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Reasons to Outsource to India

For more than 20 years India has attracted international notoriety as an outsourcing hub, which started when UK technology and telecoms companies began...

Freddie Pierce
|May 28|magazine14 min read

For more than 20 years India has attracted international notoriety as an outsourcing hub, which started when UK technology and telecoms companies began outsourcing their call centers to the country, and still it is never far from the headlines.

Recently India found itself in the press after several American universities started outsourcing the marking of their exam papers to India, and in the same week it featured again when it emerged that a major Indian outsourcing specialist had set up a data-inputting unit in a local prison.

Indeed, India continues to attract business from all over the globe, including the United Kingdom, the United States, Australia, Spain, Netherlands, Denmark and Canada. Recent examples of such deals include: International chemical firm BASF Group outsourcing its IT provision; US aerospace group Rockwell Collins extending its design development relationship with India; international toy firm Mattel outsourcing some of its IT services to the country and fashion chain Diesel selecting India to become its outsourcing hub as it expands its operations into the country.

Explaining Microsoft's new outsourcing contract with Infosys, which has taken on a wide range of internal IT services for the software giant globally, a spokesperson said: “This deal is simply a consolidation of work [IT support services] that used to be provided by multiple providers to a single provider. Microsoft has had a concentrated effort to be more efficient and save money and this was a major area where we could do this. This new contract will not impact internal resources.”

WIDE SPECTRUM

Meanwhile, India has also remained successful in securing business from international governments, having recently won IT contracts with the UK’s National Health Service and Her Majesty’s Revenue and Customs.

“In the initial phase of outsourcing offshore, work was dominated by technology companies looking for cost savings,” explains Derek Kemp, Patni Computer Systems' President of Europe, the Middle East and Africa. “This rapidly matured into financial services organizations looking to combine these savings with process efficiencies and faster responses. This then drove the increase in skills available in offshore destinations such as India, creating a virtuous circle that has funded the development of many specialisms. As a result, now, a much wider spectrum of businesses look at India for outsourcing.”

Manoj Ayyappan, Managing Director of Excellone Technologies, says that most of the enquiries that his business receives are from small and medium sized companies. “We get enquiries from financial, manufacturing, software development and recruitment companies. Also from wholesalers, the education, real estate and tourism sectors,” he adds.

Atul Vashistha, Chairman of Neo Advisory and founding member of the International Association of Outsourcing Professionals, says that India is starting to see the life sciences, retail, manufacturing and healthcare sectors increasingly using the country.

DOING BUSINESS

India has been successful in attracting business from overseas because it offers companies a cost advantage, it has a large talent pool, excellent project management skills and bags of experience.

Kemp explains: “India has excellent and established process maturity – something other offshore destinations have yet to catch up on. India also offers highly skilled people at lower cost – and as the government continues to invest in infrastructure the availability of resources improves. Compared to China, the language barrier is far less of an issue in India as English is still widely spoken, and there is now a wealth of advisory services to help drive real results from outsourcing.”

And India’s popularity is seemingly continuing to grow. Many of the companies that we spoke to said that the number of companies outsourcing to India increased in 2009, and that they are expecting more of the same in the rest of this year.

“While the pace slowed down compared to past years, we expect existing companies to outsource more and also expect other companies to start outsourcing too,” says Vashistha. “The value proposition is too compelling.”

THE COMPETITION

However, India is being put under increasing pressure from other countries wishing to vie for one of the top positions in the outsourcing industry. Competition is not just coming from one continent, but from across the globe, as Vashistha explains: “In Asia Pacific, China and the Philippines are key alternate destinations. In South America, we face competition from Mexico and Brazil. While in Europe, Poland, Russia, Hungary and the Czech Republic provide alternative outsourcing options.

“However, on a scale perspective, the others are far behind, but some such as the Philippines are catching up in call centers.”

Despite this, India remains confident that it can retain its place at the top of the outsourcing pile. “Nobody else can compete with India on process maturity – India is 20 years ahead of the game,” says Kemp.

“The stability that India offers is also critical. Certain companies will look to countries where their language is supported – for example, Spanish in South America – but only India can offer the volume and availability of language and IT skills and process maturity. There has been a lot of discussion as to the likely growth of China, but we have yet to really see that materialize beyond servicing the Japanese market.”

However, the future might not be quite as rosy for India, as companies hit by the credit crunch seek to make savings and are increasingly cancelling projects that would have been outsourced. An example of this is the new UK government cancelling its national identity card scheme. If this is replicated across the globe, India’s confidence may soon start to falter.