The routine outsourcing of core elements of business by
European and North American companies to developing economies in
Asia has had a dramatic macro-economic effect, writes Harry
McDermott at Hudson & Yorke.
During the last fifteen years, Western companies (whether they
realise it or not) have been funding the R&D of the Asian
region and have effectively invested in the creation of a new breed
of competitor. In particular, India has emerged as a significant
economic force in its own right. Although the effects of the global
economic climate are still being felt in the region, with the IT
outsourcing business likely to miss its target of $60bn worth of
exports by next year, India is faring better than most, and its
economy is expected to grow at six per cent this year, according to
the Reserve Bank of India.
Whereas India was originally positioned as an outsourced
off-shore destination for western firms, ambitious indigenous
Indian firms are rapidly altering the dynamic of the outsourcing
sector by becoming major providers of international services in
their own right. This can be clearly seen in the IT sector, with
Indian service providers such as Infosys, Cognizant and Wipro
Technologies now considered important IT players on the
international stage. Interestingly, Wipro Technologies recently
announced its intention to increase its US and European staff - the
company currently employs 97,000 people of which about eight per
cent are outside India.
There is no reason to suppose that other sectors won't soon
follow suit. For example, consider the Indian telecommunications
sector, which is enjoying growth despite the downturn and has a
domestic market of 1.2 billion people with a reported 15 million
new mobile telephone users signing up each month . Indian mobile
operators are currently driving growth by offering call rates for
less than Rs1 per minute, and with the new government in place,
India is poised to see 3G, WiMax, unrestricted VoIP (Voice over
Internet Protocol), number portability, MVNOs (mobile virtual
network operators), and large investments in infrastructure that
should augur well for the tech sector in the long term.
Likewise:
• Reliance Communications acquired Vanco in the UK, a respected
provider of VNO (virtual network operator), services to European
corporate customers until running into financial difficulty
• Tata Communications are building a global fibre network
• Bharti are bidding for MTN in Africa.
This solid growth and investment in the face of global recession
are indicators of India's strength in the telecommunications arena.
Whereas Asian companies may not currently compete to provide
western multinationals with international managed network services,
it is probably only a matter of time before this market is shaken
up by the emergence of some new contenders. Vendors and consultants
in the West must take note.
Harry McDermott is CEO at sourcing consultant Hudson &
Yorke.