This is good news for the Indian software and services exporting companies. A clutch of leading technology research firms are predicting a steady double digit growth in the offshore outsourcing market.

Despite the political backlash, offshore outsourcing market adoption is growing they have said.

META Group, the provider of IT research and advisory services in its recent report has predicted the offshore outsourcing market to grow nearly 20% annually through 2008, adding that by 2005/06, most IT organisations will have an ‘offshore’ strategy, despite current efforts of domestic vendors to position ‘portfolio optimisation’ as an alternative global approach.

“Offshore labour is proving to be a disruptive alternative in the outsourcing industry,” said Mr Dean Davison, vice-president at META Group. “With global resources costing one-third to one-fifth that of American employees — without accounting for hidden costs — and having higher process discipline, offshore strategies now pervade North American IT organisations.”

META Group believes the average enterprise will ultimately outsource 60% of application work offshore. Mr Davison in the report has said that application development and maintenance constitutes approximately 30% of spending for the average IT organisation and offshoring it will typically reduces this expense by 30%.

Application development and maintenance are the most common service that majority of Indian software service exporters provide.

META Group also finds that the political backlash towards offshore is not deterring market adoption.

Rather, public perception is another item to be managed in the process of moving offshore.

META’s view is backed up by ARM Research whose findings reveal that 25% of IT work is currently outsourced, 53% intend to increase outsource spending against the 5% percent that plan to decrease spending and companies reinvest 60-80% of the money saved from outsourcing in IT and non-IT related projects.

The second quarter (Q2- 2004) results of software service vendors trickling in seem to suggest a strong support for outsourcing and offshoring.

Infosys for instance, announced a huge 52% gain in revenues and 48% increase in net profits, while MphasiS said that its revenues and net profit grew by 35% and 24% respectively.

Mr Nandan M Nilekani, Infosys CEO, president and managing director, said that “Offshoring has become a mega trend in the industry, as more customers leverage their partnership with Infosys to increase their global competitiveness.”

He also said that though the offshoring debate continues with different levels of intensity, what Indian companies are doing in a win-win for both India and US as “We make them more profitable so that they can create jobs.”

R SUBRAMANYAM

TIMES NEWS NETWORK

Euphemism is alive and well again when it comes to axing jobs in America.

For much of the past two years, the business world has been happy to trumpet the benefits of sending technology work and other tasks offshore to lower-cost labor markets such as India and Russia. But as labor advocates and politicians have fumed over the "offshoring" trend, businesses are changing their terms, if not their tune.

It's not too different from the way corporations in an earlier era employed softer words for "layoffs," like "downsizing" and "rightsizing." "Offshoring" is giving way to phrases such as "co-sourcing" and "global sourcing," said John McCarthy, analyst with Forrester Research.

"It's all part of everyone going into the offshore witness protection program," McCarthy quipped. "They're changing the title, but the activity is the same."

Earlier this year, McCarthy reiterated his view that more than 3 million U.S. services jobs will go offshore between 2000 and 2015. And he bumped up his estimate of near-term lost jobs by some 240,000, meaning he expects a total of 830,000 positions to have moved offshore by 2005.

Defenders of offshoring say it ultimately benefits the U.S. economy and U.S. workers, and that protectionist measures would result in lower economic growth and higher unemployment.

Critics respond that offshoring costs U.S. workers jobs and threatens the country's long-term technology leadership.

The exact scope of offshoring has been hard to assess. A recent report by Congress' research arm concluded that government data offer limited insight into the extent of offshoring and its effects.

Meanwhile, companies involved with sending work offshore have come up with alternative labels for what they do--labels that avoid touching the latest political third rail. For example, India-based Infosys Technologies touts its "Global Delivery Model." When serving a U.S. client, some Infosys employees work at the company's site. But the majority of Infosys' employees are in India.

IBM, which has been expanding its operations in India, has moved away from the related term "outsourcing." Outsourcing refers to a business farming tasks out to companies like IBM--which may complete the work abroad. Big Blue avoided using the word "outsourcing" in announcing deals with two energy companies and with two German banks that all involve IBM taking over certain operations.

Big Blue described some of the deals as "business process transformation services" agreements and said the phrase refers to an emerging market category.

Corporate language transformations related to offshoring rile populist commentator Jim Hightower. "Excellent news, Americans! U.S. corporations say that they are no longer 'offshoring' our middle-class jobs," Hightower wrote in an essay published Friday. "Does this mean that greedheaded CEOs are no longer shipping our manufacturing, professional, and high-tech jobs to India, Pakistan, Russia and other low-wage centers? Of course not. It simply means they no longer say the word 'offshoring.'"

CNet Asia

Offshore outsourcing of U.S. jobs is a growing trend that cannot be ignored, according to a final report released today by the General Accounting Office (GAO). The GAO plans at least four additional studies in the coming months to further investigate this issue.

The GAO got involved after two Seattle-based labor unions, SPEEA-IFPTE and WashTech/CWA requested congressional action and research into the explosive new trend of high-end manufacturing and service job moving overseas.

"This study is a good first step," said Charles Bofferding, executive director of SPEEA. "It recognizes that outsourcing is growing and a troubling trend for our workers and our country."

"The GAO has clearly stated in this report that outsourcing of U.S. jobs abroad can not be ignored, and the government needs to act in order to address the issue in terms of data collection and policy solutions," said Marcus Courtney, WashTech president.

Released in Washington, D.C., the study was made at the request of Washington state Reps. Adam Smith (D-9th District) and Jay Inslee (D-1st District). The congressmen were prompted to make the request by the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001 and the Washington Alliance of Technical Workers (WashTech), CWA Local 37083.

SPEEA represents technical workers and engineers primarily at The Boeing Company. WashTech represents high-tech workers in the software industry. Both unions have experienced union members losing jobs as companies send more work to lower cost workers overseas.

The study does not make recommendations regarding the outsourcing trend. Union officials said they will continue to work with lawmakers to find solutions that encourage corporations to keep jobs in the U.S.

"We thank our congressional leaders for pushing for this study and welcome their help as the study continues," said Bofferding.

The actual scope of the study was reduced by the GAO to look primarily at service jobs. The GAO plans four additional studies to examine corporate offshore outsourcing's effect on federal procurement, trade and international affairs, critical capital/infrastructure and income security for workers. No release dates have been set for the additional reports.

In addition to job loss, the unions are concerned about the transfer of technology that occurs when corporations send high-level work overseas.

"Not only is Boeing creating jobs overseas, we are teaching them how to make airplanes," said Dave Landress, a member of SPEEA's Executive Board. "We're creating another competitor for our own products."

SPEEA, IFPTE Local 2001, AFL-CIO, represents 20,000 technical and professional workers at Boeing in seven states.

WashTech is a local of the Communications Workers of America and is actively organizing high-tech workers in the U.S.

TMCnet

Among those considering a bid is U.S. private-equity firm Texas Pacific Group, which has had a long relationship with GE, it said, adding that GE provided the financing for Texas Pacific's first deal, its purchase of Continental Airlines. Other investment firms and outsourcing companies have looked at the business during the past year, including Warburg Pincus.

General Electronics a pioneer in business processing in India, is looking to cash in on its giant offshore operations there, setting a price tag of as much as US$1 billion, the Asian Wall Street Journal reported, citing sources familiar with the situation.

It said GE is in talks to sell all or part of GE Capital International Services (GECIS), a division it started in 1993 in Delhi as part of GE Capital. The division employs 17,000 people, with 12,000 at four centers in India and another 5,000 at operations in Hungary, Mexico and China, it said.

Largest Western Operation in India

With revenues in 2003 of $400 million, the newspaper said it is the largest business-processing operation in India by a U.S. or European company.

Earlier this year, GE Chairman and Chief Executive Jeffrey Immelt told investors that GE could save as much as $1 billion annually by simplifying its organizations and outsourcing.

The move comes at a time when outsourcing by U.S. companies is speeding up and the industry is consolidating in India, giving the company an opportunity to profit from some of its investments, the report said.

GE could also save money by outsourcing more of its operations instead of having a captive unit, said John McCarthy, a researcher with Forrester Research in Cambridge, Mass.

Texas Pacific, Warburg May Bid

"What GE does today, the rest of the world will be doing two years from now," he said.

The report said that, while no deal appears imminent, discussions are continuing as potential buyers weigh the value of business and the terms of any transaction.

Among those considering a bid is U.S. private-equity firm Texas Pacific Group, which has had a long relationship with GE, it said, adding that GE provided the financing for Texas Pacific's first deal, its purchase of Continental Airlines.

Other investment firms and outsourcing companies have looked at the business during the past year, including Warburg Pincus and one of India's leading outsourcing companies, Wipro Ltd. For many, however, the price was too high, according to people familiar with the situation.

GECIS started out handling basic insurance claims and answering calls from customers of GE's commercial- and consumer-lending units and has moved into developing sophisticated software for analytics, data mining and business modeling.

Most Clients GE Businesses

The majority of its clients are GE businesses, but it also works with major companies in the financial, transportation and retail industries.

Since GE is the main customer, the conglomerate may prefer to sell to a financial company or another complementary player rather than an industry buyer that would be considered a competitor.

GE has also told some bidders that it would guarantee only 18 months of work before doing competitive bidding with other companies, the report said, citing one person familiar with situation. At the same time, a buyer will be able to attract new customers from outside GE, using the extensive capabilities developed at GECIS over nearly a decade.

Any deal could be affected by political factors in the United States, where outsourcing is a significant campaign issue, the report said. Several states have vowed not to give contracts for work that would be done offshore, which could initially slow down any buyer's efforts to expand the business beyond GE.

Sources

India is still the most desirable location in terms of cost and quality for call centre offshoring, but Britain continues to be seen as a lower risk option while China is being snubbed.

The results - from a survey conducted by specialist law firm Technology Law Alliance and call centre publication CCF - also confirmed that offshoring from Britain was continuing despite criticism.

Some 44 per cent of respondents said they had either engaged offshore outsourcing companies or were thinking of doing so in the next 12 months.

Two-thirds of those considering outsourcing said they were looking to move the function to India while the remainder were evenly spread among Europe, South Africa and Australia.

Legal director of Technology Law Alliance Jagvinder Kang said India's success went hand in hand with it delivering a cost-effective, high quality service.

China presented problems for British firms, he said.

"There was a lack of responses to China being a preferred destination for offshore call centres, which seems to tie in with the view that although China is making inroads into the technology offshore outsourcing sector, language and accents are still presenting themselves as obstacles."

Indian Abroad News Service (IANS)

Global sourcing of product development will no longer be an optional strategy by 2007-08, according to a study conducted by META Group. With offshore outsourcing being accepted as a key strategy to stay competitive in the globalised economy, the production cycle for technology-centred products will require global resources and global delivery, a study by Wipro Technologies has said. 

The study details Wipro's engagement with one of the world's largest semiconductor makers in the area of System on Chip (SoC) development. Wipro's SoC centre (based out of India) provided extensive SoC integration activity, along with customisation and development of design modules and helped in 20 per cent reduction in product realisation thus improving client's time to market for its chipset with a first silicon success rollout, the study said.

"Next-generation products will be developed with the globalisation model already deployed by large companies, and will extend down to regional and specialty players enabled by offshore outsourcing," said Dean Davison, Vice-President and Director at META Group. "Indeed, products developed without global resourcing will be late to market at uncompetitive costs by 2008-09."

Commenting on the findings, Ramesh Emani, President, Embedded & Product Engineering, said that "the study validates the trends we are witnessing in our business. Wipro, with its vast expertise spanning over two decades in several domains is committed to help its customers benefit from its global delivery model."

First manufacturing jobs went offshore, now tech and high-level business jobs are following, according to eMarketer's latest report, Offshore Business Process Outsourcing.

International research agency Gartner has predicted that India's overall share in the offshore business process offshoring market would slip from the present 80 per cent to 55 per cent by 2007.

Sujoy Chohan, vice-president and research director of Gartner's "Offshore BPO", said even though India would continue to be a dominant player, other countries would come up fast.

"The skill set required for BPO services is available in abundance across many English-speaking countries and even basic non-language dependent work can be offered by countries whose native language is not English.

"This has thrown up a number of countries which can and are directly competing with India. These different countries together will erode India's competitive market share," Chohan said.

Gartner said the global offshore BPO market was likely to be around $ 27 billion by 2007. India's pie would rise from $2.3 billion to $14 billion during the same period but its overall share will fall.

Chohan pointed out that the Indian IT industry and government would have to work together so that there was abundance of people with English-speaking skills.

"The issue is being addressed by the private sector but needs greater government involvement. The ministry of education needs to step in and work closely with the industry to assess what needs to be done," he said adding that the most important element for offshore BPO industry was to ensure the continuous flow of trained workforce.

He said the situation was not alarmist and could be rectified if the government puts into pace a strategy and timeline to achieve certain growth and infrastructure targets to compete in the marketplace.

The good thing, however, is the industry has already begun to admit that government assistance is essential and required to tackle the immense infrastructure issue facing the industry. "The industry did not want to accept this just two years ago," he pointed out.

A number of countries such as China, South Africa, Philippines, Australia, New Zealand, Mauritius, Malaysia have woken up to the job creating potential of BPO business and trying to put together integrated strategies to develop BPO business.

MUMBAI, India (CNN) -- After the excitement of a 10 percent economic growth rate at the start of 2004, India's economy is settling back into a pattern that is predictable if vaguely unsatisfactory.

This year Asia's third largest economy will grow by at least 6 percent, according to the latest forecasts by the government.

In virtually every other country in the world, that would be a cause for celebration. But India's needs are more pressing.

Yes, say economic observers, 6 percent is good. But it is not enough if India is to find jobs for the millions of people who join the workforce every year.

India needs at least 7.5 percent to bridge the employment gap, according to experts such as Morgan Stanley's chief economist for India, Chetan Ahya.

Others have even higher goals.

Leading Mumbai businessman Adi Godrej, head of the Godrej Group, told CNN: "This country can and should grow at 10 percent year."

He says that with more reform, including in the labor market and an overhaul of the indirect tax structure, "10 percent gets to be realistic."

That rate is more than being achieved in hot sectors such as IT services, outsourcing, pharmaceuticals, health services, retailing and automotive, but there are woeful inadequacies in the overall picture.

The biggest deficiency is in physical infrastructure. In the key areas of roads, rail, ports, power and water, India lacks the prerequisites for sustained high growth.

Ahya told CNN that there are pockets of good performance in the economy.

He pointed to a "sea change" in telecommunications and IT infrastructure over the past five years that had created the right conditions for business process outsourcing, one of the areas where India's economic prospects are brightest.

But according to Ahya, two fundamental problems are holding back India's economic performance: its well-documented infrastructure shortcomings, and a savings rate that is way below that of Asia's other economic giant, China.

Ahya believes India needs to lift physical infrastructure spending from 6 percent of GDP now to at least 9 percent, or $65 billion a year. In 2002, he notes, China spent $260 billion on power, construction, transport, telecoms and real estate, compared with $31 billion in India.

He says that India's savings rate of 24 percent of gross domestic product (GDP), allied with a relatively low inflow of offshore investment money, puts a brake on capital formation and restricts GDP growth to about 6 percent.

Godrej agrees. He says while the private sector is saving well, the government is dis-saving.

"If we can change this, with the right policies we could get to 10 percent," he says.

High-growth strategy

Another leading businessman, Tata Sons executive director R. Gopalakrishnan, is also an advocate of a high-growth strategy, arguing that India needs 9 to 10 percent a year to absorb labor and help reduce income disparities.

Gopalakrishnan, whose Tata Group is one of the mainstays of the Indian economy across sectors such as automotive, IT, resources, power and tourism, agrees that the government's savings rate has to be improved.

"We lose two to three percent of GDP through this," he told CNN.

Gopalakrishnan also wants the tax base widened -- something that will likely happen next year when the government is due to introduce a broad-based value-added tax.

Ahya's target is more restrained than these business sector advocates. Even so, he thinks the growth rate could rise to 7 percent-plus over the next 10 years, if India pushes through "big shift" reforms to cut its fiscal deficit and lifts savings for infrastructure investment.

These twin steps could make India a global competitor of China in manufacturing exports and create a "virtuous circle" that would see growth rates emulating the 1994-96 peak.

But first, India has to get the basics right. Ahya says the electricity sectors needs a "serious and immediate overhaul" to overcome losses in transmission and distribution which, combined with virtually free power for farmers, means there is no profitability in the business.

Unless this situation changes, he warns, there is no incentive to invest in the power sector.

Ahya says he is "cautiously optimistic" about India's prospects in the near term, but says it will require the Indian government to have the political will to make the changes.

He points to the contrast with China, where the central government has driven high-speed economic development through massive spending on infrastructure, embracing labor flexibility and foreign investment. For its part, India has followed a gradualist consensus approach that amounts to a "democracy tax" on economic progress.

10 years behind

Ahya says that India is about 10 to 13 years behind China in per capita GDP.

Long-term, it may be able to bridge the gap if it follows a program that includes developing its human capital; boosting its savings rate; increasing capital formation through foreign direct investment and privatization; kick-starting infrastructure investment; reforming the tax structure; improving labor flexibility; and decentralizing authority to encourage reform.

For now, the new government of Manmohan Singh has plenty of immediate challenges, including an inflation rate that is creeping up. Last month, wholesale price inflation came perilously close to 8 percent, driven by rising oil prices.

Even so, India has done enough recently to earn a revised ratings outlook.

Late last month, ratings agency Standard & Poor's revised its outlook on India's BB long-term foreign currency rating to positive from stable. It also upgraded the outlook on the BB+ long-term local currency rating from negative to stable.

But S&P warned India's high public debt weighed on its sovereign rating.

"The country's fiscal weakness is the worst among rated sovereigns, leaving it particularly vulnerable to economic cycles and any decline in growth rates," S&P said.

CNN

The next back-office job that goes to an Indian outsourcing company may not be moving as far as you think.

In a bid to tap new markets and satisfy customers keen to outsource to more than one location, India's back-office service providers are setting up shop overseas.

Infosys Technologies Ltd's back-office subsidiary Progeon has opened a centre in the Czech Republic, while MphasiS BFL Ltd's arm MSourcE has a contact centre in Mexico.

WNS Global Services, India's largest independent back-office services firm, is opening a centre in neighbouring Sri Lanka.
It is more from a customer perspective," said Raju Bhatnagar, president of ICICI OneSource, an outsourcing firm majority owned by India's ICICI Bank and one of its subsidiaries.

"If the vendor, however reliable, has a single delivery centre, it forces the customer to look for a second vendor outside India, rather than put all his eggs in one basket," said Bhatnagar, whose company announced the purchase of a Chicago-based business on Wednesday. "If I can bridge that gap, I can keep business from going to another vendor."

Research director of consultancy Gartner India Sujay Chohan said geographical diversity was also important for backing-up data for disaster recovery purposes and the ability to offer different language skills.

LEARNING THE LANGUAGE

"Today, Indian companies are guilty of servicing mainly English-speaking countries," Chohan said. "If you are going to support customers in Europe, you have to have something in Central Europe. It does not have the same cost levels (as India), but it has comfort levels, language skills."

A push for non-English speaking clients is what led Infosys to the Czech Republic and MphasiS to Mexico. The expansion overseas is also part of a wider global push by Indian companies, some of which are making foreign acquisitions.

Revenue from India's outsourcing industry has grown to $3.6 billion, mushrooming in and around key cities such as Bangalore, Mumbai and New Delhi. It employs 245,000 people, six times as many as five years ago.

While India has 80 per cent of the offshore outsourcing business today, Gartner estimates the country will see its market share halved by 2007.

"There are today 28 countries that have emerged on the screen in the past year," Chohan said.

"Who is going to take business away from India?" he said, pointing to countries such as Malaysia, Vietnam, the Philippines and South Africa. "It is these countries chipping away. It does not matter that some of these are high cost ... If cost was the only driver for BPO (business process outsourcing), then India would have been doing $10 billion today."

The Philippines, which already has a strong industry offering back-office services, is high on the list of overseas locations for India companies. Daksh eServices, recently acquired by IBM, and Hinduja TMT have operations there.

The need to find skilled workers is another attraction of overseas locations. Nearly half the workers in some Indian outsourcing companies change their jobs or leave the industry every year. Quality suffers as firms focus more on recruitment than on training.

Talented youngsters often leave the industry in frustration. Companies who hired aspiring, English-speaking 20-something workers have found these staff are hard to keep.

With such challenges at home, Indian firms would do well to look for talent in other countries, Chohan said.

That is exactly what WNS did by going offshore.

"Sri Lanka is a boutique business process outsourcing destination that offers highly qualified English-speaking staff with specific expertise in professional services such as finance and accounting and commercial law," said group chief executive officer of WNS, Neeraj Bhargava.

According to the online survey of 145 executives from various industries, more than 30% of the respondents were planning to offshore their IT infrastructure in the next 12 months and another 30% were researching or evaluating the same with active interest. Interest in offshore BPO was also gaining more ground with 34% of the respondents planning to offshore some of their business processes in the next 12 months. Traditional application development and management will continue to lead in organizations' offshore outsourcing plans with more than two third of the respondents planning to offshore them in the next 12 months.

The study found that offshore outsourcing was increasingly becoming a strategic initiative at global organizations. At 38% of the organizations, offshore outsourcing was a now a CxO led initiative. An overwhelming majority of executives (87%) polled said that their offshore outsourcing spends would increase this year. On an average, organizations were likely to increase their offshore outsourcing spends by 34%.

"The findings confirm that offshore outsourcing has now become mainstream, there is a clear indication that various global organizations have gained confidence to offshore new and complex service lines like IT Infrastructure management and critical business processes" said Sudip Banerjee, President - Enterprise Solutions at Wipro Technologies. "And Wipro, being the largest offshore provider of IT infrastructure management and BPO services, is best placed to capitalize on this new wave".

In the offshore outsourcing space, entry barriers were falling and customers were ready to add new vendors. A sizeable number of respondents (40%) were keen on evaluating/initiating relationships with new vendors. Organizations with higher maturity in offshore outsourcing or those planning to offshore newer service lines like IT infrastructure management / BPO were more likely to do so.

Wipro has been recognized by IDC and Forrester Research as the leader in the offshore outsourcing space for its service breadth, partnerships, processes, technical depth and ability to move up the value chain, is best positioned to leverage the increased interest by organizations worldwide in strategic outsourcing.  

On Monday, as the California Senate passed a bill that would ban state agencies from contracting services out to companies that use overseas labour, opponents and proponents of offshore outsourcing clashed during a conference at Stanford University.

In a panel of two venture investors, a scholar, a software engineer and two chip industry chief executives most came out in favour of moving jobs overseas, to the dismay of many visitors to the Hot Chips event, which is sponsored by the Institute of Electrical and Electronics Engineers (IEEE).

"I think outsourcing is good for Americans, it creates jobs in America," said T J Rodgers, founder, president and chief executive of Cypress Semiconductor.

Rodgers disputed the notion that offshore outsourcing is rampant. "We are not going at a tremendous speed outsourcing jobs; it is simply not true," he said.

If critics of outsourcing were to look at publicly available statistics, they would find that "there is no catastrophe", Rodgers said.

But Ron Hira, an assistant professor of public policy at Rochester Institute of Technology and member of the IEEE Career and Workforce Policy Committee, took issue with those statistics.

There have only been self-interested, industry-sponsored studies that do not tell us much, he said.

"How much work has actually moved offshore? No one knows, because nobody has collected data on it. This is a major failing of government policy," Hira said.

The Department of Commerce is conducting a study, but is unlikely to bring up new information because it is underfunded, he said.

Despite his criticism of the research, Hira said it is clear that offshore outsourcing is accelerating. "It is a really bad deal for workers," he said.

Carl Everett, a partner at Silicon Valley venture capital firm Accel Partners, argued that outsourcing offers an opportunity companies should take advantage of.

By using offshore capabilities, they can bring a product to market faster and at a lower cost, which will increase profitability and ultimately generate jobs, he said.

Natasha Humphries was laid off last year from PalmOne after having trained workers in India to do her job as a software quality assurance engineer.

"Increased profit margins will create new jobs, but they may not be in the US and they may not pay as well," she said.

Humphries also noted wage depression as an effect of offshore outsourcing.

Salaries of between $75,000 (£41,700) and $125,000 a year for individuals with her skills are no longer the norm. "My skills are still marketable, yet I cannot market them at the same price," she said.

Some audience members appeared anxious about the prospect of losing their jobs to outsourcing. They called on panel members to pressure the government to take action against outsourcing.

Questions were also asked about how to motivate students to study engineering when the job outlook is grim.

Rodgers said taking a protectionist stance would ultimately cost more jobs than it would save because of a backlash by trade partners. "We will be a big loser and there will be a lot more people on the streets if you start attacking outsourcing," he said.

"Our plan is to hire about 2,000 engineers over the next five years," Rodgers said. However, there is a caveat. "We will go wherever we need to go to find those engineers."

US companies should create jobs in new areas such as biotechnology, nanotechnology and fuel cell technology, said Vinod Dham, co-founder of NewPath Ventures, which invests in companies that do most of their work overseas. "Where is the next event that will create a boom in the market for jobs?" he asked.

Meanwhile, the California bill banning outsourcing for government agencies is expected to pass the state assembly, according to local news reports. It will then land on the desk of governor Arnold Schwarzenneger, who has yet to express a view.

Joris Evers 

IBM Philippines president and general manager Joaquin Quintos IV urged high school graduates eyeing courses in nursing and medicine to think again and consider computer-related courses instead.

Quintos said employment prospects in the global information and communications technology industry were beginning to look promising with Western companies increasingly outsourcing information and communications technology (ICT) jobs overseas.

Despite a recent US backlash against offshore outsourcing, top global ICT and services firm still consider the country the top destination for outsourced jobs due to the availability of a "flexible" workforce that can speak and understand English, Quintos said at a gathering of Department of Science and Technology scholar-graduates.

Quintos said the ICT industry was not dead, as many perceived it to be following the dot-com bust in 2000.

The IBM executive said the ICT industry had recently been growing at a sustainable rate, which meant jobs  and more opportunities for businesses.

The global outsourcing phenomenon, however, required more just purely technical skills, he said.

"What is important today is not knowing the technology per se, although this is still critical for those that are in pure IT profession[s], say, [as a] software developer or a microchip designer, but rather knowing how to apply or use that technology," he added.

The ICT outsourcing opportunities encompass other fields including business management, accounting, and customer service, Quintos added. Case in point, he said, is the booming call center industry, where the Philippines is a leading contender.

The IBM executive acknowledged, though, that not all ICT graduates of local schools ended up working in the high-tech industry due to a mismatch between school curriculums and industry demands.

Various Sources

Moving customer data out of the European Economic Area could contravene Data Protection Act

An unnamed Lloyds TSB customer, back by the bank's internal union, yesterday launched a legal challenge against the firm's plans to outsource call centre jobs to India, on the grounds that it breaches the data protection act (DPA).

The Lloyds TSB Union (LTU) claims the bank is breaching the DPA by transferring customer's financial data outside the European Economic Area (EEA) without their written consent.

Richard Thomas, the Information Commissioner, is expected to rule on the case in the next few weeks - in what will be a key ruling for the industry.

Last October, the bank announced that it was closing its Newcastle-based call centre, with the loss of near 1,000 jobs, and moving the operation to India.

If the LTU's challenge is successful, it could have serious ramifications for the rest of the financial services industry.

A spokesman for the bank says it is confident that its actions are in line with the DPA and that it has adequate measures in place to protect customer data.

James Watson

London
Reporters of a British newspaper conducted a survey on the performance of insurance major Norwich Union's call centres in India and found them not only to be satisfactory but also cost-effective.

The snapshot survey was done by reporters of the Eastern Daily Press, and involved calling up numbers of the Norwich Union and its main competitor Churchill, a part of the Royal Bank of Scotland group.

Morwich had sparked controversy when it transferred thousands of Britain's jobs to new call centres in Bangalore and New Delhi. Customers said Indian staff were hard to understand and did not have enough knowledge of the UK motor industry.

In letters to the newspaper, customers had complained of being left hanging on the phone, of impenetrable accents and having trouble with straightforward queries.

For its part, Norwich said the performance of its Indian operations has been as good as its British sites.

For the survey, the newspaper's team of reporters dialled NU Direct to get a car insurance quote, followed by another to either Churchill - which has all its call centres in Britain - or a similar insurance provider.

Some calls were directed to Norwich's call centre staff in India and others to Glasgow or Liverpool.

All the reporters succeeded in getting quotes without much trouble, although the costs sometimes varied wildly - in one case from £555 to £1,068 for the same level of cover.

The consensus was that calls to Norwich's Indian centres could take a long time, with several misunderstandings over language and accents proving hard to decipher at times, but information did come by.

Indian call centre staff seemed eager to please by offering cut-price rates and free products thrown in, and had a parrot-like obsession with the Norwich Direct catchphrase "Quote Me Happy".

The reporters found that young graduates, keen to sell large numbers of policies to new and existing customers, mainly staffed Norwich's Indian call centres.

NU customer service director Simon Machell said the company had not seen a noticeable rise in complaints since the Indian call centres came on line. The staff was working hard to combat difficulties with language, he said.

"We receive around 1,000 complaints a month at our executive complaints department in Norwich, covering a huge range of issues from pricing to difficulties with call centres. The level of complaints tends to vary and the issues being complained about vary as well.

"In our experience it takes a little bit longer to talk to our Indian call centres, but our customers are, on the whole, not finding the language issue is getting in the way.

"As our Indian workers are getting more experienced, they are getting better at handling the calls, although we do not let them on the phones unless they can have an acceptable conversation with the customer. We're very happy with how the Indian centres are performing."

Source: Business Standard

With 5,000 agents employed at call centres throughout the island, Jamaica had the lion's share of the 13,000 agents that Datamonitor, an independent research group, estimates are employed in the region, including the Dominican Republic and Puerto Rico.

But while Datamonitor expects Jamaica's employment level to increase to 8,000 by 2008 - in line with the projected regional growth trends - Michael McMorris, executive director of markets at Jampro believes that far more individuals will be absorbed by the industry within four years.

"The independent assessment from Datamonitor is consistent with our historical rate of growth," says McMorris. "However, based on the surging interest we have seen from the US market, Jamaica may be able to grow at an even faster rate."

Puerto Rico, Trinidad & Tobago, and the Dominican Republic account for a combined 6,000 workers in the field; the other 2,000 are spread throughout Barbados, St Kitts, Grenada, St Lucia, Guyana, Antigua and St Vincent.

The research group estimates that offshore outsourcing primarily from the United States, and to a much lesser extent, from Spain, will grow from 13,500 agent positions in 2003 to 34,000 agent positions by 2008.

McMorris believes that Jamaica's expansion will have to be preceded by infrastructure development and human training.

"If we do not get these right now we will miss this opportunity," he cautions.

In comparing call centres at the major jurisdictions globally, Datamonitor pointed out that Jamaica shared a similarity with India - with both markets dominated by outsourcing from the United States.

While the Jamaican centres provide a variety of services - areas including financial services, communications, technology, distribution and wholesale and travel and tourism - the call centres in Latin America are dominated by financial and telecommunications services. These are primarily inbound services, complaints handling and payment authorisation calls.

In pointing to the possible constraint on growth posed by Jamaica's relatively small population, the research agency recommended that Jamaica be used by outsourcers looking for a nearshore alternative to Canada, for English (language) calls originating in the US and Central America.

American outsourcers are attached to the Caribbean by geographic proximity, comparable time zones, the availability of English speakers and the overall satisfaction with the quality of the labour in the Caribbean, the report concluded.

Observer Business Reporter

Nearly 40% of IT departments have an outsourcing policy that is out of synch with the strategy of the business they are supporting, according to research by GARTNER.

And despite the importance of IT outsourcing deals to the success of the business, 21% of IT directors questioned by the analyst firm said their outsourcing policy was "not at all aligned" with the business.

The snapshot of IT outsourcing emerged from a Gartner survey of 68 executives in large companies during its annual European Outsourcing and IT Services Summit in April.

The survey revealed widespread dissatisfaction with the performance of suppliers. More than 50% of those questioned, most of whom were IT directors, said they were in the process of changing suppliers.

The survey also underlined the rise of offshore outsourcing - 57% of respondents said they were considering outsourcing some IT to offshore locations.

IT directors' top priorities when outsourcing were: cost efficiency, service quality, adaptability and relationship management.

Few of those surveyed listed how to build a business case and disaster recovery as among their top priorities when outsourcing.

Wide area networks were the most popular part of IT to outsource, followed by voice and video networks and the IT helpdesk.

Asked how happy they were with different kinds of IT service - whether run in-house or from a supplier - respondents to the survey said they were most satisfied with distributed systems (Lans and PCs) and application support. They were least satisfied with IT helpdesks.
Nick Huber - ComputerWeekly.com

THE HUNDU BUSINESS LINE

Indian companies benefiting from the offshoring wave are doing a bit of sleuthing. They are making sure their US clients' data is safe by screening potential employees. 

GOOD things don't always come free of trouble, it seems. Take, for instance, the offshore outsourcing wave favouring Indian shores.

As US companies send more business to Indian companies here, a significant chunk of data that is critical in nature is getting offloaded here for processing.

The responsibility of making sure that this data is not misused lies with the Indian companies, or the vendors in this instance. In the absence of proper data-protection laws, these vendors have started taking steps to prevent leaks in manpower-related security.

As a first step, companies have begun background checks on their potential employees. Employee screening, considered critical in emerging markets due to lack of criminal databases, involves hiring an external agency to conduct personal and background checks.

As the industry witnesses a significant churn in employees because of high attrition rates, screening the background of potential employees becomes imperative considering the fact that quite a chunk of potential employees lie about their education, experience, and so on to gain jobs.

A study of 3,000 screenings by risk management consultancy firm Hill & Associates (India) Pvt Ltd has revealed that 30 per cent of the candidates had falsified their resumes.

Pre-employment screening has started gaining ground with Indian vendors too, says Ashish Sonal, country manager, Hill & Associates. "At present, about 30 per cent of the requests we receive for pre-employment screening are from Indian firms," says Sonal. Global firms that carry out pre-employment screening and that have been operating in India include Kroll, ChoicePoint and Intelysis.

Indian firms such as Globe Detective Agency also carry out pre-employment screening. The monthly volumes of all the players operating in the pre-employment screening could be in the range of 8,000-10,000 screenings, says Sonal.

Hill & Associates says it is the market leader in pre-employment screening but declines to comment on the volume of its operations.

Says Rahul Verma, director, HR, Accenture "People are clearly our most important asset. We partner with our employees during their entire lifecycle with the organisation, this includes the recruitment process too."

"We undertake stringent due diligence to ensure that we hire the right people for the right job," Verma says, adding Accenture has an in-depth and rigorous pre-employment screening process which has proved to be useful in multiple instances.

"For example, one of the pre-screening initiatives we undertake includes verification of the candidates' qualification and experience.

This physical verification ensures that only candidates who are appropriately qualified join Accenture. We invest in this process as it reflects on our values of high ethics and integrity," says Verma.

Vishwanath Kulkarni
Mail Vishwanath at vishwa@thehindu.co.in

Call Centre Offshoring: Not Viable to Australian CEO's  

While Australia's largest banks are busy reviewing their call centre operations to identify areas that can be moved offshore, Suncorp has hit out at the local financial services industry accusing it of disregarding customer service levels in favour of profits.

Suncorp general manager for personal customer sales and service, Andrew Mulvogue, said offshoring a call centre tears the heart out of a company and distances both the organization, and ultimately their call centre from the people they wish to serve.

Mulvogue said the business just wouldn't work if a call centre was offshored and questioned how other banks expect to maintain a high level of service.

"Suncorp's contact centre is too important to entrust to an offshore vendor, and that's particularly true for our insurance business," Mulvogue said.

"Outsourcing call centre services offshore is not an option. As Australia's third-largest insurance company, sixth-largest bank and one of the nation's top 25 companies, we're all-Australian.

"Why would you go offshore if you're an Australian-based company wanting to look after Australians when they are making a claim and in a time of need?

"For example, how is someone in another country going to relate to someone in Australia whose house has just burnt down?"

While Mulvogue has taken a strong stance in the debate, his passionate view is not shared by the rest of Australia's financial services industry which is moving toward an onshore/offshore mix to remain competitive.

As reported in Computerworld last week, Banks cover up offshoring moves, (August 2, p1) wages for an agent in Australia are estimated to be $3000 per month compared to $3000 per year in India.

The Commonwealth Bank, Westpac, St George and the National Australia Bank have all admitted to conducting reviews that include offshoring call centres, but no steps have been taken to transition operations to the locations such as India or the Phillipines.

The Australian Banking Association has taken an impartial line towards offshoring, stating it adopts a neutral stance, adding that it is up to individual banks to make their own decisions.

Citibank Australia is the first of the big financial services firms to relocate its call centre operations. Last week the bank announced its call centre is being relocated to the Philippines.

Citibank's current Brisbane-based call centre, established in 1999, employs 120 staff and will be relocated to Manila over the next five months.

The bank said the transfer followed a "rigorous review" of the most efficient and effective way of providing services to customers in what it said was the increasingly competitive Australian financial services market place.

Michael Crawford, Computerworld

In typical doublespeak, even the U.S. government agrees that tech jobs are not likely to stay onshore, despite the growth in demand. The U.S. Department of Labor says tech jobs are expected to be among the fastest-growing occupations through 2012. But it also says that jobs are likely to leave as fast as they appear.

"Any companies experiencing double-digit growth this year are likely to dip to single digits next year," Howard Rubin, executive vice president of Meta Group, told NewsFactor's CIO Today Magazine. "Since double-digit growth won't hold, companies are being very conservative about increasing I.T. jobs and costs; hence, they will continue to outsource."

Seventy percent of companies Meta Group surveyed are offshore outsourcing technical jobs now; that percentage is expected to climb to 90 percent by 2005, according to Rubin. "Outsourcing to (US) consultants still creates jobs; it's offshore outsourcing that's taking jobs away," he says.

Easy Come, Easy Go

Losing that many jobs is bound to hurt. To add insult to injury, analysts say it is an unnecessary pain. "It doesn't make sense. There are U.S. companies and workers who are dead-on competitive -- especially in places with good quality of living and low overhead costs, outside the big city rent districts. But too few U.S. companies look outside New York, Los Angeles, and the like, to see what is really available," says Rubin.

In typical doublespeak, even the U.S. government agrees that tech jobs are not likely to stay onshore, despite the growth in demand. According to the Occupational Outlook Handbook 2004-05 edition produced by the U.S. Department of Labor, tech jobs are expected to be among the fastest-growing occupations through 2012. But the report also shows that jobs are likely to leave as fast as they appear.

"Job growth will continue to be driven by the continued expansion of the computer system design, Internet integration and related services industry, which is projected to remain one of the fastest growing industries in the U.S. economy, despite recent job losses. Job growth will not be as explosive as growth during the previous decade, as these jobs are being increasingly outsourced overseas," the report indicates.

The American Edge

So, where are the tech jobs for U.S. workers likely to be? U.S. workers probably have the best shot at tech jobs requiring a physical presence on American soil and a savvy understanding of business beyond cyberspace and the computer world.

"You still have to have people on site to touch the wires, work the gears, and manage the initiatives -- and even the outsourced work," Jim Poole, vice president and CIO of W.C. Bradley Co. (the producers of Char-Broil Grills, Bradley Direct, and a myriad of other products) told NewsFactor's CIO Today.

The U.S. Labor Department reports that employers are demanding a higher level of skill and expertise from their employees. Employers are looking for a combination of strong technical skills and good interpersonal and business skills. Those who understand the intricacies of the core business and technology will be favored over those who only know hardware and software.

"Employees must understand the core of business, as well as technology, in order to provide these new I.T. functions," says Poole. "But business leaders also have to learn more about technology. The fields are no longer mutually exclusive."

It Wasn't in the Script

Another skill that pushes a U.S. tech worker to the head of the line is mastery of anything new. "America is great at innovation and creation. Any skills close to the seat of innovation will be in high demand until offshore workers can produce a knockoff skill," says Rubin.

Specifically, demand is fastest-growing for these tech jobs: computer systems analysts, database administrators, computer scientists, networking specialists and computer software engineers. But there are other, less noticeable opportunities as well.

"Call centers will be strong since offshore outsourcing isn't working well in that area," says Rubin. "Workers in India following a script, for example, are not as effective as U.S. workers who know how to use the [CRM] technology and how to interact with customers and solve problems."