India’s largest outsourcer Tata Consultancy Services has set up a global delivery centre in Guadalajara, Mexico, with plans to hire up to 5,000 staff there over the next five years.
Having a centre in Mexico helps Tata as it will be closer to US customers and on a similar time zone, said Pradipta Bagchi, a spokesman for Tata said on Thursday.
The South American market also provides a significant opportunity for Tata because of a large number of regional companies investing in information technology and related services, Bagchi said. Tata currently has about 5,000 employees in South America, which service more than 150 clients there. It operates global delivery centers in Brazil, Mexico and Uruguay, besides a business process outsourcing (BPO) services centre in Chile.
Indian outsourcing companies are grappling with the appreciation of the Indian rupee against the US dollar, and rising labour costs. India’s National Association of Software and Service Companies (NASSCOM) has said that the 8 to 9% appreciation of the rupee over the last three months is worrisome. The US is the largest market for Indian outsourcers.
Tata’s expansion in Mexico led to speculation that the company may be looking for alternative locations to India. Staff in India is still cheaper than in Mexico, and the company has no plans to scale down its operations in India, Bagchi said.
A number of Indian companies have set up operations in South America and Eastern Europe to offer a near-shore option to their customers in the US and Europe.
Indian companies are also expanding in other countries to look for new talent pools, as it gets tougher to hire staff in large numbers in India. Satyam Computer Services, an outsourcer in Hyderabad, said last year it was expanding in China, Malaysia and other locations to tap regional markets and supplement its Indian operations.
Tata and India’s second largest outsourcer, Infosys Technologies, have also set up operations in China.
China has, however, fallen short of expectations as an offshore location, according to Forrester Research. Two years ago, China was viewed as a key challenger to India because of its large number of engineering graduates and the support of the Chinese government to establish it as a key offshore location, Forrester said. But after an initial burst of momentum, there has been relatively little evidence of the country’s success, the research firm added.
Tata’s new centre at Mexico will primarily offer software development, Bagchi said. The centre will serve clients in Mexico and in the US, he added.