Why India for Outsourcing?

Posted by KUNAL JAIN on Sep 12 2008

Fotolia_47393480_Subscription_Monthly_MInspired by the Indian IT-ITES success story, several other locations have been presented as alternate options for offshore outsourcing. However, feedback received from several MNCs having multi-country operations as well as syndicated analyses comparing the various sourcing locations has revealed that India continues to offer and deliver the best ‘bundle’ of benefits sought from global sourcing.

With significant potential still untapped, it is expected that the global sourcing phenomenon will continue to expand in scope, scale and geographic coverage. As global delivery matures, multi-location strategies will become the norm and most sourcing destinations, including emerging locations, will grow in size. Building on its existing strengths, India will remain the leading destination and will continue to play an important role in most global sourcing strategies.

Strengths at a Glance for Outsourcing to India:

  • Great history in software development
  • English Language proficiency
  • Government Support and policies
  • Cost advantage
  • Strong tertiary education
  • Process quality focus
  • Skilled workforce
  • Expertise in new technologies
  • Entrepreneurship
  • Reasonable technical innovations
  • Reverse brain drain
  • Existing long term relationships
  • Creation of global brands
  • BPO & Call center offerings
  • Expansion of existing relationships
  • Chinese domestic & export market
  • Leverage relationships in West to access overseas markets


The quality practices in the Indian IT industry have evolved through three distinct stages. The first stage was the creation of basic processes to handle all activities relating to order fulfillment. Many companies demonstrated this by aligning their Quality Management Systems (QMS) with ISO 9000 standards. This ensured consistent and orderly execution of customer engagements and provided a framework for measurable improvement.

The second stage was associated with a focus on software engineering, which was often achieved by companies aligning their QMS with the CMM framework and undergoing one or more assessments at increasing levels of maturity.

The third stage was driven by the desire to institute processes, metrics and a framework for improvement in all areas including those relating to sales, billing and collection, people management and after sales support. This was characterized by companies aligning their internal practices with the People CMM framework and by the use of the Six Sigma methodology for reducing variation and assuring ‘end-to-end’ quality in all company operations.

The journey through these stages has ensured progressively greater engagement of the workforce both in terms of numbers as well as the degree, making the quality culture increasingly pervasive. This increasing engagement has also meant greater use of friendly and accessible tools to automate workflow, to collect and process metrics and to facilitate collaboration across geographically dispersed teams. The journey has also led to the emergence of a culture of managing increasingly by numbers.

The stages have not been strictly linear, as organizations have continued to build on accomplishments even as they moved on to the next stage. For instance, organizations certified to the ISO 9000 family are migrating to the new ISO 9001:2000 standards. Organizations assessed on the CMM framework are aligning their QMS to the new CMMI framework. Finally, organizations working on ‘end-to-end’ quality are continuing to invest and upgrade their CRM and ERP initiatives, to deepen the rigor and consistency of their internal and customer-facing processes.

The emphasis on quality is just as predominant in the ITES-BPO industry. Most Indian ITES-BPO companies adhere to world class quality standards, have a dedicated quality department responsible for developing and deploying the organization’s quality policies and undertake periodic reviews of their quality processes – which are conducted by their own senior management team as well as members from the client organizations.

Today, a majority of the companies in India have already aligned their internal processes and practices to international standards such as ISO, CMM, Six Sigma, etc., which has helped establish India as a credible sourcing destination. As of December 2005, over 400 Indian companies had acquired quality certifications with 82 companies certified at SEI CMM Level 5 – higher than any other country in the world.

Competitive Cost

The past few years have witnessed steady evolution in the ecosystem for global sourcing of IT-ITES. Outsourcers have graduated to basing their decisions on a larger set of factors such as service level maturity, scalability and sustainability, infrastructure availability and a favorable business environment – in addition to the financial benefits achievable from global sourcing. In parallel, global sourcing has been adapted to a combination of near-shore and offshore models that allow companies to maximize their gains.

India has successfully leveraged its fundamental advantages of abundant talent, a keen focus on quality and low costs coupled with an enabling business environment to attain the leadership position in this space. This is reflected in India’s dominant and growing share of the global IT-ITES pie. Over FY 2001-05, India’s share in global sourcing has grown from 62 per cent to 65 per cent for IT and 39 per cent to 46 per cent for ITES-BPO. India’s leadership is also reflected in the strong preference shown by customers for sourcing various services from the country. As depicted in the following chart, India remains the most preferred offshore location for sourcing a broad range of business services.

The visibly higher preference for India is driven by its unmatched superiority when measured across a range of parameters that influence the choice of a sourcing location. As depicted in the following table, India ranks highest in a detailed analysis comparing 40 sourcing destinations across the world.

This analysis draws from the latest (November 2005) update of an annual sourcing location attractiveness index prepared by A.T. Kearney. The following chart compares the country rating accorded to the top 25 countries in last year’s (2004) analysis with their respective positions in 2005.

The global sourcing phenomenon will continue to expand in scope, scale and geographic coverage; and while most offshore markets will grow in size, India will remain the leading destination.

The maturing ecosystem of offshore service delivery has witnessed a growing number of locations emerging as contenders for a piece of the global sourcing pie. With global sourcing demand estimated to increase ten-fold, it is expected that this phenomenon will continue to expand in scope, scale as well as geographic coverage. As a result, most offshore markets – both established as well as emerging – are expected to record significant growth over the next few years.

India is well positioned to further extend its leadership in the global IT-ITES industry by leveraging its fundamental advantages of a disproportionately large talent pool, developed depth of service offerings and demonstrated process excellence at a continued cost advantage.

Knowledge Professionals

Indian software and services industry’s strong value proposition – existence of a large, English speaking, technically qualified manpower, competitive billing, high productivity gains and scalability - which had helped the country emerge as a key IT services outsourcing destination, continue to hold India in good stead. These intrinsic strengths and advantages gave India a leg up in the burgeoning ITES-BPO space as well, taking it beyond the realms of IT services.

The country is at an important juncture in its history, having completed the transition from an agrarian economy to a fully-fledged, first-world economy, operating at the leading edge of contemporary technology. A key element in taking the country forward and maintaining its growth momentum will be the provision of a highly skilled and competent global workforce.

Having apt IT and management skills, in fact, is assuming an ever-greater importance, in the current day environment, where the IT sector is emerging as a major driver of the Indian economy. IT manpower development today, is not only crucial for sustaining the growth of the Indian economy, it is also important for maintaining the country’s edge in the global markets, where competition is on the rise.

Growth of IT and ITeS Professionals in India

The total number of IT and ITES professionals employed in India has grown from 284,000 in 1999-2000 to over 1 million in 2004-05, growing by over 200,000 in the last year alone.

Most of the new recruits in the industry are fresh graduates indicating the availability of a large pool of fresh resources each year as opposed to the siphoning off of resources from other industries. A break-up of the 1 million professionals in different sectors indicate that the number of employees in the ITES-BPO segment has witnessed the highest levels of growth over the last few years – attributed to the tremendous growth in demand for these services. ITES companies recruited approx. 100,000 professionals in 2004-05. Companies in the IT software exports sector recruited 75,000 professionals in 2004-05, compared to 65,000 professionals recruited in 2001-02

With India poised to be US$ 70 billion software market in 2009, providing direct employment to more than 2.2 million (and nearly twice the number by way of indirect employment), it is essential to strengthen professional education (through curricula, faculty, infrastructure, pedagogy improvements) in line with the IT industry’s requirements and further catalyze the interface between the academia and corporate/industry.

To take this forward, NASSCOM has been conducting its annual HR Summit in Chennai for the past two years that witnesses the confluence of the IT industry and academia on one platform. The summit aims to address some of the areas of concern from the industry and academia perspective such as solutions to company’s HR challenges, appointing and retaining the right talent, etc. NASSCOM launched the IT Workforce development initiative during the summit last year, to focus sharply on the creation and nurturing of the human resources, which provides the knowledge base or intellectual capital as India moves towards a knowledge economy.

Given the growing demand for skilled professionals, and the rapid changes in technology, there is an increasing need to keep the academia abreast of the skill set requirement of the industry. To meet this requirement, NASSCOM signed a Memorandum of Understanding (MoU) with University Grants Commission (UGC). As part of the MoU, NASSCOM and UGC will jointly undertake a ‘Faculty Development Programme’ (FDP) for up-gradation of the skill-sets and knowledge base (in the area of emerging technologies, project management skills related to information technology) of the existing technical faculty in partnership with IT industry.

The IT-ITES industry also needs people who are not only technology experts, but also those who can manage customer interface at all levels. To address this, NASSCOM is working with the IT industry and Academia closely, and is organizing Industry-Academia workshops in various cities, wherein industry experts talk about the need to have expertise in non-technical areas like management and soft skills as well.


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Topics: Medical Billing, medical billing outsourcing, offshore outsourcing

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