India’s outsourcers battle for customers in a cloudy universe
Still on top but heeeere comes China ...
Posted in Management, 27th March 2013 06:31 GMT
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Analysis The rumblings started in the late 1990s. Indian services companies were getting into outsourcing. Almost before the news broke, deals followed. Before long, India was a destination for all manner of serious jobs and a byword for getting things done well and at a price western nations struggled to match.
Fast forward a decade or more and India is still a dominant source of outsourced IT work, but challengers are now emerging from nations like China. Buyer behaviour is also changing. And a little thing called the cloud is also shaking things up.
Is India therefore still on top of the heap? Or does the nation's IT industry and its IT leaders need to start planning for a new reality in IT outsourcing?
Unsurprisingly, Indian IT industry body NASSCOM is pretty confident of the future prospects for the likes of Infosys, Wipro and HCL. Its vision is for aggregate revenues to reach a staggering $US300 billion by 2020, while its prediction for fiscal year 2014 is growth in the non-domestic outsourcing market of between 12-14 per cent ($12-15bn).
An in-depth analysis of India as an offshoring destination published last November by Gartner agreed that things are pretty good at the moment, with the country expect to maintain a three-to-five-year lead over rival nations. However, Gartner also pointed out that the rate of infrastructure development is failing to keep pace with customer demand, while labour and other costs continue to rise.
The report's co-author, principal analyst Arup Roy, told The Reg that the cost benefit of choosing India as an offshore destination will continue to decline, thanks to rising GDP and wages, and annual inflation of up to 11 per cent. He added that the country’s providers were also being challenged by changes in buyer behaviour, with North American and European clients increasingly looking to bring jobs back onshore as economic stagnation continues. Added to this is increased competition from rival locations in Asia, Latin America and even Eastern Europe.
Rise of the Asian tigers
China and the Philippines are two of the key alternatives in Asia. With a large pool of skilled but cheap labour, Chinese outsourcing vendors like Gamutsoft, Pactera and iSoftStone are now aggressively targeting multi-national companies, especially in areas like software development, and infrastructure management, according to a recent Forrester report.
To do this, they’re expanding nationwide coverage to tier five cities, recruiting more senior managers, consolidating to build strong service teams and, of course, hiring more graduates. However the industry is still very young with noticeable weaknesses in higher-level skills such as project management, while factors such as language ability, time zone and cultural barriers continue to be an issue.
Next page: Can China catch up?
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COMMENTS
Thanks...
and a byword for getting things done well
Thanks, seriously, I haven't laughed so hard in ages!
My own experience of Indian engineers is this:
Outsourced performance was rubbish, they could provide all of the paperwork but never got things done properly, and had a high turn-over of those actually doing the work (which is always a BAD sign).
Worked with a USA company who had hired an Indian engineer and he was great, language no real problem and knew his stuff.
The difference? In the first case they pay peanuts, in the second they paid a good salary. I guess that is how you get & keep good staff...
Forgive me for not shedding too many tears over India, whose entire model focused on undercutting local services, being undercut by other countries. When you play that game be prepared for someone else do undercut you.
I'm not entirely sure India offered "getting things done well and at a price western nations struggled to match", only the latter half of that rings true. India has a huge number of intelligent, well trained individuals. There are also cultural and language barriers, not to mention a significant distance involved which can introduce barriers. For a long time India has been a byword for getting stuff mostly done cheaply to reduce opex and get that bonus & promotion.
I'll be glad when they bring jobs back.....
I work as a service engineer for a large datacentre kit supplier. When the company first kicked off outsourcing they kept the jobs in our European call centre but because after a few months they reckoned that the Indian one was only x% worse they started letting people go here.....
But within a few months after that the quality of support we got from wipro started to go downhill, seriously downhill. Time to fix went through the roof. So they sent someone over there to investigate.
ALL of the first bunch of guys who had been trained up and who were not too bad in fairness had moved on. We had trained them well .... too well, and they had fucked off to the other offshoring companies for a big pay rise and now ALL the people answering the phones were all only partially trained and been in the job for a few months.
When they looked into it, they found that this behavior is endemic, the Indian callcentre staff get trained up and with a few months experience under their belts they move to a competitor for 20%+ pay rise every 6 to 9 months.
Last i heard, the yearly cost of the Indian callcentre is within 15% of the cost of European callcentre that it replaced but the time to fix is 40% higher and while you might have been waiting 10 minutes in a queue before, now when you ring you are guaranteed to be waiting more than an hour.
Starting to go the other way
I know of at least one company who is planning on bringing all their support & customer service back to the UK from India & Eastern Europe. They told me it may cost a little bit more in the short term (though not as much difference as it used to be) but the improved customer service will more than account for that, same with the other functions currently off-shored.
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