First it was Forrester's Stephanie Moore, who gave a ringing endorsement of the growth of the offshore players. Now, Dana Stiffler from AMR has come out with an excellent perspective on the state of affairs of India Inc. I liked Dana’s use of the term India Inc. to describe India-headquartered or India-anchored companies. She points out that things are on fire — tremendous growth opportunities are being felt by these majors. The scalability shown by these players are a real record of sorts.
Dana makes a studied observation here — while all players are seeing an increase in their cost structure, seen from a customer perspective, the benefits still outweigh the costs. They have no intention of backpedaling on their outsourcing and offshoring strategy. Another interesting thing to watch in Dana’s chart is the revenue/employee comparison between the global and Indian players. As I see it, sourcing relationships actually encompass a wide array of choices given the dynamic nature of business and the intersections of various levels of capabilities that lay within enterprises and service providers.
The increasing expectations associated with outsourcing are becoming difficult to meet. With a wide range of functions getting outsourced, the ability of the outsourcer to bind and manage all these functions meets with a varying degree of disruption. On the other hand, the service providers are coming under huge pressure to improve operational efficiencies and to maintain and enhance margins. So in essence, seen from a customer perspective, offshoring strategies need to be dynamically re-evaluated as the business needs, strategies, models and execution methods keep changing.
Clearly for the foreseeable future, despite the higher salaries experienced in India and other offshore markets, customers can continue to work with their chosen offshore service provider out of the existing locations to maintain the cost advantage besides reaping a set of other known higher-order benefits in offshore outsourcing opportunities.
The Tier 1 Indian headquartered firms continue to make huge strides and despite some attendant difficulties in scaling up (which they are addressing quite well) they are seen to be executing very well, restrategising and as needed realigning their approach — seen from operational, financial, competitive value added and efficiency perspectives. It must be said that the focus now needs to shift to improving productivity and yield converting into better business value as can be seen by executing faster and providing better business solutions.