Offshoring: Today and Tomorrow

Plenty has changed in the field of offshore outsourcing, which has evolved from a little-used practice to a mature industry in less than a decade. And plenty of change lies ahead.

Here are some noticeable key developments in the global practice of offshoring.

Use of Collaborative Tools
Greater communication capability via the Internet was the initial driver of the offshoring trend, according to the Forrester report. With such remote networking techniques now coming into play, there is a movement away from manual and travel-intensive processes, according to cfo.com.

Discrepant India
On the one hand, India continues to lead the way as an offshore destination, ranking at the top of A.T. Kearney’s 2007 Global Services Location Index. But on the other hand, it is loosing its appeal. The reason U.S. companies went to India in the first place was to cut down on costs but over the past year the value of the dollar dropped notably in relation to the Indian rupee. Moreover, significant wage increases in India have further shaved the cost advantage.

Onshore and Nearshore
Offshore outsourcing companies are setting up their onshore development centers to be closer to clients in locations with better cultural and geographical compatibility.

Blended Contracts
As CIO Today says, clients will engage in blended contracts¬ – a combination of offshore, onshore and even local outsourcing.

Nipping at India’s Heals
Geographies are changing as the space matures. Behind India in the offshoring race is China, Latin America. Russia and eastern European countries are also in the game showing robust growth of IT services due to their high qualified human resource pool and the ability to accomplish complex creative software engineering tasks.

Read more...

When America sneezes, India catches a cold

That saying could prove particularly true for India's IT and IT-enabled services (IT-ITES) industry, where the US accounts for the largest share — at over 50 percent — of the Indian software and outsourcing market.

During a recent media briefing, Kemal Dervis, administrator at the UN Development Programme (UNDP), said the US slowdown might make it difficult for India to sustain its economic growth rate of eight percent. It has already had some impact on the Indian market. The rupee has been strengthening against the dollar for over a year now causing worries for Indian exporters.

"The implications for all of India's externally linked sectors are significant," Rajagopalachari, executive director at PricewaterhouseCoopers India, said. "The strongest and most immediate impact will be on the IT-ITES sector."

Though Milan Shethan, Ernst & Young India partner in business advisory services, noted that, while the budgets of US-based companies will undoubtedly be cut, the services of Indian companies that are adding value will be retained. Only those companies that haven't performed may lose out.

Over the last 12 months, Indian companies have been diversifying their risks by increasing their focus on non-US markets, such as Europe; by undertaking labor-cost rationalization by getting rid of poor-performing workforces and tightening recruitment policies; by reducing the average age of their workforce in order to reduce cost and improve overall profitability.

Source: ZDNet

Read more...

EPAM acquires pass to stock exchanges

EPAM Systems has acquired the B2Bits Company, an IT consultant providing services to stock exchanges and brokers. A special Capital Markets Competency Center headed by B2Bits president has been set up at EPAM, which enables the company to expand the range of services provided for the financial sector clients.

The EPAM Systems Company, a software development outsourcing services provider, has announced to acquire a 100% stake in B2btis, a provider of solutions and consulting services to professional stock market players.

One of EPAM’s service lines is development of mission-critical business applications for the financial sector organizations. About 600 of the company’s 4,000 employees are engaged in corresponding projects. EPAM now covers the entire value chain from domain knowledge and process consulting through customized high-performance architecture as well as product and application development, maintenance and support, and testing software. Russia, Western Europe and the USA are among EPAM’s top target markets.

‘The acquisition proves EPAM Systems is seeking to expand the range of services provided and become a leading service provider for stock market’, - states Arkadiy Dobkin, president and CEO at EPAM Systems.

Services for the financial sector will be provided by a specialized Competency Center headed by Mark Bisker, B2Bits president, who has worked for more than 25-year for leading technology companies, such as Schwab Capital Markets and Lava Trading.

If the IT consulting market grew by 20% in 2007, the financial segment growth was at least 1.5-fold higher, experts say. Due to transaction with B2Bits, EPAM Systems pledges to intensify related operations on the Russian market. ‘The given market is sure to continue developing due to growing professionalism of local players, foreign companies’ expansion and competition intensification’, - says EPAM. ‘Consulting for financial organizations is in greater demand than on the market in general, as financial organization are far ahead in IT implementation as compared to other entities, - says Alexander Lyubinsky, CMO at ISG. – The easy money period has finished for the financial sector, so competitive advantages might be achieved only when using updated infocom technologies’.

...According to CNews Analytics, EPAM Systems’ consolidated revenue has grown by 37.7% in 2007.

Source: CNews

Read more...

US IT outsourcing changes its geography?

Given the uncertainty about the US economic situation continues, a recent survey has forecast that spending on IT by the world’s biggest economy will shrink in the April-June quarter for the first time in nearly seven years (according to http://www.offshoringtimes.com). So US companies are looking for cost reduction, thus choosing cheap labour outsourcing destinations.

As outsourcing to India becomes more expensive, North American companies are seeking alternatives. In years past a company could save 40% to 50% by hiring Indian firms to handle IT and other services, says Atul Vashistha, chairman at neoIT management consulting firm. Should the U.S. dollar continue its descent, that differential would shrink to 10% to 20%, he estimates. "If you're only going to have a 20% savings, clients start to think about time zone," Vashistha says.

Though costs are increasing in India, anyway the country is generally less expensive than Latin America and most other locations, especially for companies that don't require high-end software development services. It’s envisioned that Mexico and the rest of Latin America will only act as a complement to India and other offshore locations. So, Europe can benefit from US recession and who knows, may be, it’s on the threshold of an IT outsourcing boom?

Source: BusinessWeek

Read more...

IT outsourcing in London and UK 'on the up'

Large and small British businesses are increasingly outsourcing their IT.

Big Four firm KPMG signed a five-year contract with BT last month but smaller firms are also seeing the benefits of IT outsourcing, according to Accounting Web.

The news provider reports that London accountancy firm Andrews Cross & Co has committed to outsourcing 100 hours of work per month, helping to solve its recruitment difficulties.

West Midlands-based accounting firm AGS has turned to outsourcing to bring its IT to the level required to support the company's professional work, according to the website.

AGS founding partner Steve Aston says: "We had to get the IT spot on. [Outsourcing ] was about that extra 10-20 per cent that dynamic, innovative IT delivery could give us."

Better value and improvements in broadband internet services are meaning an increase in the popularity of IT outsourcing as more large and small businesses realise it can bring a competitive edge, reports Accounting Web.

Source: ihotdesk

Read more...

Russian ITO market: possible development scenarios

At present Russian IT companies are on top of the IT export boom curve. But what is behind this flourishing? Which factors stimulate and restrain export of Russian IT services?

According to Vladimir Karacharovskii, consultant of IT publication CNews, there are two possible scenarios of the development of ITO - extensive and intensive - which are closely connected with Russian IT companies’ priorities. The extensive scenario is based on price competition (with other offshore outsourcing providers like Indian and Chinese ones), the intensive scenario - on the quality of services, their uniqueness, diversity and individual approach to each customer.

According to a 2007 Gartner survey of 750 IT and outsourcing executives in North America, Asia/Pacific and Europe, 41 percent of organizations that were currently outsourcing IT said they use ITO to enhance business outcomes and performance but not to reduce costs as compared to only 28 percent in 2005. It means price competition shouldn’t be the top priority.

Therefore Russian IT companies have to use other differentiators positioning themselves as providers of qualitative solutions. The advantage also lies in the fact that innovation product markets are never saturated, just vice versa - they tend to expand with each appearing innovation. This strategy requires higher employees’ commitment but will be finally rewarded with higher profits.

Government support plays a critical role in facilitating Russian IT outsourcing exports growth. The degree of government support provided in the global market differs from country to country. In Russia it results in the creation of techno parks, specialized support investment trust ICT, Federal agency on export development in IT sphere. But as Vladimir Karacharovskii claims there may be some adverse effects of the government’s intent attention if their measures are introduced and controlled by too many authorities: IT export might get overtaxed which will raise its costs.

It’s not quite clear at present which of the scenarios will be the base of Russian IT sector in the near future, but the answer will surface within the next couple of years.

Source: CNews (in Russian)

Read more...

EPAM under full steam to true full service in Finance

On the third of April, 2008 EPAM Systems Inc. announced the acquisition of B2BITS Corp, a provider of solutions and consulting services to capital markets organizations within the financial services sector. Since its foundation in 2000 B2BITS has been known for its unexceptionable performance delivering pre-built solutions, customizable frameworks, specialized testing tools as well as process consulting for Client Connectivity, FIX, FX, Options, Fixed Income, market data feeds, exchange gateways and electronic payment services.

The acquisition allowed EPAM to combine the extensive domain knowledge of B2BITS and EPAM’s high- qualified team of software engineers developing, maintaining and supporting mission critical applications for the Financial industry. That’s good news for both current and prospective clients from financial services industry as EPAM now covers the entire value chain starting from expert analysis and consultancy to the development, maintenance and 24/7 support.

As Mark Bisker, the head of EPAM’s new Competency Center and CEO of B2BITS Corp, said: “By leveraging the scale and experience of the most disciplined and efficient software engineering organization in the region, we can now better leverage our domain knowledge and consulting skills.” In his turn Arkadiy Dobkin, CEO and President of EPAM Systems, noted: “The management and consulting teams from B2BITS significantly enhance EPAM’s expertise and capabilities in this important market segment”.

Source: EPAM Systems, Inc.

Read more...

Eastern Europe: The next silicon valley?

One key to driving healthier economies in the countries of Eastern Europe, particularly in the former Soviet republics, could be significant investments in Web 2.0 development. Could Eastern Europe foster its own Silicon Valley?

The Soviet Union had its own technology capital once, though you might be surprised to learn it wasn't located in the Russian Federation.

"Belarus was regarded as the 'Silicon Valley' of the former Soviet Union, manufacturing over 50 percent of the computers and components in the former USSR." said Sergei A. Rachkov, deputy permanent representative, Permanent Mission of the Republic of Belarus. "The country is able to provide expert services in application development and testing. Belarus’ software and IT services sector is one of the most successful and fastest growing industries in the country." Rachkov spoke on Wednesday before an audience at an UN conference in New York entitled, "The UN Meets Web 2.0 and ICT Entrepreneurs."

Although India's success story garners a lot of attention, countries in Eastern Europe are also turning to IT as a way to upgrade their economies. During the UN's Web 2.0 conference, representatives of Hungary, Belarus, and Croatia talked up government and private sector initiatives that have helped to lure the likes of Microsoft, IBM, Cisco and SAP to either outsource services from or set up shop on Eastern European turf.

Meanwhile, Rachkov said that, back in 2005, Belarus set up a High Technologies Park. Since then, about 40 domestic and foreign companies -- including software developers and exporters -- have become residents of the Park, Rachkov said.

Rachkov cited Belarus companies IBA Group and EPAM Systems as two of "the largest and most established European IT outsourcing providers based east of Germany." These and other companies in Belarus "have world-class project management infrastructure [and] certification, and [they] successfully serve world-renowned clients, including IBM, Colgate-Palmolive, Samsung, Siemens, Alcatel, British Telecom, Ford-Union, and Microsoft," according to the Belarusian official.

Source: BetaNews

Read more...