Is India Losing Its Momentum in the Outsourcing Race?

Posted on June 17, 2010

During the past decade, India has been leading the global outsourcing industry primarily through its huge pool of IT graduates and English-speaking workforce. However, of late there has been tremendous concern about whether India is fast losing its place as the leader in the outsourcing race or not. ValueNotes, an analyst firm focused on outsourcing, has identified two potential “situations”, which give you an idea about the future of the outsourcing industry in India.

Growing Competition?

According to a survey conducted by the global consultancy firm PricewaterhouseCoopers (PwC) and Duke University’s Offshoring Research Network, the outsourcing industry in India is likely to transform due to the emergence of new providers. Although India remains the outsourcing market leader, stiff competition is expected from China, Philippines, South Africa, Eastern Europe, Latin America and the Middle East.

PwC’s Managing Director Charles Aird said, “India’s success as the world’s back office has motivated other developing countries with well educated and under-employed populations to seek to duplicate their experience.” The survey further revealed that only 16% of Indian service providers see competitors from other emerging economies as a threat. This is because the economic crisis of 2009 has reemphasized the importance of cost savings and access to qualified personnel as two of the top strategic reasons for outsourcing. Indian service providers are capable of offering both, less costs and high-quality workforce. This is what makes India stand out from the other countries in the outsourcing domain.

Obama’s Anti-Outsourcing Stand

The offshore shift of skilled work to India has often been portrayed as the killer of good-paying American jobs. Now, this backlash has become a reality, with the recent passage of the federal law by the U.S. Senate, barring outsourcing of U.S. government contracts given by American firms to companies located in India and other countries.

However, Indian executives of companies that provide offshore services are surprisingly sanguine about the controversy. In fact, Manoj Kunkalienkar, the president of ICICI Infotech, an outsourcing company based in Mumbai, said, “Backlash is a passing phase, and ultimately, corporations as well as people will realize the greater business benefits.” This is because most economists in the United States and India concede that though American jobs will be lost initially, both countries will reap the benefits of outsourcing in the coming years.

At the moment, all seems to be well with India continuing to dominate the outsourcing scene. It will be interesting to see if the dominance is retained or challenged, in the future.

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