Why Outsource Knowledge work to India

Outsourcing is not something new - it has been a popular management tool for over a decade. One can safely say outsourcing has evolved over the years:

• 1960's - Time-Sharing
• 1970's - Parts of IT Operations
• 1980's - Entire IT Operations
• 1990's - Alliances/Tie-ups
• 2000's - IT Enabled Services

However it was in the early to mid 1990s that India saw the huge emergence of outsourcing. Though the sector is relatively young it has seen tremendous growth in a short span of five years. This was largely due to the emergence of wholly owned subsidiaries that catered to the outsourcing needs of their parent companies. The earliest players to enter the market were GE, American Express, and Citibank. Indian companies offer a gamut of outsourcing services that range from customer care, transcription, billing services and database marketing, to Web sales/marketing, accounting, tax processing, transaction document management, telesales/telemarketing, HR hiring and biotech research. Medical transcription was one of the first services to be outsourced, while other processes like data processing, transaction processing, billing, technical support and customer support began towards the end of the 1990s.

NASSCOM studies shows the following as the major factors for the Industry growth in India

• There is in abundance, manpower highly skilled and proficient in English
• Better focus on maintaining quality and strong quality orientation
• Growth in telecom and other infrastructural facilities
• Ability to provide huge cost savings and thereby enabling productivity gains
• Security & Data Privacy
• Proactive and positive policy environment which encourages ITES/BPO investments and simplifies rules and procedures.

Manpower

India has more than 300 universities and over 900 colleges providing computer education at the degree / diploma level. Every year, India produces 2.1 million graduates and 0.3mn post-graduates (including non-engineering colleges). In addition to this there are numerous private institutions providing computer education. The chart below shows the increase in number of students passing out each year (courtesy:NASSCOM)

The Government of India set up IITs (Indian Institute of Technology) and IIMs (Indian Institute of Management) across the country in the 50s & 60s. These ivy-league institutes of formal education are centers of excellence competing with the best institutes worldwide. Besides these India can boast of research facilities like Institute of Science (IISc), Bangalore, Defence Research and Development Organisation (DRDO), ISRO Satellite Centre (ISRO), ISRO Telemetry Tracking and Command Network (ISTRAC).

In all good educational institutions, from kindergarten to graduation & beyond, the preferred medium of education is English resulting in a significantly large population of educated & qualified professionals being conversant if not proficient in the English language. There is also tremendous emphasis on mathematics and science, resulting in a large number of science and engineering graduates.

An ideal KPO employee requires domain specialization, computer skills & English proficiency. With the Indian way of education, which lays great emphasis on higher education & specialization, a talent pool with specialized knowledge in any field is readily available.

India is placed in an advantageous position to meet the global KPO demand with its specialized pool of engineers, chartered accountants, doctors, MBAs, lawyers, research analysts, scientific researchers and PhDs, India is well positioned to address the global KPO need.

Quality

In terms of quality of services offered, India ranks 30 per cent higher than any other region. The offshore units in India have achieved high levels of quality standards. India now has far more SEI CMM Level 5 companies than any other country. 80 out of the world's 117 SEI CMM Level 5 companies are from India and more than 200 companies are quality accredited and serve a great number of Fortune 500 companies. Many companies have aligned their Quality Management Systems with ISO 9000 standards. ISO9001, COPC, 6 sigma are some of the established quality initiatives.

Infrastructure

In the last couple of years, the Infrastructure condition in the country has shown improvement with infrastructure of global standards, in cities like Bangalore, Noida, Pune, Chennai, Hyderabad. Sprawling, landscaped campuses, state of art buildings incorporating the latest technology are made to cater to the client's need. Some such technology parks are Tata-Singapore Consortium, International Technology Park - Bangalore, Tidel Park. - Chennai, Hitec city - Hyderabad.

Deregulation of the telecom sector has resulted in the addition of significant bandwidth as well as a decline in telecom costs This led to reduction in telecom rates and created a revolution in the ITES industry International Long Distance, National Long Distance and Basic Telephone services have been opened up.This in turn increased the number of inbound/outbound call centres and data processing centres.

In addition to these continuous steps for improvement in terms of better roads, setting up of technology parks, the government has introduced opening up of the telecom sector, providing uninterrupted power supply etc.

Cost Advantage

The main edge that India has is its ability to provide cost savings and thereby enable productivity gains. Customers can have net savings of 50-60% by outsourcing to India despite taking into account the interaction cost of 10-20% because of locational differences, The per employee costs of similarly skilled employees when compared to countries like US or UK are about one-tenth or one-eighth The difference in wages between the US or UK and India is more than 70-80% for offshorable processes. This will prevail for the next 10 years even if the wages increase at an extreme rate of 10%.

According to Mckinsey, giant US pharmaceutical firms can reduce the cost of developing a new drug, currently estimated at between $600 million and $900 million by as much as $200 million if development work is outsourced to India.

Security & Data Privacy

Indian companies as well as the government have been active in adhering to international security standards such as ISO 17799, BS7799, COBIT and ITSM. The government has laid down the required legal framework.

From individual companies to various associations, the government, proactive measures are being taken to ensure that India is viewed as a destination for trustworthy outsourcing and is aligned with those legislatures that govern the US. Also NASSCOM - National Association of Software Services Companies intends to have the security practices of all its member companies audited by international accounting firms. The government has also taken initiatives to focus on the issues of data privacy, information security and Intellectual Property Rights (IPR).

Companies have set up advanced systems to monitor phone conversations, guard data, and watch workers' every move. Employee background checks are a regular feature of the recruitment process. In a recent study by Hill & Associates, an enterprise security and risk management consultancy firm, Bangalore, Hyderabad and Mumbai have been found to be low risk outsourcing locations. These measures work well towards alleviating concerns of privacy and information security of customers wishing to source services of Indian KPO vendors.

Government Policies

The government of India recognizing the vast potential of the ITES industry has introduced various measures in order to promote the growth of the same. Some such measures are easy accessibility of foreign technology, relaxation of restrictions on investment, simplification of the process of investment, friendly tax structures and minimal licensing requirements. In addition to this the respective States governments have come up with policies governing their state exclusively.

The Government of India has allowed total income tax exemption on export of IT enabled outsourcing services (Sections 10A/10B of the Income Tax Act). Tax holidays, concessions for companies involved in scientific R&D, Duty-free imports of capital goods permitted for BPO companies (under the Export Promotion of Capital Goods scheme) are just some of the steps to create a pro-growth environment.