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IT centres are `nearshore' now

Preeti Pandey

Mumbai , Sept. 26

Indian IT firms are finding "nearshore" development centres a useful weapon in their arsenal when pitching for orders.

In industry parlance, "nearshore" refers to software development centres located outside the clients' country but near enough for comfort. Satyam, Tata Consultancy Services (TCS) and Wipro Technologies are examples of firms with such centres.

Nearshore centres allow IT companies to garner more business with a long-term impact on the bottomline, make dynamic sourcing decisions and improve the effectiveness of the IT organisation. Uruguay, Canada, Mexico, Germany and China are fast becoming hot destinations for Indian software firms to set up centres as these locations provide easy access to the US, European and Far Eastern markets while catering to local language requirements.

According to Mr Manoranjan Mohapatra, Executive Vice-President and Chief Operating Officer, Hughes Software Systems, this approach gives Indian firms the ability to front-end customer engagements and move up the IT services value chain by providing niche services, that require presence in the same time zones while in parallel migrating other development/ maintenance work to India. HSS has seven development facilities across the world in 3 countries with a nearshore centre in Germany for development, with a pre-sales and product management support centre in the US to provide regional support.

Concurs Mr Atul Takle, Vice-President, Corporate Communications, TCS, "A nearshore centre also helps the company service the client closer home while providing a back-up system at the same time. We have centres in Uruguay, Hungary, China and Australia and are looking at a centre in Chile," he said. While TCS established its nearshore centres first and thereafter scouted for business in the complementary regions, Wipro's centre in Canada was set up in response to customer needs.

Mr Sudeep Banerjee, President, Enterprise Solutions, Wipro Technologies, says, " Outsourcing of applications maintenance and development work to nearer shores (such as Canada and Mexico) or offshore facilities is here to stay. It's rare that a company would concentrate its outsourcing efforts in one geographic region, so few companies use just a nearshore solution. More often it's part of a larger, global initiative. Some projects are better suited to close geographic proximity," he said. The Canada centre augments Wipro's network of development centres across four cities in India, two cities in the US, and one each in the UK, Germany and Japan. The globally distributed network complements Wipro's disaster recovery and business continuity plans "by de-risking Wipro's clients from natural and man-made geography risks," added Mr Banerjee.

Nearshore delivery from Canada or Mexico can offer significant economic advantages with lower risks and greater geographic and cultural accessibility. Given the language and cultural affinity to Canada, several US firms find it an attractive alternative to sending applications work offshore. Moreover, the two legal systems work well together , making it easier to protect intellectual property.

However, the nearshoring model is not risk-free. Risk evaluation in terms of economic and political stability is in order. "We chose Uruguay and Hungary to service the East European market due to the presence of quality engineering colleges here," explained Mr Takle. Companies planning to go global also need to focus on issues like hiring local hands, participating in community activities and sensitising the Indian team with local work environment. TCS, for instance, has a policy of having an 80:20 balance in favour of locals while staffing its nearshore facilities.

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