The Services Shift: Official Blog

I am Moving On...

2009-06-30T08:54:00.007-04:00

I would like to thank all of our visitors, readers and contributors for their continued support and input. Effective June 30, 2009 I am moving to another project and will no longer manage this blog site. I have enjoyed the time and effort put into this initiative. We are proud of the fact that we were named as one of the Top 100 Blog Spot for Outsourcing and Offshoring in 2009 by O-desk.com. I wish everyone the best in this dynamic and challenging economy. The blog will remain active for the foreseeable future.

Sincerely,

Lou LaFrate

Offshoring News

2009-06-29T12:01:00.003-04:00

IT Companies Expanding in Latin America
Driven by customer demand, Indian IT firms such as TCS, Infosys, and Patni are enhancing their ‘near-shore’ delivery capabilities in Latin America. This would also help them explore the emerging markets in the region. Last week, TCS opened its seventh Latam delivery centre at Queretaro, Mexico, where Patni Computers also chose to locate its first centre that was launched on Monday.
Source: Offshore Outsourcing World Blog.com

Acquiring Outsourcing Companies: Not for the Squeamish
This article was posted by E-Commerce Times. com a while ago but the content is still very relevant for any company looking to offshore business processes. The author explains that the effects of the recession on outsourcing companies have made them attractive targets for acquisition, but with opportunity comes risk. There are distinct differences between the way things are done in India vs. the United States, and they can impact the true value of a company.

Special Effects Outsourcing Grows in India

2009-06-26T10:42:00.003-04:00

News Max.com reported that outsourcing to India, long dominated by software engineering and back-office work, is expanding in new terrain: special effects for movies. India's rise comes at a difficult time for U.S. special effects outfits, some of which have buckled as the 2008 L.A. writers strike cut productions and the financial crisis curtailed financing. Executives in India say cost pressures are pushing studios to send more work to India, where special effects projects are up to 40 percent cheaper than in the U.S. This is limited in nature bu shows that many processes cn be outsourced given the right circumstances,

Indian Firms Acquire 143 US Companies, Create 30,000 Jobs

2009-06-25T10:27:00.004-04:00

Offshore Outsourcing World Blog.com ran a story about acquisitions made by Indian companies across various sectors over the last two years. In 2007-08 alone, 94 deals between the range of $0.8 million and $1,005 million were concluded with the disclosed value in 55 deals totaling $4,432 million, according to the joint study released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst and Young.

News of the Day

2009-06-24T10:18:00.001-04:00

Indian CEO Warns White House on Proposed Visa Curbs
The Wall Street Journal reported that one of India's most powerful businessmen is warning U.S. government and business leaders that proposed curbs on U.S. work visas are protectionist measures that could spark a major trade dispute with India. During a visit to the U.S. last week, Azim Premji, chief executive of Bangalore outsourcing giant Wipro Ltd., met with officials including White House economic adviser Lawrence Summers. The visa issue threatens to increase trade frictions between the U.S. and India, which are already trying to resolve disputes over agriculture and other sectors.

News of the Day

2009-06-23T09:35:00.000-04:00

Hewlett-Packard Acquires HR Business-Process Outsourcer
Global CIO blog reported that Hewlett-Packard has acquired full interest in an HR business-process outsourcing firm formed as a joint venture between EDS and Towers Perrin in 2005 and called Excellerate HRO. Now that HP's wholly owned services unit, EDS, has full control over the venture, HP is likely to become more aggressive in courting outsourcing deals in the HR sector.

Horses for Sources Interviews Cognizant's CEO
One of our favorite blogs "Horses for Sources" posted an interview with the youngest IT and BPO industry leaders, Francisco D'Souza. Please use the attached link to read the first in a series of interviews.

Globalization and Outsourcing news

2009-06-22T10:43:00.001-04:00

Is Offshoring Helping the US Economy?
Information Week posted an article that discusses the impact of offshore operations on the US economy. It's an interesting read where the author provides information supporting the premise that it does and has solicited feedback.

Globalization has Helped Redefine "Experience"
Mass High Tech.com explains, in an article posted last Friday that due to the nature of today's economy employees who have a global perspective and an understanding of business issues will fare better than those with only technological mastery.

A Unique Perspective on Managing Through the Offshoring Trend

2009-06-22T07:42:00.003-04:00

Facing Tomorrow's Challenges Calls for Right-brain Thinking
An article published by Wharton.edu brings up an interesting point about the education process and how it needs to be modified to help students manage in today's environment. The author explains that today's pace and nature of change call for a shift in the way we think about education. Daniel Pink, author of A Whole New Mind and The Adventures of Johnny Bunko, discussed this fact in a keynote speech at a recent Wharton Evolution of Learning Symposium. In a world where jobs can be sent overseas, tasks can be automated and the feverish pace of technology can render even last year's innovation obsolete, students will have to learn how to think differently than their parents in order to survive and prosper.Hide all

Today's News Updates

2009-06-19T07:35:00.002-04:00

Rio's Indian Deal is a Wake-up Call for City Firms.
Times Online.com advised that Rio Tinto's decision to recruit Indian lawyers to handle a significant portion of its legal work is a wake-up call to Britain's big law firms. The move will be closely watched by other big companies, some of which spend upwards of £50 million a year on legal costs and have been grumbling for years about whether they get value for money from their outside lawyers.

Significant increase' predicted for legal outsourcing
IP Review On-Line announced that offshore legal support services will see a major increase in their work volumes as they mature. This prediction comes from a new report titled: Legal Services Outsourcing: What Do Law Firms Think? Conducted by business intelligence provider ValueNotes – one of only two quoted sources on legal process outsourcing (LPO) market size – the study indicates that law firms are becoming more familiar with the sector as they work to offset costs.

Recession Drives Retailers to Outsourcing
VNUNET.com posted a story advising that the retail sector is investigating third party suppliers to ease financial pressures. IT and business process outsourcing will become an increasing trend in retail as firms in the sector struggle to survive in the downturn, according to research from analyst Datamonitor. According to Datamonitor retail technology analyst Christine Bardwell, retail businesses are cutting down on staff and inventory – the two key focus areas for the sector – to mitigate efficiency and cost pressures. “Many retailers are looking to technology and services to help cut the cost of managing inventory, non-critical business processes and store operations,” said Bardwell.

Outsourcing News of the Day

2009-06-18T07:16:00.003-04:00

RComm Awards Huge Outsourcing Deal to Alcatel-Lucent
BPOVoice.com announced that Reliance Communications (RCom) has awarded a $500 million (Rs 2,500 crore) operations and maintenance contract to French telecom infrastructure provider Alactel-Lucent. Last year, Reliance and Alcatel formed a joint venture for network management services, with the Indian company holding 33 percent and the French company owning the rest.

Gartner: Don't Sign Long-term Outsourcing Deals
Computer World UK.com posted a story advising that organizations renegotiating their outsourcing contracts should avoid long-term deals and look at cloud computing. This comes from the analyst firm Gartner. The next two years will be a “critical period” for the outsourcing and IT services market,” said Claudio Da Rold, vice president and distinguished analyst at Gartner.

IT Firms Face Delay in Payments from Foreign Clients
Offshore Outsourcing World Blog.com reported that a number of Indian outsourcing companies are facing difficulties as their foreign clients are delaying their payments. The firms are finding it hard to recover their money, as most of these firms are from the U.S. and Europe, which are largely hit by the recession, the Business Standard reports. Except Infosys, all the major Indian IT firms have shown a rise in the receivable income from the last three quarters.

Offshoring News

2009-06-17T11:23:00.004-04:00

Why It's Time to Look at the Inflation Clause in Your Outsourcing Contract
Outsourcing-Journal.com explains that given current market conditions it may be time to revisit your outsourcing contract. Outsourcing agreements work best when there are no winners or losers. Win/lose deals often degrade into lose/lose deals. Bilateral inflation price adjustment clauses are arguably the fairest and therefore the best way to avoid creating winners and losers. The bad news is that most contracts are not written with bilateral inflation price adjustment clauses.

Update of the Day

2009-06-16T14:31:00.002-04:00

Global Sourcing and Delivery Models in Practice
The blog SASIDAR.info posted an article on the three major models of off shoring: a Captive, a Third Party Provider (TPP) or a Build-Operate-Transfer (BOT) . It is a very good article and worth reading.

News of the Day

2009-06-15T07:53:00.004-04:00

IT Firms Investigating Japan for Outsourcing Opportunities
According to a report in BPOVOICE.com Indian IT companies are looking to Japan for new business due to the slow down in the European and US economies. The Indian IT companies currently depend on the US and European markets. Between 80% and 90% of revenues is typically accounted for by just these two regions. According to industry experts Japan will drive the next phase of growth for the Indian offshoring industry.

Outlook Brightens for Indian Vendors
The Wall Street Journal announced that spending on outsourcing is set to come out of a slump and return to pre-recession levels by the end of the year, bringing a much-needed boon to technology companies in India and elsewhere. The information comes from a closely-watched survey of the industry. More than half of companies surveyed that outsource say they expect their spending on technology to come back to levels before they made cutbacks.

Indian Outsourcer, Infosys Outsources Work to Brazil
The new Brazilian software-development and back-office center is expected start operations within next the three to four months, with about 100 employees, the Economic Times reported, citing its interview with Infosys Chief Financial Officer V. Balakrishnan.

Offshoring News

2009-06-11T15:21:00.007-04:00

Research Agencies to Boost Outsourcing in the next 3 to 5 years
Source: Outsourcing Insider : Market research Outsourcing (MRO) is relatively new compared to other outsourcing segments. It has all the potential elements to grow into unprecedented levels, as current market conditions forced research cycles to be shortened in order to be more cost efficient. Data collection, processing and panel services are the top outsourced activities due their high offshorability. While project management, report writing and research design were determined to be the most difficult areas to offshore.

Research agencies are expected to boost outsourcing of non-core activities in the next 3 to 5 years, as shown in the data above. Industry experts estimate the potential for offshoring research services to be in the range of $8 billion to $10 billion in 2010. “This growth will be primarily driven by ‘rapidly growing’ and other ‘untapped’ opportunities”

Newsworthy Items

2009-06-11T08:15:00.006-04:00

Mexico Edges in on China's Manufacturing Turf
The Dallas Morning News ran a story about Mexico vying for manufacturing jobs currently located in China. The author notes that China has consistently won the sourcing game with scores of manufacturers ready to produce products to customer specifications, pack and ship them in containers. Now Mexico is making a play for this work, with custom-made products and overnight delivery – a time frame that China can't touch.

Recession Sparks a Sharp Drop in Outsourcing in Britain
Outsourcing101.com reported that even though offshoring to locations such India and China offers cost reductions the initial cost of setting up these relationships can be significant. As a result many companies aren’t willing to invest in offshoring in the current economic climate.

Investors Predict Globalization of Industry, Especially to China
The Wall Street Journal reported that Venture capitalists expect their industry to grow increasingly global, as firms shift more attention to Asia and as institutional investors around the world seek to add venture funds to their portfolios.

Offshoring News

2009-06-10T07:18:00.003-04:00

Infosys Plans to Set Up Unit in Brazil
Economic Times.India Times.com announced that India’s second biggest software exporter Infosys Technologies plans to open a software development and back office center in Brazil
later this year, as the company seeks to serve its US customers better by establishing a near-shore presence.

Wal-Mart to Invest $500 Million in India
www.CXO Today posted a story announcing that Wal-Mart is expected to offshore its business and back office operations to India. The company has shortlisted Wipro, Infosys and TCS for its $500 million contract for a five-year term. Through this initiative, Wal-Mart may also serve its customers worldwide with online product sourcing.

News of the Day

2009-06-09T07:25:00.002-04:00

Retailing in a Recession - The Opportunities for Outsourcing
Research and Markets has announced the addition of the "Retailing in a Recession - The Opportunities for Outsourcing" report to their offering. The increasing economic pressures affecting the retail industry means that companies will increasingly look to outsource technology and business processes to cut costs and focus on core skills. This report provides a detailed analysis of service providers capabilities in selling to the retail sector through the current recession.

Lenexa Outsourcing Facility Adding 725 Jobs
DB Digitalburg.com advised that a Pennsylvania outsourcing company is nearing the end of an expansion at a customer call center in suburban Kansas City that will ultimately employ 725 new workers. NCO Group began the $5.6 million expansion in Lenexa, Kan., last year. The facility originally employed about 400 people and will ultimately employ 1,100. The company provides outsourcing services for businesses, including accounts receivable management, customer management and other administrative functions.

Significant Increase Predicted for Legal Outsourcing
IP Review Online reported that offshore legal support services will see a major increase in their work volumes as they mature. A new study indicates that law firms are becoming more familiar with the sector as they work to offset costs.

Today's News

2009-06-08T09:29:00.003-04:00

Smart Balance Keeps Tight Focus on Creativity
The Wall Street Journal reported that the heart-health food developer outsourced manufacturing and distribution to target in-house strengths on new products.

Industry Expert Believes India Needs to Overhaul it's Education System
A leading outsourcing director in India believes that in order to maintain a competitive edge in the industry they need to review their education system. He shares his thoughts on the situation in the article posted yesterday.

Offshoring News

2009-06-08T07:40:00.002-04:00

India Feels Less Vulnerable as Outsourcing Presses On
The New York Times reported that even though the global downturn has slowed the rapid growth in India’s outsourcing business many outsourcing businesses are booming- because of the pressure on companies, and even governments, to reduce costs is still ever present. Unemployment has risen to 8.9 percent in the United States, a 26-year high, increasing longstanding pressures to “keep jobs in America.” But managers of companies big and small, squeezed between political pressures and the necessity of slimming down to survive, are choosing the bottom line.

Tough Times Give a Boost to Second-gen Outsourcing
The Economic Times ran a story about Second Generation Outsourcing (SGO) that might be worth reading. It discusses the point that rather than looking for simple cost reductions companies are beginning to look for a better overall value proposition.

Outsourcing Agriculture
WNYC.org aired a story about China sending One Million workers to Africa this year as part of a growing trend for countries to outsource their food production. This report is connected to a blog post we made in late May 2009.

Outsourcing Updates

2009-06-05T07:45:00.000-04:00

Ford Drives Cost Control with Outsourcing Deal
VNUNET.com announced that Ford has outsourced its payroll and time and attendance service. Ford hopes to see cost savings and increased efficiency through more automation across the business, with its payroll staff focusing less on administration and more on value-added activities.

White House Wouldn't Stop GM from Outsourcing
A story in Real Clear Politics.com yesterday explained that reporters could not get a straight answer when they pressed Robert Gibbs to explain how the White House would react if a new General Motors board wanted to act in a way that might be contrary to the administration's goals. The press secretary was posed with this hypothetical question: What if GM could save money by outsourcing jobs to China? Would President Obama, who promised that the company would make more cars in the United States, allow that as the company's majority shareholder? The answer and entire article can be accessed via the above link.

Cisco Piloting an Outsourcing Channel Program
CRN.com advised that Cisco Systems has offered insight into an outsourcing channel program that is in the works and should be ready for launch in fiscal year 2010. Word of an outsourcing program comes as Cisco readies to relaunch its Managed Services Channel Program, which will occur on Aug. 31. The program builds on one originally established in 2007. Currently, 61 partners are part of the Managed Services Channel Program.

2009-06-04T07:35:00.002-04:00

IBM Slovakia and Soitron experts discuss IT outsourcing in Slovakia
The Slovak Spectator published an article discussing the fact that despite an increase in the level of IT outsourcing, Slovakia is still lagging behind trends in other countries. The Slovak Spectator spoke to Juraj Hupka, global technology services manager at IBM Slovakia, Pavol Németh, director for outsourcing at Soitron about IT outsourcing, and Marek Gešo, marketing and communications director at Accenture its benefits and drawbacks as well as the impact of the global economic downturn on this market segment. To read the entire post click on the above link.

Beware of Minimum Commitments with Offshoring Contracts
IT World.com advises that with the changing landscape of Offshoring companies looking for vendors need to pay attention to the details of minimum requirements. The article offers alternatives that can be considered when negotiating contracts.

US Based LPO Company to Open New Center in India and Hire 1,450 People
Timesofindia.indiatimes.com announced that US-based CPA Global, a Legal process outsourcing will set up its third center in India and hire 1,450 people over the next two years. “Like in the case of BPOs, there is a good level of expertise and costs advantage in India, which offers a good proposition to us…We are looking at setting up our third centre in India and also increase the headcount,” CPA Global Country Head (India) Bhaskar Bhagchi said.The third centre will be set up over the next three quarters and the

Today's Offshoring News

2009-06-03T07:15:00.003-04:00

Some Harsh Truths about Technology
Mark Kobayashi-Hillary posted a story on his blog about the 850 jobs Hewlett Packard is planning to axe in Erskine. The manufacturing plant is being reduced in size, with more focus on increasing production in the Czech republic.This is a blow for the local economy and an emotional decision for anyone who cares about job creation in the UK. But who is right and wrong in a case like this? Companies such as HP do have to think of all stakeholders when they make these decisions, and clearly they believe that continuing to offer a better deal to their millions of customers is more important than the livelihood of a few hundred people in Scotland.

Top Offshoring Trends to Watch in 2009
PR-Inside.com announced that the 2009 World Outsourcing Summit was held by the International Association of Outsourcing Professionals in Carlsbad, California. A report issues by the summit announced 5 trends for 2009; Enhanced Near shoring, Reliance on Smaller Deals, Importance of Professional Expertise, Enhanced Competition and Enhanced Social Responsibility. The review the entire article use the following link.

The 10 Riskiest Offshoring Locatons
Infotech-India Times.com posted a story that reviews the riskiest offshoring locations with details of each location.

Newsworthy Items

2009-06-02T07:25:00.001-04:00

IT Outsourcing. The Direction Factor
Outsourcing-Russia.com reported that in order to make the offshoring model work properly it is necessary to consider all the factors that will impact the outcome. The information in this article supports the basis of Bob's book; "The Services Shift".

Novell and ACS Form Outsourcing, Supply Partnership
www.masshightech.com issued a story today on a supply partnership that was established between Novell and ACS. Novell Inc., the Waltham-based open-source IT infrastructure provider, has partnered with Affiliated Computer Services Inc. in a five-year $135 million contract in which Novell will outsource some internal information technology services to ACS (NYSE: ACS). The partnership also entails ACS paying Novell at least $30 million in the first three years for Novell products.

The outsourcing partnership involves shifting service delivery from the 156 employees of Novell Information Services and Technology group in Provo, Utah. A release from both companies does not outline where ACS will then outsource this work, but Novell officials expect “significant cost savings.”

Financial Institutions Perspective on Outsourcing
IBS Publishing.com advised that outsourcing core systems is an area that polarizes opinion. In countries such as the US it is highly popular, but in other regions it is seen as a risk too far. The financial pressures of recent times may have changed this situation.

Offshoring News

2009-06-01T07:15:00.004-04:00

International Association of Outsourcing Professionals Releases Global Outsourcing 100 Plus Report
The International Association of Outsourcing Professionals (IAOP) released its premier 2009 Global Outsourcing 100 Plus Report highlighting the qualifications and capabilities of leading outsourcing providers and advisers globally, as well as reporting industry trends.

This newly released industry guide is an additional report available for purchase as a companion to the annual Global Outsourcing 100 ranking of top service providers and advisers. It provides independently researched profiles of an expanded list of companies including their industry focus, service expertise and geography served.

Offshoring is a Value Creation Question (the Dutch are Reviewing their Options)
Contact Center Intelligence posted a story regarding the Dutch markets approach to offshoring. Offshoring Customer Services or Contact Center Services has been a trend over the past decade or so, mostly for English, French and Spanish languages. The dutch have been waiting for quite some time, but over the past few years an increasing number of Service providers offer Offshore services for the Dutch market.

The Future of Outsourcing: Implications

2009-05-29T12:50:00.001-04:00

World Press.Com hosts an Offshoring blog (NOVA SPHERE BLOG) that maintains an up to date summary of current Offshoring issues. Their most recent post deals with the topic of what TEBO (turnkey enterprise back office) offers providers, buyers and advisers. You can access their blog via this link.

Today's News

2009-05-29T06:37:00.008-04:00

Process Design / Redesign with a Clean Sheet
Sourcing Mag.com reported that quite often, process designs or redesigns are burdened with a lot of legacy ideas! Sometimes, it may be better to start a design or a redesign of a business process with a clean sheet rather than make marginal improvements!Many processes just evolve from nothing, or have a lot of outdated steps that may have been necessary when they were designed for the first time but may be outdated today!

Travel Companies to Increase Outsourcing in the First Quarter of 2010
Travolution advises that outsourcing company Sitel is predicting one third of travel company call centers will be outsourced by the first quarter of the next financial year.The forecast comes as the company experiences increased demand from travel businesses looking at ways to reduce operating costs while maintaining or bringing back call booking volumes during the current recession.

US Federal Agency Issuing RFP's for $6.6 Billion in Outsourcing Deals
Information Week published an article advising that the Defense Intelligence Agency is moving forward with plans to spend up to $6.6 billion over five years on new outsourcing contracts. They recently issued a request for a proposal that covers development, deployment and management of various Department of Defense systems between now and 2015. The new multi-vendor contract vehicle, Solutions for the Information Technology Enterprise (SITE), will be managed by the DIA, but covers military intelligence technology that will be used by the military branches and other DoD agencies.

News of the Day

2009-05-28T14:17:00.002-04:00

Multi-country Payroll Outsourcing is Growing
According to a report in CXO Today.com multi-country payroll outsourcing (MCPO) is ahead of other, stand alone multi-country process outsourcing markets on the maturity curve. The research said that MCPO has registered a growth of 49%

Data Center Outsourcing Increases; Most are Happy with the Results
Search CIO-Mid Market.com reported that data center outsourcing is on the upswing and a recession economy is only one reason. A recent study from research and advisory firm Computer Economics Inc. shows that more companies plan to increase rather than decrease their data center outsourcing and most are pleased by the results. Another telling sign? Data center providers are expanding facilities and adding services.

Outlook for Sourcing Spending Brightens
The Wall Street Journal posted a story advising that spending on outsourcing is set to come out of a slump and return to pre-recession levels by the end of the year, bringing a much-needed boon to technology companies in India and elsewhere, says a closely-watched survey of the industry.

Todays Offshoring News

2009-05-27T09:45:00.005-04:00

Romania, an Increasingly Attractive Outsourcing Location
Financiar-ul reported that Romania continues to be an attractive location for outsourcing, climbing 14 spots in the most sought after locations according to a recent study of consultancy A.T.Kearney

Global Economic Situation Drives Outsourcing Firms to Offer New Services
According to GMA News.TV Philippine outsourcing companies have introduced new services, providing additional revenue streams for their businesses. These findings were among those reported by a survey that polled executives of business process outsourcing (BPO) companies in the Philippines.

India Turning into a Hub for Clinical Research
The Financial Chronicle ran a story about India fast turning into a global hub of cost-effective clinical research outsourcing (CRO). This is due to the adaptation of international regulatory standards. The revenue from this sector is expected to reach $1 billion by 2010.

Offshoring News

2009-05-26T09:29:00.002-04:00

7 Out of 10 Indian Call Centers Fail Turing Test
This article posted in World Press.com highlights the importance of the need to fully investigate an offshoring partner before finalizing the deal.

Firms Shifting Focus
News on layoffs has become a norm nowadays. Some blame it on the economic slowdown, some on political bureaucracy while others blame it on offshore outsourcing. There could be a number of reasons for the job cuts but according to a report in Outsourcing Insider it all boils down to “cost reduction”.

2009-05-22T08:43:00.004-04:00

Outsourcing's Third Wave
The Economist.com reported that there is a trend evolving in poorer countries around the world. Stronger countries that export capital but import food are outsourcing farm production to countries that need capital but have land to spare. Instead of buying food on world markets, governments and politically influential companies buy or lease farmland abroad, grow the crops there and ship them back.

Australian Banks Cut back on Indian Outsourcing
Business Week.com announced that several top Australian banks, Westpac and Commonwealth Bank, plan to curb offshoring of back office IT projects to India in an attempt to address local sentiments over a shrinking economy and rising joblessness . The banks are likely to demand that more projects be delivered on site.

HCL Signs Outsourcing Deal with MTV
HCL Technologies announced in Business Standard.com that it is entering into an outsourcing services agreement deal with MTV networks. MTV (or Music Television) is owned by US-based Viacom

Todays Offshoring News

2009-05-21T07:45:00.000-04:00

Sourcing in China Harsher During Economic Downturns:
China Daily ran a story about a survey conducted by Gasgoo.com that revealed "the overall sourcing strategies of China sourcing are not expecting big changes during global economic downturns". The website surveyed over 150 purchasing executives that attended the 2009 Global Automotive Sourcing Summit on April 21. Read more

Bulgaria – Most Attractive European Country for Outsourcing Activities
bgnewsnet.com presented data from the A.T Kearney’s Global Service Location Index. The information shows that Bulgaria is the most popular country in Europe, and 13th out of 50 overall, for locating outsourcing activity. Additional information can be found via the above link.

Speed Sourcing: The New trend

2009-05-21T07:20:00.000-04:00

Computer World.com announced that EquaTerra has introduced the concept of "speed sourcing" on its web site. As companies search for new ways to cut costs in challenging times, many are looking to third party IT services providers to trim expenses. Some are moving at a measured pace through the traditional process of selecting an outsourcer and negotiating a contract. But others, EquaTerra says, are jump starting their potential savings by "speed sourcing"--a new approach for choosing a service provider and sealing a deal in three months or less. To review the entire article please use the this link.

Nice Book Review on Inside Outsource

2009-05-20T17:52:00.002-04:00

Tom Hickman, proprietor of the Inside Outsource blog, has posted a nice review of The Services Shift. Key paragraph is:

I like most about this book the fact that it does a nice job bridging theory and practice. It's an excellent, scholarly book, without being too abstract, and without being overly burdened by the business school jargon and theory-bloat that plagues many business books. Think of it as The World is Flat, for a more analytic and intellectualizing audience.

I suggest reading the whole review, and making Tom's blog a regular stop on your web browsing agenda.

Thanks Tom.

Outsourcing Updates

2009-05-20T07:15:00.001-04:00

Green Sourcing the Time has Come
Novasphere blog.com posted an article today that discusses how the environment and its protection has bubbled up to the top of corporate agendas. There are a number of ways buyers and sellers of outsourced services can use this trend to their advantage while doing something that the vast majority of people now agree is worthwhile.

Everest Q1 Report: Outsourcing Market Drops
Global Services Media.com reported that the North American outsourcing market witnessed a 15 percent decrease in transaction volume during the first quarter this year compared to the previous quarter, according to the Market Vista: Q1 2009 report on global outsourcing and offshoring activity by Everest Research Institute.

News of the Day

2009-05-19T07:00:00.002-04:00

Outsourcing Demand May Revive in Early 2010: Infosys
Live Mint.com reported today that Infosys Technologies Ltd expects outsourcing demand to revive in early 2010. Although 2009 has been sluggish India’s second-largest software services exporter is looking to spend between $200 million to $300 million to acquire firms and is sharpening its focus on newer markets such as Australia, India, and China to boost growth.

Outsourcing's Five W's
WA Today.com posted a story that correlates the premise of the 5 W's that journalism schools teach novice reporters to offshoring activities. The five W's: who, what, where, when and why should be studied with each venture because the answers to those questions can help minimize costly mistakes.

The Outsourcing Boom Grows for Non-Core Pharmaceutical Activities
Scientist Live.com presented an article that states: "Like their counterparts in other commercial sectors, pharmaceutical organizations are being forced to re-examine their core and non-core activities to determine where new efficiencies can be found, and to drive greater productivity and competitive agility into their operations".

Offshoring Update

2009-05-18T09:34:00.005-04:00

Guide to a Perfect Offshore Outsourcing Vendor Deal
An article in Computer World.com discusses the pitfalls many companies encounter due to knee-jerk decisions made during times of economic turmoil. When the pressure to cut costs is most intense, many companies turn to offshore outsourcing. They see it is a quick way to reduce IT and other back-office expenses. The author of this article reviews 8 of these pitfalls and ways to avoid them. Much of the advice provided here is consistent with the information in Bob's book, the Services Shift".

Offshoring to China.
There is a blog dedicated to the practice of outsourcing, mainly to China that can be found by accessing the following link.

Offshoring in Western Europe
Near Shore Outsourcing is a blog focused on Western European countries sourcing services to East Europe. Follow this blog if you want to be up-to-date with the latest developments in this arena.

Todays Offshoring News

2009-05-14T13:41:00.004-04:00

How Outsourcing Benefits Small Legal Firms.
Immigration Daily provided some useful insight on how solo practitioners or smaller firms can benefit from legal process outsourcing.

Outsourcing in the New World Order
Computer Weekly.com explains in a recent article that given the state of the economy outsourcing projects are coming under increased scrutiny. The best service providers will have to adapt to meet the demands of the new world order - marrying the traditional priority of cost reduction with the business transformation required to drive performance in the years ahead.

Bob's Interview in The May 14 Issue of Financial Express

2009-05-14T13:01:00.004-04:00

The Financial Express interviewed Bob in an article titled "Tax Saving is a Very Minor Issue when One Considers Offshoring". Bob answers questions regarding the proposed tax law changes and how they may impact US companies and offshoring to Indian companies.

Newsworthy Items

2009-05-12T12:11:00.011-04:00

Baby Steps to Better Outsourcing
Nova Sphere blog.com published an article that delves into the reasons why innovation is typically not found in most outsourcing contracts. This is due to the fact that most contracts are based upon the FTE mentality. The author offers the following explanation:

FTE based contracts encourage all the wrong behaviors for both parties, yet they are by far the most common in the industry
You cannot put a Service Level on a person anymore than you can measure a light bulb’s output in liters. An individual’s productivity is but one component of delivering a service, yet it’s the only one companies pay for—no wonder they don’t get the process improvement/transformation/efficiency/fill-in-the-blank-with-appropriate-buzzword. Remember “you get what you pay for”? Paying for people and expecting efficiency doesn’t make a whole lot of sense to me.
FTE-based relationships tend towards “how do we do the same thing for less” through labor arbitrage instead of “how do we do it better” through innovation

To read the entire post access the following link.

Obama's First Move
The Blog at World Press.com discussed President Obama's pending decision on the tax codes for companies that are involved with offshoring. He has proposed a tax revision which will mean that US companies, earning income overseas, will have to pay US corporate tax on that money immediately, rather than deferring payment until the income is returned back to US soil.

Update on Globalization

2009-05-12T09:34:00.004-04:00

Honeywell Committed to India
BANGALORE -- Honeywell International Inc. said it is committed to India as one of its manufacturing as well as research and development hub despite Washington's plans to change tax rules related to U.S. companies' overseas operations.

A Downer on Globalization
The Wall Street Journal reported that Duetsche Bank AG Chairman and CEO Josef Ackerman did not paint a pretty picture on the future of globalization at a talk at the Atlantic Council in Washington, D.C. “We are running a risk of the disintegration” of the global economic order, he said. Why? The Great Recession is making everyone risk averse.

Maintenance Outsourcing as a Global Strategy
Industry Week.com advised that by outsourcing the global service and support of its manufacturing equipment, Lockheed Martin is building strategic value beyond cost reduction. In addition to enabling lean efficiencies and economies, the outsourcing agreement with MAG Maintenance Technologies enhances the ability of proactive maintenance to further its competitive strategy.

Newsworthy Items

2009-05-11T13:17:00.005-04:00

Outsourcing Deals Rising, but Risks Increase as Focus Narrows to Cost Cutting
mcsolutions.co.uk reported that almost 60% of organizations in Western Europe say they will outsource more IT and business process functions this year, compared to last, according to an online survey by analyst Gartner. It's all about cost reduction. More than 70% of respondents rated budget and cost containment as their top concerns in 2009, up 17.5% from 2008.

Are You ready for Transformational Outsourcing?
Gaining better value from an outsourcing relationship also means transforming the organization, not just managing headcount. According to an article published in ittmc.net smart companies adopt outsourcing to transform their processes and strategies not simply to reduce costs. Some of the advantages if this approach is adopted include.; access to additional skill sets and business experience, better resource management and creation of new revenue streams because of available cost-effective expertise.

A Matter of Trust
An article posted by Mark Kobayashi-Hillary in his blog explains a situation that he was involved in regarding trust and credibility in outsourcing arrangements. He offers an eye-opening example of his personal experiences.

Surprising News: Services Shift Blog Named a Top 100 Offshoring Blog

2009-05-07T20:01:00.003-04:00

Somewhat of a surprise, but welcome news. The oDesk. blog has come out with a list of the Top 100 Best Outsourcing and Offshoring Blogs and Resources.

The list is simply presented in alpha order, not as a rank. I was pleasantly surprised to see that the Services Shift Blog was listed as one of the top 43 "general outsourcing" blogs. My impression is that we are just learning to do this, so making any "Top" list is good news.

Thanks for whoever recommended us.

News of the Day

2009-05-07T09:41:00.005-04:00

Wipro Bags IT Outsourcing Contract from Unitech
Business Standard.com advised that Unitech Wireless, the newest telecom services player in India, today announced that it had awarded a multi-hundred-million long term outsourcing contract to Wipro for creating the next generation telecom company.

Can Outsourcing Its Network Stem the Bleeding at Sprint?
Gigacom.com posted an update from the Wall Street Journal regarding Sprint, the No. 3 wireless carrier. They are consideringoutsourcing network operations and management duties to Sweden’s Ericsson. The deal, if agreed to, would see Sprint pay Ericsson $2 billion in return for a 20 percent reduction in network costs. Part of those cost savings would likely come from shifting between 5,000 and 7,000 service employees to Ericsson.

Today's News

2009-05-07T09:22:00.003-04:00

Choose IT outsourcing firm with good track record, says guru
ihotdesk.com presented an article that says firms should not go into IT outsourcing deals with their eyes closed and should ensure that the provider has a proven track record in the business. Ross Taylor, marketing manager at Direct Response advises "Ultimately if you outsource key functions of the business to a company that cannot deliver on it, from your customer's point of view, it's not the outsourcer that's failed, as far as they're concerned, you've failed,". Access the full article via this link.

Health Care Services: Potential Opportunity for Outsourcing Growth
Seeking Alpha.com ran a story that discusses the health care situation in the US, rising costs and a need to maintain quality health care at affordable costs. The article explains that outsourcing is one possible solution. Wit the digitization of data many services are now offshored that were not possible in the past.

Obama vs. Outsourcing
Business Week.com ran this article that discusses President Obama's proposed changes to the tax code. It's a lenghty article but worth reading.

News of the Day

2009-05-05T22:09:00.002-04:00

Outsourcing: Thriving at Home and Abroad
Business Week.com reported that cities from Boise to Gdansk benefit as economic and political pressures prompt companies to outsource work to lower-cost cities at home and overseas. In spite of the troubled global economy—or more likely, because of it—one of the few business sectors that continues to thrive is outsourcing. No wonder: Companies looking to cut expenses in the face of soft demand are keener than ever to hand off parts of their operations to lower-cost providers.

Outsourcing: Obama Tax Plan Unlikely to Prevent Offshoring
CIO.com reported that analysts say it's the low cost of highly skilled labor overseas--not the tax code--that has driven the offshore outsourcing trend. President Obama unveiled tax code changes Monday he said could curb offshoring, but analysts and tax experts believe the plan will have little to no impact on the megatrend that threatens as many as one-in-four IT jobs at large companies.

News of the Day

2009-05-01T08:52:00.004-04:00

Document Outsourcing on Growth Path as Manufacturers Cut Costs
MCSolutions.co.uk ran a story that says interest in strategic document outsourcing has surged as companies look for ways to cut expenses and capital cost. A Gartner analyst is advising organizations to ensure that outsourcing print and electronic document publishing improves customer communications without sacrificing quality, efficiency and confidentiality.

Plan an Outsourcing Deal's End at it's Beginning
Computerworld.com ran a story advising that the time to set the groundwork for a termination transition plan is when you negotiate the original contract. How can you mitigate this risk? Start by making sure your contract addresses the minimum requirements for a termination transition plan. The plan should provide a detailed rule book for doing this in an organized way.

Indian IT Firms Abroad Plan to Hire Foreign Hands
www.expressbuzz.com advised that due to increasing sentiments against offshoring jobs from the US in particular and other countries in general, Indian IT majors are planning to hire more non-Indians in foreign countries. The IT companies however, claim that this is not due to pressure from the US or other countries and is in line with their strategy. Read more via this link.

Daily news

2009-04-30T08:26:00.005-04:00

Amway Extends Outsourcing Contract with IBM Germany
PR Newswire.com reported that Amway GmbH and IBM announced that they have renewed and expanded a EUR 3.2 Million outsourcing contract that will run three additional years. The direct selling company has outsourced a part of its information technology (IT) infrastructure ti IBM in Germany since 2004. The expanded agreement provides an on demand model that enables Amway to flexibly adjust its use of IT resources to meet its business requirements.

Is Now a Smart Time to Revisit Outsourcing Contracts?
Supply Chain Digest.com ran a story that asks the question "in now the right time to re-look at outsourcing contracts?" In light of the current economic situation companies are looking to cut costs in many areas, especially the supply chain. It appears that outsourcing contracts in manufacturing and logistics are a smart place to look. The article outlines four areas where savings might be found by reevaluating current contract terms.

The politics of offshoring: all talk, no action

2009-04-29T12:05:00.002-04:00

Key Insights (9): There are few options for developed countries to respond to this trend.

Continuing with the Key Insights list, but jumping ahead a bit. I did a guest post a week or so ago on Phil Ferst's Horses for Sources blog. Since the post is already written, I will jump ahead to Key Insight #9. Back to numbers 2, 3, and 4 in the coming days.

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Picking up on Phil’s April Fool’s day post, I wanted to share a few thoughts on why we see lots of anti-offshoring rhetoric from politicians, but (thankfully) very little actual policy.

There is certainly a heavy demand from the man on the street to “do something.” It’s easy to understand why. We have become accustomed to trade in manufactured goods and natural resources. But manufacturing accounts for only about 15% of US employment, and developing countries generally enjoy a fully-delivered cost advantage of 10-30%. This is disconcerting for developed country workers, and we frequently observe moves against trade in manufactured goods, such as spurious anti-dumping actions and “buy America” provisions in various pieces of legislation.

Services, by contrast, account for about 78% of U.S. employment, and developing countries enjoy delivered cost savings of 40-70%.

So developing countries’ advantage is much larger in services, and many more people are potentially affected. That explains the political heat and the politicians’ rhetoric, but not the lack of policy.

So, why haven’t we seen offshoring regulations? Because trade in services is incredibly difficult to regulate. Regulating trade effectively requires that two conditions exist:

1. The government can observe what actions firms are taking, and

2. Any proposed policy must be credible and enforceable.

To see why regulating offshoring is so difficult, compare the “offshoring” of auto components with that of IT services.

Auto parts -- Trade displacement in manufacturing is easy to observe. If Delphi closes a component plant in Michigan and opens one in Mexico, it is easy to see what happened. 500 Mexican workers are now doing the same tasks in the same way that the Michigan workers did. Production from the Mexican plant now goes to the customers formerly serviced by the Michigan plant. It is easy and accurate to conclude that the Mexican workers replaced the Michigan workers.

Second, if the Congress chooses to regulate this trade, it is fairly easy to do. Don’t let trucks from the plant cross the U.S. – Mexico border, or slap a tariff on auto components from Mexico. (Note that 99% of economists would recommend that Congress not do this, but most politicians are immune to the logic of comparative advantage).

Offshoring IT services -- IBM has been fairly aggressive about moving software support services offshore. In boom times, IBM is hiring many people in India and a few in the US. So, in 2006 and 2007, IBM hires SAP specialists, software testing, and wireless telecomm engineers in its India operation. These IT specialists work with other IBM teams in Australia, China, Japan, Germany, the UK, and the United States to service global customers.

Then, following the financial crisis in late 2008, IBM decides to lay off systems engineers, maintenance engineers, and COBOL programmers in the United States.

Is it in any way accurate to claim that the SAP specialists hired in India in 2006 displaced the systems engineers laid off in Philadelphia in 2009? Of course not. These are people in different functions, hired at different times.

IBM is a global firm servicing global companies. Except at the most aggregate level, the US government has almost no ability to independently observe whether IBM is “exporting jobs.” They could, of course, require that IBM report on what it’s doing. But there is no chance IBM would report in a way that indicts itself. There is simply no way a regulator could accurately observe what the firm’s 300,000 employees are doing, and who they are servicing.

Second, even if Congress wanted IBM to stop hiring people in India, what could it do? Would the Congress threaten to cut IBM off from the Internet? Or from communications satellites? Would Congress be willing to impose fines that are massive enough to cause IBM to withdraw from international markets, where it realizes 68% of its revenues? Unlike trucks crossing the US-Mexico border, regulators have no ability to monitor the bits and bytes zipping around the Internet, knitting various work teams together and allowing the firm to service global clients.

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The bottom line is that politicians are nearly helpless in the face of offshoring. Firms have a tremendous incentive to locate service activities in low-cost, good quality locations. Doing so cuts costs, increases capabilities, and creates competitive advantage. Politicians would like to regulate this activity, but they can neither accurately observe what firms are doing, nor come up with regulations that can be credibly enforced.

So, expect lots more rhetoric and, perhaps, some efforts to require new reporting by firms. But the offshore trend will continue unabated, despite politician’s hopes. In the short run, offshoring will cause more dislocation and pushback. In the medium and long-run, it will continue to raise productivity and living standards in both the developing and developed countries.

Today's News

2009-04-29T08:39:00.002-04:00

American Axle & Manufacturing Holdings Shifting Production Work to Mexico
Crain's Detroit Business reported today that American Axle has decided to move production from its plant in Michigan to one of their Mexico facilities. The axle program represents about 85 percent of the work currently being done at the Detroit complex. A spokesperson advised that they are idling and consolidating significant portions of the Detroit manufacturing complex to meet the massive production reductions and changes in the market place that the automotive industry is undergoing and that they will continue to operate portions of the American Axle Detroit manufacturing complex.

The Real Cost of Offshore Outsourcing
CIO ran an article that discusses the topic of how offshoring can lead to customer dissatisfaction and losses in efficiencies and productivity. There are also comments regarding the fact that oftentimes outsourced agents are not trained as well as agents who work internally for an organization, and often lack the tools to do a thorough job for customers. While this may be true proper planning and research on the part of the company offshoring the work can prevent a lot of issues. Bob's book provides a very detailed analysis of the process and ways to navigate through the offshoring venture.

More Americans Outsourcing (Their) Own Jobs Overseas!

2009-04-28T10:30:00.000-04:00

Funny parody over on the Onion News Network (perhaps in bad taste with all the cutbacks at Chrysler and GM these days). But, what the heck -- these are services jobs. And, even though its a parody, it does point out some differences vaguely reflective of reality concerning work culture in many US service operations vs. world class delivery centers in developing countries.

Enjoy. I hope you laugh.

More American Workers Outsourcing Own Jobs Overseas

News of the Day

2009-04-28T09:12:00.003-04:00

Critical Questions in Successful Outsourcing
TMC.net posted an item that discusses a change in the focus of what companies need to consider when making outsourcing decisions. Many of the items reviewed in this article are in line with the content of Bob's book.

ATM Outsourcing: a Viable Option for Struggling Banks
istockanalyst.com ran an article that discusses a dilemma banks are having regarding the outsourcing of ATM's. All industries are being affected by the current economic situation and the issue of losing control appears to be a key inhibitor to ATM outsourcing offerings. This can also be the case with smaller banks, notably those that are family-owned and thus have a strongly defined internal culture. Vendor credibility is therefore essential, and the larger institutions in particular will also seek reassurance that both their customer service levels and their overall delivery strategy will not be compromised. The complete article can be accessed via the above link.

A Blogger's Perspective

2009-04-28T08:44:00.003-04:00

Bill Detwiler, Head Technology Editor for Tech Republic posted a blog entry that discusses outsourcing and the fact that it does not have to be a sign of mass layoffs. Rather a carefully planned outsourcing strategy can let you use your current personnel more efficiently. The full article can be viewed via the above link.

Key Insights (1): Offshoring is not reversing anytime soon

2009-04-27T12:00:00.002-04:00

My post of April 14 laid out nine key insights developed in The Services Shift.

Today, I tackle Key Insight #1: The move toward offshoring is not reversing anytime soon. I will cover the other eight insights as time permits in the next few weeks.

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There has been a fair amount of announcements lately about firms bringing work back from offshore. Examples include:

Student Loan firm Sallie Mae will shift around 2,000 positions from its offshore facilities in India to US cities (story)
Delta Airlines is no longer sending reservation calls to India (story)
Florida stops offshoring call center support for its Food Stamp program to India (story)
UC San Diego Medical Center is bringing several activities back in-house (story; registration required)

Sounds like good news for offshoring opponents, and for job creation in the US economy. But does this herald a reversal of the Services Shift? Most likely, no.

To get an accurate view of offshoring prosepcts going forward, it is important to disentangle three distinct phenomena.

There are always some mid-course corrections that occur as firms work to optimize their delivery mix. Recall the famous Dell "reversal" of a few years ago (2005 I believe). At that point, Dell had moved more than 10,000 customer care positions to India. It found that some of its largest customers preferred US-based support and were willing to pay for it. So the company brought 500 positions back. The move was widely covered as a "failure" or offshoring, but it was merely a mid-course correction. The UCSD story sounds a lot like this -- normal adjustments, but why not get some good PR out of it.
Temporary effects from the economic downturn. As anyone who works in this field knows, jobs are a radioactive topic these days. Firms can get some easy PR and political goodwill by making a big announcement about bringing jobs home. The Sallie Mae and Delta Airlines stories have this flavor. Congress is considering whether to change the regulations governing student loans and Sallie Mae is in danger of losing its core business. Delta has big union problems resulting from its merger with NWA. Announcments like this provide some cover for tough decisions elsewhere.
The underlying trends that are driving the Services Shift. As discussed in Chapters 1 and 2 of The Services Shift,there are five fundamental shifts driving the globalization of service activities. These are:

Economic liberalization in countries around the world. Since 1985, the share of global population living in countries that are "open" to global trade and investment has risen from 23% to 78%. That doesn't mean all those people in India and China are exporting to the US and EU. But if they want to consume the things we make (airplanes, movies, higher education), they have to export something. And the activity they have the largest advantage in is services.
The digitization of business processes. As business data and correspondence becomes digitized, location becomes irrelevant. There has been a tremendous shift toward digital records (think SAP and Oracle ERP systems). This faculitates global sourcing.
Improvements in the cost and capabilities of computing and telecom. The relentless progress of technology opens up new opportunities for move work abroad.
Growing capabilities around the globe. The number of people receiving both basic and elite educations has skyrocketed in recent years. Many of the top business, technology, and engineering schools are now located in developing countries. Visa restrictions in the US mean that talented young people are staying at home, and serving global markets from there.
The rise of a global business culture. 25 years ago, doing business in a developing country meant doing business like the locals. Today, business culture is converging on the western norm (English, lots of MBAs, entrepreneurship and equity market allocation of growth capital). In the old days, sourcing from India, China or Brazil was difficult, today it's a snap. Chances are, there are plenty of graduates from US/EU graduate programs, potential suppliers use the same software packages, and they read the same books and watch the same movies. In short, cultural distance has declined remarkable.

So what does this all mean for the future of offshoring? If we attempt to sort out the transient vs. the structural trends, we see that item 1 above is clear transient. When you look into it, most of the "bringing jobs back" stories have lots of caveats and contingencies. Many are either PR moves or small adjusments.

Item 2, almost by definition, is transitory. The economic downturn makes offshoring polticially radioactive. That means firms don't like to talk about it. But the flip side of that coin is that margins pressures are creating more and more pressure to go offshore -- both to cut costs and as a catalyst for restructuring. So there is a divergence between political and economic logis (what else is new!!).

Finally, the structural drivers (#3 above) are here to stay. The only one of the three with the potential to reverse is policy liberalization (see Zimbabwe, Venezuela, and Bolivia). But those cases are isolated and generally lead to economic downturns. Drivers 2-5 are here to stay.

All this means that the megatrend toward the globalization of services (i.e. offshoring) will continue to move forward. There will be periodic corrections, but I would be willing to bet that offshore sourcing from developing countries will be at least twice as high five years from now as in 2008 (implying a 15% growth rate). My best guess is far higher.

Any takers?

Services Shift Coverage at Motley Fool Site

2009-04-26T15:57:00.002-04:00

The Motley Fool website posted an article reviewing The Services Shift last week.

The Motley Fool is an investing site, and they took a somewhat unexpected path to reviewing the book. They had positive things to say. But if you read the article/review, you might come away thinking the book was an investment tome.

Any press is good press. Please read, and feel free to comment.

Differing Viewpoints

2009-04-24T08:11:00.005-04:00

Within the past week reports have been issued by two different publications with opposing projections.
Business Week.com ran a story about a Gartner report stating India's share of the offshoring market is expected to double between 2008 and 2010. "The increase is driven by demand for lower cost options during the global recession." However earlier this week a report issued by IT Worl d reported just the opposite. "The growth rate of offshoring in India is expected to come down considerably, as new clients are increasingly including other countries in their evaluation, according to research firm Gartner." Do you have any thoughts on this? We'd like to hear what you have to say.

Newsworthy Items

2009-04-24T07:45:00.006-04:00

Unilever HR Outsourcing Deal Shows Companies Are Willing to Use Multiple Providers.
Workforce.com ran a story about Unilever's recent decision to outsource its HR processes for its Latin America workforce to IBM. This decision signals that employers are now more likely to go to different HR business process outsourcing vendors for different parts of their business.

American Tower to Make India Hub for Asian Ops
Wall Street Journal (sub required): More and more mobile companies in India are outsourcing their passive infrastructure requirements, including telecom towers, to independent companies. American Tower Corp. wants to build its operations in India and make the country its hub to enter other Asian markets. A company rep stated that the company is also looking at "opportunities for growth" in Sri Lanka, Vietnam, Philippines and other South East Asian countries.

BP Looks Outside for Solar Cells to Drive Down Costs - Wall Street Journal

Bank of America Hired Thousands - Abroad - Money News.com

Offshoring News

2009-04-23T11:18:00.005-04:00

City Saves by Outsourcing Construction Technicians, CAD Designers
The Ottawa Business Journal reported that the city of Ottawa has saved significant sums of money by SELECTIVELY outsourcing some of its computer-aided design (CAD) technicians and construction technicians. However, the city is financially better off using its in-house project managers and senior engineers.

Emerging Offshore Outsourcing Markets You Can't Miss
Computer World.com reported that the London School of Economics Outsourcing Unit ran a study revealing that Egypt has the most market potential among emerging providers of global IT services. The authors, who compared data on costs, infrastructure, skills and other factors among 14 offshoring up-and-comers, say that Egypt has a good cultural connection with the West, strong language skills, good positioning as a partner with other offshore leaders like India, and convenience for European businesses.

TPI Index: Outsourcing Performance Remains Soft
Consulting-News.com posted the results of a study they performed showing that 2009 will be a defining year for outsourcing as companies seek out greater cost savings measures as a result of corporate conservatism evident in the decision-making and the absence of big, transformational deals that usually excites the industry.

News of the Day

2009-04-22T08:29:00.006-04:00

NASA Outsources Space Station Transport to SpaceX
E-Week.com announced that a contract to design, build and operate a resupply program for the International Space Station was awarded to a new company founded by Elon Musk, co founder of PayPal. Mr. Musk started SpaceX (Space Exploration Technologies) after he sold PayPal to eBay. His goal was to take private enterprise inot space.

Outsourcing Bloggers Provide Their Perspective

2009-04-22T08:11:00.004-04:00

Interesting Perspective on the Satyam Purchase
Mark Kobayashi-Hillary has a blog "Talking Outsourcing" that we have been following for some time. He makes an interesting observation in a posting yesterday regarding the bid by Tech Mahindra for controlling interest in Satyam. If you have been following the Satyam situation you can understand why the questions was asked. Please refer to the attached link to view the entire article.

You Say Out-tasking, I Say Outsourcing
Ann Hall, a fellow blogger, posted a story in her blog at ITBusinessEdge.com that discusses an interview she had with one of India's leading outsourcing executives. Her perspective on the terminology used by the executive and their attempt at downplaying what is actually being done. She says: "I can't blame outsourcing companies for being worried about the possible negative impact of political fallout on their bottom lines. But I think the use of "out-tasking" rather than outsourcing is an obvious and ineffective dodge of larger issues".

Today's News

2009-04-21T10:30:00.004-04:00

When it Makes Sense to Bring Outsourcing Back In-House
Modern Healthcare.com reported that the University of California at San Diego Medical Center made a decision to bring several activities back in-house after a consultant helped the hospital evaluate its outsourcing strategy. The hospital decided to resume operation of its software and food service systems department, which involved, among other things, reestablishing its supply chain. The article says the change helped the hospital save approximately $1.6 million.

Florida Stops Food Stamp Outsourcing to India
CBS Broadcasting reported that Floridians were upset because their calls about food stamps and the government issued debit cards for the program were being answered by operators in India. JPMorgan Chase & Co., which has the contract to handle the program including customer service and administration of the EBT cards, has assured state officials that any calls about the program will be re-routed to operators in the United States. JP Morgan Chase has two U.S. call centers but also uses call centers in India to handle any overflow.

India is Losing its Share of Outsourcing Market
IDG News Service reported that the growth rate of offshoring to India is expected to drop considerably as clients are increasingly including other countries in their decision matrix. According to a Gartner report; "In the past, 80 to 90 percent of clients would automatically source from India, when they decided to go offshore. That number is down to 60 percent."ndia is losing its share of outsourcing market, says Gartner

Newsworthy Items

2009-04-20T11:12:00.006-04:00

Delta No Longer Sending Reservation Calls to India
The Associated Press announced that Delta Air Lines Inc. no longer is outsourcing reservation calls to India after years of complaints from customers who preferred to speak to someone in the United States. Delta's Chief Executive Richard Anderson told employees in a recorded message that the world's biggest airline operator is in the process of bringing all customer calls back in-house in the U.S.

Weighing the Benefits of Onshore Outsourcing
Computer World.com posted an article that discusses the rationale behind the decision process of whether a company should adopt an onshore or offshore strategy.

Infosys Sees Projects Worth $1 Billion Coming up in India
Economictimes.indiatimes.com explains that Infosys Technologies sees over $1 billion worth of outsourcing contracts coming from the Indian market over next few years, as country’s government and state-owned organisations seek to become more efficient by outsourcing their IT needs. This announcement comes at a time when customers in its top markets of US and Europe are slashing their IT budgets.

Today's News

2009-04-17T10:04:00.004-04:00

Saving Money by Outsourcing
Office Industry Resource posted an article discussing the details and benefits of outsourcing work to virtual offices and the cost savings that can be realized by taking advantage of their services.

Managed IT Outsourcing Remains Robust
Onestopclick.com reported that the value of managed IT outsourcing deals increased last year despite the difficult economic climate. Gartner research results indicate the average total contact value (TCV) for such deals was $17 billion in 2008, compared with $12 billion in 2007.
Despite the rise, the group predicts that trend will be toward a greater number of managed IT outsourcing deals, but with smaller TCVs.

Book Review Posted

2009-04-16T11:13:00.008-04:00

Remi Vespa, a noted software development expert and author reviewed Bob's book. An excerpt from the review is noted below.

"I just finished Robert Kennedy’s ”The Services Shift”, a book on the globalization of services, with an emphasis on Information Technology. Kennedy is a Professor at Michigan’s Ross School of Business. He also runs the William Davidson Institute — a fairly prominent think-tank that focuses on business and policy issues in developing countries."

"This book is a goldmine:

IT managers will find very detailed and clear information on what, when, where and how to offshore.

Outsourcing vendors will find relevant and not-so-well-known information on industry trends.

But hold on, there is more. Because the book goes far beyond the technicalities of services offshoring, literally everybody would benefit tremendously from reading its sections 1, 2, 6, and 7."

Click here to read the entire review.

Today's News

2009-04-15T08:10:00.004-04:00

Call Center Outsourcing Becomes more of a Strategic Imperative and the US Receives Renewed Consideration
Sourcemag.com ran a story about call center work being sourced to US companies. As the United States economy experiences its most severe economic downturn since the Great Depression, an increasing number of companies are recognizing the benefits of outsourcing all, or at least some of their call center operations. In addition the article indicates that while it is not a monumental shift, domestic options are gaining traction not only for political reasons, but more notably because of evolving applications and business process integration requirements.

Key Insights

2009-04-14T10:00:00.004-04:00

As previously noted, I just returned from two weeks on India. Most of the time was spent with various MBA student teams, working on a variety of projects with interesting organizations.

A second task was to do a bunch of PR for the book (to be released in India in late April). Perot Systems was great -- setting me up with about a dozen leading newspapers that led to good coverage.

Finally, I did events for Ross alums in Delhi and Mumbai (Bombay). The core of the presentation was an update on the school, but about half was key insights from the book. I will take the next week to run through the insights one at a time. But to give you some foreshadowing, I identified and discussed nine "Key Lessons." Expect a discussion of one of these each day over the next week or two:

The move toward offshoring is not reversing anytime soon.

Much confusion is caused by the fact that commentators use one word ("outsourcing") to describe two distinct phenomena.

As firms gain experience, their offshore capabilities increase and the range of possibilities expands.

We are seeing a shift from “India” to global sourcing

We are witnessing a convergence of business models for "global" and "India" firms.

There is a dramatic shift taking place from cost-focused offshoring to business enhancement offshoring.

The fastest growth is in high value activities.

Firms that move toward global sourcing require new skills to manage their organizations.

There are few options for developed countries to respond to this trend.

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I hope you'll check back, and join the discussion.

News of the Day

2009-04-14T09:19:00.005-04:00

Indian Joint Venture Makes Highest Bid for Satyam Computer Services
The New York Times reported that Tech Mahindra, a joint venture between the BY Group and the Indian conglomerate Mahindra & Mahindra, was the high bidder for Satyam Computer Services with an offer of $1.2 billion. Satyam has been losing clients, investors and employees since its chairman admitted to accounting fraud in January.

Outsourcing Not the Big Savings Firms Expect.
Business Center.com ran an article that discusses a study performed by Compass Management Consulting. The report says that companies rushing to outsource software development for quick savings actually risk significant losses in productivity because developers do not fully understand business requirements, according to the consultants. This situation holds true for any company planning to outsource a business processes. Failure to plan properly can lead to wasted time and effort.

Good discussion unfolding on Policy issues

2009-04-13T18:21:00.003-04:00

The guest blog on Horses for Sources is generating some interesting discussion (read from the bottom up) -- almost all positive.

I hope you'll join in.

Policy discussion on Horses for Sources blog

2009-04-13T12:00:00.005-04:00

I did a guest post over on Phil Fersht's Horses for Sources blog.

Phil's blog is one of the hubs for outsourcing.offshoring discussion on the Internet. It will be interesting to see what reaction we get.

The post, titled The Politics of Offshoring: All Talk, No Action, should generate a good discussion. I encourage you to check out the blog and participate in the discussion.

Todays' News

2009-04-13T10:47:00.007-04:00

Tech Recruiting Clashes with Immigration Rules
The New York Times ran an article today that discusses the impact visa restrictions are expected to have on the American economy and competitiveness of US firms. The article explains that the debate has only sharpened as the country’s economic downturn has deepened. Advocates for American-born workers are criticizing companies that lay off employees even as they retain engineers living here on visas. But the technology industry counters that innovations from highly skilled workers are central to American long-term growth

Outsourcing your call center? Nicaragua is tops for location and convenience
The Examiner.com posted an article on how Nicaragua, has opened its doors generating excitement across the industry. With CAFTA (Central American Free Trade Agreement) in place, a short 2 ½ hour flight from the U.S. allowing execs to conduct same-day business, operating in the central time zone, and an eager workforce -- Nicaragua is growing in popularity as an easy, convenient and cost-effective near shore/offshore location for U.S. companies. One reader posted a comment to this article with a proposal for an anti-OFFSHORING "PER BYTE TAX"

Is bringing the jobs back home a serious strategy?
Talking Outsourcing discussed the news that US student loan firm Sallie Mae has decided to cancel its Indian offshore operations, a back office that employs around 2,000 people. Why? The recession. The troubled economic climate means that jobs are being lost in the US and Sallie Mae has decided to hire locally back in the States as a response. I

Offshoring Affecting Alternative Industries

2009-04-13T10:38:00.003-04:00

France a Hub for Outsourcing Clinical Trials
Global Atlanta.com ran a story today that shows offshoring is reaching out to fields of study that are far outside the manufacturing sector. Companies are emerging all over the world to handle specific tasks at lower costs and with higher expertise. This phenomenon has extended to the health care field. France is benefiting from its success as a destination for outsourcing in a specialized biotechnology field.

Blog coverage of The Services Shift

2009-04-12T22:54:00.005-04:00

Blogging has been slow because of travel. I will have much more time in the coming weeks.

A couple pointers to interesting discussions elsewhere:

1. Stan Lepeak over at the EquaSiis blog provides a nice review of the book.

2. Mark Robinson at Provocations and Cogitations blog also provides a strong review.

3. Remi Vespa at the About IT Outsourcing blog also reviews the book.

Thanks to all. Now to translate this into sales. I hope you'll check out the book at Amazon and consider purchasing.

A Couple of Sites to Visit

2009-04-10T09:41:00.005-04:00

While performing a web search for information on offshoring I came across two additional resources for information on the topic.

Outsourcing Magazine is available in hard copy or online. Registration is free.

SourcingMag.com Blogosphere is a source for you to view postings from a number of bloggers on the topic.

Today's News

2009-04-10T07:50:00.006-04:00

Transparency in Outsourcing:
This article in E-Commerce Times discusses the laws governing the disclosure of layoffs and the state of the outsourcing market.

Legal Process Outsourcing (LPO) Adds Value to the Role of Intellectual Property:
IP Review Online ran an article on LPO stating that it can be helpful to patent or trademark attorneys where the emphasis is on record keeping. The author explains that the problem most companies have is that record keeping is time-consuming. LPOs can provide the training and resources required.

Porsche Finds Fortune from Unlikely Outsourcing
Helsinki Times ran an article on how Porsche has been able to utilize outsourcing in Finland to their financial advantage. While many companies have moved work to India, China and Taiwan Porsche has taken a different approach.

IBM Targets India to Beat Rivals at Their Own Game
Bloomberg.com reported that IBM has hired more than 70,000 employees in India, taking advantage of the “hyper-growth” there by helping domestic companies develop infrastructure. IBM also may attract new customers from India’s Satyam which is still involved in the nation’s largest accounting scandal.

New Findings Highlight Economic Impact on Recruitment Process Outsourcing

Marketwire.com reported that organizations that outsource their recruitment activities are achieving significant gains.

"Buy Amercian Does Not Come Free"

2009-04-08T08:53:00.003-04:00

During his visit to India Bob was interviewed on the widely debated issue of offshoring of service activities and its profound impact on businesses and governments in both developed and developing countries. Pragati Verma caught up with Bob to understand the drivers and implications of the globalisation of service activities. The question and answer session is covered in full and can be reviewed by using the following link.

News of the Day

2009-04-07T08:36:00.003-04:00

Outsourcing Is Not a Cure-All
An article posted in Smart Brief advises that “Outsourcing can bring rapid balance sheet results, but that doesn’t automatically translate into long-term business value. There’s a vast difference between externalizing for financial re-engineering versus business transformation.”

Scotland Missing out on Outsourcing Bonanza
Scotland could become the next big outsourcing destination, but is being held back by a lack of enthusiasm according to some Scottish executives. Interviews revealed overwhelmingly that moving back-office operations to Scotland would be a better alternative to destinations such as India and eastern Europe. Posted in Vuenet.com

Todays' Offshoring News

2009-04-06T11:09:00.008-04:00

Sallie Mae to Create 2,000 US Jobs, Reverse Outsourcing
Biz Journal.com reported Sallie Mae plans to create 2,000 jobs in the United States by reversing previous outsourcing actions and bringing all of its overseas operations back to America.

Smooth the Path of Outsourcing.
An article written in today's SMEweb.com discusses the fact that today's global economic crisis is creating untold challenges for businesses in all industries, in all corners of the world. Business leaders of large and small companies alike are struggling to weather the storm that is affecting the survival of many once solid companies. The author lists several basic steps that companies need to understand when heading into the offshoring arena.

Outsourcing In Game Industry on the Increase
This article in the GAMASUTRA.com website shows that offshoring is taking place in many industries. The computer game development industry is starting to see an increase in their outsourcing budgets by nearly twofold, with the proportion of companies planning to spend $2 million or more on outsourcing rising to almost 20% in 2008.

Campbell Soup Signs 65 Month Agreement with IBM for Outsourcing Services
RTT News.com reported that Campbell Soup Company has signed a 65-month agreement for information technology outsourcing services. As part of the agreement, IBM will provide IT infrastructure services, network support, application maintenance services and security services from IBM Internet Security Systems. IBM will offer infrastructure services on demand for enhanced cost efficiency and increased flexibility.

Today's News

2009-04-03T08:43:00.011-04:00

Microsoft Applying for Fewer H-1B Visas
The Seattle Times reported that with ongoing layoffs and hiring slowed across the economy. Microsoft this year is applying for "substantially fewer" H-1B visas. But their General Counsel Brad Smith said that Microsoft "still sees the program as an important part of its strategy to hire the best people, regardless of their citizenship. Of the "new applications" the company is filing for the 2010 fiscal year ' a solid majority' are to convert existing employees working on so-called L visas to H-1B visas, rather than to make new hires"

Kaiser Outsourcing Deal Leads to Job Cuts
Kaiser Permanente announced March 16 that it would outsource the management and storage of most of its data to IBM, eliminating about 700 jobs at Kaiser. The same day the seven-year deal was announced, Kaiser said it would eliminate 160 other information technology jobs in more than 30 locations across the country "as part of a realignment of its information technology function," according to a company statement. None of the positions were in areas that would affect patients or physicians, Kaiser spokeswoman Laura Dunn said in an e-mailed statement.

Outsourcing 2.0: What's the new India?
A report was issued by the London School of Economics explaining that the global growth in IT and business process outsourcing (BPO) in various new countries across the globe will allow businesses to gamble on many different off shoring deals. The author states "Off shoring today is a transitionary phase in a much larger movement towards a global division of labor." The predicted growth in the global ITO and BPO markets with outsourcing revenue is set to grow between six and nine per cent each year. The UK is predicted to have a shortfall of more than 14,000 IT specialists by 2010 and the US a shortage of 15 million by 2025. For a full review of the article please use the above link.

Transparency in Outsourcing, Part 1: Silent Shrinkage
Sometimes when companies lay off thousands of workers, they actively publicize the action in order to appease investors. Other times, little to no fanfare is made at all. Often times, at least some of these eliminated positions are actually being outsourced -- are outsourcing firms cleaning up during an overall economic recession? This article posted in E-Commerce Times discusses the premise that concerns about public outcries due to offshoring is NOT inhibiting companies from continuing their efforts.

Bob's Live Interview on Marketplace.Public Radio

2009-04-03T08:15:00.002-04:00

Bob was interviewed live on marketplace.publicradio.o rg by Ms. Renita Jablonski. The discussion focused on how H-1B visas affect US jobs. To listen to the full interview or read the article please click on the above link.

In The Teeth Of The Economic Storm: Globalize!

2009-04-01T13:20:00.003-04:00

Bob posted an Op Ed piece in Forbes.com to discuss off shoring and the global economic crisis. Several key points include: The global economic crisis has political and business leaders thinking defensively--increasing trade protection, pushing "buy American" provisions in major legislation, attempting to curtail the use of H-1B visas, the documents that allow highly skilled nonimmigrant workers into the country. The most prominent example of this bad trend is the amendment to the Troubled Asset Relief Program legislation, inserted by Sens. Grassley, Sanders and Durbin, that makes it nearly impossible for financial firms to hire talented foreign nationals--at least to work in the U.S.

The instinct among business leaders during crisis is often to do whatever is necessary to make the politicians and activists happy. This instinct is understandable. It's also wrong and ultimately destructive. This article generated quite a few responses. To investigate further please click on the above link.

Media Blast -- India Addition

2009-03-31T17:26:00.000-04:00

Have had a very busy few days in India.

First, lots of interactions with our MBA MAP teams.

First team up is working in Noida, focusing on Drishtee's microenterprise lending strategy.
Spend the weekend in Hyderabad working with a second team focusing on Acumen Fund's healthcare strategy.
Next up is two days of Ross alumni events (Delhi then Mumbai/Bombay).
Then back to Noida Wednesday Thursday for some work with the Perot Systems team, working on skills

The real news, however, is promoting the book. For those of you who've read it, you know that Perot and India play a large role. Anurag Jain, Perot's MD for Asia Pacific and Head of the firm's Business Process Solutions business, had his team organize an absolutely fantastic couple of days.

I appeared on Power Lunch, the midday program on NDTV, India's version of CNBC to discuss the book and President Obama's comments re: offshoring (sorry, no video)
Had one-on-one interviews with a series of financial publications (The Financial Express, The Economic Times, Global Services Magazine)
Then a "Wine and Wisdom" event where Anurag and I spoke about offshoring with a group of Perot executives and another dozen or so journalists.
In Hyderabad, three more interviews, with Business Line, The New India Express, and the Deccan Chronicle.

I was on cover of the Saturday Economic Times. The article was about Obama's offshoring comments in the town hall meeting and the quote from me were pretty minor. There was a huge picture of Obama on the front page, with a pull quote from me directly responding to him. Wish the book was already released here in India. You can't buy press like that.

--- --- ---
Interesting contrast with the US journalists I have been interacting with over the past few months. Not saying one is necessarily better than the other.

My experience is that most US journalists are focusing on the story of the day. They want provocative quotes and I have to push to get references to the book included in the writeups. Here, nearly all the dozen or journalists who interviewed me had spent time with the book. Many had read substantial portions. The focus was very much on the book -- why I wrote it, what was the target audience, engaging me on the key messages, etc.
I have the sense that the book will be huge here in India. Judging by the journalists, it seems to hit on a set of issues that are top of mind here. All wanted to stay in contact for future stories. They were happy to work with me and the PR firm on timing release to match the book launch (unfortunately, not for a couple more weeks here in India). Several forwarded requests from their editors about whether I could do guest, or regular columns in their publications. We're doing fairly well in the US, but this market feels ripe. We'll see.

All in all, a very productive few days on the book front. Several pieces coming out in the US next week as well. Look for something in Forbes.com, and a guest blog on Horses for Sources. Also have a piece accepted in Financial Executive Magazine that should be in the May edition.

Today's News

2009-03-31T12:54:00.002-04:00

New Job and Cost Reduction Opportunities Emerge as Manufacturers Contemplate Migration Back to the U.S.
A report was issued in Smart Brief that shows a number of companies are contemplating the re-establishment of manufacturing domestically, amid rising costs and other strategic challenges within the off-shoring model. As companies reassess their manufacturing and supply chain strategies for today’s global economic environment, the trend may create significant job opportunities in the U.S., according to the recent study.

“For years, the concept of off-shoring, or moving production and/or sourcing operations to a foreign country, has been the mantra of any supply chain manager looking to cut costs,” said John Ferreira, Principal and Global Manufacturing Industry Practice Leader, Archstone Consulting. “Now, amid volatile oil prices and an uncertain global economic future, this analysis no longer is a certainty. Furthermore, companies that will commit to domestic manufacturing can spur much-needed improvements in customer service, innovation and job creation – especially when servicing the large domestic market.”

TCS to Absorb RR Donnelly Staff
Sify.com reported that approximately 80 employees working with the India unit of Chicago-based RR Donnelley & Sons will join the rolls of the country’s largest software exporter, Tata Consultancy Services, starting June 1. The reason: Both RR Donnelley and the back-office unit of TCS provide third party transaction processing services to a US-based financial services company. The US firm has embarked on a vendor consolidation drive, as a result of which it has decided to move some of the BPO assignments from RR Donnelley to TCS.

Generally whenever a client company moves work from one vendor to another, both vendors have to come together to ensure smooth transitioning of knowledge and processes from the incumbent vendor to the new vendor, say analysts. Whether a company is initiating a new off shoring activity or transferring work among vendors the key to a successful event is clear communication of the roles, responsibilities and expectations of all concerned parties. This point is brought home in chapter 3 of Bob's book.

Newsworthy Items

2009-03-30T09:28:00.003-04:00

Two US Companies adjust to the changing market to offer outsourcing services.
A report in Smart Brief stated that OnForce and Autotask have expanded their collaboration making, and deploying local IT services quicker, easier and more cost ffficient. Autotask is extending its integration with the OnForce platform to make it easier for customers to outsource their service needs by tapping into a virtual nationwide network of service technicians and matching and deploying IT service projects from start to finish.

China's Neusoft Gained 18.2% Net Profit Growth and 29.6% Overseas Outsourcing Increase in 2008
Smart Brief reported this morning that Neusoft Corporation, a leading IT solutions & services provider as well as the largest offshore software & service outsourcing provider in China, published its 2008 Annual Report recently. The report indicates a continuously high-speed growth in its two core businesses, industry solutions and product engineering solutions, based upon its overall business strategy in both domestic and international markets. More evidence that India is not the only country with growth in the off shoring arena.

India inc. gets White House meeting on H-1B Visas
An article in Computer World.com reported that a delegation from one of India's largest business groups visited Washington to make a case for the H-1B visa program, among other political topics. Apparently it was a group with enough clout to meet with top White House officials. In India, these visas are seen as critical to that country's IT services industry. The Obama administration has yet to outline its plans for the H-1B program, but the White House has given some signals that it might support an increase in the annual visa cap — primarily via the appointment of officials who have advocated cap increases in the past, such as Janet Napolitano, the former governor of Arizona and now secretary of the U.S. Department of Homeland Security.

When Obama was a U.S. senator, he supported a comprehensive immigration reform bill that was proposed in 2007 but never voted on after its sponsors failed to get enough support for a procedural motion to end debate. That bill would have raised the annual H-1B cap from 65,000 regular visas to as many as 180,000, while also authorizing additional visas for foreigners with advanced degrees from U.S. universities beyond the 20,000 that currently can be issued each year. Since 2007, Obama has continued to urge support for comprehensive immigration reform, but without being specific on the issue of raising the H-1B cap.

The Need to Redefine Ourselves:

2009-03-30T08:55:00.006-04:00

An article in the New York Times reported that in the past, Kettering University has "honed its reputation as the West Point of the automobile industry, offering valuable work experience for its students at car companies and parts suppliers, and then virtually assuring them lucrative jobs upon graduation." Now, however, the school's students "are finding this fast track to a career shut down because of the crisis in Detroit," with some being "laid off from their student jobs at places like General Motors." Other students "are quickly switching their minors to fields like medicine, the environment and aerospace," and "even those who are clinging to their dream of an automotive career find the atmosphere to be grim at employers, where they alternate six months of work with six months of studies." The school itself is working "with a broader range of employers," including the United Parcel Service, museums, and the US Central Intelligence Agency. Bob has been advising us that if the US workforce intends to survive we will need to reinvent who we are. This article clearly shows that changes in the global economy have affected our young students currently enrolled in programs at US universities.

"The Services Shift" is Reviewed by The Hindu Business Line.com

2009-03-30T08:13:00.001-04:00

The Hindu Business Line.com web site reviewed Bob's book in its March 29, 2009 edition. The review references Bob's 7 predictions for offshoring which are covered in chapter 7 of the book. Two of the seven predictions are quoted in the article. The interviewer closes the piece with the following comment: "A book with insights that can make you shift in your seat". Please use the above link to read the complete review.

Obama Town Hall: Partial Sanity on Offshoring

2009-03-29T14:24:00.005-04:00

I'm still traveling in India (more on that in another post), so I'm running a bit behind.

An interesting development in President Obama's on-line townhall meeting. A woman named Harriet, from Georgia, asked the following question (all quotes from the NYT transcript ):

When can we expect that jobs that have been outsourced to other countries to come back and be made available to the unemployed workers here in the United States?

The president gave a surprisingly coherent response -- at least for a liberal democrat. Here it is:

Now, a lot of the outsourcing that was referred to in the question really has to do with the fact that our economy -- if it's dependent on low-wage, low-skill labor, it's very hard to hang on to those jobs because there's always a country out there that pays lower wages than the U.S. And so we've got to go after the high-skill, high-wage jobs of the future. That's why it's so important to train our folks more effectively and that's why it's so important for us to find new industries -- building solar panels or wind turbines or the new biofuel -- that involve these higher-value, higher-skill, higher-paying jobs.

So I guess the answer to the question is, not all of these jobs are going to come back. And it probably wouldn't be good for our economy for a bunch of these jobs to come back because, frankly, there's no way that people could be getting paid a living wage on some of these jobs -- at least in order to be competitive in an international setting.

So what we've got to do is create new jobs that can't be outsourced.

[He then went on to talk about "Green jobs" and having union workers building a smart grid, making $80,000-90,ooo. In the interest of space, I am leaving that out because it's very long and kind of wandering]

--- --- ---

I offer a few thoughts:

First, he didn't take the bait and make references to "our jobs" or "American jobs." That's progress.

He didn't roll out the "no tax breaks for companies that export jobs" line that nativists seem to like so much. There are no such tax breaks for "exporting jobs," and if the people who use such lines think they can take away other breaks for companies they don't like, they will run into the problem of identification and designing a program that actually works (discussed below Offshoring and Public Policy -- a Conundrum )

He seems to be somewhat mistaken about the nature of the work going offshore. From 10 to 5 years ago (as BPO gained steam) much of work was medium skilled -- things like call center jobs, accounting and finance, and claims processing.

What the president misses is that software jobs (in India, a bit more than half the total) are fairly high skill, certainly much more so than the union construction and electrical positions he talks about. Furthermore, the fastest growth today is in high skilled KPO (knowledge sector offshoring) work. Things like engineering services, business analytics, product design, teleradiology, and others.

My overall position is that, while disruptive in the short run, this is ultimately beneficial in the long run.

Bottom line: The president gets a B+. He didn't fall into the typical political trap of mischaracterizing the trade as win-lose (or zero sum). That puts him ahead of 75% of politicians, and 95% of democrats in Congress.

On the other hand, he doesn't understand (or at least communicate) the real nature of what's going on. It will be interesting to see what actions he takes going forward. One of the first tests will be how his administration treats the auto companies. Will they force them to cut back on software offshore outsourcing (GM does huge amounts of work offshore), or on back office stuff (Ford is ramping up its business analytics unit in India). Time will tell.

Offshoring News Today

2009-03-28T07:37:00.005-04:00

BPO puts Sri Lanka on the Global Sourcing Map
A recent posting in the outsourcingbpo.cbronline.com stated that although Sri Lanka is some way down the list of global sourcing locations its newly created outsourcing trade association believes that the country has the necessary attributes to become a leading center for business process outsourcing.

Sri Lanka’s budding offshore industry has inevitably been overshadowed by its larger Indian neighbor, which has been the world’s leading sourcing hub for the last decade. However, the market situation is now more favorable, as vendors are increasingly looking to offer services from multiple locations, often using India as a central hub while also delivering services from satellite facilities in Eastern Europe, Latin America and Asia. The entire article can be read via the above link.

Offshoring Curbs to Hurt US Badly
Infotech.Indiatimes.com posted a story regarding how protectionist measures will seriously hurt the US. A Duke University professor and Harvard researcher Vivek Wadhwa was interviewed in the piece and made the following comments:
"The US will see many times more job losses if it raises protectionist barriers as most of its top companies derive a major chunk of their revenues from foreign markets. As far as the issue of lawmakers trying to stop TARP-assisted companies from outsourcing, they will simply have to give these companies more. After all, the reason companies like JP Morgan are sending work abroad is because it is cheaper,”
“The protectionist measures will backfire if they get out of control. Right now, this is just noise. The last time the US did this was in 1920 and this led to the depression,”

The article also delved into the fact that the US is not alone in making anti-outsourcing noises. The economic slowdown has led to concerns over job losses in other markets and any move to outsource jobs is being met with resistance and paranoia. The complete article can be read by using the link above.

Newsworthy Items

2009-03-27T11:31:00.006-04:00

IBM and the Rebirth of Offshoring
Time.com Business & Tech ran an article that parallels the discussion Bob had with the WSJ today. The article explains that offshoring may be making a big comeback as word leaked that IBM would cut about 5,000 jobs in the U.S. and move the work to India. This may be the beginning of a new wave of moving work to developing countries which have large pools of well-educated workers.

India's GDP grew at a rate of 7% or better the last two years. The IBM news is troubling because labor costs in the U.S., even among highly educated adults, are falling. American workers should be available for employment at salaries much lower than they were two years ago. It appears that IBM has elected to move jobs offshore rather than keep them in the U.S. despite the trend of more tech workers losing their jobs here. But, the cost of labor in India, which was already below that in the U.S., is likely to be falling even faster than it is in the U.S. While labor prices drop in the U.S., they are probably dropping faster in countries like India and China. India's official unemployment rate is 8.2%, but is expected to rise throughout the balance of the year.

IBM clearly arbitraged the joblessness in the U.S. and India as it made its decision about where to employ several thousand people. To put it crassly, IBM is looking for the equivalent of the lowest cost bidder.

Bob has been saying for a long time that the US workforce will need to redefine themselves in order to compete in the global economy. It is a tough realization to come to grips with but it is a fact of life today.

Offshoring Outlook: Latin America
A story posted in CIO.com discusses the growth of outsourcing to Latin American companies. The author states: "With an estimated population of 559 million, a growing percentage of which is multi-lingual and well-educated, Latin America has become increasingly attractive for all types of business. Its IT services sector has grown rapidly—nearly doubling in the past five years. In Brazil alone, IT has become a more than $9 billion per year market. While such growth rates may not be sustainable during the current global economic crisis, Latin America is a logical place for IT to flourish, especially as the services industry scrambles to recover and regroup following the disastrous terrorist attacks and financial scandals in India.

The author does caution the decision makers with the comment: " Now, in all fairness, when it comes to global services outsourcing, Latin America should be considered as playing a complementary—not replacement—role to mitigate what a leading analyst calls "India fatigue." Each Latin-American country presents different opportunities for buyers, and none can meet all needs". As Bob has stated in the past. The right match needs to be made between service providers and the company needing the outsourcing services. We welcome comments on this posting.

Maylasia Promotes Offshoring from Singapore

2009-03-27T10:53:00.006-04:00

Berhama.com reported today that approximately 20 Malaysian outsourcing companies are looking to "Turn bad situation into better opportunity!". This is probably the most quoted phrase now among many during the current global economic recession that it has almost become a cliche. The phrase has become a good strategy for them to look for new businesses in the current dimmed business climate.

Outsourcing Malaysia chairman, David Wong Nan Fay, said this was the first and right timing for companies to enter the Singapore market which was much affected by the economic slowdown, and promote their outsourcing businesses.Wong told Bernama the companies were offering IT help desk, software development, data, banking and payroll processing services, multi-lingual contact and disaster recovery centres. The goal is for these companies to reduce their operation expenditure to 30 percent if they outsource their operation to Malaysia.He stressed that by venturing into Malaysia, the Singapore companies would not only cut their business costs but could also access to talents that Malaysia had.He said the outlook of the outsourcing business in Malaysia was positive and he expected it to grow by 15 percent during the economic crisis this year.

Bob expresses the same belief in his book that the global economy is driving companies to look for way to become more competitive. Offshoring and outsourcing allow them to find expertise they are missing and reduce costs.

Offshoring and Public Policy -- a Conundrum

2009-03-25T22:00:00.008-04:00

Big news from IBM. Multiple sources are reporting that IBM will lay off about 5,000 positions in the United States, while expanding hiring overseas (Reuters story). Also did an interview with the WSJ, but they story is behind a subscription wall.

This story illustrates several of the challenges facing firms and policymakers as they grapple with the Services Shift.

First, the advantage that developing countries have in services for medium skilled positions is much larger than the advantage they enjoy in manufacturing. This is primarily because services are so labor intensive. If you save 60% on labor, but labor is only 20% of your cost base (as in auto parts) that gives you a 10-12% advantage. If labor is 75% of your cost base, a 60% savings gets you a 45% advantage.

Second, unlike with manufacturing, it is very difficult to match jobs lost in the US to jobs gained elsewhere. If Delphi closes a plant in Michigan and opens on in Mexico, you have about the same number of people doing the same tasks. It's easy to say "these jobs replaced those jobs." With services, however, it's rarely so simple. Say IBM hires lots of SAP and networking specialists in India in 2007-08. These people service many markets, including the US. Now in the midst of the financial crisis, they lay off systems engineers and COBOL programmers in the US. Is it really accurate to say "the SAP people replaced the COBOL programmers."?

The positions are not matched up in either time or function. So is one really replacing the other?

I'm sure the anti-trade, nativist zealots would respond that "there is a US programmer 'willing' to do the job," but that's a far cry from saying that person is qualified. Is it reasonable to ask IBM to spend tens of thousands of dollars retraining an expensive and under qualified US worker? Does this make sense even if the person will be serving global markets (including India)? Does it make sense if doing so will cause IBM to become uncompetitive with rivals who do not follow a policy of giving preference to US workers?

Third, services offshoring is much more disruptive than trade in manufactured goods. Why? Because the advantage that developing countries have is much larger in services (see above). Also, many more people are affected by globalization of services. Manufacturing accounts for approximately 15% of US employment. Services for about 70%. Tens of millions of people who thought they were safe from global competition are finding out that they are not. They want the government to do "something," but no one is exactly clear on what.

Fourth, what can the government do? Actually, very little. As mentioned above, it is very difficult to identify which jobs are displacing which other jobs. Foreign workers account for 71% of IBM's global workforce. Foreign sales account for just over 2/3 of IBM's sales. So, the workforce and sales distribution are roughly in alignment.

But say your congressman wanted to do "something." What would this be? It is unlikely that Congress is willing to cut IBM off from the Internet or satellite communication? Does anyone think congress can micromanage IBM's (or any other firm's) global resource allocation. Beyond making a fuss, there is little that policymakers can do without crippling the very firms that prop up their home economies.

Bottom line, Congress is impotent.

There are really two issues at play here.

1. In the long run, does the globalization of services raise of lower living standards in the rich countries? Almost everyone agrees that it is disruptive and inconvenient in the short run. I believe that the long run benefits outweigh the short run costs (as do most economists, the McKinsey Global Institute, and many others). But intelligent people can disagree on this.

2. What policies can the government put in place to slow of stop services offshoring? Even if you believe offshoring harms the United States, the onus is on the opponents to suggest a policy that would be effective. I can't think of one. Sputtering and whining won't cut it. Most policies (such as the Grassley-Sanders fiasco on H-1B visas) cause more harm than good.
--- --- ---

So, it's a tough problem. Everyone wants to focus on question #1. But without addressing question #2, it's just whining. Still waiting for an answer on that.

Today's News

2009-03-25T14:08:00.004-04:00

Unisys Wins IT Outsourcing Contract with Chicago Park District
Unisys Corporation (NYSE:UIS) today announced, in Earth Times that it has received an extension to its information technology (IT) outsourcing services agreement with the Chicago Park District. The six-year contract, signed in the fourth quarter of 2008, has a value of $9.3 million.

Under the terms of the contract extension, Unisys will provide infrastructure management and support services to a growing number of Park District facilities and employees throughout the city of Chicago. Those services include help desk support; management of local-area and wide-area networks (LAN/WAN); hardware support for desktop, laptop and server computers; software support; and asset management. Unisys will also continue to provide support for the Park District's administrative software applications.

The Ugly And Dangerous Prejudice Against Outsourcing
An article in Information Week.com raises an interesting point: "If American businesses yield to the anti-outsourcing caterwaulers, then don't be surprised to see them go after other equally legitimate business tools next."

The author ,Bob Evans asks: "... explain this one to me: When great IT companies develop new products and services that offer significant value to CIOs, we call it innovation. But when CIOs employ outsourcing to remain competitive and create new customer value, the outrage industry calls it anti-American and screeches about the loss of " our jobs. He goes on to cite specific examples of how companies have developed leading edge cost savings that have benefited our economy. He also points out that for us to turn our back on the enormously valuable partnerships and collaborations established, and to attempt to turn the clock back 50 years and magically define what "our jobs" are, will only ensure that today's hard times stay with us for many years to come. Please click on the above link to read the entire article.

UN Bars Satyam From Outsourcing Work

2009-03-25T13:00:00.005-04:00

A report in Information Week.com announced that the United Nations plans to terminate its out sourcing contracts with scandal-plagued Satyam and will bar the outsourcer from bidding on future work. Increasingly nervous Satyam customers are looking for alternatives in case the scandal-scarred outsourcer is unable to restore internal stability or find a buyer with pockets deep enough to see the Indian company through its current crisis.

Bob devotes a significant portion of his book to the importance of choosing the right partner and performing due diligence during the partnering process. Pertinent information can be foind in chapter 3 Making it Real and chapter 4 The Supply Side.

Newsworthy Items

2009-03-24T07:54:00.004-04:00

Gartner Predicts Outsourcing Price Drop
Sourcingmag.com reported that Gartner has predicted a fall in outsourcing prices of up to 20 per cent by 2010, in what could be good news for companies that outsource their IT.
The analyst firm forecast a reduction of between five and 20 per cent based on the continued economic downturn, which will increase competition and prompt cost-focused buying behaviour.

In Defense of the H-1B Visa

2009-03-23T11:48:00.007-04:00

In an op-ed in Forbes Lily-Hayes Kaufman writes that Section 1611 of the stimulus bill, also known as the Employ American Workers Act (EAWA), serves to minimize "an international mix of perspectives and minds in the workplace" and "is the first step towards diminishing the opportunity to discover a solution, which might actually help us get out of this mess". Ms. Kaufman argues that "It is irresponsible to cut out talented people with valuable minds at a time when our country and failing businesses need it most. While the U.S. taxpayers may, arguably, be the source for the bailout funds, there is no reason that we should limit who is hired to provide the solutions."

World to US Business Schools: Thanks, but No Thanks

2009-03-23T09:16:00.006-04:00

An article posted in Business Week.com raises concern for the future of the US Business Schools and the ability of domestic companies to maintain a competitive edge in the global market place. The possible restrictions of H-1B visas and the down turn of our economy are driving potential foreign students to rethink their position regarding attending Business Schools here in the US.

The article states that for years, American business schools have effortlessly attracted a diverse body of international students, eager to come for a top-rate business education and the chance to work in the U.S. after graduation. But diversity at top B-schools across the country may take a hit this year, as a growing number of international students put off plans to attend school or decide to attend schools in their home countries instead. Though it's still too early to tell what the impact will be on next year's class, a growing number of students from China, India, Europe, and the Middle East say they are considering, or have already decided, to decline their acceptance offers to prestigious U.S. business schools.

This trend could further hurt the US economy. While we have a lot of bright and talented young people here in the US the loss of prospective foreign students could seriously impact the future of college programs (loss of income from students attending schools from abroad) and a reduction in the pool of talent for US companies. Some may argue that this will open opportunities for US students to get domestic jobs. While this may be true on a smaller scale I for one am worried that without the diversity of an international student population and workforce the US is headed for an even greater economic down turn. Your comments are welcome.

Today's News

2009-03-23T08:44:00.004-04:00

The Era of the Mega Outsourcing Deal Isn't Over
Business Week.Com posted a story that discusses the fact that large outsourcing deals are not a thing of the past. Even though outsourcing deals created over the past couple of years have become steadily smaller a few companies are still working on a larger scale. The article references two major outsourcing events by Readers Digest working with HCL and Kaiser Permanente setting up an arrangement with IBM. The following link will connect you with the article.

Recessions Fuel Off shoring Fears
Computing.co.uk presented an article that referenced a national strike in France in protest of President Sarkozy’s economic policies. Mark Kobayashi-Hillary writes; "The relevance for those working in international sourcing is clear. People on the streets are calling for tax cuts to be reversed, for public sector jobs to be preserved, and for jobs to remain local. There is a tidal wave of nationalism sweeping Europe and the US and I have not seen anyone in the industry getting prepared for this." His point is that there is going to be a lot more unrest in the future and companies involved with outsourcing [and off shoring] need to be careful of how they present their strategy. As we have all seen it is very easy for consumers and business leaders to misunderstand what is going on.

Off to India

2009-03-22T17:38:00.002-04:00

Will be spending the next two weeks in London, Amsterdam, and (mostly) India. Conference in London for the EU launch of the Aspen Network of Development Entrepreneurs (ANDE). Interesting embership group that works to bring three groups together:

Social investors -- such as The Gates Foundation, Lemelson Foundation, Omidyar Network, The Rockefeller Foundation, The Skoll Foundation, the Shell Foundation, and others.
Intermediaries -- such as Acumen Fund, Agora Partners, Dahlberg, E&Co, Root Capital, SEAF, TechnoServe, WDI (of course), and a few others
with small and medium size businesses in developing countries.

The idea is that SMEs can drive development more effectively than micro enterprises, and the group is looking to promote that.

From there, on to Delhi, Hyderabad, Mumbai (Bombay) and back to Delhi for some student work. We have a set of interesting MBA projects this year -- with Drishtee, Acumen Fund, and a skills development initiative by Perot Systems.

I will also be doing the song and dance routine for two Ross School alumni clubs -- in Delhi and Mumbai. Actually, these events are a lot of fun. Well connected people. Looking to engage with the school. And really excited about cutting edge work.

So, great trip coming up. The only downside is that I'll be staying in eight different hotels over the next 11 nights. Ugh!!

Blogging will continue, but will likely be at strange times (India is 9 1/2 hours ahead of the east coast). In the meatime, Lou will hold down the fort.

First cut at a blog list

2009-03-21T20:13:00.003-04:00

I've added a first cut at a blog list in the left sidebar. Over the past few months, I've spent quite a bit of time searching out and communicating with other bloggers who cover global sourcing for services. Here are some of the blogs I find are worth a regular visit:

Blog focused specifically on offshoring (i.e. global sourcing of services):

Horses for Sources -- written by Phil Fersht, the Research Director of AMR Research
Inside Outsource -- by Tom Hickman, an industry veteran and current consultant
Provocations and Cogitations -- by Mark H. Roninson, Chief Operating Officer at advisory firm Equaterra.
Consider the Source -- Group blog from industry advisory firm TPI.
Pragmatic Outsourcing -- wideranging blog by industry veteran Nick Krym.
The Dao of Outsourcing -- blog focused on the Chinese Offshore providers. Not very active, but the best view of the China market.
Sourcing Insight -- from Australia-based consultant Michael Rehkopf, a partner at TPI

More general blogs that sometimes touch on offshoring issues:

Innovation & Web Globalization -- Steve Hamm of BusinessWeek covers a somewhat eclectic set of issues, ranging from IT services to social enterprise in Rwanda. Always a good read.
Marginal Revolution -- Tyler Cowen's very active and always interesting economics blog. Not offshoring heavy, but provacative and informed.
Enlightenment Economics -- excellent blog on economics books. Run by British Economic Diane Coyle.
WSJ Digits Blog -- a joint effort from the Wall Street Journal's technology team.

See the list in the left sidebar. Happy reading.

And so it begins. . .the war over jobs

2009-03-21T17:41:00.002-04:00

We've been having some discussion, both on and off the blog, about the short-sighted notion of trying to "save" jobs for locals by discriminating against foreigners. Senators Grassley, Durbin, and Sanders put the toxic H-1B visa restriction in the TARP renewal, and now we're starting to see the fruits of this bad policy.

Protests and wildcat strikes in Britain and Ireland over the employment of foreign workers in the construction and energy sectors.
Bank of America has withdrawn formal job offers made to MBAs in the United States
The government of South Korea is cutting work permits for foreigners by 66%.
Mexico retaliates on trucking restrictions with tariffs.

I'm fairly confident that protectionist moves like this make the nativists happy. But the thing to remember is that the United States has much more to lose from a trade (or jobs) war that most other countries. Our firms are much more global than those of virtually any other country (with the exceptions of the U.K. and the Netherlands). Most large firms (Fortune 500) earn at least a third or their revenues in international markets. For many, the figure is more than two-thirds.

If India restricts U.S. presence (sales by firms, employment of US citizens), we have much more to lose than most trading partners. This is a classic prisoners' dilemma. It's tempting to think one country can impose restrictions in the interest of "fairness" or some other excuse. But other countries retaliate. And the downward spiral begins.

While the details differ, this is all reminiscent of the Smoot-HawleyAct -- which led to plunging global trade in the 1930s and made the Great Depression much much worse.

I hope we can pull back in time. But I'm starting to doubt it. If and when unemployment goes to 11 - 12% because large, global firms are slammed in foreign markets, I hope the nativists look back and realize what they've wrought. But I doubt they will. They'll just identify and mobilize against another convenient scapegoat.

South Korea to Slash Labor Permits

2009-03-20T15:05:00.002-04:00

According to a report in Industry Week.com South Korea is planning to reduce the number of work permits it approves for foreigners to just one third of last year's figure to safeguard existing jobs amid the global downturn. The Korean ministry has been quoted as saying "The reduction in foreign labor is needed to protect job security not only for Koreans but foreigners as well who are already staying here."

This past March Bob referenced a discussion posted in a Growthology.org publication that stated the loss of skilled immigrants to the US would result in an economic catastrophe that will hurt US competitiveness for decades to come, if H-1B visas be restricted . I wonder if the Korean economy will be adversely affected in a similar manner by their ministry's decision. Check out the two articles above. I would be interested in any comments.

Industry Updates

2009-03-19T13:55:00.011-04:00

"Obama's Anti-Outsourcing may Hurt Global Trade"
A report in Outsourcing News and Top Outsourcing Trade today explained that many US Corporations are saying Barack Obama's anti-outsourcing policies are impractical and could adversely impact world trade. However some analysts do not see such policies making a big impact. “Companies won’t give up offshoring strategy because of this,” said Suvojoy Sengupta, partner at consultancy firm Booz & Company. For the complete article please connect via the above link.

Research Shows Brazil Presents Strong Business Case for Outsourcing
Outbound Call Center.tmcnet reported today that the contact center industry in Brazil has been growing, in large part as a result of its close proximity to American businesses. Many companies looking to reduce operating costs, improve quality and deploy resources towards core activities are turning to outsource agencies that have attained a level of process maturity that can offer skilled, bi-lingual agents, catering to a diverse and growing customer base for many companies. For the full article please click on the above link.

AT&T Bringing Thousands of Tech / Contract Center Jobs Back to U.S.
Outbound Call Center.tmcnet ran an article that discussed the return of over 5,000 jobs back to the U.S. by AT&T. The bulk of these jobs are now located in broadband support contact centers in Alabama, Florida, Kentucky, Louisiana, and North Carolina with most of the others scattered across states in the Southeast. To read the entire article please click on the above link.