I always look at India’s tech industry for a possible indication of what the future might be for the VFX industry.
In a recent article titled Indian Outsourcing Model ‘Over,’ Says HCL Exec , executives at HCL, a large Indian outsourcing tech company, have decided to stray away from outsourcing to India towards nearsourcing facilities to the US and hiring more workers that are US citizens:
“You can look at the early signs that the Indian IT model is over,” said Krishnan Chatterjee, head of global strategy and marketing at HCL Technologies, during an interview last week. “The question that customers are now asking is, ‘Are you willing to blend multiple services into an integrated offering, so we can talk as business partners, rather than you giving me 10 bodies who will churn out x lines of code at the cheapest rate.”
To meet demand for onshore services, HCL is building out its presence in the U.S. Company officials said about 8,000 of the their 83,000 employees are now in the United States, and that number will grow.
Ultimately, it wants more than 12% of its employees to be based in the U.S. or Europe by 2015. About 40% of HCL’s current U.S.-based workers are Americans or green card holders; the rest are on H-1B and other temporary visas. Officials say they also want a larger percentage of their U.S.-based workers to be citizens or permanent residents.
Along the same lines, companies are marketing their services for near sourcing rather than outsourcing:
“Conventional cost-based thinking regarding outsourcing is dead,” states Raymond Watt, U.S. practice manager for Red-Consulting, an independent Oracle-certified tech support company. “The evidence is stacked against outsource frugality. Forbes recently published scary statistics about the rapid rise of Indian salaries. By 2015, India’s cost advantage over the United States will have disappeared. Then what? The recent launch of AlwaysOn, our North American counterpart, is the response to that question.”
The Countries Most Threatened By VFX Outsourcing Are India And China
When I first started this blog, I asked a rhetorical question:
when I look at the evidence and get asked which countries are most threatened by outsourcing of vfx work you know what my answer is?
India and China
Most would think the US is at most risk but much of that is due to government film subsidies used as a lure to artificialize the price of VFX.
For India and China, their bread and butter is having the cheapest labor. However the double edged sword is in the reality that wages are rising in both countries, the quality is stagnant, and other cheaper labor pools are joining the market to compete as bottom feeders.
Still Don’t Believe Me? Look At Indian Animation
I wrote another post linking to an Indian article about the demise of it’s animation industry. The hope was that a new film called Delhi Safari would turn things around. It was supposed to be released last month but then nothing. No mention of when it will be actually released. You’d figure the claim that this was India’s best animated film to date would at least have a release date. No show radio!
If you still believe that India will soon catch up and dominate the VFX and animation industry then do me a favor: Put your money where your mouth is.
Last week Digital Domain was lampooned for trying to become a publicly traded stock. It turns out India’s Crest Animation which made last year’s Alpha & Omega has been a publicly traded stock in India for the last 12 years. Take a look at their historical stock price which was $US 23 a share at one point. It’s now hovering at around 55 cents a share.
Would you put your money in an Indian animation company? Given the return on investment, you might be better off outsourcing that decision to a table in Las Vegas.