The changing face of offshoring

In the wake of Aviva's sale of its offshore operations to WNS, Businessweek has an interesting article on what it calls the "monumental shift" in the way Western firms tap into Indian expertise.

For a host of different reasons, companies are increasingly turning away from 'captive' offshore operations to outsourcing.

One of the most important factors is the rising cost of doing business in the country. Higher wages mean it doesn't make sense anymore to just ship your work out there unless you can make significant efficiency savings as well.

With thousands of employees at sites around India, big Western firms are simply proving incapable of finding this efficiency and are deciding it's better to let the specialists take over.

The other big driver for credit crunch hit banks looking to offload their Indian operations is cash.

However, the article suggests Indian BPO companies are tough negotiators and Western firms might not get the prices they look for.

I wonder if Citi is finding this out. We've been covering the bank's attempts to raise around $1 billion through the sale of its BPO unit for a year now and still no deal has been done.

Interestingly, although WNS and TCS have been named as possible buyers, it's IBM that now looks to be favourite for the unit.