WTO GATS and strategies of regional hubs Part 1
Now India is outsourcing outsourcing.
One of the constants of the global economy has been companies moving tasks – and jobs – to India, where they could be done at lower cost. But rising wages for programmers here, a strengthening currency and companies’ need for workers in their clients’ time zones or for workers who speak languages other than English are challenging that model.
At the same time, India is facing increased competition from countries seeking to emulate its success as a back office for wealthier neighbors: China for Japan, Morocco for France and Mexico for the United States, for instance.
Looking to beat back these new rivals, leading Indian companies are opening back offices in those countries, outsourcing work to them before their current clients do.
Many executives in India now concede that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks across the planet. The future of outsourcing, said Ashok Vemuri, an Infosys senior vice president, is “to take the work from any part of the world and do it in any part of the world.”
In May, Infosys’s Indian rival, Tata Consultancy Services, announced a new back office in Guadalajara, Mexico; it already has 5,000 staffers in Brazil, Chile and Uruguay. Cognizant Technology Solutions, with most of its operations in India, has now opened back offices in Phoenix, Arizona, and in Shanghai. Wipro, another Indian company, has outsourcing offices in Canada, China, Portugal, Romania and Saudi Arabia, among other locations.
Last month, Wipro said it was opening a software development center in Atlanta that would hire 500 programmers in three years.
In a poetic reflection of the new face of outsourcing, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of “states which are less developed,” Premji said.
Infosys is building an archipelago of back offices – in Mexico, the Czech Republic, Thailand and China, as well as in low-cost regions of the United States. The company wants to become a global matchmaker: Any time a company wants work done somewhere else, even just down the street, Infosys hopes to get the call.
“It’s the equivalent of a bachelor’s in computer science in six months,” said a trainee, Melissa Adams, 22. Adams graduated last spring from the University of Washington with a business degree and turned down Google for Infosys.
Still, even as outsourcing moves in new directions, old perceptions linger.
When Jeff Rand, 23, another American trainee, told his grandmother, “I’m going to be moving to India and working as a software engineer for the next six months, she said, ‘Maybe I’ll get to talk to you when I have a problem with my credit card.’ “
“It took me about two or three weeks to explain to my grandma that I was not going to be working in a call center,” Rand said with a rueful chuckle.
The value of cultural affinities and language are being put into the mix as companies compete through both WTO GATS and other agreements. Multi-lateral trade agreements and such are increasing as Doha negotiations have ground to a stop. The same trend is being played out in Europe as US firms (finance, banks, lawyers) expand into that market.
I believe the trend in countries cooperating in regional trading partner policies, for example the responses to de-pegging or considering de-pegging national currencies from the US dollar, will accelerate the process.