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Outsourcing to India Trends

Everyone is investing in India. Last year, net foreign institutional investment inflows topped $17 billion. While the bulk of the investments are still in the IT and IT-enables services sector, health care is beginning to pick up.

ANZ National Bank will move up to 500 jobs to Bangalore in India over the next 18 months. This is about 5% of its back office work such as setting up loans or accounts and data entry. The bank wanted to make better use of skilled staff here while gaining the financial benefit of lower labour costs in India. The jobs being sent to India were good jobs with good wages, some in the top third of New Zealand incomes, campaigns director Andrew Campbell said. The bank estimated labour costs in India could be up to 80 per cent lower.

US software major Novell will invest an additional $100 million over the next three years to scale up its India operations, including research and product development capabilities. The India subsidiary of the $932-million firm employs about 600 software and product development engineers in the Bangalore facility. A new 700-seat facility will enable Novell to take up product development, engineering and testing in new verticals and provide solutions for its customers worldwide.

Information services provider Thomson Reuters, a combine of Thomson Corporation and Reuters, is looking at expanding its India operations. At present, Thomson Reuters has an employee base of 6,000 in the country. Of this, 5,000 employees are in Bangalore. David Turner, CFO (markets division) of Thomson Reuters, told “The Indian economy is booming and it is the right place for us to move in. The merger of Thomson and Reuters has not resulted in any layoffs in Bangalore, we are actually keen on investing on resources here,” Turner said.

In the Automotive sector, India is attracting luxury car manufacturers to setup plants here. While Mercedes Benz has been around for over a decade, BMW, Audi, Porsche, Bentley, Lamborghini, Rolls Royce and the Land Rover entered India only in the last few years through the imported /distributor route while, Lexus, Ferrari and Aston Martin, plan to enter India soon. Recently the company announced that it would be investing Rs 250 crore for a second plant that will have a capacity to produce 5,000 vehicles annually.

Indian Companies have identified 69 projects worth over 150 billion dollars in areas of real estate, healthcare, education and tourism for investment from Arab countries. The proposals would be discussed at the two-day India-Arab Investment Projects Conclave beginning on Friday, organised by industry body FICCI and to be attended by CEOs of over 100 Companies from 13 Arab countries.

But at the same time, the high cost of doing business in India is pushing some smaller technology companies to relocate elsewhere in Asia, such as Malaysia and Singapore. Soaring wages and rentals there are having a significant impact on mid-sized companies, many of which blossomed for several years amid a vast pool of well-educated workers and comparatively lower operating costs. Having more than tripled in size in just four years, the $52 billion software industry -- arguably India's best known overseas -- is now confronted with multiple challenges. The economic slowdown in the U.S., the single largest market for outsourced orders, has cast a shadow over near-term business prospects. It's being exacerbated by local issues such as an appreciating currency, rising fixed and operating costs, a growing shortage of skilled manpower and the prospect of a sharp tax increase. So great are the concerns that some smaller companies are actually considering shifting their headquarters and the bulk of operations to locations outside of India. "Operating in India has become extremely difficult because of the government's fiscal policies," said Sankaran P. Raghunathan, president at the IT SME Association. The umbrella body encompasses 3,200 small- and medium-sized information technology companies, with many of them earning less than $2.5 million in annual revenues. Expanded global coverage.

Business Today Egypt today reported that IT outsourcing capital India is now re-exporting its services outside the nation, particularly into Egypt. The new phenomenon comes as high-tech spending by both governments and the private sector has exceeded US$1.7 trillion in 2007causing IT services’ demand to exceed the supply of qualified labor in the country’s human resources market. In addition, major companies like Microsoft, Oracle, ALCATEL, Ericsson, Vodafone and Teleperformance have all so far established operations in Egypt. Even Indian IT giants Wipro and Satyam have also come to Egypt.

Conducting business is always very dynamic, and we don't know how a business model changes with the time and economy. We just have to wait and see the changes.

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