Domestic Outsourcing is growing at phenomenal rates in India, much more than Offshored Services into India. Banks, Telecom Companies are all growing at such a breakneck speed and on top of that, you see the need to support your customers in 14+ local languages to begin with, you see the inevitable need for multiple locations with locals who speak the local languages.
Shared Services in many cases, is neither outsourced nor offshored but done out of in-country centralized locations.
Both these situations have one thing in common – No Labor Arbitrage!
Sainsbury’s Shared Services Center in London may not enjoy any labor arbitrage as much as AirTel (leading Indian Mobile services provider) in a smaller 2nd or third tier city in India. May be if they move the local shared services center to a rural area they could enjoy a bit more cost savings.
However, these kinds of situations demand a completely different Operations mindset than in an offshored business process. You cannot throw more people at the process in order to maintain service levels.
On the contrary, while your costs are rising as they inevitably do, you have the enormous potential to effect significant process improvements through focused quality efforts, lean and six sigma methodologies. You have processes happening in the same location and so any process improvement has much more dramatic impact on the company’s bottom line.
In fact, you may not have a choice. In order to keep your margins you will have to constantly keep an eye on every service level.
Interesting dynamics and implications for True Business Transformation, not the empty transformation slogans that get used as euphemisms for Outsourcing!