In Light of Outsourcing Challenges for Us It Companies, Why India Is a Competent Outsourcing Destination?

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In light of outsourcing challenges for US IT companies, why India is a competent outsourcing destination?

In light of outsourcing challenges for US IT companies, why India is a competent outsourcing destination?

Executive Summary:

In this global economy era, all major US companies, to increase their technological edge, concentrate on building upon core competencies and reduce the operational cost are trying to offshore their labor intensive businesses to low-wage countries. In last two decades, India has emerged leader in providing IT services and has been the most popular destination for outsourcing. In reality, majority of outsourced jobs to India are landing in few cities viz. Bangalore, Hyderabad, Delhi and Mumbai. Unfortunately, such popularity and majority of IT jobs restricted to few cities comes with a price; Where IT companies at such places are witnessing escalating wages, accelerating turnover, higher attrition rate and cities are unable to build infrastructure fast enough to support the growth resulting in traffic jams, daily frequent power outages etc. This paper discusses the outsourcing challenges of US IT companies related to destination and their increased relevance, in light of India’s current issues.

The common objectives of outsourcing Reducing operational and transactional cost and implementation of the outsourcing processes to meet those objectives, defines the various risks it could be exposed leading to undesirable results. To identify and ways to avoid or minimize such risks define the outsourcing challenges faced by an organization.

Few such risks that can be minimized or eliminated by choosing right offshoring destination that offers low-cast required talent, required functional, technological and managerial knowledge base, culture supporting language, communication and healthy organizational practices, strong financial, good quality standards, performance metrics, effective contract management and geographic location advantages to offshoring objectives.

India being the leader in providing the IT services from last two decades fulfills most of these requirements but facing several new issues due to polarization of all these offshored services to four major cities in India. These issues viz. increasing wages, longer turnaround time, higher real state prices and deficiency in public infrastructural gives an impression to offshoring companies that choosing these city destinations may not result in sufficient cost reduction at the same time in long term may not support the required staff.

For now India, due its experience and expertise in IT services field, clearly has an edge over other low-wage countries like China, Philippines, Russia, Thailand, Poland, Brazil, and others. While countries like China, Philippines, Russia that have better infrastructure and lower wages than India are lagging behind in English speaking professionals and offshored IT service experiences. These countries are investing heavily to increase the English speaking professionals and providing various incentives by making favorable rules and regulation, to attract outsourcing companies.

The competition is getting tougher and gap is closing faster than it seemed before. To continue to retain its leadership in providing IT services and remain favorite destination in future for long, India needs to utilize first its talents and resources across India by expanding businesses to other cities and going beyond borders to open up businesses in other lower-wage countries to use its experience and tapping into low wage talent pool. Indian central government and state government need to anticipate and speed up the infrastructure development to support the current and future growth demands. They need to make new favorable rules, regulations and provide incentives to attract US outsourcing companies. Incurring delay in implementing the required I see, generic, commodity processes moving to lower-wage places like...
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