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Skyline Business School |
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Skyline Business School |
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Issue:3
Outsourcing to add 22mn US jobs
Continuing from last week's update on the McKinsey study on the growth of BPO in India
(BPO Newsletter Issue 2), Ms Diana Farrell, director, McKinsey Global Institute addressing
the NASSCOMM '04 summit said that for every dollar invested into off shoring space by US
firms, $0.58 is directly saved. She pointed out that the Bureau of Labour Statistics was
predicting a job gain of 22m in the US by '10, against a job loss of 2m due to off
shoring.
Source: Times News Network February 5th
2004
The backlash continues..
UK financial firm stops shipping jobs to India
The Plymouth-based Co-operative Financial Services has said it would not relocate jobs to
India and create 500 jobs in Britain after resisting pressure to open a call centre
abroad. The announcement comes a day after National Rail Enquiries said half of its calls
are to be handled from India under a £100 million contract. Meanwhile, fresh concerns
were raised that thousands of jobs in Leeds could soon be put at risk by the shifting of
call centre jobs to India. Leeds - where nearly 20,000 people are employed in the
telephone services sector - is likely to feel the pinch. Meanwhile, customers at the
Lloyds TSB branch in Eastgate Street, Gloucester, are being asked to sign a petition
against the proposed transfer of jobs to India
Source: IANS February 7th 2004
Colorado introduces anti-BPO bill
Amid the continuing backlash against outsourcing in the US , two Colorado lawmakers
have introduced bills which would deny state contracts to companies which move out jobs to
India and other countries. Democrat Senator Terry Phillips pointed out that IBM recently
had announced that it was moving 900 jobs out of Louisville. His pending legislation would
bar companies that relocate 100 or more jobs outside the United States from doing business
with the state for seven years.
Source: Press Trust of India February 4th
2004
UK has no plan to ban outsourcing: Minister
The United Kingdom does not intend to adopt protectionist measures against outsourcing
like the US did. "We don't want to interfere in the decision-making process of
investing companies. We will leave it to the market forces to make decisions. I believe
protection is not the way for progress," said Stephen Timms, the UK minister for
e-commerce, department of trade and industry. Recognizing the diverse nature of Indian
companies working in the IT sphere, he asked Indian companies to look at UK as both a
destination and, a gateway to Europe.
Source: Times News Network February 5th
2004
Indian Investments create 1000 jobs in UK
British Foreign Secretary Jack Straw on Saturday said jobs were not only moving to
countries like India from UK due to outsourcing in a globalised environment, but
employment opportunities were also being generated back home with Indian companies
investing in the country. An estimated three quarters of the Indian investment are in the
knowledge-based sector: IT, Biotech and pharmaceutical firms. Nearly 60 percent of Indian
investment in Europe comes to Britain and this has resulted in the creation of 1100 jobs
in the UK over the last 3 years. UK was also India's largest market in Europe for IT
services, worth nearly $1 billion a year.
Source: Press Trust of India February 7th
2004
Global BPO sector saves 80% costs through India
The $600 billion global BPO industry is saving as much as 75-80 percent by setting up
operations in India. Labor costs to set up a call center in the US works out to $57600
annually against just $8640 a year for setting up similar facilities in India. ICRA
(Indian Credit Rating Agency) said that the savings were based on the annual salary of a
skilled worker in the IT Industry amounting to $1500 in India against his American
counterpart's salary package of $75000.
General Electric is reportedly saving an annual sum of $340 million from its outsourcing
activities to India. A study conducted by Deloitte Research states that on the current
$2340 billion cost base of global financial services, there will be a bottom line cost
savings of about $138 billion by 2008 on account of outsourcing.
ICRA estimates that Indian share in the global BPO industry will grow from 33 percent in
2003 to 42 percent in 2006 as the world BPO market increases from $419 billion in 2003 to
$717.77 billion in 2006.
Source: Business Standard February 4th 2004
BPO tax regime keeps confusion alive
The exemption of earnings from taxes for business process outsourcing (BPO) if the
services were ancillary and auxiliary in nature has lead to confusion over the Finance
Minister's statement. In case of earnings from outsourcing core business activities,
companies will have to pay taxes. Indian firms have termed this move, as the biggest
threat to outsourcing BPO to India because companies would not move core work to India and
only low value end work would come. BPO companies opposed the government's move late last
year to tax the earnings from outsourcing of core business process saying that since the
goods of products did not touch Indian shores, the overseas companies should not be
subject to tax. BPO services are also part of Infotech services, which have been allowed a
10-year tax holiday.
BPO companies fear that this move to tax multinational companies outsourcing to Indian
companies would squeeze by 50-60 percent the growth of many companies causing substantial
job losses and foreign exchange losses.
Source: Business Standard February 4th 2004
Venture Capital funding for BPO Outfits
Little for the new:
The start-up game in BPO is over. Venture capital will continue to be the main source of
capital for BPO, but the accent will be on growth capital. VCs and private equity funds
are now keeping tabs on big-ticket buyout opportunities. The target would either be MNC
captive outfits or middle-rung players with niche competencies. ICICI One Source, WNS
Global Services, Wipro Spectramind, EXL Service seem to the forerunners in such deals and
acquisitions.
Source: Business world February 15th 2004
BPO: India Vs Philippines - Operating Costs
According to the NASSCOMM Strategic Review 2004:
Parameters
India Philippines
Personnel
6179
7793
Administration
1000
1200
Telecom
2328
1862
Property Rentals
847
762
Depreciation
1500
1500
Total
11854 13117
(Figures in $ cost per full time employee per year )
Prepared by -
Abhimanyu Puri BBA-MAHE-Level 1
Comments and questions: info@skylinecollege.com
URL: http://www.skylinecollege.com
