objectives. This approach has been a mainstay for years as corporations have outsourced certain functions to enhance their return on investment.
Successes in stimulating such bottom-line increases have not entirely dispelled some clamor against the consequent loss of American jobs replaced by those shipped overseas, but as that gentle humanist Benito Mussolini put it, every omelet requires some broken eggs. So deal with it.
The same principle now applies in the outsourcing of private contracts, not only to the care and feeding of combat troops but also to related functions such as civil reconstruction in the after-action phase of military campaigns.
Once upon a time, the Army Corps of Engineers and Navy Seabees saw to such logistical programs. Now, under the strategic doctrine of outsourcing, such opportunities fall to subsidiaries of politically favored U.S. construction firms selected without the burdensome bother of competitive bids.
Alas, outsourcing of contracts in Iraq was considerably more vigorous and effective than achieving the still-elusive peace and stability essential to allow those contractors to actually do what they've been paid considerable sums of taxpayer money to do.
In recent days, unpleasant reports have exposed certain shortcomings at U.S. medical facilities -- some critics characterized them more accurately as moral outrages of heinous neglect -- particularly the Army's Walter Reed Medical Center, that treat the American wounded from Middle East battlefields.
Extended care of combat veterans has always fallen short of the ideal, but news reports about neglect and systemic breakdowns included revelations that the Walter Reed system had come under the strategic mandate to outsource major functions.
The announcement last year that the federal work force would be replaced by a private contractor struck the facility's employees at the time as a repudiation of their value to the medical services, so large numbers of them left to find other jobs.
The further administrative breakdown from the drain of caretakers and supervisors resulted in the predictable mess now being reported. Basically, the outsourcing imperative trumped the care of the wounded. So much for the administration's support of the troops.
Such outcomes arising from a commitment to the profitable privatizing of public responsibilities should surprise no one. Private contractors supposedly responsible for shipping desperately needed vehicle and body armor to the troops in Iraq and Afghanistan repeatedly missed production deadlines.
Federal no-bid contractors covered the government of the United States in shame after Hurricane Katrina.
Walter Reed's systemic failures arise from the civilian leadership's ideological determination to reward politically motivated corporate benefactors.
Certain public responsibilities -- war, natural or man-made catastrophes, urgent human needs -- require a vigorous commitment to the ideal of public accountability. Substituting slavish devotion to corporate bottom lines has never been sufficient to serve that end, as the series of recent fiascoes continues to bear out.
3/26/2007
Revenue from healthcare BPO to triple by 2011
Healthcare BPO service provider Zavata India's $80 million contract with four major US hospitals in November last year is a healthy example of the booming healthcare BPO services sector. Offshoring of healthcare revenue cycle management services is set to gain traction this year, with Zavatas deal likely to set a strong precedent for more contracts involving turnkey end-to-end revenue cycle management (RCM) services.
A range of services beginning from the admission to post-discharge of a patient including medical coding, billing, medical transcription, claims generation, patient follow-up, et al are referred to as revenue cycle management. More than half of the US hospitals are directly or indirectly offshoring various components of healthcare services, offshore vendors can now expect more end-to-end work, according to a recent report by Pune-based market research firm ValueNotes.
The study says the share of work from hospitals forms 20% of the total medical billing and coding work offshored to Indian vendors. Although the market is currently small, total revenue earned by players in 2006 was $125 million.
This is expected to more than triple by 2011, while the number of employees engaged in billing and coding will increase to 17,500. Rising cost pressures, coupled with increasing workload are forcing healthcare institutions to explore outsourcing and offshoring options. At present most offshore vendors focus on either large hospitals or the physician market space.
In future, vendors offering RCM services can look to tap a huge opportunity from the relatively un-addressed and large segment consisting of midsize hospitals in the US. So far, this segment had been beyond the radar of most vendors, but the Zavata deal, which demonstrates the rising comfort level with offshoring by mid-sized hospitals, is likely to spark off a new wave of deals. Arun Jethmalani, CEO of ValueNotes, says, A trend we are seeing is the increasing ability of Indian vendors to provide end-to-end services for healthcare RCM. Related to this is the likely increase in penetration of offshore vendors into the hospital segment.
A range of services beginning from the admission to post-discharge of a patient including medical coding, billing, medical transcription, claims generation, patient follow-up, et al are referred to as revenue cycle management. More than half of the US hospitals are directly or indirectly offshoring various components of healthcare services, offshore vendors can now expect more end-to-end work, according to a recent report by Pune-based market research firm ValueNotes.
The study says the share of work from hospitals forms 20% of the total medical billing and coding work offshored to Indian vendors. Although the market is currently small, total revenue earned by players in 2006 was $125 million.
This is expected to more than triple by 2011, while the number of employees engaged in billing and coding will increase to 17,500. Rising cost pressures, coupled with increasing workload are forcing healthcare institutions to explore outsourcing and offshoring options. At present most offshore vendors focus on either large hospitals or the physician market space.
In future, vendors offering RCM services can look to tap a huge opportunity from the relatively un-addressed and large segment consisting of midsize hospitals in the US. So far, this segment had been beyond the radar of most vendors, but the Zavata deal, which demonstrates the rising comfort level with offshoring by mid-sized hospitals, is likely to spark off a new wave of deals. Arun Jethmalani, CEO of ValueNotes, says, A trend we are seeing is the increasing ability of Indian vendors to provide end-to-end services for healthcare RCM. Related to this is the likely increase in penetration of offshore vendors into the hospital segment.
Pfizer inks IT outsourcing deal in China
08/03/2007 - Pfizer is consolidating all its IT helpdesk operations in the Asia-Pacific to a central site in China under a new outsourcing arrangement with Hewlett-Packard.
Hewlett-Packard''s newly-established Global Solution Center in Dalian, northeast China, will be used to house the new setup.
The company is already in the process of moving all of Pfizer's helpdesk operations in Japan to the site, which will be up and running by mid 2007.
Following this, Hewlett-Packard will then also migrate the helpdesk outfits of 13 other countries in the Asia-Pacific to the Chinese site, over three stages.
The countries involved in the reshuffle are Thailand, Indonesia, Pakistan, Australia, New Zealand, China, Korea, Taiwan, Hong Kong, Malaysia, Singapore, Philippines and India.
Hewlett-Packard said the consolidation effort will allow Pfizer to reduce the number of staff required to run its Asian-Pacific helpdesk services, as well as benefit from the use of shared facilities.
Pfizer was asked by Outsourcing-Pharma.com to comment on the scale of cost and other savings that such a consolidation effort is expected to bring, however, the firm failed to do so.
Indeed, Pfizer has been chasing a number of cost-cutting initiatives of late in the face of looming patent expiries for its biggest-selling drugs as well as the recent high-profile failure of a late-stage pipeline project, torcetrapib.
As part of this, the world's biggest drugmaker announced plans in January to axe 10,000 jobs and close facilities by the end of next year and indicated it would also step up its outsourcing efforts.
Hewlett-Packard has been providing Pfizer with IT support services, such as helpdesk, data centre, network and server management, since 1999. All terms of this latest, substantially-sized deal, however, remain undisclosed.
Hewlett-Packard''s newly-established Global Solution Center in Dalian, northeast China, will be used to house the new setup.
The company is already in the process of moving all of Pfizer's helpdesk operations in Japan to the site, which will be up and running by mid 2007.
Following this, Hewlett-Packard will then also migrate the helpdesk outfits of 13 other countries in the Asia-Pacific to the Chinese site, over three stages.
The countries involved in the reshuffle are Thailand, Indonesia, Pakistan, Australia, New Zealand, China, Korea, Taiwan, Hong Kong, Malaysia, Singapore, Philippines and India.
Hewlett-Packard said the consolidation effort will allow Pfizer to reduce the number of staff required to run its Asian-Pacific helpdesk services, as well as benefit from the use of shared facilities.
Pfizer was asked by Outsourcing-Pharma.com to comment on the scale of cost and other savings that such a consolidation effort is expected to bring, however, the firm failed to do so.
Indeed, Pfizer has been chasing a number of cost-cutting initiatives of late in the face of looming patent expiries for its biggest-selling drugs as well as the recent high-profile failure of a late-stage pipeline project, torcetrapib.
As part of this, the world's biggest drugmaker announced plans in January to axe 10,000 jobs and close facilities by the end of next year and indicated it would also step up its outsourcing efforts.
Hewlett-Packard has been providing Pfizer with IT support services, such as helpdesk, data centre, network and server management, since 1999. All terms of this latest, substantially-sized deal, however, remain undisclosed.
China to continue to do 5% of Airbus' outsourcing business for A350 planes
Chinese enterprises will continue to undertake five percent of Airbus' outsourcing business for A350 planes, sources with Airbus China said on Thursday.
The Europe-based company believes China will be the world's second largest aviation market and one of its most important partners around the globe in the next two decades.
The A350 is Airbus' latest long-distance, double-aisle, wide-fuselage model. The company predicts that over the next 20 years this type of aircraft will account for 40 percent of global demand for civilian planes.
In October 2006, Airbus and China Aviation Supplies Import & Export Group Corp. signed a letter of intent for the purchase of twenty A350s.
In July 2005, the Airbus Beijing engineering technology center was opened and began to recruit Chinese engineers for research and development work on A350s.
At the end of last October, the center became a joint venture between Airbus, China Aviation Industry Corp. 1 and China Aviation Industry Corp. 2. The European company took 70 percent of the new entity, CAIC 2 took 25 percent and CAIC 1 the remaining five percent.
Sources said that 105 Europe-trained Chinese engineers have joined the Airbus Beijing engineering technology center. According to the center's plan, the number will reach 200 by the end of 2008.
There are 300-plus Airbus planes operating in China. Last October Airbus inked a framework agreement with Tianjin Freetrade Zone, CAIC 1 and CAIC 2 to jointly establish an A320 assembly facility in China.
The Europe-based company believes China will be the world's second largest aviation market and one of its most important partners around the globe in the next two decades.
The A350 is Airbus' latest long-distance, double-aisle, wide-fuselage model. The company predicts that over the next 20 years this type of aircraft will account for 40 percent of global demand for civilian planes.
In October 2006, Airbus and China Aviation Supplies Import & Export Group Corp. signed a letter of intent for the purchase of twenty A350s.
In July 2005, the Airbus Beijing engineering technology center was opened and began to recruit Chinese engineers for research and development work on A350s.
At the end of last October, the center became a joint venture between Airbus, China Aviation Industry Corp. 1 and China Aviation Industry Corp. 2. The European company took 70 percent of the new entity, CAIC 2 took 25 percent and CAIC 1 the remaining five percent.
Sources said that 105 Europe-trained Chinese engineers have joined the Airbus Beijing engineering technology center. According to the center's plan, the number will reach 200 by the end of 2008.
There are 300-plus Airbus planes operating in China. Last October Airbus inked a framework agreement with Tianjin Freetrade Zone, CAIC 1 and CAIC 2 to jointly establish an A320 assembly facility in China.
2006-2007 Annual Report on IT Application Market in China's Banking Industry
In 2006, IT application got into the maturity period in China's banking industry, experiencing the gradual transition from the stage of data concentration to application integration and financial innovation. Being aware of the importance of IT planning and integration, banks embarked on overall planning on IT application and deep exploration, with growing demand for professional services, such as IT consulting, education and training. In 2006, hot spots in IT application mainly included online banking, follow-up systems for data concentration, disaster backup, information security and IT outsourcing. Upgrade of core business system remains the key area of IT investment.
From 2007 to 2008, IT investment is expected to keep growing in the banking sector. Large projects such as banks' data concentration in the final stage, and the deployment and upgrade of banks' core business systems ensure continuous growth of IT investment in this sector. With the entry of foreign banks, Chinese banks need to invest heavily to implement IT application.
To answer hot issues such as the present situation of IT application in the banking industry, market situation and future market opportunities, We releases the 2006-2007 Annual Report on the IT Application Market in China's Banking Industry. It is aimed to help IT vendors, banks' clients and investors grasp more accurately the situation and basic characteristics of the IT application market in China's banking industry, and provide strategic recommendations for IT vendors to better seize opportunities:
The report sums up the development environment of the IT application market in China's banking industry in 2006 in the respect of policy environment, business development, and competition and economic operation situation in the industry.
On the basis of scientifically designed and prudently implemented market surveys, it presents exhaustive analysis of application of IT products in China's banking industry, including the size and structure of investment in key products, brand distribution and application characteristics. It also analyzes and sums up the deployment of IT systems in the industry in 2006.
Moreover, it examines the present situation and future trend of IT application market, and assesses the market competitiveness of leading vendors and growing vendors.
After analyzing the present situation of the market and assessing opportunities and vendors' competition behavior, the report puts forward highly operable and feasible recommendations for IT vendors in mapping out competition strategy.
Enterprises involved: IBM, HP, Sybase/Digital China, Pansky, Hisuntech, Nantian, Lenovo-AsiaInfo, Sunyard, Longtop, FounderOrder, Unifisoft, etc.
From 2007 to 2008, IT investment is expected to keep growing in the banking sector. Large projects such as banks' data concentration in the final stage, and the deployment and upgrade of banks' core business systems ensure continuous growth of IT investment in this sector. With the entry of foreign banks, Chinese banks need to invest heavily to implement IT application.
To answer hot issues such as the present situation of IT application in the banking industry, market situation and future market opportunities, We releases the 2006-2007 Annual Report on the IT Application Market in China's Banking Industry. It is aimed to help IT vendors, banks' clients and investors grasp more accurately the situation and basic characteristics of the IT application market in China's banking industry, and provide strategic recommendations for IT vendors to better seize opportunities:
The report sums up the development environment of the IT application market in China's banking industry in 2006 in the respect of policy environment, business development, and competition and economic operation situation in the industry.
On the basis of scientifically designed and prudently implemented market surveys, it presents exhaustive analysis of application of IT products in China's banking industry, including the size and structure of investment in key products, brand distribution and application characteristics. It also analyzes and sums up the deployment of IT systems in the industry in 2006.
Moreover, it examines the present situation and future trend of IT application market, and assesses the market competitiveness of leading vendors and growing vendors.
After analyzing the present situation of the market and assessing opportunities and vendors' competition behavior, the report puts forward highly operable and feasible recommendations for IT vendors in mapping out competition strategy.
Enterprises involved: IBM, HP, Sybase/Digital China, Pansky, Hisuntech, Nantian, Lenovo-AsiaInfo, Sunyard, Longtop, FounderOrder, Unifisoft, etc.
perspective China versus India: which one is destined to rule the 21st century?
When it comes to divining the future, only a sucker or a veritable oracle would dare handicap that burgeoning geopolitical rivalry. Ignoring my own warning, let me try to give it a shot.
The conventional wisdom is that the Middle Kingdom is the rabbit in this race, destined to leave the tortoise that is India in the dust. At first blush, that sounds like the more plausible outcome.
Clearly, China's post-Mao transformation is the story of post-war economic history. The nation's economy has grown more than 7 percent annually for the last couple of decades. China's emergence as a manufacturer of high-tech goods is equally impressive with a roster of companies featuring the likes of Lenovo, Baidu.com and Huawei Technologies. But China's hyper-growth has disguised several increasingly pronounced blemishes.
After spending nearly a month traveling throughout China, a friend wrote me how hard it was for a visitor to comprehend the magnitude of all one encounters.
"The multitudes of people, the size of their building projects, and the sheer audacity of their vision to transform this country into a mega-powerhouse," the friend wrote. "What do you do with an infrastructure that is developing so rapidly, that there are more than 160 cities with populations over 1 million each and no fewer than 10 cities with populations over 10 million?"
Talk about an understatement. That mind-numbing question is as big as all of China.
He also could have added that almost 15 million people in China each year move from the countryside to the cities. With so vast a population in transition, the absence of a safety net carries with it the ever-present potential for social unrest.
So far, things have worked out. After Deng Xiaoping came to power following Mao's death in 1976, the government made a covenant with the rising entrepreneurial class. To put it simply, it went like this: "We'll let you get rich, but leave the politics to us." Of course, the state has had to deal with occasional turbulence, such as the rebellion at Tiananmen or the northwestern province of Xinjiang.
But these rate as momentary detours on an otherwise unimpeded march toward superpower status. Meanwhile, India has had its own issues. The state doesn't invest enough in vital infrastructure while it spends too much money subsidizing agriculture.
India's political power doesn't emanate from the barrel of a gun.
"China's invested more in infrastructure than India, which is in a big catch-up situation," said Michael Spence of Stanford University, who won the Nobel Prize for Economics in 2001. "If they don't do that, they won't grow at the rates being projected."
Nobody knows whether India's leadership will act on that warning. But if I were a betting man, I'd say there's a lot to like here.
For all the mess that is India, it's still one heck of a productive mess. In its latest five-year plan, the country forecast average growth accelerating from 9 percent to more than 10 percent. That's a breathtaking climb. And consider the following: In 2002, the country's annual GDP growth was lower than that of China, Vietnam, Sudan, Tanzania, Uganda and Bangladesh. Within a year, India had closed to No. 2 behind China, largely on the strength of its emerging IT and business process outsourcing sectors.
India also reaps benefits from an excellent educational system that's generated thousands of graduates who work for overseas American corporations.
Above all, India's political power doesn't emanate from the barrel of a gun. On Tuesday, the U.S. statement included China with the likes of Iran, Zimbabwe, Cuba, North Korea and Myanmar as a country where human rights protections routinely get violated. Compare that with India.
The system may sometimes be raucous and inefficient, but it remains the world's largest functioning democracy. That counts for a lot and helps feed into a touchy-feely attribute that can't be measured like a dry economic input.
Spence summed it up this way: It has a lot to do with a sense of optimism and momentum, a feeling that today will be better than yesterday and tomorrow will be better than today. It's a very American way to explain India's phenomenal growth, but I think it helps fill in some of the gaps. In China, you can dream of being rich, but it then behooves you to keep your opinions to yourself. The average Indian can also dream about making her fortune--and then figure out how to apply those lessons to building a better society.
What could be more Indian? What could be more American?
Biography
Charles Cooper is CNET News.com's executive editor of commentary.
The conventional wisdom is that the Middle Kingdom is the rabbit in this race, destined to leave the tortoise that is India in the dust. At first blush, that sounds like the more plausible outcome.
Clearly, China's post-Mao transformation is the story of post-war economic history. The nation's economy has grown more than 7 percent annually for the last couple of decades. China's emergence as a manufacturer of high-tech goods is equally impressive with a roster of companies featuring the likes of Lenovo, Baidu.com and Huawei Technologies. But China's hyper-growth has disguised several increasingly pronounced blemishes.
After spending nearly a month traveling throughout China, a friend wrote me how hard it was for a visitor to comprehend the magnitude of all one encounters.
"The multitudes of people, the size of their building projects, and the sheer audacity of their vision to transform this country into a mega-powerhouse," the friend wrote. "What do you do with an infrastructure that is developing so rapidly, that there are more than 160 cities with populations over 1 million each and no fewer than 10 cities with populations over 10 million?"
Talk about an understatement. That mind-numbing question is as big as all of China.
He also could have added that almost 15 million people in China each year move from the countryside to the cities. With so vast a population in transition, the absence of a safety net carries with it the ever-present potential for social unrest.
So far, things have worked out. After Deng Xiaoping came to power following Mao's death in 1976, the government made a covenant with the rising entrepreneurial class. To put it simply, it went like this: "We'll let you get rich, but leave the politics to us." Of course, the state has had to deal with occasional turbulence, such as the rebellion at Tiananmen or the northwestern province of Xinjiang.
But these rate as momentary detours on an otherwise unimpeded march toward superpower status. Meanwhile, India has had its own issues. The state doesn't invest enough in vital infrastructure while it spends too much money subsidizing agriculture.
India's political power doesn't emanate from the barrel of a gun.
"China's invested more in infrastructure than India, which is in a big catch-up situation," said Michael Spence of Stanford University, who won the Nobel Prize for Economics in 2001. "If they don't do that, they won't grow at the rates being projected."
Nobody knows whether India's leadership will act on that warning. But if I were a betting man, I'd say there's a lot to like here.
For all the mess that is India, it's still one heck of a productive mess. In its latest five-year plan, the country forecast average growth accelerating from 9 percent to more than 10 percent. That's a breathtaking climb. And consider the following: In 2002, the country's annual GDP growth was lower than that of China, Vietnam, Sudan, Tanzania, Uganda and Bangladesh. Within a year, India had closed to No. 2 behind China, largely on the strength of its emerging IT and business process outsourcing sectors.
India also reaps benefits from an excellent educational system that's generated thousands of graduates who work for overseas American corporations.
Above all, India's political power doesn't emanate from the barrel of a gun. On Tuesday, the U.S. statement included China with the likes of Iran, Zimbabwe, Cuba, North Korea and Myanmar as a country where human rights protections routinely get violated. Compare that with India.
The system may sometimes be raucous and inefficient, but it remains the world's largest functioning democracy. That counts for a lot and helps feed into a touchy-feely attribute that can't be measured like a dry economic input.
Spence summed it up this way: It has a lot to do with a sense of optimism and momentum, a feeling that today will be better than yesterday and tomorrow will be better than today. It's a very American way to explain India's phenomenal growth, but I think it helps fill in some of the gaps. In China, you can dream of being rich, but it then behooves you to keep your opinions to yourself. The average Indian can also dream about making her fortune--and then figure out how to apply those lessons to building a better society.
What could be more Indian? What could be more American?
Biography
Charles Cooper is CNET News.com's executive editor of commentary.
The Future of Software Outsourcing
According to the report issued by Forrester Research, software-jobs are getting lost in the United States because of Software Outsourcing conditioned by low salaries of IT jobs such as software programming or computer support. Nevertheless, still high paying analytical jobs such as system, network and research analysts stay in-house and dominate the market. Actually, there is observed a steady growth of jobs at rate of 4 to 5% every year in this market sector. Typically, these jobs require excellent knowledge base and idea about internal structure of IT systems and business processes. Software outsourcing not always can guarantee these qualities.
Jobs that not get affected by software outsourcing
Positions requiring higher skills such as system analysts and application developers are constantly increasing by 6 per cent a year. This situation is conditioned by increasing demand for these jobs. As an option software outsourcing can be delegated to to India or any other offshore software development country.
Reasons for decrease in Software outsourcing in future
There are no reasons to be afraid of this boom of Software Outsourcing. Analytical reports state that cost efficiency of software outsourcing is yet very high and exactly due to this fact growth in jobs like software programmer will be very insignificant. This will next result into very low increase in software programming jobs, in the next several years salary rise will also hardly reach 1 per cent. Actually, computer operators’ and database administrators’ rates will also rise at the minimal rate of 1 per cent. However, wages of computer research scientists and information system managers will rise highest at around 3.5 per cent every year, while salaries of analysts will grow 2 to 3 per cent yearly.
Offshore software development
Market researchers also forecast that software outsourcing market, which is currently still very cost efficient, will decrease by 2008. The basic cause for this trend is decreasing of salaries gap in the US and outsourcing countries. As the gap decreases, there will be no difference whether to outsource software development offshore or develop it in-house. In such a way will be reduced the basic advantage of offshore software development – cost efficiency. Ultimately, most companies will use their highly manageable in-house resources rather then offshore Software Outsourcing.
Jobs that not get affected by software outsourcing
Positions requiring higher skills such as system analysts and application developers are constantly increasing by 6 per cent a year. This situation is conditioned by increasing demand for these jobs. As an option software outsourcing can be delegated to to India or any other offshore software development country.
Reasons for decrease in Software outsourcing in future
There are no reasons to be afraid of this boom of Software Outsourcing. Analytical reports state that cost efficiency of software outsourcing is yet very high and exactly due to this fact growth in jobs like software programmer will be very insignificant. This will next result into very low increase in software programming jobs, in the next several years salary rise will also hardly reach 1 per cent. Actually, computer operators’ and database administrators’ rates will also rise at the minimal rate of 1 per cent. However, wages of computer research scientists and information system managers will rise highest at around 3.5 per cent every year, while salaries of analysts will grow 2 to 3 per cent yearly.
Offshore software development
Market researchers also forecast that software outsourcing market, which is currently still very cost efficient, will decrease by 2008. The basic cause for this trend is decreasing of salaries gap in the US and outsourcing countries. As the gap decreases, there will be no difference whether to outsource software development offshore or develop it in-house. In such a way will be reduced the basic advantage of offshore software development – cost efficiency. Ultimately, most companies will use their highly manageable in-house resources rather then offshore Software Outsourcing.
Outsourcing as division of labour
UP until now, the Indian populace has looked upon outsourcing just as one of the bastions of the export driven IT enabled service industry. The centres set up in the new urban conglomerations, that is, to service the ever expanding needs of the US and European consumer over a phone line to India. Unfortunately, that would be both a naïve and dated opinion. Neither outsourcing nor off-shoring, delivering service from lower cost centers, are a new phenomenon. Both have existed ever since people wanted to delegate activities they chose not to do themselves and latterly when they knew other nations could do it cheaper still. Adam Smith’s The Wealth of Nations in 1776 talked about the import of cheaper food produce from other nations. Being a passionate proponent of free trade, he felt this was for the greater good for both nations. It is surprisingly that this debate continues over 230 years later!
We began to outsource from the day we chose to stop hunting our own food or growing our own crops. How many urban Indians have grown their own vegetables, picked them and eaten them? Try it—somehow the food tastes better! So the concept of outsourcing is simple but the application is vast. One relies either on other people because they are trained experts or have lower costs or both. This, of course, extends to companies looking to service their ever increasing legions of customers, who in turn expect service as a norm. The issue is of how far one can reasonably extend that.
Service providers have been servicing companies for years, whether they were called vendors or suppliers is irrelevant. Assorted functions of sourcing, design, production and customer contact have sat outside companies as they focused on their core competency. This does give rise to 'virtual' companies that provide nothing more than the brand, with all functions being delivered by other providers. There is nothing wrong with this, if the arrangement maximises customer value and comfort. The US customer need not know that the motor car he/she drives is just an assembly of components from around ancillary service providers, that the design was undertaken by immerging engineering services firms in India, that the marketing was handled by a European concern, and so on. If the feel at the wheel is fine, that’s all that matters —driving the American dream. The same applies to any product and service. Ultimately, what a consumer is looking for is a level of brand comfort, even engagement (say, of one's finer faculties), backed by an assurance of quality and value for money. How the product/service companies put this together is increasingly not the consumer's concern, so long as the brand—in the sense of a consumer interface rather than just logo —remains trustworthy.
If a company or individual wants to get the best out of a finely honed skillset, you need a partner to make up the balance. The deal has to be economically viable and the quality good. The two are not mutually exclusive. Yet, just as a cheap tailor will give you an ill-fitting shirt, very cheap suppliers can be of poor quality. Diligence is required to hit the right cost-quality balance, since identifying quality providers is never easy. Having advisors to help in this process in not just convenient, but critical. The worst a company could do is to throw the work activity ‘over the wall’ and hope blindly for the best. It doesn't work, and the fault is not of outsourcing, but of the selection process.
What connects the raw product to the end customer is fairly uniform around the world, so why not manage that part of the chain from India?
So what is the extension of this sort of wide-ranging outsourcing that is visible in India? Airline companies that lease the plane, the staff and the technology, too? That sounds far-fetched, but it occurs here as it does elsewhere. So, I think it is time to move away from viewing this just as a call center-driven activity but as a phenomenon much broader. Activities which support the local business are becoming critical to underpin the successes being seen in industries like retail, pharmaceutical as well as energy. These are also leading to the development of skillsets which can further be enhanced to global markets. The dynamics, for example, in the retail logistics supply chain. What connects the raw product to the end customer is fairly uniform all over the world, so why not manage that from India? It coud well be done. Likewise, in several other sectors. The needs of midmarket businesses in this country in engineering services and healthcare services, as well as education, all touch similar areas of common ground with their counterparts elsewhere.
As end users, there are elements which we don't really care about, as we will view the service of our own providers and act accordingly. There are elements that count which are about our behaviour and acceptance of help. I used to be forever frustrated when some of my senior Indian team members would spend hours preparing simple presentations, rather than recruit help and focus on the area of their core skills. I say, be clever, use your potential. However, retain sufficient control, especially over quality.
All said, outsourcing is good. There exist services in the US that convey break-up messages on behalf of feckless individuals, but this, really, is going a little too far. In itself, outsourcing is about forging mutually beneficial relationships that last, and the concept is known to make for positive outcomes.
—Dan Sandhu sits on a number of Indian company boards in the outsourcing, media and retails sectors. These are his personal views.
We began to outsource from the day we chose to stop hunting our own food or growing our own crops. How many urban Indians have grown their own vegetables, picked them and eaten them? Try it—somehow the food tastes better! So the concept of outsourcing is simple but the application is vast. One relies either on other people because they are trained experts or have lower costs or both. This, of course, extends to companies looking to service their ever increasing legions of customers, who in turn expect service as a norm. The issue is of how far one can reasonably extend that.
Service providers have been servicing companies for years, whether they were called vendors or suppliers is irrelevant. Assorted functions of sourcing, design, production and customer contact have sat outside companies as they focused on their core competency. This does give rise to 'virtual' companies that provide nothing more than the brand, with all functions being delivered by other providers. There is nothing wrong with this, if the arrangement maximises customer value and comfort. The US customer need not know that the motor car he/she drives is just an assembly of components from around ancillary service providers, that the design was undertaken by immerging engineering services firms in India, that the marketing was handled by a European concern, and so on. If the feel at the wheel is fine, that’s all that matters —driving the American dream. The same applies to any product and service. Ultimately, what a consumer is looking for is a level of brand comfort, even engagement (say, of one's finer faculties), backed by an assurance of quality and value for money. How the product/service companies put this together is increasingly not the consumer's concern, so long as the brand—in the sense of a consumer interface rather than just logo —remains trustworthy.
If a company or individual wants to get the best out of a finely honed skillset, you need a partner to make up the balance. The deal has to be economically viable and the quality good. The two are not mutually exclusive. Yet, just as a cheap tailor will give you an ill-fitting shirt, very cheap suppliers can be of poor quality. Diligence is required to hit the right cost-quality balance, since identifying quality providers is never easy. Having advisors to help in this process in not just convenient, but critical. The worst a company could do is to throw the work activity ‘over the wall’ and hope blindly for the best. It doesn't work, and the fault is not of outsourcing, but of the selection process.
What connects the raw product to the end customer is fairly uniform around the world, so why not manage that part of the chain from India?
So what is the extension of this sort of wide-ranging outsourcing that is visible in India? Airline companies that lease the plane, the staff and the technology, too? That sounds far-fetched, but it occurs here as it does elsewhere. So, I think it is time to move away from viewing this just as a call center-driven activity but as a phenomenon much broader. Activities which support the local business are becoming critical to underpin the successes being seen in industries like retail, pharmaceutical as well as energy. These are also leading to the development of skillsets which can further be enhanced to global markets. The dynamics, for example, in the retail logistics supply chain. What connects the raw product to the end customer is fairly uniform all over the world, so why not manage that from India? It coud well be done. Likewise, in several other sectors. The needs of midmarket businesses in this country in engineering services and healthcare services, as well as education, all touch similar areas of common ground with their counterparts elsewhere.
As end users, there are elements which we don't really care about, as we will view the service of our own providers and act accordingly. There are elements that count which are about our behaviour and acceptance of help. I used to be forever frustrated when some of my senior Indian team members would spend hours preparing simple presentations, rather than recruit help and focus on the area of their core skills. I say, be clever, use your potential. However, retain sufficient control, especially over quality.
All said, outsourcing is good. There exist services in the US that convey break-up messages on behalf of feckless individuals, but this, really, is going a little too far. In itself, outsourcing is about forging mutually beneficial relationships that last, and the concept is known to make for positive outcomes.
—Dan Sandhu sits on a number of Indian company boards in the outsourcing, media and retails sectors. These are his personal views.
Issues of Software Outsourcing
IT community constantly debates regarding the fact that http://www.software-outsourcing.name">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. 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 re 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.
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 re 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.
10 do's and 5 dont's for successful outsourcing
I wrote a post earlier this week about our success in building an outsourcing partnership with our team in Russia. We’ve built a strong partnership with our team, and I mentioned some of our success factors: trust, respect, and team. Today, I want to share a list of more actionable dos and dont’s for building a successful outsourcing partnership.
When you start outsourcing, DO:
1. Write great specs - Have the discipline to clearly define what you want from your outsource partners. Great specs will help you clearly define what you want, and once you have them, communicating what you want it easy.
2. Evaluate references - Check their prior work, talk to their previous clients. Nothing is a better indicator of future success than past performance.
3. Assign a project manager on both ends - Designate one person on each team responsible for all communication between each side. Without clearly defined project managers communication will break down.
4. Make deadlines matter - Let your outsourcing partner give you their estimation of when the project will be completed. Then make this deadline matter by applying financial bonuses for early completion and penalties for late.
5. Agree on communication methods ahead of time - If you will need to talk to them on the phone, make sure everyone agrees to this ahead of time. A mix of email, instant messenger, and a project management tool like Basecamp with occasional Skype calls will probably work out great.
6. Get to know each other personally - Send pictures to each other, hook up a webcam to Skype for videoconferencing. Go see them if you can. Building personal relationships will help you get through the stresses that come with outsourcing.
7. Be a good client - Respect the constraints of your relationship. You probably aren’t their only client. Their time is valuable too. Have the discipline to know what you want, write it down in a clear way, and stick to your own deadlines.
8. Keep the ball in their court - Never let a feedback request or question from them linger in your email inbox. If there is an open issue on your end, it means something is not getting done on their end. Work to keep the ball in their court at all times.
9. Pay on time - Nothing will cause a partnership to go downhill faster than not paying the bills.
10. Remember what you’re in it for - Hopefully you are getting great work at a great price. Outsourcing can be stressful at times, but remember why you are doing it. Outsourcing works.
When you start outsourcing, DON’T:
1. Just go for the cheapest provider - Too many people think outsourcing is just about saving money. Go for the mix of high quality product at a cost that works for you.
2. Be lazy - This goes along with being a good client. If you don’t work hard on your end, they won’t either. The old saying about computers applies: “garbage in, garbage out.”
3. Let the project hit the death spiral - If things seem off course from your end they probably are. You need to take back control of the project. Most often this is caused by a communication breakdown.
4. Rush them - You should have established a project deadline based on their estimate. This is the most realistic delivery date you have. Rushing them will lead to quality problems.
5. Pull the plug - Successful outsourcing is a lot of work. And you’ll learn and grow the more you do it. Don’t pull the plug on the project at the first road bump. Work through it, you’ll be glad you did.
These tips were culled from our experience in working with our team at Flatsourcing. We’d love to hear any of your thoughts and ideas. If I’ve missed something let me know. Good luck and happy outsourcing!
When you start outsourcing, DO:
1. Write great specs - Have the discipline to clearly define what you want from your outsource partners. Great specs will help you clearly define what you want, and once you have them, communicating what you want it easy.
2. Evaluate references - Check their prior work, talk to their previous clients. Nothing is a better indicator of future success than past performance.
3. Assign a project manager on both ends - Designate one person on each team responsible for all communication between each side. Without clearly defined project managers communication will break down.
4. Make deadlines matter - Let your outsourcing partner give you their estimation of when the project will be completed. Then make this deadline matter by applying financial bonuses for early completion and penalties for late.
5. Agree on communication methods ahead of time - If you will need to talk to them on the phone, make sure everyone agrees to this ahead of time. A mix of email, instant messenger, and a project management tool like Basecamp with occasional Skype calls will probably work out great.
6. Get to know each other personally - Send pictures to each other, hook up a webcam to Skype for videoconferencing. Go see them if you can. Building personal relationships will help you get through the stresses that come with outsourcing.
7. Be a good client - Respect the constraints of your relationship. You probably aren’t their only client. Their time is valuable too. Have the discipline to know what you want, write it down in a clear way, and stick to your own deadlines.
8. Keep the ball in their court - Never let a feedback request or question from them linger in your email inbox. If there is an open issue on your end, it means something is not getting done on their end. Work to keep the ball in their court at all times.
9. Pay on time - Nothing will cause a partnership to go downhill faster than not paying the bills.
10. Remember what you’re in it for - Hopefully you are getting great work at a great price. Outsourcing can be stressful at times, but remember why you are doing it. Outsourcing works.
When you start outsourcing, DON’T:
1. Just go for the cheapest provider - Too many people think outsourcing is just about saving money. Go for the mix of high quality product at a cost that works for you.
2. Be lazy - This goes along with being a good client. If you don’t work hard on your end, they won’t either. The old saying about computers applies: “garbage in, garbage out.”
3. Let the project hit the death spiral - If things seem off course from your end they probably are. You need to take back control of the project. Most often this is caused by a communication breakdown.
4. Rush them - You should have established a project deadline based on their estimate. This is the most realistic delivery date you have. Rushing them will lead to quality problems.
5. Pull the plug - Successful outsourcing is a lot of work. And you’ll learn and grow the more you do it. Don’t pull the plug on the project at the first road bump. Work through it, you’ll be glad you did.
These tips were culled from our experience in working with our team at Flatsourcing. We’d love to hear any of your thoughts and ideas. If I’ve missed something let me know. Good luck and happy outsourcing!
Neusoft Remains No. 1 in Market Share of Offshore Software Outsourcing in China
CCID Consulting Released 2005-2006 Annual Report on China's Software Outsourcing Market
BEIJING, March 1 /Xinhua-PRNewswire/ -- According to 2005-2006 Annual Report on China's Software Outsourcing Market released by CCID Consulting Co., Ltd., a leading market survey consulting company in the information industry in China, the China software outsourcing service market reached USD1.43 billion in 2006, with an increase of 55.4% compared to the last year. As is shown in the report, Neusoft Group Ltd. continued to hold the title of No.1 offshore outsourcing in China with its outsourcing revenue of USD101 million at a growth rate of 61.1% and a market share of 7.1%, becoming the first software enterprise whose offshore outsourcing revenue has exceeded USD 100 million in China.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061219/CNTU012LOGO )
Neusoft has intensified its expansion in the Japanese market in 2006. Besides the branch in Tokyo, more offices have been established in Osaka and Nagoya to better provide Japanese clients with high quality outsourcing service. At the same time, Neusoft vigorously developed its outsourcing service market in Europe and America. Up to now, Neusoft offers offshore outsourcing service for over 30 clients abroad. Meanwhile, Neusoft has successively established international software and service outsourcing bases in Shenyang, Dalian, Shanghai, Chengdu, and Nanjing to accelerate its development of offshore outsourcing business and to create better space for larger scale of outsourcing service. Also, Neusoft has dedicated itself to strengthening the core competencies in the field of outsourcing. In 2006, it has become the first software enterprise with more than 10,000 employees in China, and the only software enterprise that has passed the certification of ISO27001 both in software outsourcing and business process outsourcing (BPO) operations.
Dr. Jiren Liu, Chairman and CEO of Neusoft Group Ltd., said that Neusoft has made outstanding achievements in the Japanese market in the past years and accomplished a high-speed growth in its European and American offshore outsourcing operations in 2006 for having gained trust of more and more clients from the regions. Neusoft will further enhance its investment in the European and American businesses in near future.
About Neusoft:
Neusoft Group Ltd. is a leading software and solution provider in China. Founded in 1991, Neusoft has three inter-promoting business units that are engaged respectively in software & services, medical systems and IT education & training, supported by a total staff of over 10,000. In addition, the Company has set up software parks in Shenyang, Dalian, Chengdu and Nanhai for further R&D and HR reserves. After successfully constructing a complete sales & service network covering over forty cities around China, it has further extended its branches to the US and Japan. At present, Neusoft offers products and services to over 8,000 large customers, maintaining leading market shares in telecommunications, social insurance, enterprises, electric power and other sectors. It is also China's largest offshore outsourcing service provider. For more information, please visit http://www.neusoft.com/ .
BEIJING, March 1 /Xinhua-PRNewswire/ -- According to 2005-2006 Annual Report on China's Software Outsourcing Market released by CCID Consulting Co., Ltd., a leading market survey consulting company in the information industry in China, the China software outsourcing service market reached USD1.43 billion in 2006, with an increase of 55.4% compared to the last year. As is shown in the report, Neusoft Group Ltd. continued to hold the title of No.1 offshore outsourcing in China with its outsourcing revenue of USD101 million at a growth rate of 61.1% and a market share of 7.1%, becoming the first software enterprise whose offshore outsourcing revenue has exceeded USD 100 million in China.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061219/CNTU012LOGO )
Neusoft has intensified its expansion in the Japanese market in 2006. Besides the branch in Tokyo, more offices have been established in Osaka and Nagoya to better provide Japanese clients with high quality outsourcing service. At the same time, Neusoft vigorously developed its outsourcing service market in Europe and America. Up to now, Neusoft offers offshore outsourcing service for over 30 clients abroad. Meanwhile, Neusoft has successively established international software and service outsourcing bases in Shenyang, Dalian, Shanghai, Chengdu, and Nanjing to accelerate its development of offshore outsourcing business and to create better space for larger scale of outsourcing service. Also, Neusoft has dedicated itself to strengthening the core competencies in the field of outsourcing. In 2006, it has become the first software enterprise with more than 10,000 employees in China, and the only software enterprise that has passed the certification of ISO27001 both in software outsourcing and business process outsourcing (BPO) operations.
Dr. Jiren Liu, Chairman and CEO of Neusoft Group Ltd., said that Neusoft has made outstanding achievements in the Japanese market in the past years and accomplished a high-speed growth in its European and American offshore outsourcing operations in 2006 for having gained trust of more and more clients from the regions. Neusoft will further enhance its investment in the European and American businesses in near future.
About Neusoft:
Neusoft Group Ltd. is a leading software and solution provider in China. Founded in 1991, Neusoft has three inter-promoting business units that are engaged respectively in software & services, medical systems and IT education & training, supported by a total staff of over 10,000. In addition, the Company has set up software parks in Shenyang, Dalian, Chengdu and Nanhai for further R&D and HR reserves. After successfully constructing a complete sales & service network covering over forty cities around China, it has further extended its branches to the US and Japan. At present, Neusoft offers products and services to over 8,000 large customers, maintaining leading market shares in telecommunications, social insurance, enterprises, electric power and other sectors. It is also China's largest offshore outsourcing service provider. For more information, please visit http://www.neusoft.com/ .
TEDA Vigorously Develops the Service Outsourcing Industry by Building Cooperation and Communication Platforms Between Government and Enterprises
TIANJIN, China, March 21 /Xinhua-PRNewswire/ -- Tianjin Economic- Technological Development Area (TEDA) announced today that the TEDA Outsourcing Industry Development Commission was established today to provide support for enterprises engaged in the service outsourcing of software development, financial background services, pharmaceutical R&D, finance & accounting, administration and human resources, and customer service centers.
At present, TEDA has preliminary been equipped with the fundamental conditions required for the development of the service outsourcing industry. An array of operators in ITO, BPO and software outsourcing sectors are now based there, including, Affiliated Computer Services (ACS), Computer Sciences Corporation (CSC), I@T Technology Co. Ltd., Neusoft, Eteda Technology Company, CS&S Cyber Resource Software Technology Ltd., Newpalm, Palm Commerce Information Technology (China) Co., Ltd., Nankai University General Data Technologies Co., Ltd., Shenchi Software and Fujitsu.
With the increasing demand for service outsourcing business in the Binhai New Area (BNA) in Tianjin, TEDA has witnessed the rapid emergence of a cluster of new enterprises operating outsourcing services in areas like information, human resources, financial management, logistics, after-sales and product R&D. For example, the software development and service field had over 100 outsourcing companies registered at the end of 2006. Another 43 software enterprises have passed authorizations, and three companies have been awarded their CMM2 authentication or higher.
Meanwhile, TEDA has begun the building of a service outsourcing industry base with the first phase covering an area of one square kilometer. The base will offer all-round services for enterprises in terms of talent recruitment and training to address the needs of the service outsourcing providers who plan to land in TEDA. Also, TEDA plans to build white-collar apartments in the base, which will be rented to enterprises at low prices. The initiative aims to provide the living establishment with low cost but complete supporting facilities for new employees who work for service outsourcing providers.
About Tianjin Economic-Technological Development Area (TEDA)
Tianjin Economic-Technological Development Area (TEDA) was established in 1984 with the approval of the State Council of the People's Republic of China. It is one of the first state-class economic-technological development areas in the country.
TEDA is located in the center of a larger area bordering Bohai Sea and the east of the Asia-Europe Land Bridge, thus serving as the gate to the two super cities of Beijing and Tianjin, and the throat connecting the northeast of China. By the end of 2005, 4,067 foreign companies have landed in TEDA. Of the Fortune 500 companies, 57 multinational companies, from 10 countries and regions, including such well-established multinational giants as Motorola, Samsung and Toyota, invested in 123 enterprises in TEDA. In 2000, "Fortune" listed TEDA as one of the most highly recommended economic areas in China. In 2002 UNIDO listed TEDA as one of the most dynamic areas of China together with Shenzhen, Suzhou, Wenzhou, Shanghai Pudong and Xi'an High-tech Park.
At present, TEDA has preliminary been equipped with the fundamental conditions required for the development of the service outsourcing industry. An array of operators in ITO, BPO and software outsourcing sectors are now based there, including, Affiliated Computer Services (ACS), Computer Sciences Corporation (CSC), I@T Technology Co. Ltd., Neusoft, Eteda Technology Company, CS&S Cyber Resource Software Technology Ltd., Newpalm, Palm Commerce Information Technology (China) Co., Ltd., Nankai University General Data Technologies Co., Ltd., Shenchi Software and Fujitsu.
With the increasing demand for service outsourcing business in the Binhai New Area (BNA) in Tianjin, TEDA has witnessed the rapid emergence of a cluster of new enterprises operating outsourcing services in areas like information, human resources, financial management, logistics, after-sales and product R&D. For example, the software development and service field had over 100 outsourcing companies registered at the end of 2006. Another 43 software enterprises have passed authorizations, and three companies have been awarded their CMM2 authentication or higher.
Meanwhile, TEDA has begun the building of a service outsourcing industry base with the first phase covering an area of one square kilometer. The base will offer all-round services for enterprises in terms of talent recruitment and training to address the needs of the service outsourcing providers who plan to land in TEDA. Also, TEDA plans to build white-collar apartments in the base, which will be rented to enterprises at low prices. The initiative aims to provide the living establishment with low cost but complete supporting facilities for new employees who work for service outsourcing providers.
About Tianjin Economic-Technological Development Area (TEDA)
Tianjin Economic-Technological Development Area (TEDA) was established in 1984 with the approval of the State Council of the People's Republic of China. It is one of the first state-class economic-technological development areas in the country.
TEDA is located in the center of a larger area bordering Bohai Sea and the east of the Asia-Europe Land Bridge, thus serving as the gate to the two super cities of Beijing and Tianjin, and the throat connecting the northeast of China. By the end of 2005, 4,067 foreign companies have landed in TEDA. Of the Fortune 500 companies, 57 multinational companies, from 10 countries and regions, including such well-established multinational giants as Motorola, Samsung and Toyota, invested in 123 enterprises in TEDA. In 2000, "Fortune" listed TEDA as one of the most highly recommended economic areas in China. In 2002 UNIDO listed TEDA as one of the most dynamic areas of China together with Shenzhen, Suzhou, Wenzhou, Shanghai Pudong and Xi'an High-tech Park.
New age of outsourcing
Third-party products and services are undergoing an evolution as a result of fundamental changes to technology, says Mark Kobayashi-Hillary
Mark Kobayashi-Hillary, Computing Business 22 Mar 2007
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When you spend a lot of time in India it becomes apparent that most technology companies are not all that worried about the competition from China; but why not?
The reason is that the nature of competition is far more complex than the IT services industry of one nation pitted against another. The question of what will happen to the outsourcing industry in India is, in fact, a function of what happens in other regions, what individual companies do and what innovations take place, disrupting our present view of the marketplace.
New approaches to technology, such as software as a service, service orientation or utility computing should – in theory – disrupt the present bread-and-butter revenue streams of package implementation and systems integration.
But those changes might not be coming as fast as some commentators believe. V Sreenivasan, vice president of strategic relations and consulting at ITC Infotech, says companies would like us to believe that everything is moving to architectures, such as service-oriented architecture (SOA).
‘But the traditional banks and companies that form the pillar of any economy still would like to put their money on their mainframes,’ he says. ‘In my view, both models will co-exist. The fundamental principle is that large and enterprise-level computing remaining with these large systems will be there for some time yet.’
If upstarts such as Google are going to challenge industry stalwarts such as Microsoft in office automation, then it is no great leap of the imagination to consider that changes might take place in IT services, too.
Francisco D’Souza, chief executive of Cognizant, says there are really three dimensions changing the nature of outsourcing today – competing countries, competing firms and technological change.
‘These are all fundamental changes that are happening and will continue to do so,’ he says. ‘In my opinion, there are two themes to this.
‘First, there is a group of firms in the industry that are focusing on being very good at transactions. These are firms that are looking at particular business problems or looking at particular industries and being very good at the transactional level. So their value proposition is: “How do I do something most effectively?”
‘Second, is another group of firms that are focused on transformation and helping customers really understand how they build stronger businesses.’
D’Souza makes a strong point. The industry moving to a situation where some firms can reduce cost, increase volume and make a living from automation and high throughput of processes. They are the classic IT firms, providing technology as a utility to other businesses.
Local knowledge
Other companies need intimate knowledge and experience of an industry domain to be able to offer a highly skilled service. These services are supported by IT, but you could not define something such as equity research for an investment bank as a pure IT service. It would be best to call it the difference between application professionalism and technical professionalism – and this does fly in the face of the outsourcing suppliers who say they can do everything from accounting to code cutting.
D’Souza says you can, therefore, see a real bifurcation going on at the moment in the industry, between what he thinks of as the transaction-focused firms and the transformation-focused firms.
‘One focuses far more on the denominator side of the equation – how do I become more efficient and how do I help my customer become more efficient? And the other group of transformational firms drives the numerator side of the equation, asking how do I drive better revenue?
‘I think that’s how the rules of competition in this sector will play out over the coming years,’ he says.
Mark Kobayashi-Hillary, Computing Business 22 Mar 2007
ADVERTISEMENT
When you spend a lot of time in India it becomes apparent that most technology companies are not all that worried about the competition from China; but why not?
The reason is that the nature of competition is far more complex than the IT services industry of one nation pitted against another. The question of what will happen to the outsourcing industry in India is, in fact, a function of what happens in other regions, what individual companies do and what innovations take place, disrupting our present view of the marketplace.
New approaches to technology, such as software as a service, service orientation or utility computing should – in theory – disrupt the present bread-and-butter revenue streams of package implementation and systems integration.
But those changes might not be coming as fast as some commentators believe. V Sreenivasan, vice president of strategic relations and consulting at ITC Infotech, says companies would like us to believe that everything is moving to architectures, such as service-oriented architecture (SOA).
‘But the traditional banks and companies that form the pillar of any economy still would like to put their money on their mainframes,’ he says. ‘In my view, both models will co-exist. The fundamental principle is that large and enterprise-level computing remaining with these large systems will be there for some time yet.’
If upstarts such as Google are going to challenge industry stalwarts such as Microsoft in office automation, then it is no great leap of the imagination to consider that changes might take place in IT services, too.
Francisco D’Souza, chief executive of Cognizant, says there are really three dimensions changing the nature of outsourcing today – competing countries, competing firms and technological change.
‘These are all fundamental changes that are happening and will continue to do so,’ he says. ‘In my opinion, there are two themes to this.
‘First, there is a group of firms in the industry that are focusing on being very good at transactions. These are firms that are looking at particular business problems or looking at particular industries and being very good at the transactional level. So their value proposition is: “How do I do something most effectively?”
‘Second, is another group of firms that are focused on transformation and helping customers really understand how they build stronger businesses.’
D’Souza makes a strong point. The industry moving to a situation where some firms can reduce cost, increase volume and make a living from automation and high throughput of processes. They are the classic IT firms, providing technology as a utility to other businesses.
Local knowledge
Other companies need intimate knowledge and experience of an industry domain to be able to offer a highly skilled service. These services are supported by IT, but you could not define something such as equity research for an investment bank as a pure IT service. It would be best to call it the difference between application professionalism and technical professionalism – and this does fly in the face of the outsourcing suppliers who say they can do everything from accounting to code cutting.
D’Souza says you can, therefore, see a real bifurcation going on at the moment in the industry, between what he thinks of as the transaction-focused firms and the transformation-focused firms.
‘One focuses far more on the denominator side of the equation – how do I become more efficient and how do I help my customer become more efficient? And the other group of transformational firms drives the numerator side of the equation, asking how do I drive better revenue?
‘I think that’s how the rules of competition in this sector will play out over the coming years,’ he says.
Tips for Offshore Outsourcing
There are some tips for Offshore Outsourcing procedure and can be very useful at the time of selection procedure.
1. To start such overseas dealings first of all prepare a detailed requirement study for the project and also make a list of documents with the business logic behind the whole procedure.
2. If you have any idea about the technologies to be used prepare a detailed list of all needs..
3. After gathering all requirements and everything are clear on your side, start the search first for overseas country and then for the company.
4. Google search engine can be useful for your required expertise area company.
5. After gathering the huge list of the Offshore Outsourcing service providers form the search, surf the websites of the companies that you find useful for your projects.
6. Some of the criterias that you can look for while surfing the websites of the company like, since how long they are in such overseas business, what are their strengths and weakness, their positive and negative reviews in the market, their work experiences and expertise, and many more can be useful at the beginning stage.
7. After short listing few companies, now its time to prepare a general enquiry about your requirements and also make sure that you submit those enquiries by company’s website’s feedback form.
8. In the initial stages of inquiries you should ask to know more about company, their prior experience about same projects, inquiry about their pricing and project execution policies and strategies and such things.
9. In such Offshore Development inquiries keep one thing in mind “DO NOT DISCLOSE” any information’s about your project documents unless and until you are satisfied by the reply of company. Signing of NDA (Non Disclosure Agreement) before disclosing by both of you is very important.
10. Make sure to mention jurisdiction which can bound both of you as in many countries having cross border agreement doesn’t work. Like for India you may write jurisdiction and laws applicable of Common Wealth Nations where India is a member country along with few developed nations.
11. After selecting the company for Offshore Development services prepares a full statement of work in tandem with the company.
12. Its time to prepare a draft of Agreement from your Lawyer or some consultants for the further procedure and send it to the company for their opinions on it.
13. If possible also fly to company’s main office in their own country. It would help you understand the company in better manner.
All these are some of the important tips for the companies who are willing to go for Offshore Outsourcing services.
1. To start such overseas dealings first of all prepare a detailed requirement study for the project and also make a list of documents with the business logic behind the whole procedure.
2. If you have any idea about the technologies to be used prepare a detailed list of all needs..
3. After gathering all requirements and everything are clear on your side, start the search first for overseas country and then for the company.
4. Google search engine can be useful for your required expertise area company.
5. After gathering the huge list of the Offshore Outsourcing service providers form the search, surf the websites of the companies that you find useful for your projects.
6. Some of the criterias that you can look for while surfing the websites of the company like, since how long they are in such overseas business, what are their strengths and weakness, their positive and negative reviews in the market, their work experiences and expertise, and many more can be useful at the beginning stage.
7. After short listing few companies, now its time to prepare a general enquiry about your requirements and also make sure that you submit those enquiries by company’s website’s feedback form.
8. In the initial stages of inquiries you should ask to know more about company, their prior experience about same projects, inquiry about their pricing and project execution policies and strategies and such things.
9. In such Offshore Development inquiries keep one thing in mind “DO NOT DISCLOSE” any information’s about your project documents unless and until you are satisfied by the reply of company. Signing of NDA (Non Disclosure Agreement) before disclosing by both of you is very important.
10. Make sure to mention jurisdiction which can bound both of you as in many countries having cross border agreement doesn’t work. Like for India you may write jurisdiction and laws applicable of Common Wealth Nations where India is a member country along with few developed nations.
11. After selecting the company for Offshore Development services prepares a full statement of work in tandem with the company.
12. Its time to prepare a draft of Agreement from your Lawyer or some consultants for the further procedure and send it to the company for their opinions on it.
13. If possible also fly to company’s main office in their own country. It would help you understand the company in better manner.
All these are some of the important tips for the companies who are willing to go for Offshore Outsourcing services.
Outsourcing - losing the shine
This article on ibnlive talks about how india is losing it’s shine as an outsourcing partner. There are several reasons highlighted by the report.
This doesn’t come as a surprise for people familiar close to the outsourcing business. Since early last year, a lot of the entrepreneurs i met made comments about how working with india was becoming un-economical. Friends in cisco, yahoo, hp all talk about how the companies are finding the hiring difficult, costs escalating and quality diminishing.
This is to be expected. Internet is a great equalizer. There is no reason why talented indian engineers should expect less pay than talented american engineers.
If you are running an outsourcing organization and want to stay competitive - here are few tips for you. All three of these are interrelated and you have to be really good at all the three.
* Quality.Focus on producing high quality implementations. Spend a good bit of time doing design, identify potential issues, discuss the specs and provide alternatives. One complaint i heard over and over from different people, is that developers don’t ask questions. They just develop it, and the thing invariably looks bad or fails. This includes situations where specs/mocks don’t address all cases. simple example, they may have designed a mock for a situation when user has rated an item, but no situation when user hasn’t rated yet etc.
* Communicate.Communicate status in a detailed fashion. Over communication is not a bad thing. It helps a lot especially when people can’t see face to face. People expect that as you develop, build a product things come up. It’s great if you can find a solution, but more often than not, you might have refer back to a ui designer, product manager and/or engineering manager. Take 10-15 mins at the end of every day (or when you finish a task) to write up what you did, any open issues, any help you need. Nothing irks a product/eng person more to receive a email saying ‘it’s done’ and then go look at the product to see that’s clearly not good enough to call “done”. “done” to you might mean that you did what was asked of you. Put yourself in the user’s seat to see if this is really ready.
* Timezone.All of us would like to have normal lives. Work during the day, catch a tv show in the evening, spend time with family. Working all nights is not healthy over longer periods of time and even though you make more money, it’s poorer quality of life. That said, make sure you can give atleast few overlapping hours a day with your product team that’s giving you the project. Especially, when you send the status, questions etc, wait till that person gets online and see if they can catch you. You can be available to get online late night to connect if they call you on phone. This will save time and avoid having to wait 12 hours to get a response and helps make the whole development move faster. People leading the project will immensely appreciate this.
To do these effectively, you need to have people working for your company for good periods of time (2 years atleast). It’s hard to do the above 3 cost-effectively, if your development team is churning over every 6 months. All companies are in a competitive, fast growing industry that is growing fast and they are all working hard to grow quickly, gain more business, meet needs of their customers.
Remember, if you expand by dropping your quality, you’ll damage your reputation and loose customers. Instead, if you miss couple of growth opportunities but keep the quality, you’ll retain your customers, grow more modestly, build a stronger company and have the opportunity to charge appropriately for your quality. Set a high bar for people to make it into your company, reward them well and hold them to high expectations.
This doesn’t come as a surprise for people familiar close to the outsourcing business. Since early last year, a lot of the entrepreneurs i met made comments about how working with india was becoming un-economical. Friends in cisco, yahoo, hp all talk about how the companies are finding the hiring difficult, costs escalating and quality diminishing.
This is to be expected. Internet is a great equalizer. There is no reason why talented indian engineers should expect less pay than talented american engineers.
If you are running an outsourcing organization and want to stay competitive - here are few tips for you. All three of these are interrelated and you have to be really good at all the three.
* Quality.Focus on producing high quality implementations. Spend a good bit of time doing design, identify potential issues, discuss the specs and provide alternatives. One complaint i heard over and over from different people, is that developers don’t ask questions. They just develop it, and the thing invariably looks bad or fails. This includes situations where specs/mocks don’t address all cases. simple example, they may have designed a mock for a situation when user has rated an item, but no situation when user hasn’t rated yet etc.
* Communicate.Communicate status in a detailed fashion. Over communication is not a bad thing. It helps a lot especially when people can’t see face to face. People expect that as you develop, build a product things come up. It’s great if you can find a solution, but more often than not, you might have refer back to a ui designer, product manager and/or engineering manager. Take 10-15 mins at the end of every day (or when you finish a task) to write up what you did, any open issues, any help you need. Nothing irks a product/eng person more to receive a email saying ‘it’s done’ and then go look at the product to see that’s clearly not good enough to call “done”. “done” to you might mean that you did what was asked of you. Put yourself in the user’s seat to see if this is really ready.
* Timezone.All of us would like to have normal lives. Work during the day, catch a tv show in the evening, spend time with family. Working all nights is not healthy over longer periods of time and even though you make more money, it’s poorer quality of life. That said, make sure you can give atleast few overlapping hours a day with your product team that’s giving you the project. Especially, when you send the status, questions etc, wait till that person gets online and see if they can catch you. You can be available to get online late night to connect if they call you on phone. This will save time and avoid having to wait 12 hours to get a response and helps make the whole development move faster. People leading the project will immensely appreciate this.
To do these effectively, you need to have people working for your company for good periods of time (2 years atleast). It’s hard to do the above 3 cost-effectively, if your development team is churning over every 6 months. All companies are in a competitive, fast growing industry that is growing fast and they are all working hard to grow quickly, gain more business, meet needs of their customers.
Remember, if you expand by dropping your quality, you’ll damage your reputation and loose customers. Instead, if you miss couple of growth opportunities but keep the quality, you’ll retain your customers, grow more modestly, build a stronger company and have the opportunity to charge appropriately for your quality. Set a high bar for people to make it into your company, reward them well and hold them to high expectations.
Reach Out and Fix Something! - BPO vs. Process Redesign
Quite often, technology is viewed as a process automation solution - increasing the efficiency of an existing process and making it go faster and cheaper. However, there are some game changing developments in technology that creep up on you slowly (over a looong 5-year period as technology changes very fast!) so that process automation does not make any sense any more.
The classic case cited is that of buggy whips and automobiles. At a time when automobiles were taking over the functions performed by horse-drawn carriages, makers of buggy whips were on a doomed path, trying to increase the rate at which buggy whips were manufactured. Any amount of Six Sigma analysis or Lean could not save that particular effort!
Help desk CRM, outsourcing, ITIL, multi-level handling of calls are all doomed in a similar way by recent advances in what one can do remotely! Citrix offers many online conferencing and remote access solutions like GoToMeeting, GoToMyPC, etc. that can enable someone 10,000 miles away to log into your system and through your system access other systems in your network using Remote Connection (a Microsoft Windows utility). They can grab hold of your mouse and keyboard and operate your system from 10,000 miles away as if they are sitting next to you!
Happened to me! Our engineers in Chennai fixed one of our systems through one of the services mentioned above all the way here in California!
Here is where five years from now, you don’t need to be answering questions over the phone to a support person. They can reach out and fix your system remotely. Chat software would most probably include this capability so that you chat and hand over control to the Dell or HP support person and they can poke around your system and fix it!
So there goes any effort put into making some aspects of help desks faster or cheaper!
The classic case cited is that of buggy whips and automobiles. At a time when automobiles were taking over the functions performed by horse-drawn carriages, makers of buggy whips were on a doomed path, trying to increase the rate at which buggy whips were manufactured. Any amount of Six Sigma analysis or Lean could not save that particular effort!
Help desk CRM, outsourcing, ITIL, multi-level handling of calls are all doomed in a similar way by recent advances in what one can do remotely! Citrix offers many online conferencing and remote access solutions like GoToMeeting, GoToMyPC, etc. that can enable someone 10,000 miles away to log into your system and through your system access other systems in your network using Remote Connection (a Microsoft Windows utility). They can grab hold of your mouse and keyboard and operate your system from 10,000 miles away as if they are sitting next to you!
Happened to me! Our engineers in Chennai fixed one of our systems through one of the services mentioned above all the way here in California!
Here is where five years from now, you don’t need to be answering questions over the phone to a support person. They can reach out and fix your system remotely. Chat software would most probably include this capability so that you chat and hand over control to the Dell or HP support person and they can poke around your system and fix it!
So there goes any effort put into making some aspects of help desks faster or cheaper!
The Buddha and China Business Process Outsourcing
The Guan Ji Temple in Wuhu, Anhui Province, is a beautiful compact temple plaza atop a small hill in the diffused center of town. It was the perfect spot to which to take a dawn walk from the hotel at which I was staying during my team’s site selection survey. The morning was cool, crisp and clear, cloudless, fresh. I could think of no better place from which to receive a call from a California venture capital company interested in investing in the Business Process Outsourcing (BPO) scene in China.
The compound’s three terraces are easily accessible, starting with the ground level plaza in which a three meter tall statue of the Boddhisatva Guan Yin greets visitors and pilgrims. At the base of the first temple early risers were already burning incense and planting the fragrant stalks in a large bell-shaped cistern filled with the ashes of previous incarnations of incense since burnt. I had already bought some incense sticks on the plaza outside the temple area, and set the tips of my bundle to candle flame. It seemed to take forever for the cinamon color to become the charcoal gray that signalled the sticks were ready to plant. I kept watching the time on my mobile phone, anxious the phone would ring with my hands full of half-burnt incense. Does the Buddha still bless you if you haven’t burnt all your incense?
The incense finally lit, I pressed the bundles between my clasped hands and gave three bows in the direction of the temple. The phone rang. I quickly made off to a stone bench in a quiet corner of the compound to take the call. An American woman on speaker phone asked if I was me. I said I was. She was tying me in to their New York Office, to talk with a Vice President charged with developing their BPO investment portfolio.
The venture capitalists’ problem was this: they were land-locked, had no one on the ground floor in China to research and qualify potential BPO targets. They knew I came in contact with both IT outsourcing (ITO) companies and BPO companies in China. Their focus was exclusively on BPO operators and providing second and third rounds of seed capital to expand operations.
The VC’s remote research had lead them to conclude there were still no pack leaders in the BPO market, no companies breaking away from the others and distinguishing themselves; especially for the North American and European marketplaces. They knew the Indians were coming to China, and that the Chinese government was promoting cities in China to become IT/BPO centers of excellence. They were confident and vested in the development of the China BPO market; but how long would it take to see an industry grow up that was as formidable as India’s? They asked for my views.
I remarked the Year 2000 (Y2K, as we in the IT industry back then called it) software re-engineering effort was a gift to the Indians. The West had millions of lines of programming code that needed to be reviewed and re-figured to take into account the change-over from the year 1999 to the year 2000, when computers would record a “00” for the new year’s dates instead of “2000”. Calculations, of course, would no longer be accurate: bills would be wrong, payments wildly out of wack with reality, airplanes would crash, the world as we knew it would end. India, though, saved the West; or rather, its armies of software engineers updated the software that ran the financial record-keeping computer applications of the West.
India also learned about Western computer systems, Western systems development methodologies, Western back office business processes. I was a project management consultant to a very large financial services organization directly after Y2K. I was charged with packaging up one of the first back office applications in the States that was going to be developed and maintained in India. Management figured that if the Indians had doneY2K right, they could cut their teeth on this application, and perhaps on further applications.
And so the Indian ITO industry as we know it today was born from this and many other projects “thrown over the wall” to the Indians after Y2K.
Of course, the Indian education system with its emphasis on English language skills also encouraged growth of the ITO business, and facilitated entry into the BPO space. Credit card processing, insurance claims processing, call centers and more were natural extensions of the knowlegde base and experience the Indians were gaining through their business analyses and IT implementations.
China, though, is different. China has no Y2K to finance or to educate its armies of fresh-eyed programmers in the hard-as-nails realities of Western business practices and operational processes. It does not have the troops of English-speaking, customer-focused go-getters that India does to kick-start an industry into the stars. Instead, China is going to have to boot-strap itself to become a world-beater in both the IT/BPO realms.
Certainly, the Chinese government has its heart in the right place and its intentions firmly set. Newly fielded economic development zones throughout China are flush with cash, already investing in platoons of engineers and hi-tech infra-structures. One partner in a venture to work with a local government to build its IT/BPO service base told me the governments are using the same approach they had in developing their manufacturing prowess: if you build it, they – the foreign companies - will come.
Problem is, the Chinese have no credibility when it comes to understanding and articulating the kinds of back-office applications that matter to knowledge-driven Western companies. Most Chinese IT companies cater to domestic customers; the vast majority support Japanese and Korean companies with relatively unsophiscticated programming that has been passed to them through highly detailed specifications; and the few BPO resources there are have made it this far performing rote activities that do not require much in the way of analysis or creativity: insurance claims processing, data entry and the like.
Another learning curve, I explained to the VC on the other side of the world, is the one the West will need to go through about China. I told the VC I call it the “Fear of the Yellow Peril”. The West has all kinds of cultural preconceptions and historical baggage related to China that will take years to dispel.
The problem will take longer to resolve than it has with manufacturing because the people who are making the decisions about whether to set up BPO operations in China know nothing about China and don’t want to know much about China, leave alone pick up their families and move to China to deepen and accelerate development platforms. We’re talking about the CFOs and CIOs and other business-line Vice Presidents who are comfortable enough in their American suburban homes with the driving wheel of their SUVs in one hand and their lattes in the other. These folks are not going to move to China to oversee development of their China IT/BPO portofolios; not like the manufacturing types that have already transplanted their lives in China.
This is all not to say the Chinese will not develop a successful BPO industry, for I firmly believe they will, I told the VC on the conference call. And the VC, for their part, reiterated their long-term commitment to developing the BPO industry in China. However, we all agreed, it’s just going to take years longer than we would all prefer. And the industry will likely go through many incarnations before it makes as large an impact on the world scene as the Indian model has. But it would happen in this lifetime, we were confident.
Phone conference concluded, I watched the monks that lived in the compound moving about their daily rituals, sweeping the courtyard, neatening the worshipping halls. Behind me the terrible screech of a buzz saw ripping through timbers forced me from the shelter of the tree under which I was sitting. It was time to return to the real world. And to the dawn of a new era in China’s industrial development.
The compound’s three terraces are easily accessible, starting with the ground level plaza in which a three meter tall statue of the Boddhisatva Guan Yin greets visitors and pilgrims. At the base of the first temple early risers were already burning incense and planting the fragrant stalks in a large bell-shaped cistern filled with the ashes of previous incarnations of incense since burnt. I had already bought some incense sticks on the plaza outside the temple area, and set the tips of my bundle to candle flame. It seemed to take forever for the cinamon color to become the charcoal gray that signalled the sticks were ready to plant. I kept watching the time on my mobile phone, anxious the phone would ring with my hands full of half-burnt incense. Does the Buddha still bless you if you haven’t burnt all your incense?
The incense finally lit, I pressed the bundles between my clasped hands and gave three bows in the direction of the temple. The phone rang. I quickly made off to a stone bench in a quiet corner of the compound to take the call. An American woman on speaker phone asked if I was me. I said I was. She was tying me in to their New York Office, to talk with a Vice President charged with developing their BPO investment portfolio.
The venture capitalists’ problem was this: they were land-locked, had no one on the ground floor in China to research and qualify potential BPO targets. They knew I came in contact with both IT outsourcing (ITO) companies and BPO companies in China. Their focus was exclusively on BPO operators and providing second and third rounds of seed capital to expand operations.
The VC’s remote research had lead them to conclude there were still no pack leaders in the BPO market, no companies breaking away from the others and distinguishing themselves; especially for the North American and European marketplaces. They knew the Indians were coming to China, and that the Chinese government was promoting cities in China to become IT/BPO centers of excellence. They were confident and vested in the development of the China BPO market; but how long would it take to see an industry grow up that was as formidable as India’s? They asked for my views.
I remarked the Year 2000 (Y2K, as we in the IT industry back then called it) software re-engineering effort was a gift to the Indians. The West had millions of lines of programming code that needed to be reviewed and re-figured to take into account the change-over from the year 1999 to the year 2000, when computers would record a “00” for the new year’s dates instead of “2000”. Calculations, of course, would no longer be accurate: bills would be wrong, payments wildly out of wack with reality, airplanes would crash, the world as we knew it would end. India, though, saved the West; or rather, its armies of software engineers updated the software that ran the financial record-keeping computer applications of the West.
India also learned about Western computer systems, Western systems development methodologies, Western back office business processes. I was a project management consultant to a very large financial services organization directly after Y2K. I was charged with packaging up one of the first back office applications in the States that was going to be developed and maintained in India. Management figured that if the Indians had doneY2K right, they could cut their teeth on this application, and perhaps on further applications.
And so the Indian ITO industry as we know it today was born from this and many other projects “thrown over the wall” to the Indians after Y2K.
Of course, the Indian education system with its emphasis on English language skills also encouraged growth of the ITO business, and facilitated entry into the BPO space. Credit card processing, insurance claims processing, call centers and more were natural extensions of the knowlegde base and experience the Indians were gaining through their business analyses and IT implementations.
China, though, is different. China has no Y2K to finance or to educate its armies of fresh-eyed programmers in the hard-as-nails realities of Western business practices and operational processes. It does not have the troops of English-speaking, customer-focused go-getters that India does to kick-start an industry into the stars. Instead, China is going to have to boot-strap itself to become a world-beater in both the IT/BPO realms.
Certainly, the Chinese government has its heart in the right place and its intentions firmly set. Newly fielded economic development zones throughout China are flush with cash, already investing in platoons of engineers and hi-tech infra-structures. One partner in a venture to work with a local government to build its IT/BPO service base told me the governments are using the same approach they had in developing their manufacturing prowess: if you build it, they – the foreign companies - will come.
Problem is, the Chinese have no credibility when it comes to understanding and articulating the kinds of back-office applications that matter to knowledge-driven Western companies. Most Chinese IT companies cater to domestic customers; the vast majority support Japanese and Korean companies with relatively unsophiscticated programming that has been passed to them through highly detailed specifications; and the few BPO resources there are have made it this far performing rote activities that do not require much in the way of analysis or creativity: insurance claims processing, data entry and the like.
Another learning curve, I explained to the VC on the other side of the world, is the one the West will need to go through about China. I told the VC I call it the “Fear of the Yellow Peril”. The West has all kinds of cultural preconceptions and historical baggage related to China that will take years to dispel.
The problem will take longer to resolve than it has with manufacturing because the people who are making the decisions about whether to set up BPO operations in China know nothing about China and don’t want to know much about China, leave alone pick up their families and move to China to deepen and accelerate development platforms. We’re talking about the CFOs and CIOs and other business-line Vice Presidents who are comfortable enough in their American suburban homes with the driving wheel of their SUVs in one hand and their lattes in the other. These folks are not going to move to China to oversee development of their China IT/BPO portofolios; not like the manufacturing types that have already transplanted their lives in China.
This is all not to say the Chinese will not develop a successful BPO industry, for I firmly believe they will, I told the VC on the conference call. And the VC, for their part, reiterated their long-term commitment to developing the BPO industry in China. However, we all agreed, it’s just going to take years longer than we would all prefer. And the industry will likely go through many incarnations before it makes as large an impact on the world scene as the Indian model has. But it would happen in this lifetime, we were confident.
Phone conference concluded, I watched the monks that lived in the compound moving about their daily rituals, sweeping the courtyard, neatening the worshipping halls. Behind me the terrible screech of a buzz saw ripping through timbers forced me from the shelter of the tree under which I was sitting. It was time to return to the real world. And to the dawn of a new era in China’s industrial development.
Outsourcing and SMEs
I had a conversation the other day with Marc Vollenweider, chief executive of Evalueserve. Evalueserve is well known for their research into the phenomenon known as KPO – Knowledge Process Outsourcing. In fact, I have often asserted to anyone who will listen that I believe the Evalueserve India head – Ashish Gupta – created the term KPO. At least, I cannot find any earlier use of the term before Ashish started talking about it, so I guess that’s decided.
Marc is Swiss, but he lives in Austria. I have often talked to Marc in person and on the phone in various countries, but I don’t think I’ve ever managed to call him and find him at home in Austria before – so that’s a first. Maybe his wife told him to stop living on airline food - for a couple of weeks at least!
Marc explained a couple of interesting things during our chat. We talked a lot about KPO in general and the market growth at present and then looked a little more at the sustainability of the sector. To begin with, look at what Marc said about KPO today in India: “We believe there are now about 75,000 KPO professionals in India – that depends on your definition of KPO – but if you look at people with two degrees then in this type of high-end task I really think it is around 75,000 people, right now generating around $3bn in revenue for the companies they work for.”
Marc also explained that he felt the build vs buy model – should you have your own ‘captive’ operation in India or outsource to a suppler – was a very different question in KPO: “At the moment, about two-thirds of KPO professionals still work in captives, however this is going to change significantly in the future. The remaining third work with vendors and about 70 per cent of those work for large and medium companies and the rest are focused within the small to medium-sized enterprise (SME) segment – that’s interesting because it shows that KPO is far more able to serve SMEs than IT or BPO type outsourcing has been.”
This is a really interesting observation. SME outsourcing is often talked of as the next wave, the place where everyone should be focused, yet the realities of outsourcing – the controls and contracts and agreements and monitoring – don’t lend it to work well in the small company environment. However, where a company needs just a few people offering a very high-end bespoke service, Marc is arguing that there are KPO vendors now developing expertise in managing that kind of SME requirement.
Evalueserve predict that KPO will grow to employ around 200,000 people in India alone by 2011 – generating $9.9bn in revenue in that market. From today to those numbers is significant. It’s even more significant when you consider that KPO did not exist at all until 1999 or 2000, when major captives such as GE and McKinsey started asking their offshore operations to perform complex work they would normally have always done locally. They were forced to do it for themselves, but soon the vendor base grew and over the last couple of years the stable of KPO vendors has been maturing.
I asked Marc about the issues of recruitment in India. Everyone asks about staff attrition in outsourcing suppliers, but recently Nasscom published some worrying research that indicated India may struggle to keep supplying graduates to the industry if things keep growing at the present rate. He expressed some concerns for those involved in BPO, but suggested that KPO is an entirely different beast.
He said: “I do believe that people and recruitment is crucial for KPO, but KPO players won’t be exposed too much to any crunch. KPO companies are far more attractive to work for. We are seeing a lot of people coming to us from the high end of BPO, IT, or consulting - all trying to join us. I think this is partly because of the exposure the KPO segment gets in the press and from groups such as Nasscom. We recently won the Nasscom award for most innovative business model in India and got an award from the Prime Minister – we had 600 job applications arrive the next morning.”
Marc has some interesting views on the salary increases in India. Many commentators have pointed to the double-digit percentage pay increases in India leading to an erosion of the cost advantage. Marc believes that this is true in the more commoditised services, such as BPO, but he feels the pay gap is actually getting wider in KPO. He explained: “Look at absolute cost increases in the West and with India – the gap is widening, not closing. Last year in the UK, an employee in a similar role with two degrees might have expected something like a six per cent raise on $80 an hour – now compare that to a 15 per cent increase on $20 in India. These are average numbers, but in general you can see that in KPO it is more likely that there is not an erosion of cost advantage – the gap is actually getting wider.”
These are some quite important comments. If the cost advantage is increasing for higher value services in offshore locations and these services can be more focused and controlled for SMEs then there is a vast market in the UK just waiting to be tapped.
Marc is Swiss, but he lives in Austria. I have often talked to Marc in person and on the phone in various countries, but I don’t think I’ve ever managed to call him and find him at home in Austria before – so that’s a first. Maybe his wife told him to stop living on airline food - for a couple of weeks at least!
Marc explained a couple of interesting things during our chat. We talked a lot about KPO in general and the market growth at present and then looked a little more at the sustainability of the sector. To begin with, look at what Marc said about KPO today in India: “We believe there are now about 75,000 KPO professionals in India – that depends on your definition of KPO – but if you look at people with two degrees then in this type of high-end task I really think it is around 75,000 people, right now generating around $3bn in revenue for the companies they work for.”
Marc also explained that he felt the build vs buy model – should you have your own ‘captive’ operation in India or outsource to a suppler – was a very different question in KPO: “At the moment, about two-thirds of KPO professionals still work in captives, however this is going to change significantly in the future. The remaining third work with vendors and about 70 per cent of those work for large and medium companies and the rest are focused within the small to medium-sized enterprise (SME) segment – that’s interesting because it shows that KPO is far more able to serve SMEs than IT or BPO type outsourcing has been.”
This is a really interesting observation. SME outsourcing is often talked of as the next wave, the place where everyone should be focused, yet the realities of outsourcing – the controls and contracts and agreements and monitoring – don’t lend it to work well in the small company environment. However, where a company needs just a few people offering a very high-end bespoke service, Marc is arguing that there are KPO vendors now developing expertise in managing that kind of SME requirement.
Evalueserve predict that KPO will grow to employ around 200,000 people in India alone by 2011 – generating $9.9bn in revenue in that market. From today to those numbers is significant. It’s even more significant when you consider that KPO did not exist at all until 1999 or 2000, when major captives such as GE and McKinsey started asking their offshore operations to perform complex work they would normally have always done locally. They were forced to do it for themselves, but soon the vendor base grew and over the last couple of years the stable of KPO vendors has been maturing.
I asked Marc about the issues of recruitment in India. Everyone asks about staff attrition in outsourcing suppliers, but recently Nasscom published some worrying research that indicated India may struggle to keep supplying graduates to the industry if things keep growing at the present rate. He expressed some concerns for those involved in BPO, but suggested that KPO is an entirely different beast.
He said: “I do believe that people and recruitment is crucial for KPO, but KPO players won’t be exposed too much to any crunch. KPO companies are far more attractive to work for. We are seeing a lot of people coming to us from the high end of BPO, IT, or consulting - all trying to join us. I think this is partly because of the exposure the KPO segment gets in the press and from groups such as Nasscom. We recently won the Nasscom award for most innovative business model in India and got an award from the Prime Minister – we had 600 job applications arrive the next morning.”
Marc has some interesting views on the salary increases in India. Many commentators have pointed to the double-digit percentage pay increases in India leading to an erosion of the cost advantage. Marc believes that this is true in the more commoditised services, such as BPO, but he feels the pay gap is actually getting wider in KPO. He explained: “Look at absolute cost increases in the West and with India – the gap is widening, not closing. Last year in the UK, an employee in a similar role with two degrees might have expected something like a six per cent raise on $80 an hour – now compare that to a 15 per cent increase on $20 in India. These are average numbers, but in general you can see that in KPO it is more likely that there is not an erosion of cost advantage – the gap is actually getting wider.”
These are some quite important comments. If the cost advantage is increasing for higher value services in offshore locations and these services can be more focused and controlled for SMEs then there is a vast market in the UK just waiting to be tapped.
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