We hear more and more in the media how the Indian outsourcing miracle has run out of steam. But the results posted by WiPro, Infosys and others really don’t bear this out. Our experience of our customers either outsourcing to India or simply off-shoring their own operations has highlighted a few things. On a dollar-for-dollar basis, Ireland obviously cannot compete with India/China etc. However, the stories we are hearing are that the rate of increase of salaries in India is very high and far exceeds that in Ireland over the past few years. In addition, the attrition rates in India have been reported in some cases as being higher than 50% annually. This is not sustainable. For companies that off-shore based entirely on cost, China, Vietnam etc will start becoming far more interesting. But there is nothing unexpected about this.

This article on Cnn.com has some interesting things to say about what is happening in India but gets it completely wrong when talking about Ireland. They seem to think that the cost increases in Ireland were a bad thing and drove out those who came here in the 80’s and 90’s. The point they miss is that all countries who go down the off-shoring model start as low-cost low-value locations and aim to transform themselves into mid-cost high-value locations to the benefit of their citizens. Ireland was first, India is next and China will come after that. The enrichment of one country does not imply the impoverishment of another - all of us taking a bite out of a bigger pie is far more preferable to some of us having all of a smaller one.

Mistakes were made by those who set up in Ireland in the 80’s (Fieldcrest anyone?). Similar mistakes have been made in the 90’s and 00’s in India (unrealistic expectations on cost savings, time-zone problems, cultural and language problems, infrastructure costs, training costs). And all of these mistakes will be made in China, Vietnam and South-East Asia over the next 10 years. But that is irrelevant. As long as these countries grow and open their own markets, then there are more opportunities for us all.