Sramana Mitra writes that the future of Indian Outsourcing is bleak. In fact, her article on Forbes.com Friday titled “The Coming Death Of Indian Outsourcing”, frames the basis of her argument by indicating that the cost advantage for offshoring to India used to be 1:6, whereas today it is 1:3 at best, with high attrition. She further predicts it will drop as low as 1:1.5 over time.
MItra goes on to say that that automatable Indian jobs will disappear over the next decade. We know that as MSP’s, this concept is not hard to believe – we do it here today. The article continues by stating that India’s tech industry is a “services” industry, and that Indians don’t do the thinking, their customers do, then India executes. As a result, India has failed to learn how to invent technology products of its own.
According to the article, Forbes’ recently published wage statistics for India reflect that salaries rose 15.1% in 2007, up from 14.4% the previous year, with 2008 forecasts of a hike of 15.2.%, signaling the fifth consecutive year of salary growth above 10% – incredible numbers in any job market, and when paired with the devaluation of the US dollar against the Indian rupee, these numbers are even more striking.
Mitra’s final thoughts forecast the cost advantage of Indian Outsourcing disappearing by 2015, leveraging a 15% year-over-year Indian salary hike rate and projecting the aforementioned continued decline in the cost advantage for Indian labor to 1:1.5 over time. Read the entire article here.
These are very interesting statistics and conclusions, as we ourselves have seen our Partners begin to adopt Outsourcing/Offshoring solutions in regions such as Russia and Eastern Europe in 2007. In fact, at the 2007 ConnectWise Summit, I had the opportunity to speak with representatives from a South African organization that were working to put together a back-office support offering for Managed Services RMM Vendor Level Platforms (www.levelplatforms.com).
These indicators signal to us that we will indeed see more Offshoring opportunities move away from India and to other developing nations, as well as back to the United States. IT Distributor Ingram Micro’s Services Division is on an aggressive Partner acquisition strategy in this regard with its Seismic offering, which delivers traditional back-office outsourcing services to Solution Providers; and is attempting to differentiate itself from competitors by adding additional products and services valuable to Solution Providers to its Sesimic portfolio, such as email protection and archiving, online backup and restore services and a nationwide network of Partners who can provide onsite project delivery and support services (www.ingrammicro.com/servicesdivision).
Zenith Infotech, the recognized leader in Indian Offshoring and back-office support for MSP’s, has also recognized the reality that, as its back-office services become commoditized and it becomes more difficult to maintain its dominance through delivery of these services alone, it needs to diversify its product offerings to the channel. In this regard, Zenith has recently announced its partnership with A-Server, a Belgian company that has created a mash-up of Virtualization and SaaS technologies to create DaaS – Datacenter as a Service. This announcement follows closely behind Zenith’s BUDR Solution for Partners, whose newest version has just been released (www.zenithinfotech.com).
As both Ingram and Zenith compete for the back-office business of IT Solution Providers, they are either creating or Partnering with other organizations to add value-added products and services to their core Outsourcing attractiveness as a hedge against Sramana Mitra’s predictions.
What do you think? I’d like to hear your comments…