MNCs take the risks, shifts more jobs to offshore locations
By siliconindia   |   Tuesday, 27 July 2010, 15:27 IST   |    5 Comments
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MNCs take the risks, shifts more jobs to offshore locations
Bangalore: Financial savings being the key factor behind offshoring, many MNCs are moving more jobs to offshore locations. There has been a tremendous increase of front-end delivery staff in offshore centres of IT majors like IBM, Accenture and EDS, which rose from 25-30 percent in 2007 to 35-40 percent in 2009, revealed Everest Research Institute in a report on global sourcing trends. Eric Simonson, managing principal of Everest Research mentioned while some global majors have a high offshore leverage of 45-50 percent, the average ratio can go up to the 38-42 percent levels during 2010. "Offshore leverage continues to dominate outsourcing economics and is an accepted reality for staying competitive," he said. By not including support staff, people engaged in domestic delivery and third-party contract workers, this measure pin-points that offshoring is imperative given the difference in cost structure and price points among locations. However, cost is one of the offshoring drivers, the report says. Globally distributed clients are asking technology service providers to set up bases in different locations as growth moves to emerging geographies from the US and Western Europe. This, Everest said, is pushing tech majors to become more globalized and extend delivery presence to serve buyer needs better, access fresh talent markets and acquire new capabilities. "Having a diverse set of locations can mitigate risk. Leading IT firms have delivery presence in as many as 25 countries," said Simonson. To boot, the average number of countries where these firms have delivery centres has gone up from 13 in 2007 to 15 in 2009. It is difficult to work out individual offshore leverage figures since most do not disclose geographically-split headcount while Everest can't divulge names of firms surveyed for sake of confidentiality. No less, Simonson notices two other discerning offshoring trends. First, technology suppliers are moving towards integrated matrix organizations, shaped around industry verticals and service lines. The other and more important one, Simonson said, is industrialization of the IT operating model. This implies that there is more vigor and predictability in processes and that best practices are being used, he said.

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