Not exactly an outsourcing backlash -2009..

Though some predict an offshoring backlash in 2009, it’s still hard to dismiss the fact that companies looking to save much needed cash to continue operations would ignore the idea of outsourcing. Who wouldn’t want to save money given the global economic crisis and increasing competition?

According to Gartner analyst Linda Cohen, “Whenever there’s a downturn people outsource more, not less. Organizations want to take costs out wherever they can. CFOs are pounding on their CIOs to just outsource it, just offshore it.”

Eugene Kublanov, CEO of California based outsourcing advisory NeoIT, agrees with Cohen. He believes: “The difficult economic conditions will push companies further than before to consider what stays in house and what gets done by others. Additionally, demands by the business for further cost reduction will need to be addressed in an environment where many companies have already leveraged labor arbitrage to source the low-hanging fruit.”

The outsourcing industry has its ‘cheap costs’ provision to thank for its staying power, but relying on this for corporate strategy could spell disaster. Recent developments at Satyam’s fraud scandal sent shock waves not only to clients but to the whole outsourcing industry. As clients evaluate their options, so should outsourcing providers.

Offshore providers need to re-evaluate their market positioning as Vamsee Tirukkala, Co-Founder and Managing Principal at Zinnov LLC explains: “We now expect the clients to closely evaluate options of setting up their own captive centers or alternatively also opt for new vendor evaluation techniques. In fact for those who have operations for very many years now, we feel that it’s the right time for them to consider options of having a direct presence or local program management offices for better control.”

Given that third-party providers need to have another look at their corporate strategies, one would think ‘outsourcing innovation’ is the key to all this right? Wrong. “The focus will shift away from open-ended efforts. Buyers will not have much appetite for transformation in 2009″, says Stan Lepeak, research director of outsourcing consultancy EquaTerra. Outsourcing innovations, such as greening of IT outsourcing deals that blossomed in 2008, all of these would take a back seat as clients will push offshore providers to further lower their costs.

On another note, Rajiv Mathew, VP for corporate communications at technology consulting firm ThoughtWorks, shared his thoughts on the possible steps the Obama administration would take to keep the US economy afloat. Matthew believes “Obama will be cognizant of the importance of outsourcing to the American economy and will probably take a calculated risk, if at all he makes any amendments to the current outsourcing polices.”

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Worst Recession period expected early 2009

By Symon Ross 

Northern Bank economist Angela

Northern Bank chief economist Angela McGowan expects the worst period of the recession in early 2009, but anticipates some improvement in the economy later in the year.

Ms McGowan predicts that the local unemployment rate of 4.3% is likely to rise to more than 5% by mid-2009.

And with UK economic activity expected to contract by up to 2% next year she believes that Northern Ireland will not escape falling into negative territory.

But she adds that “the forecast contraction for the local economy is not quite as bleak mainly due to Northern Ireland's relatively high level of public sector employment and continuing support for the retail sector coming from our euro neighbours”.

The Northern Bank economist also points out that the economic turbulence of the past year has been met with global policy efforts not seen since the 1930s.

“Although the first half of 2009 on first appearance looks gloomy, an improvement in conditions is expected towards the end of next year.

“This will be the result of the accommodative economic policies, which is the combination of cheap money and a massive fiscal stimulus kicking in. This includes the UK's fiscal stimulus of £20bn of government spending and incentives to encourage domestic spending,” she said.

“Northern Ireland policy makers have also taken up the challenge and found ways and means to deliver a stimulus package for the local economy.

“The £1.2bn devoted to public sector construction schemes and the additional £150m for social housing should go some way to reducing the vast numbers of construction workers unemployed in recent months.”

The spending will simultaneously provide the 21st century infrastructure that the local economy requires for the province to compete when the economic shoots of recovery begin to show, said Ms McGowan.

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Few Recruitment Stratergy.

Recruitment Strategies:-

 

Recruitment is of the most crucial roles of the human resource professionals. The level of performance of and organisation depends on the effectiveness of its recruitment function. Organisations have developed and follow recruitment strategies to hire the best talent for their organisation and to utilize their resources optimally. A successful recruitment strategy should be well planned and practical to attract more and good talent to apply in the organisation.

For formulating an effective and successful recruitment strategy, the strategy should cover the following elements:

1. Identifying and prioritizing jobs 
Requirements keep arising at various levels in every organisation; it is almost a never-ending process. It is impossible to fill all the positions immediately. Therefore, there is a need to identify the positions requiring immediate attention and action. To maintain the quality of the recruitment activities, it is useful to prioritize the vacancies whether to focus on all vacancies equally or focusing on key jobs first.

2. Candidates to target
The recruitment process can be effective only if the organisation completely understands the requirements of the type of candidates that are required and will be beneficial for the organisation. This covers the following parameters as well:

o Performance level required: Different strategies are required for focusing on hiring high performers and average performers.

o Experience level required: the strategy should be clear as to what is the experience level required by the organisation. The candidate’s experience can range from being a fresher to experienced senior professionals.

o Category of the candidate: the strategy should clearly define the target candidate. He/she can be from the same industry, different industry, unemployed, top performers of the industry etc.

3. Sources of recruitment
The strategy should define various sources (external and internal) of recruitment. Which are the sources to be used and focused for the recruitment purposes for various positions. Employee referral is one of the most effective sources of recruitment.

4. Trained recruiters
The recruitment professionals conducting the interviews and the other recruitment activities should be well-trained and experienced to conduct the activities. They should also be aware of the major parameters and skills (e.g.: behavioural, technical etc.) to focus while interviewing and selecting a candidate.

5. How to evaluate the candidates
The various parameters and the ways to judge them i.e. the entire recruitment process should be planned in advance. Like the rounds of technical interviews, HR interviews, written tests, psychometric tests etc.

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Forget Inflation. It’s Deflation Time.

In only a few months the global economy deteriorated with incredible speed and with it came deflation worries. Economic forecasts are clear and so too is the news: consumer and producer prices exhibited a jaw-drop last month in the U.S. with deflation risk rising. But will the outsourcing industry deflate as well? Probably not.

The goods, labor, commodity, and financial markets are all sending the same signals, and no matter what side you take on the issue, deflation is a risk. On a macro level, businesses will look left and right to shorten purchasing cycles, improve productivity levels, and substitute services to maintain profits. Many will try to replace long-term contracts with short-term, deflation-sensitive agreements. That’s because the bottom line is highly sensitive to price adjustments.

And this will have a direct affect on the outsourcing industry. For one, it’ll attract new business as many are facing a decrease in producer prices that will squeeze profits. When they realize it’s cost-effective to buy services instead of laboring in-house, they’ll turn to service providers to weather the storm.

Source-TPI

Small-Business Owners Cut Spending, Jobs as Revenues Fall

Small-business owners were far less optimistic at the end of 2008 than at any time over the past five years. The Wells Fargo/Gallup Small Business Index, which measures small-business owners' perceptions of their operating environments, plunged to a score of 10 -- down from 45 in the third quarter and its lowest level since the inception of the Index in the third quarter of 2003. Two years ago, the Index reached its peak of 114, while last year at this time it stood at 99.

Declining Revenues

Thirty-one percent of small-business owners say their revenues increased over the past 12 months while 47% say their revenues decreased. This difference of -16 points is down from +2 in the third quarter, -2 in the second quarter, and +13 in the first quarter of 2008. The damage surging gas prices did to small-business revenues last spring and summer seems to have been exacerbated by the consumer credit crunch in the fourth quarter.

Less Capital Spending

With revenues declining for nearly half of small-business owners, many owners have cut back on their capital spending on such things as computers, machinery, and facilities, with only 21% saying they have increased such expenditures in the last year and 39% saying they have decreased them. This difference of -18 points is down from -7 in the third quarter and +9 as recently as the first quarter of 2008.

Cutting Jobs

Falling revenues have also forced small-business owners to cut jobs. Only 11% say they have increased the number of jobs at their companies over the past 12 months while 27% say they have decreased them. This difference of -16 points is down from -8 in the second and third quarters, and +4 in the first quarter of 2008. The small-business job situation is now far more negative than at any time since measurement began during the third quarter of 2003.

Commentary

The sharp deterioration in small-business owners' economic perceptions at the end of 2008 is totally consistent with Gallup's other economic measures showing a plunge in consumer confidence and increasing job losses. It also serves as a reminder that while the financial difficulties facing large companies and the related job cuts make the headlines, America's small businesses are also struggling with the current economic environment.

In this regard, President-elect Obama and his economic team should think carefully about what role they want small business to play in their "bottom-up" stimulus effort. If the goal is to save existing jobs and create new ones, small business -- as the major source of private-sector job creation -- needs to play a major role. The trick will be for the new administration to find ways to help small business reverse its job-shedding and capital-spending-reduction habits of 2008, and in doing so, help spur the larger economic recovery.

As 2008 came to an end, there was a lot of focus on too-big-to-fail companies and the need to preserve the jobs they provided. As the new stimulus plans are developed to help these companies and create jobs in 2009, the nation's small businesses and their role in job creation should not be forgotten.

Source- Gallup

Unemployment Rate Likely to Surge

Gallup's hiring measure shows U.S. employees' perceptions of the job situation at their companies continued to deteriorate as 2008 came to a close. The net difference between hiring and firing turned negative during the last weeks of 2008, suggesting that the Labor Department will report Thursday that seasonally adjusted four-week average jobless claims continued to increase, likely exceeding the 2008 high of 558,000.

Jobs Continuing to Disappear

According to last week's government report, first-time unemployment claims unexpectedly plunged to 492,000 for the week ending Dec. 27. As a result, it is perhaps not surprising that the economists whose estimates form the basis for the consensus forecast have projected that jobless claims will increase to 540,000 when reported Thursday. While a number of variables make it hard to predict the exact number of new unemployment claims the Labor Department will report -- particularly given the holidays and the related seasonal adjustments -- Gallup figures suggest seasonally adjusted jobless claims are likely to exceed this 540,000 consensus estimate for the past week.

In addition, the seasonally adjusted four-week average of Gallup's hiring measure suggests the Labor Department will report that seasonally adjusted four-week average jobless claims continued to increase, likely exceeding the 552,250 reported most recently.

Surging Unemployment Rate

On Monday, President-elect Obama discussed his new stimulus plan with congressional leaders. As part of his effort to explain why such a major fiscal stimulus is required, he noted that the U.S. economy is "very sick" and that Friday's report of the December unemployment rate will be "sobering." Regardless of the actual number the government reports at the end of this week, Gallup's hiring measure suggests job losses are soaring and that the unemployment rate is likely to surge past 7%.

The Fiscal Stimulus Will Take Time to Work

Surging job losses and the inability of the Federal Reserve to do much more than it is already doing to help the economy have created enormous political pressures for the new Congress to pass a major new fiscal stimulus plan immediately, so that Obama can sign it as soon as possible after his inauguration on Jan. 20. In turn, this seems to have many Americans -- on both Wall Street and Main Street -- not only expecting swift congressional action, but also expecting that action to have an immediate impact on the direction of the U.S. economy.

Unfortunately, these rapidly building expectations for the federal government to save the economy in coming weeks are not likely to be realized. In reality, it will be considered lightning speed on Capitol Hill if the new president ends up signing a major new stimulus plan by mid-February. After that, it is likely to take months, not weeks, before Main Street begins to realize any benefits from this new stimulus, no matter how large it is or how it is constructed.

In this regard, it may be wise for the new president and the new Congress to remember the behavioral economics concept of "framing." Talk of crisis and solutions are likely to be essential politically, but it is also essential that Americans realize that all of these efforts will take time to work.

At this point, confidence on the part of consumers, investors, and business is at extremely low levels. The nation's new leadership needs to rebuild that confidence -- not create false expectations that may result in added frustration when those expectations are not realized. Rebuilding confidence by creating realizable expectations is key to any real economic recovery, and it is essential if the government is going to re-energize the private sector to create a sustained economic recovery.

Survey Methods

Using weekly results for 2008, Gallup's analysis suggests that its hiring measure has a better than 7-in-10 probability of correctly projecting the direction of weekly jobless claims and a better than 8-in-10 probability of predicting the direction of the four-week average of jobless claims. Gallup's hiring measure is based on aggregated interviews with a nationally representative sample of more than 2,000 U.S. workers each week. Gallup asks current full- and part-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Gallup's hiring measure is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a meaningful indication of the nation's job situation.

Source- Gallup

How should KPOs respond to current crisis in financial markets?

How should knowledge process outsourcers (KPOs), their clients, and their employees respond to current crisis in financial markets?

Client Perspective

Choose your vendor carefully - If there was ever any doubt, the current turmoil shows that that service quality and price should not be the only factors customers consider . Long term vendor financial stability is critical as well. Vendors with only a few hundred employers who depend on a handful of clients may find it difficult to survive even a single client loss. Depending on how much business they lose and their financial backing, a key client loss can put at risk continuity of service to remaining clients. Buyers should seek vendors with scale, good financial backing, and a broad customer base.

Outsourcing as a survival tool - Outsourcing is not just about cost savings - it can be a company’s lifeline too. Unless you remain competitive, you may not survive as a business. You may be able to save more jobs (and create new ones) by outsourcing if done smartly and with the right vendor. Choosing the right vendor will help you improve business economics, achieve flexibility, innovation, and help create growth (jobs). The downturn could last quite some time so it is important to consider both your cost basis and operating efficiency, even as your deal with what may be emergency circumstances.

Vendor Perspective

Reduce client concentration - While it’s always good to get more business from existing clients, look to balance the client mix. Otherwise, if your biggest client accounts for 40% of revenues and suddenly disappears (which seems to happen very often these days), you may not be able to survive the impact. Diversify into more verticals and geographies. Winning new business in this economy may be hard, but point your sales team in the right direction now.

Enhance capital - Clients will start asking more probing questions about the financial stability of your business and access to capital. Cover your financial bases. Work towards moving to profitability and get an investor who can be there to support you on your long term business plan/strategy

Leverage opportunities to consolidate /buy cheap assets - A major economic downturn is a time to be simultaneously conservative and bold. Be conservative in managing operating costs but be bold in buying good assets (companies, people), especially when many outstanding properties are available at the lowest price in years. Tight operations coupled with strategic acquisitions will pay handsome dividends when the economy eventually turns around.

Employee Perspective (for India-based personnel)

A downturn is not the end of the world. It’s not first time it’s going to happen. The economy will recover and KPOs will grow again at a rapid clip. This is perhaps first time that global events have had a direct impact in India, specifically immediate job losses. Previously, these types of incidents were limited in scope and barely would even be covered in the press. Now, however, the impact has been pronounced, both in captives and third party vendors. KPOs are not the only ones affected by the global turmoil; many other sectors have shared in the turmoil (e.g., consider what has happened with domestic Indian airlines). The pervasive impact of the Western downturn on the Indian job market shows that the Indian economy is now more tightly integrated into a US/global environment. So it is natural that Indian jobs in many industries will rise or fall based on events in US/global markets.

But, there is hope among this bad news. Outsourcing is expected to pick up even more strongly in the months to come and that should drive new job creation.

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Top 10 Trends for Global Outsourcing in 2009

Source:- THOLONS, an Advisory, Investments and Research Firm for IT/BPO/KPO Services Globalization

The ripple of the global economic downturn continues to impact the foundation of the outsourcing industry, both near and long-term.  Service providers are experiencing impact of sluggish growth, decreased margins and employee downsizing. Service buyers are reducing IT budget allocations but still under tremendous pressure to reduce cost and survive.

Despite this lingering cloud of uncertainty, Tholons maintains that the long term demand for Outsourcing remains intact. Decreasing margins will push providers to better utilize existing resources, leverage operational levers, implement new technologies efficiently to differentiate themselves and improve service delivery processes.  Clients, with reduced IT budgets will be more selective – demanding stringent SLAs, greater contractual flexibility and output/result based payments.

Top 10 trends that will shape Global Outsourcing in 2009:
1. The market downturn will impact revenues during the first 2-3 quarters
2. Focus on domestic market to increase
3. Global economic downturn will lead to increased outsourcing in Healthcare, Education, Retail, Telecom and Legal Process Outsourcing (LPO)
4. Governments to take special initiatives in promoting destinations
5. Clients will increase geographic diversity in their service delivery locations
6. Pricing pressures will result in reduced rates and new measures to achieve cost savings and higher productivity
7. Consolidation imminent for small players - focus away from large deals
8. Outsourcing revival by 2009 end - driven by small to mid sized (SME) clients
9. Strong focus on innovation, R&D and technology adoption will be key differentiators for providers.
10. Sourcing deal sizes will increase for large clients

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