According to Clinton, the U.S. – India relationship needs an “upgrade,” which she termed “U.S. – India 3.0.”  Her speech seemed to indirectly support the arguments made by India’s IT outsourcers that visa restrictions fall under the category of protectionism.  Clinton did not address the argument regarding offshore outsourcing and lost jobs in the United States.  Instead, she said that any differences in perspectives regarding the relationship between U.S. and India could be worked through by focusing on shared objectives and concrete results.

Legislation proposed by U.S. Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) seeks to establish stricter prevailing wage standards that could increase salaries for H-1B workers and impose limits on the number of visa workers to 50 percent of a company’s total workforce.  This bill has been strongly protested by the Indian IT community and Indian government.  Wipro Chairman Azim Premji, said that there is extreme concern among the India IT industry regarding the Grassley-Durbin bill.

The basic argument against the Grassley-Durbin bill is that global sourcing tends to lower costs for U.S. companies.  By lowering costs through offshore IT outsourcing, companies can expand in other areas and markets outside of the United States. 

India’s ambassador to the United States, Meera Shankar, said that India’s IT talent has enabled U.S. companies to become more competitive globally, while at the same time creating jobs and profits that can circulate through the economy. 

There are many offshore outsourcing benefits available for U.S. based companies.  If your company is looking to outsource IT development, you should first speak with an outsourcing consultant from A&E Consulting at 661-200-3612.

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Global sourcing refers to the practice of sending certain aspects of business development to other countries, either near shore or offshore.  When it comes to IT, global sourcing gives companies the opportunity to send certain business operations or processes to third-party suppliers outside of the country.  Global sourcing generally provides lower labor costs, access to qualified IT personnel, lower overhead expenses, increased productivity and an operation that virtually runs 24 hours a day.  All of these benefits give the company looking to outsource a competitive edge over other IT companies.

According to TechsUnite.org, a website for a high-tech workers union, 528,478 U.S. jobs have been offshored since January 1, 2000 through August 2008.  With the Internet and continuous changes in technology, it is now easier for companies to manage projects sent to global sourcing providers.

Many foreign governments have begun offering companies incentives relating to global sourcing.  India, China and Malaysia boast highly skilled technical workers and graduate thousands of IT professionals every year from the colleges and universities.

Even though global sourcing can create a competitive advantage, companies looking to outsource should be cautious when choosing a vendor and location.

Benjamin Shao, associate professor of Information Systems at Arizona State University’s W.P. Carey School of Business, was quoted in an article as saying, “It (offshore outsourcing) is still a very popular business practice nowadays.  But I think U.S. companies now have learned from their own experience or from their competitors’ experiences over the last few years.  So now they also try to be a little bit more discreet and careful when it comes down to the idea of offshore outsourcing.”

Data and intellectual property protection are often major concerns for IT companies.  When choosing a global sourcing provider, it is crucial to find out what systems are in place to protect data.  This information should be available before a global sourcing contract is signed.

Other factors to consider when choosing a vendor are the country’s benefits and risks, the vendor’s expertise and qualifications and communication capabilities. 

Global sourcing is great tool to use to stay competitive in the global environment.  Companies need to be aware of what global sourcing has to offer, but should also be aware of the risks and how to minimize them.

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Four areas of expected ICT growth were identified, which include the following:

• Sustainable IT
• Outsourcing services, managed and hosted services
• Information management tools
• Services that support mergers and acquisitions

“In particular, ICT solutions that shift costs from a capital to variable component, focus on productivity increases and cost reduction, and support organizational restructuring and acquisitions are likely to see growing demand,” says Andrew Milroy, ICT director at Frost & Sullivan. 

The report predicts that investments will be made in sustainable technology within existing infrastructure, such as virtualization, videoconferencing, thin clients and power consumption modeling, as these capabilities are able to reduce costs while increasing green initiatives.   A greater focus on variable costs is estimated to lead to an increase in popularity of software-as-a-service (SaaS) and hosted service models.

Business travel will most likely decline, which will create a greater need for conferencing tools.  These conferencing tools will also allow more employees to work remotely, which will reduce travel costs and emissions.  As a result, there will be new opportunities for providers of secure remote access solutions.

One of the major areas of expected growth among the ICT sectors involves IT outsourcing.   Many organizations are looking for ways to cut back on costs and IT outsourcing provides a way to accomplish this goal.  Plus, outsourcing to a global sourcing provider allows companies to better focus on core competencies and increase productivity.  Global sourcing providers are expected to reap the greatest benefits to this anticipated growth.  Frost & Sullivan cautions in the report that contract terms can be expected to fall significantly.  Companies can use the advice of experienced IT outsourcing consultants to ensure that the contract terms are in their favor.

The authors of the Frost & Sullivan report believe that there will be new opportunities in both traditional and non-traditional areas of managed services, including managed handsets, network services and leasing services.  According to the report, there should be an increase in mergers and acquisitions as the economy continues to weaken.

Based on this Frost & Sullivan report, it is safe to assume that a slow economy will benefit some areas within the IT industry, while negatively impacting others.  Global IT sourcing is a great way to lower costs during this economic slowdown.  A&E Consulting helps organizations weigh the benefits of outsourcing and also assists in choosing the right outsourcing partner.  The consulting firm will even oversee the first outsourced project to ensure a smooth transition.

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Most executives know that outsourcing is defined as delegating business functions to a supplier or external partner.  What many individuals do not realize is that there are different types of outsourcing, including IT outsourcing, (ITO) and Business Process Outsourcing, (BPO).  With ITO, some or all of the IT services are sent to another provider.  The outsourced function can be software development or IT infrastructure services.  BPO refers to the delegation of non-core IT intensive business processes, such as supply management, data entry and customer service.

There are many terms used to describe the geographical proximity of the outsourcing provider to the customer.  Onshore outsourcing means that a company is sending work to a provider located in the same country.  In the United States, that would basically mean a company contracts with a U.S. supplier for business services.  Near shore outsourcing refers to contracting with a company located in a nearby or bordering country.  Usually near shore means that the outsourcing provider is a short travel distance and may even be in the same time zone.  For the United States, Canada or Mexico would be considered a near shore location.  Global sourcing, also known as offshore outsourcing, offshoring, describes the process of delegating functions to a provider located in a distant location, several time zones away.   India, China and the Philippines are all considered to be offshore locations for U.S. based companies.

It is important to also be well-versed on the key players of the outsourcing relationship.  The company looking to outsource work is referred to as the buyer, outsourcer or customer.  The firm that accepts the outsourced work is called the supplier, service provider, outsource service provider, vendor or resource.

Companies looking to outsource should consider sending work to more than one service provider, which is known as multi-sourcing.  When the outsourcer utilizes the services of more than one provider in different geographical locations, this is known as an outsourcing portfolio.

A&E Consulting can bring you up to date on the newest terms in outsourcing.  We can assist you in choosing the right global sourcing provider and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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