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IT outsourcing to India saves 60% costs
Bipin Chandran in New Delhi | March 11, 2003 13:56 IST
Companies outsourcing back-office work to India save as much as 60 per cent of their cost every year, points out the National Association of Software and Service Companies.
"The differential in wages between the parent location in the US or UK and India is more that 70-80 per cent for offshorable processes.
"However, interaction costs increase by 10-20 per cent because India is a remote location, which result in net savings of 40-60 per cent for the offshored processes," a Nasscom report says.
What stands in India's advantage is the fact that this labor cost advantage, the main reason for the cost savings is likely to exist for the next 20 to 30 years.
Pointing out that the savings are directly related to the amount of work moved to India, the Nasscom points out that, insurance and banking generates the bulk of savings because of the high proportion of processes that can come offshore.
It estimates that the banking and financial services sector in the US has made savings to the tune of $ 8 billion in the last four years by outsourcing to India.
The Nasscom report also points out today the wage of an Indian call centre operators is about 15 per cent cheaper than a call centre agent in the US.
"Even in the extreme scenario, where wages grow at 9 per cent, India will still have an 70 per cent advantage in 2008. In a more realistic case, if wages increase at 3 per cent, Indian operators will be 80 per cent cheaper than their US counterparts in 2008," Nasscom report said.
Nasscom also points out that, Indian call centres attract people who are more skilled and talented that those who work in the US and UK.
Indian call centres have a higher productivity compared to the call centre operators in the US or UK.
For example, according to Nasscom, Indian call centre agent makes on an average 98 correct transactions compared to 95 by an agent in the UK.
Besides, Indian call centre agent make 120 transaction an hour, an agent in UK makes only 100 calls.Besides, the Nasscom report also points out that the average speed of answer by an Indian call centre agent is about 8 seconds, the average speed of answer by a call centre agent in the US is 20 seconds.