Niyamath Parveez

Although there is absolutely nothing new about outsourcing, the way that many companies are using are becoming more innovative. A lot of this has been driven by the need for firms to squeeze every cost to a minimum in order to stay competitive and alive in a harsh industry. The economic downturn has had a massive effect on the way that businesses are run and even when the recession is over and the economic situation improves, it is likely there will repercussions throughout a number of industries. The amount of firms using outsourcing as a solution to their problems may alter but there is still going to be a huge demand for outsourcing services and production matters.

One country that has really benefited from outsourcing is India. It is fair to say that any country that is economically underperforming is looking at India with jealous eyes, wondering how best they can replicate the economic success that has taken place in that country on recent years? Although no one thing is responsible for India being able to improve their situation in a tough economic climate, outsourcing will have played a massive part. This is agreed upon by a whole host of experts and analysts, so this is the route that many other nations wish to imitate.

Part of India’s initial success came from the fact that they were able to undercut on price so many other nations. Not every firm or business is obsessed with cost and price but a great number of them are. To find that they could massively improve their bottom line, just by shipping their workload to India was a tremendous option for companies, which helped to spark the rise in offshore outsourcing. It then became a very cyclical thing. As more people shipped their work offshore, the public interest and awareness became greater. As India was receiving more work, they were able to slash their costs and prices further. This became even more advantageous to firms of other countries, which increased the demand to send work to India. It can be seen how this cycle would keep going.

Of course, it is not possible for it continually rise, there are always other factors that will prevent this from happening and the fact that other nations can provide this work for cheaper has helped to stall the Indian outsourcing phenomenon. The major firms in India are still operating and making a huge success as well as large profits but the less successful ones are falling by the wayside. This makes perfect sense with regards to market forces and a similar situation would happen in any market which is free.

This means that outsourcing and the effects of outsourcing would occur naturally but obviously there are spikes in the behavior which makes it more likely for certain issues or incidents to occur. Outsourcing has been one of the business stories of the past decade and although it may not be as interesting or innovative in 2010, it is not going to go away.

London is one of the major cities in the world and what happens there can usually be followed all around the world. There are so many countries around the world who will follow what happens in the city that it is inevitable that the influence will extend itself all around the globe. This means that many different companies will set out to make a mark on London as this is a great way to make an impact in other places. Having a plan for reaching new markets is extremely important and setting up a successful base in London is one of the most important areas to work in.

There are obviously concerns that the recession is still going to be in place for a while to come but there are emerging signs that London business is picking up. This is true for many different industries, with the feel across many different firms being one of optimism. One of the key areas for growth in this location is providing work for Government bodies and services. The vast majority of civil servant departments and buildings are in the City, so if there is work available in the region, firms that provide outsourcing are well suited to obtaining work.

One of the main firms who have shown that the recession is no barrier to financial success is Mitie. Mitie is a company that provides support services and property management work, which has enabled them to be in a key position to obtain many of the Government outsourcing jobs which have appeared in the UK of late. There has been a lot of pressure applied to the British Government to lower costs but retain jobs in the United Kingdom. This conundrum has been solved by the plethora of UK based firms capable of providing outsourcing services.

Mitie is fortunate enough to have earned the contracts for two major profile locations in London, which has helped them further their brand and reputation. The Tower of London is one of the most popular tourist landmarks in the city of London which means that people are flocking to it every day. Mitie provide the cleaning facilities at the Tower of London, which has been a cornerstone in the success that Mitie has posted this year. Any firm which makes half year profits during the recession is clearly doing well but one that manages to make half year profits in excess of £40m is doing an excellent job.

London is a great location but success relies on being in the right place at the right time. The need for local governments to reduce their labor costs but retain a quality level of service has helped outsourcing reach new levels. Britain is not unique in this behavior but it is fair to say that many other countries still regard the United Kingdom as a beacon of success and will try to imitate what is happening there. Mitie could just have positioned them in an excellent place to make money all over the world.

At the end of a busy working week, it is inevitable that people will feel the strain of working in an office. The daily commute alone would be enough to see a lot of employees at the end of their tether and the weekend cannot come quick enough. The problem is, the weekend then runs out all too quickly and it is Monday morning again. The short days of freedom makes it hard for people to feel as though they are enjoying themselves. Whilst people are unable to be able to give up work completely, there is an opportunity for people to work from home or set up their own business.

One thing that people can sometimes overlook when trying to set up a home business is the financial and taxation element. If the new business is based upon accountancy and taxation issues, this may not be an issue for the start-up firm but for all other firms, this is unlikely. Therefore, there is a huge need for expert advice and assistance to ensure that the numbers add up. It can be very difficult to think of all the sums you need to take care of and this is where outsourcing can be very helpful.

As well as people wanting to set up their own firm at home, there are countless many people already working at home providing services. Many of these are able to provide services and features which can bring a fantastic benefit to any emerging business. This is due to the interest in outsourcing as a way of making money. There are obviously many outsourcing firms based around the world who are able to provide these services but there are many individuals working in this field too. This can be seen in the number of individuals who are now providing outsourcing services.

This has led to outsourcing becoming an important industry to people who are looking to set up their own business. Many people may consider that they do not have any great skill that can be used for other people but this could be a false situation. Word processing skills are always in high demand and it may be that someone who is keen to work in the administration field could offer great services for people wherever they may be. There are a number of freelance and outsourcing sites which can give people an indication of what work is available and what work is requested from firms.

If you are at the stage where you are thinking of leaving your job and setting up a new business, working in this field could be very advantageous. The demand for this sort of work is only going to rise, giving the perfect opportunity to set up all by yourself. Whether you need the outsourcing services or you are hoping to provide these services to other small businesses, this could be the answer to all of your current financial problems. The recession is likely to run on for a while so make the best of your skills and opportunities

There has been a suggestion that the Indian outsourcing fad is coming to an end. With so many other nations realizing the financial and economic benefits that have came to India through outsourcing, it has been harder for India to compete effectively. Much like India was able to undercut and out-compete the larger nations with regards to labor costs, smaller developing nations have managed to do to India. This is very much in line with cyclical nature of economics and would not have come as a complete surprise to industry experts. The successful firms will find a way to keep on top or be attractive to other firms and the smaller and weaker firms will fall away.

However, the stories about the death of Indian outsourcing would appear to be greatly exaggerated. There have been enough positive news stories in recent weeks to indicate that India will remain at the forefront of outsourcing services around the world. As stated, the firms who are able to provide quality services to other companies will remain in high demand. This is due to the fact that many firms are realizing that low labor cost is not the only thing worth pursuing, there are other aspects which are desirable too.

One of the ways that India is managing to stay at the top of the outsourcing tree is because there are still firms around the world looking to move into outsourcing. For companies who are unsure of what to do or where to go, it makes sense to look for the market leader. By and large, choosing the companies widely recognized as being market experts will provide customers with a level of confidence that they are making the right decision. This is of great benefit to the new customer and a great reward for being recognized as a market leader.

Some of the companies who have moved into outsourcing recently and therefore very late in the game compared to some companies include Renault, Volkswagen and Harley Davidson. These are all huge brands which further add to their need to associate with large firms who can handle high pressurized orders. They are all interested in the engineering industries and this should ensure that this industry in India will reap the benefits for years to come. There will always be a shakedown to lower levels, which means that emerging companies will be able to find a niche but when it comes to top level companies, India remains the top choice.

In fact, this continued reliance on Indian engineering outsourcing is said to achieve a sum in the region of $55bn by the year 2020. This is just over 10 years away, so it is not so far away in the future that it cannot be imagined. The past ten years have moved rapidly and the next ten years are likely to be the same. The top outsourcing firms will be the ones who have the income to invest in new technology and this should help them stay at the very top end of the market.

One of the most surprising things about the current recession is that some people are still spending money on certain products and items. The recession may mean that people are not going out socializing as much as they used to but instead, more money is being spent on staying home entertaining. Whether this means that friends are coming over for more parties or people are considering their home entertainment systems, it is fair to say the staying in is the new going out. These has led to many people looking for the new wave of televisions and are switching to flat screen TVs, plasma TVs and ones that are HD ready. All of these technological advances are changing the way that people watch television and are stimulating some demand and movement in the economy for the industry. However, it still seems that some firms are struggling to justify all of their costs and are looking for ways to reduce their labor costs. Even a big firm like Sony, long regarded as one of the major market leaders in top of the range televisions are finding times hard at the moment and they are looking to outsourcing as a solution. A great number of companies in recent years have decided that outsourcing services or manufacturing will offer them a greater chance of remaining healthy and vibrant in the market and this has led many companies to shift their focus to offshore outsourcing.

Sony, as a firm, has always seemed keen to retain control over all of their manufacturing output, believing that the quality control that comes from producing their own products to be worth the cost involved with undertaking this work. Times change though and the bosses at the company are now starting to realize they can have high quality work for a low cost and the firm is said to be closing two factories that produce their flat-screen television sets. Even though Sony has factories and manufacturing plants all over the world, the lure of offshore outsourcing is proving to be extremely strong and the opportunity to make a huge saving with regards to production costs cannot be under-estimated.

Industry insiders believe that the Taiwan based company Wistron is likely to be the company that Sony turn to for the production of their television sets and this will be of great benefit to their firms employees and the local economy. A recommendation from a multi-national firm like Sony can make all the difference to an outsource supplier and Wistron will likely feel the benefit in years to come if they are able to do a good job for Sony.

For all that outsourcing this level of manufacturing will be of great help to Sony during these troubled times, it is unlikely to provide a solution to all of the problems that the company is facing. The firm posted over 1 billion in losses in US dollars last year and whilst this year’s figures are likely to be nowhere near as bad as this, they are still expected to be over $500 million, more than small change, even for a company like Sony.

To the casual observer, India may be the only place that matters for outsourcing but there is a whole world of countries out there that can provide a fantastic service enabling companies and organizations to benefit. The financial aspect is one of the most important elements for a firm and given the fact that the current economic climate is causing many people difficulties, anything which can help a firm build a stronger financial footing should be considered. However, using outsourcing is also a great way of bringing in a different range of skills and experiences that may not have been available in their own country or affordable.

To help companies find what they need to progress their work, there are regular listings and updates of the countries around the world and how they provide outsourcing services. One of the nations who have regularly been hitting the top 10 of all outsourcing destinations of late has been Vietnam and since 2007, Vietnam has made striding moves forward in a very competitive market. The benefits of outsourcing are usually aimed at the firms who will outsource their work but there is also a great deal of benefits to the overall economy of the country that is able to provide a new workforce. Anything which guarantees work and employment has the ability to greatly improve the economic output of a region needs to be seriously considered by a government or local firm and there has been a definite decision by the Vietnamese people to make themselves far more available to outsourcing from different countries. The economic reality is that they are able to provide a workforce at a cheaper price of labor which immediately gives them a head start when it comes to providing outsourcing work but there has to be more than just low cost.

The high quality of Vietnamese workers has been indicated by the high numbers of IT work that Japanese companies to Vietnam for a number of years. This run of success alerted many other nations and firms to the qualities of Vietnam and the news has travelled to Russia. One of Russia’s major outsourcing IT firms; Luxoft has opened a major center within HCM City which they hope will bring them a great number of benefits. The reduction in labor costs is an obvious benefit that Luxoft will hoping to achieve but it should also enable the firm to make an impact on the Japanese market. The longer term approach is one that many firms and organizations are looking to make in order to be able to reap the benefits in years to come. The current economic crisis means that there is a need to be aware of what is happening right now and companies need to safeguard their future but there is also an opportunity to position themselves for later success.
With many firms now believing that India has reached its peak with regards to outsourcing and is struggling to compete with the new arrivals on the outsourcing block, Vietnam is a name that is worth considering if you wish to make moves into new and important markets.

Following on from the idea of who should be doing the outsourcing facility for a firm and whether there is benefit in looking for an external partner to supply this work, it is important to consider what the reasons for undertaking outsourcing are and how they will affect the outsourcing decision. There are many things to consider when looking finding a company to work alongside in order to gain the best level of benefits for all parties and no company should rush into any outsourcing decision. Having a strong level of preparation and consideration is vital for any firm that is serious about reducing their costs and obtaining the highest level of service possible.

This is why it is imperative for a firm to create a lengthy list of issues and matters that they need to address when looking for an outsourcing partner? What does the firm hope to achieve when outsourcing? Are there specific business functions of the business or indeed industry that are naturally suited to using outsourcing services? Are there any legislation issues or problems that would prevent a serious level of outsourcing taking place? All of these are the initial issues that a firm looking to outsource their work needs to consider and being aware of these matters will place them in a strong position to make the best choice with regards to their future.

The choice of the outsourcing firm to work with will vary for every firm and this is because of the needs and demands that every firm will place on their outsourcing partner. The Japanese model of Just-In-Time would make it nigh on impossible for the outsourcing work to be shipped halfway around the world as it thrived on having stock and supplies distributed exactly when they needed them and this necessitated a close geographical relationship. If your need is going to have many short term demands and a requirement to have instant gratification and delivery times, it is vital to choose a supplier who can promise this every time. If an outsourcing partner lets you down, you will be letting your customer down and in these harsh economic times, this is not something that many firms can contemplate too often.

The same thing can be said about the service industries which do not have as important a consideration made about their locality and this is shown in the huge amount of offshore outsourcing. The call center industry is possibly the best example of this situation but again, the level of customer support that is required by a firm may have an impact on the ability of an outsourcing firm to do the job satisfactorily. If the call center is expected to interact and engage with customers about local issues and things happening in the local region, external staff may be unaware of what is going on or may find it difficult to understand local slang or buzz-words. The offshore call center may provide cheaper wages for the staff but if they offer a service that appears remote and unwelcoming to customers, it may be of no great benefit to a firm.

This is why compiling a list of what a firm needs from an outsourcing supplier is vital before choosing who they should work with.

Indian outsourcing vendors are planning to reach out to Japanese clients soon, according to a recent report published jointly by The National Association of Software and Services Companies (NASSCOM) and Pricewaterhouse Coopers, one of the leading professional services firms operating in India. The report, titled Indian IT Industry: Japan, is the second one in the Country Report series being prepared by Nasscom. Each report in the series will focus on a single country, highlighting its potential to become a prospective alternative market, a competitive destination, or a potential partner for Indian business organizations.

Som Mittal, President of Nasscom, commented at the launch of the report that the IT-BPO industry in India is constantly looking for new opportunities to expand its reach, and augment its growth process. Presently, 90% of the exports from India are made to the Europe and US, while the remaining 10% is distributed among other regions. The markets are constantly increasing amounts of capitals invested in the IT industry, offering the opportunity for rapid growth.

Japan, in spite of having one of the most stable economies in the world, and being hugely dependent on technological advancements, presently receives only 2% of exports from India. In recent times, Japan has experienced a shortage in the number of technically proficient employees. This type of shortage, coupled with the need of many Japanese organizations to restructure their businesses, makes Japan quite a lucrative market for outsourcing vendors. Besides, Japan, being located in the same time zone, will benefit more from Indian outsourcing services than those operating in the Western hemisphere. However, the initiation of such a business deal would warrant that both sides take equal initiatives to make the operations successful.

Ambarish Dasgupta, Knowledge partner for the Nasscom report and the Partner and Head of Consulting Practice at Pricewaterhouse Coopers India, stated that Indian companies would have to prepare their workforces to suit the requirements of their Japanese partners. Japanese outsourcers need their outsourcing vendors to be more of transformational than transactional nature. The Japanese organizations also expect their partners to be able to form a strong, long lasting relationship with them. They do not look at their service providers as sellers of services, but also trusted business partners. So Indian outsourcing service providers would have to adapt themselves to the requirements of these clients, providing not only the service, but also the trustworthiness that these clients expect. This means forging a relationship of trust with the client, and maintaining it without any breach.

The report states clearly that in order to remain competitive in the global market, Japan has no other choice but to break the mould that it has been following for generations, reaching out to service providers in other countries. Proactive effort of the Japanese Government and industry would be required for this to be a success.

The report also states that Japan will have to embrace globalization, accepting the benefits of outsourcing and forging service business partnerships with India and other countries. Japanese business houses will also have to switch to the best practices in domain, technology and service deliveries. They would also have to re-think and re-model the hierarchical structure of their IT industry, as and when required, in order to stay in the global competitive market.

Nasscom made it very clear that it would work on facilitating this type of business relationships between Indian and Japanese organizations. Nasscom also identified key opportunities that Indian IT companies would have due to the scenario, as well as suggesting potential strategies for the market.

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.