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Their argument is, After all, offshore labor is so much cheaper that throwing more bodies at your projects is a nobrainer. In fact, here is where it pays you to devote some brainpower to your problems. For projects that are not running efficiently, scaling up an operation will only make matters worse. Whats needed is to identify and solve problems first. There are a range of issues that can affect efficiency of your offshore operation.
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While you pay offshore vendors much less than what you would be paying a U.S. Vendor, some members of your staff complain that offshore productivity is really low, that 2 or 3 offshore people are doing the same work that used to be done by one experienced person in the United States. And thats not all, offshoring entails additional costs for travel, communications, and duplication of equipment, to name just a few expenses. At least some of your staff may be implying,or even loudly proclaiming,that offshoring is not saving money after all and moving some functionality was a bad idea. Even if offshoring may have saved you money in the beginning, it may not be doing so any longer. After all, offshore labor costs are on the rise.
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The current stampede toward offshore outsourcing should come as no surprise. For months now, the business press has been regurgitating claims from offshore vendors that IT work costing US Dollar100 an hour in the United States can be done for US Dollar 20 an hour in Bangalore or Beijing. If those figures sound too good to be true, thats because they are. In fact, such bargain basement labor rates tell only a fraction of the story about offshore outsourcing costs. The truth is, no one saves 80 percent by shipping IT work to India or any other country. Few can say they save even half that. As just one example, United Technologies, an acknowledged leader in developing offshore best practices, is saving just over 20 percent by outsourcing to India.
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Based on interviews with tech executives at the top 11 companies in this years edition of the annual InformationWeek 500, there is little doubt of the tremendous impact that offshore outsourcing is having on their businesses.Most of the execs view offshoring as a way to improve their capabilities rather than just a costcutting measure.
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Its a testament to the evershifting dynamism of the flat earth that so much back and forth is occurring in the global IT outsourcing game. By now everyone knows about the big U.S. IT services companies EDS, Accenture, IBM, etc. acquiring and hiring in India. However, in recent years, the major Indian IT consultancies including Tata, Infosys and Wipro have similarly instituted bigticket North American employee training and development programs in a bid to capture more U.S. market share. Bangalorebased Wipro which recently joined the ranks of SAP global partners such as Accenture, BearingPoint, Capgemini, Deloitte and IBM has now come one step further stateside by buying U.S. data center specialist Infocrossing in early August of this year, potentially giving it an edge with U.S. customers concerned about sending sensitive company data to India.
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A question many executives are asking is how can we tell whether our offshoring efforts are delivering value to our company. While you pay offshore vendors much less than what you would be paying a U.S. vendor, some members of your staff complain that offshore productivity is really low, that 2 or 3 offshore personnel are doing the same work that used to be done by one experienced person in the United States. And thats not all.
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Lets reduce costs by going offshore with some development or service functions! The board and management agree to set up offshore activities in a place like India, China, Russia, Slovenia, or Bulgaria. Time passes. Everyone is happy. Right. Well, maybe.Many companies are finding that their goals are not being met in a consistent way. Issues creep into the picture. These issues are really symptoms of deeper problems. Issues that frequently arise are
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Finding a new job for an outofwork software engineer in the US or having a repairman fix a broken window pane in Geneva is all part of the dayb s work at GetFriday, a Bangalorebased company that offers such services, termed virtual assistance, to individuals and small businesses across the world. This is outsourcing upcloseandpersonal. Companies offering such services remotely support faulty home computers, file individual tax returns, tutor schoolchildren online and run personal chores. The business could be worth US Dollar 2 billion Rs8,100 crore by 2015, up from US Dollar 250 million in 2006, according to an April 2007 study on person toperson offshoring by Evalueserve, a global knowledge services firm.
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Indian IT firms that thrived on the outsourcing boom in the West are themselves headed offshore, from Malaysia to Mexico, to escape the double sting of surging salaries and a rising rupee. TCS, Infosys, Wipro, Satyam and smaller companies are stepping up acquisitions and opening more facilities closer to US and European clients to cut costs , the reason why work was farmed out to India in the first place.
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Many companies are finding that once the honeymoon period in offshoring is over, issues tend to crop up with the offshore vendor. When you started working with your vendor to set up the initial projects for offshore work, they were attentive. You felt they considered you to be the most important client in the world. They took time to educate their people about your companys specific needs. Unfortunately, things have changed. Now your offshore vendor seems distracted and distant, their staff doesnt seem to remember all of your needs or seem indifferent to them.
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One of the key decisions a company needs to make in offshoring software development is which projects to offshore. You cannot simply offshore maintenance projects, because your staff in the U.S. wants to work on new product development. This issue must be carefully thought through and here are time tested and proven guidelines.
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Satyam Computer Services Ltd., a leading global consulting and IT services provider, announced today that its 500seat Global Solutions Centre GSC in Malaysia is fully operational. It is the first phase of the rollout of Satyams Global Delivery Campus in Malaysia.Inaugurated today by Malaysias Second Minister of Finance, YB Senator Tan Sri Nor Mohamed Yakcop, Deputy Minister of Science, Technology, and Innovation, YB Dato Kong Cho Ha, and Satyam Founder and Chairman Mr. B. Ramalinga Raju, the facility will become Satyams largest outside India. The GSC is already staffed by 300 mostly Malaysian IT engineers, who support Satyams ASEAN, Middle Eastern, and American customers.
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People who are the epitome of knowledge and are residing in small cities, more often move to larger cities for their career prospect. But few people stay behind, despite the fact of their wittiness and remain ungainfully employed. In short, their talents just not justify their career graph and as a result, they cant make their good presence.
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Nowadays, this question rises in every mind , Salaries are raising fast in India, does India still make sense as the outsourcing destination.Current Indian salaries for developers are in the range of US Dollar 15K to US Dollar 20K. Silicon Valley salaries for similar skills are in the range of US Dollar 60K to US Dollar 90K. When you add other costs , additional management, travel, productivity difference, communication, duplication of equipment and so on, cost in India is still a fraction of the U.S. cost.
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Offshore outsourcing is no longer a novel idea. It is an accepted business practice and for many the offshore operation has become a significant part of their overall operations. So it is essential they succeed in this endeavor. However the reality is that better than 50 percent of offshoring initiatives fail to meet original expectations. Successfully managing offshore projects requires that you understand the major challenges. These have broken down into two categories, External and Internal.
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Green policy credentials are high on the agenda of companies looking for outsourcing partners and outsourcing vendors and those that fail to demonstrate environmental policies risk being dumped, according to a report by outsourcing consultancy Brown Wilson Group.Corporations are shifting their responsibility for environmental concerns to the supply chain, said the firm in its report, Black Book of Outsourcing 2007 Green Outsourcer Report.
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These are testing times for the Indian IT ITeS industry. If it has to take on the challenges posed by global competition, it cannot merely bank on its historical advantage of cost arbitrage to grow. It must engender innovation both at the firm and the industry level. This is what the Innovation Report 2007. Unleashing the Innovative Power of Indian IT ITeS Industry, recently released by Nasscom and the Boston Consulting Group BCG, warns.
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The infamous race to the bottom may not be over. But increasingly, service industries are moving operations not to nations at the bottom, which is to say, nations like India, where labor is cheapest, but to where the work will be done best. The new race is to find the mostcompetitive service. And it speaks volumes about the rapid modernization of India that its companies are still out front.
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