Rising wages forcing companies to look beyond India

Skills shortages and rising wages in India will increasingly force UK businesses to look at alternative offshore outsourcing locations, according to the National Outsourcing Association (NOA).

Almost two-thirds (60 per cent) of respondents to an NOA survey said skills shortages in India will push up offshoring costs and negatively impact the decision of UK companies looking to outsource there. That echoes a recent warning by India's IT trade body Nasscom that the country faces a shortage of highly-skilled IT workers by 2010.

Recent data security incidents at Indian call centres will also stop financial institutions offshoring there in the short and medium term, according to a third of the survey respondents.

In terms of alternative offshore outsourcing locations three-quarters said China is the destination most likely to challenge India's dominance over the next five years on both cost and capacity.

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Martyn Hart, chairman of the NOA, said: "There are a whole host of new supplier locations that many end users are starting to consider. Outsourcing has become a truly global market and this can only be a good thing for end users trying to find the best service in terms of both cost and service levels."

Concern about UK jobs being lost to India hit the headlines again last week when a Deloitte & Touche survey found almost a third of the UK public believes companies should be forced to bring jobs back into the country, while 82 per cent said enough UK jobs have now been moved offshore.

Online insurance company eSure revealed plans last week to bring its Indian call centre work back to Manchester, although it says it was always a temporary measure to deal with recruitment shortages in the UK and that India has proved to be an "immensely positive experience with very quick and good quality offshore staff".

But that contrasts with high street bank HSBC, which is ramping up its offshore presence in India with a new centre in Kolkata for 2,000 staff and a software development facility in Hyderabad.

The NOA survey quizzed a quarter of the 250 delegates at its outsourcing summit last month.