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Outsourcing Economy Shifts

By LIFS May 10, 2008 at 11:45 AM

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Rising costs and a weakening dollar is prompting many U.S. companies to rethink their strategies of outsourcing to India. Analysts say that India's cost advantage, which once saved U.S. corporations 40% to 50% on outsourced services, has shrunk to under 20% as the dollar has declined almost 16% against the rupee in recent years.

Some U.S. corporations are turning to outsourcing providers in Latin America, which have the advantage of being in a closer time zone as well. Currently, however, many of these countries are still more expensive than India and the dollar has eroded against their currencies as well.

Nevertheless, a Forrester Research report recently cautioned that India's "advantage as an offshore location is fast eroding-its attractiveness takes a hit with each passing day."

Heeding the shifting tides, major Indian BPOs, such as Infosys, Tata Consultancy Services (TCS) and Wipro, are moving aggressively to set up operations in Latin America and other parts of the world.

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