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COVID-19 Spotlights Issues with Outsourcing to India


Raul Vega

Founder, CEO

COVID-19 is forcing organizations to rethink the challenges of migrating back office operations overseas. Pandemic lockdowns spotlighted a critical issue with offshoring to India and other Asian locations: many countries are ill-equipped to handle large numbers of people working from home. 

But with modern telecommunications infrastructure, better living conditions among workers, and the second-highest Internet coverage in Latin America, nearshore operations to Costa Rica are proving to be a much more stable platform for keeping mission-critical services running smoothly in the new COVID-19 reality.

In part 1 of our two-part series on effective outsourcing solutions after COVID-19, we will examine offshore challenges after the pandemic. Stay tuned for the next installment, where we will show why nearshore outsourcing models offer a resilient, high-quality, and cost-effective solution for North American companies. 

Major Western companies suffer issues with outsourcing to India amidst COVID-19

As coronavirus tightened its grip around the world, much of the conversation about business continuity has been hyper-focused on interruptions to physical supply chains. But the pandemic is also disrupting service supply chains in regions poorly prepared to have millions of people working from home virtually overnight. 

Over the past 20 years, many major corporations have become increasingly reliant on mission-critical services delivered by their own internal shared service centers or third-party Business Process Outsourcing (“BPO”) providers in Asian locations, like India and the Philippines. Pandemic lockdowns are blowing a cloud of doubt over the ability of offshore markets to maintain critical support services functioning in the post-coronavirus economy. 

Whether you are relying on support in IT, finance, or customer care, choosing solutions with resilient models is essential for an exceptional experience in the post-coronavirus world. 

India has raised the biggest concerns, with some companies wondering aloud if low labor costs can outweigh the risk of offshoring work to an overcrowded country with limited health care infrastructure during a global health crisis.

The rickety infrastructure that exists outside corporate parks in many offshore markets is also struggling to accommodate a work from home model. Already, The Wall Street Journal (WSJ) reported major Western companies in industries like airlines, retail, and financial services have suffered inconsistencies and delays in service from offshore BPO providers. NPR reports frustrated customers have been left on hold for hours or encountered recorded messages saying help was currently unavailable at call centers located in offshore markets.

A Bloomberg article published in The Straits Times states that some global banks with offshore operations are “scrutinizing their presence” after coronavirus lockdowns highlighted significant issues with outsourcing to India. The Times quotes a European Banking Authority (EBA) report that asserts offshoring support functions “exposed these banks to operational risks.” 

The EBA report continues, “Many such offshore facilities were less prepared to address the COVID-19 operational challenges owing to a lack of opportunities for remote working or reduced availability of staff.”

The Times reports that global finance firms like JPMorgan Chase & Co., Barclays, and Nomura Holdings scrambled to keep offshore operations running amidst pandemic lockdowns. Special exemptions that allowed some call centers with reliable Internet and power to stay open didn’t apply across the board. 

Some banks had to transfer work usually done in India to other countries. Barclays, which maintains about 22% of its workforce in India, struggled to answer calls from customers seeking mortgage relief, The Times reports.

In the aftermath, some firms are “considering moving some Indian roles back home or to regions near their main markets, such as Eastern Europe and Latin America, to address the operational risks,” the article reports.

Offshore challenges and COVID-19: Why India falls short

These new issues pile on to existing Asia offshore challenges. When shared services and back office outsourcing started to gain traction some 20 years ago, the labor arbitrage opportunity associated with Asia-based models fueled their early popularity.