Niyamath Parveez

Percentages can sound quite large but everything has to be considered in relative terms and viewed in concept. A small firm may outsource 75% of their workload, which is obviously a huge factor for them but if a massive firm outsources 5% of their workload, it may still be a larger amount of workers or money involved. This should reinforce the fact that statistics and percentages, by themselves, prove nothing and there has to be an element of context attached to all figures and findings. Therefore, the news that Airbus is aiming to outsource 20% of its work by 2020, is eye-catching but is it really going to be a changing aspect for the firm?

The first step of putting some realistic figures on the findings is to look at the number of people the firm hope to add to their employment circle. The first step of this move will occur in 2012 where the first is hoping to dramatically increase its current production facility in Bangalore. The whole world seems to have moved to India in the hope of gaining benefits and lowering their labor costs and Airbus are no different. At this moment in time, there are currently 120 employees employed by Airbus but this is going to change dramatically. Within the next three years, the figure of employees based in Bangalore is expected to rise to 400. An increase in this size would be noticeable in any firm, so it is fair to say that sizable changes will be happening for Airbus and how they undertake their business.

Of course, for every positive action, there can be an equal and opposite reaction and it would be natural for people to think there may be other job losses before these new jobs appear in Bangalore. Again, this would not be a surprise because so many firms around the world are doing the exact same thing, which means that to not outsource means to risk being left behind. There are obviously a number of emotive issues when considering outsourcing and job losses is always going to be a tricky situation but if this what is required to keep a firm at the top of their game, then this what needs to be done. To stand still and let your opposition and rivals reap the benefits will lead you to falling behind and this is something that Airbus cannot risk.

Critics of the move towards outsourcing, particularly in the airplane industry point to some notable failings for other major firms who have taken this route. Boeing found that there were some issues regarding the quality of some of their production features and when dealing with airplane manufacturing, safety cannot be compromised. Saving money is an important issue for all firms to strive for but the pursuit of profit cannot come in place of safety and high quality. The eternal trade-off between the different elements involved with outsourcing will ensure that firms need to consider a lot of aspects before choosing which outsourcing partner to work with.

Sometimes its good to change things around a bit and keep everything fresh. It may be that nothing is wrong but if complacency creeps in, things may become a bit stale and both parties need a change to revitalize themselves again. These comments belong to a really vague opening statement but think about it and consider how many different situations or products you could apply it to? Its a really wide reaching fact of life that familiarity can breed contempt and countless relationships have came to a close not because of any great failure but because there was nothing new to uncover. And for some businesses and firms, this can be said about outsourcing and the relationship they have with an outsourcing supplier.

Bangalore has quite rightly been viewed as one of the most important places for outsourcing and there are countless companies who are very happy with the low cost and quality service they have received from moving elements of their work there. Being able to reduce their labor costs is reason enough alone for companies to move to offshore outsourcing but there have been a number of other benefits and the local economy of Bangalore has really improved by the work that has been brought to the region. Of course, any success is going to be looked on enviously by many cities and regions around the world and there are a number of places making an active effort to provide an alternative to the services offered in Bangalore. This desire to beat the number one player in the game will see these regions offering incentives or encouragement to use them and when you couple this to the complacency that may arise from existing relationships, it becomes apparent why Bangalore may lose some jobs.

One of the main areas that is looking to provide an alternative to Bangalore is Gdansk in Poland, which is making a concerted effort to bring more jobs to the region. After Poland entered the EU, there was a noticeable shift of young people out of the country but recently, the trend has switched with many returning home or new people coming in. This has given a great incentive to chase work and as the outsourcing market is so popular with many firms at the moment, it makes perfect sense to try and move into this industry. This is where Gdansk has focused on and it is already looking as though this tactic will have benefits.

Gdansk has already brought in major firms like Lufthansa, Intel and Reuters which should act as a form of confidence to anyone who is contemplating making this move as these firms, and firms of their ilk, will undertake due diligence before making such a decision. With many firms looking to move away from the established places like Bangalore, making a move to Gdansk may be just the ticket to benefit from outsourcing but also avoid the trappings and problems that are associated with some of the existing outsourcing suppliers. Sometimes making a new move is all you need to improve your status and this is what Gdansk offers.

By Saritha Rai silicon.com

Inside the neo-modern building of a Bangalore outsourcing company, thousands of workers go through an unusual exercize each week.

As they arrive at work, they must pass a clipboard full of newspaper cuttings enumerating job losses at outsourcing companies in the city. MphasiS axes 200 in Bangalore, says one. Sun Microsystems lays off 150, Sapient cuts 300 and so on.

The company's strategy is having a curious impact on employees. As measured by company executives who do not want the firm's identity to be disclosed, workers are performing better, making less demands of the company and appearing to value their jobs more highly than before the clipboard went up.

The chilling effect of the economic downturn is being felt all over Bangalore, India's outsourcing hub. Companies and workers are refashioning their strategy to face the reality of an intense downturn.

For the outsourcing industry's young workforce, long used to double-digit annual pay hikes and job hops at will, this reality is especially hard. After many years of industry growth on steroids, Infosys co-chairman Nandan Nilekani told me in a recent interview, many young workers had been lulled into a feeling that that was normalcy.

Workers are now recalibrating themselves to demonstrate higher productivity and greater loyalty to their employers. They are not taking their jobs for granted, nor are they assuming the subsidized lunches at the café or the free buses to work will last forever.

For others, the truth is taking time to sink in. At Nasscom 2009, the recent outsourcing industry annual conference in Mumbai, industry executives were bitterly complaining about the hard times.

The irony did not escape everyone. Upon his return from the conference, one industry leader told me that people at the conference who still had jobs were complaining - even as they ate the best cuisine from all over the world and drank good wine for free.

Many Indian outsourcers are remodeling their businesses to prepare for the full impact of the downturn. For a long time, these firms have remained India-centric in their operations.

This will have to change, according to Siddharth Pai, managing director and partner at the outsourcing advisory TPI India. Indian outsourcing companies will have to globalize by taking on delivery capability from different cities across the world, Pai told me.

The good news is that the current recession has made global acquisitions cheaper than ever before for the cash-rich among the outsourcing firms.

The recession is also forcing outsourcing companies to revamp their payment strategies.

Many top Indian outsourcing companies, including the Bangalore-based Infosys Technologies and Wipro, started off by executing work on hourly and day rates. Many have since moved up the value chain to project-oriented pay scales and annuity-based contracts.

Now they have been forced to take a percentage of the value of business delivered as their revenue.

The outsourcing contract between Nokia and New Delhi-based outsourcing company HCL Technologies is an example of a modern outsourcing deal.

Last month, HCL Technologies signed a five-year global help desk and desktop management outsourcing agreement with a new customer Nokia - whose vendor was previously IBM.

HCL Technologies will charge Nokia on a 'per ticket per month' or 'per device managed per month' basis. The outsourcer will deliver multicountry and multilingual (13 languages) services through its global delivery centers in China, Finland, India, Poland and the U.S.

Indian outsourcers have been growing at 30 per cent rates for several years. Many of their founders and employees have only experienced personal success. Now they are slowly discovering that the biggest fallacy of the global downturn is that outsourcing is recession-proof.

In Bangalore, this means 60 per cent off signs at downtown stores are not enough to draw in the crowds that were the norm even a year ago. And there is no stampede for booking apartments even after the country's biggest developer dropped prices by a further 30 per cent last week.

This article was originally posted on silicon.com