WHY SOFTWARE OUTSOURCING TO INDIA?
India has emerged as one of the most favoured Software outsourcing destinations for all the leading IT global players. Anywhere from one-half to two-thirds of all Fortune 500
companies are already outsourcing to India.
Let's see what the consultancy firms say on outsourcing to India:
predicts: "Compared to other competing countries such as China, Ireland, Israel, and the Philippines, India will continue to dominate as the preferred offshore country."
indicates: "By 2003, a large number of companies will engage offshore providers and their budgets too will grow rapidly. According to a study conducted by Forrester, India's edge over other competing nations in the IT outsourcing business is based on the country's decade old experience in this area, fluency in the English language, supportive Government policy infrastructure, and high quality offerings."
How Software Outsourcing to India Helps MNCs:
Outsourcing as a percentage of global companies' budgets is expected
to increase from 30% in '02 to 40% in '04 in general and to 50%
particularly in the case of software companies. The worldwide expenditure
on outsourcing services is expected to reach $151 billions by 2003.
Corporate giants in the United States, Europe, and Japan prefer
India for cost-effective and high-quality software solutions. According
to National Association for Software and Services Companies (NASSCOM),
outsourcing industry is heading to $1.2 trillion by 2006. And India,
as one of the biggest outsourcers, is likely to gain the most out
Outsourcing in India is providing effective business solution to the MNC. Software Outsourcing helps MNCs to:
Strategic Reasons For Software Outsourcing:
Concentrate On Core Competencies
- Cut application development and maintenance costs
- Deal effectively with the peaks and valleys of software demands, and
- Focus on more strategic work
Outsourcing helps companies to concentrate on core competencies
and to focus on broader business issues while leaving aside operational
details for the outside vendor, who is competent enough to offer
services at a low cost.
Capitalise On Vendor's World -standard Competencies
Being in the business and having extensive expertise at their disposal, outsourcing providers bring world- class resources, and offer access to new technology, tools and techniques that the organisation may not currently have access. With extensive expertise and expanded skills, outsource vendors offer more structured methodologies, procedures and documentation that give you a definite competitive advantage.
Split Risks Involved
Doing business in IT industry entails huge investments, and carries tremendous risks. With outsourcing some of their work, companies become more flexible and more dynamic to face new challenges.
Reorient Resources To More Strategic Needs
Every organisation has some financial and physical constraints with regard to availability of resources. Outsourcing permits the reorientation of resources from non-core activities toward activities that reap in rich returns.
Tactical Reasons For Software Outsourcing:
One Time Applications Development
If organisations want to develop applications at a specified time, which require not only big investment but also large workforce at a given point of time, outsourcing, in such situation, is the most viable and cost-effective option.
Cut Down Or Manage Operating Cost
Cutting down or managing the operating cost is the single most important tactical reason for outsourcing. Vendor's lower cost structure is one of the most convincing short-term benefits of outsourcing.
Invest Funds in Core Competency
Outsourcing spares organisations from the burden of investing capital funds in non-core business areas. This makes capital funds more available for core areas. Outsourcing can also improve certain financial measurements by eliminating the need to show return on equity from capital investments in non-core areas.
Access To Required Resources
Organisations outsource because they do not have the required resources within.
Benefits of Software Outsourcing to India:
India is an ideal offshore destination due to various cutting edge advantages it has over other countries. Let's make a closer look at the factors highlighting the potentials of IT outsourcing to India:
Large & Quality Human Resource
India is proud of the abundance of its highly qualified and technically skilled English speaking computer professionals, who are key to success in the field of IT outsourcing to India. The country turns out 75,000 IT graduates and two million English-speaking graduates every year. As per one study, there will approximately be 17 million people available to the IT industry by 2008.
Cost Effective IT Outsourcing
A substantial cost saving can be achieved by IT outsourcing to India, owing to the yawning gap between the labour costs in India and that of the developed countries. Studies and analysis suggests that outsourcing business to India saves as much as 70%.
Corporate giants in the United States, Europe, and Japan prefer India for cost-effective and high-quality software solutions.
Quality Indian IT Outsourcing Firms
The companies involved in IT outsourcing in India offer high quality work. India offers vendor sophistication--with more than 200 companies being quality accredited and serving the needs of over 255 Fortune 500 companies. Indian outsourcing firms meet international standards and comply with the ISO & SEI-CMM (Capability Maturity Model) standards. Three out of every four SEI-CMM 5 companies worldwide is located in India.
Reliable and State- of- the- art Infrastructure
Looking at the present Indian outsourcing infrastructure, outsourcing business to India would be the most viable option in front of the corporate worldwide.
Excellent telecom, ISP, and cellular networks are available in all cities & towns of the country. In addition, India has reliable satellite and submarine communication links that facilitate good band connectivity with the rest of the world.
Robust growth potential
The country will achieve the projected $70-80 billion in exports from software and ITES sectors by the year 2008 by the help of several major drivers, according to McKinsey and Co. The Indian software and ITES sectors are poised to achieve its long-term export potential. With this, their contribution to the GDP will go up from just about 2 per cent to 10 per cent by 2008.
The growth is being fuelled by following powerful forces:
- A large mass of potential `blockbuster' customers that are set to take off.
- Familiarity and experience with offshoring is dramatically increasing the breadth of service lines.
- As offshoring becomes more mainstream, global majors experience increasing pressure to move a significant portion of their work to India
IT is regarded as one of the top 5 priority industries in India.
IT is a part of the national agenda, and policies are framed so
as to obtain maximum benefit out of IT outsourcing to India. The
Government of India initiatives:
- All policies are custom made, keeping in mind the need to
achieve maximum benefit to the outsourcing industry.
- The liberalization and deregulation initiatives support growth
and integration with the global economy.
- Reduced licensing requirements to make foreign technology
- Removed restrictions on investment and made the process of
- Growth-oriented EXIM policy that attempted to-
-Remove some of the existing procedural deterrents and anomalies
that have been standing in the way of software exporting organisations.
-De-regulate the software and ITES market even further and create
a world-class business environment, where the industry can gain
- Tax incentives to give boost to the IT sector.