Near-shoring the new mantra for ITeS majors

Pune, September 25 : With a recent Gartner Inc report indicating that labour shortages and wage Inflation could erode almost 45 per cent of India’s 60 per cent share in the $24 billion global business process outsourcing market by 2007, Indian ITeS bigwigs have started hedging risks by setting up offshoring centres across the globe to service foreign clients.

While TCS has set up centres in Brazil, Uruguay, Hungary, Luxembourg, China, Singapore, Australia and Japan, Infosys BPO has 1,000 employees at its near-shore facilities in the Czech Republic and China. HCL Technologies has some 2,000 staff in UK and Malaysia. Pune-based Zensar is bullish on China and Poland.

Near-shoring is increasingly giving Indian ITeS companies an opening into newer markets, with customers accepting outsourcing to third party vendors.

Explains Ganesh Natarajan, CEO, Zensar: ‘’The key to successful offshore outsourcing lies in providing a long-term solution delivering sustained cost savings, increased quality and improved customer focus. By taking our entire bouquet of end-to-end services closer to the customer, the initial discomfort companies have while offshoring processes is dispelled.”

A major advantage of near-shoring is the cultural proximity it provides to clients. ‘’For instance, our centre in Hungary has multi-lingual capabilities in French, German and Italian, and helps us service clients in the European Union better. The centres in Brazil give us a large talent pool, a big domestic IT market and Portuguese-speaking employees, who can understand and serve customers in those regions,’’ says a TCS spokesperson. TCS will be doubling its overseas headcount to approximately 8,000 this year.

Besides, free trade agreements in many of these regions provide the necessary economic incentive as well. ‘’Regulatory requirements in areas like the EU do not allow personal information to be taken outside its borders, particularly in the financial services and healthcare industries. Besides, local professionals are more in tune with geography-specific legislative and corporate issues, giving them an edge,’’ he said. Add to that time-zone proximity and stern intellectual property laws in some areas, and the popularity of near-shoring becomes evident.

And as far as costs go, a near-shore alternative is at times more cost-effective than an offshore arrangement. ‘’A conscious effort is made to establish alternate delivery centres in territories where the advantage of cost arbitrage to be availed can be continued. For instance, Poland offers similar advantages of costs, technical academic institutions providing skilled manpower and immense support from the government. Hence, the value derived from near-shore may be beyond...

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