Surprising and Dumb Results from Low Cost Country Sourcing Survey


    I participated in a Low Cost Country Sourcing (LCCS) Survey conducted by Darden School of Business at the University of Virginia. Recently they sent me an executive summary and there were the usual reasons for someone to look at LCCS. Not surprisingly, these were "Low Cost"!

    What was even more suprising were the Bottom Five reasons companies explored some of the low cost countries. The Bottom Most one was "Desire to Exploit the Local Marketplace." If companies truly believed this in the U.S, they are truly missing out on some huge jackpots in low cost countries, especially with large populations and an accelerating growth in huge middle classes – India and China!

    In my frequent travels to India, what I realized is that in 2002, India may have been greatly helped by outsourcing, both IT and BPO. However the share of outsourcing that goes on within India is greatly accelerating; at some time, the local outsourcing will overtake business that comes in from the U.S and Europe!

    The reasons for this is that local consumption, due to increasing affluence and easier availability of credit, is fueling a boom in local purchasing power. If you sign up for a mobile phone in India, particularly if you are from the rural areas, you expect your call center to answer your questions in one of 14 major languages. Travel portals are booming and local language versions of these are coming up just now with parallel customer care centers.

    By 2015, they expect the number of mobile phones in India to reach 500 million or more. They are the fastest growing in the world now with 6.2 million cell phones in February 2007 alone! That is like adding one Denmark-sized population every month.

    If I am a software or hardware vendor what do I see? Call centers in 14 languages that need carrier ACs, Compaq/HP/Dell PCs, servers, telecom software, billing software, servers for those, power generation sets for those, huge buildings to house them and Caterpillar earthmovers to build these as fast as possible.

    This is not even counting the tracking the calls that 500 million mobiles are making. Billing software for these kinds of operations do not even exist yet. (Sprint/Nextel is 25 million subscribers or so, just for comparison.)

    So go to India and China for low cost country sourcing. If you ignore the local markets, you are giving up a huge jackpot. If you do not want it, someone from Korea, Taiwan, Japan or Europe will take it anyway or some local Indian company. China is already invading the world, including India with its Haier line of consumer durables.

    It’s time to put away Gary Cooper/Indiana Jones ideas of what is happening in Asia. Toyota is slated to become #1 automaker in the world and a large part of its growth strategy is in small, easily parked, highly fuel efficient cars for Asia – a gigantic segment the Big 3 automakers in the U.S seem to have conceded.

    Two roads diverged in a wood, and I, I took the one less traveled by, and that has made all the difference – Robert Frost


    Please enter your comment!
    Please enter your name here