Indian outsourcing cuts costs

Outsourcing IT operations to India can lead to cost savings of more than 50 per cent and significant productivity improvements, according to India's IT trade body.

The National Association of Software Service Companies (Nasscom), which represents India's burgeoning software and services industry, claimed that problems with the country's infrastructure and communications are offset by savings elsewhere.

Sunil Mehta, vice president at Nasscom, told vnunet.com that companies which have already outsourced parts of their IT infrastructure to India are seeing savings of up to 60 per cent.

"To a certain extent this is offset by higher telecoms costs of 10 to 15 per cent, but companies are still seeing overall savings of 50 to 60 per cent," he said.

The number of errors per million transactions is reduced by 15 to 20 per cent, and productivity per person can improve by 10 to 15 per cent, claimed Mehta.

He explained that the next phase of Indian outsourcing would step up from smaller scale software development and application support deals to entire IT operations and business process outsourcing.

Speaking at the Financial Times/Nasscom Outsourcing to India conference this week, Standard Chartered Bank indicated that locating facilities and recruiting over 2,000 staff for its global helpdesk, IT and software support in India had resulted in significant business benefits.

"We have seen savings of 50 per cent in terms of salary cost, and the only downside is international telecoms where costs are higher," said Simon Bush, head of the global shared service centre at Standard Chartered.

"There is no shortage of the right people to do the jobs and the productivity of the people is higher than expected."

Companies that have had some of their IT operations supported in India for some time include HSBC, British Airways and Channel 4.

Consultants advise users to aim for success with a small project first and for firms in the financial sector to use well-defined contracts to avoid regulatory issues.

"Take small critical steps and do not bite off more than you can chew," said Chris Gentle, director of research at Deloitte Touche Tohmatsu Europe.

Sid Khanna, senior partner at Accenture, added: "Companies should treat this no differently to how they treat an outsourcing contract in Europe.

"If these principles are broadly observed, the Financial Services Authority is pretty relaxed about it."