IT Outsourcing from India- A key for countries to attain prosperity amidst pandemic blues

“Outsourcing has effectively managed to survive the test of the time and will make your business reach the cloud nine”

Imagine that there is a battleground and the players are organizations of different scales and structure they have to compete against different things- with themselves, with their competitors, politics and the deadly Coronavirus. In the 21st century all are engrossed in the rat race in order to outshine each other this in the business parlance can be called as a stiff competition. However, there is the limit of managerial skills. A business owner or a top level can be the jack of all but eventually he is the maestro in one of the skills. Some skills need to be availed from the third party. Activities which are not the core functions should be given to other party in order to focus only on the core functions.

Five to ten years back there was little digital disruptions if we talk about the developing countries. The outsourcing industry in earlier times was not as charming as today. Because at that time people were hired, they were trained, there was less automation during that era. But now, due to the Digital India mission and also the Covid pandemic infused new style of working. This paved the way for digital transformation, agile infrastructure and remote working. Now, the outsourcing industry is in the limelight. Working remotely has become a new norm in the same way outsourcing industry has been able to weather the storm.

The Industry get four-fifth of the revenue from U.K & U.S.A but in pandemic these two countries were also severely affected by the Covid. Globally, the IT outsourcing suffered a plummeted value by 5%. But the silver lining here is that the global IT outsourcing industry has bounced back. The global IT outsourcing market is estimated at $410 billion by the year 2027. There is a sanguine view of the Indian IT services as they will continue to render the outsourcing to U.S and the clients which are based in Europe. IT industry will also witness 10% CAGR and it will attain $350 billion size by the year 2025.

More than 67% of the global outsourcing market is contributed by Indian IT sector. Here are the reasons to justify the fact that India is a lucrative destination for outsourcing the human resources:

1.  Dearth of tech talent: Several mind-boggling figures for the year 2021. The survey conducted by McKinsey exhibits that around 87% of the organizations are already facing the shortage of tech talent. In Europe, Sweden will face the shortage of developers amounted to 70,000 by 2022 and Israel which comes under the top three countries for tech start-ups in the world will experience a 15% software developer shortage. This so because of improper training, lack of productivity could be the reasons. The awarded computer science degrees has also decreased and rate is 6% as compared to the U.S.A which has the rate of 13%. This presents an opportunity for countries to hire migrant workers or outsourcing the skilled developers from developing countries like India. The Nordic countries can prove to be one of the biggest destinations for Indian IT outsourcing.

2.   Covid is a blessing in disguise: The third tide of crisis is wide but it brings opportunities for Indian IT outsourcing. It implies that outsourcing from India got the zeal to become a go-getter when there was the “The year 2000 bug”. The U.S.A called the software engineers from India in large numbers in order to fix the 2000 bug. Due to this the Business Process Outsourcing also rose. The second tide was the “The Global Financial Crisis-2008”. It not only impacted the U.S banking regime but impacted the entire world. Indian IT industry helped the U.S financial services. At that time the Indian IT outsourcing industry was growing at the rate of around 15%. Then comes the third tide called “Covid-19”. It brings digital disruption, more usage of cloud-based platforms, work from anywhere policy and this involves agile infrastructure and collaboration and this paved the way for outsourcing from India.

3.  Costs at arm’s length: It is evident that IT sector in European nation is facing the stagnation and many Indian IT companies have undergone the international expansion. The cost of labour both skilled and unskilled is cheaper as compared to other countries. Cost is the major issue because the companies of other countries want to reduce the costs. When there is increase in costs, the managers keep the eyeballs rolling in order to curtail the costs. So here, outsourcing from India is the saviour. Companies located in other countries need to incur the base pay and they can avoid training, cost of rework and can significantly reduce the overall cost of operations.

4.  New technology: There is a rise in new solutions. R&D centres are set up to research about 5G technology. App development activity also gained traction. More than 60% of the tech companies are outsourcing skilled IT resource to develop the part of their app. For this the Indian IT companies can bridge the gap as most of the companies are getting enormous deals.

5.   Recall the Adam Smith theory: Outsourcing is expedient for the economy of both the host company as well as the external company. Smith wants free flow of trade and migration and division of labour. If the countries avail IT resources on contract, nearshore, onshore or offshore it will enable free movement of the resources. The objective is to send few highly-skilled   IT resources to the country but they will produce high quality of work in order to reduce cost and increase efficiency. If we try to reminisce the “Theory of Absolute cost advantage” . So India has an absolute advantage of cheap labour and U.S.A and European countries has absolute advantage of being capital intensive. Which means they have technology, scientific base and research centres. Suppose in order to build a high-tech app America has robust R&D it is the strength and India has the strength of cheap labour so it will send IT resources to America to so both the countries will gain from the trade of outsourcing and this will lead to cost advantage.

6.  The rise of Gig economy: Now the full-time jobs will disappear. 20-30% of the working age population will do independent work on freelancing and contractual basis. The reason is the full-time employees are more expensive and are more rigid not flexible. Hiring an employee will cost the companies more ie 30-40% more than the independent worker. Importing IT resources from India for short duration projects reduce the costs of space and training for the companies located outside India.

The benefit that the countries will get from IT outsourcing from India are great as India has emerged as the fifth country for the adoption of the flexible-staffing concept after the U.S.A, China, Brazil and Japan. Moreover, India’s gig economy will rocket at 17% compound annual growth rate by the year 2023.

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