Planet Outsourcing

Indian Supreme Court in a landmark judgment on Monday ruled that foreign firms would not have to pay tax on their global income earned from business related to their outsourcing arms or units if these are conducted at existing market prices. The apex court decision came in a case involving Morgan Stanley’s business process outsourcing unit in India, in which Indian revenue officials had earlier served notice stating that the firm should pay taxes on its global income. According to the significant verdict, the income-tax department could not tax the global earnings of investment banker Morgan Stanley attributable to its Indian holding Morgan Stanley Advantage Service (MSAS), which provided back-office support to the parent firm.

In an earlier decision by a tax tribunal, Morgan Stanley was exempted on the grounds that the back-office unit was not a permanent enterprise of the parent company in India. The Authority of Advance Ruling had said Morgan Stanley’s global earnings were not taxable in India since the firm paid an “arm’s length” (a price at which two unrelated parties would agree to a transaction) price to its Indian subsidiary.

In addition, the Supreme Court noted in its judgment that the activities of MSAS did not constitute a permanent establishment. Nevertheless, it further conceded that owing to the deputation of employees from Morgan Stanley to MSAS, the subsidiary holding could be considered a service permanent establishment [PE].

Reacting over the judgment, tax experts have opined that despite the ruling, the concept of a service PE might need greater clarity. According to the reports, the Indian government is expected to review and clarify the definition of ‘permanent establishment’ (PE) for purposes of transfer pricing. As a matter of fact, the latest ruling will surely have far-reaching implications not particularly in terms of captive BPOs but also other sectors.

Read

Samuel J Palmisano, Chairman, President & CEO of IBM will personally meet chairman of Reliance Communications Anil Ambani and pitch for an outsourcing deal worth $1.5 billion. In case IBM lands up with the deal it would be the third major contract for the company in India. IBM has a strong presence in India and is looking forward to focus on IT outsourcing contracts. As of now both the companies have declined to comment on the any developments taking place between them.

It is expected to be a ten year contract and four companies had been ahortlisted for this purpose - Accenture, EDS, IBM and T-Systems. Reliance Communications is looking forward to outsource its wireless business to a service provider for bringing down it’s projected IT spending and also remains asset light. The company would save to the tune of twenty percent and as a result also concentrate on its core competencies.

image

Via business-standard

With the demand for data center space rising like anything it is expected that the demand would continue to surge at a rate of fifteen percent per year. Its growth is being compared to that of the energy sector. Companies offering data center space have a golden opportunity in their hands as the industry has garnered revenue worth $15 billion last year and this year figures are expected to be much higher.

The advantage of opting for data center outsourcing is that it offers companies a greener way of conducting business. Though it offers numerous benefits but people need to approach it with a lot of care and must consider the quality factors, cost and optimization factors before traveling the outsourcing route. Appropriate research needs to be carried in this regard and exercise restrain in handling over business critical data to third party. Also check that you are not charged unnecessarily since supply is less and demand is more in this sector. If you act with a bit of restraint and brains then your company can surely benefit from it.

image

Via infoworld

Asia is getting competition from South America in the arena of IT outsourcing. It is expected that Brazil would give a tough fight in IT outsourcing arena and remove its label of being a hub for automotive components. A latest report from Frost & Sullivan states that the IT infrastructure outsourcing market of Brazil will register a stupendous growth in the years to come. By 2012 the IT outsourcing industry of Brazil will garner revenues worth $3.3 billion. All this will be possible as a result of introduction of open communication networks coupled with opportunity for managing a number of networks remotely.

In the future IT outsourcers would have to fight for contracts as rising competition has increased the number of players in this arena with diversified portfolios. Now IT infrastructure outsourcing providers are in search of complete end-to-end outsourcing contracts in order to overcome price deflation in the market. Countries such as India and Philippines would surely have a tough time fighting Brazil in this arena.

image

Via ihotdesk

The growing attractiveness of the Indian market has also diversified to the medical sector as many of the US companies are planning to outsource their offshore their employee healthcare to India.

Due to the fact that the healthcare is pretty expensive in the US; and that the companies can save to about 90 percent on the expenditure cost by outsourcing; India is proving to be an irresistible option for the companies including those in the fortune 500 List. The cost advantage for the companies can range from 85 percent to 90 percent. The main reason which had led to the controversies to the idea of outsourcing healthcare is the fact that the healthcare requires a degree of intimacy with the patient is not possible by outsourcing it.

Dr Naresh Trehan , Escorts Heart Institute and Research Centre stated:

We have patients coming from there on a regular basis so far mainly those who are uninsured if you say the trend, I think it’s three times today than what it was two years ago.

It is expected that Indian health care industry can reach $47 billion in the next five years and if it undertakes outsourcing then the figures can double. The Indian healthcare industry surely has a bright future ahead.

Image

Via: ibnlive

There seems to be a heated debate over whether cytology screening should be outsourced or not. Medical researchers feel that screening should not be outsourced otherwise the quality of the tests could not be maintained and it’s in the best interests of the health of the women. It seems the Irish medical scientists are all against this idea and they also have reservations with regards to privatization of pathology work in public health sector.

I think the scientist do not understand the benefits that outsourcing can offer to the Irish medical field. It’s not just about low costs in outsourcing which can be gained but even the quality of the service can be maintained since the government would surely outsource the work to hospitals that are adept at performing screening so chances of low quality service is minimal. All I can figure out is that the medical scientists might be worried about losing jobs as a result of outsourcing.

Image

Via: irishexaminer

Air New Zealand now does not want to take the course of outsourcing and has decided to go against the idea of outsourcing jobs to India believing that it would not meet their needs. Earlier the airlines was ready to forego around seventy finance jobs in the company so that it could save out around $NZ20 million by outsourcing these jobs. Earlier the company had plans to outsource jobs to Fiji but the political instability over there caused them to shift their plans to India.

The airline issued a statement:

We have now formed a view that India would not meet our requirements, so the outsourcing proposal has been withdrawn and this was communicated to staff earlier this week.

Fearing that they might lose their jobs the employees’ gave their node for changing the work conditions and SFWU Jill Ovens stated that this move was a nice step forward for the finance staff. It is being said that the airlines dropped its plans after facing difficulties in outsourcing work and government pressure. To me the latter reasoning looks correct though.

Image

Via livemint

Aerospace market is booming like never before and so is outsourcing. A number of prime aerospace contractors are looking to outsource their regular machining and for that purpose are looking for qualified people to undertake the work. Take for example Boeing which has outsourced around seventy percent of the parts for their new aircraft. Not only aircrafts but even helicopter parts are being outsourced. Companies are outsourcing some of the functions and are leaving behind their core competencies and that surely makes sense.

Companies are looking to gel with those suppliers which are financially healthy and can bond for a longer duration of time. It was probably thirty years ago when the wave of outsourcing hit the automotive industry and now the aerospace industry is looking to gain from it. With the US aerospace industry registering sales worth $184 billion in 2006 the trend of outsourcing in this industry is expected to just go northward.

image

Via americanmachinist

Its not just employees but even students who now fear outsourcing. The number of students enrolling for IT courses has been declining since they fear that may end up either losing their job or may never find a job in the IT industry which has increased dependence on outsourcing. This has caused various IT departments across colleges in US to come up with an image building exercise and they are trying to convince students that there is a shortage of IT professionals in the country and in no way they would have to suffer if they opt for IT.

A number of colleges are trying to promote the field of IT and clear the various misconceptions which have cropped up in the minds of youngsters due to outsourcing. University of South Florida IT department is trying to attract students by offering technology based movie nights coupled with free popcorns. It hopes that it will be able clear the misconceptions in the minds of the students. It looks that the government would need to step in with a brand building exercise or its pool of IT talent may keep on shrinking hence leading to increased dependence on other countries.

Via zdnet

Wen Jibao plans to visit Japan on a relation mending mission and this is also expected to give a further push to the already rising software outsourcing trade between the two countries. China has been handling more than sixty percent outsourcing business of Japan and since 2006 has become the biggest software outsourcing base for them. China has generated revenues worth $ 1.43 billion in 2006 and Japan was responsible for more than half of the revenues. Big Japanese names such as Mitsubishi, Hitachi, NEC and Sony are already utilizing the outsourcing services of China.

Japanese have preferred China over India for outsourcing since it is geographically closer and have a cultural background which matches to that of China. The visit of Chinese premier is being seen as a confidence building measure so that more Japanese are willing to establish business links with China and end the animosity which had prevailed over the past. It now looks that outsourcing will bring the two nations closer which up till now had not been getting along politically.

Via people

Year 2006 was not a good year for the outsourcing industry but 2007 surely looks a promising year for it. With US economy slowing down the India BPO industry is all set to benefit from it even though it may be for a short period of time. Companies looking to tied over the recession are expected to increase the outsourcing of IT services. It might see a revival of the long term deals in the industry but with US presidential elections lined up for 2008 it outsourcing to India could emerge as a serious political issue.

K Sridharan, Chief mentor, Hexaware stated:

What really drives US firms is their bottom line and they will only increase outsourcing to cut on cost as employee cost accounts for around 40 per cent of their operating costs.

The Indian BPO sector is expected to grow at the rate of 28% this year and generate revenues worth $47.8 billion in 2007. Indian companies are looking forward to further incentives from the government since they have been facing increasing competition from other countries in the Asia Pacific region and since it is an industry which revolves around costs it may emerge as the deciding factor between the leader and the follower.

Via rediff

Now Dubai is also looking to emulate the success of India in the field of BPO but high costs in bringing up the BPO centres is acting as a roadblock for the city. Amazingly the economy of UAE has been adjudged as the most competitive Arab economy by the World Economic Forum. It has received strong praises for its entrepreneurial skills but has lost out due to heavy dependence on migrant workers and lack of educational reforms. Lately UAE has been witnessing rising costs due to increasing rents and inflationary pressure which has been affecting business in Dubai.

India is a leader in outsourcing and will continue for a long time since it has the basic communication skills coupled with low costs and with its expertise in IT and BPO makes it a natural choice for companies outsourcing.

Now Dubai is targeting high end outsourcing operations and with its close proximity to Africa, East and South Europe, Central and South Asia will surely offer it a geographical advantage but only if it can control its costs since this is a vital factor in the outsourcing game.

Via hindu

With the need to bring websites among top ranks in a search engine webmasters have been using search engine optimization or SEO to achieve the same but since this work requires lot of efforts therefore now they are outsourcing this work in order to improve upon their search engine ranking. By outsourcing SEO to a third party it relieves you of the pressure for bringing your site among the top ranks and since these are specialized companies therefore you can be sure of some good rankings for your websites.

These companies have specialization in the area of SEO and can help you in getting a better Google page rank which everybody dies for. Though its is emerging a good option but fingers are being pointed at the techniques being used by these companies for improving the rankings of the websites and it is being said that this could be harmful in the long run for the existence of the site. Also you might lose control over your website therefore discuss all the terms clearly with your SEO company before handing over the job to them since its you who might have to suffer in the long run if things go haywire.

Via market-day

Irish Independent, Evening Herald, Sunday Independent and Herald AM are some of the most respected newspapers of the world but rising costs are forcing them to follow the outsourcing route. This has irked the journalists and they have voted to reject this cost cutting arrangement. The newspaper had planned to outsource its sub editing work to a company set up by its two employees but now it may not become a reality.

They feel that in the long run outsourcing would affect the quality of work being undertaken at the newspaper besides costing their jobs. Media outsourcing has not been as popular as IT outsourcing and it has been generating criticism around the globe. The media fraternity feels that it will lead to loss of quality work besides taking away their jobs.

This may be true to some extent but newspapers are helpless and if they don’t opt for outsourcing they may face extinction as print media has been facing a lot of competition from electronic media of late.

Via irishexaminer

Every time work has been outsourced from Britain to India it has called for a lot of hue and cry but a recent report comes as a shocker which states that work being outsourced to India is having no effect on the call centers in Britain and a million jobs would be generated by the year end. As per ContactBabel around three percent of the working population in Britain was working in call centers. With around 960,000 jobs in the sector the numbers will continue to increase in the months to come.

Steve Morrell, of ContactBabel stated on this issue:

The UK contact centre industry continues to grow at a healthy and sustainable rate, driven by the expansion of existing operations, rather than the opening of new contact centres.

Outsourcing boom in countries such as Eastern Europe, South Africa and India have not affected work in U.K. Even some companies in U.K have withdrawn the outsourcing work and it is expected that around 1.1 million people would be employed in call centers in U.K by 2010. I was just wondering why such a hue and cry was raised every time work was outsourced to India. Was it all some political agenda? Seems so!!

Via andhracafe