7 benefits of managed services

•Skills: Simple and timely access to specialist skills and knowledge.
•Delivery: Greater control of service levels and performance.
•Quality: Project outputs enhanced by specialist resources.
•ROI: Tighter cost control and clarity on the RoI.
•Control: Refined budget and implementation management.
•Efficiency: Make best use of staff for specialist and core tasks.
•Risk: Transfer the risk for achieving high service outputs.

war of managed services in UAE

Managed services; outsourcing has become hot buzzword in UAE. Many service providers have entered into the market; numerous existing IT solution providers have moulded their business model to provide services. On the flip side many businesses have outsourced part of their business processes and many are evaluating strategies to outsource business processes. This phenomena seems prevalent primarily in the banking and government verticals and the multinationals as part of their global strategy.
In the recent past the services activities have heated up with setting up of Injazat a joint venture between EDS and Mubadala in early 2005. It is claimed Injazat has signed up business worth over USD $ 1.4 billion within 2 years of its inception and lions share comes from Abu Dhabi government departments. In March 2008 ‘Etisalat announced setting up managed services in three areas. Managed Managed WAN service; Managed Firewall and Managed Secure VPN solution. Other service providers are ASP Gulf; ehosting Datafort and the new entrant Majal that is focusing on helping RAK emirate develop an IT infrastructure, which will cover e-government, business and residential services, over the next five to 10 years. The company expects to spend between $180 to $300 million over a five-six year period to build up the emirate's IT infrastructure.

The competition has heated with presence of Satyam; Wipro; Perot and other sub- continent IT giants Then UAE has many local companies like Raqmiyat; CNS; Seven Seas; Intertec systems; Emirates computers; Alpha Data, MDS who are proposing managed services to their local clientale and winning business on trust relations and local presence.
Dubai government has put in an initiative, “Dubai Outsource zone” to set up first free zone in the world dedicated to the outsourcing industry. It will serves as a centre for off-shore disaster recovery facilities and cater to off-shoring requirements from Europe, the US and the region. DOZ's custom-made facilities, includes next-generation telecom infrastructure, office space in intelligent buildings, and facilities management, enable outsourcing companies to set up efficient operations. Dubai Outsource Zone will create the outsourcing industry in MENA. DOZ’s claims to become the leading outsourcing destination in MENA, and one of the top 10 in the world

IDC has reported that the IT outsourcing industry in the UAE is expected to grow by 16 per cent in 2007, topping USD 94.54 million from USD 81.27 million in 2006. Over a five-year period until 2011, the industry is expected to achieve a healthy compound annual growth rate (CAGR) of 13.2 per cent.

Indian Outsourcing industry is adjusting: Feb. 2008

+ Indian industry is adjusting to new 4 strands clearly visible
+ Growth in domestic demand that has increased to USD 5.4B. Companies like Bharti Airtel, Dish TV, Barclays and SBI has outsourced their Business process and call center operations locally
+ Second the global delivery model perfected by Indian giants for software delivery has resulted in shift of operations from onsite to offshore is being challenged. Offshore revenue has increased whereas onshore revenue has dropped. Infosys, TCS and Satyam have development center in Hungry, Romania, China and Canada. While Wipro plans to open a near shore center in Atlanta in US.

+Thirdly response to shortage of skilled manpower and rising wages. Some companies are taking their own steps to develop a talent of pool through initiatives like NIIT and participating in school curriculum. Further also shifting operations in countries where labour is cheaper like Infosys setting up Infosys setting up development center in China, TCS setting up in Mexico and Zensar in Poland. Many BPO’s have set up call center in Philippines.
+ Fourthly Infosys and TCS have started consulting practices and also undertaken technology research relevant to business to effectively compete with IBM; EDS and Accenture.

Infosys, TCS, Wipro have focused on US and European market whereas foreign multinationals like IBM; EDS have captured 55% of the Indian market share. Bharti and Vodaphone has outsourced their operations to IBM for more than USD 2.5B.

India Outsourcing Scenario Feb. 2008

+ India thrives on 2 advantages i.e. cost cutting and talent availability
+ Concern: Immediate Indian worry is rupee rose 12% last year – 2007 denting profit
+ Concern: is slowdown of US economy which accounts for 60% of the business.
+ Concern: Global IT spend as part of the overall spend will decrease this will put pressure on outsourcers to provide more for less.
+ Concern: is availability of skilled manpower will be bottleneck. Each year India produces 3M new graduate and diploma holder to the talent pool and nearly 3rd are in the engineering and science. However less than quarter of them are employable by the industry standards.
+ Concern: IT is loosing shine and people are being attracted by BFSI, retail and telecom sector. This has led to higher wages and attrition rate.
+ Concern: is poverty of infrastructure. Traffic jams; non-renewal of tax exemption
+ TCS sent 500 fresher for unsatisfactory performance and cut a small portion of variable pay to make up for shortfall in an internal target.
+ Earlier lower Rupee acted as partial buffer against wages and rentals.
+ The total revenue of the IT-ITES industry is expected to be USD64B for the current financial year ending March 2008 up from USD 47.8B for the 2007
+ The contribution of IT-ITES industry to the GDP grew to 5.4% from 4.7% of previous year.
+ The sector is expected to exceed overall software and services target of USD 70B by 2010

Shell – story: Monday 31 March 2008:

Shell is to transfer almost 3,000 IT staff as part of a $4bn deal to outsource the bulk of its technology infrastructure. About 2,960 Shell IT staff and contractors are expected to be transferred under the deal with AT&T, EDS and T-Systems, with Shell saying there will be "20-30 redundancies at worst".

But transferred staff will not retain their existing rights and redundancy packages under their new employers, with Shell estimating these will expire after about two years.The oil multinational expects "significant improvements in efficiency and productivity" and to deliver "important financial benefits to Shell" during the five-year deal. EDS will be the operational integrator for the contracts, with approximately 1,500 Shell IT staff and contractors to join EDS, spread throughout 65 countries. About 900 Shell staff will transfer to T-Systems and 560 to AT&T, with employees mainly coming from Malaysia, the Netherlands, the UK and the US. From July the companies will serve Shell and its subsidiaries in more than 100 countries, with AT&T looking after network and telecommunications, T-Systems hosting and storage, and EDS end user computing services and operational integration of the infrastructure services. Shell said it had signed the Master Service Agreements for the deal and was consulting with unions over the deal.

story of outsource

Pareto Law takes it’s name from Vilfredo Pareto’s 80:20 principle. This economic law stated that 80% of Italy’s wealth was owned by a mere 20%. Putting this theory into business practice, Pareto Law translate that 80% of a company’s business will be generated by 20% of its activities. Considering the Pareto law it makes business sense for businesses to focus on its core activities and outsource the rest.

Outsourcing occurs when a business purchases services or products from a foreign supplier or manufacturer, or when a business pays another company to provide services that a business might otherwise have employed its own staff to perform. Businesses outsource for the purpose of cutting costs; raising profits and productivity.

Outsourcing is not a new phenomenon. Many thousands of years ago, our ancestors realized that it would be impossible for them to fulfill all their needs by themselves and they would have to depend on someone else to serve them. However, just before the Industrial Revolution, the trend of companies was to retain all activities for themselves. They nearly never relied on outsourcing to look after their sales, storage and transportation, legal affairs, and taxes. The company performed all of these by itself.

The great Industrial Revolution between 1750 and 1900 that took place in Europe saw a manifold increase in the production of goods; the market for them widened and profits were like never before. Many companies began to outsource such activities like accounting, insurance, engineering, legal needs, etc to specialized firms. These firms were within the country and not offshore. At this point of time, outsourcing (if we could call that so) was exploitative and ugly. For instance, the Indian farmers were forced to provide raw materials like cotton and indigo for the British companies when they would rather produce food grains which was the need of the hour.

Middle of the 20th century saw many political and economic changes combined with the development of faster means of transportation. Distances began to matter less. Manufacture of low costing toys and electronic goods, apparels, etc were outsourced to less developed countries. The political set up had changed considerably. Many countries in Asia had become free. Outsourcing was a welcome development as it benefited the developing economies by increasing employment and income levels of the workers. The education and skill levels too improved. The governments in these developing countries took care to develop adequate infrastructure necessary for manufacturing companies to maximize profits.

The IT revolution and the improvement in computer technology had a great part to play in the next stage in the outsourcing history. In the 1990s, many companies began to outsource activities that were essential for them, but these did not include their core activities. Outsourced activities included data processing, human resources and accounting. All these enhanced profits for their clients. They clung on to ownership and management of core activities.

Outsourcing was a response to globalization. The origin of outsourcing in America dates back to the 1970’s when IBM developed the IT industry in India . Later, the Internet and telecommunications boom encouraged outsourcing as a means of promoting capitalism