The Future of Outsourcing: Implications

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

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with a clean sheet rather than make marginal improvements!Many processes just evolve from nothing, or have a lot of outdated steps that may have been necessary when they were designed for the first time but may be outdated today!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

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

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

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”.

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

hcl" title="hcl">

Todays Offshoring News

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.