INDIA’S Information technology enabled service (ITeS) and the Business Process Outsourcing (BPO) industry will employ nearly 470,000 people in India by the end of financial year 2005-06, as against the 348,000 people it employed in 2004-05, a recent study by National Association of Software and Service Companies (NASSCOM) -- the premier trade body and the chamber of commerce of the IT software and services industry in India -- has revealed.
The study said that the growth in the ITeS-BPO industry in India is driven by the need of overseas companies to access global talent, economies of scale, wage arbitrage and increased profit margins.
Indian ITeS-BPO exports registered a growth of 44.5 per cent in the financial year 2004-05, which translates to revenue of $5.2 billion. According to NASSCOM projections, ITeS-BPO exports this financial year is expected to touch $7.3 billion, 41 per cent higher over the last year.
The Indian ITeS-BPO industry had been dominated by the top 20 players, who control 49 per cent of the industry, the NASSCOM study noted.
Monday, September 05, 2005
Shift in outsourcing focus
Outsourcing contracts will focus on desktop management, data centre operations and network monitoring to tap the $5.5-billion market of infrastructure management services (IMS).
IMS relates to monitoring, managing and enhancing performance of a client’s IT infrastructure backbone. These include managing servers, data centres, networks and assets and providing desk-side support, IT security and maintenance services.
Such operational tasks will become the forte of offshore providers. Indian vendors, with their proven offshore process expertise and a combination of cost and reliability, stand to gain significantly from this opportunity.
A National Association of Software and Services Companies (Nasscom) report said, “Though infrastructure outsourcing has been around for a while, remote infrastructure management services represent a large and relatively untapped segment for offshore Indian vendors. It has been argued that a firm's IT infrastructure is associated and bundled with the physical assets of the IT department and the data centre, and, therefore, precludes offshore delivery.”
“However, it has been observed that 60-70 per cent of the IT services surrounding the data centre, specifically the support functions that manage and maintain the data centre, have been successfully executed remotely — and is hence offshoreable,” it added. It is estimated that 40-60 per cent of the IMS pie may be efficiently delivered through a global delivery model. This translates to a market potential of $55 billion.
“Offshore IMS is a logical extension of India’s offshore-based delivery capability and represents a sizeable opportunity for the vendors. Several global service providers such as IBM, Atos Origin, Accenture, CSC, HP and EDS have already moved components of their infrastructure services delivery processes to India,” the report said.
Indian IT firms are also busy establishing their credentials in this space. HCL Comnet, Infosys, Patni, TCS and Wipro are among the leading Indian vendors, who offer infrastructure management services. According to Forrester, Indian vendors will gain significantly from this opportunity. According to Gartner, the collective contract value for this annualised spending is more than $600 million.
IMS relates to monitoring, managing and enhancing performance of a client’s IT infrastructure backbone. These include managing servers, data centres, networks and assets and providing desk-side support, IT security and maintenance services.
Such operational tasks will become the forte of offshore providers. Indian vendors, with their proven offshore process expertise and a combination of cost and reliability, stand to gain significantly from this opportunity.
A National Association of Software and Services Companies (Nasscom) report said, “Though infrastructure outsourcing has been around for a while, remote infrastructure management services represent a large and relatively untapped segment for offshore Indian vendors. It has been argued that a firm's IT infrastructure is associated and bundled with the physical assets of the IT department and the data centre, and, therefore, precludes offshore delivery.”
“However, it has been observed that 60-70 per cent of the IT services surrounding the data centre, specifically the support functions that manage and maintain the data centre, have been successfully executed remotely — and is hence offshoreable,” it added. It is estimated that 40-60 per cent of the IMS pie may be efficiently delivered through a global delivery model. This translates to a market potential of $55 billion.
“Offshore IMS is a logical extension of India’s offshore-based delivery capability and represents a sizeable opportunity for the vendors. Several global service providers such as IBM, Atos Origin, Accenture, CSC, HP and EDS have already moved components of their infrastructure services delivery processes to India,” the report said.
Indian IT firms are also busy establishing their credentials in this space. HCL Comnet, Infosys, Patni, TCS and Wipro are among the leading Indian vendors, who offer infrastructure management services. According to Forrester, Indian vendors will gain significantly from this opportunity. According to Gartner, the collective contract value for this annualised spending is more than $600 million.
Sunday, September 04, 2005
Being a Desired Outsourcing Hub
It is believed that the efforts by the Malaysian Government to promote the information and communications technology (ICT) services sectors could make the country one of the strongest competitors to India's business process outsourcing (BPO) dominance in the coming years.
There is a growing trend of companies from developed nations outsourcing Latest News about Outsourcing IT jobs to the Asian region -- including Malaysia -- as a strategy to cut costs and boost profitability.
This can be attributed to the fact that this region has the ability to offer a huge pool of knowledge workers at a low cost.
In the Asia-Pacific region, India and China have emerged as two candidates which top the list when it comes to offshoring IT jobs. Both can offer cost benefits, abundant offshoring experience and people skills.
Challenging the Leaders
Malaysia is also ranked highly among the locations competing for offshore jobs. Factors such as low infrastructure Discover a better way to manage the business of IT with IBM Tivoli solutions. costs, attractive business environment, and high levels of global integration have helped Malaysia become more attractive to foreigners.
It is believed that the efforts by the Malaysian Government to promote the information and communications technology (ICT) services sectors could make the country one of the strongest competitors to India's business process outsourcing (BPO) dominance in the coming years.
Malaysia should be able to compete effectively with other markets, given the continuous efforts to raise educational levels, high investment in research and development (R&D), and extensive training.
Market research firm International Data Corp. (IDC) reported that the local IT outsourcing market is expected to grow at a compound annual growth rate of 27.2 percent over the next five years, hitting the US$349.2 million mark in 2008.
Beating the Competition
Some of the popular IT outsourcing jobs include operating data centers, IT infrastructure, applications development and information management functions.
The American Malaysian Chamber of Commerce (Amcham) sees Malaysia as an attractive location for foreigners to invest in BPO and shared services.
Despite the intense competition for BPO and shared services for foreign direct investment (FDI) among regional countries, Malaysia is one of the leading candidates given the ease of doing business here.
Amcham noted that American companies are increasingly looking at Malaysia and other Asian markets as possible regional or global centers for BPO or shared services investment.
The Malaysian American Electronic Industry (MAEI) Annual Survey 2005 noted that there have been an increase in the number of American firms relocating back-end business functions, including IT support services to Malaysia.
Multimedia Development Corp (MDC) and The Association of the Computer and Multimedia Industry Malaysia (Pikom) are also promoting Malaysia as a hub for BPO and shared services.
Poised for Success
MDC is positioning Malaysia and the Multimedia Super Corridor (MSC) as a provider and low-cost location for high-value shared services such as call centers, back office operations and IT centers.
Pikom has a two-pronged strategy which involves attracting foreign organizations to outsource to local companies and to bring local players to regional and global markets.
Malaysia certainly has what it takes to excel as an IT outsourcing hub, and with the groundwork being done by all the relevant parties, the prospects look bright.
Saturday, September 03, 2005
NASSCOM: an interesting offering for outsourcing
india's NASSCOM has begun piloting a competence program for the business process outsourcing market.
NASSCOM, the public body that represents outsourcing organizations located in India, has announced the pilot launch of its NASSCOM Assessment of Competence (NAC) program for the potential employees in the business process outsourcing (BPO) industry. The NAC scheme aims to create a talent-pool within the BPO industry, indicating NASSCOM's commitment to raising standards within this area.
NASSCOM, the public body that represents outsourcing organizations located in India, has announced the pilot launch of its NASSCOM Assessment of Competence (NAC) program for the potential employees in the business process outsourcing (BPO) industry. The NAC scheme aims to create a talent-pool within the BPO industry, indicating NASSCOM's commitment to raising standards within this area.
Included in the aims of the NASSCOM (National Association of Software and Service Companies) initiative are the provision of a national standard for recruitment of entry-level talent for BPO, and also the enablement of offshoring organizations to develop the ability to cut costs through a more rapid recruitment phase.
News of this initiative comes hot on the heels of a report that the UK's AA has decided not to offshore some of its operations, despite potential savings in excess of GBP20 million. The AA stated that it would keep its call center operations in the UK in an attempt to differentiate itself from its competitors, and also because it appears to believe that the quality of service is better in the UK than overseas.
Nevertheless, the BPO marketplace in India is expected to continue its tremendous growth over the next few years, and the new certification standard has been developed by NASSCOM in order to improve the quality of service the industry can offer its western customers. According to the NASSCOM website, candidates will be assessed in the areas of listening and keyboard skills, verbal ability, spoken English, comprehension and writing ability, office software usage, numerical and analytical skills, and concentration and accuracy.
NASSCOM is also encouraging state governments to commit to the NAC to improve their recruitment schemes, attract investors for the BPO sector and forge a link between education and employability.
Bearing in mind that the vast majority of BPO employees in India are graduates, NASSCOM's program demonstrates further commitment to raising standards for BPO. The development is well considered and should be welcomed, and is likely be widely adopted by the Indian offshoring industry, by potential employees and employers alike.
News of this initiative comes hot on the heels of a report that the UK's AA has decided not to offshore some of its operations, despite potential savings in excess of GBP20 million. The AA stated that it would keep its call center operations in the UK in an attempt to differentiate itself from its competitors, and also because it appears to believe that the quality of service is better in the UK than overseas.
Nevertheless, the BPO marketplace in India is expected to continue its tremendous growth over the next few years, and the new certification standard has been developed by NASSCOM in order to improve the quality of service the industry can offer its western customers. According to the NASSCOM website, candidates will be assessed in the areas of listening and keyboard skills, verbal ability, spoken English, comprehension and writing ability, office software usage, numerical and analytical skills, and concentration and accuracy.
NASSCOM is also encouraging state governments to commit to the NAC to improve their recruitment schemes, attract investors for the BPO sector and forge a link between education and employability.
Bearing in mind that the vast majority of BPO employees in India are graduates, NASSCOM's program demonstrates further commitment to raising standards for BPO. The development is well considered and should be welcomed, and is likely be widely adopted by the Indian offshoring industry, by potential employees and employers alike.
ABN Outsources Computer System Work
In one of the largest outsourcing deals in European banking, ABN AMRO signed a $2.2 billion contract on Thursday with five technology firms to manage and develop its computer systems.
The Dutch banking group said it would cut 1,500 full-time information technology jobs, helping it to generate annual savings of $319 million from 2007. An additional 2,000 jobs will be transferred to the technology companies, primarily to International Business Machines. Sierk Nawijn, an ABN spokesman in Amsterdam, said 950 of the jobs would be cut in the Netherlands, with the rest split between units in Chicago and Brazil. The five-year contract was spread between IBM, Accenture and three of their Indian rivals Tata Consultancy Services, Infosys Technologies and Patni Computer Systems. In a statement, ABN AMRO's chief operating officer, Hugh Scott-Barrett, said, "We expect that this IT program that is shared across the group will contribute to the savings in line with the earlier estimates made by the bank, while improving IT services within the group."
The financial details of the five-year contract were not provided. IBM said in a statement on its Web site that its share of the deal was worth 1.5 billion, or $1.8 billion, over five years.
The deal marks a breakthrough for India's software outsourcing firms.
The largest of them, the Mumbai-based Tata Consultancy Services, said it expected revenue of more than $247 million from the contract; Infosys Technologies, the second-largest, said it expected the deal to be worth $140 million now, though that could grow to as much as $250 million over five years. That makes the contracts the largest ever won by Indian companies, they said.
The Infosys Technologies chief executive, Nandan Nilekani, described the contract as a "landmark deal."
"This deal clearly indicates that large offshore players like us have a competitive business model to deliver large, global multiyear contracts," he added.
Other European and American banks have been aggressive in outsourcing their software and technology operations to top Indian outsourcing firms. ABN had said last year that it would cut 2,850 jobs, or about 3 percent of the total work force, to help restore profit growth.
The Dutch banking group said it would cut 1,500 full-time information technology jobs, helping it to generate annual savings of $319 million from 2007. An additional 2,000 jobs will be transferred to the technology companies, primarily to International Business Machines. Sierk Nawijn, an ABN spokesman in Amsterdam, said 950 of the jobs would be cut in the Netherlands, with the rest split between units in Chicago and Brazil. The five-year contract was spread between IBM, Accenture and three of their Indian rivals Tata Consultancy Services, Infosys Technologies and Patni Computer Systems. In a statement, ABN AMRO's chief operating officer, Hugh Scott-Barrett, said, "We expect that this IT program that is shared across the group will contribute to the savings in line with the earlier estimates made by the bank, while improving IT services within the group."
The financial details of the five-year contract were not provided. IBM said in a statement on its Web site that its share of the deal was worth 1.5 billion, or $1.8 billion, over five years.
The deal marks a breakthrough for India's software outsourcing firms.
The largest of them, the Mumbai-based Tata Consultancy Services, said it expected revenue of more than $247 million from the contract; Infosys Technologies, the second-largest, said it expected the deal to be worth $140 million now, though that could grow to as much as $250 million over five years. That makes the contracts the largest ever won by Indian companies, they said.
The Infosys Technologies chief executive, Nandan Nilekani, described the contract as a "landmark deal."
"This deal clearly indicates that large offshore players like us have a competitive business model to deliver large, global multiyear contracts," he added.
Other European and American banks have been aggressive in outsourcing their software and technology operations to top Indian outsourcing firms. ABN had said last year that it would cut 2,850 jobs, or about 3 percent of the total work force, to help restore profit growth.
Friday, September 02, 2005
Cost-cutting drives outsourcing
Firms outsourcing IT development work are increasingly motivated by the desire to save cash rather than the wish to utilise service providers' specialist skills, according to a report from analyst firm Evans Data.
Experts said this was the latest in a line of reports suggesting that firms are growing more sceptical about outsourcing's ability to consistently improve service quality.
Evans Data surveyed 400 software developers at large enterprises and found just 19 percent of respondents outsourced development work to utilise specialist expertise, down from 44 percent five years ago. In contrast, 28 percent cited cost savings as the main reason for outsourcing, compared with 15 percent in 2000.
John Andrews of Evans Data said the shift was due to many service providers failing to deliver promised improvements in productivity. The failures were caused by the inadequate resources allocated by service providers and their customers to manage outsourcing projects, he added.
The report also noted that companies now tend to outsource "lower-level programming tasks", and that while a third of respondents plan to increase their use of outsourcing, 45 percent hand less than a quarter of development work to third parties.
The report comes a week after the publication of a survey by management consultancy Compass, which questioned 8,000 firms and found 58 percent of IT and business process outsourcing (BPO) projects failed to meet expectations.
Andy Chesnutt of Compass said the high proportion of failed projects was due to poor partnership management between firms and their service providers.
"Many companies fail to realise you need different skills to manage an outsourcing alliance rather than an internal IT department," Chesnutt added.
Separately, India's National Association of Software and Services Companies (Nasscom) in August sought to re-establish confidence in Indian BPO providers following a some high-profile security breaches by launching a BPO certification pilot programme. The Nasscom Assessment of Competence certification scheme will test 15,000 graduates' listening skills, spoken English and IT capabilities.
Experts said this was the latest in a line of reports suggesting that firms are growing more sceptical about outsourcing's ability to consistently improve service quality.
Evans Data surveyed 400 software developers at large enterprises and found just 19 percent of respondents outsourced development work to utilise specialist expertise, down from 44 percent five years ago. In contrast, 28 percent cited cost savings as the main reason for outsourcing, compared with 15 percent in 2000.
John Andrews of Evans Data said the shift was due to many service providers failing to deliver promised improvements in productivity. The failures were caused by the inadequate resources allocated by service providers and their customers to manage outsourcing projects, he added.
The report also noted that companies now tend to outsource "lower-level programming tasks", and that while a third of respondents plan to increase their use of outsourcing, 45 percent hand less than a quarter of development work to third parties.
The report comes a week after the publication of a survey by management consultancy Compass, which questioned 8,000 firms and found 58 percent of IT and business process outsourcing (BPO) projects failed to meet expectations.
Andy Chesnutt of Compass said the high proportion of failed projects was due to poor partnership management between firms and their service providers.
"Many companies fail to realise you need different skills to manage an outsourcing alliance rather than an internal IT department," Chesnutt added.
Separately, India's National Association of Software and Services Companies (Nasscom) in August sought to re-establish confidence in Indian BPO providers following a some high-profile security breaches by launching a BPO certification pilot programme. The Nasscom Assessment of Competence certification scheme will test 15,000 graduates' listening skills, spoken English and IT capabilities.
Thursday, September 01, 2005
Eastern outsourcing to rise, says report
The cost-effective benefits and research standards set to become international has added to the attraction of outsourcing R&D to India and China – two developing nations that are set to ease the ever-increasing cost pressures, shorter product life cycles and numerous regulatory challenges in the West.
With current estimations of bringing one new molecule into the market amounting to at least $800 million, pharmaceutical companies looking for effective solutions are turning their attention to outsourcing to low-cost, developing countries rather than persisting with expensive R&D efforts.
The cost is certain to rise in the future. The European Federation of Pharmaceutical Industries and Associations (EFPIA) recently estimated that, on an average out of 10,000 molecules developed in laboratories, only one or two will successfully pass all stages of drug development and be commercialised.
Current business strategies include forming alliances with local companies, contractual outsourcing arrangements and establishing local subsidiaries.
Underlining the growing appeal of these two regions, several European pharmaceutical/biotechnology companies are looking to expand their presence. At the start of last year, Switzerland's Roche set up an R&D centre in Shanghai in a move, which reflected the growing importance of the country as both a market for pharmaceutical products and a site for drug research.
Roche now intends making India one of its larger sourcing hubs for active ingredients and bulk intermediates. Novartis is investigating clinical trial opportunities in both countries while big pharmaceutical companies such as Eli Lilly, Pfizer and Roche have established their clinical trial programmes in India.
Indeed, these outsourcing activities in developing countries amount to 20 to 30 per cent of total global clinical trials. Access to specialised skills in both countries and work hours on a 24/7 basis underpins their competitive advantage. In addition, better management from the start reduces development risks.
"Contract research organisations (CROs) are a popular option and carry out medical and scientific studies on a contractual basis for multiple clients," said Himanshu Parmar, Frost & Sullivan's industry analyst.
"They provide part, or all of the processes of clinical research including clinical trial management, data management, statistical analysis, protocol design and final report development," he added.
The report pointed out that despite the benefits, there has been a relatively low level of utilisation of the opportunities in both countries due to various concerns with respect to quality and infrastructure.
Companies are worried about probable loss of control in processes and proprietary knowledge. The report recommended, proper management was needed to utilise complicated and long-distance collaborative third-party relationships. Delays can even happen due to regulatory hold-ups.
As a result, recent amendments to Schedule Y of Drugs and Cosmetics Rules of India, 1945, signify a progressive attitude on the part of the Indian Government, clarifying the environment for clinical research in the country.
It is the same case in China. Regular monitoring of clinical trials ensures good clinical practice (GCP)-compliant research centres established by the government. These steps will enable the two countries attain international standards in pharmaceutical research.
"Government commitment in India and China to improve access to high-quality healthcare is a bonus for R&D outsourcing," said Parmar.
"The regulatory environment in both countries is gradually changing in favour of clinical research," he added.
The report, written by Frost and Sullivan, said that for companies wishing to leverage the regulatory changes and high-quality research, alliance strategies and identifying regions of opportunity should be priorities.
"Embracing these changes through innovative strategies and flexible approaches will allow international pharmaceutical enterprises to capitalise on these new attractive propositions," said the report.
The report, entitled: "Pharmaceutical R&D outsourcing to India and China (B600-52)," is now available to buy from Frost and Sullivan.
With current estimations of bringing one new molecule into the market amounting to at least $800 million, pharmaceutical companies looking for effective solutions are turning their attention to outsourcing to low-cost, developing countries rather than persisting with expensive R&D efforts.
The cost is certain to rise in the future. The European Federation of Pharmaceutical Industries and Associations (EFPIA) recently estimated that, on an average out of 10,000 molecules developed in laboratories, only one or two will successfully pass all stages of drug development and be commercialised.
Current business strategies include forming alliances with local companies, contractual outsourcing arrangements and establishing local subsidiaries.
Underlining the growing appeal of these two regions, several European pharmaceutical/biotechnology companies are looking to expand their presence. At the start of last year, Switzerland's Roche set up an R&D centre in Shanghai in a move, which reflected the growing importance of the country as both a market for pharmaceutical products and a site for drug research.
Roche now intends making India one of its larger sourcing hubs for active ingredients and bulk intermediates. Novartis is investigating clinical trial opportunities in both countries while big pharmaceutical companies such as Eli Lilly, Pfizer and Roche have established their clinical trial programmes in India.
Indeed, these outsourcing activities in developing countries amount to 20 to 30 per cent of total global clinical trials. Access to specialised skills in both countries and work hours on a 24/7 basis underpins their competitive advantage. In addition, better management from the start reduces development risks.
"Contract research organisations (CROs) are a popular option and carry out medical and scientific studies on a contractual basis for multiple clients," said Himanshu Parmar, Frost & Sullivan's industry analyst.
"They provide part, or all of the processes of clinical research including clinical trial management, data management, statistical analysis, protocol design and final report development," he added.
The report pointed out that despite the benefits, there has been a relatively low level of utilisation of the opportunities in both countries due to various concerns with respect to quality and infrastructure.
Companies are worried about probable loss of control in processes and proprietary knowledge. The report recommended, proper management was needed to utilise complicated and long-distance collaborative third-party relationships. Delays can even happen due to regulatory hold-ups.
As a result, recent amendments to Schedule Y of Drugs and Cosmetics Rules of India, 1945, signify a progressive attitude on the part of the Indian Government, clarifying the environment for clinical research in the country.
It is the same case in China. Regular monitoring of clinical trials ensures good clinical practice (GCP)-compliant research centres established by the government. These steps will enable the two countries attain international standards in pharmaceutical research.
"Government commitment in India and China to improve access to high-quality healthcare is a bonus for R&D outsourcing," said Parmar.
"The regulatory environment in both countries is gradually changing in favour of clinical research," he added.
The report, written by Frost and Sullivan, said that for companies wishing to leverage the regulatory changes and high-quality research, alliance strategies and identifying regions of opportunity should be priorities.
"Embracing these changes through innovative strategies and flexible approaches will allow international pharmaceutical enterprises to capitalise on these new attractive propositions," said the report.
The report, entitled: "Pharmaceutical R&D outsourcing to India and China (B600-52)," is now available to buy from Frost and Sullivan.
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