Home » India is Top IT Outsourcing Destination! Everything You Must Know to Outsource to India

India is Top IT Outsourcing Destination! Everything You Must Know to Outsource to India

by Uneeb Khan

Reports project the Indian IT outsourcing market to generate revenue of U.S. $8.8 Bn by the end of 2023. Further estimates project the annual revenue growth between 2023 and 2028 at a CAGR of 17.92%. Going by these estimates, the IT outsourcing industry in India will reach volumes of US$20.1 Billion by 2028.  

These statistics clearly explain India’s dominance amongst outsourcing destinations in the world. Several reasons have attributed to India’s success as an outsourcing destination and made global businesses try to outsource to India. Some of these reasons, which we will explore further in the coming sections, include cost advantages, a large English-speaking population, a vast talent pool, etc.  

Tracing the Roots

Before diving deeper, let’s start by tracing this huge industry’s origin story. The growth of India’s IT sector began soon after the nation embraced globalization. In about 30 years, the industry has experienced massive growth and has increased its contribution to GDP from less than 1% to about 8%.

Behold the Future

Now that we have traced the roots, let’s discuss the industry’s future. The discussion makes sense in the realm of automation unleashed by ChatGPT and other generative AI tools. ChatGPT registered 100 million active users within two months of its launch.  

The launch of ChatGPT opened a new possibility- of generative AI replacing human labor. Research indicates that by 2025, 85 million humans across the globe will lose their jobs to AI. Hence, as global businesses start adopting these AI tools on a mass scale, will outsourcing work to India take a backseat?

In this context, it is worth mentioning that AI tools will only help enhance the efficiency of Indian contract centers- by letting AI bots handle the menial tasks. This will let their human counterparts have more time to offer personalized consultation to clients on important matters.

Moreover, integrating AI will make the process more seamless and offer better outcomes. Further, offshore outsourcing companies in India will leverage data analytics to understand customer preferences, emerging trends, and behavior patterns. This will help them meet the specific client needs- enhancing the overall customer experience and satisfaction.

Similarly, NLP and speech recognition are helping vendors transcribe and analyze customer interactions more efficiently- resulting in better agent performance evaluation. NLP is also helping in sentiment analysis- helping agents to respond better to customer emotional cues. 

Another factor determining the future pathway of offshoring in India is the gradual shift towards knowledge-based outsourcing. Offshore outsourcing companies in India are shifting their offerings from simple and repetitive outsourcing services to complex and knowledge-intensive services. 

Thus, businesses will continue to outsource to India over the near future. Here are some reasons if you are wondering about the same.

Why Global Businesses Outsource to India?

Here are some factors that have contributed towards India’s success as a global outsourcing destination. 

  1. Cost advantage– The cost advantage is the first factor that motivates businesses to outsource work to India. Inda boasts of much cheaper labor compared to developed nations in the USA and UK. For example, a Chartered Accountant (equivalent to a US CPA) in India makes around $7000 per year. In contrast, their US CPA counterparts make around $40000/year. Further, businesses must pay for health insurance, contribute towards 401(k), offer paid vacations, etc., to local employees. However, companies don’t have to bear such liabilities while outsourcing work to India. This can result in massive cost savings for businesses.
  2. Cheap and High-Speed Internet– Fall in internet expenses along with advancements in imaging technologies have also motivated businesses towards outsourcing work to India. Internet costs in India have plummeted over the years along with an increase in penetration rates. 

Currently the mobile data rates in India are 5th lowest in the world.  This has made it easy and cost effective for MNCs to outsource tasks and manage the back-office operations in the nation. 

  1. Top class talents– Indians highly value English speaking ability as a necessary skill for getting a job. According to the 2011 census, English is the mother tongue of 256,000 people and the second language of 83 million people. Furthermore, 46 million people use English as a third language. This makes English the country’s second most widely spoken language after Hindi.  

India also has a sizable graduate population. The nation produces about 65 lakh graduates annually, including 15 lakh engineers. This huge English speaking graduate population offers a vast and highly competent talent pool to businesses looking to outsource their operations. 

  • Favorable Business Environment- The I.T outsourcing industry is a significant contributor to the nation’s GDP. It must play a defining role for the country to become a five trillion-dollar economy. Therefore, the government offers several incentives to motivate businesses to outsource to India.  

For instance, under the national B.P.O. promotion scheme, the government offers up to 50% subsidy on CAPEX and OPEX subject to a ceiling of Rs. 1 lakh/seat. Further, the government offers special incentives for employing women or persons with disabilities and starting operations in non-metro cities.   

Final words

Along with the factors above, several other reasons, like a favorable time-zone difference, strong data security norms, democratic government, a robust legal framework, etc., motivate businesses to outsource to India. You, too, can readily scale your business through this means.

But while outsourcing to India it is always better to partner with a local organization having tremendous experience in this field. In this context, Virtual Employee can be your ideal partner. Curious to know more? Connect now!

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