Offshore Outsourcing News & Articles

The software maker has been quietly outsourcing its back office operations to service provider Accenture over the past several months, Accenture disclosed Thursday.

Microsoft is doing some internal house cleaning.The software maker has been quietly outsourcing its back office operations to service provider Accenture over the past several months, Accenture disclosed Thursday.

The two companies struck a seven-year deal earlier this year, Accenture said. Under the pact, worth $185 million, Accenture will handle a range of finance and accounting functions for Microsoft, including accounts payable and travel and expense management and general ledger maintenance.

Accenture also is providing Microsoft with a number of procurement services, including requisition-to-purchase order processing.

Microsoft chief accounting officer Frank Brod said in a statement that the companies are “a few months into the program.” Brod said he is “pleased with the progress and speed of the transition.”

Accenture did not specifically disclose the location from which it’s providing the services, but the company has been aggressively building up its footprint in India in order to tap the country’s army of low-cost, white-collar workers. Accenture will have more employees in India than in the U.S. by year’s end, company officials have stated.

Outsourcing to India allows businesses to cut back-office costs by anywhere from 15% to 40% experts say, although the rising rupee has been gnawing away at those savings of late.

To provide some of the services, Accenture is using Microsoft’s own Dynamics AX platform, a multi-language, multi-currency ERP system that automates routine business functions.

Separately, Microsoft on Wednesday said it has boosted the quarterly dividend on its shares by a penny to $0.11 per share. The dividend is payable on December 13, 2007, to shareholders of record on November 15.

Microsoft has consistently raised its dividend over the past several years in one penny increments. In early trading Thursday, Microsoft shares were up slightly to $29.01.

India is considered the king of BPO outsourcing destinations around the globe. Now the question is, where do India Inc outsource to. This should be an interesting topic to look at. In the first half of 2007,BPO Services India outpaced Australia and Japan as the largest market for outsourcing contracts in the Asia Pacific region by awarding a total

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NEW DELHI: Everyone knows, how India’s retail sector is poised to take off and we will be among the top five retail markets in the world in the next 10 years. But that is only one part of the big story. For making the most of the retail boom worldwide is another sunshine sector that is — the IT and ITeS. While global retail chains are chalking out their India plans, Indian IT firms are quietly providing them back office and other core support from here.

Most top retail chains are either outsourcing their work to third parties in India or opening captives centres here.
And it’s been happening for sometime now. For example, UK-based chain Tesco, has set up a back office — Hindustan Service Centre in Bangalore — with a headcount of 2,000 people. Target, a US-based retailer has a captive centre in Bangalore and plans to expand it. Marks & Spencer, Sainsburys, Best Buy — all have outsourced their work to India.

Studies forecast, as retail business gathers momentum, retail will double in the next couple of years. Research done by Everest Group reveals, the global IT and BPO spend by retail firms is worth over $10 billion per annum as of now.

Nearly 75% of this relates to IT and the rest 25% is contact centre, HR, finance and accounts, procurement etc.
Already, business worth $1.5 to $2.0 billion is being offshored to India. Companies like Infosys, TCS, Wipro, Satyam, Cognizant see 6-12% of revenues coming from retail outsourcing services. This translates to over $1 billion per annum. And this is growing.

“Retail outsourcing spend on IT and BPO is growing rapidly. The volume and value of contracts globally grew at over 20% over the last few years. And Indian firms too could continue to see their revenues grow from retail IT and BPO increase,” says Gaurav Gupta, country head, Everest Group.

According to ValueNotes, a Pune-based research firm, traditionally, retailers started by outsourcing their IT functions to India but gradually they have embraced BPOs as well. “Typically, a retailer looks at improving the level of customer satisfaction, which means offering better service to the customer while keeping expenses under check. Amongst the BPO services, customer relationship management is the most commonly outsourced function,” says Neeraja Kandala, senior analyst, ValueNotes.

With growing competition, retailers are adding newer channels to sell their products, she explains. The accent of outsourcers to stay ahead of competition will accelerate offshoring in the retail space.

Besides offering HR, finance and accounting services, Indian ITeS companies are now also doing a lot of research and analysis-based work. They provide retailers an insight into buying patterns of shoppers, give information about products, pricing and distribution. KPOs like Evalueserve, Manthan and Integrated Retail are offering retail analytics, which include merchandise planning, training, supply chain management.

Gupta feels top Indian retailers could learn a few things from the retail outsourcing experience of international players.

sujata.sachdeva@timesgroup.com

Wipro’s and other outsourcers’ expansion moves show a tech industry that’s becoming more committed to local markets rather than just touting a ”presence.”

By Rob Preston
InformationWeek
August 11, 2007 12:00 AM (From the August 13, 2007 issue)

Several outsourcing industry deals last week show that the world of business technology is indeed getting flatter–but also that tech globalization is a multidimensional thoroughfare, not a one-way street out of the United States.

The biggest deal is Wipro Technologies’ $600 million acquisition of Leonia, N.J.-based Infocrossing, planting the huge Indian outsourcer firmly on U.S. soil, complete with expansion and hiring plans. Infocrossing operates five data centers in the United States, providing hosted and managed IT services. As Wipro extends its U.S. footprint, including opening software development centers in Atlanta and three other cities, the company says it’s looking to hire hundreds of Americans with associate’s degrees in tech-related fields, train them, and pay for the best to earn bachelor’s degrees in technology–much like it does with tens of thousands of locals back home.

It’s by no means a U.S. hiring spree for Wipro, whose employees in the States are mostly Indian nationals, notes senior writer Marianne Kolbasuk McGee in our cover story this week. But it’s at least a sign of long-term investment in the domestic market.

And those expansion and hiring plans aren’t just opportunistic PR for an offshore company (and industry) that strikes fear into the hearts and minds of the American IT rank and file. They’re also smart business, as Wipro appeals to U.S. customers as a full-service IT outsourcer rather than a bit player that merely picks off low-hanging business and ships it back to India. Before it had U.S. data center and development operations, Wipro was probably a legitimate option for two in 10 U.S. companies, says Dean Davison of consulting firm NeoIT, while now it’ll be an option for seven of 10 companies.

The tech globalization road also is leading to China, as evidenced by two other outsourcing industry deals last week. Under one, private equity firm Francisco Partners is investing $48 million in DarwinSuzsoft, a U.S. company that specializes in outsourcing to China. DarwinSuzsoft, which employs 800 of its 1,000 people in China, does both business process and IT outsourcing, mainly for financial, insurance, technology, and health care customers. CEO Dan Ross says companies are looking to China to access tech talent that’s up to 40% cheaper than in India, with less turnover. “It’s a massive phenomenon,” Ross told editor at large Mary Hayes Weier. “I don’t know any large company that is not considering China at this point.”

Also last week, Sierra Atlantic, an IT services provider with operations mainly in India, said it’s acquiring ArrAy, a Boston-based company with 200 engineers in Guangzhou and Shanghai. The biggest tech vendors have their sights on China as well: IBM, Oracle, Tata Consultancy Services, and others plan to hire thousands more engineers and developers in that country.

None of these moves is evidence of a kinder, gentler technology industry. Disruption will define the tech profession for many years to come. But what these moves do show is a tech industry that’s becoming more global rather than merely international, the difference being the level of commitment–not just “presence”–that offshore-based employers must prove locally.

In the United States, despite the often painful upheaval of tech globalization, especially as jobs and competencies are scattered worldwide, services exports still exceed imports. In the category of “professional, technical, and other private services,” U.S. exports (which include IT work done in the States for offshore companies) rose $2.2 billion between May 2006 and May 2007, while imports increased only $1.1 billion.

Granted, there’s a dozen ways to slice and dice trade figures to make them look good or bad, depending on your world view. What’s fact is that tech globalization isn’t slowing down. The enormous challenge is to anticipate and adapt, or get left behind.

Rob Preston,
VP/Editor in Chief
rpreston@cmp.com