Archive for May, 2005

Get it in writing on outsourcing

May 31st, 2005

Tuesday, May 31, 2005

Pre-nuptial agreements should not just be the prerogative of Hollywood stars. But while Catherine Zeta-Jones and Michael Douglas have the nous to acknowledge that even the most loving partnership can go through hard times or terminate, formerly hard-nosed business types have taken to talking about “trust” and “partnership” where once the emphasis was on contracts and lawyers.


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The growth of outsourcing has accelerated this trend. With companies now ready to pass vital business activities over to third parties, it is somehow more comforting to talk of “partners” rather than “suppliers”, but too often this disguises the fact that nothing has really changed in the age-old relationship of customer to supplier.

An outsourcing supplier is paid to provide a service and it needs to be held to a satisfactory level of quality and value for money. And that means clear intentions and responsibilities from the outset. And that means a contract. And lawyers.

In his article on outsourcing contracts on page 22, Arif Mohamed looks at the contractual essentials and the best approaches to negotiation, including clarifying mutual liabilities, possibly renegotiating at a later date and making provision for the chance that it may all end in tears.

Recent well-publicised cases of major enterprises such as JP Morgan bringing outsourced operations back in house, together with the Deloitte Consulting report on a possible outsourcing “backlash” have shown that even major corporations can fail to think far enough ahead.

But in the public sector too, outsourcing agreements have not always been given the attention to detail that is vital for success, as is made clear by Lindsay Clark’s analysis on page 12. And it is not just the suppliers that are to blame.

“A lot of deals are hyped up before they are signed,” one public sector expert told Clark. “This creates the impression the service will be much better. In reality it may be worse or not have changed, but expectations rise.”

Huge corporations with the money to pay for top lawyers, often in-house, can afford to play an expensive legal game further down the line. The mass of smaller organisations or hard-pressed local authorities accountable to taxpayers do not have that luxury.

Getting a strong contract in place from the start provides the bedrock for client and outsourcing supplier to build that sense of trust and partnership that makes for a profitable relationship for both sides. Call your lawyer now.

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posted by Preet Chandhoke at 4:33 AM

Outsourcing: Negotiating a perfect fit

May 30th, 2005

Monday, May 30, 2005

Get the contract right and you are more than halfway towards an efficient and profitable outsourcing partnership
A clear, fair and well-negotiated contract provides the basis for an effective and happy long-term outsourcing partnership. The key elements of the contract address service-level agreements, penalties and rewards, timeframes and measurements, regular reviews, and exit strategies.

It is essential to reach a clear definition of the scope of the outsourced operations beforehand. The contract should define the full extent of the services that are to be delivered and for which the service provider will be responsible – including the levels to which services must be delivered. Ideally, this should be based on detailed schedules so that neither side can be in any doubt over what is required of the service provider.

Setting these service levels so that both parties can benefit is fundamental to business process outsourcing contracts, says Michael Hyltoft, senior consultant with independent outsourcing consultancy Quantum Plus. “These identify the service deliverables and expectations of your service provider,” he says. “Good contracts will also describe the reporting methods for service-level measurement, how, when, and the level of attainment required. This will include potential penalties or benefits.”

When determining service levels, companies should make sure these apply to matters that are critical to the business, because each service level will have a cost attached to it, and too many checks can make the service regime onerous for the supplier.

Richard Peynot, senior analyst at Forrester Research, says, “Service-level definition causes most challenges. Companies have checklists that set out their basic service expectations, but these are generally incomplete. Users’ negotiating teams struggle most with putting SLAs in legal terms.”

Gillian Cameron, partner at corporate law firm Maclay Murray & Spens, says, “The key thing with service levels is clarity. It can be very difficult if you have a large complex system and different levels of service may apply to all of them. Simplicity is a challenge in that context. If the agreement is too obtuse, everyone loses out.”

She says objectivity is also important in ensuring the service level measurements are fair for both parties. “Try to make it objective, so there can’t be any argument about the service levels, and also be clear as to what you are measuring, for example, is it a response time or a fix time?” says Cameron.

Companies should also be prepared to define processes and time periods for performance measurement. “Once you have got to the core of what people are measuring, it is all about writing it down properly,” says Cameron. She says technology can be very helpful in measuring performance and time periods, and the metrics used by an agreed technology can be written into the outsourcing contract.

Cameron points out that the issue of software licensing is also worth covering in the contract, because an external provider typically takes over the running of core software, taking out ongoing licences in the customer’s name. In such cases, it is worth determining whether the licence stays with the client after contract termination, and what exactly is permitted by the licences themselves.

It may be beneficial to agree beforehand a set of penalties or incentives for poor or excellent performance. With new relationships, this can help to develop trust between the business and its outsourcing supplier, and help to give the supplier incentives for good performance.

The most common forms of penalty are service credits and “liquidated damages”. The former tend to involve small sums of money deducted from the service charges when services fail to comply with the agreed levels. Liquidated damages are monetary compensation specified in the contract for breach by one of the parties and are calculated in relation to the customer’s estimated potential loss.

In terms of rewards, benefit sharing is often used to reward the service provider for delivering real business value to the customer. Percentage uplift is another term used to describe a clearly defined improvement on a service benchmark, for which there can be a financial reward.

David Isaac, a partner at law firm Pinsent Masons, says most of the contracts he sees have penalties and incentives written into them for service levels and performance. But he adds, “You should move away from trying to get service levels for everything, because they are expensive to set up and police. You need a sensible regime for the supplier.”

As the relationship between the two parties matures, with more trust and understanding of business objectives, you need to get away from the carrot-and-stick approach, says Isaac.

According to Forrester, clients often expect to transfer too much liability and risk to the supplier, and the limits of liability often cause disputes. “As our discussions with external outsourcing advisers confirm, client companies frequently set unduly high limits for compensation in case of production losses – some even demanding up to two or three times the revenue amount lost. No experienced vendor will accept this,” says Peynot.

Companies looking to outsource should aim to agree on possible opportunities for reshaping or refocusing operations mid-term. It is worth building a review mechanism into the contract, so that reviews are carried out periodically with a view to making changes. “You need a mechanism for carrying out health checks, and governance meetings, with a two-way exchange about things that are changing – often the management on the customer side is n0t as good as it could be,” says Isaac.

According to Pinsent Masons, roughly 70% of all outsourcing deals are renegotiated within two years of the contract being signed. Reasons for this include pricing, business change and service performance.

In such cases, both parties should be clear about the purpose of any review, and it must not be used as an excuse for one party to get out of the agreement at an early stage, or to lever a better deal. “If you are going to change the contract, it must be on an agreed basis,” says Cameron.

Isaac says, “In some cases, the supplier is rewarded for over-performance – it can be good, but actually is not necessarily driving the right behaviours. If you want them to behave as though they were you, see where you can incentivise the supplier to come up with innovative ideas and demonstrate significant savings; then they should be rewarded for that, but you cannot particularise.”

He mentions a high-profile “third-generation” outsourcing deal in the engineering sector, where the company has been outsourcing with the same supplier for many years. It now deals with the supplier as if it is part of the organisation. “They are very mature in the way they deal with things, and the supplier is making a large investment in the client. They are a very good example,” adds Isaac.

Finally, negotiating termination or exit strategies, and having options for continuation after the end of term can make or break an outsourcing deal.

“An important issue often missed from the contract is the termination or exit strategy,” says Hyltoft. “Legally, both parties should have an agreement on how to terminate the contract at any point. Be aware that in contrast to traditional IT, outsourcing BPO service level agreements are business-based, not IT-based. Therefore, you will need to focus on handling processes, business outcomes and people.”

Peynot says, “Termination conditions cause frequent disagreements. For example, the details of the transition phase at the end of a contract are tricky. The incumbent is supposed to assist the new provider, but questions arise about the handover period, when it should happen, the duration, and the fees. Firms we spoke with at least try to soften the conditions around early termination, or even avoid them altogether, rather than accept the exit period and compensation that most vendors seek.”

Cameron says there are several standard conditions that would justify termination of a contract, including a general breach of agreement, and insolvency. She says, “In addition, something unforeseen may happen – for example, if the company becomes acquired and managed by its competitor.”

In such cases, the contract needs to specify the terms of any handover of outsourced business process obligations, either to an in-house team or to another service provider.

Companies should examine whether they need to have the ability to achieve a partial termination of the contract, says Isaac. As an example, he refers to a global outsourcing contract where the company got into financial difficulty and decided to dispose of a number of its businesses, which had an impact on the outsourcing deal.

“If you are having those discussions, the supplier is looking to be made whole, to recover its stranded or sunk costs. The difficulty is then agreeing what the payment should be.”

Contract checklist

* Service-level agreements
* Time frames and measurements
* Penalties for under-performance
* Rewards and incentives
* Regular performance reviews
* Scope to renegotiate and revise
* Termination clauses.

Think ahead for successful negotiation

In preparing to approach the negotiating table with the outsourcing provider, it is worth carrying out an initial investigation to understand your organisation’s particular objectives and needs, says Dalim Basu, director at BPOinform, a centre for IT and business process information.

Secondly, carry out a thorough risk assessment. Basu says, “This might involve consideration of some of the traditional objections to outsourcing. These include the risk that suppliers may not understand your organisation’s unique IT and business processes or that you may never be able to take the work back in-house and the quality of service may decline over time.”

He adds that companies should develop a strategic roadmap showing how to achieve objectives and identifying the potential risks as well as expected benefits.

Thirdly, when approaching the contract negotiation, have a well thought-out negotiation process, advises Forrester Research.

“Some companies, surveyed by Forrester, expressed difficulties in negotiating the outsourcing contract. One finance firm says, “Negotiating was a hard job, because of the repeated iterations and the time waiting for the vendor’s answers. We were disappointed in that, because we expected to be able to discuss the proposals in half the time we actually needed.”

A chemical company says, “Big providers have typical big-company attitudes. They have a price list but they don’t tell you what it is. They just look at how much you can afford.”

And an insurer says, “I have one simple principle: if I can’t understand where the price comes from, and they can’t explain why I have to close the deal for that price, then there will be no close.”

Richard Peynot, senior analyst at Forrester Research, says, “Negotiations drag on longer than buyers expect. Almost every firm struggles with outsourcing negotiations and finds them more time-consuming than expected.”

He adds that many European companies are approaching their first or second IT outsourcing project, or are currently in renewal discussions. “Most of these firms tend to underestimate the necessity of a stable negotiation process and the importance of involving the right competent people during contract discussions. As a result, they commonly miss important points in contracts, leading to vendor management issues later on.”

Peynot adds, “Serious misunderstandings and divergence of interest between users and outsourcing vendors frequently appear, even during the contract negotiations themselves. Forrester’s recommended best practices define a structured process that underpins all aspects of the negotiation.”

posted by Preet Chandhoke at 5:38 PM | 0 comments

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Bangladesh among top 20 outsourcing destinations of EU

May 29th, 2005

Sunday, May 29, 2005

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Bangladesh is one of 20 outsourcing destinations designated by the European Union from where the EU will take software and IT services.

“Bangladesh is ranked among the top 20 outsourcing destinations by the European Union,” it was revealed yesterday at a meet on a project entitled ‘development of small business ICT strategies in Bangladesh’, organised by the Commonwealth secretariat.

This project is the first of its kind in Bangladesh and has documented the opportunities and gaps existing in the country’s ICT sector, the fastest-growing economic activity in the present-day world.

The Commonwealth Fund for Technical Cooperation (CFTC), the Commonwealth secretariat’s technical assistance arm, has worked with Bangladesh’s Information and Communications Technology (ICT) sector on a project aimed at providing a competitive strategy and development plan.

Taking part in the daylong discussion, Minister for Science and Information and Communication Technology (ICT) Abdul Moyeen Khan said the government is committed to establishing a supportive environment for the ICT industry.

The Minister said ICT is not a mere technology – it has an important role in socioeconomic development of the country.

Terming ICT “user-friendly” the Minister said even people at grassroots-level can also easily use this technology, and “we can change socioeconomic condition of the country properly using the competence and merits of the young generation”.

Entrepreneurs, representatives of ICT businesses and experts, ICT officials from the banking sector, multinational companies and government participated in the programme.

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Four Big Lies About Offshoring

May 28th, 2005

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Offshoring — it’s a hot issue — and everyone, from our late night talk show hosts to politicians in Washington, has something to say. But what do we really know about offshoring? Are American jobs at stake? Is the shift in economic power tilting towards China and India? How will it actually affect the American economy in the long run?

“There’s a global supply chain emerging beneath our feet, and there are a set of widely-held ‘misconceptions‘ about offshoring that will hurt American business over the long run,” said Mark Wesker, who founded portal technology company Sequoia Software, now a part of Citrix Systems, and is now Chief Executive Officer of Artifact, which provides software outsourcing project management solutions.

“Once we better understand the offshoring opportunity and ways to bring visibility and control to projects taking place thousands of miles away, we’ll all benefit,” suggests Wesker. Here’s his take on four big lies about offshoring:

Lie Number One: Offshoring is a Threat to American Economic Prosperity

China, Russia and India may be gaining jobs, but is America losing out? The fact is that companies that have outsourced work abroad have created efficiencies that led them to hire twice as many workers here in America as their non-outsourcing counterparts. According to a recent Dartmouth study, outsourcers are job creators here in America. Since 1992, the U.S. lost 361 million jobs, but gained 380 million jobs back, for a net increase of 19 million jobs.

Offshoring is becoming an increasingly important part of competing in today’s global economy, and if start-up companies don’t have an offshoring strategy in their two year plan, there’s less chance that they’ll secure venture funding. Even if companies aren’t doing it now, META Group, now a part of market research firm Gartner, says that 88% of firms are moving to establish an enterprise-wide offshore strategy.

“There are strategic advantages to offshoring, perhaps the most important being the ability to offload less strategic tasks, and help American companies to focus where they shine — innovation,” notes Artifact CEO Wesker. “This makes us more competitive within the global economy.”

Lie Number Two: Offshoring is a Recent Phenomenon

Opportunistic politicians and naysayers have tried to make the American public believe that offshoring is a new practice. History tells us otherwise. The United Kingdom once outsourced it’s basket-weaving to India, when it was still a British colony. American companies have outsourced manufacturing for decades. And today, as many of the business processes of America’s companies are commoditized and easily delivered through technology, India and many other nations are again playing a supporting role, from customer service, to back-office support and even news-headline writing.

“As lower level functions in manufacturing, from cars to software, are commoditized, American companies must move from assembly to architecture, design, and general contracting of the global supply chain,” says Wesker.

Offshoring helps developing countries to build stronger economies, while consumption of less expensive products and services in more established markets continue to fuel global economic growth.

Lie Number Three: Offshoring is Only About Cost-Cutting and Compromises Quality

Some Americans are convinced that companies engaged in offshoring are just trying to save a few bucks instead of paying an American worker what he or she is worth. While there are industries where the primary driver is cost, and where working conditions should be thoroughly investigated for mistreatment of workers, this isn’t the case across the board.

In fact, some of the software supply chain’s greatest producers now reside in India and Russia, where the workforce is as highly educated, talented and motivated as American developers. In some cases, they’re better.

But today’s accelerated rate of offshoring has created a new business model that’s more complex in every way and at all levels. Big providers of offshore services, such as Bangalore’s Infosys Technologies Ltd., have the resources to create project management tools that bridge the gap created by this new reality. But for smaller customers and providers, the options for delivering world class projects and services haven’t kept up. This can translate into major cost, quality and time overruns that can kill a business.

However, “a new breed of solutions have been designed to help companies flourish,” according to Wesker, whose company offers a service that addresses these challenges. “What companies need is a greater level of visibility and control over their projects and service partners. Today, we can deliver services on-demand over the Internet that give customers a minute-by-minute view of where the projects stands, how its progressing on its stated goals and the ability to change course in real-time.”

Lie Number Four: Offshoring is Optional

Many people view offshoring as optional. Again, another myth. It’s a matter of survival. American firms need to outsource processes where they can’t compete, and to focus where they can — on innovation. Those businesses that do not — will face certain and aggressive price competition from domestic or foreign firms who can perform the commoditized tasks more cheaply.

Global sourcing creates greater opportunity for all parties and countries involved by allowing more developed economies to innovate, while allowing developing countries to get into the game and begin growing themselves. In essence, offshoring is essential for global business growth. And the U.S. steel industry is a good example of the fate awaiting U.S. companies that turn a blind eye.

Outsourcing and offshoring aren’t optional, and they pose as many opportunities as they do risks,” says Wesker. “Innovative companies need to get over the fear factor and implement new processes to manage offshoring’s risks in order to stay competitive and prosper.”

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posted by Preet Chandhoke at 4:01 PM | 0 comments

Report: outsourcing worries Indian union leaders too

U.S. techies aren’t the only ones anxious about outsourcing. Union leaders in India also worry about the trend of farming out tasks to other companies, according to a report Friday on the Web site of the Union Network International Graphical organization.

At a union-organized seminar in Pune, India earlier this month, outsourcing was identified as one of the five major problems facing printing and newspaper employees in the country, according to the report. “[T]his was resulting in loss of employment of the existing workers in a company (and the) employer was paying a fraction for the outsourced work,” the report said.

Perhaps surprisingly, the report indicated Indian union leaders feel empathy for European and American workers stung by offshore outsourcing. “As union members, we must understand that for every job that we get in India, a job is lost in the outsourcing country,” the report said. “And the beneficiary is always the employer because in India he has to pay only a fraction of the wages that he pays in his own country.”

posted by Preet Chandhoke at 1:53 PM | 0 comments

Outsourcing eyes smaller cities for better lifestyle

May 27th, 2005

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Bangalore may be better known to people outside India as the place that handles customer calls from around the world, but this small Punjab town is the future for those answering. In the past five years, more than 100,000 young Indian graduates have made the move to Bangalore, or the suburban New Delhi city of Gurgaon, to answer calls from credit card holders, make sales pitches or maintain records.

The jobs are eagerly sought with good pay. But late hours far from home led to high staff turnover and companies found that a good salary was not enough to attract employees who were increasingly eager to return to small-town India. Discuss: Moving call centres to smaller cities will pollute and ruin them So companies such as Texas-based Dell Computers and India’s second largest software firm Infosys Technologies are now moving out to where the staff are, rather than luring staff to the big cities, building state-of-the-art offices in remote parts India .

“I was hating every minute of my call centre job in New Delhi,” says Sanjeev Rana, 22-year-old employee at US publishing software firm Quark’s call centre at Mohali, close to Punjab and Haryana state capital Chandigarh.

“I barely got four hours sleep between shifts and meals were at dingy roadside restaurants. So when I got a job opportunity in my hometown, I grabbed it,” he adds.

Now Mohali, a city of 200,000 people, is sprouting glass and chrome buildings — filled with workers, including 300 people handling calls for Dell. Only a few miles away in Chandigarh, a city of one million, Infosys is building a new centre for 10,000 employees, while global firms IBM and Convergys are also eyeing bases in what was once a sleepy city of mostly retired people.

“Companies are beginning to see that it’s getting more and more difficult to recruit talent in the established cities. So instead of getting the talent to come to you, why not go where they are?” says Kiran Karnik, president of the industry lobby group, the National Association of Software and Services Companies.

India’s outsourcing and software industry earned $28 billion in the last financial year and is expected to grow by 30 percent for the next several years, Karnik says. “A substantial part of this will go to the smaller cities,” he adds. Companies like Quark take extra steps to keep people happy in small towns by providing swimming pools and movies to attract staff from nearby as well as from the big cities. “We not only have a zero attrition rate, but we are reversing the migration trend. Graduates from Delhi are coming here. Our compensation package is not just about money, but a better lifestyle,” Atul Gupta, vice president of Global Support Services, Quark India, tells AFP.

He says the company opened the centre after it realised thousands of students were graduating from technical and other colleges from nearby Chandigarh, capital of the northern states of Haryana and Punjab, and heading off to Delhi or Bangalore for work. Industry officials say the trend of outsourcing to smaller cities has eased the stress among employees and reduced turnover for employees who work through the night dealing with clients in Britain or the United States.

Vivek Atray, Chandigarh’s director of information technology, says the town is hoping to see a five-fold increase in call centre employment to 25,000 people in the next two years alone. “The biggest requirement for the IT outsourcing industry is human resources. So we have included soft skills such as languages in the curriculum of schools and colleges,” he adds. Such ventures are being replicated in a string of small states across India such as the university city of Pune in the west, the tourist hub of Jaipur in the northwest, and the coastal cities of Kochi and Vizag in the south. Companies such as Wipro and Infosys based in the technology hub Bangalore, have repeatedly criticised sporadic electricity supply and traffic jams as a deterrent to foreign clients.

In Gurgaon, adjacent to New Delhi’s 15 million people, an explosion of new offices, shopping malls and apartments has created traffic bottlenecks that stretch work commute times to more than an hour. In both cities house rentals have shot up 30 percent. Jamie Popkins, head of Asia-Pacific research at IT analyst firm Gartner tells AFP that the trend will deepen “as the demand for outsourcing work continues to grow”.

“IT outsourcing work will spread to smaller cities because they will develop high bandwidth, reliable Internet access, skilled labour pools, entrepreneurs with viable business models and comfortable work environments,” he adds. But he cautions that the country as a whole needs to work on developing infrastructure to maintain global leadership, including steady electricity supplies.

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posted by Preet Chandhoke at 10:19 PM | 0 comments

Outsourcing Teaching

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Outsourcing hasn’t gone far enough: the U.S. should start using Indian-based teachers. Smart, inexpensive, English-speaking Indians already help Americans with software design, computer support and tax preparation. Through satellites and the Internet workers in India can be connected, with mere millisecond delays, to Americans in need. Outsourcing jobs to India has saved Americans billions while actually increasing the quality and competitiveness of many of our industries. We should now apply outsourcing to education, the American industry most in need of improvement.

Like most teachers, I find grading to be the least interesting aspect of my job. I would gladly teach extra classes if I could in return be freed from the drudgery of grading. My employer, Smith College, should hire a few score smart Indians to grade for their faculty and in return Smith should expect its professors to spend more time in the classroom.

High schools should similarly outsource their grading to Indians. Because U.S. teachers find grading so mind-numbingly boring, outsourcing grading would make teaching a far more attractive profession, thereby allowing high schools to recruit better teachers without necessarily having to increase salaries.

I suspect that Indians would do a far better job grading than U.S. teachers currently do. Because of their much lower average standard of living, earning a few dollars an hour grading American school assignments would be a fantastic job for many talented Indians. Indians would therefore bring an enthusiasm to grading that most American teachers, including myself, lack.

Indians, moreover, could do more than just grade papers. They could run entire classes. Online college courses such as those offered by the University of Phoenix show the possibility of teaching via the Internet, and teenagers’ love of video games proves that students are capable of long-term thoughtful interactions with their computer. High schools and colleges should use the Internet to have some of their classes remotely taught. The teachers would have audio and video connections with their American students. It would be prohibitively expensive to hire one American teacher for every five students. But because wages in India are so much lower than in the U.S., schools could afford, say, 5:1 student: teacher ratios if they outsourced education.

Of course, teachers in India wouldn’t be able to discipline their American students, so the outsourcing would only work for well-behaved students. But students with Indian teachers could benefit from large amounts of individual “face” time with their instructors. Low student / teacher ratios would also allow schools to offer a diversity of classes that they couldn’t afford without using outsourcing.

High school math and science programs would greatly benefit from outsourcing. Because American adults with strong math and science skills have very good job prospects, it’s difficult for high schools to attract strong teachers in these fields. But for wages far below what even high school food service workers make, very talented and technically proficient Indians would love to become teachers.

If Indians weren’t permitted to teach entire classes, they could at least act as tutors or teaching assistants. Every high school math teacher, for example, could be given an Indian helper who would be available from 5-10 pm each night to help students with their homework. To prevent any child from being left behind, schools could give students in danger of failing two hours of individual tutoring time with an Indian teacher each weeknight. And at the other end of achievement gifted students could be assigned tutors who would facilitate their exploration of advanced topics.

Outsourcing wouldn’t have to be limited to hiring Indians, and indeed foreign language classes could greatly benefit from outsourcing teaching to non-English speaking countries. For example, given the large number of poor people in the world who speak and write Spanish, there is no reason every American taking Spanish shouldn’t have his own private instructor. Even earning just $2 an hour would be a fantastic life-changing wage for many Spanish speakers, yet at this low wage schools could afford to hire private teachers for each of their students.

Ironically, outsourcing education would make it easier for parents to home school their children. While staying at home, children could use the Internet to connect with teachers across the world. Parents, furthermore, would have many possible classes and teachers to choose from and so could insure that their children’s education reflected their parental values.

Having U.S. students taught by foreigners would increase Americans’ knowledge of other cultures. Rather than merely reading about other peoples, our students would get to talk with people throughout the world. Similarly, outsourcing education would allow many foreigners to interact directly with Americans and not base their judgments of us on how Americans are depicted in Hollywood movies.

Some of the best minds on the planet are trapped in poor countries, currently doomed to a miserable standard of living. But through educational outsourcing U.S. schools could directly tap these minds employing them to teach our children. Such outsourcing would not only lift many third world people out of poverty but also help the U.S. grow her 21st century knowledge economy.

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posted by Preet Chandhoke at 6:45 PM | 0 comments

Tesco extends Indian outsourcing deal

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Tesco has extended its outsourcing deal with IT provider Xansa for another three years. The deal extends the companies’ existing relationship, which dates back more than 15 years, guaranteeing Xansa a minimum income from Tesco until 2008.

The deal is aimed at reducing the money Tesco spends on its core IT functions, by using Xansa’s offshore facilities in India. It will handle application management, software development and project management, and encompass distribution, stock replenishment, products and pricing.

The outsourcer will support payroll for the UK and Ireland, as well as general sales information.

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posted by Preet Chandhoke at 5:19 PM | 0 comments

Outsourcing Helping Some US Companies Operate Efficiently

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Many Americans fear that the transfer of jobs to overseas workers, often called “outsourcing“, is eroding employment opportunities in the United States. And they worry that once these jobs move offshore they will never return.

Others – including some economists – argue that the global efficiencies of job outsourcing will, over the long run, strengthen the world economy and eventually provide benefits to the U.S. economy as well.

In either case, outsourcing seems here to stay. Hasnain Aslam talks to his virtual receptionist, Saada: “Hi Saadia, did Suja talk to you about making a reservation for dinner tonight?” Saada replies, “Excuse me I have a phone call. Good afternoon, The Resource Group, how can I help you.”

Saadia Musa is a ‘virtual receptionist,’ answering phones in Karachi, Pakistan for a call center firm in Washington, D.C.

The staff Saadia serves occupies the offices of The Resource Group, a Washington D.C.-based call-center company founded in 2002 to provide “Business Process Outsourcing” solutions for companies looking to cut costs.

Hasnain Aslam is head of investment for the firm, “because we are in the business of making our companies more profitable by doing a lot of the work offshore we thought that it’s best for us to practice what we preach, and we looked internally and said what are the things that we could ourselves do offshore and we started with the receptionist. We said, well, there’s no need to have a receptionist sitting here, why don’t we have somebody sitting in Pakistan, connect her through real time live video and have her do all the work.”

The use of outsourced labor for services such as call center assistance – this center is in India – and forms processing has grown rapidly in recent years, fueled by advancements in communications technology. Revenues at the Resource Group now top $170 million, and the firm employs 4,000 people worldwide.

Saadia Musa works from Pakistan for a call center firm in Washington, DC. Saadia is one of more than a dozen “virtual receptionists” in that group. “Some people who have come to the office before are kind of used to it but a lot of them don’t see me. They don’t think I’m real.”

Hasnain talks about the benefits of the arrangement. “She does all the work that you would expect a typical U.S. receptionist to do with the exception of serving you coffee, or a cup of tea or a glass of water. She not only opens the door for you but she also does all our administrative work, our restaurant reservation our meeting planning our event planning and so on and so forth. Anything that you would expect a typical receptionist to do.”

Saadia showed us her office space using a camera she controls — she sees her visitors through a similar camera set-up in Washington. “The whole thing about handling everything in D.C. from sitting in Karachi seems so amazing. I mean, that’s technology for you.”

It’s 4 pm in Washington – the day is almost done for the actual workers here. But for their virtual receptionist, sitting 12,000 kilometers away tomorrow has already arrived.

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posted by Preet Chandhoke at 2:33 PM | 0 comments

Outsourcing Industry Growth Seen From Finance & Accounting, Sales & Marketing Functions

May 26th, 2005

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Healthcare, Utilities Among Sectors Poised for Overall Growth

PETERBOROUGH, NH — 05/26/2005 — The global outsourcing market is expected to grow at a compound annual growth rate (CAGR) of 6% through 2008, according to a new report from Kennedy Information titled The Global Outsourcing Marketplace: Key Data, Forecasts & Trends. In an assessment of 15 market sectors, analysts spotlight the finance and accounting and sales/marketing functions as among the immediate opportunities, both of which will grow at or near double-digit rates.

This very comprehensive report on the full market for outsourcing services provides precise market size and forecasts growth rates across the three major market segments: traditional IT Outsourcing (ITO), Business Process Outsourcing (BPO), and Transaction Processing (TP).

The report projects spending through 2008 in the three segments for each of 15 industry sectors including banking, discrete manufacturing, process manufacturing, insurance, financial services/real estate, healthcare, transportation, utilities, retail, services, federal government, state/local government, education, communication and media, and wholesale. Global market sizing and forecasts by region cover Europe, Middle East/Africa, Japan, Asia Pacific, Latin America, Canada, and the United States.

The future of the market will be defined by shifts in the application of outsourcing by vertical industry and the ability of outsourcing providers to combine aggregate competencies to deliver one-to-many solutions to that industry,” said Brad Smith, Kennedy Information’s Vice President of Research.

“Businesses in all industry segments are finding that limited internal resources make outsourcing an attractive, cost effective and prudent option, allowing them to focus on their core competencies,” said William P. DiMartini, Sr. Vice President at SunGard Availability Services. “SunGard continues to see a growing market for outsourcing selected information technology services, both in Europe, where outsourcing of back-up services has grown, and in North America, where both security and healthcare markets are demonstrating continued advances.”

The Global Outsourcing Marketplace: Key Data, Forecasts & Trends report examines these and other outsourcing market developments, including opportunities and risks, purchasing trends, vendor offerings, client needs, competitive dynamics, and leading outsourcers approach to and position in the market. The study is an exhaustive 200-page report, supported by 124 tables and charts.

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posted by Preet Chandhoke at 9:30 PM | 0 comments

Outsourcing Center Studies Outsourcing Relationships and Selects the Six Best for Awards

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DALLAS, TX (May 26, 2005) — Outsourcing Center, the world’s premier source of information on all aspects of outsourcing, announced the six 2005 winners in the Outsourcing Excellence Awards at an Oscars-like ceremony May 25 in Scottsdale, Arizona, in conjunction with Sourcing Interests Group’s conference.

A panel of industry experts selected winners of the prestigious 2005 awards sponsored by Outsourcing Center, Everest Group, and Forbes after a rigorous review of all components of relationships among nominations from a wide range of companies across the globe.

Remarked John Funk, Esq., Partner at Jones Day, “This year’s group of finalists reflects the rich and growing diversity of functions and processes — from traditional IT functions to innovative business processes — where outsourcing can reduce costs and create value. Funk added, “I was impressed this year by the number of finalists whose partnerships are well into the second half of long-term contracts. These relationships have withstood the test of time and epitomize the best of what outsourcing offers.”

Stories of the winning and runner-up relationships will be published in the June 1 issue of Outsourcing Journal ( and mentioned in the June 20 issue of Forbes. Jerry Bowles, Producer/Writer for Forbes eBusinessSections, said, “The nominated outsourcing relationships were uniformly outstanding, so picking a winner was extremely difficult this year. Both customers and service providers have become much more adept and sophisticated in forming partnerships that are built to last.”

The six winning relationships are:

Best First Steps: Bank of India and HP
Best Governance: Westpac and EDS
Most Transformational: KeyBank and ABN AMRO
Most Innovative: Fairmont Hotels and Avendra LLC
Best Partnership – Government: QinetiQ and Accenture
Best Partnership: Johnson & Johnson and Hewitt Associates

Said Barry Wiegler, Founder and CEO of Sourcing Interests Group, “The Outsourcing Center is to be commended for its continued service to the outsourcing industry by conducting this awards program. The quality with which the team conducted the Outsourcing Excellence Awards is at the very top. It is clearly evident that a tremendous amount of time and significant funds are invested in this program.”

The Center discovered six prominent trends in today’s outsourcing relationships:

1. Cost is no longer the only key driver; an important emerging driver is
the need for process expertise.
2. Full-service human resources outsourcing is gaining acceptance.
3. Offshoring is here to stay, but still only has a small presence.
4. The deal sizes are getting smaller; there were significantly more
small deals than mega-deals.
5. Few buyers want a mid-term contract of seven or eight years; most
buyers prefer less than five years or more than ten.
6. Companies are moving away from complex service level agreements;
fewer, more effective metrics are becoming more popular.

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posted by Preet Chandhoke at 7:43 PM | 0 comments

First outsourcing forum for Dubai

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Dubai Outsource Zone will host the first World Outsourcing Forum in September during Gitex. The forum will debate outsourcing issues such as global sourcing, international standards and corporate social responsibility. Dubai was selected as the forum’s first location because of its reputation as a hub for outsourcing organisations, according to organisers.
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posted by Preet Chandhoke at 12:36 AM | 0 comments

India hot destination for engineering outsourcing

May 25th, 2005

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Outsourcing in the product engineering sector is all set to be next in line in the Business Process Outsourcing (BPO) wave as its market is expanding globally, especially in India, according to US market research analysts.

According to AMR Research’s 2004 BPO survey, 15 per cent of manufacturing companies hired outside companies to handle parts of their research and engineering activities and another 10 per cent of manufacturing companies had plans to do the same by the end of 2005.

Thirteen per cent of the outsourced engineering work was being done in India while 19 per cent was being accounted for by other Asian countries including China, it said.

Source Hindu Business Lline

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posted by Preet Chandhoke at 6:15 PM | 0 comments

Outsourcing Gains Momentum

External service providers apply pressure on businesses to shrink their in-house staffs.

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Pressures from external service providers will soon force changes in business technology employment, according to two independent reports issued Wednesday.

The reports, released by Gartner and The Yankee Group, suggest that competition from external service providers is forcing business managers to make tough decisions about their internal business departments.

Gartner warned that competition from outsourced IT providers will offer higher standards of service and price, and predicts that by 2015 the number of IT staff in business technology will decrease by 15 percent.

The research firm predicts that six out of 10 people in information systems (IS) will assume business-facing roles by 2010, resulting in a one-third decrease in IT departments within large and mid-size companies.

John Mahoney, chief of research for IT services and management at Gartner, advises managers either to focus on the reinvention of business management processes or to shift their focus to the outsourcing of IT services.

“Our advice to IS leaders is that, although they have some very difficult decisions to make over the fate of their department, they need to act now as the transition will take a number of years,” Mr. Mahoney said at the Symposium ITxpo in Barcelona.

Telecom Staffing

Meanwhile, research by The Yankee Group suggests that the big players in telecommunications are starting a growing trend in the outsourcing of their entire human resource departments. While many telecom companies currently outsource several HR services, such as payroll and benefits administration, more are shifting to full-service human resources business process outsourcing (HR BPO).

BT, AT&T, and Motorola are three telecom giants who have outsourced full-service HR processes. BT’s recent renewal of its contract with Accenture verifies the benefits of full outsourcing, and may give justification to other telecom companies to follow suit.

Phil Fersht, research vice president of business process outsourcing at the Yankee Group, is keeping a close eye on SBC. “If SBC chooses the HR BPO path, it will be an emphatic validation of the business benefits of outsourcing HR processes,” said Mr. Fersht.

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posted by Preet Chandhoke at 2:53 PM | 0 comments

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