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thank you for joining us today
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at the outsourcing panel uh earlier this
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afternoon
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you talked about some of the major
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trends that we will see in india
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in the coming years and we heard some
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divergent comments from people there
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there were some who felt that in many
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segments of the market
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the industry has matured and it needs to
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move up the ladder
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and introduce value-added services what
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is your take on
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what what do you think are the
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opportunities ahead and what are the
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concerns we have to be dealing with
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well outsourcing industry during the
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last decade
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has been quite extra has seen quite
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extraordinary growth
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and companies indian companies have
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grown quarter on quarter we have seen
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the numbers
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and there has been a
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slowdown in the business during the last
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one two years because of the
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economic scenario as well as the focus
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of government
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to by putting pressure on the companies
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not to
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offshore the business because of the
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jobs
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being lost in the united states that has
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put pressure on the industry
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while i see this as a temporary
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phenomenon
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in that over a period of time
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this will eventually fade away because
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american enterprises do need to offshore
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to
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stay competitive in the long run in the
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global economy as such
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but what the concerns that i have are
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because this so-called economic
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incentives by the government not to
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offshore are going to be there for a
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while
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and on the other side the costs of
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indian indian
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delivery model are going up because of
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the
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primarily because of wages inflation
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during the last decade or so there has
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been an average
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over 15 percent wage increase
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per year making the uh
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cost arbitrage of one in six a decade
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ago
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to at best about one in three currently
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and
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it is likely to go down to 1 in 1.5
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making the outsourcing
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not so cost effective in the next five
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six years
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if the same rate of wage inflation
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continues assuming that the u.s salaries
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remain
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more or less constant so that coupled
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with
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these social pressure on these companies
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could make it there is there is could
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make a dent into the
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indian software party that's right do
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you see that
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and i suppose you're talking about the
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us government here
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the u.s
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u.s corporate sector the pressure on
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them not to outsource
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that pressure has surely dissipated in
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recent years
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uh a lot of it probably had to do with
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election rhetoric
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right or do you really feel that at a
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firm level
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finding it i see it it it is
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there underlying in the minds of most of
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the decision makers
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there have been efforts made by nasscom
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the indian
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software industry association and other
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government agencies and industry
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leaders to promote india
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as a destination for
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offshoring i.t services there were
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delegations that came here
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they were presentations made
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at davos at the world economic forum
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what is the outcome of all that has that
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all
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yielded any fruit definitely yes
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otherwise situation could have been a
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lot more worse that's what i feel
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the cost arbitrage falling from
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once one sixth to one third i'm sure
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it's not across the board you're
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probably talking about
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certain segments or is that something
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that you see on an average
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this is an average figure yes it could
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be
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more in some sectors it could be less in
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some so
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surely one of the ways the industry can
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overcome this
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is to introduce more value-added
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services
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and move up the value chain yes
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uh as we discussed in the panel today
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um the model could be instead of
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on a hourly basis or a
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man-month basis instead of that
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are a simple process efficiency so far
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indian companies have gone to
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up to the process efficiency level the
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model has to be
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how effective the work is going to be
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which is result oriented
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based contracts that will add a lot of
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value to the enterprises here
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and which are the industries where
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you're seeing some movement
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in this area we've we've heard
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companies are making progress in in
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pharmaceuticals and life sciences
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and legal services patent filings and
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things of that nature
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what they call knowledge process
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outsourcing how much of that is
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really happening is there a real
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movement there or are we
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i see a good movement in life senses
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back office work mind legal
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expiring a very few small companies i
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didn't see much of it
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really happening that's that's what is
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my which of the industries you think we
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will see more opportunity in the years
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to come
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one thing which emerged as a as an
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outcome of
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global bandwidth prices especially into
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india
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there is there has been a substantial
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drop uh as we discussed about from 1.87
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crores almost half a million dollars per
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2 mbps per annum
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10 years ago to a thousand dollars
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per annum for the same price for the
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same quantity of bandwidth
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and the quality of it in those days it
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used to be 1600 milliseconds to under
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200 milliseconds today has
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resulted in new business models emerging
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one such is the infrastructure
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outsourcing
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that's that's what we do at control s
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and
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we have seen a great traction in the in
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this
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uh in this business model uh from
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nearby countries to begin with that is
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the gulf region as well as african
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countries
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are increasingly looking at outsourcing
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infrastructure
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to india and to set up even their
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primary data centers
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when you talk about infrastructure
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you're talking about i.t infrastructure
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iot infrastructure data centers
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primarily which could be utilized as a
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disaster recovery or the primary
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data center and i have seen
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some of the american enterprises which
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have
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data centers across the world these are
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some of the large enterprises
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mostly in the financial sector are now
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consolidating their data centers
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one in the us and the other one into
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india all the asia pac region data
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centers they want regional small data
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centers they want to consolidate into
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one
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so that they get the cost advantages as
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well as the better efficiencies
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and the capacity within the
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telecommunications industry
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the redundancies the dependability
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reliability
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all that is
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is all that our
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clients getting more and more
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comfortable with those what is the
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what is the situation on the ground
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they've had concerns about
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shortcomings on those fronts yes the
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concerns used to be there
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as latest as five six years back
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but with multiple links coming into
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india currently and almost all the major
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global carriers setting up their
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services in india that
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those problems have we haven't
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encountered anything during the last
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three four years
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we've seen a lot of other emerging
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market countries compete with india in
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recent years and
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they have grown not only
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their skill sets but also the breadth of
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services they offer
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china vietnam philippines south africa
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some of the latin american countries
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what are the comparative threats the
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indian i.t services
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industry faces well
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india is uniquely positioned when it
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comes to
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the outsourcing of it and ites
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activities
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it is uniquely positioned because of the
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talent pool
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currently available and talent pool in
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the making
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over 2 million graduates pass out every
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year
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and out of which over 600 000
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of them are engineering graduates
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so this coupled with all of them are
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english speaking
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and can easily most of them are
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readily suitable for
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doing the work and some of them
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can be trained in a very short period of
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notice
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this makes india a unique
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place for outsourcing the activity china
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for example has a serious language
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issues china russia and
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some of the east european countries
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philippines has a cost issue
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even though their accent is very good
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they have a technical issues in terms of
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their engineering the the people's
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engineering background is not so
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good as that of indians
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and similarly the for call center
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activity ireland kind of countries
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also price themselves out that their
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cost
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structures are way above the india's and
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as of at the moment i see india is in a
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great position but over the years if the
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wage inflation
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continues and if indian service
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providers do not go a step up the value
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chain and go to the next levels
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i see there could be competition coming
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from
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these countries you talk about in
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india's engineering talent i'm sure
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you've read
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numerous numerous reports that talk
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about india's
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engineering talent being overstated
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in fact many studies have said
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a large number of these engineers
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are not really as skilled as one would
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like them to be
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how much of that is
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well i wouldn't accept that
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totally india has some of the best
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talent and the
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institutions like iits and
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rural engineering colleges regional
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engineering colleges
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as well as some of the state
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government-run
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universities like i have graduated from
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osman university
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the talent available there is
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world-class i would say
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the exposure of the students is and the
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facilities which are there
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are also comparable to any any other
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university
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across the world now what
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there are this expansion of educational
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institutions to support
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the industry
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has been very rapid there are
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over 200 colleges which have come in
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into
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andhra pradesh state alone during the
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last decade
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and that could have resulted in
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some of the mishaps i would say right
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now this is one question i'm sure you
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get asked a lot
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the impact of the satyam
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controversy that scandal must have
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really shaken the confidence of
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many of the indian outsourcing
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industries
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clients in developed countries
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what what is the residual effect of that
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the the effect of it on the investors
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has been
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quite quite
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quite high especially towards
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hyderabad-based company satyam happens
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to be a hyderabad
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company and
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the investor confidence has taken a
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serious beating but
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customers are going to be more choosy
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i would say they are they are likely to
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spend a lot more time on
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dude spending doing due diligence on
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their
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on the service provider to whom they are
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going to outsource
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and that makes little more difficult
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for indian service providers i would say
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but it's not something which is
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going to have any significant effect
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well thank you so much for joining us
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today
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thank you
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you
