Future of Outsourcing IT Services in India

By Arnab Bannerjee Dec 28, 2019
Future of Outsourcing IT Services in India

Though the history of outsourcing may be traced as far back as the early 20th century, it came into its own in the early 1990s and revolutionized the way businesses are run. Since then, it has grown tremendously and benefitted businesses and employees throughout the world.

However, the economic downturn and sluggish economic growth in the West in the recent years has raised questions marks regarding outsourcing’s continued relevance. Many have started questioning its benefits and are highlighting its adverse effects for the working population in the West.

Lately, populism and demagoguery have often tended to overshadow sound economic reasoning. It is being speculated by some that political backlash, together with rising costs of outsourcing, would result in slugging growth for the IT outsourcing services in the years to come. However, most of the industry experts who have been studying this market over years have concluded that at least in the foreseeable future, outsourcing would remain profitable and continue to grow.

Outsourcing agencies will retain their cost advantage

When IT outsourcing to Indian firms began in the early 1990s, it had been predicted by some experts that over the years gradually as wages and standards of living equalize across the world, outsourcing would lose its cost advantage. However, though outsourcing has generated plenty of jobs in India, technicians’ wages, in general, continue to remain lower as compared to the West. It is highly likely that IT outsourcing would retain its cost effectiveness for a long time. Hiring coders in India is still a cost-effective proposition for firms located in the West.

Many companies would begin outsourcing their core activities

In the initial years, only non-core and low-skill jobs were outsourced, while businesses preferred to retain full control over their core functions. But lately, there has been a tendency to outsource core functions as well. Over the past decade, gradually as India’s pool of IT technicians has acquired a higher degree of expertise and experience, it has become a profitable proposition for many businesses to establish collaborative enterprises to develop core research and development processes. A lot of them are now willing to hire developers in India to engage in their core Research & Development endeavors.

Outsourcing industry would expand into newer areas

The relentless search for yet cheaper alternatives and diminishing cost efficiency of older destinations like Bangalore and Mumbai would move the outsourcing industry to tier-two cities, many of which would emerge as new hubs for the outsourcing business. Now it is possible to hire skilled developers even in tier-two cities.

A lot of companies would outsource smaller projects

Most of the outsourcing business has come in the form of big projects from major corporations. If trends are to be trusted, in the near future, a lot of smaller businesses that had earlier stayed away from outsourcing would offer smaller short-term projects. Many smaller IT outsourcing companies have already begun rolling out flexible and cost-effective schemes to attract medium and small-level businesses.

Cloud Sourcing will offer new opportunities for expansion to the outsourcing industry

A lot of businesses are adopting cloud sourcing due to the advantages it offers in terms of scalability, flexibility and cost-effectiveness. If industry experts are to be trusted, there is a strong likelihood that cloud sourcing would merge with the outsourcing business and offer the latter huge potential for expansion in the near future.

To conclude, it may be said that regardless of what the naysayers might propagate, portents are still bright for the IT outsourcing services, and in all likelihood, it would keep registering impressive growth in the years to come.

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