Over the last few years, India has emerged as a leading destination for companies wishing to outsource their software development and business process requirements. International companies have either entered into contracts with the Indian service companies or have set up their own facilities through joint ventures and Indian subsidiaries.
Outsourcing in India
The history of outsourcing in India is one of rapid growth and transformation. Outsourcing the manufacture, import and export of products goes back to almost the start of recorded history, but its extension to services is a relatively new phenomenon. Outsourcing of services in India started in the mid-1980s and rapidly accelerated in the 1990s.
The Internet and telecommunications boom of the late 1990s had a twofold impact on offshore outsourcing. First, the new telecommunication infrastructure significantly reduced the cost and risk of working with distant colleagues. Second, the demand for technical services exploded with fears of the Y2K bug and the Internet bubble. Western firms now had both the ability to go offshore and a huge demand for new talent.
With a large English-speaking, low-cost workforce, India was well positioned to take advantage of the trend, and the sector has been growing at astronomical rates. The first part of this decade saw a growth of 40-50%, and the Indian outsourcing sector is now approaching a revenue of $30 bn. The recent wage inflation and the global financial crisis are putting a dent in recent growth numbers, but the industry is in the coming years expected to post a double-digit growth. Runaway growth may be slowing, but the Indian outsourcing sector will continue to expand in the years to come.
The Indian education system has played a key role in developing the skilled workforce required to capitalize on the wave of offshore outsourcing. While India has a long history of organized education that goes back to thousands of years, and prior to the British reign, the country had a well-developed regional system, much of this was uprooted and replaced with a more western structure and content. While much was lost in the transition, India emerged with a world-class set of universities, including the famous Indian Institutes of Technology (IITs). Though producing a limited number of graduates, IIT is considered one of the top technical universities in the world and, by some metrics, the most difficult to get into.
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