planet outsourcing

With the global outsourcing market shrinking the rush for outsourcing where labor is available for cheap seems to have eased down. It is being expected that the rashness with which these outsourcing companies were recruiting would cool down. So does this mean that in the developed countries the rate at which the jobs were being slashed would slow down? If this happens then it would certainly aggravate the unemployment problems in developing countries such as India which faces continues to face unemployment problems. The next question is whether outsourcing boom would go bust just like the internet boom? Let us see what fate has in store for the outsourcing sector?

India is the outsourcing king but it is facing challenges in this industry due to shortage of manpower. A country of hundred million people and still facing shortage of talent, it is hard to believe. Big Indian outsourcing companies such as TCS, Infosys, Wipro have raised their concerns with regard to the lack of talent. India has one of the best mathematics talents and is home to world’s eighty percent of it. The shortage would further increase as India would also be requiring the best talent for their defense and space research programmes which is necessary for the development of the country as a whole. On the other hand China is a smart country which is using its people in the manufacturing sector whereas its best talents are employed in the Chinese defense systems and infrastructure. I believe that something would have to be done with regards to the brain drain from the country and see to it that the talent of the country is properly utilized if the country has to prosper.

Ovum’s ICT opportunity profiler has some good news for Indian IT vendors. 2011 will give way to the losses suffered in 2010 and India IT industry will emerge stronger. This assumption is based upon the findings of a study conducted by Ovum ICT profiler that foresees great developments for the coming year.

Profit sharing equally divided

All sectors seem to benefit comprehensively from this profit sharing. Over 17 % contracts are for the manufacturing sector with 14% going to the telecom industry. Future seems bright for the Indian technology industry with major players in the field as Tata Consultancy Services, Wipro Technologies and Tech Mahindra Satyam gaining a significant percent of this package.

However, lot needs to be done when one talks about global IT market. Despite its best effort, the Indian IT industry has been able to grab only about 20 % of the global IT outsourcing market. The results for 2010 were not encouraging. However, the market analysts attribute economic slowdown in US and Europe responsible for this slow growth during 2010.

Positive developments

Despite the negative effect of economic slowdown on Indian outsourcing industry, Indian IT vendors in banking segment grew stronger. This is evident from the multi million contract that Wipro was able to bag from Citibank in 2010, despite the economic recession being at its peak.

Senior Analyst Technology, Sai Chandra Kanala, at Ovum India is hopeful for the future. He foresees great opportunities for India during 2011 in the IT sector. This assumption is based on higher technical competency and cost advantage that India offers.

Increasing number of IT companies in Europe are considering outsourcing work to India thus helping India achieve self sustenance in Information technology sector. The coming year will see increased business being outsourced to India thus wiping off all the agony suffered due to economic recession.

The Requirements Builder is a useful outsourcing tool which helps in planning on how to go about undertaking outsourcing projects of any size. This magnificent outsourcing tool is designed by DLA Piper, one of the leading developers in the field. The Requirements Builder is based on an easy to understand questionnaire format which aims to capture all the important ingredients of an outsourcing project and aids in addressing every issue in the project process.

About The Requirements Builder

One of the first of its kind, The Requirements Builder launched soon after the launch of the premier outsourcing portal, Global Sourcing Portal which was also designed by DLA Piper, intends to address the various key issues faced during the processing of outsourcing projects and also helps in smooth processing by removing the various bottlenecks. It also helps in generating a summary of requirements which will help the suppliers, consultants and management in taking informed decisions. This questionnaire based outsourcing tool not only helps to plug the various issues but also supports in identifying the key areas to be prioritized while undertaking an outsourcing project of any kind and size. According to DLA Piper’s Technology and Sourcing head, Kit Burden, the newly launched Requirement Builder is an end product of years of experience in advising clients across various sectors and meeting the diverse requirements of complex and large outsourcing projects. He further adds that both the global sourcing portal and the Requirements Builder will go a long way in meeting the requirements of varied consumers and providing seamless services to clients across the globe.

Conclusion

DLA Piper, a leading player in the technology and sourcing field has reinforced its dominance in this domain with the launch of the Requirements Builder. DLA Piper has won many awards and accolades, including the prestigious ‘Advisor of the year’ award at the EOA 2010 awards.

The UK based defense and security systems compnay BAE has renewed its IT services outsourcing contract with CSC, the US based IT services company for a further period of 5 years from April 2012. The contract value is estimated to be $800 million. The renewal of this contract comes as welcome news for CSC in the UK where it has been under severe negative publicity over the past year over its failure to meet commitments on a contract with the National Health Service to computerize patient records.

The BAE IT outsourcing contract

BAE first awarded CSC a 10 year IT outsourcing contract in 1994, valued at over $1.2 billion. It was one of the largest IT outsourcing contracts at that time and served as the template for many such contracts from the UK in later years. BAE has expanded CSC’s scope and coverage several times over the years. The renewal beyond 2012, therefore, comes as no surprise.

In this IT outsourcing arrangement, CSC will maintain and upgrade all of BAE’s IT infrastructure including mainframe computers, physical and virtual servers, data storage and retrieval, set up and manage networks, employee work stations, help desks and provide user training. The scope of CSC’s services are quite standard for such outsourcing. The renewed contract at $800 million is some 60 percent lower than the $1.9 billion value of the previous contract. This is due to BAE having excluded its US operations that employ 52 percent of its total of 100,000 employees, its Australia operations that employ 6000 people and its small presence in India. Neither BAE nor CSC would comment whether contracts for these overseas operations are to be bid for and awarded separately.

CSC’s problems with the UK National Health Service

The UK government had embarked on a very ambitious project in 2002 to generate centralized patient records for UK’s National Health Service. At $18 billion, this was one of the largest government IT projects anywhere in the world. CSC was awarded a $4.5 billion piece of this contract, centered around a new health management software platform that it was to develop. This platform, named Lorenzo, was badly delayed in development and had major problems when initially deployed. Meanwhile, many of the UK hospitals were unhappy with the concept of a top down patient data system and wanted to install local hospital level systems that could be linked to a common central data base.

The change of government from the Labor party to the Conservative led coalition led to a re-look at the whole project and calls to cancel all contracts and sue the companies for damages. CSC wrote off $1.5 billion last year from its books to provide for losses from this contract. This write-off has prompted a group of shareholders to sue the management for failure to disclose pertinent company information earlier.

In recent weeks there is better news for CSC. Its Lorenzo system has now started functioning in 10 hospitals in the UK and the roll out to other hospitals is being done. The UK government also appears to have softened its position and appears willing for a compromise on the NHS contract.

With the BAE contract in hand and a settlement of its dispute with NHS on the horizon, CSC can hope to remain a major player in the UK market, where it appeared threatened a few months ago.

President Barack Obama minced no words when he referred to outsourcing as a cause of concern for American economy. Hitting hard at outsourcing jobs, he called for bringing the manufacturing jobs back to America.

He was giving his third State of the Union Address and stressed upon the need to consider the issue of outsourcing in full earnest. He vowed to fight the opposition from Republicans and hinted that the country has barely recovered from economic recession and cannot risk outsourcing jobs without considering American interests.

Preparation for elections

This sudden move by the American President is being seen as preparation for the next elections. This move comes as Barack Obama prepares for a tour of the five key election states. He also listed his administration’s priorities keeping in view the proposed elections in November.

India did not figure in his speech, though Barack Obama spared no word as he spoke about China. He announced formation of a trade enforcement unit to look to unfair trade practices, especially in China. China manufactures large number of American goods.

Listing policies

The American President listed his trade policies that include wall street reforms, government stimulus spending and healthcare reforms. He also listed ways of bringing back the outsourcing business back to America. He hinted at lowering the corporate taxes thus providing the technology solution providers with a major incentive.

This is a strategic move meant at bringing back the outsourcing jobs and creating work at home. He had a tough message for those who continue to outsource jobs despite the presence of talented workforce within United States.

The President talked about rewarding companies that created jobs for Americans rather than outsourcing the work to Asian countries.

However, Republicans left no effort to undo the effect created by Barack Obama’s hard hitting speech. Senator Jim DeMint was of the view that the President needs to consider the facts responsible for the economic slowdown rather than harping upon bringing the outsourced jobs back to the country.

A number of small to medium sized businesses are looking to outsource their IT management processes in the future and it is expected that the integration of IT support in to SMEs would become a high growth area for IT outsourcers over a period of next five years. Companies looking to offer IT support services would have to adapt their business models for meeting the expected influx of SMEs requiring outsourcing services. It is expected that private contractors would increase the implementation and support of IT management processes. Andrew Parker, V.P, Forrester stated: We’ll see stable operations farmed out to third parties, new IP sourced from open communities and solution brokers, emerging technologies going to market wrapped in process bundles and new software investments based on subscription rather than ownership. Improved cost savings and greater efficiency is the reason behind SMEs turning to IT outsourcers besides offering expertise that professional IT support firms can offer. Via ihotdesk

There is some more encouraging news for the Indian outsourcing industry. Indian software companies have stated that they are in a very good position to get a bigger share in the aerospace market as aero plane manufacturers are looking forward to controlling their costs since competition is hotting up. Aerospace accounts for eight percent of the market and this figure is expected to reach $1.1 trillion by 2020. M Ashok Kumar, Exec V.P, HCL states: Aerospace as a vertical is being focused more than the others, especially by companies like ours whose core strength lies in engineering. If we look at the current scenario then aerospace outsourcing has a very bright future and some say that in this sector sky is the limit. Indian outsourcing companies have been offering a number of services such as on-board electronics systems development, air traffic management, engine control and aircraft design. With the Indian offset policy requiring foreign airplane companies to spend a percentage of their Indian orders on buying services from local Indian companies the Indian outsourcing companies are expected to get a further boost. Via economictimes