Wednesday, May 31, 2006

India's Offshore Advantage to Last for 30 Years

A recent 2006 Global Sourcing Market Update by Everest has brought to light that India will maintain its low-cost IT skills advantage in the offshoring market for at least another 30 years.
The update claims that fears of rapid wage inflation and skills shortage quickly reducing India’s offshore cost advantage are “greatly exaggerated.”

verest Research Institute conducted the sustainability analysis using a three-step approach.

1. In-depth Illustration: analyzed the sustainability of labor arbitrage for offshoring of select processes from UK to India
2. Generic analyses: explored expected labor arbitrage sustainability among a comprehensive list of source-destination country pairs

Source countries: US, UK, France, Germany, Japan

Destination countries: Indian, China, Philippines, Czech Republic, Poland, Mexico

3. Sensitivity to variations in key factors

Methodology takes into account that there are multiple factors affecting the longevity of labor arbitrage.
1. Current wage Diffential

2. Compensation increase in SOURCE Country

3. Compensation increase in DESTINATION Country

4. Exchange rate movements

5. Wage differential hurdle rate

Low-cost offshore locations such as India and the Philippines are aggressively making moves to minimize the impact of wage inflation by encouraging the expansion of the quality and size of the relevant workforce and by developing more low-cost offshore locations, states the report.

IT suppliers in India, for example, are lowering their costs by moving to Tier 2 cities — away from traditional high-tech centers such as Bangalore — and opening delivery centers in other countries.

for more information and full report visit

Tuesday, May 30, 2006


Major Insurers Who Have Outsourced to India :

AA Insurance ... Aetna ... Abbey Insurance Services ... Admiral Insurance ... Allianz Cornhill Captive ... Aviva ... Axa Captive ... BCBS companies (a few) ... BUPA ... Cigna ... CNA ... Conseco ... Friends .... GE Financial ... Genworth ... MetLife ... Pacific Care ... Principal Group ... Prudential Financial US ... Prudential UK Captive ... Sentera Sesame (MIFAS) .... Standard Life .... Swiss Re Captive ... Royal/Sun Alliance ... UnitedHealth ... WellPoint .... WillisCAPTIVE .... Zurich Re ...

Top Employers ( Insurance BPO India )

Rank ... Company ... Employees

1 Lason India 2603

2 EXL* 2450

3 WNS 215

4 Gecis 1800

5 AXA* 1800

6 ICICI Onesource 1790

7 Hinduja TMT 1500

8 MphasiS BPO 1500

9 24/7 Customer 1400

10 Prudential* 1000

11 Wipro BPO 1000

*Source: Global Services

Monday, May 29, 2006

Study Finds Direct Correlation Between Satisfaction and Investment In Outsourcing Management

According to a study by EquaTerra, there is a direct relation between a satisfactory outsourcing agreement and that of investments made in Outsourcing Management and Governance (OM/G).
The conclusion was based on a survey of 250 IT and BPO decision makers by the US-based outsourcing advisory firm. The firm advises a four to seven percent range in terms of the total value of contract as the optimum level of expenditure on OM/G to ensure maximum satisfaction on outsourcing deals. Executives outsourcing for process improvement than cost-savings are also expected achieve higher satisfaction levels. High-Tech Products and Services, Pharmaceuticals and Automotive/Manufacturing experienced the most satisfying results in terms industries while IT and CRM were the best verticals due to matured process.

The survey also finds that outsourcing satisfaction improves over time (respondents whose engagements had been in place more than two years were consistently more satisfied); IT and CRM executives cited the highest satisfaction levels.
While satisfaction was greatest for companies that spend 4%-7% on OM/G, over 48% of respondents spend between 1%-4%. Interestingly, HR executives were the least satisfied at this 1%-4% spend-level.

The study also indicates that organizations were using a wide range of software tools to support their outsourcing efforts. There was no clear consensus on which software applications or class of software vendors has the most compelling OM/G tools.

However, organizations clearly identified that value for the money and ease of use are the key desired functional attributes of a quality OM/G tool, and that providing timely, relevant and actionable data was the more important deliverable from an OM/G tool.

Source: Global Services, EquaTerra

Sunday, May 28, 2006

Sprint Files Lawsuit against IBM

BusinessWeek has reported that Sprint is suing IBM, saying Big Blue did not live up to its claims three years ago that it would save the telecommunications company money by taking over some of its computer programming.
Instead, Sprint said the deal ended up costing the company. It claims IBM Corp. now owes Sprint at least $6.4 million for 119,000 hours of uncompleted work - or 57 years for a single employee.
In a lawsuit filed this week in U.S. District Court in Kansas, Sprint/United Management Co. - a subsidiary of Sprint Nextel Corp. - said IBM didn't provide "contractually promised productivity improvements for 2005."
BusinessWeek reports that IBM, according to court documents, said Sprint is using an incomplete formula for measuring productivity and the amount of hours owed.
The suit focuses on a five-year, $400 million contract that went into effect in 2004. The deal, which was extended by a year, called for IBM to develop and oversee software applications for the Overland Park-based company.
Sprint transferred around 1,000 of its computer workers to IBM as part of the outsourcing agreement.

Friday, May 19, 2006

ACS to Acquire Intellinex, LLC to Enhance Learning Solutions HRO Capabilities

Affiliated Computer Services, Inc. (NYSE: ACS), a premier provider of business process outsourcing and information technology solutions, announced today that it has signed an agreement to acquire Intellinex, LLC, an Ernst & Young LLP enterprise and leader in integrated learning solutions. The transaction is expected to close within 30 days and is subject to Hart-Scott-Rodino approval as well as other customary closing conditions.

"We expect all of ACS/Intellinex's customers, including Ernst & Young, will benefit from their combined knowledge and expertise," said Mike Hamilton, Americas Chief Learning and Development Officer for Ernst & Young LLP. "Ernst & Young was recently ranked third in Training magazine's Training Top 100, and we believe this transaction will allow us to focus even more of our efforts on the development and implementation of world-class learning content and programs for our people."

"Intellinex has demonstrated its value to our global organization through the services and technologies it offers," said Pierre Hurstel, Ernst & Young Global Managing Partner -- People. "Through its affiliation with ACS, I believe Intellinex will become even more effective in the delivery and implementation of our learning programs. I look forward to a continued relationship and am confident that the innovation and commitment Ernst & Young has received from Intellinex can only strengthen."

Ernst & Young LLP has entered into a multi-year learning services agreement with ACS/Intellinex to use its technology and administrative training support, as well as its learning design, to facilitate the delivery of the training content developed by Ernst & Young to its people.

Established in 2000 by Ernst & Young LLP, Intellinex has been recognized in the Leader Quadrant by the Gartner Group, most recently in its 2005 Learning Management System Magic Quadrant. More than 300 Intellinex employees at its headquarters in Cleveland, Ohio, and at locations in Irving, Texas, Lakewood, Colorado, and Europe, will become part of ACS when the transaction closes.

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Wednesday, May 17, 2006

Dubai Outsource Zone to Start Operations by July ’06

According to media reports, Dubai Outsource Zone (DOZ), a free zone for the outsourcing industry, is expected to be operational by July 2006. The zone is aiming to account for a 5 percent share in the global outsourcing industry and expects to have 200-300 companies in the first five years of its operation. The zone is targeted at the companies providing mid- to high-end IT and BPO services in sectors, including finance, accounting, IT, payroll processing, graphic design, engineering, biotech, R&D, and design.

In a related development, the Arab bank has signed an agreement with DOZ to move its back-office operations to the DOZ. The new facility of the Arab bank, Arab Company for Shared Services, will conduct back-office work, including processing for fund transfers and retail and commercial loans.
Taiwan III Launches Offshore Development Center in India

The Institute for Information Industry (III), Taiwan, has announced the launch of its offshore development center in Chennai, India. The III is expected to invest about USD 1.5 million towards the center in 2006, with the figure slated to reach about USD 6.7 million by 2008.

The center will recruit about 60 IT professionals in 2006, with the strength expected to go up to 200 by 2008. The center will undertake software development and provide research and development for the Taiwanese Information, Communication and Technology (ICT) companies. It will also act as an information exchange center between India and Taiwan. The III stated the availability of skilled manpower as the primary reason behind selecting Chennai as the location for its center. The institute provides assistance to the Taiwanese government for the development of the local IT industry.

Monday, May 15, 2006

When Pearl, one of the UK's oldest insurers, hived off 950 jobs last month to an Indian outsourcing company, it could have been just another chunk of a historic industry disappearing offshore. After all, April had already seen announcements from Prudential and ABN Amro of hundreds more jobs to go in the UK financial sector, with India picking up the gains.

Tata Consultancy Services (TCS), Pearl's chosen outsourcer, has been clocking up the big deals of late. ABN Amro signed a £140m contract with the company in September to offshore 200 jobs, and Deutsche Bank is in final-stage negotiations to outsource even more in a deal worth at least £280m.

But the Pearl deal is different. Instead of shipping jobs to steamy Mumbai, TCS set up a joint venture with Pearl called Diligenta, and employees processing closed-book claims will remain at their desks in Peterborough.

Worth £486m over 10 years, the contract, which was first announced last October, is the largest-ever deal for an Indian outsourcer, and a potential IT deathtrap. Pearl has 11 legacy systems which TCS plans to combine before touting its solution to other insurers. "It's a very high-risk process," says Catherine Schmitt from research firm Celent. "A lot of the industry are holding their breath and saying 'let's see what happens'."

TCS hopes Diligenta will help it to woo a clutch of European insurers that are struggling with high operating costs but are culturally biased against sourcing out. "The UK has always been more open in insurance for offshoring but the Continental market is much more nationalistic," says Schmitt. "Tata is reacting to that by setting up an office in Hungary because there is less of an issue if you have a base in the EU."

TCS now has 4,500 employees outside India, and as the trend continues it will change how we define Indian companies, says Seturaman Mahalingam, the company's global finance director.

"If you look at the regional scene, in Europe we have capability in Budapest and in South America we have Sao Paulo. In Asia we are in China, Yokohama, and Melbourne, those kinds of places. So does that make us an Indian company? I don't know. What is an Indian company? IBM? They have 35,000 people in India. Accenture, with 16,000 people there? That distinction has blurred."

As befits an economy with 500m workers that is growing at 8pc a year, India's largest IT companies - the "big three" - are starting to bulk up. In recent results, Wipro and Infosys both reported revenues above $2bn for the first time while TCS's were just short of $3bn. The company's next target is to beat $10bn by 2010 with sales increasing 36pc a year. Not only are revenues growing, but Indian firms are doing it on margins of 25pc to 30pc, more than double those of mature players such as Accenture and IBM.

Of course, growing so fast presents its own problems. Last year TCS almost doubled its workforce by recruiting 27,377 people - 75 a day - and once took out 1,000 job ads in a single morning.

"There are issues," says Mahalingam. "For example the wages in India will go up. There is a tendency towards it already because it is a competition amongst everyone and everyone is recruiting." This has already driven up prices in the labour market, with IT wage inflation already at 10pc to 15pc a year. "And there will be currency appreciation because our functional currency is still the rupee. So there are dangers."

These dangers are the other force driving TCS's expansion on to Western shores. With costs at home going up, the company can now grow fastest by taking over existing workforces overseas. And as well as working with Indian university faculties to squeeze out more graduates, it is recruiting directly from prime British universities such as York and Queen's, Belfast.

The biggest prize for TCS is to break into higher-value business consulting work in the UK and US. Completing a blockbuster engagement like Pearl may get the firm on to a few more shortlists for this sort of work.

"I think people possibly underestimate TCS," says Schmitt. "There has been a lot of criticism of the Indian providers for being good at the technology but not really understanding the business, but that is changing. Companies like Accenture have moved down the value chain from highbrow strategy work to systems. The Indian guys are coming from a background as engineers and they are meeting and starting to compete in the middle."

Mahalingam responds to talk of the company's growing international recognition with a wry smile. He first came to the UK in the early Seventies to work on a systems migration job for Burroughs, and TCS has been quietly carving out a sizeable niche in systems here ever since.

"We have been here since 1974," he says. "It's just now, we are being noticed."
According to FAO Research, the proportion of procurement outsourcing element in the finance and accounting outsourcing (FAO) contracts is increasing. The report observed a 33 percent rise in the number of companies considering including procurement services as a part of FAO contracts. The main drivers propelling the trend are improved financial performance, better process efficiency, and access to specialized expertise. There has been a potential 100 percent increase in the number of FAO contracts involving procurement services in this year compared with those signed in 2004 and 2005 combined. The report finds that IBM has won most of the full-scale procurement outsourcing contracts, with Accenture closely succeeding.

Friday, May 05, 2006

Dow Jones Considering Outsourcing IT, Accounting Jobs

Dow Jones & Co. Inc. is considering cutting jobs in its finance and information technology divisions as the media company seeks ways to reduce expenses in the face of higher newsprint costs, reports Reuters.

According to Reuters, Dow Jones has told its employees in a memo last week that it was considering whether to outsource some of the jobs. No newsroom positions are to be cut.
Dow Jones, which also runs Dow Jones Newswires, Barron’s, MarketWatch and the Ottaway community newspapers, in April reported a higher quarterly profit but warned that second-quarter results would fall short of expectations.

Monday, May 01, 2006

Wipro Eyes Amex, BoA Contracts

According to media reports, Wipro has placed its bid for an outsourcing deal, with an expected value in excess of $ 1 billion, with American Express (Amex). Amex is offering this contract as its seven-year, $4 billion outsourcing deal with IBM expires next year. Wipro is also reported to be in pursuit of another deal of approximately $1 billion with the Bank of America (BoA).

Wipro’s attempts to win the contracts are in line with its strategy to increase its presence in the financial segment.