Offshoring: Why India's outsourcers are setting up shop in the West

Recession and changing political climate are boosting nearshoring...

Political, public and consumer opinion is subtly changing the outsourcing model. That's why more offshore outsourcers are thinking about moving some operations closer to their Western customers, says Saritha Rai.

Ours is a low-cost economy. We operate at half the cost of London. We have a great worth ethic and low attrition rates. Our culture is family-centric.

The sales pitch had been carefully constructed. But this was no hard sell for a cheaper, faraway outsourcing destination. This was the line taken by a delegation from Northern Ireland who had come to India to persuade the subcontinent's outsourcing companies to go westwards to be closer to US customers and next-door to their European clients.

"We are marketing the idea of localisation," said Alastair Hamilton, chief executive of Invest Northern Ireland, the country's investment promotion agency. "We are selling the idea that Belfast could be the location for an American service to be delivered by an Indian company," added Hanif Lalani, former chief executive of BT Global Services and now the investment ambassador of Northern Ireland.

Changes to the outsourcing model
Political, public and consumer opinion is subtly changing the outsourcing model, so the sales pitch is well timed. Offshoring to a remote, cheap location with plenty of skills was the convention until the global economic recession skewed the scenario.

The recession has pitted Indian outsourcing leaders such as TCS, Infosys, Wipro and HCL against US lawmakers trying to stanch the flow of work and against political lobbies agitating over the export of jobs.

New legislation has jacked up visa application fees for Indian outsourcing companies, doubling the visa fee for each technology professional brought in to the United States on H1-B and L-1 visas. Individual states too are beginning to turn protectionist: Ohio has banned outsourcing of government contracts.

As a result, outsourcing companies are moving offshored work to a third country or sometimes even back to the customer's home country. Some see this is a device for customer appeasement and even a tool to prospect for increased outsourcing.

"There is a realignment of what work moves where," says Avinash Vashistha, CEO of outsourcing consultancy Tholons. "We see an increasing trend of clients electing to move additional work to near-shore destinations or even to Tier 2 cities in the home country".

High profile for Western activities
Given the prevailing political climate, outsourcing companies understandably want their principal Indian operations and back-office centres to remain in the background, while drawing customers' attention to their operations located in the West.

Economic and strategic reasons ensure that the demand for outsourcing is...