India Is Hub in Hub-and-Spoke Approach to Offshoring

Ann All
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Top Outsourcing Trends for Q2 2010

The latest outsourcing trends identified by the Everest Group.

A few months ago I wondered if any countries had the potential to become the "next India," by rivaling that country's popularity as an offshore services destination. The answer, according to Salil Dani, a senior research analyst for Everest Research Institute's Global Sourcing team, is probably not. But, he told me when I interviewed him recently, that doesn't mean buyers aren't changing the way they approach offshoring.

 

India's great advantage, he said, is its capability to provide a complete spectrum of services, including those related to business processes (finance and accounting, contact centers), knowledge processes (research and development).and IT (infrastructure and applications). Yet there are a few areas in which India isn't as strong as other countries, said Dani, including bilingual voice support, for any language other than English, manufacturing and certain IT specialist skills such as mainframe development.

 

To satisfy these requirements and also to better manage risk by spreading their outsourcing business around, buyers are increasingly taking a portfolio approach to offshoring, Dani told me. Still, because of the relative maturity of its services industry, India remains at the center of most portfolios. Said Dani:

They will have a hub-and-a-spoke type model. India typically ends up being the hub and then they selectively leverage a few locations in Latin America, a few in Eastern Europe, a few in Asia, to complement India and ensure global delivery is possible.

In our wide-ranging discussion of global offshoring activity, Dani mentioned that China was becoming an increasingly popular spot for research and development for Western companies, since R&D is less dependent on English proficiency than other outsourced services. Yet the project management for these R&D activities often still happens in India, he told me.



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