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Welcome to Smart Enterprise Exchange: Outsourcing Wisdom: 9 Global Services Trends for 2012

Atul — Tue, 22 Nov 2011 16:30:36 +0000

Outsourcing Wisdom 9 Global Services Trends for 2012Posted by Atul Vashistha on Nov 2, 2011 7:26:54 AMOut with the old and in with the new — well, almost! We do see “retro” back in fashion in some areas of the outsourcing market when looking ahead to 2012. What follows are nine key trends that CIOs can expect in the coming year in terms of outsourcing and global services. 1. Demand outlook is bright, with some points to consider. Demand will weaken initially, but then should improve by mid-year. The inhibiting factors and pain points will be:Continued tight budgets.Minimal discretionary spending, with approvals requiring rigorous ROI explanations. The majority of investments will need to show positive ROI within the fiscal year and, as a result, lead times and planning cycles will be short.Most IT budgets will be approved on a rolling monthly or quarterly basis.Systems integration, led by standardization and migration to common global processes, will lead growth. Simplify remains the buzzword for CIOs.Cloud computing offerings will stimulate greater demand for infrastructure outsourcing. Outsourcing providers, therefore, will revamp the architecture of their product offerings to fit the modular needs of a cloud environment. As a result, buyers moving to the cloud will create a big demand for redesigning software architecture, and also for quality assurance and testing services.The ROI of business process outsourcing will continue to be challenged. As providers support clients in this sourcing area, we see a lack of domain skills on their teams hindering deals.Outsourcing by midmarket companies will be on the rise, with much attention paid to platform-based, bundled outsourcing and transaction-based pricing. Typical examples are payroll and hosting services. 2. Operating models are going retro.There are some contradictions affecting the market. On the one hand, clients frustrated with suppliers’ rising costs, governance challenges and uneven performance are exploring in-sourcing more often. At the same time, continued hiring and attrition challenges at global businesses, and overall governance requirements, will accelerate buyers’ move to managed services models. This will need to shake out over the year. 3. Professionalization of outsourcing will increase.Supplier management and governance challenges will also spur the need for professionally trained managers. Programs such as the Certified Outsourcing Professional COP from the International Association of Outsourcing Professionals IAOP, and training workshops will be leveraged more often.Additionally, customers will increasingly see clear differences among suppliers in the services sector versus other outsourced product categories. As a result, high-quality procurement managers will be in greater demand.

via Welcome to Smart Enterprise Exchange: Outsourcing Wisdom: 9 Global Services Trends for 2012.

Survey: Is Brazil IT for sale? | IT Decisions

Atul Vashistha — Sun, 21 Aug 2011 22:44:34 +0000

Survey: Is Brazil IT for sale? | IT Decisions.

CPM-Braxis with capgemini; Politec now with Indra ….

Why are Indian majors not there in a big way yet? In fact one would expect to see more USA players in there. Accenture and IBM of course are there but others are still missing!

Forbes India Magazine – How Chandra Helped TCS Climb To The Top

Atul Vashistha — Wed, 13 Jul 2011 00:05:14 +0000

Forbes India Magazine – How Chandra Helped TCS Climb To The Top.

Worth reading. One of the “Built to Last” firms.

Colombia: Understanding the Nation’s Passion for Outsourcing | Nearshore Americas | Latin America Outsourcing Analysis and Expert Commentary

Atul — Tue, 28 Sep 2010 16:25:36 +0000

Colombia: Understanding the Nation’s Passion for Outsourcing | Nearshore Americas | Latin America Outsourcing Analysis and Expert Commentary.

“Colombia is Passion” is the brand the Colombian government at the helm at pro-export chose to brand the nation. What one soon discovers in this beautiful country of beautiful people is a passion for business, music and family. One also soon realizes that a passion for outsourcing already exists here too!

Colombia is a rising star in Latin America. Once perceived to be unsafe, the country has, over the last decade, transformed itself as one of the best locations to do business in Latin America, ranking higher by the World Bank in 2010, than countries such as Peru, Panama, Brazil, Chile and Mexico.

Citi, Henkel, Wyatt, Abbott and HP have captive centers here that serve as regional centers. International firms such as Telefonica, Telmex, Avianca, Greyhound and Tracfone leverage outsourcers such as Telemark, Teleperformance, Assenda, Avanza, Unisys, ACS and IQ Outsourcing. Domestic firms such as Carvajal, Bancolombia, Suramericana, Banco Agrario and even the Colombian government are not much behind in leveraging outsourcing. Interestingly, Bancolombia leverages not just local suppliers like Assenda but also leverages global suppliers such as ACS, TCS andInfosys.

ROOM FOR IMPROVEMENT: While the country has a large population, the level of maturity of ITO and BPO operations is limited. No CMM 5 providers or six-sigma black belts are found easily. Call center operations are advanced but process discipline in other business process needs scale. So, if you are going to setup or outsource here, suggest that you invest in ongoing training and process discipline.

What makes Colombia such a passionate adopter and attractive destination for outsourcing?

A country with a population of 46 million with outsourcing friendly labor pools in multiple cities such as Bogota, Medellin, Cali, Baranquilla and even Periera, presents multiple options for buyers and suppliers. Thirty cities have a population of 100,000 or more. Bogota produces 67,000 graduates every year, of which, 17,000 are technical graduates. At present, the combined workforce of IT and BPO industry in Bogota exceeds 50,000.

Labor costs in Colombia are very attractive with Bogota being one of the least expensive cities in the region. Labor cost for bi-lingual while higher than Spanish speaking employees, is 15-25% lower than comparable employees in Monterrey or Buenos Aires. Real estate costs are lower too than Mexico City and Sao Paulo.

More …. at Nearshore Americas

Oracle to Acquire Major IT Services Firm, In Our Opinion

Atul — Thu, 09 Sep 2010 21:39:00 +0000

I am posting this as I believe that thus is overdue!

Oracle to Acquire Major IT Services Firm, In Our Opinion.

By: Stephen Jannise

ERP Market Analyst, Software Advice
on 9/9/2010

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Last month, we hosted a survey on which company Oracle might acquire next. If you missed it, be sure to check out the results in our post, “Oracle Mergers & Acquisitions: Who’s Next?” We had a great turnout with over 1,250 industry experts sharing their predictions. Among the more substantiated claims was the prediction that a global systems integrator like Capgemini could be a logical fit for Oracle. Now that Mark Hurd has joined their executive team, we think it’s all the more likely that Oracle will make a major acquisition in the IT services market.

By acquiring the consulting arm of PricewaterhouseCoopers in 2002, IBM solidified its dominance over the global technology services industry. Hurd’s acquisition of EDS in 2008 was seen as a direct assault on IBM Global Services, making HP the strongest contender for IBM’s throne. Now, Hurd is essentially competing against himself, facing not only IBM but also the very beast that he created, HP Enterprise Services. Can he achieve for Oracle what he has already achieved for HP?

If so, Hurd will have more than one option to choose from. Capgemini has a relatively low P/E, and its recent acquisition of a majority stake in CPM Braxis, a leader in Brazilian IT services, makes it an even tastier morsel. However, there are many other fish in the services sea, so we’ve decided to look at several other services providers as well. Which of these do you think Oracle should go after? Leave us a comment below.

Indian IT: Just to Name a Few
For the past two decades, India has been a major player in the global IT services market. A number of highly successful Indian companies emerged during the Y2K boom, and a few of them have grown to become multi-billion dollar businesses. Three particularly well-regarded companies are:

A company that started out with $250 and grew to become a $5 billion global consulting and IT services provider. Last year, it became a member of the Global Dow, which suggests a strong global influence that might be appealing to Oracle.

Initially responsible for providing computer services to its more established sister company Tata Steel, Tata Consultancy Services is now the largest IT services provider in Asia. Throughout the last decade, Tata completed a series of well-placed global acquisitions that helped the company gain entry into major markets around the world.

Emerging in the 1980s from what was once a vegetable products factory, Wipro is now a major competitors in IT services and consulting. In recent months, Wipro and Oracle have collaborated quite frequently, as Wipro has drawn upon its history in factory production to develop solutions with Oracle for the manufacturing industry.

However, forming a relationship with one of these companies may bring more problems for Oracle than solutions. Over the past several weeks, many of these Indian IT companies have been fighting against new U.S. government regulations that will add thousands of dollars in new fees. Now, any company with more than half their U.S. workforce on visas will be forced to pay these fees, and spokespeople from Infosys and Wipro have already announced that this legislation could have a significant impact on their operating margin. This is just one example of the many unique issues Oracle would face if they go after one of these overseas companies.

Some Homegrown Alternatives
There are also plenty of American options, some of which match the global influence of the aforementioned Indian companies while offering much smaller pills for Oracle to swallow. Whereas the previous three Indian companies have P/E ratios of 23x-30x, two of the following three American services providers come a little cheaper.

This consultancy serves 96 of the Fortune Global 100 companies, making it the kind of global player Ellison and Hurd will need to compete with IBM and HP. However, Accenture is more than just IT services; its management consultancy arm is responsible for much of its success. Would Oracle want to acquire elements that it may not need? With a $27 billion market cap and a 16x P/E, Accenture is certainly well within reach.

This Pennsylvania company would be an even easier target for Oracle. The company’s revenue has declined in recent years alongside the proprietary mainframe systems market that once made it successful. When equipment sales took a hit, the company’s market cap fell precipitously, forcing them to shift their focus to services. With revenue under $5 billion and a meager 5x P/E, Unisys may be too small to frighten IBM and HP.

In contrast, Cognizant has been one of Fortune’s 100 Fastest Growing Companies for seven years. Their performance is frequently praised, and their revenue grew 16% in 2009. At this rate, Cognizant will strengthen its value and become an increasingly pricey acquisition. With a 32x P/E, time is running out for Oracle to bring this proven commodity into its fold and mount a serious campaign against its competitors.

“Global Sourcing in the New Normal: Adapting to Economic Uncertainty, Changing Markets and Competitive Dynamics”

Atul — Wed, 25 Aug 2010 22:34:23 +0000

“Global Sourcing in the New Normal: Adapting to Economic Uncertainty, Changing Markets and Competitive Dynamics”

by Atul Vashistha

Staffing augmentation. Labor arbitrage. India.

For many out there, outsourcing seems to be defined only by the above – people working for low compensation in locations such as India helping the client save significant monies. That is outsourcing to them. However, the recent and continuing downturn in 2009 and 2010, has upset many notions and models that have been in place for over a decade. What was considered to be the norm or the normal as far as outsourcing is concerned, is now in flux and so requires different responses. The recent downturn has fundamentally changed how firms look at outsourcing. This period also revealed the challenges with current models and practices.

Over the next ten or so articles, I will touch on a topic each time and explore it in more detail. This blog’s topic is

Trend: Location
Take for instance, the call center business. There was a time when India was the only market given due consideration, as far as setting up call center operations was concerned. That notion has been dispelled by other markets such as the Philippines and Costa Rica, which have showcased themselves in exemplary fashion as far as the provision of voice-based customer support services is concerned.

In similar manner, we see the rise of engineering services and local players in Brazil and Russia, increasingly emerging as a premier destination for the outsourcing of complex engineering and applications activities.

The above instances are just some of the many shifts and changes we are likely to continue to witness. In particular, they point towards an endeavor to be on the lookout for markets with newer skill sets, and not just go by established norms wherein predestinated markets such as India have long been considered to be the haven for any and every kind of outsourcing. In the same breath, it is vital that markets with access to equal or better technology processes are also identified. The situation is akin to the age old maxim wherein stock diversification is key to a healthy nest egg; depending on just one or more markets for all of one’s outsourcing needs is really not a very good idea. Increased attrition and competition for resources point to the need for geographic diversification.
Besides skill sets and technology, there are other reasons for which alternate markets also need to be actively considered. Take for instance the aspect of time zone. Many of the Latin American locations lie at the same time zones as the US. There are various outsourcing opportunities that may be tapped here, especially if we are to look at the large Spanish speaking population of the region and juxtapose it with the equally large Hispanic population of the US.

We see the following clusters developing:
Asia Pacific: The key locations in this cluster are India, Philippines, China, Malaysia and Vietnam. Others such as Thailand, Sri Lanka and Indonesia are expected to contribute too.
Europe: The key locations in this cluster are Czech Republic, Poland, Russia, Hungary, Ireland and Romania.
Middle East/Africa: The key locations in this cluster are Egypt, South Africa, Jordan and Ghana. Other locations such as Kenya, Nigeria and Morocco can contribute too.
North America/South America: The key locations are USA, Canada, Mexico, Brazil, Colombia, Chile, Costa Rica and Argentina. Panama and Guatemala can contribute too.

I will be doing a key note at the Global Sourcing Forum in NYC on the 13th of October. Join me in NYC and learn from an industry expert and I on the trends, traps and emerging opportunities that will be the “New Normal” and what you can do to leverage it to your benefit. Learn about rising destinations, new pricing models, leading engagement models, governance technologies and knowledge management models. This keynote is led by Former J&J business unit CIO and Head of eJNJ, John Hammitt and I.

Atul — Thu, 12 Aug 2010 07:26:11 +0000

The End of IT Outsourcing As We Know It – Computerworld

Atul — Thu, 12 Aug 2010 07:26:07 +0000

WoW! I am starting to see “Cloud Computing” being put forth as the “Internet Boom” of the late 90s. Think it has tremendous potential and just like the internet will take its time to mature…. Let’s make sure we “Look Before We Leap”.

FROM COMPUTER WORLD

Arjun Sethi doesn’t equivocate. “In the next five years, outsourcing as we know it will have disappeared,” says the partner and head of the outsourcing practice at consultancy A.T. Kearney. “New players, which have yet to enter the market, will soon rule the industry.”

At the heart of Sethi's prediction of a “massive reconfiguration of the outsourcing industry” is the rise of cloud computing. Most existing providers simply won't adapt quickly enough. As a result, Sethi says, Amazon, Google or a vendor we've not yet heard of will become the market leaders. Meanwhile, traditional infrastructure providers like HP, Dell and Xerox may struggle to keep up, and many Indian providers will disappear completely.

CIO.com talked to Sethi about his vision of the next generation of IT outsourcing.

via The End of IT Outsourcing As We Know It – Computerworld.

Tata Consultancy Services: Improving Results

Atul — Fri, 16 Jul 2010 14:21:58 +0000

Tata Consultancy Services: Investors.

Yesterday, TCS announced a strong performance in the first quarter of the fiscal year. Is the market really improving dramatically or is this the pre-summer bump?

Revenues at $1,794 million

up 6.4% sequentially; up

21.2% Y-o-Y

Financial Highlights for Quarter Ended June 30, 2010:

Operating Profits at $487 million; Growth 32.5% Y-o-Y and 5.1% Q-o-Q
Profit After Tax at $403 million; Growth of 29.3% Y-o-Y and (4.9) % Q-o-Q
Earnings Per Share at $0.21

Business Highlights for Quarter Ended June 30, 2010:

Gross Addition of 10,849 Employees (Net Addition of 3,271 employees)
36 New Clients added

Please use the link below to view the entire press release.

http://www.tcs.com/news_events/press_releases/Pages/Q1-2011-Revenues-USD-1794-million-up-6.4-percent-sequentially-up-21.2-Y-o-Y.aspx <http://www.tcs.com/news_events/press_releases/Pages/Q1-2011-Revenues-USD-1794-million-up-6.4-percent-sequentially-up-21.2-Y-o-Y.aspx>

Forget India, Outsource To Arkansas

Atul — Fri, 09 Jul 2010 19:27:04 +0000

I served on the board of Rural Sourcing Inc., which was founded by Kathy White, Former CIO – Cardinal Health, until this firm was acquired by Clarkson Consulting. A very viable alternative!

I was very impressed by the quality of resources in rural locations such as Jonesboro, Greenville etc. in states such as Arkansas, New Mexico and North Carolina.

Forget India, Outsource To Arkansas.

By CNN at July 08, 2010 Comments (0)

Looking for skilled, low-cost labor? Forget about India and China. How about Jonesboro, Ark.?

As the national unemployment rate hovers near 10%, some companies are starting to eye job-hungry areas of the country as prime candidates for the kind of outsourced work that once would have gone overseas.

Dubbed “ruralsourcing,” “rural outsourcing” and “onshoring,” the practice relies on two simple premises: Smaller towns need jobs, and they offer a cheaper cost of living than urban centers. So businesses that outsource work to these areas can expect to pay less — rates are often as much as 25% to 50% lower — than if they were hiring urbanites with comparable skills. More>>

Tags: arkansas, india, outsourcing