Why Is It Beneficial To Outsource To India?
Outsourcing: A very common term in this day and age. Is it a new phenomenon or had it been around for some centuries? Why suddenly this is considered the revolutionizing business strategy and why India is in the middle of this outsourcing boom? Well, there are many answers, debates and few more questions along with the recent development of offshore Software Solutions. Offshore Software Solutions is part of an outsourcing project that many companies use and India has become one of the beneficiaries of that. Let’s find about outsourcing and India a bit more in this article.
Is Outsourcing a ‘New Thing?’
It has been reported by Grant Thornton International Business Report in 2014 that 40 percent of business leaders globally either want to outsource their business or are already into outsourcing. But it would be a mistake to view outsourcing as a modern-day phenomenon, rather it started way back in the 1700s during the Industrial Revolution. Manufacturers were shifting goods from one country to the other that would be able to produce the finished good at cheaper rates due to cheap labor.
Is Cheap Labor the Only Factor for Outsourcing Now?
The kind of works that gets outsourced to India is a bit different but when it started it was for the same reason as it started in 1700s, cheap labor. Though there had been a steady competition in global outsourcing yet it has been estimated India still receives quite a significant percentage of the outsourced jobs from the developed countries and multinational firms. The reason for India being a country of having a substantial percentage of the world’s outsourced jobs is because it has been able to build a world-class IT software and technology related services. It has been able to offer a steady market that supplies a unique combination of IT and BPO by implementing advanced technology in communication and software development at a relatively quite low cost.
Indian Government Needs Outsourced Jobs
Furthermore, since the onset of globalization successive Indian governments have been pursuing economic programs that would help in liberalization and privatization of sectors. Governments have also eased restrictions, which helped in the influx of jobs from other countries that were mainly outsourced to India. Such jobs have also helped India in building a rapid economic growth.
But before we get into the factors that make India the destination for outsourced jobs, we need to understand what outsourcing is referred to in the present day, how it works and why there has been a steady influx in outsourcing of works and various sectors.
What Is Outsourcing?
The business practice of hiring a third party or party outside the company to execute the services of the business instead of being performed by in-house staff and the employees is Outsourcing. One of the primary reasons that companies engage in outsourcing is for cost-cutting and often used for customer support or back-office services.
It has been recognized that modern-day outsourcing as a business strategy was first used in 1989 and from the 1990s onwards it became an essential part of business economics. While there have been many arguments about the pitfalls of outsourcing, the primary one being the loss of domestic jobs, however, there is a huge section of people who support outsourcing. According to the outsourcing enthusiasts, this mode of business strategy provides an incentive for companies to assign resources that will be effective for the company’s business. Furthermore, the pro-outsourcing groups argue that it helps in maintaining the world’s free market economics.
Why Outsourcing Works?
There are several factors that enable outsourcing to be one of the most used business strategies among the first world companies. They are as follows:
- Labor costs can be reduced significantly by outsourcing certain tasks.
- Companies can save money on overheads, technology and equipment by outsourcing
- By outsourcing with the money saved the business can focus better on developing the core characteristics of the company and the business.
- Productivity and efficiency of a company can be improved by outsourcing non-core and smaller tasks.
- At times other smaller firms or companies are in a better position to deal with smaller tasks.
- By focusing on the core elements of the company it can have faster turnaround time by cutting the overall operational costs.
Examples of Outsourcing
As mentioned earlier one of the significant advantages that outsourcing provides in cost saving and time. Here are few examples of how it is achieved.
- To save on the production cost a personal computer manufacturer might buy the internal parts of the machine from other companies in bulk instead of engaging with in-house production.
- A law firm can use the service provider for cloud-computing to store and back up its files. While using digital technology from a service provider the firm saves lots of money by not investing, as it does not buy the actual technology.
- For small companies outsourcing bookkeeping duties is cheaper than keeping an in-house accountant.
- Some companies also outsource the duties of human resources, payroll, health insurance, and housekeeping more effective than having in-house departments.
If outsourcing is implemented in an effective manner it can reduce expenses while giving the business and the company a competitive edge over the rivals.
Why Outsource Internationally?
Once outsourcing was executed with the motive to reduce operational costs solely but no longer it is the same. Outsourcing is now a business strategy not only to cut costs but also to get an edge on the competitors while also extending their reach globally.
As a result, many companies while trying to reap the benefits of labor and production costs among countries they are even relocating some of their operations to cheaper countries to increase their profits so they can get an edge on their competitors.
Advantages of Outsourcing to India
There are many companies that outsource their work to India few of the leading companies are IBM, Vodafone, Telstra, BestBuy, Mastek Limited, Orcim Soft, Inc., CITIBANK, JP Morgan, GE Capitals, Microsoft, Oracle, Dell Computer Support, Hewlett Packard, Schlumberger, ATT Wireless, Texas Electronics, TransUnion, Rand McNally, etc. Apart from these big shots, there are many more that get their back office works done in India. So what makes India the place for getting outsourced works from so many companies? Here are a few reasons:
- Higher Benefits but Lower Costs: Unlike the labor markets in the US, Canada, UK, Australia, and Dubai the Indian market is cheaper and has an immense impact on the increase of ROI. By hiring Indian workforce the company is able to reduce the cost that they would incur from having in-house staff. Furthermore, the outsourced workforce offers flexibility while giving the same quality of work.
- Communication: With Indian workforce, the communication is seamless as the majority of it is conducted in English. Indians are better than the Chinese or Filipino workforce where communication is concerned. The companies can share their plans and strategies the Indian staffs understand effectively.
- Skilled Workforce: The Indian workforce that takes on the outsourced works is highly skilled and experienced in handling critical projects with ease. Additionally, this skilled workforce is less costly than their USA, Canada, UK, Australia and Dubai counterparts.
- Latest Technology with Advanced Infrastructure: Most Indian companies that take on the outsourced works are committed to providing the best infrastructure and latest technologies. These Indian companies also conduct regular training to ensure that their employees are well equipped to handle overseas clients. Advanced infrastructure and implementation of the latest technology is the core strategy of these Indian firms.
- E-commerce Solutions: The Indian companies have been able to lend constant support in developing e-commerce software and solutions to international e-commerce companies. As a result e-commerce giant Amazon is setting up software development centers in Indian cities like Hyderabad, Pune, Bangalore, and Chennai. Over the years to gain a competitive edge on their rivals the e-commerce companies have been outsourcing their customer care service but now they are using Indian companies for developing their software too. This is because India is able to provide integrated customer support with logistics at a very nominal price with seamless service.
- Friendly Outsourcing Policies: In 2010 India earned US$50 billion from outsourcing, which has gone up to US$118 billion in 2016. The figures reveal that there has been a significant rise in India’s income from outsourcing business. This has been possible because of India’s favorable and flexible outsourcing policies that allow foreign companies to avail skilled workers at lower costs.
- Better Customer Support: Despite the time zone difference India provides excellent round the clock customer support to the companies and the clients. Also, the fluency and good knowledge of speaking and comprehending English enable Indians to outdo other countries in getting the outsourced jobs in customer care.
- Increase in Talent Pool: With such a huge student population of 3.1 million, every year a new workforce gets added to the existing one. Hence creating a large pool of talent and a well-qualified workforce.
- Productivity: Since India is able to provide all these services seamlessly and in a cost-effective manner the productivity of the company that outsources the jobs can be increased.
All these aspects along with the facts that Indian companies are developing their delivery services globally by combining greenfield initiatives, cross-border mergers and acquisitions and partnerships with local companies make the country a steady place for getting outsourced jobs.
Offshore Software Solutions
One of the crucial benefits of implementing outsourcing program by a company is the opportunity to engage with offshore software solutions. When a company delegates the software development work to an offshore team for jobs that can be for a range of services. They can be anything from coding, development, providing software support and maintenance even developing mobile application and designing, developing and maintaining of a website. A company hires the OSS with the expectation that they will benefit.
Benefits of Offshore Software Solutions
- Lower cost: As part of an outsourcing program Offshore Software Solutions too is done with the intention of getting the best service from experienced IT professionals at cost. The hiring company does not have to bother with recruiting and training employees.
- No-cost technology: Having offshore Software Solutions would mean the company hiring the service does not have to bother about having an in-house IT team or develop an expensive IT infrastructure. Rather have get the work done in an Indian firm that has reputed technology.
- Dedicated team: With the offshore Software Solutions the company can ensure having not only experts for the service but people who are dedicated and be able to deliver the product even with around-the-clock service so that the product reaches the market within a short time-span.
Therefore when a company outsources for offshore software service they should also be aware of the latest OSS trends that are in the market. This would enable them to get the edge over their competitors by selecting the service that is apt for their business.
Trends in Offshore Software Solutions
While offshore companies can help in delivering software services it is quite a complex process that requires conducting series of tasks. The firm providing the service needs to engage with latest trends so that thy can benefit the outsourcing company. Here are the some of the latest trends in offshore Software Solutions development.
- Cloud Computing: Vital in offshore Software Solutions development as it gives flexibility and scalability hence becoming the crucial aspect in offshore Software Solutions.
- Automation: Will help in reducing human efforts thereby risks of human labour and drive down costs.
- AI: The way for the future that can be used for improving code quality and faster software development.
Many multinational companies are outsourcing their peripheral services like data entry, employee database, customer support, the creation of content, and other designer works. These works can be managed effectively and efficiently without hampering the size and operation of the company. There is also no extra risk involved in outsourcing such activities rather they are able to turn fixed costs into variables. Furthermore, companies are able to reduce the burden of maintaining and managing an extensive large workforce yet gets the benefits of it.