FutureWire - futurism and emerging technology

Monday, January 30, 2006

Outsourcing to India No Longer a Bargain

If you're an IT business owner looking to offshore some of your work to cut costs, India may no longer be the best place to look.

High staff turnover and rising wages in India are prompting US and European businesses to look elsewhere to outsource -- namely to China, despite concerns about protection of intellectual property rights there. Says SAP CEO Henning Kagermann, "India is slowly getting expensive... We have decided to hire a certain number there, and then start looking at other locations."

In addition to the fact that businesses are realizing that offshoring is not a panacea to cut costs, and that process improvements at home can often yield as much or greater savings, outsourcing hubs such as India and (eventually) China will invariably become more costly as the laws of supply and demand play out, and the talent pools becomes stretched. Other less-costly regions will likely emerge, but they will need to offer clients the right mix of low-cost talent, technical savvy, easy accessibility, and political stability. India, meanwhile, will likely remain a key outsourcing destination, but because of its tech-savvy, English speaking workforce rather than low costs.

Sources: Techdirt, Network World