More nations vie to outsource

Wages paid to outsourced workers in India expected to rise to nearly double by next year

At the Gartner Outsourcing Summit in Dallas this week, representatives from countries like China, South Africa, Brazil, the Czech Republic and, of course, India set up shop on the trade show floor. And many other nations may have a presence in the future if they can successfully develop offshore outsourcing industries.

Gartner estimates that about 60 countries are involved in outsourced IT at some level. The firm divides them into several categories: market leaders, such as India, China, Argentina and Russia; active participants, which include nations such as Vietnam, Egypt and Chile; and countries that are just taking preliminary steps to develop offshoring capabilities.

Among the new countries added to Gartner's list of potential offshore providers this year are Algeria, Bahrain, Kenya, Madagascar, Malta, Moldova, Saudi Arabia and Uganda. It's a fluid list -- countries removed for a lack of progress include El Salvador, South Korea, Panama, Peru and Taiwan. Puerto Rico was also scratched.

One survivor on the list is Cuba. Gartner analyst Frances Karamouzis said the communist country, which has a population of about 11 million people, is "an interesting prospect" because of its educational programs in math and computer science.

Eric Driggs, a research associate at the University of Miami's Institute for Cuban and Cuban-American Studies, said in a telephone interview that Cuba offers an educated population and university-level IT training. It also has youth centers that provide basic computer training. "You are definitely seeing a buildup of human capital to make [offshore services] possible," Driggs said.

But Cuba's government restricts Internet access and sees IT as a threat to its security, according to Driggs. And the Castro regime isn't showing any signs of loosening its technology controls: Ramiro Valdes, who was appointed last year as Cuba's IT and communications minister, is a longtime government official and former security chief. His appointment, Driggs said, "is probably a good indicator that they are not messing around when it comes to the Internet."

IT execs look beyond India for offshore sites

Gartner said wages paid to tech workers in India for application-related services continue to rise. For instance, in 2004, a U.S. customer might have been billed US$22 per hour for a Java programmer in India. By next year, that same programmer's services may cost nearly US$40 per hour, according to the consulting firm.

One conference attendee whose company runs its own offshore development facility in India agreed with Gartner's assessment of the wage increases in India. "We're finding that ourselves," said the attendee, who requested anonymity. He added that his CIO asked him last year to investigate other countries, and his company is currently looking at China as a possible alternative for offshore IT work.

Most outsourcing customers are insulated from wage increases under their contracts with IT services vendors. But not all are. And in general, there seemed to be a willingness among the IT managers at the conference to explore the globe when it comes to offshoring.

For instance, Nissan North America gets application development services from Satyam Computer Services in Hyderabad, India. All of that work is done in India now. But James McClanahan, Nissan's director of applications, said that if Satyam were to suggest moving some of the development operations to another country, he might not object -- as long as the work met the same service standards.

"I don't believe there is an affinity to any particular location," McClanahan said. He added, though, that India has "the critical mass and capability" in terms of skilled workers.

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