India’s offshoring success story will need greater onshoring support to sustain it, notes the Black Book of Outsourcing’s 2008 State of the Industry report. The most comprehensive client satisfaction survey in the outsourcing industry saw Infosys fall out of the top 50 this year to rank 59. Three Indian firms, Wipro (6), Satyam (7) and Genpact (8), figure in the top 10. TCS moved up to rank 15 this year from 27 last year while HCL tumbled from 13 last year to 21. On of the big European player on the Indian market, Capgemini, has moved in the overall ranking from the second place in 2007 to the 12 place this year.

Conducted by the US-based consultancy Brown-Wilson Group, the report is based on client experience responses of nearly 24,000 buyer executives. In what the report said was “indicative of the growing re-appreciation for US-centric firms”, Hewlett-Packard emerged numero uno in the rankings, followed by Perot, CSC, Unisys and EDS.

The report notes the rise of ‘reverse outsourcing’, the phenomenon of Indian companies opening offices in USA and hiring locally. “The reverse outsourcing development is too new for Indian companies to point to actual cost savings yet, but moving front office processes closer to the client is fast attracting buyer interest. Major suppliers are responding to the demand for enhanced, locally delivery customer service,” it said. Attributing the decline of Infosys, which was ranked 10th last year, to ‘rising accounts of client discontent’, the report notes, “over a dozen major customers cited the fact that Infosys has not melded their consulting and service delivery well. US clients cite a lack of American front-office support with an imbalance of too much delivered from offshore.”

The report showes that the big approval winners were those vendors that placed heavy focus on verticalization: Those outsourcers who adapted to their clients' specific industry demands rather than applying a cookie cutter domain approach. Also for the second year, China, which has seen a tremendous increase in outsourcing investment, scored overall with very low levels of satisfaction. The majority of analysts believe China will take at least another 10 years before emerging a rival to India. Latin America and Central & Eastern Europe suppliers saw the highest growth in its outsourcing industry with parallel upsurges in client satisfaction scores. Many new vendors from these regions displaced Indian, Philippine, Chinese and Canadian outsourcing suppliers this year on a competitive KPI (key performance indicator) index. Western EuropeWestern Europe prefer regional vendors, while US is leaning towards western hemisphere providers as likely considered alternatives to China and India next year. The UK and Western Europe also views the U.S. as its third most popular destination for offshore outsourcing after India and China. We expect to see the US and Central/Eastern Europe to replace China in this period of evolution for European destination preferences.

A majority of analysts said that China will take another 10 years before emerging a rival to India. Respondents rated client experience, economy/inflation/recession and globalisation as the top factors dominating outsourcing strategies next year.

Sectors likely to boost offshoring efforts in 2009 include banking, which is expected to increase offshoring by over 72 per cent, investment management (68.5%), insurance (62.7%) and legal (59.4%). The most important supplier features for 2009 include a client-centric culture, cultural alignment and the right onshore-offshore balance.