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India Losing Its Offshoring Advantage

According to the latest analysis of the Indian labour market by Pierre Audoin Consultants (PAC), out of the 21 centres opened since January 2007 by the 20 largest UK companies, only two were in India, while four were in China, three in Eastern Europe and Morocco, respectively. Nick Mayes, senior consultant at PAC said that in the short term, there was no “serious threat” to India’s outsourcing dominance. However, he added that companies are on the verge of reducing their dependence on “India’s heated labour 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 started sourcing facilities in the country over the past 18 months.

The two facilities launched in India were both outside the traditional hotspots of Bangalore and Mumbai-IBM’s new centre is in Noida and TCS’ expansion site in Hyderabad. Among the companies that were analysed were Accenture, BT Global Services, Capgemini, Capita CSC, EDS, Fujitsu, HP, IBM and Logica.

As salaries of the Indian workforce increase, it seems obvious for the western companies to look for options that provide reduced costs. With an efficient English speaking workforce, Europe seems to be a hot destination. Similarly, close proximity also enhances their say in the outsourcing industry. In fact, the emergence of increased outsourcing to China will be closely watched by the Indian industry for sure.