IT outsourcing: It's not just India anymore

NEW YORK (09/17/2003) - In the past few years, companies considering offshore outsourcing for some of their IT work have typically looked to India for services.

But that is slowly changing, as several relative newcomers, including Nepal, the Dominican Republic and Grenada, are now working to persuade companies from the U.S. and other countries to send their business overseas.

At the annual TechXNY/PC Expo show here at the Jacob Javits Convention Center, outsourcing companies from all over the world gathered this week for OutsourceWorld, being held as part of TechXNY, to show what they can do for customers.

Bhavana Rana, managing director of Data Resources Inc., a business processes outsourcing company in Katmandu, Nepal, said clients are typically nervous about entering into an outsourcing arrangement overseas because of fears about disruptions such as terrorism. But, she said, because work can be done and transmitted electronically, those risks are overblown.

"In this business, we're virtual," she said. "Terrorism happens everywhere, including in the Philippines, and they have done great business process outsourcing for the U.S."

Rana's company is still growing its outsourcing operations and is seeking clients to do back-office operations for hospitals, legal firms, insurance companies and airline frequent-flier programs. "We're saying, 'We're here,'" she said. "I'm not looking for short-term business plans. I'm looking for long-term business plans. That's what I learned in (this) country, and that's what I want to uphold."

In the Philippines, Pacific Connexion in Pasig City offers offshore back-office, customer service, sales support and telemarketing outsourcing, while 3D Networks in Makati City helps clients set up their own outsourcing operations there.

Eugene Reyes, a New York-based trade representative for the Philippine Trade and Investment Center for the Consulate General of the Philippines, said his office works to tell U.S. companies what his country can offer to their businesses. "We try to close the deal together," he said.

It's like running a restaurant that serves many different kinds of food, Reyes said: "I don't care what you order, as long as it's in my restaurant."

Some companies offer a combined approach, with management offices in North America and the actual outsourcing operations in other countries.

Ron Johnson, president of BPM Outsourcing in Toronto, provides business process management outsourcing to clients from the company's operations in St. George, Grenada. By being in Canada, services cost less than U.S. prices to start, and the company is able to offer additional savings from being in Grenada, where Johnson has about 150 workers.

Stephen Muirhead, chief executive officer (CEO) of outsourcing vendor Absolute Quality in Hunt Valley, Maryland, said his company's offering of management in the U.S. and outsourcing services offshore will be the best of both worlds for customers seeking help. The new approach is still evolving, but it will be offered to clients soon.

"By working with someone like us, you've got the assurance of a substantial U.S. infrastructure, a substantial European infrastructure, and if something goes wrong, you can always pull it back," Muirhead said.

The company will offer the lower pricing of offshore vendors, along with management provided from a local office in the U.S., which can help convince worried IT executives that this is the safest path for their companies, he said. Typically, if outsourced tech support in India goes for US$12 per hour, his company will charge $15 per hour, including enhanced management services, he said. "What we're selling is peace of mind, so we better be damn sure that we deliver it."

Accelerated Computer Technologies Inc. in Pompano Beach, Florida, offers management from the U.S. and services offshore in the Dominican Republic. "We're still partially made in America," said Vice President Brian Javeline.

And by being close to the U.S. mainland, business communications are simplified. "You have to be able to talk to people on your clients' business hours," he said.

Software development outsourcing is also gaining new providers in places like Bulgaria, Romania and Egypt.

Bucharest, Romania-based Akela has been doing business in Europe for several years but is opening a sales office in Fairlawn, N.J., in several weeks to offer its services to U.S. companies, said Peter Ungureanu, a managing partner. The U.S. office will help create a presence here and give comfort to potential customers, he said.

Eastisoft Inc. in Sofia, Bulgaria, is a software outsourcing company with offices in Salt Lake City, again to help reassure clients that they're not losing touch with their products when they send work offshore.

Five software companies from Egypt, including software outsourcing businesses, were at the show for the first time collectively to bring their offerings to the U.S. as an IT team. Manal Amin, deputy chairman of the Egyptian Software Foundation, said the companies are trying to "create an awareness" that they are ready to provide outsourcing services to the world. "We're trying to promote Egypt as a hub for the region," Amin said.

James Johnson, an analyst at The Standish Group International Inc. in Dennis, Massachusetts, said the availability of offshore outsourcing in more nations around the globe is growing. "We haven't seen it to such an extent before," Johnson said.

The idea of outsourcing companies using U.S. offices for project management to reduce corporate worries about sending IT work overseas is "an interesting idea, but I think that doesn't really solve the bigger issue. All that is a comfort thing," he said.

If companies are outsourcing work offshore, there is more risk of an IT worker booby-trapping code or causing some other intentional problem without U.S. laws to protect the client's company, Johnson said. "I think there are issues one has to make sure that they cover" when considering offshore outsourcing, he said.

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