Cultural Barriers to Offshore Outsourcing

Courtesy: http://www.cio.com/

Culture has often been cited as one of the biggest barriers to successful offshore outsourcing. While we all know and agree that that is the case, and often talk about it, not all of us understand specifically how different cultural aspects show up in offshore projects and how the resulting barriers can be addressed.

To know more about how culture differences show up, one can either rely on research studies or on first hand observations and experience. When it comes to research, Geert Hofstede’s work in identifying cross-country cultural differences based on five measures: power distance, individualism, uncertainty avoidance, long-term orientation and masculinity, is a good starting point. A few examples: Western countries like US and UK are more individualistic compared to the collective culture in Latin America and Asia; Asian countries like China and Japan score high on long term orientation while western countries are more short-term oriented. Richard Nisbett, a social psychologist, found that Easterners perceive objects holistically through a wide-angle lens whereas Westerners perceive them in isolation, through a narrow lens with sharper focus. Another study looked at culture and mum effect, which occurs when one or more stakeholders who have information indicating a project is failing decide to remain silent and let the project continue. It indicates that the risk of mum effect is higher in Asia than in the West. Of course, there are caveats and assumptions in these studies so they should serve only as initial anchors rather than absolute truth.

First hand observations and experience bring out much more specific aspects. For example, Utkarsh Rai, author of Offshoring Secrets highlights specific aspects of the Indian culture that show up while managing offshore projects—the compare and contrast culture, the workplace socialization practices, the importance of age and seniority, the sensitivity to criticism and the difficulty in saying no. This is in stark contrast with some elements of the western culture—the directness of criticism, the slightly circumlocutory style of communication and the focus on productivity in UK and the informality of work culture, the direct but sometimes overbearing style of communication and the "it’s all about time and money" approach in the US.

These cultural differences impact interactions, communication, interpretation, understanding, productivity, comfort and commitment.

So how can we address them? Companies have adopted two routes so far: cultural awareness and culturally compatible resource deployment. Cultural awareness involves conducting workshops and sessions both offshore and offshore to make both sides aware of each other’s cultural practices. In fact, such sessions are now included as a freebie in many large outsourcing programs. Culturally compatible resource deployment involves having local, native onsite persons manage the onshore client relationship or even having a culturally compatible offshore workforce (example UK and South Africa). The two things to be kept in mind while doing this are firstly whether the cultural barrier is addressed internally within the service provider’s organization and secondly if the erosion of cost advantage is worth it.

Beyond the above, obvious solutions, companies need to keep three principles in mind to fully address cultural barriers. The first principle is that it is a two-way street. A director of a leading cultural training institute in UK once told me of an incident where his (not yet then) client in UK was complaining "the Chinese don’t know how to work with us. The Indians don’t know how to work with us". The director retorted, "Have you ever considered that you may not know how to work with them?" So it’s as much about the buyer understanding the supplier’s culture as the other way round.

The second principle is that it takes conscious effort, intention and patience for cultural awareness to show up in our behavior. There are two systems in our mind—System 1, the intuitive part, and System 2, the reflective part. Our native cultural factors are in System 1, and when we learn about a new culture, it gets slotted in System 2. So unless we practice and reflect about the new culture, the intuitive aspect of our own culture will still be the only driver. Scientists have also found that our childhood cultural experience plays a major role in shaping the way we think and as we grow older, the neuroplasticity of our brain actually reduces, making change much harder.

The third and most important principle is that addressing the cultural barrier requires a shift in individual thinking. Each culture brings in its unique perspective, and that’s what is required to solve today’s complex problems. But we listen to other cultures through our own judgments and prejudices. We have to be willing to let them go, to accept another. How we see other people and their differences is merely a point of view.

And no one point of view is the only true or correct one.

IBM to withdraw its patent for offshore outsourcing

Courtesy: http://economictimes.indiatimes.com/

The world’s biggest IT company IBM will withdraw its patent application for offshore outsourcing, second time in past few years, after the US Patent & Trademark Office published the company’s latest filing seeking rights to a new ‘Method and system for strategic global resource sourcing’ last week.

The patent was aimed at helping companies make their offshore outsourcing decisions with the help of a new mathematical model developed by five IBM engineers including two Indians–Mayank Sharma and Karthik Sourirajan. Other inventors included Ching-Hua Chen-Ritzo, Daniel Patrick Connors and Markus Ettl.

Meanwhile, this is not the first time IBM had to withdraw a patent seeking rights to an offshoring mechanism. Around two years ago, the company filed a patent for ‘a software-driven approach for identifying at least a portion of a human resource within an organization for outsourcing.’

IBM’s latest application for ‘Method and system for strategic global resource sourcing’, described a methodology for offshoring projects based on the quality and quantity of global talent available in cheaper offshore locations such as India and China.

IBM competes with Indian offshore outsourcing providers TCS, Infosys and Wipro, apart from its traditional rivals HP-EDS and Accenture.

An IBM India spokesperson had not replied to an email query sent by ET on Tuesday at the time of this story going online. However, according to an online report, IBM confirmed that it will be withdrawing its patent application. "Labor wages and material costs constitute significant operating costs for businesses and other organizations. Therefore, it is generally the case that an organization desires to minimize such costs by making careful sourcing decisions," IBM said in its patent application published on March 26. "However, these cost reductions should not come at the expense of service or product quality delivered by the organization."

Many large outsourcing customers traditionally take offshoring decisions based on cost advantages, however, cost reductions should not come at the expense of service or product quality delivered by the organization.

"By simply minimizing wages and material costs, the organization may indirectly increase other costs such as those associated with poorer quality workers and/or materials (e.g., costs due to loss of customers, lower productivity, increased product returns, high attrition, increased cycle time)," IBM said.

Outrage at museum outsourcing – Peoria, IL

Courtesy: http://www.pjstar.com/

Some local business owners are irked that the Build the Block Downtown museum campaign is outsourcing the printing and mailing of some of its campaign literature to an Iowa-based company.

The pro-museum group is asking taxpayers to help fund the $136 million project through a sales tax referendum, saying it will bring jobs to the area, yet isn’t supporting the local economy itself, they say, and it just sends a bad message.

Leonard Unes of Unes Printing said he was outraged when he received a Build the Block mailer last week. "Since it’s a local building campaign, they need to use local printers. We have all the capabilities in Peoria, there’s no reason to go elsewhere. We’re just as competitive," he said.

Added another business owner who asked to remain anonymous: "I am appalled to think these campaigns raise funds from locals and spend the money outside the area. Peoria has many capable printers and mailers."

In order for the combined Peoria Riverfront Museum and Caterpillar visitors center project to happen, Peoria County taxpayers must approve a referendum April 7 for a sales tax increase of 25 cents for every $100 worth of purchases made in the county. The increase would raise about $4 million a year.

Brad McMillan, spokesman for the Museum Collaborative Group, says the group has spent a lot of money with local printers and union shops on the public awareness campaign, not to mention the creative work that was done here.

However, the group had to outsource the mailers, he said, because he doesn’t think there’s any operation in the Peoria area that does a combination of printing and mailing with access to political databases.

"There simply isn’t an organization that does this unique niche – the printing of the pieces and the bulk rate permit and addresses in one fell swoop," McMillan said. "None of the money for these political mailers came from taxpayer money. This was all private money."

Only the political mailers were printed at the Davenport, Iowa-based Victory Companies, he said. The rest of the work was done here.

Brad Hoerr of Wayne Wagoner Printing Company in Edwards said his business does have the capability to print and mail pieces with access to political databases. In fact, it’s done a lot of work for the Build the Block campaign.

However, because his company is not completely unionized, it isn’t allowed to use the "union bug" on mailers, something the Build the Block campaign was set on.

"That’s an absolute requirement," McMillan said.

Hoerr and Unes (whose business does not do mailings, but will direct customers to local mailers) still say it’s vital to keep business in Peoria.

"Since it’s a local building campaign, they need to use local printers. They need to keep the work in Peoria no matter how they do it," Hoerr said, adding that he supports the museum project.

Susie Ketterer, co-owner of Simantel Group, the Peoria marketing firm hired to promote the museum project, said Victory doesn’t compete with local businesses.

"I’m a huge believer in local resources. We go to local people every time we possibly can," she said.

Data Center Outsourcing Likely to Grow

Courtesy: http://www.computereconomics.com/

The level of data center outsourcing has remained fairly constant over the past few years. But we believe interest in outsourcing data center operations, in whole or in part, will increase as the ailing economy enforces cost-containment initiatives and as capital expenditures are limited by the credit crunch. CIOs and IT managers need to be aware of new and evolving options for outsourcing and carefully investigate the pros and cons of providers and their service offerings.

Turning over responsibility for an organization’s data center operations to an outside party, generally known as outsourcing, has been an element of IT strategy for many years. In fact, IT started as an outsourced industry, back when most computing was done by way of “time sharing”—renting time (CPU cycles) on mainframes owned by third-party service providers.

This Research Byte is a summary of our full report, Time Right to Revisit Data Center Outsourcing Strategy.

Data Center Outsourcing Varies by Degree

First it is important to define what the term “outsourcing” encompasses. There are several approaches lumped under the data center outsourcing category, depending on which functions the service provider performs.

Outsourcing varies by degree. Co-location, for example, involves leasing space, power, bandwidth, and even manpower in an outside data center facility to run servers owned by the customer. Managed service providers (MSPs) will oversee parts or the whole of the customer’s IT infrastructure, reducing manpower requirements. Hosting providers will lease servers and services for any range of specific applications from e-mail to e-commerce activities.

Outsourcing varies in other ways. A data center service provider can take over the customer’s entire data center operation, or it can handle the customer’s IT processing requirements in data centers owned by the service provider. There are myriad regional service providers from mom-and-pop shops to well-established midsize firms, and there are global outsourcers with familiar names like Accenture, CSC, EDS, and IBM that offer soup-to-nuts data center outsourcing services.

In the full report, we use a broad definition of data center outsourcing, defining it as any service that enables an organization to significantly reduce the amount of internal resources devoted to managing servers, storage, and other data center equipment and facilities. In this study, we also examine the level of data center outsourcing as a percentage of data center work outsourced.

Data Center Outsourcing Steady in Past Three Years

For the past few years the percentage of companies outsourcing data center operations has remained fairly constant. As shown in Figure 1, about one-third of organizations turn over at least some data center operations to third parties.

Obama lowers temperature against outsourcing

Source: http://economictimes.indiatimes.com/

US President Barack Obama will not insist on bringing back poorly-paid, low-skill jobs offshored to India and other emerging markets, signaling a reversal of his stance against US companies sending jobs abroad. Obama said he would rather work on creating high-skill, well-paying jobs in the US.

The US president’s acknowledgement that offshoring is here to stay, made in a live online town hall meeting from the White House, brings relief to the over two million employees in technology services and BPO companies in India and their counterparts in other offshore destinations like China and the Philippines.

Commenting on President Obama’s statement in Washington, Nasscom president Som Mittal told, “It will be good for the US and for us,” Both low-end and high-end offshoring would grow, he added.

“The issue is that over the years fewer Americans have been opting for STEMS (Science, Technology, Engineering & Maths) and there is a shortage of workers there. This is what President Obama is trying to address,” said Mr Mittal.

“It is the right sentiment. At a broader level, the issue is not high-end or low-end, but accepting the reality of today’s world, that is, you cannot root any job to a geography,” said Robert E Kennedy, a professor at Ross School of Business, University of Michigan.

Mr Kennedy recently wrote a book on outsourcing: The Services Shift, Seizing the Ultimate Offshore Opportunity.

IT honchos said the US now acknowledges that offshoring is a reality to live with. “President Obama is actually saying that the US needs to move up the value chain, while legitimizing offshoring. About 8-10% of those done in India is high-end and this trend will continue, even as the US scales up further,” said the India head of a US services multinational who requested not to be named.

Citing a S&P 500 research, Mr Mittal said among the top 10 US companies, 50% of the revenue comes from outside the US and the growth in their businesses outside the US is 2.5 times that of their businesses in the US. Also, US companies like GE, Cisco, Intel, Microsoft, Oracle have R&D centres in India. They are leveraging global talent to remain competitive and will continue to do so.

Responding to a question about outsourced jobs returning to the US, Mr Obama said: “Not all of these jobs are going to come back… What we’ve got to do is create new jobs that can’t be outsourced.”

However, not all jobs that have been offshored are low-end. The high-end jobs being done in India include the work done at R&D units of multinationals, analytics, engineering services, new technology development and so on. “Calling jobs ‘low skilled’ is a reference more to manufacturing rather than services offshoring. The US will not put curbs on offshoring, but will give a stimulus to its own high-end work across industries, be it healthcare or manufacturing,” said Avinash Vashishta, CEO, Tholons, a Bangalore-based advisory firm.

The Ugly And Dangerous Prejudice Against Outsourcing

Source: http://www.informationweek.com/

If American businesses yield to the anti-outsourcing caterwaulers, then don’t be surprised to see them go after other equally legitimate business tools next.

So explain this one to me: When great IT companies develop new products and services that offer significant value to CIOs, we call it innovation. But when CIOs employ outsourcing to remain competitive and create new customer value, the outrage industry calls it anti-American and screeches about the loss of "our jobs."

This ugly and ill-informed nonsense has been going on for the past 10 years, which is about 10 years too many. Because if American businesses begin to yield even a single inch to the anti-outsourcing caterwaulers, then don’t be surprised to see them go after these equally legitimate business tools next:

# Cisco says its new Unified Computing System could help CIOs cut IT operating costs in the data center and elsewhere by up to 35%, and surely some of that savings would come from reduced head count owing to more automation and more built-in intelligence. But wait — what about the loss of "our jobs" from such an approach — doesn’t that make the use of such advanced technology unpatriotic?

# What about some of the lower-cost alternatives being offered by Salesforce.com and other successful SaaS vendors? If the cloud offers a simpler way to run applications, then that means fewer support jobs will be required — so are cloud and SaaS companies therefore responsible for decimating tens of thousands of "our" IT jobs?

# Last week, Hewlett-Packard signed a $50 million deal with Korea’s Shinhan Bank. To get the work done, should HP shuttle US -based workers back and forth from Korea since HP is, after all, based in the United States and should therefore deploy only "our jobs" on the Shinhan Bank project? And that comes on top of HP senior VP Marius Haas recently citing his company’s far-flung development operations in India, Costa Rica, and Europe: "It’s a competitive economy and you go where the talent is."

# Oracle says that because of the challenging global economy, it’s adjusting its hiring practices in the consulting sector by "load-balancing with contractors and integrators" rather than hiring more full-time professional-services employees. Hey, wait a minute — what about "our jobs"? According to the protectionist lobby, shouldn’t Oracle be forced to hire more full-timers and tell all of those contractors and integrators to get busy laying off the workers whom Oracle had been planning to retain to handle the consulting work?

On top of those examples, how about all the other highly intelligent IT products this industry has created in the past 10 years, all of which without question have led to the reduction or even elimination of various types of jobs: virtualization, systems management, network monitoring, rapid-development tools, Web-native software, and many more? Will they be taxed and regulated, or just pilloried as destroyers of "our jobs"?

CIOs today are being asked to squeeze costs aggressively while also keeping alive innovative projects that will lead to competitive advantage when the global economy improves. Neither those CIOs nor their companies can afford to ignore the very tangible benefits of tapping into the best sources of talent and skills and value the global market has to offer out of fear that some protesters or politicians will carp about it publicly.

And they should stick to their guns for two reasons: first, because doing so makes great business sense; and second, because of the hypocrisy shown by so many of the political class who live by the rule of do as I say, not as I do. Based on precedents, one of the likely carpers will be Sen. John Kerry, who for many years rode stylish motorcycles made in foreign countries: Ducatis from Italy and BMWs from Germany. Most people would say that if those are the bikes he wants to road, go right ahead. But personal preferences aside, Euro-biker Kerry will look to score political points as one of the tub-thumpers who tries to intimidate American corporations into cutting back on outsourcing even though it’s in the best interests of those companies and their shareholders and their customers and, yes, their employees to engage in outsourcing.

Just this week, US Rep. Robert Brady of Pennsylvania described as "outrageous" the plans of JPMorgan Chase to accelerate the integration of Washington Mutual and Bear Stearns by stepping up its business with Indian outsourcing firms.

"We would like to remind you that the taxpayers of the United States of America contributed $25 billion to your company to help stabilize our economy, not send jobs overseas," Brady recently wrote to JPMorgan CEO Jamie Dimon, as reported by my colleague Paul McDougall.

In the same vein, those CIOs and other business leaders can’t afford to let recent broad but clearly protectionist comments from President Obama intimidate them from pursuing the business practices that will let them create the most-competitive products and services possible by fully leveraging global sources of talent and innovation as well as global sources of raw materials and finished goods. Because it’s those companies that will succeed, which means they’ll grow, which means they’ll need to hire new engineers and designers and marketers and developers and salespeople and production workers and accountants and drivers and managers.

Like every other person with a pulse, my heart goes out to those Americans — as well as workers in other countries — who through no fault of their own have lost their jobs in this global economic slowdown. And without question, some of those job losses have come as a result of corporate decisions to shift those jobs from the United States to other countries. But this current round of jobs being moved around the globe is not an isolated occurrence, it’s not something specific to our troubled times right now in 2009, and it’s not the cause of the rising unemployment in this country.

If US firms are to remain competitive in the global economy, they need to be free to conceive, create, sell, and ship products in whatever combinations of locations and processes that yield the greatest chances for success. If that means making cars in the United States as Honda and Mercedes and Toyota do, then that’s terrific. If it means the iPod is "proudly designed in California" but is built in the Far East from components supplied from multiple countries, then that’s terrific as well. And if it means US-based companies employ outsourcers to help them create great products and services that are sold around the world — thereby creating more jobs for that company in this country — then that’s equally terrific as well.

In addition to the comments above from HP’s Marius Haas, consider these remarks from execs at IBM and Sun Microsystems on the same subject of the futility of protectionist policies in a massively interdependent global economy, as noted in a Global CIO blog last week:

IBM’s Edward Orange, emphasizing that IBM manufactures products and delivers services in 170 countries, echoed Haas’ point: "IBM goes wherever the talent and the market is." Orange is the Asia-Pacific director for IBM’s Lotus unit, the article said.

Sun’s Joe Hartley was even more blunt: "The policy may shrink global trade in the long run. Not every job can be outsourced. But a job has to be done at the right place and at the right time," according to the Economic Times, which also offered these statistics: Indian subsidiaries of US companies such as IBM, Sun, Microsoft, Oracle, and HP together employ over 150,000 people. IBM, which has more than 70,000 employees in India, sees no merit in US government’s protectionist policies.

These are indeed hard times, but the approach that will get us out of this mess is the spirit of American innovation and determination, which over the past 200 years has created the highest standard of living the world has ever known with dazzling breakthroughs in medicine, manufacturing, higher education, entertainment, space exploration, pharmaceuticals, and much more. Going into the 21st century, we have the opportunity to leverage that priceless spirit of American innovation and determination with not only the remarkable immigrant entrepreneurs who’ve contributed so much to this country but also with global partners in countries across the globe who currently serve as our partners in every industry. To attempt to cut off those enormously valuable partnerships and collaborations, and to attempt to turn the clock back 50 years and magically define what "our jobs" are, will only ensure that today’s hard times stay with us for many years to come.

Accenture denies another batch of layoffs

Courtesy: http://www.abs-cbnnews.com/

There is no second batch of layoffs at Accenture’s Manila office, one of the country’s biggest business process outsourcing company and employer recently said.

In a statement to abs-cbnNEWS.com, Accenture denied reports that it is sacking more employees after it laid off 500 last January. "This statement is being issued to correct the news story circulating in the local and international media that Accenture will lay off half of its workforce in the Philippines."

A news wire story picked up by local dailies and news websites cited an official from the labor department saying that Accenture’s Manila office "has filed a notice of retrenchment for about 500 workers at its facilities in Manila." The story then erroneously accounted for the total number of retrenched workers as equivalent to half of the company’s total workforce in the Philippines.

Accenture has about 16,000 employees in its Philippine operations, making the outsourcing firm one of the–if not the–biggest employer in the country.

“Over a month ago, Accenture implemented a redundancy program that affected approximately 500 employees, or 3 percent of its total workforce in Manila and Cebu,” Accenture said in its letter.

News about Accenture’s decision to let go of employees in mid-January sparked initial worries on the fate of the Philippine business process outsourcing (BPO) industry amid the global economic crisis. The BPO industry has been much touted as the country’s sponge for the thousands of graduates that the fledging and regionally uncompetitive manufacturing sector could not absorb. Its rapid growth in the past years has also fueled expansions in other allied industries, including retail and real estate.

Accenture has been a major force in the local BPO’s growth since it converted its decades-old high-end consulting business to accommodate a wider base of clients who have management and more basic outsourcing needs, including call center services. Most of their end-clients are based in the US.

During the outsourcing boom, Accenture Manila was one of the most firms that were active and aggressive in the job markets, both in Metro Manila and in the provinces.

Accenture’s "redundancy" program, however, came at the heels of US president Barack Obama’s assumption of office in January and the worsening financial crisis in rich countries. Obama was initially feared as anti-outsourcing since he favored higher taxes for work that US companies send out to other countries.

In its statement, Accenture clarified that the redundancy program was a result of what it saw as "the need to balance the skills of its workforce with the demand of its clients.”

abs-cbnNEWS.com talked to an Accenture employee who shared that the layoffs directly affected a division in the company that provided clients with technical support on programs. "The programming and computer engineering outsourcing market really took a plunge in the US, causing the dismissal of the programmers and engineers [in Manila]." He asked for anonymity since they are not allowed to talk to the media.

He added, however, that the client of that group closed shop last November due to the financial crisis in the US.

Accenture explained, “The decision was made after a thorough review of its business in the Philippines."

Bench

A former Accenture hiring agent told abs-cbnNEWS.com that the BPO company has been very strict with recruiting and maintaining employees.

“Accenture is like a school, you always get grades based on your performance,” he shared. A consistent low grade puts an employee under probation.

Aside from the regular employees, he said some of those terminated were non-regular employees whose six-month contracts were about to end.

He shared that Accenture has a "Bench" Division where all those who got lower grades were placed to undergo additional training. He learned recently that the division was dissolved in time with the redundancy program.

Accenture started in the BPO business in 2007 but has been in the Philippines since 20 years ago.

Still hiring

Despite trimming its workforce in January, however, Accenture remains in the local job market. It continues to advertise for vacancies and still keeping its eye on available talents for its other existing and upcoming projects.

“Accenture works like a global talent manager in the market place. In that system, the IT workers are pooled for clients to choose from,” said a source who is familiar with the company’s strategies.

Accenture reportedly hopes to recover from the slack in the US IT outsourcing market by expanding its client base. It is said to be eyeing opportunities in AustralAsia and Europe.

A new client is said to be in the pipeline and will be added to Accenture Manila’s portfolio by April.

Temporary

According to commissioner Mon Ibrahim of the Commission on Information and Communication Technology (CICT), the job situation at Accenture is temporary and “not unusual.”

Ibrahim told abs-cbnnews.com that the IT and software industry is still in “hiring mode” despite the financial crisis. In fact, Ibrahim noted that the 500 laid-off employees might already have a job right after leaving Accenture.

“There’s always a year to year increase. There will be a slowdown but there will still be growth in the IT industry,” Ibrahim said.

He said they are expecting more growth rate this year as compared to the voice-based sector who anticipates only 20 to 30 percent growth in 2009.

Can Offshore Outsourcing Vendors Innovate?

Courtesy: http://www.computerworld.com/

"Offshore Outsourcing is dead!" But before you jump off your seat, let me clarify what I mean by dead. I mean dead not with reference to its importance, relevance or future; I mean dead with reference to its character-it is devoid of vibrancy, excitement, creation and innovation.

When offshore outsourcing emerged into the limelight decades ago, it was a disruptive innovation, challenging convention and redefining what could be done where, by whom and at what cost. It created a cheaper labor pipe, through which any transactional, discrete piece of work could flow. Developments since then have resulted in the pipe growing fatter (a larger volume of work can flow through the system at a given point), having an ability to accommodate different types of flow within (applications, infrastructure, business processes), and in some cases, an increased rate of flow (how much work can be transferred to or done by offshore in a given amount of time).

Today innovation is high on the hype cycle. Every offshore outsourcing service provider cites innovation as its key differentiator. Catchy taglines, flashy messages appear on websites, brochures, case studies…adaptive innovation, collaborative innovation, applied innovation…To prove the point they win innovation awards from organizations you’ve never heard of. Their cases studies scream offshore outsourcing has made their customers more innovative. They conveniently, selectively retrofit their revenue streams to produce an impressive, "x% of our revenues come from innovation" figure. At the core of course they chose the definition of innovation that suits them-new to the world is too hard, new to the industry, hmmm easier, and new to the company…very, very easy.

If you look deeper, authentically and honestly, without biases, you can easily see the lack of authenticity in most messages around innovation. First of all, the ensuing developments in the industry cannot even be termed innovations. Have we really created anything new? Is changing the attributes of a pipe (making it fatter, increasing its flow, making it versatile) creating something new? And in what way has it generated value for the customer? When productivity increases and more work flows offshore, does it go to only improving the provider’s margins or does the customer get a price benefit as well? How much of the proclaimed value is theoretical versus actual? Is doing things faster and cheaper all that’s required to be innovative? Isn’t there something more to it than that?

There is talk about innovation (and its manifestations of incremental and radical innovation) not being enough for today’s times. The next stage, experts say, is transformation-from creating something new to creating something with a dramatic change in nature, form, or appearance. Unfortunately again, the users of the word transformation fall into that same trap-delivering multiple services together is not transformation, merely moving the workforce offshore is not transformation. Unless it changes the cultural DNA of the company, unless it results in a significant shift in form or performance of a company, it is not transformation.

What we have done so far in the offshore outsourcing industry can be at best be termed as evolution-a gradual development and change in characteristics while the core remains the same.

We’ve used and abused innovation and transformation for far too long. It’s time to accept that and start innovating and transforming in the true sense of the terms.

Symantec study finds most firms outsource security

Risk, regulatory and cost pressures too much for many internal staff to handle

Courtesy: http://www.vnunet.com/

Three out of four European organizations are outsourcing part of their security function because they face increasing risk, regulatory and cost pressures, as well as staffing problems, according to Symantec research released today.

The security giant interviewed around 500 mid-sized to large enterprises, and found that 95 per cent had experienced attacks in the past two years, and three quarters rated such attacks as their number one or number two risk.

Symantec also identified growing losses from this type of crime, whether through downtime, loss of customer or corporate data, or damage to brand. Around 60 per cent of respondents said that it was becoming ‘somewhat’ or ‘significantly more’ difficult to provide security.

Jim Hart, manager of security analysis for Symantec’s managed security services division, explained that organizations are also struggling to recruit the best staff.

"Budgets are being constrained and firms are struggling to recruit the top performers," he said. "Things like training are also being affected and because security certifications are often time-dependent, a lot of people are finding their certifications are expiring and they can’t replace them."

As a result, 77 per cent of companies in the survey said they were outsourcing some of their security functions in order to cut costs, mitigate increasingly complex risks or have 24/7 access to fully trained staff.

Igate, Tokyo-based CAC team up to pursue outsourcing deals with Japanese companies

Courtesy: http://www.bizjournals.com/

Outsourcing firm Igate Corp. said it will pursue new deals with Japanese companies under an agreement with a Tokyo-based outsourcing provider.

Fremont-based Igate said its deal with CAC Corp. calls for the two companies to cater to Japanese businesses that want outsourcing services globally.

Igate and CAC will split revenue based on the amount of work each company provides Japanese clients, said Igate CEO Phaneesh Murthy.

CAC has the right to acquire up to 2.5 percent of Igate’s outstanding shares as part of their deal.

CAC and Igate said they hope to generate more than $50 million over three years from joint customer contracts.

Igate helps businesses with tasks like running call centers, executing transactions and overseeing order entry, accounts receivable and purchasing. The company lists clients like General Electric Co., Royal Bank of Canada and Philip Morris International Inc.

Igate has 6,500 employees and offices in India, Canada, Malaysia, Australia and the United Kingdom.

Separately, Igate said will not pursue a bid for Satyam Computer Services Ltd. Igate last January said it was considering a bid for the rival outsourcing company.

Satyam, which has been called India’s version of Enron Corp., was plunged into tumult after founder B. Ramalinga Raju admitted he overstated profits for several years and created a phony cash balance in excess of $1 billion. Prosecutors also accuse Raju of siphoning millions of dollars to buy land.

In a press release, Igate did not elaborate on why it will no longer consider a bid for Satyam, which said it may sell as much as 51 percent of the company.