India optimistic as industry experts say outsourcing will stay

India optimistic as industry experts say outsourcing will stay
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First Published: Wed, Jun 03 2009. 09 51 PM IST
Updated: Wed, Jun 03 2009. 09 51 PM IST
Noida: The global downturn has not stopped the rapid growth in India’s outsourcing business, but only slowed it. In fact—because of the pressure on companies, and even governments, to reduce costs—many outsourcing businesses are booming. And a mood that was deeply uncertain just six months ago has turned much more optimistic.
Unemployment has risen to 8.9% in the US, a 26-year high, increasing long-standing pressures to “keep jobs in America”. But managers of companies big and small, squeezed between political pressures and the necessity of slimming down to survive, are choosing the bottom line.
J. Brandon Black, president and chief executive of the Encore Capital Group, a debt collection company based in San Diego, California, said he planned to significantly increase his workforce in India in the next few years, in part because of the tough economic times.
“The thing it boils down to is the supply of well-trained educated labour at reasonable prices is just too great to ignore,” said Black. In India, “we’re hiring college-educated people”. The company is not doing that in the US, where it would incur greater infrastructure and healthcare costs.
“Outsourcing is here to stay,” Black said.
Some of the US’ biggest companies continue to invest in India, even as they trim costs at home.
Hewlett-Packard Co. said last week that it would cut an additional 6,400 jobs, on top of the 24,000 it said it was eliminating in September after a merger with Electronic Data Systems Corp. About half of the September cuts are expected to come from the US.
This month, Honeywell International Inc., the manufacturing firm based in Morristown, New Jersey, said it would invest $50 million (Rs234 crore) in a new research and development facility in Bangalore that would employ 3,000.
Many in India say they believe that demographics are on their side in the long run.
“In most developed economies, the workforce is ageing,” said Ranjit Tinaikar, a partner with McKinsey and Co., a consulting firm. The healthcare costs associated with employing those Western workers will continue to increase, he said, creating a “big opportunity” for India.
Growth will slow this year at many of India’s biggest outsourcing companies, however, because of the implosion of some of their largest clients: banks, mortgage servicing companies and Wall Street firms. But that does not mean revenue is no longer growing.
“People who have never looked at outsourcing before are saying they have to do it,” said Amitabh Chaudhry, the chief executive of Infosys BPO, the outsourcing arm of Infosys Technologies Ltd. He expects his unit to grow 25-30% this year, compared with 40-50% in the past.
But political pressures are making a difference in how business is done. One growing trend, many outsourcing executives say, is placing more Indian employees in offices in the client’s home country. That way the job, ostensibly, does not move abroad. But over the long term, many are likely to be moved across the globe.
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First Published: Wed, Jun 03 2009. 09 51 PM IST