Offshore software outsourcing improves production by 25%

Jobs in United states, in manufacturing and other sectors, will continue to be moved to India and other countries as foreign workers work more at low cost than their american counterparts, which increases production of the business processes outsourced by up to 25 per cent, a new research has said.
The trend of sending higher-paying jobs offshore would continue and a key reason is lack of appropriate skills in the United States, according to a survey by the Earth Institute at Columbia University.

Of the 45 companies surveyed, a majority said after they shipped work abroad the quality of the product improved. They also said foreign workers have better skills than Americans and put more efforts.

The companies represented a broad cross-section of industry, from automotive and banking to government, healthcare, financial and computer services.
The institute said 82 per cent of the companies currently outsource jobs, and 70 per cent said production of the business processes they outsourced abroad was up 5 to 25 per cent. Sixty-two per cent were looking to outsource business processes and software outsourcing to countries other than India, the report said.

"Companies, including offshore pioneers such as General Electric, Nortel Networks and Citibank, found that actual cost savings, which remain the primary reason for outsourcing, were achieved by 67 per cent of the companies to the tune of 5 to 50 per cent," said the report.

"The main downside to outsourcing perceived by American businesses is loss of institutional knowledge, data security, loss of intellectual property rights, and political risks," the report added.

Security Software Outsource

Deciding to outsource network security is difficult. The stakes are high, so it's no wonder that paralysis is a common reaction when contemplating whether to outsource or not:

The promised benefits of outsourced security are so attractive. The potential to significantly increase network security without hiring half a dozen people or spending a fortune is impossible to ignore.
The potential risks of software outsourcing are considerable. Stories of managed security companies going out of business, and bad experiences with outsourcing other areas of IT, show that selecting the wrong outsourcer can be a costly mistake.

If deciding whether to outsource security is difficult, deciding what to outsource and to whom seems impossible. Over the past few years, we've seen many different companies offering different capabilities under the general category of “managed security services.” The field is so confusing that even the industry analysts can't agree on how to categorize the services offered. This company manages firewalls. That company offers periodic vulnerability scans. Another offers to manage security policies, or monitor the network, or install the IDS, or host the computers. Some of these businesses make sense, and some of them don't. Some will survive; some won't.

What to outsourceCompanies won't outsource everything, because some things just don't outsource well. Either they're too close to the business, or they're too expensive for an outsourcing company to deliver efficiently, or they simply don't scale well. Knowing what to outsource is key.

Medical care is a prime example of outsourcing that works well. Everyone outsources healthcare; we don't act as our own doctor. More to the point, no one hires a private personal doctor. And we all know what aspects of medical care we like: the ambulance arrives in seconds and rushes us to the hospital, a team of medical experts spares no expense in running tests to figure out what's wrong and in doing whatever it takes to cure us, and (for many people) the insurance company pays (all or most of) the bill. We all also know what aspects we don't like: ill-equipped and ill-staffed hospitals, HMOs telling us that we can't have that particular test or that a specialist isn't warranted, and getting stuck with an outrageous bill.

The aspects of outsourced healthcare we like involve immediate access to experts. Any medical emergency requires experts, and the faster they can pay attention to us the better off we'll be. The aspects of outsourced healthcare we don't like involve management. Our healthcare is our responsibility, and we don't want someone else making life and death decisions about us.
Network security is no different. Companies should outsource expert assistance: vulnerability scanning, monitoring, consulting, and forensics, for example. But they should not outsource management.

The industry has already proven this point. Salinas Network Services was the largest firewall management company. Earlier this year, it disappeared. There just wasn't a profitable business in managing firewalls for other companies. Firewall management is simply too central—companies outsourcing to Salinas had no choice but to treat their Salinas contractors as employees. And, for the money they were willing to pay, the companies demanded too much individual attention. Another example: Pilot Network Services offered secure network management. Its business was to host computers securely, manage all security devices, and test applications before putting them up on the network, effectively becoming the security management group. They're gone now too—same problem.

Some consulting companies are doing well and some are not. This is primarily a function of the quality of the service they offer. Consulting is, and always will be, a profitable business. Outsourcing occasional requirements for expertise transcends any single area. The outsourced security companies that are doing well offer clearly defined services organizations need. For example:
Consulting companies (such as VeriSign, @Stake, Foundstone) provide expert advice and assistance: strategic security consulting, penetration testing, forensics, and so forth. Security Value-Added Resellers (VARs) provide product installation and configuration. TruSecure provides certification and expert assistance. Qualsys has an automatic vulnerability scanning service. Counterpane provides network security monitoring. In all of these cases, the company buying the security services retains management and ultimate control. Conversely, by not demanding a management role, the security providers offer useful, effective, and scalable services. Both win.

Why outsource securityThe primary argument for outsourcing is financial: a company can get the security expertise it needs much more cheaply by hiring someone else to provide it. Take monitoring, for example. The key to successful security monitoring is vigilance: attacks can happen at any time of the day, any day of the year. While it is possible for companies to build detection and response services for their own networks, it's rarely cost-effective.
Staffing for security expertise 24 hours a day, 365 days a year, requires five full-time employees—more when you include supervisors and backup personnel with specialized skills. Even if an organization could find the budget for all of these people, it would be very difficult to hire them in today's job market.

Retaining them would be even harder. Security monitoring is inherently erratic: six weeks of boredom followed by eight hours of panic, then seven weeks of boredom followed by six hours of panic. Attacks against a single organization don't happen often enough to keep a team of this caliber engaged and interested.

This is why outsourcing is the only cost-effective way to satisfy the requirements. Think about healthcare again. I might only need a doctor twice in the coming year, but when I need one I might need him immediately, and I might need specialists. Out of a hundred possible specialties, I might need two of them—and I have no idea beforehand which ones. I would never consider hiring a team of doctors to wait around until I happen to get sick. I outsource my medical needs to my clinic, my emergency room, my hospital. Similarly, companies will outsource network security monitoring.

Aside from the aggregation of expertise, an outsourced monitoring service has other economies of scale. It can more easily hire and train personnel, simply because it needs more employees. And it can build an infrastructure to support them. Vigilant monitoring means keeping up to date on new vulnerabilities, new hacker tools, new security products, and new software releases. Outsourced security companies can spread these costs across all customers.

An outsourcing company also has a much broader view of the Internet. It can learn from attacks against one customer, and use that knowledge to protect all its customers. It also faces attacks much more frequently. No matter how wealthy we are, we don't hire a doctor to sit in our living room, waiting for us to get sick. We get better medical care from a doctor who sees patient after patient, learning from each one. To an outsource security company, network attacks are everyday occurrences; its experts know exactly how to respond to any given attack, because in all likelihood they have already seen it many times before.

How to choose an outsourcerIt is difficult to choose an outsourcer because it's hard to tell the difference between good and bad computer security. By the same token, it's hard to tell the difference between good and bad medical care. Because most of us aren't healthcare experts, we can sometimes be led astray by bad doctors who appear to be good. So how do we choose a doctor or a hospital? I choose one by asking around, getting recommendations, and going with the best I can find. Medical care involves trust; I need to be able to trust my doctor.

Security outsourcing is no different; companies should choose an outsourcer they trust. Talking with others and asking industry analysts will reveal the best security service providers. Go with the industry leader. In both security and medical care, you don't want a little-known maverick.
Companies buying security services should also avoid outsourcers that have conflicts of interest. Some outsourcers offer security management and monitoring. This worries me. If the outsourcer finds a security problem with my network, will the company tell me or try to fix it quietly? Companies that both sell and manage security products have the same conflict of interest. Consulting companies that offer periodic vulnerability scans, or network monitoring, have a different conflict of interest: they see the managed services as a way to sell consulting services. (There's a reason companies hire outside auditors: it keeps everyone honest.) Outsourcers offering combined management and monitoring services will be among the next to disappear, I believe. If a company outsources security device management, it is essential that it outsource its monitoring to a different company.

In any outsourcing decision requiring an ongoing relationship, the financial health of the outsourcer is critical. The last thing anyone wants is to embark on a long-term medical treatment plan only to have the hospital go out of business midstream. Similarly, organizations that entrusted their security management to Salinas and Pilot were left stranded when those companies went out of business.

Modern society is built around specialization; more tasks are outsourced today then ever before. We outsource fire and police services, government (that's what a representative democracy is), and food preparation. Businesses commonly outsource tax preparation, payroll, and cleaning services. Companies also outsource security: all buildings hire another company to put guards in their lobbies, and every bank hires another company to drive its money around town.
In general, we outsource things that have one of three characteristics: they're complex, important, or distasteful. Computer security is all three. Its distastefulness comes from the difficulty, the drudgery, and the 3 a.m. alarms. Its complexity comes out of the intricacies of modern networks, the rate at which threats change and attacks improve, and ever-evolving network services. Its importance comes from this fact of today's business world: companies have no choice but to open their networks to the Internet. Doctors and hospitals are the only way to get adequate medical care. Similarly, outsourcing is the only way to get adequate security for today's networks.

The States and Outsourcing

The emergence of John Kerry as frontrunner for the Democratic nomination suggests that free trade might be off the table in 2004, at least as a national issue. It's certain to come up, however, in a number of congressional, senatorial, and gubernatorial campaigns. And, of course, as long as Lou Dobbs is still kicking at CNN, we'll continue to hear nightly nativist tirades against the loss of manufacturing jobs, the off-shoring of tech jobs, immigration, and general alarmism about the "outsourcing of America."
The truth, of course, is a bit more complicated than the simplistic picture painted by protectionists. The United States is still far and away the world's leading exporter of services. Direct corporate investment in India -- generally the target of protectionist rants on tech jobs -- actually declined from 2001 to 2003. As for manufacturing jobs, sure, it's likely that free trade agreements played a part in the loss of jobs in the last five years, but so too did a host of other factors, including exchange rates, changing consumer preferences, upgrades in technology and equipment, the recession, and new federal regulations. Michigan's Mackinac Center for Public Policy, to cite just one example, estimated in 2002 that a federal appeals court ruling favoring procedural matters over hard science in federal environmental regulatory policy could cost the state as much as $2.6 billion, or about 10,000 jobs.
Which brings us to state policy. Time and again, when we look at the states attracting and retaining jobs, and we compare them to the states losing jobs, we find that the states doing well are those with tax and regulatory schemes most friendly to business. It's only when the cost of staying local becomes too burdensome that companies pick up and relocate elsewhere. Perhaps that's not surprising. But just how strongly the data shakes out might be.
For example, according to the Economic Policy Institute, the five states losing the most jobs between 1993 and 2000 were, in order, California, New York, Michigan, Texas and Ohio. According to figures from the Bureau of Labor Statistics, New Jersey, Pennsylvania, Illinois and Massachusetts also rank near the bottom, particularly when you take jobs as a percentage of population. The left-leaning EPI blames these losses chiefly on NAFTA, and perhaps that's partially the case. But aggressive tax and regulatory climates play a pretty big role, too.
Each year, CFO magazine asks financial executives to assess the business-friendliness of tax policy in their respective states, which the magazine then compiles and ranks. Ranking in the bottom 10? California, New York, Michigan, Texas, Ohio, New Jersey, Pennsylvania, Illinois and Massachusetts -- the very states that seem to be bleeding jobs. The most recent unemployment figures from the Labor Department put California, Texas, Ohio, Illinois, and Michigan all in the bottom 10 there, too, all with unemployment rates at 7.0 percent or higher.
The Small Business Survival Committee also puts out a report ranking the states on business-friendly public policy. In the SBSC report, Ohio ranks 39th, New York 45th and California 46th. Oregon, also with one of the country's highest unemployment rates, ranks 41st.
A 2003 ranking by the Tax Foundation focusing mainly on tax policy and business tells the same story. It puts California 49th, Ohio 47th, and New York 44th.
Only Texas and Michigan score relatively well on the Tax Foundation and SBSC reports, suggesting that at least in these two states, free trade may have played a more significant role in job loss than poor public policy (and when you think about what Michigan manufactures, and where Texas is located, that makes some sense).
The Cato Institute's Alan Reynolds wrote recently about San Jose, California, a city that lost about 120,000 jobs over two years. Reynolds points out that despite the debacle in San Jose, the communities of San Diego, Riverside, and Orange County actually added almost as many jobs over the same span of time.
San Jose was one of the first jurisdictions in the area to implement a so-called "living wage" ordinance, mandating that businesses contracting with the city pay their lowest-paid workers around $11 per hour, more than double the federal minimum wage. Of course, a living wage law in and of itself won't wipe out 120,000 tech jobs, but it's certainly indicative of the sort of "progressive" anti-corporate sentiment that might cause local businesses to pick up and spill out into friendlier communities.
Protectionists often bring up Ohio as the prototype of a hard-working, breadbasket state whose manufacturing sector has fallen victim to free trade. But Ohio is also a case study in how a state government hostile to business pushes jobs to more hospitable locales. You've read the numbers above. But additionally, in the last few years, Ohio legislators have begun to feel the hangover caused by big spending habits fomented back in the freewheeling 1990s. As of 2003, the state faced a $720 million deficit. Ohio governor Bob Taft has promised to shrink the deficit not with cuts in state spending, but with new taxes, tax hikes, and new fees, as well as rollbacks of promised tax breaks. Taft's tax-happy policy earned the Republican condemnation from the Club for Growth's Steve Moore, who called Taft one of the "worst governors in America."
The Buckeye Institute, an Ohio free market think tank, reports that Ohio's aggressive pro-labor policies cost the state jobs even during the relatively strong economic period of 1982-1998. Zeroing in on the effect of mandatory union memberships on state economies, the Institute emphasizes that during that 16-year period, states that mandated union membership in the manufacturing sector lost a net 996,000 jobs, while "right to work states" gained 493,000.
Let's look at the flip side. How well are states with business-friendly public policy doing at attracting and retaining jobs? The anecdotal evidence suggests they're doing pretty well.
According to the Bureau of Labor statistics, the only state that actually gained net manufacturing jobs from 2000 to 2003 was Nevada. It ranks 2nd on the SBSC's business-friendly list. It ranks 3rd on the Tax Foundation list. It ranks in the top four of CFO's list. Alaska lost only 900 manufacturing jobs over those same four years, which is likely due to its population. Still, Alaska too ranked in the top four on the CFO list. Virginia made a big push in the late 1990s to attract tech firms to its D.C. suburbs and the Dulles corridor. Despite the tech bust, Virginia still has one of the lowest state unemployment rates in the country and, perhaps not coincidentally, ranks 14th on the SBSC list (and would likely rank higher were it not for Gov. Mark Warner's recent promise to raise taxes). South Dakota, which ranks number one on the SBSC list, also has one of the four lowest unemployment rates in the country (as of December 2003).
On its face, this cursory look at the data makes a lot of sense. For all the talk of off-shoring, the cost of packing up a domestic plant and moving it overseas is pretty significant. Even outsourcing tech support and programming doesn't always make economic sense. American workers are still far more productive than, for example, Indian workers, even when you factor in the lower wages. It's only when the onus of complying with federal, state, and local tax laws and regulations becomes overly burdensome that it makes economic sense for a corporation to shop jurisdictions for a better deal.
So the next time a local politician (or news anchor) blasts NAFTA or greedy corporatism for the loss of local jobs, it might not hurt to take a look at just how friendly that politician's state or city taxes, regulatory and labor policies are toward business. Check where his state ranks on the Tax Foundation, SBSC or CFO lists. If he's a governor, see how he did on the Cato Institute's Governor's Report Card. If relocation really is the cause of the job hemorrhage he's complaining about (and often it isn't), it's likely that same politician's policies are a big reason those jobs left.
by Radley BalkoTechCentralStation

IT job turnaround could spell strategic change for outsourcing providers

The outsourcing sector has been one of a very few bright spots in the IT industry over the past two years, showing slow growth while the rest of the market continued a prolonged tailspin. New projections on IT employment, however, suggest that the tailspin might soon level off.
According to research published last week by the AEA, formerly known as the American Electronics Association, the free-fall of IT industry employment is finally slowing. After losing some 540,000 jobs between 2001 and 2002, the AEA projects that 2003 job losses will be around 234,000, approximately 57% fewer than the year before
What's more, AEA researchers are predicting that the IT industry is gearing up for a turnaround. There is a strong possibility that the sector will actually add jobs in the second half of 2004, they said.
The AEA's predictions are supported by other researchers. IDC is projecting that IT spending in the U.S. will increase 1.5% this year over last year to $372 billion. Over the next five years, spending is expected to increase at a slow compound annual growth rate of 4.9%, reaching $467 billion by 2007, the research firm said.
For outsourcing providers, the slowdown in IT job losses is both good news and bad news. The good news is that IT spending is slowly coming around, and that there will be more funds available for IT projects in the coming months, many of which will be out-tasked to third parties.
The bad news is that it may not be long before companies begin to staff up their internal IT organizations again. Thanks to the economic slump, there is a large pool of unemployed skills on the market, and enterprises that loosen their purse strings can expect to get top-flight talent at a reasonable price. Many of the skills offered by outsourcing providers can now be found on the wide-open employment market.
How will outsourcing providers respond to the resurgence in internal IT employment? Many will look for ways to hold onto current clients, either by renegotiating their terms or by building closer relationships with the IT departments they serve. If an enterprise is happy with its IT performance, and the way its operation works, it will be less likely to seek a return to an internally-staffed model.
Some outsourcing providers will look to re-establish their role as strategic consultants, rather than operational manpower. Before the downturn, many outsourcing providers were called in to help with transitional projects - consolidation of applications, deployment of new technology, or re-engineering of business processes - rather than substitute for internal operations staff. If the internal staffing problem becomes less of an issue, then outsourcing providers can move back to helping with strategic projects.
Finally, some outsourcing providers will look to provide a less expensive alternative to internal staffing. Much has been said recently about offshore IT outsourcing, and this trend is not likely to slow down. If outsourcing providers can deliver lower-cost IT services by shipping them overseas, then many enterprises will take advantage of them, possibly to the detriment of unemployed IT workers in the U.S.
Whatever the impact of the IT hiring turnaround, it is clear that the outsourcing market will look very different by the end of 2004 than it does today. The key for outsourcing providers will be to monitor the shift and respond in ways that will enable them to continue to grow, even as the internal IT organization grows.

source:[nwfusion.com]

IT Outsourcing Market

IT Outsourcing Vendors Will Reap $7 Billion in the Next Two Years - Research Report Now Available
The US Enterprise IT Outsourcing Market will grow 20%, from $46.3B to $55.5B in the next two years according to a new research report published by the InterUnity Group. While the On-shore market will grow by 5%, the Off-shore market will grow 11 times faster at 55%. A total of $7.8B will be shifted Off-shore increasing the Off-shore total to $21.7B in 2005. Enterprises will shift $930 Million of this growth to wholly owned Off-shore subsidiaries.
Concord, MA December 17 2003-The US Enterprise IT Outsourcing Market will grow 20%, from $46.3B to $55.5B in the next two years (Figure 1) according to a new research report published by the InterUnity Group. While the On-shore market will grow by 5%, the Off-shore market will grow 11 times faster at 55% (Figure 2). A total of $7.8B will be shifted Off-shore increasing the Off-shore total to $21.7B in 2005. Enterprises will shift $930 Million of this growth to wholly owned Off-shore subsidiaries.
Overall outsourcing growth will slow from 13% in 2004 to 7% in 2005. The slowdown in IT outsourcing growth is due to rapid market penetration and saturation.
The market for On-shore outsourcing from companies that currently outsource will decline by $3B from 2003 to 2005. This will be off-set by $4.6B growth in On-shore outsourcing from companies that do not currently outsource. Combined net growth will be 5% in the domestic outsourcing market.
The $21.7B growth in Off-shore outsourcing will come from enterprises currently outsourcing in US migrating Off-shore (40%) and from enterprises that do not currently outsource (60%) but plan to in the next 24 months.
Not all of the growth in the Off-shore outsourcing market is available to vendors. About 12% of Off-shore outsourcing will be performed through captive subsidiaries. This $1.7B segment in 2003 will grow to $2.7B by 2005.
Enterprises currently outsourcing have determined their Off-shore outsourcing strategy:
40% do not plan to go Off-shore, 7% are watching the market and 11% have Off-shore trials under way.
Two-thirds of companies doing Off-shore outsourcing have a proactive cost saving focus and one-third have a proactive strategic focus. The combined growth in Off-shore outsourcing from this segment is just over $3.1B over the next two years.
The largest opportunity for Off-shore outsourcing vendors comes from companies who have not yet done any IT outsourcing. The combined growth in Off-shore outsourcing from this segment is $4.7B over the next two years.
Since two thirds of Off-shore outsourcing is driven by a proactive cost reduction, vendors who can demonstrate significant cost savings to their prospects will win two thirds of the growth. The remainder will go to vendors who can align with prospects strategic enterprise needs for specific skill sets and industry expertise.
Conclusions
Vendors who clearly differentiate their offerings have an opportunity to capture market share. Strategies include:
Develop high-probability target customer profiles to focus sales and marketing resources on organizations that are developing outsourcing plans Demonstrate realizable benefits and cost savings Develop solutions that solve business problems specific to industry verticals and company size
To be successful longer term, US based outsourcers must ramp up their Off-shore delivery capabilities, either through alliances or captive Off-shore subsidiaries, to maintain market share.
Definition of the US Enterprise Market
The US Enterprise Market includes the following industries:
Mining Construction Manufacturing Transportation, communications, and utilities Wholesale trade Retail trade Finance, insurance, and real estate Services
Government, Education, and non-profit sectors are excluded.
This article courtesy of [outsourcingconnections.com] You may freely reprint this article on your website or in your newsletter provided this courtesy notice and the author name and URL remain intact.

offshore outsourcing -HP and Intel hire Asian helpers to make Itanium cheap

What's the key to Itanium's future success? Cheap, Asian labor.
HP and Intel have decided to tap Asian server design and manufacturing teams to come up with a low-cost Itanium server. This approach, similar to that used for today's x86 servers, would bring the cost of a low-end Itanium server down from about $10,000 today to close to $4,000 in 2007.
"We are working with Intel to drive costs down," said Don Jenkins, HP's VP in charge of business critical systems, at the Intel Developer Forum event held here. "In the 2007 timeframe, we will be able to more actively play at edge of the network . . . places where you expect x86 servers."
HP and Intel plan to deliver a common chipset for Xeon and Itanium processors by 2007, which should help lower overall system costs. The plan mentioned by Jenkins extends beyond this, however. During a speech here, he said twice that HP and Intel had already started investing in Asian design houses that will be expected to create cheap Itanic kit.
Itanium's sluggish sales haven't dampened HP's enthusiasm for the chip. And how could they? HP "bet the company" on Intel's 64-bit product.
In the near term, Jenkins told the IDF crowd to expect a whole new fleet of Itanic boxes described as the "Arches" systems. The Arches code-name refers to HP's upcoming chipset for Itanium servers, which will support the PA-8900 processor and Intel's dual-core version of Itanium code-named Montecito due out by year end.
"We won't get all of the systems out the door in 2005, but we will get a fair chunk of the Montecito products out the door in 05," Jenkins said.
HP will also rollout a Itanium-based blade system in early 2006. This product will be aimed at HP-UX users, Jenkins said.
Jenkins, who has given a similar Itanium speech for many years, did a nice job of defending the chip against its painfully slow sales.
"It's fundamentally true that over the long-term x86 and Itanium will be the dominant architectures in the industry," Jenkins said. "We have a long way to go with Itanium. We know that. We are building it brick by brick."
By brick, by brick, by brick.
"Companies like SGI, Unisys and NEC are helping to make the market with Intel, and others will get involved over time," he added.
This statement would be more impressive if the vendors mentioned above had any Itanium sales of consequence. In the fourth quarter, SGI shipped 318 systems, Unisys shipped 46 and NEC shipped 75. Less than 500 boxes per quarter does not an ecosystem make.
Jenkins also lost some ground when he tried to explain why IBM's Power5 wasn't as powerful as it seemed to be. He looked at IBM's TPC-C score of more than 3m transactions - triple that of HP's best score - and noted that if IBM used 1.65GHz chips instead of 1.9GHz chips and didn't use DB2 for the benchmark, its score would have been 25 per cent lower. HP researchers also discovered that they could have beaten IBM on the benchmark had the Power5 box not been plugged in. ®
source:[theregister.co.uk]

Can they find a good employment line?

Of all people, George W. Bush, a son of a one-term President, should certainly understand the importance of getting the script and the staging just right when it comes to demonstrating how committed he is to helping Americans get and keep good jobs. The economy was improving on Election Day 1992, but voters could still recall images of George Herbert Walker Bush buying four pairs of socks at J.C. Penney the previous Christmas season and exhorting them to shop their way out of bad times. Or how, as he prepared to tee off at a Kennebunkport, Maine, golf course in the summer of 1991, the elder Bush declared the recession over and then blocked funding to extend unemployment benefits. Though people understand their President can't guarantee their jobs, they want to know that he's doing what he can and that, at a minimum, he's paying attention.
So this President Bush makes sure to plant himself as often as possible on the factory floor, surrounding himself with happy workers—as he did last week at a window-and-door factory in Tampa, Fla.—and touting the job-creating power of his tax cuts, even as he acknowledges that many people are still out of work.
But as hard as Bush tries to show that he is both optimistic about the economy and empathetic to the plight of people who haven't felt the turnaround yet, there are some discomforting realities. Chief among them: Bush looks certain to go into the election with the distinction of being the first President since Herbert Hoover to see the total number of jobs shrink during his term in office.
Democrats point that out often, like whenever they move their lips. "Everywhere I go, I'm meeting people who are talking about working harder, working longer, not getting ahead, wages frozen, health-care costs going up. People feel very anxious, as manufacturing has slipped away," Democratic front runner John Kerry told TIME. "During Clinton, we had 23 million jobs created. That's almost 3 million a year. Under Bush, we've lost 3 million in three years."
It does not help that a White House that has set the modern standard for message management has been sending up flares in recent days that illuminate for the most jittery Americans the fragility of their situation. First came the observation by Bush's top economist Gregory Mankiw that outsourcing jobs overseas is "probably a plus for the economy in the long run." That may be true in theory, but the statement was so impolitic that even such staunch Bush supporters as House Speaker Dennis Hastert were furious. "An economy suffers when jobs disappear," Hastert said. And so do politicians.
Jobs have always made or broken the political fortunes of Presidents, yet outsourcing packs a powerful new wallop. That's because it hits middle- and upper-income workers—software engineers, X-ray readers, financial analysts—who thought they were immune to the great job exodus to Mexico and China that has decimated blue collars over the past 25 years. These are people who believed they were safe in a global economy, because they worked with their minds, not with their hands. "Outsourcing is the ultimate nightmare issue for the White House, because it's a problem that every voter understands. It's extraordinarily difficult to solve—and impossible to solve in the short run," says Bruce Reed, president of the centrist Democratic Leadership Council, who was also Bill Clinton's chief domestic-policy adviser. And while Bush can blame many of the economy's woes on the vicissitudes of war, terrorism and corporate scandals, outsourcing is one problem that won't go away when those do.
But even as the Democrats denounce the phenomenon, the proposals they offer do little more than attack it at the margins. Kerry calls for a study to examine the problem and possible solutions. He would discourage outsourcing federal contracts and would require employees from outsourced call centers to identify their location so that consumers can respond to that information as they see fit. (His own campaign was embarrassed by a firm it had hired that was routing calls to Wisconsin voters through Canada.) North Carolina Senator John Edwards would also try a combination of browbeating and suasion: he would create a new Office for Corporate Responsibility at the Commerce Department to encourage companies to keep jobs here rather than outsourcing them.
Outsourcing isn't the only jobs issue the Bush White House has uncharacteristically bumbled lately. Another political land mine exploded when the 417-page Economic Report of the President, sent to Congress under Bush's signature, delivered the staggeringly optimistic forecast that the economy would create millions of jobs this year. When asked about the prediction, Bush backed away, avoiding a question about the number after his Treasury Secretary and Commerce Secretary cast doubt upon it. Yet another section of the report raised the important question of whether making a sandwich at a fast-food restaurant (some assembly required) should be reclassified as a manufacturing job—a prospect that brought immediate comparisons to Ronald Reagan's disastrous effort to classify catsup as a vegetable on school-lunch menus.
In an election year, or any other time, no one wants to hear that his or her job is gone forever. What makes the jobs issue particularly potent this year is the fact that the states with the biggest manufacturing job losses happen to be such swing states as Michigan, Ohio and Pennsylvania. Administration officials tout Bush's plans to strengthen community colleges and career centers and provide up to $3,000 to help displaced workers find new jobs. But as Edwards likes to point out as he stumps for the Democratic nomination, that's little comfort if there are no jobs waiting in your community when you get out of school. A 2001 Labor Department audit found that only 1 in 5 who participated in programs for displaced workers found jobs for which they had been retrained; nearly 40% ended up working part time or for less than they had earned before; 28% had not yet found any work at the end of their training.
So how would the Democrats ease the pain of outsourcing? Both Kerry and Edwards have put forth a set of proposals that focus on the tax code—closing loopholes that make it more profitable to move jobs overseas, offering new incentives to keep them here. But no one believes that companies are moving overseas simply to save money on their taxes. So increasingly the nomination battle, which grew more intense last week with Edwards' surprisingly strong second-place finish in Wisconsin, is turning toward which candidate would do more to toughen trade agreements. It's a debate Bush campaign officials confidently predict will backfire on the Democrats. "We have a new economy, and they have yesterday's wrong ideas," said Bush campaign manager Ken Melhman. Maybe so, but if Bush can't convince voters he's got some ideas too, one job that might disappear come November is his.
Source:[Time.com]

Software outsourcing is used as a measure to cut the cost on resources and concentrate on core business. However it can be an expensive affair if it is not managed properly and in turn can be a failure.
According to Gartner one out of every four outsourcing deal is failing at present. Many industry analysts believe that, very few number of outsourcing projects are problem free. There are many reasons for the failure of outsourcing project. Software outsourcing doesn't mean giving requirements and forget about it. It is a delicate issue and should be handled with care. There are many issues which creates problem like source code ownership, communication time difference, communication methods, cultural difference etc. However, though it is risky and problematic, an experienced manager can always get maximum benefits from outsourcing. Thats why, companies around the globe are using offshore software development to reduce the cost, access advanced technology, compensate for a lack of skilled IT workers, improve business efficiency and remain competitive in global market. A successful outsourcing relationship requires vendor and buyer to communicate and work simultaneously together and solve each issue step by step.
To view outsourcing issues, visit http://www.tatvasoft.com/software-outsourcing-central/outsourcing_issues.asp

Programming jobs are heading overseas by the thousands. Is there a way for the U.S. to stay on top?

Stephen Haberman was one of a handful of folks in all of Chase County, Neb., who knew how to program a computer. In the spring of 1999, at the height of the Internet boom, the 17-year-old whiz wanted to strut his stuff outside of his windswept patch of prairie. He was too young for a nationwide programming competition sponsored by Microsoft Corp. (MSFT ), so an older friend registered for him. Haberman wowed the judges with a flashy Web page design and finished second in the country. Emboldened, Stephen came up with a radical idea: Maybe he would skip college altogether and mine a quick fortune in dot-com gold. His mother, Cindy, put the kibosh on his plan. She steered him to a full scholarship at the University of Nebraska at Omaha.
Half a world away, in the western Indian city of Nagpur, a 19-year-old named Deepa Paranjpe was having an argument with her father. Sure, computer science was heating up, he told her. Western companies were frantically hiring Indians to scour millions of software programs and eradicate the much-feared millennium bug. But this craze would pass. The former railroad employee urged his daughter to pursue traditional engineering, a much safer course. Deepa had always respected her father's opinions. When he demanded perfection at school, she delivered nothing less. But she turned a deaf ear to his career advice and plunged into software. After all, this was the industry poised to change the world.
As Stephen and Deepa emerge this summer from graduate school -- one in Pittsburgh, the other in Bombay -- they'll find that their decisions of a half-decade ago placed their dreams on a collision course. The Internet links that were being pieced together at the turn of the century now provide broadband connections between multinational companies and brainy programmers the world over. For Deepa and tens of thousands of other Indian students, the globalization of technology offers the promise of power and riches in a blossoming local tech industry. But for Stephen and his classmates in the U.S., the sudden need to compete with workers across the world ushers in an era of uncertainty. Will good jobs be waiting for them when they graduate? "I might have been better served getting an MBA," Stephen says.
U.S. software programmers' career prospects, once dazzling, are now in doubt. Just look at global giants, from IBM (IBM ) and Electronic Data Systems (EDS ) to Lehman Brothers (LEH ) and Merrill Lynch (MER ). They're rushing to hire tech workers offshore while liquidating thousands of jobs in America. In the past three years, offshore programming jobs have nearly tripled, from 27,000 to an estimated 80,000, according to Forrester Research Inc. (FORR ). And Gartner Inc. figures that by yearend, 1 of every 10 jobs in U.S. tech companies will move to emerging markets. In other words, recruiters who look at Stephen will also consider someone like Deepa -- who's willing to do the same job for one-fifth the pay. U.S. software developers "are competing with everyone else in the world who has a PC," says Robert R. Bishop, chief executive of computer maker Silicon Graphics Inc. (SGI ).
For many of America's 3 million software programmers, it's paradise lost. Just a few years back, they held the keys to the Information Age. Their profession not only lavished many with stock options and six-figure salaries but also gave them the means to start companies that could change the world -- the next Microsoft, Netscape (AOL ), or Google. Now, these veterans of Silicon Valley and Boston's Route 128 exchange heart-rending job-loss stories on Web sites such as yourjobisgoingtoindia.com. Suddenly, the programmers share the fate of millions of industrial workers, in textiles, autos, and steel, whose jobs have marched to Mexico and China.
"Leap of Faith"This exodus throws the future of America's tech economy into question. For decades, the U.S. has been the world's technology leader -- thanks in large part to its dominance of software, now a $200 billion-a-year U.S. industry. Sure, foreigners have made their share of the machines. But the U.S. has held on to control of much of the innovative brainwork and reaped rich dividends, from Microsoft to the entrepreneurial hotbed of Silicon Valley. The question now is whether the U.S. can continue to lead the industry as programming spreads around the globe from India to Bulgaria. Politicians are jumping on the issue in the election season. And it will probably rage on for years, affecting everything from global trade to elementary-school math and science curriculums.
Countering the doomsayers, optimists from San Jose, Calif., to Bangalore see the offshore wave as a godsend, the latest productivity miracle of the Internet. Companies that manage it well -- no easy task -- can build virtual workforces spread around the world, not only soaking up low-cost talent but also tapping the biggest brains on earth to collaborate on complex projects. Marc Andreessen, Netscape Communications Corp.'s co-founder and now chairman of Opsware Inc. (OPSW ), a Sunnyvale (Calif.) startup, sees this reshuffling of brainpower leading to bold new applications and sparking growth in other industries, from bioengineering to energy. This could mean a wealth of good new jobs, even more than U.S. companies could fill. "It requires a leap of faith," Andreessen admits. But "in 500 years of Western history, there has always been something new. Always always always always always."
This time, though, there's no guarantee that the next earth-shaking innovations will pop up in America. Deepa, for example, has high-speed Internet, a world-class university, and a venture-capital industry that's starting to take shape in Bombay. What's more, her home country is luring back entrepreneurs and technologists who lived in Silicon Valley during the bubble years. Many came home to India after the crash and now are sowing the seeds of California's startup culture throughout the subcontinent. What's to stop Deepa from mixing the same magic that Andreessen conjured a decade ago when he co-founded Netscape? It's clear that in a networked world, U.S. leadership in innovation will find itself under siege.
The fallout from this painful process could be toxic. One danger is that high-tech horror stories -- the pink slips and falling wages -- will scare the coming generation of American math whizzes away from software careers, starving the tech economy of brainpower. While the number of students in computer-science programs is holding steady -- for now -- the elite schools have seen applications fall by as much as 30% in two years. If that trend continues, the U.S. will be relying more than ever on foreign-born graduates for software innovation. And as more foreigners decide to start careers and companies back in their home countries, the U.S. could find itself lacking a vital resource. Microsoft CEO Steven A. Ballmer says the shortfall of U.S. tech students worries him more than any other issue. "The U.S. is No. 3 now in the world and falling behind quickly No. 1 [India] and No. 2 [China] in terms of computer-science graduates," he said in late 2003 at a forum in New York.
Fear in the industry is palpable. Some of it recalls the scares of years past: OPEC buying up the world in the '70s and Japan Inc. taking charge a decade later. The lesson from those episodes is to resist quick fixes and trust in the long-term adaptability of the U.S. economy. Job-protection laws, for example, may be tempting. But they could hobble American companies in the global marketplace. Flexibility is precisely what has allowed the U.S. tech industry to adapt to competition from overseas. In 1985, under pressure from Japanese rivals, Intel Corp. exited the memory-chip business to concentrate all its resources in microprocessors. The result: Intel stands unrivaled in the business today.
While the departure of programming jobs is a major concern, it's not a national crisis yet. Unemployment in the industry is 7%. So far, the less-creative software jobs are the ones being moved offshore: bug-fixing, updating antiquated code, and routine programming tasks that require many hands. And some software companies are demonstrating that they can compete against lower-cost rivals with improved programming methods, more automation, and innovative business models.
For the rest of the decade, the U.S. will probably maintain a strong hold on its software leadership, even as competition grows. The vast U.S. economy remains the richest market for software and the best laboratory for new ideas. The country's universities are packed with global all-stars. And the U. S. capital markets remain second to none. But time is running short for Americans to address this looming challenge. John Parkinson, chief technologist at Cap Gemini Ernst & Young, estimates that U.S. companies, students, and universities have five years to come up with responses to global shifts. "Scenarios start to look wild and wacky after 2010," he says. And within a decade, "the new consumer base in India and China will be moving the world."
People SkillsTo thrive in that wacky world, programmers like Stephen must undergo the career equivalent of an extreme makeover. Traditionally, the profession has attracted brainy introverts who are content to code away in isolation. With so much of that work going overseas, though, the most successful American programmers will be those who master people skills. The industry is hungry for liaisons between customers and basic programmers and for managers who can run teams of programmers scattered around the world. While pay for basic application development has plummeted 17.5% in the past two years, according to Foote Partners, a consultant in New Canaan, Conn., U.S. project managers have seen their pay rise an average of 14.3% since 2002.
Finding those high-status jobs won't be easy. Last summer, 34-year-old Hal Reed was so hungry for a programming job that he answered an ad in the Boston Globe for contract work at cMarket, a Cambridge (Mass.) startup. The pay was $45,000 -- barely more than an outsourcing company charges for Indian labor. But he took it. Fortunately for him, he was able to convince his new boss quickly that he was much more than a programmer. He could lead a team. Within weeks, his boss nearly doubled Reed's pay and made him the chief software architect. "He had great strategic thinking skills," says Jon Carson, cMarket' chief executive. "You can't outsource that."
To prepare students for the hot jobs, universities may need to revamp their computer-science programs. Carnegie Mellon University, where Stephen now studies, has already begun that process. His one-year master's program focuses on giving students the skills needed to manage teams and to play the role of software architect. Such workers are the visionaries who design massive projects or products that hundreds or even thousands of programmers flesh out.
The key players in the drama, including these two master's students, Stephen and Deepa, don't have the luxury to wait and see how it turns out. Their time is now. Deepa graduates in May from the Bombay campus of the Indian Institute of Technology, a top university nestled between two lakes. Stephen emerges three months later from the Pittsburgh campus of CMU.
The options they're eyeing illustrate the unfolding map of an industry in full mutation. A software career is no refuge for the faint of heart. Deepa, for example, could suffer if the U.S. government moves to block offshore development or if rocky experiences in foreign lands spark an industry backlash. And Stephen, if he misplays his hand, could find himself competing with lowballing Filipinos or Uruguayans.
For now, their stories reflect the moods in their two countries -- one with lots to lose, the other with a world to win. Deepa is brimming with optimism about the future, convinced that her opportunities are limited by nothing more than her imagination. She is thinking not only about the next job but about the startup that she'll found after that. Stephen, by contrast, is cautious. Even at 22, he's attuned to the risks of a global market for software talent. While confident he'll make a good living, he's plotting out a career that sacrifices opportunities for a measure of safety. Self-protection, an afterthought five years ago, is a pillar of his strategy.
Seeking a NicheIt's midday in the windowless basement labs at CMU's Wean Hall. Stephen, tall and lanky, wearing a white T-shirt tucked into jeans, leans back in his chair and ponders his future. He signed up for the master's program at CMU on the advice of a professor in Omaha who told him that graduates with an MS could land more interesting jobs and make more money. But now the big recruiters coming onto the snowy Pittsburgh campus -- companies such as Microsoft and Amazon.com Inc. (AMZN ) -- are hiring cheaper undergrads, he says, and barely giving the masters a look. Sure, other recruiters come knocking. Banks, he says with a grimace. Insurance companies. But the idea of working in a finance-industry tech shop leaves him cold. "I'm not even interviewing," he says.
The 17-year-old hotshot who was ready to skip college and make a mint has undergone quite a change. He's married, has witnessed the bumps in the world of software, and plans to establish "an upper-middle-class lifestyle, and maybe more" as a businessman. His plan is to carve out a niche for himself back in Omaha. He'll gather three or four colleagues and produce custom software for businesses in town, from hospitals and steakhouses to law firms. Omaha is plenty big, he says, for a good business, but it's remote enough to insulate his startup from offshore competition -- and even from the bigger competitors in Chicago.
Stephen understands the threat posed by smart and hungry programmers in distant lands. He was once such a programmer himself. From his senior year in high school all the way through college, he worked as a freelancer for a New York software-development company, Beachead Technologies Inc. Geoff Brookins, Beachead's young founder, spotted Stephen's prize-winning entry in the 1999 Microsoft Web-site design contest. He called Nebraska, sent Stephen some work, and was blown away. "He did two months of work in three days," he recalls. Brookins quickly signed him on at $15 an hour, ultimately paying him $45 an hour. Like the Indians, Stephen provided a low-cost alternative to big-city programmers -- but he had an advantage because he spoke American English and was only one time zone away from New York.
The job let Stephen work on projects that normally would have been far beyond the reach of a student. One was to create IBM's (IBM ) Web page for its Linux operating-system technology -- a crucial arm of Big Blue's business. "Stephen was lead engineer on that project," Brookins says. The student also got to spend much of the summer of 2001 working at Beachead's office in New York City. It was a fun contrast to Nebraska, he recalls. But he stopped working for Beachead after he moved to Pittsburgh last summer.
It was there that Stephen got a strong signal that the prospects were dimming for programmers. When his wife, Amy, a fellow computer-science student from Nebraska, began looking for programming work, she came back to their suburban apartment disheartened. The only available jobs, she says, "would have paid me interns' rates." She ditched the profession and is now writing a Christian-themed novel.
Then, Stephen's old boss hammered home the dangers of coding for a living in a wired world. Beachead's competitors were finding cheaper labor offshore, and Brookins, to win contracts, had to match them. Last fall, he logged on to a Web site, RentACoder, a matchmaking service between employers and some 30,000 programmers around the world. There, Brookins found a 27-year-old Romanian named Florentin Badea, a star from Bucharest's Polytechnic University and the 11th-ranked programmer on the whole site. Badea was willing to charge just $250 for a project that would have cost $2,000, Brookins estimates, if Stephen had done it.
Those same global forces, Stephen admits, could eventually hollow out his business in Omaha. Already, Indian tech-services outfits such as Infosys and Wipro are competing head-to-head with U.S. companies in this country. But Stephen is betting that by working closely with customers, he can whip bigger firms on quality and service. He says he'll give the venture six months to a year and then see what happens.
Ultrafast TrackDeepa sees a reverse image of Stephen's worldview. Where the prospects for U.S. tech grads seem to narrow as they peer into the future, she's looking down an eight-lane highway. Yet she faces her own set of challenges, she acknowledges, while sipping tea with her classmates in a breezy open-air cafeteria on the Indian Institute of Technology's Bombay campus. They don't want to be cogs in a software-programming factory -- India's role to date. Instead, they want India to be a tech powerhouse in its own right. "Good Indian engineers can do good design work, but we need a venture industry" so Indians can start their own companies, says Deepa. Her pals nod in agreement.
Deepa is positioned on India's ultrafast track. The country pins high hopes on the 3,000 students in the six Institutes of Technology. Their alumni are stars locally and worldwide -- including Yogen Dalal, a top venture capitalist at Mayfield, and Desh Deshpande, founder of Sycamore Networks and Cascade Communications. Within this elite, Deepa and her friends are a rarified breed. They aced the grueling national exams, ranking in the top 0.2% and winning places in the school of computer science. They're known as "toppers." The challenge for Deepa's small crowd is to move beyond the achievements of Dalal and Deshpande, who notched their successes for U.S. companies, and to make their mark with new Indian companies.
That means bypassing the bread-and-butter service giants, such as Tata, Infosys, and Wipro, that dominate the Indian stage. The jobs they offer, says Deepa, sound boring. To get their hands on exciting research and more creative programming, she and her friends are banking mostly on U.S. companies in India, including Intel, Texas Instruments, and Veritas. This summer, when Deepa graduates, she'll be a software engineer at the Pune operations of Veritas Software Corp. (VRTS ), a Silicon Valley storage-software maker. Her pay will start at $10,620 a year -- plenty for a comfortable middle-class life in India. "I'm living my dream," she says.
And thrilling her family. Her father, Arun Paranjpe, who grew up in Mhow, a tiny army-base town in central India, could afford only a bachelor's degree, which prepared him for work as an officer in India's railways. He regretted not advancing further and along with Deepa's homemaker mother, he pushed his two daughters toward advanced professional degrees. So while she studied Indian classical vocal music for nine years and escaped, when she could, to the cricket field, Deepa always finished at the top of her class in mathematics. That helped her land a plum spot in the computer-science program at Nagpur University.
Now Deepa is ITT-Bombay's star in search technology -- and she's hoping that this specialty will be her ticket to a rip-roaring career. She routinely works till 3 a.m. in the department's new 20-pod computer lab, doing research on search engines. She admits the work at Veritas, at least initially, will involve more routine database tasks than the cutting-edge work she's hoping for. But if Veritas disappoints, a topper like Deepa will have plenty of other options. Both the search giant Google Inc. and the Web portal Yahoo! are setting up research and development centers in India this year. Deepa hopes to manage a research lab some day, and ultimately, she says, "I'd like to be an entrepreneur."
But she's an entrepreneurial revolutionary and family traditionalist at the same time. It's part of her balancing act. Consider her eventual marriage. As an attractive, professional woman, she'll make a prize catch in India's conservative marriage market. Deepa expects she will have an arranged marriage: Her parents will chose a suitable husband for her from within her own caste. But she is firm: Her husband would have to be an entrepreneur, or a tech whiz, and preferably in the same field, "so we can have a common platform and he can understand my work," she says.
Maybe one day the couple will be able to raise venture money together. While venture-capital investing didn't exist in India until a few years ago, the industry is starting to take root. In 2003, India's 85 venture-capital firms invested about $162 million in tech companies, according to estimates from the India trade group National Association of Software & Services Cos. That's up from zero in 1998. Still, it's miles short of the financial support available to Stephen and his classmates. The 700 U.S. venture firms poured $9.2 billion into tech startups last year, according to market researcher VentureOne.
Multicultural EdgeDiversity is another advantage the U.S. has over India. Take a stroll with Deepa through the leafy ITT campus, and practically everyone is Indian. Stephen's scene at CMU, by contrast, feels like the U.N. Classmates joke in Asian and European languages, and a strong smell of microwaved curry floats in the air. This atmosphere extends to American tech companies. With their diverse workforces, American companies can field teams that speak Mandarin, Hindi, French, Russian -- you name it. As global software projects take shape, with development ceaselessly following the path of daylight around the globe, multicultural teams have a big edge. Who better than U.S.-based workers to stitch together these projects and manage them? "These people can act as bridges to the global economy," says Amar Gupta, a technology professor at Massachusetts Institute of Technology's Sloan School of Management.
The question is whether the technology industry can respond quickly enough to a revolution that's racing ahead on Internet time. Stephen's former boss, Brookins, frets that the pace could overwhelm the coming generation of U.S. programmers, including his former Nebraska star. "He's a genius. He's the future of the country. [But] if the question is whether there's going to be a happy ending for Stephen, there's a big question mark there," Brookins says. Stephen is betting that quality and customer service will offset the cost advantage of having computer programmers 10 time zones away. He still sees software in the U. S. as a path to wealth -- "though I won't really know until I get out there," he says.
While Stephen is busy mounting his defenses, Deepa is setting out on the hard climb to build Silicon India. Much like their two countries, the leader is looking cautiously over his shoulder while the challenger is chugging single-mindedly ahead. No matter which way they may zig or zag, both of them are prepared to encounter rough competition from every corner of the globe. There's no such thing as a safe distance in software anymore.
source:[businessweek.com]

Indians tipped to stay on top, for now

Angus Kidman INDIA may be the dominant player in offshoring IT and business activities, but other countries are seeking to curry favour with executives and grab a share of an increasingly busy market.
There's a lot at stake. Analysts at Gartner estimate that global spending on offshoring will reach $65 billion by 2007. Analysts say India is unlikely to be be toppled from its position as offshoring champion in the near future.
Its position at the top of the offshoring ladder is supported by English language skills; a well-established legal system; low labour costs; and a large pool of offshoring specialists with representation in client markets such as the US and Australia.
Gartner vice-president Bob Hayward says there's no evidence of any big Australian companies examining offshoring in markets outside of India, in part because no organisations from other countries have set up offices here.
"The most successful offshore providers have invested heavily in front offices," he says.
India has had a focus on overseas markets from the very beginning of its IT industry, he says.
However, in the longer term, China is emerging as a threat to India's dominance. Some eastern European countries may also tarnish its technology crown.
The top-five offshoring destinations this year are India, China, Costa Rica, the Czech Republic and Hungary, according to the Global Outsourcing Report by Horasis and Going Global Ventures.
The Economist Intelligence Unit has a slightly different take on the market. It lists the main players as: India, China, the Czech Republic, Singapore and Poland.
The Global Outsourcing Report says the situation will change by 2015.
China will have demoted India to second place, and larger nations, the US, Brazil and Russia, will have used scale to reassert their dominance in the global marketplace, it says.
Skills shortages and other factors are beginning to influence offshoring decisions.
A survey by Hewitt Associates found that a lack of skilled staff was forcing some companies into offshoring regardless of cost.
Gartner analyst Partha Iyengar says cost is not the only factor. "While cost savings is the most frequently cited reason for the decision to rely on offshore sourcing, it is not the only driving force between teaming offshore and local development groups."
However, cheaper labour is the main reason companies are shifting IT activities across borders.
In that field, while India remains competitive compared with Western nations, it is facing stiff competition by players such as China.
At the lowest end, Vietnamese programmer salaries are typically half of those in India, and less than a tenth of the comparable salary in Australia.
Gartner predicts Indian labour costs may rise by as much as 60 per cent by 2008.
Indian outsourcing providers are keen to downplay the threat.
"Areas such as China, Eastern Europe and the Philippines are becoming major players in IT offshoring but India still has an overwhelming advantage because of the support of the government and the country's huge talent pool," Wipro chairman Azim Premji said in a recent interview.
One commonly-touted scenario suggests India will dilute the threat from China by using Chinese labour to do basic tasks, but retain the overall management of offshoring contracts.
Many of the emerging offshoring players are concentrating their skills in particular fields.
The Philippines has developed a solid reputation for call-centre and data-entry outsourcing, while a number of eastern European countries specialise in high-end coding tasks and security applications.
One potential advantage for Soviet countries may be their legacy of a well-developed education system compared to their Asian counterparts, providing a solid pool of staff for more technically oriented activities.
Conversely, they are perceived as lacking political stability and legal sophistication.
Political stability is less of an issue for centrally-managed China, but a lack of English language skills may restrict its ability to grow.
Hayward says most Chinese IT companies can get plenty of business from the growing domestic market and don't yet need to look offshore for revenue.
The emergence of these new players does not spell good news for Australian IT workers.
The Global Outsourcing Report says that while only 32 per cent of companies are offshoring, half of those that do cut positions in their home countries.
source :[australianit.news.com.au]

Siemens Information Systems To Expand BPO Operations

MUMBAI: Siemens Information Systems (SISL) Ltd, one of the leading Systems Integrators and a total solutions provider will be expanding its business process outsourcing (BPO) operations in the next 6 months from the current 50 agents to 200 agents. SISL’s Managing Director Anil Laud said that this could grow to a ‘couple of 1,000’ agents in the next 18 months. The BPO business of the company had commenced a year back and is called Siemens Shared Services. Mr Laud added that this name might undergo a change. When set up, the shared services were restricted only to Siemens. The company has recently exten-ded its services to Siemens’ customers. SISL has also signed a distribution agreement with VocalTec Communications, a telecom equipment provider offering packet voice solutions for carriers and service providers. SSIL will offer vocaltec’s end-to-end solutions, both hardware and software, along with its own system integration services for third party software vendors within India and neighbouring regions excluding Nepal and including the Middle East.
VocalTec’s solutions include international and long distance calling, voice VPN, calling card, excha-nge carrier and ‘surf & call’ e-comm.
VocalTec also plans to offer intra-state voice over Internet protocol (VoIP) services as soon as the concept receives regulatory approval. VocalTec’s vice-president sales (Asia-Pacific) Zwicka Ben Zion says, “We have the solution ready for the intra-state Internet telephony market, once the telecom regulator agrees to its use we will introduce the system in India.” He said domestic and global market trends would induce the telecom regulatory authority of India to allow use of VoIP by way of mobile phones.
source : [www.financialexpress.com]

Are Too Many Jobs Going Abroad?

RiOSEN SHARMA IS SURE ABOUT ONE THING. HIS NINE-month-old company, Solidocore, a start-up that makes backup security systems for computers, could not survive without outsourcing. By lowering his development costs, the 18 engineers who work for him in India for as little as one-fourth the salary of their American counterparts allow him to spend money on 13 senior managers, engineers and marketing people in Silicon Valley. If he doesn’t outsource, in fact, the venture capitalists who fund stat-ups like his won’t give him a nickel. Sharma’s Indian-American team, tethered by a broadband connection, gets his product in front of customers faster and cheaper. “As a business, you have to stay competitive,” he says. “If we don’t do it, our competitors will, and they’re going to blow us away.”
But Sharma’s sharp analysis loses its edge when he thinks about what decisions like his will mean someday for his children, a 2-year-old daughter and another on the way. “As a father, my reaction is different than my reaction as a CE,” he says. He believes that companies like his will always need senior people in the U.S. like the systems architect who designs new products and the experienced salespeople who close deals. “But if you’re graduating from college today, where are the entry-level jobs?" Sharma asks quietly. How do you get to that secure, skilled job when the path that path you there has disappeared?
That’s an issue that economists, politicians and workers are struggling with as the U.S. finds itself in the middle of a structural shift in the economy that no one quite expected. There must be a mix-up here. We ordered a recovery, heavy on the jobs, please. What we’re getting is a new kind of homeland insecurity powered by the rise of outsourcing, a bland yet ominous piece of business jargon that seems to imply that every call center, insurance-claims processor, programming department and Wall Street back office is being moved to India, Ireland or some other place thousands of miles away.
To be sure, public anxiety and election-year finger pointing have blurred some important distinctions. To set them straight: most of the jobs that have shifted to places like Mexico and China in the past several decades have been in manufacturing, which is being done with ever increasing sophistication in low-wage countries. Some have also blamed trade-liberalization deals like the North American Free Trade Agreement (NAFTA), which the Labor Department estimates was responsible for the loss of more than 500,000 U.S. jobs between 1994 and 2002. That’s significant number but modest in comparison with the millions of jobs that are created and lost annually in the constant churn of the U.S. economy. Indeed, much of the job loss during the recent U.S. recession was cyclical in nature. But in recent years, one noteworthy segment of the economy began suffering from the permanent change of outsourcing (or off-shoring), particularly the movement of service-industry, technology-oriented jobs to overseas locations with lower salaries. What puts teeth into the buzz words is the sense that getting outsourced could happen to almost anyone.
Outsourcing, primarily to India, accounts for less than 10% of the 2.3 million jobs lost in the U.S. over the past three years. But the trend is speeding up, and it is quickly becoming the defining economic issue of the election campaign. The Administration learned that the hard way a few weeks ago, when President Bush’s chief economic adviser suddenly found himself on the wrong side of the issue. In a casually imperious tone worthy of Martha Stewart, Gregory Mankiw declared, “Outsourcing is just a new way of doing international trade…More things are tradable than were tradable in the past, and that’s a good thing.”
Many economists agree with him. Anything that makes an economy more efficient tends to help in the long run. But in reducing job losses to macroeconomix landfill, Mankiw handed Democrats an issue. His words, accompanied by an ominous drumbeat, are now immortalized on the AFL-CIO’s website, just before an image of a beaming John Kerry, who won the union’s endorsement last week.
Kerry is taking the opportunity to paint Bush as insensitive to middle-class job anxieties. “I don’t think the Bush Administration has over felt this or had a sense of it,” Kerry told TIME. “And I think the No.1 major issue facing the country right now is, How do you really create the jobs that we want?” With a touch of demagoguery, John Edwards has sought to get an edge on Kerry by reviving the unresolved battle over NAFTA, which Kerry voted to approve a decade ago. “When it comes to bad trade agreements, I know what they do to people,” Edwards said last week. “ I have seen it with my own eyes what happens when the mill shuts down.” Kerry points out that at the time Edwards was in no position to put anything on the line over NAFTA: “I don’t know where he registered his vote, but it wasn’t in the Senate.”
Source : [www.time.com]