ITBE - OUTSOURCING FOR STRATEGIC ADVANTAGE

AZCentral.com: Start-up manufacturing requires a huge cost outlay, including design and development, production, testing, quality control, packaging, raw material and finished goods inventory, order processing and fulfillment, marketing and sales, operations, and finance. Only marketing and sales generate income; the rest are expenses. Many new companies find that outsourcing helps them offset such expenses, allowing them to concentrate on revenue.

Outsourcing Journal: When QinetiQ, a scientific research organization employing 10,000 people, reached the end of its existing outsourcing contract, the company was able to identify the need for a single-source solution to manage complexity, add innovative thinking, substantially reduce the total cost for IT services and improve current service levels and customer service. It found all of that in a 7-year, $30-$50 million partnership with Accenture. According to the two companies, the success of their outsourcing relationship stems from a desire on the part of both organizations for the other to succeed. Accenture also offers transparent pricing and operating models, which allow QinetiQ to understand how Accenture operates.

The Register: DiamondCluster's annual outsourcing survey suggests that the market is still growing, along with customer dissatisfaction. Just over half of outsourcing buyers prematurely ended their agreements within the past year, compared to 21 percent last year. DiamondCluster blames the new statistic on the boom in new outsourcing providers, many of which were below par. DiamondCluster also found that many buyers didn't understand effective contract management procedures. Despite the bad news, outsourcing is growing, with 74 percent of survey respondents expecting to increase spending in the next year.

Hindustan Times: Indian call center workers are facing a new set of challenges as professionals from all over the world are going to India, where the bulk of call center work is being sent. India is not expected to be able to supply enough skilled call center workers to fill the flood of positions that will be available by 2010. So the workers are coming, mostly from Central Europe, and they are trying to position themselves to take full advantage of the foreign language-focused call center work that is emerging. Foreigners are now seeing India as an attractive destination for job opportunities. According to this article, they are thrilled with India's compensation packages, the impressive lifestyle levels and the multiple growth options. Plus, it provides hands-on training in the BPO industry.

Pittsburgh Post-Gazette: The National Association of Software and Services Companies (Nasscom) plans to create a database that will compile information on employees in India's outsourcing industry. The database represents a major effort to prevent criminals from getting jobs in India's outsourcing sector and threatening the data security of global companies. The hope is that the proposed database would make it easy for companies to hire accredited workers and minimize fraud risks. Nasscom's database plan follows several reports of data theft and bank fraud by Indian call center employees, most notably the Mphasis BPO case, in which former call center workers misused financial data and illegally withdrew money from the accounts of New York-based Citibank customers.

E-Commerce Times: This article examines the continuing and growing success of diaspora entrepreneurship. The pivotal role played by successful non-resident Indians in the relatively short history of the Indian software and IT-enabled services industry offers important lessons about the offshoring industry and how to grow a company overseas. A recent study by the Pakistan Software Export Board examined the role of expatriate entrepreneurship in the development of the software industry in Pakistan; it found a strong correlation between ventures that had foreign-based founders and success and growth over the last year. An expatriate founder can offer a wealth of cultural knowledge about the country where the offshoring is taking place. Leveraging that knowledge can allow for a big payoff for a company trying to grow its overseas presence. This article offers examples of how diaspora-driven entrepreneurship offers a safe way to enter a new market like Pakistan or other countries of South East Asia, South Asia, Eastern Europe and the Middle East.

SearchSAP.com: According to the Yankee Group, SAP and other large software vendors are being pressured to shift sales models off core enterprise resource planning suites as customers gravitate to the BPO field, where they can integrate multiple business services under a single provider. According to one expert, ERP is no longer the core strategy of the enterprise; instead, companies are building their strategies around BPO. In an effort to shift with the BPO changes, SAP launched its Enterprise Services Architecture and licensing scheme to partner vendors. In a brazen display of an "If you can't beat them, join them" attitude, SAP has also hired BPO experts and plans to jump into the BPO market — the very market that is threatening SAP's ERP cornerstone.

Question: IPLocks has recently announced its Seven Laws of Information Risk Management. Can you explain how this list came to be, and why it was necessary to outline these rules?
Crandell: Over the past eight months, the topic of our conversations with customers and prospects has changed. Previously, they wanted to talk about database security tools for monitoring database administrator behavior, but now companies want to understand how to implement information risk management as part of an overall enterprise risk management strategy. We also found a number of myths about information security, risk management and how traditional security solutions, such as encryption, firewalls, VPN, and AAA (authentication, authorization and access) can deter abused authorized user privileges. The list grew out of these numerous conversations. We realized that the marketplace was ready to hear, and could benefit from, these laws. While the top 5 percent of companies have a reasonable understanding of information risk management, the concept is new for mid-sized and smaller companies.
The goal of the Seven Laws of Information Risk Management is to foster dialogue within companies and the market about the need for information risk management and how it can deliver better security within the perimeter.

Question: How much has the outsourcing of information corresponded with a need for better risk management? What types of issues have arisen through outsourcing that have demanded stronger risk management strategies?
Crandell: Outsourcing has certainly contributed to the need for better information risk management. Issues associated with outsourcing are threefold: information theft by subcontractors of outsourcers, Sox compliance of outsource vendors, and the need for outsourcers to demonstrate that adequate information security policies are in place.
Stories have made the headlines where subcontractors have held data "for ransom." This has drawn attention to the need for companies to understand WHO has access to WHAT data and HOW. Consumers are concerned when they learn that their credit card company or hospital has outsourced their call center or medical testing and diagnosis. This has drawn attention to the need to determine and verify that private information cannot be stolen or manipulated. It has also brought to the forefront discussion on how different countries and cultures view privacy, intellectual property and legal structures to protect sensitive information. Progressive outsourcing providers are implementing information risk management systems to demonstrate that their security systems are sufficiently robust and include mechanisms for alerting both the outsourcer and company if data has been inappropriately accessed or breached.

Question: Can you offer some highlights from the Seven Laws of Information Risk Management?
Crandell: A company is ultimately responsible for how its business partners access and use its data. As globalization and interconnectedness increases, employees, customers and trading partners can accidentally corrupt data or, as a worst case, they can steal confidential data and sell it. A company can't achieve privacy without first achieving security. Security is the building block for privacy. Implementing a comprehensive information risk management solution helps to achieve privacy and compliance through security.
Information risk management should not radically alter work or operational process flow. Securing information is about protecting data as it moves through the organization and beyond to the value chain. Information risk management must protect information in context of business processes, decisions and evolving conditions. Companies should match the level of information risk investment directly to the value of the data. For each dollar invested, ascertain the quantitative and qualitative risk mitigated by the technology to reach an optimal risk reduction on investment. While 100 percent risk reduction is not feasible, reducing risk to critical data and process is not only feasible but a sound management approach to balancing costs with protection.

Express India: India is pushing the issue of U.S. waffling over its stance on outsourcing by asking that the U.S. lock in legislation that would allow U.S. companies to move jobs offshore as part of any new world trade agreement. India is, not surprisingly, tired of hearing about Congress considering outsourcing bans. This WTO legislation would resolve the situation once and for all, according to the Indian Commerce Minister.

Financial Express: A new Accenture study has found that U.S. and European companies plan to increase their procurement offshoring efforts by 85 percent over the next three years. The survey found that global sourcing could help companies increase savings from 16 percent to 22 percent of their costs. Also, the survey found that companies struggled with long lead times, insufficient product innovation and delivery reliability when dealing with low-cost country suppliers.

ZDNet India: Consulting firm neoIT has released a report on salary numbers for IT jobs done offshore. Entry-level workers in IT outsourcing operations earn an average of $5,443 in India, $5,616 in Romania and $25,338 in Canada. NeoIT cautions that the numbers must be taken in context in order to get the full benefit from the report. The total cost of offshoring requires a more complex management and governance structure in order to ensure that goals are met, and those management and governance costs are not reflected in the salary numbers. One more interesting nugget: According to the report, India had the highest year-over-year growth in average salary for IT outsourcing professionals in 2004, at roughly 13 percent.

Boston Globe: With more tales of outsourcing deals going sour, the process of backsourcing, or bringing a previously outsourced function back in-house, is gaining momentum, according to Cutter Consortium senior consultant Jeffrey Kaplan. He suggests that the new trend of companies backing out of agreements and bringing IT functions in-house is only the tip of the iceberg. The problem is rooted in having unrealistic expectations for an outsourcing deal. While companies can certainly work on the level of their expectations for outsourcing deals, Kaplan also recommends signing a "pre-nuptial contract" of sorts, outlining how the "marriage" should be dissolved, should it come to that.

Bernama.com: Malaysia could be in reach of Asia Pacific's number-one outsourcing spot for information technology support and research and analytical processes, as well as supply chain management. To achieve the top spot, Malaysia would need to identify its competitive edge in order to attract more multinational companies. According to a Deloitte study that examined the competitiveness of offshoring locations in the Asia Pacific region, the top spot for IT support was Bangalore, while Singapore held the number-one spot for analytic and supply chain management. Malaysia's economic growth, along with its efforts to improve its infrastructure and grow its talent pool, are all making the area a stronger contender in the Asian Pacific market.

The Standard: Mainland China stands to benefit from India's wage hikes, according to a recent study. The numbers are a bit surprising, with about 40 percent of the companies in the study planning to shift some technology work to Mainland China in the next three to five years, compared with 8 percent last year. China boasts labor costs that are 20 percent to 50 percent lower than India's — even without the wage hikes. China is still battling intellectual property issues, but has made some headway in that area.