ITBE - OUTSOURCING FOR STRATEGIC ADVANTAGE

Forbes: The offshoring industry is paying a lot of attention to the fact that, in the U.S., the Latino population is the fastest-growing ethnic group, and is predicted to account for 15 percent of the population by 2010. This is good news for the Latin American region, where costs, while not as cheap as India, are certainly lower than in the U.S. and where the native tongue is a virtual goldmine. Both outsourcing call centers and software programming are picking up the pace in places like Buenos Aires, Argentina and Santiago, Chile. Workforce quality, low rent pricing, nearshore availability and the vast number of Spanish-speaking workers will help Latin America move up the offshoring chain, as the U.S. works to appeal to the rising Latino demographic.

OutsourcingInformationTechnology.com: Changing outsourcing suppliers doesn't have to be the nightmare that many believe it is. This article follows one IT manager's successful switch to Unisys, during which he created an easy blueprint that anyone in the same position can follow. The four steps involve assuming good will, assessing the problems with the current situation, normalizing day-to-day processes and, finally, improving and fine-tuning everything. You can't skip any of the steps, which together create a process of "healthy change management."

Computerworld: IT managers who are trying to justify offshoring efforts to India, Pakistan or any number of outsourcing locations can run into trouble when defending their security capabilities. India and the Philippines have long-standing travel warnings, thanks to talk of nuclear war and continued terrorist threats. But these security concerns aren't keeping India from leading the outsource pack, as many companies find that the risk is worth it or has been blown out of proportion. In fact, there are good risks and bad risks when it comes to security. A threat of violence against employees or a complete breakdown of law and order is, obviously, a bad risk. But breakdowns that only affect the currency can be good risks for investors, because as the value of local currency drops, so does the cost of doing business there.

IT Jungle: There has been a lot of coverage on the recent Deloitte report that basically says companies are finding that outsourcing isn't as effective as they expected. This article stands out from the rest of the pack and is excellent at highlighting the most significant findings in the study as well as applying those lessons to real-life outsourcing. The final thought here is that outsourcing works well for what you can predict, but it fails miserably when the unpredictable happens, as it so often does in business.

The Advertiser: Hostworks is a South Australian IT services provider that is doing a lot of things right, as witnessed by its half-year net profit growth of 350 percent. Hostworks, which manages critical applications and Web sites for clients including Microsoft, Sony and American Express, sees the growth stemming from an increase of online traffic, Internet-based commerce and outsourcing. To keep the staff of 70 self-professed tech geeks satisfied, management focuses on keeping challenging projects in the loop, including a lot of high-profile, high-volume content.

ServerWatch: The commodity server was supposed to be the death knell for computer leasing, but the leasing industry appears to be gradually transitioning to hosted options. Instead of leasing the equipment for their own shops, company owners are blending the lease option with outsourcing and are leasing servers, space and services inside an outsourcer's data center. This hybrid leasing/outsourcing option is appealing on many levels. There is no learning curve on the newer equipment and with lower-end equipment, there is a pricing option for any size shop.

silicon.com: Companies are flocking to the outsourcing model as a way to save money and increase efficiencies, but organizations are still struggling mightily with defining their core competencies and agreeing to just what should be sent out of house. In many cases, core competencies are being outsourced as well. Just look to the pharmaceutical industry, where R&D is the backbone and is outsourced 40 to 60 percent of the time. Other industries, such as financial services and insurance, are gravitating toward outsourcing more of their core areas, creating a utility-based outsourcing model that is gaining steam throughout all industries, including IT.

With Ross Dannenberg, partner at Banner and Witcoff, where he handles a wide range of intellectual property issues, with experience in Internet, telecommunications and computer software-related issues.

Question: How much of the U.S. video game industry is being outsourced overseas, and where are the current hotspots for video software offshoring?
Dannenberg: While it's difficult to pinpoint a dollar figure regarding how much video game development work is being outsourced overseas, one thing is clear: The amount of outsourcing of video game development increases every year. The video game industry is estimated to be an $8 billion a year industry in the U.S. alone, and companies are fiercely competitive in their drive to cut costs while still providing an exceptional gaming experience. As a result, many video game developers outsource development projects (or portions of projects) to software developers in China, Vietnam, India, Philippines and Russia, as well as many other parts of Eastern Europe.

Question: What trends are affecting this software niche in terms of offshoring?
Dannenberg: Companies are always looking for ways to cut costs. Thus, outsourcing is one natural answer. Contractors can be hired at a moment's notice and let go once the work is done, creating a cost-effective development process. However, the video game industry has built-in defenses against outsourcing: creativity and nationalism. Similar to the movie business, the lifeblood of video games is creativity and originality as they appeal to your target audience. It is often difficult for a foreign game developer, much less a non-English speaking developer, to understand the nuances of American gamers. What one culture finds humorous or entertaining, another culture might find lackluster, dull or, even worse, offensive. Thus, it is difficult to outsource creative aspects of video game development, and companies are limited in the work they can send overseas. Typically, outsourced portions include production items after the creative storyboard has been completed, such as animation, character modeling, motion capture editing, cinematics, artwork and such. Otherwise outsourced video games are usually games of a smaller scale, such as games for mobile phones and PDAs.

Question: What can other software companies learn from the successes and failures of the patent process in relation to the video game industry and its offshoring efforts?
Dannenberg: Each company should spend some time and effort researching which countries they will use for outsourced software development, as well as in which countries they will market their products. Those are the countries in which they should focus their efforts for protecting their IP. The next step is to determine what forms of intellectual property each country offers to protect video game software. Some countries may provide strong patent protection of software; others may provide broader copyright protection, although it's unlikely. If a country doesn't provide strong patent rights for computer software, in addition to copyright protection, a company should consider design patent protection for visual aspects of the video game, such as characters in the game, icons, graphics, user interfaces and so forth. Just as creativity is important in the video game development process, it is also important in developing a comprehensive plan to internationally protect your video game IP.

Macon Telegraph: Dell plans to increase its Indian presence by 2,000 people by the end of the year, bringing its Indian workforce up to 10,000. The increase will help Dell make India a hub for its software development and back-office work. Dell plans to continue to increase its Indian presence, projecting that its revenue growth will come increasingly from its Indian hub.

ZDNet Australia: If you thought things were going gangbusters in India and China, just wait until the boom of software coders happens. IDC predicts the Asia Pacific region will be the largest area for software developers by 2006. The huge expansion will be the result of growth in IT spending, population growth, and a rise in literacy levels worldwide. Despite the big number, developers in the region will have to learn the skills necessary to do well in the offshoring and outsourcing environment that will drive the IT surge.

Australian IT: The Bank of Queensland is extending its outsourcing agreement with services group EDS by two years and $140 million. The agreement was originally worth $480 million and will now run until 2014. EDS will supply a number of services to the bank, including IT services, applications and business process services.

The Financial Express: In an interview, Microsoft India chairman Ravi Venkatesan discusses the staffing issues facing India's IT outsourcing market. Apparently, even Microsoft is having a difficult time finding workers there. The problem is basically that there are "too many jobs chasing too little talent." High attrition rates and increasing salaries add to the problem, which needs to be addressed before more jobs start leaving for other high-staff offshore opportunities.

CRN: The U.S. outsourcing market is showing no signs of stopping, with new reports saying that it will rise by 6.6 percent this year. A large part of that increase will be the significant numbers of small to medium-sized businesses that ramp up their outsourcing efforts. SMBs are predicted to increase their outsourcing spending to 27 percent by 2009, up from 23 percent in 2004, according to IDC.

Hindustan Times: Amar Gupta, professor of entrepreneurship at Eller College of Management at the University of Arizona, found such demand for a class on outsourcing that he put an entire course together in a matter of weeks. Gupta's outsourcing class covers strategic, organizational, technical and economic issues, and is filled with many business students, along with computer science and engineering majors. It's been so successful that other colleges have approached Gupta to get information on starting an outsourcing curriculum.