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EMF Conference Brussels, 14 th - 16 th December 2005

Offshore Outsourcing Challenges and Risks MOOS Project Gerhard Rohde, Head of UNI – IBITS/P&MS & Sabrina De Marchi, policy officer . EMF Conference Brussels, 14 th - 16 th December 2005. This activity is held in co-operation with Uni-Europa

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EMF Conference Brussels, 14 th - 16 th December 2005

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  1. Offshore OutsourcingChallenges and Risks MOOS Project Gerhard Rohde, Head of UNI – IBITS/P&MS & Sabrina De Marchi, policy officer EMF Conference Brussels, 14th - 16th December 2005 This activity is held in co-operation with Uni-Europa and with the financial supportof the European Union

  2. Offshore Outsourcing – Challenges and risks MOOS project • Outsourcing across national boundaries: • Offshoring, nearshoring, global sourcing, best sourcing, “geo-sourcing”, • Today, “3rd wave”: broad range of software products, maintenance, system integration, etc.. • Higher value services such as financial analysis, industrial engineering, analytics, drug research, medical analysis • Fastest growing segments: IT enabled services (ITES) and business process outsourcing (BPO, KPO) • legal database, digital content/animation • accounts, financial services, human resources, pay roll • research EMF Conference Brussels, 14th - 16th December 2005

  3. Offshore Outsourcing – Challenges and risks MOOS project • 70 : 70 : 70 • 70% of all business processes will be bought in the future • 70% of outsourcing will be bought from abroad • 70% of those outsourcing services will come from India (J. Welch, GE) • India: « back office of the world » EMF Conference Brussels, 14th - 16th December 2005

  4. Offshore Outsourcing – Challenges and risks MOOS project EMF Conference Brussels, 14th - 16th December 2005

  5. Offshore Outsourcing – Challenges and risks MOOS project • Offshore outsourcing here to stay • „Push factors“: • consultants set the trend • pressure from customers to lower prices through offshore components • stock markets love an „India story“ • “Pull factors” EMF Conference Brussels, 14th - 16th December 2005

  6. Offshore Outsourcing – Challenges and risks MOOS project • Why offshoring? • Largely costs • “Savings of > 40%”: more realistic: 10-15% • Competition key driver: even SMEs involved today • Huge skills and talent pools: scalability • Lower salaries in India e.g.: • Chip designer, masters degree $1‘000 in India - $7‘000 in US • Programmer: $10‘000 p/a in India - $ 66‘100 in US • IT Manager: $ 8‘500 in India p/a - $ 55‘000 in US • Prices going up in India in these days • ! Indian salaries at purchasing power parity with USA • No « sweatshops », working conditions generally good EMF Conference Brussels, 14th - 16th December 2005

  7. Offshore Outsourcing – Challenges and risks MOOS project Offshoring: division of labour – practical example EMF Conference Brussels, 14th - 16th December 2005 Source: VLG

  8. Offshore Outsourcing – Challenges and risks MOOS project EMF Conference Brussels, 14th - 16th December 2005

  9. Offshore Outsourcing – Challenges and risks MOOS project 8.2 8.3 7.7 3.7 3.0 1.1 Source: BusinessWeek February 3, 2003 Ireland Canada China Israel India RoW Source: McKinsey&Company 2004; Billion US$) EMF Conference Brussels, 14th - 16th December 2005

  10. Offshore Outsourcing – Challenges and risks MOOS project EMF Conference Brussels, 14th - 16th December 2005

  11. Offshore Outsourcing – Challenges and risks MOOS project Forecast: European Jobs Moving Offshore By Job Type, 2004-2015 EMF Conference Brussels, 14th - 16th December 2005

  12. Offshore Outsourcing – Challenges and risks MOOS project Forecast: European Jobs Moving Offshore By Country, 2004-2008 EMF Conference Brussels, 14th - 16th December 2005

  13. Offshore Outsourcing – Challenges and risks MOOS project Offshore highly controversial • Layoffs through offshoring: • Europe: outsourcing 2.5%; relocation 4.9% (EMCC) • US – 0.9% of all mass-layoffs • Judgment depends on perspective: • Macro- or micro-economic perspective • Location (sending or receiving countries) • Shareholder or employee • Offshoring a controversial political issue • »American jobs for Americans; unpatriotic investment » • Xenophobia, protectionism • Downward pressure on salaries, social and working conditions EMF Conference Brussels, 14th - 16th December 2005

  14. UNI-Europa MOOS project Making offshore outsourcing sustainable Why a MOOS Project? Only reason for Outsoucring = lower cost? Reality is more complex ! No reliable indicators on the scale or characteristics of offshore outsourcing but it is increasing Offshore outsourcing in Europe is still in early stage  structural change through offshore outsourcing will intensify over the next years the need for advice, tools, training, expertise as regard as sustainable management offshore outsourcing will increase ⇒ To develop a pan-European trade union strategy EMF Conference Brussels, 14th - 16th December 2005

  15. UNI-Europa MOOS project Making offshore outsourcing sustainable MOOS to develop measures to increase the capacity of employees, their representatives ans trade unionsts to anticipate and manage offshore outsourcing in a way which avoids social hardships and economics failures. Objectives are to: • Increase & improve understanding on offshoring and its mechanisms • Provide UNI-Europa affiliates with an information hub • Develop a trade union strategy • Provide support and tools for employee representatives • Develop mechanisms for anticipating and managing change EMF Conference Brussels, 14th - 16th December 2005

  16. Offshore Outsourcing – Challenges and risks MOOS project MOOS Project partners • MOOS is coordinated by UNI-Europa IBITS, with the support of a project team including: • LBC-NVK, Belguim • CFDT-Cadres, France • SIF, Sweden • CF, Sweden • FNV Bondgenoten, Netherlands • HK-Privat, Denmark • HIVA, Belgium • Ver.di, Germany The project is implemented with the financial support of the European social funds EMF Conference Brussels, 14th - 16th December 2005

  17. Offshore Outsourcing – Challenges and risks MOOS project 4 phases of the MOOS project (01/12/04  01/12/06) • Development of an interative website to track offshore outsourcing in Europe =www.moosproject.be • Reporting on offshore activities in 6 European countries = offshore tracking • Analysis on offshore practice and development of an offshore management handbook • Capacity building of stakeholders •  Development of training material • Offshore management seminars EMF Conference Brussels, 14th - 16th December 2005

  18. Offshore Outsourcing – Challenges and risks MOOS project What do we have so far? EMF Conference Brussels, 14th - 16th December 2005

  19. Offshore Outsourcing – Challenges and risks MOOS project What do we have so far? EMF Conference Brussels, 14th - 16th December 2005

  20. Offshore Outsourcing – Challenges and risks MOOS project Next steps of the MOOS project … • 1st MOOS Workshop, 12&13 January 2006, Antwerp, Belgium Drafting of the Management handbook • 2nd MOOS Workshop, 30&31 March 2006 in the Netherlands Validation of the Management handbook • 3rd MOOS Workshop, 1&2 June 2006 in Denmark • Development of the implementation strategy • National offshore management seminar (June-November 2006) • Final conference, 7 November 2006 in Germany • 4th meeting of the PC on 27&28 November 2006 in France EMF Conference Brussels, 14th - 16th December 2005

  21. Offshore Outsourcing – Challenges and risks MOOS project Offshore principles • involvement and participation of employees • avoid compulsory redundancies • protect career value, terms and conditions of employment • reinvest savings in skill development, • respect socio-political situation in target country: • respect of ILO labour standards and OECD guidelines • freedom of association and the right to collective bargaining • working conditions are safe and healthy, living wages are paid • UNI offshore outsourcing charter (www.union-network.org/themes EMF Conference Brussels, 14th - 16th December 2005

  22. Offshore Outsourcing – Challenges and risks MOOS project Offshore agreements • Some UNI affiliates have negotiated agreements with companies along those lines: • Amicus/BIFU: Barclays, Lloyds TSB, HSBC • Amicus: CSC • Connect: British Telecom • Italian unions: employers federation EMF Conference Brussels, 14th - 16th December 2005

  23. Offshore Outsourcing – Challenges and risks MOOS project Inter-national BBTK,Belgium Project CoordinatorBangalore UNI National National ServiceCenter (NSC) National CoordinationCommittee State Andhra Karnataka Maharastra Tamil Nadu Delhi Local Hyderabad Bangalore Mumbai Chennai Kerala Vizak Mysore Pune Coimbatore Vijayawada Hubli www.itpfindia.org EMF Conference Brussels, 14th - 16th December 2005

  24. Offshore Outsourcing – Challenges and risks MOOS project In conclusion: • Offshore outsourcing is a complex process with political, social, cultural, ethical and economic implications • Offshoring has become a wave we cannot stop • ICT, tradability of services, global competition are key enablers and drivers • We can contribute to better manage itand alleviate the impact onour members EMF Conference Brussels, 14th - 16th December 2005

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