TCS and Capgemini prove there's still life in the offshore IT model

The offshore IT delivery model is far from dead, despite moves to non-linear business models among IT services providers

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Recent announcements by Capgemini and Tata Consultancy Services (TCS) confirm that the offshore IT delivery model is far from dead, despite the move towards non-linear business models among IT services providers.

As technologies such as automation software and cloud computing reduce the need for low-cost human resources in outsourcing contracts, suppliers are able to grow in a non-linear way rather than just adding human resources for every new bit of business.

TCS recently stated that, contrary to speculation, it will not make large cuts to its India-based workforce, and Capgemini confirmed it will have more than 70,000 staff in India by the end of 2016 as it re-affirms its commitment to the offshore delivery model.

At the end of 2014, the French IT services firm had about 55,000 employees in India – 15% more than at the end of 2013. Almost all (95%) of the company’s workforce growth was the result of recruitment in India. In the UK, the company has about 9,000 staff.

This follows reports in India that IBM is making huge cuts to its India-based workforce

Aruna Jayanthi, CEO of Capgemini India, said it was on track to reach its goal of employing 70,000 people in India by 2016. 

Peter Schumacher, CEO at management consultancy the Value Leadership Group, which focuses on offshore services, said Capgemini has come a long way in India. 

“In just 10 years its employee base in India has grown 25-fold to more than 50,000,” he said, adding that the supplier's acquisition of Kanbay, an IT services firm with a big presence in India, in 2006 was important in building its initial offshore momentum.

“But merely increasing headcount in India to emulate the global delivery capabilities offshore firms already have is not a winning strategy. Capgemini still needs to figure out how to leverage its evolving delivery model to achieve higher organic growth rates and superior performance. Improving delivery quality is an important lever, but even more importantly Capgemini must develop advantages, rather than just eliminate disadvantages.”

According to AT Kearney’s ranking of business services locations, India is the best place for businesses to outsource services and is unrivalled in its scale and availability of skills.

Asian countries dominate the management consultancy’s index of the top 50 global locations, with six of the top 10 in the region. India (1), China (2) and Malaysia (3) make up the top three, while Indonesia (5), Thailand (6) and the Philippines (7) follow close behind, with only Mexico (4) splitting the group.

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