The Shift in Outsourcing

The IT industry is witnessing a dynamic shift, not just in technology, tools, infrastructure and methodology, but in the choice of geographical locations for outsourcing and offshoring, as well. As the outsourcing industry matures, a dynamic shift simultaneously takes place across regional outsourcing landscapes. Historically, organizations have been able to tap into relative wage differentials across geographies to build a strong value proposition for offshoring. While cost arbitrage continues to be a significant driver of global sourcing for most companies, the cost advantage is slowly diminishing due to factors like wage inflation, talent scarcity and throughput. Organizations, who are diversifying their outsourcing locations are looking for increased flexibility to service delivery, build new capabilities with access to local skill and to leverage the growth in the domestic economy.

While India continues to be a hub for IT services, companies are looking at Mexico and Poland for their proximity to sourcing locations and multilingual skills, and Bulgaria for design services like computer aided design (CAD) and computer aided manufacturing (CAM). Philippines is often considered for voice-based and process-based services. Places like Brazil, Columbia, Czech, Egypt and Sri Lanka are also emerging as an alternative locations. It is interesting to note that while major IT service providers from Asia are expanding their operations in Latin America, a majority of the captives are expanding in Asia.

As a result, relying on a cost-savings-driven value proposition alone will not yield long-term benefits. Businesses are looking for value beyond cost savings and high growth sustenance by leveraging a global delivery model.

As per a leading consultancy firm, most new centers set up across the globe in the last two years are set up for risk mitigation and diversification of location foot print from the conventional outsourcing locations. Many relatively new captives have been set up largely for risk diversification. As per a U.S. strategic advisory firm for global outsourcing and investments, the Philippines, Malaysia and Indonesia were amongst the most promising Southeast Asian destinations. Among the three, the Philippines continues to be the most vibrant location.
Another consultant, in its recent ranking of the most desirable global services locations, ranked the Philippines seventh in the world — a huge change from being outside the top 10 a few years ago.
With strong government support, the Philippines is aggressively trying to expand the service line from BPO to value added services. The outsourcing industry’s recent growth spurt in the Philippines has been fueled, not by traditional low-value-added call centers but, by more higher-end outsourcing such as web design, medical transcription, software development, animation, legal services and shared services.

Syntel Philippines is poised to play an important role in the global delivery model by connecting the important dot in follow-the-sun strategy. When compared to other emerging locations, the quality of the resources with high proficiency in English, affinity to western culture, strong government support, service maturity and scalability are great advantages for the Philippines. Its near shore capacity for Australia is another plus point. Within a year of starting Syntel operations in the Philippines, we are already providing services in IT application testing, KPO operations and medical coding solutions in diversified domains like banking and finance, insurance and healthcare. These form the basis and drive opportunities for further expansion in other areas as well.

Indeed, Syntel Philippines can be a part of the solution in capitalizing the shift in the global services market.