India is losing its stranglehold as the offshoring destination of choice as China, Morocco and Hungary gain ground.
Fewer global delivery centers were opened in India by the United Kingdom's 20 largest IT services suppliers than in each of the three countries over the last year.
The competitive Indian labor market is driving companies to alternative destinations, say Pierre Audoin Consultants (PAC) in its report.
The 20 largest U.K. companies analyzed in the report included Accenture, BT Global Services, Capgemini, Capita, CSC, EDS, Fujitsu, HP, IBM and Logica.
Of the 21 centers opened since January 2007 by the big 20, only two were in India, while four were in China, with three were Eastern Europe and Morocco respectively.
Nick Mayes, senior consultant at PAC, said there is no "serious threat" to India's outsourcing dominance in the short term but companies are looking to reduce their reliance on "India's heated labor market".
China's emergence as a global sourcing hub has traditionally been slow but the report found that BT Global Services, EDS, IBM and Tata Consultancy Services (TCS) have all opened sourcing facilities in the country in the last 18 months.
The two facilities launched in India were both outside the traditional hotspots of Bangalore and Mumbai--IBM's new center in Noida and TCS's expansion site in Hyderabad.
Nick Heath of Silicon.com reported from London.
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Innovation or Disintegration
Like any other boom that is unplanned and lacks long term approach, bubbles burst and markets crash.
There are a multiple reasons why India might be left following the race after winning the lap.
In the past and current century, the United States and Europe have remained as the leaders of innovation and creativity. Institutes like MIT and Stanford continue producing graduates who not only are technically sound but innovative. To have a sustainable growth, technology needs to be followed by ideas and needs, instead of the other way round.
Companies and countries which follow ideas with technology often face this crisis. As U.S. and European companies feed on their technical skills while the flag of innovation remains beached on their lands, this results in great products and profits.
Indian companies made great efforts to fulfill the technical demands of US and European companies and when the price margin didn't remain competitive they began to offshore to China.
What India needs to realize is that companies are not nationalist in the current times; they are global and would not waste a second thinking for better places to offshore or outsource.
To sustain growth, innovation and creativity are the vital elements for organizations which keep them attached to a particular region.
India needs to focus on producing and hiring graduates with not only technical skills but also entrepreneurial skills who know how can they establish and develop companies like Google, Facebook, Microsoft, Amazon, e-Bay, Oracle, IBM and Cisco. Companies that feed on their own ideas, creativity and research.
During this process instead of focusing on outsourcing and off shoring opportunities Indian companies should have focused more on partnerships and alliances that are mutually beneficial not just in terms of material but also in terms of knowledge sharing and true development of organizations. This can be best achieved by practicing the agile model fairly as it spotlights on collaborative teams.
With the agile mind set, everyone, from the project manager to the junior developer, is involved in communication with the client, resulting in business understanding and knowledge growth.
Coming to the financial and economic factor, Indian companies need to operate their cash flows in Euro's as the U.S. dollar is losing its value swiftly and the euro is the next global currency. This can even worsen the condition if Indian companies do not modify their pricing model.
The pricing model needs to be based on the project scope and complexity rather than rigid pricing which is usually based on the popularity and reputation of the company itself. This again requires business analysis skills along with excellent expertise of requirements gathering, analysis and design phases while estimating the RFP's or requirements.
The best solution for this is the agile framework, as pricing done through agile framework offers better ROI for both the vendor and the client. But agile framework essentially requires business analysts, project managers and technical employees to have both business and technical know how, as the agile model requires day to day based communication of the development team and the client.
This brings us back to the need of technical human resource with economic and business knowledge.
India is not the only country that has faced this crisis. We should not forget the Indian capitalists were the ones who wisely benefitted from the dot com crash resulting in a great growth to India's economy and also they most efficiently utilized the 10 flatteners mentioned in the book "World is Flat" by Thomas Friedman. But the new 11th flattener is Innovation and Creativity for sustainable growth.
It's not too late as Indian companies are moving towards the Question Mark from the Cash Cow quarter after enjoying a money-spinning time period as the Star. I am sure Indian think tanks have a back up plan to safe-guard their strength.
Posted by Ali Zaidi on Thursday, March 06 2008 12:28 AM