Indian information technology and outsourcing firms, which have a reputation for cheap operations, are diverting new orders to places like the Philippines, East Europe and Latin America that offer better pricing and skill sets.
India’s brand image is being leveraged to get high margin deals, which are then done out of different geographies.
“Labour costs in places like Poland, Hungary and the Philippines are just marginally higher than in India, but with Indian wages going up by 15 per cent in 2007-08, companies are forced to look at these destinations," said Sid Pai, partner, Technology Partners International, an analyst firm based in Bangalore.
Indian companies, initially undertaking sub-contracting work that involved writing software code, have now started taking complex work such as infotech infrastructure and maintenance, design and engineering for airplanes. These high-end outsourcing deals are routed to their captive centres in the Philippines and Mexico.
Indian companies are increasingly looking to set up development centres abroad to leverage advantages like technical capabilities and language skills. Poland, for instance, is known for its expertise in handling technical problems.
Recently, Infosys BPO bought out three delivery centres of consumer electronics major Philips, which provides it offshore delivery locations in Poland and Thailand. BPO major Transworks, the fully owned subsidiary of Aditya Birla Nuvo, which bought Canadian outsourcing firm Minacs, is also planning to set up a development centre in the Philippines. A month ago, HCL Technologies opened its second European development centre in Krakow, Poland, to service clients in Germany and France. Wipro has announced that it is setting up two outsourcing centres in China by September.
“Earlier, if a company outsourced work to Indian firms, it was run-of-the-mill stuff. Now, Indian companies are looked upon as firms that can design the next generation of infotech systems," pointed out William McArter, president of Mastek’s US operations.