Indian outsourcing companies need to watch their backs

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Indian outsourcing companies need to watch their backs

Kathleen Hall

China will take low-end ICT work away from Indian companies, warned Vineet Nayar, CEO of India's fourth largest outsourcing company HCL Technologies.

Nayar said the fact that Chinese workers cost less removes a traditional advantage of India.

"The reason business moved to India in the first place was because of economics. It's a fool's paradise to think that it will not grow there [for the same reasons], people work 18 hours at half the cost."

China has 350,000 computer science graduates every year and they cost less than their equivalents in India. Chinese service providers such as Bleum and VanceInfo are currently targeting the UK market for growth.

"[Before contracts moved from the west] the US and Europe did not see it coming - they continued to deliver the same value to customers at higher prices," said Nayar. "We will be out of business too if we don't drive costs down and value up. To predict the same growth journey we had from 2005 to 2010 as 2010 to 2015 is not going to happen."

Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, said India will be difficult to catch in BPO offshoring, but added that China is a threat to its dominance in IT offshoring.

He said the Indian companies need to move on from their traditional models. "Unless the Indians up their game in IT, they will be caught up by the Chinese in particular. The Indian suppliers have to decide whether they are truly global or large offshore providers with some global capabilities."

HCL's Nayar said if the company is to grow over the next decade it must move away from simply offering technology solutions to business problems, and be more proactive he said. "If that isn't something we can solve in the next 24 months we will be obsolete."

HCL has plans to expand the company further. "Mergers and acquisitions are very important to us. Acquired companies should be in charge of leading and filling the hole you have. We do not believe size matters. Boring companies define vision on a size-agenda. Instead we are defining ourselves on an innovation-agenda."


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