Competition To Be The Next Bangalore
Posted : January 30, 2006 at 9:50 pm [IST]
This is part of a story that appeared in ‘Business Week’. Every Indian can feel proud of its position in outsourcing business. India has become a benchmark for the whole world. But main task today is to keep in tact the superiority in the sector. India will have to give the maximum thrust on the quality of education. It will require restructuring to meet the demand of the industry. Indians must excel in fluency in foreign languages, not only in English but even in Spanish, German, Japanese and Chinese too. It had been the strength of Indians. Let us maintain the lead.
Mikhail Gorbachev, the former Soviet President last April in a packed Boston (USA) hotel ballroom didn’t discuss perestroika or Vladimir Putin. Rather, in his speech to the Massachusetts Software Council, Gorbachev talked up Russia’s world-class programming skills, urging the audience of 700 executives to send engineering projects to fledgling Russian software shops. World statesman turned pitchman: It’s a sign of the growing stakes in global outsourcing, where developing countries from Argentina to Vietnam are scrambling to lure services work from the U.S., Europe, and Japan. Their inspiration is India. The South Asian giant booked $22 billion in business last year answering customer phone calls, managing far-flung computer networks, processing invoices, and writing custom software for multinationals from all over the world. Other developing countries see what outsourcing has done for India’s economy — including creating more than 1.3 million jobs during the past decade — and want a piece of the action.
It’s no wonder so many countries covet a Bangalore of their own. Compared with capital-intensive manufacturing, service businesses are cheap to set up — and can generate a hundred times as many jobs per dollar invested. Plus, the sector is exploding. Researcher Gartner Inc. estimates offshore info tech and business-process outsourcing amounted to $34 billion in 2005 and could double by 2007. India’s 60% share of the pie is set to decline, in part because success there is driving up wages and job turnover steeply. That leaves room for other nations to stake their claims. By 2007, Gartner figures, they’ll pull in a combined $30 billion from outsourced services work.
Some contenders in the global outsourcing race are big developing countries looking to parlay low wages and plentiful labor into export service jobs. China leads the pack. China is now chasing India’s lucrative IT and business services work. Russia, Brazil, and Mexico are likewise piling in, offering costs and skills often on par with India’s, plus advantages such as closer proximity to U.S. and European markets.
Even tiny countries such as Nicaragua, Botswana, and Sri Lanka are trying to grab the brass ring. To lure clients, they’re sending trade missions to outsourcing expos, subsidizing training and office parks, and offering tax breaks. “From the President on down, this is a top priority for us,” says Juan Carlos Pereira, executive director of Nicaraguan trade promotion agency ProNicaragua.
The economic and social benefits extend far beyond immediate jobs. India’s software industry association, Nasscom, figures that each new worker in the info tech sector creates seven indirect positions, from janitors to security guards. To compete, countries often must improve their telecoms, airports, and even business laws — moves that pay long-term dividends. Clean, well-paying service jobs boost demand for educated workers, an impetus to improving schools and training. And the high-level skills learned “spill out to the economy as a whole,” says Diana Farrell, director of the McKinsey Global Institute.
Still, the aspirants’ success isn’t guaranteed. Because they lack India’s scale and experience, emerging rivals have to differentiate themselves sharply to win contracts.
Indian giants such as Infosys Technologies Ltd. and Tata Consulting Services Ltd. are buying or opening operations in China and Europe. “The point is to serve customers wherever they are, and to tap into the talent of countries hungry to join the outsourcing craze. At least in this game of ‘outsourcing’, India must not lose as it did in Hockey. Fortunately, IT and ITeS is in private hands. But here too, the competition will be tough.
- Indra
Category: Employment/Education |
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