Outsourcing is a business model in which one organization enters into a contract with another to manage and operate its business processes. India has turned out to be one of the largest offshore outsourcing hubs for the IT sector and IT enabled services and processes. About 44 % of all the outsourcing in the IT and the BPO industry is done to India. There may be several reasons as to why India has turned out to be an IT hub (Schaaf, 2005 & Sharma, 2004).
The human resources available in India are well trained, skilled, not very expensive to hire, and are basically English speaking. The population of India is young and can be utilized in almost any field. The human resources available in India (especially in the IT sector) have been high. These resources are increasing in number tremendously and are becoming more and more available for the IT sector. The cost of hiring human resources in India is much lower than several developed countries in which the MNC’s originate. Companies have to pay about 10 times more if they want to hire a professional in their home nation. Hence, investing in India could be a huge benefit (Schaaf, 2005).
India does belief in the social upliftment and offering policies that would help women to become more independent and free. As the IT and the KPO industry is not labor oriented, it is officering a good opportunity for women to work. Slowly the situation of women has improved in the country, and people would basically thank the booming outsourcing business (Burzi, 2005). Personally I feel that women are more suited to do jobs in which meticulous concentration is required and the BPO industry is offering a huge opportunity for women.
The Indian government has setup policies that do favor outsourcing and building the country into a global outsourcing hub. India is very much interested in creating international relationships and establishing international business with several nations in the world. As the BPO industry is offering a huge benefit for the society and upliftment of the people, the government is continuously encouraging foreign companies to setup shop in India (Schaaf, 2005).
India has been growing at a tremendous rate in the last ten years. The growth annually has been about 6 %. India may even be able to grow at a faster rate. One of the mains causes for such a high growth rate is the booming outsourcing and the knowledge-processing units available in India. India has been especially been open to the field of IT and software, and application of Information technology has expanded into various other sectors. Effectively, many companies are having their back-end office in India, which offers back-end support (Schaaf, 2005).
There may be a few issues that need to be considered for foreign companies whilst investing in India for outsourcing. India has a large number of universities and a huge number of graduates are produced every year. However, several of these universities may not meet international standards, and only about 10 to 20 % of those who graduate out every year are able to meet international standards. The cost of hiring these individuals may become very difficult in the future due to a shortage of human resources. Many people still consider the outsourcing business as unattractive and it may be difficult in certain instances to actually acquire the staff for such businesses. Foreign companies may have to consider investing in the education system so that the quality of education is improved (Schaaf, 2005).
India may be available to offer specialized services in certain fields. However, in several other fields expertise may not be available. The international investors who want to setup back-end support offices in India may not know this. The investors have to conduct a detailed research so as to know the resources available and accordingly plan to utilize them, before actually investing (Schaaf, 2005).
Another problem, which exists in India, is that it may be very costly to setup telecommunication links with the parent company in the US. If due to some reason this telecommunication links are lost, life may be virtually be shut down completely in another part of the world. Outsourcing businesses are usually conducted in developed cities of India, and several far-flung areas are unable to offer any support to the BPO’s. Land is very costly such places, and companies would have to pay a huge price to actually setup infrastructure (Burzi, 2005).
It may be very difficult for Indian professionals to work as per the convenience of US or European timings. Many firms, which have been outsourcing their business processes to India, need to take several issues into considerations before actually conducting work. They would have to take care of the conveyance and security of the employees (especially females) before having them work as per the US and European timings. Socially, an Indian woman may not like to venture out of her home at night and work during night shifts. This may be one of the major issues. However, several of the MNC’s have guaranteed proper security, conveyance and flexible work timings to ensure that they have the staff to work according to the US and European timings.
Hence, although India does offer a huge amount of opportunities for foreign investors, several issues need to be taken into consideration before actually investing. It may actually be a challenge, but finally if these issues are sorted out, the companies could bear true fruits for their investment. Besides, it has really become a trend for a company to setup a business in India that would offer backend support.
Burzi, F. (2005), Outsourcing in India Gets Cultural Backlash, Retrieved on September 10, 2007, from Impact Lab Web site: http://www.impactlab.com/modules.php?name=News&file=article&sid=12101
Schaaf, J. (2005), Outsourcing to India: Crouching tiger set to pounce, Retrieved on September 10, 2007, from Deutsche Bank Research Web site: http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000192125.pdf
Sharma, S. (2004), BPO Industry in India- A Report, Retrieved on September 10, 2007, from BPO India Web site: http://www.bpoindia.org/research/bpo-in-india.shtml