Planet Outsourcing

Remember people, I had earlier told you about IRS outsourcing taxes to a private collection agency and the employees were certainly not happy with it. IRS has now moved from its earlier decision of outsourcing of seven centers to just two centers.

IRS stated the following reason for changing their decision:

The conversion was scaled back to ensure that a sufficient number of employees with the required training and security clearances are in place to manage the files during the upcoming filing season.

IAP Worldwide Services has been chosen for the outsourcing contract and the agency is expecting to save around $25 million during the period of the contract but the union feels they have been given a raw deal and a contractor was chosen over them to complete the job.

The country might be happy with outsourcing but its people are not. I am talking about U.K- a number of Brits are surely not happy with the jobs being sent to low cost destinations such as China and India and some of them believe that the trend needs to be reversed.

Most of them want that now the jobs should stay in the country and the companies which have already outsourced some of their functions should bring back the jobs back to the country. They believe that a lot many jobs have been outsourced which should not have happened on the first count.

Though the unemployment rate in the country is lower when compared to other European nations with the figure standing at 5.6% still there seems to be job insecurity prevailing among the people of U.K. With people not happy with the outsourcing trend, let’s see for how long outsourcing continues. Is the government listening?

The seriousness of the Indians for Japan can be judged from the fact that Wipro has been conducting Shimpo programme where software engineers are trained in Japanese language and etiquette. Year 2005 figures state that IT outsourcing market in Japan totaled around $ 15 million and the figure is expected to touch 2.34 trillion yen by 2010.

The latest figures from NASSCOM state that software and back office services export from India to Japan are expected to touch around $1.5 billion by 2010. As most of the deals are moving to China, Indian companies are establishing their base in China in order to get hold of some share in the deals.

Expect more work from Japan as it has started to face manpower shortage so countries such as Indian and Vietnam stand to gain. Besides capturing work in China, Indian companies are also vying for work in their home country as it is emerging as an attractive destination for low wage labor for Japan for their work.

There seems to be a trend where a number of companies now prefer to get their work done in their own country rather than outsource to low cost destinations such as India. Yes, you read it right and for this purpose rural America is emerging out as an attractive destination.

This strategy is being adopted by those companies who prefer their work to be conducted within their own geographical boundaries. Take for example where Oglala Lakta tribe members check the data entry work conducted in China and similarly in other states native Indians are being deployed for such work.

This is not only helping in preserving the jobs in the country but is also building a sense of social responsibility besides ensuring the economic development of the region.

In the coming years you would see a trend where insurance companies would be outsourcing the management of their account assets to external investment managers. Between the year 2002 and 2006 the outsourcing in this area increased from 56% to 68%.

As per David Holmes, Partner, Eager, Davis & Holmes:

Insurance company outsourcing is driven by a desire to earn higher returns, but with at least equal emphasis on portfolio diversification and risk management. The move toward outsourcing is not surprising in an era of 5% interest rates and an equity risk premium of roughly.

This trend is now visible across most of the asset classes and investment styles. With an increase in demand expected in the case of specialized fixed income mandates, within the next two years, twenty percent of the insurance companies are expected to outsource the mandates.

Whenever you come across the word outsourcing, the first thought that comes to your mind is jobs’ being transferred from states to other countries at the expense of people working out there but the word ‘outsourcing’ has a wider connotation.

Outsourcing also includes local outsourcing which leads to the creation of innumerable business benefits. Also known as managed services, in the case of local outsourcing, SMBs outsource their daily IT responsibilities to local technology consultants.

A quick growth is being witnessed in this area as a number of business owners are witnessing that it is beneficial to have external technology experts available for maintaining their work. This not only enables the company to focus on its core operations but at the same time save on costs.

The educational services outsourcing market is set to grow by around ninety per cent in U.S and Pakistan, not India stands to capture a share of this big market. Though both the neighboring countries are equal in terms of Educational Services Outsourcing but Pakistan seems to have an edge as Urdu phonetics are a bit similar to the American accent.

Both of the countries possess benefits such as advanced tutoring system, have a large English speaking population and talent available at a lower cost. It is expected that the market for private tutoring is set to cross the figures of $10 billion in the next ten years.

I must tell you that education is emerging as the second largest market worldwide and teaching has just opened another door for outsourcing. Is India listening? Would it let Pakistan gain an edge?

Outsourcing brought a number of high paying jobs for a number of unemployed youth and along with it we witnessed a change in the economic conditions of the families in the country but what we are missing is that besides bringing money it is degrading the social and moral structure of the country.

These people work during the night and rest and enjoy during the day and this pattern has been promoting promiscuity among these youth as some experts suggest but it seems that the parents are turning a blind eye towards all this as most of them are dependant on their children for survival.

This makes me wonder is money everything. Have the social values and morals taken a back seat in this jet age life. Is the power of money so strong that you tend to forget what is right or wrong? Certainly it seems so and it is bad for a country which is known worldwide for its rich customs and traditions.

Now outsourcing is taking place within India too. With the telecom war getting heated within the country, BSNL which is one of the biggest government undertaking has decided to take on private companies by outsourcing some of its marketing functions to private agencies.

For this purpose it would be appointing business associates for its twenty three circles for marketing and selling a wide range of its products such as broadband services, phones etc and this seems to be the first promising attempt by the company for giving a fight to other players in the country.

It seems that companies within the country too have realized the importance of outsourcing and are trying to adopt it in order to fight competition within the country. With competition heating up and margins reducing this seems to be a good move by the company to make itself popular in an economical way. I hope this way it is able to compete with the private players which seemed a difficult task up till now.

Though SOA is now a preference of a number of companies but still there is a lot of conjecture regarding how it could have an impact on outsourcing. It could have a negative impact on outsourcing and cause it to decline. This happens because of decline of the coding.

If there is less of coding it implies that very few things would have to be outsourced. Also if in case technologists are brought into symphony with business process management it would become even more problematic for outsourcing technology functions.

It is expected that SOA would bring down costs to such an extent that very few projects would be required to be outsourced but it is expected that the number of projects would increase and enterprises would be accessing their components anywhere in the world.

Thnx Joe