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Saturday, August 13, 2005
Outsourcing services face stiff competition
Investing in product-based companies is seen to be a better option than going into outsourcing of services, where India and China will outperform the Philippines in the next five to 10 years, a local industry player warned.
Lawrence Hughes, chairman and chief technology officer of InfoWeapons, said “outsourcing is only a temporary phase at best” and the best direction to take is the creation of products.
“Outsourcing will help develop local talent in key technologies, but India and China will soon underbid and outperform us in this area. We should be creating products here that we (can) export directly to customers in the US, Europe and the rest of Asia,” Hughes suggested during a presentation on “signposts” for investing in Cebu during the Sun.Star Economic Forum 2005 at the Waterfront Cebu City Hotel and Casino last Wednesday.
Even call centers that generate employment and profits will not thrive with the competition.
“(Call centers) currently employ large numbers of people and generate revenue, but their profit margins will shrink in the face of increasing competition from China and India,” he said. “A product-based company can easily generate 10 times the revenue per person than the best call centers. Its `multipliers,’ are far greater than any services-based venture.”
Hughes said the business venture is possible because there are “many very talented, highly intelligent information technology (IT) professionals” in Cebu, like the pool of workers he has in Infoweapons.
Like his company, he also believes that Cebu’s IT firms can create “globally competitive products, even for the US market.”
“The US Department of Defense said that what we have created here in Cebu is ‘years ahead’ of any similar product worldwide (a watershed event for Cebu and the Philippines),” he said.
Aside from the creation of products, Hughes raised the need for investments and the wide use of Open Source software, the IPv6, or the next generation Internet protocol and in-computer security.
Hughes said Open Source software is powerful and a highly appropriate technology for countries, like the Philippines.
“Products using Open Source components are dramatically better and more profitable than those based on commercial software platforms,” said Hughes, who is also the director of the Open Source Computer Security Laboratory at the Department of Science and Technology 7 compound.
As for the Ipv6, Hughes reported that the largest investments in such a
technology are being made by China, Japan, Korea and Taiwan, making it mainly an Asian phenomenon.
“Philippine companies that work with IPv6 will have a big advantage
over US-based companies, that are still mostly unaware of IPv6 or are waiting for their customers to start demanding for it,” he said.
Hughes said computer security is also another “potentially rich area.”
IT firms should have their software developers obtain security certifications so they will know “how to avoid vulnerabilities,” he added. (CYR)
(August 13, 2005 issue)
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