NEW YORK: Six Indian cities -Bangalore, Delhi NCR, Mumbai, Chennai, Hyderabad, Pune - are among the eight top global destinations for outsourcing of services, according to a new survey released Tuesday.

The other two are the Philippines’ Manila NCR and Ireland’s Dublin city, according to the 4th Global Services-Tholons Top 50 emerging outsourcing destinations survey, jointly done by Global Services from CyberMedia and Tholons, a services globalisation advisory firm.

The Next 10 Outsourcing Destinations considered to be ‘Top 10 Aspirants’ from a total of 68 destinations is dominated by China’s Shanghai, Beijing and Shenzhen, Vietnam’s Ho Chi Minh City and Hanoi, Poland’s Krakow, Argentina’s Buenos Aires, Egypt’s Cairo and Brazil’s Sao Paulo.

Avinash Vashistha, CEO of Tholons says: “For a CIO today, finding a Centre of Excellence is more than just lower cost. It must consider location, risk mitigation for business, cultural affinity and scalability of the skilled workforce.”

“The service providers need to think through their offerings so as to differentiate as the competitive advantage is rapidly vanishing due to cut throat competition and market saturation,” adds Vashishtha.

India continues to top the list with revenues of $40 billion in IT-BPO export services in 2008. Indian IT-BPO export services posted 35 percent year on year growth rates in the last five years.

Interestingly India’s FDI inflows posted the largest increase globally at 46 percent in 2008 — from $25 billion to $46 billion even as global FDI flows decreased from $1.9 trillion to $1.7 trillion and several developing economies struggled to acquire investments from client nations.

Compared to the previous year’s rankings, this year’s study reveals minimal shifts in rankings because of the overall slowdown in the pace of outsourcing activity in the face of global recession.

Seven Chinese cities - Shanghai, Beijing, Shenzhen, Dalian, Guangzhou, Chengdu and Tianjin - and six Indian cities - Chandigarh, Kolkata, Coimbatore, Jaipur, Bhubaneswar, Thiruvananthapuram - make it to the list of next 60 outsourcing destinations.

The study lists India, Philippines, Ireland, China and Brazil among Top 5 Offshore Nations “with a high degree of maturity and record of successful delivery capabilities.”

Canada, Russia, Mexico, Vietnam, Poland are listed as Top 5 Emerging Nations. The difference between the Top 5 and the Next 5 offshore nations is most pronounced in the service level maturity, the study said.

Source:www.economictimes.indiatimes.com/

These five countries offer the strongest value propositions to clients based on the Location Assessment Platform and are considered as prime locations when considering specific outsourced processes.

Established offshore nations with a high degree of maturity and record of successful delivery capabilities are categorized as the Top 5 Offshore Nations. These countries typically have centers of excellence across multiple outsourcing segments and rank highly in a number of location-assessment scenarios. These five countries offer the strongest value propositions to clients based on the Location Assessment Platform and are considered as prime locations when considering specific outsourced processes. These emerged destinations will most often also have the unique advantage of scale and capacity as compared to smaller or emerging locations.

The difference between the Top 5 and the Next 5 offshore nations is most pronounced in the service-level maturity. In terms of potential, the Next 5 are not far behind, however this potential is considered to be still unrealized due to specific inhibiting factors. It also must be stated that the service-level maturity has been taken into consideration from the client point of view, as client nations look at offshore nations in a distinct manner. This has been taken into consideration when categorizing locations. This customer perception may change or alter over time, but takes significant effort and time on a destination’s operational front. Successful service delivery is the most significant factor in altering customer perception.

Next 5 Offshore Nations
Canada

An interesting characteristic of Canada’s outsourcing industry is evidenced in the fact that despite its relatively higher costs compared to other nearshore destinations south of the U.S., such as Mexico and Costa Rica—Canada remains an attractive investment site for service providers. This is due to the wide array of outsourced services the country provides which includes low-end services in customer support to high-value shared services centers. However, the country’s niche service continues to be of high-value services in FAO, engineering services as well as ITO-related processes in applications development and management, testing and R&D. Several area clusters in the country house outsourcing hubs such as Toronto, Halifax, Calgary, Montreal and Vancouver.

Russia

Russia continues on the path of becoming one of the leaders for hi-tech R&D outsourcing in the world. Russia’s deepening service delivery expertise and rich talent pool have made the country a research factory for top organizations like Intel, IBM, Motorola, Samsung and Google. Being a part of the Eastern European outsourcing region has also enabled Russia to collectively share the niche service characteristic for the offshoring and outsourcing industry. The country, however, stands out in the region due to its capacity to fulfill large-scale, high-value services.

Mexico

With a business landscape centered on manufacturing and historically catering to the U.S. market, Mexico has slowly added outsourced services into its business portfolio. The country is considered to be one of the Next 5 offshore destinations—an attribute owed to its favorable nearshore characteristics. Outsourced services in the country started with voice-based services catering to both English and Spanish speaking customers. This attribute—the provision of multilingual capabilities—distinguishes it from Asian competitors such as India and the Philippines.

Vietnam

Vietnam’s economic growth over the last several years has been invaluable towards its emergence as a Next 5 Offshore Nation. For instance, net FDI inflow to Vietnam reached $6 billion in 2007, up from $2.3 in 2006. Further, even as the global economic crisis took full swing towards the end of 2008, Vietnam’s GDP grew by a decent 6.2 percent by year-end, just down from 8 percent posted in 2007. The country’s economic dynamism is also attributed to its rapidly maturing business environment. Vietnam is perceived as one of the more vibrant destinations for engineering services outsourcing and software development services in the Asian region.

Poland

Poland is emerging as a premiere nearshore shared services center for Western European and Scandinavian client markets. With its capabilities in serving the full spectrum of services in both ITO and BPO spaces—Poland has emerged as arguably the strongest competitor in the region for a spot in the Top 5 Offshore Nations list. While other countries in the region struggle to develop and build a scalable/employable talent pool, Poland’s population of almost 40 million and world-class education system—has successfully positioned its place among the top offshore nations.

Story Source: http://www.outsourcing-russia.com/docs/?doc=1775

The IT company will absorb the Swiss financial company’s 2,000 associates based in Hyderabad

Mumbai: New Jersey, US-based Cognizant Technology Solutions Corp. has agreed to buy UBS AG’s India back-office operations for $75 million (Rs344 crore) to strengthen its financial services business, the latest is a lineup of such deals by other firms in India since last year.

Analysts expect more such deals involving the outsourcing units of global financial services firms caught in the slowdown and looking to re-focus on core operations. But they warn time may be running out as the global recession recedes.

As part of the agreement, Cognizant, an information technology (IT) consulting and services firm, has won a five-year contract worth at least $440 million from the Swiss financial services firm to provide it outsourcing, IT and remote infrastructure management services globally.

Cognizant will also absorb UBS India Service Center Pvt. Ltd’s nearly 2,000 associates in Hyderabad.

The company disclosed the value of the deal and the contract in a filing to US market regulator, the Securities Exchange Commission.

“This acquisition deepens our relationship with UBS and extends our leadership position in financial services,” Cognizant chief executive Francisco D’Souza said in a statement on Thursday.

“The acquisition gives Cognizant a good presence in the European market besides giving it BPO (business process outsourcing) capabilities, both of which were areas that the company needed to strengthen,” said Sid Pai, managing director of the India arm of global outsourcing advisory TPI.

More such deals are likely, he said. “(But) the window period for such deals are fast closing as we are getting out of recession and the valuations will now start going up.”

According to analysts, Cognizant has closed the deal at a reasonable price, especially when compared with other recent deals.

“At $440 million, the annual revenue run rate from this acquisition comes to nearly $90 million, which is more than the cost of the acquisition,” said Nitin Padmanabhan, an analyst with Mumbai-based Centrum Broking Pvt. Ltd.

Last December, Wipro Ltd, the country third largest IT firm, acquired Citi Technology Services Ltd, Citigroup Inc.’s technology arm in India, for $127 million.

As a part of that deal, Wipro won a six-year software services and infrastructure management contract worth nearly $500 million. It also took on board Citi Technology’s 2,050 associates.

Similarly, Tata Consultancy Services Ltd, India’s largest IT firm, bought Citigroup Global Services Ltd (CGSL), Citigroup’s back-office centre in India, for $500 million with assured outsourcing revenues of $2.9 billion over nearly 10 years.

Earlier, in July 2008, WNS Global Services, one of India’s largest outsourcing firms, bought Aviva Global Services, the outsourcing arm of British insurer Aviva Plc, for $228 million. WNS had acquired nearly 5,800 personnel with the deal.

Source:http://www.livemint.com/2009/10/15222635/Cognizant-buys-UBS8217-Indi.html?h=B

IT leaders are increasingly turning to multiple outsourcing vendors to obtain application development and maintenance services. They’re finding that spreading their application development and maintenance work across, say, three vendors makes more sense than having a single provider perform all of the work.

Indeed, multisourcing, as the practice of using multiple vendors for one function is known, offers a number of benefits to the customer, says David Rutchik, partner with outsourcing consultancy Pace Harmon. For one, a portfolio approach to sourcing provides access to a wide, deep bench of resources that may not otherwise be available from a single provider. Moreover, it encourages competition among the vendors, which benefits the customer’s bottom line. It also keeps the vendors honest and hungry for the customer’s business.

“By avoiding minimum commitments of spend or services with any one vendor, each provider earns the business by providing ongoing, compelling value,” Rutchik says. “This can be more important than any outsourcing contract provision.”

Of course, using too many providers would spoil this outsourcing secret sauce: It would increase governance challenges and require the customer to smooth the ruffled feathers of vendors who might feel marginalized. That’s why the typical multisourcing recipe includes ongoing relationships with a couple of Indian providers and one U.S.-based multinational supplier. The domestic provider can perform the work offshore or access a pool of U.S.-based resources if necessary, whether for customer comfort, ease of collaboration or security reasons, Rutchik explains. And with potential changes to the H-1B and L-1 visa programs looming, having an American provider in the mix may become even more important.

As for the two offshore providers, clients should opt for vendors of different sizes–one large firm and a Tier 2 or 3 vendor, advises Rutchik. The smaller provider should keep pricing competitive, may offer specialization in certain verticals, and offer more individual focus and attention.

The Mechanics of Multisourcing

Here’s how a multi-sourcing agreement works. The client enters into agreements with the three providers upfront, establishing terms, service levels and pricing either for a specific project or projects in the future. However, these contracts should not guarantee future work to any provider.

Each time new development or maintenance needs arise, the client determines its requirements and issues a statement of work on which the vendors may bid. “As a best practice, a company should not award projects in a de facto manner,” says Rutchik. “A competitive process ensures the right pricing, skill sets, et cetera are secured for the particular project.

Multisourcing requires more work upfront, admits Rutchik. And no one wants to put together statements of work for every little project. “However, the structure and attention on the front end–which does add incremental resources and effort from groups such as IT and sourcing–actually enables less overhead on the governance side because projects requirements are scoped and resourced more appropriately,” Rutchik says.

More:http://www.computerworld.com