However, few had approached it from a strategic perspective. Most of these locations of delivery were either the lowest-cost country in a particular region or a comparatively lower-cost country that spoke the same language as a major market, often geographically near. So if Costa Rica or Mexico served the Spanish-speaking population in the US, East European countries served Germany, and Chinese provinces like Dalian served Japan.

However, beyond this tactical need, there was no major objective for an integrated offering. It was believed that while some cost saving could be achieved by operating some delivery centers in these locations, it could never go mainstream as these locations could not offer scale beyond a point.

That is one perception that India changed. It could offer a workforce of millions, which could speak English-still the most spoken in outsourcing markets-and do complex technology and business jobs.

Take IBM. In all these years it reached a size of 12-13,000 people in all its offshore-delivery locations put together. With just one acquisition in 2004 (Daksh), it increased that by more than 50 percent.

Call it an irony if you like. The same India that was giving new hopes to these companies to take offshore mainstream had, in the first place, forced them to readjust!

But, competition is good for everyone. Incidentally, it is the US, not India, which taught the world this mantra. Yet, it was still offshore as the ‘idea’, and disparate nearshore delivery to different regions in ‘practice’. It was international, not yet global.

Meanwhile, another development was happening globally. Most services industries-like financial services, insurance, telecom, and technology-were getting more consolidated and globalized. The bigger TNCs-more likely to be the clients of these companies than the smaller companies-were approaching services procurement with a more global approach. This in turn was not only driven by the changes in those industries but the increasing awareness about and growing comfort levels with offshoring as a service-delivery model.

While competition from offshore-centric players was an igniting factor, it was changes in user mindset that catalyzed the globalizing effort. Then, suddenly an IBM Europe was no more selling to Citicorp Germany. It was IBM selling to Citicorp.

This required a global outsourcing company to not only evaluate Hungary and Slovakia for delivery to a client in Germany, but evaluate India and China as well. “These are truly global companies and they can leverage on their global presence as it suits them,” says David Tapper, director of IT outsourcing, utility services and global offshore services with IDC.

Most of these companies have embarked on a strategizing journey, wherein they have charted out what value-add they would offer, what pieces need to be put together, and what is needed to fill the gaps, if any- all as an integrated strategy.

Today all expansion plans, selection of locations, and mergers and acquisitions emanate from that integrated strategy. Here the central idea is that the whole offers significantly higher value than the sum of parts. While companies glued to one location try to build the bits and pieces, these global companies plan to provide a real choice to the customer.

Do not be surprised if the phrase global delivery dominates the outsourcing lingua franca through 2005.

Does it mean that the game is tilted in favor of the big and the famous? If only global business was the simple....

2005: The Crystal Ball

Strategizing to continue: Merely realizing that a global approach is the best bet does not necessarily mean that the differentiation is achieved. For one, the strategy of each player has to be differentiated. And then, a lot remains to be done on the ground. For example, ACS and EDS still have a limited presence in India. Many like CapGemini, Atos Origin, and BearingPoint are still not here significantly. They will have to decide their expansion strategy. Also, the medium-sized, specialist, pure-play offshore vendors in IT and BPO will increasingly play an important role by offering a differentiation as compared to both global majors and India-based big players. They can play an important role in the inorganic growth strategies of the big players. Entry strategy in each offshore location will be different and only successful executions will see the companies through.

Call-center companies have a challenge: While call-center companies like Convergys, Sitel, Sykes, Teleperformance led the broad-based companies by moving out of the US to nearshore locations, many of them have not been able to ramp up successfully in distant locations. Though almost all major names (other than APAC Customer Services) have their delivery facilities in India, only Convergys has been aggressive in ramping up. “Convergys is the only company that has had a genuine change of heart; all others are still half-hearted,” says an industry observer. Convergys, has a global base of close to 60,000 employees. It has already crossed the 10,000 mark (more than 16 percent) in India and is looking at doubling that by the end of 2005. Otherwise, too, Convergys has more than 40 percent of its people at offshore locations. Sitel, with a global base of close to 35,000 people, has about 10 percent of its employees in India. However, companies like TeleTech and Teleperformance have been far behind. It would be known who manages to stay in the offshoring game by the end of this year.

Inorganic growth to play a major role: Till now, growing skills was the strategic objective of outsourcing companies; location expansion was often tactical. We continue to see M&As driven more by the need to acquire skill. With global service delivery becoming a strategic objective, a lot of M&A will happen with this objective. And no marks for guessing where the major part of the drama will unfold!

Seamless delivery-the next driver: So far, the offering is more from a ‘what we can offer from where’ standpoint, and the actual service delivery is still isolated. For example, if a center is running some process with some skills, there is no simple way to deliver that from another center in a short time, let alone seamlessly. The next phase will have to offer that seamlessness. That will come from a different way of planning service delivery, of distributing processes across locations; looking at skills other than language; and somewhat seamless connectivity among major centers. While a shift towards such an approach is imminent, it may not exactly happen in 2005.

Never take the Indians for granted: Some big India-based vendors have realized that they need to develop global capability and will try to achieve that by a combination of organic and inorganic means. And do not discount their inherent strength: they understand long-distance relationships far better and know how to operate at low costs.

New kids on the block: With BPO growing fast enough, companies with strong BPO skills may emerge. The most likely candidates are the ‘captives turned third parties’ who, like the broad-based BPOs, have diverse skills, such as WNS and GECIS.

India-A heady mix of hype and substance: The tech boom of the 90s elevated the stature of Indian tech capabilities. In BPO, that capability was matched by the country’s ability to scale up rapidly.

Excellence and scale, individual skills as well as craze for quality, domain knowledge and tech capability-the combinations are deadly. No wonder, India is leading the offshoring space with an almost two-thirds market share. It is only fair that in the hype-loving American mindset, the mind share is much more. Says Lewis P Wheller, CEO of US-based Rapidigm, a first-time offshorer having established a center in Noida couple of years ago and now looking at expansion in India, “Right now, India is on top of any CEO’s mind. The Indian work ethic, intelligence, technical expertise beats that of anyone in the US. Guess who is it that always volunteers to work on a Sunday or a holiday? An Indian.” And a lot of Indians in the technology space as well as verticals like financial services, banking, insurance, and telecom meant that the passage to India has so far been smooth.

Not only have companies brought some of their core activities, many jobs that have never been outsourced have been offshored to India, albeit as part of captive operations. HP’s accounting delivery center in Bangalore, Reuters’ delivery center in the city, and equity research of almost all major investment bankers (JP Morgan, Morgan Stanley, Glodman Sachs, Lehman Brothers at the last count) is now being done from India. Scale has matched the value: “The company will hire 20,000 employees in India by end of 2007,” John C Freker, president, customer management group, Convergys had announced at the opening of the second center in Bangalore just less than two years ago. Today, that target is for end-2006. How many countries can offer that?

“India is an integral part of Accenture’s strategic delivery model, which enables the company to provide clients with seamless delivery of services from multiple geographic locations,” says Chet Kamat, head of Accenture India delivery centers.

If value and scale are attractive, quality is taken for granted the moment one enters India. In 2002, 60 of the 80 SEI CMM level 5 companies hailed from India. COPC’s chairman himself does business development in India in the call-center community.

In some offshoring, scaling up is not so easy. There is no scope for inorganic growth. Take F&A. HP had to grow organically. “It is for similar reasons that the expansion of some major back-office players like ACS, Hewitt, or even BearingPoint has not been dramatic,” says Avinash Vashistha, managing partner, NeoIT, a Bangalore- based outsourcing consultancy firm.

Many have also opted for the partnership route or the build-own-transfer route with third-party Indian service providers. BearingPoint has tied up with Covensys, Perot Systems earlier had a joint venture with HCL Technologies, Sitel has a joint-venture with the Tatas, and Xchanging has a joint-venture with Patni BPO, Capita entered the country through Mastek, and TeleTech through a joint venture with Bharti Group.

While most companies are gung-ho about India, Ken Touchman, chairman and CEO of TeleTech said while responding to a query about the limited TeleTech presence in India, “We have followed a very deliberate strategy as far as India is concerned. The country has a lot of promise but it is still in its infancy. The Indian management capability is still in its infancy. Being first is not necessarily the most important, but being consistent in our service delivery is. The second reason is that we have a very big presence in the Asia-Pacific region as compared to our competitors, so we do not need to stack our cards on India.”

For those who have placed their bets on India and are keen to scale, a potential challenge especially for companies like BearingPoint is their brand image within the country. Says Ravindra Datar, principal analyst, IT services (India), BPO (Asia Pacific), Gartner India Research & Advisory Services, “Now it is an open war for talent. Most companies are in the ramp-up mode and brand recall becomes key in scale-up ability. Therefore a major activity for companies is building brands, even though they do not sell their products in India.”

At this point, India’s hype is matched by its ability. There is no other country, that is a close number two.

But as offshoring changes to global delivery, India cannot retain its leadership by just being the biggest location. It has to be a hub of activities. That is the challenge for now.

Global-Delivery Hot Spots

A- Asia, with its nerve-center at India, is the true offshoring destination for both America and Europe. Some places like the Dalian province of China also serve Asian countries like Japan. Other major destinations are the Philippines and Malaysia. African nations such as Egypt and Ghana are emerging but may be part of a greater Afro-Asian cluster.

B- This region, comprising countries such as Mexico, Jamaica, Costa Rica, Brazil, Argentina, Dominican Republic, and even Guatemala, has been used for near-shoring by global companies for some time.

C - Eastern Europe has emerged as a near shoring destination for countries in Western Europe. Geographically closer, availability of people speaking languages such as German and French has been a major reason. Major destinations are the Czech Republic, Slovakia, Poland, Bulgaria, Hungary, and even Russia.