Foreign Firms Must Look Beyond India For Outsourcing: Report
India is not the only alternative and companies with experience in outsourcing should mitigate risks by moving beyond India in 2005 and consider countries like Russia, Eastern Europe, Latin America and other Asian countries.
Jan 10, 2004
Houston, Jan. 9 (PTI): Though India is the primary IT outsourcing partner for over 51 per cent companies, a recent report has suggested that once a firm establishes a relationship with one or more Indian enterprises, it should look to other geographies while it expands its IT sourcing strategy.
India is a favourite primary IT outsourcing partner for over 51 per cent companies as its leading service providers offer quality services and maturing processes for managing the transition of work from in-house to the offshore location, the AMR report said.
In order to minimise risks associated with developing in-house competencies for managing offshore relationships, companies with minimal experience using offshore services should capitalise on the Indian service provider expertise, it said.
But once a company establishes relationships with one or more Indian companies and gains experience in managing an outsourcing relationship, it should look to other geographies as it expands its IT sourcing strategy, it recommended.
This was because India is not the only alternative and companies with experience in outsourcing should mitigate risks by moving beyond India in 2005 and consider countries like Russia, Eastern Europe, Latin America and other Asian countries, the report said.
A reason for trying out other markets is overheated labour market in India which is driving up labour costs and attrition rates for service providers.
"High attrition rates result in higher costs for the outsourcing customer. Smaller IT services industries in Latin America, Eastern Europe and Russia have more stable IT workforces", the report said. The report said that though Indian service providers offer strong English skills, they have limited non-English capabilities.
It noted that the language issue works both ways and Russian, Chinese and Latin American service providers have weaker English skills than their Indian competitors. Although India is a stable democracy, many companies are concerned that its "relationship with Pakistan and China, natural disasters, and cultural and religious diversity may destabilise the country and are looking to non-India locations in order to minimise the risk of geo-political destabilisation", the report said.
It also noted that major Indian service providers were not resting on their low-cost, high-quality laurels and ignoring foreign competition. They were expanding globally and in their non-English capabilities.
TCS has opened Spanish and Portuguese-centric development centres in Brazil and Uruguay and is investing in innovative service delivery models.
Wipro is working with a large automotive manufacturing company and creating a factory model for delivering application integration.
Companies are also investing in expanding their consulting capabilities to provide higher value transformation services, the report said.
India is a favourite primary IT outsourcing partner for over 51 per cent companies as its leading service providers offer quality services and maturing processes for managing the transition of work from in-house to the offshore location, the AMR report said.
In order to minimise risks associated with developing in-house competencies for managing offshore relationships, companies with minimal experience using offshore services should capitalise on the Indian service provider expertise, it said.
But once a company establishes relationships with one or more Indian companies and gains experience in managing an outsourcing relationship, it should look to other geographies as it expands its IT sourcing strategy, it recommended.
This was because India is not the only alternative and companies with experience in outsourcing should mitigate risks by moving beyond India in 2005 and consider countries like Russia, Eastern Europe, Latin America and other Asian countries, the report said.
A reason for trying out other markets is overheated labour market in India which is driving up labour costs and attrition rates for service providers.
"High attrition rates result in higher costs for the outsourcing customer. Smaller IT services industries in Latin America, Eastern Europe and Russia have more stable IT workforces", the report said. The report said that though Indian service providers offer strong English skills, they have limited non-English capabilities.
It noted that the language issue works both ways and Russian, Chinese and Latin American service providers have weaker English skills than their Indian competitors. Although India is a stable democracy, many companies are concerned that its "relationship with Pakistan and China, natural disasters, and cultural and religious diversity may destabilise the country and are looking to non-India locations in order to minimise the risk of geo-political destabilisation", the report said.
It also noted that major Indian service providers were not resting on their low-cost, high-quality laurels and ignoring foreign competition. They were expanding globally and in their non-English capabilities.
TCS has opened Spanish and Portuguese-centric development centres in Brazil and Uruguay and is investing in innovative service delivery models.
Wipro is working with a large automotive manufacturing company and creating a factory model for delivering application integration.
Companies are also investing in expanding their consulting capabilities to provide higher value transformation services, the report said.