Dobberstien highlights advantages of tier 3 cities, saying offshoring to India remains a high attractive proposition for many companies.
Global offshoring and outsourcing companies are looking to new talent in India’s tier 3 cities such as Surat, Nagpur, Lucknow and Ahmedabad, according to a London-headquartered consultancy.
Rating India as number one in the 2016 Global Services Location Index (GSLI), A. T. Kearney said real estate facilities in tier 3 cities in India are relative affordable with Nagpur and Ahmedabad are 25 per cent to 30 per cent cheaper than Kolkata and Delhi.
Another advantage is the relative availability of labour, its lower cost and lower attrition rates, said Nikolai Dobberstien, partner with A.T. Kearney’s Communications, Media and Technology practice in Mumbai.
Many of these cities have highly developed educational infrastructure, ensuring fresh crops of qualified graduates for the foreseeable future, he noted in the GSLI released January 12, 2016.
While this year’s GSLI examines the trajectory of offshoring cost arbitrage to low-cost developing countries, and the rise of some new locations, the real story lies in the disruption being felt throughout this already disruptive industry in levels of automation of business processes.
“Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what’s being outsourced is changing,” observed Arjun Sethi, global leader of A.T. Kearney’s Strategic IT practice and principal author of the study.
“For the first time, we have a trend – automation – that could displace the leadership of the likes of India and China in outsourcing.
“Technology’s relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom – or by what – it is being done. The new business model associated with this automation threatens established concepts of offshoring, while expanding the market,” he explained.
The study projects that Robotic Process Automation (RPA) will continue to ripple through the service economy over the next decade, as the rules-based, repetitive tasks that most back-office employees perform are the easiest to automate.
However, a disruptor has emerged in the form of Business Process as a Service (BPaaS). While in RPA robots are “taught” to emulate what humans do using the company’s own user interfaces, in BPaaS service providers use a standardized interface and process across multiple customers – with varying degrees of automation – to quickly deliver outcomes at any scale.
“The implications on accessibility of services and employment in these countries are massive. On the client or receiver end, BPaaS dramatically lowers the entry barriers to business data management, opening the floodgates to smaller and newer companies,” he said.
“Simultaneously, we’re seeing a shift in required job skills that will play to those countries with the most adaptable educational systems – as standardization and automation come to dominate the simpler processes, offshorers will demand skills of a more analytic nature,” explained Sethi.
Nevertheless, India’s undisputed industry leadership is facing a challenge from China which has become attractive with its recent devaluation of Renminbi and gains in educational skills and cultural adaptability.
China, Malaysia, Brazil, Indonesia, Thailand, The Philippines, Mexico, Chile and Poland were respectively made up the top 10 list.
The GSLI, launched in 2004, helps companies make key location decisions for offshoring and industry development projects with objective guidance. fii-news.com
