India has secured the position of the world’s largest outsourcing destination, based on financial attractiveness and business environment. This was revealed in a study published by A T Kearney, a London-based global management consulting firm.
According to A T Kearney’s 2016 Global Services Location Index (GSLI), India attained the top position from among 55 countries analysed worldwide. The other countries that made up the top 10 list include China, Malaysia, Brazil, Indonesia, Thailand, The Philippines, Mexico, Chile and Poland respectively.
Attraction of India as an offshoring destination
The study noted that for many countries offshoring to India is a highly attractive proposal. The study also took a deep look at the ideal cities for offshoring within the top 10 countries.
Nikolai Dobberstien, partner with A T Kearney’s Communications, Media and Technology practice said, “While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries capitals and major cites to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and Iloilo City in the Philippines.”
Advantage of 3 tier cities for offshoring projects
In India the 3 tier cities provide enough advantages to be able to attract offshoring projects. One of the biggest advantages provided by tier 3 cities is the relative affordability of real estate. According to the report, real estate facilities in Nagpur and Ahmedabad are 25 per cent to 30 per cent cheaper than Kolkata and Delhi.
Among the other major advantages of tier 3 cities are the easy availability of labour, relatively lower cost and lower attrition rates. The GSLI report said that there are highly developed educational infrastructure in many of the tier 3 cities. This indicates that those cities will have a continuous supply of fresh and qualified graduates in future.
The future of offshoring and India’s position
India has been the undisputed industry leadership in this field. But things may not remain the same in the future.
“Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what’s being outsourced is changing,” said Arjun Sethi, global leader of A T Kearney’s strategic IT practice.
“For the first time, we have a trend- automation- that could displace the leadership of the likes of India and China in outsourcing. Technology’s relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom- or by what- it is being done,” Sethi said.
According to Sethi, conventional concepts of offshoring face a genuine threat from the new business model connected to this automation as they expand the market. India’s position in the industry is being threatened by China as it is becoming attractive due to its recent devaluation of Renminbi, the official currency of China. The country is also increasing its educational skills and cultural adaptability, which are making it more attractive for offshoring business.
Sethi further added, “The implications on accessibility of services and employment in these countries are massive. On the client or receiver end, Business Process as a Service (BPaaS) dramatically lowers the entry barriers to business data management, opening the floodgates to smaller and newer companies.”
The GSLI was started in 2004 with the aim to help companies make major location decisions for offshoring and industry development projects with impartial guidance.