| Indian IT / BPO cos: Moving to a global delivery network |
| Wednesday, 04 August 2010 | |||||||||||||
 The IT / BPO industry is consistently evolving and has moved from outsourcing primarily for cost benefits to gaining strategic importance in business for clients and users of IT / BPO services. Similar to other industries such as manufacturing, IT / BPO industry operates on a delivery model with the objective of utilizing resources from different regions to optimize delivery of services. Service providers have implemented different delivery models to improve services to their clients and optimize resource utilization. This has resulted in their models evolving over time and one definitive change is the strategic location of the delivery centers. Evolution of the delivery model The growth and success of the IT industry in the last two decades has seen IT / BPO services move from client locations (on-site), to offsite (non-client locations), to off-shore (other countries) and near-shore (close proximity countries). Impact on operating costs was the primary reason for change in the location strategy. First development centers moved to cheaper offshore destinations and then to low cost destinations closer to the client’s country. The shift to near-shore destinations has the added benefit of similarity in culture and proximity of the client. The present model implemented by service providers is a combination of various location strategies with delivery centers spread across the “globe”. In a truly global delivery model, capabilities are distributed across centers with each location having specific areas of excellence. The model must include multi-location development centers spread across the globe to mitigate risk if one delivery center is non-operational, provide 24*7 services, and utilize the best resources and infrastructure at lower costs. Indian v/s International companies’ delivery model All the large service providers claim to have centers in different locations worldwide with a proprietary delivery model which is better than their competitors. However, in reality their scale of operation and delivery capability is concentrated in only a few centers. The role of India and Indian IT / BPO companies has been significant in the growth of the industry. India continues to be the biggest and key offshore destination due to its sheer size and capability of providing services from a single location. However, this will change as companies move to a global delivery model. No single country including India can alone satiate the demand in the long-term. Further, many countries are building their infrastructure and human resource capabilities to invite IT / BPO companies to set up centers. To counter this development and sustain their growth, Indian IT / BPO companies have been ramping up their service offerings and establishing delivery centers in locations outside India. The top Indian players such as TCS, Infosys and Wipro have set up centers in other offsite locations including those that are near-shore. The table below highlights the countries where the Indian companies have set up centers outside India to serve their clients.
From the above table, it is evident that the Indian companies have expanded their presence globally although India remains the “mother” delivery center contributing to half the revenue and more in terms of man-hours (resources).
For instance, in 2006 Wipro acquired Enabler to widen its delivery center network to include Portugal and Brazil, and set a target of achieving 10% non-Indian workforce. Similarly, TCS now has delivery centers spread across 20 countries including India. In contrast, if we look at some of the bigger international service providers such as IBM, Accenture or Capgemini, their deliver center strategy is different from their Indian counterparts. IBM for instance has over 450 centers across 40 countries providing their global Technology Services (GTS). Their total workforce in 2008 including their other division was over 390,000 with the largest workforce in US of 100,000. India has the largest workforce outside USA with approximately 75,000 people. Accenture has 50 centers in 20 countries as part of their global delivery network providing outsourcing services to client across the globe. Their technology services division has a workforce of approximately 80,000 across the centers with the highest concentration of 25,000 in India. Capgemini has delivery centers in Latin America, Morocco, Eastern Europe and Asia. Like IBM and Accenture, they too have a predominant set up in India which accounts for 31% of this workforce. Convergence of both delivery model strategies The delivery network of the top Indian IT / BPO companies is spread across the globe with a higher concentration in India (offsite). The international players however have a higher proportion of their workforce onsite. However, the regional location and the objectives of the delivery centers of Indian and international companies are similar. The location strategy of the international companies is the different from that of the Indian companies as they move towards increasing the role of offshore destinations in their global delivery model while the Indian counterparts are moving to locations closer to the client. The Indian companies do not have a similar global footprint as the large international companies. However, both are moving towards a common center of being truly global with the right balance of onsite, offsite which includes near-shore and the service capabilities of each delivery center. This puts the Indian companies in a strong position to sooner than later have a global delivery network at par. |
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