India remains top nation for outsourcing: report

India the favored technology outsourcing destination, an industry report said yesterday, amid concerns a rising rupee and soaring wages would blunt the country's competitive edge.

A study by industry publication Global Services and investment advisory firm Tholons put the Indian cities of Chennai, Hyderabad and Pune at the top of a list of 15 emerging outsourcing destinations for global companies.

Kolkata No. 5 and Chandigarh at No. 9 were the other two Indian locations on the list, which contained three Chinese and two Vietnamese cities as well.

The three hottest cities for outsourcing in China were Shanghai at No. 8, Beijing at No. 10 and Shenzhen at No. 13.

Vietnam's Ho Chi Minh City was No. 6, while Hanoi was No. 12.

Cebu the Philippines came in at No. 4, the Sri Lankan capital of Colombo at No. 7, Cairo at No. 11, Buenos Aires at No. 14 and Sao Paulo at No. 15, the study's sponsors said in a statement released in Bangalore.

The list is based on criteria such as scale and quality of workforce, financial infrastructure, risk environment and quality of life.

But it does not include established outsourcing locations such as Bangalore, the New Delhi capital region, Manila, Mumbai and Dublin that have had a decade's head start.

Costs surging in the prime cities in India, which has earned a reputation as the world's back office, as property values and rentals rise and wages increase at an annual pace of more than 15 percent amid a shortage of skilled workers.

Indian firms are also feeling the pinch from an appreciating rupee, which dents earnings billed in dollars, forcing them to cut costs by expanding to less expensive locations.

"With the demand-supply gap widening, newer tier II cities will play a critical role in re-engineered globalization models," Tholons chairman Avinash Vashistha said.

"Destinations will need to provide greater level of cost effectiveness and operational efficiency," he said.

India's companies have thrived by winning work from companies in the US and Europe seeking to tap the country's low costs and large employee pool by handing over jobs ranging from answering customers' calls to risk management and financial analysis.

Outsourcing accounted for about 10 percent of the revenue generated in the last fiscal year by the entire information technology industry.