TCS opens new outsourcing center in Mexico

Tata Consultancy Services, India's largest outsourcing firm, has opened a new center in Queretaro, Mexico, the company said on Thursday, a reflection of the growing move to diversify offshore locations.

TCS said it would hire 500 people to work at the new center, its third in Mexico since entering the country in 2003.

The company has seven centers across Latin America, in Brazil, Argentina, Uruguay, and Chile, as well as Mexico, and employs information technology consultants in 42 countries around the world.

The industry and its clients alike have been seeking to expand the number of countries they use for offshore outsourcing, and some U.S. clients are more comfortable sending work closer to home than to faraway Asia, analysts say.

India still dominates the industry, accounting for 85 percent of the $45 billion information technology services offshore market in 2008, according to Forrester Research.

``There are some clients out there, particularly the large ones, that are looking to diversify risk,'' said John McCarthy, principal analyst at Forrester.

He said some companies, like General Electric, have tried to lessen their dependence on Indian outsourcers, but have struggled to find adequate alternatives.

``They can't find the skills in some of these other locations,'' he said.

The push out of India began several years ago, as wages skyrocketed and attrition soared, McCarthy said. The recent downturn has curtailed both those trends, but last year's terror attacks on Mumbai and continuing political instability in neighboring Pakistan have renewed the push to alternate locations, he said.

``India clearly is going to be the dominant location for the foreseeable future, barring some major geopolitical issue,'' he said. Argentina, Brazil, Mexico, Eastern Europe, Russia, Egypt, China, Malaysia, Vietnam, and the Philippines have all been developing as India alternatives, but none, save China, has the potential to be a real competitor, McCarthy said.

``I think potentially the big wild card is China. The rest of the locations will continue to play a niche role. They just can't scale,'' he said.

But for now China is ``not cheaper than India and the skills aren't nearly as developed,'' he said. ``Until that changes not much is going to happen.''