Savings road leads to India.

• Author: Marshall, Jeffrey
• Position: Outsourcing Overseas

A rapidly growing volume of routine back-office and software development work is being sent to low-cost venues like India, thanks to vendors that have sprung up to expand that pipeline

Working out of a modern office building in steamy Bangalore, India, a team of programmers and clerical workers handles a range of software development and routine back-office support for a Fortune 100 company in the U.S.

Nearby, workers in another building, working in round-the-clock teams, handle call-center duties for another American company, answering customer inquiries and even doing some cross-selling of a few financial services products.

Sometimes referred to as India's Silicon Valley, Bangalore has become a poster city for a mushrooming phenomenon: outsourcing routine data processing and clerical functions, including call center operations, from companies in the U.S. and Europe. As multinational companies scramble to wring still more out of parched budgets, the lure of cheaper skilled labor has become very powerful. A number of vendors, some of them with strong Indian connections, have emerged to pitch business, mostly to major corporations. Their principal appeal: a well-educated, courteous and English-speaking labor force and potential savings of 30 to 50 percent on processing and technology development costs.

To be sure, a number of companies have been sending work to India for years through their own arrangements; General Electric Co. and Oracle Corp. are often mentioned as leading lights in this movement. And India isn't the only location targeted.

Experts mention Ireland, Canada, Mexico and even the Philippines as countries to which foreign-based companies have turned for cheaper infrastructure and applications outsourcing. China is being held out as perhaps the El Diablo of outsourcing -- costs would be lower than anywhere in the world -- but there are concerns about the lack of infrastructure and the population's work experience and fluency in English.

Xansa, a British-based company with a specialty in business process outsourcing (BPO), has set up shop in four locations in India. The company bought a company there and has fully integrated it; workers in Delhi, for instance, are linked to others in England, working on the same projects with the same manager, says Judith Halkerston, Xansa's chief operating officer for North America.

"We started with IT development projects and applications management, moved into IT outsourcing and established ourselves as a leading player in business process management," she says. "We tie together business process improvement, technology; and applications development and optimization in our business process management offering." Xansa's programs in India chiefly involve outsourced work for retailers, utilities, financial companies and telecommunications; the company recently signed a seven-year contract with British Telecom valued at $350 million.

Xansa's approach echoes that of a number of other outsource specialists: It looks for cost-reduction and IT optimization opportunities, among them ways to...