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Tuesday, February 28, 2006

Indian BPO industry --10 years later … (Year 2014):

Now fast forward this situation to year 2014. The Indian BPO industry is an enormous success. It has grown at a compounded annual rate of 50 per cent and now employs 6.5 million people. If you include people who started life in the BPO industry and have moved on to do other things (assuming an annual attrition rate of 30 per cent for the BPO industry as a whole), you will have another 6 million people.

This means that there will be over 12 million individuals in our country who have worked in the BPO industry, i.e. have been through the rigorous recruitment tests, extensive training, are accustomed to working in a very high-quality environment, don't consider air-conditioning a luxury, have a very strong work ethic and expect similar professionalism from their colleagues as a matter of course, are used to satisfying very demanding customers, and delivering quality that is second to none in the world.

These will be the Indians who have acquired global skills without having to migrate to the West.

Monday, February 27, 2006

Some Outsourcing Benefits

Bottom line benefits
Time-tested, proven systems and processes ensure critical cost savings. With state-of-the-art communication facilities and infrastructure, our offshore centers function as virtual extensions of your offices providing 24 x 7 support and huge cost savings.

Focus on core competence
With our more than five years of experience in business process outsourcing spread across diverse industries, you can safely leave all your business process needs to us and focus on your core businesses and nurturing your core competence.

Assured quality
Staff in our offshore centers is customer -specific, not multi-customer. You can afford one job process to one employee. Managers and Team Leaders are customer-specific assuring rigorous quality control. Office space, hardware, connectivity and telephony are simply at par with the best in the world.

Risk mitigation
We mitigate risks through the use of a robust delivery methodology and best-in-class people practices. We run pilot projects prior to project acceptance and follow a well-documented transition path. Above all we provide you peace of mind because the SLA you sign is with a name brand US Corporation.

Access to world class talent
Hiring the best talent and robust people practices are our guiding principles. Each candidate hired at Databazaar goes through a rigorous selection process to ensure that the right skill set is matched with the right client requirement. Our satisfied employees translate into higher productivity, higher efficiency and job performance. This also means lower turnover of staff supporting the client and lower learning curves for client processes. This coupled with our superb training provide a global work force.

Motivating Call Center Workers

There are a variety of ways to motivate workers. Some common modern techniques are:

1. Motivation through job design, including job rotation, job enlargement, and job enrichment.

2. Motivation through entrepreneurial incentives.

3. Motivation through training and education.

4. Motivation through incentives. However, critics say it often creates too much person-to-person competition and interferes with teamwork.

5. Motivation through empowerment.

Call Centers - The Bound In The 21st Century

Specialization is a constant situation nowadays. Companies and even small offices have been separating and dividing their activities into sectors and sessions, each one responsible for one or few activities provided by them.
This is a reality regarding the development of commerce and the relation between company and client. The idea lies on: separate to better serve their clients. And this tends to be true, since you have specialized people serving sessions they are specialized on. This makes the work faster and more helpful.

And this idea is deeply found in the new segment called Call Center. Companies and offices found it is much more helpful having a specialized session in their environment responsible for answering income phone calls. Besides it is also interesting in making phone calls in order to try to sell a service or product provided by the office.

Call Center – almost a revolution
Call Centers have become almost a revolution in the means of communication and the relations established between companies and clients. Due to Call Centers, doubts and complaints have become much easier and faster to be solved. The clients just have to call the Call Center and ask their doubts or make their complaints that someone trained is there to listen to everything and solve the problem as soon as possible.

In addition to that, offices can hire people just to sell their services or products through telephone. This can increase the profits besides being much easier than going door to door to try to sell it.

Some Call Centers are also responsible for reading and answering mail, although this is usually called Contact Center rather than Call Center.

In simple words, Call Centers are some sort of filter, that select phone calls and solve the problems in order to not disturb the “boss”.

Inbound and outbound call centers
These are two different things regarding Call Centers. Although they work in a similar way, they have different goals.

Inbound Call Centers are centers that just receive phone calls. In general, clients call to ask for information about some sort of service, to clear up doubts or to make complaints. On the other hands, while the Inbound Call Centers receive phone calls, the Outbound Call Centers originate these phone calls. Outbound Call Centers have their employees dedicated to make phone calls usually in order to sell some product or service. Some institutions may also have Outbound Call Centers in order to get donations or members.

Pros and cons regarding Call Centers
Call Centers are a reality in almost every country and offices use that in order to get the best they can when it comes of communication and hearing their clients.

Although it is almost impossible to think of a company without a Call Center, there has been much criticism about it.

It is undeniable the importance and utility of a Call Center, however some critics allege that the work conditions are “de-humanizing”, which has created a lot of discussion. The pressure, sometimes the low salary, the environment people work in, the atmosphere of competition, all of these have made some people give up this job despite the growing of this sector.

For these reasons, some people disapprove Call Centers.
Resource Box: Maria Carmine had worked in Call Centers for over than 5 years.

The stages of outsourcing

# Selection of the business process/processes to be outsourced
# Selection of a suitable partner
# Selection of a suitable engagement model e.g. captive, BOT
# Drawing up the Service Level Agreement (SLA)

Indian Market size estimates of BPO

Nasscom has estimated that the Indian ITES industry will gross over $5.7 billion by 2005 (based on a conservative year-on-year growth of 65 percent by Nasscom).
Nasscom-McKinsey: In 1999 they estimated by 2008 it will be $17 billion but it has been revised to $21-24 billion by 2008. Indian can capture 25% of global BPO offshore market and 12% of the market for other services such as animation, content development and design services.

Gartner: $1 billion (2002), $1.2 billion (2003). $13.8 billion by 2007. Gartner does not incorporate animation, medical or other (legal) transcription services, GIS, market research, data search, research and development, network consultancy and other non-business processes in its estimates on the ITES market size and potential.

India’s BPO industry has grown at phenomenal rates

India’s BPO industry has grown at phenomenal rates in the past few years. BPO exports grew from a mere $565 million in 1999-2000 to $3.6 billion in 2003-04. Despite emerging constraints, the industry is expected to grow rapidly, given cost pressures and demographic shortages in developed countries and India’s comparative advantage based on its labour endowment and skill base. BPO exports are projected to rise to $20 billion by 2007 and employment in this sector is projected to rise from its current level of around 300,000 to one million by 2012. Given this, the BPO industry has far-reaching socio-economic and cultural implications, beyond the employment and foreign exchange earning effects.

Friday, February 24, 2006



1. Accelerate Reengineering Benefits
Reengineering aims for dramatic improvements in critical measures of performance such as cost, quality, service and speed. But the need to increase efficiency can come into direct conflict with the need to invest in core business. As non-core internal functions are continually put on the back burner, systems become less efficient and less productive. By outsourcing a non-core function to a world class provider, the organization can begin to see the benefits of reengineering.

2. Access to World Class Capabilities
World class providers make extensive investments in technology, methodologies, and people. They gain expertise by working with many clients facing similar challenges. This combination of specialization and expertise gives customers a competitive advantage and helps them avoid the cost of chasing technology and training. In addition, there are better career opportunities for personnel who transition to the outsourcing provider.

3. Cash Infusion
Outsourcing often involves the transfer of assets from the customer to the provider. Equipment, facilities, vehicles and licenses used in the current operations have value and are sold to the vendor. The vendor then uses these assets to provide services back to the client. Depending on the value of the assets involved, this sale may result in a significant cash payment to the customer. When these assets are sold to the vendor, they are typically sold at book value. The book value can be higher than the market value. In these cases, the difference between the two actually represents a loan from the vendor to the client which is repaid in the price of the services over the life of the contract.

4. Free Resources for Other Purposes
Every organization has limits on the resources available to it. Outsourcing permits an organization to redirect its resources, most often people resources, from non core activities toward activities which serve the customer. The organization can redirect these people or at least the staff slots they represent onto greater value adding activities. People whose energies are currently focused internally can now be focused externally -- on the customer.

5. Function Difficult to Manage or Out of Control
Outsourcing is certainly one option for addressing this problem. It is critical to remember that outsourcing doesn't mean abdication of management responsibility nor does it work well as a knee jerk reaction by a company in trouble. When a function is viewed as difficult to manage or out of control, the organization needs to examine the underlying causes. If the requirements expectations or needed resources are not clearly understood, then outsourcing won't improve the situation; it may in fact exacerbate it. If the organization doesn't understand its own requirements, it won't be able to communicate them to an outside provider.

6. Improve Company Focus
Outsourcing lets a company focus on its core business by having operational functions assumed by an outside expert. Freed from devoting energy to areas that are not in its expertise, the company can focus its resources on meeting its customers' needs.

7. Make Capital Funds Available
There is tremendous competition within most organizations for capital funds. Deciding where to invest these funds is one of the most important decisions that senior management makes. It is often hard to justify non-core capital investments when areas more directly related to producing a product or providing a service compete for the same money. Outsourcing can reduce the need to invest capital funds in non-core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for on an "as used" operational expense basis. Outsourcing can also improve certain financial measurements of the firm by eliminating the need to show return on equity from capital investments in non core areas.

8. Reduce Operating Costs
Companies that try to do everything themselves may incur vastly higher research, development, marketing and deployment expenses, all of which are passed on to the customer. An outside provider's lower cost structure, which may be the result of a greater economy of scale or other advantage based on specialization, reduces a company's operating costs and increases its competitive advantage.

9. Reduce Risk
Tremendous risks are associated with the investments an organization makes. Markets, competition, government regulations, financial conditions and technologies all change extremely quickly. Keeping up with these changes, especially those in which the next generation requires a significant investment, is very risky. Outsourcing providers make investments on behalf of many clients, not just one. Shared investment spreads risk, and significantly reduces the risk born by a single company.

10. Resources not Available Internally
Companies outsource because they do not have access to the required resources within the company. Outsourcing is a viable alternative to building the needed capability from the ground. New organizations, spin-offs, or companies expanding into new geography or new technology should consider the benefits of outsourcing from the very start.

Saturday, February 18, 2006

Knowledge process outsourcing climbing...

The globalisation of work tends to start from the bottom up. The first jobs to be moved abroad are typically simple assembly tasks, followed by manufacturing, and later, skilled work like computer programming. At the end of this progression is the work done by scientists and engineers in research and development laboratories.

A new study that was presented on Friday to the National Academies, the nation’s leading advisory groups on science and technology, suggests that more and more research work at corporations will be sent to fast-growing economies with strong education systems, like China and India.

In a survey of more than 200 multinational corporations on their research center decisions, 38 per cent said they planned to ‘‘change substantially’’ the worldwide distribution of their research and development work over the next three years — with the booming markets of China and India, and their world-class scientists, attracting the greatest increase in projects.

Whether placing research centers in their home countries or overseas, the study said, companies often use similar criteria. The quality of scientists and engineers and their proximity to research centers are crucial. The study contended that lower labor costs in emerging markets are not the major reason for hiring researchers overseas, though they are a consideration. Tax incentives do not matter much, it said.

Instead, the report found that multinational corporations were global shoppers for talent. The companies want to nurture close links with leading universities in emerging markets to work with professors and to hire promising graduates.

‘‘The story comes through loud and clear in the data,’’ said Marie Thursby, an author of the study and a professor at Georgia Tech’s college of management. ‘‘You have to have an environment that fosters the development of a high-quality work force and productive collaboration between corporations and universities if America wants to maintain a competitive advantage in research and development.’’ The multinationals, representing 15 industries, were from the US and Western Europe. The authors said there was no statistically significant difference between the American and European companies.

Dow Chemical is one company that plans to invest heavily in new research and development centers in China and India. It is building a research center in Shanghai, which will employ 600 technical workers when it is completed next year. Dow is also finishing plans for a large installation in India, said William F. Banholzer, Dow’s chief technology officer. Today, the company employs 5,700 scientists worldwide, about 4,000 of them in the US and Canada, and most of the rest in Europe. But the moves overseas will alter that. — NYT

Thursday, February 16, 2006

BPO is big and getting bigger

There's no doubt that BPO is big and getting bigger. Market researcher IDC predicts that worldwide BPO spending will experience a compound annual growth rate of 10.9 percent between 2004 and 2009, growing from $382.5 billion to $641.2 billion per year in those five years.

Monday, February 13, 2006

Outsourcing is not new - it has been a popular management tool for decade.

Outsourcing is not new - it has been a popular management tool for decade. One can safely say outsourcing has evolved :-

1960's - time-sharing
1970's - parts of IT operations
1980's - entire IT operations
1990's - alliances/tie-ups
2000's - IT-enabled services

India has one of the largest pool of low-cost English speaking scientific and technical talent. This makes India one of the obvious choice to outsource to. Dell, Sun Microsystems, LG, Ford, GE, Oracle all have announced plans to scale up their operations in India. Others like American Express, IBM and British Airways are leveraging the cost advantage India has to offer while setting up call centres. Several foreign airline and banks have too set up business process operations in India.

Human Resource (HR) BPO / Outsourcing

The Human Resource (HR) department is critical for employee satisfaction in any firm. Some businesses don’t have the staff, the budgets or the inclination, to deal with the nitty-gritty of HR management, so they opt for outsourcing. Deciding which functions to offload and which firm to outsource is also a major decision.
HR functions include Payroll administration (producing checks, handling taxes, dealing with sick time and vacations), employee benefits (Health, Medical, Life insurance, cafeteria, etc), human resource management (hiring and firing, background interviews, exit interviews and wage reviews), risk management (workers’ compensation, dispute resolution, safety inspection, office policies and handbooks) and others.

HR outsourcing Services could fall into one of four categories: PEOs, BPOs, ASPs, or e-services.

A Professional Employer Organization (PEO) takes legal responsibility for employees. The PEO and business owner are partners, with the PEO handling HR aspects and the business handling all other aspects. BPO refer to all fields, but specifically for HR, a BPO would ensure that a company has access to latest technologies. Application Service Providers (ASPs) host HR software, on the web and rent it to users. E-services are those HR services that are web-based.

BPO: Why Outsourcing to China?

CHINA Key Cities: Beijing, Guangzhou, Shanghai

Labor Pool: China's technical schools turn out 50,000 graduates annually, many of whom migrate west. Those who stay generally don't speak English.

Costs: IT salaries range from $3,000 to $8,000 annually. No real BPO competency.

Government: China's government has hampered growth due to trade policies and overregulation; intellectual property concerns linger. The hope is that these issues will evaporate as China blends into the World Trade Organization.

Infrastructure: Infrastructure can be spotty outside major cities, but China is building networks, particularly telecommunications, almost as fast as the U.S.

Expertise: Transaction processing, low-end software development and maintenance.

Major U.S. Customers: HSBC, Microsoft.

BPO: Why outsourcing to Philippines?

PHILIPPINES Key Cities: Manila, Cebu City, Makati City

Labor Pool: The Philippines turns out 380,000 graduates annually, but only 15,000 of them are focused on technology. The country has cultural affinities with the U.S., is well-versed in U.S. accounting and customer service standards and has low employee turnover.

Costs: Higher labor costs than India; technical salaries range from $5,000 to $10,000 annually and back office from $3,000 to $8,000.

Government: Government exempts companies from export taxes, fees, dues and licenses if they open in one of the country's IT parks. Government's task force charged with development of IT and business process outsourcing (BPO) services.

Infrastructure: IT parks that have sprung up over the past 13 years fuel the export industry. Abandoned U.S. military bases left behind dependable telecom infrastructure.

Expertise: Accounting, finance, call centers, animation, human resources.
Major U.S. Customers: Procter & Gamble, American International Group, Citigroup.

Why outsourcing to India?

INDIA: Key Cities: Bangalore, Chennai, New Dehli

Labor Pool: India has many prestigious technical universities, but the Indian Institute of Technology stands apart as one of the world's best. India produces 75,000 IT graduates and 2 million English-speaking graduates annually.

Costs: Labor costs have crept upward over the years but have been offset by falling telecom rates. Typical salaries range from $5,000 to $12,000 for technical staff, while back-office salaries range from $3,500 to $7,500.
Government: Outsourcing is so ingrained in the fabric here that the Indian government has a national minister specifically for IT. The government favors IT foreign ownership and imposes no export taxes.

Infrastructure: With redundant telecom and utility infrastructure, there is very good reliability within India's special IT parks. Reliability can be spotty outside the parks or in more remote areas.

Expertise: Application development, maintenance, call centers, financial processing. Experts see India becoming a hotbed for more critical analytical jobs.

Major U.S. Customers: Citigroup, GE Capital and American Express have a very large presence and have set up their own centers here.

Data center outsourcing ?

A very simple explanation of a data center would be a place where data is stored. Storage, computing and network resources have become ‘virtual’ and are accessed by a wide range of applications and users.

Most data centers have to deal with huge amounts of information and virtual material. Whether attuned to consumers or inward-looking, as with an intranet model, whether it is supply chain management system or an e-business portal, a data center requires heavy investments in IT resources and management.

An outsourced data centre solution takes some of the responsibility off the customer’s hands. Much of the data is automated in the outsourcer’s web-centric environment. Of course, it doesn’t make sense to outsource a data center only because it is too much of a nuisance to manage it because with outsourcing comes a loss of control. The data itself, hardware and software resources, and the network handed to IT professionals and managers.


No commonly accepted definition of "offshoring" exists, and the term has been used to include various international trade and foreign investment activities. Services that U.S.-based organizations purchase from abroad are considered imports. They may also be linked to U.S. firms' investments overseas -- for example, U.S. firms may invest in overseas affiliates as a replacement for, or as an alternative to, domestic production. In recent years, services offshoring has been facilitated by factors, such as the Internet, infrastructure growth in developing countries, and decreasing data transmission costs. Organizations' decisions to offshore services / BPO are influenced by potential benefits such as the availability of cheaper skilled labor and access to foreign markets, and by risks, such as geopolitical issues and infrastructure instability in countries that supply the services.

Four reasons why youngsters quit BPOs

What drives young people to quit call centres and data processing units as fast as they join them?

As industry attrition rates (how soon people quit jobs) climb as high as 80 percent in some companies, human resource executives in various BPO firms tried to pinpoint the reasons that make young people between the ages of 22 and 26 shuffle jobs in months. They were participating in a seminar on key HR issues for the BPO industry in Bangalore today.

This is what they came up with.

1. BPO not seen a long term career

"This industry is still not being accepted for a long term career," said Mphasis BPO Services' chief human resources officer Manab Bose.

2. High aspirations that the industry cannot meet

BPO employees have high aspirations. They want to see 'wealth' in this lifetime and have low respect for authority. This is because most BPO employees have immense family support.

3. Good talent is prone to poaching

ICICI OneSource President and CEO Raju Bhatnagar said the pulls of the market (poaching by competitors) cannot be countered easily.

BPO firms try to pick the best talent, he explained, and good talent is prone to be poached or to shifting jobs. He suggested that firms should instead look at the average person, train and retain him/ her for the longer haul.

4. Employees face pressure at home and at work

Philips Software CEO Bob Hoekstra felt BPO employees are in a piquant situation, having to handle pressure both from their customers and at home.

"There is an enormous conflict in age group [in terms of the fact that] youngsters are serving mature customers, and they are prone to make mistakes," he said.

Outsourcing backlash is subsiding’

It’s been barely one month into the new year and India has seen two of its biggest IT deals - HCL-DSG ($330 million) and Wipro-GM ($300 million).

The outsourcing marketplace is all set to witness hectic activity this year with 325 deals worth over $100 billion up for renewal. And a billion dollar deal, especially in the BPO space, may be in the offing, says Global Research director of IDC David Tapper.

“IT deals of more than a billion dollars involve large-scale outsourcing, for which offshore providers will need to expand their capabilities.

BPO sector must gear up for role changes: study

Technology and market research firm Forrester Research has predicted that the growth in offshore activity and services has seen the business process outsourcing (BPO) industry enter its third phase of evolution.

The growing complexity and nature of deals for services, requires suppliers to change their market and account management practices.

Sharing the highlights of a soon to be published report, John McCarthy, vice-president (Asia Pacific Research), Forrester Research Inc said, “In the past five years, the BPO services industry has started maturing. The nature of services being ofshored are more complex.”

Pointing out to the increase in the number of clients for IT companies and complex nature of services being offshored, McCarthy stressed, “Companies will now have to change to cater to the specific needs of each verticals and sub verticals. They can no longer have a generalised marketing strategy.”

He outlined the new offshore success mantra for IT companies as, “product marketing, real account management (an increase in client servicing and marketing executives handling a particular account), making strategic choices (focusing upon 3-4 verticals) and becoming specialised service providers.”

Noting that consolidation, acquisitions and mergers would continue across the industry, “Only the big three would survive to be multi-line global delivery service providers,” said the study, warning that the rest, if they did not adopt any key differentiation strategy, would be at the bottom.

The research has also brought to the fore a few disturbing facts. Citing key trends in the offshore services space based on a survey carried out on 227 IT executives on several parametres like overall satisfaction, industry expertise, perception of communication and professionalism, McCarthy said, “As offshoring companies are growing, the satisfaction levels have dropped almost 50 per cent for quality advantage and communication and professionalism. In 2003 communication and professionalism was 27 per cent and its reduced to 18 per cent in 2005, whereas the quality advantage has diminished from 27 per cent in 2003 to 19 per cent in 2005.”

Source: Business-standard.com

Monday, February 06, 2006

BPO Growth Areas

Complementing the growth in the traditional service lines is a new breed of high-end knowledge based BPO. This new breed of knowledge process outsourcing (KPO) comprises vendors providing higher-end research and analytic based services - in traditional service lines as well as new business areas.

Financial process outsourcing (FPO) is already witnessing explosive growth with most of the leading global financial institutions beginning to outsource high-end activities such as insurance underwriting, risk assessment and equity research, financial data mining and modelling, corporate and market research.

Other areas with significant latent potential for KPO include healthcare - pharmaceuticals and biotechnology, legal support - intellectual property research, design and development for automotive and aerospace industries and animation and graphics in the entertainment sector.

Friday, February 03, 2006

KPO: The Challenge of Measuring Quality and Productivity

KPO creates the need for a new business and engagement models, where measurement of quality and productivity vary from those associated with other types of outsourcing. Value-based measurements around service provider specialization, competency, scope of innovation, and impact on client business objectives replace the pure cost-based measurements associated with traditional outsourcing. Successful KPO engagements require more partnering and sharing of responsibilities and knowledge in order to improve performance versus rote compliance-to-process standards and automation structures alone.

KPO holds great promise for global organizations seeking to leverage the productivity and economies of scale that a strategic outsourcing relationship can provide. The service provider's best positioned to deliver the value that KPO promises have deep analytics skill, BI process excellence, vertical market expertise, high intellectual property assets and solid global infrastructure allowing for ongoing computing and storage of high volumes of data.

BPOs maturity yet to be attained

Over the last few years, the worldwide business process outsourcing (ITeS-BPO) industry has undergone rapid transformation. Maturity of the marketplace, preceding rapid developments in telecommunications and related infrastructure, and setting up of new off shoring destinations have catalysed the growth of the ITeS-BPO industry.
The accelerated pace of industry consolidation and service convergence, has helped stabilise the ITeS-BPO market and strengthen the BPO value proposition. Given the relative infancy of the ITeS-BPO Industry, service providers have not yet reached the levels of maturity displayed by IT services companies. This has resulted in higher risk levels and consequently, there is a greater need for due-diligence. While vendors have succeeded in providing adequate infrastructure and high quality, cost efficient resources, most still lack the process expertise, systems and practices that need to be built to support customer organisations. This often demands for alternative certification frameworks / building blocks, so that clients can be reassured of the quality of service delivery.

Infrastructure to be improved to retain BPO edge

With the Philippines and China emerging as new outsourcing destinations, the overall growth rate of the BPO sector in India has slowed down over the last couple of years. But the heartening news is that growth opportunities abound in the high-end BPO segment.

This clearly shows India is no more being perceived as just a cost effective destination. Client expectations have risen and they are looking for end-to-end services where India is beginning to make inroads. This was the message from the speakers of the IT and BPO industry who were present at the Indiatimes Mindscape BPO Conclave ’06.

Wednesday, February 01, 2006

BPO Geographic Trends

Geographic Trends

In the United States and Europe, the sourcing markets remain very buoyant. In the US, the outsourcing market is expected to grow by average 9.3% over 2005-10. A key driver will be increased adoption of BPO as companies prioritise the outsourcing of key business processes.

In Europe, the UK remains the biggest market for BPO deals and, generally across Europe, demand for outsourcing is growing (although still lagging the US and UK, which one might say reflects a normal lag of European countries adopting technology relative to the United States). Sourcing advisers TPI reported last year that Europe is now the biggest market for outsourcing – with 49% of all new contracts in 2004 and, for example, Germany is now 12% of the world market from virtually zero in 2001.

In Asia, of course, the sourcing market is supply-side driven. But the biggest Asian economy of them all, Japan, remains the enigma of the sourcing market. According to a recent IDC survey, 14.8% of Japanese corporations have used IT outsourcing for more than 3 years; 19.8% have considered IT outsourcing but decided against it; but a startling 50.9% of Japanese corporations are not currently considering the use of IT outsourcing. This reflects the experience of Morrison & Foerster’s own Tokyo office – the largest of any foreign law firm in Japan – which sees plenty of joint manufacturing and research projects, but a relatively low incidence of traditional outsourcing projects.

It seems that the key to the future success of the Japanese outsourcing market lies not just in addressing pricing, security and service issues, but in how well vendors can surmount the degree of cultural resistance to outsourcing that exists there. If the vendors can unlock the Japanese market, that could be the next big driver in growth for the global sourcing market.

Source: Internet

About Offshoring of Services

The growth of services offshoring is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecom and internet expansion of the late 1990s. Coupled with the digitization of many services, it was possible to shift the actual production location of services to low cost countries in a manner theoretically transparent to end-users.

India first benefited from the offshoring trend as it had a large pool of English speaking and technically proficient manpower. India's offshoring industry took root in low-end IT functions in the early 1990s and has since moved to back-office processes such as call centers and transaction processing. In the late 1990s, India's abundant and cheap software engineering talent combined with massive demand from the Y2K problem helped to move India up the value chain to attract large-scale software design and development projects for US based customers. Currently, India's engineering talent has made India the offshoring destination of American high-tech firms, including Intel, AMD, Microsoft, Oracle, and Cisco. Each of these companies has promised or is in the process of investing at least $1 billion in India, to supposedly retain market share in the face of competition and cost-cutting measures of rivals and industry in general, at the expense of investment in the United States.

As a result of the offshoring boom, India has seen double-digit wage growth for much of the 2000s. Consequently, Indian's operations and firms are concerned that they are becoming too expensive in comparison with competition from the other offshoring destinations listed below. They are now diversifying and attempting to branch out to other high-end work in addition to software and hardware engineering. These jobs include research and development, equity analysis, tax-return processing, radiological analysis, medical transcription, and more.

Other offshoring destinations include Philippines, Ireland, Argentina, and Eastern European countries.