Outsourcing Goes Global; Small and Mid-Size Companies

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IBM Global Services and Accenture, US companies that provide outsourcing services, are adding staff in China, Hungary, the Czech Republic and Brazil, and even some of India's giant outsourcing companies, like Tata Consultancy Services, are themselves looking to send some functions to other countries, forbes.com says. Tata acquired a 1,300 employee outsourcer in China last year, and signed a deal with Microsoft and an arm of the Chinese government to set up Information Technology (IT) services in China, where they will employ 5,000 people.

Convergys, the US call-center company, is expanding beyond India, to Dubai and Budapest, forbes.com says. Call center workers in Hungary, where Convergys has established its human resources outsourcing center, earn 25 percent more than their Indian counterparts, but are multilingual. Convergys is able to serve clients in 15 countries, in ten European languages from Budapest. .

“We're looking for the cost arbitrage and moving operations to where they're most effective,” Jean-Herve Jenn, president of Convergys' international operations, told forbes.com.

With spending on IT outsourcing leading the way, the offshore services industry is expected to earn $60 billion by 2010, according to research firm Gartner, Forbes reports. New services like engineering, research and development, and legal research, are expected to add to the growth.

Outsourcing business functions like IT, billing, and human resources, has a growing appeal to small and mid-sized companies in the U.S, the businessledger.com reports. Physicians are looking for companies that can take over reimbursement and billing and upscale hotels and restaurants outsource desserts and pastry making.

Elite Communications of Northbrook, Illinois, decided to look for an IT service provider three years ago, according to the businessledger.com. “We rely heavily on the Internet to transfer files to and from customers, track projects, capture updates, Linda Spulak, Elite's vice president and general manager said.. Many of our applications are also Web-based, so when we lose the Internet, our ability to support our customers becomes extremely limited.”

“Having a full-time IT professional on staff can be cost prohibitive she added. “You're also exposed if that person is on vacation, or sick or moves on. And unless you're technologically savvy, finding, testing, and recruiting a person with the right skills can be like flying in the dark.” Elite turned to Agility Computer Networks to provide their IT service and Spulak has found professional 24-7 support, as well as a business partner and peace of mind.

Chris Vosatka, office manager at Ranger Locksmith, Inc. in Plainfield, Illinois, has used Paychex to handle payroll for 10 years. Ranger has never employed more than 6 staff during that period, but Paychex allowed her to concentrate on billing, accounting and inventory. Letting go of some functions can be a problem, she told thebusinessledger.com, but she recommends that small business owners try outsourcing. “If there's a function that's a burden, and it is dragging down other parts of the business, give outsourcing a try.”

With clients demanding low-cost offshore services, more US and European companies are looking to acquire Indian tech services companies, businessweek.com reports. Electronic Data Systems Corp. (EDS) offered $380 million for MphasiS, a Bangalore software and back-office services company. “MphasiS helps us play offensively in the markets we serve, said Stephen Heidt, an EDS vice president. “It offers us capabilities that otherwise we'd have to develop ourselves.”

More deals are expected in coming months, businessweek.com says, as IBM, Capgemini and Flextronics look for acquisitions in India.

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