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Outsourcing To Get Cheaper

Carrier Hotels Staff Posted Mar 17, 2004

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Outsourcing technology jobs to India is likely to get even cheaper, as the cost of bandwidth between the U.S. and India is poised to fall dramatically in coming years.

A new report from TeleGeography notes that bandwidth to India currently "comes at a premium price," a function of India having missed out on much of the underwater fiber buildout of the 1990s. Capacity prices from the U.S. to India are still five to 10 times higher than on the U.S. to Hong Kong route, according to Alan Mauldin, Senior Research Analyst at TeleGeography, a unit of Primetrica..

But TeleGeography's research found that India's international submarine cable capacity has grown from 31 Gbps in 2001 to 541 Gbps by the end of 2004. As that trend accelerates, prices to move data backl and forth from the U.S. to India will head lower. "Inevitably, the increase in capacity and number of competing cable systems will drive down the price of bandwidth to India," said Mauldin. "In other parts of Asia, prices declined by
60 percent or more in the last year- this could easily be repeated on Indian routes for years to come."

With a skilled labor force that speaks English, India has among the prime beneficiaries of the outsourcing trend, with many U.S. companies saving money by "offshoring" tech jobs to Bangalore and other emerging Indian tech hubs.

Managed services market leaders IBM , Hewlett-Packard and EDS have all moved significant chunks of their operations offshore, a trend that has created challenges for U.S.-based firms pursuing IT outsourcing and managed hosting business.