Source: Crmbuyer.com

Commercial call center service providers are less able to absorb wage increases and currency fluctuations than software firms and remote computer system administration service providers, in part because of the way billing and payment arrangements for call center firms are tied.

Cost increases are squeezing margins for outsourcing Latest News about Outsourcing companies providing software and call center services to U.S. customers from popular international destinations. No immediate price increases for U.S. customers are possible for suppliers that are locked into fixed-term contracts in U.S. dollars, but price changes could be sought in contract renewals, extensions, and in the pricing of new contracts.

Prices for call center and e-mail Email Marketing Software - Free Demo support services provided by facilities in the Philippines, South Asia and the Persian Gulf have remained relatively constant since the end of 2004, as detailed here. That is likely to change for new and renewed contracts because of cost increases for suppliers.

There are three factors behind cost increases for suppliers:

* Currency exchange fluctuations
* Wage increases
* Tax increases

Canadian Dollar Approaches Parity

The Canadian dollar has gained 50 percent in value in the last five years. It is now within striking distance of parity with the U.S. dollar for the first time in over 30 years, reaching just short of the psychologically important benchmark of 95 US cents in trading last week. Wage rates for skilled customer service Get Automated Customer Contact Solutions Powered by West Interactive agents in major cities in Canada are now higher than wages paid in many second- and third-tier U.S. cities for comparable work.

Canadian governments and educational institutions are implementing coordinated educational and labor market policies to help ensure that staff with requisite skills are ready and able to meet expected job requirements, especially in the Maritime Provinces.

Philippine Peso Rises

The Philippine economy is booming. Exports have increased by 13 percent so far this year. Foreign direct investment increased by 26 percent in 2006. Along with economic growth has come a stronger local currency.

The Philippine peso has gained 6.7 percent in value against the U.S. dollar this year. Outsourcing service providers locked into contracts negotiated when the peso was low are now looking for ways to cut costs. Last June the peso traded at more than 53 to the dollar. It now trades at 46.6 pesos to the dollar.

India Rising

In India, the rupee has gained 8.7 percent against the dollar during the first quarter of this year. It now stands just a few paise bits above the psychologically important threshold of 40 rupees to the dollar.

The customer service industry in India has been consolidating for more than two years. The larger players enjoy profit margins of 20-30 percent and will be able to absorb currency fluctuations in the short term. Smaller players generally have profit margins of 10 percent, with lower profits often due to a reliance on telemarketing projects rather than stable inbound work. Indian firms of all sizes will likely push for price adjustments in contract renewals and in price proposals for new contracts.

India is experiencing the most rapid wage increases of any country in the Asia-Pacific region. Wages in India are influenced by regional factors, as InternationalStaff.net found in this salary survey of call center agents in major metropolitan areas.

Kolkata (formerly Calcutta) continues to be the lowest-wage metro area for both call center and technical staff. Rolta India Limited announced on June 6 that it is building an IT park there with 5,000 seats, primarily for the provision of engineering and software development services.

Wage rates in India as a whole are forecast to climb from between 12 percent to almost 16 percent this year, with professional employees and middle managers expected to be at the higher end of that scale. Increases for technical employees are expected to average around 12 percent, or 7 percent after inflation. Overall wage increases topped 14 percent in both 2006 and 2005.

Call Centers Less Able to Absorb Cost Increases

Commercial call center service providers are less able to absorb wage increases and currency fluctuations than software firms and remote computer system administration service providers, in part because of the way billing and payment arrangements for call center firms are tied to labor hours. A company whose business model is based purely on labor arbitrage will be immediately impacted by currency fluctuations and wage increases.

A company that bills on a task basis without defined headcount requirements may be able to grow without adding large numbers of new personnel. A company that bills on a task or project basis can also raise its prices quietly by simply adjusting the formulas used to submit price quotes and bids for new work.

Indian Taxes

India's current national budget includes a minimum alternate tax Free Trials. eCommerce Data Solutions, Tax Rates, Address Verification & more. (MAT) to be applied to Indian IT firms and call centers on revenue from work done for clients outside of India. These firms had enjoyed tax exemptions from standard corporate income tax rates because of their status as export-oriented IT operations. This 10-year period of exemption comes to an end in 2009, when full corporate income tax rates are scheduled to be applied.

The 10-year exemption was established under the Software Technology Parks of India initiative. Some IT firms are lobbying for the government to grant them tax-exempt status after 2009 under India's system of incentives for firms located in special economic zones.

Indian companies that serve both domestic and international customers are already paying corporate income taxes on income from their domestic operations. Companies locked into multi-year contracts with clients outside India will be under pressure to pass those tax increases along to customers.

Source: Eweek.com

What will be the next big offshoring frontier? While the experts don't all have the same locations in mind, they all agree that it will no longer be in India. Salary inflation is largely to blame for the change in course. When the outsourcing boom took off in 2004, the salaries of software engineers were one quarter of what San Francisco-area computer engineers made, making very clear the cost savings of offshoring.

However, it wasn't only salary inflation that has caused many technology firms to pull their labor out of offshore centers; it was the hidden costs they hadn't anticipated such as geographic and time gaps, the need for more U.S. managers to oversee the outsourced relationships and the significant costs associated with pulling out.

Companies that are not pulling out of outsourcing relationships altogether are shifting their offshore office to newer and different regions. A report released by the Aberdeen Group found that while India remains the leading offshore destination for most companies—especially if cost savings are the primary driving force—both Russian and Asian providers are maturing quickly and sustaining double-digit growth by competing on both price and quality.

Wage inflation and higher attrition issues, as well as a rising demand for technology professionals in India are causing enterprise customers to shift from tier 1 to midtier providers, finds the report, and argues that companies that want to stay ahead should take advantage of multiple offshoring locations across the globe, or multisourcing.

In comparing potential offshore delivery centers based on labor, cost of rent, language skills and turnover rate, IDC found in a report that while Indian cities were still highly ranked, Chinese cities were on the rise and closely nipping at India's heels.

Conrad Chang, research manager for IDC's Asia/Pacific BPO Research said that there are different risk factors to consider when evaluating outsourcing, offshoring, onshoring and nearshoring.

"Often times, what differentiates leading cities from the rest is their focus on deal-clinching factors, and the GDI [Global Delivery Index] weighs that more heavily than other factors," Chang said.

Agent skills, political risk, cost of labor and language skills were all factors considered in the IDC report's ranking of three Chinese cities—Dalian, Shanghai and Beijing. These three cities were ranked by IDC as numbers five, six and seven of the top ten locations for global delivery. IDC predicted that Chinese cities could take over Indian ones as early as 2011.

Source: Businesswire

Everest Research Institute Study: Global Buyers Now Looking to Source Skills from Multiple Regions; 77 Percent of FAO Contracts Have Elements of Offshore Delivery

Findings from a new Everest Research Institute study reveal that among all outsourced General and Administrative functions, Finance & Accounting Outsourcing (FAO) has the highest rate of global sourcing adoption, with 77 percent of contracts having elements of offshore delivery. As operating models continue to improve and output quality rises, more global buyers are looking to source a growing number of skills from multiple regions, and suppliers are driving innovation beyond pure labor arbitrage to remain competitive.

“The FAO market, enticed by labor arbitrage-driven savings, launched into a ‘rapid-growth' phase beginning in 2002,” said Katrina Menzigian, Vice President, Everest Research Institute. “Today, the value proposition around offshoring in FAO is evolving in two key areas. First, we are seeing suppliers deliver on the promise of global sourcing by actively pursuing low-cost regions other than India, with Eastern Europe being a focus area. Second, Everest is increasingly seeing the inclusion of judgment-intensive processes, such as analytics and reporting, incorporated into the globally sourced components of FAO deals.”

The study, entitled “Global Sourcing in Finance & Accounting Outsourcing,” reveals that while labor arbitrage and productivity improvements can potentially save buyers between 30 and 40 percent on their direct-costs, these are one-time benefits which typically stagnate as the deal progresses. As such, buyers are seeking contracts with continuous improvement parameters and innovative sourcing models such as a combination of global sourcing, technology enhancements, and process improvements for optimal service delivery and ongoing cost savings.

“Now that buyers are looking beyond a one-time savings impact from labor arbitrage and sourcing their Finance & Accounting processes from a large, well-established pool of suppliers, they need to ensure careful evaluation to identify the solution that is best suited to their needs,” said Saurabh Gupta, Research Director, Everest Research Institute. “At the same time, suppliers need to boost their onshore resource base, invest in technological solutions and processes as well as develop expertise around key market segments in order to remain competitive and to provide incremental value to the buyer year on year.”

The study also recognizes key responsibilities for buyers. To identify a solution that fits their needs in this complex and competitive market, buyers must assess niche providers, delivery locations and global solutions. Buyers also will be responsible for co-driving innovation initiatives, such as engagement structuring and management, throughout the project lifecycle.

About Everest Research Institute

Everest Research Institute (www.everestresearchinstitute.com) serves as a central source of independent and objective strategic intelligence, analysis, and actionable insight for leading corporations, service providers, and investors in the global outsourcing and offshoring marketplace. The Institute addresses both business process and information technology sourcing topics, providing the global outsourcing and offshoring community with information that empowers highly productive, sustainable sourcing strategies and relationships. The Institute’s distinguished Board of Advisors, senior executives and thought leaders oversee the Institute’s research agenda to ensure that it fully supports the business needs of corporations, service providers and investors.

Source: Tekrati.com

While reports continue to cite drops in outsourcing demand growth, EquaTerra's 2Q07 Pulse Survey study shows signs of continued market health. The second quarter study supports EquaTerra research and analysis released earlier in the year, outlining a "reshaping" of the outsourcing market as opposed to a downtrend.

Said Stan Lepeak, EquaTerra’s Managing Director of Research, "The outsourcing market is clearly maturing and growing in new areas, as we’re seeing initiatives of all shapes, flavors and sizes. And while this bodes well for organizations looking to attain the variety of benefits outsourcing can deliver, those who source on a smaller, more distributed basis must safeguard against losing value in the process. Buyers must ensure they leverage their spend and relationships with their providers, appropriately staff their governance processes -- some centrally, some decentrally -- and deploy a comprehensive governance program using the latest techniques and tools."

Signs of continued market health from EquaTerra's 2Q07 Pulse Survey include:

* Global and regional demand: Outsourcing demand was up 50 percent in 2Q07 in the Europe, Middle East, Africa (EMEA) region, and up 37 percent globally, as cited by EquaTerra advisors.

* IT outsourcing: One half of EquaTerra advisors cited IT outsourcing (ITO) as the strongest functional growth area, continuing strong 1Q07 demand trending; demand for ITO in Europe was especially strong during the quarter as demonstrated by the fact that 60 percent of the publicly announced deals of greater than $50 million in total contract value in May and June 2007 were for buyers based in EMEA countries.

* Finance and accounting outsourcing: Another one thirdof EquaTerra advisors cited finance and accounting outsourcing (FAO) as the leading outsourcing demand area; demand is particularly strong in EMEA.

* Public Sector outsourcing: Outsourcing in the public sector is increasing in both North America and Europe, as illustrated by the ~ $20 billion telecommunications outsourcing deal between the U.S. General Services Administration and a Verizon/CSC consortium, and the €1.3 billion+ ITO deal between the Italian Central Government and AlmavivA Group.

* Smaller, "under the radar" deals: The market is experiencing an influx of ~ $1 - $10 million outsourcing engagements, many with clients using a variety of providers; these deals may not be publicly announced, and often remain under the internal radar screen due to their size

Despite the positive market findings, both providers and buyers continue to experience a dearth of talent possessing the skills and experience required to support increasingly complex outsourcing deals. On the service provider side, these talent challenges -- which EquaTerra refers to as "capacity constraints" -- include insufficient experience in sales pursuit, engagement, transition and actual service delivery. Buyers are challenged with a lack of sufficient skills and experience to support transition and ongoing governance requirements. These capacity constraints impact demand growth in some regions and functions, pricing competitiveness, sales cycle, time-to-contract, profitability and satisfaction with the initiative.

Other key findings from EquaTerra’s 2Q07 Pulse Survey include:

* Outsourcing buyers, in general, are more positive about their outsourcing experiences than in past quarters, and are more realistic and sophisticated, especially relative to outsourcing’s ability to deliver innovation and process transformation.

* There is ongoing growth of multi-location global service delivery capabilities.

Source: Iht.com

Indian software company Infosys Technologies Ltd. said Wednesday it has won a US$250 million (€180 million) outsourcing order from Royal Philips Electronics NV to handle its backoffice work relating to finance and administration.

Under the seven-year deal, Bangalore-based Infosys will take over the Dutch company's back-office centers in India, Poland and Thailand, Chief Operating Officer S.D. Shibulal told The Associated Press.

Philips currently uses these centers to process purchase orders, prepare bills and handle other tasks relating to financial administration. All that work will now shift to Infosys.

"This is one of the largest (outsourcing deals) in the finance and administration space," Shibulal said.

It is also "a first for Infosys" in terms of the number of employees that it will be taking over from Philips, he said. The three centers currently employ about 1,400 people and all of them will transfer to Infosys rolls.

"Infosys clearly demonstrated a willingness to invest in people with a strong HR process, better solution quality ... and a robust risk mitigation and transition plan," Gerard Ruizendaal, Chief Strategy Officer at Philips, said in a statement. "Their leadership capabilities were clearly evident in all interactions and proposal submissions, with a strong focus on the customer," he said.

News of the deal lifted Infosys shares by 0.7 percent to 1,990 rupees in Wednesday's trading on the Bombay Stock Exchange.

The deal is intended to help Philips focus on its core business of lighting and electronic equipment manufacturing, while Infosys benefits from higher revenues and expanding global footprint, Shibulal said.

Companies like Infosys have seen their sales and profit grow rapidly in recent years as Western companies increasingly transfer software development and back-office work to India, where wages are low and skilled, English-speaking workers are plentiful.

To keep the momentum going, Indian software companies are looking to win more customers outside the United States, traditionally the largest client country.

Earlier this month, Infosys cut its forecast for full-year revenues and profit because of the rupee's sharp appreciation against the U.S. dollar. North America accounts for 65 percent of the company's revenue that totaled US$3.1 billion (€2.24 billion) in fiscal year ended March, while Europe's share was about 25 percent.

Source: Emediawire.com

With only about 5% of Fortune 2000 companies and 1% mid-market companies involved in the multi-process HR BPO contracts, there lies huge potential for HRO market. Enhanced global delivery capabilities of HRO service providers are driving demand for large multi-purpose HRO contracts. By offering plethora of services, new players entering into HRO middle-market are aptly addressing the HR requirements of companies with about 1,000 to 10,000 employees.

World human resource outsourcing (HRO) market is all set to exceed the US$78.8 billion mark by 2010 at a healthy CAGR of 10.71% over the 2000-2010 analysis period. As stated by the recent report published by Global Industry Analysts, Inc., the United States, with a share estimated at 48.90% in 2006, forms the largest market for Human Resource Outsourcing, while fastest growth is expected to emanate from countries in the Asian region, with a projected CAGR of 15.74% over the aforementioned period.

In terms of service sectors, payroll services market constitutes the largest outsourced service, with a share estimated at 29.34% in 2006. Fastest growth, however, is expected to emanate from the education and training services market that is expected to post a CAGR of 13.08% over the 2000-2010 analysis period. Other services independently analyzed include Benefits Administration Services market, Recruitment and Staffing Services market, Hiring Administration Services market and Other Human Resource Outsourcing Services market.

Outsourcing of administrative functions to third parties is not new, and dates back to the 1940s, when Automated Data Processing instigated service offerings. In the year 1949, ADP (formerly Automatic Payrolls Inc.) was the first company to offer payroll services to its customers. However, most of the services provided in the past were for single-process, transaction-focused HR services such as workers compensation, payroll, payroll taxes, training, or employee benefits. Additionally, client companies generally outsourced a few back-office HR functions, while performing other HR functions in-house. In 1998, Proctor & Gamble signed a 10-year contract worth US$400 million with IBM for outsourcing of its HR functions.

Contract negotiation cycles are getting shorter and buyer confidence being increased with Tier 1 HRO service providers entering into large and complex contracts that require huge capital investment in regional shared service centers with excellent HR expertise. By offering plethora of services, new players entering into HRO middle-market are aptly addressing the HR requirements of companies with about 1,000 to 10,000 employees. Number of contracts received by HRO suppliers is increasing, with the time span ranging from seven to ten years, as compared to earlier five-year term. Increased HR service offerings that include payroll, benefits administration, and employee care are expected to drive prices down. Further, by leveraging offshore resources and refining delivery systems, HR service outsourcing providers can significantly offer cost savings. Surging interest of multi-national organizations to benefit from multi-national contracts is expected to raise multi-country HRO capabilities of HR service providers.

HRO is also driven by offshore outsourcing trend with most of the outsourcing focused on processing services. Philippines, India, South America, and China are some of the major regions with more offshore contracts. There is a shift in vendor focus from payroll, benefits administration, and employee care services to recruitment, absence management, and learning services. Also, there exists a market shift in vendor focus towards business case metrics development. HRO is still a growing market and is rapidly transforming to an industry that supports complete business processes from an earlier model of payrolls service bureau.

HRO industry is likely to witness growth in the business from mid-market companies. It is expected that HRO suppliers would receive more number of outsourcing deals that are of smaller value from mid-market clients in the near future. Though few mid-sized companies can spend substantial amounts of over US$25 million per year on HRO, the number is on the rise.

Organizations are innovating on various tools such as performance indicators and standard HRO performance metrics for critically analyzing HRO processes. They are employing these tools to determine return on investment, and to monitor Service Level Agreements (SLAs) related to HRO functions. Corporate HR leaders are ensuring that services offered by HR providers are actually worth the value paid.

IBM, Hewitt, and Accenture are the major players dominating HRO industry, with considerable market shares. The industry also includes small and large new entrants, including Yurcor and SAP.

Source: Hindustantimes.com

Impact of external factors like the rising exchange rate of rupee against all global currencies on the exports sector of the economy has begun to show in the top and bottomlines of the IT industry.

But the confidence of industry CEOs is high about the vast global opportunity that global offshore outsourcing still presents and efforts are on in most significant companies to weather the currency storm and increase focus on profitable business development and execution through innovative ways.

Innovation in this industry consists of two opposite yet complementary thrusts. Looking inwards where many tactical moves are possible including training and preparing the new generation of industry entrants to participate in global IT and BPO projects, developing multi-skilled work force to enhance deployment-flexibility, and a sharper focus on operational excellence.

On the customer acquisition front, while the traditional focus on large volume applications support and development deals continues and expertise across a range of enterprise package software implementation, migration, hosting and support is intensified, the big white space of first time outsourcing customers is another significant opportunity that can fill revenue and profit gaps in the medium term.

Engagement at senior levels in the vision and execution of outsourcing, something that even larger companies have sometimes failed to do as they develop an attitude of piecemeal or tactical outsourcing, is one key differentiator that presents both a challenge and an opportunity.

Workshops to articulate the specific firm benefits for the firm can lead to a robust applications portfolio analysis for outsourcing and ensure that the four key factors that have to be managed for success. These are the business processes to be optimised, the technology both for existing applications and for management of the new outsourced processes, the ongoing engagement of key leaders and managers in maximising the benefits garnered from outsourcing and the preparation of a facilitating organisation culture to enable all participants to willingly and effectively play their role in the transition to the new ways of working.

There is often a fear that smaller firms will be more difficult to sell to as well as support and the time required to achieve success with first time outsourcers could probably be more profitably invested in a renewed thrust on large deals. As the industry expands, it is sometimes the breaking of these paradigms that can give as much joy and success as continuing to tread the beaten path.

Source: Ecommercetimes

IT functions most often outsourced by small businesses include virus protection and security, e-mail and messaging, accounting and payroll, and data storage and backup. However, some companies may be wary of giving an outsider access to sensitive information as it relates to customers, employees and financial information.

Almost 60 percent of small companies' information technology is outsourced to third-party providers -- and a number of whom are in the Virginia, West Virginia, Maryland and Pennsylvania quad-state area -- the largest of which are listed in the Quad-State Business Journal's "2007 Book of Lists" under Computer Dealers/Networkers.

As with many outsourcing Latest News about Outsourcing decisions a small business owner must make, the key question relates to whether or not the IT function is within its core competencies; does it lie within the IT staff's main areas of strength like desktop support? If not, and depending on the complexity of the computer system Manage remotely with one interface -- the HP ProLiant DL360 G5 server. and the various applications used to manage the business, then outsourcing may be the answer.

Cost considerations also come into play. Is it less expensive to contract out a certain number of hours of IT support a month or a year than it is to hire someone full time, and is that individual easy to find? A lot depends on the company's budget, as well as if backup support needed on a consistent basis.

Sensitive Information

IT functions most often outsourced by small businesses include virus protection and security, e-mail Email Marketing Software - Free Demo and messaging, accounting and payroll, and data storage and backup.

However, some companies may be wary of giving an outsider access to sensitive information as it relates to customers, employees and financial information. In that regard, only 16 percent of companies with between 50 and 499 employees outsource technology security, according to AMI-Partners, a New York City consulting firm.

Here are some tips in signing a contract with an IT vendor:-

# Have an exit strategy if things don't work out.
# Meet the people from the actual team that will be doing the work.
# Do a thorough check of references supplied by the IT vendor.
# Have in your files a second choice vendor if the first one doesn't work out to your satisfaction.
# Be careful of scope creep where work requirements change or are added to the initial work plan.

Source: Forbes

When brothers Shep and Ian Murray decided to expand distribution of their preppy, nautical-themed apparel, they didn't know the first thing about running a retail store. That's why they let their competitors do it for them--and have been making decent waves ever since.

Armed with a slug of credit card debt, the brothers traded their entry-level New York City jobs back in 1998 for the chance to sell cheekily patterned ties out of their car's trunk. By 2004, Stamford-Conn.-based Vineyard Vines had stretched beyond ties and tote bags into a full assortment of men's, women's and kids' weekend wear and accessories, sold in bits and pieces through high-end department stores and specialty shops catering to the country-club set.

Still, there was no one place where customers could buy the whole range of Vineyard Vines apparel--and opening up their own slew of stores was an accident waiting to happen.

"It's very complex to open a retail store," says analyst Marshal Cohen of The NPD Group, a retail consultancy. "These guys are smart enough to realize they don't have the expertise."

Outsourcing has become a core strategy for firms big and small. Apple and Cisco outsource most of their manufacturing; Nokia and Royal Bank of Scotland lean on India's Wipro and Infosys Technologies to handle IT work; even big banks like Bank of America and Lehman Brothers are now farming out some of their research and financial analysis. Now the Murray brothers are applying that model to retail, with decent success.

Their march began on the tony Massachusetts resort island of Martha's Vineyard, where years of vacationing had made the Vineyard Vines brand a hometown favorite. The plan was to ask a local retailer already carrying their line to open and manage a standalone store selling only Vineyard Vines; that would leave the brothers and their staff to dream up new designs and market the brand by sponsoring regattas and the like.

The store owner balked at the request, so the brothers took the plunge and opened their own shop on the island. When the store didn't flop, the retailer agreed to open a second one on nearby Nantucket Island. More stores followed in Hyannis on Cape Cod and posh Greenwich, Conn., all in partnership with experienced, family-owned retailers.

Here's how these agreements work: Both partners split the initial start-up costs, which include tricking out each store with nautical art, old guitars and boating memorabilia in keeping with the brand. Vineyard Vines sells its products at wholesale to the retailer, who handles the day-to-day operations, though the Murrays retain creative control over how their goods are presented. The store owners provide feedback on popular items, as well as comments from customers on what they would like to see in the future. Promotions are announced simultaneously in the stores and on the Vineyard Vines Web site.

The partnership model has helped Vineyard Vines nearly triple its revenue since 2004, to $37 million. The brothers claim their operation has been profitable since inception, but they won't discuss hard figures.

Source: Bangkokpost.com

High talent turnover can wipe out cost advantage, as India is discovering

Companies looking to be a part of the information technology outsourcing trend in the region should consider other aspects of competitiveness apart from mere cost effectiveness, says an industry expert.

"The paradigm is shifting away from just being a cost-competitive player in the market. Instead it is more toward value creation, and this is going to change the landscape of the outsourcing service industry in the near future," said Aroop Zutshi, president and senior partner at Frost & Sullivan, a multinational consulting group.

Outsourcing, which currently is associated with hiving off various business processes to companies in countries such as India, was a $930-billion industry in 2006 and is poised for 15% annual compounded average growth rate over the next three years to $1.43 trillion, a Frost & Sullivan study shows.

The study, which was conducted from February to June this year across the company's vast network of clients and offices across the globe, showed that the major was coming come from a shift of outsourcing hubs to other parts of the world, and away from traditional centres such as India.

"The biggest problem that India is facing today is the attrition rate, which in some instances is running as high as 70% annually," Mr Zutshi said.

"Creating more problems for the industry is the fact that costs in India are rising by as much as 25-35% annually, and this is one of the key reasons why some global outsourcing giants are shifting their bases away from India to other parts of the world."

Mr Zutshi said that even with more than three million engineering graduates entering the market each year, India's reputation has been tarnished due to the higher cost and attrition rate.

"The biggest challenge that companies are facing in India is the retention of talent, as it costs more than two or three times the salary to train and bring the employee to a highly productive level - and then companies are seeing this talent flow out to other companies," he said.

He added that such factors have helped to push even Indian companies away from home turf, with outsourcing giants such as Satyam and Infosys gradually shifting part of their operations to other countries such as China, Ireland, Malaysia, Mexico, the Czech Republic, Poland, Philippines and Canada.

"These countries have the cost advantage, the quality and availability of human capital and the infrastructure to support it, and as there is higher demand from the technological, health-care, fast-moving consumer goods and retail areas that is set to rise, these countries are likely to benefit," Mr Zutshi said.

He added that countries looking to be emerging SSO centres should also look at their immigration regulations to ensure they can attract talent to settle on a long-term basis.

Frost & Sullivan said that during 2006 the top three spenders on SSO were the banking, financial and insurance sector with $273 billion, technology and ICT at $233 billion, and health care at $130 billion, accounting in all for more than 50% of SSO spending.

Other areas that are heavily involved in outsourcing included transport and logistics ($113 billion), energy ($84 billion) and fast-moving consumer goods (FMCG) at $59 billion.

"We have seen what has happened in India. It took the country just three years to reach this stage and we want to avoid such mistakes, and therefore would look at all means not to overheat the SSO market," said Zulfiqar Zainuddin, head of marketing and partners for SSO at the state agency Multimedia Development Corporation Sdn Bhd, which is in charge of promoting the IT industry in Malaysia.

"We are not there to take away the industry from these two countries but instead to complement them and this can only be done by cross-pollination - that is, to bring in outside talent and mix it with local talent," he said.

Source: Dmnews.com

There is not always power in numbers. Whether an organization is local, national or global, the process of centralizing commercial printing, promotional products, warehousing and fulfillment has proven to be successful on many levels.

Centralizing printing requires moving away from a project-by-project mentality to a philosophy of business processing outsourcing and procurement management with one source.

The idea of BPO, while not new to the corporate world, is fairly new to the graphic-communications industry. If executed effectively, BPO can help an organization achieve print consolidation and deliver a faster, more convenient and cost-effective print-management process. And the organization’s brand police will sleep better knowing brand guidelines are being protected across departments, locations and marketing literature.

Leaders jump on board

AOL, BP, Discovery Communications and E-Trade Financial are all leaders in their respective industries. And as leaders often do, they are adapting a new method for managing their printing by outsourcing printing, promotional products, warehousing and fulfillment.

Before outsourcing and centralizing its collateral, E-Trade had about 30 printers nationwide servicing its branch network. This lack of centralization meant E-Trade could not easily estimate the amount of money spent on printing, fulfillment and warehousing. More importantly, it was not accurately managing its master and 20 sub-brands.

Don’t forget your life raft

Organizations may fear losing control of the print-management process and experiencing a drop in quality. However, those with the courage to outsource actually gain control of the process and experience quality improvements.

The key to a manageable and smooth transition is working with the right business partner. Here are a few considerations:

Workflow experts. Does the print-management company focus on the entire document-management process? Or are they simply focused on getting an organization the best printing prices? What is important is that the print-management company has workflow expertise, and with that will come printing cost efficiencies.

Standard or customizable solutions. Will the organization benefit from an online-procurement program that is turnkey or a program that is flexible and can accommodate growth and changing needs? Additionally, there are solutions that enable organizations to customize the look and feel of the procurement site.

Software requirements. There is no need to purchase additional software to run a successful e-procurement program. Programs are typically run through intranets or Enterprise Resource Planning systems, such as Ariba, SAP and Oracle.

Customer support. While most online-procurement programs are simple to learn and navigate, customer support is still a necessary component. Inquire about online support, as well as staffed help desks. Customer support will be essential not only for the launch of the program but also on an ongoing basis.

Upgrades. How often does the print-management organization conduct upgrades of the e-procurement system? Some have more ongoing, rigorous upgrade programs than others, enabling an organization to provide feedback and see the changes implemented to the entire system in as little as three months.

Digital-assessment management. Managing digital files is just as important as managing printed pieces. An online-procurement system that allows organizations to store and share digital files — logos, photos, sales materials, videos and sound bites — can help manage the brand by ensuring the correct digital files are being used and also simplifies the process of file sharing among multiple locations.

Source: Zdnet

The "mega" outsourcing deals of the past struggled to deliver innovation or the significant service improvements expected of them. Not all have been catastrophic, headline-hitting failures, but many simply did not live up to their billing.

A new trend in outsourcing has developed as a result — multisourcing. In 2006, the central theme of one of the industry's biggest shows, the Gartner Outsourcing Summit, was the new trend of multisourcing. This year the central theme remained the same as many companies now have experience of implementing and managing multisourcing relationships. But, before the implications of this new approach can be analysed, it is first important to discover why the long-term single supplier approach appears to have failed.

Initial outsourcing engagements barely went beyond performing functional tasks more cost-effectively and productively. While costs may have been reduced in the short term, no real emphasis was placed on adding any value to the business. When inadequate results were delivered, the outsourcing suppliers had to go back and rethink the implementation strategy and any short-term cost savings tended to disappear.

Traditional contracts spanned anything from five to 15 years but work was often poorly defined and focused on transactions to such an extent that suppliers became "slaves to SLAs [service-level agreements]". Whatever the investment made in RFPs (request for proposals), due diligence and the like, the risk from a lengthy project was incredibly high and companies realised they couldn't afford to put all their eggs in one basket.

The outsourcing landscape has instead moved towards using one of multiple suppliers, with chief information officers selecting specialist providers to make the most of the available outsourcing options. One of the obvious advantages is the "best of breed" effect. A chief information officer can now deploy an outsourcer for individual projects, individual services, or outsource finite parts of their function, which clearly makes more sense than offering a contract based on an ability to service every possible function at an acceptable level.

Gaining a multisourcing mindset

However, to implement a successful multisourcing approach, a new mindset is required from an organisation. Gartner describes multisourcing as an innovative discipline that takes organisations beyond "quick fix" cost-cutting to enable capability building, global expansion, increased agility and profitability, and competitive advantage. Central to a successful multisourcing approach is the creation of an outsourcing strategy that is linked to the overall business strategy, enabling the customer to meet strategic goals and win market share.

Firms looking to move beyond outsourcing to multisourcing must, therefore, have an integrated sourcing strategy across all services, and, to reap the benefits, an outsourcing team with specific skills and experience is required, as well as a supplier that understands the business structure and commercial environment in which they work. Companies must remember that multisourcing is about building relationships, not just signing contracts and "throwing it over the wall".

Vendors need to ensure that relationships are developed across the client's business; it is no longer enough to have one point of contact with the customer. This is not purely so that vendors can sell more; rather the customer should see it as a way to maximise on the vendor's capabilities, making the vendors work for their department, and the company as a whole, to drive business success.

Innovation is another crucial component to successful multisourcing arrangements. Companies can look to outsourcing to deliver major service improvements and business benefits, rather than simply solving a problem. Reduced cost is almost a given, but companies should be aware that the lowest-cost option may not be the best for innovation. By maximising on the cost-saving capabilities of a global delivery model, and providing an in-depth local consulting presence with on-site teams focused on the customer's business applications, suppliers can invest in and deliver innovation.

As the multisourcing market matures, the most value and strategic business impact will be seen in those engagements where a real partnership exists. From the perspective of both the chief information officer and the supplier, the importance of forming and nurturing deep relationships between the two parties has never been more important.

Source: Sbinformer.com

Back office is that aspect of any business that takes care of all the works related to the smooth functioning of any organization. Today, the world is very competitive and to stay ahead of the competition, business owners need to constantly improve upon the ways in which the whole aspect of their business is conducted. Back office outsourcing is one strategy that can be successfully adopted for taking care of all the back office related work of any business.

Global statistics indicate that the benefits of outsourcing are so many that this process is going to stay for a long time, and more and more businesses are opening up to the idea of undertaking this process. It is understood that running a business successfully is a tough task and this is not everyone�s cup of tea.

As a business owner you will have to focus your attention on many aspects of your business, and what is important is that you will have to give the same amount of attention to every aspect. Now if you happen to be one of those business owners that have the knowledge, expertise and skill to handle all the different aspects of your business properly, then you are really fortunate. But all of us know that this is rarely possible and at some point or the other, you will require the services of an expert to help you in the different processes including the back office works. Hiring the services of a back office outsourcing firm will work out to be beneficial for you in several ways.

You must find out how feasible it will be for your business, if you go about undertaking back office outsourcing from a third party. Some of the main functions of back office in an organization are verifying, settling, reconciling and confirming all the financial transactions that take place on a daily basis in the organization. In other words the back office division of any organization handles all the time consuming and difficult top manage aspects of the organization. Back office outsourcing is beneficial in the sense that an organization can hire the services of highly qualified professionals to do the work, and this ensures that they get quality service. Normally hiring the services of trained professionals to handle the back office work can be really difficult as they charge a very high price.

However if you hire the same service through back office outsourcing, be assured that the money you will be charged will be nominal. One thing that you will have to do on a regular basis is to keep a tab on the work that is being done under the process of back office outsourcing from your business. This is to ensure that you know about the type of work that is being done for your business and see if this is suitable for your business or not. If at any time you are not satisfied with the work being done, you can hire back office outsourcing services from another firm to do the work for you. There are many outsourcing firms operating in the market and it will not be difficult for you to find one.

Source: Bloomberg

Indian software companies, which compete furiously with each other for global outsourcing deals, are now facing a common enemy in the rising rupee.

Infosys Technologies Ltd., India's second-largest computer- services provider, last week pared its full-year sales and profit estimates. A strengthening home currency is reducing the rupee value of its dollar revenue and earnings.

Tata Consultancy Services Ltd., Infosys's bigger rival, this week reported that its profit margin was hurt by 2.6 percentage points in the three months ended June 30 by, among other things, a 7 percent appreciation in the rupee against the dollar, the biggest quarterly gain in more than three decades.

The company said it managed to ``largely offset'' the impact on net income by hedging its revenue against an increase in the rupee's value.

Although the day-to-day volatility in the exchange rate has abated since the end of April, the challenge of long-term competitiveness remains for Indian exporters.

As the Indian economy expands 9 percent a year, soaking in larger amounts of overseas capital, the real effective exchange rate of the rupee is bound to rise.

Since inflation tolerance in India is low, much of this adjustment will occur through an appreciation in the nominal currency value. The Indian central bank will try to hold the rupee down when it can afford to loosen monetary conditions at home. It would be less willing to protect a competitive exchange rate when doing so could lead to overheating.

All is not lost for Indian software exporters. The economics of outsourcing are still in their favor, though wage costs are galloping, too.

A Blueprint

Partha Iyengar, vice president at research firm Gartner Inc. in India, has a blueprint that Indian companies can use to mitigate cost pressures.

Their first task should be to walk away from simple code- writing and testing -- the ``$10-an-hour'' work that Iyengar estimates still makes up 55 percent to 65 percent of the revenue generated by top Indian software exporters.

Beaten in Backyard

Out of the several large outsourcing deals from India in the past several years, few have gone to Indian companies.

In March 2004, IBM won a $750 million order from Bharti Tele-Ventures Ltd., an Indian mobile-phone service provider.

Around the same time, Dabur India Ltd., a local maker of shampoos and beverages, asked Accenture to manage its computer systems. A 10-year, $150 million order from Bank of India, a state-owned commercial lender, went to Hewlett-Packard Co.

Meanwhile, IBM and Accenture are expanding in India, hiring the same programming talent as their homegrown rivals. Unlike the latter, however, they also have a larger pool of business consultants, people who understand clients' needs.

``It won't take an IBM six months to line up a supply-chain specialist to go talk to the board of directors of a prospective client,'' Iyengar said.

Neglected Home Market

To stake a credible claim for, say, a $2 billion global outsourcing order, Indian companies must first show their ability to execute large projects at home, says Iyengar.

This reality is still not widely understood.

At Infosys, revenue generated within the Indian market is just 2.4 percent of North American sales.

Telecommunication, Retail

These are also businesses that are most likely to place large outsourcing orders. When Bharti Airtel Ltd., as the company is now called, placed its order with IBM, it had 7 million mobile-phone subscribers. Now it has 43 million.

Had an Indian outsourcing company won the chance to meet the company's information-technology requirements during this explosive growth, it could have leveraged that experience to seek deals from Vodafone Group Plc or Sprint Nextel Corp.

The same is true now for retail.

Mumbai-based Reliance Industries Ltd., which began setting up supermarkets last year, intends to make it a $25 billion business by 2011. According to media reports, it's going to spend at least $250 million on technology.

These local growth engines offer learning opportunities. Indian outsourcing companies must tap them if they want to go beyond being low-cost service providers.

Apart from its other advantages, local, rupee-denominated revenue will also serve as a natural currency hedge.

Source: Businesswire

* Asia-Pacific market shows 3rd straight half-year of new business growth
* Asia-Pacific BPO market bucks the global trend
* Inclusion of offshore delivery in outsourcing deals hits record high
* Telecoms sector leads in outsourcing contract value

Demand for outsourcing in Asia-Pacific grew strongly in the first half of 2007, compared with the same period last year, according to the latest Quarterly Index from sourcing advisers TPI. The total value of new (as opposed to renewed or restructured) outsourcing contracts in the US$25 million plus bracket -- where most significant outsourcing activity occurs -- is US$5.4B, an increase of 100% on the first half of 2006. This strong Asia-Pacific performance is in sharp contrast to a modest overall global increase in new business of just 6% in the first half of 2007.

Arno Franz, Managing Partner for Asia-Pacific Region at TPI, explained: “Traditionally the Asia-Pacific outsourcing market has been seen as relatively immature in contrast to the Americas and European markets and thus prone to peaks and troughs in activity. However a strong performance in the region in 2006 has carried on through the first half of 2007 and we have seen three straight half-years of growth in new business demand. There are signs that the Asia-Pacific outsourcing market has steadied. Indeed strong growth in Asia-Pacific and Europe is compensating for a very soft US market, where new outsourcing business is at its lowest level since 1994.”

The Asia-Pacific performance has been further impacted by an increase in global share of mega relationship volume and value. Asia-Pacific mega relationships, those transactions with an average annual spend, of US$100M or greater, represented 23% of the global total and 23% of global value, an almost doubling of share by both measures, at the expense of a sharp decline in mega relationship activity in the Americas.

Eight BPO contracts, in the US$25 million or greater category, with a total contract value of US$700 million were signed in Asia-Pacific in the first half of 2007, representing growth of 33% by volume and 133% by value compared to the first half of 2006.

* Inclusion of offshore delivery in outsourcing deals hits record high

Despite TPI’s observation of an increase in offshoring through captives, the use of offshore service delivery within the scope of outsourcing also continues to expand. In the first six months of this year, 59% of the deals on which TPI advised entailed at least partial delivery offshore -- the highest percentage ever.

* Telecoms sector leads the way in Asia-Pacific Outsourcing as financial services contract value declines

Over the last five years the financial services sector has accounted for 28% of global TCV for contracts valued at over $25M, and 38% of Asia Pacific TCV. In the first half of 2007, despite a 34% share of global TCV, financial services sector had just 9% of Asia Pacific TCV.

Telecoms sector is the most prolific sector for outsourcing in the region in 2007 to date. Traditionally a strong player in Asia-Pacific, Telecoms took a 46% share of first half TCV in 2007, compared to a 33% average in the previous five years. However, this overall performance was strongly impacted by the China Mobile mega deal.

Other sectors showing increased outsourcing activity in the region include Manufacturing with a 26% share and Energy with 12% of 2007 TCV, compared to just 1% in the previous five years. Deregulation of the energy industry in the region is providing opportunities for outsourcing as companies seek to variabilise their cost structures and become more competitive.

Source: Reddevnews

Some useful guidelines for choosing the the right IT partner.

When you need to launch a new software development effort, time is of the essence. You need skilled software engineers to hit the ground running and deliver immediate value. You don't have the luxury of unlimited time and budget to recruit and hire the best IT talent in the business, so you turn to an outsourcing partner.

But how do you choose the right IT partner? Here are some guidelines for choosing a software development partner, and smart questions to ask to ensure you'll "get it right" the first time -- and avoid costly mistakes.

Choose a software engineering firm -- not a resume database.

All too often, IT outsourcing firms are little more than temp agencies, many of them managed by sales and recruiting professionals, not software engineers. If you ask for a .NET programmer with SQL Server experience to build an e-commerce application, the request triggers a keyword search in their resume database that yields potentially dozens of candidates.

Look for the firm's renewal rates -- a key quality indicator.

If an IT partner truly operates