India Outsourcing

The idea of Outsourcing has its origination in the competitive advantage theory propagated by Mr. Adam Smith in his book 'The Wealth of Nations' which was published in 1776. In a world where IT has become the backbone of businesses worldwide, Outsourcing is the process through which one company hands over part of its work to another company, making it responsible for the design and implementation of the business process under strict guidelines regarding requirements and specifications from the outsourcing company.

Since the onset of globalization in India during the early 1990s, successive Indian governments have pursued programs of economic reform committed to liberalization and privatization aiming for Outsourcing to India.

The New Telecom Policy of 1999 brought in further changes with the introduction of IP telephony and ended the state monopoly on international calling facilities. This brought about a drastic reduction and this heralded the golden era for the ITES-BPO industry and ushered in a slew of inbound and outbound call centers and data processing centers enhancing India and Outsourcing Services.

Although the IT industry in India has existed since the early 1980s, it was the early and mid 1990s that saw the emergence of India Outsourcing. One of the first Outsourced services was medical transcription, but Outsourcing of Business processes like data processing, billing, and customer support began towards the end of the 1990s when MNC’s established wholly owned subsidiaries which catered to the process off-shoring requirements of their parent companies.

India Outsourcing offers significant improvements in quality and productivity for overseas companies on crucial parameters such as number of correct transactions/number of total transactions; total satisfaction factor; number of transactions/hour and average speed of answer.

Surveys by NASSCOM have revealed that Indian companies are better focused on maintaining quality and performance standards. Indian ITES/BPO companies are on an ascending curve as far as the quality standards are concerned. Apart from investing in upgrading their CRM and ERP initiatives, many Indian ITES companies are beginning to acknowledge the COPC certifications for quality and are working towards achieving COPC license.

1. During 2003-04, the ITES-BPO segment is estimated to have achieved a 54 percent growth in revenues as compared to the previous year.
2. ITES exports accounted for US$ 3.6 billion in revenues, up from US$ 2.5 billion in 2002-03.
3. The ITES-BPO segment also proved to be a major opportunity for job seekers, creating employment for around 74,400 additional personnel in India during 2003-04.
4. The number of Indians working for this sector jumped to 245,500 by March, 2004.

By the year 2008, the segment is expected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and leading business Intelligence Company, McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing at over 50 percent. Surveys of the Indian ITES/BPO industry in 2004 expected it to follow these trends:

1) Customer care and support services will continue to lead in terms of revenue generation, with a turnover of around US$ 1200 million in 2003-04, up from last year's turnover of US$810 million.
2) With the Financial Services segment moving into value added domains like insurance claims processing, financial management services and equity research, this segment is expected to clock the highest growth, with estimates of US$820 million in revenue in 2003-04, up from US$510 million in 2002-03.
3) HR services are also expected to grow and revenues are expected to touch US$70 million during 2003-04, thereby providing latent opportunities to the industry's dominant players.
4) This segment has also been identified as a high growth area within the industry, and is expected to generate revenues of around US$430 million for 2003-04, up from US$210 million in 2002-03.
5) Revenues from the administration services segment are expected to increase from US$ 310 million in 2002-03, to US$540 million during 2003-04.
6) The content development services segment which includes engineering and design services, digitization (GIS), animation, network management and biotech research, is expected clock a turnover of around US$520 million in 2003-04.
The availability of technically trained and skilled manpower in the process of India Outsourcing is making companies across the world look at the country as a profitable base to shift their high-end support services. Companies like COLT Technology Services are considering Outsourcing their technical back-office support work to India.

Other areas are high-end network engineering/management support. Another field which is showing immense potential is that of digital content creation and animation. Animation studios like Walt Disney, MGM and Warner Brothers are already outsourcing low-end work like clean-ups, tweening and modeling to India.

The availability of skilled and trained manpower and India's ability to keep in step with the latest technological advances in the industry is prompting foreign studios to consider India as a base to shift other high-end animation work like storyboarding and developing original content for animated films ad TV series.

Tele-radiology is the next segment that holds great promise, mainly due to the time zone differences and the availability of highly skilled radiologists and companies like Teleradiology Solutions have been offering their services to US and South-East Asian hospitals for the past two years.