India made its mark as the preferred IT outsourcing destination for many companies in North America and Europe. The enormous talent pool attracted many global corporations to leverage the Indian expertise. Every year soothsayers predict that China will overtake India in IT in five years. But, India enjoys advantages well beyond the cliché Engineering talent and English speaking resources. This article discusses the Indian competitive advantage and focuses on China as reference. The disadvantages plaguing China are applicable to most other countries in the fray and China is better placed and perceived to vie for the top slot.

Outsourcing began as a cost-cutting exercise by availing cheap labor from the developing world. Initially India, Ireland and Israel vied as destinations for IT outsourcing. Israel focused on R&D-based outsourcing. Ireland specialized in customizing software for the European needs for customer support operations for the US and European clients due to the time zone and English accent advantages. India positioned itself as a service provider to the US market and carved a niche for services-based outsourcing for IT and IT Enabled Services (ITES) due to its large English speaking competent workforce and commitment to quality. Russia, China and a few European countries surfaced on the scene. During the 2000s downturn, Indian companies looked beyond the US to diversify the risk of dependency. In parallel, the highly-talented engineering pool from premier institutes in India attracted the global majors like Microsoft, HP, IBM etc., to set up their captives and increase investments. The perception has changed from availing cheap labor to leveraging the local talent. Prof. C K Prahalad advocated that outsourcing is about importing innovation and it turned true that the Indian captives today are developing crucial high-end software components and products, filing for patents rather than playing a mere second fiddle to their American headquarters. This made India fit into their global strategy and India emerged as the leader.

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