The importance of outsourcing to a Democratic nation

Outsource to any rouge or unstable nation or outsource to India a free market, democratic country? This is a question that companies considering where to outsource have asked themselves many a time.

The question has however been answered with a resounding “yes” in affirmation of democratic India.
 More than 400 of the Fortune 500 companies that outsource to India have poured in billions of dollars during the last 10 years in outsourcing to India.

These companies see India as the fastest growing free market democracy which ensures a strong legal system, stable political environment, and a pluralistic society. It’s a democracy that allows market conditions to operate in a macro and micro-economic environment which is smartly regulated. All these factors play a crucial role when companies decide upon where to outsource.

Not surprisingly, multinationals such as IBM, Microsoft, Dell, and Accenture, who outsource massive amounts of services related work to India, do so due to its democracy, says NYT journalist Thomas Friedman.

The post-liberal Indian generation, of which hundreds of thousands are into outsourcing, is a new breed with a zip in their step. “They're hungry, they're energetic. They're demanding of their democratic government,” says Friedman.

He also adds that India is a country that is very instinctively able to localize, take the best of the global world, and absorb it within its own culture – a very important facet of India’s secular democracy.

A secular democracy is a business advantage in outsourcing that an unstable democracy, communist government, or a country based on religion, can never compete with. Indian democracy allows itself a free flow of ideas and their execution without interference from a 'party', 'ideology' or an 'autocrat'.
 
It’s only in a democracy such as India that a true market economy can be sustained in an open society. In contrast, in China, now second to India in outsourcing global business, the communist government is willing to let go of its stranglehold on the people, albeit very slowly.

But one never knows the challenges it will face in a country, which is already rife with internal tensions.

While China may lead in all important indicators like GDP, GDP growth rate, per capita income, birth control and literacy, it is in India that an individual has free will and is rewarded for taking the initiative.

Today, as the world recovers from deep recession, the democratic fabric of the Indian business environment will be considered even more than ever before an advantage when outsourcing.

As the outsourcing industry consolidates, India's democracy is a competitive advantage that translates into long term cost savings when traded off against market exit due to political threats.

Outsource to India, as outsourcing to a ‘democratic mixed market economy’ is the best safeguard against the vagaries of supply and demand – could very well be the future buzz phrase in outsourcing.

Companies will prefer to outsource to democratic India:
Given the economic volatility that’s bound to plague the world economy in the future, India’s democratic set-up, as compared with other countries, offers stability for those who want to outsource.

China, India’s closest competitor, will always be considered with circumspection by those who want to outsource. Its communist leadership’s stringent control over personal freedom will always be a negative in any business outsourcing SWOT analysis.

Malaysia, although a democracy, is regarded politically unpredictable, with the possibility of becoming unstable - no way is this conducive for outsourcing. Personalities tied to underlying economic interests are a well-known story in Malaysia, presently, the third largest destination for outsourcing.

In such a scenario, companies wanting to outsource would be diffident to outsource work to the country. Also because Malaysia has a troubled ruling party that resorts to racial discourse, has an untested opposition, a stalled economy, and a politicized judiciary – more dangers to outsourcing.

In the Philippines, incoming volume of outsourcing has suffered due to falling standards of English usage. Successive governments, again personality led, decreased investment in education – resulting in companies choosing to outsource elsewhere.

Pakistan was considered an upcoming destination for companies wanting to outsource during the internet boom in 2002-04. But continuous clashes between civilian, military leadership, and militant extremists reversed the flow of companies who wanted to outsource.

Outsourcers want to outsource to the balanced Indian democracy:
Another important and positive feature of the Indian democracy is the clear demarcation between the political, judicial, and legislative.

This ensures that outsourcers and Indian vendors that outsource for them are not subjected to pressure of any kind from any of them. For instance, lobbyists or outsourcing companies wanting to lobby for more favorable conditions for a particular sort of outsourced specialization, will not be encouraged. 

Outsource to India is a unified mantra amongst government bodies:
Top services companies have chosen India as the destination to outsource IT and office related outsourced services. This success, over time, has brought about synergy amongst government bodies to promote India as a preferred destination to outsource various complex operations.

The democratic nature at the centre and in Indian states ensures that in outsourcing there is synergy and not competition or brinkmanship between governmental departments and industry bodies.

Political stability and maturity enables better outsourcing:
If a company wants to outsource to India, one of the conditions it expects is that governments last their full term. They don’t want to deal with a country, say like Pakistan, in which who will be in power, and when, is a million dollar question.

India’s deep-rooted democratic institutions have ensured political stability in multi-party democracy.

Further, as India is a stable democracy, organizations that outsource don't have to be uncertain about the Indian government's stance on outsourcing.

So much so that democracy has enhanced India's 'reputation' as a location that can be trusted to business and for those who want to outsource key operations.

India’s democratically elected governments have been enablers of outsourcing:
Government intervention in software industry has been minimal. In fact, successive governments have invested in education, especially in engineering, to create human capital and infrastructural clusters.

This single-mindedness has attracted companies who want to outsource business tasks to India. This in turn has generated intense rivalry among Indian software exporters and other outsourcing vendors whom companies outsource services related and other work.

Indian firms therefore have resorted to differentiate themselves from their competition in terms of quality. Of the 26 CMM level-5 companies in the world, 19 are in India. About 108 Indian software companies are ISO9000/1/2 certified. As a result, Fortune 500 companies outsource cutting edge R&D projects to India.

Entrepreneurs in outsourcing are a result of Indian democracy:
India has a much more vibrant private sector than China with more world class home grown companies from the private sector. Its entrepreneurs are a result of Indian democracy that allowed years of centralized economy to be transformed into a mixed market economy.

Corporate governance is another Indian forte, with Indian entrepreneurs and managers, including in the outsourcing industry, being among the most highly respected in the world.

One would be hard pressed to find entrepreneurs such as Ratan Tata, Dhirubhai Ambani, Narayana Murthy or Azim Premji in China.