Outsourcing: Evalueserve Interview (Part 8)

By guest author Tony Scott

The Future of Outsourcing in India

Tony: I don’t know if you have read Sramana Mitra’s article “The Death of Indian Outsourcing”?

Alok: Wow, that’s pretty provocative – but no, I haven’t.

Tony: She basically said that there are many challenges to the growth of the outsourcing industry, particularly for those companies that are providing a pure labor arbitrage model.

Alok: I think there is some truth to that. Pure labor arbitrage in business process outsourcing may not work. If you say “death of call center outsourcing,” then I would probably agree with that. But IT outsourcing, even though there is a lot at the low end that Infosys, Wipro, and so forth sell, I think I don’t see there would be the death of that kind of IT outsourcing any time soon, because there is a fair amount of project management and other glue that goes into providing the outsourced service.

Tony: To make sure I am clear on what her article said since you didn’t read it, I think that she was saying the growth of the Indian outsourcing business as it has been over the past ten years was going to hit some major walls. Further, she thinks that the pure labor arbitrage outsourcing work is not going to go away, but that there will be other competitors from other locations that will be able to provide even lower costs.

Alok: I think that’s a fair statement in general, because if you look at call centers, that has already started to happen. A lot of the call center business has been moving from India to the Philippines. I think the same thing is going to take place in manufacturing once the Chinese currency begins to appreciate. But it will be slightly harder in the manufacturing segment because companies have invested a lot of capital in creating manufacturing plants, and moving plants is not as easy as moving services.

Tony: Right – it’s much easier to move a call center than a semiconductor foundry.

Alok: India does have a lot in IT outsourcing where it’s not purely the cost arbitrage. There is a fair amount of project management that goes along with it, and there I think it will be harder for the Philippines or Vietnam to achieve it with simply a lower cost. Eventually though, yes, things will saturate to the point at which it’s only a pure cost play, but I think IT outsourcing has at least ten more years to grow before it really saturates.

This segment is part 8 in the series : Outsourcing: Evalueserve Interview
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