September 07, 2006
Sluggish mood could cost India its outsourcing advantage
The sooner Indian outsourcing vendors emerge from their complacency, the better for the market. Having carved out a sizeable portion of the global outsourcing market, Indian vendors seem to be sitting back on their success, making little or no effort to cover fresh territory. Take the field of HR outsourcing, for example. Out of an estimated $80 billion global HR outsourcing market, India accounts for a miniscule part of the pie.
The biggest fear of HR outsourcing companies in the West is data privacy and data security. However, the security aspect doesn't seem to figure high enough on the priority list of India's outsourcing service providers. As Business Standard reports, the lack of data privacy concerns has kept most of the HR outsourcing bigwigs away from India:
The biggest problem—and this is why the HR outsourcing industry in India is on the back foot—is the government’s and the industry’s failure to tackle issues like data security and data privacy. Most foreign companies insist that their outsourcing agreements contain detailed and precise contractual specifications regarding data privacy and protection. This is where Indian HR outsourcing companies face a major handicap.
Then, there is the other aspect of human resources—Indian salaries are rising at 14% per annum, and this could even out the positive incline that Indian vendors are enjoying at the moment. India's cost advantage might disappear in a few years' time.
Before that happens, Indian companies need to pull up their socks and tighten other business processes, such as the security concerns, so that they stay afloat—and swim—in the global outsourcing market.
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