Advantage MNCs

ComputerWorld has an interesting article on the competition that Indian offshore firms are facing from MNCs that are increasingly coordinating a global network of offshore bases to deliver value. The article, which draws from a recent survey by TPI, states that the MNC edge comes from:

• Lower expectations of the financial markets of profit margins. The margins expected for multinational service companies is less than 15%, while it is close to 30% for Indian outsourcing companies. This allows the MNCs to offer a lower price relative to Indian competitors.
• An increasing trend to outsource to multiple providers stemming from the need to lower costs further and mitigate outsourcing risks.
• Closing of the cost arbitrage gap

Hopefully, the Indian CEOs are taking notes.