India’s dominance as low-cost outsourcing destination seems to be on the decline, with countries like China, Morocco and Hungary fast emerging as preferred choices by IT services providers, a recent study says.
Focused on UK’s top IT service providers, a study by Pierre Audoin Consultants (PAC) showed that China, Morocco and Hungary are new locations of choice to set up offshore sourcing centres.
Heated labour market
Pierre Audoin Consultants is a European market research and strategic consulting firm for Software and IT Services Industry (SITSI). According to the study, since the beginning of January 2007, UK’s 20 largest IT services suppliers have opened 21 new global delivery centres. However, of these only two were located in India. Four such centres were set up in China, while Eastern Europe and Morocco had three each, it observed.
“India’s position as premier low-cost IT sourcing centre is not under serious threat in the near term. But what we are seeing is vendors (are) looking to reduce their reliability on India’s heated labour market...,” PAC Senior Consultant Nick Mayes said in a statement The 20 largest IT services vendors in the UK are based on rankings in PACs annual SITSI report.
These include EDS, IBM, Fujitsu, Capgemini, Capita, Accenture, CSC, HP, BT Global Services and LogicaCMG.
The two new facilities launched in India were both outside the traditional hot spots of Bangalore and Mumbai, IBM’s new centre has been set up in Noida, while Tata Consultancy Services’ expansion site has come up at Hyderabad, it said.
However, it is not just India where changes are taking place, the report said that recently “contact centre services firm Convergys revealed it will close its support centres in Canada and replace them with operations in the Philippines and India, as the appreciation of the Canadian dollar has wiped out much of country’s cost advantage.
Meanwhile, vendors including CSC and EDS have opened new facilities in rural US to provide lower-cost support to major metropolitan areas.”