In a painful reminder that not all outsourcing is good outsourcing, The Charlotte Observer ran an article titled, “US Airways revisits outsourcing,” which opens with an anecdote about a guy who wanted to reserve tickets for a family vacation next summer. When he couldn’t understand the person he was talking to at the center handling US Airways calls, he asked to speak to a supervisor, and he was cut off instead. Ouch.

During the summer, the airline had shuttered its Pittsburgh customer service center completely and shrunk the one in Winston-Salem to handle only calls from elite-level frequent fliers and other specialty groups. Everybody else is now shuttled to a call center in either Mexico City (Atento, a Latin America- and South America-based company) is the service provider there) or Manila (PRC is the service provider there). In that process US Airways sliced about 1,150 customer service reps from its payroll. Last year, the airline also tacked on a $5 service fee to use its service center; customers who order through the Web pay no fee.

My guess is that some of the snafus are just part of the learning curve; but I wonder if the airline even knew about the incident before the article came out in a major daily newspaper.

Of course, the company is now partnered with America West, which makes a point of keeping its customer service operations in centers in Reno, NV and Tempe, AZ. The company considers its customer service of value -- something to distinguish it from its competitors. So we may be reading soon that new CEO Doug Parker, who comes from the America West side, has decided to revisit how customer service is handled for the larger organization.

I wonder if the name that was chosen for the newly formed entity -- US Airways -- was perhaps the wrong direction to go. Not only is it the name of the company that declared bankruptcy before the sale, but also could it become synonymous with mismanaged customer service that the customer needs to pay for?

According to this coverage by Globes [online], First International Bank of Israel has signed Israel’s largest outsourcing contract.

The eight-year agreement with EDS Israel and Ness Technologies totals $130 million and covers the bank’s “central, departmental and personal computer activities and its communications equipment procurement.” The bank said it expects to save about $48 million over the life of the agreement, which involves the transfer of 100 employees to EDS Israel.

The two service providers won against a proposal from IBM Israel and Matrix IT.

Zinnov Research has just released a 14-page “snapshot” report on Chennai (formerly, Madras), which has seen remarkable growth in the India IT space and hosts companies such as TCS, Wipro, Infosys, Satyam, Cognizant, Microsoft, Google and Verizon. The document contains plenty of practical information, such as:

The major IT region of Chennai is the OMR (Old Mahabalipuram road) highway and Gundy. These locations are attracting major IT and ITES companies. This region is being promoted as the IT hub of Chennai city.

There are currently around 20 IT parks all over Chennai. The rental rates in these IT parks range between $1 and $1.1 per sq. ft.

(The parks have excellent telecomm and security arrangements, which makes them attractive to high tech companies, in particular.)

Residential rentals in “good” areas, such as Anna Nagar, Adyar, Besant Nagar or T Nagar range from between $230 and $350 per month, with 6 to 10 months rent payable in advance. (If you’re looking to buy, get to Poes Garden or Boat Club, where two-bedroom flats cost “well above $200,000,” but you’ll have “political leaders and film stars” as neighbors.)

The report shares the outlook on power and water; education; growth of the IT and IT-enabled services sector; the talent pool and where it’s working (Isoft has 2,000 people, whereas Flextronics has 500); the attrition rate (it’s higher in BPO than in IT -- around 30-35%); salaries (for somebody with five to eight years of experience, you’ll pay on average $1,200 to $2,300 per month); and living standards.

If you’re considering a Tier 1-1 city (the ones just behind Tier 1 cities in Gartner lingo) for some of your work in India, definitely download this briefing to get the lowdown.

If you want a quick rundown on Microsoft’s investments in China, you can get it with this Reuters piece, which ran on ZDNet this week.

Apparently, Microsoft has finally begun investing in China-based operations three years after proclaiming intentions to invest 6.2 billion yuan in the country. On Monday it announced that it and International Finance, the World Bank’s private sector arm, would jointly invest $35 million in ChinaSoft International, which does software work in the areas of government, e-business and systems integration.

In an article I wrote a few weeks back, one of the subjects alluded to the JPMorganChase-IBM contract cancellation but didn’t want to provide any details (probably because he’d gotten his information second-hand).

That’s why I was inextricably drawn into a blog posting by Tristan Yates, titled, “How IBM Conned Our IT Execs Out of Millions.” Mr. Yates describes his work for an unnamed defense contractor (I’m guessing Northrop-Grumman from the description...), where he worked as a contractor in the project management office, “getting paid by the hour to help them with project planning, forecasting, status, and other PMO and IT advisory functions.”

The project he was involved with -- an enterprise-wide portal and knowledge management system -- already had the vendors lined up. IBM was to handle the portal. The lone IBM consultant on site (another one would show up occasionally) actually “spent most of his time selling.” Whenever a senior member of the client team had reservations about the vendor that had been chosen for a particular aspect of the job, the IBM guy was there to push IBM as “the solution to their projects.”

At one point, he looked up from the work to discover that a herd of IBM Global Services consultants had flooded the conference rooms -- at $325 an hour. Most were ordinary techies hired through a third-party job shop from Monster.com and Careerbuilder.

Mr. Yates provides plenty of detail about how the project went so wrong. What’s even more useful is his list of mistakes to avoid making, such as:

Check resumes of individual consultants. A $250+/hr consultant should be able to walk on water, and their resume should reflect that.

Painful to read (not because it isn’t well written). Good advice.