Exclusive: Gartner Predicts Huge Increase In Offshore Outsourcing By 2015

Informationweek
Report to be released next week says 30% of IT jobs in developed countries will be "offshored" by 2015.By Paul McDougall InformationWeek

A leading industry research firm says in an upcoming report that the number of information technology jobs outsourced to low-cost countries such as India and China is just a trickle compared with what's going to happen over the next 10 years. Gartner says less than 5% of IT jobs in the United States and other developed countries are currently "offshored." By 2015, however, that number will rise to 30%. "It's a tectonic shift," says Gartner analyst Frances Karamouzis, the report's author. The figures cover work that will be exported not only from the United States but from other developed countries as well. Gartner's research will be unveiled formally Monday at its outsourcing conference in Los Angeles. InformationWeek has obtained an exclusive advance look at the report. Despite the magnitude of the shift, Karamouzis says she doesn't believe offshoring will result in a net loss of IT jobs in the United States. "There are a lot of people who are currently programmers who could transition to higher-level positions where you need to be close to the customer," she says.
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Higher-skilled City jobs heading offshore next

Silicon.com
Higher-paid City jobs will follow call centre and back office admin roles offshore over the next five years, warns financial consultancy Troika. The consultancy’s research suggests that as many as 15,000 higher-paid jobs will go to offshore locations such as India over the next five years. It calculates that 100,000 financial services jobs will move abroad in total over the same period. Troika’s managing director Andrew Stewart said: “We saw last year that companies – particularly in the financial services sector – are comfortable with outsourcing some aspects of their business. The disaggregation of value chain and outsourcing components is now widely accepted as a business strategy.” more...

The next dollar hunt: pharma pops the IT pill

Financial Express
After the BPO boom, the pharmaceutical industry could be the next big vertical for the Indian IT giants who make top dollars by doing outsourcing work for western companies. Increased competitiveness along with the pressure to cut the lead time in developing a new drug and validating it through clinical trials besides cost pressures have seen multinational drug majors heading to India to outsource their work to IT companies who have the domain knowledge. To be fair, leading Indian pharma companies are also treading the same line as their MNC counterparts. According to an estimate, the drug companies outsourcing operations in India is currently pegged at $20 million but is projected to cross $2 billion in the next 10 years. A significant share of this would go to IT companies. more...

Many top Indian BPO outfits under threat, warns Gartner

Financial Express
As many as 70% of the top 15 Indian business process outsourcing (BPO) start-ups will cease to exist in the coming months, analyst firm Gartner has said. “By year-end 2005, 70% of the top 15 Indian-owned BPO start-ups that offer customer call centre services will be acquired, merged or be marginalised,” it said. Gartner said despite the hype, only a small fraction of customer service outsourcing will be done at offshore locations. “Offshore call centres, offshore customer service outsourcing only represents a tiny fraction of the market. In 2005, it is expected to be less than 2% of the total and will grow only to less than 5% in 2007,” it said. The worldwide market for customer service outsourcing is set to grow from $8.4 billion in 2004 to $12.2 billion in 2007. Gartner also predicted that through 2007, 80% of organisations that outsource customer service and support contact centres with the primary goal of reducing cost will fail. more...

China to be world’s top outsourcing destination

Financial Express
Three-quarters of US companies outsourced some or all of their information technology activities in 2004. And that percentage is likely to increase this year, according to a special survey on outsourcing and offshoring, the Global Outsourcing Report, released by Horasis and Going Global Ventures said. While a smaller percentage of companies are outsourcing those activities offshore (32%), half of them have cut full-time jobs as a result. India is the most competitive and popular technology outsourcing destination in the world in 2005, according to the report, and China will be the No. 1 technology outsourcing country in 10 years. The Global Outsourcing Report 2005 is the first-of-its-kind report to rank countries based on opportunities, costs and risks they present for IT outsourcing, both now and in the future. more...

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India, ITeS have become synonymous

Sify.com
Building on the trust generated over years of delivering offshore IT services, India is now the natural destination for Business Process Outsourcing (BPO) in the world, Director General of the Commonwealth Business Council, Mohan Kaul has said. "If a company wants a quality software product to be created, then the leading global software experts are located in India. This is now an accepted fact. The city of Bangalore has become synonymous with technology and other regions, such as Gurgaon have become huge centres of excellence for BPO," he said speaking at the launch of Mark Kobayashi-Hillary's book 'Outsourcing to India:the Offshore Advantage' here on Wednesday night. "BPO alone was worth almost $4 billion to India last year, yet these direct gains in sales to Indian companies also generate other effects that assist in the development of the country," he said. Dr Kaul said that the concept of outsourcing to India has been a popular business strategy for several years, however the growth rates in the sector are continuing at a strong pace. more..

Outsourcing Leads Trends in Human Resources

HR.BLR.Com
According to payroll and human resources outsourcing firm Innovative Employee Solutions (IES), human resources functions will continue to be outsourced into the foreseeable future. IES estimates that 85% of businesses in the United States will outsource at least one component of HR functions through 2005. The functions most likely to be outsourced are back-office services, like payroll, benefits, and training. Another trend identified by IES is the increase in sending HR functions offshore. The worldwide offshore outsourcing market is currently estimated at $10 billion and is expected to grow 20% annually through 2008, according to the company. The growth is expected to be strongest in India, the Philippines, China, and Central and Eastern Europe. more...

Bank Outsources to Catch Launderers

eWeek
Catching money launderers might sound like an exciting covert operation, but it is an onerous, labor-intensive task. In the United States, banks and other financial institutions must report illegal cash transfers to authorities, and this task requires them to have automated systems to detect suspicious activity and to have a sizable staff to pursue leads. Even the best money-laundering detection systems produce many false positives, wasting a lot of valuable staff time on wild-goose chases. One major U.S. bank recently decided there was a better way. Rather than grappling with these time-intensive processes in-house, it decided to turn them over to a third party, Kanbay International Inc., which was already handling many of the bank's other back-office IT functions from a staffing center in India. more..

Software companies scale up, target niche segments

Financial Express
The global delivery model seems to be working for Indian software companies and the offshore outsourcing phenomenon is into episode two. At the same time, the domestic market for software services is burgeoning as India Inc starts adopting IT with a vengeance, says Venkatesh Ganesh. What started out as a backlash against outsourcing in early 2004 turned out to be just a passing phase for Indian software. That said, the ground realities remain the same. US companies continued to outsource with the same fervour as before. According to Nasscom, IT services and software exports grew by 33% in FY 2003-04 clocking revenues of $12.8 billion. Nasscom predicts that the IT services and software exports industry is likely to grow 35% to touch $17.5 billion in FY 2004-05. Custom application development and maintenance account for approximately half of India’s IT services exports. more...

It's a European dawn for Indian IT companies

Economic Times
European companies are now getting onto the offshore outsourcing bandwagon. German, Swedish and even Spanish companies are looking at India for outsourcing some of their functions. Some companies like Wipro, Hexaware, HCL Tech and Mastek have traditionally had a much stronger European presence than others. Now, these companies are looking at expanding not only their sales and delivery but even their language capabilities for the European market. As a result, the contribution to revenues from Europe is on the increase for Indian IT companies. more...

Second Round of Super Growth as Offshore Outsourcing Goes Mainstream

CRM Today
Several outsource providers are seeing their order books filling up once again with offshore projects destined for India and the Philippines, says independent market analyst, Datamonitor. In a report just published, " The Future of Contact Center Outsourcing in Indian and the Philippines ," Datamonitor expects more than 127,000 new offshore outsourced call center agent positions (APs) to be added in India and the Philippines over the coming five years. The U.S represents the vast majority of overseas demand, followed by the UK. Whilst India continues to dominate the global offshore call center outsourcing landscape, the Philippines threatens to poach some activity as its own market grows in strength. Firms that have chosen to lock in shareholder value by tapping into the offshore labor arbitrage model via establishing in-house offshore (captive)* centers, will look to deliver further returns, either by selling off their captive offshore operations or by outsourcing the processes to third parties - either large or local start up outsourcing service providers. more...

Indian Outsourcing Companies Go After Best of Breed

AMR Research
When pursuing their business application strategies, companies must evaluate a threesome of vendors: suite vendors, best-of-breed point product vendors, and service companies offering to build custom applications. Companies must balance purchase, implementation, integration, and long-term support costs with the compromise between the ideal business process support and the delivered business process support. The Bottom Line: By developing their own intellectual property to support business processes, Indian service providers are changing the dynamics of the build versus buy equation by drastically reducing the cost of purpose-built software. What It Means: Services companies such as Cognizant, Infosys, Patni, Satyam, Tata Consultancy Services (TCS), and Wipro have built reusable frameworks that form the basis for business applications when deployed at a customer site. The customer buys a services engagement, and the service provider uses the framework as a starting point and higher level toolset for developing the resulting custom system (see the AMR Research Alert article “India Inc.’s Future: More High-Value Services” for examples). more...

N.J. nears ban on offshoring of state work

NorthJersey.com
A bill to bar companies from carrying out New Jersey government contracts abroad will probably get a final vote Monday, after lying dormant for months. The bill, if approved by the state Assembly, will require all state work to be done in the United States except in those situations where a local contractor cannot supply the service. Opponents of the legislation - among them the state Chamber of Commerce and representatives of the insurance and securities industries - told the Assembly Labor Committee on Monday that the bill's passage is premature. They argued that its impact on a broad range of government contracts hasn't been determined. "There are so many unanswered questions on the ramifications," Jim Leonard, a vice president for the state Chamber of Commerce, said after the committee hearing in Trenton. "Why are we forcing the issue without due diligence?" more...

Now, 20,000 more H-1Bs for Indians

Economic Times
The recent US Citizenship and Immigration Services (USCIS) decision to issue 20,000 new H-1B visas till September 2005 is not just good news for Indian and other foreign students passing out from American universities with masters or higher degrees. In fact, contrary to its earlier decision, USCIS issued a press release last week stating that it will process additional petitions for H-1B professionals for FY 2005 and that the available numbers will be applied to all qualified H-1B non-immigrant workers , and not just to those individuals holding a master’s or higher degree from a US institution of higher learning. Late last year, the Omnibus Consolidated Appropriations Act of 2005 established the new H-1B cap exemption, providing 20,000 visa numbers for foreign nationals with qualifying advanced degrees from US universities. The new development is contrary to previous USCIS guidance, which had indicated that the new number would only apply to advanced degree graduates and only prospectively beginning March 8, 2005. more...

Lou Dobbs to outsourcing: Drop dead

Townhall.com
Where does it say somebody owes you a job? Sure, for most of us, this seems self-evident. But how else do you explain people like CNN's Lou Dobbs? Dobbs, formerly the host of CNN's "Moneyline," who now hosts CNN's "Lou Dobbs Tonight," seems downright anti-money. For Dobbs constantly rants at the evil perpetuated by greedy American CEOs. What evil is that? Why, outsourcing! Dobbs calls it "exporting America," while he whines about "cheap overseas labor," arguing that "corporate America" ignores its responsibilities that "extend beyond a quarterly profit statement." more...

Outsourcing IT, without losing your job

IT World
In an ongoing drive to reduce capital expenditures, corporate executives continue to consider outsourcing as a way to pare IT costs and focus on projects that are most directly linked to business goals. Experienced executives agree that outsourcing almost always sows uncertainty in internal personnel. It can result in layoffs and budget reductions among IT middle managers. The silver lining for IT managers is that there are opportunities for those who are prepared to embrace change and help their companies face the challenges of dealing with outsourcers - whether those external providers are in Bangalore or Boston. more...

Companies Considering Offshoring Must Carefully Weigh Risks Vs. Rewards

Infozine
Most experts see no end in sight to the offshoring trend, as growing numbers of companies seek the cost savings and competitive advantage offshoring promises. But with an estimated half of all offshoring operations destined to fall short of expectations, companies are under increasing pressure to calculate the risks - not merely the rewards - that offshoring entails, according to a report released today by The Conference Board. The report, Thinking Offshoring Through: A Framework for Decision Makers, reveals that unless corporate leaders address the full spectrum of offshoring challenges, underperformance will only grow - and the impact on corporate operations will be significant. more...

Gartner: Outsourcing costs more than in-house

News.com
Outsourced customer service operations can cost almost a third more than those retained in-house, according to a new study by Gartner. The research firm found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations. Alexa Bona, research director at Gartner, said businesses often fail to take hidden costs, such as in-house backup support to the outsourced function, into account. "The outsourced service is often more efficient, but then outsourcers need to make a profit too," she said. Gartner also said 80 percent of organizations that outsource their customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing. more...

Wall Street in love with Indian BPOs

Economic Times
The Global Indian Takeover has found its newest ground — Wall Street research — as BPO firms in Gurgaon, Chennai and Mumbai gear up for big business. Glance through the appointments page of any leading newspaper and you’ll find advertisements from BPO companies looking for research analysts fairly regularly. These include Chennai-based BPO Office Tiger, which recently invited applications for 1,500 jobs and others like Evalueserve, WNS, Progeon and Copal Partners who are hiring aggressively too. more...

IT wages bounce back from three year decline

Silicon.com
Domestic IT wages in Europe and the US have finally rebounded from three years of consecutive decline and increasing pressure from offshoring, according to new research. The Hot Technical Skills and Certification Pay Index, by US-based Foote Partners, shows an average increase across certified and non-certified IT skills wages in the US and Europe of between one and four per cent last year. more...