Outsourcing: India Derisking

New Delhi, March 24 | Updated: Mar 25 2004, 05:30am hrs
Indian infotech sector is derisking its business against rising rupee-dollar rates, building backlash in the US and an anticipated shortage of skills in niche technologies in India. The companies are actively looking at newer geographies to broadbase not only their markets but to set up global delivery centres.

Currently, US alone contributes 68 per cent of the total software exports from India. On the other hand, very few Indian companies have delivery centres outside India, making the industry vulnerable to geo-political and skills-scarcity risks.

National Association of Software and Service Companies (Nasscom) president Kiran Karnik says Indian software companies will have to look at other countries in order to build defences against geo-political risks, regional economic conditions, change in currency rates and possibly and an anticipated shortage of skill pool in some of the specific technology areas.

Geographical spread is a must. Not only for the markets but also to broadbase delivery capabilities. Indian companies are handling mission critical operations of their clients and heavily dependent on telecom infrastructure. Multi-geography presence will ensure business continuity, says Mr Karnik.

The companies will also be able to take advantage of skill pool of other geographies. According to a KPMG report, India will witness a shortfall of 5 lakh skilled people in IT and IT enabled services by 2009, based on existing human resource supply trends.

Some of the companies have been proactive and have already set up global delivery operations. For example, Tata Consultancy Services (TCS) has set up development centres in Hungary, Uruguay and China. Infosys is also setting up a centre in China. The trend to set up global delivery centres is picking up and even BPO companies are looking at options, adds Mr Karnik. BPO companies such as MSource and Daksh eServices have set up delivery centres in Mexico and the Philippines respectively.

The research and consulting firm Gartner India country manager Partha Iyengar says Indian firms are serious about derisking their businesses.

KPMG executive director R Venkatraman agrees that there is an increasing interest in Indian companies to look beyond US market. The Indian companies are now seriousabout entering other markets. And, I hope that Indian market neglected by most of them so far will also receive some attention, says PriceWaterhouseCoopers (PWC) executive director Ambarish Dasgupta. Declining to give names, almost all the consultants FE spoke to indicated that definitive derisking strategies were taking shape.

Stronger India Brand Emerging
New Delhi: India has left its competing countries far behind as far as its brand recall in global markets is concerned.
Amidst tremendous pressure to lobby against anti-outsourcing policies of the US government, Nasscom president has a reason to smile. India is receiving unprecedented attention of industry, media and governments globally. This will help Indian companies in the long-term to have an edge over other countries that are considered to be Indias competitors in outsourcing business, says Mr Karnik.
Mr Karnik suggests that the Indian companies should also look for increasing onshore delivery (delivery centres at clients homeland). Nasscom is not in favour of a 100 per cent offshore delivery model. A balanced onshore delivery capability will help in building customers confidence and mitigate the risk involved in transition of offshore work, he adds.
However, Indian companies should learn a few lessons from backlash and evolve new outsourcing business models.

Apart from the US, Indian exports are focused on a few countries like UK (14% of total software exports), Japan (2.82%) and Germany (2.6 %). Nasscom says countries such as France, Netherlands, Canada, Taiwan also have a tremendous potential for growth.