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India remains Top Outsourcing destination by large Margin for American Companies…

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Even as talks of Outsourcing centered around recent ban by Ohio state – India remains at the top and most preferred Outsourcing Destination by large private U.S Corporations.

According to recent survey released by Cap Gemini in partnership with Harris International, India has over 60 percent of the Outsourcing Market share in U.S. China comes in 2nd with overall market share of 27 percent, while Latin America close to its heels at 25 percent. The survey interviewed 300 senior executives from Fortune 1000 companies to come up with following results.

Top Outsourcing Countries for U.S Companies

Top-Outsourcing-Countries

Even today, the biggest reason for outsourcing is labour cost saving, with 69 percent executives citing that reason. Technology and Infrastructure capabilities (49%) along with skilled labour (48%) were also important considerations while deciding the country for outsourcing.

Some Other highlights of the survey

  • The top five factors listed by executives in choosing an outsourcing destination are
    • labor costs (79 percent),
    • Technology & infrastructure capabilities (62 percent),
    • Skilled labor (61 percent),
    • Language proficiency (49 percent) and
    • Economic stability (44 percent)
  • Less important factors listed by executives in choosing an outsourcing location are tax benefits (26 percent) and proximity to the U.S. (3 percent)

It is interesting that only 3 percent cited that proximity to U.S was important – So hype about near-shoring is actually quite misplaced, or atleast that’s what appears from survey results.

The important thing is that China is far behind India when it comes to outsourcing market share in the biggest Market. Although, in Asia Pacific, India seems to have lost the edge, Western countries still prefer India as their outsourcing destination!

  1. Do it Yourself Website says

    good to hear india maintains its lead in the outsourcing industry. i wouldnt be surprise if other emerging countries would overtake india soon.

  2. Guha Rajan says

    On positive note, it good that India is doing well in outsourcing, in providing services US companies.

    On negative note, most of the US companies itself are not doing well, in fact, the maximum US real estate mortgauge foreclosure were reported for March 2010. Interestingly, USD exchange rate is almost same is last 10 years, while inflation in India has been on the raise in the last 10 years.

    India outsourcing companies has to change its business model and it should concentrate globally instead of focusing just on US to survive at this number 1 position in the next decade as well

  3. Madhav Shivpuri says

    Few points:

    Agree with the comments that the rising salary and inflation are too much of a headache to outsourcing mgmt.

    I don’t see this survey as a apples to apples comparison though it gives a big-picture break up.

    1. Outsourcing should be seen in the light of the services being outsourced. If for India majority it is IT related while China it is manufacturing…

    2. The survey doesn’t mention the value of goods and services that has been outsourced. If its $X Bn for India and $X+alpha Bn for China, then even if we have a higher outsourcing market share it would mean nothing.

    This report was probably commissioned by a Latin America trade body grab some headlines! Nonethless, if India remains complacent, it will surely lose the race someday like the proverbial hare (from “The hare and the tortoise” story.)

  4. Aseem Rastogi says

    I am sure with China at less than half of India’s share and others even further off it would take a long long time for them to move India out of the numero uno position…

  5. Karen Cayamanda says

    We can’t really avoid it if Indian IT salaries shoot up–a number of factors influence that. The fact that there’s a demand for their services and rising costs of living in India point to its inevitability. Outsourcing companies in India will have to give US firms a reason to choose them over American and other Asian counterparts.

  6. VIJAIANAND says

    While the news is encouraging, we cannot celebrate it as the conditions are drastically changing these days in India. There is study which shows Indian IT salaries have gone up so much in recent years surpassing the US salary ratio for the similar jobs.

    Many companies actually moved back to US because of the increase in cost and many other reasons including DELL and HP. At the same time, many Indian companies are buying small companies in US to create a US hub since the market in US is favorable and affordable with less paying employees.

    I am not sure how long we will remain the first but I feel you can count the months or years when the US companies will pull their plug from outsourcing because of the inflation and cost of employment in India. Unless government controls Inflation which in turn can cut employment cost, it is going to be an uphill battle. Another opportunity, we shouldn’t be dependent only on service sector, we should move to production path and try to develop new apps with our innovative excellence to attract customers which will be a long lasting growth.

    Vijai

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