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Indian IT firms expand abroad as global delivery dynamics change
By siliconindia
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Monday, 10 December 2007, 20:30 IST
Bangalore: With a view to combat the downside of rupee appreciation and meet the increasingly complex demands, the leading Indian IT services firms are in the process of significantly changing their business model.
Reaching out to their customers more effectively, the companies are setting up development centers closer to their customer-bases to be able to work in the same time zone. This helps the vendors to penetrate deeper into the local markets with a strong local delivery network, reports Business Standard.
T V Mohandas Pai, Director for human resources, Infosys, sees this trend as a change in the way Indian software firms do business. The global delivery model has entered the third phase. Earlier, companies were operating in their own countries. The second phase saw offshore centers like those set up in India. The third phase is witnessing near-shore centres to work closely with customers, probably in the same geography.
All Indian companies are adopting the model, Pai said. According to him, there are several advantages from working close to the customer. First, customers are happy to have their projects running close to them and in the same time zone. Second, with dollar getting cheaper, Indian companies can reduce their operating costs by locating to a dollar area. Third, there is greater scope for market penetration as a local. IT companies, which have presence in various countries, can actively consider more projects within those geographies.
This will enable Indian companies seek projects from companies which are not keen on off-shoring work to locations thousands of miles away, he pointed out. He noted, We (Infosys) have a presence in the US, Mexico, Canada, the UK, Germany, Mauritius, Philippines, Australia, Thailand and China. All these centers are catering to the respective clients in those countries. A few years ago, Infosys had a presence at only one location outside India - Toronto in Canada.
Similarly, Wipro has 48 centres worldwide compared to a few years ago. Wipro has eight centres in Europe alone, including one in Romania and two in Portugal. It opened two centres each in China and Brazil and one each in Canada and Mexico recently. We believe that while operating overseas, we have to localize. We have done that with extreme success in Japan and Europe and got dividends for it. We are systematically doing that for the US and North America now. Our global delivery model requires about 25 per cent and 30 per cent of our people to work with our customers overseas, said Azim Premji, Chairman, Wipro.
Recently, Wipro opened a centre in Atlanta in the US, which will displace the people Wipro sent from India on H1B visas with people who will be hired locally. So it will not mean an extra cost to us. In fact, the people we hire locally will be significantly from campuses like we do in India. We will bring them to India for induction training for 10 to 12 weeks, train them here and send them back in terms of building a cadre or professionals who will serve us going forward, he added.
Premji also pointed out that Wipro would realize the same high degree of utilization from the local recruits as was achieved when staff were sent from India. Depending upon the results of this initiative, we would like to duplicate it in a few more centers in the U.S. And since we are locating these centers in states like Georgia, which are very competitive for encouraging employment, we have also got some amount of fiscal subsidies from the state government, which acts as a nice cash flow, he added.
He said Wipro could also bid for local projects in the process. It means that with the local presence and local employment, we stand a much better chance in state government contracts. So there are multiple advantages.
The countrys largest software exporter TCS, which was the first to localize, has in excess of 46 development centers worldwide. The top BPO firm Genpact has a global network of 25 delivery centers in nine countries which include India, China, Hungary, Mexico, the Philippines, the Netherlands, Romania, Spain and the U.S. According to company officials, the presence provides multi-lingual capabilities and access to a larger talent pool along with near-shoring capabilities to take advantage of time zones.
Hyderabad-based Infotech Enterprises has over 10 per cent of its staff (6,300 people) located on-site. Most of the companys global clients are located at its 12 global delivery centers. In which six are in India (Hyderabad, Bangalore and Noida) with the rest situated in North America and Europe. According to Infotech Enterprises CMD B V R Mohan Reddy, a good on-site presence is needed for the company as over 94 per cent of its annual revenue comes from exports.
Infotech Enterprises, which provides engineering design outsourcing services, has clientele like Airbus, Bombardier, Alstom, P&W, Tele Atlas and Philips. Industry sources say access to certain specific IT skills in many on-site and near shore locations is also one of the reasons for Indian IT firms to expand their global delivery capacity.
Indian techies are more comfortable with newer technologies than the legacy skills needed to work on platforms like mainframe. Many of the North American and European countries offer certain skill sets, which are not sufficiently available in India, said a source.
Market analysts feel it is also the sign of the maturity of the industry as it is seriously looking to go beyond labour arbitrage. Depending upon the areas they operate in, Indian IT firms are now realizing that there are certain services which need to be delivered near-shore and in an on-site environment. Besides, having a centre closer to the customers locations also help them gain access to certain language skills, said Gaurav Gupta, Country Head (India), Everest Group.
