International Business Opportunities

US officials have written to nine Indian firms based in the US, asking them to account for their workforce, and explain how the visas were granted.
The US authorities are concerned that the Indian companies are trying to avoid hiring skilled American workers.

US authorities grant a total of 65,000 temporary working visas every year. (see H-1B Visa Now Just a Critical Tool for Indian Outsourcing Vendors)

However, in recent months, the US has become concerned that many companies are bringing over lower-paid Indian workers at the expense of the more expensive Americans.
In the past few years, the US has been urging India to open up its own economy to American businesses.
Many US companies have come to India, lured by the fortunes of firms that have flourished because of the strength of the Indian economy.
(
source: BBC)

According to Gartner’s IT sourcing group, Indian service providers set their sights on European countries as key areas for growth. […]

To avoid losing out to this new breed of competition, Gartner says that continental European service providers should revamp their strategies to encompass global delivery and service industrialisation. […]

Some issues must be resolved before Indian companies can truly compete on a level playing field: “These Indian offshore providers are recruiting staff in the European markets they sell into; not just sales staff, but consultants, project managers, engagement managers and, in some cases, personnel to staff their new near shore delivery centres” said Ian Marriott, vice president of research for Gartner’s IT sourcing group.
(Source)

“China accounted for more than 60 percent of Japan’s outsourced software trade in 2006 and has become the country’s biggest software outsourcing base,” said Mine Shentaro, of the Japan External Trade Organization based in Dalian, China’s Liaoning Province. […] “More than 60 percent of China’s software trade is Japan-oriented,” said Jin Guowei, deputy director of Dalian Information Technology Bureau. […]

According to a government plan for the development of software and information services, China aims to generate 168 billion U.S. dollars from the software sector and export 12.5 billion U.S. dollars worth of software services in 2010.

Noshiro Yasuo, president of Fujitsu System Engineeering Co., Ltd in northwest China’s Xi’an, said:
“While European and American companies are choosing India as an outsourcing base, Japanese firms prefer China because we are close neighbors and have similar cultural backgrounds.“

The H-1B visa law, championed as a way to attract the world’s best and brightest to America to study and work, allows skilled, specialized foreigners to work in America for up to six years and then pursue permanent residency.
The International Herald Tribune points out how the H-1B visa is now being put to a starkly different use.

The newspapers says:
“It is now a critical tool for Indian outsourcing vendors to gain expertise and win contracts from Western companies to transfer critical operations to places like Bangalore.” […]

According to a tabulation of U.S. Labor Department statistics, eight of the 10 largest H-1B applicants last year were outsourcing firms with major operations in India.

The newspapers explains:

“To deliver the solutions from a remote environment, Indian outsourcing vendors need a certain number of people being with a customer, understanding his needs and collecting the requirements.[…] They simlpy need a link between the people who are doing coding in India and the client”.
Indian outsourcing vendor Infosys had 6,800 U.S. employees on H-1Bs as of last September. In 1998, the figure was 231.

Growing IT services demands from USA and Europe along with shortage of skilled employees, are forcing Indian IT firms to look for outsourcing to China.

“Reoutsourcing” to China, seems a new strategy for leading Indian IT companies, which also try a way to face increasing salaries of high cost workers.
In China, on an average IT-engineer with little bit of experience can be paid 500$ salary per month as compared to over $700 in India.

However, what can be outsourced to China is related to Information Technology services, not BPO segment which requires knowledge of English language.
Poor English skills of its employees, limit China also to become a potential competitor of India in the offshore outsourcing market.

India has currently about 80 % of IT services being outsourced offshore, as reported from Gartner Group,research company. ( source )

A new points-based immigration system is expected to come into force in UK from the middle of next year.

The new system, structured into five tiers, will award points to those applying for visas and work permits based on qualifications, experience and age.
Only those achieving the target points for their tier will get a work permit.

According to the UK IT industry, it will make it easier for businesses to face the IT shortages by recruiting skilled workers from overseas.

Nick Kalisperas, director of public sector, Intellect, said:

“Most overseas IT workers will fall into the top two tiers, covering ‘highly-skilled’ workers - such as entrepreneurs, doctors and IT specialists - who will be able to get a visa without a firm job offer.”
“It’s a step in the right direction. It’s important there is recognition that the industry needs staff from outside the EU.”

However, Mr. Kalisperas over addressing the shortage of some IT skills in the UK in the long term, added:

“More needs to be done in terms of retraining, more in terms of attracting women into the IT workforce and more in making IT an attractive discipline and career option for students.” ( source )

According to a new study by the Association for Computing Machinery (AMC), released on Thursday, March 2, predictions of job losses from shifting high-technology work to lower-wage countries were just nonsense.

The research found that information technology employment was higher today than it was at the peak of the dot-com bubble, despite the growth of offshore outsourcing in the last few years.

Moshe Vardi, co-chairman of the study group and a computer scientist at Rice University in Houston, explains:
“The global competition has gotten tougher, and we have to run faster, but the notion that information technology jobs are disappearing is just nonsense. The data don’t bear that out.”

The study predicts for United States between 2 percent and 3 percent jobs in Information Technology would be moved offshore annually over the next decade.

And most important, the report emphasizes that more jobs will be created than are lost in the future, as long as the industry in America moves up the economic ladder to do higher-value work, typically applying information technology to other fields like Biology and Business.

In order to achieve that, Education will be critical and over that the report complains Government job retraining programs are focused on the manufacturing industry instead of high-technology services.

The study by the Association for Computing Machinery (AMC), is the result of a year long project by the organization to assess the impact and implications of the offshoring of software development and research. ( source )

Following the opening of its office in Frankfurt, Germany, EPAM Systems, a provider of software engineering outsourcing services in Central and Eastern Europe, explains the advantages of the Nearshore software development on the German market.
Karl Robb, EPAM Executive VP for Global Operations, said:

“Although we already have a larger than average number of German speaking project managers and architects in Budapest and Minsk, we see a clear need for a permanent local team to intensify our activities on the German market”

“Having used software development service providers at different Off- and Nearshore locations in a number of sizeable software projects for many years I am convinced that the acceleration in this area is finally picking up momentum in Germany. Besides the already experienced big corporations more and more mid-size companies are catching up trying to use the advantages of the flexible, high-quality and cost-effective Nearshore software development. The proximity and the cultural compatibility give Nearshore a clear advantage over Offshore, especially in incremental, iterative projects, which are more common these days,”

He added that Germany plays a crucial role in EPAM’s growth; last year, 17% of EPAM’s revenue came from German companies.
( source )

British telecoms firm BT Group Plc is planning to set up a research and development center in India.

The announcement was was given by Clive Ansell, BT Group Strategy Director, at a software industry conference in Mumbai.
He said:

“Given the skill base it makes real sense to look at India very seriously to do some of our research. The average skill set per dollar outsourced is rising all the time and at the moment, India seems able to deal with that.”

Mr. Ansell added BT already spends about $450 million on offshore outsourcing in India and the figure is expected to rise. BT also has technical support centres in some east European countries.
( source Reuters )

UK and Ireland based companies currently outsource 8% of IT operations to offshore partners, versus a average of 2% of European companies.

This is the result of a survey conducted by Capgemini, IT and business consultancy company. These figures are expected to increase to 24% for British and Irish and to 5% for the European companies by 2008.

Andrew Taylor, vice president of Capgemini, explained the cause of this gap between UK and Europe:

“The rest of Europe is definitely a step behind, because of social and cultural issues, but increased competition will not give them an option,”

According the Capgemini’s report, British and Irish companies are mostly focused on cost-reduction and less aggressive than US companies in terms of reinvesting the savings made through outsourcing.
That would cause a difference in productivity: US productivity has grown by 1.8 percent in 2005, compared to 0.9 percent in Ireland and Britain.

The survey shows that companies that reinvest the savings from outsourcing in in new technology to become more competitives get a 10% higher rate of productivity than those who simply use outsourcing to cut costs.
( source )