India is fast becoming a global center for back-office services as U.S. and European companies increasingly are shifting their IT services, call-center operations and other business processes to the sub-continent. India is looked at as an outsourcing destination by other countries as the cost of labor and content development is low. India has a good talent pool in animation and content creation.

The Indian IT-outsourcing market is already changing, and market analysts point to some dark clouds on the sector’s horizon. Massive IT services firms and global IT-consulting firms that are based internationally are opening their own software-development centers in India. Similarly the large Western software-product companies such as Microsoft and Oracle are doing.

All these foreign branded companies will compete with Indian companies for local talent. Global IT services firms also compete for work against Indian companies that are trying to develop in Indian market. Eventually, the software-product companies may even encroach on some service areas. At the same time, customers are squeezing IT vendors–including Indian technology firms–for price cuts across the board.

India’s domination in the outsourcing market may be challenged as emerging destinations gain prominence with firms seeking access to skills, predominantly non-English languages, that are lacking in existing locations. Outsourcing is not only a matter of arbitraging low-cost labor. Providing low-cost, high-quality software-development service somewhat requires well-developed processes for managing large-scale projects in distributed locations.

Reorganization in the outsourcing industry benefits companies specialized in off-shoring, business processing and high-end consulting. Deflationary pressure continues to force the industry to restructure around low-cost delivery methods, improved automation and increased use of standardized elements according to America analysts.

Outsourcing in the current scenario includes work being done across a global network of multiple, offshore locations that deliver services at even lower cost. The move to a low-cost GDM is at the beginning of an evolution that is thought to take place during the next three to five years.

With suppliers shifting focus to expanding their talent pools in developing areas like China and Southeast Asia, Indian vendors need to improve account management, move away from technology-centric messages that often alienate business buyers and need to invest in vertical-specific skills.

Source:www.informationweek.com

Wipro’s and other outsourcers’ expansion moves show a tech industry that’s becoming more committed to local markets rather than just touting a ”presence.”

Several outsourcing industry deals last week show that the world of business technology is indeed getting flatter–but also that tech globalization is a multidimensional thoroughfare, not a one-way street out of the United States.

The biggest deal is Wipro Technologies’ $600 million acquisition of Leonia, N.J.-based Infocrossing, planting the huge Indian outsourcer firmly on U.S. soil, complete with expansion and hiring plans. Infocrossing operates five data centers in the United States, providing hosted and managed IT services. As Wipro extends its U.S. footprint, including opening software development centers in Atlanta and three other cities, the company says it’s looking to hire hundreds of Americans with associate’s degrees in tech-related fields, train them, and pay for the best to earn bachelor’s degrees in technology–much like it does with tens of thousands of locals back home.

It’s by no means a U.S. hiring spree for Wipro, whose employees in the States are mostly Indian nationals, notes senior writer Marianne Kolbasuk McGee in our cover story this week. But it’s at least a sign of long-term investment in the domestic market.

And those expansion and hiring plans aren’t just opportunistic PR for an offshore company (and industry) that strikes fear into the hearts and minds of the American IT rank and file. They’re also smart business, as Wipro appeals to U.S. customers as a full-service IT outsourcer rather than a bit player that merely picks off low-hanging business and ships it back to India. Before it had U.S. data center and development operations, Wipro was probably a legitimate option for two in 10 U.S. companies, says Dean Davison of consulting firm NeoIT, while now it’ll be an option for seven of 10 companies.

The tech globalization road also is leading to China, as evidenced by two other outsourcing industry deals last week. Under one, private equity firm Francisco Partners is investing $48 million in DarwinSuzsoft, a U.S. company that specializes in outsourcing to China. DarwinSuzsoft, which employs 800 of its 1,000 people in China, does both business process and IT outsourcing, mainly for financial, insurance, technology, and health care customers. CEO Dan Ross says companies are looking to China to access tech talent that’s up to 40% cheaper than in India, with less turnover. “It’s a massive phenomenon,” Ross told editor at large Mary Hayes Weier. “I don’t know any large company that is not considering China at this point.”

Also last week, Sierra Atlantic, an IT services provider with operations mainly in India, said it’s acquiring ArrAy, a Boston-based company with 200 engineers in Guangzhou and Shanghai. The biggest tech vendors have their sights on China as well: IBM, Oracle, Tata Consultancy Services, and others plan to hire thousands more engineers and developers in that country.

None of these moves is evidence of a kinder, gentler technology industry. Disruption will define the tech profession for many years to come. But what these moves do show is a tech industry that’s becoming more global rather than merely international, the difference being the level of commitment–not just “presence”–that offshore-based employers must prove locally.

In the United States, despite the often painful upheaval of tech globalization, especially as jobs and competencies are scattered worldwide, services exports still exceed imports. In the category of “professional, technical, and other private services,” U.S. exports (which include IT work done in the States for offshore companies) rose $2.2 billion between May 2006 and May 2007, while imports increased only $1.1 billion.

Granted, there’s a dozen ways to slice and dice trade figures to make them look good or bad, depending on your world view. What’s fact is that tech globalization isn’t slowing down. The enormous challenge is to anticipate and adapt, or get left behind.