Indian tech vendors are fast expanding globally—from Hangzhou to Lima, Sydney to Prague—as they hunt for employees with specific skills and their clients begin to demand that they be serviced at multiple international locations that have a high concentration of their end customers.
Such ‘near-shore’ operations have resulted in significant business gains for the likes of Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd, Wipro Ltd, Satyam Computer Services Ltd and Cognizant Technology Solutions Ltd. Not only does their visibility on the world map increase, making clients more comfortable outsourcing work to them, such centres help them charge higher rates.
“Today, revenues for Indian companies from their global delivery centres is going up because clients are willing to pay 15-20% extra to have their work located near-shore,” says Navin Agrawal, executive director at consultant KPMG’s Mumbai offices. “This trend will continue. In the next three years, most leading software companies will see 30% of their revenues coming in from their global delivery centres.”
The move to European, South American and Canadian cities also helps the companies shore up information technology (IT) skills required in chip-level software, high-end engineering design and consulting. It also gives a leg-up to their back-office divisions to acquire the ability to service new customer groups such as the Hispanic millions in the US, the largest ethnic group in the world’s most prosperous nation.
“As Indian IT companies move up the value chain, in processes such as consulting, high-end system integration, and onsite infrastructure management, their global clients need more proximity to their work, as against simpler processes such as application development and maintenance work that can easily be moved out to low-cost regions,” said Sudin Apte, senior analyst and country head at the Indian unit of Forrester Research, a firm that tracks the industry.
Cognizant is a good example. “The drivers for our near-shore expansions are specific skill sets, time zones similar to where our clients are based, unique lingual capabilities and front-ending relationship management,” says R. Chandrasekaran, president and managing director of the company
For India’s largest software services firm, the Rs18,685 crore TCS, about 5% or Rs934 crore of its revenues came from such non-Indian delivery centres in fiscal 2007, and the company plans to ramp up that number. “Global development centres will continue to remain a core focus area for us and we will be increasing our revenue from these centres going forward,” says a TCS spokesman. Such business is growing 50% year-on-year for the company.
TCS, which set up its first global development centre in Uruguay in 2002, is present today in Brazil, Uruguay, Chile, Hungary, China, the UK, Australia and Japan, and plans to set up a centre in Morocco later this year.