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KPMG-Nasscom advisory for Indian outsourcing players

Hyderabad April 27 Domestic technology outsourcing services providers need to rework their business plans and strategise for the emerging destinations to compete with the global big five, according to KPMG-Nasscom report on emerging destinations.

The KPMG-Nasscom combine released the report here in the presence of technology industry players. The report aims at offering insight into trends that would help build strategies for an enhanced service footprint.

The Global Head Sourcing Advisory, KPMG Advisory Services, Mr Pradeep Udhas, said the need to develop a hub and spoke model, making India as a hub and countries like Malaysia, Singapore, Brazil, as spokes, was vital to take on competition from established global players such as IBM, Accenture and EDS, who have made a mark in technology outsourcing.

Global activity

These regional centres would also be required for disaster recovery, business continuity in many cases and near-shore centres in some cases. One finds Dalian in China supports Japan, South Korea, Canada, the US, and Egypt and Morocco, the European Market.

Mr Udhas said sourcing is viewed by most companies as a global activity and has become a core part of the business strategies of large companies. In addition to the increasing number of back-office services, such as payroll, HR, customer care, companies are now outsourcing their core business processes.

In contrast to strong and balanced presence of foreign companies in the new emerging markets, Indian companies are yet to reach the scale in globalisation. Citing numbers, Mr Udhas said that the foreign direct investments in Latin America, Europe and Asia Pacific indicated strong growth and outsourcing offers immense scope.

Increasing presence

However, while some of the top tier India technology companies such as TCS, Infosys, Wipro, Satyam have presence in emerging markets, the fact remains that they have not scaled up. In most cases, the average number is about 250 people. The challenge for them is to have about few thousands in some of these markets to keep pace with the `Big Five'.

For instance, down the lane some of these companies are in pursuit of say a $1 billion deal, a big presence in emerging markets would make a difference to their competitiveness.

Together, KPMG and Nasscom reviewed Czech republic, Hungary, Poland, Romania and Slovakia in the Central and Eastern Europe; Mexico, Brazil, Chile and Argentina in Latin America; China, Vietnam, Malaysia and the Philippines in Asia Pacific and Canada in North America.

New destinations

Drawing patterns within these regions, Mr Udhas said as global sourcing matures, interest across new sourcing destinations will continue to grow and national boundaries will become less relevant. While Indian companies specialise in some aspects of technology outsourcing, they will need to focus on new locations offering language, transaction processing and knowledge processing skills.

Mr Kumar R. Parkala, Global Chief Operating Officer, IT Advisory, KPMG, based in Sydney, highlighted the potential Down Under where Indian top tier companies were making inroads and continue to bid for more outsourcing deals. TCS and Satyam have already bagged good deals and have stepped up presence to serve both Australia and New Zealand.

Mr Udhas said in the next two three years India would have atleast four - five companies with revenues more than $5 billion each. And, potentially some of them may make big ticket acquisitions to achieve scale.

The Indian IT firms enjoy big market capitalisation, enabling them the power to take on some big ones globally, he said.

Asked if TCS's plan of achieving $10 billion was likely, Mr. Udhas said "this is certain to happen."

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