Financial Resource

Outsourcing Relationship: The report titled “Creating a Win-Win Culture” in Outsourcing Journal talks about QinetiQ which was reaching the end of an existing outsourcing contract and realized the need to have a single source solution to provide a wide range of services and also reduce its total cost for IT services. In the year 2003, the company signed a contract with Accenture to provide broad range of applications; hardware and data center services, as well as purchasing and program management. To achieve early savings, the two companies bought into a structure and effective governance along with establishing good relationship at all levels at both the organizations. They were able to exceed the savings target in the first year of their partnership with the help of open communication, continuous innovation and win-win based solutions. Looking at the example of QinetiQ and Accenture we can say that good outsourcing relationships can create a win-win culture, which can benefit both sides. More and more companies are trying to copy the success of these two companies.  

Having discussed about the positive side of outsourcing, the benefits it can offer to the business and the Government, we now turn our discussion to the negative side of outsourcing namely declining satisfaction among the outsourcing clients, security risks, social effects and public opposition. Declining satisfaction among outsourcing clients Report on declining satisfaction among outsourcing clients published on ZDnet talks about Diamond Cluster International’s study, which found out that the number of buyers satisfied from their offshoring provider has dropped from 79% to 62%. Also the number of buyers terminating their offshoring contracts prematurely has doubled and reached 51%.  

Security Risks in Outsourcing: This declining rate of satisfaction will not be helped by recent reports on security breaches at the call centers in India. It was reported on the BBC by Zubair Ahmed that some employees of Indian call center Emphasis in Pune transferred large sums of money to the fake account they created from the accounts of American customers of Citibank, whose call operations were handled by the company. This incident has brought into focus the lack of integrated security management system in India’s call centers. The industry is still in the growing stage, and not much attention is paid to ensure that proper security procedures are followed. It is only after this incident that the companies have started doing background checks on the employees and have made the background checks a norm in their hiring process. This incident raises many questions regarding the safety and security of data when processes are outsourced; also the capacity of Indian companies to handle data securely is in question.  

Social Effects of Outsourcing: While data security in outsourcing is being questioned, there is a question about the social effects of outsourcing too. This issue has largely being sidelined because the industry is mostly concerned with the more visible effects of outsourcing like the cost saving and profits, rather than look for the slow but steady social change outsourcing is causing. Kaushik Basu talks about this issue in his article, “The Politics of Business Outsourcing,” published on Project Syndicate’s website. In his article he says that job loss due to outsourcing may lead to protectionism and nativism. In the long run this can lead to racism and other discriminatory practices. So it is very important to help the laid off workers so that they do not develop these kind of feeling toward the country where his job went.  

Unions Opposing Outsourcing IT: Unions in America have looked at one side of the social effects of outsourcing – job loss and the effect it has on the family and society. They are protesting against outsourcing and pushing the Government to pass laws to ban outsourcing. In his report “Unions step up anti-outsourcing efforts,” Juan Carlos Perez says that Information Technology Unions are fighting to keep American jobs in America. Leading this struggle is the International Federation of Technical and Professional Engineers (IFPTE), which is trying to convince the United States Congress to pass laws that, will protect jobs from being outsourced. The Union is also lobbying hard to get the working visa, especially H1B regulations tightened so that whatever jobs stay in America goes to Americans. (Perez, 2005, p.4) Although it concerns us that the Unions are painting outsourcing as the sole reason for job losses in the IT industry, while they turn a blind eye to other reasons like stagnating industry, high costs and increasing competition from foreign-based companies. It would be better for the industry and also for the IT professionals if they start looking at the whole picture instead of targeting outsourcing as the sole evil.

Depleting IT Talent Pool in USA: To understand why outsourcing is happening we must realize that the USA has a fast depleting talent pool in technical fields like Computer Science and Physics. So the companies are forced to seek talent outside the country or to send the job to country where there is a large talent pool. India and China are the best examples for this. India has a large population of engineering graduates who have refined technical skills and are able to do the job for less. Also China produces largest number of Computer engineers every year. So to compete against them united States should try to encourage its students to enter technical fields and should also introduce courses in schools and universities to increase technical skills. The report “Inside the Debate over Outsourcing Information Technology Service Jobs Overseas,” published by Manufacturing News, talks about the issue of talent shortage in America. The reports also discusses about the rising number of job protection groups, some of whom have websites; although these groups are trying to bring into focus the job loss and economic hardships caused to the American workers by outsourcing, some of their sites have included racist and biased remarks. And instead of using reasons they are resorting to insulting the foreigners who are talking their job overseas. 

Having discussed in length about the issues in outsourcing like security concerns, questions on job loss, depleting talent pool in America, and others, we now move our discussion to the outsourcing destinations and the IT infrastructure in those destinations. Outsourcing Destinations India and China have emerged as the leading destination IT job outsourcing. For out study we did an analysis of China as an outsourcing destination.

The report “Country Analysis: China” talks about China as an outsourcing destination. The highlights of the report have been summarized as follows: The software outsourcing market in China is a US.5 billion market with annual growth rate of about 35%. The present position of China is where India used to be 12 years ago. The growth in this sector is fuelled by the large supply of low-cost and qualified labor and a large internal market. Although the Chinese market is promising it is suffering from some serious problems like the lack of English language proficiency among the programmers and managers, the Chinese companies do not have established quality control procedure like their Indian counterparts. Also the large problem of software piracy in China is not helping it to become a credible destination for software development. The Chinese government is launching programs to encourage and develop the software industry. But it does not have a good international image because of its un-democratic style of governance and many European companies and US companies are hesitant of doing business in China because of this. Although China has a large supply of IT professionals, those qualified in software engineering and software are very limited because the Chinese universities still emphasize the traditional engineering fields like mechanical engineering and electrical engineering. Also, China has made great improvements in the telecommunication infrastructure but the developments are concentrated in the big cities and near the costal regions. The heartland and the rural areas are still far behind. This limits the Chinese market for software sales and development. We can see that China is a promising destination for IT outsourcing, but then it has some problems too. The country is trying to take the position India has in the outsourcing market, which it may be able to if we look at the IT infrastructure and other surrounding issues affecting IT development in the South Asian market.

A report titled “Struggling with the Digital Divide, Internet Infrastructure, Policies and Regulations,” published in South Asia net, talks about the problems facing the South Asian IT industry. The highlights of the report can be summarized as follows: The Internet made way to the South Asian region in the late 1980s through bulletin boards, government and non-government initiatives. In India, in the year 1995 government-owned VSNL started offering Internet access to the public. Private companies entered the market in 1998. In Nepal, the Internet was introduced in 1993 and in 1996 the people were given access to the World Wide Web. In the beginning only the big cities in the region had access to the Internet, but now Internet usage has spread to the rural areas too. For example: In India many villages’ government agencies have set up their own websites and offer many of their services online. Although the Internet is

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