International Business Opportunities

According to a statement from the Irish Congress of Trade Unions (ICTU), Ireland could suffer a loss of about 38,000 jobs due to outsourcing to low wage countries such as India.

The services sector, employing 67% of the workforce in Ireland, would be the most threatened by offshore outsourcing.
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The annual report on Global Sourcing released yesterday by Everest Research Institute, as opposed to the current industry thinking, emphasises that labor arbitrage will continue to drive offshore sourcing decisions for the next 30 years.

The survey points out that issues such as growing wages and skills shortages in offshore markets, will eventually work themselves out, as the offshore labor market continues to expand into new locations.

Joe Fernandes, Managing Research Director, Everest Research Institute says:
“Our findings show that wages are rising for a relatively small base of workers and that shortages are cropping up only in certain skill areas”

The key findings from the survey:

• The offshore market will continue to grow at an approximate rate of 33 percent a year for the next three years.
• As a result of skills shortages in an offshore location, jobs outsourced are more likely to move to another offshore market than return to their country of origin, as labor arbitrage is sustained by a increasingly expanding offshore marketplace.
• Non IT-offshoring will represent nearly 45% of the offshore market in three years, with companies will prefer using subsidiary companies that serve the parent company exclusively for offshoring business process outsourcing (BPO) services

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According to the UK’s National Outsourcing Association (NOA), Indian IT companies will compete with western IT firms for more onshore contracts in Europe during 2006.

The UK based body foresees Indian outsourcers open up European centres or acquire European IT companies by developing a model where services they provide will be divided between 60% offshore and 40 % onshore.

Martyn Hart, chairman of the NOA, said:
“Indian outsourcing providers are starting to think about the UK market from a western perspective. Companies are no longer in the solely onshore or offshore mind-set - they are more open to using a blend of sourcing options to achieve the best result.”

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Among the original attractions of doing business in Ireland, it seems just the low corporate tax mostly continues to draw multinationals to this location.

Low corporate tax rate, language skills, the availability of an educated work force, overall low costs and high productivity first attracted multinationals to choose Ireland for European operations.

However in the last five years the environment has changed dramatically, with the increasing costs of labor, electricity, and for other services; just the corporate tax rate continues to be kept low.

So the multinationals still aimed to base their European operations in ireland to take advantage of such tax benefits, are starting to shift from doing manufacturing to financial services, research or any activities not so reliant on low costs of operation.
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By launching Dubai Outsource Zone (DOZ), Dubai is set to enter in the offshoring market.

Dubai Government, with DOZ, aims to turn the emirate into a knowledge-based economy by 2010, making it a new offshore outsourcing location.
DOZ director, Ismail Al Naqi, says:

“Dubai has made it clear it is not trying to compete with lower-cost destinations. Rather it is aiming to attract the high end of outsourcing and to complement other destinations such as India, Philippines, Germany and Russia and be a back-up centre for disaster recovery, for example”

Industries DOZ is targeting are:
ICT;
media;
biotechnology;
energy.

Over the difference of costs with India, Al Naqi explains:

“DOZ’s cost analysis shows Dubai’s costs to be only 30-35 per cent higher than India’s. And this is for direct costs only - infrastructure, people, telecommunications. When other facts are considered such as the quality of life, connectivity to other parts of the Middle East and the rest of the world, and the quality of infrastructure, the differential is likely to be much smaller.”

Dubai appears to be in

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Gartner, the world’s largest IT research and advisory company, estimates offshore outsourcing spending will surpass $50 billion for information technology, and $24 billion for business process services, by 2007.

According to Tom Lambert, President of The International Centre for Consulting Excellence, about 11 per cent of the total service sector in the US and Europe could be outsourced by 2010, with financial services playing a very important role in the industry.

It is estimated, India, leading country in the global offshoring industry, will face a skill shortage of at least half a million within five years.
Because of that, increasingly companies are looking to new outsourcing destinations such as China, Philippines, Russia, Ireland, Czech Republic and other Eastern Europe countries.

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As Australia plan to become a new destination for outsourcing of financial services, New Zealand’s businesses face the concern of a talent shortage for 2006.

The point is New Zealand’s most talented employees continue to look for better opportunities in the US, Australia and Europe.

Sandra Lyall, human resources director of Unisys New Zealand, says:

“Talent shortage looks set to become a major concern for CEOs and CIOs in 2006. It has reached a critical level. In the past, talent management and retention programmes have been a perk for employees. Effective talent management is now a business imperative. Companies will no longer be able to retain a competitive advantage without it.”

Unisys experts predict the following HR trends will drive change in the IT sector in 2006:

1. Increasing difficulty finding the best people for positions on offer;

2. Rising costs from recruitment, initial salary offerings, and running programmes and incentives to retain top performers;

3. Increase of flexible working options for employees;

4. Employee retention-once a business has found the right person for the job, the challenge becomes finding the unique motivators to keep them engaged;

5. Managing performance-basic people management techniques and transparency in communication with employees will help to ensure profitable performance.

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A new e-marketplace, SBF Global Sourcing Hub, has launched by Singapore Business Federation.

It is a procurement portal, with a platform, where firms can hunt for both local and overseas projects.

The decision to create the hub followed a survey of some 15,000 firms commissioned by the SBF, showing a increasingly number of Singapore firms are now venturing abroad by choosing mostly destinations such as China, India, the Middle East and Eastern Europe.

Trade and Industry Minister Lim Hng Kiang says the SBF Global Sourcing Hub will help local businesses become more cost-competitive.

Some S$20 billion worth of deals are expected to be transacted through this e-marketplace over the next five years.

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Australia could become the favorite destination for outsourcing financial services in Asia.

The report’s findings commissioned by the Federal Government have identified five key advantages to offshoring in Australia:

1. low cost and deep pool of labour

2. low business infrastructure costs

3. stable business environment

4. strategic time zone advantage

5. good quality of life

The report focuses on opportunities in the following financial services:
a. equity research,
b. structured finance,
c. retail banking,
d. actuarial services

The report found specialised financial services staff cost on average 30 per cent less in Sydney than they do in London.

Why should companies outsource in Australia and not in India?

“We have better infrastructure, we have a strong and transparent regulatory and legal framework and a deep pool of accounting, actuarial and analytical skills. Australia is very well placed to provide the high-value-added activities.” said Gary Johnston, executive manager at Axiss Australia, a government body established to position Australia as a global financial services centre in Asia.

Co-author of the report Sriraman Annaswamy, who heads up offshoring advisory firm Swamy & Associates, said a skills shortage in India had led to a rapid rise of professional salaries and reduced its competitiveness. “Indian destinations are not necessarily the cheapest knowledge-processing outsourcing destinations as is conventionally believed” Mr Annaswamy said.

He said people were often surprised to hear it is cheaper to rent office space in Sydney than Mumbai and that office space in Brisbane and Melbourne costs about the same as Bangalore.

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Toyota reacts to the strike to protest the dismissal of three employees, by shutting down its factory in southern India.

“Workers began the strike Jan. 6 demanding the three dismissed employees of the factory be reinstated.
We were forced to declare a lockout because the safety of our officers and machines was threatened by the striking employees”

A.R. Shankar, the general manager of Toyota Kirloskar Auto Parts Ltd. told, told The Associated Press.

Toyota Kirloskar Auto Parts Ltd. manufacturing manual transmissions, is a joint-venture owned by the Toyota Motor Corp. and India’s Kirloskar Group.
It has the capacity to make 160,000 units a year.