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India no longer the cheapest outsourcing location?

India’s run as the worldwide leader in cost-effective outsourcing may soon be coming to an end. At least one company in the UK has decided that India’s rising wages and extreme...

http://www.supplychaindigital.com/supplychainmanagement/2295/India-no-longer-the-cheapest-outsourcing-location


India no longer the cheapest outsourcing location?

- Supply Chain Management - Jul 05, 2011

India’s run as the worldwide leader in cost-effective outsourcing may soon be coming to an end.

At least one company in the UK has decided that India’s rising wages and extreme location are driving up outsourcing pricing, and have decided to open a call center in northern England instead of Mumbai.

New Call Telecom will leave its Mumbai operations to open up a call center in Burnley, Lancashire after the allure of low commercial rents and cheap labor was too much to pass on.

“Salaries in India aren’t that cheap anymore,” New Call Telecom CEO Nigel Eastwood told The Daily Mail. “Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity.”

Indeed, India’s labor costs are quickly rising, and the country is currently battling the highest inflation rate of the big Asian economies. India’s salaries will rise almost 13 percent this year, up from the 11.7 percent they increased last year.

For comparison’s sake, China’s wages will increase 9 percent, while the Philippines is expecting to see 7 percent wage growth.

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Staff retention is also expected to help save New Call Telecom money, as attrition rates of 25-35 percent can add additional costs to a not-so-cost-effective outsourcing market.

Eastwood doesn’t expect to lose too many call center employees at the new location in the UK, however.

“Given the current economic environment, we will get good “sticky” employees,” Eastwood said.

Offshore outsourcing certain tasks is still a cost-effective alternative to running a business, but India’s long run as the cost-effective outsourcing hotspot in the world is in jeopardy with labor costs continuing to escalate.

Sometimes, looking in your own country’s backyard can make for a worthwhile investment when it comes to outsourcing.

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