The global sourcing market aims at leveraging the best of talents at the highest cost advantage to deliver premium services/products to customers. GICs have played a key role in enabling this. Set up by international firms in offshore locations, particularly India, to take advantage of the cost arbitrage offered, GICs are now also contribution significant value addition. However, cost advantage continues to be a key driver for offshoring. E.g., GICs in leading delivery locations provide significant savings of 30-70% with source markets.
This report has analysed the cost competitiveness of GICs in India vis-a-vis other offshore locations. India today offers anywhere between 70-80 per cent cost savings (IT services) and 75-85 per cent in BPM services.
GICs are also utilising multiple efficiency levers to mitigate cost impact by 8-10 per cent. These include reduction in general & admin expenses, increase capacity utilisation, increase entry-level mix, increase span of control, lower attrition, and leverage low-cost locations.
- While India’s cost competitiveness has increased compared to 2012, arbitrage in most other GIC destinations has remained largely similar
- Best-in-class GICs have been able to achieve over 10 per cent impact on TCO by effectively utilizing multiple efficiency levers
- GICs need to continue focus on “cost and value addition” and NOT “cost instead of value addition”
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