Niyamath Parveez

The internet has quite clearly made the world seem like a smaller place. Connecting people with so many new communication channels and possibilities has made it easier for firms to interact with other companies and customers but that is hardly the tip of the iceberg. Many of the firms operating in developed countries will consider their cost of labor to be higher than what could be had in many developing countries around the world but working out how to channel and utilize this staff force is difficult. It can be an extremely bad PR move for any firm as it invariably involves placing some local based staff out of employment whilst hiring people from another country that is able to provide labor at a much cheaper rate. This is what is known as offshore outsourcing and has been a staple part of many firms’ international tactics in recent years. However, offshore outsourcing has generally seen jobs and departments move wholesale to a new country, perhaps with new offices being set up specifically for these jobs.

It is obvious to see why major firms with huge work forces will gain a benefit from this but smaller firms are unable to benefit from this. However, the internet has opened up the possibilities to employ a single person or very small team of staff, wherever a firm can find them. This means that no matter where in the world a potential employee is situated, they can be utilized to allow a firm to reduce their labor costs and save money.

There are web sites like the elance site which allows companies to advertise jobs they require to be filled and allow potential employees to tender for these jobs. This site, and many others, has dramatically changed the way that employers go about finding workers and fulfilling their work orders. The beauty of elance is that it is extremely simple for all parties to use the site and this is very useful for encouraging communication and shared workloads. A company will upload details of their job and interested parties can tender for the product, indicating the price they take for completing the job and the deadline with which they will complete the job in. It is possible for the tendering party to supply further information about their experience and credentials for fulfilling the job and there are additional tests than the tendering parties can undertake to offer some guarantee about their working experience. This provides a degree of confidence to the firms who are advertising the jobs and all customers will receive feedback, which also gives some form of indication about the quality of the work of a supplier. Once a winning bid has been accepted, the two parties can start sharing information about the job and it is possible for all parties to communicate directly through whatever mechanisms they choose, which can help speed up the process of outsourcing. If a firm has only infrequent jobs that they need completed in a short time, using an outsourcing site like elance is a fantastic way of working.

One of the hardest issues when it comes to outsourcing is the length of contracts and the way that markets can change over the length of a contract. What may have seemed a fantastic deal when the ink dried on the initial contract may be a terrible deal over the length of the deal. Few predicted that the market would suffer in such a manner that has occurred in recent years and it has led many firms to count the cost of the contracts that they thought was going to provide fortune and long term security. Even aspects like the fluctuating exchange rates have dramatically altered the end value of many deals and as more and more businesses are going under due to the financial stress they are under, a number of companies are looking to alter their deals.

Of course, when one firm is unhappy with a deal, it is likely that the other partner may be extremely happy and therefore have no great desire to alter the deal. This makes it tricky to reach an amicable solution for both parties and this is behind the major problems and areas of conflict between firms who are supposed to be in partnership with each other.

Many firms are now entering break clauses into their outsourcing contracts to ensure that if a change has to occur, the issues that will allow a breaking of the contract are laid out in black and white. This is fine for contracts going forward from now but if the outsourcing contract already exists, it is not easy to insert a break clause in the contract. Again, this can be it may be more beneficial for one partner to break from the other and there needs to be a balance for both parties.
Whenever there is a contractual dispute and parties are unable to reach an amicable agreement, it quite often follows that litigation is the answer that firms turn to. This can be very costly and timely, which will drain even further resources from both parties and will have a bigger chance of grounding an organization than the original contract probably did. This is why it should always be recommended for all parties to try to negotiate their way out of problems as much as possible before heading for lawyers and costly answers to their problems. In the heat of the moment, litigation may seem like the perfect solution to break you free from a damaging contract but if you consider the long term negative effects of doing so, not always related to finance, and there will be a good argument for looking at alternative solutions.

A firm can pick up a damaged reputation amongst other firms and in their overall industry if they are seen as one that regularly relies on lawyers to negotiate settlements and deals, which may result in fewer firms being willing to work with them. Therefore, being able to negotiate your way out of a contract may allow a greater opportunity to work with other firms at a later date.

Facts and figures can be presented or represented to prove anything and the best way to find out the truth in a situation is to look behind the main figures. This is not to say that companies or firms are being deliberately deceitful in their actions or reporting or figures but there can be many different ways to release statements or presentations. A company who has a number of goals and aims may need to present figures for one issue but these may not be relevant to their entire output or workload. This can be seen when examining a firm’s revenue, and considering the current financial climate, it is vitally important for companies to understand, how and where they are making any revenues.

Not every company is able to offer good news about their financial status at the moment but Tata Consultancy Services, an Indian based software Services Company was able to do just that recently. They announced that their revenues had risen by 12% during the first quarter of 2009. There has to be consideration given over to other factors to take in the full picture but one thing of great interest is the fact that financial services made up for just under 50% of the entire revenue earned by the firm. This means that the company is largely dependent on the financial sector which could cause problems if there was to be a change in the market. However, given that it is predicted that more banks and similar companies will be turning towards outsourcing to get through the current financial situation, it is likely to be a booming industry for some time to come. This means that Tata Consultancy Services should be able to keep their revenue levels high.

It is obvious that many banking firms are badly hit at the moment due to the current financial crisis that is engulfing the world and it makes perfect sense to see many of them looking to cut costs in anyway that they can. One of the best ways to reduce labor costs is to turn to an outsourcing firm for assistance and the benefits that can come from offshore outsourcing is not only restricted to financial benefit. Given that Tata Consultancy Services are working on behalf a great number of customers and clients; they are able to pick up a lot of experience and expertise, which ensures they can offer a great service to their customers. The reduced labor costs is one thing but if the service was terrible, the end users would not be slow in telling the firm and they may take their business elsewhere. This means that an outsourcing firm needs to provide quality at a cheaper cost and the results for the first quarter of the year suggests that Tata Consultancy Services are managing to do just that, especially in the difficult financial times we are experiencing.

The route of outsourcing is not something that every firm can benefit from but the results that have been obtained by Tata Consultancy Services indicates that providing an outsourcing service can be a great way to give your revenue a boost.

The business person or company who can predict what is coming next will always manage to be a success and stay ahead of the game. This is obviously not an easy task because if it was then everyone would be able to predict the future and there would be no advantage in doing so, in fact, the advantage would come from doing something different. However, in the current climate being able to predict what is coming around the corner and where the benefits are going to come from is all so important. Sometimes this means taking a risk, which is definitely difficult to do at this moment in time but when a risk comes off, the benefits to the firm will see them well placed regardless of the twists and turns the market may make.

This is as true for markets that are calmer than the more volatile markets and if you were to name a calmer market, Canada would definitely be in the running. A lot of this may come from the fact that it is neighbors with America, who always seem mad, bad and dangerous to know. This means that many foreign nationalists may not give the Canadians the respect they deserve but there is no doubt that many firms and companies could learn from the successful Canadian model.

Realizing that firms are looking for any way to trim their bottom line, any possible cut back is a good move. Outsourcing jobs is the most instant issue that people consider but there is also the opportunity to outsource services like outsourcing and data warehousing. Computers are now an integral part of everyday business for many companies but there is still the likelihood that many firms are struggling to keep up with the most efficient ways of dealing with their data or database needs. Unless companies are able to pay top dollar for the highest trained staff or be able to put their staff through training to keep up to date, they may lag behind with the latest technologies. This causes inefficiency and when you are looking to ensure that every dollar and cent is accounted for, inefficiency can be a killer. Therefore, many firms are looking to outsource their data warehouse and storage facilities to bring in a batter range of expertise and knowledge. This is exactly the area that Canada IT firms are turning their attention to and the ability to save money whilst assisting their local economy is very attractive.

During the recession, each firm needs to put their own needs at the top of their list of priorities but once that has been achieved, being able to provide jobs in the local economy is a great bonus and the IT service is an outsourcing facility that can provide this. As the benefits from outsourcing these IT services is as much from the level of experience as opposed to just cost saving, Canadian firms are finding out that the solution they really need can be found on their own doorstep.

The citizens of Scotland like to moan about how wet and windy the weather is, but sometimes it can have its advantages. Whilst some countries suffer from heat-waves, the humble Scottish are usually experiencing damp and moist conditions which aren’t always great for humans but they can have benefits in storing computers. Yes, the fact that the Scottish temperature is a couple of degrees cooler than their London counterparts is more than enough to make a huge difference in the cost of storing a lot of computers or servers. This is due to the fact that these appliances are prone to overheating and need to be constantly monitored and the temperature will have an effect on how quickly they warm up. This cost benefit has led many firms to consider using Scotland for their computer storage centers and has positively impacted on Scotland’s ability to outsource.

Of course, a wet and windy climate also provides ample opportunity to make the most from alternative sources of power and energy and this is also something that is making Scotland look far more attractive to firms from other countries. There is an obvious need for many firms to show that they have a “green” or environmental outlook on life and being able to use outsourcing suppliers which have access to alternative sources of energy is a fantastic PR boost. The minimum wage that is paid in Scotland may not be as low as the equivalent wages in countries in Asia but for the overall benefits that will come to a firm, it is apparent why Scotland is a key outsourcing partner.

The best example of this comes from the plans submitted by ‘Lockerbie Data Centres’ which really goes the extra mile with regards to environmentally friendly plans. The company hopes to harness the power from wind farms situated close to their center and in return, they propose they would be able to use the heat built up in their data center to provide a source of renewable energy for over 700 local homes. This is a perfect example of giving something back to the community and would be considered a great PR boost for anyone needing to extend their “green” credentials.

Add to that the fact there has been a definite move to IT training and ensuring large swathes of the population have computer skills and it is all to noticeable that Scotland is perfectly suited to offer computer services to firms and this is something many developers in Scotland are keen to take advantage of. There is currently a group of developers and investors looking to create new centers in Scotland at various locations throughout the nation. Some are keen to develop in the Borders area, and this will benefit from being situated close to England. Others are keen to move to the Highlands in order to use the breathtaking scenery and quieter pace of life to attract foreign companies to Scotland. The beauty about Scotland is that it is a small country and it is quite easy to comfortably travel its length in a day by road. It may not be something that you would wish to do every day but it is certainly an option and this means that outsourcing to Scotland is an extremely viable option which could bring benefits to many countries.

You don’t have to be an avid news junkie to understand that the world economy is in a pretty bad place at the moment and that many people and businesses have been struggling to make ends meet. This has led to firms going under, people losing their jobs, their homes and their self-esteem and generally placed a lot of pressure on people and their relationships. However, in life, wherever there is a bad reaction, there can usually be an equal yet opposite reaction which sees people benefiting whilst others are suffering. This is a very natural reaction and nothing out of the ordinary but up until recently, it has been considered that outsourcing has been doing very well out of the current economic downturn and recession.

This has been due to the fact that firms have been so desperate to cut costs and reduce their overheads that they have looked to reduce the costs of labor and outsourcing has given them a fantastic opportunity to do so. The chance to save money whilst having the same, if not higher, quality of product or service is a no-brainer in these troubled times and this has led many people to believe that outsourcing was one of the untouchable industries, striving onwards in a time when destitution came knocking at the front door of many companies and organizations.

However, the further reductions in the budgets and spending capabilities of many firms in America is now starting to creep towards India and the outsourcing firms based there are starting to feel the pinch. This is made even harsher by the fact that so many new countries and offshore firms are looking to take some of the outsourcing market as well and they are able to undercut the prices offered by Indian firms. All in all, India’s outsourcing firms are starting to suffer in the way that they hit a number of areas in recent years and if the market continues to struggle, there could be some difficult times ahead for the India based outsourcing firms, especially those specializing in IT.

The IT industry is a strange one as it relies very much on continual development and progression and failure to keep up can be disastrous for the long term future of a firm or business. However, as budgets are slashed, many firms are considering it to be too much of a risk to place all of their IT needs in an outsourced basket. Some of the thinking behind this decision lies in the fact that all of the firm based employees would have an easily defined lack of knowledge about the current developments in IT and if the firm had to take control of their own systems in the future, they could be woefully short of the knowledge needed to perform the task successfully. This has caused further pressure on firms to limit the amount of outsourcing activities they undertake, which has had an even bigger negative impact on the outsourcing firms based in India. India is still the home of outsourcing but if the economic downturn continues and the countries snapping at their heels keep on improving, who knows how long that will last for.

There are many different industries which are perfectly suited to outsourcing but perhaps aren’t considered right away for his task. One such industry is the gaming industry which to many people remains a niche market and one of little interest. Studies and more importantly, sales figures have shown the computer and console games industry to be one of the leisure activities of this generation and as the technology improves, this shows no signs of stopping. With games becoming ever more complex, the amount of man hours required to make the modern style of games that players love is becoming longer and longer. It therefore makes perfect sense that games makers would look to outsource large parts of their work to speed up the process or to benefit from a range of skills and techniques that may have otherwise been unavailable to their firm. This means that there are many countries looking to step in and offer fantastic outsourcing capabilities with regards to writing games and one such country is the Philippines.

The Philippines has developed a reputation for being skilled at producing 3D graphics and realistic animation, two traits that are in large demand at the moment. The games consumer is a demanding customer, which is not unrealistic given the high price they pay for a game and this means that there is a need for games manufacturers to offer a quality service. With computer programmers and writers in the Philippines, being recognized for their talent in this field, it makes perfect sense to outsource work here. Given that the level of wages in the Philippines will be more attractive to a firm than comparative wages in the Western world, there is likely to be a large demand for staff and outsourcing work.

Another great benefit that the Philippines have is that they are greatly influenced by Western culture and many people in the country speak the English language. Given that there can be many intricacies in making computer games; this higher level of communication should make it much easier to create the finished product to all parties satisfaction. With deadlines being tight, being able to communicate fully is vital and the Philippines market has a head start on some of its potential rivals on this score.

One of the reasons for the continuing, indeed, growing trend for games machines is the current economic downturn. It is harder for many people to justify a night out on the town and so are turning towards finding entertainment at home. It is possible to invite a great number of friends around to play the games and console and computer games are far more of a sociable interaction than they were one or two decades ago. The importance of the computer and console market is only going to continue the longer the current economic trend continues so expect the needs of outsourcing to surge even further. With so many different styles of games available, there will be a wide range of services needed and many interested games writers and small firms should take an interest in providing outsourcing services to the abundance of games manufacturers.

Hydrocarbons are no longer the only export of the oil producing countries located in the Middle East. Countries like UAE and Kuwait are fast catching up with other Asian countries in a competition to get a taste of outsourcing services. UAE is particularly interested in transforming a major portion of its young workforce into IT and financial outsourcing professionals. The country has the perfect setting for doing it too, resulting in a series of advantages for its working population with a educational background based on commerce looking forward to helping financial organizations in the developed countries with auditing, and IT-savvy professionals are aiming at helping US-based MNC-s with their IT based processes.

Dubai is not completely new to the world of outsourcing. The country first entered the scene in the early 2000s, and soon afterward created an industrial zone to house the core of its newfound businesses, christened as the Dubai Outsource Zone (often abbreviated as DOZ). International Data Corporation (IDC), a leading global market research firm recently revealed that outsourcers have increased their investment in the outsourcing industry in UAE by as much as 7.5 times since the initial stages, when the base of operations in Dubai was quite small. The services related to hosting infrastructure have experienced a good boost, rising in 2005 by as much as 69%. IDC has already predicted outsourcing spending to increase by a further 8% by 2010, a welcome scenario, no doubt.

The DOZ has expanded to an area of 11 times its initial allocated space already, in order to meet constantly increasing demands for space, for more services. The zone presently covers a massive area of 33 million square feet. A Dubai-based international carrier service, Futech, is already planning to set up its regional headquarters in Dubai, in order to support its global operations. Futech has already announced plans to invest a sum of around Dh200 million (USD 54.5 million) to set up a call center with at least 500 employees inside the DOZ. This will expand the area covered by the DOZ by an additional 100,000 sq. ft, and will be ready soon.

At present, India leads the outsourcing bandwagon in the globe, with a total value of US$ 47.8 billion, as estimated in 2007. This is around 10 times of its value back in 1998. The IT outsourcing industry is predicted to flourish at the rate of 28% every year. However, a new study has revealed that rising wage costs in India may hinder the expansion of outsourcing industry in the fields of banking and insurance services to some extent. Besides, a recent research by Compass Management Consulting has revealed that UK based customers may find it hard to understand the accent used by many call center employees in India. This automatically results in increased call times and correspondingly lesser profits for the outsourcers.

That said, it will be a long time before Dubai based outsourcing vendors can even dream to give their Indian cousins a run for their money. The major factor behind this would be the strength of the workforce itself. Number of professionals engaged in outsourcing services in India exceeds that in the UAE by as much as 9-10 times. This kind of manpower, capable of providing virtually any kind of services, ranging from software development to financial accounting is tough to battle with, and UAE will have to do better than simply upgrading infrastructures in order to become the slightest threat to the ever thriving Indian outsourcing industry.

Egypt is being hailed as one of the best outsourcing destinations in the world for quite some time now. The recognition for the undeniable appeal of the country to international outsourcers was finally made official recently, when the country was awarded the much coveted title of Outsourcing Destination of the Year at the National Outsourcing Association's 2008 Awards. Egypt beat competent rivals Romania and Philippines to top the list of outsourcing destinations across the globe at the ceremony held in London.

The award was received by Dr Hazem Abdelazim, CEO of Information Technology Industry Development Agency, (ITIDA), of Egypt. Dr. Abdelazim was ecstatic after receiving the award at the ceremony, which was attended by over 350 high-level executives and outsourcing professionals from various top-ranked outsourcing service providers of the world. He remarked, “This award recognizes the vast progress Egypt has made in the outsourcing market”, adding that, “Egypt is putting its mark on the map of favored global services locations. Its young population, large multi-lingual workforce, solid infrastructure and competitive cost structure is fortified by unequivocal government support, making Egypt a compelling destination for outsourcing services.”

The judges explained the reason for their decision by pointing out that Egypt qualified for the prestigious accolade because of three primary reasons – the skilled multilingual workforce, the young population in their 20’s engaging in outsourcing, and the growing list of global sourcing investments in the country. Egypt is already recognized as an outsourcing destination for Europe by market giants such as, Microsoft, Oracle, Teleperformance, and Vodafone.

Martyn Hart, Chairman of National Outsourcing Association commented on the award system of NOA, stating, “The NOA awards celebrate best practice in the outsourcing industry. Our winners have demonstrated excellence in outsourcing and have highlighted the importance of best practice and meeting industry standards. These achievements make an excellent contribution to the Body of Outsourcing Knowledge (the BOOK) that the NOA holds on behalf of the industry.”

NOA grants awards every year to competent outsourcers across the globe. The award chiefly focuses on substantial achievements in IT outsourcing and business process outsourcing operations. However, sector specific achievements in the popular outsourcing fields of telecommunications, utilities, and finance do not go unnoticed by NOA either. Usually, countries that provide great performance with excellent value for money to outsourcers are given preference when they are being considered for the award.

The Yankee Group, which is one of the world’s leading independent technology research and consulting firms, recently recognized Egypt as “by far the Middle Eastern country currently best positioned to take advantage of the boom in outsourcing”.

Tholons, one of the leading full-service Strategic Advisory firms for Global Outsourcing and Investments, published a study on the top 50 emerging outsourcing cities in the world in 2008, with Cairo (the capital city of Egypt) placed at the well-deserved 7^th position in the list.

AT Kearney, a global management consulting firm that focuses on strategic and operational CEO-agenda concerns – also placed the country in the 13^th position in its Global Services Location Index in 2007.

Software development is something that most companies are trying to outsource these days. It is chiefly because this field requires hiring of specialists in good numbers, resulting in quite an increase in the overall expenses of a company. Companies that are just starting up depend even more on outsourcing, because these organizations can seldom afford a team of well-trained professionals needed to build an in-house software development team. These companies seek out reputed offshore service providers to get there software development done at a fraction of the price needed to get it done in their home countries. This is true for most American and European companies.

The practice of outsourcing software development is, however, not without its caveats. The prospect of getting high quality work done at only a fraction of the price that would otherwise be spent can seem very lucrative to most startup companies at the beginning. However, in the long run, the inevitable cropping up of different issues can act as major concerns. Here are some points that outsourcers have to consider when enlisting the help of an offshore service provider:

1. Small may be better – Small scale offshore providers do not always provide inferior quality service. In fact, it is better to be the major client of a small scale provider than a small client of a major provider. The former case will often yield much better result in the long run. The provider will usually pay a lot of attention to the client’s projects and may also end up providing small bonus services at times in order to hold on to the client. However, it is not always easy to determine beforehand the quality of service the provider is going to give. So it can be a gamble to some extent, but the risk is certainly worth it.
2. Some security issues are unavoidable – Let’s face it, sometimes the outsourcer will be forced to disclose some sensitive data to the provider, in order to enable them to provide the service. This is risky, but sometimes inevitable. One way of working around it is to hire a small in-house team of experts that can take care of the core functions, leaving the bulk of the repetitive, low-risk work for the service provider to crunch through.
3. Junior talent will dominate – Most small scale providers, and even some large ones, end up hiring junior developers with little or no experience, in order to save money. It is often hard to find candidates with even 5 years of experience in these providers’ offices. While these amateur developers are often eager to put in extra hours when needed, their knowledge levels will evidently be quite low. As such, they may not be able to handle some complex technical issues properly, which makes the decision to hire a small in-house team seem all the more logical.
4. Cost will rise slowly – Even if the cost of service is low at first, the cost should be expected to rise as time progresses. The salaries of the inexperienced developers will increase as they gain experience, thereby increasing the cost of service given by the provider as well. One good side of it is that the developers working on the project will provide better service as well.

Thus it is clear that outsourcing software development, though seemingly a cost effective option, is not without its caveats. Fortunately, the benefits do seem to outweigh the problems in the long run, which still make it a viable option for startup companies, as well as companies operating with a tight budget.