Study: US companies eye home soil for outsourcing

A recent study by BDO Seidman LLP, an accounting and consulting organization, finds that nearly a quarter of the chief financial officers at US technology businesses who outsource plan to consider the United States as the main outsourcing destination in 2009.

Twenty-two percent of the chief financial officers surveyed pegged the United States as an outsourcing destination; 16 percent named China and 13 percent named India. These were the three top countries named in the survey.

China takes the number two position with 16 percent, followed by India with 13 percent. Nineteen percent say they have no plans for further outsourcing, according to the study

“While last year may have produced an outsourcing bubble, 2009 will see companies retrench to survive in the face of reduced demand. The United States has become a far more viable option for them,” said Douglas Sirotta, a partner in BDO Seidman’s technology practice.

“This year we are seeing three global factors that are causing US technology companies to pull back from traditional outsourcing locations, led by the recent boom and bust of the worldwide economy. Satyam’s fraud case and the terrorist attacks in Mumbai are causing a lot of companies to reconsider operating in India. And supply chain and shipping cost issues in China are negatively impacting the attractiveness of outsourcing technology operations to the Far East,” Sirotta added.

Higher shipping costs from China to the United States may also weigh into decisions about whether the United States is seen as an attractive alternative to farming out operations to China.

The cost of shipping a 40-foot, standard container from East Asia to the eastern seaboard of the United States has tripled since 2000, according to a late 2008 report from CIBC World Markets in Toronto.

Other findings from the study include:

• The most common non-US locations for outsourcing are India, at 50 percent; Southeast Asia, including the Philippines, at 31 percent, down from 50 percent in 2008; China, at 19 percent, down from 46 percent in 2008, and Western Europe, at 19 percent.
  

• Economic climate affects international growth plans. Less than half, 42 percent, of the CFOs surveyed indicate that they have operations outside the United States, compared to nearly double that amount, 79 percent last year. Nearly a third, 29 percent of respondents, said their primary concern regarding international growth is an uncertain business or political climate. Twenty-six percent cite international business and tax regulations, with 21 percent citing currency risk, 14 percent intellectual property risk and exploitation, and 10 percent training of international employees as their primary concern.
  

• Of those outsourcing, the most common functions being off-shored currently are: manufacturing, at 54 percent; information technology services and programming, at 46 percent; and research and development, distribution and call centers, all at 35 percent.

Source: http://www.indusbusinessjournal.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=884EBE4DDA734BD5BDFAA9E8C533BCDA

China to Fund Software-Information Service Projects

US President Barack Obama's announcement to end tax sops to those US firms outsourcing jobs to countries like India has come under lak from Phil Harkins, a leading US management expert and chief executive of Linkage Inc, a global firm specializing in leadership development.

"What Obama is doing is just politics. It's the arrogance of the US to think creating jobs overseas will result in job losses back home. Such measures (offering tax sops) will not stop US firms from outsourcing talent where it's available at a best cost," Harkins told IANS Tuesday on the margins of a news conference here.

Terming Obama's observations on outsourcing as political posturing, Harkins said in a globalised world, companies look for sharing resources, be they human or investments, to remain competitive and sustain growth even in a downturn.

"I don't think American firms will stop outsourcing jobs overseas for availing tax incentives at home in a global economy. By outsourcing jobs where they are beneficial and cost-effective, they actually protect jobs back home and stay competitive," he said.

Clarifying that Obama's proposal had to do more with the international tax policy reform than creating jobs in the US, Harkins said those US firms with global operations outsource jobs where they make business sense.

"By outsourcing manufacturing of goods to countries like China, the US economy benefitted a lot. Similarly, by outsourcing services or back-office operations to overseas firms located in countries like India, US firms benefit a lot more," Harkins said at the launch of his firm's India operations here.

The Massachusetts-based Linkage offers corporate clients the world over with integrated solutions, including strategic consulting services, customized leadership development and training experiences, tailored assessment services, executive coaching and benchmark research.

Source: http://economictimes.indiatimes.com/Obama-stand-on-outsourcing-is-politics-US-expert-/articleshow/4487816.cms

Obama stand on outsourcing is politics, says US expert

US President Barack Obama's announcement to end tax sops to those US firms outsourcing jobs to countries like India has come under lak from Phil Harkins, a leading US management expert and chief executive of Linkage Inc, a global firm specializing in leadership development.

"What Obama is doing is just politics. It's the arrogance of the US to think creating jobs overseas will result in job losses back home. Such measures (offering tax sops) will not stop US firms from outsourcing talent where it's available at a best cost," Harkins told IANS Tuesday on the margins of a news conference here.

Terming Obama's observations on outsourcing as political posturing, Harkins said in a globalised world, companies look for sharing resources, be they human or investments, to remain competitive and sustain growth even in a downturn.

"I don't think American firms will stop outsourcing jobs overseas for availing tax incentives at home in a global economy. By outsourcing jobs where they are beneficial and cost-effective, they actually protect jobs back home and stay competitive," he said.

Clarifying that Obama's proposal had to do more with the international tax policy reform than creating jobs in the US, Harkins said those US firms with global operations outsource jobs where they make business sense.

"By outsourcing manufacturing of goods to countries like China, the US economy benefitted a lot. Similarly, by outsourcing services or back-office operations to overseas firms located in countries like India, US firms benefit a lot more," Harkins said at the launch of his firm's India operations here.

The Massachusetts-based Linkage offers corporate clients the world over with integrated solutions, including strategic consulting services, customized leadership development and training experiences, tailored assessment services, executive coaching and benchmark research.

Source: http://economictimes.indiatimes.com/Obama-stand-on-outsourcing-is-politics-US-expert-/articleshow/4487816.cms

Plan an Outsourcing Deal's End at Its Beginning

For whatever reason, you are terminating a contract with a key outsourcing vendor . Perhaps their prices are too high, or they failed to meet performance goals. You look over your contract and-surprise! Very little is said about what happens when the deal ends and you need to transition to a new vendor.

Contracts often do not address this critical issue in sufficient detail, making a difficult situation even worse. Instead of focusing on the new vendor, CIOs find themselves negotiating with both vendors to avoid a service interruption or other adverse effect on business.

The time to set the groundwork for a termination transition plan is when you negotiate the original contract. No one likes to do this -- focusing on a relationship's end before it starts is viewed as bad karma. But unless you do so, the vendor has no incentive to do more than the contract requires when it comes to transitioning out of a deal.

How can you mitigate this risk? Start by making sure your contract addresses the minimum requirements for a termination transition plan. The plan should provide a detailed rule book for doing this in an organized way.

To begin, the vendor should be contractually obligated to aid in the development of a transition plan. The vendorand customer should review and approve the plan as part of the initial contract or right after it begins. Basic requirements should be specified, such as requiring details of activities performed by the vendor, the customer and affected third parties, as well as a process allowing activities to be validated and updated during a transition.

Key issues include: ownership and return of data, documentation and intellectual property created or used to develop the services and knowledge transfer; determining whether a new vendor may obtain hardware, software, staff and business procedures used by the incumbent; and detailing the incumbent vendor's obligation to perform the steady-state services during transition. All relationships have a beginning and an end. A well-designed contract ensures a successful exit for everyone.

Source: http://www.itworld.com/

Obama takes first step in tax overhaul

President Barack Obama's move to curb overseas tax havens and job outsourcing was his first major proposal in what promises to be a broad overhaul of the US tax system.

Obama chose a relatively populist initial step.

Americans have little sympathy for companies that park their money in places like the Cayman Islands in order to avoid paying US taxes.

And they are even more fed up with companies that have benefited from tax incentives for shipping jobs overseas, blaming these policies for a broad erosion of the US labor market.

Not everyone agrees with his salvo at tax havens.

Daniel Griswold, an expert at the Cato Institute think tank, said locating affiliates in foreign markets is now the chief way that US companies reach new customers outside the United States.

"This demagogic grab for more revenue will only cripple the ability of US companies to expand their sales in global markets, putting in jeopardy the US-based jobs that support their foreign affiliates," he wrote in a blog.

Demands for more revenues to close a widening budget deficit and pay for government programs are driving what could turn out to be the biggest overhaul in the US tax code since 1986.

The US budget deficit for fiscal 2009 could top $1.8 trillion and is forecast to be around $1.4 trillion in 2010. Obama has vowed his economic plan will cut the deficit in half in four years, but many lawmakers express concern about the burden of long-term debt.

Obama has proposed a record $3.55 trillion budget for 2010, which includes billions in support of overhauling healthcare and education and expanding green technologies.

The Democratic-controlled Congress has passed a $3.4 trillion compromise version that sets parameters for spending and tax legislation, with many battles left to be fought.

More changes in the tax system are likely to be proposed in the months ahead.

"It's a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations," Obama said in making his tax-haven announcement on Monday.

In March Obama formed a White House task force to recommend ways to simplify the tax code, close loopholes and limit tax evasion.

Obama has vowed to increase taxes for Americans making more than $250,000 a year but other Democrats have voiced concern that this may not raise sufficient revenues.

Many voices, including Obama's, are calling for a simpler tax system.

The Center for the Study of the Presidency, a bipartisan think tank, issued a report in March that among other things, talked about the need to reform a tax code that contains 3.7 million words.

Among its conclusions was that: "The tax system needs to strike a better balance between taxing income and consumption."

Source: http://uk.reuters.com/

Russia IT and Outsourcing Industry

According to “Russia IT and Outsourcing Industry Forecast to 2011”, a new research report by RNCOS, the Russian IT & outsourcing market has been growing at a rate of more than 20% since the past few years. The Russian IT hardware market, accounting for more than 50% of total IT spending, continues to dominate the total IT market. However, software spending has reported high growth rates compared to that of hard

According to “Russia IT and Outsourcing Industry Forecast to 2011”, a new research report by RNCOS, the Russian IT & outsourcing market has been growing at a rate of more than 20% since the past few years. The Russian IT hardware market, accounting for more than 50% of total IT spending, continues to dominate the total IT market. However, software spending has reported high growth rates compared to that of hardware and services spending over the recent past. Considering the future market potential, RNCOS believes that software spending will continue to lead the growth patterns in the IT industry during 2008 to 2012.

The Russian software and services market will be mainly driven by the country's emergence as an IT Outsourcing (ITO) center, thanks to its close proximity with Europe, similar time zone, and availability of high quality workforce at low cost. The ITO market is undergoing phased transformation and is progressive from nascent stage to the development stage. Investments are also being phased in from both the government and private sector. The Russian government is increasing its IT investments in order to expand and develop the IT infrastructure in the country. Private sector investments are concentrated into opening of new software development centers in the country and also towards the expansion of the existing software development centers.

The report thoroughly evaluates the opportunities and factors critical to the success of the IT industry in Russia. It underlines the issues related to the success of the industry and provides a prudent analysis on its various aspects. It presents a comprehensive overview on the past and current performance of the IT industry, including software, hardware and services industry.

Industry Forecast till 2011

- IT spending as percentage of GDP and fixed investment
- IT spending in Billion US$
- IT spending by segments in percentage terms
- Packaged software sales in Billion US$
- ERP software market in Billion US$
- Antivirus market in Million US$
- IT hardware spending in Billion US$
- IT services spending in Billion US$
- Computer games market in Million US$
- Retail sales of IT products in Billion US$
- Revenue from printers and multifunctional devices by value (in Billion US$) and volume (in Million Units).
- IT spending on infrastructure by SMEs

Key Players Profiling

This section covers the key players currently operating in the Russian IT and outsourcing market. This section describes the business overview of key players, operating system platforms, technologies used, application and web servers, and their area of expertise. The key players have been discussed under two heads - Domestic Companies (including Reksoft Co. Ltd., Artezio and Aplana Software), and International Companies (including IBA Group, Auriga, and DataArt).

http://www.pr-inside.com/

ware and services spending over the recent past. Considering the future market potential, RNCOS believes that software spending will continue to lead the growth patterns in the IT industry during 2008 to 2012.

The Russian software and services market will be mainly driven by the country's emergence as an IT Outsourcing (ITO) center, thanks to its close proximity with Europe, similar time zone, and availability of high quality workforce at low cost. The ITO market is undergoing phased transformation and is progressive from nascent stage to the development stage. Investments are also being phased in from both the government and private sector. The Russian government is increasing its IT investments in order to expand and develop the IT infrastructure in the country. Private sector investments are concentrated into opening of new software development centers in the country and also towards the expansion of the existing software development centers.

The report thoroughly evaluates the opportunities and factors critical to the success of the IT industry in Russia. It underlines the issues related to the success of the industry and provides a prudent analysis on its various aspects. It presents a comprehensive overview on the past and current performance of the IT industry, including software, hardware and services industry.

Industry Forecast till 2011

- IT spending as percentage of GDP and fixed investment
- IT spending in Billion US$
- IT spending by segments in percentage terms
- Packaged software sales in Billion US$
- ERP software market in Billion US$
- Antivirus market in Million US$
- IT hardware spending in Billion US$
- IT services spending in Billion US$
- Computer games market in Million US$
- Retail sales of IT products in Billion US$
- Revenue from printers and multifunctional devices by value (in Billion US$) and volume (in Million Units).
- IT spending on infrastructure by SMEs

Key Players Profiling

This section covers the key players currently operating in the Russian IT and outsourcing market. This section describes the business overview of key players, operating system platforms, technologies used, application and web servers, and their area of expertise. The key players have been discussed under two heads - Domestic Companies (including Reksoft Co. Ltd., Artezio and Aplana Software), and International Companies (including IBA Group, Auriga, and DataArt).

http://www.pr-inside.com/

Glory Foods outsourcing work on produce line

Southern-style foods producer Glory Foods Inc. has signed on with a third-party logistics firm to handle its fresh produce line as the Columbus company makes a heavier marketing and development push.

The company, one of the largest privately held businesses in Central Ohio, said Friday that it tapped Eden Prairie, Minn.-based C.H. Robinson Worldwide Inc. to oversee distribution, sales and retail customer support for its fresh produce business. C.H. Robinson (NASDAQ:CHRW) is an $8.6-billion-a-year company that serves 32,000 customers around the world.

Financial terms of the companies’ relationship weren’t disclosed.

Glory Foods, which also makes heat-and-serve canned vegetables and other products, said the deal will allow it to focus on developing new products and marketing as C.H. Robinson works with growers, packers and retailers to boost efficiency.

“Working with C.H. Robinson allows us to concentrate on our specialty – developing quality, Southern-style food products that appeal to consumers’ tastes and meet retailers’ needs,” President Jacqueline Neal said in a release.

Glory Foods in 2007, the latest year of data available, recorded $70 million in revenue, making it one of the 100 largest private companies in the region and the third-largest minority-controlled business, according to Columbus Business First research.

Source: http://www.bizjournals.com/