I've long been a fan of Sramana Mitra - she has a terrific blog and has her own deep definition and framework for Web 3.0 . Forbes.com carries a fascinating article by her this morning: The Coming Death Of Indian Outsourcing , in which she talks about the new challenges facing Indian Outsourcing Companies.
As usual, Mitra's basic analysis is spot-on, although one can certainly take issue with her conclusions. There is no question that Indian OCs (Outsourcing Companies) now face unprecedented challenges, and cannot carry on with a "Business As Usual" approach for much longer.
This should not come as a surprise; competing on the basis of price alone is never a sustainable business strategy. In a price war between brands (or countries!), no supplier wins. And this price advantage is rapidly eroding, with the steep rise in software development labor costs and the deteriorating strength of the dollar.
On the upside, the quality and maturity of software provided by the Indian OCs has been improving steadily, and it was high to begin with. But those are merely the hygiene factors, not competitive differentiators; they are simply the stakes needed to stay in the game.
As Mitra says, Indian Outsourcing companies need to move up the food chain - not just focusing on software development and maintenance, but up towards design and then product definition. As she correctly points out, the "thinking" still comes from the OCs' customers.
However, things are starting to change. And that's the point: Realizing this vision may not be as far away as it appears! The shift is already beginning to happen, although it has not yet captured the popular imagination.
I wrote about this shift in an earlier article, Enterprise 2.0: Battle of the IT Supply Chains : as offshore providers move up the value chain, the relationship between these vendors and their Enterprise clients is changing. Instead of outsourcing specific, contained projects, companies are looking at IT development vendors as strategic partners - essentially, suppliers of IT business value.
Since most Enterprises use IT globalsourcing in some way, future competitive battles will not be limited to the Enterprises themselves; the competition will be between one Enterprise supply chain and another, each of which includes the primary outsourcing providers (whether international or domestic), their corresponding software and technology suppliers, then the next level of suppliers and so on.
My image from the previous article is reproduced below.
Their recent sustained successes have left the major Indian Outsourcing companies with significant cash reserves, so it would not be difficult for them to buy their way higher into the value chain. The required mindset change and organizational realignment, however, is another matter; those are always the most difficult of all!
Outsourcing is still in demand in India. This is very dominant because Indians offer their labor at a very low cost that's why many companies around the world building their customer service at India.
Posted by: philippine contact center | May 04, 2010 at 07:48 PM
Well said. I guess the Original article makes some simplistic assumptions that are just not true. Also the market economies are at play here. Sure the wages are rising in India, but they will stabilize.
Posted by: Contact Center Philippines | June 21, 2010 at 07:40 PM
I agree with your review. It is still popular and in demand in various countries. Everyone wants to have work at minimum cost incurred. India being at the top in outsourcing because in India people agree to work at lower cost.
Posted by: Software Testing Services | July 20, 2010 at 07:14 AM
Developing countries still got a bundle of work to be done and always turn to India, not just because of cost-effective, but because of the talented man power..
Posted by: Virtual Assistant Services | August 05, 2010 at 07:07 AM
The technical expertise available in India with low cost is also the reason for outsourcing...
Posted by: ezestseo | August 19, 2010 at 10:40 PM
Outsourcing to India will never die as long as the costs to move operations to India remain less than moving operations to another country in the world.
Posted by: The First Call Resolution Guy | September 17, 2010 at 01:56 PM
I like your review that Indian outsourcing companies provides their services at low cost and hence are dominated in this sector. I think that your suggestion will also be beneficial for them to improve themselves.
Posted by: Indian virtual assistant | October 29, 2010 at 10:44 PM
Actually, wage inflation in India has been considerably offset by the quality of the work and the availablity of talent. Hence when you look at the total cost of delivery, including the increased quality, your benefit in far more than cost arbitrage. If you have offshored to India just for the cost aspect, then you are missing out the bigger opportunity to increase your quality substantially.
My read is that while the currency exchange rates will continue to provide pressure, India's large talent pool and strong education system combined with a condusive business atomsphere will continue to drive outsourcing.
Posted by: Call Center Outsource | November 08, 2010 at 09:50 PM
Actually, wage inflation in India has been considerably offset by the quality of the work and the availablity of talent. Hence when you look at the total cost of delivery, including the increased quality, your benefit in far more than cost arbitrage. If you have offshored to India just for the cost aspect, then you are missing out the bigger opportunity to increase your quality substantially.
My read is that while the currency exchange rates will continue to provide pressure, India's large talent pool and strong education system combined with a condusive business atomsphere will continue to drive outsourcing.
Posted by: Call Center Philippines | November 17, 2010 at 11:48 PM
I have seen the less potentiality and talents Indian have. It's a fact that posting this article is likely an effective idea for them to be tapped and consider the factors they should have been considering to increase and enhance their IT market.
Posted by: Web Designer Philippines | February 16, 2011 at 09:31 PM
have a nice day
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Posted by: BPO India | April 06, 2011 at 05:42 AM
Even if outsourcing to India is dieing (which I highly doubt), there will always be another country that can do the job for less than it can be done on home soil.
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My read is that while the currency exchange rates will continue to provide pressure, India's large talent pool and strong education system combined with a condusive business atomsphere will continue to drive outsourcing.
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Even if outsourcing to India is dieing (which I highly doubt), there will always be another country that can do the job for less than it can be done on home soil.
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Posted by: winter clothes | November 29, 2011 at 07:47 PM
well I do not think so because India and different countries around the world are gonna change their strategy for outsourcing
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