Major outsourcers like Citibank and GEO are now leaning toward nearshore, specialized vendors instead of offshoring work to distant locations like India. These clients are now looking at emerging outsourcing centers like Latin America that is closer to home as favored destinations for outsourcing, reports the Times of India.
Jimit Arora, Research director at Everest Group was quoted as saying, “Some customers having 70-80 per cent of their offshore resources in India are realizing that they need to look at the third category of suppliers that are local and niche,” in an online report by SourcingFocus.com.
In order to contain nearshoring major IT service suppliers like TCS, Wipro and India are expanding their own units and staff in Asia, Latin America and Eastern Europe so they can tap into this new trend. According to experts in the industry, the recession is likely to take shape into a recovery phase later in the year, and outsourcing firms are getting ready for a growth in the sector. Hence, the scurry in these emerging markets is a last ditch attempt to gain market share in the wake of intense competition in global outsourcing. Incidentally, Indian appears to be losing its stronghold in the outsourcing sector with several new regions like Mexico and China offering similar cost savings and convenience.
An official at Wipro, Suresh Vaswani, explained that the Indian outsourcing giant is seeking to widen its reach into niche markets, such as China and Europe. China offers a superior cost advantage to India and other locations, but leaves some firms dissatisfied with the level of skills in the country. Some companies see the weaker skills in emerging locations as eventually costing the company more, since most of the work that is outsourced in IT. Moreover, Wipro’s move to expand into China is seen as a means of tapping into the Japanese market as well. Wipro has posted increases in revenues in Latin America and the Middle East, tow emerging hotspots in the industry.
Whatever the trend that is likely to follow in the recovery phase, the sector is witnessing a new wave in outsourcing. Most likely, the pattern of offshoring is likely to shift to centers closer to home, with fewer players like India taking a big chunk of the market share. Furthermore, cost savings and efficiency among outsourced projects is expected to improve post recession.