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Industry Research : India's Outsourcing Miracle Feels the Chill Winds of Competition
India's outsourcing companies are cutting pay and have put the brakes on hiring new staff as they battle against a global economic slump and fierce competition from rivals in countries such as the Philippines.
Two of the industries providers, Tata Consultancy Services and Info-sys, have begun trimming quarterly bonuses, according to research by HSBC.
Yogesh Aggarwal, an outsourcing expert at the bank, said the move was linked to a slowdown in revenues for the industry in India, which is struggling because of rising costs and a trend among some foreign companies to move call centres back onshore.
"Hiring seems to have slowed down and many of these companies are now being cautious," Amneet Singh, an outsourcing expert at the Delhi-based consultancy Everest Group, said.
The slowdown in recruitment comes as many Indian technology companies are shifting their focus to operating call centres outside India.
Aparup Sengupta, chief executive of Aegis, a Mumbai-based outsourcing company that employs 57,000 people worldwide, said that the trend was being driven partly by inflating costs and partly by a feeling among many Western companies that their customers were better served by call centre staff more familiar with their own language and culture.
"Indians can speak good English but it's still not easy for them to understand someone from, say, Scotland or Yorkshire. There can be misunderstandings, which can really damage their brand," he said.
Aegis now employs only one third of its staff in India and is expanding in Latin America, Europe and Australia.
It recently hired 400 workers for a new call centre in Costa Rica.
Wipro, another Indian outsourcer, has opened call centres in Romania and China.
Several British-based companies, such as the UK operation of the Santander banking group, have moved their call centres from India to Britain for similar reasons.
While India's outsourcing industry is still growing, it is being undermined in some areas by fierce competition from other countries, most notably the Philippines, a former US colony that retains many American cultural values.
A recent survey by IBM found there were now more call centre staff there than in India.
The Contact Centre Association of the Philippines says that 350,000 people are employed in the country, compared with India's 330,000.
Last year, the business in the Philippines raked in about £6.5 billion ($9.8bn), with that figure projected to rise to £16.5bn by 2016.
India remains the world leader in the wider market for outsourcing, which includes software development jobs as well as call centre work, but its lead is narrowing.
China's IT outsourcing industry is growing by 30 per cent a year against India's 14 per cent, according to research from XMG Global, a Canadian ICT research firm.
Posted by Veronica Silva Cusi, news correspondent
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Published: Thursday, September 1, 2011