IT Outsourcing India

While there are opportunities in outsourcing and offshoring to businesses under pressure to cut costs and stretch slimmed-down budgets, that opportunity is accompanied by an additional level of complexity, said a PricewaterhouseCoopers LLP executive.

In the IT world, especially, outsourcing and offshoring models have become extremely mature with time, said Madhav Murti, a vice-president specializing in offshoring and outsourcing advisory services with the Toronto-based professional services firm. But in tough economic times, he said, new complexities like service provider viability must be considered when implementing these models because "now the level of risk has gone up so much."

"What is happening is, any company looking at an outsourcing relationship is dealing with a provider environment which is extremely volatile," said Murti, listing diminished business, access to credit, and stock market pressures as factors brought on by the weak economy.

Given those various impacts, businesses considering a new outsourcing relationship should first evaluate the service provider, said Murti, given "the diligence of the service provider goes up probably fivefold because you can no longer just look at their financial viability."

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As organizations pursue cost savings and operational efficiencies with their existing business processes, they often turn to service providers either in their home countries or abroad to reap additional cost savings associated with factors such as lower wages, lower operating costs and workers with experience that may not be available in-house. Alternatively, some organizations choose to move their operations to off-shore locations but retain control over their infrastructure, staff and processes. In either case, organizations need to manage the risks associated with safeguarding their assets and their information while complying with the various regulations and laws that govern their industry.

All business initiatives have an associated degree of risk. The risk associated with safeguarding the confidentiality, integrity and availability of information assets is a component of the overall business risk picture for all organizations worldwide. Ensuring that people, processes and technology are properly managed to address this risk is a challenge faced by information security professionals. There are, however, some unique risks associated with outsourcing that need to be addressed by various organizational stakeholders to avoid pitfalls. These risks include:

Political and country risk: if the outsourcing is going to be done in a country other than the country in which the sourcing organization is located, it may be necessary to examine the political environment of the service provider’s country.

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Indian offshoring is expected to grow from current USD 1.4 billion to USD 4.2 billion before year end 2010. Zinnov, a management consultancy outfit, forecasts Infrastructure Management Services IMS to be the next big growth Indian offshoring. The banking, financial services and insurance industries are the biggest users of IMS services and will constitute approximately 43 percent of the market. High tech telecom, manufacturing and retail industries will constitute approximately 12 percent each and will be second biggest consumers of offshored IMS services.

Management consulting firm, Zinnov, today released the results of its study regarding the offshoring of Infrastructure Management Services IMS to India. Zinnov forecasts offshoring of IMS to India to grow from USD1.4 billion today to USD4.2 billion before yearend 2010, with hardware support services accounting for the majority of those revenues. According to the report, the banking, financial and insurance segment BFSI represents by far and away the largest market for such services, at 43 percent. The high tech telecom, manufacturing and retail industries are the next biggest consumers of offshored IMS services at approximately 12 percent each.

Although, historically, the majority of IMS has been kept inhouse or outsourced to nearshore locations e.g. in North America, this trend is changing, notes the report. Having leveraged India primarily for call center support, product testing, and other related services over the past twenty years, western multinationals are increasingly looking for other ways to tap into Indias growing workforce. Infrastructure Management Services are particularly suitable for offshoring given the relative disconnect between clients core business offerings and these backend services. Not surprisingly, cost savings between 40 and 60 percent and 24 7 operations are cited as the main growth drivers of the offshored IMS industry.

The trend of having an inhouse IMS or getting it outsources from nearshore locations that is North America is changing. Having seen the efficiency of India in providing call centre support, product testing, and other related services over the past twenty years, western multinationals are now looking out for other ways to benefit from Indias growing workforce.

The offshoring of IMS to India is clearly a huge growth area for both American and Indian vendors with the available talent in that country. And, as western companies continue to put an ever greater premium on holding down costs, we expect this growth to extend well into the next decade� Said Vamsee Tirukkala, CoFounder and Managing Principal, Zinnov.

A third, less obvious reason for the growth in IMS offshoring regards the type of service level agreements SLAs that western multinationals are negotiating with their vendors. In an effort to mitigate the risks associated with offshoring, clients are increasingly engaging in managed services agreements with vendors. The managed services model typically includes language in the SLA that, essentially, ties pay to performance. Other forms of offshoring that have also benefited from this model include call center services and back office processing.

In a sign of the times, Hewlett Packard recently announced the acquisition of EDS and the latters 27,000person Indian workforce. It has been widely speculated that part of the impetus for HPs acquisition is an attempt to displace IBM as the worlds largest provider of outsourced infrastructure services. Said Vamsee Tirukkala, CoFounder and Managing Principal of Zinnov, The offshoring of IMS to India is clearly a huge growth area for both American and Indian vendors with the available talent in that country. And, as western companies continue to put an ever greater premium on holding down costs, we expect this growth to extend well into the next decade.

Source : http://www.offshoringtimes.com/

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Egypt is the latest in a long line of countries to set up a government agency to sell its IT services to businesses overseas.Countries such as the Philippines, Russia and Kenya have sent out similar delegations, envious of the spectacular overhaul of Indias economy in the past 10 years, led by technology investment.Amin Khaireldin, a board member of Egypts Information Technology Industry Development Agency, said the country has learned from Indias example.

We studied India carefully and learned two things ­ we need to focus on our talent pool keeping supply ahead of demand, and we need to have a reliable infrastructure, he said. Khaireldin insists Egypt has done both these things.

The government has approached universities, and along with industry help designed an IT curriculum that it hopes will train 40,000 graduates a year over three years.

Significant infrastructure investments, along with the construction of a technology village near Cairo, have attracted the likes of Orange, Vodafone and Alcatel to outsource business processes there.

Internal IT infrastructure investment has grown from USD4bn GBP2bn to USD12bn GBP6bn in the past three years, in part because a strong rupee and rising labour costs in India have led costcutting outsourcers to look elsewhere.

A McKinsey study found that Egypt was the 13th best outsourcing destination globally, and on average 14 per cent cheaper than India.

As well as trying to attract outside investment, the Egyptian government is encouraging internal innovation.

The government has cut corporation tax from 42 per cent to 20 per cent and begun customs reforms to improve trade.

And a competition prize offering three startups a year USD 50,000 GBP 25,000 and free resources has led to a number of innovative new firms.

Raya, an Egyptian startup that began converting voicemails into text then moved into IT services, was launched in 1998 and recently floated on the Cairo stock exchange for about GBP180m.

Stephen Page, chief executive of hardware manufacturer Sapphire, said he has been happy with his companys recent outsourced operations in Egypt.

It has good value, good workers and not too much red tape, he said. We have found the infrastructure is at least as reliable as in India.

But Mark KobayashiHillary, director of the National Outsourcing Association, said there was no noticeable trend of UK companies going to Egypt yet.

They paint a rosy picture but what they have to offer in terms of value and infrastructure is similar to many other countries around the world, he said.

Source : http://www.offshoringtimes.com/

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