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Outsourcing Growing Beyond India
PreacherTom writes "One of the most controversial aspects of the global economy has been the newfound enthusiasm of companies, freed from the constraints of physical location, to outsource jobs. No country had embraced tech outsourcing with more passion than India. Of late, problems are beginning to arise in Indian outsourcing: engineers will start a project, get a few months' experience, and then bolt for greener pastures. The level of attrition can cause the turnover of a project's entire staff within the course of a year. Combine this with salaries in Bangalore that are rising at 12% to 14% per year and it is no surprise that companies are looking beyond India to a slew of emerging hotspots for IT, such as Brazil, China, and Vietnam. Will Ho Chi Minh City be the new Bangalore?" From the article: "India remains an IT outsourcing powerhouse, with $17.7 billion in software and IT services exports in 2005, compared with $3.6 billion for China and $1 billion for Russia... India's outsourcing industry is still growing at a faster pace than that of... other wannabe Bangalores... By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead."
I'm in China at the moment, actually, about to go to a second site here. My purpose? I'm looking at the security of two vendors who are competing for a financial BPO (Business Process Outsourcing) contract with a major corporation. This is my first look at outsourcing up close, and I can see why companies examine the option. Yesterday I looked at a BS 17799 and SAS 70-certified facility, with smart people who cost far less than their counterparts. Also, there was discussion about turnover in India.
Outsourcing is definitely here to stay, but from what I have seen, cost is not the only factor that gets considered these days. (At least, not by the client I'm working for.) They're looking at the whole package, but the biggest thing that has mattered so far are the tools and functionality that the outsourcing provider can bring to bear. At the end of the day, it'll be functionality that matters the most, especially as labor costs in markets like India and China grow. But don't make the mistake of thinking that in such countries lower cost is all they have to offer, because that's not necessarily the case; the provider I visited yesterday had a hell of a great system for handling the complex financial functions that are a main pain point for my client.
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