Friday, March 04, 2005

Is India Losing its competitive advantage in offshore outsourcing

Is India losing its edge in the outsourcing game? My take is No, however it shows early signs of a burnout.

India may give away couple deals to emerging markets such as China, Philippines,Russia etc, however India is way ahead in this industry and getting business out of India will be very tough.

Couple warning signs:

1) Attrition: India is currently facing one of the worst employee attrition, the high demand propelled by increased offshoring of work has taken the worst HR nightmare out of the box. No Shows, walk outs have become HR's reason for insomnia. High attrition will force companies to revise employee retention activities which will drive up employment cost in turn impacting price competitiveness which has been a major offshore calling card. Indian companies are now looking at cities such as Jaipur, Chandigarh, Calcutta,Chennai to tap local talents and to remain competitive to the clients.

2)Salary Inflation: With increased competition and multinational corporation waging a talent war, companies are looking at abnormal salary raises to employees to bind them to their companies. Money matter, that's what the new mantra is, commitment and loyalty is out of the window, Indian employees have found their new friend in waiting after a three year hiatus. Companies will have to look at yearly increases by 20 - 40% and will find it hard to provide same value add to Client without adding some of it to their project cost.

3) A weak dollar : May 2002 , a dollar fetched Rs.49, today a Dollar will get us Rs.43.5, with the trillions of deficit, the Dollar is not a favored currency at this time and may fall further which will directly impact offshore project pricing.

4) Political volatility & questionable infrastructure: India has always been viewed by the western world as unstable and volatile. Nuclear neighbors, a corrupt political and bureaucratic system, weak infrastructure ( road, electricity etc)are couple notable reasons why our own homegrown companies have disaster recovery centers at places lile Mauritius, or development facilities at Philippines and china.

5) Job burnout: The high demand industry is pushing the limits on people,no one talks of work-life anymore, extended working hours, late nights, night shifts have taken a toll on employee health and family. Result, an under productive employee - outcome a dent on quality.

Will India remain victorious, time will tell, India is the china of Software, its not only impossible but a long shot to outrun China from the manufacturing top spot, out placing India from the IT top spot is unthinkable at this time.
Stellar leaders, quality service at a fraction price, a untirin workforce,competent talent pool and consistency in successful delivery of world class services 24/7, India leads the pack by years.