Indian outsourcing firms lag in infrastructure

July 16, 2008

Research says that Indian outsourcing firms have not been progressing. Reasons: Infrastructure services fall short; firms desist from making large capital investments and distance between supplier and client is more disturbing for their operations..

INDIAN OUTSOURCING firms have not made much progress in signing significant infrastructure deals. Research indicates that there are three primary reasons for this lack of success. First and most importantly, infrastructure services (other than help desk and desk side support) are a set of integrated, highly automated processes. The high levels of automation greatly reduce labour, which in turn nullifies the labour arbitrage advantage the Indian firms look for and have created in their business models.

Second, the Indian firms have resisted making large capital investments. Many, if not most, infrastructure deals require that the provider buy and/or supply significant amounts of hardware as part of the client solution.

Domestic providers are comfortable making large capital investments in leveraged infrastructure while most of the Indian providers remain hesitant. None of these problems individually create a huge obstacle, however, collectively they are difficult to overcome and this has not gone unnoticed by the Indian providers.

Ramesh Manghirmalani said, "Conceptually we believe that Wipro’s recent acquisition of domestic infrastructure provider Infocrossing is an example of how the Indian firms can successfully deal with the above noted disadvantages. And we believe that other similar deals are in the works."

Finally, the distance between supplier and client creates several issues for the Indian firms. The cost of telecommunications is higher at long distances and the chance of failure is greater, desk side support requires a local presence and distance increases the chance of a force majeure event such as political turmoil, civil unrest or a natural disaster interrupting service. Infrastructure, unlike application development services, cannot withstand even short outages without serious impact on the client’s business. Together these issues add up to a significant issue.

Source :  http://www.merinews.com/

 

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Economic causes increases Indian outsourcing

May 9, 2008
Facing a troublesome economic slowdown, service providers in the US are expected to accelerate the rate of offshoring IT services, according to Gartners latest report.The information technology research and advisory group asserts that lowercost locations such as Mumbai, India will remain the location of choice for IT offshore services for North American and European buyers causing trouble for UK firms.

Gartner believes that buyers of IT services will cease to focus their attention on cost containment by aiming for greater cost reduction and productivity increases in their sourcing decisions.

Gartners research director J T Singh believes that India will have an advantage over other offshore locations due to its proven productivity and competitive rates.

Factors that will give India the edge over other offshore locations are scale and quality of labour. North American and European buyers of IT services have been the force behind a growing offshore services market and India is central to almost any discussion of offshore services delivery for these buyers, Singh said.

The USs actions could have worrying implications for UK firms, however, as organisations in differing counties experiencing similar economics turmoil will also seek to reduce IT costs by accelerating the use of offshore labour.

Gartners research vice president Ian Marriott said that if the economic downturn is not reversed in the US by the end of this year the UK will certainly face a similar position to its Atlantic service providers.

The US economic downturn will spill into the UK and will ripple through the rest if Europe. Were not seeing the same effect in the UK now but if things dont pick up in the US by December its likely that more companies form the UK will source to places like India.

Although smaller service providers are pitching to a different market, some who are in competition with larger service providers are going to find offshoring difficult, Marriott said.

Source : http://www.offshoringtimes.com/

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Indian firms close to inking deal with UK cos

April 16, 2008
CHENNAI: With India becoming the preferred destination for UK-based private equity (PE) firms to park money, two IT firms are "close to inking" a deal with PEs to fund their expansion plans.

Refusing to disclose the identity of the firms and the amount, UK India Business Council (UKIBC) Chief Executive Sharon Bamford told PTI here today that the PE firms were seriously scrutinising 26 Indian companies for investment, out of which two companies would sign the deal soon.

The High Networth Individuals of UK were very much interested in investing in India, particularly in IT, marine infrastructure, engineering, oil and gas and insurance sectors, she said.

Money was not a problem but the government should liberalise certain policies to attract more investments, mainly in retail, which was expected to be the major sector in the coming years, she said.

Stating that auto component was another major sector that had evinced interest among the UK investors, she said the UKIBC would help ambitious medium-sized companies to find a perfect financial partner in the UK.

"So far, our endeavour in facilitating introductions between UK and Indian companies has turned out successful and we hope more such deals to materialise in the future," she added.

 
Source : http://economictimes.indiatimes.com/ 
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