India’s Biggest Advantage Isn’t Its Labour Costs

At the start of this year I accompanied one of my clients on a trip to India to visit a number of LPO suppliers. During our packed week, in which we covered sites in Noida, Gurgaon and Mumbai, we saw a wide range of supplier capabilities, approaches and facilities. But one thing was consistent across all of the suppliers, and, I believe, is the quality that will ensure India’s continued success in this ever more competitive market. You may be surprised to hear that it has nothing to do with price.

With each of the suppliers we visited, we were insistent that we didn’t just get a series of presentations in their boardroom; why travel for 11 hours when you could do the same thing in the comfort of your own boardroom? So, as part of the agenda, we walked the floors and met the people who actually did the work on behalf of the suppliers’ clients. And this is where we found our gems. Without exception, everyone we met was professional, friendly, approachable and, most importantly of all, committed. And we didn’t just meet people the senior managers wanted us to meet – as far as we could (remember that there are very strict confidentiality requirements in place when you are working on firms’ legal processes) we talked to people randomly and without their managers present. The consistent themes we found were of staff who were proud to be there, that wanted to succeed and who put their clients at the same level (and, in some cases, above) their own employers. And, in an environment where they may have met their opposite numbers only once before and who might operate in completely conflicting time zones, that is highly commendable indeed.

And don’t think that this advantage could only be over other outsourcing destinations. As a management consultant, I’ve met many, many staff from hundreds of organisations across the world and, particularly, in the UK. Rarely have I seen such pride and commitment as we witnessed at those LPO providers in India. Whether you see that as an unfavorable statement on Western staff or a positive statement toward Indian staff, it can only be a good thing for outsourcing as a whole: it’s clear that the business case for resourcing offshore should be stated as not only being cheaper, but better.

One thought on “India’s Biggest Advantage Isn’t Its Labour Costs

  1. Interesting thoughts.

    The argument for outsourcing to India has long moved away from “Cost arbitrage”. While the IOPs (Indian origin outsourcing providers) have been saying this all along, these musings from a Westerner – and a management consultant at that – will hopefully make it more credible.

    If a customer is looking to outsource IT/Business processes/Legal processes/R&D to India, it must have reasons other than cost arbitrage. A business case predicated on India based cost arbitrage is generally a hollow one. Most IOPs:

    1. Have significantly superior processes – means higher efficiency/service levels/doing more with less for their customers
    2. Have significant experience at putting together and executing “Business Outcome” based rather than “FTE/Hours” based solution constructs
    3. Demonstrate significant thought leadership in putting together and executing partnership orientated, risk & reward business models – “Business Partners” rather than “Vendors” to their customers.

    At the heart of the above mentioned is nothing except people’s innovation / commitment / passion. Of course, the bigger IOPs are better at this game than the smaller ones. And expectedly so.

    Just sample these facts:

    1. The India R&D centers of companies like Texas Instruments and GE file more patents annually than their western counterparts
    2. Knowledge intensive companies such as Merck, Pfizer, GSK etc. increasingly leverage their India captives and their other Indian partners’s capability to do high end, fundamental research, the type that was supposed to be the exclusive preserve of the west till some years back.
    3. The company I work for engineers a wide range of sophisticated, high end network management equipment for world’s number 1 network equipment manufacturer. The company in question does the end-to-end R&D and engineering of these equipments right from market requirement analysis through to design to prototyping to the stage when the device is ready for commercial scale manufacturing. And the commercial model in use with the customer is based on “Revenue sharing” not on the amount of “Efforts/hours” spent in engineering the particular devices.

    Satyendra Kumar

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