US HRO to reach USD 19 Billion

According to a report titled, 'Worldwide and US HR BPO 2006 Vendor Analysis: The Answer is in the Margin' by IDC, the HR BPO segment of US HR services will grow at a CAGR 16 percent to reach USD 18.9 billion by 2010.

It also reports that with the growth in the HR BPO segment, the obstacles for the new entrants in the market will also increase. However, the trend might change in the future with the entry of new Indian HR firms. The major reason for the growth of HR BPO services is that most companies, including the mid-sized companies, are aiming at global recognition. As a result, most of the firms are establishing their operations outside their headquarter country. Among the key findings, about 37 percent of the US HR services spend in 2004 was spent on HR BPO services and is expected to reach 46 percent by 2010.


via: GlobalOutsourcingNow

Source: Nelson-Hall study

BPO Sector in 3Q ’06 on the Rise – NelsonHall

NelsonHall, a US-based BPO analyst firm, has reported growth in the BPO sector contracts. The level of BPO activities is more in Europe as compared to North America. Europe showed an increase of about 36 percent, while North America reported a decrease of 26 percent, in the first nine months of 2006.

The major reasons for this increase in the BPO market include the outsourcing of HR, F&A, and procurement services. The value of about 36 percent of BPO contracts depended on the types of the services provided by the company in the quarter ending September 2006, as compared to 24 percent in the corresponding year-ago period. The BPO contract value for the back-office services has increased by 36 percent, as compared to the decrease in the industry-specific services contract value by 28 percent by the end of September 2006.

The BPO contract value of outsourcing HR, F&A, and procurement services accounted for 40 percent in North America, as compared to 31 percent in Europe by the end of September 2006. The manufacturing and retail BPO contracts accounted for 27 percent by the end of September 2006, as compared to 13 percent in the corresponding year-ago period.

Source: GlobalOutsourcingNow

India And U.S.A.: Top Destination for R&D

source:globalservicesmedia

Top 100 Outsourcing Deal Value Down to $67.9Bn - IDC

More Globally-Scaled Deals, More Network and Desktop Outsourcing, and Reduced Combined Deal Value.

The tenth annual IDC study of the top 100 worldwide outsourcing deals reveals fundamental changes in the outsourcing marketplace, including an increase in deals with more global reach, an increase in the number of serious competitors, a dramatic rise in network and desktop outsourcing, and a reduction in combined deal value. These developments demonstrate increased competition and customer demand for greater provider capabilities, and create pressure for outsourcers to alter their business models in order to successfully compete and expand in the coming years.

The total contract value (TCV) of the 100 worldwide outsourcing deals decreased by 3.1% from $70.1 billion in 2004 to $67.9 billion in 2005. The study finds a reduction in the number of both megadeals and deals ranging from $500 million to less than $1 billion TCV. However, the number of deals with less than $250 million TCV has seen a dramatic increase from eight in 2004 to 23 in 2005. The study also finds that the number and value of business outsourcing deals declined in 2005, while the value and number of IT outsourcing deals increased. Within IT outsourcing, the share of network and desktop outsourcing deals climbed substantially from 14.6% of total IT outsourcing deal value in 2004 to 32.4% in 2005.

The study found that while six players captured 54% of the top 100 contract value in 2004, it took just five players to capture nearly the same amount (53.5%) in 2005, with IBM Global Services leading the way, followed by EDS, BT Group, CSC, and T-Systems.

Source: IDC Press Relase

ICICI OneSource Launches New BPO Facility in Argentina

ICICI OneSource, an Indian outsourcing services provider, has announced the launch of a new BPO facility in Buenos Aires, Argentina. This is the fourth overseas delivery center for the company. Apart from the overseas centers, the company operates 10 delivery centers in India.

The company will initially use the center to provide back-office transaction processing services to one of its US-based telecom clients. It is expected to leverage the new center to add Spanish language capabilities to its services portfolio. The new center has a capacity to accommodate 400 employees, and is a part of the company’s strategy to capture a pie of the telecom outsourced services market, which it expects to grow at a CAGR of 10.7 percent in the next five years. At present, the telecom vertical contributes about 30 percent to the company’s revenues.


Source: GlobalOutsourcingNow

Watson Wyatt has won a GBP 1.2 billion mandate with the Whitbread Group. Watson will provide investment advisory services for a pension plan of the group.

According to a Capgemini survey at the IDC Midwest Conference, outsourcing results in a substantial return on investment. Around 85 percent of the respondents stated that they managed to save at least the expenses which they had incurred on outsourcing, with 26.4 percent reporting their savings quantum to be about twice the size of their investment on outsourcing. In terms of investments, around 60 percent of the respondents reported having spent up to USD 50 million on outsourcing, while 18 percent of the respondents reported having spent up to USD 100 million.

About 9 percent of the respondents had invested between USD 100 million and USD 200 million, while an equal percentage of respondents had invested more than USD 500 million. Cost reductions, increased productivity, along with opportunity to redeploy the resources for executing core functions were identified as the prime underlying drivers of outsourcing decisions.

About 94.8 percent of respondents stated that outsourcing helps in augmenting the shareholders' value. About 70 percent of respondents stated that the US is their preferred choice for outsourcing.

International Technology Alliance (ITA), has won a ten-year, USD 135.8 million contract to provide research services for the US Army Research Laboratory and the UK Ministry of Defence.
ITA will provide research and development services to investigate advanced technology for secure wireless and sensor networks. The alliance will work towards enhancing the effectiveness of military establishments by contributing to their capabilities pertaining to the collection, interpretation, and distribution of battlefield information among themselves.

According to a study by Boston Consulting Group (BCG), Multinational Pharmaceutical Companies (MPCs) are increasingly exploring India and China as they are seeking various offshoring options for their R&D function.
The upcoming trend is attributed to the improving regulatory and competitive environment in the two countries. Amongst the findings, almost all the top 20 MPCs have outsourced their chemistry work to China.
The report states that the MPCs wishing to establish successful offshore R&D operations in India and China should adopt an integrated strategy, as against the ad-hoc strategies which are currently being followed by some of the companies operating in the domain.
The offshoring strategy should be flexible enough to incorporate the changes in the R&D capabilities of the two countries.

Genpact, a business services and technology solutions company will acquire Irvine-based MoneyLine Lending Services, a specialized provider of end-to-end mortgage origination and fulfillment services. Established in 1996, MoneyLine is a provider of outsourced mortgage services for more than 50 financial-institution clients. Terms of the deal, expected to close in August, were not disclosed.

Read the press release here

Lessons Learned from Diamond Cluster Global Outsourcing Study:

In the qualitative portion of the research, DC asked Buyers and Providers to share their insights and experience with their peers. The following is a representative sample of their first-hand observations from the front lines of outsourcing.


Buyers
• Outsourcing is always harder than you originally thought.
• Cost savings alone is not a good reason to outsource.
• Leverage resources with experience and skills in outsourcing to help you develop your own sourcing strategies and execution roadmaps.
• Clearly define your goals, measurement metrics and exit strategies up front.
• Well-defined governance structures and proactive management and communication are the keys to success.
• Structure your vendor relationships as win/win propositions.
• Outsourcing your problems won’t solve them. You should fix potential problems first before you hand over the process to someone else.
• Establishing very specific and measurable SLAs is crucial for evaluating performance.
• Give providers a chance to be successful. Transitions take time.
• Due diligence on providers is essential if you want to avoid surprises.
• Internal resistance to outsourcing can be managed but you have to foster proactive and candid communications to succeed.


Providers
• Successful outsourcing requires strong buyer commitment.
• Be prepared to talk to buyers in terms of business value.
• Buyers and providers need to be long-term partners.
• Buyers should recognize that providers need time to be effective. Bringing on an outsourcer can’t happen over night.
• Buyer expectations and objectives are always evolving. Make sure you understand them at the outset and are nimble enough to satisfy them when they change.
• Resistance to outsourcing and uncertainty about its value are still issues in many organizations.
• Contracts and negotiations need to be customized for each situation.
• It’s still difficult for outsourcing firms to differentiate themselves and cost is still very important to buyers.
• You’ve got to be able to work closely and communicate clearly with buyer management to be successful.
• Cultural differences need to be acknowledged and managed.
• Establishing a mutual understanding about governance structures, SLAs and performance expectations is critical.


Profile of the Participants:

DiamondCluster’s Global Outsourcing Study includes the insights of 210 buyers and 242 providers of outsourcing services.

All of the participants are either directly involved or highly aware of their company’s outsourcing-related decisions.

The number of total employees in the participating companies ranged from 100 to more than 50,000. The number of IT employees on staff ranged from less than 100 to more than 50,000. IT budgets of participating companies ranged from less than $5 million to more than $500 million. Buyers participating in the survey conduct business in the financial services, professional services, insurance, consumer products, retail, telecommunications and public sectors.

The providers participating in the study range in size from less than 100 to more than 10,000 employees. Many of the outsourcing providers had operations in multiple locations, including Brazil, Canada, China, Egypt, France, Germany, Hungary, India, Malaysia, the Netherlands,Romania, Russia, Spain, Ukraine, the United Kingdom, the United States, and Vietnam.

Source: DiamondCluster Research

Now, It is CEOs' Attrition in India


Several top-level executives in the frontline offshoring companies have quit in the last one year drawing attention to the attrition in this segment. The good news, however, is that the movements are within the industry, in almost all cases, proving that it is just some readjustment and not a cause for concern...

Raman Roy who had started Spectramind in 1999, that soon became the No 1 BPO company in India and was sold off by Roy to Wipro.
Now Mr.Roy's planning his new venture QuatrroBPO.

Rizwan Koita and Jagdish Moorjani, who started Transworks, which was later acquired by Indian business group, AV Birla. The two have already started a company focusing on the healthcare space.
(Called ‘1shore’, the new company will offer end-to-end healthcare services and also provide financial services. They are currently in talks with a couple of US firms to provide end-to-end healthcare BPO. Read the story here)

Prashant Sahni quit as CEO Tecnovate-eBooker to start something fresh.

The Other CEOs/country heads who have quit in the last few months include...

Rakesh Chopra, as head of Amex offshore operations to EXL services
Romi Malhotra, as head of StanChart's offshore operations to Dell offshore Ops
RK Rangan, as head of Prudential offshore operations to Lehman's offshore

Convergys has lost two country heads in the past 12 months with Jaswinder Ghumman and Rakesh Chopra leaving, for some BPO heads movement has become par for the course.
Mr Chopra has travelled from Genpact to American Express, EXL, Convergys and back to Genpact.(Meanwhile Dr. Bawa Singh is the interim Vice President and Country Manager of Convergys India Press release)

Sunil Mehta, vice-president, Nasscom, told EconomicTimes India:

The industry is growing at 38-40% annually. Considering the growth, senior level
movement is not surprising.

Need more?

Aparup Sengupta GTL-Mumbai
K R Viswanath - CEO Epicenter (Mumbai based Collections co.)
R Mohan - CEO of Hinduja TMTR Venkatesh Iyer - President, NIIT SmartServe

The following fellows have remained in this industry...

Sujit Baksi - President vCustomer India - joined Lehmen Brothers - quit- joined Tech Mahindra
Ravi Chandaran quit HP to head ANZ Grindlay’s back office
Kiran Shah - moved from Bank of America to join Goldman Sachs BPO
Ravi Bhatia quit World Bank BPO to join Genpact
Rakesh Kumar - President Global VantEdge ( joined IntelliRisk )
Anshuman Kankan - Head India Ops ePhinay (F&A BPO) (joined COLT Telecom India Offshore Center)
Shailaja Puranik - COO/Head India ops. Sitel ( Now COO Vertex India )

There are instances of top honchos in BPOs leaving to explore options in private equity. Sanjeev Agarwal leaving IBM Daksh for Helion Venture Partners and Akshay Bhargav leaving Progeon to join 3i are cases in point.

The good news, however, is that the movements are within the industry, in almost all cases, proving that it is just some readjustment and not a cause for concern.

I like the comment of Shyamanuja about this trend ...

... we blame the 20-somethings for changing jobs because they prefer the canteen
of XYZ to that of ABC... They are at least are clear about why they are doing
it!

Source: Global Services, Convergys Corp, EconomicTimes, The Time Magazine, GoldmanSachs, McKinsey & Co Alumi, Managing Offshore

R&D Investment Heads East: Booz Allen Hamilton-INSEAD Study

Picture/Research crtsy: Booz Allen Hamilton, Global Services

The winners for the 2006 Everest Grp. Outsourcing Excellence Awards!

Best BPO - Hughes and ACS
Best ITO - Vanguard Car Rental and Perot Systems
Best EU - Invista and Freeborders
Best Financial Services - Channel Life and Alfinanz
Best Healthcare - St. Vincent Health System and Eclipsys
Best Business Challenge - Citrix and HP Global Services
Best Offshore - Delta Airlines and Wipro
Best Partnership - BT and Accenture HR Services

source: www.Outsourcing-center.com , Everest Group

TCS Looking to Buy Vertex
reported by Global Services

India’s Tata Consultancy Services (TCS) is looking to buy Vertex, the outsourcing arm of U.K.’s United Utilities, in a deal valued at $800 million to one billion, the Times of India reported citing company sources.

Vertex – the company which has interests in back-office functions like customer services, human resources, procurement, finance and accounting – is perceived by the parent company as a non core business, and hence the decision to sell.

TCS already has an existing relationship with United Utilities, with the latter having signed a multiyear IT maintenance contract, the newspaper noted.

Vertex has about 9,000 employees across U.K., Ireland, Switzerland, U.S.A., Canada and India. The company reported a turnover of approximately $748 million in 2005-06 and a profit of approximately $38 million for the same time period.

Canadian Small Businesses to Spend $9Bn on IT in 2006 – Study


According to a study by AMI-Partners, a US-headquartered market intelligence firm, Canadian small businesses are expected to spend about USD 9 billion for the IT related products and services in 2006. This reflects a 9 percent growth over the previous year. The firm expects a majority of the projected spend to be on storage, security, Internet, and IT services.

Amongst the findings, the total spend for basic support relating to computing, networking and software, as well as professional services such as IT management and consultancy, is expected to account for about 25 percent of the total IT spending by Canadian small businesses. The data back-up and disaster recovery are also given strategic importance by the Canadian small businesses. In 2005, these businesses spent about USD 359 million on storage components. In addition, enhanced data security is also amongst the most strategic issues.

Source: GlobalSourcingNow

Apple finds Indian jobs too pricey

India might still be the outsourcing apple in the eye of American businesses, but in Steve Jobs’ mind, the country looks too pricey these days.
US companies are even now offshoring work to India at the rate of knots, but the industry buzz is that the legendary founder of Apple pulled out of the world’s Back Office Central last week after facing rising costs and difficulties in hiring and retaining talent.

‘‘The turnover is high, and the competition for good people is strong.’’ The company feels it ‘‘can do it more efficiently elsewhere.’’ According to industry mavens, entry-level wages have climbed by as much as 13% annually from 2000 to 2004, while salaries for mid-level managers have gone up 30% annually during the same period to a median of $31,131.

Apple’s decision came even as the US behemoth IBM announced it would triple its investments to $ 6 billion over the next three years. IBM, which already employs some 42,000 people in India and is the country’s largest multinational employers, plans to hire thousands more, its CEO Sam Palmisano said during an analysts conference in Bangalore, the first time Big Blue has held such a meet outside the United States.

According to sources, the center had to be closed as it was not financially feasible. The company, however, will continue to provide technical support to its clients from a Bangalore, India-based third-party BPO services provider, TransWorks.

Still can't figure out what went wrong with India? Don't know - prob'ly Apple's tie-up with HCL Infosystems?

Whatever... The support would be no better and possibly worse if it was moved back. The training curve would need to start over again... The longer support stays in India, the better it gets...’’

Anyways Apple is "Thinking Differently ..."

source: ET/GlobalOutsourcingNow/Apple/Transworks/IBM

US High-End IT Job Losses Lower than Reported – Study

According to a study by the American Sentinel University, the chances of the US losing high-end IT jobs due to the fast development of IT and related industries in low-cost destinations such as India are much lesser than what was being reported by various private studies. IT offshoring is primarily limited to low-end occupations such as programmers, coders, and support specialists.

According to the study, high-end IT positions are growing at a pace which is at par with the levels experienced by the country during the boom period in the 1990s. A majority of the job losses that took place in the US during and after the recession period of 2000-01 were cyclical in nature and have been won back.
Though the low-end IT jobs have shown a marginal decline of 1.5 percent during the post-recession period of 2002-04, high-end IT jobs have shown a robust growth of 18.1 percent during the same period. Network system and data communication analysts lead the growth in the high-end IT group with a growth rate of 32.5 percent, followed by computer software engineers for systems software at 25.9 percent. The trend is supported by the fact that the total value of import of IT services in the US is less than 2.5 percent of software publishing and information services produced by the country.

The study titled, Offshoring of Information-Technology Jobs: Myths and Realities, defines low-end IT occupations as the jobs which are intensive, easy to codify, and require less face-to-face interaction. High-end IT jobs are the ones requiring advanced degrees in computer science or information systems and an understanding of management and business processes.

India’s IT, ITeS Exports Soar 33% to $23.6 Billion

The overall growth of the industry including both exports and the domestic market registered a 31% increase to reach $29.6 billion


Exports of Indian IT and IT enabled Services (ITeS) continued to grow for the fourth year in a row with an increase of 33% to touch $23.6 billion in ’05–06, according to reports by India’s industry association, Nasscom.

The overall growth of the industry including both exports and the domestic market registered a 31% increase to reach $29.6 billion according to the annual Nasscom report.
Though the projected growth in the exports for the year ’06–07 will continue to outstrip the growth in the domestic market, the industry is expected to meet its target of being a $60-billion industry by 2010.

Nasscom has also projected that exports will grow 27%–30% in ’06–07 to $29–$31 billion, while the overall industry is expected to grow 25%–28% to $36–$38 billion.

Of the total exports in ’05-06, IT software and services grew by 33% to $17.3 billion, while exports of the BPO industry grew 37% to $6.3 billion. For the year ’06-07, Nasscom has estimated that exports of software and services will increase to $21–$22 billion, while BPO exports will touch $8–$8.5 billion.

The domestic market for software is estimated to reach $6 billion in the current year from $4.8 billion in the previous fiscal year.