Is India becoming too expensive for offshoring your IT?

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India is synonymous with offshoring. But in this guest post NOA board member Debra Maxwell who is global BPO director at Arvato where heads up the company's $200m global contract with Microsoft, discusses the changing geographies of outsourcing and the factors that make emerging offshoring locations a good bet.

Challenging offshoring cost effectiveness in India: how is the market responding?


By Debra Maxwell,

"India is undoubtedly still a prominent offshoring location, but wage inflation and high staff turnover mean the cost savings aren't as impressive as they once were. At the same time, the necessary skills and infrastructure are improving in several up-and-coming destinations, leading to a shift in the geography of outsourcing. This competition can only be good for companies looking to offshore and their customers; it's driving improvements in quality while keeping costs low.

While cost will always be the overarching driver for offshoring, smart companies are looking for the right mix of cost and quality from their offshoring arrangements - be that accurate data transactions or excellence in customer service or both.

To really challenge India as a major destination for offshoring, emerging locations need to have a combination of attributes at their disposal. The ease of doing business is a key consideration, including the level of government support, political stability, accessibility and security. Investment in infrastructure is another prerequisite; including access to technology, decent internet bandwidth and a reliable electricity supply. With these factors in place, those countries with a large, highly-skilled and university-educated workforce with the right language capabilities are creating the right environment for successful offshoring.

But the destinations that really stand out from the crowd are those that deliver commonality between your business or customer base and the location. No matter what the cost benefits are, it's easy to be put off when it's difficult to communicate with agents in offshore locations due to language or cultural differences.

For this reason, we often see French companies outsourcing to Morocco and Spanish speaking business going to Mexico. So, India was an obvious choice for English-speaking companies. But we're now, for example, seeing the Philippines emerge as an alternative destination, especially for American companies, thanks to the neutral accent and employees' familiarity with American culture and society.

Indeed, a recent study by GlobalEnglish showed that of the 30 countries with the largest labour forces, the Philippines scores highest in terms of workers' fluency in English -- above India, Canada, and, astonishingly, the UK.

The final consideration should be about the type of service you're looking to offshore. Not all destinations are equally strong across front and back office services. Some, like China, are perhaps strongest in ITO, whereas the Philippines has always been recognised for providing good voice services but is increasingly delivering growth in BPO.

One size doesn't fit all, so I for one welcome the addition of new destinations on the global offshoring map, and the choices and diversity they bring."

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4 Comments

"...a recent study by GlobalEnglish showed that of the 30 countries with the largest labour forces, the Philippines scores highest in terms of workers' fluency in English -- above India, Canada, and, astonishingly, the UK..."

That raises more questions about the quality of this study than about the spoken English of the various countries.

I would hardly say the Phillipines was a haven of political stability. The shadow of Imelda Marcos hangs over them. Hiring is difficult as you have to be from the right social background.There are many political factions. It is true though the spoken English is often better than other offshore destinations and a more familiar American type of accent is common. The risk is though the cultural difference. The Phillipino teams I have worked with would rather work 168 hour weeks than fail to deliver. It's a very subserviant attitude and you have to monitor things closely otherwise teams can run themselves into the ground.

There are lot of BPO in Philippines that are relevant and competitive it offshoring and method of delivery.

There are many quality developers which are looking for job, that makes this 'expensive' a very short blurp.

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This page contains a single entry by Karl Flinders published on September 24, 2012 12:48 PM.

Businesses offshoring analytics work to India was the previous entry in this blog.

General Motors recruiting 10,000 to fill IT outsourcing void is actually bad news for IT pros is the next entry in this blog.

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