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India top offshoring pick of cost-conscious
By siliconindia
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Friday, 16 May 2008, 01:14 IST
Bangalore: As global technology firms are seeking low cost destinations in order to reducing their expenses, India is likely to be the most preferred offshoring destination, reported The Economic Times.
These companies cite availability of local talent, better delivery and conducive environment as key reasons for the offshoring.
Testifying the trend, Networking and telecom software major Nortel has recently decided to move almost 1,000 jobs from the U.S. and the UK to low-cost, high-growth destinations like India, China and Mexico. The move is aimed at both restructuring business and reducing costs. It was said by Nortel Networks global services president Dietmar Wendt.
Nortel, which has posted a steeper first-quarter loss ($138 million against $103 million a year earlier) as a series of charges weighed on results, had in February pointed out that it will knock off almost 2,100 jobs from the developed markets.
For Andy Green, Logica CEO in January, two of the main drivers to revitalize the firm have been to double offshore and near-shore headcount to 8,000 by end-2009; and a significant drop in costs resulting from a reduction of 3 percent of overall headcount.
And, the lynchpin of this strategy, which is expected to drive Logica?s growth to above-market levels from end of 2008, will be the 1,500 seater second site at Chennai. The plan to deliver above-market growth is funded by a ?110 million restructuring that will lead to cost savings reaching an annualized ?80 million from 2010.
In addition, software services major CSC had announced sometime back that it was shifting more UK jobs offshore in an effort to control costs. The redundancies were in its Global infrastructure Services department and, according to sources, the job cuts were aggressive, almost 30 percent of the staff within GIS.
"Moving positions to India will give software companies higher leverage on costs but there are other key business drivers such as focus on revenue creation, increasing productivity and efficiency that will be a major determinant of the shift," says Ajay Kela, managing director and COO, Symphony Services.
A Gartner's recent report too corroborates that the current US economic slowdown will lead buyers of IT services to consider increasing their offshoring to lower-cost locations.
European information technology vendors like Atos Origin and Groupe Steria are also planning to strengthen their service delivery capabilities by leveraging their presence in India.