Asia is No Longer Only a Delivery Location
In the last week of March, news of two major IT outsourcing deals hit the media headlines. One, valued at $80 million, went to Indian IT services company, Wipro; while IBM bagged the other, valued at $340 million. Both were 10-year total outsourcing contracts, in the broader financial services/insurance domain.
What makes them noteworthy? Both of them were announced in Asia, in consecutive days. Indian financial services company, HDFC awarded its IT infrastructure management contract to Wipro. IBM will provide IT consulting services to Korean insurance company KYOBO. While two major contracts coming from Asia in the same week make many to take notice, these two are by no means exceptions. Asia—and even without including Japan and China—has seen a rise in activities as far as IT services outsourcing goes.
And it is not just restricted to just one market. Earlier this year, in January, Israeli bank FIBI announced an eight-year, $108 million contract with EDS. Around the same time, Abu Dhabi Water & Electricity Authority awarded a ten-year $110 million contract to an EDS joint venture Injazat.
India, the land of offshoring, has seen some concerted effort by industry groups to develop its domestic IT services market. According to a study by Indian IT services association NASSCOM, about 27 percent of India’s domestic IT spend is now in IT services. The market has seen landmark deals, especially in the highly competitive telecom and financial services markets.
What does that mean for the outsourcing fraternity? For the vendors, it means that while trying to fight a bloody war in North America and Western Europe, they have to look more closely at Asia for growth. For the outsourcing buyers in developed markets, it could mean more competition for limited human resources. In India, for example, the local telecom industry already lures IT professionals with a higher average salary than what the IT industry provides. The financial services industry also pays almost as much as IT industry pays the IT professionals. This was unthinkable five years back.
Global services is truly becoming global. If the trend continues, it will no longer remain a one-way traffic, with market in the developed countries and the delivery being in developing world. Another manifestation of the flat world, did you say?
I have just finished an article on the subject of call center trends that involves three analysts. There is a move by US and Europeans towards domestic and nearshore locales. Where low cost labor is sought, other nations in Africa, Malaysia, and the Philippines are growing. Mexico and South American locales are increasingly being leveraged for the Spanish speaking US market.
Managing the engagement due to the distance to the call centers in India is a major factor. Labor savings are no longer as attractive. Cultural differences and accent issues remain problems for customers.
Hi
Asia is no longer only a delivery location…I agree with you. Amid such big deals…one thing which We have noticed is a sharp decline in vanilla BPO jobs (mostly voice based). Atleast it seems like recruitment for such jobs have declined. As you’ve been tracking these sectors for a long time, would expect your comment on this.