Gujarat an outsourcing destination for MNCs

Wednesday, 18 September 2002, 07:00 Hrs
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AHMEDABAD: Gujarat has emerged as an offshore office for foreign companies interested in outsourcing business to the state.

The Confederation of Indian Industry (CII) Gujarat chapter says currently 26 firms are doing outsourcing business with the state. The sector generated around 250 million in revenue for the state in 2001.

Most groups categorize their business into core and non-core and have been outsourcing the non-core processes to captive units or third party vendors for some time.

But in recent years there has been a change in the definition of core and non-core processes, with much of it moving away from the former, creating a huge outsourcing market.

According to CII, business process outsourcing (BPO) has been growing at 70 percent a year and its net worth in India is $1.6 billion. The sector employs around 100,000 people.

U.S. consultancy major Mckinsey has projected that BPO in India has to grow by only 27 percent till 2008 to deliver $17 billion in revenues and employ a million people.

"The outsourcing business is a cost effective business for foreign companies. Most companies from developed countries prefer to have their work done by hiring skilled services from Third World countries," CII senior director Sunil Parekh told IANS.

"Accounting that costs $4,000 to a U.S.-based company would cost around 4,000 (around $80) in India. Thus it would prove 50 times beneficial for the company.

"Indian firms would not be at a loss either, as they would get such assignments in bulk incessantly," he added.

The growth of outsourcing has been fuelled by Gujaratis becoming more comfortable in English and other foreign languages, especially in the cities of Ahmedabad and Vadodara.

"Every year Gujarat produces 40,000 graduates who are well-versed in written and colloquial English," stated Parekh.

Said Vishnu Varshney, the Gujarat Venture Finance Ltd managing director: "The capital costs of running the BPO business is the lowest in India while the running cost is also only 50 percent as compared to the U.S.

"Wage differential is another major advantage that India has over others. Net margins are 20-25 percent in India compared to 5-10 percent in the U.S and Europe," he said.

Accounting, insurance, payroll, IT software developments, medical transcription, mapping and equity research on the share and corporate market are the usual areas in which outsourcing is carried out.

Said Chandrashekhar Rao, who represents Global Telecom, Mumbai: "IT outsourcing means delegating the responsibility for managing and marketing your computer to a third party."

Rao said improvements in telecom infrastructure were one of the major reasons for boosting the BPO business in the country.

About human resource (HR) outsourcing, Sanjay Shetty, accounts director of Emmay HR, Mumbai, gave three tips.

"Anyone who wants to start HR outsourcing should keep three things in mind: one, the company one is dealing with and the negotiations; two, hiring people in the age group of 20-25; and, three, always believing in the theory that 'if one is paid peanuts, one is bound to give monkey's work'," he said.

Source: IANS
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