Thursday, March 06, 2008

PAC Outsourcing Study Is Not Really a Knock on India

Source : Click here

I've seen two recent reports that were pretty quick — too quick, in my mind — to question India's status as a favored offshore destination.

The headline on an story: "India Losing Luster as Offshore Site." ZDNet India at least places a question mark at the end of its similar headline: India Losing Status as Offshore King?

Both articles cite research from French consulting firm Pierre Audoin Consultants (PAC) that found that just two of 21 offshore delivery centers established in the last year by service providers like IBM and Accenture were located in India. Four of the centers are in China, and three each were launched in Morocco and Eastern Europe.

While these companies were almost certainly influenced by India's fast-growing wages, shrinking talent pool and rising value of the rupee, it seems just as likely that they want to diversify and appeal to a wider variety of outsourcing clients, especially those based in Europe. Says a senior PAC consultant:

… what we are seeing is vendors looking to reduce their reliability on India's heated labor market, while adding non-English language skills to support clients in regions such as Central Europe.

It's interesting that the PAC report mentions Morocco, for instance. In a July blog on the increasing number of offshore options, I noted that the country was popular among companies looking for French speakers to staff call centers. Given the growing popularity of outsourcing in Europe, it makes perfect sense for service providers to establish nearshore alternatives for their European clients.

In fact, according to an August story in The Economic Times, Indian service providers are angling to use some of their ample cash reserves to acquire European service providers.

It's worth noting that, according to an EquaTerra report released just last month, all UK companies that offshore all or part of their IT functions send at least some of the work to India and plan to continue to do so. Echoing the PAC report, EquaTerra found that the number of UK companies outsourcing to Eastern Europe grew from 17 percent in 2006 to 25 percent in 2007.