India: Hot Spot For IT Outsourcing
BY ASHISH CHAND, IT&T LIMITED
India, the world's largest democracy and home to nearly one billion
people, has quietly but quickly emerged as a leader in the field of
software development and Web-based services. India has a competitive
advantage in the software business, as it is a location that offers
cost-effective solutions, world-class quality, high reliability and rapid
delivery. It is a country to which more and more multinational companies
are outsourcing their software requirements to retain a competitive
advantage. The Indian software industry has grown from a mere U.S. $150
million eight years ago to a whopping U.S. $3.9 billion in 1998-99. In
1998-99, about 200 of the Fortune 1000 companies outsourced their software
development requirements to India.
Having established its presence in the global software development
market, India is now emerging as a preferred destination for outsourcing
of IT-enabled services, which include call centers, medical transcription,
back-office operations, revenue accounting, insurance claims processing,
content development, animation, payroll and logistics management.
Several companies such as Bechtel, GE Capital and British Airways have
already established facilities for the provision of IT-enabled services
from India. In an office block on the outskirts of New Delhi, GE Capital
has set up a call center to service its U.S. customers. The facility
employs agents who have anglicised their names to ensure that customers
based in the U.S. are able to recall their names easily. These agents make
calls to and receive calls from customers in the United States throughout
the day and night while chasing credit card debtors, assessing medical
claims and approving car loans. Most of them have never set foot in the
U.S. and have cultivated their American accents by watching American
television shows. A large number of agents have college degrees and earn
$3,000 to $5,000 a year, while their American counterparts, who are
sometimes less educated, earn between $18,000 and $20,000 a year.
Companies in the U.S. or Europe can establish and advertise a toll-free
number and have the resulting calls diverted via satellite or over leased
fiber optic cables to a call center located in India. The cost of
diverting the call to the center is borne by the service provider. When an
Indian call center quotes a price, it includes the telephone charge to
receive the call in India. Since the overhead costs in India are low,
Indian companies can provide call center services to clients based in the
U.S. or the U.K. at one-sixth to one-fourth of what it costs in the U.S.,
U.K. or Australia. A call center in the U.S., for instance, charges on
average $12 per call from the company to which it provides call center
services. In India, this cost would range between $2 and $4 per call,
including the network charges for uplinking a call from the U.S. to India.
Political and Economic Risk Consulting of Hong Kong, in its latest
survey, rated India as the best location for call centers in Asia. India
is an attractive location for companies to outsource their IT-enabled
service requirements for the following reasons:
Language and manpower. India has the second-largest
English-speaking population in the world and a technical manpower pool of
4.1 million. This has been instrumental for companies such as Oracle and
Microsoft to establish large operations all over India.
High quality. Indian companies are increasingly adapting to
international quality standards. It is expected that India will soon have
the maximum number of ISO 9000 certified companies in the world for the
Cost-effective. Outsourcing to India means substantial cost and
time saving compared to most of the rest of the world.
Experience/skills. India can offer individuals with excellent
project management skills and experience in state-of-the-art software and
Stable legislative and legal framework. The Government of India
is supportive of the IT-enabled services industry and offers some special
policies and tax exemptions to fuel the growth of this industry in India.
There is a strong focus by the Government to make India an information
technology-driven nation. The total call center business in the U.S. in
1998 was $23.5 billion. Of this, business worth $17.5 billion was
outsourced. In the U.S., there are more than 100,000 call centers in which
approximately 3 percent of the country's population is employed. By 2003,
these services are estimated to reach a figure of $58 billion, of which
$43 billion is likely to be outsourced. According to a study done by
McKinsey, IT-enabled services can generate a substantial amount of revenue
and employment for India in the next eight years (see Table 1).
Realizing the importance that IT-enabled services can play as a growth
engine for the Indian economy, India has been making improvements in the
quality of its workforce and infrastructure. As a result of these
improvements, India is poised to make further inroads into high-value
segments of the global information technology market.
NASSCOM-McKinsey Study: Indian IT Strategy Summit
Ashish Chand is head of Internet and New Projects at IT&T
Limited, India. After having lived and studied in both the U.S and the
U.K. for more than six years, he moved back to India to help identify new
lines of business for IT&T. IT&T is an e-transition company with
more than 350 employees and 33 office locations. The company provides
Web-based live chat and e-mail-based technical support.
to the July 2000 table of contents ]