Only five days until the Eastern & Central Europe Shared Services & Outsourcing Conference

There's still time to register for the IQPC Shared Services and Outsourcing conference in Krakow, Poland.  The Conference will be held on 9-10 March, 2011.

Some of the many topics to be covered include:

• KPI's: The Best Form of Measurement
• Balancing Customer Service and Bottom Line Needs
• Priming the Ejector Seat: Devising Exit Strategies Just In Case
• Automation: Beyond Initial Implementation
• Reset Shared Services to Maximise Value Creation

In addition to the many workshops, this conference represents a great opportunity to network with others who are on the shared services and outsourcing journey.  I recommend that you attend if you are able to do so.

Customer or Partner? The Role of the Business Units in Shared Services

I've posted a new article today dealing with the relationship between Shared Services and the business units they serve.  Here's an excerpt:

In developing the framework for shared services in an organization, there are different approaches to how the business units should be viewed. Some organizations view the business units as customers while other companies view the business units more as partners in a journey.  How the Shared Service Organization views the business units will impact their relationship with the business units and the way they chose to deliver services.

Continue reading Customer or Partner? The Role of the Business Units in Shared Services.

Building a Better Budget - Part 3 - Eight Tips for a Better Budget

Note: This is the third post in this series.  You can read Part I and Part 2.

Given the challenges in the budgeting process, leading companies have moved to a new budgeting paradigm that emphasizes speed and flexibility.  Here are eight ideas to incorporate into the budgeting process:

• Establish key linkages between the strategic plan, the Sales & Operations Plan and the financial budget.  The numbers in the financial budget should be the culmination of a planning process that begins with the strategic plan and incorporates demand and supply plans from Operations.
• Scale down the budget.  Reduce the number of line items budgets to focus on the true drivers of revenue and cost.  It isn’t necessary or desirable to create a highly detailed budget.  Focus on key line items that are material and that are derived from supporting operational detail.
• Automate the budget with a dedicated software solution.  Reduce reliance on Excel spreadsheets and manual consolidations.  Invest in a dedicated software solution that provides a web-based interface for users, workflow, security and that automatically rolls up budgets at each level of the organization.  These software packages also facilitate the reporting of actual, budget and forecast data.
• Employ zero-base budgeting.  Don’t use last year’s numbers as a base for the upcoming year.  It’s too easy for managers to simply resubmit their numbers without going through the exercise of determining costs based on estimated activity volume.
• Document budget assumptions (e.g. growth rates, estimated activity volume).  Just as footnotes are an integral part of financial statements, the assumptions made to develop a budget are also critical.  Assumptions must be realistic or the budget will lose credibility.
• Foster dialogue across functions.  The process of budgeting, if done correctly, can add as much or more value as the budget itself.  When departments work together on an integrated budget, they gain a better understanding of the challenges facing the overall organization.  Strong communication leads to more useful budgets.
• Move compensation goals from a static budget to a series of balanced KPIs.  Yes, some will still be financial in nature and a streamlined budget can capture those.  Revenue, Gross Margin, EBIDTA, Return on Invested Capital can all be measured against pre-established targets.  But managers should also be evaluated on non-financial factors such as product innovation, time-to-market, employee satisfaction, customer retention and customer satisfaction ratings.
• Allocate capital based on a dynamic forecast rather than on a static budget. In most industries business events occur too quickly to depend on a static budget for capital allocation.  Leading companies use their forecast to identify emerging market opportunities and enable them to respond more quickly to those opportunities. 

Budgeting still matters, but to obtain the greatest value from the budgeting process, companies need to adjust to the present realities.  By following tips outlined above, companies will produce more meaningful budgets with less effort and cost, freeing up time and management attention to focus on creating value in their businesses.

European IQPC Shared Services and Outsourcing Conference - Launching a Shared Service Center in Central and Eastern Europe, Maintaining a Low Attrition Rate, and Much More

The Shared Services and Outsourcing Network is hosting a conference in Krakow, Poland on March 9 - 10, 2011.  One of the workshops focuses on planning and launching a Shared Service Center in Central and Eastern Europe.  The workshop will cover topics such as:

• Critical success factors for any Shared Services implementation
• Defining the project scope (depth and breadth)
• Recognising the critical importance of the “customer”
• People and organisation structures
• Systems/technology and ERP
• Processes
• Considering outsourcing as a possibility
• Criteria for your location decision

You'll also have the chance to tour the UBS Shared Service Center in Krakow.  The UBS SSC spans the areas of legal, compliance, risk, research, operations, IT, marketing and analytics.

To get an additional perspective on relevant topics covered by the IQPC Shared Services and Outsourcing Conference, you can listen to a podcast on ways to keep personnel turnover low in your Shared Services Center:

Tony Roberts-York: Shared Services: How To Achieve Attrition Rates of Below 10%

You can sign up by visiting the Conference website. 

Building a Better Budget - Part 2 - The Problems with Traditional Budgeting

Budgeting as a tool can be very useful but the traditional budget is a product of a distant past.  During most of the 20thcentury, manufacturing dominated the industrial landscape.  These businesses were hierarchical and capital intensive.  It was the job of managers to oversee the deployment and allocation of capital.  To do so, they needed strict controls over capital allocations and information to understand how closely they were tracking to their financial objectives during the year.  Couple this with a business environment that was minimally impacted by globalization and it’s easy to see how a detailed, static budget was sufficient to provide value to management.

Unfortunately, while the world changed the annual planning cycle remained relatively unchanged, the budgeting process has remained relatively static.  Whereas in the past manufacturing facilities and production volumes helped determine corporate value, companies today are far more likely to create value through product innovation, mass customization and agile supply chains.  Given the new realities, traditional budgeting suffers from the following issues:

• The traditional budget takes too long to prepare.  It isn’t uncommon for a budget to require 4 – 5 months and consume a substantial portion of executives’ time. 
• The budget is too manual.  Many companies prepare and consolidate their annual budget in Excel.  This increases the time necessary to develop the budget and exposes the budgeting process to human error as spreadsheets are manually combined to reflect organizational roll-ups.
• The level of detail is too great.  At some companies the budget is at the same level of detail in the Chart of Accounts.  This creates far more complexity than is necessary.  Instead of facilitating the budget process, it actually becomes a hindrance to the creation and monitoring process.
• The number of iterations is too high.  A typical budget can require 5 - 6 iterations before the numbers are accepted by senior management.  Leading companies focus on minimizing the number of iterations to reduce the time and effort spent on budgeting.
• Budgets are internally focused.  Most of the numbers in the budget are based on previous years’ data.  All too rarely is a budget based on existing and anticipated economic factors that drive volume and cost.  Few companies evaluate their proposed revenue and cost structure based on similar companies in the industry.  Finally, the budget measures internal metrics such as revenue growth, but fails to take into account other levers of value such as customer satisfaction.
• Budgets lock in costs through the year.  While the budget is thought of as a tool to control costs, all too often costs are locked into the budget for the year.  Even if economic conditions vary widely from the assumptions upon which the budget was built, the company’s cost structure resists downward pressure as those costs were budgeted for the year.
• Politics permeates most budgets.  The annual budgeting process has become a high-stakes game of bluffing.  Many managers “pad” their budgets with extra costs so that they end up with something they envisioned after their budget requests have gone through multiple iterations.
• The budget is quickly obsolete.  Given that the budgeting process can start four or more months before the end of the fiscal year, and coupled with a dynamic business environment, it’s no surprise that many budgets are obsolete after the first month of the fiscal year. 

In the third and final post in this series, I'll discuss eight leading practices in the budgeting process.

Building a Better Budget - Part 1 - The Goals of Budgeting

Speak with virtually anyone involved with the annual budgeting process and they’ll tell you that it’s painful: Time consuming, difficult, error prone, and based more on politics than on valid economic assumptions.  The worst part, however, is that the budget is viewed as obsolete almost as soon as it’s complete.  Despite these challenges, most corporations have stuck with the traditional budgeting process as they don’t believe they have anything better to replace it with.

Fortunately there are companies who have scrapped the traditional notion of a budget and have replaced it with something much more useful.  They still have a budget, but their updated budget has been streamlined.  No longer do they put themselves through the long and difficult budgeting process; rather, they focus on creating a budget that is far less detailed but that communicates the key ideas of the planning process.

The Goals of Budgeting

The annual budget and the budgeting process serve a number of goals.  Among them are:

• Link operational plans from multiple departments.  The budgeting process, as opposed to the actual budget, fosters communication and enables the coordination of business unit and departmental activity across the organization to support the achievement of strategic plans.
• Capital allocation.  One of the key aspects of the budget is to decide where a company will employ its resources.  Strategic plans around new products and markets, research and development, production capacity and other dimensions will feed directly into the budget.
• Performance monitoring.  The control of capital and the early detection of deviations from establish plans have also been key elements of budgeting.  Reports comparing the variance of actual results from budget are a standard component of management reporting packages.
• Compensation rewards. Many executives have a portion of their pay linked to the attainment of budget goals.  The targets established through the strategic planning process are incorporated into the budget and ultimately into the annual performance plan for these executives.

In subsequent posts I'll discuss the problems with traditional budgets and the opportunities to create a more effective budgeting process.

IQPC to host Shared Services & Outsourcing conference in Krakow, Poland

IQPC, the International Quality and Productivity Center, is hosting a Shared Services & Outsourcing conference in Krakow, Poland on March 9-10, 2011.  As one who has both attended and spoken at the Shared Services & Outsourcing conference in Orlando, Florida, I can strongly recommend the program to those who are able to attend.  Participants will be able to attend a number of workshops on topics relevant to Shared Services and Outsourcing, meet with various service providers to gain a greater knowledge of available services, and spend time networking with other professionals.

Leaders from UBS, Kodak, Cognizant, KLM and others will facilitate discussions on a variety of relevant topics under the themes of Technology & Process, People & Culture, and Strategy, Value & Growth.  Some of the scheduled workshops include:

• Reset Shared Services To Maximise Value Creation
• Attrition: Leading the fight back
• Creating a HR strategy to combat turbulent time
• Corporate value creation: It's never been just about the bottom line

To obtain more information about the conference, you can visit the event website.  Additionally, you can listen to a podcast from one of this year's speakers, Neill Ginn, the Global Shared Services Finance Manager for Kodak:  Neill Ginn: A Few Things You Should Know about SSON in Eastern Europe

Supplier innovation in a "Connect and Collaborate" world

If the 20th century was about "Command and Control", the 21st century is about "Connect and Collaborate". Companies are relying less on internal resources they control directly and are forming a network of global relationships with 3rd party suppliers to drive innovation and enhance the value chain.

A news story from The Japan Times illustrates this concept.  Foxconn, the Taiwanese contract electronics manufacturer, is purchasing Hitachi's controlling interest in their LCD business as part of an effort to enhance its knowledge of LCD manufacturing and to drive down costs.

Foxcon already provides LCD displays for smart phones and devices, including Apple's iPhone and iPad.  This is a perfect example of a company relying on an external supplier to drive innovation in the value chain.  As Foxconn enhances its capabilities in LCD research and manufacturing, companies like Apple will benefit from improved displays and lower costs.  Of course, the consumer will be the ultimate beneficiary as Apple and others continue to improve the value they deliver to the consumer.

You can read the full article at: Hitachi LCD biz to be run by Foxconn

Indian commerce group pushes back on the implementation of IFRS

The Federation of Indian Chambers of Commerce and Industry (FICCI) is pushing back against the Indian Ministry of Corporate Affairs (MCA) on the adoption of IFRS.  As of now, the MCA wants Indian businesses with a net worth of Rs 1,000 crore to convert to IFRS by April 2011.

As FICCI notes, the standards are still being developed and it doesn't necessarily make sense to implement the standards when they are still undergoing revision.  While they're at it, they're also pushing back on the possible requirement that companies will need to produces parallel statements according to both Indian GAAP and IFRS.

You can read the full article at: Ficci demands delay in implementation of IFRS

China Phasing Out More FDI Tax Incentives

For years China has aggressively courted foreign owned firms with a number of tax incentives.  China has had to balance the economic incentives necessary to draw foreign firms with their desire to nurture and protect domestic firms. 

Chris Devonshire-Ellis at China Briefing has an interesting article on China's shift towards domestic firms through the phaseout of certain tax incentives for foreign-owned entities.  An excerpt from the article:

Foreign investors have long enjoyed a variety of incentives, including the once very attractive five year tax breaks, but these are now long consigned to the scrap heap as China aims to put foreign investors on the same financial platform as its domestic companies. However, in some regards this makes it harder for foreign companies to compete. While legally foreign investors should be treated the same way as domestic corporations, in reality they are not. Foreign invested enterprises are considered as Chinese companies in law, however treatment of them in administrative areas often leaves them at a decided disadvantage when compared with Chinese owned domestic businesses.

An interesting note in the article is that China is reforming its capital markets to enable foreign-owned firms to raise capital in the Chinese capital markets.  Previously foreign-owned entities have been prohibited from doing so.

You can read the full article at: China Phasing Out More FDI Tax Incentives

Asian Development Bank estimates China's growth at 10.1%

According to an article at Shanghai Daily, the ASD has revised China's expected growth.  An excerpt from the article:

THE Asian Development Bank has revised its forecast of China's economic growth this year to 10.1 percent from a September estimate of 9.6 percent.

China's faster-than-expected economic expansion will help emerging East Asia to grow 8.8 percent this year, up from a previous estimation of 8.4 percent, the ADB said in its latest edition of Asia Economic Monitor released yesterday.

The article also notes that strong capital flows into China has created inflationary pressures that have been fueling asset bubbles.  Additionally, the Asian Development Bank suggests China and other Asian countries should coordinate policies to achieve economic stability and sustained growth.

Read more: http://www.shanghaidaily.com/article/?id=456664&type=Business#ixzz17X6jpJEN

Companies not eager to convert to IFRS

A new survey out by KPMG and the Financial Executives Institute reveals that companies don't plan to convert to IFRS until they have to, even if there is an early adoption period.  The survey polled 900 accounting and finance executives.  Here are some of the highlights:

• 75% of companies said they would wait until they were forced to convert before the did so,
• Only about half the respondents expect the SEC to make a decision in 2011, which is the published timeline for making that decision,
• 65% of executives are worried about implementation costs,
• 88% believe the adoption of IFRS by the United States will increase comparability of financial statements around the world,
• 57% say that the convergence of U.S. GAAP and IFRS is the best approach,
• Only 30% would like to see the U.S. establish a specific date for adoption

You can read the full article here: Ready But Not Eager for IFRS

Finance Leadership: Creating a culture that supports open dialogue

Many years ago when I served in industry, I was part of a large team charged with the task of designing and delivering an ERP system to replace a number of legacy systems.  The project was enterprise-wide and, accordingly, incorporated talent from the business units and support staff.

There was one meeting in particular that has stuck with me over the years.  Many of us were in a conference room discussing the design and the various attributes the system should have.  It was a great discussion with many people contributing and the ideas flowing freely.  It was a great example of how collaboration across business and functional units should occur.  And then it happened.

One of the company's senior executives walked in.

The tone of the room changed instantly.  It was as if the room temperature dropped 10 degrees (fans of horror films will understand the implication).  The problem was that this particular executive had a reputation for undermining his people.  He would say one thing to you privately and when the political tide changed he would reprimand you publicly for doing exactly what he told you to do.  And the people learned very quickly that they should not take risks around him.

In the conference room, that's exactly what happened.  Everyone became quiet and only spoke when the executive asked them a direct question.  And even then it was just the facts and nothing but the facts.  No more creativity and no more ideas.

As you read this you might scoff and shake your head at such non-productive behavior, but my question to you is this:  If you're a leader in your Finance organization, what are you doing to encourage risk taking and idea generation?  Do you create a safe environment for your people to take risks?  Are you sure?

Effective leaders, whether they have the title of leader or not, are people who understand that they and their company can only succeed when the people around them are able to take calculated risks without the fear of failing.  That doesn't mean that there are never consequences for failing to meet expectations, but it does mean that people are safe to create and explore new ideas.  It the role of a leader to shape that culture.

What are you as a leader doing to create a culture where people are free to explore ideas?  What are you doing to stifle it?

Four Leadership Qualities Few Leaders Possess

Tony Schwartz has an interesting post over at Harvard Business Review titled The Four Capacities Every Great Leader Needs (And Very Few Have).Here's a summary of the four points:

1. Great leaders recognize strengths in us that we don't always yet fully see in ourselves.
2. Rather than simply trying to get more out of us, great leaders seek to understand and meet our needs, above all a compelling mission beyond our immediate self-interest, or theirs.
3. Great leaders take the time to clearly define what success looks like, and then empower and trust us to figure out the best way to achieve it.
4. The best of all leaders — a tiny fraction — have the capacity to embrace their own opposites, most notably vulnerability alongside strength, and confidence balanced by humility.

If you're a leader in your Finance organization, how do you score on these four points?  In my experience, most leaders are weakest on point 4.  For all the talk of diversity, I've met relatively few leaders that really seek out alternate opinions and encourge debate.  Far more likely is the leader who surrounds himself or herself with people who create an echo chamber, simply agreeing with the boss.  Of course, many people do this because it's the sane thing to do.  They live in a culture where debate isn't encouraged and could even be punished.

So, as a leader in your organization, what are you doing to encourage debate?  How do you let people know that it's safe to discuss ideas?  And how do you nurture and cultivate ideas that are generated through this process?

After the Go-Live: Ten focus areas for effective Shared Service delivery - Part 10 - Foster a Culture of Continuous Improvement

It's been a long journey though this series of posts.  If you've stuck with me this long I appreciate it and hopefully you've gathered some additional insight that you can apply to your organization.  I'm wrapping up this series with a post about continuous improvement and organizational development.

High-performing companies make a commitment to continuous improvement in every area of their operations.  This improvement focus is centered on both the effectiveness of service delivery as well as the relentless pursuit of ever increasing efficiency.  There are a number of opportunities to focus on improvement.  Much of this improvement will be incremental and take place inside the walls of the broader transformation effort.  While true transformation makes bold leaps from one point to another, an organization's continuous improvement efforts supplement and refine that transformation effort.

Senior management must be visible in their commitment to the process, not only in word but in deed.  Funds must be allocated to the effort and the Shared Service Organization’s management team must be held accountable for delivering on promised and potential benefits.  Here are some ideas to contemplate as you improve your organization:

• Develop an integrated scorecard for the Finance organization that focuses on Financial, Customer (internal and external), Internal business processes and Learning and Growth.  It's hard to know how your journey is going if you don't have a way to keep score.  Develop a series of balanced metrics that provide a feedback loop for not just your current performance, but also to track the investments you're making to continuously improve.  You can track the number of customer invoices without an error, but you should also track the investment in training hours that you're people complete.
• Hold regular "lessons learned" meetings to identify areas for improvement.  I used to be a Controller in private industry, so I know as well as anyone that time is short in Finance and Accounting.  Yet it's important to set time aside to evaluate the current performance of the organization against established metrics.  What, you don't have metrics?  See point #1.  Really, why do Finance organizations continue to make the same mistakes and live with the same inefficient and ineffective processes month-after-month and year-after-year?  Don't let money be an excuse.  If the value is there and it's well documented in a business case, you stand a chance of improving your future.  At least you're trying.
• Rotate Finance personnel through Finance and Operations to give them a broader perspective on how Finance creates value in the organization.  I wish I had a dollar for every time a senior Operations manager told me they wished the Finance organization really understood their business.  Finance is about more than debits and credits.  Leading organizations have a formal rotation program that moves select personnel through both Finance and Operations so that they have a deeper appreciation for challenges of the business and better understand the ways in which they can create value.
• Clarify organizational responsibilities.  The world changes and so do a company's priorities.  Make sure that people's performance plans are up-to-date and reflect the alignment of operations with the company's strategy.  Implement at least two formal review periods during the fiscal year - at the end of the year and at it's mid-point.  Don't wait 12 months to give personnel formal feedback on how they haven't been living up to expectations for the last year.  Does a sailor only check his compass once a year?
• Implement a formal development plan for both individuals and departments.  What are the goals of each for the coming year?  What training, both formal and on-the-job, will these individuals and departments get to support their efforts to develop?  How do these plans align with the overall strategy of the organization.  If you don't have alignment you don't have an effective plan for organizational development.
• Implement a formal quality program.  Many companies have made the commitment to a formal program to track and improve quality.  And this is not just about manufactured products, but about all the support services used to support the company's strategy, including Finance & Accounting.  Instilling a culture of quality is as important as the reduction in error rates achieved.

These are just some ideas that companies use to continuously improve.  What have you tried in your organization?  What would you like to try and what's stopping you?  I encourage you to use the comment section below to leave your ideas and be part of the conversation.

Many oppose FASB proposal for Loan Mark-to-Market

Reuters is reporting that comments regarding an expansion of the Mark-to-Market rules for loans is running heavily against the proposal.  The expansion would impact loans and other financial instruments.

An exceprt from the article:

The banking industry has opposed the measure, saying it does not make sense to assign market prices to loans that will never be sold.

"Thus far, I think the count is up to about 1,500 or so comment letters," said Lawrence Smith, a board member of FASB, which sets U.S. accounting rules. "I think I've read one that supports what we propose."

One of the considerations impacting this proposal is the goal of FASB to achieve convergence with the IASB.  Mark-to-market accounting is one area where the two governing bodies differ.  The IASB has loans valued at amortized cost.

Aligning IT investments with Finance priorities

It's no secret that technology plays a key role in the achievement of high performance in the Finance organization.  Technology is a strong tool in creating standard and efficient processes, and in driving cost out of those processes.  What may be a secret, at least to some people, is how technology investments in the Finance organization are prioritized, funded and monitored. 

I'm currently reading IT Savvyby Peter Weill and Jeanne Ross.  (By the way, it's an excellent read and I highly recommend it.)  In the book they discuss the BT Group, a global telecommunications company and how BT approaches IT funding.  According to the authors there are three areas of focus:

1. Establish clear priorities and criteria for IT investments,
2. Develop a transparent process for assessing potential projects and allocating resources, and
3. Monitor the impact of prior investment decisions

This is a useful framework for a company's Finance organization to use when evaluating IT investments.  Unfortunately, while most of my clients would agree with the framework, my experience tells me that many organizations find the execution of this model difficult.

Nothing happens in a vacuum, and Finance must be part of a broader governance structure that evaluates potential IT investments.  However, Finance must develop a position on its strategy and the technology required to implement that strategy.  Finance should be bringing their investment priorities to the IT governance committee(s).  In order to do that, Finance needs a clear vision of their IT priorities, and that can only come about if Finance has a strong and clear vision about its role in the organization and how it delivers value to the operating units.

Developing transparency in an organization is usually difficult.  However, it's important for all stakeholders of Finance to understand how decisions are made.  That means understanding the vision and how technology supports that vision, but it also means establishing criteria that objectively analyzes the advantages and disadvantages of a particular technology investment.  Every proposed initiative should have a business case that clear details the reason for the initiative, the anticipated investments and future cash flows, as well as the risks and assumptions of the initiative.  The criteria should be openly communicated so that everyone is approaching IT investments from the same perspective.

Perhaps more than the other two areas, the ability to monitor and accurately assess the value of IT investments is an area that companies struggle with.  In large part it's because these companies haven't made it a priority to formally assess returns on IT investments.  The smart companies have put a governance structure in place to monitor these investments and determine to what extent they have fulfilled the promises of the business case.  Learnings from this analysis create a feedback loop for future IT investments and the business cases that support them.

Every Finance organization should take the lead on developing a perspective around the technology investments required to execute on its strategy.  Working in a partnership with the IT group, Finance can ensure that its perspective on IT investments is properly represented, funded and monitored.

Genpact plans to double US headcount in 2-3 years

A number of India-based companies have made no secret of their desire to break the mold of an "Indian only" company.  Many have established country presences in the U.S., the U.K. and elsewhere.  In a recent news article, The Hindu Business Line reported that Genpact plans to substantially add to their headcount in the U.S.  

An excerpt from the article:

Offshore BPO major Genpact is planning a major ramp-up of its ‘onsite' presence by doubling the US workforce to 2,000 professionals in the next 2-3 years. It currently has about 1,000 professionals in the US, across functions such as revenue cycle management, mortgage processing and loan modification.

“This whole area of business process management and driving improvement in business processes will demand more onsite presence, more domain-specific capabilities and very high-skilled re-engineering capabilities. I think we need to be closer to our customers when we do this kind of work. So we are very comfortable from a business model and demand perspective, with regard to our hiring plans in the US,” the Genpact President and CEO, Mr Pramod Bhasin, told Business Line.

You can read the full article here: Genpact plans to double US headcount in 2-3 years

Extreme Offshoring: IT Edition

India's Business Standard is reporting that Infosys is looking at moving IT work from outsourced contracts from the U.S. to India in response to rising Visa costs.  Per the article, Infosys has the ability to offshore 95% of its work.

An excerpt from the article:

Against the backdrop of a clampdown on visas by the US and growing antagonism towards foreign workers and immigrants in that country, Infosys Technologies, India's second-largest IT services firm, is mulling an ‘extreme offshoring’ model to help reduce its dependence on H1 and L1 visas.

“There is a cost element (due to the visa fee hike) to what is happening now and there is a philosophical or directional element. The cost is no doubt increasing, but it is manageable. But it is more about what it indicates. If there a build-up of negativity in sentiment, we have to prepare ourselves (for extreme offshoring) if need be. However, as long as unemployment remains high, the negative sentiment will continue, unfortunately,” Kris Gopalakrishnan, CEO and MD, Infosys Technologies, told Business Standard.

You can read the full article here: Infosys plans 'extreme offshore' model to tide over visa crisis

Dalian, China restricts foreign workers

Dalian, China has been a favored location for companies looking to service the Japanese market due in part to the high number of Japanese speakers in that area.  China Briefing, which covers business developments in the Chinese market, has an article discussing Dalian's move to restrict foreign workers in organizations with small capital investments.  As noted in the article, this new ruling will have little effect on manufacturing concerns as they require relatively high capital investments.  Rather, it's likely to impact IT and BPO operations that are not as capital intensive.

An excerpt from the article:

The Dalian government introduced a new policy [Effective August 1, 2010] restricting the ability of foreign investors with a registered capital of under RMB3 million to obtain work permits for their foreign staff, effectively stopping foreign employees that want to work for such companies from being able to apply for a Z visa to work in China.

This measure is likely to affect companies in the service and IT sectors more than the manufacturing sectors, as service and IT enterprises tend not to be capital intensive, relying instead on generating income to grow their operations. The policy is likely to have a particularly large negative effect on innovation and entrepreneurship in the area.

Corporations looking to locate a site in China should look at how this impacts their evaluation criteria, including the ability to use foreign workers.  You can read the full article here.