Future of outsourcing in India – debate continues

February 22, 2012: The future of the Indian outsourcing industry has always been a hot topic of discussion and it is still on. There is a wide spread fear that the increasing unemployment in the west would reduce outsourcing as they are about to take steps to drive jobs back home. Meanwhile a recent report by NASSCOM says that the revenue of the Indian outsourcing industry is expected to cross USD 100 billion during 2012. Revenue from export services will amount to USD 69 billion, an increase of 16.3 per cent over the last fiscal year. Projections indicate that the revenue from export will increase at a rate of 11 to 14 per cent and that from the domestic market will increase by 13 to 16 per cent.

India still enjoys the position of the most favored outsourcing destination due to its time location and the low cost of operations. More than 50 per cent of the Fortune 500 companies make use of services offered by Indian service providers. One of the main driving forces behind outsourcing is the cost reduction. In order to maintain the cost advantage, most of the service providers have decided to set up delivery centers in tier 2 and tier 3 cities across the country. There are also other areas where outsourcing has gained relevance such as F&A and legal process outsourcing.

The Indian outsourcing service providers are spending on developing platforms and solutions to drive future growth opportunities. The increase in the number of startups which caters to both domestic and global markets is expected to increase the opportunities in the future.

Given these circumstances, the future of the outsourcing industry in India seems to be bright. With the increase in economic activities across the world, companies in Europe and China are opening up opportunities for the service providers in India. There are also service providers who offer front office activities. There is increased adoption of IT in various fields such as agriculture, research and infrastructure building. As a result, outsourcing is expanding across more fields thus making it more meaningful and beneficial. Based on the above observations, it is believed that the outsourcing industry in India will grow at a rate which is more than what the present estimates show. It requires deeper understanding of the customers in terms of outsourcing and improved delivery capabilities. Even though the time now might seem challenging, there is a general sense of belief that the outsourcing industry in India is strong enough to overcome the challenges.

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