IT Outsourcing India

The Indian job market has become expensive and some studies have proved it. It is likely to jump 14 per cent this year, up 12.6 per cent from the last year, placing India atop the list of 47 countries worldwide, for the second year in a row..

A QUESTION like this will upset people, especially those who are directly or indirectly associated with the outsourcing sector in India. But there are indications that the bubble may burst, sooner if not later, if the requisite measures are not initiated now. If you are an employee of an outsourcing firm, you will be hearing some gossip doing the rounds. So is there a solution to this problem? A BIG YES is my answer. So there is some reason to smile now!

Some years ago, a new job opportunity arose for many youths in India, with the dawn of outsourcing. Those were boom times since many fresh graduates were able to earn handsome salaries. So what has currently gone wrong? I have some answers to this question like: India becoming an expensive outsourcing destination because of inflation and high attrition rates; competition from latest entrants becoming fierce; and finally, Barack Obama, the Democratic presidential candidate. The Indian job market has truly become expensive and some studies have proved it. According to a recent report from the London-based human resources firm ECA International, average wages at multinationals in India are likely to jump 14 per cent this year, up from 12.6 per cent, putting India at the top of the list of 47 countries worldwide for the second year in a row. "Salaries in India are catching up with that of developed nations at a faster rate (than in many other Asian countries)", says Lee Quane, the Hong Kong-based Asia General Manager for ECA. He feels that the culprits behind the rise are inflation and attrition.

Now let’s look at the other roadblock, which is the tough competition that India has to face in the global outsourcing market. I’ll substantiate my statement with some statistics. Focused on UK’s top IT service providers, a study by Pierre Audoin Consultants (PAC), a market research firm, showed that China, Morocco and Hungary are the new locations of choice to set up offshore sourcing centres. "India’s position as the premier low-cost IT sourcing centre is not under serious threat in the near term. But what we are seeing is vendors looking to reduce their reliability on India’s heated labour market," Nick Mayes, a senior consultant at PAC, said in a statement. SAP AG has announced plans to expand its BPO operations in countries like Eastern Europe and China. The reason behind this switch is that outsourcing work to India is proving to be pretty expensive. So it seems that stiff competition is mainly because of the ‘heated labour market.’

And we have some political dimension to this story too, viz., Obama’s views on outsourcing. Though it remains to be seen if he emerges as the most powerful man in the world, let’s currently focus our thoughts on his views. We know that Obama has been playing the anti-outsourcing card since he entered the presidential race. Recently in a speech, he added fuel to the fire by saying, "….Unlike John McCain, I will stop giving tax breaks to companies that ship jobs overseas and I will start giving them to companies that create good jobs right here in America."

Yes, that is an offensive comment by Obama. Now let’s see what the Indian reply to this comment is. According to NASSCOM President Som Mittal, Indian software exports are unlikely to be affected by this since off-shoring is a key economic decision for US companies. Mittal feels American companies will themselves favour outsourcing. "US companies are facing a shortage of talent to drive their growth. It is in their interest," Mittal said. Now, don’t you think that it is really nice to hear these words from him? Well, I think that should keep Obama at bay, at least for sometime. You may think that is a lot of problem. I feel the problems faced by Indian outsourcing are mainly because of the soaring salaries and attrition rates, as pointed out earlier. This has led to many questions being sked about the future of the outsourcing industry in India including the question, "Is Indian outsourcing on its deathbed?"

I feel companies should start setting up their facilities in smaller towns and villages rather than in big cities. It is a strategy that has been obvious to most industry leaders for a long time but has not yet been adopted widely. This will create a larger workforce, because a majority of our compatriots live in the villages. When companies take the jobs to the rural pockets, they will create a world of opportunities for the said rural masses. This will bridge the gap between supply of and demand for labour. It will invariably help in controlling rising salaries and attrition. An interesting experiment is being conducted by Satyam Computer Services’ founder, Ramalinga Raju. His philanthropic endeavour, GramIT, aims to ship business process outsourcing projects to some of the 600,000-odd villages in India, dropping the cost-structure further even while creating jobs.

GramIT employees earn USD 1,000 a year vis-à-vis the USD 10,000 to USD 15,000 that urban employees with outsourcing companies make. GramIT’s attrition rate is close to zero. Employees successfully handle jobs such as data entry and transaction processing. Seven such centres are operating in Andhra Pradesh and 10 more are slated to come up. Each centre averages 70 to 100 employees and is often the pride of the village. Even the likes of HDFC bank and the Tatas have taken initiatives to set up rural BPOs. I think the GramIT model can prove to be the survival formula for the low-end of the Indian outsourcing industry. If the cost structure is pegged at the right level, India can also work for other emerging markets. And, more importantly, India can work for itself.

Source :  http://www.merinews.com/