The future of India?s outsourcing locations?Tier II cities in the country definitely have a lot to catch up in order to elevate. Even though IT hubs like Bangalore, Hyderabad, Delhi and Mumbai are saturated, multinationals and the major Indian software companies still shy away from investing a major chunk in the emerging cities. Interestingly, while Tier II Indian cities are not able to meet expectations in terms of being successful outsourcing hubs, other countries like China and Philippines are lucratively promoting their untapped cities, analyses a report ?Top 100 global outsourcing destinations? by Tholons Investment Advisory and Global Services Media.
Less developed cities like Kolkata, Chandigarh, Coimbatore, Jaipur and Bhubaneswar have been facing a constant decline for the past four years in the annual ranking of this survey. The Tier II cities today face growing challenges of moldering infrastructure, superior living costs, high attrition rates, increased competition from foreign offshore centres and terrorism threats. These factors are hurting the $60 billion Indian software industry as these mega cities are the nerve centres of the Indian software outsourcing industry in the near future. An important concern is that the vendors also have to invest a huge amount of time, energy and money training the youth in English speaking in these cities which lack high profile education.
Take for instance Kolkata, which was at 9th position as an outsourcing destination in 2007 has reached 23rd in 2010, courtesy a poor international business environment. Even though Chandigarh has presence of big names like IBM Daksh and Genpact, the last two years have seen no new MNCs entering the city. High real estate cost continues to be a major concern in the city.
Not to forget is the pink city of India, Jaipur, which has been experiencing a royal ignore from the government for the past two years. The city was included in the Tholons ranking at 31st position for the first time in 2008 and is now at 41. Due to close proximity to Delhi, the talent pool is always ready to move out of Jaipur and settle in the metropolitan capital. Infosys, Teleperformance, Genpact, Deutsche Bank, Wipro, Nagarro, Truworth, Tech Mahindra and QH Talbros are some prominent firms in the city. But in the last one year, there have been no new delivery centres in the city.
On the brighter side, cities like Bhubaneswar and Thiruvananthapuram were recently included in the ranking. Last year, many technology firms like Genpact and Mindtree consulting had planned long-term investment plans for Bhubaneswar. Saugata Sengupta, consultant at Tholons Investment Advisory signifies that with cities coming from South America and MENA regions, it is compelling to see stiffer competition arising from these locations in order to capture a significant share of the global outsourcing market.
Each city in the list has been positioning itself and their respective niche services and specific target markets.
Pointing towards the strength of India?s outsourcing rival China, Beijing is second in the list of global emerging cities. Its strength lies in scale and labour for ITO services. The ITO sector captures 80% of the total outsourcing revenues of the city.
A notable outsourcing city of the MENA region, Cairo is an important emerging place this year. The fusion of nearshore advantage to Europe and multilingual skills of the people, positions the city in delivering quality voice-based services to European and Arabic markets. Other cities overshadowing the Tier II cities of India include Sao Paulo, being the banner high-value ITO city of Brazil. Also in the race is Vietnam?s Ho Chi Minh, an ITO-centric city, has significantly dropped three places due to scalability and employability of its labour pool.
?The fact is that Indian Tier II cities have seen a dip in their ranking since they have failed to live up-to the promise they had a couple of years back,? concludes Sengupta.