New Delhi: For businesses such as Nissan Motor Co., Hitachi Ltd and Vodafone Essar Ltd, outsourcing services to multiple locations such as India and China in the Asia-Pacific (APac) region will be a top priority in 2008 as they seek to not just save costs but also access various services, according to a recent survey by a global research firm.
“Global delivery will be top of the mind for organizations across Asia-Pacific this year, resulting in a surge towards global sourcing strategies, that will allow them to access best-of-breed skills and price points without the restrictions of geographical boundaries,” said Jenna Griffin, senior analyst for Asia-Pacific global delivery research at International Data Corp., or IDC, in a 28 January survey. Indian service providers such as Tata Consultancy Services Ltd, Wipro Technologies Ltd and Satyam Computer Services Ltd are moving into the region, particularly to locations in China and parts of South-East Asia, aggressively to capture that opportunity.
According to IDC, the technology outsourcing budget in Asia-Pacific (excluding Japan) last year was $12.6 billion (Rs49,644 crore), with Indonesia, India and Vietnam the fastest growing markets by overall spending on information technology services.
“The top 5 Indian tech firms have grown more than 35% in the first nine months of 2007... one of them will break into the top 10 service providers in Asia Pacific by the end of this year,” said Philip Carter, associate research director, information technology services, IDC Asia-Pacific. He declined to name the Indian firm.
The top 10 IT service providers in the region include International Business Machines Corp., Hewlett-Packard Development Co. Lp., Samsung SDS, Accenture Inc. and Fujitsu.
Satyam, which began operations in Asia-Pacific, a grouping under which it includes West Asia and Africa, in 2000, reported one-fifth of its global revenues in the December quarter from the region—at par with its revenues from Europe. “We are growing in excess of 60% in the Asia-Pacific region and going forward, we want to maintain that growth rate. We are making huge manpower investments in Japan and China, both of which have not been tapped aggressively by any of the Indian tech firms,” said Harsh Vardhan, head of North Asia business at Satyam, which counts the Singapore government and Qantas Airways Ltd among Asia-Pacific customers.
Wipro calls the region (it includes West Asia under the group) a strategic market. The firm has been present in the region for some five years and draws revenues of more than $1 billion from there, more than 70% of which are from India. “The biggest opportunity here is the sheer growth of the region, which for us in the last four-six quarters, has been between 25% and 30%,” said Wipro’s chief strategy officer K.R. Lakshminarayana.
Even the nature of work Indian tech firms do in Asia-Pacific is changing as they move beyond system integration services, considered low-value work.
“In the last 12-18 months, we have seen them doing application management, transaction-based work and infrastructure outsourcing,” IDC’s Carter added.
For Indian service providers, particularly, in regions such as Japan and Korea, the challenge lies in receiving government support. “There is a conflict of interest and Indian tech firms are seen as competition because of India’s services delivery capabilities,” he added.
Satyam’s Vardhan agrees, but says though China has been supportive, government support is only warming up in Japan. “Korea has not seen much action on that front.”