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India’s Response to the US Dollar

December 13, 2009

Big question from a few days ago:  What will India’s outsourcing industry do if the US dollar fails?

Of course, there was talk of gloom and doom.  The outsourcing industry would fail, China would emerge as the dominant power, and of course the dark ages would descend on us all.

Having lived and worked in the US and Canada for at least the last 40 years, and having worked closely with Indian outsourcing service providers, I can honestly say that these negative scenarios are nonsensical.  They are built on the assumption that the Indian outsourcing industry competes on cost alone.

As the teenage daughter of my friend said to me in 2000, “That is sooo 1999“.

In other words, the cost-based competition model was on its deathbed at least a decade ago.  I remember in 1997, there were announcements of CMM level 3 certified facilities in India.  Today, 80% of such facilities worldwide are located in India.

value Outsourcing
This is not cost-based competition.  This is real value-added service that is worth the investment even on par with US rates.

I had a chance to work with a large Indian company in 2008.  The client was a large insurance company in the US.  They wanted to have operations support from India.  The Indian company not only provided the required resources, but they also brought in best practices, metrics, reporting, and professional management.

The cost to the client?  $3 per hour per person MORE than what the client could have done on their own.  The other interesting thing to me was:  The client already had an office with 1,800 staff working in India.

Why would a client pay more to an Indian outsourcing company than their own cost?  Because of the value that the Indian company brought.  Our Indian team went from 2 people to 14 people.  Other departments were looking at our success and asking for the Indian company to talk to them in more detail.

The point is simply this:  India stopped competing solely on the basis of cost more than a decade ago.  Today, cost is just a way to get into the front door of a client.  The real story lies in the value being provided and the total bottom-line benefits that the client gets.

Question now is:  What comes next?

Pawan Varma
Outsourcing Readiness
http://www.linkedin.com/in/pawanvarma
www.twitter.com/outread
pawan@outsourcingreadiness.com


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Comments

3 Responses to “India’s Response to the US Dollar”

  1. Outsourcing for innovation on December 15th, 2009 7:22 am

    I think the low-end outsourcing is all done long-time back, all the big outsource vendors are moving towards the high-end outsourcing and competing directly with IBM, Accenture, etc. It is happening in all types of outsourcing like BPO, LPO, etc.

  2. Lien on December 17th, 2009 12:12 pm

    Nice Blog and good info. so what comes next?

  3. pvarma on December 18th, 2009 3:25 pm

    Hi, Lien and Outsourcing for innovation.

    Thank you for your comments. I agree with Ofi that the big boys are now competing with the really big boys around the world. The fact that they are able to do so is a testament to the idea that price-based competition is old news.

    Lien, to answer your question about what comes next, please take a look at the next article, “New Careers In Outsourcing”. Let me know your thoughts.

    Thanks.

    - Pawan

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