Yet, there are newer challenges as well, including the falling dollar and expected tax revisions that may increase the cost of relying on outsourcing providers.
India's cost differential fast eroding
Contracts are written in dollars, and as much as 60% to 80% of Indian service providers' revenue is in US dollars, but more than half of their costs are incurred in rupees, according to an October report from Forrester.
Indian outsourcing powerhouses like Wipro are feeling the squeeze. They've strived to cut costs, and now they're raising prices to keep margins from narrowing further.
"We are relentlessly driving for higher pricing for our services and have seen price increases from our customers in the range of 3 to 6 per cent, and our new customers are coming in at around 5% higher than our average," Wipro chairman Azim Premji said on a conference call with investors on Jan 18.
Image: Employees at the Wipro Spectramind call center, that services customers of a US-based computer manufacturer and an Internet service provider in Britain, work their nightshift | Photograph: STR/AFP/Getty Images
Also read: Offshoring bargains
Advertisement
