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A computer programmer in
the US costs IBM $56 an hour; a programmer in India or China would be about
$12.50. What would you do? Outsource your jobs offshore or not? Forrester
Research now says it expects that 830,000 U.S. service jobs will move to
low-wage countries such as China , India , and Mexico by the end of 2005.
Forrester's well-cited
projection of 3.3 million US services jobs moving offshore by 2015 will
increase slightly to 3.4 million.
By the end of 2003,
315,000 jobs had been shifted offshore, representing less than 1 percent of the
jobs in the affected categories. This number will grow to 1.6 percent by the
end of 2005.
Forrester finds several
additional factors driving the short-term increase, including:
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Existing offshore clients ramp up.
While 5 percent of Fortune 1,000 firms are full exploiters of offshoring (using
it whenever possible), it is the firms that have experimented with small
projects that will become more committed, fueling most of the growth. These
firms will increase spending during their migration offshore as they put
processes in place to manage the remote IT and business operations.
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New services from top-tier offshore
vendors. Leading Indian suppliers, such as Satyam, Wipro, and Infosys, are
expanding their services beyond application maintenance into business process
outsourcing (BPO), packaged application implementation, and remote monitoring
and administration of infrastructure, allowing them to capture a greater
percentage of IT services' spend.
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Expanded offshore capabilities from
US-based vendors. Customer and competitive pressure have caused services and
technology vendors like IBM and Accenture to expand operations in India, China,
and the Philippines. These two companies alone plan to add close to 9,000 jobs
in India by the end of 2005.
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Offshore has become a BPO requirement.
Access to low-cost offshore labor, a primary driver for IT, has become one for
BPO as well. Prospects are demanding an offshore component for BPO from even
onshore vendors, which led to IBM's recent acquisition of Daksh in India .
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Firms setting up captive operations.
Many firms are trying to achieve offshore cost savings themselves with
"captive" operations in places like India. Sending back-office jobs
like accounting and claims processing offshore will yield near-term savings -
without the need for a third party or waiting for vendors to ramp up skills.
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New verticals enter second wave.
Following the IT-intensive industries already dabbling in offshoring, verticals
like electronics and manufacturing that spend a high percentage of IT revenue
will be the next to make the move.
Advantage India:
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Talent-rich country
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Exports software to 95 countries around
the world
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Enjoys the confidence of global
corporations
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State-of-the-art technologies for total
solutions
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IT is a major thrust area for the
Government of India
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Stable government
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One of the world's 10 fastest-growing
economies
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Significant cost saving
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Large pool of computer literate and
English speaking professionals
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Quality standards meet the approval of
the world.
Below are six key
provisions that any outsourcing agreement should have to help mitigate
unavoidable problems when they occur.
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Protect Your Intellectual Property
Rights
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Ensure Data Privacy
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Require Consent for Subcontracting
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Include an Exit Strategy
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Properly Address Dispute Resolution
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Indemnification
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