Thursday, March 22, 2007

According to recent 4Q 2006 Outsourcing Pulse Surveys conducted by EquaTerra, the demand for outsourcing in the overall BPO and IT outsourcing markets has grown at a slower rate in 4Q 2006 as compared to 3Q 2006 and 4Q 2005.

The number of expected deals grew to 61 percent in 4Q 2006 as compared to 48 percent in 3Q 2006 and 67 percent in 4Q 2005. The study also anticipated a low growth in the outsourcing market during 1H 2007. This slow growth is primarily driven by multisourcing and capacity constraints among BPO service providers. The study also revealed that outsourcing of non-traditional functions, such as document and imaging services, legal processing, knowledge process outsourcing, and logistics services are expected to grow significantly in terms of demand as well as supply in 2007. The existing renegotiations for outsourcing deals among buyers and suppliers were not the main reasons for slow growth in the outsourcing industry. However, it has been predicted that large outsourcing vendors will be able to retain a majority of their business with their existing buyers.

According to a recent study by AT Kearney, the US firms will not be benefited (in terms of cost savings) by offshoring their IT and back-office work to destinations, including India and China, in the next 20 years due to rising wages and price inflation in such countries. Among the key findings, the average wages for the programmers in India, China, and Eastern Europe grew by up to 40 percent in 2006 as compared to up to 10 percent for their US counterparts. Despite this fact, majority of US-based companies, such as Accenture and IBM, are establishing/expanding their offshore units in countries such as India and China, in order to leverage the low-cost labor market in such countries.

It is evident that Indian professionals' wages are 40-60 percent less as compared to their US counterparts.

Tuesday, March 20, 2007

Indian Salaries Saw Highest Growth in A-Pac in 2006

Working in India could not have been better at any other time considering the salaries that the market is offering. Employees across industries in India saw their salaries increase between 11.9% and 16% (average 14.4% increase) in 2006 over the previous year, according to Hewitt Associate’s 11th annual Salary Increase Survey released a few days ago. This makes 2006 the fourth consecutive year in which salaries grew by double digits.

India’s salary increase was the highest in the Asia Pacific region. Not surprisingly, China came second to India; but at 8.3% average increase in 2006 over the previous year, its percentage increase still quite behind India.

While forecasts for 2007 are more or less along the same lines as 2006, the numbers for Singapore make one sit up. From an average salary increase of 4.6% in 2006, it is expected to see an increase of 8.9% this year. The Philippines, too, which is seeing increasing international investment, will see a much higher increase in 2007 (8.9%) than in 2006 (8.2%).

Average Salary Increases in Asia Pacific :

Country Year 2006 (%) 2007 (expected) (%)

India 14.4 14.5
China 8.3 8.2
Philippines 8.2 8.9
Korea 7.4 7.4
Thailand 6.5 6.6
Malaysia 6.2 5.9
Australia 4.8 4.4
Singapore 4.6 8.9
Taiwan 4.3 4.4
Hong Kong 4.0 3.9
Japan 2.6 2.7

While salary hikes may be good news for employees in India and other Asia Pacific countries, it may not be so for Western companies that have taken to increasingly source IT and business services from the Eastern hemisphere. Salaries comprise a large component of the total cost of offshoring incurred by customer companies.

Yet, a recent McKisney studies argues that rising wages in India do not impact the overall cost. It presents data to show that other costs — technology, infrastructure, staff productivity, shift utilization — if managed efficiently keep the fully loaded cost of offshoring low.

Yet, India’s offshore market is likely to maintain its low-cost labor advantage over countries such as the U.S.A. and U.K. for at least the next two decades, according to Everest Research Institute’s 2006 Global Sourcing Market Update.

source: GlobalservicesMedia, Everest Research Institute
No Plans to Divest Indian BPO Unit: HP

Hewlett-Packard (HP), the U।S.-based PC giant, has no plans to sell its Business Process Outsourcing (BPO) business in India, according to media sources. The firm’s Business Development and Communications Head in India Arundhati Chakraborty confirmed the information. In fact, the company is planning to increase headcount in its Indian BPO unit 20% from the current strength of 6,500 employees to 7,800 employees over the next one year.

The company is also planning to ramp up its operations with headcount and infrastructure additions as well as new contract wins.

via: globalservice media

Monday, March 05, 2007

According to a study conducted by IDC, the Philippines IT and telecom spending is expected to grow by 10 percent during 2007. About 67 percent of the IT spending is expected to be contributed by hardware, while about 68 percent of the total telecom spending will be contributed by wireless services. The Philippines IT industry is expected to witness a shortage of human resources in 2007 due to the widespread outsourcing of the Philippine IT professionals to ASEAN countries. The study also predicted that the Philippine BPO industry will try to reposition itself as a quality-of-service destination rather than a cost-reducing destination in order to compete with various emerging countries such as China, Vietnam and Eastern European countries in the BPO space.

According to the recently released Indian budget, all the services carried out in the contract research and clinical trials industry was proposed to be exempted from the services tax of 12.24 percent. The proposal has been approved by the Indian Parliament and the exemption will be enforced from April 1, 2007, in India. The move will help to boost the growth of contract research organizations (CROs) as well as encourage international pharmaceutical firms to establish their CROs and outsource clinical trials to India.
Annual Banking IT Budget to Increase by 30% by ’10 – Deloitte

According to the latest study by Deloitte, the annual IT budget of the banking industry is expected to increase from 6 percent in 2006 to 30 percent in 2010. Several banking organizations around the world will increase the percentage in their IT budget to secure technology services from various offshore providers operating from low labor cost countries, such as India and China, in the next three years.

The study also reported that the banks have started relying on offshore service providers, as they have moved away from outsourcing low-level work. At present, banks consider offshoring as a basic necessity and not just a cost-cutting strategy. Also, offshoring of technology workers help in savings as the Indian programmers receive 40-80 percent less than their US competitors.

According to the study, shifting bank’s IT projects to an offshore service provider could save about 40 percent in their IT budgets. It also claimed that extensive salary hike reduces the cost savings offered by offshore outsourcing. About 55 percent of the banking IT executives expect offshoring costs to increase by about 10 percent in 2007, while 36 percent expect a decline in the costs.