India is probably one of the first countries you’ll think of if asked about outsourcing.
Several huge companies have already outsourced significant segments of their businesses in the Indian subcontinent. They include giants like IBM, Google, and Microsoft.
So why is India a popular outsourcing destination? Does it really work?
If you are thinking of also outsourcing to India, this article will help you understand anything you need to know.
Table of Contents
What is outsourcing?
Outsourcing is the business practice of a third-party provider to perform services instead of the traditional way of having them done in-house. The procedure involves transferring responsibilities from employees to the third party and its staff or employees.
In business parlance, outsourcing is a practice as a cost-cutting measure. Outsourcing can be either involve domestic or foreign contracting or a mix of both. The most popular form for many western countries would be contracting with foreign countries, where labor and salary levels are lower.
Why companies outsource?
The apparent reason is cost reduction on staff costs. In addition, the idea that business processes can be performed, with the same quality and precision, by equally qualified individuals in another country for a much affordable rate appeals to many companies.
Another reason for outsourcing is to free up time from non-core activities and functions and leave it to third parties with more expertise and competency. With the extra hours, the business can now focus on more pressing matters,e.g., business strategy, expansion planning, or product development. For this reason, some of the earliest business processes outsourced are payroll processing, human resources management, and accounting.
Who are the outsourcing providers?
Before, companies with facilities in other countries are the go-to outsourcing providers by many western countries. It is because they boast office spaces, equipment, information technology (IT) infrastructure, and the trained personnel could convince businesses in the United States, Canada, etc., to entrust their crucial business processes.
The vast improvement of internet speed and modern communication and teleconferencing tools allowed the work from the home set-up. Slowly, office spaces were no longer an essential requirement as more and more businesses embrace the idea of virtual teams and company staff working remotely.
Many outsourcing providers are now online platforms, composed of entirely virtual teams, working independently and away from each other.
At present, companies have two choices as to providers, (1) office-based outsourcing providers and (2) remote teams fully embracing the virtual set-up.
What is the status of the outsourcing industry in India?
According to the 2019 Tholons Services Globalization Index, India is still the leading country to outsource. In the said report, the country ranked 1st in the Tholons Top 50 Digital Nations and has 14 cities in the Top 100 Super Cities in its globalization index.
With more than 1 billion people and high English proficiency, it is no wonder that India remains to be a top outsourcing destination. Its cities like Bangalore, Mumbai, and Hyderabad are popular places to outsource and are home to some of the most trusted brands in outsourcing.
The large population of India means a massive talent pool of highly skilled workers. In particular, India figures prominently in the outsourcing of information technology (IT) services. Moreover, the enormous support of the Indian Government, specifically the National Association of Software and Services Companies (NASSCOM), boosted the confidence of foreign businesses.
What are the most commonly outsourced services to India?
Nowadays, you can outsource anything anywhere. It is especially true with Indian outsourcing providers. But here are the three most popular services outsourced to India:
1. IT services
IT is now an essential department of any business or organization. However, unless you are an IT company, IT tasks are non-core activities and are deemed to be cost centers. The most popular outsourced IT services to India are IT support tasks such as:
- Web development;
- Applications development; and
- Technical support.
Developing your own IT team, training the in-house personnel, and building the required infrastructure would be expensive. Also, since there is a need to acquire specialized skills, it means hiring costly experts.
So why not tap India’s massive pool of battle-hardened IT professionals?
The infrastructure is already ready, and the Indian IT professionals are well-trained, skilled, and very experienced. Therefore, outsourcing to India means skipping the expensive development and training stage while riding on their rich IT experience.
2. Customer support services
Traditionally, we think of customer support outsourcing as those massive call centers answering calls for big telecommunications companies. But the fast-growing segment of customer support now lies with responding to customer tickets lodged with the thousands of e-commerce websites.
So why outsourced to India?
One, the country already has the infrastructure and technology needed. Second, India has a relatively large English-speaking population. Third, you can also skip the costlier office-based providers and directly hire Indian remote workers, thereby creating your virtual team. Finally, Indian virtual workers are some of the most competent, technically adept, and hardworking in the market.
3. Knowledge Process Outsourcing (KPO) services
KPO is a form of outsourcing core business services, usually information-related activities that are an integral component of a company’s value chain. These services typically require highly specialized skills and advanced-degree holders. Some of the scopes of KPO services include accounting, finance, insurance, healthcare services, animation, content creation, and engineering design.
So why outsource to India?
Indians’ reputation of being technically adept and academically excellent isn’t a myth. Indian workers are the top choice of many technology-based companies to handle KPO activities precisely for this very reason. Decades of investment allowed India to develop technologies that ensure accurate data transmission and storage, both critical in delivering KPO services.
What are the advantages of outsourcing to India?
1. Cost efficiency
With an average of $437 monthly salary, India’s labor ranks only 72nd among 106 countries surveyed. With relatively much lower wage levels than most western countries, outsourcing to India means reducing staff costs. It is in addition to the massive savings already enjoyed by skipping the capitalizable costs of developing an in-house team.
2. Large pool of talents
India is producing millions of university-trained and skilled professionals vying for positions in the now highly competitive outsourcing market with its large and young population. Backed with competent training, experience-produced methodologies, and determination, Indian virtual assistants and remote workers can provide the desired quality of work.
3. English proficiency
Not as neutral as Philippine virtual workers, a significant portion of the population speaks English fluently. Many highly trained workers speak English with native-level proficiency, and some are of neutral accent. English communication is no trouble for Indian online workers, coupled with technical knowledge; Indians are the best candidates for particular positions like customer service.
What are the disadvantages of outsourcing to India?
1. Location and time zone disparity
Physical distance and differences in time zones pose some issues in the initial run of outsourcing services to India. Lack of face-to-face interaction and not working physically together doesn’t feel the same when people are used to working together in an office set-up.
But technology has come a long way now. Available new technologies like communication and project management tools helped solve approximately 90% of the problems. Tools like Slack and Fleep are now available for messaging needs, while Zoom and Google Meet have been utilized for video conferencing.
2. Monitoring and quality control issues
With workers located thousands of miles away, it becomes extra challenging for the company to track workers’ time spent at work and implementing quality control mechanisms. Outsourcing added another layer of issues to an already challenging segment of any business or organization.
However, technology proves to be a blessing as time monitoring software like Time Doctor, HourStack, and Everhour can now be used to establish time tracking, work snapshot, and work accountability.
What are the steps to start outsourcing to India?
1. Determine the tasks that you can outsource
More than a cost-saving endeavor, outsourcing is also about freeing time from non-essential tasks in favor of having more time for core business activities.
To begin outsourcing, you need first to determine the activities you are willing to give up control of. But bear in mind that you only outsource non-core activities. For example, you can outsource preparatory or support activities if you own a digital marketing agency but not the primary digital marketing service.
After listing non-core services, you also need to quantify the resources currently allocated to the said activities. Having an idea about the portion of the annual budget allows you to rank non-core activities by priority. Moreover, you can already estimate the possible savings should you decide to outsource them.
2. Choose a provider
There are so many reputable business process outsourcing (BPO) companies in India. Tata Consultancy Services, Wipro, and Infosys are big names in the industry employing around 30,000 Indian workers on average respectively. These industry titans have the reputation, experience, and infrastructure to provide for your needs.
But for small businesses, you are left on your own to scour the numerous outsourcing providers and compare their services, rates, and business reputation. To aid you with choosing the best outsourcing provider, you can use our comprehensive and honest reviews as the basis.
You may also contact us and schedule a consultation to diagnose your needs and refer you to some trusted names in our database.
3. Utilize management and productivity tools
Project management software, communication tools, and time tracking applications are the cornerstone of your outsourcing endeavor. You can start learning how to use them as you go along the way. The important thing is to establish work accountability early on amongst your virtual team.