What can Hungary learn from India?

Did we miss the train, or has the train just arrived? The question is hard to avoid if we look at the most popular outsourcing investment destinations.

Hungary is fifth in the world this year - but we are predicted to have fallen back to 26th place in ten years' time. The customer service outsourcing train left the station over ten years ago. The leader in the area is India, which got hold of Swissair's and Lufthansa's data storage centres 13 years ago. Following this early success, the trophies just kept coming: American Express (1993), British Airways (1994), General Electric (1997), McKinsey (1998), Amazon.com (2000), Dell (2001), the World Bank (2002). It's no surprise that The Economist in 2001 described India as "the world's back office."

Nowadays, a German air passenger has no idea that his frequent flier miles are tracked in Bangalore in India. Few Americans know that when they phone to check the balance in their Citibank or American express accounts they are probably talking to someone in Mumbai. Amazon.com, the best-known online bookshop, has been running much of its IT in Gurgaon, India for years. The pioneering search engine AltaVista answers our queries from Bangalore.

India's advantage is that is started early. It has a good telecommunications infrastructure and lots of cheap, well-trained labour. Knowledge of English is widespread.

But Hungary isn't there yet. We are strong in terms of price, technology and training - but the outsourcing contracts that come our way are mostly low in added value - telephone customer service centres are the classic example. In a similar way, when the big electronics companies came in the first half of the 1990s, they tended to bring only assembly plants. But wages are now cheaper elsewhere and we can't go on giving tax incentives for ever.

I worry that the service centre outsourcing train has mostly left the station - there are just a few more carriages to go. We can only get it back if we build up a phalanx of strong, innovative local firms.

Source: HVG


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