Virtual Assistant Business Outsourcing

When many people think of outsourcing, visions of call centers in India and sweaty factories in China come to mind.  Since outsourcing began gaining in popularity in the 1990’s, India has been the primary hub for sectors of business process outsourcing like call center/customer service, data entry, administrative and accounting support.  India was a premier outsourcing destination because they provided a pool of hundreds of thousands of primarily English-speaking college graduates each year.   In the early days of outsourcing, India had little competition because their labor was reasonably skilled and worked for a very meager hourly wage rate.  Well, that time has passed and the world is changing rapidly.

Higher Wages, Turnover and Inflation Make India Less Desirable

Inflation of goods and services (including wages) is becoming problematic as India competes with low cost countries like Viet Nam, Malaysia and the Czech Republic.  Wages are rising fast and turnover rates are also increasing.  This gives cause for alarm to potential clients who were initially intrigued by outsourcing to India because of the cheap labor rates and worker stability.  A new study from Hewitt Associates reports that Indian employees in 2007 had the highest salary increases worldwide, averaging 15.1%.  Compensation is expected to increase by an average of 15.2% in 2008, marking the fifth consecutive year that wages have risen in excess of 10%.  The Hewitt study also revealed that staff turnover has reached an all-time high in India.  For example, the turnover rate for information technology services was 28.9 in 2007.  That’s over 1 out of every 4 workers!  To further exacerbate the problem, the rupee appreciated about 12% against the dollar last year.

Growth in India Slows

Another recent study by Pierre Audoin Consultants (PAC) revealed that China, Hungary and Morocco are emerging as preferred locations for IT service providers.  PAC is a European market research and strategic consulting firm for the software and IT services industry.  According to the PAC study, in the past year the United Kingdom’s 20 largest IT service suppliers have opened 21 new global delivery centers, but only 2 have been located in India.  As business process outsourcing services have expanded into areas like financial planning and strategy, human resources, website development, software development and virtual assistants, India has held fast to lower skilled, lower paying occupations.   

Indian Employment Choices Limited to a Few Dominating Companies

Another problem facing India is the fact that 3 large companies dominate their outsourcing market. A study by Forrester Research reports that Indian firms Infosys Technologies, Tata Consultancy Services and Wipro now command 46.4% of India’s entire outsourced services market.  This further stagnates growth by stifling competition.  Working for large organizations many times also stifles the motivation of employees who feel lost among the hundreds of other co-workers toiling in jobs with little chance for advancement.  As we know in the U.S., small business is the engine that drives our economy.

Who Is on Top Now?

Although it is facing problems on several fronts, India remains an IT outsourcing powerhouse.  According to trade organizations India still brings in billions more in IT services and software compared with China and Russia.  Even though they’re still on top, India cannot afford to rest on its laurels in today’s competitive global economy.