IT Outsourcing India

THIRUVANANTHAPURAM: It’s been nearly two decades of happy living for businesses, content with the simple fact that outsourcing provided a clear
and significant saving in their cost structures. The time has come, it appears, for them to say goodbye to that well-worn model.

While first generation outsourcing relied almost entirely on the cost arbitrage model, enabling companies to clock savings by simply hiving off work to places that offered output at lower cost, second-generation outsourcing (SGO) is all about better value proposition.

According to G B Prabhat, founder-CEO of Chennai-based Anantara Solutions, the sheen has more or less been wiped off the cost arbitrage factor. "When it began, offshoring offered substantial cost saving, but over the years the savings have turned incremental. With SGO, what companies gain is a `step jump’ as against a slow movement over an incline", he says, adding that these turbulent times have made more companies sit up and take notice of this.

At the heart of SGO is the desire of companies to have a value proposition that addresses their business goals rather than just having a technology partner that will fix one of its immediate problems. "SGO guarantees all of the benefits of first-generation outsourcing, but what it also represents is a radical leap from the current era", says Mr Prabhat.

According to him, the key markers of SGO are, the business solutions being the driver, an ecosystem method of addressing problems that bring in the technology equivalent of an integrated supply chain management, and value-based pricing that promotes a risk-reward partnership between client and SGO provider.

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The global downturn has only slowed the rapid growth in India’s outsourcing business. In fact, the pressure on companies, and even governments, to reduce costs significantly is giving outsourcing business, a boom, which was deeply uncertain just six months ago.

The unemployment rate in US is at a 26 year high with 8.9%. But managers squeezed between political and survival pressures are choosing the bottom line.

J. Brandon Black, president and chief executive of the Encore Capital Group, a debt collection company based in San Diego, California, said he is planning to significantly increase his workforce in India in the next few years, in part because of the tough economic times, by hiring college-educated people.

Honeywell International Inc., a manufacturing firm based in New Jersey, plans to invest $50 million (Rs234 crore) in a new research and development facility in Bangalore that would employ 3,000 people.

Ranjit Tinaikar, a partner with McKinsey and Co., a consulting firm says, “in most developed economies, the workforce is ageing and the healthcare costs associated with employing those Western workers will continue to increase creating a ‘big opportunity’ for India.

Growth will slow this year because of the implosion of some of their largest clients: banks, mortgage servicing companies and Wall Street firms. But that does not mean revenue is no longer growing.

Since political pressures are making a difference in how business is done, many outsourcing executives say, one increasing trend is placing more Indian employees in offices in the client’s home country, ostensibly, which does not move abroad. But on the long run, many are likely to be moved across the globe.

Source : http://iitrade.ac.in/