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India losing its status as world’s top outsourcing hub

China, Morocco and EEurope among new locations for global IT services providers

INDIA’S position as the No. 1 low-cost outsourcing destination is under threat, with China, Morocco and eastern European nations such as Hungary emerging as the sought-after locations by nformation technology (IT) services providers, a recent study has shown.

The study by Pierre Audoin Consultants has highlighted these new locations of choice to set up offshore sourcing centres. PAC is a European market research and strategic consulting firm.

According to the study, since January 2007, Britain’s 20 largest IT services suppliers have launched 21 new global delivery centres. However, only two of them are situated in India.

Four facilities were set up in China, while eastern Europe and Morocco had three each, the study added. The aim is to broad-base operations and not rely on one geographical location.

Although China has been slow to emerge as a global sourcing hub due to language barriers, the report found that BT Global Services, EDS, IBM and Tata Consultancy Services (TCS) have set up sourcing facilities in the country in the past 18 months.

‘India’s position as the premier low-cost IT sourcing centre is not under serious threat in the near term.

But what we are seeing is vendors (are) looking to reduce their reliability on India’s heated labour market,’ Nick Mayes, a senior consultant at Pierre Audoin Consultants, said.

In India itself, there is a movement away from the traditional IT hot spots of Bangalore and Mumbai, the study said, with this perhaps due to rising costs of operations.

IBM has set up its new centre in Delhi suburb Noida, while TCS’ expansion site has come up in Hyderabad.

While rising wages, a shrinking manpower pool and the appreciating rupee are some of the problem areas that outsourcing firms have to face in India, it is also true that the country’s position as the world’s top tech destination for outsourcing will take some beating.

Software body the National Association of Software and Service Companies has estimated that total software and services revenues should rise more than 33 per cent to reach US$64 billion in financial year 2007-2008. Software exports have been estimated to rise 28 per cent to cross US$40 billion.

Indian IT firms are looking at newer income streams from Europe and Japan to move away from dependence on the US, given the depreciating dollar.

Source: Business Times 10 Mar 08

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