The Ministry of Commerce (MOC) has published a "Report on Service Trade Development in China", urging to seize the opportunity in the current service trade transfer.
The report points out that the focus of international industrial transfer to China is shifting from manufacturing industry to service industry.
Statistics show that service industry makes up over 60 percent of the world's total economic volume. Finance, insurance, tourism and consultation are major sectors where international transfer is conducted.
According to the report, efforts should be put to ensure the unification of service trade sector and to promote exports of computer, information service, finance and insurance sectors to form a competitive industrial system.
MOC will contribute to improve policies and regulations concerning service trade, to implement a brand strategy and to foster leading service trade enterprises. It will also take a positive attitude in developing outsourcing service.
The report shows that China's export of service trade grew by nearly 29 times in 1982-2005 period, with an annual growth of 15.9 percent which was two times the world's average.
However, the proportion of service trade export in China's total export remained below 10 percent, only half of the world's average, and long-term deficit was reported in the country's service trade.
1/06/2007
China aims for outsourcing supremacy
The Chinese government has announced plans to consolidate their outsourcing industry in an effort to capture business from other developing countries such as India.
Intrinsic advantages that China offers such as lower wages need to be combined with financial and logistical improvements in other areas if the People's Republic is to capitalise fully on their potential as a major outsourcing hub.
In order to combat the fragmentation seen within China's outsourcing industry Assistant Minister of Commerce, Fu Ziying, has outlined plans to develop 10 outsourcing base cities, starting with Shanghai, Dalian, Xi'an, Shenzhen and Chengdu.
Fu hopes the scheme will encourage multinationals to shift offshore outsourcing services to China and promote up to a 1,000 native outsourcing enterprises.
He said: "The Ministry of Commerce is to channel social resources into innovation-oriented enterprises, and support policies will focus on enterprises rather than export products."
India looking east
Remarkably, the increasing opportunities available in China aren't just attracting the usual expected clients. Developing countries such as India are also taking advantage. Indian outsourcing company Tata Consultancy Services (TCS) are expanding their operations into China, adding up to 5,000 new workers to their Chinese operations over the next 3 to 5 years.
A further boost to China's outsourcing industry is provided by a recent lifting of a World Trade Organisation (WTO) restriction, allowing foreign banks in China to operate in local currency.
The resultant expansion of the banks networks coupled with the introduction of new services will make it easier for European and American pharmaceutical companies to outsource services to China.
Bridge Pharmaceuticals, a preclinical CRO based in the US, have also moved into China by building a new animal research facility at the Zhongguancun Life Science Park in Beijing that operates to US level good laboratory practice (GLP) standards.
Chinese companies are becoming more outward looking especially with respect to conforming to international standards. For example, SynTheAll Pharmaceuticals, the manufacturing unit of WuXi PharmaTech, China's leading supplier of pharmaceutical R&D outsourcing services, has been recertified as International Organization for Standardization (ISO) 9001:2000 compliant.
Intrinsic advantages that China offers such as lower wages need to be combined with financial and logistical improvements in other areas if the People's Republic is to capitalise fully on their potential as a major outsourcing hub.
In order to combat the fragmentation seen within China's outsourcing industry Assistant Minister of Commerce, Fu Ziying, has outlined plans to develop 10 outsourcing base cities, starting with Shanghai, Dalian, Xi'an, Shenzhen and Chengdu.
Fu hopes the scheme will encourage multinationals to shift offshore outsourcing services to China and promote up to a 1,000 native outsourcing enterprises.
He said: "The Ministry of Commerce is to channel social resources into innovation-oriented enterprises, and support policies will focus on enterprises rather than export products."
India looking east
Remarkably, the increasing opportunities available in China aren't just attracting the usual expected clients. Developing countries such as India are also taking advantage. Indian outsourcing company Tata Consultancy Services (TCS) are expanding their operations into China, adding up to 5,000 new workers to their Chinese operations over the next 3 to 5 years.
A further boost to China's outsourcing industry is provided by a recent lifting of a World Trade Organisation (WTO) restriction, allowing foreign banks in China to operate in local currency.
The resultant expansion of the banks networks coupled with the introduction of new services will make it easier for European and American pharmaceutical companies to outsource services to China.
Bridge Pharmaceuticals, a preclinical CRO based in the US, have also moved into China by building a new animal research facility at the Zhongguancun Life Science Park in Beijing that operates to US level good laboratory practice (GLP) standards.
Chinese companies are becoming more outward looking especially with respect to conforming to international standards. For example, SynTheAll Pharmaceuticals, the manufacturing unit of WuXi PharmaTech, China's leading supplier of pharmaceutical R&D outsourcing services, has been recertified as International Organization for Standardization (ISO) 9001:2000 compliant.
IDC�s Top 10 predictions for Asia Pacific
The rise of global players among software developers in the region and the growing adoption of service-oriented architecture among users are among IDC’s key predictions expected to shape the IT industry in Asia Pacific in 2007.
The following are IDC’s top 10 predictions:
1. China and India continues to lead the pack as the next opportunity - emerging Asia - approaches BRIC (Brazil, Russia, India and China)-like growth rates
GDP growth in China and India are predicted to hit 8.3 percent and 7.7 percent, respectively. As economic growth rates cool slightly, these countries will be pushed to look at domestic markets as recent years of prosperity drive IT infrastructure build-out and the closing of domestic urban/rural gaps. These developments will require vendors to have very deep sub-regional local knowledge to extract big wins in these markets. Further, Emerging Asian Countries (EACs) - Bangladesh, Pakistan, Sri Lanka, and Vietnam will see spending power and IT infrastructure budgets accelerate to approach similar growth rates of BRIC.
2. Eastern heroes emerge to capture regional and global software markets
The rise of “Eastern Heroes” includes the likes of UFIDA Software Co. Ltd.'s UFSoft, Kingdee International Software Group Co. Ltd., Mincom Ltd., Ahnlab Inc., and Rising Software Australia Pty Ltd. to take the lead will give more established global vendors a run for their money. These firms have regional and even global ambitions, particularly in the underserved SMB markets. They are bolstered by their belief that they have far more practical experience to integrate into their solutions and hence able to build applications that are simple to roll out and easy to manage.
3. SOA momentum gathers with new entry points
Nearly two-thirds of midsize and large corporate firms in Asia Pacific Excluding Japan (APEJ) will commit to early stage service oriented architecture (SOA) adoption in 2007, with initial projects concluding in 2008. The appeal of SOA has to be tempered with caution regarding internal process assessments and re-engineering. As many corporations in the region are still struggling with managing business processes, a near-term opportunity may lie with vendors and systems integrators to aid with both re-engineering and roll-out.
4. Consulting and systems integration vendors refine delivery models to improve profitability
As vendors have been forced to over-commit with extra services to meet tight delivery timelines, profitability has often taken a beating. Consulting and systems integration (C&SI) firms will, in 2007, take a more discreet service approach to counter the erosion of their profitability through “standardization” of these services. These services will have standard prices, fixed service level agreements and pre-defined deliverables.
5. BPO customers test drive before making long-term commitments.
New BPO projects will be won from Asian customers through the provision of short term pilot projects first, then followed by long-term contracts after the BPO vendor proves capable of meeting the Asian customer’s needs. This is a different model from the typical one to serve Western clients, who are more willing to transit to BPO based on compelling economics. The vendor-customer relationship is key to Asian clients, and BPOs will deliver this through service innovation in 2007.
6. Vendors chase the long tail in the SMB market
2007 will be marked by an aggressive focus from all major vendors to broaden and deepen their coverage of the SMB sector in the APEJ region. The region’s SMB market has seen growth rates in recent years approaching 10%, with the SMB market breaking US$52 billion in 2007.
7. Services get caught in the wireless mesh
After much hype, 2007 will finally be the year where wireless mesh services will emerge in Asia. Existing deployments in Taipei will push Malaysia, Singapore, and others to champion their own metropolitan and regional networks, offering wide-area coverage and limited mobile voice over IP (VoIP) capability. IDC expects the wide-area metropolitan Wi-Fi market to double in 2007 to US$250 million.
8. Fixed-Mobile-Convergence enables mass-market consumer mobility
IDC predicts that telecom network operators will begin initial deployments of fixed-mobile convergence (FMC) services in 2007. Technologies such as WiMAX, mesh networking, peer-to-peer computing, software-defined radio equipment, USB-based HSDPA modems, and IPv6 upgrades to Internet equipment have helped push the capability and desirability of FMC services and networks.
9. The evolution of laptops take over both mature and emerging markets in Asia by storm
Notebooks will be the fastest-growing PC form factor in the APEJ region with over 25 percent unit growth in 2007, driven by low prices and growing awareness that help to create more multiple PC households and increased migration away from desktops. While notebook growth is aggressive, IDC predicts the 3G-enabled notebook segment will disappoint in 2007, with bottlenecks at the network operators causing delayed demand.
10. Content is king as HDTV and IPTV emerge in Asia/Pacific
Both high-definition television (HDTV) and IPTV have seen significant growth in recent years. For HDTV, the adoption of high-dollar HD-capable TV sets is expected to pick up as viewers adopt equipment in preparation for HD broadcasts of the 2008 Beijing games. IPTV has seen astonishing growth rates, which will continue in 2007 and 2008 at 76 percent and 168 percent respectively. In both cases, however, the lack of content, due largely to regulatory lags with HDTV and geographic exclusivity with IPTV, currently inhibits large scale levels of uptake.
The following are IDC’s top 10 predictions:
1. China and India continues to lead the pack as the next opportunity - emerging Asia - approaches BRIC (Brazil, Russia, India and China)-like growth rates
GDP growth in China and India are predicted to hit 8.3 percent and 7.7 percent, respectively. As economic growth rates cool slightly, these countries will be pushed to look at domestic markets as recent years of prosperity drive IT infrastructure build-out and the closing of domestic urban/rural gaps. These developments will require vendors to have very deep sub-regional local knowledge to extract big wins in these markets. Further, Emerging Asian Countries (EACs) - Bangladesh, Pakistan, Sri Lanka, and Vietnam will see spending power and IT infrastructure budgets accelerate to approach similar growth rates of BRIC.
2. Eastern heroes emerge to capture regional and global software markets
The rise of “Eastern Heroes” includes the likes of UFIDA Software Co. Ltd.'s UFSoft, Kingdee International Software Group Co. Ltd., Mincom Ltd., Ahnlab Inc., and Rising Software Australia Pty Ltd. to take the lead will give more established global vendors a run for their money. These firms have regional and even global ambitions, particularly in the underserved SMB markets. They are bolstered by their belief that they have far more practical experience to integrate into their solutions and hence able to build applications that are simple to roll out and easy to manage.
3. SOA momentum gathers with new entry points
Nearly two-thirds of midsize and large corporate firms in Asia Pacific Excluding Japan (APEJ) will commit to early stage service oriented architecture (SOA) adoption in 2007, with initial projects concluding in 2008. The appeal of SOA has to be tempered with caution regarding internal process assessments and re-engineering. As many corporations in the region are still struggling with managing business processes, a near-term opportunity may lie with vendors and systems integrators to aid with both re-engineering and roll-out.
4. Consulting and systems integration vendors refine delivery models to improve profitability
As vendors have been forced to over-commit with extra services to meet tight delivery timelines, profitability has often taken a beating. Consulting and systems integration (C&SI) firms will, in 2007, take a more discreet service approach to counter the erosion of their profitability through “standardization” of these services. These services will have standard prices, fixed service level agreements and pre-defined deliverables.
5. BPO customers test drive before making long-term commitments.
New BPO projects will be won from Asian customers through the provision of short term pilot projects first, then followed by long-term contracts after the BPO vendor proves capable of meeting the Asian customer’s needs. This is a different model from the typical one to serve Western clients, who are more willing to transit to BPO based on compelling economics. The vendor-customer relationship is key to Asian clients, and BPOs will deliver this through service innovation in 2007.
6. Vendors chase the long tail in the SMB market
2007 will be marked by an aggressive focus from all major vendors to broaden and deepen their coverage of the SMB sector in the APEJ region. The region’s SMB market has seen growth rates in recent years approaching 10%, with the SMB market breaking US$52 billion in 2007.
7. Services get caught in the wireless mesh
After much hype, 2007 will finally be the year where wireless mesh services will emerge in Asia. Existing deployments in Taipei will push Malaysia, Singapore, and others to champion their own metropolitan and regional networks, offering wide-area coverage and limited mobile voice over IP (VoIP) capability. IDC expects the wide-area metropolitan Wi-Fi market to double in 2007 to US$250 million.
8. Fixed-Mobile-Convergence enables mass-market consumer mobility
IDC predicts that telecom network operators will begin initial deployments of fixed-mobile convergence (FMC) services in 2007. Technologies such as WiMAX, mesh networking, peer-to-peer computing, software-defined radio equipment, USB-based HSDPA modems, and IPv6 upgrades to Internet equipment have helped push the capability and desirability of FMC services and networks.
9. The evolution of laptops take over both mature and emerging markets in Asia by storm
Notebooks will be the fastest-growing PC form factor in the APEJ region with over 25 percent unit growth in 2007, driven by low prices and growing awareness that help to create more multiple PC households and increased migration away from desktops. While notebook growth is aggressive, IDC predicts the 3G-enabled notebook segment will disappoint in 2007, with bottlenecks at the network operators causing delayed demand.
10. Content is king as HDTV and IPTV emerge in Asia/Pacific
Both high-definition television (HDTV) and IPTV have seen significant growth in recent years. For HDTV, the adoption of high-dollar HD-capable TV sets is expected to pick up as viewers adopt equipment in preparation for HD broadcasts of the 2008 Beijing games. IPTV has seen astonishing growth rates, which will continue in 2007 and 2008 at 76 percent and 168 percent respectively. In both cases, however, the lack of content, due largely to regulatory lags with HDTV and geographic exclusivity with IPTV, currently inhibits large scale levels of uptake.
2006: Outsourcing’s Year of Contract Renewals
Yes, offshore firms are making their presence felt. But the incumbents seem to have learned from their mistakes, and are fast making amends, in the process, wining back the confidence of the customers. The result: Contract failures and bitter re-negotiations of 2004 and 2005 gave way to large number of renewals and extensions in 2006. Here is a brief round up
by Imrana Khan
After a series of failures in older outsourcing contracts like the IBM-JP Morgan and Sears-CSC in 2004–05, coupled with consistent rise of the offshore firms from India, many market observers predicted in the beginning of 2006 that it was only a matter of time before the traditional large North American service providers give way to the new offshore service providers and specialized firms. What added to the fears — or expectations — depending on which camp you are in, is the announcement of outsourcing advisory firm, TPI, that as much as $100 billion of outsourcing contracts due for renewal between 2006 and 2007, and the incumbent vendors could well lose their market share.
And they are losing their market share, strictly speaking. However, as 2006 has proved, they are not going anywhere. If anything, they have consolidated their position a little more in last year. So, while still losing a bit of market share to the rising offshore vendors, firms like Accenture, CSC, ACS and an almost-written-off EDS have managed to renew many of their older contracts in 2006, putting to rest speculations that the contact cancellations trend would continue through 2006.
Extensions Galore
The year 2006 saw probably more contract renewals and extensions in recent years. Some of the large renewed deals were GM-EDS deal (part of a multisourcing deal); 7 Eleven-Excellerate HRO contract; BAE-CSC IT contract; PepsiAmerica-ACS BPO contract; Aetna-ACS BPO contract; InBev-Logica IT contract; Barclays-Siemens BPO contract; DirecTV-HP ITO contract; NAB-Accenture FAO contract; CIBC-HP IT contract and T-Mobile-T-Systems contract.
While not many analysts were right about the fate of deals, where they got bang on, was the size of deals: Larger deals of over $500 million were limited in number, thanks to the comfort level that organizations today have with multisourcing and more sophisticated instruments to control those deals.
It was not surprising, hence that most of the renewed contracts were in the range of $50–$200 million. Some of the contracts that were in this range include the Atena-ACS deal ($56 million), Barclays-Xansa ($140 million), AMP-CSC ($146 million), The Whitebread Group-CSC ($48 million), Laurentian Bank of Canada-CGI Group ($100 million), and so on.
The terms of maximum deals were extended in the last months of the year. For instance, the deals like, Eastman Kodak Company-Nortel, Lloyds TSB-First Data International, MERSCORP-EDS, Advanta Bank-First Data International, U.S. Postal Service-HP, Dansk Supermarket-IBM, Ann Taylor-Convergys, Mutual Concept Computer Group-Nexolink, Farm Credit Canada-IBM, 7-Eleven-ExcellerateHRO, CI Financial Income Fund-RBC Dexia Investor Services, Fonterra Co-operative-EDS, U.S. Health and Human Services Department-Thomson Medstat, Duro Textiles-OneNeck IT Services, First Federal-First Data, BT-Capita and Ford-TechTeam.
Winners and Losers
For CSC, EDS and ACS, 2006 was proved immensely favorable. CSC inked several ITO contracts extensions, including the renewal of deals with Airbus North America Engineering, The Whitbread Group, Powercor-CitiPower, OneSteel, AMP, BAE Systems and Schroders. In the same time period, EDS renewed deals with customers like GM, MERSCORP, Fonterra Co-operative, Visanet, AEGON and U.S. Navy. ACS also inked many ITO and BPO agreements with European and American customers such as Aetna, PepsiAmericas, City of Riverside, First Horizon Home Loan Corporation and AmeriHealth Mercy/Keystone.
And of course, IBM also signed many renewal agreements, such as those with Dansk Supermarked, Farm Credit Canada, Symcor and UPM.
What It Means
In all aspects of outsourcing, 2006 was a year of action with lessened hype and more mature approach to outsourcing. Gone were the political rhetoric that marked 2004; gone was the fear that outsourcing, after all, may be losing out in 2005. In fact, like the single-most important thing that 2006 gave rise to —multisourcing — 2006 showed most definitely that you do not necessarily have to spend most of your time and energy in figuring out the next big thing. You should be comfortable with many ideas; many vendors; many models.
The offshore firms learned a lot to get a bigger slice; the incumbents learned new realities and put them into practice. The result was a much more mature option for the customers. Some of the renewed deals have taken into account new market realities. For the customer, it is best of both worlds.
Renewed Contracts in 2006
Month Customer Service Provider Engagement Period
(in years) Value $
(in million) Region
December Eastman Kodak Company Nortel ITO 3 NA North America
December Lloyds TSB First Data International BPO 7 NA Europe
December MERSCORP EDS BPO NA NA North America
December Advanta Bank First Data International BPO NA NA North America
December U.S. Postal Service HP ITO NA NA North America
December Dansk Supermarked IBM ITO 3 NA Europe
December Ann Taylor Convergys BPO NA NA
December Mutual Concept Computer Group Nexolink ITO NA NA Europe
December Farm Credit Canada IBM ITO 5 36 Europe
December 7-Eleven ExcellerateHRO HRO 5 (approx.) NA North America
December CI Financial Income Fund RBC Dexia Investor Services BPO 5 NA Canada
December Fonterra Co-operative EDS ITO 4 NA
December U.S. Health and Human Services Department Thomson Medstat BPO 3 14.9 North America
December Duro Textiles OneNeck IT Services ITO NA NA North America
December First Federal First Data FAO NA NA North America
December Ford TechTeam ITO 3 NA
November TD Banknorth Metavante BPO NA NA
November Siemens Business Services Barclays BPO 2 NA
November Laurentian Bank of Canada CGI Group 5 100 Canada
October Airbus North America Engineering CSC ITO 6 20 North America
October Symcor IBM ITO 3 26.6 Canada
October Farm Credit Canada ISM Canada ITO 5 32 Canada
October Infocrossing State of Missouri BPO 1 18 North America
October The Whitbread Group CSC ITO NA 48 Europe
October Powercor-CitiPower CSC ITO 5 13 Australia
October UPM IBM ITO NA NA Europe
October Marine One Acceptance ACS ITO 3 NA North America
September First Horizon Home Loan Corporation ACS BPO NA NA North America
September DirectTV HP ITO 7 500
September Perot Systems Owens & Minor ITO 5 NA
September Visanet EDS ITO and BPO 10 209
September T-Mobile T-Systems ITO NA 1.28b Europe
August Canadian Imperial Bank of Commerce (CIBC) HP ITO NA NA North America
August Cambridge City Council Serco ITO NA NA North America
August National Australia Bank Accenture BPO NA NA Australia
August OneSteel CSC ITO 37 2 Australia
July AEGON EDS ITO 5 NA Europe
July EMC Unisys ITO NA NA
June REAAL Insurance Unisys ITO NA NA Europe
June East Jefferson General Hospital Phoenix Health Systems ITO NA NA North America
June AIG Technologies Unisys ITO 3 NA North America
June AMP CSC ITO 4 146
June City of Riverside ACS ITO 1 5.52 North America
June AIG Technologies Unisys ITO NA NA
June Barclays Xansa ITO 5 140
June AmeriHealth Mercy/Keystone ACS BPO NA NA North America
May Jetstar Airways Navitaire BPO NA NA
May BAE Systems CSC ITO 5 1.9b
April PepsiAmericas ACS BPO 3 5 North America
March Iron Mountain Symphony Services ITO NA NA North America
March U.S. Navy EDS ITO NA 3b North America
March Schroders CSC ITO NA 235 Europe
January OP Bank Group TietoEnator ITO NA NA Europe
January Aetna ACS BPO 3.5 56
January Thames Water Xansa BPO 2 (approx.) NA
by Imrana Khan
After a series of failures in older outsourcing contracts like the IBM-JP Morgan and Sears-CSC in 2004–05, coupled with consistent rise of the offshore firms from India, many market observers predicted in the beginning of 2006 that it was only a matter of time before the traditional large North American service providers give way to the new offshore service providers and specialized firms. What added to the fears — or expectations — depending on which camp you are in, is the announcement of outsourcing advisory firm, TPI, that as much as $100 billion of outsourcing contracts due for renewal between 2006 and 2007, and the incumbent vendors could well lose their market share.
And they are losing their market share, strictly speaking. However, as 2006 has proved, they are not going anywhere. If anything, they have consolidated their position a little more in last year. So, while still losing a bit of market share to the rising offshore vendors, firms like Accenture, CSC, ACS and an almost-written-off EDS have managed to renew many of their older contracts in 2006, putting to rest speculations that the contact cancellations trend would continue through 2006.
Extensions Galore
The year 2006 saw probably more contract renewals and extensions in recent years. Some of the large renewed deals were GM-EDS deal (part of a multisourcing deal); 7 Eleven-Excellerate HRO contract; BAE-CSC IT contract; PepsiAmerica-ACS BPO contract; Aetna-ACS BPO contract; InBev-Logica IT contract; Barclays-Siemens BPO contract; DirecTV-HP ITO contract; NAB-Accenture FAO contract; CIBC-HP IT contract and T-Mobile-T-Systems contract.
While not many analysts were right about the fate of deals, where they got bang on, was the size of deals: Larger deals of over $500 million were limited in number, thanks to the comfort level that organizations today have with multisourcing and more sophisticated instruments to control those deals.
It was not surprising, hence that most of the renewed contracts were in the range of $50–$200 million. Some of the contracts that were in this range include the Atena-ACS deal ($56 million), Barclays-Xansa ($140 million), AMP-CSC ($146 million), The Whitebread Group-CSC ($48 million), Laurentian Bank of Canada-CGI Group ($100 million), and so on.
The terms of maximum deals were extended in the last months of the year. For instance, the deals like, Eastman Kodak Company-Nortel, Lloyds TSB-First Data International, MERSCORP-EDS, Advanta Bank-First Data International, U.S. Postal Service-HP, Dansk Supermarket-IBM, Ann Taylor-Convergys, Mutual Concept Computer Group-Nexolink, Farm Credit Canada-IBM, 7-Eleven-ExcellerateHRO, CI Financial Income Fund-RBC Dexia Investor Services, Fonterra Co-operative-EDS, U.S. Health and Human Services Department-Thomson Medstat, Duro Textiles-OneNeck IT Services, First Federal-First Data, BT-Capita and Ford-TechTeam.
Winners and Losers
For CSC, EDS and ACS, 2006 was proved immensely favorable. CSC inked several ITO contracts extensions, including the renewal of deals with Airbus North America Engineering, The Whitbread Group, Powercor-CitiPower, OneSteel, AMP, BAE Systems and Schroders. In the same time period, EDS renewed deals with customers like GM, MERSCORP, Fonterra Co-operative, Visanet, AEGON and U.S. Navy. ACS also inked many ITO and BPO agreements with European and American customers such as Aetna, PepsiAmericas, City of Riverside, First Horizon Home Loan Corporation and AmeriHealth Mercy/Keystone.
And of course, IBM also signed many renewal agreements, such as those with Dansk Supermarked, Farm Credit Canada, Symcor and UPM.
What It Means
In all aspects of outsourcing, 2006 was a year of action with lessened hype and more mature approach to outsourcing. Gone were the political rhetoric that marked 2004; gone was the fear that outsourcing, after all, may be losing out in 2005. In fact, like the single-most important thing that 2006 gave rise to —multisourcing — 2006 showed most definitely that you do not necessarily have to spend most of your time and energy in figuring out the next big thing. You should be comfortable with many ideas; many vendors; many models.
The offshore firms learned a lot to get a bigger slice; the incumbents learned new realities and put them into practice. The result was a much more mature option for the customers. Some of the renewed deals have taken into account new market realities. For the customer, it is best of both worlds.
Renewed Contracts in 2006
Month Customer Service Provider Engagement Period
(in years) Value $
(in million) Region
December Eastman Kodak Company Nortel ITO 3 NA North America
December Lloyds TSB First Data International BPO 7 NA Europe
December MERSCORP EDS BPO NA NA North America
December Advanta Bank First Data International BPO NA NA North America
December U.S. Postal Service HP ITO NA NA North America
December Dansk Supermarked IBM ITO 3 NA Europe
December Ann Taylor Convergys BPO NA NA
December Mutual Concept Computer Group Nexolink ITO NA NA Europe
December Farm Credit Canada IBM ITO 5 36 Europe
December 7-Eleven ExcellerateHRO HRO 5 (approx.) NA North America
December CI Financial Income Fund RBC Dexia Investor Services BPO 5 NA Canada
December Fonterra Co-operative EDS ITO 4 NA
December U.S. Health and Human Services Department Thomson Medstat BPO 3 14.9 North America
December Duro Textiles OneNeck IT Services ITO NA NA North America
December First Federal First Data FAO NA NA North America
December Ford TechTeam ITO 3 NA
November TD Banknorth Metavante BPO NA NA
November Siemens Business Services Barclays BPO 2 NA
November Laurentian Bank of Canada CGI Group 5 100 Canada
October Airbus North America Engineering CSC ITO 6 20 North America
October Symcor IBM ITO 3 26.6 Canada
October Farm Credit Canada ISM Canada ITO 5 32 Canada
October Infocrossing State of Missouri BPO 1 18 North America
October The Whitbread Group CSC ITO NA 48 Europe
October Powercor-CitiPower CSC ITO 5 13 Australia
October UPM IBM ITO NA NA Europe
October Marine One Acceptance ACS ITO 3 NA North America
September First Horizon Home Loan Corporation ACS BPO NA NA North America
September DirectTV HP ITO 7 500
September Perot Systems Owens & Minor ITO 5 NA
September Visanet EDS ITO and BPO 10 209
September T-Mobile T-Systems ITO NA 1.28b Europe
August Canadian Imperial Bank of Commerce (CIBC) HP ITO NA NA North America
August Cambridge City Council Serco ITO NA NA North America
August National Australia Bank Accenture BPO NA NA Australia
August OneSteel CSC ITO 37 2 Australia
July AEGON EDS ITO 5 NA Europe
July EMC Unisys ITO NA NA
June REAAL Insurance Unisys ITO NA NA Europe
June East Jefferson General Hospital Phoenix Health Systems ITO NA NA North America
June AIG Technologies Unisys ITO 3 NA North America
June AMP CSC ITO 4 146
June City of Riverside ACS ITO 1 5.52 North America
June AIG Technologies Unisys ITO NA NA
June Barclays Xansa ITO 5 140
June AmeriHealth Mercy/Keystone ACS BPO NA NA North America
May Jetstar Airways Navitaire BPO NA NA
May BAE Systems CSC ITO 5 1.9b
April PepsiAmericas ACS BPO 3 5 North America
March Iron Mountain Symphony Services ITO NA NA North America
March U.S. Navy EDS ITO NA 3b North America
March Schroders CSC ITO NA 235 Europe
January OP Bank Group TietoEnator ITO NA NA Europe
January Aetna ACS BPO 3.5 56
January Thames Water Xansa BPO 2 (approx.) NA
BPO experience: Looking beyond cost-savings
Offshore outsourcing has become a potent weapon for global companies seeking to improve their financial performance. But many companies have yet to realise the full benefits offshoring can provide – advantages that extend far beyond the cost savings that first attracted their attention. These advantages are at the foundation business process outsourcing( BPO) industry.
BPO companies operate as an extension of clients’ enterprises and run customised end-to-end processes – such as finance and accounting, insurance claims processing, and market and industry analytics – and bring industry-specific knowledge to each engagement.
Today’s outsourcing industry – which is expected to grow by 37% annually between now and 2010 – is much more specialised than just a few years ago, largely due to the deep industry expertise provided by leading BPO companies.
Management consulting firm McKinsey noted this trend in its May 2006 edition of The McKinsey Quarterly, in which consultant Vikash Daga and principal Noshir F. Kakas wrote, “As the offshoring industry matures, some providers are beginning to specialize in service lines in order to cater to new opportunities, from process reengineering to capturing previously unrecoverable revenues.”
Companies that take the initiative to choose outsourcing not only strengthen their bottom line, but also can improve process quality, increase efficiency, enhance customer service, develop compelling new products and services, and increase revenues.
Quality
Offshore BPO not only replicates processes previously carried out internally, but also performs them better by utilising highly trained senior managers and associates with industry-specific expertise.
BPO companies recruit several hundred associates each month – including individuals with industry certification or advanced degrees in travel, healthcare, management, accounting and finance. Associates are matched with assignments based on a highly effective predictive framework and provided with additional training. This approach delivers important value to clients in terms of reduced program-launch times, better allocation of resources and high-quality performance.
Offshore BPO providers also supply risk-management protocols and redundancies that often are cost-prohibitive if a company attempts to replicate them in-house. Acquiring these capabilities through BPO ensures business continuity, data security and regulatory compliance. In many cases, it also increases productivity – sometimes by as much as 60 per cent.
Efficiency
Improvements in productivity, when combined with 24x7 work capabilities, also enhance efficiency. Capitalising on the time difference, clients rely on offshore BPO partners to complete overnight projects – such as market data analysis – which enables in-house staff to keep projects moving according to schedule.
BPO companies operate as an extension of clients’ enterprises and run customised end-to-end processes – such as finance and accounting, insurance claims processing, and market and industry analytics – and bring industry-specific knowledge to each engagement.
Today’s outsourcing industry – which is expected to grow by 37% annually between now and 2010 – is much more specialised than just a few years ago, largely due to the deep industry expertise provided by leading BPO companies.
Management consulting firm McKinsey noted this trend in its May 2006 edition of The McKinsey Quarterly, in which consultant Vikash Daga and principal Noshir F. Kakas wrote, “As the offshoring industry matures, some providers are beginning to specialize in service lines in order to cater to new opportunities, from process reengineering to capturing previously unrecoverable revenues.”
Companies that take the initiative to choose outsourcing not only strengthen their bottom line, but also can improve process quality, increase efficiency, enhance customer service, develop compelling new products and services, and increase revenues.
Quality
Offshore BPO not only replicates processes previously carried out internally, but also performs them better by utilising highly trained senior managers and associates with industry-specific expertise.
BPO companies recruit several hundred associates each month – including individuals with industry certification or advanced degrees in travel, healthcare, management, accounting and finance. Associates are matched with assignments based on a highly effective predictive framework and provided with additional training. This approach delivers important value to clients in terms of reduced program-launch times, better allocation of resources and high-quality performance.
Offshore BPO providers also supply risk-management protocols and redundancies that often are cost-prohibitive if a company attempts to replicate them in-house. Acquiring these capabilities through BPO ensures business continuity, data security and regulatory compliance. In many cases, it also increases productivity – sometimes by as much as 60 per cent.
Efficiency
Improvements in productivity, when combined with 24x7 work capabilities, also enhance efficiency. Capitalising on the time difference, clients rely on offshore BPO partners to complete overnight projects – such as market data analysis – which enables in-house staff to keep projects moving according to schedule.
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