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Offshoring to India will end in 8-10 years: Hackett report

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Offshoring to India will end in 8-10 years: Hackett report

Last updated: March 26 2012
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  • Offshoring to India will end in 8-10 years: Hackett report

    21 MAR, 2012, 10.10AM IST, ET BUREAU

    NEW DELHI: Offshoring of jobs to India will begin to decline starting 2014, and will reach the end of its lifecycle in eight years, according to US-based strategic advisory and research firm The Hackett Group released at the Nasscom Global In-House Centers ( GIC) Conclave being held here.

    According to The Hackett Group, the traditional model of US and European companies moving finance, IT, and other business services jobs offshore will reach the end of its lifecycle over the next 8-10 years, and US and European companies will simply run out of jobs which can be moved offshore to locations like India.

    The Hackett Group's offshoring research, examined 4,700 companies with annual revenue over $1 billion and headquartered in the US and Europe. It found that by 2016, a total of 2.3 million jobs in finance, IT, procurement and HR will have moved offshore.

    The Hackett Group's Director Martijn Geerling said: "After the offshoring spike driven by the Great Recession of 2009, the well is clearly beginning to dry up. It's critical for India to develop alternative sources of demand, to maintain growth of their business services industries."

    India is by far the most popular destination, with nearly 40% of the jobs being offshored headed there. Hackett predicted that India's overall share will decline to 38% in 2013.

    According to Nasscom, captive offshoring units of large banks, insurance companies and retailers contribute $14 billion to India's $100-billion IT-BPO industry. According to The Hackett Group, only about 4.5 million of the 8.2 million business services jobs located in North America and Europe at the start of 2002 will still exist in 2016.

    "By 2016, the number of potentially offshorable jobs will have been reduced to one million," said Michael Janssen, principal and chief research officer at The Hackett Group.

    KPMG disagreed with the Hackett's research. "India currently has about 6% of world's outsourcing potential. Even if we manage to double it by 2014, there will be enough headroom for more growth," said Pradeep Udhas, Partner and Head ITBPO sector at KPMG. A partner at AT Kearney also echoed a similar sentiment.
  • #2

    #2

    Re : Offshoring to India will end in 8-10 years: Hackett report

    Also as per this report, and from last 2 years we are observing that MNC are not opening their new offices in India at that speed as they started to open 6-7 years before.... There is huge empty big offices space vacant all around in NCR which still need to FILL by Companies....

    If Outsourcing started to downfall as per this report then will it also effect Real Estate of areas which are only depend upon IT/BPO Jobs..... or NOT ???

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    • #3

      #3

      Re : Offshoring to India will end in 8-10 years: Hackett report

      Originally posted by saurabh2011 View Post
      Also as per this report, and from last 2 years we are observing that MNC are not opening their new offices in India at that speed as they started to open 6-7 years before.... There is huge empty big offices space vacant all around in NCR which still need to FILL by Companies....

      If Outsourcing started to downfall as per this report then will it also effect Real Estate of areas which are only depend upon IT/BPO Jobs..... or NOT ???
      Last 4 years have seen the economic slowdown throughout the world.
      Heck....Jobs were lost in several parts of world....but Hiring continued in India.

      What i want to say that economy will not increase at break neck pace for ever. There will be times when economy will mature and would increase at moderate speed.
      Its better to be cautious and prepared but hell's not going to break.

      As for empty office space and flats.....greedy and blind builders and investors will suffer....let them. we shall give them two hoots.

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      • #4

        #4

        Re : Offshoring to India will end in 8-10 years: Hackett report

        I don't know about offshoring but there is no doubt that there have been no economic reforms in last 8 years. In fact, the direction of reforms have been reversed to a certain extent and we are regressing back to the days of 'mai-baap' sarkar and the old hackneyed defeated slogans of 'Garibi Hatao'. Ofcourse, this empty sloganeering hurts poor than anyone else but who cares as long as it fetches votes.
        'LIVE FOR INDIA'

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        • #5

          #5

          Re : Offshoring to India will end in 8-10 years: Hackett report

          One very big reason that willl contribute to end or decline of offshoring will be, hike in salary.
          Offshoring is only there coz of the cost benefit. The way the companies have been increasing salaries in India, very soon, it will be at par with what is there in US and Europe. This will lead to no cost benefit and eventually, no offshoring.

          And the reason why the Indians are getting paid handsomely, is because of talent. Initially, offshoring was here only for support and maintenance. But eventually, because of the quality work we have delivered and are capable of delivering, the entire work/projects started coming here.

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          • #6

            #6

            Re : Offshoring to India will end in 8-10 years: Hackett report

            Originally posted by ashar_amu View Post
            One very big reason that willl contribute to end or decline of offshoring will be, hike in salary.
            Offshoring is only there coz of the cost benefit. The way the companies have been increasing salaries in India, very soon, it will be at par with what is there in US and Europe. This will lead to no cost benefit and eventually, no offshoring.

            And the reason why the Indians are getting paid handsomely, is because of talent. Initially, offshoring was here only for support and maintenance. But eventually, because of the quality work we have delivered and are capable of delivering, the entire work/projects started coming here.
            Dear

            Salaries are hiking cuz cost of living is increasing (Inflation). Why do you think that salaries will only Hike in India not in US / Europe ?

            They also have Inflation and their salary is also hiking, I don't think salary will become equal in India and US / Europe

            Comment

            • #7

              #7

              Re : Offshoring to India will end in 8-10 years: Hackett report

              Congress seems to be spending money on PAID media only. Bad for India that we stuck up with people like Sonia and Rahul. Media did it best to make Rahul Hero from non issue of Bhatta etc but indirectly helped SP to win state.

              Economy of India will never be going to great it look like that India has missed bus and it is all advantage to China only. It is all because of "sabse Nikamma Pradhanmati" India ever get

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              • #8

                #8

                Re : Offshoring to India will end in 8-10 years: Hackett report

                It seems that you are too angry with the indian government but you need to check the reaserch and study conducted by reputed and reliable firm. All of them considering that India is going to be the world leader in year to come and Indian Primeminister is an very very inteligent guy. If you read the credential and achievement of our PM and compare it with anyone in world you will not find anyone who can even think of becoming Manmohan Singh. People like us who sits in office and cheating their own company by doing half heartedly work and looking for another job simultaneously and spending time on facebook and doing chatting, think that they are more genious than Manmohan Singh, Abdul Kalam, P.Chidambaram, Narayan Murty, Sachin Tendulkar and Amithab Bacchan.

                Originally posted by rudresh26 View Post
                Congress seems to be spending money on PAID media only. Bad for India that we stuck up with people like Sonia and Rahul. Media did it best to make Rahul Hero from non issue of Bhatta etc but indirectly helped SP to win state.

                Economy of India will never be going to great it look like that India has missed bus and it is all advantage to China only. It is all because of "sabse Nikamma Pradhanmati" India ever get

                Comment

                • #9

                  #9

                  Re : Offshoring to India will end in 8-10 years: Hackett report

                  Originally posted by indnefb View Post
                  It seems that you are too angry with the indian government but you need to check the reaserch and study conducted by reputed and reliable firm. All of them considering that India is going to be the world leader in year to come and Indian Primeminister is an very very inteligent guy. If you read the credential and achievement of our PM and compare it with anyone in world you will not find anyone who can even think of becoming Manmohan Singh. People like us who sits in office and cheating their own company by doing half heartedly work and looking for another job simultaneously and spending time on facebook and doing chatting, think that they are more genious than Manmohan Singh, Abdul Kalam, P.Chidambaram, Narayan Murty, Sachin Tendulkar and Amithab Bacchan.
                  Arre yaar... tum to serious ho gaye.....

                  Yes, we know our PM is very intelligent as he does only what his BOSS 'SG' says.... for any critical decision he runs to her to seek advise.... Madamji jaise bolengi, apun waise hi karega!!!!

                  Can't you think why Sonia picked Manmohan ji to be PM who was no-where as PM Candidate while elections... coz she knows that this the only GUY who will not betray her.......... Politics mein tow log sage baap par bhi bharosa nai karte.....

                  Didn't you see the latest example of Mr. Trivedi (ex railminister) what he did to Mamta who proposed his name as her successor for this role..... now he is regretting... kyu Congress ki baaton mein aa ke apne Maa se dushmani le liiiii

                  Comment

                  • #10

                    #10

                    Re : Offshoring to India will end in 8-10 years: Hackett report

                    Originally posted by ashar_amu View Post
                    One very big reason that willl contribute to end or decline of offshoring will be, hike in salary.
                    Offshoring is only there coz of the cost benefit. The way the companies have been increasing salaries in India, very soon, it will be at par with what is there in US and Europe. This will lead to no cost benefit and eventually, no offshoring.

                    And the reason why the Indians are getting paid handsomely, is because of talent. Initially, offshoring was here only for support and maintenance. But eventually, because of the quality work we have delivered and are capable of delivering, the entire work/projects started coming here.
                    I own a small IT company. From my day to day experience, I understand that increasing salaries are not the only issue that are bothering Indian IT. We can afford to pay even better salaries to the employees with required skills and experience. It is the lack of infrastructure that is killing us. Bad infra means power cuts that last from 3-4 hours a day in parts of Delhi in summers on an average to several days in a row in Gurgaon or Noida summers. Then there is cost of government supplied electricity (when it is available) which is 2-4 times that of the prevailing cost in say Canada that has no power cuts. Cost of power generated by diesel gensets operated by builders is even higher. Similarly cost of communications (leased lines) is about 50-120 times more in Delhi when compared with any developed country or many developing countries. Cost of water supply by DJB in Delhi went up by a ridiculous 11 times in last 1 year.

                    I am yet to start talking about the conditions of roads or law and order in India.

                    Then there is corruption. I am yet to meet a single honest sarkari employee. All government employees in our country are thugs, without exception. Our justice system is rotten and exists only to protect the corrupt, rich and powerful criminals.

                    Last but not the least, real estate companies and corrupt politicians have played their role as well by boosting the value of real estate as well as rentals.

                    All these small issues combine to increase our costs by a significant absolute number.

                    It is a miracle that outsourcing industry has grown as much as it has in our country but as they say: all good things must come to an end. So end is near for a vast majority of outsourcing companies that operate in areas with low entry barriers or low margins. Their profit margins are shrinking and soon they will not be able to afford the high rents, increasing price of electricity and data lines, ever increasing demand for bribes as well as increasing salaries. So they will close their shop and move to cheaper destinations like Vietnam etc.

                    There is a good reason that builders are struggling to sell commercial office space in Noida and Gurgaon now a days.
                    Last edited March 21 2012, 05:25 PM.

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