IBM: China & India Are Mission Critical

India and China will be "pivotal" markets for IBM going forward, say Big Blue executives.

Michael Cannon-Brookes, IBM's vice president for business development in China and India, said at a media briefing here Tuesday that the ability to innovate business models and having access to a ready talent pool are key for a global enterprise to be successful.

The two most populous countries in the world meet both conditions, said Cannon-Brookes, adding that there are "dramatic changes in business models coming out from China and India".

Pointing to research from McKinsey & Co., Cannon-Brookes added that China and India had the most cost-effective developer pools in 2005, compared to other geographies such as Latin America, Russia and Western Europe. By 2010, the number of Chinese and Indian developers is expected to triple, while remaining the most cost-effective.

India is a particularly significant market as it also has a young workforce, said Cannon-Brookes. Quoting data from the United Nations, he pointed out that India is expected to have a median age advantage of 10 to 20 years over competing economies by 2025. By that time, the median age of India's workforce will be 30 years, compared to China and the United States at 39 years, Western Europe at 45 years and Japan at 50 years. Currently, the Indian workforce's median age is estimated at 24.

IBM has made substantial investment in both China and India, as part of its global integrated enterprise strategy which develops business capabilities in various locations to serve the global market.

In June, the company announced a US$6 billion investment in India covering hardware and software, services and research. Big Blue currently employs over 43,000 personnel and operates over 25 facilities in India.

In October, the company relocated its procurement headquarters in New York to Shenzhen.

China and India are also important hubs for business transformation outsourcing and business process outsourcing services, said Randy Walker, general manager for managed business process services in the Asia-Pacific region, in an interview with ZDNet Asia.

The regional growth potential for BTO and BPO is high, with many businesses wanting to have access to skills and best practices. Typical BPO deals start on a small scale and gradually build into larger, more complex ones, he noted.

According to Walker, IBM will be opening a new BPO center in Vietnam, another emerging market for the delivery of services. However, Vietnam will not be as key a market as India, China and even the Philippines which specializes in human resource services, he said. The company has identified Vietnam as a site with the potential to service the French and Japanese markets.

There will always be new and cheaper locations to provide labor, but China and India will maintain the skills edge, Walker pointed out.

He added: "If you're looking at 'cheap', there'll always be a Christmas Island (new low-cost locations). If you're looking at 'skills', the 'what next' will always be India...the 'what next' will always be China."

Securing the BPO network

Safety first, the rest can wait. Research reports have consistently favoured India as the outsourcing hub of the future, provided data security gets more-than required attention from India's BPO industry.

IDC estimates that the Indian IT industry is all set to grow to $55 billion by the end of 2008, fuelled by the rise in technology and business process outsourcing. While there is not shortage of enabling factors, certain issues like information security could debilitate growth. In the outsourcing domain, security means trust. Organisations hold and exchange massive amounts of sensitive data relating to their customers, products, suppliers, and clients. Corrupted, lost or leaked data could jeopardise an organisation’s survival. The availability of information systems may also be critical for the achievement of an organisation's business objectives.

Networks are critical to business performance especially in the IT and BPO sector with organisations depending on these networks for communication, transactions and data sharing. The overriding concern of CIOs today is to ensure their networks are constantly safeguarded against various attacks. As a result, information security is increasingly playing a strategic role in today's outsourcing environment.

Organisations outsourcing to India look for service providers with strong security practices and robust, secure yet open networks. Enterprises face daunting challenges when it comes to security. In addition, IT and BPO service providers have to address the following issues:

Compliance to Regulations
A majority of Indian companies primarily comply with BS 7799. Companies have also signed service level agreements (SLA), which have very strict confidentiality and security clauses built into them at the network and data level. Laws such as the IT Act 2000, Indian Copyright Act, Indian Penal Code Act and the Indian Contract Act, 1972 provide adequate safeguards to companies offshoring work to the US and the UK. Most of the BPO companies providing services to UK clients ensure compliance with UK Data Protection Act 1998 (DPA) through contractual agreements.

But in some cases, organisations are eyeing compliance certificates as ticket to more business. Some firms scramble for certification just before a client visit. Despite various security certifications, many organisations have had a rude awakening to severe breaches that have impacted their businesses. Therefore, establishing a culture of security in an enterprise and creating relevant user awareness in terms of empowerment, confidentiality and code of conduct are of great importance and supplements the process of becoming standard compliant. An organisation should be clear from the beginning that becoming compliant to a standard is not a mere IT exercise but a serious business initiative with an end goal of improving enterprise performance.

Privacy and Trust
Enterprises are constantly handling data and information of their clients' customers. Care should be that the information is used only for purposes authorised by the owner or supplier and is not shared with unauthorised personnel.
Businesses need to effectively and securely manage who and what can access the network, as well as when, where, and how that access can occur. Deploying a complete identity management solution lets enterprises secure network access and admission at any point in the network, while isolating and controlling infected or unpatched devices that attempt to access the network.

Data Protection
While the concern for data protection always existed, the India outsourcing phenomenon has only increased the concern for protection of sensitive information . While stringent data protection laws exist in EU and USA, most clients are keen that their Indian service providers have stringent policies to prevent the misuse of data. While addressing security concerns, organisations need to consider various factors like:

Integrity
Gathering and maintaining accurate information and avoiding malicious modification

Availability
Providing access to the information when and where desired

Confidentiality
Avoiding disclosure to unauthorised or unwanted persons

Secure Connectivity
A vast majority of companies use the flexibility and cost effectiveness of the Internet to extend their networks to branch offices, telecommuters, customers and partners. Ensuring the privacy and integrity of all information is paramount. Not only must organisations protect external communications, they must also help ensure that internal information remains confidential.

Earthquake off Taiwan hits cables, BPOs unhurt

An earthquake off Taiwan last night, measuring 6.7-7.1 on the Richter scale, knocked out Internet links to India for 20-25 minutes and affected Reliance Communications’ FLAG and VSNL’s SEA-ME-WE-3 under-sea cable systems, even as telecommunications around Asia was severely disrupted, with Internet services slowing and financial transactions being hindered, particularly in the currency market. However, BPO and IT services across India remained largely unaffected.

Spokespersons for companies like 24/7Customer, Infosys BPO, Wipro BPO, Intellinet, WNS and Tech Mahindra said their operations remained unaffected.

The damage was contained to some extent since the disruption took place at a time when data and voice traffic had not peaked in Europe and the US, which accounted for a major part of their businesses. The other reason was that all Indian players had accounted for such natural disasters and built in two levels of redundancies.

These companies have coverage across the Pacific and the Atlantic and if one of these links snaps, the other one takes over seamlessly.

The FLAG cable links India, Thailand, Hong Kong, China, Korea and Japan. SEA-ME-WE 3 includes 39 landing points in 33 countries across four continents — from Western Europe to the Far East and Australia.

Other cables damaged in the quake included those of Asia-Pacific Cable Network, Asia Pacific Cable Network 2, Cable 2 Cable, China US Cable Network, and East Asia Cable.

A VSNL spokesperson said: “VSNL’s traffic has not been significantly affected by the earthquake in Taiwan since we do not have cable systems going there directly. SEA-ME-WE 3 interconnects with other cable systems in the region that has been affected, and hence the disruption. The company is taking action to re-route its affected traffic to other cable systems and normalcy is expected in about 24 hours.”

Meanwhile, Sify customers received an SMS stating, “You may experience slow browsing.” A Sify spokesperson said, “We have five under-sea cables and hence the overall effect is marginal. The SMS was a proactive measure on our part.”

South Korea’s top fixed-line and broadband service provider, KT Corp, said six submarine cables were knocked out by Tuesday night’s earthquakes. “Twenty-seven of our customers were hit, including banks and churches,” a KT spokesperson said. “It is not known yet when we can fully restore services.”

The foreign exchange market suffered in Seoul. “Trading of the Korean won has mostly halted due to the communication problem,” said a dealer at one domestic bank. Some disruption was also reported in the important Tokyo currency market, but the EBS system that handled much dollar/yen trading appeared to be working.

Global information company Reuters Group said users of its services in Japan, South Korea and Taiwan had been affected, although dealing services were restored in Tokyo in the afternoon.

The main quake, measured by Taiwan’s Central Weather Bureau at magnitude 6.7 and at magnitude 7.1 by the US Geological Survey, struck off Taiwan’s southern coast on Tuesday. Two people were killed.

In China, financial markets worked normally, but China Telecommunications Group, the country’s biggest fixed-line telephone operator and parent of China Telecom Corp, said Internet had been badly disrupted.

Phone links and dedicated business lines had also been affected to some degree, it said. Officials declined to give details. “Undersea communication cables fall in the area of state secrets,” said a ministry of communications official in Beijing.

Chunghwa Telecom, Taiwan’s biggest telecom carrier, said two of the four major under-sea cables out of Taiwan had been affected, initially cutting more than half of its international telecommunications capacity. Calls to Southeast Asia were the worst affected, with less than 10 per cent going through — an improvement since the morning, when less than 2 per cent succeeded.

KDDI Corp, Japan’s second-largest telecom company, said communication along submarine cables out of Japan went through Taiwan before reaching Southeast Asian countries, which was leading to disruption, but there were alternative lines.

PCCW, Hong Kong’s main fixed-line telecom provider, said several under-sea cables it part-owned had been damaged. “Data transfer is down by half,” a spokesperson said.

Both Singapore Telecommunications (SingTel), Southeast Asia’s top phone company, and local rival StarHub Ltd said Internet services were slow. But SingTel said traffic was being diverted and repair work was in progress, adding, “Our submarine cables linking to Europe and the US have not been affected.”

Philippine Long Distance Telephone Co said its Internet service was intermittent and international phone calls had been disrupted but domestic calls and its Smart mobile phone service were working normally.

Earthquake off Taiwan hits cables, BPOs unhurt

An earthquake off Taiwan last night, measuring 6.7-7.1 on the Richter scale, knocked out Internet links to India for 20-25 minutes and affected Reliance Communications’ FLAG and VSNL’s SEA-ME-WE-3 under-sea cable systems, even as telecommunications around Asia was severely disrupted, with Internet services slowing and financial transactions being hindered, particularly in the currency market. However, BPO and IT services across India remained largely unaffected.

Spokespersons for companies like 24/7Customer, Infosys BPO, Wipro BPO, Intellinet, WNS and Tech Mahindra said their operations remained unaffected.

The damage was contained to some extent since the disruption took place at a time when data and voice traffic had not peaked in Europe and the US, which accounted for a major part of their businesses. The other reason was that all Indian players had accounted for such natural disasters and built in two levels of redundancies.

These companies have coverage across the Pacific and the Atlantic and if one of these links snaps, the other one takes over seamlessly.

The FLAG cable links India, Thailand, Hong Kong, China, Korea and Japan. SEA-ME-WE 3 includes 39 landing points in 33 countries across four continents — from Western Europe to the Far East and Australia.

Other cables damaged in the quake included those of Asia-Pacific Cable Network, Asia Pacific Cable Network 2, Cable 2 Cable, China US Cable Network, and East Asia Cable.

A VSNL spokesperson said: “VSNL’s traffic has not been significantly affected by the earthquake in Taiwan since we do not have cable systems going there directly. SEA-ME-WE 3 interconnects with other cable systems in the region that has been affected, and hence the disruption. The company is taking action to re-route its affected traffic to other cable systems and normalcy is expected in about 24 hours.”

Meanwhile, Sify customers received an SMS stating, “You may experience slow browsing.” A Sify spokesperson said, “We have five under-sea cables and hence the overall effect is marginal. The SMS was a proactive measure on our part.”

South Korea’s top fixed-line and broadband service provider, KT Corp, said six submarine cables were knocked out by Tuesday night’s earthquakes. “Twenty-seven of our customers were hit, including banks and churches,” a KT spokesperson said. “It is not known yet when we can fully restore services.”

The foreign exchange market suffered in Seoul. “Trading of the Korean won has mostly halted due to the communication problem,” said a dealer at one domestic bank. Some disruption was also reported in the important Tokyo currency market, but the EBS system that handled much dollar/yen trading appeared to be working.

Global information company Reuters Group said users of its services in Japan, South Korea and Taiwan had been affected, although dealing services were restored in Tokyo in the afternoon.

The main quake, measured by Taiwan’s Central Weather Bureau at magnitude 6.7 and at magnitude 7.1 by the US Geological Survey, struck off Taiwan’s southern coast on Tuesday. Two people were killed.

In China, financial markets worked normally, but China Telecommunications Group, the country’s biggest fixed-line telephone operator and parent of China Telecom Corp, said Internet had been badly disrupted.

Phone links and dedicated business lines had also been affected to some degree, it said. Officials declined to give details. “Undersea communication cables fall in the area of state secrets,” said a ministry of communications official in Beijing.

Chunghwa Telecom, Taiwan’s biggest telecom carrier, said two of the four major under-sea cables out of Taiwan had been affected, initially cutting more than half of its international telecommunications capacity. Calls to Southeast Asia were the worst affected, with less than 10 per cent going through — an improvement since the morning, when less than 2 per cent succeeded.

KDDI Corp, Japan’s second-largest telecom company, said communication along submarine cables out of Japan went through Taiwan before reaching Southeast Asian countries, which was leading to disruption, but there were alternative lines.

PCCW, Hong Kong’s main fixed-line telecom provider, said several under-sea cables it part-owned had been damaged. “Data transfer is down by half,” a spokesperson said.

Both Singapore Telecommunications (SingTel), Southeast Asia’s top phone company, and local rival StarHub Ltd said Internet services were slow. But SingTel said traffic was being diverted and repair work was in progress, adding, “Our submarine cables linking to Europe and the US have not been affected.”

Philippine Long Distance Telephone Co said its Internet service was intermittent and international phone calls had been disrupted but domestic calls and its Smart mobile phone service were working normally.

USA Outsourcing Marketing Overview

The range of activities being outsourced from USA to countries like India is no longer a passing trend. It is an increasingly viable option being taken by more and more public and private organizations, with even the little jump start-ups hopping on to the outsourcing bandwagon, eager to make a quick buck. This leaves a question hanging in the air, whether, it is just the cost factor driving US companies to outsource, just almost everything that can be outsourced. However, A.T. Kearney in its Making Offshore Decisions says: “…labour arbitrage is far from the only factor in the decision to outsource. Companies cite greater productivity, improved service and superior technical skills as other reasons to move operations offshore.

While, the US Department of Commerce quotes the value of US exports of legal work, computer programming, telecommunications, banking, engineering, management consulting, and other private services jumping to $131.01-billion in 2003, up $8.42 billion from 2002, imports of services, a category that encompasses US outsourcing of call centres and data entry, hit $77.38-billion for the year, up $7.94 billion from 2002.

That was in 2002 and 2003, but now USA’s outsourcing market has become much larger, and is growing by leaps and bounds. Clearly, it is more than evident that the Americans are off-shoring / outsourcing everything that can be, as the success of off-shored projects, coupled with all kinks being ironed out, and a smooth relationship developed with off-shore service providers, the smooth delivery of future projects is ensured. The comfort zone American firms have found in the outsourcing market confirms Information Technology Services (Computer and Related Services), Business Process Outsourcing (Customer Interaction Services, Back-Office Operations, More Independent Professional or Business Services) outsourcing segment will continue to outperform, and grow yearly by 8% in 2007.

Moreover, as a result of the global outsourcing trend, Gartner predicts that up to 25% of traditional IT jobs in many developed countries, including USA will be situated in emerging markets by the year 2010. “Analysts predict that as many as 2 million US white-collar jobs, such as programmers, software engineers and application designers will shift to low-cost centres by 2014.” That even as, a Forrester Research report predicts: “...at least 3.3-million white-collar jobs and $136-billion in wages will shift from the United States to low cost countries by 2015. In the past 3-years, off-shore programming jobs have nearly tripled, from 27,000 to an estimated 80,000.”

Already, 40% if not more of America’s Fortune 500 firms have outsourced / off-shored to countries like India, according to research firm, Gartner Inc. This is, because the pros and cons of off-shoring / outsourcing have finally been understood, and the cons can be avoided as pros far outbalance the cons, pros such as:

• Competition.
• Productivity.
• Improves local knowledge and access to local markets.
• Access to and availability of skilled human resources.

According to Hackett-Group, a strategic advisory firm, Fortune 500 companies could potentially save $58-billion annually, or some $116-million per company, by off-shoring general and administrative jobs. The study estimates that increased use of cheaper overseas labour could affect up to 1.47-million back-office jobs over the next decade, or nearly 3,000 at a typical Fortune 500 company. And, the jobs under review will go far beyond call centres.

“People have become more confident in the analytical capabilities of the overseas staff, and that is expanding the profile of the kinds of jobs that are under consideration,” Wayne Mincey, President of the Hackett Group confided in Reuters from Atlanta, USA.

Some of the jobs that can now more readily be shipped overseas than they could several years ago include those in information technology, finance, human resources and procurement.

The Hackett study stresses the education base and skill set, and with it the potential savings on labour costs, are on the rise in India, and other emerging countries. Sending certain jobs off-shore results in typical savings in salaries of about 70% compared to savings of 10 to 20% by moving jobs to lower-cost US locations, according to Mincey. “Executives have to take a much closer look because the savings are so large it becomes a competitive issue,” he added. The Hackett study suggests that many companies are relying on outdated analysis to assess the benefits of outsourcing and risk "under-scoping" such initiatives. But, once they get up to speed, it could be: “Katie bar the (office) door.”

And, as the classrooms of America’s higher education institutions feature the world, with Indians leading, and only a small scattering of Americans, the lack of requisite skills is telling across the length and breadth of America. With firms unable to find employees with the required skill set, the only way out is to off-shore / outsource to countries like India, with not only sufficient human resources, but resources that have the right set of skills. Annually, churning out millions of graduates in almost every field, it has a steady supply of skilled human resources to meet American shortfall.

The allure of off-shoring / outsourcing that promises a gleam of money in the fist, has fast caught the fancy of America’s business industry, and its ensuing success is seeing a wide gamut of services from IT, retail, manufacturing, pharmacy, engineering, finance, HR, R&D, legal services, etc. being off-shored / outsourced. As the baby boomers retire or reach retirement age, an aging population means that American will not be able to function without off-shoring / outsourcing.

So much so, Reuter’s financial news agency has announced its decision to outsource journalism jobs. It plans to hire journalists in India to report on 3,000 small to mid-sized companies in the States, in order to free up Western journalists for value-added work, such as, interviewing.

This article is sponsored by www.offshoreoutsourcingworld.com