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Attacks in Mumbai Could Force Execs in U.S. to Rethink Outsourcing Plans

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OhioChick Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 06:48 PM
Original message
Attacks in Mumbai Could Force Execs in U.S. to Rethink Outsourcing Plans
The fallout from the recent terrorist attacks in Mumbai, India, will most likely be felt in U.S. boardrooms, as officers and directors reassess the risks involved in running outsourcing operations in that tension-racked country.

Granted, its not likely many U.S. businesses will immediately cancel outsourcing contracts with Indian vendors in the wake of the attacks, which may have killed more than 300 people. India has become the preferred outsourcing destination for U.S. corporations, with American businesses sending approximately $24 billion in technology work to Indian cities such as Mumbai, Kolkata, Chennai, Hyderabad and Bangalore in 2008. All told, U.S. companies will probably ship around $36 billion in outsourcing assignments (including IT and nontech work) to India this year, says Sanjay Puri, president of the U.S. India Business Alliance.

Typically, outsourcing deals with Indian vendors cover several years. Breaking a contract could prove to be costly, and might also threaten a clients back-office operations or supply chain.

But Indian outsourcers are undoubtedly nervous about the situation. While the attacks last month targeted hotels, public transportation, a hospital and a Jewish center, published reports in India say the nations IT and outsourcing sectors remain a top target of extremists.

To guard against attacks, outsourcing vendors most likely will have to beef up the already-tight security at their facilities. Vehicles attempting to enter the Tata Consultancy Services facility in Kolkata, for example, are routinely searched by armed guards and police dogs.

More stringent precautions will cost money and boost the price of outsourcing vendors services. Insurance rates for the vendors are sure to go up as well, further jacking up operating costs and eroding the price advantage of doing business in India.

Thats the last thing Indian outsourcing vendors like TCS, Satyam Computers and Infosys need. Although India is still a low-cost-labor country, its not nearly as cheap as it once was.

Compensation consultant Hewitt Associates is predicting that the average Indian workers wages will increase 15.2 percent this year. That follows the 15.1 percent increase in 2007 and marks the fifth consecutive year of double-digit wage increases in India. Hewitt projects annual wage increases will stabilize at around 10 percent by 2012.

In fact, managers at some U.S. companies have discovered that offshoring in India is not quite the cost saver they imagined. Thats particularly true for captive offshore operations, in which the U.S. parent sets up and runs the outsourcing operation, usually employing local workers to staff much of the operation.

More: http://www.workforce.com/section/00/article/26/01/57.ph...
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Deja Q Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 06:53 PM
Response to Original message
1. And with other countries wanting the US to fix the crisis,
continuing to offshore jobs to other countries won't do any good either.

It's ultimately impossible to help others until you help your own.
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Azlady Donating Member (889 posts) Send PM | Profile | Ignore Mon Dec-08-08 06:57 PM
Response to Reply #1
2. Bingo -
That is what I am saying, it is not about abandoning other countries, each needs to find the best way to recover, taking care of their own, we MUST take care of our own first. I hope our jobs come back from the outsourced jobs across the planet.
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AndyTiedye Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 06:59 PM
Response to Original message
3. The Execs May Also Figure the Paltry Savings Aren't To Die For
If you run an operation somewhere overseas, you have to visit there from time to time.
If doing so makes you and your family fear for your safety,
maybe hiring domestically instead might not seem such a bad deal after all.

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stillcool Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 07:22 PM
Response to Original message
4. GM doesn't mind...although it's not "out-sourcing"..
Edited on Mon Dec-08-08 07:23 PM by stillcool47

http://www.rediff.com/money/2008/dec/01gm-to-make-india...

GM to make India Asia-Pacific hub for power-trains

December 01, 2008 14:42 IST

Unperturbed by the Mumbai terror attacks and its ongoing struggle to avoid bankruptcy back home, US auto major General Motors said on Monday it is making India power-trains development hub for Asia-Pacific region.

The company's Indian subsidiary General Motors India has already announced a total of $500 million investments in the country to set up new car and power-train manufacturing facilities and it will be hiring 500 people in the second-half of next year.
"With our engineering facility in Bangalore as the foundation of our business in India, we are making the country the development hub of power-trains for Asia-Pacific region," GMI president and managing director Karl Slym told PTI.

Considering the fact that the hub will cover countries like Australia, China, Korea, choosing India as the location is a significant decision, he added.
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Skittles Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 09:54 PM
Response to Reply #4
5. much of GM data processing is done in Brazil and India
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stillcool Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 10:03 PM
Response to Reply #5
6. I'm sure..I think it's kind of funny..
with all that is going on GE is opening up a brand spanking new manufacturing plant in India.
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