Source: www.indiaabroad.com
While, India continues to be the global off-shoring hub, a report by Deloitte Touche, a consulting firm states stiff competition from China could well crack India’s hold on outsourcing, over the next ten years.
Titled Global Financial Services Off-shoring Report 2007, the report adds off-shoring saves the financial services industry an estimated 4.5 billion pounds a year, up from around 2.5 billion pounds just a year ago, propelled by an 1,800% overseas increase in headcount, over the last four years. Estimates confirm, the UK financial services industry alone, saves 1.5 billion pounds per year by off-shoring, mostly to India.
The report adds, while India remains a global off-shoring hub, however, the next ten years could see it lose a two-thirds share of global off-shored staff employed on the sub-continent. Simply because, China is gearing up and threatening to beome India’s principal off-shoring competitor.
To that end, currently, some 200-million Chinese people have started to learn English, so as to provide a growing pool of skilled labour that will offer stiff competition to India over the next 10-years. Deloitte says, one can already see China’s share of off-shored labour increasing, with a third of financial institutions now running back-office (mainly IT) processes in China.
Chinese competitiveness is bound to dampen salary inflation among Indian off-shoring industry workers. That aside, Indian firms are growing increasingly concerned over the supply of skilled workers in India, as only 10-15% of Indian college graduates are considered suitable for direct employment by the off-shoring industry. This could hit India’s off-shoring industry, as India experiences a shortfall of up to half a million professionals by 2010.
To quote Chris Gentle, Associate Partner - Financial Services, at Deloitte and author of the study: “Off-shoring is maturing at a rapid pace but, in future, the best off-shoring strategies will not, and cannot, be based on labour arbitrage alone. Financial institutions need to re-engineer business processes, or risk simply transferring off-shore the legacy inefficiencies of older, onshore processes.
The industry’s star performers have successfully deployed aggressive off-shoring strategies, transferring more than 5% of group headcount off-shore and achieving bottom line savings of over 40%. In some cases, the savings are equivalent to 3% of the total cost base. However, at the other end of the spectrum, institutions that have failed to adopt best practices are experiencing a decline in operational performance. While, most major financial institutions now have a sizeable off-shore delivery function, the gap between the best and the worst is widening. We believe it is critical that a business builds a platform for success, based on relocating at least 5% of the total group’s headcount off-shore.
The best performing institutions off-shore around 12% of group headcount and, on average, save 55% on each business process. The companies whose off-shoring programmes are suffering, off-shore less than 5% of headcount and typically save 32% per process. The most efficient off-shorers take just 15-months to migrate each process, compared to around 25-months for poorer performers.”
Unite, a British finance union reacted to Deloitte’s report with a warning, saying ‘human and social costs’ of off-shoring ‘have been absolutely huge’, adding the money saved through off-shoring represents a tiny amount, when compared to overall profits made within the financial services industry. The union argues, an effective business case for off-shoring has yet to be made, while pointing to an increase in staff turnover and rising wages in countries such as India, with Unite’s National Officer, David Fleming saying: “It is as high as 75% or more in some cases. Many companies have to retrain an entire workforce over the course of a year and wages are rising. These cost savings hardly dent the profits that UK financial services companies make collectively.”
While, David Fleming argues about huge human and social costs, including widespread customer dissatisfaction, Unite believes organisations overlook the complexities of off-shoring, even as they fail to make a sound business case for exporting work overseas.
Meanwhile, defence group QinetiQ is reported to be on a collision course with union staff, over plans to ship administrative jobs to India that could lead to a 100-redundancies. Though there are worries about the security of their personal information, contract and bank details, QinetiQ confirms it is outsourcing work to Accenture and the work will be done at its delivery centre in India.
A QinetiQ spokesman said: “Our risk, compliance and security experts have reviewed Accenture’s processes and are satisfied that they are as robust as our current procedures.”
But then, for those in the know, US firm, Deliotte Touche’s report is nothing, but the same old argument that has been around ever since off-shoring / outsourcing to India began. All it has done is rehash and serve up the same bogey man aka China vs. India. While, Indian firms cannot take it easy and need to drum up new ways to ensure they retain their off-shoring edge, the threat of China will hopefully remain just Chinese Whispers!
Think back, when the world and his wife went gung ho about setting up base in China over India, only to pull out and hustle down to placate an irate sub-continent. The Chinese Whispers have started again, but while, they cannot be ignored, don’t allow them to rattle or throw the Indian off-shoring momentum off keel, as that is just what they are designed to do. However, while India cannot wish the irritating whispers away, it can take comfort in the fact that as in the past, so in the future, erroneous reports from the West will remain just so.
Simply because, Indian firms have begun to take measures to stop China in its tracks, finishing schools on their campuses for keeping India’s talent pool directly employable, scaled up services, centres in the Americas, Europe and Asia, for employing local talent, while ensuring costs remain at profitable levels. And, just the way cheap ‘n tacky Chinese manufactures found American and European manufacturers sigh over Indian expertise and better quality, similarly, despite all Chinese efforts, India will continue remain the global off-shoring hub.
Still, one must not get complacent, as the Chinese are a cunningly, devious lot! Nigh time the High Mandarins in charge of foreign affairs at the Ministry of External Affairs in New Delhi realise, no matter what Nehru might have said, Hindi Chini can never be Bhai Bhai! A myth, an illusion, a deceptively sweet dream! All the Chinese want like the West is to dominate the world! They want back every tract, every inch of land they may have once conquered! The same imperialistic designs as the West are harboured by them, while imperialism may be passé, neo-imperialism is the new state of world affairs. And, nursing the same ambitions as the West, the Chinese have been coming up with territorial claims, such as, Tibet (already taken over, despite Tibetan protests and of those that care), Taiwan is still viewed as part of the Chinese mainland, and irritatingly so, they continue to claim Arunachal Pradesh and other tracts of India’s Northern borders as theirs, simply on the basis that the people in these areas have similar Mongolian features.
The late 1950s saw the Chinese occupying Tibet, and soon after China occupied a large tract (approximately 38,000-sq. km.) of Aksai Chin, a remote part of Ladakh in Jammu and Kashmir bordering Pakistan, building a highway (National Highway 219) through it to connect with its eastern province of Xinjiang, which India has always reiterated is illegal occupation of Indian land by China.
In the middle, or southern part of Tibet, China asserts that the border dividing Tibet and Sikkim and Uttar Pradesh is also disputed. And, in the east, it lays claim to the entire state of Arunachal Pradesh. The Chinese look upon Tawang as the strategic gateway to Tibet, and in the reverse Assam. In their perception, strategic control of Tibet cannot be taken for granted unless and until they control Tawang. In case of instability in Tibet, if the Dalai Lama were to die, the Chinese Army would not hesitate to launch a pre-emptive strike and occupy Tawang, if not the whole of Arunachal Pradesh, basically due to their fear of the US exploiting the instability to their advantage.
So, instead of all this Bhai-Bhaism that the Ministry of External Affairs dumb mandarins are chuntering about, cold rationale should prevail. Instead, of warm handshakes that show up the Chinese double standards, it should be made clear to the Chinese that India will not accede to any of their false demands.
To come back to the point, Deloitte’s report is just old wine, nothing else! While, the world went on and goes on about China, India quietly steals a march and determinedly it has turned itself into a global off-shoring hub. No matter the English lessons and what have you, I for one am of the firm opinion, China is not in the same league as India. India always was, is and always will be the better option of the two. The Dragon is for those who can afford nothing else but cheap ‘n tacky, slipshod and shoddy, while India’s best quality is for only the discerning! Dragon over Tiger, the choice is yours! However, with good sense prevailing, the Dragon will remain bested!
