Offshore PDS market to ramp up by 28%
By agencies   |   Friday, 04 May 2007, 19:30 IST
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BANGALORE: According to the ARC advisory group services report, the top five suppliers of offshore product design services (PDS) are large Indian IT companies and account for more than 60 per cent of the market. The offshore PDS market is set to mark a 28 per cent rise annually, and is estimated to be over $4.1 billion business in 2011. According to the report, the capabilities of leading offshore companies in hiring, training, and managing large numbers of new employees has led to the growth of the offshore PDS market and other service lines based on the global service delivery (GSD) model. The value proposition is simple; knowledge workers from low cost regions are paid about 25 per cent of what their counterparts in the west get. Though that does not necessarily mean a total savings of 75 per cent. Global Service Delivery (GSD) is the practice where the work is outsourced to low cost regions. The labor for a particular client task is divided between service people located in the client?s office or a nearby office (nearshore), and a low cost offshore facility. A typical ratio in PDS is 80% offshore to 20% onshore. All of these companies are attempting with various degrees of success, to become service providers are challenged by their extremely high growth rates. Hiring and training tens of thousands of new employees per year, high attrition, and growing wage pressures, which lead to a gradually decreasing labor arbitrage value proposition are some of the factors that affect the growth rates of these companies. According to Steve Banker, ARC advisory group service director, ?When you have forecasted growth of over 25 per cent for a market that is already larger than a billion dollar, you are looking at an extraordinary market. One explanation for this is the power of the GSD business model.? In the areas such as custom software development, IT infrastructure support, call center services (and other similar business process outsourcing services), application implementations, and PDS, GSD model has proved its success.

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