Outsourcing: India no more a preferred destination
By siliconindia   |   Wednesday, 04 March 2009, 20:46 IST   |    24 Comments
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Outsourcing: India no more a preferred destination
Mumbai: A long held delusion of Indians that their country is the preferred outsourcing destination beyond the reach of any competitor is all set to be done away with. According to Mike Lafford, group VP of Gartner Research, India is facing stiff competition not only from China, but from a host of other third world countries that are slowly emerging as preferred outsourcing destinations, reports CXO today. China is one country that India-based service providers have to keep looking over their shoulders for, especially when it comes to commodity-based services, Lafford. "The countries like Vietnam and Thailand compete with India on the pricing front. This is important especially in the current times," said Lafford. But the difficulties are not only from our Asian neighbors. "Countries in Latin America and others like South Africa and Brazil are slowly emerging as outsourcing destinations. Currently, they are catering to organizations based internally, but they could start competing with India and China in the future," said Lafford. Besides, there are also countries in Eastern Europe that are improving on the outsourcing front. These new emerging centers benefit from the organizations that are outsourcing for the first time and do not want to move far away from their region. Culture and language are also critical issues, says Lafford. However, he thinks that these new countries will find it hard to compete with the likes of India and China on the skills front, though they could pose a real threat on the culture, language, geography, and most importantly, pricing front. Speaking of China, Laffard said that though language and culture is a big hurdle for Chinese companies, they have a unique ability to easily learn from the mistakes made by their Indian counterparts and avoid them. So the way is somewhat eased for them. To maintain India's competitive edge in the sector, Lafford recommend that the Indian companies establish relationships with countries in geographies other than the U.S. and the other traditional regions. Secondly, language is still a problem in India and Indian service providers need to rectify it immediately. Though English-speaking regions seem to prefer India right now, if we want to tap non-English speaking geographies like Africa, South America and Eastern Europe, then language and culture will play a major role. The global economic meltdown can be viewed as a treasure trove of opportunity, if the approach is right. "We have seen companies that never outsourced, considering outsourcing due to the unstable scenario. Insourcing is another huge opportunity and this is seeing growth currently. However, service providers shy from this due to the lower business margins." Moreover, a downturn in worldwide economy, Satyam's fraud case and the terrorist attacks in Mumbai and supply chain and shipping cost issues in China are causing U.S. technology companies to pull back from the two traditional outsourcing locations-India and China. Citing these three global factors, an annual survey by BDO Seidman, LLP, one of America's leading accounting and consulting organizations, Tuesday suggested several technology firms would choose U.S. as future outsourcing location over India and China. "While last year may have produced an outsourcing bubble, 2009 will see companies retrench to survive in the face of reduced demand. The U.S. has become a far more viable option for them," said Douglas Sirotta, a Partner in BDO Seidman's Technology Practice.

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