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US outsourcing implodes, India looking for pastures overseas even though it ain’t that green

OutsourcingIt wasn’t a total surprise but I felt a little awkward when I read the news about a big Indian Outsourcing giant setting up a customer-service call center in Reno, Ohio (US). This is at a juncture when the western and the european world feels India and China like itches that you can’t really scratch; and when a tangent of love-hate relationship is growing organically on its own.

The Indian conglomerate Tata Group has setup a 250 seater call center to serve the online travel agency Expedia across the street from an Army Reserve center and next to a farm in Reno, Ohio. It definitely looks like ‘Outsourcing’ is imploding back to the US.


The Tata Group, which is based in Mumbai, established its Reno roots last year when its business services unit, SerWizSol, bought the call-center business of travel-processing firm TRX. Ricardo Layun, head of U.S. operations for SerWizSol says that it is done in a bid to keep clients happy who wish to have their calls answered by an American.

Here is an excerpt from the article;

Tata Group, which has a history in India of caring about social causes, has encouraged workers in Reno to get more involved in the community. There was a Tata float in the local Thanksgiving parade. Workers recently swept up a playground that had fallen into disrepair. And when an employee was injured in a car accident, Tata donated $500 to the family. Christy Rice, senior team leader, says those efforts demonstrate the biggest difference under the new owners. “It’s less about numbers and more about people,” she says.

Insourcing

It is not just the Indian firms that are pitching for low-cost cities in the United States as against outsourcing it outside to India or China. US Technology firms like Rural Sourcing Inc (Durham, North Carolina) are competing for outsourced Software Projects from big American corporations.

Cities such as Pendleton in Oregon, Irving in Texas, Kearney in Nebraska, Oklahoma City and Jonesboro of Arkansas have highly skilled programmers for as low as $40 to $50 an hour which is almost half as cheap as any typical big city programmers (San Francisco, New York, Chicago etc). The rate however may be about twice the cost of an average programmer for some of the big Indian Outsourcing firms – Tata Consultancy Services, Wipro, Infosys etc. But many American clients and firms alike prefer to keep their works on-shore rather than negotiate and manage complex off-shore Outsourcing firms’ work culture, language barrier and time zone difference.

Recently, the IT Association of America (ITAA) has turned the spotlight on firms such as Greenwood Village, Colorado-based Ciber Inc, Atlanta-based Xpansion LLC, Cayuse Technologies LLC and Rural Sourcing, which are increasingly wooing clients to look within the country for Software Development and Outsourcing.

Nonetheless, there has not been many cases of US corporations scaling down on off-shoring to look at domestic outsourcing besides the few – California-based Kana Software, which bought back its product development from India to the US citing productivity challenges and high attrition rates. And of course, the much talked Riya’s Bangalore (India) office shutdown and its Software Development being moved to the US.

Currently, several other Indian firms – Wipro, Tata Sons – are planning to establish centers in low-cost US cities. It may be noted that some Indian firms have already setup shops in other low-cost countries like China, Vietnam, Thailand – with their most recent destination being Egypt.


Middle East

In a recent development, the Egyptian government has sent a high-level delegation to India to convince the IT behemoth to sub-source its outsourcing to Egypt. Some big Indian giants like Wipro and Satyam have concede to the agreements and have signed papers to setup support centers in Egypt.

According to the Yankee Group, a US based technology research and consulting firm in IT outsourcing, Egypt is 15 to 20 years behind India, which has boomed to dominate 60% of the overall offshore market. But India struggles to maintain an adequate supply of skilled workers, and handling some of the pie to Egypt could be mutually beneficial.

In Egypt, if a type of business is successful, everyone jumps into it, which is an individual and business trend. Far from the clutter of Cairo, the government has allocated a vast expanse of desert to the highly marketed Smart Village, a gated compound built with state of the art technological services. The lush techno-park already houses industry giants Microsoft, Vodafone, Ericsson and Alcatel among others.

Young graduates in Egypt are attracted by so many factors in the IT industry – the prospects of a career, the salaries which are about 4 times that of an average starting salary and the opportunity to work somewhere like “Smart Village” with all its benefits – restaurants, cafe and gym.

UPDATES

2007, August 9
Not to be outdone by its rivals, Wipro announced their acquisition of InfoCrossing Inc – a US IT outsourcing company and Unza Holdings Ltd – Singapore-based consumer goods firm. InfoCrossing was acquired for $600m while Unza Holdings goes for $250m. With these, Wipro has made 16 acquisitions since 2002. Some of them are

List of Recent Wipro Acquisitions

  • cMango — $29m — 20th Feb 2006
  • Quantech Global Services — undisclosed — 15th May 2006
  • Enabler Informativs SA — $56.4m — 1st Jun 2006
  • Saraware Oy — $34.4m — 8th Jun 2006
  • 3D Networks & Planet PSG — $23m — 26th Oct 2006
  • Unza Holdings — $250m — 11th Jul 2007
  • InfoCrossing Inc — $600m — 6th Aug 2007

Note: The above list is in order — “Company Name”, “Price in US Dollar”, “Official Date of Acquisition”

21 Comments

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  2. My younger brother works for a top US business consulting firm. He takes keen interest in Outsourcing. Every time I tell him that I outsource all my writing to US based writers, he is puzzled. I guess there are many parameters which decide which way the business should flow. It is not only about cost per employee per hour. I think that the US outsourcing work to India simply opened the gates. We can look at many more Tata like examples.

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