Emerging destinations like Philippines and China are asking for their slice of the pie with huge investment in human and IT resource infrastructure. A recent report by BPO research firm, Value Notes Research cites that quest for new market discovery alternative to India, that has began in the turn of the century exploring destinations like Malaysia, Singapore, South Africa, Egypt, Poland, Bulgaria, Romania, Mexico etc contending for greater share of total offshoring market.
However, Software Technology Parks of India (STPI) director-general N Krishnan is confident on the fundamental robustness of Indian outsourcing saga and terms the countrys position as unassailable in experience, quality and cost. Peeved by the pricing pressure, some outsourcing players who ditched India for alternative locations had burned their fingers by not meeting accepted service delivery standards. Undoubtedly, pricing blues could be beaten by migrating the outsourcing contracts to capable Indian rural shores, he says.
DK Sareen, executive-director, Electronics and Computer Software Export Promotion Council of India says that India still enjoys the vanguard position as Indian small and medium business (SMB) IT companies are hunting where top tier-IT majors fail to prey.
After the government hiked the incubation market access initiative allocation from between Rs 75 and 85 crore last year to around Rs 124 crore this year, it helped in foraying of Indian IT SMBs into unreached markets of US and Europe, he says.
Yet, newer emerging destinations like Kenya, Ghana, Senegal, Brazil, Argentina, Mexico, Malta, and Lithuania are looking to leverage their strong domestic industry, language capability, proximity to developed nations in addition to the cost advantage to fuel the economy through outsourcing.
The Value Notes Research report contends that every emerging destination is looking to grab a substantial share of the outsourcing industry. The Philippines and China have been able to position themselves quite strongly in the buyer community. The Philippines has also established itself as a preferred or first choice destination for offering contact centre services to the US clients. Alternately, countries like Malta, Lithuania, Vietnam, Kenya and Ghana have seen growth in their local outsourcing industry driven largely due to domestic clients. With maturing service capability, vendors in these destinations are now looking towards graduating to international clients with the help of government incentives.
On the flip side, some of these destinations have their own set of drawbacks including political and economic volatility, data security concerns and the problem of scalability due to the relatively limited manpower availability.
Asit K Barma, Tamil Nadu State Council member of ICT panel of Ficci and vice-president of Hinduja group company, Defiance Tech too discounts the threat perception to outsourcing emanating from China. He argues that open culture of individual entrepreneurship in India is better poised than government-led IT business and infrastructure growth drive of China.
However, with growing saturation among the large offshore destinations and the buyers need to diversify risk, the industry may witness greater growth towards smaller locations.
While these smaller and less matured (in terms of offshoring) destinations are likely to find it difficult to become a first choice destination for outsourcing, they can enter the industry by positioning themselves as complimentary outsourcing destinations, the report says.
India is known for its large talent pool with domain knowledge ranging from engineering, pharma, statistics, and legal to a strong IT labour pool, and the ability to scale. Moreover the slump in the US market is putting pressure on the margins, forcing Indian BPOs and multinational companies to diversify their client base.
Interestingly, companies that have shifted services to India on a large scale are gradually trying to diversify their outsourcing strategies by having a secondary or backup location. For instance, Wipro, TCS, Infosys, Satyam, WNS, OfficeTiger and Cognizant have set up development centres in Australia, China, Sri Lanka and Japan to serve the Asia Pacific market, observes the report.
K Purushothaman, regional director, Nasscom says that Indias roadmap and gameplan to beat the competition from other destinations is in the creation of tier-II and tier-III low-cost ecosystems within the country.
The fad of rural BPO is here to stay as cost advantage between the countrys metro cities and tier II and III cities, including rural hubs to the incomingclients is well enlightened to offer a mixed bag of cost tariffs in operating from different locations, Purushothaman contends.