Tier II US cities challenge India's BPO dominance

[dwarakesh]

With cost advantages disappearing many companies are looking within the US for outsourcing BPO work. A fall in wage rates and an increase in the number of unemployed professionals, has ensured that locations in the US like Albuquerque, Tulsa and El Paso emerge as frontrunners as 'near shore' destinations for outsourcing of back-office work.

And this trend can very well challenge India's dominance in the global business process outsourcing (BPO) industry says a report in the Economic Times.

Even though large companies like GE and Citi continue to send work offshore to India, many customers and vendors are discovering the potential of tier-II towns in the US and Mexico that offer similar cost advantage as well as closeness to customer locations.

Annual wages in Albuquerque, New Mexico for bilingual associate staff delivering business support services range from $20,000 to $35,000 per annum, which is almost on a par with costs in most locations in Latin America and only a small percentage greater than locations such as Philippines and India says the paper.

"One can hire staff in low-cost US locations for a low as $25K a year for back-office administrative work and reduce that further, to $22K a year as a result of tax incentives," said an Everest Research analyst.

The unemployment rate in the US was as high as 7.2% as of last December 2% with almost 2 million workers losing their job between September to December according to the US Department of Labor.

Fidelity, one of the biggest providers of human resource and payroll outsourcing to customers such as IBM, GM and ABB, established its nearshore centre in Albuquerque despite incremental costs of employee healthcare in order to mitigate risks of moving the work offshore, where attrition rates can run higher than 30%, and also keep the intimate BPO work closer to customers the paper reported.

Source: BPOwatch India