December 22, 2011

India's top outsourcing firms plan to reduce the amount of work performed onsite by their staff travelling on temporary visas in the US, as they battle increased immigration scrutiny and push harder to increase profitability by shipping more work offshore.

At least three CEOs at the country's top 10 technology firms confirmed they plan to reduce onsite work by up to 5% over next year and handle traditional onsite projects such as managing takeover of an existing outsourcing contract among other activities through videoconferencing.

By shipping more work to offshore development centers in India, companies such as TCS, Infosys and Wipro aim to protect, and in some instances even improve, profit margins at a time when customers are negotiating hard. 

"Some customers are even asking us to hire local subcontractors instead of bringing temporary workers, as it's not seen as 'a nice thing to do' in the current environment," one of the CEOs who requested anonymity said last week.

Outsourcing customers in the US, especially those considering this option for the first time, are wary about increased public backlash and federal scrutiny. In many ways, the ongoing investigations against Infosys for alleged misuse of short term business visas to perform long term projects is making these clients even more wary. "Increased scrutiny is among reasons triggering this trend and such concerns come up during discussions," said Amneet Singh of outsourcing advisory firm Everest Group.

Currently, Indian tech firms execute anywhere between 25-30% of projects at customers' premises and deliver the remaining work from cheaper development centres in India. Onsite projects are billed at 3-4 times or higher than projects delivered out of India. But onsite costs too are high because of higher local wages in the US, making them less profitable than offshore projects.

Infosys, for instance, has nearly 25% work performed onsite and the remaining from India. "There's scope to do more-in some application development and maintenance projects this could go to 95% and more," added Singh. "As Indian service providers get more experienced, it's becoming increasingly commonplace to increase the offshore/onshore ratio -- especially for ADM work. For BPO, it is still relatively unchanged for 2008, but we're starting to see more highervalue F&A work (such as risk management and analytics) now moving offshore in greater quantities," said Philip Fersht, CEO of sourcing advisory firm HfS Research.

Newer solutions like telepresence- a technology that links remote meeting rooms over high definition television -- are also helping these software exporters to move traditional onsite work offshore. "Earlier, it was a common practice to fly for every transitioning. But now firms have reduced travel and are doing it over telepresence," Singh added.

Every time an outsourcing firm bags a new contract, they have to send a team of experts to understand business needs and ensure that projects get handed over from existing vendors or internal IT departments. As work permits get tougher to obtain, these companies are now doing most of it over highend video conferencing.

"Today, there is no hesitation in doing some high-end consulting projects offshore. Clients want to save more on costs and hassles and also want us to pass on some of it," another CEO at one of the top Indian tech firms that counts a US retailer among its customers said.

From : Economic Times

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