According to new research from The US-based strategic advisory and research firm The Hackett Group, Inc. the long-hold ace position of India's outsourcing capital will soon come to an end. The group beleives that The offshoring business' jobs to India will begin to decline by 2014 although US and Europe will move an additional 7.5 lakh jobs to India by 2016. While, according to Nasscom, captive offshoring units and GICs contribute $14 billion to India's $100-billion IT-BPO industry.
The research finds that India's overall offshoring market share will decline to 38 Percent in 2013 from current share of 40 Percent. Martijn Geerling, Director- Hackett Group, released the report readings at the Nasscom Global In-House Centers ( GIC) Conclave 2012 concluded in New Delhi on March 21, 2012. The Hackett Group's offshoring research, examined 4,700 companies with annual revenue over $1 billion and headquartered in the US and Europe.
According to the research the Net G&A job lost due to offshoring (in 000s), 2002-16 will account for -136 in comparison to -285(expected) for the year 2012.The numbers projected for 2013-2016 indicate a slowing of job cuts, at least in absolute numbers. As a result, the same productivity improvement percentages represented a much larger number of absolute job losses in 2002 than in 2012. Companies in these regions are quickly changing their global operating models to remain competitive. By 2016, the number of offshore jobs will have been reduced to one million. The research clearly identifies that the prime reasons that will hamper the Indian-outsourcing market includes local wage inflation and increased competition from other low-cost labor markets. The countries will need to develop alternative sources of demand in order to maintain growth in the outsourcing market.
As quoted, the research also found that of 5.1 million business services onshore jobs (U.S. and European market-2012), only about 1.8 million is expected to be moved offshore. Reductions, accelerated by the recession are driven largely by a structural, longer-term trend of ongoing innovation in companies’ Service Delivery Models, maturation of offshoring options, and increasing levels of automation. Hackett estimates that, at the end of 2001, North American and Europe based companies with over US$1 billion in 2010 revenues employed about 8.2 million people in business services positions. (The total number of companies included in this analysis is 4,700.)
As per the research, between 2002 and 2016, 3.7 million of these jobs will have been eliminated through a combination of productivity improvements (3.2 million, or 39%) and offshoring (2.1 million/25%), partially offset by 1.6 milion jobs (20%) created through economic growth. This represents a net decline of 45% over a 15-year period. The research finds that 74% of companies consider India to be a top potential destination for new operations, followed by China at 55%. In an interesting finding, automation and other productivity improvements are a major factor impacting on the number of jobs that companies offshores.
Martijn Geerling, Director- Hackett Group, iterating the report findings said- "looking ahead we see that several types of skill sets will be in high demand, including critical shortages and demand for skills in some areas will go hand in hand, putting a premium on companies’ talent management capabilities. Companies are planning to accelerate the movement of work into low-cost geographies across the entire spectrum of services."