Smaller towns keep India on top in IT offshore world

India’s position as the global hub for IT offshoring and outsourcing remains undisputed. Despite the emergence of other locations across the world, newer delivery centres are expected to come up in the near future within the country for IT services.

For starters, it has been BPO services that are moving into tier 2 and 3 cities and it is now expected that IT services will follow suit, though at a slower pace. According to Partha Iyengar, head of research-India, Gartner, there will be expansion of IT delivery centres within the country into the tier 2 cities. “There will be a bigger hub and spoke model within India than outside,” he added. Gartner, for example, has increased the number of tier 2 locations it takes into consideration from 23 to 30.

Many companies are looking at starting new IT services centres in locations like Kochi, Bhubaneswar, Mangalore and Coimbatore. Sudha Kumar, CEO, Prayag Consulting, said some of the tier 2 locations have gained enough maturity to become viable IT services delivery centres and companies are looking at tapping into this talent pool.

The reasonable spread of engineering colleges across the country is also helping the IT services companies to tap into these tier 2 locations. However, the movement of companies into the tier 2 and 3 locations will be a lot slower as the quality of the available talent pool does not necessarily match the required standards. TV Mohandas Pai, director, HR, Infosys, said the smaller towns have very limited capacity and that makes it very difficult to scale up operations. Though, he added, there will be a slow movement towards the secondary cities for IT services centres.

The primary reason for these companies to move into locations is the lower attrition rate and costs. Typically, IT professionals in these locations remain within a particular company for a longer period of time. Gartner has analysed 30 countries and assessed their suitability for offshore locations. The analysis showed that India remains the undisputed leader in offshore services, but increasingly countries such as China, Russia and Brazil are providing credible alternatives.