Q: What impact does the recent news of inflation in low-cost zones have on companies considering outsourcing and offshore-captive centers?

A: Wage inflation should always be considered, particularly in low-cost locations. Picking a city and building is a careful exercise to avoid needless salary inflation impact. While we have learned to live with three to five percent increases in the US, current rates as high as 15 to 20 percent in India should not be surprising if you make a poor location decision. That said, the cost-savings delta is still dramatic between onshore and offshore. The cost of labor through globalization of labor pressures creates an equalizing effect. The real issue however is currency rates and terms associated with currency risk.
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