Friday, January 27, 2012

Offshoring - Going Beyond India

Are companies becoming weary of Bangalore, India's increasing wage rates? Will this herald the beginning of a significant decline of outsourcing revenue to the giant? BusinessWeek reports it will, in it's annual outsourcing round up. Because of steadily increasing costs in India, the fact that much of the labor market has been saturated, most notably in Bangalore, companies are now seeking to move elsewhere in an attempt to bring down their costs. Indeed, Indian based companies themselves are looking beyond their own shores to maximize profits, and not lose clients.

Many companies complain that the problem with working with Indian companies, is that they're enthusiastic in the beginning, but once they've "earned" the valuable experience, pack up and leave for more greener pastures. This in turn leads the corporations to start looking elsewhere, most notably in Vietnam, Russia, Mexico and Argentina.

Many vendors like IBM Global Services, Accenture, EDS and Genpact; have started pooling together talent from various outsourcing destinations across the world, to give their clients the best of both worlds. The example cited in BusinessWeek is of EDS who works with Continental Airlines in India in developing a software application that runs on its mainframes, and in Brazil taking care of its financial operations. Accenture claims that it has split its operations into three sectors: high-cost regions with 35% (U.S and Britain), medium cost regions with 20% (Spain, Canada etc) and low-cost regions with 45% (India, Philippines, etc). Of note, is the still majority reliance on low cost regions, which despite BusinessWeek's analysis, still maintains its dominant share.

But it isn't just cost that remains a concern for these companies, it's that it comes with suitable strings, in the form of no prominent difference in time zone, and a lack of economic and language barriers. In that capacity, Bucharest, Romania is earning a steady reputation as being that location, and offshoring providers across the globe are hoping its entrance into the European Union will herald a greater shift towards its combined set of skills. Because there seems to be a shift to moving towards off shore globalization, intellectual property issues are now more of an issue than they ever were. In an effort to combat this, software and outsource giant Infosys Technologies, has taken to eliminating USB drives on their computers, thereby allowing the transport of information to be that much more limited.

But of course, all of this comes at a price. Because now we (the American & British workforce) aren't just competing with some bloke in India, but with some thousands of employees across the world, spanning from Bucharest, to St. Petersburg, to Argentina, to Brazil, to somewhere in the Philippines. Don't believe me? Consider Indian giant Wipro's CIO, Mr. Laxman Badigo's words: "Overall, in terms of productivity and quality of life, beyond Bangalore is better."

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