Evolving Aspects of Outsourcing to India
Outsourcing is defined as the transfer of certain functions or services and the delegation of their day-to-day management responsibilities to third party providers (Karthikeyan, Bhagat, & Kannan, 2013). Outsourcing non-core business processes and competencies to a third party gives an organization better focus and control on their core competences, this leads to increase in the overall productivity and profits made by the business. Business entities outsource for a number of reasons for instance increasing shareholder value, gaining competitive advantage over other firms, reducing costs incurred in production, improving operations, business transformation, overcoming lack of internal capabilities, keeping up with competitors, mitigating capital investment, improving capabilities to control the business, improving service delivery to customers, increasing sales of products, and reducing inventory. Several developed countries with no exception of the US outsource their services to India as a result of the favorable conditions that the country has for the success of a business. Competition is one of the evolving aspects of outsourcing to India; the paper reviews the evolving aspects of outsourcing to India for instance competition.
Outsourcing goes back in the time of the Romans where it is alleged that the Romans used outsourced services for collecting their taxes. The practice became popular in the 1970s when large companies were seen not to be performing well; the trend even became widespread in 1980s. Furthermore, there was a shift and change of direction in business strategies focusing on cutting down the number of activities in the late 1980s. Initially outsourcing was taken as a strategy of saving costs businesses incurred, however many business entities are now outsourcing many customer related tasks for many reasons. The main common types of business outsourced tasks are back office outsourcing that include functions for instance purchasing or billing that are internal to the firm and front office outsourcing that includes services such as marketing and customer support.
The numbers of business services that are outsourced to India have significantly expanded. The providers of the services are expected to return a series of great benefits for instance a combination of higher expertise, lower costs as a result of economies of scale and greater flexibility in the delivery of the services. However there are some problems in outsourcing, many manufacturers and business these days are reevaluating their strategies for outsourcing. The cost of energy has increased dramatically making the cost of transport go sky high, In addition, time to market is facing extreme pressure in order to reduce such unpleasant delays to the market; therefore, the closer one is to the market, the better one can reduce the delays. Supply chain managers are in great concern on multiple issues such as time of delivery and cost in general. The response time from ordering to fulfillment as well as cost of transportation to the market is the issue to address when deciding for outsourcing.
Most of the economic growth of India is attributed to the service sector, accounting for half of its output for the reason that the service sector in India accommodates less than one quarter of its labor force (Jaoin & Khurana, 2015). The economy of India is the second basing on population and is the eleventh in terms of current Gross National Income. External sector policies have been formulated to gradually open the Indian economy and consequently the Indian market. In fact, a significant number of business opportunities for foreign investment have opened dramatically since the government had opened the Indian market in the 1990s. In recent years, the economy of India has grown considerably with positive impacts on both social and economical fronts.
Outsourcing has played a crucial role in solving labor problems faced by many companies. The companies reach out to cheaper labor markets for increased production; they can also outsource materials which are needed in production by using purchasing companies that provide good materials with good prices. Most services are outsourced to India because of the cheap labor that is found in the country and large pool of qualified personnel that the country has.
Outsourcing to India
The practice commenced with the software industries long time ago in the city of Bangalore of India. The rise of outsourcing to India had its start in the 1980s, during this time the country provided skilled contract workers for the USA. Efforts to outsource projects to India arose in the early 1990s.This was as a result of the changing technologies and the shrinking IT budgets. The success of the industry in country is premised on the strength of the pioneer companies who learned how to transform the industry into firm specific capabilities in outsourced software markets. The main strength of the firms in India was their ability to assemble teams of talented people and deliver a technical outsourced service to different customers around the world (Javalgi, Joseph, Granot & Gross, 2013). As new opportunities arose the companies took advantage of the opportunities and used their strength to maximum economic values through the adaptation of a new model of business which were based on an outsourced service offering.
The popularity of India is underscored by the fact that even some state governmental agencies have outsourced several of the U.S public services to India (Kesavan, Mascarenhas, & Bernacchi, 2013). With the revolution of the Micro-Electronics in the 80s, production in India increased and thus making it necessary for large firms to outsource so as to meet demands of the market.
The government of India has taken steps to encourage outsourcing to India; this has attracted investors from foreign countries due to the good environment that the government has provided. The Indian government has also opened foreign investments to non residents understanding that the benefits will be enormous. The swift growth in the outsourcing of services to India has raised the possibility that this industry will be a key engine of India’s economic expansion (Kuruvilla, & Ranganathan, 2008). The business process opportunity of outsourcing has come a boon for the country with the sector crossing note-worthy milestones in terms of its significant contribution to the economy of India; the sector contributes greatly to gross domestic product, generations of employment and export earnings. The country has continued to be the greatest destination for outsourcing Information technology and BPO services (Nakra, 2014).
Outsourcing IT to India
India has emerged as one of the destination that is most favored for IT related services for the reason that it has a large pool of skilled workers, English language competences, cost and project management advantages and quality standards that have been put in place by the Indian government. The government of India has discovered and recognized the potential in the outsourcing arena and has put in place strategies to ensure that it is developed further. The Indian company’s service providers have demonstrated a strong commitment to achieving internationally recognized quality standards thus making them one of the best options around the world.
The Indian IT outsourcing companies have been successful in competing with other companies around the world especially those that are in the US (Davis, Ein-Dor, King, & Torkzadeh, 2006). However, the BPO sector has started losing its pre-eminent position due to a number of challenges. In the last years, advancement in information technology has generated substantive opportunities for a number of countries.
The main challenges include; intense competition from other countries which have put in place strategies to outpace India, increasing protectionism in the developed nations, phasing out of tax exemptions to the industry, wage inflation impacting the bottom line growth, an imbalance in the demand and supply of skilled workforce and high attrition rates. While companies in India can have only a limited control over the problems that are a function of their business and political environments, high employee attrition needs to be tackled at the organizational level. It is about reengineering and being able to provide customers a greater value faster, at a lower cost and higher qualit
Evolving Aspects of Outsourcing to India
There are many evolving aspects of India’s outsourcing, While India is showing its outstanding competitive advantage toward marching in to the world of super economic powers, and the country has to address multiple issues in order to maintain its competitive advantage in the business world. These challenges need to be overcome, both on the domestic as well as on the external front. One of the serious challenges faced by the Indian economy on the global stage is to deal with the rising competition from China, due to its speedy emergence and agreement to the World Trade Organization (WTO) rules.
Competition, Several countries have emerged in the sector and are posing a challenge for the outsourcing to India, the countries include Philippines, Russia, and Brazil among many others; they are developing markets which are slowly becoming alternatives to those of India. For instance china has managed to maintain its position in the market for a long time is presently creating a threat to India abilities in the IT sector. The country boosts of not only a scientific workforce but also is aggressive in training programs that are aimed at addressing their deficiency in English competence. China has the abilities and the resources to develop its IT sector hastily and this is a threat to India. Many people in china are learning English and this may give them a competitive edge over India because this has been their main outdoing.
Philippine has also become the offshore destination of choice for call centre outsourcing for the reason that they have specialized in customer support services. As a result of Philippines dominancy in the English language many leading companies have chosen Philippines as a customer service hub. The country has several professionals in IT and a telecommunication infrastructure. Philippines and Russia have started to create a threat to India’s control in business processes outsourcing that is efficient and of good cost. This is a major challenge to India unless it puts in place mechanisms to improve its infrastructure and consistently work on increasing its skilled labor force. If this does not happen the country will face a movement of its foreign clients to other countries that will have outpaced India. There are opportunities for India to improve in many aspects for instance cost efficiency of programs can be improved if few services are in sourced within the country but in a more cost efficient way.
The attractiveness of India
India has continued to be the most favored destination for firms looking to offshore their information technology and back-office functions, despite the backlash against outsourcing to the country. The country is also cost effective thus making it to be among the most financially strategic locations when looked at in combination with the environment of business it offers and the availability of skilled people. India has clearly emerged as the leading nation in the outsourcing field and its burgeoning ITES/BPO industry has made it to be a model that other countries aim to emulate .There are many emerging markets in the developing nations such as India, china, Brazil Malaysia, South Africa among many others. These countries seem to be committed to continued supply of skilled people so as to meet the demands of the labor market. The key to selection of a country is a combined criterion of many factors for instance availability of resources, the cost of resources and the quality of the outputs. The most given reasons for selecting India for the off shoring include the high number of English speakers who are ready to do quality work for much as compared to those in the US and other countries around the world.
Industry size and experience, the Indian IT industry is the largest IT and ITES outsourcing market, nearly three times than that one of Canada which has been the most favored ITES outsourcing destination even Statistics reveal that the Indian IT and ITES industry has recorded a growth in the exports. The service providers have acquired a high level of expertise in delivering services to various destinations around the world. India has the largest number of outsource employees who are focused on IT and other services. Complaints about the a bad effects it has on the health of BPO staff on account of night shifts and sleep deprivation is the most commonly given example. Concern has also been expressed about the psychological impact of the use of foreign pseudonyms at work and the abnormal social life induced by a work at night, sleep at day routine. The effects of spending long hours in front of a computer terminal have also been cited
Labor pool and language, other countries like Philippines can offer a similar labor cost advantage but the low supply of talent for instance language competences remains a barrier to the countries. Countries like china have a large pool of skilled manpower but it is behind India in terms of the ability to speak in several languages for instance the ability to speak English. The countries service providers have also failed to adopt international quality process certifications unlike in India. India graduates about 200,000 engineers annually and about 2.1 million English speaking graduates join the labor force each year. The ability of the Indian companies to provide services at low prices with vast English speaking resources and a strong educational orientation makes it the most desired destination.
Employee cost, the great advantage that Indian outsourcing companies enjoy is their lower employee cost with over 80% of the workers based offshore. Therefore cost savings have attracted many service related companies to India. India has found several ways to compete the IT arena sector worldwide for instance India is one of the world’s leaders in software exports. The country has many universities devoted to maintaining state-of-the-art IT curriculums and this has made the country to have excess labor force that other countries outsource. Due to the large number of professionals in the country that are churned out from the institutions of higher learning the cost of employees has gone down making the country a magnet for investors from foreign countries.
The sector contributes a lot to the GDP of India and for this reason the country has been rank among the top countries in the export of services. The service sector of India is considered a big magnet that attracts foreign companies to the country. This is as a result of the good telecommunication infrastructure in most parts of India as well as the huge number of skilled Indians who can speak many languages and have got various talents. This has made the country an ideal place for many companies who are willing to outsource their non-core competences to foreign firms.
Indian firms offer a wide range of businesses processes services which are growing and expanding from day to day. In the past the outsourcing sector was only associated with simple computer programming, call centers, medical records, transcription, data processing and revenue accounting. However in the recent past the number and variety of services has grown to include those that were not offered before. The services have grown to include higher value added and those that are more complex for instance financial and accounting processes. Call centers have dominated India’s businesses processes, they account for nearly a third of the revenues collected. The companies are developing expertise in the transportation of biological samples in accordance with strict trial protocols specifying temperature conditions and delivery periods.
India has a competitive advantage to attract many investors and companies from foreign countries for outsourcing their core business functions but this is being threatened by evolving aspects like competition. The large number of graduates that the country produces in many fields for instance IT, the mastering of foreign languages and the infrastructure that the country has are the main factors for judging outsourcing decisions to India. The country has to focus on further reducing the costs of foreign companies so that this will greatly benefit the companies that outsource services to India. Competition is likely to continue growing from other countries and cost will be the crucial factor. Therefore the stakeholders in the industry in India should work on the reduction of inflation of the cost of labor should be the new area of research for the outsourcing industry of India. The Indian government should keep working on liberazing the industry by allowing a large number of foreign investors thus creating jobs to the people of India. Indian researchers should also conduct more studies on the advancement made by other countries in the outsourcing industry for instance China, South Africa, Malaysia and Philippines
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