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India key IT destination despite challenges

india Updated: Feb 07, 2012 03:17 IST
Vivek Sinha
Vivek Sinha
Hindustan Times
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India continues to remain the preferred offshoring destination for technology and service outsourcing despite political rhetoric in the developed West against it and talk that India is losing its competitive advantage for IT and back-office services.

A close look at the new service delivery centres opened in 2011 shows that around one third of the total came up in India, beating all other regions in the world including Europe, Latin America and China (see table).

A service delivery centre is a campus or a unit to carry out IT or other services, either by an independent vendor or the captive unit of a company headquartered overseas.

The data further points out that within India it is not that Bangalore(s) and Hyderabad(s) are the only favourites, rather smaller cities such as Ahmedabad, Vadodara, Dehradun, Nagpur and Kochi, are also finding favour with big corporations.

"The cost of setting up a service delivery centre in a smaller city of US or Europe is quite high," Salil Dani, research director at consultancy firm Everest Group told HT. "And it proves even costlier when a company needs to scale up operations at this centre."

A delivery centre in India brings other advantages such as relatively lower attrition levels, low wage inflation and being the employer of choice in the city.

“A company by reasonable work allocation between its centres in India ensures both cost effectiveness and quality. This effectively means that while smaller centres carry on with transactional work, all judgemental work remains with its bigger centres in India,” said Dani.