India Remains Outsourcing Powerhouse

A recent study shows that India will continue to be the favored target for IT/BPO off shoring in spite of rising wages and surging rupee value. When it comes to outsourcing, India continues to rule. According to industry experts, emerging destinations like the Philippines, Brazil, Russia and other countries in East Europe do not, at present, pose a threat to India. It will take at least five year for these emerging countries to pip India’s position.

Reports suggest that on average, an IT worker’s salary in India is growing at about 12% annually. The rupee, too, has risen by around 12% against the dollar this year. Despite this, an Indian software engineer gets only one-fifth of what his counterpart in the US or Western Europe earns. - The Economic Times

India has a very important advantage, their command of the English language. There are lots more Indians with good English skills than Chinese. Forrester also endorses the view that scalability of resources (talent pool) is the major factor that makes India an attractive offshore location. The cost of operations in India can be 20-30% higher than places like Vietnam or lower than places like Brazil. But part of the challenge for these countries is the lack of skills. There is a very limited set of low-end work that companies like GE are looking at and lack of quality resources makes it hard for these countries to get started. The work going offshore today is geometrically more complex than the Y2K work that India got started on with,says Mr McCarthy.

Companies are setting up offshore centers outside India to mitigate geopolitical risk. Besides, clients are also asking companies to have centers close to their locations.At present outsourcing business in India is increasing at a rate four times more than any other country and the county has the resource and margin to meet. Turn Around Time (TAT)
is the time needed for performing a task, especially receiving, completing, and returning an assignment.

According to the study, growing at a rate of 40 per cent annually, India is the lead player in this sector followed by China at the second spot with a growth rate of 25 per cent.

The overall outlook of this industry seems positive with experts predicting that the global market for shared services would grow to 1.43 trillion dollar by the end of 2009 from 1,000 billion dollar at present.

According to the study, although India and China are the market leaders in this sector, there are huge opportunities present in the market to give ample space to other countries like Philippines, Vietnam, Romania, Kenya, Sri Lanka and North America market to grow.

The study also said although it is unlikely that India would be able to retain its number one slot with China aggressively trying to outstrip it in the business, it would still be able to get a decent share of the pie.

Also, processes like human resource, insurance, life sciences, finance, legal services, technical support, risk management, supply chain and media would come up in a big way in terms of business and employment opportunities, the study added.

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