Indian outsourcing companies are shifting some of their operations to China, the Philippines, Vietnam and Kenya in a bid to stay competitive as higher wages, expensive property prices and a rising rupee eat into profits.

Back-office services companies thrive on doing jobs such as taking customer calls, payroll management and accounting at a fraction of the cost for big multinational firms or governments.

But costs in India are climbing on the back of a robust economy that has lured skilled workers to other sectors, forcing companies to look elsewhere to stay in business.

"If I was only in India, probably I would have been worried to death," said Partha Sarkar, chief executive of HTMT Global Solutions Ltd.

The Bangalore-based back-office services provider used to generate all its revenue from India by providing services to its clients in the United States. But India now accounts for little over half the total, and rapid expansion in the Philippines and Mauritius has helped it offset the impact of a stronger rupee. It plans to enter China and Vietnam soon.

The company sees its 2008 revenue jumping to $150 million from $97 million in the last fiscal year.

"Three years back, I was completely exposed to rupee-dollar," Sarkar said. "Now it doesn't worry me. I have diversified my currency and country risk."

In July, Infosys Technologies, India's second-largest software services exporter, said it would buy three of Royal Philips Electronics' back-office services units in Thailand, Poland and India to expand market presence.

The back-office services unit of the third-largest software exporter Wipro Ltd plans to set up two facilities in China to tap growing business opportunities there, its chief executive T.K. Kurien said.

India's English-speaking workforce, a big factor in winning call-centre jobs, faces competition from countries like Kenya.

"When compared to India, we are better off in terms of salary and cost per seat, and we have a large pool of Kenyans with clear accents," said Bitange Ndemo, permanent secretary in Kenya's Information Ministry.

India's share in the global back-office services pie will drop to 50 percent in the next 3-5 years from about 60 percent now, according to U.S.-based Tholons Inc, which offers management consultancy for offshoring.

SKILLS SHORTAGE

India produces about 2.5 million graduates every year, versus 400,000 in the Philippines, but only about 15 percent are suitable for employment in the outsourcing sector.

US-based outsourcer 24/7 Customer, which has multiple facilities in Asia's third-largest economy, interviews 5,000 candidates a month in India,

Courtesy : Expressindia.com

Seeking to pose a stiff challenge to India's booming software industry, China has started constructing the world's largest software and IT service hub in Dalian, a coastal city in Northeast China's Liaoning Province.

"Stretching over 40 kilometres, we'll build Lushun South Road into not only China's Silicon Valley, but the world's leading IT city with a first-class environment," Mayor of Dalian, Xia Deren said at the launch ceremony.

The development of the Dalian Tiandi Software Hub will involve a total investment of 15 billion yuan from Hong Kong-based Shui On Group and Dalian-based Yida Group.

The city plans to increase its software exports almost eightfold to USD 3.5 billion by 2012. In 2006, Dalian exported 450 million US dollars worth of software products and IT services, accounting for almost one-third of the country's software outsourcing revenue.

The software hub is a mixed project comprising office buildings, residential and commercial properties, as well as recreational and educational facilities, chairman of Shui On Group, Vincent Lo said.

Occupying more than four million square metres of ground floor area, the hub will take 7 to 10 years to complete, he said.

Phase I of the project will mainly cater to the needs of Japanese and South Korean companies, while its master planning will take into consideration target tenants like IBM and Oracle, he said.

"We are keen to support Dalian in its bid to become the leading IT outsourcing and service centre in Northeast Asia," he said.

Courtesy : Expressindia.com