The US decision to cut visas to skilled manpower from countries like India would not protect American jobs, but goad American companies to opt for outsourcing, a leading think tank has warned.

In a report released on Wednesday, RAND Corp, a non-profit global policy think tank, said curbing the inflow of foreign science and engineering workers would force US firms to outsource research and development or locate new facilities overseas.

"Rather than protecting jobs, this could lead to reduced investment and employment at home," said RAND, known for its non-partisan analysis and policy recommendations. click here

A five-hour drive from Patna is one of the India's first BPOs being run out of a village, by the village, and for a large part, for the village.

The people who live in Saurath village in Bihar had never heard of a computer, let alone use one just a few years ago.

But now, they are busily tapping away on their keyboards and an entire area, cut off from urban centres, is connected.

Just a year ago, Saurath was like any other village that had come to terms with it's geography - that they could never easily get what they wanted - be it a top-up card for their mobile phones or a life insurance policy.

It was a two to three hour drive to the nearest district town.

That's when a tech company stepped in and offered them the chance to help themselves.

And Saurath agreed. At the cost of Rs 7,000 per head for six months to learn how to use computers that they had earlier seen only in Hindi films.

"Earlier I would feel scared. Now I feel proud that being a village boy, I can work on the computer," Bauajee Paswan, a BPO worker, says.

Today the people of Saurath, who put in their hard earned money, are part of a revolution. The confidence levels are so palpable that one can almost see the kind of respect they have earned for themselves.

Thirty-eight year old Asha Jha was just a housewife who spent the entire day in the kitchen with her pallu (part of saree) draped over her head looking after her family.

But when she found out about the training course that empowered people like her, she didn't have to work too hard convincing her in-laws to lend her the money for her classes.

Now Asha earns about Rs 17 an hour, which come to a little more than Rs 4,000 a month. That has brought smiles on the faces of her in-laws.

And like any other woman balancing the work place with a family life - Asha seems to be pulling it off brilliantly.

"Even I wanted to do some thing. Now I manage my house and office," says Asha.

The process is simple. If a man, for example, wants to buy a mobile phone in the next village, he goes to a kiosk in his village, chooses the phone he wants and places an order.

The kiosk owner then calls up the BPO and tells the person on the other side about the order. They, in turn inform the tech company that runs the BPO who then send over the product, which is then delivered to the man who placed the order.

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Workers at the New Balance factory in this suburb of Boston create the sound of "made in the USA." The company, striving in a world dominated by Nike, Adidas and Reebok, keeps 25 percent of its manufacturing in America — the only company to make any athletic shoes here.

"Our labor costs are 10 to 12 times higher," says President and Chief Operating Officer Jim Tompkins. "But productivity at New Balance's five U.S. plants is much greater, lowering other costs. We're able to deliver into the market in a matter of days, where our competitors are looking at a matter of weeks and sometimes months."

To speed up production, employees assemble in teams, designed to maximize output and minimize waste.

Not so long ago, we used to make a case of shoes, 12 pairs, in eight days," says Lawrence, Mass., plant manager Claudio Gelman. "Now we're down to three hours."

Other companies are actually bringing jobs back to the U.S. One is Long Island's North Fork Bank. Even though its customer service call center in India was a bargain, there were problems.

"That amounted to a savings of about $20,000 a head," says North Fork President, CEO and Chairman John Kanas.

North Fork's reputation as a neighborhood bank suffered.

So Kanas brought the jobs back to Long Island, adding $2 million a year to his expenses.

"We've kept it here because of the tremendous importance of quality of that experience to us," he says. "And we think the tradeoff for the money is worth it."

Unlike other carriers, Denver-based Frontier Airlines keeps all its work in-house, refusing to outsource its maintenance or its call centers to other companies in America or overseas.

"Our employees here take ownership," says Frontier CEO Jeff Potter. "They are so committed to our customers, and I'm not sure that's something you could find offshore."

New Balance, Frontier and North Fork Bank have all discovered that while it is more expensive to keep work in this country, it ultimately delivers a bigger payoff.

So much so that New Balance plans to expand its U.S. manufacturing, believing that "made in America" still has a competitive edge. click here

India's dominance as a low-cost outsourcing destination seems to be on the decline, with countries like China, Morocco and Hungary fast emerging as the preferred choices by IT services providers, a recent study says.

Focused on UK's top IT service providers, a study by Pierre Audoin Consultants (PAC) showed that China, Morocco and Hungary are the new locations of choice to set up offshore sourcing centres.

Pierre Audoin Consultants is a European market research and strategic consulting firm for Software and IT Services Industry (SITSI).

According to the study, since the beginning of January 2007, UK's 20 largest IT services suppliers have opened 21 new global delivery centres. However, of these only two are were located in India. Four such centres were set up in China, while Eastern Europe and Morocco had three each, the study added.

"India's position as the premier low-cost IT sourcing centre is not under serious threat in the near term. But what we are seeing is vendors (are) looking to reduce theirreliability on India's heated labour market...," Nick Mayes, a senior consultant at PAC, said in a statement

The 20 largest IT services vendors in the UK are based on rankings in PACs annual SITSI report. These include EDS, IBM, Fujitsu, Capgemini, Capita, Accenture, CSC, HP, BT Global Services and LogicaCMG.

The two new facilities launched in India were both outside the traditional hot spots of Bangalore and Mumbai, IBMs new centre has been set up in Noida, while Tata Consultancy Services' expansion site has come up at Hyderabad, it said.click here

Five-year contracts were given to Electronic Data Systems Corp. (EDS), Hewlett-Packard Co. (HP), International Business Machines Corp. (IBM), France's Cap Gemini, the Compuware Covisint unit of Compuware Corp., and India's Wipro Ltd.

About half of the $15 billion in five-year contracts were awarded on Thursday, GM said.

The world's largest automaker said the initiative was driven by the end of a deal with EDS that expired in June, 10 years after EDS was spun off from the No. 1 automaker.read more

NASSCOM, the premier trade body and ‘voice’ of the Indian IT-BPO industry, along with Everest Group, a global strategy consulting firm, today released the findings of the landmark study on India’s BPO industry, titled, NASSCOM-Everest India BPO Study - Roadmap 2012 - Capitalizing on the Expanding BPO Landscape. This study provides a comprehensive fact-based view of capabilities of sector, opportunities and growth imperatives for the Indian BPO industry and its key stakeholders. It sets the stage for the next wave of the industry’s growth.

Speaking at the launch, Som Mittal, President, NASSCOM said, “The Indian BPO sector has evolved tremendously since its inception, not only in its size but also in terms of maturity - service lines, service delivery capability and footprint. This US$ 11 billion industry today employs more that 700,000 people across 25 countries and accounts for approximately 40 percent of the global BPO offshore market thereby creating huge job opportunities and impacting the economy. The future potential is even larger. This study not only estimates the opportunity ahead but also lays down specific agenda for all stakeholders to help achieve this.”

Gaurav Gupta, Country Head, Everest Group added, “Though the initial focus was on moving activities regarded as non-core in order to cut costs, today an increasing number of buyers are showing the confidence to pursue complex global sourcing and transformational programmes with offshore providers, including third-parties and captives. This confidence reflects in the Indian BPO industry’s rapidly evolving capabilities and an exciting future for its stakeholders.”

The NASSCOM-Everest study presents a detailed, bottom-up analysis of the Indian BPO industry and perspectives from constituents including buyers, suppliers and captive BPO organizations. The effort covered over 60 percent of the Indian BPO market, with detailed findings and opportunity assessments in a variety if industries and functions. Adds Gaurav Gupta, “the report indicates a possible target of US$50 billion by 2012 for the Indian BPO industry. This reflects a 5-fold growth over the next five years and can create up over 2 million direct jobs in India.”

Raman Roy, Chairman and Managing Director, Quatrro said “The right choices by stakeholders of the Indian BPO industry will decide and impact this potential five-fold growth. Less than 5 percent of the total opportunity has been tapped till now, which is indicative of the enormous growth potential available to the industry. While the aspired target is aggressive – it is definitely achievable, and will bring huge payoffs to India’s economy, employment and development.”

The report outlines the need for significant collaboration between the industry, government and other stakeholders on a range of initiatives including education, infrastructure, country-competitiveness, and domestic BPO. Nikhil Rajpal, Global Services Practice Head, Everest Group, said “capturing the true benefits of this opportunity will require significant change to how buyers and suppliers operate in an increasingly competitive market for global services. The government will need to actively support and partner with the industry to ensure that India does not lose out on the opportunity to add up to 2.5% to its GDP by 2012.”

From a talent perspective, while the number of people required to capture a five-fold growth are available, there may be a requirement of employable talent, of which approximately 50 percent of the additional talent requirements will have to be met from Tier 2 and 3 cities in India, necessitating the creation of physical and social infrastructure in these cities.

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With the slowdown in the US economy, a strong rupee and questions over extension of the Software Technology Parks (STP) scheme looming large, 2008 will be a crucial year for the Indian BPO industry. While players and analysts agree the troubled American economy is unlikely to have a significant impact on the industry, the decision on STP-extension closer home is seen as a clincher.

Analyst firm Forrester has predicted that the US technology economy will flirt with recession but will post another decent growth year in 2008. “The US economy is expected to be weak in the first quarter of next year but will be stronger as the year progresses,” it said.

It’s the extension of the STP tax holiday, which expires in 2009, that tops the industry’s wish-list this year. “STP extension is important for India to remain competitive on the global platform where China and Philippines are offering 10-year tax holidays. Whether the tax holiday is extended or not will have a decisive impact on the BPO industry,” said Quatrro BPO Solutions managing director Raman Roy.

While it battles such issues, the industry is looking forward to some consolidation and heightened merger & acquisition (M&A) activity in 2008. “Captives, which is how this industry got started, are going to become rarer next year,” adds Mr Roy. While clarity on the Citi captive sale is expected to emerge next year, Aviva’s offshoring centres, too, are on the block.

Analysts also see greater investor interest, due to more realistic valuations. “One can expect greater interest among private equity (PE) firms to invest in BPO/ KPO firms. After an upbeat 2007 where valuations were a bit on the higher side, 2008 will bring more realistic valuations, giving a boost to consolidation,” says offshoring advisory firm Tholons president Pradeep Mukherji. The year 2008 assumes greater importance as the US goes to polls. While outsourcing has already become an election issue, more anti-outsourcing rhetoric is expected as the race hots up. “Wait till the first quarter of 2008 and the rhetoric against job-loss and outsourcing would gain ground to gain votes,” says US India Business Alliance vice-chairman Abhi Shah.

However, players think the impact would be insignificant. “Considering the recession in US, offshoring is an imperative and hence, anti-outsourcing rhetoric won’t have much impact. BPOs in India are going to benefit from the global credit crunch as companies will resort to more offshoring to minimise impact on falling margins,” said HCL BPO chief exec Ranjit Narsimhan. Adds ExlService Holdings president & COO Rohit Kapoor, “It’s expected that banks and other financial institutions will downsize staff in the first half of 2008. After the restructuring, these institutions will start outsourcing their back-office work to cut costs.”

The BPO industry could see some sobering in salary hikes in 2008. “Salary increases won’t be as dramatic as last couple of years. We expect a 9-12% wage hike, rather than a 15-17% hike as in the past. Also, we expect more and more companies to weave in the variable component into contracts at all levels,” said Mr Mukherji. click here