Sunday, October 21, 2007

Is India's offshoring industry losing its shine?

It is interesting to note that a recent study by has provoked some interesting insights.

Some of the points addressed revolve around news reports of some firms pulling back their teams in India. Here are some of the observations:

1. The fixed costs of the captive units model are very high when the requirements are for about 30-50 people. Most companies that have pulled back-are in this category -as most have overlooked the softcosts associated with managing remote team.

2. The companies best positioned to sustain their outsourced operations in India are those that have large teams or those with specialised products or services that can command premium pricing.
3. An interesting model that seems to be gathering momentum is Outsourcing for Outsourcers-or by partnering with third party outsourcers. The magic word here is TOB - transfer, operate and build- ie a third party firm absorbs the captive unit's employees on its own payroll, and takes over its projects. The example quoted involving a total of 120 employees, indicates the firm has cut costs by 10% to 20%, improved performance by 20% to 50% and cut attrition from 50% annually to less than 20%.
Personally I think it is yet to too early to generalise. In any maturing market, the fittest survive! I think we can see a lot of innovative models that are likely to emerge from these pain points..that will give long term solutions.
In some of the IT companies, we already see a fair amount of recruitment process outsourcing (RPO) happening already-with a partnership mode prevaling over the previous'vendor management' approach.
I also know of a few professional outfits run by HR firms- that leverage on the wealth of industrial experience a third party firm can provide- for an amount equivalent to a junior management's annual salary.

1 comment:

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