Is Wage Inflation Forcing Companies Out of India?

What once was considered a vast land of culture now takes on a new meaning for many Americans as some saw their jobs move overseas to Indian workers. India has long offered educated and talented individuals willing to complete work for a fraction of the cost of their American counter-parts.

The tide appears to be changing. Although India still proves to be a prime location for many organizations considering offshoring their contact center operations, the country has endured significant wage inflation, according to local reports. As a result, many of its companies have begun to outsource business clients that were initially outsourced to them from other nations.

It has been reported that many Indian companies that are typically closely associated with outsourcing have begun to outsource those jobs to other countries in an attempt to avoid wage inflation as well as a lack of qualified workers in India.

Tata Consultancy (News - Alert) Services, India’s largest technology firm, has been forced to begin operating call centers in Brazil as a result of the challenging business climate it is facing in India. The firm recently signed a $200 million deal with the Dutch bank, ABN Amro, to offer its customers technology services through its new Brazilian branch.

As recently as one year ago, Datamonitor reported that the number of call agents based in the Asian markets, including India, the Philippines, Malaysia and Singapore, will be driven by internal demand in addition to a focus on language capabilities and comparative advantage from a price standpoint.

This current re-exportation of such jobs is being viewed as representing the ability of Indian firms to focus on the individual parts of a complex task in different global locations without negatively impacting the final outcome.

While the wage inflation may be very real in India and felt by many organizations, these increases still do not come close to wage costs in countries such as the U.S. and the UK. What could be contributing more to this move to areas such as Brazil could be the increased demand for Spanish-speaking services for the ever-expanding Spanish-speaking population in the U.S.  

The benefits of nearshoring are also driving many U.S.-based organizations to establish contact center operations in countries such as Brazil. The market in which the organization operates and the target audience it is focusing on can also play a big part in the decision of where to locate its contact center operation.

At the end of the day, it is unlikely that we will witness any kind of mass exodus of companies leaving India for any reason. The landscape of the contact center industry is changing however, and to remain competitive, organizations must be able and willing to change with it.

Susan J. Campbell is a contributing editor for TMC (News - Alert) and has also written for eastbiz.com. To see more of her articles, please visit Susan J. Campbell’s columnist page.