Obama the explainer

Courtesy: http://washingtontimes.com/

Twice in the last week I've noticed that President Obama has told the American people some tough things, and has then gone on to do a good job of explaining why things are the way they are.

This is something that Obama does a good bit better than President Bush. I don't remember Bush ever addressing the issue of outsourced jobs or bankruptcy for the auto makers.

Obama was very careful in how he talked about bankruptcy yesterday during his speech on the auto companies.

"Now, while Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plan they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," Obama said.

He then took pains to clarify what he meant and what he did not mean.

"Now, I want everybody to be clear about this.  I know that when people hear the word 'bankruptcy' it can be unsettling, so let me explain exactly what I mean.  What I'm talking about is using our existing legal structure as a tool that, with the backing of the US government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success; a tool that we can use, even as workers staying on the job building cars that are being sold," he said.

"What I'm not talking about is a process where a company is simply broken up, sold off, and no longer exists.  We're not talking about that," he said, reassuring auto company workers who would understandably be anxious or fearful at the mention of bankruptcy.

The other time Obama did something like this recently was at last week's "virtual town hall." A woman asked him through a YouTube video, "When can we expect that jobs that have been outsourced to other countries to come back and be made available to the unemployed workers here in the United States?"

Mr. Obama talked about the job market overall and his economic plan, but then addressed the question directly.

"Now, a lot of the outsourcing that was referred to in the question really has to do with the fact that our economy -- if it's dependent on low-wage, low-skill labor, it's very hard to hang on to those jobs because there's always a country out there that pays lower wages than the US," he said.  "And so we've got to go after the high-skill, high-wage jobs of the future."

Obama talked about new energy industries as the high-wage sector of the future, and then made a somewhat eyebrow-raising comment, especially when you consider some of his rhetoric on the campaign trail about the Bush administration outsourcing jobs.

"So I guess the answer to the question is, not all of these jobs are going to come back.  And it probably wouldn't be good for our economy for a bunch of these jobs to come back because, frankly, there's no way that people could be getting paid a living wage on some of these jobs -- at least in order to be competitive in an international setting."

Short on cash? Stop outsourcing education

Courtesy: http://www.al.com/

City schools are overusing costly outside tests

Every year Huntsville's schools spend millions of dollars paying companies outside the city for tests and scripted curricula. At what point in time did Huntsville's citizens decide that the teachers in their schools were not capable of creating curricula and tests on their own?

The answer is they didn't. Both have been increasingly imposed because of the No Child Left Behind Act, passed under the belief that local communities were not qualified to determine whether or not their schools were working. According to NCLB's supporters, failing schools - identified as such by failing test scores - could improve by adopting scripted materials that are "teacher proof" and administering frequent tests to make sure the teachers are doing their jobs.

There are at least two problems with this logic. The first is that there is not a single shred of empirical research supporting the use of testing or scripted curricula as means to improve human growth and development.

The second is the belief that teachers are "the" problem with schools. In reality, when it comes to "failing" schools, zip codes have more influence than the teachers. If that is not the case, we should immediately swap all of the teachers in Butler High School with all of the teachers in Bob Jones. If NCLB's logic holds, Butler's scores will drastically improve and there will be a corresponding decrease at the other school.

We don't need tests to tell us that this will not occur.

Chances are, if you are reading this op/ed, you went to a public school and graduated before educational outsourcing began. Somehow, despite failing schools and failing teachers, you managed to become successful to some degree. If that were not the case, you would not have the luxury of reading this newspaper.

As a former teacher, and now a teacher of teachers, I understand the importance of determining whether or not the individuals in our schools "are doing their jobs." And after visiting a number of schools it is easy for me to say that some are not. They are, however, dwarfed in number by the teachers doing amazing things with America's future leaders.

We don't have to pay a company outside of Huntsville to tell the difference. We (yes, you the reader) simply need to go into buildings and look and listen to the people inside of them.

Huntsville is easily spending more than $3 million a year in time and resources on imported tests and curricula. That's at least $3 million leaving the city every year.

If citizens could vote on the issue, I'd lobby for dropping all tests and scripted materials that don't come from within the city or county. I'd then ask students, parents, teachers, administrators, and members of the community to determine whether or not our children are becoming engaged, intelligent, doers. Am I to understand that this city, trusted to put humans into outer space, cannot be trusted with children on terra firma?

While I believe our principals and teachers are capable of charting student progress without federal or state interference, I recognize the benefits of inviting individuals from outside of an institution to ensure quality control.

I am, of course, partial to using UAHuntsville as a mechanism for helping the city measure student achievement robustly defined. For $3 million, UAHuntsville could do a better job of helping Huntsville's school system measure student development and growth than any imported test or curricula. And we could do it for a period of four years.

The city would save at least $9 million, teachers and administrators would be freed from a great deal of paperwork, and students would spend more time meaningfully employed in the most robust sense of the term. The only real obstacle is our collective will.

Return of outsourced jobs not good for US: Obama

Courtesy: http://www.hindu.com/

In the midst of its worst recession in decades, President Barack Obama says it would be better to create new jobs that can't be outsourced instead of bringing back such low paying jobs from other countries.

"Not all of these jobs are going to come back," he told a questioner during an "Online Townhall" from the White House, who asked when would jobs outsourced to other countries come back and be made available to the unemployed workers in the US.

"And it probably wouldn't be good for our economy for a bunch of these jobs to come back because, frankly, there's no way that people could be getting paid a living wage on some of these jobs - at least in order to be competitive in an international setting."

The online meeting - a new take on President Franklin Roosevelt's fireside chats - was streamed on the Internet from White House government.

Mr. Obama said a lot of the outsourcing has to do with the fact that "our economy - if it's dependent on low-wage, low-skill labour, it's very hard to hang on to those jobs because there's always a country out there that pays lower wages than the US.

"And so we've got to go after the high-skill, high-wage jobs of the future," he said. "That's why it's so important to train our folks more effectively and that's why it's so important for us to find new industries - building solar panels or wind turbines or the new biofuel -that involve these higher-value, higher-skill, higher-paying jobs.

"So what we've got to do is create new jobs that can't be outsourced," Mr. Obama said.

The president also asked Americans "to be patient and persistent about job creation because I don't think that we've lost all the jobs we're going to lose in this recession."

"I don't want people to think that in one or two months suddenly we're going to see net job increases," he said striking a note of caution. "It's going to take some time for the steps that we've taken to filter in."

Other questions - some of which came from the live audience - focused primarily on health care, job loss, mortgage payments and energy.

CGI bags 10-year IT deal worth C$182 million

Source: http://www.reuters.com/

Canada's biggest computer consulting company CGI Group Inc said it bagged a 10-year information technology outsourcing deal worth C$182 million from life insurance company Foresters.

CGI said the agreement also extends the existing infrastructure services outsourcing agreement by seven year, and will see 78 Foresters IT employees move to CGI.

Under the agreement, CGI will deliver IT application maintenance and development services from its centers in Toronto, Halifax and Bangalore, while IT infrastructure services will be delivered from its centers in Ontario.

IT outsourcing prices to fall - Gartner

Courtesy: http://www.reuters.com/

Prices of IT outsourcing services will shrink 5 to 20 percent through 2010 due to the uncertain economic climate, IT budget constraints and competition between vendors, research firm Gartner said on Monday.

"This fall in prices will occur due to increasing competition in the market between traditional and new providers as more providers compete aggressively to keep revenue growth on target, while ensuring margins," Gartner said.

Gartner said it expects prices for application hosting services to fall by 10 to 20 percent and for network services to fall 10 to 15 percent. It sees prices for data centre service dropping 5 to 15 percent and help desk services 5 to 10 percent.

"These are not `price list reductions' but represent an overall price reduction on infrastructure outsourcing deals that may apply to new deals and, albeit only partially, to renegotiated deals," analyst Claudio Da Rold said in a statement.

ITV looks at outsourcing to cut costs

Courtesy: http://www.telegraph.co.uk/

The commercial broadcaster is close to outsourcing its technology division and is aggressively pursuing a range of similar deals throughout the group.

"We are currently conducting a cross-company outsourcing review. Our technology division is at an advanced stage in this project and we will be announcing the results in the near future," said an ITV spokesman.

The spokesman refused to comment on whether this would lead to more job cuts than the 600 announced at ITV's full-year results earlier this month. One industry analyst said that a large-scale back-office outsourcing deal would save ITV at least 10pc of its variable cost base.

Sources close to ITV said potential outsourcing deals outside of back-office functions were also being identified. International distribution is thought to be one area under review, although industry sources said this was not top of the agenda and ITV would only take this route if the cost savings were significant.

ITV executives have come under increased pressure to deliver further cost savings across the group.

Earlier this month, the broadcaster announced losses of £2.7bn after taking a large-scale write-down.

Recession Takes A Bite Out Of Pay-For-Performance Outsourcing

The downturn is making it harder for companies to tie outsourcing to broader goals than basic cost cutting.

Courtesy: http://www.informationweek.com/

Risk-reward IT outsourcing contracts, where service provider fees are tied to business outcomes, have been viewed as the next tier of maturity for the outsourcing industry. But the slowing economy has dampened interest in the model, and getting to that tier is going to take longer.

That's not what we expected. Before the recession, interest had been growing among IT outsourcers and longtime customers in forging relationships where both parties share in benefits reaped through working together, but also share in any pitfalls. Outsourcers looked for "partnerships." To do this, they needed to shift to "higher-level" deals that didn't focus solely on cost cutting--including offshore labor arbitrage--but on strategic measures such as revenue growth and customer satisfaction.

The reality is that such relationships are complex to set up, difficult to execute, and riskier, which means they require deep trust and a long-term view. All those obstacles become bigger in a downturn.

Companies haven't given up the pursuit of innovation, and they're still working closely with their outsourcers, but they're paring down their project lists. And if there's a revenue-generating project to be done, CIOs are likely to want their own staff on it, rather than share the rewards with a services provider. "If you have 100 discussions with clients about risk-reward contracts, maybe only 10 will end up doing them," says Ray Strecker, head of Tata Consultancy Services' North America consulting practice.

Eighteen months ago, two goals frequently came up during client discussions, Strecker says. One is still common: how to take direct costs out of the client's business, primarily with IT but sometimes through other operations, such as human resources.

The second theme that almost always came up was how to shift the IT spending mix from running the business--support, security patching, data center operations--to fostering innovation. In those conversations, cost cutting was a way to "free up" funds for other purposes, Strecker says. In the last few months, however, the talk has shifted back almost solely to cost cutting as a way to "batten down the hatches," he says.

Some clients continue to ask TCS where it can be a strategic partner in achieving objectives beyond cost cutting, such as improving customer service. Yet, even in the pockets of innovation where there is a shared incentive to improve performance, "we're not seeing revenue-sharing models," says Sultan Khan, head of TCS IT strategy and governance for North America, citing the complexity of such arrangements.

Vincent Cirel, senior VP and CIO of Norwegian Cruise Line, says too many CIOs think of pay-for-performance narrowly--as the financial penalties outlined in service-level agreements, rather than incentives to perform better. SLAs aren't of much use to a CIO. If performance tanks to the point that it triggers an SLA, it will give the lawyers some work, but the CIO and business managers relying on it are out of luck. So when Norwegian Cruise Line inked a 5-1/2-year deal in October with IBM to run its reservations as an online service, Cirel included performance incentives (which he declines to detail).

Follow The Money
Between 15% and 30% of Computer Sciences Corp. contracts have risk-reward provisions. Like other outsourcers, CSC has seen engagements shift from supporting growth to "How can you help us become more efficient and save cash?" says Russ Owen, president of CSC's Americas commercial group.

The risk-reward provisions often involve CSC getting a share of savings achieved on behalf of clients, such as helping insurers identify fraud or multiple billings for the same services. When CSC helps its outsourcing customers launch products, such as a new health insurance policy, it's often paid based on the volume of claims activity. CSC expects volume-based, variable payments, which usually involve business process as well as technology services, to be a growth business.

Capgemini's risk-reward arrangements tend to have a business process outsourcing component as well. In one example, Capgemini has been working with an energy company that had been losing customers. It took over billing and customer service operations, and used analytics to spot the types of calls--like asking about rates--that are a red flag for customers who are at risk of leaving, then created offers to retain them. Capgemini earned a bonus based on the company's customer numbers.

For a consumer-goods company, Capgemini is running a billing and financials system where incentives are tied to spotting double-billing and other problems. Capgemini has hired people with coding and audit experience to try to outperform the customer's accounting system, and Capgemini gets a cut of any recoveries that result. But it's a bonus, says David Poole, head of Americas business process outsourcing for Capgemini, not the main means of payment.

Increasing revenue has been the goal of outsourcing efforts for a notable minority of companies--or at least it was before the worst of the downturn. In a survey by InformationWeek Analytics last spring of 272 companies, almost 30% cited increased revenue as a driver for BPO. In addition, 38% cited improved customer satisfaction and 42% faster time to market as BPO drivers. Not surprisingly, cost cutting was cited by 83% of companies.

Even when the economy picks up, revenue- and profit-sharing deals will continue to be more the exception than the rule, predicts Dave Liederbach, general manager of global strategies outsourcing with IBM. The reason is that it's too hard for most companies to tie a service to driving revenue growth, and most outsourcers don't have the industry experience needed to set up such deals. "You have to have the capacity to track revenue and influence outcomes," Liederbach says. "If all you deliver is low-cost labor and insight into how your products work, ... you'll run into trouble in aspiring to higher-value outcomes."

When IBM does tie contracts to outcomes such as revenue growth, Liederbach says, it's "not about extremes." Typically, only a fraction of the contract is variable. Also, in some industries, such as health care and government, revenue might be a less important measure than satisfaction or responsiveness. "Outcomes are based on client vernacular," he says.

In working with Norwegian Cruise Line, an incentive for IBM is that it can leverage the reservation-as-a-service model with other customers in the travel industry, applying what it learns working with the cruise line. CIO Cirel says the model will help the industry overall without hurting Norwegian Cruise Line, since it's not the transaction that's the competitive differentiator, but the "shopping process prior to making a reservation" where IT can provide a company with competitive advantage.

Liederbach points to Norwegian Cruise Line's move to reservations as a service as an example of companies cutting costs while using that as a reason to try new technology models. "While cost cutting is a part of what we're all doing, the best are cost cutting to be positioned for long-term growth," he says.

EDS also is looking to cloud computing as a way to open up new pay-for-performance options. Today, most of its variable pricing contracts are output-based models, such as the volume of health care claims managed or e-mail boxes maintained. As more business processes can be moved online, they lend themselves to a variable model, says EDS VP Dan Zadorozny. However, don't expect big moves until the economy improves and business picks up. "We have some clients who are very interested in this when the time is right," Zadorozny says.

Even with a better economy, any deal linked to revenue or profit should be treated with a rigor that's close to what a company would apply to a joint venture, from the financial accounting to how each puts in investment funds, says Kate Hanaghan, senior analyst at research firm Bathwick Group.

Hanaghan estimates that fewer than 15% of outsourcing contracts today involve risk/reward provisions beyond conventional SLAs in which IT services providers are paid based on straightforward criteria such systems availability or cost-cutting measures.

The more elaborate deals take more outsourcing management expertise than most companies have or are willing to develop. "Unless it's a mature buyer that knows the partner well, those kinds of deals are considered too risky, especially these days," Hanaghan says. "They require an enormous level of trust."

Plus, as companies look down the road to what they hope is an upturn, they're loath to share in potential growth. "Most clients want to control their own destiny, rather than share it," says TCS's Khan.

With a carefully crafted outsourcing deal, however, your company just might be able to accomplish both.