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, it’s 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 client’s 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 nation’s 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.
That’s the last thing Indian outsourcing vendors like TCS, Satyam Computers and Infosys need.
Although India is still a low-cost-labor country, it’s not nearly as cheap as it once was. Compensation consultant Hewitt Associates is predicting that the average Indian worker’s 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. That’s 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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And with other countries wanting the US to fix the crisis,
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Bingo -
