SIDEBAR

A rising ride of expertise

A major reason why companies are able to approach offshoring more strategically is that offshorers are establishing themselves as full-fledged multinational operations with ever-growing areas of expertise that may soon rival those of their U.S. competitors, says Paul Roehrig, an analyst at Forrester Research Inc.

He cites a recent $140 million, five-year comprehensive outsourcing agreement between Tata Consultancy Services and Ecuador's largest private bank, Banco Del Pichincha CA, in which TCS will retain 500 of the bank's current employees. They will be augmented by TCS's own business process outsourcing center in Chile, which was established through an acquisition.

"That's exactly the sweet spot of the IBMs, EDSs and HPs of the world," Roehrig says.

"Five years ago, it never would have happened."

While U.S.-based providers still have the edge in areas such as onshore delivery, alignment with vertical markets and consultative selling, Indian providers are working hard to overcome their weaknesses in those areas, he points out.

And as that happens, it's important for companies to rethink what offshoring means, Roehrig says.

"It's starting to mean having the work done where it can be done best, balancing price and service components," he says.

"There are still customers who just want to cut costs and who think that by booting work to India they'll do that -- and they will. But they're not leveraging the complete value of that relationship."

Gartner analyst Lorrie Scardino agrees that India-based providers have much to offer in terms of process standardization, portfolio rationalization, automation and process maturity. These capabilities will play an increasingly important role as Indian labor costs rise.

"When it was just a low-cost labor source, that's all companies were interested in -- replicating what they had with people who cost less," she says.

"But if they leverage this other potential, they'll see the results and sustained advantage, especially as labor costs go up."