Pakistan among upcoming outsourcing destinations

“Firms are considering outsourcing more than ever before -- and their choices are growing by the minute”

IT outsourcing continues to dominate; however, in the global marketplace, an increasing number of companies, both multinationals and service providers, are heading into the business process outsourcing (BPO) arena.

Outsourcing destinations are grouped into three categories:
• Main destinations
• Upcoming destinations
• Others: Chile , Venezuela , Thailand , South Korea , Malaysia , Vietnam , Singapore and Romania.

The countries have been compared on parameters such as total size, average IT employee costs, total workforce, number of quality certifications, main clients and other considerations.

At present, the most preferred destinations for IT services outsourcing include Ireland , India , Israel , Canada , Philippines and South Africa. India is in the list of the most favored outsourcing destinations across the world and has a proven process maturity model and has captured major share of the offshore market. Ireland is the one of the largest IT services outsourcing destination in the world. There taxes are favorable and infrastructure and educational system is very good. Outsourcing in Ireland is driven mainly by the development centers of large technology companies such as Microsoft, Dell, IBM etc.

Israel has been ranked as a country that has an extremely skilled programming workforce. Software export sales are under $1 Billion. Canada definitely gains owing to close proximity to the US and also due to favorable business climate, greater cultural compatibility and comprehensible legal system. In Philippines, the education system is on par with the US system. The total outsourcing revenues from Philippines is estimated to be under $350million. South Africa is emerging as a noticeable destination. The IT manpower that was homegrown to achieve self-reliance is now beginning to be leveraged to serve global markets.

Upcoming destinations
Include Ukraine , Russia , the Czech Republic , Poland , China , Pakistan , Brazil , Argentina and Mexico.

In terms of size of the industry, the most serious contenders are Argentina , the Czech Republic and China . Pakistan , Russia and Ukraine are still much smaller in size. The Ukraine is preoccupied with the challenges of economic transition from the Soviet to the Western economy model and has not as yet fully entered into the Global IT offshore. The Czech Republic having cultural affinity with Western Europe , relatively low costs and strong education system are some key factors in its favor.

In Poland the outsourcing has identified as one of four critical export industries. Here cost is lower than Czech Republic and has good infrastructure and Government working hard to promote IT sector. In China the Government has been taking a lot of initiatives in the recent past which has given a boost to the IT sector in China. China has the numbers and the low cost structure.
Scalability, reliability and low-cost environment makes Pakistan the hot new offshore information technology (IT) destination.

Argentina is an ideal location for outsourcing, with low costs, large labor pool including solid base of engineering talent. Mexico , shares the same socio-cultural milieu with the US .

Brazil, becoming more popular as destination of Western outsourcing, as well as offshoring activities from Asia and other regions owing to its cheap and efficient labor. Most of the East European countries boast of good quality engineers. This may result in high end engineering jobs moving to these locations.

Source: IT Match Online

 

World economic recession represents opportunity

Every cloud has a silver lining, even recessionary ones. UK companies are contracting out work at "unprecedented" rates ahead of a potential economic downturn, according to Capita.

The firm reported a jump in profits to £271 million pre-tax on a 19 percent increase in revenues to £2.07 billion. "Trading conditions are buoyant," said chief executive Paul Pindar, adding that the firm has won £1.89 billion worth of contracts so far this year. "If we are going to enter an economic downturn then it will be positive for us. We have seen an unprecedented level of decisions in the last three months. We have enjoyed a good run of late. The phrase 'it's better to travel than to arrive' comes to mind."

As an example, Capita Group has won a contract worth approximately €25 million over five years to provide contact handling and directory enquiry services to Eircom. Capita staff will base themselves in Eircom’s Cork call centre. Eircom’s directory enquiry operation handles over 40 million calls each year. “This deal puts in place a new flexible operating model that will deliver an even better directory enquiry service for all our customers,” said Cathal Magee, managing director, Eircom Retail. “Capita has been selected for its strong track record in providing cost-effective call centre solutions across a number of industry sectors in the UK and Ireland.”

The results are encouraging, according to Samad Masood from Ovum. “Capita has cemented its domination of the UK BPO market,” said Masood. “It is now almost twice the size of its next largest competitors in both the local government and life & pensions sectors, and at least £1.5 billion in revenue ahead of second place Vertex in our UK BPO player rankings. In fact, Capita swallowed up almost every mega-deal up for grabs in the UK BPO in 2007. It has been so successful that it's fair to say it has a part to play in driving local rivals such as Vertex and Xchanging to focus their efforts outside of the UK in order to have a chance at some growth.

“Capita is clearly in an incredibly strong position. Unlike any other BPO player in this market, it has managed to build significant scale across most of its target sectors. And now it is rightly focusing on the next step: generating economies of scale across its contracts by investing in integrating platforms, processes and IT systems. Capita is also accelerating its offshore resource capability, which should double in volume to 2,500 staff in India thanks to the addition of Prudential's offshore operation.
“These integration and offshoring investments will boost profit margins - and just in time too. Large BPO deals incur heavy costs in their early years. And having just swallowed a series of large deals in the past two years, Capita's margin is under pressure. Indeed, we don't expect Capita to increase its margins in 2008 - and it will have done well if it can keep margins flat.

“Meanwhile, Capita is exploring opening up new markets in the UK, although it is very tight-lipped about what new opportunities it expects to see. It is already expanding in the mortgage and insurance sectors, and general banking is being targeted more aggressively after the sub-prime crisis. Outside the finance sector the company continues to expand its horizontal services offerings, particularly around human resources.

“All in all, Capita looks unbeatable in the UK BPO market - especially when it comes to winning big deals. However, the market is changing, and deals are getting smaller. Capita's own pipeline reveals this. For 2008 it is £2.5 billion comprising of 25 bids, when last year it was £2.6 billion comprising of 12 bids. This is a very significant shift. Having built scale, Capita will always look like a good option to clients. However, given the changing make up of deals in the market, there are still opportunities for smaller, more nimble vendors to continue to nip at Capita's heels.”

Source: Outsource magazine
 

Outsourcing ROI benchmarks for 2008

Glomark-Governan, the leading provider of business case solutions for sales, marketing, product development and IT organizations, has released a sampling of Outsourcing benchmarks from an Outsourcing ROI Research Study concluded in the first quarter of 2008. The recent Glomark-Governan research study on the benefits and risks of outsourcing identified a series of actual improvements that have already been achieved with various types of outsourcing. A sampling of these improvements, which can be used as benchmarks, includes:

IT Outsourcing Benchmarks

IT Total Headcount Reduction: 12% to 62%
IT Infrastructure Operational Cost: 16% to 48%
Overall IT Operations Costs: 21% to 55%

General Business Process Outsourcing Benchmarks

Reduction in Business Process Costs: 6% to 41%
Increase in Revenue: 0% to 7%
Increased Customer Retention: 2% to 23%

Manufacturing and Maintenance Operations Outsourcing Benchmarks

Reduced Maintenance Costs: 15% to 30%
Increase in Equipment Efficiency: 5% to 19%
Reduced Inventory Level: 13% to 38%

Source: Glomark-Governan