Outsourcing Going Green – Raising the Retirement Age of IT Equipment

With government drives for public sector efficiency and private sector organisations facing continued capital expenditure freezes, no organisation should be embarking upon hardware replacement without excellent business reasons. Yet vendor policies of increasing support costs by upwards of 150% after the initial warranty period and refusing to support products outside of a sometimes unreasonably small service life window is leaving many organisations feeling they don’t have a choice.

As Paul Timms, Operations Director, Maindec, explains, it doesn’t have to be like this and third party support services can not only help drive down costs, but by extending the life of IT equipment, can help organisations improve their green credentials and meet efficiency targets.

Efficiency Drive

With continued economic uncertainty, going green will have slipped down a lot of organisations’ agendas, even though being environmentally sound and cutting costs can in fact co-exist to produce an efficient and profitable outfit. Yet every day across the country in both public and private sector organisations, equipment that is performing well, is stable and continuing to meet business needs is being ripped out and replaced at huge cost to the customer.

Is this simply another example of the throwaway society; reinforcing the perception that technologists are obsessed by the latest equipment, from the smallest PDAs to the most powerful servers?

Or is it, in fact, a response to the vendor strategy of hiking support/maintenance costs by up to 150% as soon as a product comes out of the three year warranty period? Or that vendors are actually choosing not to support equipment that is more than five years old? In the face of these strategies, it is perhaps no surprise that many organisations perceive the only option is to move to new hardware under warranty.

Realistic Business

Is it really necessary to replace a machine that is perfectly reliable; that delivers the performance required and, critically, has a stable operating system/application environment? The cost is not simply associated with upgrading the hardware. More often than not the new hardware will be running on a different operating system, requiring changes to the underlying application. The organisation will have to embark upon a development and migration project; it will have to incur the risk associated with environment change; and, if a financial institution, the demands of application recertification to achieve regulatory compliance.

From a vendor perspective it makes perfect sense to encourage customers to upgrade every few years. Not only is this strategy generating a strong revenue stream but by limiting the range of equipment that has to be supported to the most recent product set, vendors can carry a smaller range of spare parts and provide engineers with training only on the latest kit, all under the guise of providing you with equipment that is more environmentally sound.

Understanding Choice

There is a strong market of third party support organisations, as well as excellent international supply of spare and refurbished parts. Third party support contracts instead of a supplier’s out of warranty tariff can save any organisation 50% on service costs. In addition, by not upgrading to the new software infrastructure, there is no need to continue paying software license fees, further reducing costs.

But how does the quality of service compare? With aging kit running business critical applications, organisations will be understandably concerned about reliability, the speed of availability of spare parts and the responsiveness of any support operation. No business will want to delay a hardware upgrade if it jeopardises uptime or compromise operational performance – the business cost will be simply too high.

This third party support market is well placed to offer an exceptional level of service required by critical systems. To be at their most effective, support companies need highly skilled engineers with experience in a raft of different hardware platforms of very different ages. Regional distribution centres are needed, with spare parts always available to meet customer’s specific hardware requirements; and they need a support process that provides customers with rapid access to experienced engineering expertise as soon as a problem occurs.

Business Decision

Of course organisations need to upgrade systems. But should these replacements really be carried out every three years simply in response to the vendor’s hike in support costs? Or can outsourced service providers provide another way?

The argument that each successive generation of hardware, from servers to storage devices, is being developed to support the environmental agenda, is a common one, but should this really be enough to encourage the regular upgrade strategy? The new equipment will, indeed, consume less power. But is it really greener to scrap an entire system every three years in favour of one that uses a few less Amps and perhaps demands less data centre space and air conditioning? It is far better for the environment to extend the life of existing equipment even by a couple of years than continually rip out and replace.

Irrespective of whether it is reducing capital expenditure or improving green credentials that drive the agenda, organisations should be making upgrade decisions based purely on business need. Is the system performing effectively? Can it efficiently support additional storage? In the end, doing what makes sense for the business may be greener than it appears.

There are very real environmental benefits associated with extending the life of hardware, and it is clear that simply upgrading in response to the vendor’s support pricing policy does not make sense from a CSR (Corporate Social Responsibility) stance, not to mention the impact it may have on the bottom line. Organisations, despite what they are told, do have a choice, so why not help them go green and raise the retirement age of IT equipment?

Source:http://www.sourcingfocus.com/site/opinionsitem/3633/

US President Barack Obama rode to power on the promise of stopping American jobs from being outsourced to India.

Ironically, the Indian IT and IT services companies targeted by him may actually be bailing out unemployed Americans by hiring thousands in BPO jobs, in a US economy still struggling to cope with the aftermath of the worst recession since World War II. Outsourcing has come full circle.

Take Aegis, the BPO arm of the Mumbai-based conglomerate Essar Group.

Aegis is one of the largest Indian employers in the US. It has over 5,000 US citizens on its payroll and plans to hire 10,000 more over the next three years.

“We have 10 centres operating in the US and more than 97 per cent of our employees are US citizens.

Our clients are happy to have locals attend to their calls and we will be hiring many more,” said an Aegis spokesperson.

Infosys, India’s second largest IT company, plans to hire 1,500 workers in the US, its biggest market this fiscal. Apart from BPO companies like Genpact, Aegis, TCS and Wipro, too, already have large centres in the US, with thousands of Americans employed.

The term ‘Bangalored’- coined by the US media to describe offshoring of services (and jobs) to India’s Silicon Valley- has been made to stand on its head.

“Indian IT companies have come a long way. But I will not call this outsourcing, but rather call it local hiring,” said Ameet Nivsarkar, spokesperson for India’s IT trade body Nasscom.

“Many Indian IT companies are looking at local hiring as they are expanding their operations overseas.

This is a very positive trend for the Indian IT sector,” Nivsarkar added.

One reason for this is the rising costs of IT services staff in India, which has made the average US call centre employee a relatively less expensive proposition.

The soaring unemployment in the US has made it possible for Indian firms to hire US citizens at cheap rates. Struggling residents desperate for work are happy to take a call centre job paying around $14 an hour.

The option of working in shorter shifts, and other incentives like a free holiday trip to India, also help to attract local talent, a Genpact executive said, wishing to stay unidentified since he was not the official media spokesperson.

“It is a good deal. Hiring locally not only helps us to retain our US clients but also helps us to understand the market better. And with high unemployment, it is easy now to get talent locally,” he added.

Political pressure in the US and providing certain level of comfort to US clients are also major factors.

There is also a business incentive. Many recession-hit local governments are offering tax breaks to companies that provide local jobs. For Indian companies, the tax saving helps them stay competitive despite hiring relatively costlier US workers.

Problems caused by rising visa restrictions in the US are also forcing Indian firms to increasingly rely on local workers.

With many Indian IT services companies bidding for US government jobs- at the federal, state and local levels- promising to keep the jobs in America can often prove to be the clincher.

Aegis, for instance, gives an option to the client to either go for service by locals with 15 to 20 per cent cost saving, or 45 to 50 per cent cost saving by taking the job offshore to India or Philippines.

Many firms opt for the former to prevent job loss and stave off any potential political backlash. “The US became the fastest-growing location for us last year. We expect that to continue this year,” Genpact chief executive V. N. ‘Tiger’ Tyagarajan had told Daily Mail.

Harish Bijoor, a brand consultant and BPO observer, said, the cheap US worker was a myth. “$14 per hour boils down to something around $112 (Rs 5,000) a day, and that is a decent wage for Indian BPO employers,” Bijoor said.

The real benefits, he says, are in the local knowledge, efficiency and increased ’socialisation’ US workers provide. “It is a positive development for Indian outsourcing industry,” he said.

“We don’t buy this statement (on cost effectiveness). We look at value-based platforms and business rather than just commoditised services,” said D. Swaminathan, chief executive officer (CEO), Infosys BPO, which gets a good percentage of revenue from its US business.

Infosys is hiring fresh graduates in the US as a matter of policy.

“Hiring from campuses in USA is an important part of our globalisation strategy,” notes its US website.

The hiring process covers engineering universities, liberal arts colleges and business schools.

Recruits go through classroom or hands-on training or both.

“Most of the multinationals hire locally to strengthen their base. As Indian IT companies look at larger markets and move up the value chain, it makes sense to include local people,” Nivsarkar said.

Indian companies have also seized the chance to take the fight to US firms which are also ramping up operations in India. US firms like Cognizant, Accenture and IBM have large operations in India, offering offshore services to global clients, the Washington Post reported, so “Infosys, Tata Consultancy Services and Genpact have had to move into the culturally uncomfortable area of managing Americans”. However, another reason that has forced Indian companies to hire people overseas is the high wage inflation, higher attrition rates and often, the unavailability of the right talent.

“As the IT companies are growing, it is getting difficult to get and retain talent. Also, their training and visa costs are high. IT companies have seen the highest wage inflation,” said E. Balaji, CEO of Ma Foi Randstad, a leading global recruiting firm.

Source:http://businesstoday.intoday.in/story/attrition-rate-shoots-up-to-55percent-in-bpo-sector/1/15776.html