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Outsourcing to India requires giving up IP

Outsourcing to India requires giving up IP

The Department of Foreign Affairs and Trade may have identified outsourcing IT to India as an easy way for Australian companies to save a few dollars, but companies must relinquish a great deal of intellectual property for the move to be effective, according to local integrators.

A report by the Department's Economic Analytical Unit, India: New Economy Old Economy, outlines "significant opportunities" for Australian companies to cut costs by investment in, and outsourcing to, the IT-enabled sector in India.

But regardless of the savings, companies have to understand the issues involved with outsourcing IT operations, said Craig Neil, managing director of voice and data integrator NSC.

"Whether you are going to India or to any other outside organisation, the biggest consideration is that to be successful in the implementation, you really need to hand over a lot of intellectual property," he said. "That's a really big issue."

Phil Hassey, IDC Australia's senior analyst for Asia-Pacific IS outsourcing services, said that savings by outsourcing back-end operations to India could be as high as 70 per cent on labour-intensive jobs. "However, cost savings are hard to quantify. For example, a CRM implementation is quite labour-intensive, so the integration savings would be quite significant if done in India."

Companies such as GE Capital and the ANZ Bank are already outsourcing to India.

NSC operates in the South Pacific region. Neil said organisations that outsource their operations to India could provide cost savings for industries with a high consumer volume, such as the power or mobile phone industries, but it could prove a challenge for call centres.

"There are so many different skill levels and those people have so much access to the intellectual property and back-ends of a system," Neil said. "I think it is a great idea for many businesses but we often see big struggles over the amount of access those centres must have."

The report has sparked debate in political circles, being labelled short-sighted by Federal Opposition Leader Simon Crean.

Labor's industry and trade spokesman, Dr Craig Emerson, also criticised the report, saying it showed the Government had no commitment to creating jobs in Australia's new-economy sector.

"The vigorous promotion of a report designed to get Australian businesses to relocate offshore is a slap in the face for Australian workers trying to compete for jobs in the new economy," Emerson said.

Paul Bassat, CEO of online recruiting company Seek, said there are a number of talented IT people out of work. "There is no question that there are people struggling to find work. It's a hard issue. Ultimately, if companies have to make decisions - such as where is the best place for their IT work to be done - it is really down to individual companies," he said.

"But if the Government is encouraging outsourcing to India . . . it is disappointing and surprising."

Total revenue for India's IT sector is expected to reach about $US11.4 billion in 2000-01, and about 70,000 Indian workers are employed in the IT-enabled sector, specifically looking after outsourced call centres, back-office support and data-processing services.


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