Offshore Outsourcing
The article “Offshore Outsourcing: a SWOT Analysis of a State in India” by K.G.K. Nair and P. N. Prasad discusses the possibility of developing IT industry in the state of Kerala in India. The authors implement the framework of a SWOT analysis in order to provide a holistic assessment of Kerala as a destination for offshore outsourcing. Firstly, the article demonstrates the current trend in the outsourcing of IT and business processes to the low-cost locations, which is fuelled by the global economic recession. Limited opportunities for growth and the need to reduce costs in response to the unfavourable business environment and the economic turmoil make outsourcing a necessary step in achieving competitive advantage and maintaining profitability nowadays.
The main body of the article is dedicated to the analysis of the internal and external factors that have an impact on the potential success of IT industries in Kerala. In particular, the authors identify low costs of connectivity and labour, high level of IT infrastructure, the presence of Technopark, the local IT hub, availability of quality human resources, which are characterized by both low turnover and high level of education, and the positive attitude of the local governmental that is reflected in low start-up costs and the overall support of the businesses in the area as the main strengths of the region.
Nair and P. N. Prasad in their article have extensively discussed also the weaknesses of Kerala as an outsourcing location. Thus, they mention limited growth of domestic market, inadequate IT infrastructure and financing opportunities, poor implementation of governmental policies and a negative perception of Kerala among the main impediments for the development of IT industry in the region.
External environmental factors can also have a strong impact the future of IT offshoring activity in Kerala. Thus, the industry can enjoy several opportunities, namely a vast global market, the increasing importance of outsourcing for competitive advantage and numerous business initiatives in other industries that were undertaken in Kerala by non-residents. However, the companies that would like to take advantage of Kerala as an offshoring destination would face several threats. Thus, new competition, software piracy and work interruptions may jeopardize the success of offshoring to Kerala.
While the authors of the article did not make any conclusions based on their evaluation and aimed solely to analyze the situation in Kerala, the content of the article raises important questions for further research and assessment. One of them is going to be discussed further.
Discussion question: Based on the information from the article, what measures should Kerala state undertake in order to attract more offshoring business?
The SWOT analysis provided by Nair and Prasad is a helpful tool in identifying the most successful strategy that would help the region to capitalize on its strengths, while mitigating weaknesses and capturing the opportunities in the external environment in order to develop IT industry in the area.
Firstly, low awareness among business people about the benefits provided by Kerala is derived from the limited promotion and media exposure of the district. Thus, businesses are not well-aware of the local situation and most of the available information reflects only the negative aspects of the region, thus creating a poor image of Kerala as a destination for offshoring. Therefore, the main efforts of Kerala government should focus on improving the image of Kerala worldwide, on promoting the benefits from relocating businesses to Kerala, while convincing potential outsourcers that business risks in the region are relatively low and are controlled by the local authorities. This strategy of more extensive marketing of Kerala could help to leverage the strengths of the area, while addressing the issue of low trust and negative perceptions that have become one of the major barriers to Kerala’s success.
The second step that government should undertake in order to make Kerala a desirable spot for offshoring operations, is to become more proactive in creating incentives for businesses to come to the area. Thus, additional incentives for developing other industries, apart from IT, could help Kerala to create an internal market, and possibly to attract large-scale manufacturing companies that Kerala currently lacks and to gain access to financial capital both from India and from abroad. Additional investment into physical infrastructure and education in the state could also help to address some of the regional problems, thus making it more attractive for the companies, which are looking for an offshoring destination. Perhaps the biggest governmental initiative should be to enhance control and law enforcement mechanisms in Kerala. In particular, higher level of governmental influence could help to improve policy implementation and to reduce the time lost due to work interruptions. It will also help to build trust with potential investors and to develop a positive image of Kerala. The role of the government is also key to coordinating the changes in the region. Since the opportunity window for building a competitive advantage in IT offshoring for Kerala is pretty narrow and the competition in the industry is becoming more significant, it is important to develop the state according to the strategic objectives and to gain the market share soon enough. In case the current opportunity for attracting outsourced activities into the region fails, it may be very hard to find an alternative as promising as this one.
Nair and Prasad in their article “Offshore Outsourcing: a SWOT Analysis of a State in India” provide a comprehensive analysis of Kerala State in India and evaluate the possibility of attracting companies that are interested in offshoring some of their activities into lower cost locations. Their findings provide a background for evaluating the actions that should be taken by the state in order to become more attractive for foreign companies. Some of the steps have been discussed above, however a deeper analysis could reveal numerous areas, where further improvements could greatly benefit the development of the state of Kerala
References
Nair, K. G. K., & Prasad, P. N. (2004). Offshore outsourcing: a swot analysis of a state in
India. Information Systems Management, 21(3), 34-40.
