Source: Edn.com

In research results that will likely be of little surprise to semiconductor industry watchers, analysts from market research firm Gartner Inc. have reported that outsourcing is on the rise as specialization becomes more prevalent within the chip industry's operations.

The worldwide semiconductor contract assembly and test services (SATS) market experienced double-digit growth in 2006 as revenue totaled $19.2 billion, a 26.5 percent increase from 2005, according to Gartner. Outsourcing's share rose to 43.5 percent of the total semiconductor packaging market.

"SATS market growth was greater than overall semiconductor growth again in 2006, reflecting the ongoing increased used of outsourcing services resulting from the dynamic expansion in chip scale packages (CSP), flip-chip packages, system-in-package (SiP) and 3-D assembly," Jim Walker, research VP for Gartner's semiconductor manufacturing and design research group, said in a statement.

On a company-by-company basis, Advanced Semiconductor Engineering (ASE) Group remained the number one provider of assembly and test services and became the first SATS provider to exceed $3 billion in a calendar year, Gartner said. ASE held 15.8 percent of the market's share with $3.02 in revenues for 2006.

Second-ranked Amkor Technology grew the fastest among the top three companies, growing more than 30 percent and grabbing $2.72 billion sales and 14.2 percent market share in 2006, while third-ranked Siliconware Precision Industries Co. Ltd. (SPIL) saw $1.7 billion in 2006 revenues, controlling 8.9 percent of the market.

Fourth-ranked STATS ChipPAC Ltd. had $1.6 billion in sales and 8.4 percent market share. Rounding out the top-five SATS providers was United Test and Assembly Center Ltd. (UTAC), which made $638 in revenues and controlled 3.3 percent of the market.

Source: Banktechnews.com

Doing more with less is the mantra for all financial services executives today. Continually improving operational excellence may seem like an impossible goal in a world where the volume of transactions increases exponentially, customer expectations rise daily, regulatory requirements abound, and the margin for error is zero.

Outsourcing has increasingly become a mandatory and highly successful strategy within market-leading banks around the globe. A recent survey of industry executives conducted by Deloitte Research revealed that the majority believe more than 20 percent of the industry's global cost base will have shifted offshore by 2010. The Outsourcing Journal predicts that between 20 to 30 percent of a bank's staff will either be an offshore captive or employed by a third party outsourcer.

Banks have already realized substantial savings from offshoring, from $8 to 12 billion in the last four years, up to 37 percent savings per process outsourced. The ability to reduce costs, increase market agility and improve business focus, response time and speed time to market will be significantly impaired by keeping functions in-house that can be efficiently provided by a third party.

BPO companies now offer a way to bridge the gap between the reality of today and the vision of tomorrow for financial services: a way to achieve the cost and quality advantages of strategic global outsourcing without the risks of losing control of the operation and without the investment costs of setting up their own offshore centers.

Achieving cost savings from wage differentials and tax incentives of 45-55 percent is just the beginning of a successful outsourcing relationship. Productivity and consolidation gains from a less expensive but very skilled workforce increase the value derived from the outsourced services. Finally, re-engineering processes can further increase the savings to a total of 60-70 percent less than the initial costs.

Perhaps the most significant benefit from global outsourcing is an intangible: once the headaches of routine, high volume transactions are moved out of the bank's offices, management and staff can devote their energies and resources to the tasks of realizing business goals and building competitive advantage.

However, outsourcing and offshoring can be a daunting prospect to many managers, especially those in mid-size banks which lack the resources to follow in the larger banks' footsteps and set up their own captive operations offshore. Potential drawbacks include increased concerns of risk around security and privacy; losing control over their businesses during the outsourcing process given that this could have a serious impact on their reputation and competitive position; and accountability for that outsourced function, even if a contractor fails to comply.

Banks should create an enterprise strategy for outsourcing rather than the more traditional functional approach run by functional or business unit leads. The resulting master plan will help the bank evaluate which processes could be outsourced and which ones could or should go offshore in logical groups sequenced to maximize value as well as prepare for the challenges of managing a bank in 2010 and beyond.

Processes that are easiest to outsource are those that are labor intensive, well defined, have few possible outcomes, are standardized with clear rules, and stand alone with minimal linkages to other processes. The mapping process is an integral part of successful outsourcing. Analyzing each step of the process and determining the most efficient way to execute it on the front end will ensure that the outsource map will be most effective. The BPO partner should clearly define the steps, which involves identifying the selected services migration phases and ranking them in order.

To ensure that outsourcing remains a source of competitive advantage, not a risk to business, banks must be proactive in creating a risk-aware culture and implementing a risk-management architecture that integrates risks of all types across the enterprise. A successful risk management program must have a long-term planning horizon, yet be structured carefully to yield concrete value in the near term.

Source: Hindustantimes

About 400 Indians are at work off the expressway that connects Noida with Greater Noida near Delhi, to make next generation Boeing aircraft get faster on to runways.

That might seem like an exaggeration, when you learn that all they are doing is to reduce the cost and assure the timely delivery of the nuts and bolts that would go into the new Boeing jets. There hangs the tale of procurement outsourcing. This is one of the newer stories in the larger theme of business process outsourcing (BPO). The simple fact is that virtually anything that can be done by using a combination of skilled workers, telecommunication links and involves high costs can now be offshored to India. Companies like Corbus LLC, based in Dayton, Ohio and founded by former Delhi College of Engineering student Raj Soin, are trying to unlock value for Fortune 500 giants by trying to manage complex tasks involving dealing with a global network of suppliers.

Corbus has a $100 million 10-year contract from General Electric Co (GE) to manage supplies for customers like Boeing for which GE makes aircraft engines. Increasingly, giants source as much supplies as possible from the best and the cheapest wherever they are on the earth—and procurement is a complex puzzle in the game. An offshore-based procurement outsourcing company promises to cut costs by as much as 20 per cent a year.

Business-to-business (B2B) was a favourite theme in the late 1990s but often, the headaches to be resolved lie in coordination and delivery, with an eye for detail on specifications, schedule and efficiency. In the twenty-first century version, procurement outsourcing involves a nitty-gritty management service done from a corner of the globe, very much resembling the supply of components it coordinates.

Players in the procurement service game include giants like Accenture and IBM, and have been joined by Gurgaon-based Genpact, which was spun off from GE’s own international services arm that ran call centres, and also Scandent Solutions in Bangalore. Unlike call centres, procurement outsourcing involves management and often, engineering skills.

Engineering companies like GE spends 60 per cent of direct spending on parts like nuts, bolts and other small items that cost under $1,500 per unit, supplied by various manufacturers dotted across the globe.

For an outsourcing partner to make sense, it must achieve what is called the “QCDC” formula—covering quality, cost, delivery and compliance. Indirect spending can be as much as $100 million per year in a company with annual revenues of $1 billion, says Mittal. Earlier this year, the National Association of Software and Service Companies (Nasscom) said that offshore services were expected to boom, driven by offshoring of “large white spaces in major industries.” Procurement is one of them. Telecommunication and automobile sectors are among those that offer strong promise in procurement outsourcing.

Nasscom says the current size of the global BPO industry is about $14 billion (India accounts for nearly half of it) but the addressable offshore market that could slowly be ripped off from its origins in advanced markets to low-cost countries like India estimated to be as high as $120-150 billion a year.

If the business grows, demand would grow for engineers, certified purchase managers and other agents whose skills are qualitatively different from the smooth-talking, fake-accented post-teen women who started the BPO revolution about a decade ago.

Source: Zdnet

The BBC's £1.5bn IT outsourcing deal with Siemens Business Services has come under fire from MPs for over-estimating cost savings and for key projects running late and over budget.

The BBC signed the 10-year deal with Siemens Business Services (SBS) in 2004 to replace the services previously supplied by BBC Technology, which include desktop computers, specialist technology projects and support for programme production and broadcast functions. SBS acquired BBC Technology for an undisclosed sum as part of the deal.

When BBC managers sought approval for the SBS deal they told BBC governors that cost savings were guaranteed at £35.2m a year. In a report by parliamentary spending watchdog the Public Accounts Committee (PAC), it has now emerged the savings for the first year fell 38 percent short of that figure at just £22m.

The deal does not allow the BBC a share of SBS's profits on the contract if they exceed a specified level — a clause that is now standard in many outsourcing contracts today. SBS's forecast profit margins for the contract are 12.25 percent for commodity work and 23 percent for special projects.

The BBC has also been criticised for not exercising its rights of open-book access to check how profitable the contract is for SBS. The BBC argues that benchmarking provisions keep the contract competitive, but these do not apply to one-third of the services provided by SBS. The BBC is now due to examine the SBS profits on the deal this year.

Performance management by the BBC also comes under fire from MPs in the PAC report. In the first year of the contract, SBS reported 95 percent of key service targets were met, but the BBC has now acknowledged that the validation of performance data provided by SBS was not sufficiently robust.

Despite the £1.5bn framework agreement, substantial amounts of money are still being spent on other IT suppliers for services. In the financial year 2005/06, £190m was spent by the BBC through the SBS contract, but a further £260m was spent on technology services from other suppliers. Around £50m of this was spent by BBC units procuring their own technology services that could have been bought through the SBS contract.

The BBC claims the contract will still hit the projected cost savings target over 10 years and is now forecasting average savings of £40m a year for the rest of the contract.

The PAC report, however, expresses doubt over whether this will be achieved and recommends a BBC internal audit to confirm the accuracy of the latest savings estimate and regular updates to the BBC Trust on progress against that target.

Source: Business-standard.com

Person-to-person outsourcing gains currency with small offices and individuals. You have heard about BPO & KPO, but it’s time now to add a new word to your vocabulary: PPO.

Coined by Alok Aggarwal, chairman of Evalueserve Inc, PPO means person-to-person outsourcing. The US-based Aggarwal, who is the co-founder of the global research and analytics services firm, says offshoring is now beginning to go mainstream and is touching the upper class and working class alike. “This is very reminiscent of 1991-92 when manufacturing in China and other low-wage countries began to impact the lives of the rich and the not-so-rich in developed countries,” he says.

Here’s how: small offices, home businesses and even individuals are utilizing PPO services everyday through various means such as online tutoring and home & landscape design services. Even invitation cards for weddings and other parties, personal assistant secretarial services like scheduling appointments and maintaining calendars are now being outsourced.

Many of these professionals work from their homes with a broadband connection and given the low overhead, vendors and freelancers can charge fairly low rates.

A few companies, such as Future Net (a subsidiary of the Alaphuza, India-based Future Groups) are also experimenting with providing ancillary and concierge services from low-wage countries. In their model, the end-client registers on their website and agrees on a price. Future Net then provides property deals for customers or for their family members and friends. Other services would include payments made to utility service agencies, educational or other institutions; and purchase of simple items such as movie tickets, personal computers, and electronics equipment.

Apart from online tutoring, for instance, companies such as Transtutors, Career Launcher, Educomp Datamatics, and Tutor Vista also offer one-on-one “live” homework assistance over the web and provide essay-writing guidance and help with educational content. Most Indian tutors charge between $8 and $40 per hour — a pittance by US standards.

Individual contracts are often of low value – between $100 and $5,000 – but since the number of end consumers and small businesses is enormous, the total addressable market in the US alone easily exceeds $20 billion. Evalueserve’s research and analysis shows that between April 2006 and March 2007, the revenue from this sector was more than $250 million and it is likely to grow to over $2 billion by 2015 — a cumulative annual growth rate of around 26 per cent. The growth rate, is likely to be much more in the future as many of these PPO offshoring trends are at the beginning of their lifecycles.

According to Evalueserve, PPO services follow two business models: the direct interaction model where the individual client signs a contract directly with a vendor in a low-wage country, whose employees (tutors, admin etc) work on a full-time or a part-time basis, or as sub-contractors. Since these contracts are of low monetary value, the individual client cannot usually travel to the offshore location or perform a costly due-diligence process, and is therefore exposed to some risk.

The second is the online marketplace model where the vendors providing PPO services enrol in an online marketplace by paying a monthly subscription fee plus a fixed percentage of the revenue if they win the project through this marketplace. So, when an individual client posts requirements for a new project to be conducted on the online marketplace, the marketplace communicates these opportunities to the selected vendors and freelancers and requests proposals to be delivered to the client. The client then awards the work to the appropriate vendor depending on price (which may be on a per hour or a fixed cost basis), delivery time and a quality score provided by other clients who have been served by this vendor.

Some of the prominent online marketplaces are Guru.com (the largest marketplace with more than 625,000 registered vendors and freelance professionals), California-based Elance.com, Florida-based RentACoder.com and GetAFreeelancer.com, owned by Sweden-based Innovateit.

PPO is indeed a silent revolution and one that goes beyond just a few big companies. It’s difficult therefore to doubt Aggarwal when he says PPO signifies how outsourcing is slowly, but steadily, becoming a people’s project by reaching small businesses and homes directly.

Source: Rediff

The ethical guidelines proposed by three US bar associations for their attorneys will not have any adverse impact on the legal outsourcing services industry in India.

In fact, the opinions delivered by the associations legitimise the outsourcing of legal services to other countries and will lead to the market in India getting larger, according to Ram Vasudevan, president of SQ Global Solutions.

New York-based SQ Global Solutions is a joint venture between Strategic Legal Solutions, a 12-year-old US domestic legal staffing company and Quislex, a provider of offshore legal services in India. The company employs around 300 professionals, of which about 150 work out of India.

It may be recalled that three US bar associations -- New York, California and Los Angeles -- had in 2006 and early 2007 delivered opinions stating that offshoring of legal support work by lawyers in the US to other countries was ethical provided certain conditions are met.

"The guidelines state that US lawyers who are contemplating outsourcing legal services to other countries should inform their client that the work is being outsourced, besides protecting the client's confidences. The US law firm should also be closely involved in the supervision of the outsourced work. In addition, the entity performing the work must perform conflict checks to avoid any unpleasant surprises," said Vasudevan.

"Companies in India directly deal with the legal departments of US corporations and law firms for outsourcing work to avoid any issues of unauthorised practice and usually have several quality control metrics in place," he said. For instance, SQ follows the Six Sigma process.

At present, there are around 15 companies in India that provide legal outsourcing services, with the prominent among them being SQ Global Solutions, Pangea and Mindcrest.

Though not mandatory, many US law firms and attorneys have been adopting the ethical guidelines and client demand too has been picking up.

This is expected to accelerate the growth of the legal outsourcing services industry in India in the years to come. The Indian legal outsourcing industry is currently pegged at $130 million, and is expected to touch the $4-billion mark by 2015, according to Forrester Research, he added.

Currently, there are around 1,000 such professionals, both lawyers and non-lawyers, delivering high-end legal outsourcing services in India.

Source: Themanufacturer.com

The worldwide market for Offshore Product Design Services (PDS) is expected to grow at a compounded annual growth rate (CAGR) of 28.0% over the next five years. According to a new ARC Advisory Group study, “Offshore Product Design Services Worldwide Outlook”, the market was $1.2 billion in 2006 and is forecasted to be over $4.1 billion in 2011.

According to ARC Advisory Group Service Director Steve Banker, Ph.D., “When you have forecasted growth of over 25% for a market that is already larger than a billion dollars, you are looking at an extraordinary market. One explanation for this is the power of the Global Service Delivery business model.”

Global Service Delivery Model

Global Service Delivery (GSD) is the practice of outsourcing work to low cost regions. Labor for a particular client task is divided between service people located in the client’s office or a nearby office (nearshore), and a low cost offshore facility. A typical ratio in PDS is 80% offshore to 20% onshore.

The GSD model has proven itself across areas such as custom software development, IT infrastructure support, call center services (and other similar business process outsourcing [BPO] services), application implementations, and now PDS. The value proposition is simple; knowledge workers from low cost regions are paid about 25% of the level of their counterparts in the West. The Internet infrastructure and mature business models among leading offshore IT companies support the GSD model.

The Flat World Comes to Engineering Services

The top five suppliers of offshore PDS are large Indian IT companies that provide a broad range of BPO and IT services. Each has revenues of over $100 million in the offshore PDS market, and cumulatively these four suppliers account for more than 60% of the market.

Each of the market leaders has strong market recognition as a company that has perfected the offshore model. Each has developed strong processes and systems to manage offshore projects across their diverse service areas and each has extremely robust processes for hiring new personnel and training them.

All of these companies are challenged by their extremely high growth rates, which for some of them means hiring and training tens of thousands of new employees per year, high attrition (though it is typically much lower in PDS than in other service areas), and growing wage pressures which lead to a gradually decreasing labor arbitrage value proposition.

There is considerable work surrounding 3D to 2D conversions, using Product Data Management systems to create documentation, and design of simpler components. To the extent that service providers can engage in more complex forms of engineering, they improve their ability to help clients speed their products to market.

Source: Oobp.org

Outsourcing a part or complete IT department frees up a company's valued IT personnel so they can support their mission critical business processes. In addition many companies today are finding that they cannot take the risk or endure the financial burden of running their whole IT department in-house.

Outsourcing a part or complete IT department can make financial and business sense to companies of all sizes. In many organisations, users demand the highest level of service - both from a technical and a customer care perspective. This can be challenging for smaller in-house teams to achieve as they are often so busy tackling the day-to-day issues, making it difficult to implement any IT improvements.

Outsourcing IT department – What are the drivers?

Growing pains: - Is your company growing so rapidly or making acquisitions? What impact is this growth on your IT staff and resources? Outsourcing either a part or the whole of your IT department is now an accepted mainstream solution.

Downsizing: Is your organisation downsizing? What are the impacts of this on your IT service delivery? IT department outsourcing is an option worth evaluating to save costs and improve efficiencies.

Infrastructure refresh: Are you coming to the end of your IT systems lifecycle? (Servers, laptops, PCs). This is usually a 3 year cycle. This event is the right time to consider the options of IT department outsourcing.

Outsourcing a part or complete IT department may provide the following benefits:

# Quick deployment
# Flexibility in the choice of technology and modules
# Improvement of cash flow management
# Reduce the burden on internal IT staff
# Efficient use of internal resources
# Strong skills sets at lower costs - access to a mix of technicians with unique skills
# Better risk management, especially those risks associated with unscheduled downtime due to major disruptions.
# Avoids expensive recruitment

Risks & Costs of IT Department Outsourcing

IT department outsourcing can expose the company with associated risks that potentially have a higher costs than benefits for the company. Some of those associated risks could be:

# Loss of control over service quality
# Possibility of service disruption due to instability of vendors

Outsourcing IT services to a third party potentially puts a company’s reputation at risk - if suppliers or partners let it down. Organisations in both public and private sectors need a process of regular assurance from their external partners.

With a rigorous system in place, businesses can manage their external relationships and reputation more effectively, while allowing legal and working arrangements to be adjusted as the partnership evolves.

Source: Outsourcing-pharma

A number of outsourcing misconceptions are luring companies into viewing offshoring as an easy process, new research reveals.

The outsourcing market is booming and more and more companies are relying on external firms to save on costs and improve efficiency.

Indeed, outsourced pharmaceutical R&D spending is set to increase at twice the expected rate of general R&D expenditure for the next five years, according to recent data, and in particular outsourcing clinical trials is seen by many pharma companies as a means to make the process cheaper, quicker and more efficient.

However, companies that think transferring an operation to an overseas provider is a trouble-free, straightforward task can get a rude awakening, warns new research , and companies often find that their high hopes about cost savings and greater efficiency don't pan out.

The study based on an industry survey found seven common myths that outsourcing vendors and clients cling to about offshore outsourcing - false assumptions about how the process should work - and gave some advice on how to overcome them.

The first common myth is the idea that the three main objectives of outsourcing a development stage - cost reductions, improvement in service, and flexibility - can be achieved at the same time.

"The kind of skills you need to achieve cost reductions, production flexibility or enhancement, are usually different. Even when you offshore, where in principle you can get low cost and quality, it is better to begin with just one objective." , Phanish Puranam, one of the researchers, told the WSJ.

The second most common myth was to see outsourcing services as simple as buying commodities, such as stationery.

In reality, the process does involve significant transaction costs, starting with finding a vendor and negotiating a contract, and followed by the costs of moving operations from one location to another while maintaining the connection with the rest of the company.

A third false assumption, according to the survey, was relating to negotiation of the contract. The outsourcing process should not be seen as a one-off deal, but instead as a relationship that keeps evolving and needs constant updating. The researchers found that writing a highly complex contract, trying to include clauses covering all possible situations, usually proves to be a waste of time.

On the other hand, there is another mistaken belief that a company does not need a contract because the deal with the vendor is seen as a partnership rather than a simple procurement relationship.

Furthermore, the number five on the list of common misconceptions that clients and services providers accept as true is to view the vendor as an insurance company who should bear greater liability in case of problem.

"The sharing of risk between client and vendor is one of the most contentious issues in outsourcing, leading to acrimonious negotiations and poor relationships," said the research.

Moreover, the survey found that sometimes companies think once they have outsourced an operation, they can just forget about it and rely completely on the service provider. The researchers explained that it was crucial for the client firm to retain the knowledge of the process outsourced to avoid difficulties down the road.

Finally, the seventh most common myth in outsourcing is to think that the first attempt will automatically be a success and relinquish at the first failure.

"Very few companies report great success with their very first outsourcing project but that doesn't mean they should give up," the researchers said.

Source: Crn.com

At a recent government event in Washington, D.C., the president of Panasonic Computer Solutions made a big statement: "All our competitors moved engineering and manufacturing to third-party partners." More specifically, he mentioned locations like Taiwan and other countries in Asia.

Why is that a big statement? Beyond the fact that he made a sweeping generalization that some of those competitors might take exception to, the significance of that statement by Panasonic's Rance Poehler lies in the fact that, in a considerable number of cases at least, it's exactly true. And for government customers and the solution providers that sell to them, that's something to seriously consider when making purchasing and partnering decisions.

Two reasons exist for why this trend is happening. The first is simple cost-cutting. Manufacturers can save a lot of money by relying on original design manufacturers, or ODMs, that can make their products for much less, thanks to cheap skilled labor. This is nothing new, of course. The second reason for the trend that's more specific to the federal market is the need to comply with the Trade Agreement Act (TAA). Vendors based in countries that aren't authorized to sell to the U.S. government have to find an alternative, which often leads them to the very same ODMs that others rely on to cut costs.

But with manufacturers removed from the process, issues can arise. Beyond quality concerns, duplicate products are made and sold to the gray market or, worse yet, originals are reverse-engineered for the purpose of counterfeiting them across Asia. The experience of American Data & Computer Products is a perfect example.

Original equipment manufacturers (OEMs) aren't intentionally turning around counterfeit goods when they filter manufacturing to Asia. They don't want to see fakes any more than the government does. But the strategy opens the door for that to happen, which introduces the very risk many of these OEMs were trying to avoid in the first place: violation of the TAA.

Plenty of people lump this issue together with the politics of offshoring, arguing that vendors cause the problems when they decide to manufacture outside U.S. borders. Outsourcing serves a very real purpose, and, frankly, it's inevitable in a global economy.

Obviously, in a market that depends more on the channel than most any other, partnering is an essential way to keep everyone in business and meet customer demands. But the decision to partner for the actual engineering and manufacturing of products that could land in the hands of federal customers carries with it a degree of irresponsibility. Offshore to save costs and enable TAA compliance, yes, but not at the risk of sacrificing control over processes, intellectual property and, subsequently, security. Simply put, those that deal in government contracting have to be more responsible.

So what exactly are the alternatives? Vendors have to hold offshore locations to the same standards as the government headquarters, which is difficult to do if they're not in complete control of how things are run.

Or maybe they should handle the manufacturing of products for federal customers differently than they handle it for the commercial sector. That's perhaps an expensive option, but it's one that would alleviate some of the risk. Another alternative for vendors is to follow Panasonic's lead, avoiding these issues altogether by keeping product design, engineering and manufacturing in-house.

Offshore Outsourcing is so often stated responsible for the gloomy job market in the United States. Is outsourcing the sole reason for the job losses? Here is an objective look at the matter.

Every time a new, more advanced technology is introduced into any industry; there is always some form of retraining, reduction in scope, or redundancy. Why then has offshore outsourcing created so much uproar? Probably because of the scale and speed of change!

Comparative advantage! Yes, that what fuels offshore outsourcing. A benefit in cost, skill or speed provided by a country in comparison to other countries draws business from the United States and other western nations. In the 1980’s this transition began with the manufacturing industry, who in order to save labor costs continued to do their design, development and marketing work on their own while outsourcing their manufacturing operations. The same trend is being mirrored by the service industry. To stay in the competition and to stay afloat, downsizing/ laying off, cost cutting, investment in new technologies, process reengineering and outsourcing become necessary. In fact, these are the factors that drive outsourcing. Why then is outsourcing considered the prime culprit for the job losses?

More than outsourcing, it is productivity that is responsible for the current situation. The rising productivity in the US means a growing number of jobs which are to be accomplished by a fewer number of men. Labor costs are falling but capital costs are falling faster, and that makes it more advantageous to invest rather than to hire. The cost savings are invested in innovations or building a competitive edge. And, the fact that is not so often cited is that the United States imports far more jobs than it exports and has the best re-employment rate in the world.

Also, what is lacking today to cause this furor over outsourcing is probably the fact that in the current productivity boom there are no new and innovative industries that create jobs to replace those that are lost, like the car manufacturing industry in the 1920s, commercial aviation in the 1950s and 1960s and information technology in the 1990s. Currently, we are all waiting for the next big thing to happen, be it healthcare, pharma, biotech, energy — all of which can make a big impact.

Hence, the negative connotations of outsourcing will not really help in increasing the number of jobs in the US but they will definitely limit and restrict productivity. Moreover, there’s very little to show that outsourcing does in fact cause job loss in the US. On the contrary, a Boston University Professor examined the effect of outsourcing on large financial firms, and found that less than 20 per cent of workers affected by outsourcing lose their jobs; the rest are repositioned within the firms.

In the present scenario, sectors such as construction and health care are positioned to exploit the benefits of outsourcing to the fullest. The result will be a decrease in their cost of production, and improvement in quality and output.

Source: Ohio.com

Offshore firms aiming to offer work that isn't just cheaper, but better

Businessmen's collective memory doesn't go that far back. When chief executives decide to move jobs to India, they draw intellectual sustenance from something more recent. When you apply the model of core competence to business processes, outsourcing is all about companies parceling out activities that they aren't best equipped to undertake.

If you sell computers, you shouldn't run your own help desk. If you are an airline, you mustn't waste your time juggling cash collected in different currencies. No company needs to tie up resources in managing accounts receivable, or preparing payroll, in-house.

You can buy all these services from third parties, which will either automate them or manage them with cheaper staff in India, Latin America or eastern Europe.

This offloading of noncore work to specialists has been the main driver for the business-process outsourcing industry, projected to grow 10 percent a year to $618 billion by 2010.

As these services add depth to their own organizations by hiring engineers, doctors and statisticians, they are now able to do things that a client company has always considered to be integral to its main business.

Nipuna Services Ltd., a Hyderabad, India, business-process outsourcing company, manages the shop-floor inventory for an automaker in Detroit, creates graphics for an animation studio in the United Kingdom and handles artwork changes on labels and cartons of GlaxoSmithKline Plc medicines to satisfy regulators in various countries.

Most economists believe that outsourcing is only about getting things done ``cheaper.'' They think it is transient and self-adjusting: A rise in the inflation-adjusted exchange rate of the exporting nation will make its cost advantage disappear; the same relative-price mechanism will also increase developed-country exports to places such as India and China. New jobs will be created to replace the ones that are being lost.

What this argument misses is that the third-party services that are winning ownership of business processes will move them from one developing country to another. Profits will be repatriated to developed-nation companies by the truckload. But the jobs won't go back. Not for a long time.

If outsourcing becomes as widespread in services as it already is in manufacturing, Western economies may still grow strongly, thanks to surging corporate profits. However, the falling share of wages in economies across the developed world will keep offshoring a hot issue for decades to come.

Source: News.independent.co.uk

The issue of poor service does seem a real deal-breaker

The preliminaries to the US presidential election took a bizarre turn last week when a leaked document from the Barack Obama camp referred to Hillary Clinton as the "Democratic Senator for the Punjab". This clumsy jibe at a rival Democrat candidate, immediately retracted, was a reference to Mrs Clinton's supposed close connections to US corporations which have outsourced jobs. This subject, in particular offshore call centres, is in danger of becoming a hot potato in the election. But the politicians need not worry, for there is every sign that what was once believed to be an unstoppable trend is losing momentum.

The conceptual thinking behind BPO (business process outsourcing) is simple: companies stick to what they do best and spend their dollars on human capital in the most efficient way. Back-office outsourcing began in the US in the 1960s (payroll processing etc) and gathered pace along with the rapid advances in IT. The last decade's revolution in telesales and customer support propelled BPO into a new dimension.

A casual glance at any selection of Dow Jones annual reports will tell you that at least some outsourcing is virtually universal. In India, it is thought that call centres alone now employ in excess of a million people (compared to just 300,000 at the start of this decade) and pro- viders have sprung up in all elements of the BPO spectrum - from the lowest level of data processing, to functions that require customer interaction, to the transfer of intellectual capital.

Prices range from an estimated $10-$12 (£5-£6) per hour outsourced at the bottom, to around $14 for call services and much more at the top end. Workers in call centres see a much-reduced portion of this - albeit general opinion is that working conditions far exceed the local manufacturing equivalent.

At the sophisticated end, there have been many reports of New York investment banks outsourcing research functions to the highly educated and relatively poorly paid labour force of southern Asia. Similarly, in a recent report, McKinsey estimated that large US pharmaceutical groups were reducing the cost of new drug development (estimated at between $600m and $900m) by as much as $200m through outsourcing. Even at the bottom end, data-processing outsourcing at US retail banks is thought to save at least $18m in costs per 1,000 jobs transferred.

It is this angle, US job losses, that makes BPO such a political issue. The Communication Workers of America union has been particularly active and sought to influence the policies of individual states. At the start of this year, politicians in Minnesota pushed for legislation to give customers an automatic right to request an alternative, American, call centre, if they were dealing with personal or financial information.

The CWA's campaign has cleverly focused as much on the customer as the displaced worker. Three issues are cited: a generally poor level of customer service, data fraud and, this being modern America, terrorist risks.

Source: Asiamedia

Is there anything out there that can't be outsourced to a cheaper part of the world? Probably, but reporting on city council meetings for the local news "paper" is not one of them. Online community news site Pasadena Now (http://www.pasadenanow.com), in California, found this out last month when it hired two reporters in India to cover the weekly council meeting.

The only problem is, the response to the decision was so heated that the editor has been too busy fielding media enquiries to train the new staff. There was a mixed reaction to the story, with the predictable backlash but also comments that it's something people better get used to.

The thinking behind the move was that the time difference allowed for the Indian reporters to sit through the evening council meeting and write up a report in time for Pasadena Now's readers first thing in the morning. As these meetings could drag on well into the night, it made sense. And needless to say the Indian writers would be a lot cheaper than having a US journalist sit through the meeting and then stay up another hour or so to write it up.

Many people questioned whether the quality of reporting would suffer if the writer was not physically present, suggesting they would not get reactions or comments from other sources. Perhaps, but it's still valuable to get a record of the proceedings for an early morning news piece, which can then be updated throughout the day by the local reporters who can "add value" to the story.

It's also not such a novel idea, either -- Reuters has been using Indian reporters to do some of the "grunt" reporting for a few years now, while headlines and copy editing for the South China Morning Post gets done by cheaper editors right here in the same building that produces the Bangkok Post.

The press pack, the security risk that we are, was shunted off into a special media room where they had a couple of large screens set up to relay what was happening in the main hall. The strange thing was that it was more convenient to sit and take notes this way -- coffee supply on tap, fellow journalists to chat with without annoying the delegates and easy access to the exit once you had the story.

Increasingly these days there are a lot of major events, particularly technology pow-wows, that are streamed live over the web. So if you were a budding reporter, blogger or Indian looking for overseas work, you could start to tune in and make a name for yourself by churning out reports quicker and better than everyone else. A young guy by the name of Charles Dickens made his name by being able to attend court hearings and churning out a story quickly and accurately, and who knows, if he was around today he might do the same from webcasts to get his start.

Source: Maltastar.com

HSBC Bank Malta might be relocating a number of jobs, which had always been carried by Maltese workers since the time when the bank was state-owned, to cheaper markets such as India – where workers are paid less, maltastar.com is informed.

Investigations by this e-newspaper found that HSBC UK started outsourcing particular jobs to countries where the workers are paid less to maximise the banks profits. This practice might now shift to Malta’s HSBC arm.

The HSBC jobs touted to start being carried out in India are related to accounting and payments, while security at the bank will be outsourced to a Maltese company.

The outsourcing of certain jobs within HSBC Malta will not affect the present workforce at HSBC no staff will be made redundant by virtue of an agreement which the international bank had signed as part of the deal to take over Mid-Med Bank, sources confirmed.

But at the same time, the redeployment exercise in the bank will freeze the intake of new staff for a period of time since the openings will be taken over by the workers who will have their present job outsourced.

The idea behind outsourcing certain jobs to cheaper markets is to maximise profits, particularly when the work is done by workers who are paid less than in our country for every hour of work. At the same time, work outsourced to local companies contributes to an increase in precarious jobs and exploitation of local staff.

HSBC deployed at least one staff member solely for the purpose of identifying the jobs that HSBC Malta can outsource to foreign companies in the coming weeks and months.

Maltese banks have always offered services of high quality and assured a large contribution towards Malta’s economy. But excessive competition and globalisation seem to be taking their toll also in the banking sector.

Source: Computing.co.uk

Research released last week from sector skills body e-Skills UK echoes the common observation that UK IT graduates need more business skills, because lower-level technology jobs that do not require such expertise are being offshored, mostly to India.

But as the global market matures, the Indian IT industry is starting to face some of the same issues as its UK counterpart.

There are already warnings that the subcontinent will face a talent shortfall in its technology workforce by 2010, although Indian IT trade association Nasscom says there is still time to avert a crisis.

Unlike in the UK, where technology degree numbers halved between 2001 and 2005, recruitment is not a problem in India. The country produces more than three million IT graduates a year, and the current workforce stands at 1.6 million.

But as market requirements change, the industry is starting to question whether degree courses are producing the right skills, says Nasscom spokesman Ameet Nivsarkar.

‘The cause for concern is that the three million graduates are not all ready and competent to enter the workforce,’ said Nivsarkar.

Like e-Skills UK, Nasscom is working on initiatives to bring graduate training in line with private sector requirements. One current scheme, for example, aims to create finishing schools that offer three short courses to bridge the gap for graduates between academic learning and the kind of business skills required in the real world.

"The training shortfall is largely in communication and the ability to present oneself before a customer," said Nivsarkar.

Skills issues are part of wider changes in the offshore market. Until now India has been the undisputed leader, generating about $48bn (£24.2bn) in annual IT services exports last year.

One of the biggest threats to India’s dominance is China. Its vast pool of cheap labour is increasingly attractive to suppliers catering for growing demand, including Indian firms such as Wipro and Infosys.

Ironically, the sub-continent’s economic success is also presenting new problems. Indian supplier TCS announced earlier this month that it is moving 5,000 jobs to Mexico because of wage inflation at home.

Global currency fluctuations can have a major impact on the economics of offshoring deals, according to Mark Kobayashi-Hillary, director of the National Outsourcing Association.

"Margins are being eroded as the Indian rupee becomes stronger against the dollar, so hiring elsewhere has become a more attractive proposition," he said.

But there are also changes in the shape of the global outsourcing market that may play out to India’s benefit.

As offshoring becomes a more established practice, the supply market is fragmenting and specialising. Ukraine and Russia, for example, are making major in-roads into the high-end scientific software niche.

Growing specialisation could help India offset the business it has lost to cheaper rivals.

The country is still the dominant player in the business process outsourcing (BPO) sector, which is expected to grow by another 32 per cent to £4.2bn this year. And while better educated staff may be pushing up Indian prices, customers’ selection criteria are also likely to change, says Kobayashi-Hillary.

For Indian firms, the decision to hire staff from abroad reflects their emergence as truly global companies.

"They are no longer just Indian firms. They are deliverers of IT services and need skills from all over the world," said Ovum analyst Phil Codling.

The difficulty for suppliers, regardless of their country of origin, is that requirements can change so quickly.