Near-shoring: A New Trend Luring Indian IT Firms
posted in Outsourcing News and Top Outsourcing deals, Nearshore Outsourcing, New Outsourcing Destinations |Source: www.business-standard.com
Even as, the next few years could see China emerge as a major IT sourcing centre, including for back office skills, (exactly where India was positioned, before it wore the Numero Uno crown, when the whole off-shoring / outsourcing concept began), a concept called ‘near-shoring’ (proximity to the client) and ‘time-zone’ advantage is seeing Eastern Europe and Latin America move up the outsourcing popularity index scales. With Mexico, Argentina, Brazil and Costa Rica, some of the most mature sourcing destinations in South or Central America, it is the Indian vendors that lead ‘The Charge of the Light Brigade’!
Cultural ties and close physical proximity to USA / Canada, including shared time zones, short travel time and frequent flights, are just some of the benefits that have made Mexico, the most accessible low-wage market for the North American firms.
Taking notice, just a while ago, TCS expanded operations in Latin America by setting up its first Global Delivery Centre (GDC) at Guadalajara in Mexico. N. Chandrasekaran, TCS Executive Vice- President and Head of Global Sales and Operations confirms: “Apart from a strong domestic IT market, Mexico shares a similar time zone with the US and is within 5-6 hours flying distance from anywhere in the US, allowing us the ability to provide near shore services for our large US client community.”
And so, the last five years have seen TCS set up operations in 14-countries, including major centres in Argentina, Brazil, Chile and Uruguay, where it employs over 5,000-professionals to cater to more than 150-clients, and TCS Latin America saw its 2006 – 07 revenues touch $159-million (around Rs. 650-crore).
As well, TCS acquired a 100% control of TCS do Brasil, its Brazilian joint venture that saw the Indian IT major hire over 1,700-employees and record revenues of $66.5-million (around Rs. 273-crore) for FY2006-07.
Other Indian firms to follow the TCS lead, saw Cognizant last year, set up operations in Buenos Aires. While, this April, Infosys announced plans to establish a software development subsidiary in Mexico, with an initial investment of $2-million (a little over Rs. 80-crore) to serve its US customers.
According to a McKinsey Global Institute (MGI) study titled: ‘Shaping A New Agenda for Latin America‘, it is Brazil, from amongst all Latin American countries, to be well placed to supply labour to the global off-shoring market, because of its strong Telecom infrastructure, attractive IT vendor market and relatively low costs. This, even as, the report cautions, Brazilian workers possess weak English-speaking skills and lack international experience, which makes many of them unsuitable for employment.
The McKinsey report states the Latin American country of Chile has a risk profile better than that of India and China, thus making it most attractive from amongst all Latin American countries. Moreover, it has the lowest electricity costs in the world. However, Chile’s IT workforce and market for IT / BPO services are small.
On the other hand, the Mexico advantages start with low labour costs and, even though power costs are high in Mexico, it still holds the most attractive position among the Latin American countries studied for the report. Recent annual sales figures show, fifty of the largest information technology (IT) services providers had 4.3-lakh employees located in India, out of their total workforce of 1.7-million. Tata Consultancy Services (TCS), Wipro, Infosys, Cognizant, Satyam, HCL, Patni, between them more than doubled their combined headcount, over the last two years to 3.54 lakh.
And, according to recent research by Computer Business Review, a vast majority are based in Indian delivery centres. While, ComputerWire states, the top 50-suppliers have a combined 5.37 lakh employees in low-cost global sourcing locations, with India accounting for 80%.
