Is India Losing Out As An Outsourcing Destination To The US?

Rumors hound every business and every avenue of human existence. One of India’s major job creation avenue i.e. outsourcing is currently in murky waters with all the rumors surrounding it. With whispers of top revenue generating companies re-routing their business processes to local companies, is India losing the edge of being the top outsourcing destination to the US?

The market has always been fiercely competitive and blood thirsty. Hearsay of companies moving business processes back to local companies adversely affects the market in India. In order to understand why outsourcing in India is losing its edge, it is important to understand why this business model made an appearance in the first place.

The beginning of outsourcing

“Outsourcing” is a turn of the century term that is frequently used to describe an internal business process that is contracted out to a third-party team or organization. Offshoring business processes from USA to India became one of the many ways to save dollars without compromising on quality.

There are manifold reasons as to why companies began sending their business processes to offshore companies. Tax evasion was one of the top reasons for offshoring business processes. The costs of constructing and maintaining an office on US soil turned out to be far more expensive than offshoring.

Another possible explanation for offshoring jobs overseas is the unions that are disadvantaged by labor legislation. Through the legislation, companies can fire employees and ship their jobs to overseas companies without breaking any laws. The model became an accepted route before long.

The process has enjoyed a long stint of being a clever business strategy. Movies were made about the subject and it was integrated in to pop psychology. How then, did outsourcing begin to lose its shine? Read on to find out more.

The political issues

It is a highly debated political issue in the United States. US citizens have always been fairly divided on their views. The consequences of outsourcing jobs on the US domestic workforce sparked a series of debates which made  this business model unfavorable in the United States.

The “Bring Jobs Home Act” promoted by President Obama was initiated to reroute outsourced jobs back to US soil. Tax cuts and 20 percent tax credit for moving jobs back seemed to be incentive enough for some companies to shift business processes back.

The economic views

Economies are like sand castles, the subtlest shift in one sand grain might cause a lapse. The gloss and sheen associated with outsourcing started to fade when the ground underneath the US economy started to become unstable. The shift in economic stability caused a lot of people to lose jobs.

Local companies and jobs gained favor over outsourcing. Insourcing suddenly became the new term to reckon with in international newspapers. With the tax cuts and benefits, insourcing jobs became favorable to multinational companies.

Distance, time zones and communication issues

The reversing trend of companies moving from outsourcing jobs to insourcing jobs is a slow, subtle shift. It is a shift that is happening for sure. Although the major contributing factors to the change have already been listed, the more nuanced causes are the more evident ones.

The contracts drafted even a year ago is probably challenged because of the shifts in the work environment. With outsourcing, the modules that have been drawn up long ago do not hold true to the current work environment. Loss of transparency and control over the business process, an inability to communicate between the broken pieces of the process and an inability to execute strategy seamlessly caused many companies to rethink about this business pattern.

Insourcing jobs gives the parent company a higher degree of control over the end product and the process. This control, compliance and lack of contracts, hidden costs and revisions bear the torch for and validate insourcing jobs.

The growing disillusionment

Disillusionment with the whole idea of employing a consultancy outside the country to handle their business process has begun not only in the US but in India as well. Although the business model accounts for 11 billion dollars in revenue and 2.8 million jobs in India, the idea of working for an insignificant, small portion of a larger business process in a multinational company, has lost its sheen.

The ungodly work hours (given the different time zones between India and US) makes a lot of employees rethink working for a BPO or call center. The fact that employees are required to don American personalities including accents, speech patterns including slang usage and even names has Indians feeling inadequate.

The wider ramifications of outsourcing including the governments support and legislative benefits for such companies has sparked debates about how the government support would bring higher ROI (Return On Investment) for other sectors that are more in need of Government attention.

Although industry representatives refuse to comment on these whispers and hearsays, outsourcing has definitely lost the charm and sheen. With the Government supporting this business model and rallying for it, everything does look fine. However,  only the industry insiders are aware of the MNC’s withdrawing business. And the graphs of steady incline, however, beg the question “Are we past the saturation point?”

Predicting the future of outsourcing in India is as futile an effort as predicting the weather. What can be gleaned from the outside is that the model has lost favor with the population at large.




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