DIBYANGSHU SARKAR—AFP / GETTY IMAGES

EXIT STRATEGY: Outsourcing giants like Infosys must venture beyond Bangalore

Bangalore Goes Global
	A labor crunch and foreign rivals force India's outsourcing hub to reinvent itself
	By Aryn Baker

Posted Monday, June 12, 2006; 20:00 HKT
A new word has appeared during water-cooler conversations in offices across the U.S. The term is "Bangalored." It means your job just moved to India without you. But in the shifting global labor market, vernacular can quickly become outdated. What's the term for a job that is outsourced to India only to be relayed on to China, Uruguay or Romania?

There is none—but one may soon be needed. That's because India, which virtually invented offshore outsourcing of software programming and back-office business operations, is becoming a victim of its own success. Companies such as Infosys, Wipro and Tata Consultancy Services (TCS), India's top three outsourcing companies, became giants by tapping armies of quick-coding, English-speaking, low-wage technoserfs. But Indian salaries are rising—the median annual wage for a software engineer jumped 11% from $6,313 in 2004 to $7,010 in 2005, according to India's National Association of Software and Service Companies (NASSCOM)—and there's a mounting shortage of qualified workers that is crimping further growth. Fewer than one-third of the 400,000 Indians who annually graduate from the country's technical colleges have the right skills, says Kiran Karnik, president of NASSCOM. "We are sucking the well dry," he says, "and the current education [system] cannot replenish it quickly enough."

Not only is there a talent squeeze, but India is also feeling the sting of a globalization backlash. Outsourcing companies are springing up in low-cost markets worldwide, including China, the Philippines and Eastern Europe. "China has much the same resources as us: great pools of talent and a young workforce—and better schools, airports, and roads," says Karnik. What's more, major IT-service companies from the U.S. are muscling into India, accentuating the demand for well-trained young talent. Last week, IBM announced plans to invest $6 billion in Bangalore over the next three years. That means the U.S.-based tech giant will be adding significantly to its already vast India workforce of 43,000 employees.

Such pressures are forcing Bangalore to look for workers beyond India's borders. Infosys, Wipro and TCS have all built outsourcing campuses in China and are actively recruiting Chinese employees to serve North Asian markets. In an ironic twist, Infosys has gone one step further by hiring 300 Americans who recently graduated from top universities. They will undergo six months of training in India and then will be redeployed around the world. Wipro is looking at opening a campus in Vietnam, and plans to hire 1,000 bilingual speakers at a new center in Romania to service European clients.

To maintain profit margins and growth rates, Indian companies are also offering higher-value services such as R&D, infrastructure management and bespoke software design. "Our customers are now saying they want faster, better and cheaper services, but they also want their problems solved by someone who is intimately capable of understanding their unique challenges," says Nandan Nilekani, CEO of Infosys. Selling increasingly sophisticated services often means expanding overseas to gain the required expertise. Infosys has beefed up its U.S. consultancy wing by hiring specialists in the pharmaceutical, investment-banking and insurance sectors. Wipro, too, is venturing abroad, acquiring six foreign companies in the past six months, including the $53 million purchase of the Portuguese firm Enabler, which works with large retailers in Europe and Brazil. "The idea is to buy companies with skill sets we don't have in geographic regions we'd like to be in," says Lilian Jessie Paul, Wipro's chief marketing officer. TCS, which already has offices in some 45 countries, plans to increase foreign employees to 10,000 by the end of the year. In 2002, it had fewer than 300. "To keep growing, we need to make acquisitions," says Phiroz Vandrevala, TCS executive vice president.

So what's the word to describe someone whose job is outsourced to Romania via India? Wipro's Paul likes "globombed." Sudip Banerjee, president of enterprise solutions at Wipro, prefers the more subtle "flattened," with a nod to Thomas Friedman, author of the globalization bible The World is Flat. Says Banerjee: "The jobs will go to those who can do them best, in the most cost-effective manner. Geography is irrelevant." So are companies that fail to go global.

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