LifeStyleValue

Looking to buy a new car this year? You may have your heart set on a particular make or model and you might have explored the new and second hand car prices on the internet and have decided that you can afford to purchase the car of your dreams, but a question you have to ask yourself is can you afford to run it?

Previously you may have asked yourself this question in passing and not really given it any real thought, but with the changes in Vehicle Excise Duty in 2009 and spiralling fuel and maintenance costs, coupled with the Credit Crunch and the through of recession for the next few years then running costs become much more important, therefore compromising and picking a car that you not only like, but will save you money in the long run is a sensible thing to do. What about the changes in Vehicle Excise Duty?

Now cars are classed by how much Carbon Dioxide they emit, therefore more environmentally friendly cars will be charged less Vehicle Excise Duty than more polluting vehicles. At the time of writing the least polluting cars will be exempt from paying tax at all, where as the most polluting cars (class M) such as large, big engined 4×4 vehicles will have to pay £440 per year. Come 2010-11 then this cost increases further to £455 per year. If you’re looking to purchase a brand new car, then there will be another shock for your wallet and it has been dubbed the ’showroom tax.’ If you’re looking to drive that Class M car out of the showroom, you’ll also have to face a bill for a one off ’showroom tax’ payment of £950. To help you pick the right car in this current environmental and financial climate we’ve compiled a top ten list of cars and car related schemes to consider that could save you money.

1. Buy a Small Family Hatchback. Small family hatchbacks are generally more economical to run and are usually big enough to meet most people’s needs. For example the VW Polo Bluemotion 1.4 Tdi is an economical runabout which falls into the Group A tax band. Not only do you not have to pay any tax on this vehicle, you can also avoid paying the showroom tax as this diesel car is so economical it is exempt. This car also boasts around 70mpg which makes it super cheap to run.
2. Buy a Diesel. When it comes to economical cars, vehicles with diesel engines are first to spring to most people’s minds. Whilst historically this was typically true, with the cost of diesel at the pump increasingly outstripping the cost of petrol, buying a diesel may not be the best way to save money. For drivers who typically need to drive a lot of miles each year then a diesel will still be more cost effective than its petrol equivalent. However if you do not drive many miles then this may not be true. You’ll need to do the maths before you take the plunge in buying a diesel car. On the plus side, the miles to the gallon of a diesel vehicle is typically much higher than petrol cars, so you will at the very least be doing more for the environment. Diesel vehicles are also typically classed into a lower tax band saving money on Vehicle Excise Duty.
3. Bi-Fuel Cars. Liquefied Petroleum Gas (LPG) as a method of running a car or van is becoming a popular way of running a vehicle more environmentally friendly and economically. Although you can buy a bi-fuel car from new many people pay to convert their current car to support LPG. The cost to convert a car is typically around £1500 and a real saving of around 30% on fuel costs can be made with each fill up at the pumps. Finding a petrol station that sells LPG may be one of the more difficult aspects of owning a LPG vehicle, with at least 10% of forecourts now stocking this alternate fuel type.
4. Electric Cars. – For many years electric cars have been pitched as the salvation to spiralling fuel costs and saving the environment from car pollution. Unfortunately in reality the electric vehicle hasn’t really lived up to the hype, with slow vehicles and short battery life limiting range. There are a few vehicles on the market which may be suitable depending on your circumstances. If you live in the centre of a large capital city such as London then a vehicle like the G-Wiz may be the right vehicle for you. Owning a G-Wiz in London could make perfect sense as they are exempt from paying parking charges in Westminster, do not have to pay the Central London Congestion Charge and are free from both road tax and petrol costs. However there are some catches. The G-Wiz is a tiny vehicle and feels very cramped inside. The car has a top speed of 50-60 miles per hour, which may not be the end of the world in a city where traffic barely moves faster than a snail pace. Another limiting factor is that the range of the vehicle is just 70 miles and it takes a while to recharge the batteries, which is not quite as simple as filling up at a petrol station! A less extreme version of the G-Wiz is the Toyota Prius, a hybrid electric vehicle which predominately runs off petrol, but uses electric power at low speeds and recharges the batteries at faster speeds. The Prius can do around 65 mpg making it an extremely economical car to drive.
5. Large Cars For the Family and Dog. If you’re single and want to save money on your car running costs or do your bit for the environment then you have a lot more options than families who need a larger vehicle to fit everyone in. Whilst smaller cars are more likely to be economical there are some larger vehicles out there which have been designed with both space and economy in mind. Take the Ford Focus C-Max 1.6 TDCI LX- a MPV which has been designed to give plenty of room inside. This is a five seat car which boasts a 1620 litre boot space and a top speed of 115mph. With fairly low emissions, helping to save money on Vehicle Excise Duty and decent economy with 58mpg this vehicle is a good bet for a family looking to save money.
6. Sports Performance in a ‘Green Car’. Traditionally being green means that you also have to sacrifice something. However car manufacturers being aware of this have been trying to come up with a compromise- a car with good performance, yet can also give a decent MPG return. For example the Honda Accord 2.2 I-CTDI Sport is one of these cars with 52.3 MPG and a top speed of 129 miles per hour, a great combination of efficiency and performance that can meet all your expectations.
7. Buy a Classic Car. If you’re scared that you’ll loose a lot of money on the value of your car then buying a classic car may be the best option for you. Try to avoid fashion trends such as the one for VW Beetles and Camper Vans which inflate the cost of these vehicles short term for them to only crash at a later date. Instead pick a car that pure enthusiasts hanker after, as most classic cars tend to hold their value, or indeed increase over time as long as they are looked after. Maintenance costs are likely to be much higher with a classic vehicle and they may not be the most economical on the market, but for pure return on investment if you pick the right vehicle then you will likely get your money back when you come to sell the car.
8. Car Sharing Schemes. Those looking to save money on their everyday running costs of their cars could consider car sharing schemes. Basically car sharing schemes are set up for people to take turns when they drive, saving themselves money on fuel, plus gaining the benefit that they do not have to drive all the time! There are plenty of car sharing schemes out there, such as ones set up for parents doing the school run to a scheme for members of the Met Police Force in London. Explore the options in your local area and you may find that car sharing is a great way to save money. Perhaps if you want to get even more involved you could consider setting up your very own scheme.
9. Time Share Cars. You’ve heard all about time share villas in the Costa del Sol, but you don’t necessary have to be scared of time share car schemes. These schemes can range from clubs where you get a share of a Ferrari or Bentley to drive at the weekend every so often, to pay-as-you-go car schemes where you can join a club, and simply book a run-around for as long as you want from an hour to a day. For those who tend to use public transport predominately and can’t really justify owning a car then a pay-as-you-go scheme may be the perfect way of having access to a car without having to pay expensive rental costs. Live in a city and fancy a country jaunt once a month? No problem, book a car online and pick it up, swipe your membership card on the dashboard and you’re away! Generally fuel costs (up to a point) are included and insurance is also taken car of.
10. Car Finance Packages. In the current economic climate taking out a car finance package makes perfect sense as you can split your payments over many months allowing you to fully budget for your vehicle. If you are considering buying a car in cash over a forecourt you may be concerned about the recession and redundancy. Having a nest egg in the bank can help provide comfort and piece of mind. Spending that nest egg in the current climate may not be the most sensible thing to do therefore buying a car on a car finance scheme can be the smart move. Also you will likely be able to afford a better car on finance than you might if you were to buy a car outright. The newer the car the more likely your maintenance costs will be reduced, again saving you money in the long run.

Jessica Samuels is a freelance writer and loves to write on a wide variety of topics.

Hong Kong – Hong Kong offers Anonymous Corporations, Bank Secrecy, No Tax Information Exchange Agreements, No Tax on Offshore Derived Income, No Capital Gains Tax, Stock Brokerage Accounts at the Bank, A Bank with One Trillion dollars in Deposits, Online Banking, Credit Cards, Accounts in 10 Currencies including Chinese Renminbi, Unlimited Government Bank Insurance, and you do not have to go to Hong Kong to have bank account opened. The features and benefits of using Hong Kong are extensive. The material contained below is in depth and was written for a sophisticated investor client. We are eager to answer any questions you may have, just inquire

Hong Kong Banking – We have now made it possible to open up corporate bank accounts in Honk Kong without a need to visit Hong Kong (no personal accounts please). Hong Kong today is one of the best private offshore tax havens in the world. They have not signed any Tax Information Sharing Agreements and have world-class banks. Hong Kong does practice tight bank secrecy with serious criminal and civil penalties for any bank personnel who violates such bank secrecy laws. Hong Kong is actually a world-banking center like Switzerland used to be. It has at least 100 times more bank deposits that countries like Panama, 69 of the world’s largest 100 banks, and a total of more than 1300 bank branches in the territory.

The Hong Kong Bank We Use – The bank we open our clients’ accounts for in has well over one trillion US dollars in assets. It is a massive, quality bank by any standards. It has no legal ties with any bank located in other countries as to avoid coercion by an opposing party using the banks with the same name in other countries to affect this. Various countries have done such things in past. No worries with this bank. This bank is authorized to issue bank notes for Hong Kong.

The bank has full online banking including the ability to launch online wires, check balance and history, switch from one currency to another, move money from one account to another, etc. The bank offers accounts in 10 currencies: Australian Dollar, Canadian Dollar, Euro, Japanese Yen, New Zealand Dollar, Pound Sterling, Singapore Dollar, Thai Baht, US Dollar, and Renminbi (Chinese Ruan). One statement will show your holdings in any or all of these currency accounts.

You can get assigned a private banker with an account of $150,000 or more and then you can also use Swiss Francs for banking in addition to the other 10 currencies. You can buy CD’s in the bank. Rates will usually not be over 2% per annum on USD deposits, generally lower for most other currencies. We have banks in other countries with higher rates and we also offer anonymous bearer bonds paying 8.5% from other countries. Hong Kong is for privacy and security, not high bank interest rates. Another consideration is access to a Hong Kong stockbroker that can provide you with investment opportunities paying significantly higher yields.

Hong Kong Bank Security – Once you are the signatory on the bank account no other signatories can be added or and it is impossible to remove you as a signatory without your written consent. Having share certificates for the corporation is not enough to change the signatories at the bank. Nominees are unable to effect a change at the bank for the signatories. No additions or deletions of signatories without the written consent of the existing signatories. No changes at all without this. Any attempt would be accepted by bank with their ID in a pending state. Then bank would contact you for written permission. You say “No way, I knew nothing about this.” Then they go to jail. Hong Kong banks are very used to nominees and understand how to protect the owners/signatories of the bank account. No worries.

Hong Kong Bank Insurance – This is Hong Kong government-backed bank insurance. This measure is in place until the end of 2010, which can be extended at the option of the government. It was already extended once, after first being put into place to reassure depositors during the worldwide financial crisis. The government is backing all bank deposits to any amount. The insurance covers HK dollar accounts and all foreign currency accounts such as USD, Euro etc. There are certain types of specialized accounts not covered, which are listed as follows:

CDs or time deposits with a term in excess of five years, secured deposits, structured deposits like equity linked accounts, bearer instruments like a bearer certificate of deposit (does not affect corporation having bank accounts that are bearer share corporations). The insurance does not cover stocks, bonds, mutual funds, insurance policies, or unit trusts bought and held by the bank. The funds for immediately (immediately is the word Hong Kong uses) compensating depositors come from a standby credit facility provided by the Hong Kong SAR Government’s Exchange Fund. So the deposits are insured up to any amount until at least the end of 2010 and the deadline will most likely be extended again until the world financial crisis is over.

Hong Kong Bank Credit Cards – The bank will issue you a secured Visa or Master card. The card will have to have your name on it. You cannot not get a corporate name only card. They do not issue anonymous cards. The cards are secured by a deposit exceeding the credit line of the card. The bank is not going to extend to you a line of credit. If you want a card limit of $10,000 the deposit will be $12,500 typically. This depends on what currency the card is in, if you are a private banking client, etc. This bank has at least 10 different card programs.

Bank in Renminbi or Chinese Yuan – With this Hong Kong bank you are able to bank in Chinese Renminbi also called the Yuan. You can even get a checking account in this currency. You can hold this currency in your account. Much business in Hong Kong is now conducted in Renminbi. You can have time deposits in this currency. You can even get a credit card in this currency which is really only going to work in Mainland China but they do have 370,000 merchants and 60,000 ATM’s taking this card. This card is going to grow, this is the beginning.

You can move up to 80,000 Renminbi a day to an account in Mainland China, if you happen to have a bank account in Mainland China. This is the Chinese currency that is being used to clear international payments but it is not yet fully convertible at this time. It is just starting so you are getting in on the ground floor. To truly diversify your currency holding portfolio hold Renminbi. The Renminbi will soon become a fully convertible currency and then probably soar in terms of exchange rates. It is expected that the Renminbi will soon have its own wire transfer facilities clearing in China or Hong Kong and it is doubtful that the USA will have access to view or affect these wires.

Stock Brokerage Accounts – The bank has a stock brokerage division. Online platform and full service. Play the major markets around the world USA, UK, Canada, Japan, Hong Kong, China, Australia). Bonds, options, futures, forex, and equities – everything including margin accounts. You can also open up a European stock brokerage account through us using your Hong Kong Corporation as the vehicle if you wish access to other additional markets. If you are an American or Canadian citizen or resident you can have a bank account in Hong Kong BUT NOT A STOCK BROKERAGE ACCOUNT AT THIS BANK. This policy is to avoid some new tax withholding laws. We can however get you a stock brokerage account at another stockbroker in Hong Kong with an online platform that allows trading major markets in the world. This will require an extra whole set of certified documents approved by the HK court so we must charge an extra $800 for this service if you are unable to get a stock brokerage account at the bank. When you sue the same bank for the stock brokerage account there is no extra staff time or need for an extra set of paperwork.

Anonymous Hong Kong Corporations – Hong Kong Corporations are basically private limited companies being very private and limiting liability for shareholders. There is no paid in capital requirement. It is possible to get a corporation formed in Hong Kong that is anonymous. Your name as the owner will not appear in any public registry or database. If the client desires to be an anonymous owner of the corporation he can do so with a trust arrangement having the trustee (the Hong Kong Lawyer) hold the shares for him (as a beneficiary) and the client holds the trust deed, which is conclusive proof of him being a real owner of the shares. This trust law and arrangement is valid and lawful in Hong Kong.

The corporation is formed in Hong Kong, the lawyer is in Hong Kong, and the bank account is in Hong Kong so this structure is all legal and fully enforceable in Hong Kong which is the only jurisdiction that matters in this scenario since everything is located there. This structure makes it impossible to look up the name of the owner of a corporation filed using this trust arrangement. A nominee director, shareholder and founder are used whose name does appear in the public registry but these persons do not know you at all. You wind up with an anonymous corporation and have all the controls plus you control the bank account.

Hong Kong Taxes – Hong Kong does not tax offshore-derived income. There is no VAT tax. No withholding taxes. No annual net worth taxes. No accumulated earnings taxes for retained versus distributed earnings. There is no capital gains tax on bank interest or stock market investments. You can have an office in Hong Kong and still receive money from offshore and have it tax exempt. Unless you conduct business inside of Hong Kong like having a pizza store there, you will not be paying any Hong Kong taxes. It is a true offshore privacy and tax haven.

Hong Kong Corporation Tax Return Filing – One small disadvantage to Hong Kong Corporations is that an annual tax return must be filed at the end of each year. If the person is not conducting business in Hong Kong, there is no obligation to complete the return but as a matter of expediency and maintaining a low profile, the return should be filed with the HK Inland Revenue with a brief explanation as to why the corporation is not carrying on business in Hong Kong. This is something the accountant will do for you.

If a person is carrying on business in Hong Kong but has no profits subject to tax because all their income was deemed to be offshore derived, that person should file a tax return with all the relevant attachments, which should also include a detailed explanation as to why each source of income is not considered to be taxable. This is usually as simple as stating it is offshore derived income from sales commissions, sales of property, brokerage fees, earnings for work conducted outside of Hong Kong, etc. This is to show that there was no onshore Hong Kong income derived for which taxes are owed. If there is no activity in the corporation a return can so be filed showing no business activity. Again the accountant will do this for you.

If the business has not yet commenced then the company can just file a negative or nil tax return and technically it can even not file but later on this could be questioned by Hong Kong Inland Revenue so we suggest doing a simple filing. Again the accountants will do this for you. The lawyer we use to form the corporations in Hong Kong has certified accountants in Honk Kong on staff who will do the annual filing for you and it is already included in the fee. You just supply the data to them and they will do the rest. If you are going to conduct a real business venture using the Hong Kong Corporation and Hong Kong bank account then you will need to file a real tax return even if the company had no onshore income. There will be no tax due but a filing is necessary and the cost of the filing is included in the price.

If you have a serious business it will be incumbent upon you to have the books and records prepared independent of our accountants who are just going to prepare the filing for you, they are not going to be your accountants or bookkeepers in general. If you are just going to use the corporation and bank account for savings or holdings then there really isn’t much of anything to file and the accountant will do it for you. Feel free to ask questions. It sounds more complicated than it really is. For many of you it will be as simple as telling the accountant the corporation has not engaged in any business for the tax year and then forgetting about it.

What Is Included With the Hong Kong Corporation -

I) Certificate of incorporation

II) Business registration certificate

II) Original formation documents and minutes

IV) Minute booklet

V) Share certificate booklet

VI) Two chops and a seal (a chop is a corporate stamp, not a tool for eating with)

VII) One certified copy of formation documents

VIII) Appointment of corporate secretary for a year providing a registered office address for a year. This address can be used for mail and courier receiving of documents but does not include forwarding or receiving of parcels.

IX) A box to contain all papers in.

In addition, to keep the corporation anonymous there is included a private trust agreement for nominee shareholder, director and founding member so the owner is not registered in the public registry yet still has all the control over the corporation while remaining anonymous. This trust agreement also includes a General Power of Attorney executed by the nominees. The firm in Hong Kong will also file your annual return for you at no additional cost.

Using the HK Corporation for Bank Accounts in Other Jurisdictions – To use your Hong Kong Corporation in a country other than Hong Kong for opening a bank account or a stock brokerage account there is an extra fee of $800. Why this fee? The Hong Kong lawyer will need to issue a full set of notarized and apostilled corporate documents. These documents need to also be approved and signed off on by the High Court of Hong Kong. This is the reason for this extra fee if you wish to use the corporation to open a bank account or stock brokerage account outside of Hong Kong.

Attorney Client Privilege – The formation of the Hong Kong Corporation is done by a Hong Kong lawyer so attorney client privilege flows through the entire transaction from start to finish.

Due Diligence – What is needed is a notarized copy of a passport and driver license. We also need a utility bill for proof of address. This has to be a working address that can receive correspondence. You can tell the bank to hold your statements and not send them but some things like signature cards, online banking forms etc will need to be send physically by courier.

There is no bank reference letter required. In some countries banks will not issue a bank reference letter any more. In other countries a bank reference letter is considered to be a “suspicious transaction” and is reported to the authorities as such because it means an offshore bank account is being opened. Banks inside the same country rarely require a bank reference letter.

Time Frame – It takes 2-3 weeks to form a corporation and have the bank account opened for it. The time clock starts ticking when we have an order form, notarized ID documents, Utility bill and payment.

Hong Kong Shelf Corporations – We have a reasonable supply of shelf corporations on hand. This speeds the process up by a week or so but then you have to accept a name you did not chose. Not suggested for those operating a business but can work for those in a hurry who just wish to use the account for savings or as a holding entity. Shelf corporation fees are the same.

Cost – The fee for the Hong Kong Corporation complete and the opening of the Hong Kong Bank Account without coming to Hong Kong in the above-described bank is $7000. This is paid by wire transfer. We do not take credit cards. The minimum deposit at the bank is $1000 and should be included along with the wire for the professional fees.

How to Order – First step is to fill out our online order form.

Next send us by email a scan of the notarized copy of the passport and driver license plus a utility bill showing your real address. This can be sent by email as an attachment to: staff@panamalegal.org

If the documents are correct and acceptable we will then provide courier directions to send hard copies.

Next we will send you coordinates to wire the fee to us.

After the fee is received we will begin forming the corporation. After the corporation is formed we will begin the bank account opening process.

Bank forms, signature cards will be sent to you by courier with the corporate documents included and you will have to execute the bank forms and return to us by courier. When the forms are returned the bank account will be opened several days later.

The online banking will come after that requiring 7-10 additional days after account opening. Credit Cards require a security deposit and take about two weeks after the account is open, and the deposit is received.

When young, we all dream of Retirement, The Good Life , the never ending round of pleasure, and it certainly won’t hurt thinking about How, When and Where you would retire in order to prepare for this Utopia. The reality of course is there is no such paradise., so if you are wise you’ll takeEarly steps to realize those dreams, while you canThe following are a number of tips to ensure you are set for life.

1. Money as always is the deciding factor for all the above questions Many wait until the age of 65 before finally deciding to retire, and by that time unless you have made provisions life can drastically change financially.

2. Nowadays, many people retire even earlier and by following some tips that will save money, a person can retire early and enjoy it.

3. The first thing you MUST do is manage the expenses. It is a Fact that big expenses such as a mortgage, even a car will take some time to finish. By cutting down on luxury items and getting something similar for a more affordable value, the money saved could be used for reducing those debts. A good example, instead of buying lunch out everyday, you could make lunch at home, take it to work, it doesn’t sound much. But over a year it all adds up.

4. The next step to early retirement is to accumulate capital. At an early age, you can start saving into a reliable plan.. Some Banks and Insurance companies have good rates which in the long term will possibly even double the money you have put aside over a period of ten years..

5. Lastly, you can have more money by investing it. Studies have shown that there are many places where money can be doubled. You can do it through bonds, putting some money in the stock market, purchasing some real estate property and even putting up a business.A little money spent wisely on sound investments is another way in helping you amass a certain amount of money and make the dream of retirement happen As YOU would like.The task is not easy., but then whoever said it would be. Some people retire in total poverty with no chance. Don’t be one of those. There will be times you will be tempted to buy something. It just takes a lot of planning, patience and self-control to make it happen., but go on. Live that Dream Retirement is not the end as I can testify Personally. It is a NEW beginning. It is a another Phase of life where one chapter closes and we move forward with confidence to face another.It is a time that you may be able to restructure your life and spend more time with the family or give more to the community.

New opportunities may arise from it and by showing the same amount of Vigour and Courage as you have done in your working life so many times, the options are endless. I am a 68year old Pensioner, in ENGLAND and refuse to sit in any rocking chair. And all the above tips apply to wherever you happen to live. We all face the same problems when we retire.The choice is up to you what to do next. Follow my lead, whether you are still working OR Retired, start a Business online to really help those decreasing Pensions..

Do you hate the thought of a budget telling you how and when you can spend your money? Then you have the wrong idea about budgets because a budget is actually something you make up about how and when you can spend your money. A budget is actually a tool you can use to help you achieve your goals and become the person you want to be.
There are plenty of websites and personal finance books out there that will help you put your budget on paper. But do you know why you need a budget? Do you know why budgets are mentioned in every personal finance plan out there?
It doesn’t matter if you make 6 figures and own your own home, invest in the stock market and drive a BMW or if you are barely making it on $30 grand a year and have your kids on medicaid. You need a budget!
A budget is actually a plan that you make to fund your dreams. Take your goals, your long term goals, your short term goals and everything in between. Figure out how much each goal is going to cost. (Yes, I recognize some goals do not require money. Great. But those are not the goals we are talking about here.) Figure out how much each will cost and when you need that money.

Figuring how much you need for a new car in two years or a cruise next winter won’t be that hard, but to figure out the cost for something like retirement or a second home, you may need to consult a financial planner.
Once you know how much money you need to pay for your dreams, you have to figure out how to save that much in the time period you have. Going into debt is not usually good. It gets you things in the short term, but in the long term it just costs you money and stress. You’ll probably need a mortgage on your home. You might need some student loans. Maybe you could take out an auto loan, but think three or four times before you take on any debt!
Once you have your dreams and their cost written down, find out where you are. Write down your income and all your expenses. Check your check book register and your credit card bills to figure out your expenses. You can find lists of possible expenses online, just google “make a budget” and you will find lots of examples. You’ll probably want to take 2 to 4 weeks to write down all your expenditures to make sure you don’t miss all the little things you spend cash on each day–those add up.

Once you know where you are, make sure you are not spending more than you make.
Now, look at your expenses and make sure you are spending your money on things that are important to you. A lot of times we don’t realize how much we spend on eating out, books and CDs, and clothing. How much are you spending on fuel? Can you find places you would be willing to cut back just by thinking about how that money could be used elsewhere? Make sure you are saving money, not only for retirement, but in your emergency fund as well (your emergency fund should have about 3-6 month’s living expenses in it).
Once you make sure you’re not overspending and you are paying for the essentials (food, clothing, shelter, transportation, retirement, insurance, and emergency fund), then start saving for your dreams! Each month as you put money away toward what really matters, you will find freedom in your budget and in living to become who you really want to be!

Imagine a bank that offers so many things free with all of their checking accounts, things such as; online banking, online bill paying, and ATM transactions at many convenient locations as well as Occasional Overdraft Protection Service. Along with all those free services, there are also several options for totally free checking accounts, such as; eChecking, Home Free Checking, Preferred Interest Checking, Prestige Checking, 55 Plus Checking and Student Checking.

Imagine a bank that offers so many ways to save your money! We offer many kinds of savings accounts, such as; Statement Savings, which is an easy way to start saving, Prestige Savings, where the interest paid is based upon your account balances, and Money Market Savings, which requires a higher balance but also pays the highest rates while still allowing you the ability to write checks and have easy access to your funds. For the long-term saver, we offer Certificates of Deposit to those who prefer a safe and guaranteed rate when it comes to their money.
Imagine a bank that finds so many ways to lend you the money that you need, such as; consumer loans, auto loans, and home equity lines of credit as well as both fixed and adjustable rate mortgages with competitive rates, construction loans, and first time home buyer plans. The friendly loan officers here will gladly help you decide what kind of loan makes the most sense for you and your personal needs.

Imagine a bank that encourages the success of most non-profit religious, fraternal and educational organizations by offering them free basic checking account banking services that require no minimum balance, that have a free Visa check card and also allows unlimited activity on most banking activities such as checks, deposits, electronic credits and debits and check cards. Additionally, we promote growth in those same agencies through another type of account called nonprofit interest checking in which the non-profit agency must maintain a specified minimum balance and offset any activity charges the account may incur. If the non-profit account meets those two requirements, and it holds any money in excess of the amounts already mentioned, the bank then pays any interest on that money into the non-profit account.

Imagine a bank that offers so many ways to plan for your future economic stability. We offer services such as; retirement planning with both individual and group retirement plans, education planning with 529 College Savings Plans, and estate planning with Annuities Insurances which include life, health, disability and long-term care. We offer a virtual cornucopia of investment opportunities, such as; stocks, bonds, mutual funds, and tax managed funds. We also offer Real Estate Investment Trust (REIT) Managed Accounts.
Imagine a bank that also keeps the business community in mind. A bank that is experienced in business planning as well as in portfolio analysis and offers business accounts to fill every need, large or small, such as; Basic Business Checking, Business Checking, Business Money Market, and Commercial Preferred Money Market as well as Certificates of Deposit and other lending products.
We think great banking shouldn’t be left to your imagination. Come by one of our convenient locations today and see for yourself that we are real.

As the financial crisis continues to grip markets and businesses worldwide, is there any clarity as to the consequences for the sourcing sector? The Shared Services & Outsourcing Network hosted a roundtable debate looking at the short- and long-term impact of the turmoil on the sourcing space; online editor Jamie Liddell was joined by some of the keenest minds in sourcing to analyse the possible repercussions, the potential winners and losers – and steps industry players can take to minimise the impact on their businesses.

Attending were:

Charles Aird Senior Managing Director of Outsourcing/Shared Services & OffshoringPricewaterhouseCoopers

Phil FershtResearch Director, BPO, Offshoring & IT ServicesAMR Research

Katherine Kawamoto VP Research & Advisory ServicesIACCM

Tony Rawlinson Managing Director, Financial ServicesEquaTerra

Brian D Smith Partner & Managing Director, Financial ServicesTPI

Dr. Thomas Tunstall Advisory LiaisonACS

SSON: Let’s kick off with the immediate future: how do you see the short-term impact of the financial crisis playing out across the outsourcing sector?

Brian Smith: I think we’ve seen we’ve seen some impact here already; people are starting to think carefully about discretionary projects, particularly in the application development space. But we’ve seen less impact on day-to-day BPO-type activity which is outsourced and offshored, I think largely because the financial crisis has had more of an impact on credit and the capital structure of organizations, and less impact at this point on operating volumes.

I think what we’re seeing is a slowdown in discretionary activity – but that will pick up again at some point as people get back to realizing their projects to execute against – and then the string of mergers that are taking place particularly here in the US as well as in Europe is obviously going to spawn a degree of activity in restructuring. I think that will impact the captive side of life; I think we’ll see more activity there. So my thought would be that we’re going to see a lull followed by a large amount of activity.

SSON: To what extent do you think the mergers that have taken place have been driven directly by the crisis rather than having already been in the works?

Brian Smith: I would say most of the big mergers that have taken place here are directly related to the financial crisis. I suspect very few, if any, were even on the cards three months ago.

Tony Rawlinson: Picking up on that, I think we see the economics at the moment both disrupting and driving outsourcing. On the one hand there’s certainly a disruption in the short term, an impact on project budgets, a deferral of capital expenditure, a deferral of all but mission-critical projects especially in financial services. Conversely our view is that the credit crunch and economic downturn mean that structurally outsourcing and offshoring are even more useful strategic tools going forward.

I’d share Brian’s view that there’s going to be a short pause before the true implications of the market crystallise, and then a forceful push for cost-reduction – but also a recognition that the winners now in recessionary times are going to turn their service delivery model into something that’s a lot more flexible. I think the winners in recessionary times will already be thinking about their sourcing strategy for what comes after the recession; the flipside of flexibility in a downturn is a need to switch on as the upcurve starts again.

SSON: You said a short pause: how long do you think that short pause is going to be?

Tony Rawlinson: I think it’s going to be market-specific; my sense is that the US is further through that process than the UK and continental Europe. Some institutions are still, frankly, focused on survival – I’m going to meetings with institutions that are clearly worried about their continued existence – but over the next month or so we should have a lot more clarity. The other interesting flavour of course in the US, the UK and increasingly in continental Europe is the impact of the virtual nationalization or semi-nationalization of some institutions; we see that potentially impacting the political attitude to offshoring at a time when offshoring is clearly going to help address the short-term cost objectives of some of these players. So there are some interesting forces at work here, some of them pulling in different directions, and I think all will become a lot clearer over the next few weeks.

Phil Fersht: There are some interesting discussion points here and I’m inclined to agree with them. We went out of our way to speak with 44 of the major US financial institutions over the last two or three weeks to really gauge what their short- and medium-term plans are with regards to embracing outsourcing, and naturally the short-term focus is very much on stability and understanding how the hell this is going to play out for them. Taking 20 or 30 per cent off the bottom line is a nice-to-have, but at this moment just knowing you’re going to be around is taking precedence. However, the way things seem to be moving, I think people are going to have a pretty strong idea in the next month about stability, about M&A – I think we’ll see a lot of the M&A start to happen in the next few weeks as this thing starts to settle down a bit – and then the process is going to move on towards further optimization in the back office, further means to find cost-containment and broader–scale strategies.

In addition to that, there’s definitely a change in mindset amongst the finance operations leaders in terms of embracing outsourcing as a strategic vehicle for longer-term plans to cut costs – and being perceived to do so. When we spoke to these institutions, 40 per cent of them said they were going to increase their spend and their impetus towards outsourcing in the next 6 months and only 15 per cent said they were going to decrease that. And when we break that down further, it’s the banking sector that has the strongest impetus to increase outsourcing; nearly half the banks – all the usual suspects going through this meltdown right now – said they were increasing their impetus towards outsourcing, and only 10 per cent were decreasing. When we get into other areas like insurance it’s a much more neutral effect; it’s definitely the banking sector that’s driving this.

When we get a bit deeper into the actual specific areas they’re looking to get quick hits from, it’s the bread-and-butter areas of outsourcing which don’t require massive amounts of upfront transformation, where they’ve already done some educational exploration and some evaluation, and it’s areas like banking BPO, application outsourcing, and F&A BPO that are clearly those that are going to offer the lower-hanging fruit opportunities. Taking the areas like core financials, core HR, bringing them out into third-party models quickly and effectively, is where we see a lot of activity in probably the middle of Q1, Q2, Q3 next year; we’re expecting to see a big spike in contracts being signed, but we don’t think they’re going to be very large contracts, we’re expecting to see a lot of small-to-medium-size contracts as companies try and move quickly into engagements that are more workable.

The short-term areas that we’re seeing a drop-off include areas like IT infrastructure. Any IT staff augmentation projects seem to be a negative right now; anything discretionary is definitely being put on the back burner; things like HR outsourcing are definitely being put on the back burner in the near-term as companies look to have quicker, more impacting areas to move into. Then when we look at the sort of 6-to-12-month timeframe, we see a much stronger bend towards things like mortgage BPO, or even HRO coming back, and areas like staff augmentation have to come into play. When you think about Wells Fargo and Wachovia merging, that’s a ton of systems integration that has to go on. Wachovia had a very broad, well-documented BPO and ITO strategy, Wells Fargo is not traditionally a big adopter of broad outsourcing, so how are these companies going to align? Which road are they going to go down? We think outsourcing is going to be one of them.

SSON: Charles, is this reflected in how your clients are approaching the crisis at the moment?

Charles Aird: I would say yes and no. I think for the traditional back office that everybody’s been talking about, the answer is yes, short-term; there’s definitely a pause, people are trying to figure out what their existence is going to be and it’s taking longer for them to make decisions. However, having said that, we do a lot of work around sourcing with clients in manufacturing, R&D, and other areas both for captive and outsourcing – and we’re not seeing a significant change for those organizations, because, as you’ll find, research shows that the US just isn’t turning out science and technology people anymore – well, I shouldn’t say that, universities are, but people are going back to India and China, to their home countries – and so we don’t have the skills in the US to do a lot of the work that needs to be done for the US economy. So outsourcing’s now embedded in organizations.

Plus we see a lot of organizations that we work with are using outsourcing as a means to penetrate markets that they haven’t been in before, particularly in developing countries; we see those things continuing. But definitely in the BPO, ITO environments – particularly over the last month or six weeks – organizations are loath to spend, so they’re looking for ways – creative ways, which I think probably helps the outsourcing service providers – to finance some of these deals, particularly the upfront part of them that deals with transition costs and may be involved with severance, consulting fees, legal fees, whatever it may be. And interestingly enough we’re seeing some private equity firms with interest in providing some of the finance for doing this transformational kind of thing. So it’s becoming a much more interesting –  remembering the Chinese proverb “may you live in interesting times” – environment to work in and it probably is going to stretch a number of organizations like ours in the consultancy and advisory markets in helping our clients get over the issues that they may be having.

Tom Tunstall: I would agree with that. One thing I do want to comment on, with regard to when we would see things getting clearer, and settling out, I think a month may be too optimistic – particularly considering the fairly massive government interventions taking place right now. I think it’s more likely it’ll be a full quarter before we see clients deciding upon, or being able to strategise around, increased use of outsourcing. The analogy I’ve heard used recently is the deer in the headlights – a lot of companies, particularly financial service firms have been caught off-guard by the depth of the financial turmoil.

I think it’s likely that’s the first-order effect. The second-order effect, we’re starting to see apart from banking is a cascade into insurance as well as other types of organizations. Automotive manufacturers are under stress, and other industries are likely to be affected as well. Probably consumer non-discretionary items are going to be least impacted, and if they are it’ll take the longest to occur. Unfortunately, financial services are probably just the first-order effect. As all of you know this often creates opportunities for outsourcing suppliers.

SSON: So at least a quarter of uncertainty?

Tom Tunstall: I think so. If the markets had been allowed to correct, and to assign prices to the assets, then I think we might have had a sharper downturn but it would have occurred more quickly and we would have started to see some clarity. The government involvement creates more uncertainty and will stretch the timeline out for any sort of recovery.

Charles Aird: Until the credit crisis sorts itself out a lot of clients just aren’t able to get financing for operating capital, so we see clients just hanging onto their cash because of that kind of issue.

Phil Fersht: I think the election plays into this a little as well, in terms of who gets in; are there going to be any immediate strategies on bringing work back onshore? I think that’s another factor.

Katherine Kawamoto: I think what we’re seeing is that some decisions are starting to stall, particularly in areas related to outsourcing, and if companies are going to go forward with an outsourcing operation they’re proceeding very cautiously and are really waiting for the dust to settle. We’re hearing that budgets are starting to be looked at with more scrutiny and are starting to be reduced for the coming year, so some of the projects that people had anticipated rolling out in the first quarter are now on hold; that could be problematic for a number of the companies that we work with.

SSON: Looking a bit further ahead, what do you think will be the impact on the sourcing industry over the next few years? Do we think this is going to lead to a general reorganization of sourcing providers?

Phil Fersht: I think for some of the up-and-coming Indian providers I think this might have come a little bit sooner than they’d wished. Yes, it’s creating a ton of opportunity, but the bigger question is: when the world’s in crisis, and companies are looking to find relationships that can take them to the next level – or that can get them out of this mess – are they willing to take a risk on a provider that doesn’t have a lot of experience. So I think that this might have come a little sooner than some of the providers may have wanted, whereas it may create an opportunity for some of the incumbents to cement their positions so they can ride out the storm and consolidate further. I think we’ll see some really step up and be successful; I think others will drop away quite quickly.

We’ll also see a move towards the ability to augment application development work with BPO, for example. Providers who can really prove that they’ve got their act together bringing together systems architects, business process analysts and application development people to work across broader business goals are really going to be more successful in the long term; those providers that are pure-play process or pure-play IT need to think very seriously about how they’re going to develop their solutions in the coming years.

Tony Rawlinson: I think it’s going to be quite situational. On the one hand firms like TCS – who’ve recently done what I take to be a very attractive deal to buy Citi’s BPO banking operations in India – clearly have a strategy to acquire service lines and scale up, and I think they’ll be successful. There’re clearly signs at the moment that it’s a buyer’s market, and some of the activity we will see will be more selective sales of captive operations – or if not that, certainly selective outsourcing of captive back office processes. I think conversely what we’ll also see emerging will be providers that continue to specialize. Some of the big Indian KPO players will not want to scale up. They won’t want to be reliant on having to make large capital investments. They’ll stick to their knitting. I think service providers with a clear strategy will be those that are successful.

To pick up on the point a minute ago, I think I’d agree too that actually it’s not so much the new deal activity that’s pivotal for a lot of these providers: it’s going to be extending, restructuring, realigning their existing outsourcing relationships with clients, in order to grow revenue for them but also to address client needs. We see a continuation – certainly in financial services – of center-led strategies to outsourcing being successful but conversely there are still a lot of institutions out there that are behaving quite dysfunctionally, at business-unit level or geography level, and those sort of buyers are still a real headache for providers to deal with.

Brian Smith: One observation I would make is that we’ve seen a lot of people looking at moving away from India over the last few months, and starting to look at different locations, and I suspect that this will cause some reconsideration of that because there will be – at least in the sort term – some capability in India that may not have been there previously as things slow down a bit, and this may cause people to stop looking elsewhere. In that sense, for the Indian provider community, this may not be as bad a thing as maybe could be construed.

Charles Aird: I agree with that. I think that the Indian market is not as attractive as it was before, but then I don’t consider a TCS or an Infosys to be an Indian company any more; they’re just as global as IBM as Accenture, and they’ve diversified very successfully into Eastern Europe and China and South America and places like that. But one of the things we’ve seen, just before this hit – and I wonder what the impact is going to be – is that we’ve found clients more comfortable with setting up captives in remote areas, in Eastern Europe, in China, in India, wherever, because of some perceived dissatisfaction with service providers. Service providers are getting spread really thin in their delivery teams. We’re all going for similar skill-sets, whether it’s a major service provider, one of the advisory firms like us and our competitors, or a client with its performance management and governance – and so the thing with service providers is that clients think they’re not getting out of the deals what they expected to, and start to think about going more into the captive environment. So it’ll be interesting to see over the next few months if that continues as a trend – and some of our research has shown that a lot of people are going to more captive – or if they will leverage the financing that I mentioned earlier through service providers to go the outsourcing route.

Tony Rawlinson: From an EquaTerra research perspective we’ve certainly seen signs of a slowdown in the trend to captives. I think we’re beginning to see now – depending on the market and the proposition of the provider – certainly a growing maturity and range of some service provider offerings, and I think I’d expect to see the credit crunch at least make financial institutions and other organizations reassess whether they want to be in the captive game, and certainly in some circumstances – as the Citi example has shown – to focus on core businesses and leverage the growing capability of some of these providers to pick up commodity services, whilst at the same time assessing which of the processes that are in their captives right now give them competitive differentiation, and making sure they hold onto those.

Brian Smith: Tony raises some good points there; we just did some benchmarking of captives in India and observed that the smaller captives – even the medium-sized captives – are not as efficient as third parties; it’s only the bigger ones that can achieve that degree of efficiency, and it tends to be the bigger ones which get sold, as we’ve seen happening twice recently. My sense is that I do agree that people do want to have captives, but sometimes the economics don’t support that decision and sometimes it’s more a politically or risk-driven decision.

Phil Fersht: We definitely don’t see a move back towards captives at all at AMR; it’s been much more of a shift away from that strategy, particularly for captives smaller than 150, 200 staff that are very challenging to run, very costly, and where in many cases the cost per transaction or the cost of managing staff has spiralled out of control. The other issue is finding providers that actually want to invest and buy them. You look at the financial services space right now and the cost per transaction or trade is through the roof at the moment – because you can’t lay off staff very easily in India, it’s very complex to do that – and at the same time these companies want to be more flexible. They want to have a more flexible infrastructure that can allow for future divestitures, and the common thinking is that an outsourced model allows for more flexibility in the future. We’ll see a few selective strategic acquisitions like TCS-Citi, and we may see Lehman and a few of the other captives get snapped up, but I don’t think this is going to be a broad trend. I just don’t think there’s enough appetite to buy all these captive centers. We’re going to see a lot of them being slowly phased out and merged into outsourcing operations. That’s the way we see things right now.

SSON: Are you saying that – without wishing to be too melodramatic – we might witness the slow death of the captive?

Phil Fersht: I think unless you’re a big-brand, well-resourced organization where you want to invest in having high-quality processes running offshore – and a lot of the captives now are very high-quality, they do very good work, they’re just expensive – in a down-market or volatile market it goes against the model of being predictive and being nimble. I think we’ll always have specialist areas remaining within certain captive operations, but I think it’s going to be more in areas like engineering than in back-office, data-analytics, areas like that where we’re getting a proven model. Offshore companies are very good at doing this stuff: it doesn’t make sense to keep it all in-house.

Charles Aird: I would agree with that. When I say “captive” I go back to my definition of sourcing which includes manufacturing, engineering, R&D, and so on, and a lot of the time we see our clients going as captives into China, India, etc, in manufacturing and R&D because again they’re not able to find resources in the US, whereas they’re not as likely to do that in IT or accounting or the F&A processes that are not core to their operations.

Phil Fersht: We were talking with some clients the other day, and a lot of them have reduced budgets for next year in things like IT, and now have no choice but to look at outsourcing models that work for them; anything that is bread-and-butter like core HR, core financials, they’re looking at moving out now, and actually taking industry-specific areas that give them the value-add, that are client-facing, and consolidating that stuff in-house. That’s really where things are moving and I think we’ll see a heavy move towards non-core, non-mission-critical support operations being moved into the outsourced model; I think this economic crisis is just going to accelerate and expedite that process.

Tom Tunstall: I would agree with that. Captives represent something of an opportunity, either as an acquisition candidate, or as a way to put together a creative deal to help clients move to more of a variable cost model.

Tony Rawlinson: The only other thing I’d add – and it’s been a thread running through our conversation anyway – is that a lot of clients have very complex sourcing maps, multi-sourcing, multi-provider landscapes. Some of them have not traditionally been very good at managing these landscapes. So in an era when we’re all agreeing there’s going to be greater pace to selectively offshore and selectively outsource more, the skills that are going to be fundamental to success are going to be around governance and managing these multi-source landscapes. So there’s certainly going to be a need for us in the advisory community to play our part in equipping clients to successfully make that trip.

SSON: Let’s talk a little about locations. We were discussing India a minute ago, and the idea that it might benefit a little from the downturn in terms of people postponing their decisions to move out of the country. Is it too early to pinpoint the winners in terms of locations that might come best out of the crisis?

Katherine Kawamoto: I think it depends on what you’re sourcing. If you’re talking about services, then I’d say whatever country has the largest talent-pool and the lowest wage inflation. From a wage standpoint you could look at the US and claim we would be one of the better countries as far as sourcing goes.

Charles Aird: I think India has a lot of issues that may cause them even greater pain during the crisis. I’ve lived in India, set up centers there, and am very acquainted with the environment there; but over the last few years the retention issues they have, the escalation in wages, and the perceived drop in quality in both IT and BPO, have caused a lot of frustrations with clients. So I don’t see clients knocking on our doors to say “let’s go to India”. More and more they’re looking at alternatives: China, Eastern Europe, South America, those countries that started making inroads into what India has been doing. I think the current crisis may cause even more of that to occur.

Brian Smith: I do think however that this will maybe cause a reduction in the attrition rate in India, which will be a good thing and one that will make people feel more comfortable. We may also see some change in the underlying economics of offshoring particularly from some of the less expensive regions within the US, and making the business case for doing this may get more difficult.

Tony Rawlinson: I think it’s got to be looked at through the lens of what the requirement is, where the point of service delivery is, where the point of service receipt is, and against that backdrop EquaTerra feels that India will continue to be the dominant market for these services. I think they’re going to be helped clearly by the move we’ve already talked about from captive to outsourced; I think some of the weakness in the global economy is going to feed through to lower wage inflation in India which might address some of the frustration that was mentioned a minute ago. We see China maturing but frankly not rapidly enough to be a universal service delivery response, and clearly Eastern Europe has its supporters mainly around continental European customers who take a more conservative approach to risk.

This is very much an Anglophone discussion and we’re seeing the emergence of places like Morocco serving the French market, for instance, and we’ve talked already about Brazil serving the US market. I think overall our view would be that India will continue to be the big player but we’d also see a “horses for courses” approach being taken by clients and a recognition that risk needs to be managed on a global basis: it doesn’t make sense to have all your services running out of one country.

Phil Fersht: I can add a little additional perspective on that: let’s look at the types of services that are being outsourced to different locations. When you look at IT, I think India has developed a very strong position now delivering high-quality programming, application development services, at labor costs often a quarter of what you’d find in places like the US or UK. I think that’s just going to go from strength to strength as that model matures. They have a real industry developing, with strong training programs and very strong footprints. I think a broader area where it’s still an open game is BPO, and when you look at the fact that you can hire BPO staff for $25-30,000 a year in rural areas of the USA, the arbitrage trade-off with India and other countries isn’t that great – and if Obama takes power and gives even further tax breaks to incent countries to onshore, I do think that nations like the US – and even the UK – are still in the game. And I think that that’s going to be the area where we’re going to see some change globally.

Don’t rule out the Latin American countries for providing voice services and employee services and things like that. But I think on the IT side it’s almost a done deal now: I think India has cemented their footholds, they’re moving into the European markets, they’ll develop intelligent resources in the US and the UK and other places to service their clients. It’s more in the BPO area where we’re going to see more variety, and different countries offering different unique characteristics.

Katherine Kawamoto: It seems to me that wage inflation is such a key factor in these decisions; a couple of people have mentioned Brazil, but if you look at the inflation there that seems to be on the rise – or at least is trending in an upward direction. Globally these are really tough decisions to make because the economies themselves are so unpredictable at this point. We really can’t predict with any certainty what to predict in the way of wage increases. As to the point about Obama: I think it will have an impact; I don’t know how soon it will have an impact, however. I’m not as certain that these things will turn around as quickly as some of the panel have indicated. I really think this is a much longer-term issue that we’re faced with.

Tom Tunstall: I think there are some things that – no matter who’s in office – will preclude an easy repatriation of jobs, if you will. With the electronic mechanisms available, some of that stuff is going to be fairly difficult, and frankly a lot of the jobs that do get outsourced are on the lower end whereas jobs created through outsourcing often are managed in the US and tend to be higher up the value-chain. The idea that whoever happens to be in the White House will affect these things greatly is likely oversimplifying things a bit. Global macro effects override a lot of that.

Charles Aird: I think I’d agree with that. I’m pretty cynical about election campaigns – and we went through a lot of this same rhetoric in the last campaign; some of you may remember Lou Dobbs and all of those things. And then we didn’t see a great deal of change. Obama will more than likely win the election – I can’t imagine him not, given the way things are going these days – and I think the issues he will have to face when he becomes president are much larger than what’s happening in outsourcing around the world.

Tony Rawlinson: I think it’s maybe worth looking at this more holistically as well as from a service provider perspective. The Indian players are becoming global players, the MNCs have deepened their investment in India and other low-cost economies. I think the successful service providers are going to be able to load-balance their client requirements across multiple geographies – so actually it’s probably going to be smart in many cases for clients to let the service providers take those decisions and let the economics of the deals drive where the requirements are placed.

SSON: That sounds like another reason to be concerned about the future of the captive model.

Tony Rawlinson: I think so, overall – although we shouldn’t be too black and white. Yet another driver here that we need to look at – and I’m not sure I know the answer to this one – is there have been signs in recent months, until the credit crunch, of wage price arbitrage not being the only driver of offshoring. It was increasingly coming to be seen as an acquisition of capability. So I think potentially what we’re going to see at least in the short term is a reawakening of the wage price arbitrage driver and I do think to your last point that that’s going to be associated predominantly with outsourcing.

SSON: OK, let’s move on. How can people in the industry best mitigate against the worst effects of the crisis in the short-term – what are the easy wins which can at least lessen the impact of what we know is going to be a pretty lengthy downturn?

Charles Aird: Somebody mentioned this earlier: for a lot of clients maybe it’s time to take stock of the relationships they already have, and improve their governance and performance management. We see a lot of organizations that get through the honeymoon period – whether it’s captive or whether it’s a service provider relationship – and they’re not getting out of the deals what they expected to get. And quite often it is those two areas: the governance is poor, the training on both sides between the client and the service provider is really bad, and the performance management is just not up to speed. In the short term, trying to improve the performance of the deals that are currently in place would be an excellent way for a client to go forward.

Brian Smith: I would agree with that. I think that there are many smallish transactions that have been done – small numbers, moved either domestically or offshore – that have never truly been leveraged across organizations because they belong to one business unit or one particular function within an organization, and I think this may prompt people to realise that looking for that enterprise-level direction is something that is going to add value at this point in time, and to get more strategic in how they manage these relationships.

Tony Rawlinson: We see the value-leakage in outsourcing at the front end of the sourcing lifecycle: ie where a client’s got the wrong strategy or the strategy is too distributed across business units. So there needs to be some focus there to ensure that some of the short-termism that will inevitably be around doesn’t lose sight of the need to have a sustainable target operating model. I think the other area, as Brian covered there, is that value-leakage often is most rife around sourcing and management, so I see a continuation of the multisourcing approach. I think there’s an interest in clients to go to best-of-breed providers, but I think as more stuff is outsourced I think that that governance challenge has to be met head-on, and we need to help our clients invest in the right skills to manage these multi-provider landscapes successfully.

Tom Tunstall: One of the things from ACS’ perspective that we intend to do is continue to focus on client intimacy – which to Charlie’s point should help us better understand the landscape and client requirements. The other thing we intend to do is make greater use of business process utility, delivering the same standardized process to multiple clients, our own technology and best practices; those types of approaches in the short term should allow our clients to save money and we think certainly in the near term that’s going to be top of the list: minimizing investment and saving costs.

Katherine Kawamoto: One of the things that we recommend is that now is really the time to benchmark current processes, and redesign if necessary. Certainly if you’re not already outsourcing but it’s something you might want to look at, it’s better to have a good process that you throw over the fence, versus what we’ve seen in the past where people have just given whatever processes existed at the time to someone else to go and sort it out. We are recommending that people do some self-assessments, do some benchmarking, and proceed with a little more knowledge.

Phil Fersht: All really good points here. We spend a lot of time talking with a lot of business leaders about this and the key issue now is for providers and leading sourcing executives to sit down and work out how to create some innovation within an engagement. Innovation doesn’t just mean operationally effective; it means actually finding new ways of doing things, finding ways of bringing together things like application design with business process design more effectively, and building business-level metrics that can achieve that. So how can you incent vendors to deliver business performance, and not penalise vendors for missing their metrics one quarter, that sort of thing.

We’ve seen that penalising vendors doesn’t really work; there needs to be more collaboration, there need to be better ways of managing vendor relationships, and I think it’s up to the intermediaries, the third parties, the consultants, the analysts of this world, to really help drive this conversation to the next level, to really help create more innovative contracts. It doesn’t help when vendors sell deals that are literally just providing bodies to the client, and the client doesn’t really know how to manage them. There needs to be a greater focus from companies on how to do this more effectively.

Look at the Big Four consulting firms; they need to build practices that are specialized in governing outsourcing contracts. I think too many of those companies are too focused at this point on old-style business models, on shared services and things like that. The vendors need to step up, the buyers need to step up, everybody needs to step up and start being more innovative and thoughtful about how this industry is changing and how we can design a curriculum to reflect that.

Charles Aird: One of my concerns is that our clients use consultants too much! And everybody may be appalled at that but: we find that they’re too dependent on us for helping them set up the governance or the deal or the shared service environment or whatever, and then when we go away they’re not able to maintain it, so more and more we’re encouraging them to embed a center of excellence, or a sourcing team – call it whatever you want – into their organizations so that they can take tools and templates that come from us, or others, and then extend them through their organizations over a period of time to be able to do the deals themselves. So that’s a hope. It may even be a dream. Some organizations obviously have been able to carry it off very well in the world, but I think most of them are still struggling around that and, as I say, I think most organizations use consultants too much, and depend upon them too much.

Tony Rawlinson: I’d generally go with that, and I think it’s got to the point now where it’s incumbent on all of us to incorporate skills trends in our advice. I think there’s enough outsourcing that’s going to go on for us not to be too frightened of clients growing their capabilities, and I’ve always been very evangelical about outsourcing only working if it’s properly managed by both provider and client. I think it’s in everyone’s interests at the end of the day.

Brian Smith: A client who’s not doing this and does not embrace the need for them to manage is not going to succeed, and I think we need to help them understand how to embrace that. We need collectively to evolve our way of helping them through that post-deal phase of life and we can do that in many creative ways.

In my recent book, The Millionaire Nurse, I outline the steps to take for Nurses to take control of their personal finances.  I would like today to discuss the reasons to do so and tell-tale signs of needing to do so NOW.  I would also like to share three reasons why smart people, even nurses who have a great deal of responsibility in their day jobs, disregard this important part of their lives.

Why bother?  That is the question that is frequently on the minds of nurses when they see information about personal finance.  Why should I be worried about it?  I am paying my bills on time.  I can go out to eat whenever I want and my kids have presents at Christmas.  I have got so much going on in my life, why should I add one more thing to my to-do list?

I would strongly make the case that not paying attention to your personal finances, and not learning the “anatomy and physiology” (nuts and bolts to you non-medical folks) of how to manage your money, is personal finance Malpractice, hey, did that word get your attention?).

What do I mean by personal finance malpractice?  Well, do you think it is your job to provide a roof over your families head?  Do you think you should provide food for them to eat, clothes for them to wear, and transportation to school?  Of course the answer to these questions is yes!

You also know about the importance of paying the power, cable and cell phone bills.  Not because those are needed to live, but your kids would rather be dead than not watch TV or texting their buds.

Do you want to be able to retire someday on more than just Social Security?  Do you want to travel before you are too old to do so? These are just a few of the reasons for learning to manage your finances.   And from strictly selfish reasons, most of us want to be able to order a pizza when we don’t want to cook, stop at Starbucks occasionally, or go see a movie.  So don’t let that ambulance chasing attorney file suit against you for personal finance malpractice.

However, the recent crash in the real estate and stock markets, along with the most severe recession since the Great Depression, have all of us fearful about our financial status.

So why do smart, well educated nurses mismanage their money?  You know, most people that file bankruptcy, aren’t out spending money like a banshee on caviar and champagne.  They just aren’t paying attention, until it is too late.

The three most common reasons for poor financial choices:

Time: We are all so busy, who has time to read books about personal finance, like The Millionaire Nurse?

Knowledge: Roth IRA’s, 401-K’s, annuity’s, pension plans, money market accounts, mutual funds, etf’s, Quicken, derivatives…who can keep up with all the jargon? And with so many choices, the easiest choice is to do nothing.

Fear:  Fear of the unknown is one of the strongest obstacles to learning new information and putting it to work.

So how do you deal with the barriers to learning about personal finance? 

Time: The first step is to have the goal to make a change.  You only have time for those things that are most important.  When I am counseling people about changing a behavior, I ask them to “make an appointment” with themselves.  Set aside a certain amount of time to think, and plan to deal with the issue without interruption.  Get your spouse or partner to join you, as any financial decisions not made together will be sunk before they begin.

Knowledge:   Read books on the subjects where you need the most help.  Use the web.  Read my book, The Millionaire Nurse.  Learn the basics; don’t get an investment book when you can’t balance your check book.  Build a strong foundation in step by step fashion.  Learn proven methods for getting out of debt, and learning to save.  Over time, broaden your study to include insurance, investing and retirement accounts.

Fear:  As Susan Jeffers, Ph.D. says in her book, Feel the Fear and Do It Anyway, to diminish your fear requires you to trust in your ability to handle the situation.  How to develop that trust: learning and putting to work what you learn.

So with apologies to Jeff Foxworthy and “you might be a redneck”, what are the signs of distress in your personal finances?    

If you know what a bounced check costs-you might be financially distressed.

If you are checking your bank balance online daily, you might be financially distressed. 

If you use your debit card at McDonalds, you might be financially distressed. 

If you have a heart attack when the kids bring home another fundraising project, you might be financially distressed. 

When you go to your brother in laws house for vacation, because you can’t afford to stay at Disney World…

When you only put 5 bucks worth of gas in your SUV….

You get the picture.  Don’t wait until it is too late to recognize financial distress. Make that appointment with yourself TODAY and learn how to change that behavior.