India’s outsourcers battle for customers in a cloudy universe
Still on top but heeeere comes China ...
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.