Wednesday, May 06, 2009

Nearshore Outsourcing: Next Big Thing?

Is going nearshore a strategy which will help lift the fortunes of the embattled Indian BPO industry?

Seems so, as one can clearly notice the rising public sentiment against offshoring of jobs when the domestic opportunities are drying up. Earlier, the economic logic that this keeps the cost of service cheap was good enough; but today an organization employing overseas workers may appear insensitive and overtly motivated by profit, not a good thing when such public goodwill is so necessary for ongoing existence of the business.

We have noticed that there was a premium attached to 'UK Call Centres' even before the recession hit. However, most people did not care. Though this was a slightly more sensitive issue than buying Chinese toys in the supermarket - manufacturing seemed remote and people preferred lower prices on goods - this was okay. However, as the recession bites and everyone suddenly knows someone who got affected, this uneasiness about services being offered by overseas workers have become more severe.

The media is also making a bigger issue out of it. Obviously, because this sells. The accent and culture issues were always there [though I wonder how a Londoner feels comfortable with Northern Irish accent, but not the urban Indian accent], but now suddenly this is an issue of foreignness, which is up in the face. I am sure most people are decent and have the perspective not to blame these poor overseas workers for their job losses. In fact, one Indian executive recently emphasized to me that recession has actually taken the spotlight away from them. However, a snap poll of my friends and family tells me that in that mixed sample, most people still blame 'globalization' for this current problem, which is possibly a mistaken view, and bundles offshoring as an essential element of the globalization.

In one of the recent visits, I was told that the call centres in Northern Ireland are doing well and some of the Indian companies, HCL among them, is taking work to be done from Northern Ireland, particularly for the clients who would want to appear politically correct. I do think we may see more and more of this now. Frankly, the cost differences, at a certain level of service, between India and UK are not that much anymore. I would think it is now operating at about 30% - work of £1 being done in India at 70p - and this recession, which affected UK and USA more than India, would make these cost differences even narrower. So, Indian outsourcing industry needs to climb up the value chain, which many companies have done successfully, and they have to continue to climb further. I think the ability to offer a choice of base, some nearshore some politically correct, will become the name of the game. This is already happening, with the leading third party providers opening bases in cheaper parts of the UK and the United States, and this is bound to accelerate in the coming months.

I think this is going to be an opportunity for training and recruitment solution providers in India and in the UK, and solutions tailored to help building nearshore subsidiaries will be needed and accorded a premium. I think we have an opportunity here and so do companies with presence in the United States and India. My plans beyond August will align with this opportunity, and so will be the business that I run today.

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