Global competitiveness of Indian cities as outsourcing destination


Indian cities led by Delhi’s national capital region (NCR) have grabbed the top seven slots in a global ranking of competitiveness of cities as outsourcing destinations. Close on the heels of Delhi are Bangalore, Hyderabad and Mumbai, according to a study released by US-based consulting firm neoIT.

The other three Indian cities at the top of the list are Pune, Chennai and Kolkata. Ho Chi Minh City (Vietnam), Manila (Philippines) and Shanghai (China) are the three non Indian cities which figure among the top 10 off shoring destinations.

Beyond that piece of good news, there is a word of caution. According to the study, in the next three to four years, several cities in Eastern Europe and China could become major rivals to India as outsourcing destination. In fact, the study project that Warsaw (Poland) would be right at the top of the list by then, along with two Indian cities, Kolkata and Hyderabad.

Delhi, Mumbai and Bangalore could have fallen well behind by that time, with Mumbai and Bangalore likely to be not even in the top 15, while Delhi too could drop out of the top 10. India would still have three of the top five slots, with Chennai joining kolkata and Hyderabad in that category.

The choice of outsourcing cities is based on both generic and enterprise-specific factors. Generic factors are independent of the country from which work is off shored, with the entrepreneur off shoring his work mainly to benefit from cheap labor. The other generic determinants are availability of proper infrastructure and lower country risk.

It is these generic factors that have made Indian cities hot destinations for off shoring, it says availability of a fairly large and qualified pool of workers is imperative to the success of these Indian cities over the rest of the world. Infrastructure is available and India has proved to be politically stable, hence the risk factors have been lowered.

It can also be plausibly argued that these cities have gained from coming into business quite early and having matured by the time when off shoring emerged as a major business demand. Small companies usually do not want to be adventurous in venturing to new destinations; definitely these cities have an edge over rest of the world.

Another important reason for these cities being hot spots is the availability of middle and senior level management. Then, of course there is India’s huge advantage over many other destinations when it comes to English language skills – part of enterprise – specific factors.

Times are changing and the ‘one size fits all’ approach has lost its relevance. With off shoring emerging as a major business process and companies off shoring both core and value added process, enterprise specific factors are going to determine the choice of location. These include language compatibility, physical proximity, socio-economic affinity as well as availability of sector specific expertise. The traditional locations, it predicts will be already heated up and there is possible chance of a supply crunch in them.

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