Wednesday, June 2

India's Dominance in Outsourcing

E.C. Thomas writes about - India's Dominance in the outsourcing industry. He also writes about the outsourcing competition and controversy surrounding it. The extract covers the growth of outsourcing in India:
The BPO sector in India has been growing at almost 60 to 70 per cent per annum. According to NASSCOM, the projected revenue of the BPO industry in India is expected to touch US $ 12 billion in 2006. This is a nearly four-fold growth from the 2003-04 revenue estimates of around US $ 3.6 billion.

The number of jobs increased from 140,000 at the end of March 2003 to a projected 245,000 in March 2004, according to Nasscom’s ‘Strategic Review 2004’. This could rise almost five times in the next five years. Each day nearly 200 people join the Indian ITES – BPO industry.

BPO is a specialized form of international trade in services, based on the doctrine of comparative advantage in international trade. Today, companies outsource to destinations like India because they see value in their investments in terms of quality service and financial spending. By outsourcing to quality and lower cost operations, these companies are able to lower overhead costs, compress time-to-completion with efficient time difference management and focus on core competencies. There are many clear instances of such advantages to companies over a short time-frame. Likewise, banks and financial institutions will not send their data to these countries, unless they are sure of the credentials. As pointed out in the McKinsey Institute study, the US economy benefits in outsourcing in more ways than one.

One estimate says that the General Electric (GE) which employs 18,000 workers in India, saves $ 350 million per year through outsourcing. In all, $ 8 billion has been saved in the USA through outsourcing. A NASSCOM report estimated 60 per cent savings in costs for companies outsourcing to India. There exist 185 Fortune 500 companies which outsource work to India. Information Technology Enabled Services (ITES) provides opportunities for MNCs to reap the surplus in the service sector that did not exist earlier. The companies engaged in production of value-added services, from medical transcriptions to software programming, require skilled labour which countries like India have in abundance. In fact, Indian call centres have a higher productivity as compared to those in the USA or UK.

According to NASSCOM, an Indian call centre agent makes on an average 98 correct transactions, as compared to 95 by an agent in the UK. Besides, the Indian makes 120 transactions an hour, while his British counterpart makes only 100. However, efficiency does not always mean higher pay. A worker’s basic salary in the USA is $ 63,000 per annum, while it is $ 5,850 in India and $ 4,750 in China for the same job.

Related Links :

* Wipro named among top 10 outsourcing vendors in US

* BPO industry revenues to touch $12.2 billion by 2006