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For an industry body, the National Association of Software and Services Companies (Nasscom) has been singularly successful. Some would say it’s been lucky. The Indian IT industry, after all, has been through a boom phase. The government has bent over backwards to give the IT industry concessions, because its earnings are mainly in dollars.
Nasscom has been very efficient in lobbying at home; it had a willing sponsor in the government, which handed out the concessions. It has not been as effective in the US, which has borne the brunt of job losses. It has been a disaster in Australia, a competitor for jobs in IT space.
The Nasscom argument in the US has been rational. It has pointed out that offshoring creates jobs in the US. But that is in the long run. Obama & Co can only think of today. You need a target to blame. So you ask US companies to create jobs in Buffalo not Bangalore. Obama has asked Americans to get their treatment at home rather than in Mexico or India. If the world takes his advice, the healthcare system in the US will take a hard knock. Today, the country most visited by medical tourists is the US itself with a 40 per cent plus market share.
But off-shoring is undergoing a change that threatens the established models. There was a time in the IT industry when body-shopping was the way to go. Even the best of IT companies were basically recruiting agents, the way the market for Gulf labour works these days. Small wonder the human exports were called cyber-coolies.
Today, low-cost is no longer a factor. “The world is changing and the next 10 years are likely to be different from what we have experienced over the past decade,” says a Nasscom publication — Newsline. “The goal of the sector will be to keep its eye on the horizon and its finger on the pulse of the market.”
Nasscom has relied a lot on an earlier Booz Allen Hamilton report titled The Globalisation of White-Collar Work: The Facts and Fallout of Next-Generation Off-shoring. Says the Booz report: “Off-shoring is not what it used to be. No longer is off-shoring all about moving jobs elsewhere; It’s about sourcing talent everywhere.”
The report plots the cost of labour against access to qualified talent. The countries that are the best bets (high access-low cost) are India, the Philippines and China. In neutral territory (low cost-low access) are Africa, Mexico and Latin America, and (high cost-high access) Western Europe, Eastern Europe and Canada. And in the worst of all worlds (high cost-low access) are West Asia and Australia.
The report gives three recommendations:
Develop a global workforce sourcing strategy now.
Erase organisational boundaries.
Promote policies that cultivate innovation.
The continued success of Indian IT is based on the fact that companies like Infosys and TCS were doing this several years before the report was published. If they need to change again — to become more innovative — they will do so before the consultants come trotting around with their prescriptions.
BEYOND THE OBVIOUS
The new normal in off-shoring
MYTH
At the end of the day, outsourcing is all about cost reduction.
REALITY
Labour arbitrage is giving way to talent access as the primary driver of next-generation off-shoring.
MYTH
Offshoring inevitably leads to largescale job loss in the originating country.
REALITY
Offshoring high-skilled functions creates – rather than replaces – jobs.
MYTH
Offshore “hot spots” can’t stay competitive as wages climb.
REALITY
The competitiveness of traditional off-shoring markets is strong and sustainable.
MYTH
Companies don’t offshore because political and other external risks are too high.
REALITY
The obstacles to off-shoring are increasingly internal.
