Firms Seek Alternatives to India for Outsourcing Higher-Level Jobs

In 2011, Latin America and Eastern Europe surpassed India in the growth of outsourcing facilities.  According to Everest Group, India opened 49 new outsourcing facilities in 2011 while Latin America and eastern Europe opened 54 new facilities.  The trend of shifting functions away from India and toward nearshore destinations is continues to grow as American companies outsource skilled white-collar jobs in research, accounting, procurement, and financial analysis.  As many companies have capitalized fully on their savings potential in India, it is natural progression to seek savings in other functions and geographic locations.   With higher-level functions that don't require mass processing or large numbers of workers, countries like Argentina and Poland are viable options.  While you won't find critical mass in any one Argentinian outsourcing firm, the laborers are skilled and offer a valuable service at a lower hourly rate than companies can find in the U.S.

Source: Bloomberg Businessweek

Outsourcing firms in India are catching on the the trend as well; Tata Consultancy has 8,500 employees operating in Peru and Paraguay.  Genpact, India's largest BPO firm, opened and F&A (Finance and Accounting) outsourcing firm in  Brazil.  Outsourcing is becoming increasingly popular in Eastern Europe.  Particularly in Wroclaw, Poland, 30 universities graduate a steady stream of skilled laborers each year.  Firms including IBM, Ernst and Young, and Microsoft have opened up outsourcing centers in Wroclaw.  Poland and other Eastern European countries offer a better environment for high-level outsourcing.  About 50% of Poland's 20-24 year olds are college-educated, compared with a mere 10% of 20-24 year-olds in India.  It's important to keep in mind that India's massive population means an incomparably larger number of college graduates; India has 109.4 million people between 20-24, compared with Poland's 2.9 million people in that age range.  Though the sheer numbers may always be in favor of India, nearshoring offers valuable benefits that India can't match, such as cultural alignment, language capabilities, and the ability to interact with clients.

Read more here at Businessweek.

Philippines Surpasses India as Call Center Hub

The Philippines has officially surpassed India as the number one destination for U.S. call center business. The growing preference for demonstrates the maturity of the outsourcing market, as executives adjust priorities away from pure cost savings in favor of value. The cost of an agent's monthly wages is about 26,000 pesos (or $600), which is about 10,000 pesos more than the average Filipino family earns each month.  This number is higher than what companies could pay for labor in India, but executives are starting to see the value in spending a little more. 

"US companies are reluctant to discuss their outsourcing strategies, but privately some executives acknowledged that early on, they focused primarily on saving money. But as they gained experience in different countries, they realized that was not the best strategy." -The Economic Times

 Culturally, the Philippines is a much better fit to the U.S., with a better knowledge of American English idioms. Filipinos learn U.S. English beginning in the first grade, watch popular TV shows like Friends from a young age.  There's also the benefit of a stronger infrastructure in the Philippines, which leads to a lower frequency of blackouts and allows companies to spend much less on back up generators and diesel fuel.  The Indian outsourcing industry as a whole still earns about 10 times more annually, but the revenue is growing in the Philippines.  According to Salil Dani of the Everest Group, the call center business is growing at 25-30% annually in the Philippines compared with 10 to 15% growth in India.

Read it here at the Economic Times.