9 Outsourcing Stories
9 Outsourcing Stories
Date: Saturday, May 03, 2003 7:35 AM
H-1B and JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Article 1:
http://www.hinduonnet.com/thehindu/holnus/02231603.htm
World Bank to outsource IT work to India
Article 2
http://www.ctnow.com/business/hc-cignacuts0501.artmay01.story
CIGNA Laying Off More Workers - moving to Satyam
Article 3
http://www.msnbc.com/news/908113.asp?cp1=1#BODY
Wall Street research jobs go overseas
Article 4
http://www.theinquirer.net/?article=9266
Dell shifts product development to Taiwan
Article 5
http://www.zdnet.com.au/newstech/hr/story/0,2000048610,20274128,00.htm
HP confirms AU support jobs will go to India
Article 6
http://www.zdnetindia.com/news/national/stories/366,80650.html
neoIT lines up $1 billion IT, ITES outsourcing deals for India
Article 7
http://www.zdnetindia.com/news/national/stories/366,80553.html
Intel to ramp up India centre
Article 8
http://itmanagement.earthweb.com/career/article.php/2196601
Deloitte Says 2 Million Jobs Moving Offshore
Article 9
http://atimes.com/atimes/Asian_Economy/EC12Dk01.html
Outsourcing: Asia cashes in
http://www.hinduonnet.com/thehindu/holnus/02231603.htm
World Bank to outsource IT work to India
New Delhi, Apr. 23. (UNI): The World Bank will outsource to India
information technology (IT) work worth over $10 million in the next 12
months through its current Indian partners, the Government informed the
Lok Sabha today.
According to the Bank, the projections of about $10 million dollar per
year are for the period 2003-05 and may increase, Minister of State for
IT, Su Thirunavukkarasar, said in a written reply.
Chennai BPO Centre is a World Bank office and business will expand in
relation to business strategy over the coming years. World Bank IT
outsourcing and BPO Chennai office have provided employment to Indian
professionals and its growth will help in providing further employment.
A move by some State legislatures in the United States like New Jersey
to restrict outsourcing of jobs to other countries, has caused concern
among Indian corporates, particularly those in the IT sector.
The Centre had taken up this matter with the United States Trade
Representative at the WTO mini-ministerial meeting in Tokyo on February
14 to resolve this issue. The Indian embassy in Washington has also
raised this issue with the US Trade Representative's office.
The ongoing global slowdown has been impacting the performance of
Indian infotech companies by putting pressure on margins. However, IT
software and services outsourcing has come to the mainstream and the
volume of business for Indian IT companies has increased, the Minister
said.
Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu have emerged as
the leading States in terms of e-readiness, according to the National
Council of Applied Economic Research (NCAER), the House was informed.
http://www.ctnow.com/business/hc-cignacuts0501.artmay01.story
CIGNA Laying Off More Workers
Job Cuts Aimed At Paring Expenses
By DIANE LEVICK
Courant Staff Writer
May 1 2003
CIGNA Corp. said Wednesday it is laying off 135 to 150 employees in
information technology - about half of them in Connecticut - as the
company continues to pare expenses.
Meanwhile CIGNA is also increasing its use of Indian vendor Satyam for
certain information technology work, a move angering U.S.-based
consultants in a tight job market.
CIGNA, which is trying to raise slumping profits, said the layoffs
announced Wednesday aren't the result of any shift to India or
outsourcing.
The layoffs are aimed at reducing expenses and ensuring "that staffing
is proportionately aligned with CIGNA's current business needs and work
volume," spokesman Tony Branco said. CIGNA won't say how much the
layoffs will trim costs.
CIGNA started notifying affected employees this week and expects to
complete notification by the end of May. Technicians, administrative
and financial staff are among those being terminated.
The company has more than 3,400 IT employees including about 2,000 in
Connecticut.
The 135 to 150 cuts are in addition to the previously announced 3,900
terminations companywide, and aren't part of a $98 million after-tax
charge in the fourth quarter of last year.
The 3,900 layoffs are meant to slash $100 million from after-tax
expenses this year. CIGNA has said that 315 to 355 of those cuts were
supposed to be done by the end of March 2003 but wouldn't give an
update Wednesday. More of the 3,900 cuts were expected in Connecticut
after the first quarter, but CIGNA wouldn't say how many.
Meanwhile, CIGNA is trying to step up use of Satyam, as it had planned
when hiring the Indian company last year.
As of early March, about 74 Satyam workers were employed in various
CIGNA offices and five were working in India, and the estimated savings
for the year-to-date were $1 million, an internal CIGNA memo shows. It
couldn't be determined Wednesday whether CIGNA had additional Satyam
staff.
To speed replacement of local consultants, certain areas of IT are
giving Satyam the right of first refusal on all requests for
consultants, the memo said.
Local IT consultants have complained bitterly that "offshoring" of work
by CIGNA and other companies is drying up the job market for U.S.
workers. Many U.S. consultants - individuals who take temporary
assignments with companies - say the positions are much harder to find
and pay less than they did two or three years ago.
Some question the legality of importing foreign workers under visa
programs that were designed to help employers when they can't find
local talent with the needed skills and knowledge. Local consultants
and placement firms, however, say the skills are here and that
employers are just trying to save money at the expense of the local
economy.
"We're very much aware of the relevant laws associated with consulting
services and do everything in our power to make sure we and our
contractors conform to such laws including those relating to H1b and
other required permits," Branco said.
CIGNA isn't planning to replace all of its U.S.-based IT consultants,
Branco said. The U.S. and Indian consultants, he said, "free CIGNA
staff to work on more strategic initiatives and allow us to flexibly
increase our skills, cost effectiveness and provide more capacity to
move products to market faster."
Copyright 2003, Hartford Courant
http://www.msnbc.com/news/908113.asp?cp1=1#BODY
Wall Street research jobs go overseas
Reuters
Wall Street research analysts have suffered rounds of layoffs, big pay
cuts, and accusations that they routinely lied to the investing public.
Now there's a new worry -- that their jobs are being shipped overseas.
INVESTMENT BANKS like Morgan Stanley, Goldman Sachs Group and Citigroup
Inc. are mulling the benefits of shipping research jobs to countries
like India, where salaries for business graduates are as little as 10
percent of those in New York and London.
Morgan Stanley plans to experiment by hiring stock analysts in India to
support its U.S. and European analysts, while Deutsche Bank AG has
contracted Irevna Limited, a London-based consultancy that specializes
in outsourcing research to India, according to sources familiar with
the situation.
Last week, J.P. Morgan Chase & Co. said it will hire 40 junior stock
analysts and other research staffers in its Bombay office this year as
a way to expand research in a weak market.
"Every bank on Wall Street will eventually use the cost benefits
offshore to maintain their research businesses," said one executive at
a major investment bank.
Financial services consultants and banking executives say that offshore
operations are part of broader efforts to bankroll research departments
in the face of shrinking revenue from equities underwriting and trading
businesses and a tighter regulatory environment.
SOPHISTICATED RESEARCH
For now, the idea is for offshore analysts to collect data, do basic
number crunching and create finance models, while production tasks like
editing can also be moved abroad. The aim is to inexpensively provide
support for more senior analysts, who would have more time to finish
research reports and meet clients.
In time though, offshore hires could translate into fewer research
posts in the United States and Europe. Once the operations are up and
running, it will be a natural progression to shift more complicated
tasks abroad, say financial services consultants.
Wall Street is looking to examples such as General Electric Co., which
shifted software development and back office jobs to India under former
Chief Executive Jack Welch. Today, Indian engineers are contracted for
tasks as sophisticated as analyzing the materials and design of new jet
engines.
In the research world, consulting firms are leading the way. Firms such
as McKinsey & Co. and A.T. Kearney Inc. have shifted the bulk of their
research divisions to such places as Bombay and Chennai, India, keeping
U.S. and European offices staffed mainly with division heads who need
to have regular contact with clients.
"If GE can do the advanced research over there on its next generation
of jet engines, then there's no reason why that can't be the same case
for financial institutions," said Stefan Spohr, a principle in
Kearney's financial services division.
The potential opportunities have given rise to a cottage industry of
consultants with Indian connections. Fast-growing firms like Office
Tiger, Smart Analyst Inc. and Irevna help to provide third-party
research out of India.
Spokespersons at Merrill Lynch, which has been outsourcing technology
services to India for three years, and Citigroup, which has offshore
operation in India for its commercial bank, said there are currently no
offshore research initiatives.
A spokesman for Goldman Sachs also said it had no plans to hire
offshore analysts. Spokeswomen at Deutsche Bank and Morgan Stanley had
no comment.
MASSIVE RELOCATION
A report recently completed by Kearney shows that the idea of
relocating jobs has taken hold.
U.S. banks, brokerages, mutual companies and other financial services
companies are planning to relocate 500,000 jobs offshore, or 8 percent
of their work force, over the next five years.
So far, research accounts for a small fraction of that, but Andrea
Bierce, an A.T. Kearney managing director who oversaw the study, said
that financial analysis and research is fast becoming an offshore
favorite.
In a Kearney poll, executives were asked which business processes were
being shifted abroad. The No. 2 answer was analytical and technical
services.
"If it can be done by sitting at a desk in front of a computer, then it
can be done abroad," said Bierce.
Shifting services offshore is not without its risks. Some executives
have complained that communications with home offices and cultural
differences have led to inefficiencies, said consultants.
Another concern in India are the geopolitical tensions with Pakistan
and the threat of nuclear conflict, said one Wall Street executive.
http://www.theinquirer.net/?article=9266
Dell shifts product development to Taiwan
And HP outsourcing. Once it's gone, will it return?
By INQUIRER staff: Thursday 01 May 2003, 11:16
BIG PC COMPANY Dell has plans to shift product development from Austin
in Texas to Taiwan, a report claimed today.
The report in Digitimes, quoting unnamed sources, claimed that Dell is
hiring on the island in all areas.
If true, the move is a cost cutting measure and suggests redundancies
could be in store in the US.
Currently Dell is engaged in a bitter fight for market share with its
old enemies at Compaq, now HP, but the same report suggests that Carly
Fiorina's company will also expand its operations in the Far East.
It claims that the Taiwan R&D group is designing up to 12 products
including servers, desktop PCs and notebooks. 5
http://www.zdnet.com.au/newstech/hr/story/0,2000048610,20274128,00.htm
HP confirms AU support jobs will go to India
May 01, 2003
URL:
http://www.zdnet.com.au/newstech/hr/story/0,2000048610,20274128,00.htm
Hewlett-Packard (HP) will outsource jobs from its frontline support
operations in Sydney, Melbourne and throughout the Asia Pacific to
India, according to an internal memo obtained by ZDNet Australia.
The confidential memo, authored by Christine Scammell, general manager
customer support, HP services South Pacific, and distributed to staff
in the company's Volume Call Centre and Call Management and
Co-ordination groups, followed grim news delivered to staff at the
support centre in Rhodes in inner-western Sydney.
According to two well placed sources, 109 staff within the HP
Consulting and Integration Group, based at Rhodes, were informed that
their jobs would be made redundant yesterday.
Speaking to ZDNet Australia today, Scammel verified the authenticity of
the memo but declined the opportunity to discuss its content in detail.
The memo, delivered by e-mail early today, was accompanied by a
document titled 'Call Centre Consolidation', containing a detailed plan
and schedule for changes to the Australian support operations. It read:
"The front line support for the Volume Call Centre will be centralised
to India. This is a region-wide activity that is occurring in all HP
subsidiaries across the Asia Pacific, including Australia". The support
will be undertaken by Bangalore-based Digital GlobalSoft, which is 51
percent owned by HP.
The memo indicates that Sydney frontline support operations for the
Volume Call Centre would be relocated to Bangalore by mid-July.
Equivalent operations in Melbourne are expected to follow in September.
Frontline support connected with two other HP operations were earmarked
to be relocated to Digital GlobalSoft in August/September this year.
However, their location and nature was not made clear by the document.
Other changes outlined in the document include the centralisation of
Call Management operations in Sydney and Call Coordination activities
to Melbourne.
It's clear that HP has been examining the prospects of outsourcing
parts of its support operations to India for some time. The memo
indicates that outsourcing decision was made as result of an extensive
audit Compaq and HP's pre-merger call centres to determine how to
integrate them.
Hewlett-Packard corporate communications manager, Hugh Scott, was today
playing down the impact of the outsourcing decision. Scott confirmed
that a number of positions would be outsourced to India but said it
would only represent a small portion of HP's support presence in
Australia. Scott, however, refused to reveal how many local positions
would be outsourced to the Bangalore operation over the next 12 months.
"This is decision has not been easy to make, given the personal impact
it will have on the Call Centre Staff, but we need to ensure the long
term viability of the HP Customer Support business," wrote Scammel in
her memo.
According to two well placed sources, the Rhodes support operation
employs around 240 to 250 people. Hewlett-Packard support operations in
Victoria are located at Blackburn, Forest Hill and Nunawading.
According to one estimate the Victorian support centres could employ
between 100 to 200 staff.
HP last February refused to comment after sources close to the company
alleged that managers at the Rhodes support centre been to told migrate
aspects of the operation to India within eight months.
At the time the source also claimed that HP was planning to axe an
estimated further 200 jobs at the Rhodes facility by outsourcing its
operations management centre functions to China.
http://www.zdnetindia.com/news/national/stories/366,80650.html
neoIT lines up $1 billion IT, ITES outsourcing deals for India
neoIT, a global consultancy firm for IT outsourcing and offshore
activities, is closely working with 10 Fortune 1000 companies to
outsource $1 billion worth IT and ITES work to India.
Prachi Verma, April 28, 2003
neoIT, a global consultancy firm for IT outsourcing and offshore
activities, is closely working with 10 Fortune 1000 companies to
outsource $1 billion worth IT and IT-enabled services (ITES) work to
India.
"In the coming 8 months, we will bring to India 8 to 10 deals in the
areas of IT and business process outsourcing (BPO) to India," neoIT
senior vice president Cliff Justice told.
neoIT has already supported 40 companies to outsource their IT and ITES
requirements to India through companies like HCL Technologies,
Hexaware, Ernst & Young, Syntel, Tata Consultancy Services, Wipro, etc.
"We started our operations in India since 1999 as a team of consultants
and since then have brought in deals worth $500 million," he said.
Within IT, the Fortune 1000 companies are looking at outsourcing their
applications development and maintenance work. Most of these companies
are in the following verticals, financial services, manufacturing and
gas/energy.
"After the war (Gulf war II), the demand for outsourcing the IT
requirements by various companies is on a steep rise. This can be
attributed to the companies' strategy to cut down costs," Justice said.
neoIT enables buyers to reduce costs significantly, while decreasing
risk and increasing the value received from strategic and offshore
supplier relationships, he said.
neoIT's clients include Fortune 100 majors like HCA (healthcare
company), Exult, Carreker (financial services), Lucent Technologies,
Chevron, AMP, AXA, Networth Services, Agilent, etc.
neoIT, in association with its global sourcing advisory partner TPI, is
also planning to capitalise on the increased interest in business
process outsourcing (BPO).
Business process outsourcing is likely to account for 50 percent of the
total deals (almost $500 million) of the total work outsourced to
India, he said.
"We basically help companies place their resources in the right manner
and at the right time. We help our clients look for the right suppliers
(outsourcing partners) based on low-cost and high-productivity
conditions," he said.
Source: The Financial Express
http://www.zdnetindia.com/news/national/stories/366,80553.html
Intel to ramp up India centre
Chipmaker Intel Technology India Pvt Ltd is planning to hire 500
software developers in the coming 18 months as part of its software
development initiative in India. Intel has a development centre in
Bangalore (the largest outside the US) with close to 1000 developers.
Prachi Verma, April 25, 2003
Chipmaker Intel Technology India Pvt Ltd is planning to hire 500
software developers in the coming 18 months as part of its software
development initiative in India. Intel has a development centre in
Bangalore (the largest outside the US) with close to 1000 developers.
In 2001, Intel had doubled its staff to 800 and in the last year it had
announced that it would add another 200 developers.
"We have a total of 1000 developers at our Bangalore development centre
and in the next year-and-a-half we expect to increase the developers
team by 50 percent," Intel Technology India Pvt Ltd president (Intel
India) Ketan R Sampat told.
Engineers at the Intel development centre specialise in three
verticals-- enterprise products (with a focus on Xeon processor),
communications group (both silicon and software) and e-business group.
The company has recently added another vertical, mobility or wireless
solutions and the development centre in Bangalore is in the process of
starting development work in this area, he said.
The Intel Xeon processor is designed for dual-processor server and
workstation platforms.
According to an earlier report, a $25 million spanking-new glass-facade
building near Bangalore airport is ready and would house Intel's
growing staff strength currently spread out over different locations in
Bangalore.
As reported earlier, Intel Corporation worldwide chief executive
officer Craig Barrett had indicated that the company was keen on
outsourcing its back office operations to India.
Source: The Financial Express
http://itmanagement.earthweb.com/career/article.php/2196601
Deloitte Says 2 Million Jobs Moving Offshore
By Sharon Gaudin
April 24, 2003
The world's 100 largest financial-services companies say they expect to
transfer about $356 billion of their operations and 2 million jobs
offshore over the next five years in an attempt to reduce costs.
Moving jobs and business offshore is expected to save the companies
approximately $1.4 billion each by 2008, according to a report from
Deloitte Research, an arm of Deloitte Consulting, a global management
consulting firm. Financial services companies from North America,
Europe and Asia say they plan to send work to low-cost centers such as
India.
''Offshoring is gaining momentum at a rapid pace,'' says Christopher
Gentle, a director at Deloitte Research. ''India stands to be the major
offshore hub because of its combination of low-cost and high-tech
expertise. But there's no guaranteed bonanza for India unless it
continues to deliver improved services at globally competitive wage
rates. Competition from other countries around the India Ocean rim --
from South Africa to Australia -- will be fierce.''
Deloitte analysts predict that more than 1 million jobs -- or about
half of the estimated relocations -- will move to the Indian Ocean rim
over the next five years. Today, nearly half are targeting India, which
has a huge market of IT professionals who earn much lower wages than in
other countries. South Africa and Ireland are two other attractive
offshore locations, with China, Malaysia and Australia growing in
popularity.
The survey of 27 of the world's largest financial institutions shows
that the shift in operations already is well underway.
Thirty percent of the respondents say they currently have existing
offshore operations. That percentage is expected to jump to 75 percent
within two years, according to Deloitte analysts. The survey also notes
that the companies can achieve a 39 percent cost savings by moving work
to areas where salaries and other costs are much lower.
The survey also shows that banks and insurance companies are
transferring offshore functions like application development, coding
and programming, accounting and finance, contact support and
call-center operations.
Deloitte reports that its analysts estimate that 2 million out of the
13 million people now employed in the financial services sector in
North America, Europe and Asia will lose their jobs because of
offshoring.
http://atimes.com/atimes/Asian_Economy/EC12Dk01.html
Outsourcing: Asia cashes in
By Tony Sitathan
SINGAPORE - Mention the word "outsourcing" to a management consultant,
and chances are that his or her eyes will light up. Nowhere is that
truer than in Asia.
When David Kennedy, a former management consultant with PriceWaterHouse
Coopers, came to Asia from the United Kingdom, he was surprised at the
size of outsourcing contracts from large corporations, which in the
past was unheard of. "This trend is very much similar in the UK, where
large banks, finance houses, trading companies, brokerage firms and
manufacturing companies are all looking at the outsourcing avenue once
they realize that doing everything in-house is a thing of the past," he
said.
Rolf Jester, chief analyst for information-technology (IT) services for
Gartner, an international research and consulting group headquartered
in the United States, predicts that the current outsourcing market in
Asia is worth about US$4.7 billion. Estimates are that it will grow to
$8.3 billion by 2006, with a compound annual growth rate of 18.5
percent. Jester also says that most of them in Asia are outsourcing
their data centers, network services as well as help-desk services. The
main motivation for outsourcing is to trim IT budgets and to focus more
on their core competencies, whether in services or in delivering
products to their customers.
So when the Development Bank of Singapore (DBS) decided to outsource
its IT operations, it signed a 10-year, $687 million outsourcing
contract with IBM Corp. According to several IT providers, the cost
savings would be about 15-25 percent of the costs of services being
outsourced, translating into more than $28.5 million within the first
three-year period. "The cost saving is substantial, and that would in
effect make DBS more cost-competitive operationally, especially in
these lean and mean times," said Kennedy. IT operations alone now
account for 15 percent of DBS's total expenses.
Several other Singaporean banks plan to follow DBS's lead, including
the United Overseas Bank and Overseas Chinese Banking Corp. Keppel and
Tat Lee Bank are also poised to outsource some of their key IT services
contracts. JP Morgan has similar plans to sign a seven-year contract
with IBM, worth in excess of $5 billion, while GE Medical Systems Asia
has also indicated that it intends to outsource its entire IT
operations in the Asia-Pacific region to HP Services with intentions to
build an IT services hub in China.
IT networking and communications tools are not the only things being
outsourced by large corporations. When Toshiba Corp and Matsushita
Electric Industrial Co decided to work together to establish a liquid
crystal display (LCD) plant worth more than $1 billion, producing
advanced flat panel displays (AFPD), in Singapore it turned to a
little-known company called Opentech Networking Pte Ltd.
The AFPD plant is considered the biggest thin-film transistor LCD
factory to be located outside of Japan and the world's biggest
production plant. These thin-film LCDs are found in notebook computers,
desktop computer monitors, portable DVD (digital video disc) players
and color televisions. There are plans to produce 180,000 LCD screens a
month and up to 330,000 LCD screens in two years' time (see Singapore
bucks electronics slump, December 24, 2002).
"When Toshiba first came to Singapore to study the possibilities of
setting up their manufacturing plant, they had failed to realize the
intensity of setting up a completely new advanced tech plant away from
Japan," recalled Manish Sharma, the strategic sales director of
Opentech. "We were fortunate that they listened patiently to us and we
in turn managed to deliver the programs of setting up the plant on
time. We met strict deadlines and the plant opened up late last year
within its scheduled time without missing out on its initial production
deadline."
By working with Opentech on outsourcing the entire operations of
setting up the plant from scratch, it was estimated that more than 90
percent of Toshiba's time was saved in planning the operations and
several million dollars in savings was passed on to Toshiba. It was a
massive exercise to relocate technology as well as people from the
United States and Japan to Singapore.
But it was a lesson well learned by Opentech, as it gained some domain
knowledge as well as the ability to replicate its success with other
similar industries and clients. "Meeting tight deadlines was a
challenge and the entire planning and organizing team had to work
around the clock with as many as 30 vendors from building-maintenance
contractors, air-con installers, specialized machine installers as well
as even finding the right people to manage the canteens in the plant,"
remarked Manish. "There were also cultural and environmental
differences that had to be ironed out before the successful
implementation of the manufacturing plant from scratch in Singapore."
Outsourcing of project-management fee-based contracts is also a very
lucrative market in Asia. It has been estimated to range between $9
billion and $12.5 billion before 2005, according to a recent study by
Axiom Consulting, an IT- and engineering-based consultancy in Hong
Kong. And with more manufacturing companies coming to Asia from the
United States, Europe and Japan, there seems to be lots of opportunity
for companies like Opentech.
"When you look at the high-tech sector you see several parallels with
the West evolving in Asia," noted Mitch Lee, senior IT analyst with
Axiom Consulting. "Due to the obvious economies of scale and the fact
that Asia has cheaper labor and mineral resources, you see a flight of
tech companies outsourcing their manufacturing operations and either
going into joint-venture partnerships with companies in China,
Thailand, Malaysia and Singapore or even nominating other OEM [original
equipment manufacturing] companies in manufacturing for them."
Asia is set to benefit from this outsourcing trend and companies such
as Opentech are set to trailblaze in Asia, provided they have the right
manpower and resources in place.
()2003 Asia Times Online Co, Ltd. All rights reserved. Please contact
content@atimes.com for information on our sales and syndication
policies.)
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