Publication: Economist Intelligence
Richard Mills, Chairman
past success is putting restraints on continuing growth. “Next-step”
destinations like the Philippines couldn't be happier, says Chalre
Associates' Richard Mills.
in India has reached a near-term peak, and meaningful expansion from this
point forward will result in higher costs and lower-quality delivery.
Business leaders in Asia have been saying such things to one another for
months now. Today, we are seeing deliberate action to move capacity from
India to next-step destinations like the Philippines, China and Vietnam.
major business publications have picked up on the evolving situation. Both
Forbes ("India: Good Help Is Hard to Find") and BusinessWeek
("India's IT Challenge") recently published feature articles that
directly address the growing problems in India and the
viability of the next-step destination countries.
at current events in the Philippines, we can get a better idea what is going
on. Sykes, a large U.S.- based contact center and IT support organization,
has operations in both India and the Philippines. The company said it would
shift much of its Indian capacity to the Philippines, where it already has
7,000 employees. "We moved calls to other facilities in Asia to get a
higher rate of return," was the official statement from Dan Hernandez,
Sykes' vice president for global strategies. But knowledgeable observers in
the region say that the rate of return differential must be large for a
company of Sykes' size and prominence to forgo India after already putting
capacity in place.
Solutions is another large contact center organization with operations in
the Philippines. The company just received a $43.5 million investment
through Telus International, a Canada-based global IT provider. Jim Evans,
who played the key local role in coordinating the deal, says his company
wanted a "strategic investment" in the outsourcing industry in
Asia, and the Philippines offered the best long-term opportunity given all
the options, including India.
Asia-Pacific vice president for global business-to-business services
provider GXS, Victor Lee oversees the professional and customer services
operations in the region. His company made the decision to direct functions
with a strong customer component to the Philippines because of better
economics and results there. His company's analysis also indicated that
costs were increasing disproportionately in India. As well, Lee feels that
"having product development in India and professional and customer
services in Philippines reduces risks."
outspoken than most, Rick McGonegal is clear that India won't be part of his
company's plans for the foreseeable future. He is the managing director of
RCG Information Technology, another goodsize IT provider. The company
already has a strong offshore presence in the Philippines and has assessed
the Asia-Pacific region for future expansion. India, he feels, is already
too crowded, with numerous companies all scrambling to hire from each other.
The result is destructively high staff turnover rates, mounting salary costs
and poorer English communications skills compared with that
available in the Philippines. He also cited overstretched infrastructure in
India as a further reason RCG wouldn't consider this destination at present.
According to McGonegal, his company has its "radar set on Vietnam and
China" should its current best option of the Philippines give way.
that appear to be moving work to the Philippines include Hewitt, which has
just started hiring staff for its newly commissioned business process
outsourcing facility, and HSBC, the global banking organization, which got
its BPO under way a few months ago. I am currently meeting with numerous
early-stage entrants to the Philippines -- more than at anytime during the
past three years.
another anecdote, I spoke recently to the Texas-based global recruitment
manager of a multinational technology company who needed help attracting
Indians living in the U.S. and Canada to jobs back in India. This is no
surprise, since there is strong demand for returnee management talent. But
this fellow wasn't looking for managers; he was looking for individual
contributors with three years of Java/C++ experience—a core skill that was
once available in seemingly infinite quantities. He described, with great
exasperation, the challenges his company faced hiring such people within
India these days.
Live the King
one is saying that the king of outsourcing will lose its dominance or its
long-term attractiveness as an outsourcing destination. India created the
offshore outsourcing model, and it will continue driving the industry
forward because of its huge size and the remarkable competence of its
India does experience slower growth because of constrained resources in the
near term, it is only because of its tremendous success over the past few
years. India's recent hiring growth has been roughly double that of the
crazy dot-com boom times in North America. So, current alleged constraints
aren't indicative of weakness but of great success.
while rising costs may be a big deal to business leaders who have to somehow
budget for them, they probably don't warrant the same degree of concern for
individual workers, who see their paychecks rise by 30 percent or more from
a well-timed job change.
countries like the Philippines and Vietnam are providing better options
today, it's only because they have been less successful at developing and
attracting quality outsourcing employers in the past. The pioneering
accomplishments made by India have now opened the door for these countries
to receive their share of the blessings. And as for India, we can be sure it
will soon be back stronger than ever.
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