Posts Tagged ‘offshore’

India, China still the top out sourcing destinations

March 31st, 2014

India is the clear global leader by revenue, while China is the most serious challenger by scale, according to a study of nine Asia-Pacific (APAC) countries as potential offshore service locations.Outsourcing30

Bangladesh, Indonesia and Vietnam are continuing to gain regional traction for offshore service delivery, while more mature countries, such as Malaysia and the Philippines, are refocusing on their core capabilities. The capabilities are higher-end IT infrastructure, help desk, application and business process services, the study by Gartner said.

Historically, cost attractiveness, quality of service and scalability were key drivers for using Asia as an offshore outsourcing destination. However, in the last few years, growing concern about high inflation, attrition and quality lapses in offshore and nearshore locations have been driving chief information officers to consider alternatives such as low-cost onshore sourcing and sometimes crowd-sourcing.

Despite these trends, India and China are still among the most popular destinations for offshore services. Over 48 per cent and 45 per cent of clients surveyed in 2012 were using these countries for nearshore or offshore outsourcing respectively.

Countries in APAC offer cost-competitive, typically stable and scalable locations for offshore IT and business process services, but Latin American and Eastern European countries now compete more aggressively for offshore deals, it said.

The currency fluctuations and rising delivery costs are also an issue for Asia, it added.


Business Process Management to touch USD 50 billion in next six years

February 10th, 2014

The BPM industry has indeed transitioned from the delivery of simple, repeatable processes of non-core functions at offshore locations as BPO to driving business outcome of clients’ complex, industry-focused processes from global locations.outsourcing56

“The industry that has demonstrated resilience in the face of economic uncertainty by constantly re-inventing itself to meet market needs, is forecast to touch USD 50 billion by 2020 from the present USD 21 billion,” Nasscom BPM Council Chairman and WNS Group CEO Keshav R Murugesh told.

An integral enabler for growth in these times has been the industry’s smart use of technology to create innovative solutions, Murugesh said.

The world of BPO or business process outsourcing as it was known, has evolved into a brand new identity – Business Process Management (BPM), Murugesh said.

“While BPM 1.0 in the late nineties was centered on cost efficiencies and productivity, BPM 3.0 in late 2000 focused on specialisation, process re-engineering, technology-enabled platforms and taking BPM to the rural areas. I believe that the era ahead is that of clients and
providers working together even more closely on disruptive innovations,” he added.

Commenting on the focus of the Nasscom BPM Council, Murugesh said, “We have a rather audacious goal ahead of us as a Council. We are looking to rebrand the image of the industry from BPO to BPM to signify the evolution and the value that it creates for client companies globally.”


China Specifies VAT Exemption for Offshore Outsourcing Services

December 26th, 2013

In the recent “Notice Regarding the Inclusion of Railway Transportation and Postal Service Industries under ‘Value-Added Tax (VAT) in lieu of Business Tax’ Pilot Reform (Caishui [2013] No. 106, hereinafter referred to as ‘Circular 106′)” jointly released by the Ministry of Finance (MoF) and the State Administration of Taxation (SAT), it specified that offshore outsourcing services in China will be VAT exempted from January 1, 2014, to December 31, 2018, as a pilot transitional policy during ongoing VAT reform.Outsourcing23

Under Circular 106 offshore outsourcing services refer to ITO (Information Technology Outsourcing), BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing) services provided by a pilot taxpayer of the VAT reform to a foreign company under an entrustment contract.

The “Circular on the Tax Collection Policies for the Nationwide Adoption of the Business Tax to Value-Added Tax Pilot Conversion in the Transportation Industry and Certain Modern Service Industries (caishui [2013] No. 37, hereinafter referred to as ‘Circular 37′)” came into effective on August 1 this year and is the current major guideline for enforcing the VAT reform. Circular 37 allowed VAT exemption for offshore outsourcing services provided by companies located in certain cities of China and is scheduled to expire at the end of this year. Circular 106 expands this exemption to all pilot taxpayers and provides the detailed scope of eligible services. It will be effective starting next year and will abolish the provisions of Circular 37.

Greater detail of the eligible services for VAT exemption can be found below:


1) Software research, development and outsourcing:

a) Software research and development services

  • The development of customized software, embedded software, packaged software, system software, and software testing services provided to departments and enterprises of/in finance, government, education, manufacturing, retail, services, energy, logistics, transport, media, telecommunication, public utilities and medical and public health for the operation, production, supply chain management, customer relationship management, human resource and financial management, auxiliary design in computers, engineering, and other activities of clients.

b) Technical software services

  • Technical services such as software consulting, maintenance, training and testing.

2) Outsourcing of research and development services in information technology:

a) Design of integrated circuits and electronic circuits

  • The design and provision of relevant technical support services for integrated circuit and electronic circuit products.

b) Platform testing

  • Platform testing for the development and application of software, integrated circuits and electronic circuits.

3) Outsourcing of the operation and maintenance of information systems:

a) Operation and maintenance services of information systems

  • Internal information system integration, network management, desktop management and maintenance services for clients.
  • Information system application services such as information engineering, geographic information system and remote maintenance.

b) Fundamental information technology services

  • Fundamental information technology services such as integration of management platforms for fundamental information technology, IT infrastructure management, data centers, hosting centers, security services and communication services.


1) Process-design services for enterprises:

  • Process design for enterprises in internal management and business operation.

2) Internal management services for enterprises:

  • Services in backstage management, human resource management, financial, audit and tax management, financial payment, data analysis of medical and other internal management operation, data mining, data management, data usage, and special data processing, analysis and integration.

3) Enterprise operation services:

  • Services in technology research and development, and client analysis and database management for enterprise operations, sales, after-sale service of products, mainly including financial operations, government affairs and educational operations, manufacturing operations, life sciences, retail and wholesale, and transportation operations, public health operations, communication and public utilities operations, call center operations and E-commerce platforms.

4) Enterprise supply chain management services:

  • Overall solution design and database services for client’s procurement and logistics needs.


  • Research services on intellectual property rights, the research, development, and testing of pharmaceutical and biological technology, the research and development of product technology, industrial design, analytics and data mining, design and development of animation and online games, the research and development of educational courseware, and engineering design.


Cloud is vital for offshore providers ‘long term future’

July 30th, 2013

Offshore providers require a cloud strategy to ensure their long-term future is kept safe, Gartner has suggested.

The organisation believes that an increasing use of industrialised services will reduce the volume of traditional and customised services, leading to the impact on offshore providers to be counterbalanced by new revenue from cloud investment.Outsourcing9

Ian Marriott, research vice president at Gartner, estimates growth in public cloud services, with end-user spending on the technology expected to grow by 18 per cent in 2013 to $131 billion (£85 billion).

Despite rising investments in cloud-based services differentiating the leading providers from labour-intensive “pure-play” providers, a balanced portfolio of managed services and other conventional delivery approaches will be required.

Such a tactic will allow them to compete with leading multinational providers, as they will meet the evolving needs of buyers, leading to increases in revenue growth and profitability.

“There will always be a need for “pure-play” providers that operate a labour-intensive delivery approach. But, for broad-based offshore providers that operate in multiple geographies, industries and service lines, and who seek to compete for significant ‘wallet share’ in major accounts, strategic investments in cloud-based services are mandatory,” Mr Marriott concluded.

Gartner emphasised the importance of refreshing outsourcing strategies at least once a year in order to ensure optimal responsiveness to changing market opportunities and business demands.

Furthermore, the experts must perform a critical assessment of any investments made by their offshore providers in cloud-based services.

“The consequence to offshore providers of not responding to such significant market changes will be the deterioration of market share, acquisition by another provider, or its disappearance from the offshore services landscape,” Mr Marriott concluded.

The security of the cloud is another vital consideration for businesses, as the technology is often vulnerable to a host of online threats.

In order to protect against this, file recovery technology should be introduced, offering companies peace of mind when it comes to their data.

As the trend to embrace the cloud continues, organisations need to provide their employees with clarity on how to safeguard the organisation’s operating environment and critical data.


Should businesses cut their losses and bring offshore IT back to the UK?

May 21st, 2013

Offshoring IT made sense ten years ago because labour costs in countries such as India were so much lower than the UK. But is this still the case?

In this guest blog post Andrew Holley, founder partner at Holley Holland argues that some businesses with offshore operations should cut their losses and come home.outsourcing12

Offshoring IT made sense ten years ago because labour costs in countries such as India were so much lower than the UK. But is this still the case?

In this guest blog post Andrew Holley, founder partner at Holley Holland argues that some businesses with offshore operations should cut their losses and come home.

Offshore or off course?

By Andrew Holley

“It’s time for a re-think on offshoring. A decade or so ago it may have made sense for UK-based organisations to send some of their jobs and business processes to areas of the world where labour costs were lower. There were reports of overheads cut by around three-quarters. Yet, any company still following an outdated offshoring strategy needs to ask: ‘Does the maths still add up?’

Think back to the London Olympics.  Overnight, the UK re-defined itself as a 21st century, vibrant and highly-capable nation; a welcome change from its previous heritage-based image. We should use this updated image to optimise our identity business-wise, bringing jobs back to the UK and encouraging European companies with bases in this country to see that the UK is better served by local jobs and services.

The tide is already turning; more competitive onshore wage bills are being negotiated through the unions and the cost of offshore manpower is rising. Gartner is predicting that by 2014, EU directives will drive legislation to protect jobs, reducing offshoring by 20 per cent by 2016.

The unemployment figures are fuelling frustration. Returning work to the UK would be good for brand image. Onshoring or nearshoring also helps reduce an organisation’s carbon footprint.

There are hard economic reasons to return too. Previous estimates of cost savings though offshoring now seem naïve. For some, the loss of customers has eaten away at any initial savings. Santander was an early backtracker, announcing in 2011 that it would replace its Indian call centres with those in Glasgow, Leicester and Liverpool.

Wages in fast-developing countries such as Brazil, China and India have risen steadily. Last year The Economist reported a rise in Chinese labour costs of 20% year on year over the past four years. One company, New Call Telecom, is reported as discovering that it was cheaper to set up its datacentre in Burnley, Lancashire than Mumbai.

Job mobility in India and other offshoring destinations is high. Consequently, training has to be continuously repeated and becomes an ongoing cost. In some sectors, the annual attrition/staff turnover rate can reach 30%.

It’s no wonder that nearshoring – the transfer of business operations to a nearby region – is becoming the favoured option. Doing so can mean becoming eligible for various incentives. Those relocating to an Enterprise Area in Scotland, for example may enjoy discounted business rates and enhanced capital allowances, training support and planning concessions.

There are still reasons why offshoring makes sense for some businesses; for example, for those that need to ‘”follow the sun” and provide a worldwide, 24/7 service. However, many companies that offshored on purely financial grounds are now left with a dilemma.

A move back could make sense financially and earn the trust and respect that has waned in the financial services sector of late.”


Offshore IT outsourcing: Economy, not ethics, is big question for CIOs

April 25th, 2013

This past week, SearchCIO-Midmarket Features Writer Karen Goulart explored the trend of IT insourcing. It was perceived by our readers as a feel good story, but I’m not sure why. One of the biggest issues that pops up when discussing offshore IT outsourcing surrounds ethics. Senator Chuck Grassley wrote in a letter to Microsoft Inc. CEO Steve Ballmer, “Microsoft has a moral obligation to protect these American workers by putting them first during these difficult economic times.” Apple Inc. has taken criticism for offshoring to gigantic facility Foxconn the manufacturing of iPads and iPhones by the millions. Working conditions at Foxconn are allegedly inferior to what would be legal in the U.S.Outsourcing8

One has to wonder whether there’s an apples-to-oranges conflagration. While jobs truly are being eliminated on U.S. soil in exchange for new positions created in foreign markets, in practicum, it’s not usually a one-to-one relationship. Jobs are often eliminated due to a financial need to reduce costs and stay competitive in the marketplace. While it’s an emotional subject, the fact remains that the typical U.S. worker demands a higher salary than a similar worker in Bangalore, Shenzhen or Mexico City. By offshore IT outsourcing, the company is able to retain the same productivity at a lower cost (in theory, at least).

If, say, the U.S. government ruled that offshore IT outsourcing were illegal, it’s entirely possible that we’d see a reduction in workforce to align with those budgetary constraints while the workers who remained would be tasked with more work to fill the gap. Of course, associates who are retained after a blitz might argue that they are still filling a gap even with the relocated offshore IT support. The justification for small- and medium-sized businesses (SMBs) is that, by sending a portion of the jobs overseas, they save whatever jobs remain in the U.S.

Obviously, outsourcing IT services makes sense in many situations. But in outsourcing a task, production or an initiative, the where is often under the advisement of the CIO. For instance, whether an SMB decides to go with a local company to produce its new mobile customer engagement application or to a Silicon Valley producer is entirely a matter of what makes the best sense.

Offshoring as a national concern

In the 2012 U.S. presidential election, offshore outsourcing became the demon that everyone liked to invoke, but the truth is, it’s not as simple as an ethical dilemma, and I’m not entirely sure that it should be one. Capitalism, by definition, requires the purchase and acquisition of goods at a lower price and then the sale of those goods or services at a higher price. In a perfect world, we would all understand exactly how each and every piece of the supply chain gets produced, and we would have a rock-solid understanding — ideally gained through first-hand experience — of how the workers are treated in those facilities. The moment that those goods and services are produced and performed outside of U.S. borders, you can no longer trust what you’re seeing.

The only way to ensure U.S.-grade working conditions is to retain U.S. production facilities at U.S. pay grades. Period. You can’t have it both ways.

Nobody likes to talk about this, but how likely is it that offshore providers who are treating their workers inhumanely would neglect to create a smokescreen to hide their less-than-desirable facilities? The only way to ensure U.S.-grade working conditions is to retain U.S. production facilities at U.S. pay grades. Period. You can’t have it both ways.

Instead, let’s talk about what’s right or wrong for the U.S. economy — you know, that thing that drives a business’ sales and growth. What CIOs (and CEOs) should be wondering is how eliminating a portion of their U.S. workforce will affect the state of the U.S. economy and their potential U.S. customer base. Shifting those jobs to other economies to fix this one is like fixing a leaky boat by poking more holes in the bottom to let the water out. There’s an assumption that by shifting money into foreign markets, those markets will eventually shift that same capital back to the U.S. However, one has only to look at the U.S. trade deficits — upwards of $500 billion annually and growing by the minute — to suspect that might be poor assumption.

How can CIOs support the goals of the business — one of which is ostensibly to earn revenue — while sending their customers’ income overseas? And if there’s not a direct impact on their particular customer base, the income stream certainly impacts other businesses, which are in turn potentially offshoring customers of still other business. Pardon me while I get all Elton John, but we’re talking about the circle of life here as it pertains to wallets and take-home pay. You start sending the money outside the circle and other facets start to weaken.

This is where CIOs have the opportunity to support the business’ bottom line by thinking nationally but acting locally. While selective offshore outsourcing is a facet of today’s business, it pays to cultivate innovation closer to home. You can bank on it.

What do you think? How has offshore IT outsourcing worked for you? Are you finding it worthwhile? Have you seen any negative impacts of offshoring IT? Let’s start a discussion in the comments.


APN looks to India for ad outsourcing

March 1st, 2013

APN has told staff it wants to outsource most of its advertising production to an offshore company.
The proposal comes as the publisher of the Herald newspaper reported a significant annual loss amid declining revenues last month.

APN New Zealand chief executive Martin Simons says the company has been in talks with providers in India and a preferred vendor has been selected.

However, APN staff first have the chance to submit feedback to the proposal by March 7.

While the proposal does not affect staff who perform bookings and layout functions, there are 24 in Auckland and APN’s other regional daily operations which will be affected if the proposal goes through.

Mr Simons says the changes are needed to meet the demand for more efficient production.


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