Outsourcing: A Passage Out of India;For years there was pretty much one choice for U.S. companies seeking to move jobs offshore: India. Outsourcing grew to a $69 billion business there and transformed backwaters such as Chennai and Hyderabad into teeming cities. That wave has crested. In 2011 companies in Latin America and eastern Europe opened 54 new outsourcing facilities, vs. 49 for India, according to industry tracker Everest Group.;The two regions are challenging the subcontinent?s dominance in outsourcing as American corporations increasingly ship higher-level jobs offshore. India had substantial advantages in offshoring?s first phase: plenty of English speakers to staff call centers and enough tech talent to run remote data-processing and computer support centers?all at about a 60 percent discount to stateside workers. But having wrung substantial costs out of back-office functions, U.S. companies are exporting skilled white-collar jobs in research, accounting, procurement, and financial analysis.;http://images.bwbx.io/cms/2012-03-15/comp_outsourcing12__01inline__405.jpg;Because these jobs aren?t mass-processing functions, India?s forte, there are greater opportunities for countries such as Argentina and Poland, which have higher labor costs than India. Using an outsourcing firm to hire an entry-level accountant in Argentina, for example, costs 13 percent less than a similar U.S. worker, while an Indian worker would cost 51 percent less. But many employers moving higher-end jobs offshore care about more than just getting the lowest wage. ?The higher-value outsourcing jobs require a greater understanding of business context and a higher amount of interaction with clients,? says Phil Fersht, chief executive officer of HfS Research, a Boston outsourcing research firm.;Cities such as S?o Paulo have large groups of young people with engineering and business school degrees who speak English and are capable of doing everything from developing video games to analyzing mortgage defaults for U.S. companies. Brazil has the most Java programmers in the world and the second-most mainframe (COBOL) programmers, according to Brasscom, a technology trade group in S?o Paulo. IBM (IBM) located its ninth research center in the city in 2010, the first since 1998, when it opened a center in India.;It helps that the region?s time zones are more in sync with those of North America. That?s why Copal Partners (MCO), which since 2002 has built up its investment-research outsourcing business in Gurgaon, India, added an office in Buenos Aires. It?s only a two-hour time difference for Copal?s clients in New York. ?If you?re working with a hedge fund manager where you have to interact with him 10 to 15 times a day, having someone in about the same time zone is important,? says Rishi Khosla, Copal?s CEO.;Even Tata Consultancy Services (TCS)?India?s outsourcing leader, with estimated sales of $9.8 billion in 2011?has 8,500 employees in South America, including Peru and Paraguay. And Genpact (G), the subcontinent?s biggest business-process outsourcer, opened a finance and accounting center in S?o Paulo last year for U.K. drugmaker AstraZeneca (AZN).;Such ?nearshoring? of jobs is also benefiting eastern Europe. The economy of Wroclaw, Poland?s fourth-largest city, revolved around heavy industry during the Communist years. Now it?s an outsourcing center, with 30 local colleges providing a skilled labor pool. Local outsourcing jobs doubled from 2008 to 2010, when centers were opened there by IBM, Microsoft (MSFT), and Ernst & Young. The auditing firm in 2011 added a second center in Wroclaw, where workers provide legal, real estate, and human resources services to European clients. E&Y employs 1,300 people in six Polish centers.;Poland?s Gen Y population is highly educated?about 50 percent of its 20- to 24-year-olds are in college, says Hersht, vs. 10 percent in India?and prolifically multilingual. The 26 languages spoken at Hewlett-Packard?s (HPQ) Wroclaw center make it ideal for serving its European, African, and Middle Eastern operations, says Jacek Levernes, who oversees outsourcing for those regions. The Wroclaw center employs more than twice as many workers as HP expected when it opened in 2005?2,300, vs. 1,000?and they perform higher functions. The Polish workers originally provided basic financial and accounting support, now they handle marketing services and supply-chain analysis as well.;France?s Capgemini (CAP) has staked much of its outsourcing future on nearshoring, including financial and accounting centers in Guatemala City and Krak?w, Poland. Bottler Coca-Cola Enterprises (CCE) pulled jobs out of its Tampa, Dallas, and Toronto offices in favor of Capgemini?s Guatemala center, for instance, and out of Paris, Brussels, and London in favor of Krak?w.;HfS?s Fersht, who?s visited both, says each could pass for a U.S. office, except for the rich stew of languages?more than two dozen in the Krak?w center and conversations in both English and Spanish in Guatemala?and the workers? nearly uniform youth. The average age is 26, reports Capgemini, which hires from the pool of 30,000 graduates produced annually by Krak?w?s colleges. Capgemini has staffed up from 180 business-process outsourcing employees there in 2003 to 2,500 now.;Hansj?rg Siber, head of Capgemini?s global business-process outsourcing operations, says the Guatemala center employs college graduates who can analyze the bottler?s vendor agreements and optimize its procurement costs. Such jobs also require interacting with clients, an area in which he says nearshoring beats offshoring. ?The Guatemalans speak English with an American accent, which is very well accepted,? he says, ?and not an Indian accent, which is not.? Fersht cites another benefit: Capgemini?s clients get the services of Polish and Guatemalan college graduates for the price of U.S. high school grads.;Discuss questions;1. What are the business reasons behind the "push" to offshore jobs?;2. Is "nearshoring" jobs, i.e., to Brazil or Poland, a viable alternative to offshoring to India? Why?
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