Companies are keeping their options open when it
comes to choosing where to send their project work.
India has long dominated the offshore market—but that
may be changing as other outsourcing players around
the globe angle for a piece of the action.
Part of it comes down to simple economics. In the
quest to control costs, companies are making cuts in
just about every area, and outsourcing is no exception.
But India has also been forced to contend with some
other issues, including rising salaries, the terrorist
attacks in Mumbai and the high-profile implosion of outsourcing giant Satyam in the wake of accounting fraud
A whopping 61 percent of 221 IT decision-makers
surveyed said they have concerns about or wouldn’t
work with Indian services companies,
according to an InformationWeek study
done after the Satyam scandal broke.
And more than half ( 56 percent) of
respondents said they believed less in
Indian outsourcers’ value proposition
than they did two years ago. The biggest
shortcoming? Fifty-five percent of
respondents reported their Indian service providers fell short of expectations in
delivering projects quickly.
Research firm IDC reduced its forecast
for IT spending growth in Asia/Pacific
(excluding Japan), with the overall uptick
now expected to be only 1. 4 percent, down
from the earlier estimate of four percent.
Specifically, IT spending in China is
expected to increase 6. 5 percent, down from 9. 1 percent,
while India’s boost has been cut to 5. 7 percent from 10
Spending shortages aside, India is also still confronting the fallout from the terrorist strikes of last
“While the attacks in Mumbai did not target the outsourcing industry, we know that companies that have
captive operations or outsourcing providers in India took
note of the potential for disruption to their operations,”
Arno Franz, partner and Asia-Pacific president at TPI
told ZD Net Asia. Yet no other country “presents a serious threat as a key outsourcing destination,” he said.
“China is still very much an emerging destination, while
it is debatable whether any other single country has the
breadth and depth of skills, experience and infrastructure
to seriously challenge India's position," Mr. Franz explained.
That doesn’t mean other nations won’t try. This
year’s Gartner’s 30 Leading Locations for Offshore
Services found that India and China still lead the pack,
but there were credible alternatives around the globe.
“Countries such as Mexico, Poland and Vietnam
have continued to strengthen their position against
leading alternatives, while others have forced their
way into the top 30,” says Ian Marriott, research vice
president at Gartner. “These countries will be seeking
to take advantage of the opportunity created by the
increased focus that many organizations now have on
cost optimization, as a result of the current economic
The four countries that left the list this year were
Northern Ireland, Sri Lanka, Turkey and Uruguay. The
new entrants were Egypt, Morocco,
Panama and Thailand. Strong interest in
nearshore locations was a key factor,
with language skills, cultural compatibility, time zone and travel time cited as key
considerations. French companies, for
instance, are increasingly outsourcing to
Morocco, where they have access to a
French-speaking workforce, and many
U.S. firms are moving work to Latin
America, where time-zone challenges
can be reduced.
Companies can—and do—bring work
back home, of course. In the wake of
recurring delays to its 787 Dreamliner
passenger jet, U.S.-based Boeing is looking to wrangle back work previously
shipped around the world to companies in Britain,
France, Germany, South Korea, Japan, Sweden and
Italy, just to name a few.
“We will probably do more of the design and even some
of the major production for the next new airplanes ourselves as opposed to having it all out with the partners,”
Michael Denton, Boeing vice president of engineering, told
The Associated Press in October 2008.
And IBM announced its two latest global service
delivery centers aren’t in Bangalore or Mumbai. Big
Blue picked two spots on their home turf: East Lansing,
Michigan and Dubuque, Iowa.
In another twist, Indian companies are now setting up
in the United States. Wipro Technologies launched service delivery centers in Georgia and Michigan. And Infosys
Technologies and Tata Consultancy Services have invested millions to open up shop in the United States.
attacks in Mumbai
did not target the
industry, we know
that have captive
providers in India
took note of the
disruption to their
—Arno Franz at TPI to ZD Net Asia