Session 7 - Smarter Offshoring
JEAN-FRANCOIS MARTIN
The most popular offshore sites for service functions are overheating. Now is the time for companies to explore a world of opportunity beyond those hot spots and to base investment decisions not just on costs but also on talent, markets, strategic aims, and appetite for risk.
SMARTER
OFFSH RING
T
YEL MAG CYAN BLACK
BY DIANA FARRELL
he practice of moving service jobs to lowwage countries is entering a new phase. For offshoring functions ranging from computer programming and R&D to call-center and back-office tasks, U.S. and western European companies will have to expand substantially the number of locations they consider. In choosing a city, they will have to focus less on low wages and much more on other ways that candidate cities can fulfill their business needs.
june 2006
85
Smarter Offshoring
In the past ten to 15 years, the vast majority of offshore service jobs have gone to just a handful of cities in India, eastern Europe, and
Russia, notably Hyderabad, Bangalore, Delhi,
Mumbai, Budapest, Prague, and Moscow. But popularity has come at a price. The turnover rate among IT staff in the banking industry is
30% to 40% in some Indian cities, and hiring graduates from the country’s prestigious technology institutes has become a nightmare. “You have to wait in line from 5 am and make commitments to applicants on the spot,” reports a recruiter who has been hunting for engineers to fill posts in packagedsoftware and IT hardware companies.
In Mumbai, a hot spot for overseas invest% ment banks, escalating wages and accelerating turnover are beginning to worry firms that need college graduates for sophisticated jobs such as reconciling foreign-exchange transactions. In Bangalore, the demand for college-educated people fluent in English to staff offshore call centers has pushed wages up. The story is similar in Moscow and St. Petersburg, where pay for software engineers has soared by 50% in
The most popular offshore sites for service functions are overheating. Now is the time for companies to explore a world of opportunity beyond those hot spots and to base investment decisions not just on costs but also on talent, markets, strategic aims, and appetite for risk.
SMARTER
OFFSH RING
T
YEL MAG CYAN BLACK
BY DIANA FARRELL
he practice of moving service jobs to lowwage countries is entering a new phase. For offshoring functions ranging from computer programming and R&D to call-center and back-office tasks, U.S. and western European companies will have to expand substantially the number of locations they consider. In choosing a city, they will have to focus less on low wages and much more on other ways that candidate cities can fulfill their business needs.
june 2006
85
Smarter Offshoring
In the past ten to 15 years, the vast majority of offshore service jobs have gone to just a handful of cities in India, eastern Europe, and
Russia, notably Hyderabad, Bangalore, Delhi,
Mumbai, Budapest, Prague, and Moscow. But popularity has come at a price. The turnover rate among IT staff in the banking industry is
30% to 40% in some Indian cities, and hiring graduates from the country’s prestigious technology institutes has become a nightmare. “You have to wait in line from 5 am and make commitments to applicants on the spot,” reports a recruiter who has been hunting for engineers to fill posts in packagedsoftware and IT hardware companies.
In Mumbai, a hot spot for overseas invest% ment banks, escalating wages and accelerating turnover are beginning to worry firms that need college graduates for sophisticated jobs such as reconciling foreign-exchange transactions. In Bangalore, the demand for college-educated people fluent in English to staff offshore call centers has pushed wages up. The story is similar in Moscow and St. Petersburg, where pay for software engineers has soared by 50% in