Planet Outsourcing

You must be knowing about Luxoft, a Russian company which offers IT outsourcing services to a host of companies such as Dell, IBM, T-Mobile to name a few and now it has come up with a prediction for the IT outsourcing industry for the year 2007. This is a well covered prediction which includes a range of business, technical and relationship pulse points and states that the global IT outsourcing market has matured to quite an extent.

Some of the predictions for the year 2007 for the outsourcing industry are:

Value Becomes King Over Pure Cost

Financial Industry Increasingly Banks on Outsourcing

This is a very good prediction and some of the predictions are expected to turn out to be true. Click her to read the whole prediction.

Somebody said ‘Small is Beautiful’. It seems that companies outsourcing their work have realized this and now they are moving away from multi million contracts and are rather just opening their purse to smaller offshore contracts.

The figures speak for themselves and it’s not me who says this. World’s top hundred outsourcing deals contract value has shot down by 3.1% and fallen from figures of $70.1 billion in 2004 to $67.9 billion in 2005.

Companies are now entering into multiple outsourcing contracts rather than sticking to a single supplier as it results in high costs and decreased service levels. The need of today is to choose those suppliers which not only fulfill all the requirements but can also spread the outsourcing business.

Read

Chinese government is very serious about dismantling India from its top position in outsourcing and this can be judged from the fact that the country has zeroed down on ten cities which it would like to develop as major outsourcing centers. The cities which will get a facelift for this purpose are Chengdu, Dalian, Shanghai, Shenzhen and Xi’an which are one of the ten cities which would aid the country in tripling its outsourcing exports by 2010. As of now the figures stand at $900 million.

The country is in the process of convincing a hundred MNCs to outsource their work to China but when compared with India, China’s industry still remains fragmented. Now even India is moving to China for offsetting spiraling wages and a tight labor market.

Up till now India seemed to be the preferred choice but it seems that these companies would also have to think about China too before signing contracts. Let’s see who wins the race- it is a tough fight.

India is shining!! Outsourcing has brought with it rising purchasing power for its people. This can be witnessed by the fact that there has been a rise in the number of electronic goods companies in India and this is expected to rise further. The number of people earning $4,500 annually in India is expected to double in the next five years so it is expected that people will spend a lot on consumer durables such as fridge, TVs etc.

All this is being attributed to outsourcing which has given an increased pay levels to the Indian population. India has already witnessed one of the highest average salary increases in 2006 in the Asia-pacific region. There is already a craze for finest mobile phones in India and a number of semiconductor companies are setting up their plants over here.

It seems that outsourcing has not only filled the pocket of Indians but also opened a number of business opportunities for a number of companies as a result of this.

I had never thought that outsourcing would enter the judiciary too but the trends seem to be changing. Up till now we had witnessed outsourcing in IT, manufacturing but now even the judiciary too seems to be tempted by it.

This all never happened in India since the time it gained Independence but now you will see transportation, cleaning, security and even stenographers being outsourced. Judiciary seemed to be feeling the pressures of maintaining these services and therefore it is now looking to outsourcing to relieve itself.

Registrars of the high courts stated at a recent meeting in the Supreme Court:

A number of services being rendered by court servants can be outsourced if they are found to be more economical.

The courts were getting bogged down by increased salaries and PF contributions. I feel the decision which will be raising questions would be regarding the outsourcing of stenographers. Anyways everybody seems to be outsourcing then why not the judiciary too.

Hybrid outsourcing seems to be on the rise and this has jumped in the last few years. Let me tell you, hybrid outsourcing deals comprises of both service offering and related corporate deals between service provider and its customers. These deals are on the rise due to increased spin offs and monetization of captive service providers.

It’s just the start and in the future we could see more of these arrangements of this kind. Since spin offs are increasing therefore service providers are now on a look out for new vehicles for expanding their service offerings. With private equity funds cash rich they would certainly like to ride on the success of some recent deals.

With outsourcing market maturing and going international with more functions and processes being covered we would see a number of hybrid deals though complicated ones but if structured well these deals could serve both customers and service providers and turn out to be a platform for a number of transactions in the future.

It was five years back when China embraced WTO and since then the country has seen a number of restrictions being removed for foreign companies to invest and continuing with its initiative last month China did away with restrictions in the banking sector and now it has allowed foreign banks to operate in local currency. This decision is being regarded as one of the biggest milestones for China’s banking system.

Foreign banks are smiling with this decision and China is expected to see network expansion and a wide variety of services being offered to the customers. Besides banks even the outsourcing industry of China is expected to gain which up till now was dependant on low end business from local and Japanese market. This will help the industry to get business from American and European markets too.

The outsourcing industry can help the banks recruit and train workforce. They could also help in offering infrastructure and support facilities. With partners the financial institutions are expected to set up their facilities in tier II and III cities which are cost efficient but one of the problem is that a very few of the providers are experienced in the banking sector. I think the gates have been opened it’s just that the Chinese outsourcing industry needs to create a road for itself. Now there are opportunities for both financial institutions and outsourcing sector in China.

Information and Communications technology (ICT) is making headway in South Africa and as per the representatives of the country it is here to stay. This has raised hopes of generating employment for a number of unemployed in the country and in order to encourage investors, South Africa is offering tax breaks and grants to companies which outsource to India in the next five years.

Some of the areas where South Africa is looking forward to are insurance, banking, IT support and telecommunications. Companies such as Barclays and Vodafone are already operating in the country.

What was holding companies back up till now regarding moving to South Africa was the monopoly of Telkom in telecommunications but now the sector has been deregulated. Also the high crime rate in the country was a big drawback but South Africa wants to change this all.

You want to outsource your functions and thinking about India? You are wrong my friend as Eastern Europe is emerging as a hot destination for offshore outsourcing and outsourcing is expected to shoot up between 2005 and 2008 in this region. Expect around 130,000 jobs to be generated by the year 2008.

Western European companies are finding Eastern Europe as a hot destination for outsourcing. The reason Eastern Europe is being preferred is because the wages are low when compared with India and even the wage inflation is not going to turn its head up for a while.

Even the infrastructure level is good and risks are also less when compared with other countries. Eastern Europe is also beneficial due to geographical and cultural proximity and language barriers are also negligible so now head to Eastern Europe before it gets too late!!

As per a new report if pharma companies want to achieve the most from sales force outsourcing then they should draw a long term strategy. The companies had been using sales force outsourcing as a short term means and entered into contractual relationship with the provider.

Since the sales functions are same throughout the industry therefore it is quite easy to outsource it and along with it brings the advantages of efficiency and flexibility. Though companies are gaining from outsourcing but they are jittery abut giving their control to a third party.

If companies want to realize the benefits of sales force outsourcing then they should use their in house sales force resources in places where their strengths are and use the services of external providers in areas where they are quite weak.