Indian cities emerge global winners as best offshoring sites – What happened to Sri Lanka?

NEW DELHI, Nov 5, 2006 (AFP) - Seven Indian cities have emerged as the most favored outsourcing destinations globally, beating out rivals such as Manila, Shanghai and Moscow, according to a report by a US-based consultancy.

And India looks set to remain the outsourcing leader in the long term, according to the consultancy neoIT, which advises global companies on offshore operations.

New Delhi headed the seven Indian cities that topped the list of 24 from around the world vying for the tag of favorite offshore sites, said neoIT in a report entitled: "Offshore Insights: Global City Competitiveness."

"A lot has been said about India's eroding cost advantage and supply constraints," senior neoIT consultant Sabyasachi Satyaprasad said Saturday.

"But the fact remains that in terms of talent supply and cost arbitrage, India is still the leader," said Satyaprasad, whose company is headquartered in San Ramon, California, with offices in India and the Philippines.

Industry analysts closely watch profit-margin trends of Indian outsourcing companies for signs their competitive edge is eroding.

But Satyaprasad said in an interview there was no sign of that happening and Indian outsourcing giants like Infosys, Wipro and Tata Consultancy Services routinely report profits that beat market expectations.

New Delhi, Bangalore, Hyderabad, Mumbai, Pune, Chennai and Kolkata were the seven most favoured sites worldwide to locate offshore, said the report assembled from feedback from over 60 clients.

The Indian cities rated higher than Ho Chi Minh City, Manila, Shanghai and Moscow.

Sao Paulo, Warsaw and Krakow were at the bottom of the list.

India, which already holds at least 50 percent of the global outsourcing market, appeared set to maintain its dominance, said Satyaprasad.

"India will dominate the global outsourcing scenario for the long-term," said Satyaprasad.

"That's because of its skilled and broad labour pool, overall maturity of delivery services in term of breadth and quality and the easiness of scaling up manpower numbers because of India's big population advantage," he said.

"But it (outsourcing) is a constantly expanding pie -- there's lots of room for everyone to grow," Satyaprasad added.

To assess the cities, neoIT used such criteria as human capital -- the existence of a large, qualified pool of workers; costs -- salaries, real estate; infrastructure -- good telecommunications, transport; and living environment factors such as quality of life.

Vietnamese capital Ho Chi Minh, which ranked eighth, has a huge talent supply with more than 100,000 students graduating each year, the report said.

But it still has to catch up in terms of availability of right skill-sets for global sourcing jobs, catering now to software programming and business process outsourcing (BPO) jobs with low skill requirements, the report said.

Manila, which ranked ninth, is popular with BPO companies serving US clients.

"The people are well versed with the American accent and culture and a large talent supply thanks to universities in the region, but costwise it's slightly more expensive than Indian cities," Satyaprasad said.

Shanghai, which is 10th on the list, has excellent infrastructure and a good talent supply but is held back by the lack of English-language fluency, the report said.

"China has similar advantages (to India) in terms of labour skills. But its major disadvantage is lack of English skills although it's making big efforts to change this," Satyaprasad said.