Analyst: Near-Shoring Can Help U.S. Solution Providers Beat India's Services

Outsourcing help-desk and other IT services to India is costing U.S. firms much more than they expected, creating an opportunity for U.S.-based solution providers with near-shoring service models, an analyst said Thursday at CompuCom Systems' sales awards conference in Palm Springs, Calif.

Rich Matlus, vice president of research at Gartner, told CompuCom service executives at the annual event that North American companies could use technical resources in Canada and "beat or match costs in India, and the quality is good."

Many U.S. companies believe the cost for India-based services is 30 cents on the dollar, according to Matlus. "Actually, the costs are 60 cents on the dollar," he said.

Companies typically spend an additional 5 percent to 7 percent to manage an outsourcing contract in the United States, Matlus added. "But the cost to manage an outsourcing deal with India is 20 percent to 25 percent," he said. "When you add the 60 percent, that ups the cost to 85 percent."

More important, Matlus said, there's a growing backlash against Indian help-desk support because of the language barrier. He urged CompuCom to take advantage of its lower cost and English-speaking advantage in Canada to better compete against India-based outsourcing firms.

CompuCom CEO Jim Dixon said the Dallas-based solution provider aims to use a combination of Canadian, U.S. and Indian resources to grow its services business.

CompuCom has three North American service support centers, one in Dallas and two in the Toronto area, according to Dixon. CompuCom also has service centers in India.

Dixon said that using Canadian resources gives CompuCom an "in between" cost advantage when comparing costs in India vs. those in the United States.

"It's less expensive than the U.S., but it's not near the lowest cost that India has," he said. "But having said that, a lot of our customers don't want the Indian voice alternative."

As a result, CompuCom doesn't use its Indian resources for voice service and support, Dixon said. Instead, India is used to support call centers in North America. All service and support e-mail is routed through India, and the Indian facilities are used for network monitoring. Application and database support also are handled in India, he said.

"We leverage the normal strengths that India has to offer, but voice is not one of them," Dixon said. "You have to have a cost alternative that is English-acceptable to the customer."

CompuCom also is exploring adding another offshore support facility in Costa Rica, Dixon added. "Our value proposition in services is that we deliver the quality of a tier-one provider at the cost of a tier-two," he said. "If we don't offer both, the customer doesn't need us."