Wednesday, March 12, 2008

Indian Outsourcing, is it in decline?

Following up Monday's post, can I recommend a good article challenging commonly held assumptions. It's by Sramana Mitra and is called the, "The Coming Death Of Indian Outsourcing" and is available either on Forbes or on her blog.

Very similarly to my post on Monday she looks at whether it is sustainable to compete on cost in the longer term. She makes the good point that if India continues to experience wage inflation for skilled labour at current rates, it won't be able to compete on cost and it is debatable if it can compete on value. She writes generally about the Indian IT industry, but I think her points apply equally to the Indian call centre industry. Her point on innovation (or the absence of it in many offshoring propositions) is particularly valid.

My view is that some of the larger Indian companies (Wipro, Tata, etc...) probably will adapt and remain competitive, as will the the wholly owned Indian subsidiaries of multi-nationals like IBM and Accenture. These firms, though, offer a much greater value proposition than just cost reduction.

In contact centres, I suspect there will be a similar trend. Indian wage inflation will push work back to Europe (especially Eastern Europe) and to newer destination like South Africa (see my post from last year "Offshore - why I would go for South Africa over India" and "Offshoring and mainland Europe").

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